<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 3)*
NEW CENTURY FINANCIAL CORPORATION
(Name of Issuer)
Common Stock, $.01 Par Value
(Title of Class of Securities)
64352 D 10 1
(CUSIP Number)
Lee R. Mitau, Esq.
Executive Vice President, General Counsel and Secretary
U.S. Bancorp
U.S. Bank Place
601 Second Avenue South, Minneapolis, Minnesota, 55402-4302
(612) 973-0363
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
July 26, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rules 13d-1(e), 13d-1(f) or 13d-1(g) check the following
box. / /
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following page(s))
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CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 3 Page 2
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1 NAMES OF REPORTING PERSONS: U.S. Bancorp
IRS IDENTIFICATION NOS. OF ABOVE PERSONS: 41-0255900
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS: WC
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e): [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
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NUMBER OF 7 SOLE VOTING POWER: 4,225,800
SHARES
BENEFICIALLY -----------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER: 0
EACH
REPORTING -----------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER: 4,225,800
WITH
-----------------------------------------------------------
10 SHARED DISPOSITIVE POWER: 0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY
EACH REPORTING PERSON: 4,225,800
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [X]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 23.20%
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14 TYPE OF REPORTING PERSON: HC
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CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 3 Page 3
ITEM 1. SECURITY AND ISSUER.
The title and class of shares to which this statement relates is the Common
Stock, par value $0.01 per share (the "Common Stock"), of New Century
Financial Corporation, a Delaware corporation (the "Issuer"). The Issuer's
principal executive office is 18400 Von Karman, Suite 1000, Irvine,
California, 92612.
ITEM 2. IDENTITY AND BACKGROUND..
(a) Name of Person Filing:
U.S. Bancorp
(b) Address of Principal Business Office:
U.S. Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
(c) Principal Business:
U.S. Bancorp is a regional bank holding company with its headquarters
in Minneapolis, Minnesota, and its operations concentrated in 17
Midwestern, Rocky Mountain and Western States.
The name, business address, present principal occupation or employment and
citizenship of each director and executive officer of U.S. Bancorp are set
forth in Annex A hereto and are incorporated herein by reference.
(d) Criminal Proceedings:
During the last five years, neither U.S. Bancorp nor any executive
officer or director of U.S. Bancorp has been convicted in a criminal
proceeding (excluding traffic violations and similar misdemeanors).
(e) Civil Proceedings:
During the last five years, neither U.S. Bancorp nor any executive
officer or director of U.S. Bancorp has been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction resulting in a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws, or finding any violation with
respect to such laws.
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CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 3 Page 4
(f) Place of Organization:
Delaware
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The source of funds for each of (a) U.S. Bancorp's purchase of 65,000
shares of the Issuer's Common Stock from Steven G. Holder, (b)
U.S. Bancorp's purchase of 500,000 shares of the Issuer's Common Stock
from The Foundation Companies, Inc. and (c) U.S. Bancorp's purchase
of 20,000 shares of Series 1999A Convertible Preferred Stock (the "Series
1999A Preferred") and 20,000 shares of Series 1998A Convertible Preferred
Stock (the "Series 1998 Preferred" and, together with the Series 1999A
Preferred, the "Convertible Preferred Stock") of the Issuer, all as
described herein, was working capital funds of U.S. Bancorp.
ITEM 4. PURPOSE OF TRANSACTION.
On July 26, 1999, U.S. Bancorp acquired 20,000 shares of Series 1999A
Preferred at a purchase price of $1,000 per share from the Issuer.
On May 4, 1999, U.S. Bancorp purchased in a privately negotiated
transaction for investment purposes 65,000 shares of the Issuer's Common
Stock at a price of $11.3625 per share from one of the Issuer's
shareholders, Steven G. Holder.
On December 29, 1998, U.S. Bancorp purchased in a privately negotiated
transaction for investment purposes 500,000 shares of the Issuer's
Common Stock at a price of $9.90 per share from one of the Issuer's
shareholders, The Foundation Companies, Inc.
On November 24, 1998, U.S. Bancorp acquired 20,000 shares of Series
1998A Preferred. A copy of the Preferred Stock Purchase Agreement dated
as October 18, 1998 (the "Stock Purchase Agreement") between the Issuer
and U.S. Bancorp pursuant to which the Series 1998A Preferred was
acquired has been filed as Exhibit 99.1 to this Schedule 13D.
The rights, preferences and other terms of the Series 1999A Preferred and
the Series 1998A Preferred are substantially similar. The designation
of the rights, preferences and other terms of each series of the
Convertible Preferred Stock is set forth in the respective Certificate
of Designations (the "Designation Certificate") for such series. The
Designation Certificate for the Series 1998A Preferred Stock and the
Series 1999A Preferred Stock have been filed as Exhibit 99.3 and Exhibit
99.2, respectively, to this Schedule 13D.
The following is a summary of the rights and preferences of the
Convertible Preferred Stock:
Rank: The Convertible Preferred Stock ranks prior to all of the
Issuer's Common Stock, both as to payment of dividends and
as to distribution of assets upon the liquidation and
winding up of the Issuer. Each series of Convertible
Preferred Stock ranks equally with the other series of
Convertible Preferred Stock as to the payment of dividends
and as to distribution of assets upon the liquidation and
winding up of the Issuer.
Dividends: Holders of Series 1999A Preferred are entitled to receive
from the Issuer cumulative dividends of $70.00 per share
per annum, when such dividends may be legally declared by
the Issuer's Board of Directors. Holders of Series 1998A
Preferred are entitled to receive from the Issuer
cumulative dividends of $75.00 per share per annum, when
such dividends may be legally declared by the Issuer's
Board of Directors.
Redemption: On or after the fourth anniversary of the issue date with
respect to each series of Convertible Preferred Stock the
Issuer may, at its option, redeem any or all of such
series of Convertible Preferred Stock at a price of
$1,000 per share, plus accumulated and unpaid dividends.
The Issuer may also redeem the Convertible Preferred
Stock in certain limited circumstances involving the
consummation of an acquisition transaction involving the
Issuer.
Conversion: Each share of the Series 1999A Preferred is immediately
convertible, at the option of the holder, into 46.80
shares of the Issuer's Common Stock. Each share of the
Series 1998A Preferred is immediately convertible, at the
option of the holder, into 136.24 shares of the Issuer's
Common
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CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 3 Page 5
Stock. The conversion rate for each series of
Convertible Preferred Stock is subject to adjustment as
provided in Section 8 of the Designation Certificate.
Voting Rights: The holders of the Convertible Preferred Stock will be
entitled to the same voting rights as, and will vote
together as one class with, holders of the Issuer's Common
Stock. Each holder of Convertible Preferred Stock will have
such voting rights as are attributable to the number of
whole shares of Common Stock into which such shares of
Convertible Preferred Stock are convertible. In addition,
absent the consent or affirmative vote of the holders of at
least a majority of the outstanding shares of the
Convertible Preferred Stock, voting separately or as a
class, the Issuer may not (a) authorize, issue or create any
shares of any other class or series of capital stock ranking
senior to the Convertible Preferred Stock as to dividends or
liquidation or (b) amend, alter or repeal the Issuer's
Certificate of Incorporation, whether by merger or
consolidation or otherwise, so as to adversely affect the
rights or preferences of the Convertible Preferred Stock.
Pursuant to Section 8.3 of the Purchase Agreement, the Issuer has
expanded its Board of Directors (the "Board") from nine to ten
members, and U.S. Bancorp has designated, and the Issuer has
appointed, Francis J. Partel, Jr. and Terrence P. Sandvik to the
Board. The Issuer further agreed to take all reasonable action necessary
to further expand its Board and to appoint, nominate and support one or
more additional individuals designated by U.S. Bancorp for election to
the Board such that U.S. Bancorp's representation on the Issuer's Board
may approximately reflect U.S. Bancorp's ownership stake in the Issuer
from time to time, until such date as the earliest to occur of (a)
December 31, 2002, (b) the date on which U.S. Bancorp owns less than 5%
of the Issuer's outstanding shares of Common Stock (assuming conversion
of the Convertible Preferred Stock) or (c) certain defaults by U.S.
Bancorp (such date the "Termination Date").
Pursuant to Section 8.4 of the Purchase Agreement, until the earlier to
occur of the Termination Date, November 24, 2000 or the receipt by the
Issuer of gross proceeds totaling $30 million from certain offerings by the
Issuer, U.S. Bancorp has, subject to certain exceptions, a right of first
refusal to purchase certain issuances of new securities by the Issuer. In
addition, pursuant to this Section, until the Termination Date, U.S.
Bancorp has, subject to certain exceptions, a right to purchase a
proportionate share of any new securities to be issued and sold by the
Issuer. In addition, these rights terminate upon the closing of certain
acquisitions of U.S. Bancorp or if U.S. Bancorp sells more than 20% of its
shares of Common Stock during any 90-day period, provided that such sales
are not made for regulatory reasons (an "Additional Termination Date").
Pursuant to Section 8.5 of the Purchase Agreement, until the Termination
Date or an Additional Termination Date, the Issuer has agreed not to
solicit, authorize, initiate or encourage submission of, any proposal,
offer, tender offer or exchange offer from any
<PAGE>
CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 3 Page 6
person or entity relating to any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or purchase of
all or a material portion of the assets of, or any material equity
interest in, the Issuer or its subsidiary, New Century Mortgage
Corporation, or other similar transaction or business combination
involving the Issuer or such subsidiary, or, unless the Issuer shall
have determined, based on the advice of counsel to the Issuer, that the
Board has a fiduciary duty to do so, (a) participate in any
negotiations in connection with or in furtherance of any of the
foregoing or (b) permit any person other than U.S. Bancorp and its
representatives to have any access to the facilities of, or (c) furnish
to any person other than U.S. Bancorp and its representatives any
information with respect to, the Issuer or such subsidiary in
connection with or in furtherance of any of the foregoing.
U.S. Bancorp has acquired the Convertible Preferred Stock and the
Common Stock for investment purposes. In addition, U.S. Bancorp's
investment in the Issuer's securities has been made in connection with
certain strategic agreements between U.S. Bank National Association
("U.S. Bank"), the principal banking subsidiary of U.S. Bancorp, and
New Century Mortgage Corporation ("New Century Mortgage"), the
principal operating subsidiary of the Issuer. Under these agreements,
New Century Mortgage and U.S. Bank have agreed to cross sell and
solicit real estate loans and other financial services through each
other's branch system. In addition, U.S. Bank may bid on certain whole
loan sales transactions of New Century Mortgage, with the price and
volume subject to agreement by the parties. The investment, together
with these agreements, allows U.S. Bancorp to expand its business
activities in the area of sub-prime mortgages and to draw upon the
Issuer's capacities in providing sales, underwriting and processing
services for such loans.
Although U.S. Bancorp has no present intent to do so, U.S. Bancorp may,
subject to certain standstill agreements described in Item 6 of this
Schedule 13D, make additional purchases of the Issuer's securities
either in the open market or in privately negotiated transactions,
including transactions with the Issuer, depending on an evaluation of
the Issuer's business prospects and financial condition, the market for
the securities, other available investment opportunities, stock market
conditions and other future developments. Depending on these factors,
U.S. Bancorp may decide to sell all or part of its holdings of the
Convertible Preferred Stock or Common Stock in one or more public or
private transactions.
Except as set forth in this Item 4 or Item 6 which is incorporated herein
by reference, U.S. Bancorp has no plans or proposals which relate to or
would result in any of the matters set forth in clauses (a) through (j) of
Item 4 of Schedule 13D.
The preceding summary of certain provisions of the Purchase Agreement, the
Designations Certificate, the Registration Rights Agreement and the
Shareholder Agreements, copies of which are filed as exhibits hereto, is
not intended to be complete and is qualified in its entirety by reference
to the full text of such agreements.
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CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 3 Page 7
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) As of July 30, 1999, based on U.S. Bancorp's prior ownership of
2,724,800 shares of Convertible Preferred Stock, its prior
ownership of 565,000 shares of the Issuer's Common Stock and its
acquisition on July 26, 1999 of 20,000 shares of the Issuer's Series
1999A Preferred, U.S. Bancorp is the beneficial owner of approximately
23.20% of the Issuer's outstanding Common Stock (based upon
14,552,021 outstanding shares of the Issuer's Common Stock as of June
30, 1999). U.S. Bancorp may also be deemed to beneficially own shares
of Common Stock held in client accounts with respect to which U.S.
Bancorp Piper Jaffray Inc., an indirect wholly owned subsidiary of
U.S. Bancorp ("Piper"), or employees of Piper have voting or
investment discretion, or both ("Managed Accounts"). U.S. Bancorp and
Piper disclaim beneficial ownership of the shares of Common Stock held
in Managed Accounts. U.S. Bancorp and Piper may also be deemed to
beneficially own from time to time shares of Common Stock acquired in
ordinary course trading and market-making activities by Piper.
(b) Other than those shares held by Piper in ordinary course trading and
market-making activities, U.S. Bancorp has sole voting and dispositive
power as to the shares of Convertible Preferred Stock and the shares
of Common Stock that are described above in paragraph (a).
(c) Reference is made to the information disclosed under Item 4
of this Schedule 13D, and such information is incorporated herein by
reference in response to this Item. Except for the transactions to
which this amended Schedule 13D relates and those shares bought or
sold by Piper in ordinary course trading and market-making
activities, neither U.S. Bancorp nor, to the best knowledge of U.S.
Bancorp, any of U.S. Bancorp's executive officers or directors has
effected any transaction in the shares of the Issuer's Common Stock
during the past sixty (60) days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Reference is made to the information disclosed under Item 4 of this
Schedule 13D, and such information is incorporated herein by reference in
response to this Item. In addition to such information, the following
contracts, arrangements, understandings or relationships are reported
hereunder.
Section 8.1 of the Purchase Agreement provides that, until the Termination
Date, the Issuer will make available to U.S. Bancorp such information and
data of the Issuer, and
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CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 3 Page 8
will provide access to the executive officers and independent accountants
of the Issuer, as U.S. Bancorp may reasonably request for the purpose of
monitoring U.S. Bancorp's investment in the Issuer.
Section 8.6 of the Purchase Agreement provides that, until the Termination
Date, the Issuer will use reasonable efforts to cooperate with and assist
U.S. Bancorp in connection with sales of shares of the Issuers's capital
stock whether through private placements, market transactions pursuant to
Rule 144 or registered offerings pursuant to the Registration Rights
Agreement.
Section 8.7 of the Purchase Agreement provides that, until the Termination
Date or an Additional Termination Date, and subject to standstill
provisions described below and certain other restrictions, the Issuer will,
if requested to do so by the Purchaser, cooperate with and use its best
efforts to assist the Purchaser in identifying existing shareholders of the
Issuer who may be interested in selling shares of Common Stock, and, once
any such potential seller is identified, will cooperate with U.S. Bancorp,
in such manner as U.S. Bancorp may reasonably request, so as to enable such
purchases to be made in accordance with applicable laws rules and
regulations or other applicable requirements.
Section 8.9 of the Purchase Agreement provides that, until the Termination
Date or an Additional Termination Date, and subject to certain exceptions
and without the prior written consent of U.S. Bancorp, the Issuer shall not
(a) increase the number of shares available for issuance under certain
employee stock plans, (b) adopt certain other stock-related plans,
(c) grant additional restricted stock awards other than pursuant to certain
existing plans or (d) take any action to reprice or regrant any securities
issued pursuant to any employee stock plan of the Issuer.
Section 10 of the Purchase Agreement provides that, without the consent of
the Board, U.S. Bancorp will not take certain actions involving a change of
control of the Issuer.
Pursuant to the Shareholder Agreements, a form of which has been filed as
Exhibit 99.4 to this Schedule 13D, each of Robert K. Cole, Brad A. Morrice,
Edward F. Gotschall and Steve Holder (each a "Shareholder") has agreed with
U.S. Bancorp that: (a) such Shareholder will first offer to U.S. Bancorp
any shares of Common Stock to by sold by such Shareholder, subject to
certain terms and conditions; (b) subsequent to certain triggering events
(which triggering events relate to certain third-party actions involving
the Issuer), such Shareholder will vote such Shareholder's shares of Common
Stock in favor of an acquisition transaction involving U.S. Bancorp and
against certain other transactions, subject to certain conditions; and (c)
such Shareholder will not enter into any agreement or understanding with
any person that would be inconsistent with or violate such Shareholder's
agreement with U.S. Bancorp described in clause (b) of this paragraph.
Each such Shareholder has also agreed, subsequent to such triggering
events, to execute and deliver an irrevocable proxy appointing U.S. Bancorp
as such
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CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 3 Page 9
Shareholder's proxy to vote such Shareholder's shares in the manner
provided in clause (b) of this paragraph.
Pursuant to the Amended and Restated Registration Rights Agreement filed
as Exhibit 99.5 to this Schedule 13D, U.S. Bancorp has certain demand and
piggyback rights to require that the Issuer effect a registration under the
Securities Act of 1933, as amended, of the shares of Common Stock issuable
upon conversion of the Convertible Preferred Stock.
<PAGE>
CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 3 Page 10
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
99.1 Preferred Stock Purchase Agreement dated as of October 18, 1998
(previously filed as an exhibit to the Issuer's initial 13D
filing dated November 24, 1998)
99.2 Certificate of Designations for Series 1998A Convertible
Preferred Stock (previously filed as an exhibit to the Issuer's
13D initial filing dated November 24, 1998)
99.3 Certificate of Designations for Series 1999A Convertible
Preferred Stock (filed herewith)
99.4 Shareholder Agreement (previously filed as an exhibit to the
Issuer's initial 13D filing dated November 24, 1998)
99.5 Amended and Restated Registration Rights Agreement (filed
herewith)
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CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 3 Page 11
SIGNATURES
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: August 4, 1999
U.S. BANCORP
By /s/ Susan E. Lester
--------------------------------------
Susan E. Lester
Executive Vice President and Chief
Financial Officer
<PAGE>
ANNEX A
IDENTITY AND BACKGROUND
The following table sets forth the names, addresses and principal occupations of
the executive officers and directors of U.S. Bancorp. Except as set forth
below, the principal business address of each such director and executive
officer is the address of U.S. Bancorp, U.S. Bank Place, 601 Second Avenue
South, Minneapolis, Minnesota, 55402-4302. Each of such directors and executive
officers is a citizen of the United States.
<TABLE>
<CAPTION>
Name and Principal Business Address Occupation
- ----------------------------------- ----------
<S> <C>
John F. Grundhofer Director; Chairman of the
Board and Chief Executive
Officer
Philip G. Heasley President and Chief Operating Officer
Gary T. Duim Vice Chairman
Robert D. Sznewajs Vice Chairman
Richard A. Zona Vice Chairman
J. Robert Hoffmann Executive Vice President and Chief
Credit Officer
Susan E. Lester Executive Vice President and Chief
Financial Officer
Lee R. Mitau Executive Vice President, General
Counsel and Secretary
Daniel C. Rohr Executive Vice President, Commercial
Banking and Business Banking
Robert H. Sayre Executive Vice President, Human
Resources
Terrance R. Dolan Senior Vice President and Controller
David P. Grandstrand Senior Vice President and Treasurer
<PAGE>
Linda L. Ahlers Director; President, Department Store
Dayton Hudson Corporation Division, Dayton Hudson Corporation
700 Nicollet Mall
Minneapolis, Minnesota 55402
Harry L. Bettis Director; Rancher
Arthur D. Collins, Jr. Director; President and Chief Operating
Medtronic, Inc. Officer, Medtronic, Inc.
7000 Central Avenue, N.E.
Minneapolis, Minnesota 55432
Peter H. Coors Director; Vice Chairman and Chief
Coors Brewing Company Executive Officer, Coors Brewing
311 Tenth Street, NH300 Company
Golden, Colorado 80901
Robert L. Dryden Director; President and Chief Executive
ConneXt, Inc. Officer, ConneXt, Inc.
1301 5th Avenue, Suite 1900
Seattle, Washington 98101-2603
Joshua Green III Director; Chairman and Chief Executive
Joshua Green Corporation Officer, Joshua Green Corporation
1425 4th Avenue, Suite 420
Seattle, Washington 98101
Delbert W. Johnson Director; Chairman and Chief Executive,
Pioneer Metal Finishing Officer, Pioneer Metal Finishing
1717 W. River Road North
Minneapolis, Minnesota 55411
Joel W. Johnson Director; Chairman, President and
1 Hormel Place Chief Executive Officer, Hormel
Austin, Minnesota 55912 Foods Corporation
-2-
<PAGE>
Jerry W. Levin Director; Chairman and Chief Executive
Sunbeam Corporation Officer, Sunbeam Corporation
35 E. 62nd Street
New York, New York 10021
Edward J. Phillips Director; Chairman and Chief Executive
Phillips Beverage Company Officer, Phillips Beverage Company
25 Main Street S.E.
Minneapolis, Minnesota 55414
Paul A. Redmond Director; Chairman and Chief Executive
Officer (Retired), Avista Corp.
Richard G. Reiten Director; President and Chief Executive
Northwest Natural Gas Company Officer, Northwest Natural Gas Company
220 N.W. 2nd Avenue
Portland, Oregon 97209
S. Walter Richey Director; Former Chairman and Chief
Meritex, Inc. Executive Officer, Meritex, Inc.
2285 Walnut Street
Roseville, Minnesota 55113
Warren R. Staley Director; President and Chief
15615 McGinty Road West Executive Officer, Cargill,
Wayzata, Minnesota 55391 Incorporated
</TABLE>
-3-
<PAGE>
NEW CENTURY FINANCIAL CORPORATION
------------------
CERTIFICATE OF DESIGNATIONS
FOR
SERIES 1999A CONVERTIBLE PREFERRED STOCK
(PURSUANT TO DELAWARE GENERAL CORPORATION LAW, SECTION 151(g))
------------------
The undersigned, being respectively the Chairman and Chief Executive
Officer and the Secretary of New Century Financial Corporation (the
"CORPORATION"), a corporation organized and existing under the Delaware General
Corporation Law, in accordance with the provisions of the Delaware General
Corporation Law, Section 151(g), do hereby certify that:
Pursuant to the authority vested in the Board of Directors of the
Corporation by the Certificate of Incorporation of the Corporation, the Board of
Directors on July 23, 1999, in accordance with the Delaware General Corporation
Law, Section 151, duly adopted the following resolution establishing a series of
20,000 shares of the Corporation's Preferred Stock, to be designated as its
Series 1999A Convertible Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation (the "BOARD OF DIRECTORS") by the Certificate of
Incorporation of the Corporation, the Board of Directors hereby establishes a
series of Series 1999A Convertible Preferred Stock, of the Corporation and
hereby states the number of shares, and fixes the powers, designations,
preferences and relative, participating, optional and other rights, and the
qualifications, limitations and restrictions thereof, of such series of shares
as follows:
SERIES 1999A CONVERTIBLE PREFERRED STOCK
Section 1. DESIGNATION; NUMBER OF SHARES. The shares of such series
shall be designated as "Series 1999A Convertible Preferred Stock" (the
"CONVERTIBLE PREFERRED STOCK"), and the number of shares constituting the
Convertible Preferred Stock shall be 20,000. Such number of shares may be
decreased by resolution of the Board of Directors adopted and filed pursuant
to the Delaware General Corporation Law, Section 151(g), or any successor
provision; provided, that no such decrease shall reduce the number of
authorized shares of Convertible Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, warrants, convertible or
exchangeable securities or other rights to acquire shares of Convertible
Preferred Stock.
Section 2. STATED CAPITAL. The amount to be represented in the stated
capital of the Corporation for each share of Convertible Preferred Stock shall
be $0.01.
<PAGE>
Section 3. RANK. The Convertible Preferred Stock (i) shall rank prior
to all of the Corporation's Common Stock, par value $.01 per share (the "COMMON
STOCK"), now outstanding or hereafter issued, both as to payment of dividends
and as to distributions of assets upon the liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary and (ii) shall rank on
parity with all of the Corporation's Series 1998A Convertible Preferred Stock,
par value $.01 per share (the 1998A Convertible Preferred Stock), now
outstanding or hereafter issued, both as to payment of dividends and as to
distributions of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary.
Section 4. DIVIDENDS AND DISTRIBUTIONS.
(a) The holders of shares of Convertible Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors out of funds
legally available for such purpose, dividends at the rate of $70.00 per annum
per share. Such dividends shall be fully cumulative, shall accumulate without
interest from the date of original issuance of the Convertible Preferred Stock
and shall be payable quarterly in arrears in cash on each January 31, April 30,
July 31 and October 31, commencing October 31, 1999 (provided, that if any such
date is a Saturday, Sunday or legal holiday in the place where such dividend is
to be paid, then such dividend shall be payable without interest on the next day
that is not a Saturday, Sunday or legal holiday) to holders of record as they
appear on the stock books of the Corporation on such record dates as shall be
fixed by the Board of Directors. Such record dates shall be not more than 60 nor
less than 10 days preceding the respective dividend payment dates. The amount of
dividends payable per share of Convertible Preferred Stock for each full
quarterly dividend period shall be computed by dividing the annual dividend
amount by four. The amount of dividends payable for the initial dividend period
and for any other period shorter than a full quarterly dividend period shall be
computed on the basis of a 360-day year of twelve 30-day months. No dividends or
other distributions, other than dividends payable solely in shares of Common
Stock or other capital stock of the Corporation ranking junior as to payment of
dividends to the Convertible Preferred Stock (such Common Stock and other
capital stock being referred to herein collectively as "JUNIOR DIVIDEND STOCK"),
shall be paid or set apart for payment on, and no purchase, redemption or other
acquisition shall be made by the Corporation of, any shares of Junior Dividend
Stock unless and until all accumulated and unpaid dividends
on the Convertible Preferred Stock, including the full dividend for the
then-current quarterly dividend period, shall have been paid or declared and set
apart for payment.
(b) Notwithstanding the provisions of Section 4(a), dividends shall not be
declared or paid, but shall accumulate, on the Convertible Preferred Stock until
such time as the execution and delivery of the Amendment (as defined in the
Preferred Stock Purchase Agreement dated as of July 26, 1999 between the
Corporation and U.S. Bancorp (the "1999 PREFERRED STOCK PURCHASE AGREEMENT")) to
the Fourth Amended and Restated Credit Agreement dated as of May 26, 1999 by and
among New Century Mortgage Corporation, the lenders party thereto and U.S. Bank
National Association, as Agent (the "CREDIT AGREEMENT"), by the Required Lenders
(as defined in the Credit Agreement).
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(c) If at any time any dividend on any capital stock of the Corporation
ranking senior as to payment of dividends to the Convertible Preferred Stock
(such capital stock being referred to herein as "SENIOR DIVIDEND STOCK") shall
be in default, in whole or in part, no dividend shall be paid or declared and
set apart for payment on the Convertible Preferred Stock unless and until all
accumulated and unpaid dividends with respect to the Senior Dividend Stock,
including the full dividend for the then-current dividend period, shall have
been paid or declared and set apart for payment, without interest. No full
dividends shall be paid or declared and set apart for payment on any capital
stock of the Corporation ranking, as to payment of dividends, on a parity with
the Convertible Preferred Stock (such capital stock being referred to herein as
"PARITY DIVIDEND STOCK") for any period unless full cumulative dividends have
been, or contemporaneously are, paid or declared and set apart for payment on
the Convertible Preferred Stock for all dividend periods terminating on or prior
to the date of payment of such full cumulative dividends. No full dividends
shall be paid or declared and set apart for payment on the Convertible Preferred
Stock for any period unless full cumulative dividends have been, or
contemporaneously are, paid or declared and set apart for payment on any Parity
Dividend Stock for all dividend periods terminating on or prior to the date of
payment of such full cumulative dividends. When dividends are not paid in full
upon the Convertible Preferred Stock and any Parity Dividend Stock, all
dividends paid or declared and set apart for payment upon shares of Convertible
Preferred Stock and Parity Dividend Stock shall be paid or declared and set
apart for payment pro rata, so that the amount of dividends paid or declared and
set apart for payment per share on the Convertible Preferred Stock and the
Parity Dividend Stock shall in all cases bear to each other the same ratio that
accumulated and unpaid dividends per share on the shares of Convertible
Preferred Stock and Parity Preferred Stock bear to each other.
(d) Any reference to "distribution" contained in this Section 4 shall not
be deemed to include any distribution made in connection with a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.
Section 5. LIQUIDATION PREFERENCE. In the event of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Convertible Preferred Stock shall be entitled to receive out of
the assets of the Corporation, whether such assets constitute stated capital or
surplus of any nature, an amount equal to the dividends accumulated and unpaid
thereon to the date of final distribution to such holders, whether or not
declared, without interest, plus a sum equal to $1,000 per share, and no more,
before any payment shall be made or any assets distributed to the holders of
Common Stock or any other capital stock of the Corporation ranking junior as to
liquidation rights to the Convertible Preferred Stock (such Common Stock and
other capital stock being referred to herein collectively as "JUNIOR LIQUIDATION
STOCK"); provided, that such rights shall accrue to the holders of Convertible
Preferred Stock only in the event that the Corporation's payments with respect
to the liquidation preferences of the holders of capital stock of the
Corporation ranking senior as to liquidation rights to the Convertible Preferred
Stock (such capital stock being referred to herein as "SENIOR LIQUIDATION
STOCK") are fully met. If upon liquidation, dissolution or winding up of
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the Corporation, the assets of the Corporation available for distribution after
the liquidation preferences of any Senior Liquidation Stock are insufficient to
pay the holders of the Convertible Preferred Stock and any other capital stock
of the Corporation which ranks on a parity as to liquidation rights with the
Convertible Preferred Stock, the entire assets of the Corporation then available
for distribution shall be distributed ratably among the holders of the
Convertible Preferred Stock and any other capital stock of the Corporation which
ranks on a parity as to liquidation rights with the Convertible Preferred Stock
in proportion to the respective preferential amounts to which each is entitled
(but only to the extent of such preferential amounts). After payment in full of
the liquidation preference of the shares of the Convertible Preferred Stock, the
holders of such shares shall not be entitled to any further participation in any
distribution of assets by the Corporation. Neither a consolidation or merger of
the Corporation with another corporation nor a sale or transfer of all or part
of the Corporation's assets for cash, securities or other property will be
deemed a liquidation, dissolution or winding up of the Corporation for purposes
of this Section 5.
Section 6. REDEMPTION AT OPTION OF THE CORPORATION.
(a) Subject to Section 6(b), the Corporation may not redeem the Convertible
Preferred Stock prior to July 26, 2003. The Corporation, at its option, may, on
or after July 26, 2003, redeem at any time all, or from time to time any
portion, of the Convertible Preferred Stock on any date set by the Board of
Directors, at $1,000 per share, plus an amount per share in cash equal to all
dividends on the Convertible Preferred Stock accumulated and unpaid on such
share, whether or not declared, to the date fixed for redemption (such sum being
hereinafter referred to as the "REDEMPTION PRICE").
(b) The Corporation may, at its option, redeem the Convertible Preferred
Stock concurrently with an Acquisition Event (as defined herein) if each of the
following conditions are met: (i) the Corporation has complied with the
covenants contained in Sections 8.4 and 8.5 of the Preferred Stock Purchase
Agreement dated October 18, 1998 between the Corporation and U.S. Bancorp (the
"1998 PREFERRED STOCK PURCHASE AGREEMENT") in all material respects; (ii) the
Purchaser (as defined in the 1998 Preferred Stock Purchase Agreement) has been
notified in writing of all material terms of the Acquisition Proposal (as
defined herein) that relates to such Acquisition Event; and (iii) either (A)
such Purchaser, within 15 days of the first date on which it had been so
notified of such Acquisition Proposal, failed to make an offer that is similar
to, and on terms no less favorable to the Company and its shareholders than, the
Acquisition Proposal; or (B) prior to the date of a definitive agreement with
respect to an Acquisition Transaction with Purchaser or an affiliate of
Purchaser, (x) the terms of the Acquisition Proposal are improved or a new
proposal regarding an Acquisition Transaction that is financially superior to
such original proposal (a "SUPERIOR PROPOSAL") is received by the Company and
the Purchaser fails to match such improved terms or such Superior Proposal
within five business days of Purchaser's receipt of written notice of all
material terms thereof or (y) the Purchaser withdraws its offer. Any redemption
pursuant to this Section 6(b) shall be at the Redemption Price, and the
redemption date for any such redemption shall not be earlier than, but may be
concurrent with, the effective
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time of the Acquisition Event. For purposes of this Section 6(b), the following
terms shall have the following meanings: "ACQUISITION PROPOSAL" shall mean a
proposal relating to any of the following actions: (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company; or (B) a sale, lease or transfer of a
material amount of assets of the Company, or a reorganization, recapitalization,
dissolution or liquidation of the Company; "ACQUISITION TRANSACTION" shall mean
any of the actions described in (A) or (B) of the definition of "ACQUISITION
PROPOSAL"; and "ACQUISITION EVENT" shall mean the consummation of an Acquisition
Transaction.
(c) The following provisions will apply to any redemption pursuant to
Section 6(a) or 6(b):
(i) In case of the redemption of less than all of the then outstanding
Convertible Preferred Stock, the Corporation shall designate by lot, or in such
other manner as the Board of Directors may determine, the shares to be redeemed,
or shall effect such redemption pro rata. Notwithstanding the foregoing, the
Corporation shall not redeem less than all of the Convertible Preferred Stock at
any time outstanding until all dividends accumulated and in arrears upon all
Convertible Preferred Stock then outstanding shall have been paid for all past
dividend periods.
(ii) Not more than 60 nor less than 30 days prior to the redemption date,
notice by first class mail, postage prepaid, shall be given to the holders of
record of the Convertible Preferred Stock to be redeemed, addressed to such
shareholders at their last addresses as shown on the stock books of the
Corporation. Each such notice of redemption shall specify the date fixed for
redemption; the redemption price; the place or places of payment; the
then-effective Conversion Rate and Conversion Price (as defined in Section 7);
that the right of holders of Convertible Preferred Stock called for redemption
to exercise their conversion right pursuant to Section 7 shall expire as to such
shares at the close of business on the date fixed for redemption (provided that
there is no default in payment of the Redemption Price); that payment of the
Redemption Price will be made upon presentation and surrender of certificates
representing the shares of Convertible Preferred Stock; that accumulated but
unpaid dividends to the date fixed for redemption will be paid on the date fixed
for redemption; that accumulated but unpaid dividends will not be paid in the
case of a conversion of Convertible Preferred Stock; and that on and after the
redemption date, dividends will cease to accumulate on such shares.
(iii) On or after the date fixed for redemption as stated in such notice,
each holder of the shares called for redemption (other than shares which have
been duly surrendered for conversion at or before the close of business on the
date fixed for redemption) shall surrender the certificate or certificates
evidencing such shares to the Corporation at the place designated in such notice
and shall thereupon be entitled to receive payment of the Redemption Price. If
fewer than all the shares represented by any such surrendered certificate or
certificates are redeemed, a new certificate shall be issued representing the
unredeemed shares. If, on the date fixed for redemption, funds necessary for the
redemption shall be available therefor and shall have been irrevocably deposited
or set aside, then, notwithstanding that the certificates evidencing any
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shares so called for redemption shall not have been surrendered, the dividends
with respect to the shares so called shall cease to accumulate on and after the
date fixed for redemption, such shares shall no longer be deemed outstanding,
the holders thereof shall cease to be shareholders, and all rights whatsoever
with respect to such shares (except the right of the holders thereof to receive
the Redemption Price without interest upon surrender of their certificates)
shall terminate.
Section 7. CONVERSION AT OPTION OF HOLDERS. Holders of Convertible
Preferred Stock may, at their option upon surrender of the certificates
therefor, convert any or all of their shares of Convertible Preferred Stock into
fully paid and nonassessable shares of Common Stock (and such other securities
and property as they may be entitled to, as hereinafter provided) at any time
after issuance thereof; provided, that such conversion right shall expire at the
close of business on the date, if any, fixed for the redemption of Convertible
Preferred Stock in any notice of redemption given pursuant to Section 6 hereof
if there is no default in payment of the Redemption Price. Each share of
Convertible Preferred Stock shall be convertible at the office of any transfer
agent for the Convertible Preferred Stock, and at such other office or offices,
if any, as the Board of Directors may designate, into that number of fully paid
and nonassessable shares of Common Stock (calculated as to each conversion to
the nearest 1/100th of a share) as shall be equal to the Conversion Rate,
determined as hereinafter provided, in effect at the time of conversion. Shares
of Convertible Preferred Stock may initially be converted into full shares of
Common Stock at the rate of 46.80 shares of Common Stock for each share of
Convertible Preferred Stock, subject to adjustment from time to time as provided
in Section 8 (such conversion rate, as so adjusted from time to time, being
referred to herein as the "CONVERSION RATE"). The "CONVERSION PRICE" shall be
equal to $1,000 divided by the Conversion Rate. Upon conversion, no adjustment
or payment shall be made in respect of accumulated and unpaid dividends on the
Convertible Preferred Stock surrendered for conversion.
The right of holders of Convertible Preferred Stock to convert their shares
shall be exercised by surrendering for such purpose to the Corporation or its
agent, as provided above, certificates representing shares to be converted, duly
endorsed in blank or accompanied by proper instruments of transfer. The
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of Common Stock or other
securities or property upon conversion of Convertible Preferred Stock in a name
other than that of the holder of the shares of Convertible Preferred Stock being
converted, nor shall the Corporation be required to issue or deliver any such
shares or other securities or property unless and until the person or persons
requesting the issuance thereof shall have paid to the Corporation the amount of
any such tax or shall have established to the satisfaction of the Corporation
that such tax has been paid.
A number of shares of the authorized but unissued Common Stock sufficient
to provide for the conversion of the Convertible Preferred Stock outstanding
upon the basis hereinbefore provided shall at all times be reserved by the
Corporation, free from preemptive rights, for such conversion, subject to the
provisions of the next paragraph. If the Corporation shall issue any securities
or make any change in its capital structure which would change the number of
shares
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of Common Stock into which each share of the Convertible Preferred Stock
shall be convertible as herein provided, the Corporation shall at the same time
also make proper provision so that thereafter there shall be a sufficient number
of shares of Common Stock authorized and reserved, free from preemptive rights,
for conversion of the outstanding Convertible Preferred Stock on the new basis.
The Corporation shall comply with all securities laws regulating the offer and
delivery of shares of Common Stock upon conversion of the Convertible Preferred
Stock and shall use its best efforts to list such shares on each national
securities exchange on which the Common Stock is listed or to have such shares
admitted for quotation on the Nasdaq National Market if the Common Stock is
admitted for quotation thereon.
Upon the surrender of certificates representing shares of Convertible
Preferred Stock to be converted, duly endorsed or accompanied by proper
instruments of transfer as provided above, the person converting such shares
shall be deemed to be the holder of record of the Common Stock issuable upon
such conversion, and all rights with respect to the shares surrendered shall
forthwith terminate except the right to receive the Common Stock or other
securities, cash or other assets as herein provided.
No fractional shares of Common Stock shall be issued upon conversion of
Convertible Preferred Stock but, in lieu of any fraction of a share of Common
Stock which would otherwise be issuable in respect of the aggregate number of
such shares surrendered for conversion at one time by the same holder, the
Corporation shall pay in cash an amount equal to the product of (a) the Closing
Price of a share of Common Stock (as defined in the next sentence) on the last
trading day before the conversion date and (b) such fraction of a share. The
"CLOSING PRICE" for such day shall be the last reported sale price regular way
or, in case no sale takes place on such day, the average of the closing bid and
asked prices regular way on such day, in either case as reported on the New York
Stock Exchange Composite Tape, or, if the Common Stock is not listed or admitted
to trading on such Exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading, or, if the Common Stock
is not listed or admitted to trading on any national securities exchange, on the
Nasdaq National Market System, or, if the Common Stock is not admitted for
quotation on the Nasdaq National Market System, the average of the high bid and
low asked prices on such day as recorded by the National Association of
Securities Dealers, Inc. through Nasdaq, or, if the National Association of
Securities Dealers, Inc. through Nasdaq shall not have reported any bid and
asked prices for the Common Stock on such day, the average of the bid and asked
prices for such day as furnished by any New York Stock Exchange member firm
selected from time to time by the Corporation for such purpose, or, if no such
bid and asked prices can be obtained from any such firm, the fair market value
of one share of the Common Stock on such day as determined in good faith by the
Board of Directors of the Corporation.
Section 8. ADJUSTMENTS TO CONVERSION RATE. Notwithstanding anything in this
Section 8 to the contrary, no change in the Conversion Rate shall be made until
the cumulative effect of the adjustments called for by this Section 8 since the
date of the last change in the Conversion Rate would change the Conversion Rate
by more than 1%. However, once the
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cumulative effect would result in such a change, then the Conversion Rate shall
be changed to reflect all adjustments called for by this Section 8 and not
previously made. Subject to the foregoing, the Conversion Rate shall be adjusted
from time to time as follows:
(a) In case of any consolidation or merger of the Corporation with
any other corporation (other than a wholly owned subsidiary of the
Corporation), or in case of any sale or transfer of all or
substantially all of the assets of the Corporation, or in case of
any share exchange pursuant to which all of the outstanding shares
of Common Stock are converted into other securities or property, the
Corporation shall, prior to or at the time of such transaction, make
appropriate provision or cause appropriate provision to be made so
that holders of each share of Convertible Preferred Stock then
outstanding shall have the right thereafter to convert such share of
Convertible Preferred Stock into the kind and amount of shares of
stock and other securities and property receivable upon such
consolidation, merger, sale, transfer or share exchange by a holder
of the number of shares of Common Stock into which such share of
Convertible Preferred Stock could have been converted immediately
prior to the effective date of such consolidation, merger, sale,
transfer or share exchange. If in connection with any such
consolidation, merger, sale, transfer or share exchange, each holder
of shares of Common Stock is entitled to elect to receive either
securities, cash or other assets upon completion of such
transaction, the Corporation shall provide or cause to be provided
to each holder of Convertible Preferred Stock the right to elect the
securities, cash or other assets into which the Convertible
Preferred Stock held by such holder shall be convertible after
completion of any such transaction on the same terms and subject to
the same conditions applicable to holders of the Common Stock
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(including, without limitation, notice of the right to
elect, limitations on the period in which such election
shall be made and the effect of failing to exercise the
election).
(b) In case the Corporation shall (i) pay a dividend or make a
distribution on its Common Stock in shares of its capital stock, (ii)
subdivide its outstanding Common Stock into a greater number of shares,
(iii) combine the shares of its outstanding Common Stock into a smaller
number of shares, or (iv) issue by reclassification of its Common Stock any
shares of its capital stock, then in each such case the Conversion Rate in
effect immediately prior thereto shall be proportionately adjusted so that
the holder of any Convertible Preferred Stock thereafter surrendered for
conversion shall be entitled to receive, to the extent permitted by
applicable law, the number and kind of shares of capital stock of the
Corporation which such holder would have owned or have been entitled to
receive after the happening of such event had such Convertible Preferred
Stock been converted immediately prior to the record date for such event
(or if no record date is established in connection with such event, the
effective date for such action). An adjustment pursuant to this
subparagraph (b) shall become effective immediately after the record date
in the case of a stock dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or reclassification.
(c)(i) In case the Corporation shall issue Additional Shares of
Common Stock (as defined herein) (including, without limitation, Additional
Shares of Common Stock deemed to be issued pursuant to Section 8(c)(iii))
without consideration or for a consideration per share less than the
Current Market Price (as defined herein) calculated as provided herein as
of the date of and immediately prior to such issue, then in each such case
the Conversion Rate in effect on such issue date shall be adjusted in
accordance with the formula:
O + N
C(1) = C x -----
O + N X P
-----
M
where
C(1) = the adjusted Conversion Rate.
C = the current Conversion Rate.
O = the number of shares of Common Stock outstanding immediately
prior to such issue.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the Current Market Price per share of Common Stock immediately
prior to such issue.
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For the purpose of such calculation, the number of shares of Common Stock
outstanding immediately prior to such issue shall be calculated on a fully
diluted basis, as if all shares of Convertible Preferred Stock and all
Convertible Securities had been fully converted into shares of Common Stock
immediately prior to such issuance and any outstanding warrants, options or
other rights for the purchase of shares of stock or convertible securities
had been fully exercised immediately prior to such issuance (and the
resulting securities fully converted into shares of Common Stock, if so
convertible) as of such date.
(ii) For purposes of this Section 8(c), the following definitions
shall apply: (A) "OPTIONS" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities; (B) "CONVERTIBLE SECURITIES" shall mean any
evidences of indebtedness, shares or other securities convertible into or
exchangeable for Common Stock; (C) "ADDITIONAL SHARES OF COMMON STOCK"
shall mean all shares of Common Stock issued (or, pursuant to Section
8(c)(iii), deemed to be issued) by the Corporation after July 26, 1999,
other than shares of Common Stock issued or issuable: (1) upon conversion
of shares of the Convertible Preferred Stock or upon conversion of shares
of 1998A Convertible Preferred Stock; (2) pursuant to a stock grant, option
plan or purchase plan, other employee stock incentive program or agreement
approved by the Board of Directors which was disclosed in Schedule 5.3 of
the 1999 Preferred Stock Purchase Agreement (the "OPTION POOL"); or (3)
pursuant to the terms of any stock grant, option, warrant, employment
agreement or other written obligation, agreement or commitment to which the
Corporation was a party as of July 26, 1999 and which was disclosed in
Schedule 5.3 of the 1999 Preferred Stock Purchase Agreement; and (D)
"CURRENT MARKET PRICE" shall mean the average of the daily Closing Prices
of the Common Stock (as defined in Section 7) on the 30 consecutive
business days commencing 45 business days before such issue date, as
applicable.
(iii) In the event the Corporation at any time or from time to time
after July 26, 1999 shall issue any Options (other than the issuance of
Options pursuant to the Option Pool) or Convertible Securities or shall fix
a record date for the determination of holders of any class of securities
entitled to receive any such Options or Convertible Securities, then the
maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable upon the exercise of
such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall
be deemed to be Additional Shares of Common Stock issued as of the time of
such issue or, in case such a record date shall have been fixed, as of the
close of business on such record date, provided that Additional Shares of
Common Stock shall not be deemed to have been issued unless the
consideration per share of such Additional Shares of Common Stock would be
less than the Current Market Price calculated as provided herein as of the
date of and immediately prior to such issue, or such record date, as the
case may be, and provided further that in any such case in which
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Additional Shares of Common Stock are deemed to be issued no further
adjustment in the Conversion Price shall be made upon the subsequent issue
of Convertible Securities or shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible Securities.
(iv) Upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not
have been exercised, the Conversion Price and Conversion Rate computed upon
the original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall, upon
such expiration, be recomputed as if:
(A) in the case of Convertible Securities or Options for Common
Stock the only Additional Shares of Common Stock issued were the shares of
Common Stock, if any, actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by
the Corporation for the issue of all such Options, whether or not
exercised, plus the consideration actually received by the corporation upon
such exercise, or for the issue of all such Convertible Securities which
were actually converted or exchanged, plus the additional consideration, if
any, actually received by the Corporation upon such conversion or exchange;
and
(B) in the case of Options for Convertible Securities only the
Convertible Securities, if any, actually issued upon the exercise thereof
were issued at the time of issue of such Options, and the consideration
received by the Corporation for the Additional Shares of Common Stock
deemed to have been then issued was the consideration actually received by
the Corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the
Corporation upon the issue of the Convertible Securities or Convertible
Preferred Stock with respect to which such Options were actually exercised.
(e) All calculations hereunder shall be made to the nearest cent or
to the nearest 1/100 of a share, as the case may be.
(f) In the event that at any time, as a result of an adjustment made
pursuant to subparagraph (a) or (b) above, the holder of any Convertible
Preferred Stock thereafter surrendered for conversion shall become entitled
to receive securities, cash or assets other than Common Stock, the number
or amount of such securities or property so receivable upon conversion
shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in subparagraphs (a) through (e) above.
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Except as otherwise provided above in this Section 8, no adjustment in the
Conversion Rate shall be made in respect of any conversion for share
distributions or dividends theretofore declared and paid or payable on the
Common Stock.
Whenever the Conversion Rate is adjusted as herein provided, the
Corporation shall send to each transfer agent for the Convertible Preferred
Stock and the Common Stock, and to the principal securities exchange, if any, on
which the Convertible Preferred Stock and the Common Stock is traded, or the
Nasdaq National Market if the Convertible Preferred Stock or Common Stock is
admitted for quotation thereon, a statement signed by the Chairman of the Board,
the President or any Vice President of the Corporation and by its Treasurer or
its Secretary stating the adjusted Conversion Rate determined as provided in
this Section 8; and any adjustment so evidenced, given in good faith, shall be
binding upon all shareholders and upon the Corporation. Whenever the Conversion
Rate is adjusted, the Corporation shall give notice by mail at the time of, and
together with, the next dividend payment to the holders of record of Convertible
Preferred Stock, setting forth the adjustment and the new Conversion Rate and
Conversion Price. Notwithstanding the foregoing notice provisions, failure by
the Corporation to give such notice or a defect in such notice shall not affect
the binding nature of such corporate action of the Corporation.
Whenever the Corporation shall propose to take any of the actions specified
in subparagraphs (a), (b) or (c) of the first paragraph of this Section 8 which
would result in any adjustment in the Conversion Rate, the Corporation shall
cause a notice to be mailed at least 20 days prior to the date on which the
books of the Corporation will close or on which a record will be taken for such
action to the holders of record of the outstanding Convertible Preferred Stock
on the date of such notice. Such notice shall specify the action proposed to be
taken by the Corporation and the date as of which holders of record of the
Common Stock shall participate in any such actions or be entitled to exchange
their Common Stock for securities or other property, as the case may be. Failure
by the Corporation to give such notice or any defect in such notice shall not
affect the validity of the transaction.
Anything herein to the contrary notwithstanding, no adjustment will be made
to the Conversion Price or Conversion Rate by reason of (i) the issuance of
Common Stock, Options or Convertible Securities to employees, directors,
officers or consultants of the Corporation or any subsidiary of the Corporation
pursuant to the Option Pool or the issuance of Common Stock upon the conversion,
exercise or exchange thereof, (ii) the issuance of Common Stock upon the
conversion, exercise or exchange of Options or Convertible Securities issued and
outstanding on July 26, 1999, including, without limitation, the issuance of
Common Stock upon the conversion of any shares of 1998A Convertible Preferred
Stock, (iii) the issuance of Common Stock upon the conversion of the Convertible
Preferred Stock, (iv) rights to purchase Common Stock pursuant to a Corporation
plan for reinvestment of dividends or interest, (v) the issuance of Common Stock
upon the exercise, conversion or exchange of Options or Convertible Securities
of the Corporation where the Conversion Price had previously been adjusted
pursuant to this Section 8 upon the initial issuance of such Options or
Convertible Securities. In addition, no
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adjustment in the Conversion Price need be made for a change in the par value
of the Common Stock.
Section 9. CONVERTIBLE PREFERRED STOCK NOT REDEEMABLE AT OPTION OF HOLDERS
OR EXCHANGEABLE; NO SINKING FUND. The Convertible Preferred Stock shall not be
redeemable upon the request of holders thereof or exchangeable for other capital
stock or indebtedness of the Corporation or other property. The shares of
Convertible Preferred Stock shall not be subject to the operation of a purchase,
retirement or sinking fund.
Section 10. VOTING RIGHTS. Except as herein provided or as otherwise
required by law, holders of Convertible Preferred Stock shall be entitled to the
same voting rights as, and shall vote together as one class with, holders of
Common Stock, with each holder of shares of Convertible Preferred Stock having
such voting rights as are attributable to the number of whole shares of Common
Stock into which such shares of Convertible Preferred Stock are convertible in
accordance with Sections 7 and 8 hereof as of the date of such vote.
In addition to any matters requiring a separate vote of the Convertible
Preferred Stock as a single class under applicable law, the approval of the
holders of a majority of the issued and outstanding shares of Convertible
Preferred Stock, voting as a class, shall be required as set forth in Section 11
hereof with respect to the priority and rights of the Convertible Preferred
Stock hereunder and under the Corporation's Certificate of Incorporation, as
amended.
At each meeting of shareholders at which the holders of shares of
Convertible Preferred Stock shall have the right, voting separately as a single
class, to take any action, the presence in person or by proxy of the holders of
record of at least 50% of the shares of Convertible Preferred Stock outstanding
and entitled to vote on the matter shall be necessary and sufficient to
constitute a quorum. At each such meeting, each holder of shares of Convertible
Preferred Stock shall be entitled to vote for each share of Convertible
Preferred Stock then held. In the absence of a quorum of the holders of shares
of Convertible Preferred Stock, a majority of the holders of such shares present
in person or by proxy shall have the power to adjourn the meeting as to the
actions to be taken by the holders of shares of Convertible Preferred Stock from
time to time and place to place without notice other than announcement at the
meeting until a quorum shall be present.
Section 11. CERTAIN ACTIONS NOT TO BE TAKEN WITHOUT VOTE OF HOLDERS OF
CONVERTIBLE PREFERRED STOCK. Without the consent or affirmative vote of the
holders of at least a majority of the outstanding shares of Convertible
Preferred Stock, voting separately as a class, the Corporation shall not
authorize, create or issue any shares of any other class or series of capital
stock ranking senior to the Convertible Preferred Stock as to dividends or upon
liquidation. The affirmative vote or consent of the holders of at least a
majority of the outstanding shares of the Convertible Preferred Stock, voting
separately as a class, shall be required for any amendment, alteration or
repeal, whether by merger or consolidation or otherwise, of the Corporation's
Certificate of Incorporation (including any certificate of designations
establishing any class or series of Preferred Stock of the Corporation) if the
amendment, alteration or repeal adversely
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<PAGE>
affects the rights or preferences of the Convertible Preferred Stock; provided,
however, that any increase in the authorized Preferred Stock of the Corporation
or the creation and issuance of any other capital stock of the Corporation
ranking on a parity with or junior to the Convertible Preferred Stock shall not
be deemed to materially affect such powers, preferences or special rights.
Section 12. OUTSTANDING SHARES. For purposes of this Certificate of
Designations, all shares of Convertible Preferred Stock shall be deemed
outstanding except for (a) shares of Convertible Preferred Stock held of record
or beneficially by the Corporation or any subsidiary of the Corporation; (b)
from the date of surrender of certificates representing Convertible Preferred
Stock for conversion pursuant to Section 7, all shares of Convertible Preferred
Stock which have been converted into Common Stock or other securities or
property pursuant to Section 7; and (c) from the date fixed for redemption
pursuant to Section 6, all shares of Convertible Preferred Stock which have been
called for redemption, provided that funds necessary for such redemption are
available therefor and have been irrevocably deposited or set aside for such
purpose.
Section 13. STATUS OF CONVERTIBLE PREFERRED STOCK UPON RETIREMENT. Shares
of Convertible Preferred Stock which are acquired or redeemed by the Corporation
or converted pursuant to Section 7 shall be retired pursuant to the Delaware
General Corporation Law, Section 243, or any successor provision, and thereupon
shall return to the status of authorized and unissued shares of Preferred Stock
of the Corporation without designation as to series. Upon the acquisition or
redemption by the Corporation or conversion pursuant to Section 7 of all
outstanding shares of Convertible Preferred Stock, all provisions of this
Certificate of Designations shall cease to be of further effect. Upon the
occurrence of such event, the Board of Directors of the Corporation shall have
the power, pursuant to the Delaware General Corporation Law, Section 151(g), or
any successor provision and without shareholder action, to cause this
Certificate of Designations to be eliminated from the Corporation's Certificate
of Incorporation.
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<PAGE>
IN WITNESS WHEREOF, New Century Financial Corporation has caused this
certificate to be signed by Robert K. Cole, its Chairman and Chief Executive
Officer, and attested by Brad A. Morrice, its Secretary, this 26th day of July,
1999.
NEW CENTURY FINANCIAL
CORPORATION
By
Robert K. Cole
Chairman and Chief Executive Officer
Attest:
By
-------------------------------
Brad A. Morrice
Secretary
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<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (the "Agreement")
is entered into as of July 26, 1999, by and between New Century Financial
Corporation, a Delaware corporation (the "Company"), and U.S. Bancorp, a
Delaware corporation (the "Purchaser").
WHEREAS, on November 24, 1998, the Purchaser purchased shares of the
Company's Series 1998A Convertible Preferred Stock.
WHEREAS, the Company and the Purchaser are a party to the Registration
Rights Agreement dated as of November 24, 1998 (the "1998 Registration Rights
Agreement") relating to the Company's agreements to register under the
Securities Act the shares of the Company's Common Stock issuable upon conversion
of the Company's outstanding Series 1998A Convertible Preferred Stock.
WHEREAS, the Purchaser has agreed to purchase shares of the Company's
Series 1999A Convertible Preferred Stock.
WHEREAS, in connection with such purchase, the Company and the Purchaser
desire to amend and restate the 1998 Registration Rights Agreement to include
certain arrangements with respect to the registration for public sale under the
Securities Act of 1933, as amended (the "Securities Act"), of the shares of the
Company's Common Stock, $.01 par value per share, issuable upon conversion of
the Series 1999A Convertible Preferred Stock.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchaser
hereby agree as follows:
1. DEFINITIONS.
1.1 "Affiliate" shall mean any person that directly or indirectly
controls or is controlled by, or is under common control with, another specified
person.
1.2 "COMMISSION" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
1.3 "COMPANY" shall mean New Century Financial Corporation, a
Delaware corporation.
<PAGE>
1.4 "COMMON SHARES" shall mean the shares of common stock, par
value $.01 per share, authorized by the Company's Certificate of
Incorporation and any additional shares of common stock which may be
authorized in the future by the Company, and any stock into which such Common
Shares may hereafter be changed, and shall also include capital stock of any
other class of the Company which is not preferred as to dividends or assets
over any other class of stock of the Company and which is not subject to
redemption.
1.5 "FOUNDING MANAGERS" shall mean Robert K. Cole, Brad A.
Morrice, Steven G. Holder and Edward F. Gotschall.
1.6 "OTHER SHAREHOLDERS" shall mean Paul B. Akers and Kirk Redding,
and their successors in interest, under that certain Merger Agreement, dated as
of December 17, 1997, among the Company, NC Acquisition Corp., PFW Corporation
and the shareholders named therein.
1.7 "PREFERRED STOCK" shall mean all outstanding shares of (a) the
Series 1999A Convertible Preferred Stock, par value $.01 per share, of the
Company, and any securities (other than Common Shares) into which such shares
may hereafter be changed and (b) the Series 1998A Convertible Preferred Stock,
par value $.01 per share, of the Company, and any Securities (other than the
Common Shares) into which such shares may hereafter be changed.
1.8 "PUBLIC OFFERING" shall mean any offering of Common Shares to
the public, either on behalf of the Company or any of its security holders,
pursuant to an effective registration statement under the Securities Act.
1.9 "PURCHASER" shall mean U.S. Bancorp, a Delaware corporation.
1.10 "REGISTRABLE SECURITIES" shall mean (a) the Common Shares at
any time issued or subject to issuance upon the conversion of the Preferred
Stock and (b) any additional securities issued with respect to the
above-described securities upon any stock split, stock dividend,
recapitalization, or similar event. Registrable Securities shall cease to be
Registrable Securities when (w) a registration statement with respect to the
sale of such securities shall have been declared effective under the Securities
Act and such securities shall have been disposed of in accordance with such
registration statement, (x) such securities shall be eligible to be distributed
pursuant to Rule 144(k) under the Securities Act, (y) such securities shall have
ceased to be outstanding, or (z) such securities are transferred in a
transaction in which the rights hereunder are not assigned as permitted by
Section 9.
1.11 "REGISTRATION EXPENSES" shall mean the expenses described in
Section 5.
1.12 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
1.13 "STOCK PURCHASE AGREEMENT" shall mean the Preferred Stock
Purchase Agreement dated July 26, 1999 between the Company and the Purchaser.
<PAGE>
2. DEMAND REGISTRATION.
2.1 Subject to Sections 2.3, 2.4, 2.5 and 2.6, if at any time the
Company shall receive a written request therefor from the record holder or
holders of an aggregate of at least 51% of the Registrable Securities, the
Company shall prepare and file a registration statement under the Securities Act
covering such number of Registrable Securities as are the subject of such
request and shall use its best efforts to cause such registration statement to
become effective. Upon the receipt of a registration request meeting the
requirements of this Section 2.1, the Company shall promptly give written notice
to all other record holders of Registrable Securities that such registration is
to be effected. The Company shall include in such registration statement such
additional Registrable Securities as such other record holders request in
writing within fifteen (15) days after the date of the Company's written notice
to them. If (a) the holders of a majority of the Registrable Securities for
which registration has been requested pursuant to this Section 2.1 determine for
any reason not to proceed with the registration at any time before the related
registration statement has been declared effective by the Commission, (b) such
registration statement, if theretofore filed with the Commission, is withdrawn
and (c) the holders of the Registrable Securities subject to such registration
statement agree to bear their own Registration Expenses incurred in connection
therewith and to reimburse the Company for the Registration Expenses incurred by
it in such connection or if such registration statement, if theretofore filed
with the Commission, is withdrawn at the initiative of the Company, then the
holders of the Registrable Securities shall not be deemed to have exercised
their demand registration right pursuant to this Section 2.1.
2.2 At the request of the holders of a majority of the Registrable
Securities to be registered, the method of disposition of all Registrable
Securities included in such registration shall be an underwritten Public
Offering. The managing underwriter of any such Public Offering shall be selected
by the majority of the Registrable Securities, provided that such managing
underwriter is reasonably acceptable to the Company.
2.3 The Company shall be obligated to prepare, file and cause to be
effective not more than two registration statements pursuant to Section 2.1.
2.4 Notwithstanding the foregoing, the Company may delay initiating
the preparation and filing of any registration statement requested pursuant to
Section 2.1 for a period not to exceed one hundred eighty (180) days if, in the
good faith judgment of the Company's Board of Directors, filing the registration
statement would reasonably be expected to have a Material Adverse Effect (as
defined in the Stock Purchase Agreement), which Material Adverse Effect could
reasonably be expected to be avoided by delaying such filing for such period.
2.5 Notwithstanding anything to the contrary contained herein, at
any time within thirty (30) days after receiving a demand for registration
pursuant to Section 2.1, the Company may elect to effect an underwritten primary
registration in lieu of the requested registration. If the Company so elects,
the Company shall give prompt written notice to all holders of Registrable
Securities of its intention to effect such a registration and shall afford such
<PAGE>
holders the rights contained in Article 3 with respect to "piggyback"
registrations. In such event, the demand for registration pursuant to Section
2.1 shall be deemed to have been withdrawn.
2.6 The Company shall not be obligated to effect a demand
registration (a) within 180 days after the effective date of a previous demand
registration or a previous registration in which the holders of Registrable
Securities were given piggy-back registration rights pursuant to this Agreement
and in which there was no reduction in the number of Registrable Securities
requested to be included or (b) prior to the first anniversary of this
Agreement, provided that this Section 2.6(b) shall not be applicable if the
Purchaser notifies the Company in writing that Purchaser, in its reasonable
judgment, has determined that it is required to divest all or a portion of the
Registrable Securities in order to satisfy or comply with regulatory
requirements applicable to Purchaser.
3. PIGGYBACK REGISTRATION.
3.1 Each time the Company shall determine to proceed with the actual
preparation and filing of a registration statement under the Securities Act in
connection with the proposed offer and sale for money of any of its securities
by it or any of its security holders (other than a registration statement on
Form S-8, Form S-4 or other limited purpose form), the Company will give written
notice of its determination to all record holders of Registrable Securities.
Upon the written request of a record holder of any Registrable Securities given
within 15 days after the date of the receipt of any such notice from the
Company, the Company will, except as herein provided, use its best efforts to
cause all Registrable Securities the registration of which is requested to be
included in such registration statement, all to the extent requisite to permit
the sale or other disposition by the prospective seller or sellers of the
Registrable Securities to be so registered; PROVIDED, HOWEVER, that nothing
herein shall prevent the Company from, at any time, abandoning or delaying in
its sole and absolute discretion any registration.
3.2 If any registration pursuant to Section 3.1 is underwritten in
whole or in part, the Company may require that the Registrable Securities
included in the registration be included in the underwriting on the same terms
and conditions as the securities otherwise being sold through the underwriters.
If, in the good faith judgment of the managing underwriter of the Public
Offering, marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may exclude some or all of the
Registrable Securities from such registration and underwriting. Any reduction in
the number of securities of the Company included in such registration and
underwriting shall be borne (i) first by the Founding Managers and the Other
Shareholders pro rata based on the number of shares, if any, for which
registration was requested by the Founding Managers and the Other Shareholders,
(ii) second by the Holders of Registrable Securities pro rata based on the
number of shares, if any, for which registration was requested by such Holders,
and (iii) then equally by the other holders of securities of the Company
requested to be included in such registration and underwriting, as a group, pro
rata based on the number of shares for which registration was requested by such
holders. The Registrable Securities which are thus excluded from the
underwritten Public Offering shall be withheld from the market by the holders
thereof for a period which the managing underwriter reasonably determines is
necessary in order to effect the Public Offering.
<PAGE>
4. REGISTRATION PROCEDURES. If and whenever the Company is required by the
provisions of Article 2 or Article 3 to effect a registration of Registrable
Securities under the Securities Act, the Company will use its best efforts to
effect the registration and sale of such Registrable Securities in accordance
with the intended methods of disposition specified by the holders participating
therein. Without limiting the foregoing, the Company in each such case will, as
expeditiously as possible:
4.1 In the case of a demand registration pursuant to Section 2.1,
prepare and file with the Commission the requisite registration statement to
effect such registration (including such audited financial statements as may be
required by the Securities Act or the rules and regulations thereunder) and use
its best efforts to cause such registration statement to become effective;
PROVIDED, HOWEVER, that as far in advance as practical before filing such
registration statement or any amendment thereto, the Company will furnish
counsel for the requesting holders of Registrable Securities with copies of
reasonably complete drafts of all such documents proposed to be filed (including
exhibits), and any such holder shall have the opportunity to object to any
information pertaining solely to such holder that is contained therein and the
Company will make the corrections reasonably requested by such holder with
respect to such information prior to filing such registration statement or
amendment.
4.2 Prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in connection
therewith as may be necessary to maintain the effectiveness of such registration
statement and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities included in such registration
statement, in accordance with the intended methods of disposition thereof, until
the earlier of (a) such time as all of the Registrable Securities included in
such registration statement have been disposed of in accordance with the
intended methods of disposition by the holder or holders thereof as set forth in
such registration statement or (b) 180 days (or, if the filing was on a Form S-3
registration statement, 365 days) after such registration statement becomes
effective; provided, that, in the event the holder of Registrable Securities is
required to discontinue such holder's disposition of Registrable Securities
pursuant to Section 4.11 hereof, such 180-days (or 365 days, if applicable)
shall be extended for such additional period as is equal to the period during
which such holders was required to discontinue such disposition.
4.3 Promptly notify each requesting holder and the underwriter or
underwriters, if any, of:
(a) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been filed
and, with respect to such registration statement or any post-effective amendment
thereto, when the same has become effective;
(b) any written request by the Commission for amendments or
supplements to such registration statement or prospectus;
<PAGE>
(c) any notification received by the Company from the Commission
regarding the Commission's initiation of any proceeding with respect to, or of
the issuance by the Commission of, any stop order suspending the effectiveness
of such registration statement; and
(d) the receipt by the Company of any notification with respect to
the suspension of the qualification of any Registrable Securities for sale under
the applicable securities or blue sky laws of any jurisdiction.
4.4 Furnish to each holder of Registrable Securities included in
such registration statement such number of conformed copies of such registration
statement and of each amendment and supplement thereto, and such number of
copies of the prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 promulgated under the Securities Act relating to such
seller's Registrable Securities, and such other documents, as such holder may
reasonably request to facilitate the disposition of its Registrable Securities.
4.5 Use its best efforts to register or qualify all Registrable
Securities included in such registration statement under the securities or "blue
sky" laws of such states as each holder of Registrable Securities shall
reasonably request within twenty (20) days following the original filing of such
registration statement and to keep such registration or qualification in effect
for so long as such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable such holder to
consummate the disposition in such states of the Registrable Securities owned by
such holder, except that the Company shall not for any such purpose be required
(a) to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this Section 4.5
be obligated to be so qualified, (b) to consent to general service of process in
any such jurisdiction or (c) to subject itself to taxation in any such
jurisdiction by reason of such registration or qualification.
4.6 Use its best efforts to cause all Registrable Securities
included in such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to enable
each holder thereof to consummate the disposition of such Registrable
Securities.
4.7 Notify each holder whose Registrable Securities are included in
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which any prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and at the request of any such holder promptly prepare and
furnish to such holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the Purchaser of such Registrable Securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
<PAGE>
4.8 Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission.
4.9 Use its best efforts to cause all Registrable Securities
included in such registration statement to be listed, upon official notice of
issuance, on any securities exchange or quotation system on which any of the
securities of the same class as the Registrable Securities are then listed.
4.10 The Company may require each holder whose Registrable
Securities are being registered to, and each such holder, as a condition to
including Registrable Securities in such registration statement, shall, furnish
the Company and the underwriters with such information and affidavits regarding
such holder and the distribution of such Registrable Securities as the Company
and the underwriters may from time to time reasonably request in writing in
connection with such registration statement. At any time during the
effectiveness of any registration statement covering Registrable Securities
offered by a holder, if such holder becomes aware of any change materially
affecting the accuracy of the information contained in such registration
statement or the prospectus (as then amended or supplemented) relating to such
holder, it will immediately notify the Company of such change.
4.11 Upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 4.7, each holder will forthwith
discontinue such holder's disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until such holder
receives the copies of the supplemented or amended prospectus contemplated by
Section 4.7 and, if so directed by the Company, shall deliver to the Company all
copies, other than permanent file copies, then in such holder's possession of
the prospectus relating to such Registrable Securities.
4.12 As used in this Agreement, the term "best efforts" shall not
mean efforts which require the performing party to do any act that is
unreasonable under the circumstances or to expend any funds other than
reasonable out-of-pocket expenses incurred in satisfying its obligations
hereunder, including but not limited to the fees, expenses and disbursements of
its accountants, counsel and other professionals.
5. EXPENSES. With respect to any registration requested pursuant to Article
2 (except as otherwise provided in such Article with respect to a registration
voluntarily terminated at the request of the requesting holders of Registrable
Securities) the Company shall bear all of the expenses ("Registration Expenses")
incident to the Company's performance of or compliance with its obligations
under this Agreement in connection with such registration including, without
limitation, all registration, filing, securities exchange listing and NASD fees,
all registration, filing, qualification and other fees and expenses or complying
with state securities or "blue sky" laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees and disbursements
of counsel for the Company and of its independent public accountants, including
the expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance, premiums and other costs of any
policies of
<PAGE>
insurance against liabilities arising out of the Public Offering of the
Registrable Securities being registered obtained by the Company (it being
understood that the Company shall have no obligation to obtain such insurance)
and any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities; but excluding underwriting discounts and commissions and
transfer taxes, if any, in respect of Registrable Securities and any fees and
disbursements of counsel and accountants to the holders of the Registrable
Securities, which discounts, commissions, transfer taxes, fees and disbursements
shall in any registration be payable by the holders of the Registrable
Securities being registered, PRO RATA in proportion to the number of Registrable
Securities being sold by them.
6. INDEMNIFICATION.
6.1 The Company will, to the full extent permitted by law, indemnify
and hold harmless each holder of Registrable Securities which are included in a
registration statement pursuant to the provisions of this Agreement, and its
directors, officers and partners and each other person, if any, who controls
such holder within the meaning of the Securities Act, from and against any and
all losses, claims, damages, expenses or liabilities, joint or several
(collectively, "Losses") to which such holder or any such director, officer,
partner or controlling person may become subject under the Securities Act or
otherwise, insofar as such Losses (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in a
registration statement prepared and filed hereunder, any preliminary, final or
summary prospectus contained therein or any amendment or supplement thereto or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, and the Company will reimburse the holder and each such director,
officer, partner and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
against any such Losses (or action or proceeding in respect thereof); PROVIDED,
HOWEVER, that the Company will not be liable in any such case to the extent that
any such Losses arise out of or are based upon (a) an untrue statement or
alleged untrue statement or omission or alleged omission made in conformity with
written information furnished by such holder specifically for use in the
preparation of the registration statement or (b) such holder's failure to send
or give a copy of the final prospectus to the persons asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such holder or any such director, officer,
partner or controlling person of such holder and shall survive the transfer of
such securities by such holder. The Company shall also indemnify each other
person who participates (including as an underwriter) in the offering or sale of
Registrable Securities, their officers and directors, and partners, and each
other person, if any, who controls any such participating person within the
meaning of the Securities Act to the same extent provided above with respect to
holders of Registrable Securities.
<PAGE>
6.2 Each holder of Registrable Securities which are included in a
registration pursuant to the provisions of this Agreement will, to the full
extent permitted by law, indemnify and hold harmless the Company, its officers,
directors and each other person, if any, who controls the Company within the
meaning of the Securities Act from and against any and all Losses to which the
Company or any such officer, director or controlling person may become subject
under the Securities Act or otherwise, insofar as such Losses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue or alleged untrue statement of any material fact
contained in a registration statement prepared and filed hereunder, any
preliminary, final or summary prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was so made in reliance
upon and in strict conformity with written information furnished by such holder
specifically for use in the preparation of such registration statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
person of the Company. The holder of Registrable Securities included in a
registration statement shall also indemnify each other person who participates
(including as an underwriter) in the offering or sale of Registrable Securities,
their officers and directors, and partners, and each other person, if any, who
controls any such participating person within the meaning of the Securities Act
to the same extent as providd above with respect to the Company. In no event
shall the liability of any holder under this Section 6.2 exceed the gross
proceeds received by such holder from the sale of their Registrable Securities.
6.3 Promptly after receipt by a party indemnified pursuant to the
provisions of Section 6.1 or Section 6.2 of notice of the commencement of any
action involving the subject matter of the foregoing indemnity provisions, such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of Section 6.1 or Section 6.2,
promptly notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against any indemnified party,
the indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; PROVIDED, HOWEVER, that if the defendants in any action include both the
indemnified party and the indemnifying party and the indemnified party
reasonably concludes that there is a conflict of interest that would prevent
counsel for the indemnifying party from also representing the indemnified party,
the indemnified party shall have the right to select one separate counsel to
participate in the defense of such action on behalf of the indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party pursuant to the provisions of Section 6.1 or
Section 6.2 for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof unless (a) the
indemnified party shall have employed counsel in
<PAGE>
accordance with the proviso of the preceding sentence, (b) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after the
notice of the commencement of the action or (c) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. If the indemnifying party is not entitled to, or elects
not to, assume the defense of a claim, it will not be obligated to pay the fees
and expenses of more than one counsel for the indemnified parties with respect
to such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other
indemnified parties with respect to such claim, in which event the indemnifying
party shall be obligated to pay the fees and expenses of additional counsel or
counsels for the indemnified parties, but only to the extent necessary to cure
such conflict of interest. No indemnifying party shall consent to entry of any
judgment or enter into any settlement which does not include as an uncondtional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation without
the consent of the indemnified party. No indemnifying party shall be subject to
any liability for any settlement made without its consent. An indemnified party
may at any time elect to participate in the defense of any claim or proceeding
at its own expense.
7. UNDERWRITTEN OFFERINGS. If a distribution of Registrable Securities
pursuant to a registration statement is to be underwritten, the holders whose
Registrable Securities are to be distributed by such underwriters shall be
parties to such underwriting agreement. No requesting holder may participate in
such underwritten offering unless such holder agrees to sell its Registrable
Securities on the basis provided in such underwriting agreement and completes
and executes all questionnaires, powers of attorney, indemnities and other
documents reasonably required under the terms of such underwriting agreement. If
any requesting holder disapproves of the terms of an underwriting, such holder
may elect to withdraw therefrom and from such registration by notice to the
Company and the managing underwriter, and each of the remaining requesting
holders shall be entitled to increase the number of Registrable Securities being
registered to the extent of the Registrable Securities so withdrawn in the
proportion which the number of Registrable Securities being registered by such
remaining requesting holder bears to the total number of Registrable Securities
being registered by all such remaining requesting holders.
8. STAND-OFF AGREEMENT. Each holder of Registrable Securities agrees, so
long as such holder holds at least 5% of the Company's outstanding voting equity
securities, in connection with a Public Offering, upon request of the Company or
the underwriters managing such Public Offering, not to sell, make any short sale
of, loan, grant any option for the purchase of, or otherwise dispose of any
Common Shares of the Company without the prior written consent of the Company or
such underwriters, as the case may be, for such period of time (not exceeding
180 days) from the effective date of the registration statement relating to such
Public Offering as may be requested by the underwriters; PROVIDED, HOWEVER, that
all other persons with registration rights (whether or not pursuant to this
Agreement) and all of the executive officers and directors of the Company who
own stock of the Company must also agree to not less onerous restrictions.
<PAGE>
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register the Registrable Securities pursuant to this Agreement may not be
assigned by the Purchaser except (a) to an Affiliate of the Purchaser without
limitation or (b) to a transferee or assignee of Registrable Securities
representing or convertible into 5% or more of the Company's outstanding Common
Shares. In the case of either (a) or (b) the Purchaser shall, within a
reasonable time after such transfer or assignment, furnish to the Company
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned.
Any transferee asserting registration rights hereunder shall be bound by the
applicable provisions of this Agreement.
10. AMENDMENT. The Company shall not amend this Agreement without the
written consent of the holders of more than 50% of the Registrable Securities.
11. TERMINATION. This Agreement, and all of the Company's obligations
hereunder (other than its obligations pursuant to Article 6, which obligations
shall survive such termination), shall terminate upon the earlier to occur of
(i) the date on which there are no Registrable Securities outstanding and (ii)
July 26, 2004.
12. SEVERABILITY. Whenever possible, each provision of this Agreement shall
be interpreted in such a manner as to be effective and valid under applicable
law but if any provision of this Agreement is held to be invalid, illegal or
unenforceable under any applicable law or rule, the validity, legality and
enforceability of the other provision of this Agreement will not be affected or
impaired thereby.
13. NOTICES. All notices, consents, requests, instructions, approvals or
other communications provided for herein shall be in writing and delivered by
personal delivery, overnight courier, mail or electronic facsimile addressed to
the receiving party at the address set forth herein. All such communications
shall be effective when received.
(a) If to any holder of any Registrable Securities addressed to
such holder at its address as shown on the books of the Company, or
at such other address as such holder may specify by written notice
to the Company, or
(b) if to the Company, at New Century Financial Corporation,
18400 Von Karman, Suite 1000, Irvine, California 92612, Attention:
Brad A. Morrice, Fax: 949-440-7033; or at such other address as the
Company may specify by written notice to the holders of Registrable
Securities hereunder.
14. COUNTERPARTS. This Agreement may be executed concurrently in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Facsimile signatures
shall constitute original signatures for all purposes of this Agreement.
15. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties.
<PAGE>
16. GOVERNING LAW. This Agreement shall be governed by, interpreted under,
and construed and enforced in accordance with the internal laws, and not the
laws pertaining to the conflicts or choice of laws, of the State of Delaware.
17. ENTIRE AGREEMENT; EFFECTIVENESS. This Agreement is intended by the
parties hereto to be the final expression of their agreement and constitutes and
embodies the entire agreement and understanding between the parties hereto with
regard to the subject matter hereof and is a complete and exclusive statement of
the terms and conditions thereof, and shall supersede any and all prior oral or
written correspondence, conversations, negotiations, agreements and
understandings relating to the same subject matter. This Agreement shall take
effect upon its execution by the Company and the Purchaser and shall amend and
replace the 1998 Registration Rights Agreement. Upon the effectiveness of this
Agreement, the 1998 Registration Rights Agreement shall be of no further force
and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized representatives as of
the day and year first above written.
NEW CENTURY FINANCIAL
CORPORATION
By
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Its
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U.S. BANCORP
By
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Lee R. Mitau
Its Executive Vice President, General
Counsel and Secretary
