**Exhibit 10.1**

 

 

**New Century FinancialCorporation**

 

**Deferred CompensationPlan**

 

**Amended and RestatedJuly 1, 2004**

 

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**ARTICLE 1**

 

 

In recognition of the services provided by certain keyemployees, the Board of Directors of New Century Financial Corporation herebyadopts a deferred compensation plan (the “Plan”) to make additional retirementbenefits and increased financial security, on a tax favored basis, available tothose individuals effective January 1, 1999 and amended effective July 1,2004.  This Plan shall be unfunded fortax purposes and for purposes of Title I of ERISA.

 

**ARTICLE 2DEFINITIONS**

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Affiliate.  “Affiliate” means any firm, partnership, or corporation thatdirectly or indirectly through one or more intermediaries, controls, iscontrolled by, or is under common control with the Company.  “Affiliate” also includes any otherorganization similarly related to the Company that is designated as such by theBoard.

 

Annual Bonus.  “Annual Bonus” means any compensation, inaddition to Base Annual Salary, paid in respect of a Plan Year to a Participantas an Employee under the Company’s Incentive Plan, or otherwise as a bonus inthe discretion of the Company.

 

Annual Deferral Amount.  “Annual Deferral Amount” shall mean thatportion of a Participant’s Base Salary, Annual Bonus, Commissions, and/orExcess Deferrals that a Participant elects to have, and is, deferred, inaccordance with Article 4 for any one Plan Year.  In the event of Retirement, Disability, death or a Termination ofEmployment prior to the end of a Plan Year, such year’s Annual Deferral Amountshall be the actual amount withheld prior to such event.

 

Base Annual Salary.  “Base Annual Salary” means the annualcompensation (excluding bonuses, commissions, overtime, incentive payments,welfare benefits, including, without limitation, severance benefits,non-monetary awards or payments, Directors Fees and other fees, stock optionsand phantom stock grants, and car allowances) paid to a Participant forservices rendered to any Employer, before reduction for compensation deferredpursuant to all tax-qualified, non-qualified and Code Section 125 plans (otherthan compensation deferred under individual employment Contracts) of anyEmployer.  The Committee may, in itsdiscretion, with respect to any one or more Participants establish for any PlanYear a limit on the amount of Base Annual Salary to be taken into account underthis Plan.

 

Beneficiary.  “Beneficiary” means the person or personsdesignated as such in accordance with Section 15.2.

 

Board.  “Board” means the Board of Directors of the Corporation.

 

Change in Control.  “Change in Control” means any of thefollowing:

 

(a)                                  Theacquisition by any individual, entity or group (within the meaning of Section13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (a“Person”)) of beneficial ownership (within the meaning of Rule 13d-3promulgated under

 

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the Securities ExchangeAct of 1934, as amended) of 25% or more of either (1) the then-outstandingshares of common stock of the Corporation (the “Outstanding Company CommonStock”) or (2) the combined voting power of the then-outstanding votingsecurities of the Corporation entitled to vote generally in the election ofdirectors (the “Outstanding Company Voting Securities”); provided, however,that, for purposes of this definition, the following acquisitions shall notconstitute a Change in Control; (A) any acquisition directly from theCorporation, (B) any acquisition by the Corporation, (C) any acquisition by anyemployee benefit plan (or related trust) sponsored or maintained by theCorporation or any affiliate of the Corporation or a successor, or (D) anyacquisition by any entity pursuant to a transaction that complies with Sections(a), (b), and (c) below;

 

(b)                                 Individualswho, as of July 1, 2004, constitute the Board (the “Incumbent Board”) cease forany reason to constitute at least a majority of the Board; provided, however,that any individual becoming a director subsequent to July 1, 2004 whoseelection, or nomination for election by the Corporation’s stockholders, wasapproved by a vote of at least two-thirds of the directors then comprising theIncumbent Board (including for these purposes, the new members whose electionor nomination was so approved, without counting the member and his predecessortwice) shall be considered as though such individual were a member of theIncumbent Board, but excluding, for this purpose, any such individual whoseinitial assumption of office occurs as a result of an actual or threatenedelection contest with respect to the election or removal of directors or otheractual or threatened solicitation of proxies or consents by or on behalf of aPerson other than the Board;

 

(c)                                  Consummationof a reorganization, merger, statutory share exchange or consolidation orsimilar corporate transaction involving the Corporation or any of itssubsidiaries, a sale or other disposition of all or substantially all of theassets of the Corporation, or the acquisition of assets or stock of anotherentity by the Corporation or any of its subsidiaries (each, a “BusinessCombination”), in each case unless, following such Business Combination, (1)all or substantially all of the individuals and entities that were thebeneficial owners of the Outstanding Company Common Stock and the OutstandingCompany Voting Securities immediately prior to such Business Combinationbeneficially own, directly or indirectly, more than 50% of the then-outstandingshares of common stock and the combined voting power of the then-outstandingvoting securities entitled to vote generally in the election of directors, asthe case may be, of the entity resulting from such Business Combination (including,without limitation, an entity that, as a result of such transaction, owns theCorporation or all or substantially all of the Corporation’s assets directly orthrough one or more subsidiaries (a “Parent”)) in substantially the sameproportions as their ownership immediately prior to such Business Combinationof the Outstanding Company Common Stock and the Outstanding Company VotingSecurities, as the case may be, (2) no Person (excluding any entity resultingfrom such Business Combination or a Parent or any employee benefit plan (orrelated trust) of the Corporation or such entity resulting from such BusinessCombination or Parent) beneficially owns, directly or indirectly, 25% or moreof, respectively, the then-outstanding shares of common stock of the entityresulting from such Business Combination or the combined voting power of thethen-outstanding voting securities of such entity, except to the extent thatthe ownership in excess of 25% existed

 

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prior to the BusinessCombination, and (3) at least a majority of the members of the board ofdirectors or trustees of the entity resulting from such Business Combination ora Parent were members of the Incumbent Board at the time of the execution ofthe initial agreement or of the action of the Board providing for such BusinessCombination; or

 

(d)                                 Approvalby the stockholders of the Corporation of a complete liquidation or dissolutionof the Corporation other than in the context of a transaction that does notconstitute a Change in Control under clause (c) above.

 

Claimant.  “Claimant” shall have the meaning set forth in Section 13.1.

 

Code.  “Code” means the Internal Revenue Code of 1986, as amended fromtime to time.

 

Commissions.  “Commissions” means an Eligible Employee’scommissions for any Plan Year, as determined in accordance with an Employer’spolicies and procedures regarding compensation.

 

Committee.  “Committee” means the persons appointed by the PlanAdministrator, and which also may act for the Company or the Board in makingdecisions and performing specified duties under the Plan.

 

Company.  “Company” means the Corporation and any Affiliate which isauthorized by the Plan Administrative Committee to adopt the Plan and cover itsEligible Employees and whose designation as such has become effective uponacceptance of such status by the board of directors of the Affiliate.  An Affiliate may revoke its acceptance ofsuch designation at any time, but until such acceptance has been revoked, allthe provisions of the Plan and amendments thereto shall apply to the EligibleEmployees of the Affiliate.  In theevent the designation is revoked by the board of directors of an Affiliate, thePlan shall be deemed terminated only with respect to such Affiliate.

 

Compensation.  “Compensation” means the total amount ofcash remuneration paid by the Company to an Eligible Employee for any calendaryear of employment as wages, commissions, bonuses and other monetaryincentives, including the Participant’s contributions under this Plan and underany other plan of deferred compensation maintained by the Company or anAffiliate but not taking into account any Company contributions to benefitplans, all fringe benefits, moving and relocation expenses and other forms of welfarebenefits.

 

Compensation Deferral.  “Compensation Deferral” means that portionof Compensation as to which a Participant has made an annual irrevocableelection to defer receipt until the date specified under the In-ServiceDistribution Option or the Retirement Option.

 

Corporation.  “Corporation” means New Century FinancialCorporation, a Delaware corporation, and any successor.

 

Deduction Limitation.  “Deduction Limitation” means the followingdescribed limitation on the annual benefit that may be distributed pursuant tothe provisions of this Plan.  Thelimitation shall be applied to distributions under this Plan as expressly setforth in this Plan.  If the Companydetermines in good faith prior to a Change in Control that there is areasonable

 

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likelihood that any compensation paid to a Participantfor a taxable year of the Company would not be deductible by the Company solelyby reason of the limitation under Code Section 162(m), then to the extent deemednecessary by the Company to ensure that the entire amount of any distributionto the Participant pursuant to this Plan prior to the Change in Control isdeductible, the Company may, in its sole discretion, defer all or any portionof the distribution.  Any amountsdeferred pursuant to this limitation shall continue to be credited (or debited)with earnings, gains, losses, and changes in value of the Deemed InvestmentOptions in accordance with Section 5.3. The amounts so deferred and interest thereon shall be distributed to theParticipant or his or her Beneficiary (in the event of the Participant’s death)at the earliest possible date, as determined by the Company in good faith, onwhich the deductibility of compensation paid or payable to the Participant forthe taxable year of the Company during which the distribution is made will notbe limited by Section 162(m), or if earlier, the effective date of a Change inControl

 

Disabled.  “Disabled” means a mental or physical condition which qualifies aParticipant for benefits under the Company’s Long-Term Disability Plan.

 

Discretionary Company Contribution.  “Discretionary Company Contribution” arethose credited to the Participant’s Retirement Distribution Account and/orIn-Service Distribution Account by the Company pursuant to Section 4.4.

 

Discretionary Company Contribution Account.  “Discretionary Company Contribution Account”shall mean the sum of (i) the Participant’s Discretionary Company ContributionAmount plus (ii) earnings, gains, losses, and changes in value of the EarningsCrediting Options hereon credited (or debited) in accordance with Section 5.3,net of all distributions from such account. This account shall be a bookkeeping entry only and shall be utilizedsolely as a device for the measurement and determination of the amounts to bepaid to the Participant pursuant to the Plan.

 

Discretionary Matching Contribution.  “Discretionary Matching Contribution” arethose credited to the Participant’s Retirement Distribution Account and/orIn-Service Distribution Account by the Company pursuant to Section 4.5.

 

Discretionary Matching Contribution Account.  “Discretionary Matching ContributionAccount” shall mean the sum of (i) the Participant’s Discretionary MatchingContribution Amount plus (ii) earnings, gains, losses, and changes in value ofthe Earnings Crediting Options hereon credited (or debited) in accordance withSection 5.3, net of all distributions from such account.  This account shall be a bookkeeping entryonly and shall be utilized solely as a device for the measurement anddetermination of the amounts to be paid to the Participant pursuant to thePlan.

 

Distribution Option.  “Distribution Option” means the two (2)distribution options which are available under the Plan, consisting of theRetirement Distribution Option and the In-Service Distribution Option.

 

Distribution Option Account.  “Distribution Option Account” or “Accounts”means, with respect to a Participant, the Retirement Distribution Accountand/or the In-Service Distribution

 

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Account established on the books of account of theCompany, pursuant to Section 5.1, for each Distribution Option Period.

 

Distribution Option Period.  “Distribution Option Period” means a periodof five (5) Plan Years for which an Eligible Employee elects, in the EnrollmentAgreement, the time and manner of payment of amounts credited to the EligibleEmployee’s In-Service Distribution Option Account for such Plan Years.

 

Earnings Crediting Options.  “Earnings Crediting Options” means the deemedinvestment options selected by the Participant from time to time pursuant towhich deemed earnings are credited to the Participant’s Distribution OptionAccounts pursuant to Section 5.2

 

Effective Date.  “Effective Date” means the effective date ofthe Amended Plan which is July 1, 2004.

 

Elective Deferral Account.  “Elective Deferral Account” shall mean thesum of (i) a Participant’s Deferral Amount, plus (ii) earnings, gains, losses,and changes in value of the Earnings Crediting Options hereon credited (ordebited) in accordance with Section 5.3, net of all distributions from suchaccount.  This account shall be abookkeeping entry only and shall be utilized solely as a device for themeasurement and determination of the amounts to be paid to the Participantpursuant to the Plan.

 

Eligible Employee.  “Eligible Employee” means an Employee who isa member of the group of selected management and/or highly compensatedEmployees of the Company and who is designated by the Committee as eligible toparticipate in the Plan for a Plan Year.

 

Employee.  “Employee” means any individual employed by the Company on aregular, full time basis (in accordance with the personnel policies andpractices of the Employer), including citizens of the United States employedoutside of their home country and resident aliens employed in the UnitedStates; provided, however, that to qualify as an “Employee” for purposes of thePlan, the individual must be a member of a group of “key management or otherhighly compensated employees” within the meaning of Sections 201, 301 and 401of the Employee Retirement Income Security Act of 1974, as amended.

 

End Termination Date.  “End Termination Date” means the date oftermination of a Participant’s Service with the Company and its Affiliates andshall be determined without reference to any compensation continuationarrangement or severance benefit arrangement that may be applicable.

 

Enrollment Agreement.  “Enrollment Agreement” means a written agreement,as may be amended from time to time, which is entered into by and between theCompany and a Participant.  The terms ofany Enrollment Agreement may vary any of the terms set forth in this Plan andsuch changes shall be binding on the Company and the Participant if theEnrollment Agreement is signed by the Participant and accepted by theCommittee.  Each Enrollment Agreementexecuted by a Participant shall provide for the entire benefit to which suchParticipant is entitled to under the Plan, and shall specify, the Companyliable for the Participant’s benefits hereunder and the magnitude or extent ofsuch liability.  The EnrollmentAgreement bearing the latest date of acceptance by the Committee shall governsuch entitlement

 

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and each Employer’s liability.  Upon the complete payment of a Participant’sAccount Balance, each individual’s Enrollment Agreement and his or her statusas a Participant shall terminate.

 

ERISA.  “ERISA” means the Employee Retirement Income Security Act of1974, as it may be amended from time to time.

 

Excess Deferrals.  “Excess Deferrals” means amounts equal tothe amounts of a Participant’s Employee Before-Tax Contributions under the401(k) Plan (i) which are limited to Section 402(g) of the Code but which wouldotherwise have been made to the 401(k) Plan pursuant to a Participant’selection under the 401(k) Plan, and/or (ii) which are distributed to aParticipant from the 401(k) Plan in order to satisfy the limitations of Section401(k) of the Code.

 

In-Service Distribution Account.  “In-Service Distribution Account” means theAccount maintained for a Participant for each Distribution Option Period towhich compensation Deferrals are credited pursuant to the In-Service DistributionOption.

 

In-Service Distribution Option.  “In-Service Distribution Option” means theDistribution Option pursuant to which benefits are payable in accordance withSection 7.2.

 

Participant.  “Participant” means an Eligible Employee whohas filed a completed and executed Enrollment Agreement with the Committee orits designee and is participating in the Plan in accordance with the provisionsof Article 4.  In the event of the deathor incompetency of a Participant, the term shall mean his personal representativeor guardian.  An individual shall remaina Participant until that individual has received full distribution of anyamount credited to the Participant’s Account.

 

Plan.  “Plan” means this plan, called the New Century FinancialCorporation Deferred Compensation Plan, as amended from time to time.

 

Plan Administrator.  “Plan Administrator” means the CompensationCommittee of the Board when acting as the administrator of the Plan.

 

Plan Year.  “Plan Year” means the 12 month period beginning on each January 1and ending on the following December 31, except that the first Plan Year shallbegin on the Effective Date, and end on December 31.

 

Retirement.  “Retirement” means the termination of theParticipant’s Service with the Employer (for reasons other than death) at orafter age 65, or, if the Participant has 5 or more years of Service, at orafter age 55.

 

Retirement Distribution Account.  “Retirement Distribution Account” means theAccount maintained for a Participant to which compensation Deferrals and CompanyMatching Contributions are credited pursuant to the Retirement DistributionOption.

 

Retirement Distribution Option.  “Retirement Distribution Option” means theDistribution Option pursuant to which benefits are payable in accordance withSection 7.1.

 

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Savings Plan.  “Savings Plan” means the New CenturyFinancial Corporation Employee 401(k) Plan, as it may be amended from time totime.

 

Trust.  “Trust” shall mean the trust established pursuant to that certainTrust Agreement between the Company and the trustee named therein, as amendedfrom time to time.

 

Years of Service.  “Years of Service” means the period of timeduring which an employment relationship exists between an Employee and theCompany, including any period during which the Employee is on an approved leaveof absence, whether paid or unpaid. “Years of Service” also includes employment with an Affiliate if anEmployee transfers directly between the Company and the Affiliate.  For purposes of this definition, a year ofemployment shall be a 365 day period (or 366 day period in the case of a leapyear) that, for any subsequent year, commences on an anniversary of that hiringdate.  Any partial year of employmentshall not be counted.  Notwithstandingthe previous sentence, a Participant’s first Year of Service shall be treatedas a full Year of Service for purposes of this definition, even if it is only apartial Year of Service.

 

**ARTICLE 3ADMINISTRATION OF THE PLAN AND DISCRETION**

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3.1                                 ThePlan Administrator shall have full power and authority to interpret the Plan,to prescribe, amend and rescind any rules, forms and procedures as it deemsnecessary or appropriate for the proper administration of the Plan and to makeany other determinations and to take any other such actions as it deemsnecessary or advisable in carrying out its duties under the Plan.  All action taken by the Plan Administratorarising out of, or in connection with, the administration of the Plan or anyrules adopted thereunder, shall, in each case, lie within its sole discretion,and shall be final, conclusive and binding upon the Company, the Board, theCommittee, all Employees, all Beneficiaries of Employees and all persons andentities having an interest therein.

 

3.2                                 Membersof the Committee and the Plan Administrator shall serve without compensationfor their services unless otherwise determined by the Board.  All expenses of administering the Plan shallbe paid by the Company.

 

3.3                                 TheCompany shall indemnify and hold harmless each member of the Committee and thePlan Administrator from any and all claims, losses, damages, expenses(including counsel fees) and liability (including any amounts paid insettlement of any claim or any other matter with the consent of the Board)arising from any act or omission of such member, except when the same is due togross negligence or willful misconduct.

 

3.4                                 Anydecisions, actions or interpretations to be made under the Plan by the Company,the Board or Committee shall be made in its respective sole discretion, not asa fiduciary and need not be uniformly applied to similarly situated individualsand shall, except as expressly provided in Section 13.6 with respect to anarbitrator’s de novo review of determinations related to claims arising upon orfollowing the occurrence of a Change in Control, be final, binding andconclusive on all persons interested in the Plan.

 

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**ARTICLE 4PARTICIPATION**

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4.1                                 DeferredCompensation.  For each Plan Year, aParticipant may elect to defer Base Salary, Annual Bonus, Commissions, and/orCompensation.  If no election is made,the amount deferred shall be zero.

 

In no event shall the maximum amount of Base Salarythat a Participant may defer to this Plan in any one year exceed (i) theParticipant’s total Base Salary, less (ii) the sum of the maximum amount thatthe Participant could elect to defer to the Savings Plan for that year plus theamount(s) that the Participant may elect to contribute to any qualified welfarebenefit plan of the Company for that year for medical, healthcare, insurance,or similar benefits coverage.  Theminimum deferral limits of Section 4.1 shall not apply with respect to aParticipant for a Plan Year if the amount determined pursuant to the precedingsentence is less than the applicable minimum amount determined in accordancewith Section 4.1.

 

4.2                                 Electionto Participate.   Each Employee whois an Eligible Employee for a Plan Year will be offered the opportunity todefer Compensation to be earned in that Plan Year.  Any Eligible Employee may enroll in the Plan effective as of thefirst day of that Plan Year by filing a completed and fully executed EnrollmentAgreement with the Committee by a date set by the Committee but in any eventprior to the first day of that Plan Year. Pursuant to said Enrollment Agreement, the Eligible Employee shallirrevocably elect (a) the percentages, in whole percentages, by which (as aresult of payroll reduction) an amount equal to any whole percentage of theParticipant’s Compensation to be earned during that Plan Year, in each caseafter required nondeferrable payroll tax deductions, will be deferred, and (b)the Distribution Option Accounts to which such amounts will be credited, andshall provide such other information as the Plan Administrator shallrequire.  The first Enrollment Agreementfiled by an Eligible Employee during any Distribution Option Period must alsoset forth the Participant’s election as to the time and manner of distributionfrom the Retirement Distribution Account and In-Service Distribution Accountand of amounts credited for that Distribution Option Period and relatedearnings.  The Committee may establishminimum or maximum amounts that may be deferred under this Section and maychange such standards from time to time. Any such limits shall be communicated by the Committee to the PlanAdministrator and by the Plan administrator to the Participants prior to thecommencement of a Plan Year.

 

4.3                                 NewEligible Employees.  The Committeemay, in its discretion, permit individuals who first become Employees after thebeginning of a Plan Year and who are selected as Eligible Employees to enrollin the Plan for that Plan Year by filing a completed and fully executedEnrollment Agreement, in accordance with Section 4.1, as soon as practicablefollowing the date the individual first becomes an Eligible Employee but, inany event, within 30 days after such date. Notwithstanding the foregoing, however, any election by an EligibleEmployee, pursuant to this Section, to defer Compensation shall apply only tosuch amounts as are earned by the Eligible Employee after the date on whichsuch Enrollment Agreement is filed.

 

4.4                                 DiscretionaryCompany Contributions.  The Company,in its sole discretion, may, but is not required to, credit any amount itdesires to any Participant’s Retirement Distribution Account and/or In-ServiceDistribution Account under this Plan. The amount so credited to a

 

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Participant may besmaller or larger than the amount credited to any other Participant, and theamount credited to any Participant for a Plan Year may be zero (0).  Any Discretionary Company Contributionsapproved by the Company will be credited as frequently as determined by theCommittee acting on behalf of the Company.

 

4.5                                 DiscretionaryMatching Contributions.  If aParticipant has deferred Compensation during any Plan Year, the Company shallreserve the right to credit to such Participant’s Retirement DistributionAccount and/or In-Service Distribution Account a Matching Contribution, asdefined above.  Any DiscretionaryMatching Contributions approved by the Company will be credited as frequentlyas determined by the Committee, acting on behalf of the Company.

 

**ARTICLE 5DISTRIBUTION OPTION ACCOUNTS**

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5.1                                 DistributionOption Accounts.  The Committeeshall establish and maintain separate Distribution Option Accounts with respectto a Participant for each Distribution Option Period.

 

A Participant’s Distribution Option Accounts shallconsist of the Retirement Distribution Account and/or one or more In-ServiceDistribution Accounts.  The amount ofCompensation deferred pursuant to Sections 4.1, 4.2 or 4.3 shall be credited bythe Company to the Participant’s Distribution Option Accounts as soon asadministratively practicable after such compensation would otherwise have beenpaid, but in no event later than the fifteenth day of the month following themonth in which such Compensation would otherwise have been paid, in accordancewith the Distribution Option irrevocably elected by the Participant in theEnrollment Agreement.  Any amount oncetaken into account as Compensation for purposes of this Plan shall not be takeninto account thereafter.  TheParticipant’s Distribution Option Accounts shall be reduced by the amount ofthe payments made by the Company to the Participant or the Participant’sBeneficiary pursuant to this Plan.

 

5.2                                 Earningson Distribution Option Accounts.  AParticipant’s Distribution Option Accounts shall be credited with earningsaccording to the Earnings Crediting Options elected by the Participant.  Participants may allocate their RetirementDistribution Account and/or each of their In-Service Distribution Accountsamong the Earnings Crediting Options available under the Plan only in wholepercentages of not less than five percent (5%) for any one Earnings CreditingOption and provided that allocation must total 100%.   The Committee shall select the Earnings Crediting Options whoseperformance will measure the amounts to be credited under Section 5.3 to theDistribution Option Accounts of Participants. The selection of Earnings Crediting Options shall be for bookkeepingpurposes only, and the Company shall not be obligated actually to invest anymoney in the Earnings Crediting Options, or to acquire or maintain any actualinvestment.  The Committee may, in itsdiscretion, change its selection of the Earnings Crediting Options at any time;provided that following a Change in Control, the number and general type(s) ofEarnings Crediting Options offered shall not be substantially diminished.  If a Participant or Beneficiary has electedpursuant to this Section to invest all or a portion of his DistributionAccounts in a Earnings Crediting Option which the Committee decided todiscontinue, his Distribution Accounts shall be invested after suchdiscontinuance in the

 

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continuingEarnings Crediting Options which the Committee determines, in its discretion,most nearly resembles the discontinued Earnings Crediting Options.  The Committee shall provide each Participant(or Beneficiary in the event of a Participant’s death) with a list of theEarnings Crediting Options available for hypothetical investment, and theParticipant (or Beneficiary in the event of a Participant’s death) shalldesignate, on a form provided by the Committee, or on the Plan’s website, oneor more of such Earnings Crediting Options in which he or she wishes his or herDistribution Option Accounts to be “invested”. Notwithstanding the foregoing, the Participant’s Distribution Accountson July 1, 2004 shall be deemed to be invested in an Earnings Crediting Optionthat is similar to a money market fund. The Committee, in its discretion, shall designate the times, procedures,and limitations for the designation of hypothetical investments by Participantsor Beneficiaries of their Distribution Option Accounts among the EarningsCrediting Options (including, but not limited to, the times when a Participantor Beneficiary may change his hypothetical investments, the incrementsexpressed as a dollar amount or as a percentage of the Participant’sDistribution Accounts in which a Participant or Beneficiary may choose to makea hypothetical investment in a Earnings Crediting Option, and any minimumincrement expressed as a dollar amount or as a percentage of the Participant’sDistribution Accounts that may be deemed to be invested in a Earnings CreditingOption); provided, however, that (i) a Participant or Beneficiary may make aselection of a hypothetical investment in a Earnings Crediting Option on aprospective basis only, and (ii) the times, procedures and limitations for theselection of hypothetical investments in the Earnings Crediting Options ineffect at any time shall be uniform among all Participants and Beneficiaries.

 

5.3                                 Creditingof Earnings, Gains, Losses, and Changes in Value of Earnings Crediting Options.  The Committee shall determine, in itsdiscretion, the exact times and methods for (i) crediting or charges to eachParticipant’s Distribution Accounts with the earnings, gains, losses, andchanges in value of the Earnings Crediting Options selected by the Participant,(ii) crediting each Participant’s Distribution Accounts with such Participant’sAnnual Deferral Amount, Discretionary Company Contribution, and DiscretionaryMatching Contribution, and (iii) debiting each Participant’s DistributionAccounts with the payment of benefits or withdrawals under this Plan; providedthat any such credits, debits or other charges shall be made no less frequentlythan annually.  The Committee may, atany time, change the timing or methods for crediting or debiting earnings,gains, losses, and changes in value of Earnings Crediting Options, AnnualDeferral Amounts, Discretionary Company Contribution, Discretionary MatchingContribution, and payments of benefits under this Plan; provided, however, thatthe times and methods for crediting or debiting such items in effect at anyparticular time shall be uniform among all Participants and Beneficiaries andsuch crediting or debiting shall occur no less frequently than annually.

 

5.4                                 Changesin Earnings Crediting Options.  AParticipant may change the Earnings Crediting Options to which his DistributionOption Accounts are deemed to be allocated, in the manner prescribed by theCommittee, with whatever frequency is determined by the Committee provided thateach Participant shall have the right to elect at least one such change peryear.  Each such change may include (a)reallocation of Participant’s existing Accounts in whole percentages of notless than five percent (5%), and/or (b) change in investment allocation ofamounts to be credited to the Participant’s Accounts in the future, as the Participantmay elect, provided that the allocations remain in whole percentages of notless than five percent (5%).

 

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5.5                                 Valuationof Accounts.  The value of aParticipant’s Distribution Option Accounts as of any date shall equal theamounts therefore credited to such Accounts, including any earnings (positiveor negative) deemed to be earned on such Accounts in accordance with Section5.2 through the day preceding such date, less the amounts therefore deductedfrom such Accounts.

 

5.6                                 Statementof Accounts.  The Committee shallprovide to each Participant, not less frequently than quarterly, a statement insuch form as the Committee deems desirable setting forth the balance standingto the credit of each Participant in each of his Distribution Option Accountsas of the end of the preceding calendar quarter.

 

5.7                                 Distributionfrom Accounts.  Any distributionmade to or on behalf of a Participant from one or more of his DistributionOption Accounts in an amount which is less than the entire balance of any suchAccount shall be made pro rata from each of the Earnings Crediting Options towhich such Account is then allocated.

 

**ARTICLE 6DISTRIBUTION OPTIONS**

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6.1                                 Electionof Distribution Option.  In thefirst completed and fully executed Enrollment Agreement filed with theCommittee for each Distribution Option Period, an Eligible Employee shall electthe time and manner of payment pursuant to which the Eligible Employee’sDistribution Option Accounts for that Distribution Option Period will bedistributed.  Annually, the EligibleEmployee shall allocate his or her deferrals between the Distribution Optionsin increments of five percent, provided, however that 100 percent of suchdeferrals must be allocated to one or the other of the Distribution Options.

 

6.2                                 RetirementDistribution Option.  Subject toSection 7.1 distribution of the Participant’s Retirement Distribution Account,if any,  shall commence upon (a) theParticipant’s Retirement,  or (b) iflater, the Participant’s attainment of age 65, as elected by the Participant inthe Enrollment Agreement pursuant to which such Retirement Distribution Accountwas established or otherwise as permitted under Section 7.1(a).

 

6.3                                 In-ServiceDistribution Option.  Subject toSection 7.2, the Participant’s In-Service Distribution Account for anyDistribution Option Period shall be distributed commencing in the year electedby the Participant in the Enrollment Agreement pursuant to which suchIn-Service Distribution Account was established.  Notwithstanding the foregoing, a Participant shall not beentitled to allocate any deferrals to an In-Service Distribution Account fortwo Plan Years preceding the Plan Year which includes the date on which suchAccount is to be distributed and such additional deferrals shall instead beallocated to the Retirement Distribution Account.

 

**ARTICLE 7BENEFITS TO PARTICIPANTS**

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7.1                                 BenefitsUnder the Retirement Distribution Option. Benefits under the Retirement Distribution Option shall be paid to aParticipant as follows.

 

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(a)                                  BenefitsUpon Retirement.  In the case of aParticipant whose Service with the Employer terminates on account of hisRetirement, the Participant’s Retirement Distribution Account shall bedistributed in the following methods, as elected by the Participant in writingeither in the Enrollment Agreement or in a separate election made prior to thefirst day of the Plan Year immediately preceding the Plan Year in which the Participant’sRetirement occurs:  (i) in a lump sum;(ii) in annual installments; or (iii) by any other formula that ismathematically derived and is acceptable to the Committee.  Any lump-sum benefit payable in accordancewith this paragraph shall be paid in, but not later than January 31 of, thePlan Year following the Plan Year in which occurs the Participant’s Retirementor, if later, attainment of age 65 as elected by the Participant in accordancewith this Section or Section 6.2, in an amount equal to the value of suchRetirement Distribution Account as of the last business day of the Plan Yearpreceding the date of payment.  Annualinstallment payments, if any, shall commence no later than January 31 of thePlan Year following the Plan Year in which occurs the Participant’s Retirementor if later, attainment of age 65, as elected by the Participant in accordancewith this Section or Section 6.2, in an amount equal to (i) the value of suchRetirement Distribution Account as of the last business day of the Plan Yearpreceding the date of payment, divided by (ii) the number of annual installmentpayments elected by the Participant in the Enrollment Agreement pursuant towhich such Retirement Distribution Account was established.  The remaining annual installments shall bepaid not later than January 31 of each succeeding Plan Year in an amount equalto (i) the value of such Retirement Distribution Account as of the lastbusiness day of the immediately preceding Plan Year divided by (ii) the numberof installments remaining.   AParticipant may change the election regarding the manner of payments asdescribed in Section 6.1 of the Participant’s account at any time prior to thefirst day of the Plan Year immediately preceding the Plan Year in which theParticipant’s Retirement occurs, and elected as the distribution date by theParticipant in accordance with Section 6.1.

 

(b)                                 BenefitsUpon Termination of Employment.  Inthe case of a Participant whose Service with the Employer terminates prior tothe earliest date on which the Participant is eligible for Retirement, otherthan on account of becoming Disabled or by reason of death, the vested portionof a Participant’s Retirement Distribution Account shall be distributed (i) ina lump sum by February 28 of the year following the Participant’s EndTermination Date or (ii) beginning at age 65, as irrevocably elected by theParticipant in the Enrollment Agreement pursuant to which such RetirementDistribution Account was established; provided, however, that the Company mayoverride Participant’s election and cause a distribution under clause (i)notwithstanding any other election by the Participant.

 

7.2                                 BenefitsUnder the In-Service Distribution Option. Benefits under the In-Service Distribution Option shall be paid to aParticipant as follows:

 

(a)                                  In-ServiceDistributions.  In the case of aParticipant who continues in Service with the Employer, the Participant’sIn-Service Distribution Account for any Distribution Option Period shall bepaid to the Participant commencing no later than January 31 of the Plan Yearelected by the Participant in the Enrollment Agreement pursuant to which suchIn-Service Distribution Account was established, which may be no earlier thanthe third Plan Year following the end of the last Plan Year in the DistributionOption Period in which deferrals are to be credited to the In-ServiceDistribution Account for that Distribution Option Period in one lump sum or inannual installments payable over 2, 3, 4 or 5 years.   Any lump-sum benefit

 

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payable inaccordance with this paragraph shall be paid not later than January 31 of thePlan Year elected by the Participant in accordance with Section 6.3, in anamount equal to the value of such In-Service Distribution Account as of thelast business day of the Plan Year preceding the date of the payment.  Annual installment payments, if any, shallcommence not later than January 31 of the Plan Year as elected by theParticipant in accordance with Section 6.3, in an amount equal (i) the value ofsuch In-Service Distribution Account as of the last business day of the PlanYear preceding the date of payment, divided by (ii) the number of installmentsremaining.  In accordance withprocedures established by the Plan Administrator, not later than twelve monthsprior to the Participant’s designated In-Service Distribution date, theParticipant may elect in writing to extend the designated In-ServiceDistribution date into the future but such extension will not result in anextension of less than five years.

 

(b)                                 BenefitsUpon Termination of Employment.  Inthe case of a Participant whose Service with the Employer terminates prior tothe date on which the Participant’s In-Service Distribution Account wouldotherwise be distributed, other than on account of becoming Disabled or byreason of death, such In-Service Distribution Account shall be distributed (i)in a lump sum by February 28 of the year following the Participant’s EndTermination Date; (ii) in annual installments commencing on the date suchIn-Service Distribution Account would have been distributed; or (iii) in a lumpsum on the date such In-Service Distribution Account would otherwise have beendistributed, all as irrevocably elected by the Participant in the EnrollmentAgreement pursuant to which such In-Service Distribution Account wasestablished; provided, however, that the Company may override a Participant’selection and cause a distribution under clause (i) notwithstanding any otherelection by the Participant.

 

**ARTICLE 8DISABILITY**

** **

In the event a Participant becomes Disabled, theParticipant’s right to make any further deferrals under this Plan shallterminate as of the date for which the Participant first receives benefitsunder the Company’s Long-Term Disability Benefit Plan, as amended from time totime.   The Participant’s DistributionOption Accounts shall continue to be credited with earnings in accordance withSection 5.2 until such Accounts are fully distributed.  For purposes of this Plan, a DisabledParticipant will not be treated as having terminated Service.  The Participant’s Retirement DistributionAccount, if any, shall be distributed to the Participant in accordance withSection 7.1(a), provided, however, that distribution of the Participant’sRetirement Distribution Accounts, if any, shall commence not later than January31 of the Plan Year immediately following the later of (a) the Plan Year inwhich the Participant first becomes eligible for Retirement, or (b) the PlanYear in which the Participant first received benefits under the Company’sLong-Term Disability Plan, as amended from time to time.  The Participant’s In-Service DistributionAccounts, if any, will be distributed to the Participant in accordance withSection 7.2(a) without regard to the fact that the Participant became Disabled.

 

**ARTICLE 9SURVIVOR BENEFITS**

** **

9.1                                 Deathof Participant Prior to the Commencement of Benefits.  In the event of a Participant’s death priorto the commencement of benefits in accordance with Article 7, benefits

 

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shall be paid tothe Participant’s Beneficiary, as determined under Section 12.4, pursuant toSection 9.2 or 9.3, whichever is applicable, in lieu of any benefits otherwisepayable under the Plan to or on behalf of such Participant.

 

9.2                                 SurvivorBenefits Under the Retirement Distribution Option.  In the case of a Participant with respect towhom the Company has established a Retirement Distribution Account, and whodies prior to the commencement of benefits under such Retirement DistributionAccount pursuant to Section 7.1, distribution of such Retirement DistributionAccount shall be made (a) in a lump sum as soon as practicable following theParticipant’s death, or (b) in the manner and at such time as such RetirementDistribution Account would otherwise have been distributed in accordance withSection 7.1 had the Participant lived, as elected by the Participant in theEnrollment Agreement pursuant to which such Retirement Distribution Account wasestablished or as may have been changed by the Participant.  The amount of any lump sum benefit payablein accordance with this Section shall equal the value of such RetirementDistribution Account as of the last business day of the calendar monthimmediately preceding the date on which such benefit is paid.  The amount of any annual installment benefitpayable in accordance with this Section shall equal (a) the value of suchRetirement Distribution Account as of the last business day of the calendarmonth immediately preceding the date on which such installment is paid, dividedby (b) the number of annual installments remaining to be paid pursuant to theelection of the Participant in the Enrollment Agreement pursuant to which suchRetirement Distribution Account was established or as may have been changed bythe Participant.

 

9.3                                 SurvivorBenefits Under the In-Service Distribution Option.  In the case of a Participant with respect towhom the Company has established one or more In-Service Distribution Accounts,and who dies prior to the date on which such In-Service Distribution Accountsare to be paid pursuant to Section 7.2, distribution of such In-ServiceDistribution Accounts shall be made (a) in a lump sum as soon as practicablefollowing the Participant’s death, or (b) at such time and in such form as suchIn-Service Distribution Accounts would otherwise have been distributed inaccordance with Section 7.2 had the Participant lived, as irrevocably electedby the Participant in the Enrollment Agreement pursuant to which suchIn-Service Distribution Accounts were established.  The amount of any lump sum benefit payable in accordance withthis Section shall equal the value of such In-Service Distribution Accounts asof the last business day of the calendar month immediately preceding the dateon which such benefit is paid.

 

9.4                                 Deathof Participant After Benefits Have Commenced.  In the event a Participant who elected the RetirementDistribution Option dies after annual installment benefits payable underSection 7.1 from the Participant’s Retirement Distribution Account hascommenced, but before the entire balance of such Retirement DistributionAccount has been paid, any remaining installments shall continue to be paid tothe Participant’s Beneficiary, as determined under Section 15.2, at such timesand in such amounts as they would have been paid to the Participant had hesurvived.

 

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**ARTICLE 10EMERGENCY BENEFIT**

** **

In the event that the Committee, upon written requestof a Participant, determines, in its sole discretion, that the Participant hassuffered an unforeseeable financial emergency, the Company shall pay to theParticipant from the vested portion of his Distribution Option Account, as soonas practicable following such determination, an amount necessary to meet theemergency, after deduction of any and all taxes as may be required pursuant toSection 15.8 (the “Emergency Benefit”). For purposes of this Plan, an unforeseeable financial emergency is anunexpected need for cash arising from an illness, casualty loss, suddenfinancial reversal, or other such unforeseeable occurrence.  Cash needs arising from foreseeable eventssuch as the purchase of a house or education expenses for children shall not beconsidered to be the result of an unforeseeable financial emergency.  Emergency Benefits shall be paid first fromthe Participant’s In-Service Distribution Accounts, if any, to the extent thebalance of one or more of such In-Service Distribution Accounts is sufficientto meet the emergency, in the order in which such Accounts would otherwise bedistributed to the Participant.  If thedistribution exhausts the In-Service Distribution Accounts, the RetirementDistribution Account may be accessed.  With respect to that portion of any Distribution Option Accountwhich is distributed to a Participant as an Emergency Benefit, in accordancewith this Article, no further benefit shall be payable to the Participant underthis Plan.  Notwithstanding anything inthis Plan to the contrary, a Participant who receives an Emergency Benefit inany Plan Year shall not be entitled to make any further deferrals for theremainder of such Plan Year or the following Plan Year.  It is intended that the Committee’s determinationas to whether a Participant has suffered an “unforeseeable financial emergency”shall be made consistent with the requirements under section 457(d) of theCode.

 

**ARTICLE 11ACCELERATED DISTRIBUTION**

** **

11.1                           Availabilityof Withdrawal Prior to Retirement. Upon the Participant’s written election, the Participant may elect towithdraw all or a portion of the Participant’s Distribution Option Account atany time prior to the time such Distribution Option Account otherwise becomespayable under the Plan, provided the conditions specified in Section 11.3,  Section 11.4, and Section 11.5 aresatisfied.

 

11.2                           Accelerationof Periodic Distributions.  Upon theParticipant’s written election, the Participant or Participant’s Beneficiarywho is receiving installment payments under the Plan may elect to have all or apercentage of the remaining installments distributed in the form of animmediately payable lump sum, provided the condition specified in Section 11.3is satisfied.

 

11.3                           ForfeiturePenalty.  In the event of awithdrawal pursuant to Section 11.1, or an accelerated distribution pursuant toSection 11.2, the Participant shall forfeit from his Distribution OptionAccount from which the withdrawal is made an amount equal to ten percent (10%)of the amount of the withdrawal or accelerated distribution, as the case maybe.  The forfeited amount shall bededucted from the applicable Distribution Option Account prior to giving effectto the requested withdrawal or acceleration. The Participant and the Participant’s Beneficiary shall not have anyright or claim to the forfeited amount, and the Company shall

 

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have no obligationwhatsoever to the Participant, the Participant’s Beneficiary or any otherperson with regard to the forfeited amount.

 

11.4                           MinimumWithdrawal.  In no event shall theamount withdrawn in accordance with Section 11.1 be less than 25% of the amountcredited to the Participant’s Distribution Option Account immediately prior tothe withdrawal.

 

11.5                           Suspensionfrom Deferrals.  In the event of awithdrawal pursuant to Section 11.1, a Participant who is otherwise eligible tomake deferrals under Article 4 shall be prohibited from making any deferralswith respect to the Plan Year immediately following the Plan Year during whichthe withdrawal was made, and any election previously made by the Participantwith respect to deferrals for the Plan Year of the withdrawal shall be void andof no effect with respect to subsequent deferrals for such Plan Year.

 

**ARTICLE 12VESTING**

** **

12.1                           AParticipant shall at all times be one hundred percent (100%) vested in his orher Elective Deferral Account.

 

12.2                           AParticipant shall be vested in his or her Discretionary Company ContributionAccount in accordance with the following schedule:

 

| **Years Discretionary  Company Contribution  has been credited to account** |   | **Vested  Percentage** |   |
|-----------------------------------------------------------------------------|--------|------------------------|--------|
| Less than 1 year                                                            |   | 50                     | %      |
| 1 year but less than 2 years                                                |   | 75                     | %      |
| 2 years or more                                                             |   | 100                    | %      |

 

 

12.3                           AParticipant shall be vested in his or her Discretionary Matching ContributionAccount in accordance with the following schedule:

 

| **Years of Service**          |   | **Vested  Percentage** |   |
|-------------------------------|--------|------------------------|--------|
| Less than 1 year              |   | 0                      | %      |
| 1 year but less than 2 years  |   | 20                     | %      |
| 2 years but less than 3 years |   | 40                     | %      |
| 3 years but less than 4 years |   | 60                     | %      |
| 4 years but less than 5 years |   | 80                     | %      |
| 5 years or more               |   | 100                    | %      |

 

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12.4                           Notwithstandinganything to the contrary contained in this Section, in the event of a Change inControl, Retirement, or Death, a Participant’s Discretionary CompanyContribution Account and Discretionary Matching Contribution Account shallimmediately become one hundred percent (100%) vested (if it is not alreadyvested in accordance with the above vesting schedules).

 

**ARTICLE 13CLAIMS PROCEDURE**

** **

13.1                           Presentationof Claim.  Any Participant orBeneficiary of a deceased Participant (such Participant or Beneficiary beingreferred to below as a “Claimant”) may deliver to the Committee a written claimfor a determination with respect to the amounts distributable to such Claimantfrom the Plan.  If such a claim relatesto the contents of a notice received by the Claimant, the claim must be madewithin sixty (60) days after such notice was received by the Claimant.  The claim must state with particularity thedetermination desired by the Claimant. All other claims must be made within one hundred eighty (180) days ofthe date on which the event that caused the claim to arise occurred.  The claim must state with particularity thedetermination desired by the Claimant.

 

13.2                           Notificationof Decision.  The Committee shallconsider a Claimant’s claim within a reasonable time, and shall notify theClaimant in writing but not later than ninety (90) days after receiving theclaim.  If the Committee determines thatspecial circumstances require an extension of time for processing the claim,written notice of the extension shall be furnished to the Claimant prior to thetermination of the initial ninety (90) day period.  In no event shall such extension exceed a period of ninety (90)days from the end of the initial period. The extension notice shall indicate the special circumstances requiringan extension of time and the date by which the Committee expects to render thebenefit determination.  The Committeeshall notify the Claimant in writing:

 

(a)                                  Thatthe Claimant’s requested determination has been made, and that the claim hasbeen allowed in full; or

 

(b)                                 Thatthe Committee has reached a conclusion contrary, in whole or in part, to theClaimant’s requested determination, and such notice must set forth in a mannercalculated to be understood by the Claimant:

 

(i)                                     thespecific reason(s) for the denial if the claim, or any part of it;

 

(ii)                                  specificreference(s) to pertinent provisions of the Plan upon which such denial wasbased;

 

(iii)                               a description of anyadditional material or information necessary for the Claimant to perfect theclaim, and an explanation of why such material or information is necessary; and

 

(iv)                              anexplanation of the claim review procedure set forth in Section 13.3 below or,to the extent required by law, a civil action under ERISA Section 502(a)following an adverse benefit determination on review.

 

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13.3                           Reviewof a Denied Claim.  Within sixty(60) days after receiving a notice from the Committee that a claim has beendenied, in whole or in part, a Claimant (or the Claimant’s duly authorizedrepresentative) may file with the Committee a written request for a review ofthe denial of the claim.  Thereafter,the Claimant (or the Claimant’s duly authorized representative):

 

(a)                                  may,upon request and free of charge, have reasonable access to, and copies of, alldocuments, records and other information relevant to the claim for benefits;

 

(b)                                 maysubmit written comments or other documents;

 

(c)                                  mayrequest a hearing, which the Committee, in its sole discretion, may grant.

 

13.4                           Decisionon Review.  The Committee shallrender its decision on review promptly, and not later than sixty (60) daysafter the filing of a written request for review of the denial of theclaim.  If the Committee determines thatspecial circumstances require an extension of time for processing the claim,written notice of the extension shall be furnished to the Claimant prior to thetermination of the initial sixty (60) day period.  In no event shall such extension exceed a period of sixty (60)days from the end of the initial period. The extension notice shall indicate the special circumstances requiringan extension of time and the date by which the Committee expects to render thebenefit determination.  In rendering itsdecision, the Committee shall take into account all comments, documents,records and other information submitted by the Claimant relating to the claim,without regard to whether such information was submitted or considered in theinitial benefit determination.  Thedecision must be written in a manner calculated to be understood by theClaimant, and it must contain:

 

(a)                                  specificreasons for the decision;

 

(b)                                 specificreference(s) to the pertinent Plan provisions upon which the decision wasbased; and

 

(c)                                  astatement that the Claimant is entitled to receive, upon request and free ofcharge, reasonable access to and copies of, all documents, records and other informationrelevant (as defined in applicable ERISA regulations) to the Claimant’s claimfor benefits; and

 

(d)                                 tothe extent required by law, a statement of the Claimant’s right to bring acivil action under ERISA Section 502(a).

 

13.5                           LegalAction.  With respect to claims madeprior to the occurrence of a Change in Control, a Claimant’s compliance withthe foregoing provisions of this Article 13 is a mandatory prerequisite to aClaimant’s right to commence arbitration pursuant to Section 13.6 with respectto any claim for benefits under this Plan. With respect to claims made upon and after the occurrence of a Change inControl, the Claimant may proceed directly to arbitration in accordance withSection 13.6 and need not first satisfy the foregoing provisions of thisArticle 13.

 

13.6                           Arbitration.  All claims or controversies arising out ofor in connection with this Plan, that any Company may have against anyClaimant, or that any Claimant may have against

 

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any Company oragainst any of their respective officers, directors, employees or agents actingin their capacity as such, shall, subject to the initial review provided for inthe foregoing provisions of this Article 13 that are effective with respect toclaims brought prior to the occurrence of a Change in Control, be resolvedthrough arbitration as provided in this Section 13.6.  The decision of an arbitrator on any issue, dispute, claim orcontroversy submitted for arbitration, shall be final and binding upon eachCompany and the Claimant and that judgment may be entered on the award of thearbitrator in any court having proper jurisdiction.  With respect to claims arising upon or following the occurrenceof a Change in Control (but not with respect to any determination made by theCommittee prior to the Change in Control), the arbitrator shall review *de novo*anyclaim previously considered by the Committee pursuant to this Article 13.

 

Except as otherwise provided in this procedure or bymutual agreement of the parties, any arbitration shall be conducted in OrangeCounty, California before a sole arbitrator selected from Judicial Arbitrationand Mediation Services, Inc., Orange County, California, or its successor(“JAMS”), or if JAMS is no longer able to supply the arbitrator, sucharbitrator shall be selected from the American Arbitration Association, andshall be conducted in accordance with the provisions of California Code ofCivil Procedure §§ 1280 et seq. as the exclusive forum for the resolution ofsuch dispute.  The party desiring toinitiate arbitration shall do so by sending written notice of an intention toarbitrate to the other party, which notice shall include a description of thenature of all claims or controversies asserted and a description of the factsupon which such claims are based. Pursuant to California Code of Civil Procedure § 1281.8, provisionalinjunctive relief may, but need not, be sought by either party to thisAgreement in a court of law while arbitration proceedings are pending, and anyprovisional injunctive relief granted by such court shall remain effectiveuntil the matter is finally determined by the arbitrator.  Final resolution of any dispute througharbitration may include any remedy or relief which the arbitrator deems justand equitable, including any and all remedies provided by applicable state orfederal statutes.  At the conclusion ofthe arbitration, the arbitrator shall issue a written decision that sets forththe essential findings and conclusions upon which the arbitrator’s award ordecision is based.  Any award or reliefgranted by the Arbitrator hereunder shall be final and binding on the partieshereto and may be enforced by any court of competent jurisdiction.  The parties acknowledge and agree that theyare hereby waiving any rights to trial by jury in any action, proceeding orcounterclaim brought by either of the parties against the other in connectionwith any matter whatsoever arising out of or in any way connected with thisPlan.

 

All forum costs of the arbitration (including, but notlimited to, the fees and expenses of the arbitrator) shall be advanced andborne by the Company.  Further, the feesand expenses of the counsel for the Claimant shall be advanced and borne by theCompany; provided, however, that if it is determined by the arbitrator that theClaimant did not commence the arbitration in good faith and had no reasonablebasis therefore, the Claimant shall repay to the Company all amounts advancedby the Company to cover the Claimant’s fees and expenses of counsel and shallreimburse the Company for its reasonable legal fees and expenses (other thanforum costs) in connection with the arbitration.

 

The arbitrator shall interpret this Plan, anyapplicable Company policy or rules and regulations, any applicable substantivelaw (and the law of remedies, if applicable) of the state in which the claimarose or applicable federal law (any such law to be applicable only to theextent

 

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consistent with Section 15.11).  In reaching his or her decision, thearbitrator shall have no authority to change or modify any lawful Companypolicy, rule or regulation, or this Plan. The arbitrator, and not any federal, state or local court or agency,shall have exclusive and broad authority to resolve any dispute relating to theinterpretation, applicability, enforceability or formation of this Plan,including but not limited to, any claim that all or any part of this Plan isvoidable.

 

The arbitrator shall have authority to entertain amotion to dismiss and/or motion for summary judgment by any party and shallapply the standards governing such motions under the Federal Rules of CivilProcedure.

 

**ARTICLE 14TRUST**

** **

14.1                           Establishmentof Trust.  The Company shall establishthe Trust, and the Employers shall transfer over to the Trust such assets, ifany, as the Committee determines, from time to time and in its sole discretion,are appropriate.

 

14.2                           Interrelationshipof the Plan and the Trust.  Theprovisions of the Plan shall govern the rights of a Participant to receivedistributions pursuant to the Plan.  Theprovisions of the Trust shall govern the rights of the Participant and thecreditors of the Employers to the assets transferred to the Trust.  The Employers shall at all times remainliable to carry out their obligations under the Plan.  The Employers’ obligations under the Plan may be satisfied withTrust assets distributed pursuant to the terms of the Trust.  Any such distribution shall reduce theEmployer’s obligations under this Agreement.

 

**ARTICLE 15MISCELLANEOUS**

** **

15.1                           Amendmentand Termination.  The Plan may beamended, suspended, discontinued or terminated at any time by the Committee;provided, however, that no such amendment, suspension, discontinuance ortermination shall reduce or in any manner adversely affect the rights of anyParticipant with respect to benefits that are payable or may become payableunder the Plan based upon the balance of the Participant’s Accounts as of theeffective date of such amendment, suspension, discontinuance or termination.Notwithstanding anything else contained herein or in the New Century FinancialCorporation Supplemental Benefit and Deferred Compensation Trust Agreement IIto the contrary, the Company may at any time terminate the Plan and pay out theDistribution Option Accounts in the form of lump sum payments

 

15.2                           Designationof Beneficiary.  Each Participantmay designate a Beneficiary or Beneficiaries (which Beneficiary may be anentity other than a natural person) to receive any payments which may be madefollowing the Participant’s death.  Suchdesignation may be changed or canceled at any time without the consent of anysuch Beneficiary(1).  Any suchdesignation, change or cancellation must be made in a form approved by theCommittee and

 

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(1)  In Community Property States, in order for a married participantto designate someone other than his/her spouse as the primary beneficiary,consent of each spouse is required.

 

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shall not beeffective until received by the Committee, or its designee.  If no Beneficiary has been named, or thedesignated Beneficiary or Beneficiaries shall have predeceased the Participant,the Beneficiary shall be the Participant’s estate.  If a Participant designates more than one Beneficiary, theinterests of such Beneficiaries shall be paid in equal shares, unless theParticipant has specifically designated otherwise.

 

15.3                           Limitationof Participant’s Right.  Nothing inthis Plan shall be construed as conferring upon any Participant any right tocontinue in the employment of the Company, nor shall it interfere with therights of the Company to terminate the employment of any Participant and/or totake any personnel action affecting any Participant without regard to theeffect which such action may have upon such Participant as a recipient orprospective recipient of benefits under the Plan.  Any amounts payable hereunder shall not be deemed salary or othercompensation to a Participant for the purposes of computing benefits to whichthe Participant may be entitled under any other arrangement established by theEmployer for the benefit of its employees.

 

15.4                           NoLimitation on Company Actions. Nothing contained in the Plan shall be construed to prevent the Companyfrom taking any action which is deemed by it to be appropriate or in its bestinterest.  No Participant, Beneficiary,or other person shall have any claim against the Employer as a result of suchaction.

 

15.5                           Obligationsto Company.  If a Participantbecomes entitled to a distribution of benefits under the Plan, and if at suchtime the Participant has outstanding any debt, obligation, or other liabilityrepresenting an amount owing to the Employer, then the Employer may offset suchamount owed to it against the amount of benefits otherwise distributable.  Such determination shall be made by theCommittee.

 

15.6                           Nonalienationof Benefits.  Except as expresslyprovided herein, no Participant or Beneficiary shall have the power or right totransfer (otherwise than by will or the laws of descent and distribution),alienate, or otherwise encumber the Participant’s interest under the Plan.  The Company’s obligations under this Planare not assignable or transferable except to (a) any corporation or partnershipwhich acquires all or substantially all of the Company’s assets or (b) anycorporation or partnership into which the Company may be merged orconsolidated.  The provisions of thePlan shall inure to the benefit of each Participant and the Participant’sBeneficiaries, heirs, executors, administrators or successors in interest.

 

15.7                           ProtectiveProvisions.  Each Participant shallcooperate with the Employer by furnishing any and all information requested bythe Employer in order to facilitate the payment of benefits hereunder, takingsuch physical examinations as the Employer may deem necessary and taking suchother relevant action as may be requested by the Employer.  If a Participant refuses to cooperate, theEmployer shall have no further obligation to the Participant under the Plan,other than payment to such Participant of the then current balance of theParticipant’s Distribution Option Accounts in accordance with his priorelections.

 

15.8                           WithholdingTaxes.  The Company may make suchprovisions and take such action as it may deem necessary or appropriate for thewithholding of any taxes which the Company is required by any law or regulationof any governmental authority, whether Federal,

 

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state or local, towithhold in connection with any benefits under the Plan, including, but notlimited to, the withholding of appropriate sums from any amount otherwisepayable to the Participant (or his Beneficiary).  Each Participant, however, shall be responsible for the paymentof all individual tax liabilities relating to any such benefits.

 

15.9                           UnfundedStatus of Plan.  The Plan isintended to constitute an “unfunded” plan of deferred compensation forParticipants.  Benefits payable hereundershall be payable out of the general assets of the Company, and no segregationof any assets whatsoever for such benefits shall be made.  Notwithstanding any segregation of assets ortransfer to a grantor trust, with respect to any payments not yet made to aParticipant, nothing contained herein shall give any such Participant anyrights to assets that are greater than those of a general creditor of theCompany.

 

15.10                     Severability.  If any provision of this Plan is heldunenforceable, the remainder of the Plan shall continue in full force andeffect without regard to such unenforceable provision and shall be applied asthough the unenforceable provision were not contained in the Plan.

 

15.11                     GoverningLaw.  Subject to ERISA, the Planshall be construed in accordance with and governed by the laws of the State ofCalifornia, without reference to the principles of conflict of laws.

 

15.12                     Headings.  Headings are inserted in this Plan forconvenience of reference only and are to be ignored in the construction of theprovisions of the Plan.

 

15.13                     Gender,Singular and Plural.  All pronounsand any variations thereof shall be deemed to refer to the masculine, feminine,or neuter, as the identity of the person or persons may require.  As the context may require, the singular mayread as the plural and the plural as the singular.

 

15.14                     Notice.  Any notice or filing required or permittedto be given to the Plan Administrator or the Committee under the Plan shall besufficient if in writing and hand delivered, or sent by registered or certifiedmail, to the Human Resources Department, or to such other entity as the PlanAdministrator or the Committee may designate from time to time.  Any notice or filing required or permitted tobe given to a Participant under the Plan shall be sufficient if in writing andhand delivered, or sent by registered or certified mail, to the Participant atthe Participant’s last address reflected on the payroll records of the Company,or to such other address as the Participant may specify from time to time (anysuch other address to be sent by the Participant in a written notice thatsatisfies this Section 15.14 and which notice shall make express reference tothe purpose of the notice).    In eithercase, any such notice shall be deemed given as to the date of delivery, or, ifdelivery is made by mail, as of the date shown on the postmark on the receiptfor registration or certification.

 

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**Dated at Irvine, State of California, on June22, 2004.**

 

 
|     | /s/ Stergios  Theologides                                     |
|----------|---------------------------------------------------------------|
|     | (Signature  of Representative of New Century Financial Corp.) |
|     |                                                          |   |
|     |                                                          |   |
| Witness: | /s/ Amy Gossin                                                |   |
|          |                                                               |  |  |  |

 

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