EX-10.1






EXHIBIT 10.1




AMENDED AND RESTATED EMPLOYMENT AGREEMENT




This Amended and Restated Employment Agreement (this “Agreement”) is effective as of December
27, 2005 (the “Effective Date”) between New Century Financial Corporation, a Maryland corporation
(the “Company”), and Patrick J. Flanagan (“Executive”) and, as of the Effective Date, supersedes
all prior employment agreements between Executive and the Company.



WHEREAS, Executive and Company are currently parties to an Employment Agreement dated January
1, 2004, as subsequently amended (the “Prior Employment Agreement”); and



WHEREAS, Executive and Company desire to continue Executive’s employment with the Company on
different terms and conditions that are mutually satisfactory to the parties; and



NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein,
Executive and Company agree as follows:



ARTICLE I




EMPLOYMENT




The Company hereby employs Executive and Executive accepts employment with the Company upon
the terms and conditions herein set forth. Executive and Company agree that from and after the
Effective Date, the Prior Employment Agreement shall be of no further force and effect and that
this Agreement, including Exhibits, shall govern the parties employment relationship and other
matters addressed herein.



1.1 Employment. The Company hereby employs Executive, and Executive agrees to serve,
as the Company’s Executive Vice President during the Employment Period (as defined below). The
term of employment of Executive hereunder (“Employment Period”) will be for the period commencing
on the Effective Date and ending on June 30, 2006, subject to earlier termination pursuant to
Section 4.2.



1.2 Release. Concurrent with the execution of this Agreement, Executive and the
Company shall execute the Mutual General Release Agreement attached hereto as Exhibit A.
Notwithstanding anything else contained in this Agreement to the contrary, this Agreement shall be
null and void if Executive revokes such Mutual General Release Agreement (or the release contained
therein) within any revocation period afforded by applicable law.



ARTICLE II




COMPENSATION




2.1 Base Salary. From the Effective Date through December 31, 2005, the Company shall
pay to Executive a base salary (the “Base Salary”) at an annualized rate of $577,500.00. The Base
Salary shall be payable in substantially equal semi-monthly installments.



2.2 Bonuses. Executive shall receive the remaining sum payable for his 2005 bonus,
pursuant to the terms of the New Century Financial Corporation 2004 Performance Incentive Plan
Performance-Based Award Agreed for the 6-Month Period Ending December 31, 2005 (including Exhibit A
thereto) by and between the Company and Executive (such amount estimated to be $1.232 million;
Total Estimated Award for 2005 is $1,354,814, of which $172,224 was previously paid. Balance
remaining due pursuant to 150% cash cap ($866,250) is $694,026; remaining sum exceeding cash cap is
currently estimated at $488,564 to be paid in cash or common stock). The final amount shall be
approved by the Compensation Committee of the Company’s Board of Directors. Any bonus payment
shall be paid pursuant to the Company’s current payroll practices and is subject to tax withholding
and other authorized deductions.



2.3 Reimbursement of Expenses. Executive shall be entitled to receive prompt
reimbursement of all reasonable expenses incurred by Executive in performing services requested
hereunder, including all reasonable expenses of travel, and other reasonable out-of-pocket expenses
incurred while in the service of the Company, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the Company.



2.4 Benefits. Executive shall be entitled to participate in and be covered by all
health, insurance, pension, disability insurance, physical exam and other employee plans and
benefits established by the Company (collectively referred to herein as the “Company Benefit
Plans”) on the same terms as are generally applicable to other senior executives of the Company,
subject to meeting applicable eligibility requirements. Executive will continue to be covered by
the Company’s directors and officers insurance policies with substantially the same coverage as
provided to executive officers of the Company.



2.5 Personal Leave of Absence. The Company and Executive agree that from January 1,
2006 through June 30, 2006, Executive shall be on a personal leave of absence (the “Leave”).
Notwithstanding anything to the contrary in this Agreement, during the Leave, Executive shall be
relieved of all duties and responsibilities as an officer of the Company and its affiliated
entities and shall not have authority to bind the Company or any of its affiliated entities,
provided, however, Executive agrees that he will during the Employment Period (including
the Leave) make himself reasonably available to provide information and answer questions regarding
business matters in which he was involved prior to the Leave and to cooperate with the Company in
signing such legal documents as the Company requests in operating its on-going business until the
Company can make arrangements for new authorized signatories.



(a) During the Leave, Executive shall be paid Base Salary at a rate of $76,445 per month, to
be paid in monthly or semi-monthly installments. Executive will continue to be eligible to receive
medical benefits including insurance and medical expense reimbursement plans and other medical
arrangements in which Executive participated in 2005. Executive shall not be entitled to accrue any
vacation benefits or be paid any additional amount for any holidays during the Leave.



(b) During the Leave, Executive will have no bonus opportunity with respect to the first and
second quarters of fiscal 2006.



2.6 Equity-Based Compensation. Executive shall not be entitled to any new
equity-based compensation grants from the Company or any of its affiliates. As to equity-based
awards previously granted by the Company to Executive, Executive and the Company agree to the
modifications set forth on Exhibit C hereto as to the awards identified therein. Such
modifications are effective immediately and no amount is payable with respect thereto or in respect
thereof.



ARTICLE III




NON-COMPETITION, CONFIDENTIALITY AND NONDISCLOSURE




3.1 Confidentiality. Executive will not during Executive’s employment by the Company
or thereafter at any time disclose, directly or indirectly, to any person or entity or use for
Executive’s own benefit any Trade Secrets of the Company or any of its affiliates. The parties
agree that the following constitute “Trade Secrets”:




(a) information about the Company’s (or any Company affiliate’s) products, techniques,
processes, services, clients, employee relationships, employee compensation, marketing
strategy and/or business plans, information relative to client lists, business development
plans, business studies, projections, business practices and finances (individually or in
the aggregate), and highly confidential personal and financial information of the Company’s
(or any of its affiliate’s) customers;




(b) All computer programs and databases belonging to the Company (or any Company
affiliate), including, but not limited to:




	 	(i)	 	New Century’s AE Lounge;






	 	(ii)	 	New Century’s database applications for
integrating data for marketing, sales, and loan origination systems
into a real-time data system, including applications to map brokers and
applications for Account Executives to manage their territories;






	 	(iii)	 	Loan pricing models;






	 	(iv)	 	Automated systems for underwriting and
appraisal; and






	 	(v)	 	Information contained in New Century’s data
warehouse and marketing databases.






(c) All business practices and methodologies of the Company and each of its affiliates,
which include, but are not limited to:




	 	(i)	 	The flow used to process loans;






	 	(ii)	 	Organizational structure and practices within
the production groups;






	 	(iii)	 	Operational practices to ensure proper
handling of risks associated with appraisals and loan originations; and






	 	(iv)	 	New Century’s flash report and other
informational reports designed to track the performance of New
Century’s products.






(d) All business studies performed by the Company (or any of its affiliates) to:




	 	(i)	 	Improve marketing strategies and techniques;
and






	 	(ii)	 	Improve market awareness and concentration.






(e) All broker lists and broker information, including, but not limited to:




	 	(i)	 	Identities of current and prospective brokers;






	 	(ii)	 	Broker reports;






	 	(iii)	 	Broker contact information, including
identities of contact persons for brokers;






	 	(iv)	 	Broker fundings;






	 	(v)	 	Broker affiliations with Account Executives;






	 	(vi)	 	Broker business volume;






	 	(vii)	 	Broker pricing specials;






	 	(viii)	 	Preferences and requirements of brokers with respect to products,
services, terms, pricing information, and other matters; and






	 	(ix)	 	Broker status information.






(f) All loan characteristics reports for production by product and credit grade of the
Company (or any Company affiliate).




(g) All preferences of investors for purchasing loan pools.




(h) All strategies pertaining to Secondary Market execution.




(i) All employee lists and employee contact information (including, but not limited to,
positions held and home telephone numbers).




(j) All information regarding borrowers of the Company (or any Company affiliate).




(k) All sales and marketing programs and strategies of the Company (or any Company
affiliate).




(l) All information regarding the compensation structure for, and amounts paid to,
employees of the Company (or any Company affiliate).




(m) All information on the productivity of employees of the Company (or any Company
affiliate), including, but not limited to, information regarding the highest producing
Account Executives and/or Loan Officers.




(n) All account retention programs for Account Executives and/or Loan Officers of the
Company (or any Company affiliate).




(o) All documents and information concerning New Century’s Servicing Division
(“Servicing”), including, but not limited to:




	 	(i)	 	Servicing and collection software;






	 	(ii)	 	Knowledge of New Century’s Servicing Division
including, but not limited to, delinquency, collection, and foreclosure
statistics and procedures including training manuals, dealings with
customers, and strategies and techniques concerning collections;






	 	(iii)	 	Loan characteristics for any of the loans
serviced by New Century;






	 	(iv)	 	30, 60, and 90-day delinquency numbers;






	 	(v)	 	Servicing contracts with third party providers,
including, but not limited to consumer reporting agencies, broker lists
for broker price opinions, real estate agents, and appraisers;






	 	(vi)	 	Complaint and litigation specifics or
statistics; and






	 	(vii)	 	Asset management or foreclosure figures
including number of houses, days on the market, profitability or resale
figures.






(p) All documents and information concerning ratings agency and investor comments and
perception of the Company (and any of its affiliates) that is not publicly available in its
or their reports.



3.2 Return of Confidential Material. Executive shall promptly deliver to the Company
upon the termination of Executive’s employment with the Company, for any reason, or any time the
Company may so request, all memoranda, notes, records, reports, manuals, charts, and any other
documents of a confidential nature belonging to the Company, including all copies, wherever and
however located, including electronically, of such materials which Executive may then possess or
have under Executive’s control. Upon termination of Executive’s employment with the Company,
Executive shall not take any document, data, or other material of any nature containing or
pertaining to the proprietary information of the Company.



3.3 No Competing Employment. During the Employment Period, Executive shall not,
without prior written approval of the Company, directly or indirectly own an interest in, manage,
operate, join, control, lend money or render financial assistance to, as an officer, employee,
partner, stockholder, consultant or otherwise, any individual, partnership, firm, corporation or
other business organization or entity that, at such time directly competes with the Company or its
affiliates in the business of, underwriting, purchasing, securitizing, selling or servicing
residential mortgage loans and lines of credit (a “Competing Company”). Notwithstanding the
foregoing, Executive shall be entitled to own up to 5% of the outstanding securities of any entity
if such securities are registered under Section 12(b) or (g) of the Securities Exchange Act of
1934, as amended, and, upon approval of the Company’s Board of Directors, Executive shall be
entitled to purchase securities of a Competing Company entity if such securities are offered to
investors irrespective of any employment or other participation in the entity by the investor.



3.4 Prohibition on Solicitation of Customers. During the term of Executive’s
employment with the Company and for a period of one year thereafter, Executive shall not, directly
or indirectly, either for Executive or for any other person or entity, solicit any person or entity
to terminate such person’s or entity’s contractual and/or business relationship with the Company,
nor shall Executive interfere with or disrupt or attempt to interfere with or disrupt any such
relationship.



3.5 Prohibition on Solicitation of the Company’s Employees or Independent Contractors
After Termination. During the term of Executive’s employment with the Company and for a period
of one year thereafter, Executive will not directly or indirectly solicit any of the Company’s
employees, agents, or independent contractors to leave the employ of the Company for a Competing
Company.



3.6 Right to Injunctive and Equitable Relief. Executive’s obligations not to disclose
or use Confidential Information and to refrain from the solicitations described in this Article III
are of a special and unique character, which gives them a peculiar value. The Company cannot be
reasonably or adequately compensated in damages in an action at law in the event Executive breaches
such obligations, and the breach of such obligations would cause irreparable harm to the Company.
Therefore, Executive expressly agrees that the Company shall be entitled to injunctive and other
equitable relief without bond or other security in the event of such breach in addition to any
other rights or remedies which the Company may possess. Furthermore, the obligations of Executive
and the rights and remedies of the Company under this Article III are cumulative and in addition
to, and not in lieu of, any obligations, rights, or remedies created by applicable law relating to
misappropriation or theft of trade secrets or confidential information.



3.7 Cooperation. Executive agrees that during his employment (including during the
Leave) and thereafter, he shall respond to all inquiries of the Company about any matters
concerning the Company or its affairs that occurred or arose during Executive’s employment by the
Company, and Executive further agrees to cooperate fully with the Company in investigating,
prosecuting and defending any charges, claims, demands, liabilities, causes of action, lawsuits or
other proceedings by, against or involving the Company relating to the period during which
Executive was employed by the Company or relating to matters of which Executive has or should have
knowledge or information. Executive further agrees that, except as required by law, Executive will
at no time voluntarily serve as a witness or offer written or oral testimony against the Company in
conjunction with any complaints, charges or lawsuits brought against the Company by or on behalf of
any current or former employees, or any governmental or administrative agencies and will provide
the Company with notice of any subpoena or other request for such information or testimony.



3.8 Remedy for Breach of Article 3. In the event Executive breaches any provision
contained in Article III, and notwithstanding anything else to the contrary, then, in addition to
any other legal remedies the Company may have, the Company shall have the right, in its sole
discretion, to take any or all of the following actions: (a) terminate the payments and benefits
contemplated by this Agreement and/or (b) terminate any and all stock options and other
equity-based awards theretofore granted to Executive by the Company (to the extent not theretofore
exercised or paid, as applicable); provided, however, that if a cure is reasonably possible in the
circumstances, the Company shall provide Executive with written notice of the breach and shall not
take any of the above actions unless Executive fails to cure the breach within ten (10) business
days’ after such notice.



ARTICLE IV




TERMINATION




4.1 Expiration. Unless Executive and the Company mutually agree to continue
Executive’s employment on mutually acceptable terms and conditions and subject to earlier
termination pursuant to Section 4.2, Executive’s employment with the Company shall terminate on
June 30, 2006 (the “Expiration Date”). In the event Executive’s employment terminates on the
Expiration Date, then on or before the Expiration Date the Company shall pay to Executive (i) his
Base Salary through the last day of his employment by the Company, (ii) any vacation earned but not
taken through the last day of his employment by the Company, (iii) the earned, but unpaid Incentive
Compensation Bonus, if any, for 2005, and (iv) any amounts due Executive pursuant to Section 2.4
through the last day of his employment by the Company (collectively, the amounts in clauses (i)
through (iv) are referred to as the “Accrued Obligations”). The Company shall thereafter have no
further obligations to Executive under this Agreement; provided, however, that the Company will
continue to honor any obligations that may have vested or accrued under the existing Company
Benefit Plans or any other Agreements or arrangements applicable to Executive. Without limiting
the generality of the foregoing Executive acknowledges that he shall not be entitled to any
severance payments upon the termination of Executive’s employment on the Expiration Date.



4.2 Other Terminations of Employment. In the event of Executive’s death during the
Employment Period, Executive’s employment by the Company shall automatically terminate. In
addition, the Company or Executive may terminate Executive’s employment by the Company at any time
by written notice to the other; provided that the Company shall only terminate Executive’s
employment pursuant to this Section 4.2 for a legitimate business reason that is not a punitive
action against Executive. In the event of any termination of Executive’s employment pursuant to
this Section 4.2, the Company shall pay the Accrued Obligations to Executive. In addition, if the
termination of Executive’s employment is by the Company other than for Cause (and, for purposes of
clarity, such termination is not pursuant to Section 4.1), then Executive’s then-outstanding and
otherwise unvested equity-based compensation awards theretofore granted by the Company shall
automatically become fully vested and the Company shall promptly pay Executive a cash lump sum
amount equal to the Base Salary Executive would have otherwise been entitled to receive from the
Company after the date of such termination had he continued to be employed through June 30, 2006
(including the period of the Leave); provided that Executive deliver to the Company a Separation
and General Release Agreement in a form satisfactory to the Company. After any termination of
Executive’s employment pursuant to this Section 4.2, the Company shall thereafter have no further
obligations to Executive under this Agreement; provided, however, that the Company will continue to
honor any obligations that may have vested or accrued under the existing Company Benefit Plans or
any other Agreements or arrangements applicable to Executive. Without limiting the generality of
the foregoing Executive acknowledges that he shall not be entitled to any severance payments upon
the termination of Executive’s employment (except as expressly provided otherwise in this Section
4.2 in connection with a termination of employment by the Company other than for Cause). For
purposes of this Agreement, “Cause” means:




(i) Executive’s conviction of any felony (whether or not involving the Company) which
constitutes a crime of moral turpitude or which is punishable by imprisonment in a state or
federal correction facility;




(ii) Actions by Executive during the term of this Agreement involving willful
malfeasance or gross negligence upon the Company;




(iii) Executive’s commission of an act of fraud or material dishonesty during the term
of this Agreement upon the Company;




(iv) Executive’s repeated, willful failure or refusal to perform his duties as required
by this Agreement on an exclusive and full-time basis or any other material breach by
Consultant of his obligations under this Agreement; provided that termination of Executive’s
employment pursuant to this subparagraph (iv) shall not constitute valid termination for
cause unless Executive shall have first received written notice from the Board of Directors
of the Company stating the nature of such failure or refusal and affording Executive at
least ten (10) business days to correct the act or omission complained of to the
satisfaction of the Board of Directors; and




(v) Executive’s willful violation during the term of this Agreement of any reasonable
rule or regulation of the Board of Directors applicable to all senior executives; provided
that termination pursuant to this subparagraph (v) shall not constitute valid termination
unless Executive shall have first received written notice from the Board of Directors of the
Company stating the nature of such violation and affording Consultant at least ten (10)
business days to correct the act or omission complained of to the satisfaction of the Board
of Directors.



4.3 Consulting Relationship. Concurrently with the execution of this Agreement,
Executive and the Company shall execute the Consulting Agreement attached hereto as Exhibit, which,
provided the following conditions precedent have been satisfied, shall commence on July 1, 2006.
Notwithstanding anything to the contrary herein or in the Consulting Agreement, the Consulting
Agreement shall not become effective and enforceable unless (i) Executive has performed his
obligations under this Agreement and is not in breach of this Agreement as of the Expiration Date,
(ii) Executive’s employment by the Company terminates at the close of business on June 30, 2006
(and not before that date, unless an earlier termination is a result of a termination of employment
by the Company other than for Cause), and (iii) Executive executes and delivers to the Company the
Supplemental Release attached hereto as Exhibit B after his last day of employment by the
Company (and Executive does not revoke such Supplemental Release (or the release contained therein)
within any revocation period afforded by applicable law). The Company shall pay Executive $20,000
promptly after the Supplemental Release referred to in the preceding sentence is received from
Executive (after having been fully executed by him) and such Supplemental Release has been
irrevocable by Executive under applicable law.



4.4 Effect of Termination. Upon any termination of this Agreement, for any reason,
Executive shall be deemed to have immediately resigned as a director and/or officer of the Company
and all subsidiaries, if applicable, without the giving of any notice or the taking of any other
action.



ARTICLE V




ASSUMPTION OF OBLIGATIONS BY SUCCESSOR TO COMPANY




5.1 Assumption of Obligations. The Company will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in form and substance
satisfactory to Executive, expressly, absolutely and unconditionally to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. Any failure of the Company to
obtain such assumption and agreement in a written instrument prior to the effectiveness of any such
succession or assignment shall be a material breach of this Agreement. As used in this Agreement,
“Company” shall mean the Company as herein before defined and any successor or assign to its
business and/or assets as aforesaid which executes and delivers the agreement provided for in this
Article V or which otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law. If at any time during the term of this Agreement Executive is employed by any
corporation a majority of the voting securities of which is then owned by the Company, “Company” as
used in this Agreement shall in addition include such employer.



5.2 Beneficial Interests. This Agreement shall inure to the benefit of and be
enforceable by Executive’s personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die while any amounts
are still payable to him or her hereunder, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee, or
other designee or, if there be no such designee, to Executive’s estate.



ARTICLE VI




GENERAL PROVISIONS




6.1 Non-Disparagement. Executive agrees that he shall not at any time (during the
Leave or at any time thereafter) (i) directly or indirectly, make or ratify any statement, public
or private, oral or written, to any person that disparages, professionally, the Company or any of
its affiliates, past and present, and each of them, as well as its and their directors, officers,
agents, attorneys, insurers, employees, stockholders, and successors, past and present, and each of
them, or (ii) make any statement or engage in any conduct that has the purpose or effect of
disrupting the business of the Company or any of its affiliates. Neither the Company nor any of
its executive officers or directors shall at any time, directly or indirectly, make or ratify any
statement, public or private, oral or written, to any third-party that disparages Executive
professionally. Directors, employees and contracted consultants are not third-parties for this
purpose.



6.2 Notice. For purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return receipt requested, postage prepaid, as
follows:



	 	 	 
	If to the Company:

	 	New Century Financial Corporation

18400 Von Karman, Suite 1000

Irvine, CA 92612

Attn: President
	 
	 	 
	If to Executive:

	 	Mr. Patrick J. Flanagan







33 Rockrose


Aliso Viejo, CA 92656



or such other address as either party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon receipt.



6.3 No Waivers. No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by Executive and the
Company. No waiver by either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.



6.4 Governing Law. This agreement shall be governed by and construed in accordance
with the laws of the State of California without regard to the principles of conflict of laws.



6.5 Severability or Partial Invalidity. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.



6.6 Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
instrument.



6.7 Legal Fees and Expenses. Should any party institute any action or proceeding to
enforce this Agreement or any provision hereof, or for damages by reason of any alleged breach of
this Agreement or of any provision hereof, or for a declaration of rights hereunder, the prevailing
party in any such action or proceeding shall be entitled to receive from the other party all costs
and expenses, including reasonable attorneys’ fees, incurred by the prevailing party in connection
with such action or proceeding.



6.8 Entire Agreement. This Agreement (including attached exhibits) constitutes the
entire agreement of the parties and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings, and negotiations between the parties with respect to the subject
matter hereof, except that the parties acknowledge that they have in the past and may in the future
enter into stock option or other equity-based award agreements reflecting stock option and any
other equity-based awards to Executive. This Agreement is intended by the parties as the final
expression of their agreement with respect to such terms as are included in this Agreement and may
not be contradicted by evidence of any prior or contemporaneous agreement. The parties further
intend that this Agreement constitutes the complete and exclusive statement of its terms and that
no extrinsic evidence may be introduced in any judicial proceeding involving this Agreement.



6.9 Assignment. This Agreement and the rights, duties, and obligations hereunder may
not be assigned or delegated by any party without the prior written consent of the other party and
any such attempted assignment and delegation shall be void and be of no effect. Notwithstanding
the foregoing provisions of this Section 6.9, the Company may assign or delegate its rights,
duties, and obligations hereunder to any person or entity which succeeds to all or substantially
all of the business of the Company through merger, consolidation, reorganization, or other business
combination or by acquisition of all or substantially all of the assets of the Company; provided
that such person assumes the Company’s obligations under this Agreement in accordance with Section
5.1.



6.10 Arbitration. Any controversy arising out of or relating to this Agreement, its
enforcement or interpretation, or because of an alleged breach, default, or misrepresentation in
connection with any of its provisions, or any other controversy arising out of Executive’s
employment, including, but not limited to, any state or federal statutory claims, shall be
submitted to arbitration in Orange County, California, before a sole arbitrator selected from
Judicial Arbitration and Mediation Services, Inc., Orange County, California, or its successor
(“JAMS”), or if JAMS is no longer able to supply the arbitrator, such arbitrator shall be selected
from the American Arbitration Association, and shall be conducted in accordance with the provisions
of California Code of Civil Procedure §§ 1280 et seq. as the exclusive forum for the
resolution of such dispute; provided, however, that provisional injunctive relief may, but need
not, be sought by either party to this Agreement in a court of law while arbitration proceedings
are pending, and any provisional injunctive relief granted by such court shall remain effective
until the matter is finally determined by the Arbitrator. Final resolution of any dispute through
arbitration may include any remedy or relief which the Arbitrator deems just and equitable,
including any and all remedies provided by applicable state or federal statutes. At the conclusion
of the arbitration, the Arbitrator shall issue a written decision that sets forth the essential
findings and conclusions upon which the Arbitrator’s award or decision is based. Any award or
relief granted by the Arbitrator hereunder shall be final and binding on the parties hereto and may
be enforced by any court of competent jurisdiction. The parties acknowledge and agree that they
are hereby waiving any rights to trial by jury in any action, proceeding or counterclaim brought by
either of the parties against the other in connection with any matter whatsoever arising out of or
in any way connected with this Agreement or Executive’s employment. The parties agree that the
Company shall be responsible for payment of the forum costs of any arbitration hereunder, including
the Arbitrator’s fee. Executive and Company further agree that in any proceeding to enforce the
terms of this Agreement, the prevailing party shall be entitled to its or his reasonable attorneys’
fees and costs (other than forum costs associated with the arbitration) incurred by it or him in
connection with resolution of the dispute in addition to any other relief granted. Notwithstanding
this provision, the parties may mutually agree to mediate any dispute prior to or following
submission to arbitration.



[Continued on the next page.]



1



IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.



NEW CENTURY FINANCIAL CORPORATION



By: /s/ Brad A. Morrice



EXECUTIVE



/s/ Patrick J. Flanagan






2






EXHIBIT A




MUTUAL GENERAL RELEASE AGREEMENT




1. Release by Executive. Except for any Accrued Benefits set forth in Section 2
below, Patrick J. Flanagan (“Executive”), on his own behalf and behalf of his descendants,
dependents, heirs, executors, administrators, assigns and successors, and each of them, hereby
acknowledges full and complete satisfaction of and releases and discharges and covenants not to sue
New Century Financial Corporation (the “Company”), its divisions, subsidiaries, parents, or
affiliated corporations, past and present, and each of them, as well as its and their assignees and
successors (individually and collectively, “Company Releasees”), from and with respect to any and
all claims, agreements, obligations, demands and causes of action, known or unknown, suspected or
unsuspected (collectively, “Claims”), arising out of or in any way connected with Executive’s
employment or any other relationship with or interest in the Company, including without limiting
the generality of the foregoing, any claim for severance pay, profit sharing, bonus or similar
benefit, pension, retirement, life insurance, health or medical insurance or any other fringe
benefit, or disability, or any other Claims resulting from any act or omission by or on the part of
Company Releasees committed or omitted prior to the date of this Agreement, including, without
limiting the generality of the foregoing, any claim under Title VII of the Civil Rights Act of
1964, the Americans with Disabilities Act, the Family and Medical Leave Act, the California Fair
Employment and Housing Act, California Labor Code Section 132a, the California Family Rights Act,
or any other federal, state or local law, regulation or ordinance.



2. Acknowledgement of Payment of Wages. Except for accrued vacation (which the
parties agree totals 184 hours of pay), salary for the current pay period, and the sums remaining
due for Executive’s Performance Based Bonus for the period ended December 31, 2005 (currently
estimated to be $1.232 million) (“Accrued Benefits”) to the extent not heretofore paid, Executive
acknowledges that he has received all amounts owed for his regular and usual salary (including, but
not limited to, any bonus, severance, or other wages), and usual benefits through the date of this
Agreement.



3. Release by the Company. The Company, its divisions, subsidiaries, parents, or
affiliated corporations, past and present, and each of them, hereby acknowledges fully and complete
satisfaction of and releases and discharges and covenants not to sue Executive and his descendants,
dependents, heirs, executors, administrators, assigns and successors, and each of them, from and
with respect to any and all Claims, arising out of or in any way connected with Executive’s
employment with any of them.



4. Waiver of Civil Code Section 1542. This Agreement is intended to be effective as a
general release of and bar to all Claims as stated above. Accordingly, Executive and the Company
each hereby expressly waives any rights and benefits conferred by Section 1542 of the California
Civil Code as to the Claims referred to in Sections 1 and 3 above. Section 1542 of the California
Civil Code provides:



“A GENERAL RELEASE DOES NOT EXTEND TO A CLAIM WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR
HER SETTLEMENT WITH THE DEBTOR.”



Each of Executive and the Company acknowledges that he or it later may discover Claims or facts in
addition to or different from those which Executive or the Company, respectively, now knows or
believes to exist with respect to the subject matter of this Agreement and which, if known or
suspected at the time of executing this Agreement, may have materially affected its terms.
Nevertheless, each of Executive and the Company hereby waives, as to the Claims referred to in
Sections 1 and 3 above, any Claims that might arise as a result of such different or additional
Claims or facts.



5. Additional Release by Executive. In addition to the release set forth in Section 1
above, Executive, on his own behalf and behalf of his descendants, dependents, heirs, executors,
administrators, assigns and successors, and each of them, hereby acknowledges full and complete
satisfaction of and releases and discharges and covenants not to sue any director, officer,
shareholder, partner, representative, attorney, agent or employee, past or present, of any Company
Releasee (individually and collectively, “Individual Releasees”), from and with respect to any and
all claims, agreements, obligations, demands and causes of action (collectively, “Known Claims”),
arising out of or in any way connected with Executive’s employment or any other relationship with
or interest in the Company. Executive represents and agrees that he has no knowledge of any facts
or circumstances that may reasonably constitute or lead to any such Known Claim.



6. ADEA Waiver. Executive expressly acknowledges and agrees that by entering into
this Agreement, he is waiving any and all rights or claims that he may have arising under the Age
Discrimination in Employment Act of 1967, as amended, which have arisen on or before the date of
execution of this Agreement. Executive further expressly acknowledges and agrees that:



(a) In return for this Agreement, he will receive consideration beyond that which he was
already entitled to receive before entering into this Agreement;



(b) He is hereby advised in writing by this Agreement to consult with an attorney before
signing this Agreement;



(c) He was given a copy of this Agreement on December 27, 2005 and informed that he had
twenty-one (21) days within which to consider the Agreement; and



(d) He was informed that he has seven (7) days following the date of execution of the
Agreement in which to revoke the Agreement.



7. No Transferred Claims. Each party hereto represents and warrants to the other that
he or it, as applicable, has not heretofore assigned or transferred to any person not a party to
this Agreement any released matter or any part or portion thereof.



[Continued on the next page.]



3



The undersigned have read and understand the consequences of this Agreement and voluntarily
sign it. The undersigned declare under penalty of perjury under the laws of the State of
California that the foregoing is true and correct.



EXECUTED this 27th day of December 2005, at Orange County, California.




“Executive”




Patrick J. Flanagan




“Company”


NEW CENTURY FINANCIAL CORPORATION




By:




Brad A. Morrice



4




EXHIBIT B




SUPPLEMENTAL RELEASE




1. Release. Patrick J. Flanagan (“Executive”), on his own behalf and behalf of his
descendants, dependents, heirs, executors, administrators, assigns and successors, and each of
them, hereby acknowledges full and complete satisfaction of and releases and discharges and
covenants not to sue New Century Financial Corporation (the “Company”), its divisions,
subsidiaries, parents, or affiliated corporations, past and present, and each of them, as well as
its and their assignees and successors (individually and collectively, “Company Releasees”), from
and with respect to any and all claims, agreements, obligations, demands and causes of action,
known or unknown, suspected or unsuspected (collectively, “Claims”), arising out of or in any way
connected with Executive’s employment or any other relationship with or interest in the Company,
including without limiting the generality of the foregoing, any claim for severance pay, profit
sharing, bonus or similar benefit, pension, retirement, life insurance, health or medical insurance
or any other fringe benefit, or disability, or any other Claims resulting from any act or omission
by or on the part of Company Releasees committed or omitted prior to the date of this Agreement,
including, without limiting the generality of the foregoing, any claim under Title VII of the Civil
Rights Act of 1964, the Americans with Disabilities Act, the Family and Medical Leave Act, the
California Fair Employment and Housing Act, California Labor Code Section 132a, the California
Family Rights Act, or any other federal, state or local law, regulation or ordinance.



2. Release by the Company. The Company, its divisions, subsidiaries, parents, or
affiliated corporations, past and present, and each of them, hereby acknowledges fully and complete
satisfaction of and releases and discharges and covenants not to sue Executive and his descendants,
dependents, heirs, executors, administrators, assigns and successors, and each of them, from and
with respect to any and all Claims, arising out of or in any way connected with Executive’s
employment with any of them.



3. Waiver of Civil Code Section 1542. This Agreement is intended to be effective as a
general release of and bar to all Claims as stated above. Accordingly, Executive and the Company
each hereby expressly waives any rights and benefits conferred by Section 1542 of the California
Civil Code as to the Claims referred to in Sections 1 and 2 above. Section 1542 of the California
Civil Code provides:



“A GENERAL RELEASE DOES NOT EXTEND TO A CLAIM WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR
HER SETTLEMENT WITH THE DEBTOR.”



Each of Executive and the Company acknowledges that he or it later may discover Claims or facts in
addition to or different from those which Executive or the Company, respectively, now knows or
believes to exist with respect to the subject matter of this Agreement and which, if known or
suspected at the time of executing this Agreement, may have materially affected its terms.
Nevertheless, each of Executive and the Company hereby waives, as to the Claims referred to in
Sections 1 and 2 above, any Claims that might arise as a result of such different or additional
Claims or facts.



4. Additional Release by Executive. In addition to the release set forth in Section 1
above, Executive, on his own behalf and behalf of his descendants, dependents, heirs, executors,
administrators, assigns and successors, and each of them, hereby acknowledges full and complete
satisfaction of and releases and discharges and covenants not to sue any director, officer,
shareholder, partner, representative, attorney, agent or employee, past or present, of any Company
Releasee (individually and collectively, “Individual Releasees”), from and with respect to any and
all claims, agreements, obligations, demands and causes of action (collectively, “Known Claims”),
arising out of or in any way connected with Executive’s employment or any other relationship with
or interest in the Company. Executive represents and agrees that he has no knowledge of any facts
or circumstances that may reasonably constitute or lead to any such Known Claim.



5. ADEA Waiver. Executive expressly acknowledges and agrees that by entering into
this Agreement, he is waiving any and all rights or claims that he may have arising under the Age
Discrimination in Employment Act of 1967, as amended, which have arisen on or before the date of
execution of this Agreement. Executive further expressly acknowledges and agrees that:



(e) In return for this Agreement, he will receive consideration beyond that which he was
already entitled to receive before entering into this Agreement;



(f) He is hereby advised in writing by this Agreement to consult with an attorney before
signing this Agreement;



(g) He was given a copy of this Agreement on June      , 2006 and informed that he had
twenty-one (21) days within which to consider the Agreement; and



(h) He was informed that he has seven (7) days following the date of execution of the
Agreement in which to revoke the Agreement.



6. No Transferred Claims. Each party hereto represents and warrants to the other that
he or it, as applicable, has not heretofore assigned or transferred to any person not a party to
this Agreement any released matter or any part or portion thereof.



[Continued on the next page.]



5



The undersigned have read and understand the consequences of this Agreement and voluntarily
sign it. The undersigned declare under penalty of perjury under the laws of the State of
California that the foregoing is true and correct.



EXECUTED this      day of      2006, at      County, California.




“Executive”




Patrick J. Flanagan




“Company”


NEW CENTURY FINANCIAL CORPORATION




By:




Brad A. Morrice



6




EXHIBIT C




EQUITY-BASED COMPENSATION MODIFICATIONS




The stock options granted by the Company to Executive on or about March 10, 2005 are terminated in
their entirety.



The restricted stock award granted by the Company to Executive on or about March 10, 2005 is
terminated in its entirety.



The restricted stock award granted by the Company to Executive on or about June 24, 2005 is
terminated in its entirety.



In the event of a change in control of the Company (as such term is defined in the applicable stock
plan under which such award was granted) in connection with which the stock options and restricted
stock awards granted by the Company to its executive officers generally become fully vested, any
stock options and restricted stock awards granted by the Company to Executive that are
then-outstanding and otherwise unvested shall become fully vested to the same extent as the
corresponding awards held by other executive officers of the Company.



Each stock option, dividend equivalent right and restricted stock award referred to below is
amended such that the portion of the award originally scheduled to vest on or about the
corresponding “Original Vesting Date” set forth below shall now vest on the corresponding “Revised
Vesting Date” set forth below; provided that each such portion of an award shall vest on the
corresponding Revised Vesting Date only if Executive has remained continuously employed by or
continuously providing service pursuant to the Consulting Agreement to the Company through such
Revised Vesting Date.



	 	 	 	 	 	 	 
	 	 	Approximate	 	Original	 	Revised
	Type of Award	 	Date of Grant	 	Vesting Date	 	Vesting Date
	Stock Option (NQ)

Restricted Stock

Stock Option (ISO)

Stock Option (NQ)

Stock Option (ISO)

Stock Option (NQ)

Restricted Stock

Div. Equiv. Right

	 	October 5, 2001

January 21, 2003

October 5, 2001

February 22, 2002

February 22, 2002

January 21, 2003

January 21, 2004

March 10, 2005
	 	1

1

1

1

1

1

1
	 	June 30, 2006

50% on June 20, 2006 and

50% on September 30, 2006

September 30, 2006

March 31, 2006

December 31, 2006

March 31, 2007

December 31, 2006

March 31, 2006
	 
	 	 	 	 	 	 
	Stock Option (NQ)

Stock Option (ISO)

Stock Option (NQ)

Stock Option (NQ)

	 	October 5, 2001

October 5, 2001

February 22, 2002

January 21, 2003
	 	2

2

2
	 	March 31, 2007

September 30, 2007

June 30, 2007

June 30, 2007
	 
	 	 	 	 	 	 
	Stock Option (NQ)

Stock Option (ISO)

Stock Option (NQ)

Stock Option (NQ)

	 	October 5, 2001

October 5, 2001

February 22, 2002

January 21, 2003
	 	3

3

3
	 	September 30, 2007

December 31, 2007

September 30, 2007

March 31, 2008
	 
	 	 	 	 	 	 
	Stock Option (NQ)

Stock Option (ISO)

Stock Option (NQ)

Stock Option (NQ)

	 	October 5, 2001

October 5, 2001

February 22, 2002

January 21, 2003
	 	4

4

4
	 	December 31, 2007

March 31, 2008

December 31, 2008

June 30, 2008
	 
	 	 	 	 	 	 
	Stock Option (NQ)

Stock Option (NQ)

Stock Option (ISO)

Restricted Stock

Div. Equiv. Right

	 	February 22, 2002

January 21, 2003

February 22, 2002

January 21, 2004

March 10, 2005
	 	5

5

5

5
	 	June 30, 2008

September 30, 2008

June 30, 2008

September 30, 2006

March 31, 2007
	 
	 	 	 	 	 	 
	Stock Option (NQ)

	 	January 21, 2003
	 	 	 	December 31, 2008
	 
	 	 	 	 	 	 
	Stock Option (ISO)

Div. Equiv. Right

	 	January 21, 2003

March 10, 2005
	 	7
	 	December 31, 2008

March 31, 2008






In the event Executive is no longer employed by the Company and no longer provides services to
the Company pursuant to the Consulting Agreement, any then-unvested portion of any equity-based
award granted by the Company to Executive shall thereupon immediately terminate (subject to any
accelerated vesting required by this Agreement or the Consulting Agreement in the circumstances)
and Executive shall have 30 days to exercise any stock option granted by the Company to Executive
(to the extent such option is outstanding and vested upon such termination, and subject, in all
cases, to the expiration of the award at the end of its maximum term and to any termination of the
award in connection with a change in control or similar event affecting the Company pursuant to the
terms of the award).



1 The portion of the award that was originally
scheduled to vest at any time on or after January 1, 2006 and on or before
March 31, 2006.



2 The portion of the award that was originally
scheduled to vest at any time on or after April 1, 2006 and on or before June
30, 2006.



3 The portion of the award that was originally
scheduled to vest at any time on or after July 1, 2006 and on or before
September 30, 2006.



4 The portion of the award that was originally
scheduled to vest at any time on or after October 1, 2006 and on or before
December 31, 2006.



5 The portion of the award that was originally
scheduled to vest at any time on or after January 1, 2007 and on or before
March 31, 2007.



6 The portion of the award that was originally
scheduled to vest at any time on or after April 1, 2007 and on or before March
31, 2008.



7 The portion of the award that was originally
scheduled to vest at any time on or after January 1, 2008 and on or before
March 31, 2008.




7