exv10w7



 







Exhibit 10.7




NEW CENTURY FINANCIAL CORPORATION

2004 PERFORMANCE INCENTIVE PLAN

PERFORMANCE-ACCELERATED STOCK OPTION AGREEMENT




          THIS PERFORMANCE-ACCELERATED STOCK OPTION AGREEMENT (this “Option Agreement”) dated as of
                     (the “Award Date”) by and between NEW CENTURY FINANCIAL CORPORATION, a Maryland
corporation (the “Corporation”), and                      (the “Grantee”) evidences the
performance-accelerated stock option (the “Option”) granted by the Corporation to the Grantee as of
the Award Date.




WITNESSETH




     WHEREAS, pursuant to the New Century Financial Corporation 2004 Performance Incentive Plan
(the “Plan”), the Corporation has granted to the Grantee, effective as of the Award Date and
subject to the terms and conditions set forth herein and in the Plan, a stock option as to                     
shares of the Corporation’s Common Stock.



     NOW, THEREFORE, in consideration of the mutual promises and covenants made herein and the
mutual benefits to be derived here from, the parties agree as follows:




	1.	 	Defined Terms.
	 
	 	 	Capitalized terms are defined in the Plan if not defined herein.
	 
	2.	 	Grant of Option.





     This Option Agreement evidences the Corporation’s grant to the Grantee of the right to
purchase, on the terms and conditions set forth herein and in the Plan, all or any part of an
aggregate number of                                 shares of the Corporation’s Common Stock1 at $                     per
share (the “Exercise Price”)1, exercisable from time to time, subject to the provisions
of this Agreement and the Plan, prior to the close of business on                      (the “Expiration
Date”).1,2 The Option has been granted to the Grantee in addition to, and not in lieu
of, any other form of compensation otherwise payable or to be paid to the Grantee. The Corporation
and the Grantee agree to the terms of the Option set forth herein. The Grantee acknowledges
receipt of a copy of the Plan and the Prospectus for the Plan.





 




			
	1	 	Subject to adjustment under Section 7.1 of the Plan
	 
	2	 	Subject to early termination under Section 6 below and Section 7.4 of the Plan




 









 











	3.	 	Vesting; Limits on Exercise.





     The Option shall become vested as to 100% of the total number of shares of Common Stock
subject to the Option on the fifth (5th) anniversary of the Award Date; provided,
however, that vesting of all or a portion of the shares of Common Stock subject to the Option may
be accelerated pursuant to Exhibit A attached hereto. The Option may be exercised only to
the extent the Option is vested and exercisable.




	 	•	 	Cumulative Exercisability. To the extent that the Option is vested and
exercisable, the Grantee has the right to exercise the Option (to the extent not
previously exercised), and such right shall continue, until the expiration or earlier
termination of the Option.
	 
	 	•	 	No Fractional Shares. Fractional share interests shall be disregarded, but
may be cumulated.
	 
	 	•	 	Minimum Exercise. No fewer than 1001 shares of Common Stock may
be purchased at any one time, unless the number purchased is the total number at the
time exercisable under the Option.
	 
	 	•	 	Nonqualified Stock Option. The Option is a nonqualified stock option and is
not, and shall not be, an incentive stock option within the meaning of Section 422 of
the Code.






	4.	 	Continuance of Employment/Service Required; No Employment/Service Commitment.





     The vesting schedule requires continued employment or service through each applicable vesting
date as a condition to the vesting of the applicable portion of the Option and the rights and
benefits under this Option Agreement. Employment or service for only a portion of the vesting
period, even if a substantial portion, will not entitle the Grantee to any proportionate vesting or
avoid or mitigate a termination of rights and benefits upon or following a termination of
employment or services as provided in Section 6 below or under the Plan.



     Nothing contained in this Option Agreement or the Plan constitutes a continued employment or
service commitment by the Corporation or any of its Subsidiaries, affects the Grantee’s status, if
he or she is an employee, as an employee at will who is subject to termination without cause,
confers upon the Grantee any right to remain employed by or in service to the Corporation or any
Subsidiary, interferes in any way with the right of the Corporation or any Subsidiary at any time
to terminate such employment or service, or affects the right of the Corporation or any Subsidiary
to increase or decrease the Grantee’s other compensation.




	5.	 	Method of Exercise of Option.





     The Option shall be exercisable by the delivery to the Secretary of the Corporation (or such
other person as the Administrator may require pursuant to such administrative exercise procedures
as the Administrator may implement from time to time) of:



 









 






	 	•	 	a written notice stating the number of shares of Common Stock to be purchased
pursuant to the Option or by the completion of such other administrative exercise
procedures as the Administrator may require from time to time,
	 
	 	•	 	payment in full for the Exercise Price of the shares to be purchased in cash, check
or by electronic funds transfer to the Corporation, or (subject to compliance with all
applicable laws, rules, regulations and listing requirements and further subject to
such rules as the Administrator may adopt as to any non-cash payment) in shares of
Common Stock already owned by the Grantee, valued at their Fair Market Value on the
exercise date, provided, however, that any shares initially acquired
upon exercise of a stock option or otherwise from the Corporation must have been owned
by the Grantee for at least six (6) months before the date of such exercise;
	 
	 	•	 	any written statements or agreements required pursuant to Section 8.1 of the Plan;
and
	 
	 	•	 	satisfaction of the tax withholding provisions of Section 8.5 of the Plan.




The Administrator also may, but is not required to, authorize a non-cash payment alternative by
notice and third party payment in such manner as may be authorized by the Administrator.



The Grantee may irrevocably elect, in such manner and at such time or times prior to any applicable
tax date as may be permitted or required under Section 8.5 of the Plan and rules established by the
Administrator (and subject to the requirements of applicable law), to have the Corporation withhold
shares of Common Stock issuable on exercise of the Option at their fair market value at the time of
exercise to satisfy any minimum withholding obligations of the Corporation or its Subsidiaries with
respect to such exercise.





	6.	 	Early Termination of Option.





     6.1 Possible Termination of Option upon Change in Control. The Option is subject to
termination in connection with a Change in Control Event or certain similar reorganization events
as provided in Section 7.4 of the Plan.



     6.2 Termination of Option upon a Termination of Grantee’s Employment or Services. Subject to
earlier termination on the Expiration Date of the Option or pursuant to Section 6.1 above or
Section 6.3 below, if the Grantee ceases to be employed by or ceases to provide services to the
Corporation or a Subsidiary, the following rules shall apply (the last day that the Grantee is
employed by or provides services to the Corporation or a Subsidiary is referred to as the Grantee’s
“Severance Date”):




	 	•	 	other than as expressly provided below in this Section 6.2, (a) the Grantee will
have until the date that is 30 days after his or her Severance Date to exercise the
Option (or portion thereof) to the extent that it was vested on the Severance Date, (b)
the Option, to the extent not vested on the Severance Date, shall terminate on the
Severance Date, and (c) the Option, to the extent exercisable for the 30-day period
following the Severance Date and not exercised during such period, shall terminate at
the close of business on the last day of the 30-day period;




 









 






	 	•	 	if the termination of the Grantee’s employment or services is the result of the
Grantee’s voluntary Retirement (as defined below and other than a termination by the
Corporation or a Subsidiary for Cause as provided below), then (a) the Grantee will
have until the date that is 3 years after his or her Severance Date to exercise the
Option (or portion thereof) to the extent that it was vested on the Severance Date or
becomes vested pursuant to the following, (b) any portion of the Option that was
scheduled to vest during the 3-year period following the Severance Date shall
automatically become fully vested and exercisable as of the Severance Date, (c) to the
extent the Option was not vested on the Severance Date or scheduled to vest during such
3-year period, such portion of the Option shall terminate on the Severance Date, and
(d) the Option, to the extent exercisable and not exercised at the end of such 3-year
period, shall terminate at the close of business on the last day of the 3-year period;
	 
	 	•	 	if the termination of the Grantee’s employment is the result of the Grantee’s
voluntary Early Retirement (as defined below and other than a termination by the
Corporation or a Subsidiary for Cause as provided below), then (a) the Grantee will
have until the date that is 3 years after his or her Severance Date to exercise the
Option (or portion thereof) to the extent that it was vested on the Severance Date or
becomes vested pursuant to the following, (b) the Administrator may, in its sole
discretion, provide that all or any portion of the Option that was scheduled to vest
during the 3-year period following the Severance Date shall automatically become fully
vested and exercisable as of the Severance Date, (c) to the extent the Option was not
vested on the Severance Date (after giving effect to any accelerated vesting pursuant
to the foregoing clause (b)), such portion of the Option shall terminate on the
Severance Date, and (d) the Option, to the extent exercisable and not exercised at the
end of such 3-year period, shall terminate at the close of business on the last day of
the 3-year period;
	 
	 	•	 	if the termination of the Grantee’s employment is the result of the Grantee’s death
or Disability (as defined below), then (a) the Grantee (or his beneficiary or personal
representative, as the case may be) will have until the date that is 3 years after the
Grantee’s Severance Date to exercise the Option, (b) the Option, to the extent not
otherwise vested on the Severance Date, shall become fully vested as of the Severance
Date, and (c) the Option, to the extent exercisable for the 3-year period following the
Severance Date and not exercised during such period, shall terminate at the close of
business on the last day of the 3-year period;
	 
	 	•	 	if the Grantee’s employment or services are terminated by the Corporation or a
Subsidiary for Cause (as defined below), the Option (whether vested or not) shall
terminate on the Severance Date.





     For purposes of the Option, “Disability” means a “permanent and total disability” (within the
meaning of Section 22(e)(3) of the Code or as otherwise determined by the Administrator). For
purposes of the Option, “Retirement” means a termination of employment by the Grantee that occurs
upon or after the Grantee’s attainment of age 65 and in accordance with the retirement policies of
the Corporation (or the Subsidiary that employs the Grantee) then in effect.



 









 




For purposes of the Option, “Early Retirement” means a termination of employment by the
Grantee that occurs upon or after the date the Grantee attains age 55 and has performed at least 5
Years of Service (as such term is defined for purposes of determining vesting under the
Corporation’s 401(k) Profit-Sharing Plan). For purposes of the Option, “Cause” means that the
Grantee: (a) has been negligent in the discharge of his or her duties to the Corporation or a
Subsidiary or has refused or failed to adequately perform stated or assigned duties (other than by
reason of a disability or analogous condition), which shall be determined by the Corporation or a
Subsidiary in its sole discretion; (b) has been dishonest or committed or engaged in any act of
theft, embezzlement, dishonesty or fraud, breach of confidentiality, or unauthorized disclosure or
use of inside information, customer lists, associate information, trade secrets or other
confidential information of the Corporation or a Subsidiary or any other misuse of data,
information or documents acquired in connection with employment by the Corporation or a Subsidiary;
(c) has breached a fiduciary duty, or otherwise violated any duty, law, rule, regulation or policy
of the Corporation or a Subsidiary; (d) has misused or misappropriated the assets of the
Corporation or a Subsidiary; (e) has been convicted of, or pled guilty or nolo contendere to, any
felony or any misdemeanor involving moral turpitude or otherwise causing embarrassment to the
Corporation or a Subsidiary; (f) has materially breached any of the provisions of any agreement
with the Corporation or a Subsidiary; (g) has engaged in unfair competition with, or otherwise
acted intentionally or negligently in a manner injurious to the reputation, goodwill, business or
assets of, the Corporation or a Subsidiary; or (h) has induced a vendor or customer to breach or
terminate any contract with the Corporation or a Subsidiary or induced a principal for whom the
Corporation or a Subsidiary acts as agent to breach or terminate such agency relationship. “Cause”
shall also include any resignation by the Grantee in anticipation of a discharge for “Cause” (as
provided above) or resignation by the Grantee accepted by the Corporation or a Subsidiary in lieu
of a formal discharge for “Cause.”




     In all events the Option is subject to earlier termination on the Expiration Date of the
Option or as contemplated by Section 6.1 or Section 6.3. The Administrator shall be the sole judge
of whether the Grantee continues to render employment or services for purposes of this Option
Agreement.



     6.3 Termination of Option upon Grantee’s Engagement in Competition or Breach of Agreement.
Subject to earlier termination on the Expiration Date of the Option or pursuant to Section 6.1
above, if at any time during any post-termination exercise period of the Option provided for in
Section 6.2 above the Grantee (a) engages in any business for the Grantee’s own account or
otherwise derives any personal benefit from any business that competes with the business of the
Corporation or any of its Subsidiaries, (b) enters the employ of, or renders any services to, any
person engaged in any business that competes with the business of the Corporation or any of its
Subsidiaries or (c) breaches his or her obligations relating to disclosure, use or ownership of
intellectual property or proprietary information, competition, the solicitation of employees or
customers or non-disparagement of the Corporation or any of its Subsidiaries, in each case pursuant
to any agreement with the Corporation or any of its Subsidiaries, then the Option shall immediately
terminate on the date of such action, and the Grantee shall have no rights thereafter under or with
respect to the Option or this Option Agreement.



 









 






	7.	 	Non-Transferability.





     The Option and any other rights of the Grantee under this Option Agreement or the Plan are
nontransferable and exercisable only by the Grantee, except as set forth in Section 5.7 of the
Plan. For purposes of clarity, the Administrator has not authorized any transfer exceptions as
contemplated by Section 5.7.2 of the Plan.




	8.	 	Notices.





     Any notice to be given under the terms of this Option Agreement shall be in writing and
addressed to the Corporation at its principal office to the attention of the Secretary, and to the
Grantee at the address last reflected on the Corporation’s payroll records, or at such other
address as either party may hereafter designate in writing to the other. Any such notice shall be
delivered in person or shall be enclosed in a properly sealed envelope addressed as aforesaid,
registered or certified, and deposited (postage and registry or certification fee prepaid) in a
post office or branch post office regularly maintained by the United States Government. Any such
notice shall be given only when received, but if the Grantee is no longer employed by the
Corporation or a Subsidiary, shall be deemed to have been duly given five (5) business days after
the date mailed in accordance with the foregoing provisions of this Section 8.




	9.	 	Plan.





     The Option and all rights of the Grantee under this Option Agreement are subject to the terms
and conditions of the Plan, incorporated herein by this reference. The Grantee agrees to be bound
by the terms of the Plan and this Option Agreement. The Grantee acknowledges having read and
understanding the Plan, the Prospectus for the Plan, and this Option Agreement. Unless otherwise
expressly provided in other sections of this Option Agreement, provisions of the Plan that confer
discretionary authority on the Board or the Administrator do not and shall not be deemed to create
any rights in the Grantee unless such rights are expressly set forth herein or are otherwise in the
sole discretion of the Board or the Administrator so conferred by appropriate action of the Board
or the Administrator under the Plan after the date hereof.




	10.	 	Entire Agreement.





     This Option Agreement and the Plan together constitute the entire agreement and supersede all
prior understandings and agreements, written or oral, of the parties hereto with respect to the
subject matter hereof. The Plan and this Option Agreement may be amended pursuant to Section 8.6
of the Plan. Such amendment must be in writing and signed by the Corporation. The Corporation
may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not
adversely affect the interests of the Grantee hereunder, but no such waiver shall operate as or be
construed to be a subsequent waiver of the same provision or a waiver of any other provision
hereof.




	11.	 	Governing Law.





     This Option Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Maryland without regard to conflict of law principles thereunder.



 









 






	12.	 	Effect of this Agreement.





     Subject to the Corporation’s right to terminate the Option pursuant to Section 7.4 of the
Plan, this Option Agreement shall be assumed by, be binding upon and inure to the benefit of any
successor or successors to the Corporation.




	13.	 	Section Headings.





     The section headings of this Option Agreement are for convenience of reference only and shall
not be deemed to alter or affect any provision hereof.



     IN WITNESS WHEREOF, the Corporation has caused this Option Agreement to be executed on its
behalf by a duly authorized officer and the Grantee has executed this Option Agreement by his or
her electronic acceptance hereof.



	 	 	 	 	 
	 	

NEW CENTURY FINANCIAL CORPORATION

a Maryland corporation

 	 
	 	By:  	 	 
	 	 	Name:  	Brad Morrice 	 
	 	 	Title:  	Vice Chairman, President and Chief

Operating Officer 	 
	 



	 	 	 	 	 
	 	PARTICIPANT

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	 	 



 









 






	 	 	 	 	 



EXHIBIT A




PERFORMANCE-ACCELERATED VESTING





     Subject to early termination of the Option under Section 6 of this Option Agreement, the
Option shall immediately become vested as to the percentage of the total number of shares of Common
Stock subject to the Option set forth on the table below (the “Vesting Percentage”) at the end of
any period of ten (10) consecutive trading days on which the Common Stock is actively listed or
traded on a national securities exchange or on the New York Stock Exchange Reporting System and the
closing or last price, as applicable, for a share of the Common Stock (“Stock Price”) on each of
such trading days equals or exceeds the applicable threshold amount set forth below (the “Stock
Price Threshold”). For avoidance of doubt, the Option may vest only once with respect to any Stock
Price Threshold so that, for example, if the Stock Price equals or exceeds the 25% Stock Price
Threshold below for ten (10) consecutive trading days and 25% of the shares subject to the Option
vest accordingly, no additional shares subject to the Option shall vest if the Stock Price declines
below the 25% Stock Price Threshold and subsequently increases above the 25% Stock Price Threshold.
Furthermore, the Vesting Percentages do not cumulate so that, for example, if the Stock Price
equals or exceeds the 25% Stock Price Threshold for ten (10) consecutive trading days and 25% of
the shares subject to the Option vest accordingly, an additional 25% of the shares subject to the
Option (not an additional 50% of such shares) shall vest if the Stock Price subsequently equals or
exceeds the 50% Stock Price Threshold for ten (10) consecutive trading days.



	 	 	 	 	 
	Vesting Percentage	 	Stock Price Threshold	 
	25%
	 	$	46.00	 
	50%
	 	$	53.00	 
	75%
	 	$	60.00	 
	100%
	 	$	67.00	 






     Adjustments. The Administrator shall adjust the Stock Price Thresholds referenced above to
the extent (if any) it determines that the adjustment is necessary or advisable to preserve the
intended incentives and benefits to reflect (1) any stock split, reverse stock split, stock
dividend, material change in corporate capitalization, any material corporate transaction (such as
a reorganization, combination, separation, merger, acquisition, or any combination of the
foregoing), or any complete or partial liquidation of the Corporation, (2) any change in accounting
policies or practices, (3) the effects of any special charges to the Corporation’s earnings, or (4)
any other similar special circumstances.