Document:

Senior Secured Facility Commitment Agreement with HSH Nordbank AG

 EXHIBIT 10.17 
  
 Firm Offer for financing the acquisition of 
 Navios Maritime Holdings Inc. 
  

			
	 Borrower
	  	 International Shipping Enterprises, Inc. Delaware.
  

		
	 Acquisition
	  	 The Borrower intends to acquire 100% of the shares of Navios Maritime Holdings Inc.
  
 At the time of purchase Navios Maritime Holdings Inc. to be the sole shareholder of the
following subsidiaries which in their entirety shall be included in the purchase of Navios Maritime Holdings Inc, namely:
  
 –       Anemos Maritime Holdings Inc. (100%) and all of its subsidiaries
namely:
 –       Ionian Shipping Corporation (100%)
 –       Apollon Shipping Corporation (100%)
 –       Herakles Shipping Corporation (100%)
 –       Achilles Shipping Corporation (100%)
 –       Kypros Shipping Corporation (100%)
 –       Hios Shipping Corporation (100%)
 –       Navios Ship Management Inc. (100%)
  
 –       Navios Corporation (100%) and all of its subsidiaries namely:
 –       Navimax Corporation (100%)
 –       Navios Handybulk Inc. (100%)
 –       Navios International Inc. (100%)
 –       Corporacion Navios Sociedad Anonima (100%)
 –       Acropolis Shipping & Trading Inc. (50%)
  
 (Navios Maritime Holdings Inc. and all of its above subsidiaries hereinafter together “Navios Group”).
  

		
	 Purchase Price
	  	 The price which the Borrower has agreed to pay to the existing owners of the Navios Group (“the
Seller”) and the Seller has accepted as payment for 100% of the shares of Navios Group.
  

		
	 Navios Group
	  	 Navios Maritime Holdings Inc. and all its assets and subsidiaries.
  

	 Vessels/Assets
	  	 Navios Group shall be the sole owner of the following assets (only encumbered to such extent as has been
disclosed to the Agent and Underwriter):
  
 1. Six (6) ultra handymax dry bulk
carriers 100% owned by Navios Group, in particular:
  
 –       Navios Achilles, built 2001, 52,063 dwt
  
 –       Navios Apollon, built 2000, 52,073 dwt
  
 –       Navios Herakles, built 2001, 52,061 dwt
  
 –       Navios Hios, built 2003, 55,180 dwt
  
 –       Navios Ionian, built 2000, 52,068 dwt
  
 –       Navios Kypros, built 2003, 55,180 dwt
  
 2. All other tangible and intangible assets which have been disclosed to the Agent and
Underwriter in the course of the due diligence process and presented in the Acquisition data room of Navios Group.
  

		
	 Facility Purpose
	  	 Tranche A:
  
 –       to refinance existing outstanding long-term indebtedness secured on the
Vessels;
  
 –       to partly finance the equity value of Navios Group (“the Equity Value”); and
  
 –       to provide funds to the Borrower for general corporate purposes provided that any
advances will be used to finance core business activities of Navios Group.
  

			
	 	  	 Tranche B:
 –       to partly finance the Equity Value; and
  
 –       to
provide funds to the Borrower for general corporate purposes provided that any advances will be used to finance core business activities of Navios Group.
  
 Provided that (including, but not limited to)
  
 –       the Borrower will participate with its own equity of at least USD 180,000,000 in
the financing of the Purchase Price (“the Minimum ISE-Equity”); and
  
 –       the Purchase Price does not exceed USD 600,000,000 unless any excess amount is
100% covered by additional ISE equity which has to be received by the Borrower not later than four (4) weeks after the Closing Date (“the Additional ISE-Equity”) (the Minimum ISE-Equity and Additional ISE-Equity together “the
ISE-Equity”); and
  
 –       the ISE-Equity to be applied first towards the Purchase Price and the balance of the Purchase Price to be covered by the Facility.
  
 The Equity Value to be defined as follows:
  
 The equity value of all the assets of Navios Group based on the assessment of the Borrower assisted by HSH Gudme Corporate Finance GmbH, Hamburg (“HSH Gudme”)
and Investment & Finance S.A., Greece (“I&F”). Such assessment being the result the Borrower’s, HSH Gudme’s and I&F’s evaluation of the Acquisition including due diligence, evaluation and preparation of a
financial business-plan and cash flow model for Navios Group and the valuation of Navios Group.
  

		
	 Facility Amount
	  	 Tranche A:
 The lower of USD 140,000,000 and 75% of the Market Value of the Vessels.
  
 Tranche B:
 Up to USD 380,000,000. Tranche B will be divided into the following sub-tranches (“the Tranche B Sub-Tranches”):
  
 Tranche B1 of up to USD 215,000,000
 Tranche B2 of up to USD 50,000,000
 Tranche B3 of up to USD
115,000,000
  
 The ranking of the Tranche B Sub-Tranches and the Tranches’
relative share in the overall amount of Tranche B is based on the inherent risks of the business segments included in the Equity Value excluding the Vessels (“Equity Value B”), in particular :
  
 Long term Chartered-in fleet = approx. 57% of Equity Value B
 Port Business = approx. 13% of Equity Value B
 FFA-Trading and short term
physical trading = approx. 30% of Equity Value B
  

		
	 Arranger and Agent
	  	 HSH Nordbank AG
  

		
	 Underwriter
	  	 HSH Nordbank AG
  

		
	 Lender
	  	 HSH Nordbank AG and any banks selected by the Agent.
  

		
	 Swap Bank
	  	 HSH Nordbank AG
  

		
	 Drawdown and
 Availability Period
	  	 The Drawdown date not to occur later than April 30, 2005 provided that the availability period can be
extended by the Lender at the Lender’s sole discretion.
  

		
	 Closing Date
	  	 The date on which the Borrower becomes the full legal owner of Navios Group, not to occur later than April
30, 2005.
  

  

 2 

			
	 	 
	 Support Letter
	  	 Upon acceptance of this firm offer letter and subject to a Purchase Price acceptable to HSH Nordbank, HSH
Nordbank will issue a letter to Lazard Freres & Co LLC, New York in the wording as in the attached Schedule 1 (“the Support Letter”).
  

		
	 Facility Maturity Date
	  	 Tranche A: approx. eight (8) years from the Closing Date.
  
 Tranche B: approx. six (6) years from the Closing Date.
  

		
	 Currency
	  	 USD
  

		
	 Repayment
	  	 Tranche A:
  
 In thirty-one (31) consecutive instalments, the first instalment to be paid ninety (90) days after the Closing Date, but not later than July 31, 2005, and the second
instalment to be paid on September 30, 2005, as follows:
  
 –       two (2) installments of USD 7,500,000, followed by
  
 –       five (5) quarterly installments of USD 7,500,000, followed by
  
 –       four (4) quarterly installments of USD 2,500,000, followed by
  
 –       twenty (20) quarterly installments of USD 1,250,000, and
  
 –       a
balloon payment of USD 52,500,000 payable together with the last installment.
  
 Tranche B Sub-Tranches:
  
 In twenty-three (23) consecutive instalments
according to the attached Schedule 2; the first instalment to be paid ninety (90) days after the Closing Date, but not later than July 31, 2005.
  

		
	 Voluntary
 Prepayment
	  	 The Borrower may prepay outstanding amounts under the Facility without penalty in multiples of USD
1,000,000 with 10 days prior written notice to the Lender, provided that such prepayments take place on the last day of an Interest Period, otherwise subject to compensation for breakage costs. Amounts so received by the Lender may not be
re-borrowed and shall be applied firstly against Tranche B and secondly against Tranche B in the following manner:
  
 Tranche A:
  
 First against the balloon payment and then against the instalments in inverse order of maturity.
  
 Tranche B:
  
 First against the instalments of Sub-Tranche B1, second against the instalments of Sub-Tranche B2 and third against the instalments of Sub-Tranche B3, in each case in inverse order of maturity.
  

		
	 Mandatory
 Prepayment
	  	 The Facility Amount will be reduced and the balance shall be prepaid upon sale or loss of any tangible
and/or intangible assets (including, but not limited to the Assets as defined above) of the Borrower and Navios Group in an amount equal to the sales and insurance proceeds of such asset. In case of sale of any assets, the sales proceeds to be at
fair market value of such asset. Such prepayments to be made as per above.
  

		
	 Conditions precedent
	  	 Usual for this type of facility, including but not limited to:
  
 –       in
the Underwriter’s sole opinion the absence of any material adverse change having occurred in any of the business, condition (financial or otherwise), operations or prospects of any of the Borrower and Navios Group since December 31,
2004;
  
 –       the accuracy and completeness of all the representations that the Borrower has made or will make to the Underwriter, Agent and/or Lender and all information that has been furnished by the
Borrower to the Underwriter, Agent and/or Lender and the Borrower’s compliance with this Facility;
  

  

 3 

			
	 	  	 –       the payment in
full of all fees, expenses and other amounts payable under the Facility;
  
 –       HSH Gudme having been mandated as advisor to the Borrower to advise and assist
the Borrower in the Acquisition;
  
 –       satisfactory to the Agent and the Lender due diligence with respect to Navios Group and all financial and legal aspects of the Acquisition (including but not limited to any charter and
employment contracts of the Vessels or vessels Chartered-in by Navios Group, any FFA transaction entered into by Navios Group, the employment contracts of Navios Group’s employees, any tax issues, the Navios Group’s audited and un-audited
financial statements, cash positions etc);
  
 –       satisfactory to the Agent and the Lender report on the financial statements and accounts of Navios Group until the change of ownership to the Borrower and satisfactory to the Agent and the
Lender report on all legal aspects of the Acquisition; the auditor and legal council to carry out such audits to be approved by the Lender;
  
 –       the valuation of Navios Group and the Equity Value to be acceptable to the Agent
and the Lender;
  
 –       the Purchase Agreement to be in form and substance acceptable to the Agent and the Lender;
  
 –       all documentation regarding the Acquisition (including management lock-up periods
(“the Lock-up Periods”) and non-competition clauses for the senior management and any key personnel) to be in form and substance acceptable to the Agent and the Lender;
  
 –       all corporate approvals necessary for the Borrower
to execute the Purchase Agreement in form and substance satisfactory to the Agent and the Lender.
  

		
	 Interest Rate Periods
	  	 One, Three (3), six (6) or twelve (12) months at the Borrower’s option or such period as the Borrower
and the Lender may agree upon.
 Interest payments to be made at the end of each Interest Period or semi-annually in arrears if any interest period exceeds
six months.
  

		
	 Interest Rate Option
	  	 At any time the Borrower may, through interest rate swap contracts with the Swap Bank, fix the interest
rate for any amount of the Facility and for any period during the life of the Facility. The Borrower may also enter into structured interest rate instruments with the Swap Bank to hedge the interest rate exposure.
  

		
	 Interest Rate
	  	 The rate of interest will be either LIBOR or the applicable swap rate plus Mandatory Costs plus the
Margin. In the event of an interest period exceeding 12 months, LIBOR may be substituted by the Lender’s funding costs.
  

		
	 Mandatory Costs
	  	 The cost of complying with any applicable regulatory requirements of any relevant regulatory
authority.
  

		
	 Margin
	  	 Tranche A:
  
 1.50% p.a.
  
 Tranche B:
  
 Tranche B1: 2.250% p.a.

Tranche B2: 2.500% p.a.
 Tranche B3: 2.750% p.a.
  

		
	 Upfront Fee (including
 structuring and
 arrangement fees)
	  	 Non-refundable, payable by the Borrower to the Lender in the following tranches,
  
 –       USD
200,000 upon the Borrower’s nomination by the Seller as the exclusive bidder;
 –       USD 1,500,000 upon signing of the Purchase Agreement, but not later than March 15, 2005 irrespective of whether a Purchase Agreement has been signed or not;
  

  

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	 	  	 –       and the balance
of the fees on the Closing Date;
  
 as follows:
  
 Tranche A: 0.650% of the Tranche A Amount.
  
 Tranche B:
  
 Tranche B1: 1.000% of the Tranche B1 Amount.
 Tranche B2: 1.300% of the Tranche B2 Amount.
 Tranche B3: 1.600% of the Tranche B3 Amount.
  
 Irrespective of (i) the Acquisition will materialize or not (ii) or this Facility will be
drawn or not the Borrower to pay to the Agent until April 30, 2005 a minimum fee of USD 2,000,000 as part of the a.m. fees, provided that a Purchase Agreement has been signed.
  

		
	 Underwriting Fee
	  	 0.45% of the Facility Amount provided that the consultancy fee of HSH Gudme payable by the Borrower to HSH
Gudme will be increased from 0.30% of the Purchase Price to 0.45% of the Purchase Price.
  

		
	 Commitment Fee
	  	 0.45% p.a. on the un-drawn portion of the Facility Amount, payable quarterly in arrears starting on the
date of the acceptance of this Firm Offer letter.
  

		
	 Drop-dead Fee
	  	 USD 200,000 flat, non-refundable, payable by the Borrower if the Borrower’s bid is not successful or
no valid and binding Purchase Agreement is concluded between the Borrower and the Seller for the Navios Group within the Commitment Period.
  

		
	 Accounts
	  	 Any accounts regarding the collection of any charter earnings of the vessels operated by Navios Group
(whether owned or Chartered-in), the collection of surplus earnings and any operating and retention accounts (as the case may be) to be opened and maintained with the Agent.
  

		
	 Ownership
	  	 During the Facility Period the Vessels/the Assets have to remain 100% owned by owners acceptable to the
Agent and the Lender.
  

		
	 Security
	  	Usual for this type and nature of facility, including but not limited to:
		
	 (i)
	  	Cross-collateralized mortgages on the Vessels acceptable to the Lender.
		
	 (ii)
	  	Assignment of the Vessels’ Insurances and Notices of Assignment thereof acceptable to the Lender.
		
	 (iii)
	  	Assignment of the Vessels’ earnings acceptable to the Lender including but not limited to specific assignment of any contracts / charters having a duration of more than 11 months (those
specific assignments to be notified to and acknowledged by the respective counter parties) and general assignments of earnings and requisition compensation.
		
	 (iv)
	  	First Priority Pledge of any surplus cash accounts Navios Group maintains with the Agent or any other bank.
		
	 (v)
	  	First Priority Pledge of the Accounts to be opened with the Lender.
		
	 (vi)
	  	First Priority Assignment of any closed-out FFA contracts acceptable to the Lender.
		
	 (vii)
	  	First Priority Assignment of the charter contracts entered into by Navios Group for the vessels Chartered-in by Navios Group (“Chartered-in Vessels”) including but not limited to
specific assignment of any charter-in contracts/ charters having a duration of more than 11 months (those specific assignments to be notified to and acknowledged by the respective counter parties).
		
	 (viii)
	  	First Priority Assignment of the Chartered-in Vessels’ and any other vessel’s chartered in by the Borrower resp. Navios Group earnings including but not limited to specific
assignment of any contracts / charters having a duration of more than 11 months (those specific assignments to be notified to and acknowledged by the respective counter parties) and general assignments of earnings and requisition
compensation.

  

 5 

			
	 (ix)
	  	First Priority Assignment of the Purchase Agreement.
		
	 (x)
	  	Assignment/pledge (as the case may be) of Navios Group’s property, leases, benefits and/or rights in relation to the Corporacion Navios Group S.A. (the Uruguay port terminal) acceptable
to the Lender.
		
	 (xi)
	  	Pledge of all shares in Navios Group owned and/or controlled by the Borrower.
		
	 (xii)
	  	 All securities to be cross-collateralized and to secure the total amount of the Facility plus interest
thereon and otherwise and also to secure on a pari-passu basis any interest rate swap or any other hedging instruments with the Swap Bank.
  

		
	 Application of Funds
	  	 Any funds paid to the Agent for the purpose of repaying the Facility Amount shall be applied
  
 First: in or towards satisfaction of any amounts then due and payable under Tranche
A
  
 Secondly: in or towards satisfaction of any amounts then due and payable
under Tranche B1
  
 Thirdly: in or towards satisfaction of any amounts then due
and payable under Tranche B2
  
 Fourthly: in or towards satisfaction of any
amounts then due and payable under Tranche B3.
  

		
	 Insurances
	  	 
	 (i)
	  	 The Vessels:
  
 Hull and Machinery Insurance (fire, marine and other risks (including Excess Risks) and war risk) in an amount of not less than 110 % of the Tranche A Amount or the
Market Value of the Vessels, whichever is the higher.
  
 All other
Assets:
 Shall be insured against loss and other customary risks at their respective fair market value and on terms and conditions acceptable to the
Agent.

		
	 (ii)
	  	 For all Assets:
 Protection and Indemnity Insurance at
the highest possible cover (for the Vessels for the time being USD 1bn for oil pollution).

		
	 (iii)
	  	 The Vessels:
 Mortgagee’s Interest Insurance (MII) in an amount of not less than 110 % and Mortgagee’s Additional Perils Pollution Insurance (MAP) in an amount of not less than 110 % of the Tranche A Amount to be taken out by the Lender. The
cost of the MII and the MAP will be for the account of the Borrower.
  
 All other
Assets:
 The Agent and the Lender to enjoy all privileges customary in relation to the respective insurance. If any such privileges should not be available,
respective insurance cover similar to MII for ships to be taken out.
  

		
	 Covenants
	  	Usual for financings of this nature, including, but not limited to:
		
	 (i)
	  	Angeliki Frangou to hold and control at least 20% of the shares of the Borrower during the tenor of the Facility.
		
	 (ii)
	  	No change in the ownership of Navios Group after the Acquisition.
		
	 (iii)
	  	 No change in the business of either of the Borrower or Navios Group and no sale of any Vessels and
Chartered-in Vessels in case Navios Group would exercise any of the purchase options (“New Vessels”) and no sale of any of the purchase options for any of the Chartered-in Vessels during the tenor of the Facility without the prior written
consent of the Lender.
 The Lender to have the right of first refusal to finance the acquisition of any or all of the New Vessels.
  

  

 6 

			
		
	 (iv)
	  	Usual covenants in relation to the Vessels/other Assets (flag, class, earnings, inspection, market value, minimum value clause etc.).
		
	 (v)
	  	No change in the Vessels’ and Chartered-in Vessels’ employment or charter contracts without prior written consent of the Lender.
		
	 (vi)
	  	 The Navios Group to guarantee all obligations of the Borrower under and in connection with the Facility (and the Securities then to secure such
guarantee obligation of the Navios Group) or such other legally valid and binding structure to be found (subject to appropriate legal advice) to enable the Agent, the Underwriter and the Lender to enjoy the terms and conditions of this Firm
Offer.
  
 Any merger between the Borrower and Navios Group after the Acquisition
to be subject to the approval of the Lender.

		
	 (vii)
	  	Any compensation for any management services rendered by the Borrower or any third party to Navios Group to be calculated on an arm’s length basis and at market prices.
		
	 (viii)
	  	 The Borrower, Navios Group and/or the new entity which may emerge from the merger of the Borrower and Navios Group to distribute any dividends
without prior written consent of the Lender, provided that:
  
 –       the Borrower, Navios Group and/or the new entity which may emerge from the merger of the Borrower and Navios Group shall not declare and/or distribute any dividends in
the financial year 2005, ending on December 31, 2005; and
  
 –       in case of dividend payments in the financial year 2006 and the following years until maturity of the Facility dividend payments shall be restricted to such annual
amounts that after the full and due payment of the Borrower’s obligations in relation to this Facility, any capital expenditure and the respective dividend payment the Borrower will maintain a minimum unencumbered free liquidity (“the
Minimum Liquidity”) as follows:
  
 –       USD 50,000,000 in 2006;
  
 –       USD 40,000,000 in 2007, and
  
 –       USD
30,000,000 for the remaining tenor of the Facility;
  
 and
  
 –       no event or potential event of default has occurred.

		
	 (ix)
	  	 Financial covenants on the consolidated financial statements of the Borrower and Navios Group (to be evidenced semi-annually according to the
audited consolidated financial statements):
  
 1.      Solvency ratio (equity adjusted by the charter-free market value of the Vessels and any New Vessels—as the case may be—to balance sheet total) not less than
 –       1:3.0 at year end 2005
 –       1:2.5 at year end 2006 and for the remaining life of the Facility.
  
 2.      Minimum
equity (adjusted by the charter-free market value of the Vessels and any New Vessels) of
  
 –       USD 220,000,000 at year end 2005
 –       USD 280,000,000 at year end 2006
 –       USD 340,000,000 at year end 2007 and for the remaining life of the
Facility.

		
	 (x)
	  	 Lock-up Periods and non-competition clauses for the senior management and any other key personnel adequate
to safeguard the continuity of the level and quality of Navios Group physical and derivative trading.
  

  

 7 

			
	 	 
	 Market Value
	  	 The Vessels are to be valued with or without physical inspection (as the Agent acting on behalf of
the Lenders may reasonably require) at the first time immediately prior to the first Drawdown Date of the Facility and thereafter on a yearly basis, by two independent ship brokers approved by the Lenders (such as Fearnleys, Clarksons, Maersk, SSY,
Arrow). The Market Value then to be determined as the arithmetic means of such two sets of valuations. In case such valuations differ by more than 15 % a third valuation shall be obtained. The Market Value then to be determined as the arithmetic
means of all three sets of valuations. All market valuations to be at the Borrower’s expense.
  

		
	 Information
	  	 The Borrower and Navios Group to provide the Lender with their annual audited consolidated financial
statements within 120 days from the end of each fiscal year, starting with 2005 statements, plus their unaudited consolidated quarterly financial statements within 60 days from the end of each fiscal quarter. The Borrower and Navios Group will
additionally provide the Lender with an opening balance sheet for their combined business as soon as possible.
  
 In addition the Borrower and Navios Group shall provide any information on their financial condition, commitments, long-term Chartered-in fleet, Port Business, FFA-Trading and short term physical trading and any other
operations as the Agent (acting on behalf of the Lender) may request from time to time.
  

		
	 Expenses
	  	 All reasonable legal and other expenses, including (but not limited to) for any due diligence the Agent
deems reasonably necessary, the drafting of the Loan Documentation, the Security Documents and satisfactory Legal Opinions, incurred by the Lender to be for the account of the Borrower.
  

		
	 Documentation
	  	 The Borrower shall undertake to sign and procure the signing of all documentation the Lender deems
reasonably necessary to perform the transaction contemplated by this Firm Offer in all respects, especially, but without prejudice to the generality of the foregoing to perfect the security over the assets to be encumbered according to the terms
hereof in favour of the Lender.
  
 The Loan Documentation to be drawn up by
lawyers appointed by the Lender (in prior consultations with the Borrower) in a form satisfactory to the Lender, and to contain clauses customary for this type of financing including, but not limited to, conditions precedent, application of sale
and/or insurance proceeds of the Vessels/other Assets, events of default and cross-default, undertakings, certain representations and warranties, increased costs, material adverse change and consents of governmental authorities.
  

		
	 Tax
	  	 The Borrower will pay any taxes and deductions in relation with the Facility. This is not meant to include
taxes on the overall income of any Lender.
  

		
	 Law
	  	 This firm offer letter is governed by German Law. The Loan Documentation will be governed by English Law,
except for the Mortgages which will be subject to the law of the country of registry and the Accounts’ Pledges which will be subject to the law of the country where the Accounts are to be maintained.
  

		
	 Disclaimer for
 unencoded
 e-mails
	  	 All information related or connected to the making of this Facility by the Lender and its respective
credit decisions and all negotiations related or connected to the drafting and drawing up of any of the Loan Documentation, the security documents and any transaction document may be made or given by the Lender, their respective lawyers and any
other consultant, inter se and otherwise, by e-mail. The Borrower to confirm its awareness of the risks generally (which include the possibility that the confidentiality and the authenticity may not be safeguarded) related to communications by
e-mail.
  

  

 8 

 We are pleased to offer you this term loan facility. If the terms and conditions of the above firm offer are acceptable
to you, please so acknowledge by signing the Endorsement of Acceptance here below and return to the Agent a copy of this letter until February 4, 2005. 
  

For and on behalf of HSH Nordbank AG.: 
  

			
		
	 /s/    Christian Bock

 Name: Christian Bock
 Title: Senior Vice President
	 	 /s/    Christiana Stahn

 Name: Christiana Stahn
 Title: Credit Analyst

  
 Endorsement of Acceptance:

 We acknowledge receipt of the above letter, dated February 4, 2005, and we hereby confirm acceptance of all the terms and conditions contained
therein, and that you may proceed, with the preparation of a Loan Documentation and all related documents at our cost. 
  
 For and on behalf of 
 International Shipping Enterprises, Inc. 
  

			
		
	 /s/    Angeliki Frangou

 Name: Angeliki Frangou
 Date: February 4, 2005
	 	
 Name:
 Date:

  
  
 Schedule 1: Form of Support Letter 
 Schedule 2: Repayment
schedules for Tranche A and Tranche B 
  

 9Form of Director Stock Option Agreement

 Exhibit 10.1 
  
 NEW CENTURY FINANCIAL CORPORATION 
 2004 PERFORMANCE INCENTIVE PLAN 
 DIRECTOR STOCK OPTION AGREEMENT 
  
 THIS DIRECTOR STOCK OPTION AGREEMENT (this “Option
Agreement”) dated                      by and between NEW CENTURY FINANCIAL CORPORATION, a Maryland corporation (the
“Corporation”), and [                    ] (the “Grantee”) evidences the nonqualified stock option (the
“Option”) granted by the Corporation to the Grantee as to the number of shares of the Corporation’s Common Stock first set forth below. 
  
 Number of Shares of Common Stock: [            ]1 Award Date: [            , 2005] 
  
 Exercise Price per Share:
$            1 Expiration Date:
[            , 2005]1,2 
  
 Vesting1, 2
[Alt. 1: The total number of shares of Common Stock subject to the Option shall be fully vested as of the Award Date.] [Alt. 2: The Option shall vest and become
exercisable in installments as to one-third (1/3rd) of the total number of shares of Common Stock subject to the
Option on each of the first, second, and third anniversaries of the Award Date.] 
  
 The Option is granted under the New Century Financial Corporation 2004
Performance Incentive Plan (the “Plan”) and subject to the Terms and Conditions of Director Stock Option (the “Terms”) attached to this Option Agreement (incorporated herein by this reference) and to the Plan.
Capitalized terms are defined in the Plan if not defined herein. The parties agree to the terms of the Option set forth herein. The Grantee acknowledges receipt of a copy of the Terms, the Plan and the Prospectus for the Plan. 
  

					
	“GRANTEE”	 	NEW CENTURY FINANCIAL CORPORATION
	 	 	a Maryland corporation
	  

 Signature
	 	By:	 	  

	  

 Print
Name
	 	Print Name:	 	  

			
	 	 	Title:	 	  

	1	Subject to adjustment under Section 7.1 of the Plan. 

	2	Subject to early termination under Section 4 of the Terms and Section 7.4 of the Plan. 

 TERMS AND CONDITIONS OF DIRECTOR STOCK OPTION 
  
 1. Vesting; Limits on Exercise; Incentive Stock Option Status. 
  
 The Option shall vest and become exercisable as set forth on the cover page
of this Option Agreement. 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.

  
 2. Service; No Service Commitment. 
  
 The Grantee agrees to serve as a member of the Board in accordance with the
Corporation’s Articles of Amendment and Restatement, bylaws, and applicable law. 
  
 The vesting schedule, if any, requires continued service through each applicable vesting date as a condition to the vesting of the applicable installment of the Option and the rights and benefits under this Option
Agreement. 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
services as provided in Section 4 below or under the Plan. Nothing contained in this Option Agreement or the Plan constitutes a continued service commitment by the Corporation or interferes with the right of the Corporation to increase or decrease
the compensation of the Grantee from the rate in existence at any time. 
  
 3.
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; 

	1	Subject to adjustment under Section 7.1 of the Plan. 

  

 2 

	•	 	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. 
  
 4. Early Termination of Option. 
  
 4.1 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. 
  
 4.2 Termination of Option upon a Termination of Grantee’s Services. If the Grantee ceases to be a member of the Board (regardless of the
reason), the following rules shall apply (the last day that the Grantee is a member of the Board is, except as otherwise provided below, referred to as the Grantee’s “Severance Date”): 
  

	•	 	the Grantee (or, in the event of the Grantee’s death, his or her beneficiary) will have until the day before the third (3rd) anniversary of his or her Severance Date to exercise the Option (or portion thereof) to the extent that it was vested on the Severance Date,

  

	•	 	the Option, to the extent not vested on the Severance Date, shall terminate on the Severance Date, and 

  

	•	 	the Option, to the extent not exercised during the 3-year period following the Severance Date as provided above, shall terminate at the close of business on the day before the third
(3rd) anniversary of the Grantee’s Severance Date. 

  
 Notwithstanding anything above to the contrary, in all cases the Option remains subject to
earlier termination on the first to occur of the Expiration Date of the Option or the termination of the Option pursuant to Section 4.1 above. 
  

 3 

 Furthermore, if the Grantee ceases to be a member of the Board (regardless of the reason) but, immediately thereafter, is
employed by the Corporation or one of its Subsidiaries, the Grantee’s Severance Date shall not be the date the Grantee ceases to be a member of the Board but instead shall be the last day that the Grantee is either or both (1) a member of the
Board and/or (2) employed by the Corporation or a Subsidiary. 
  
 5.
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. 
  
 6. 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 a member of the Board, 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 6. 
  
 7. Plan. 
  
 The Option and all rights of the Grantee under this Option Agreement are subject to, and the Grantee agrees to be bound by, all of the terms and
conditions of the Plan, incorporated herein by this reference. In the event of a conflict or inconsistency between the terms and conditions of this Option Agreement and of the Plan, the terms and conditions of the Plan shall govern. 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. 
  
 8. 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 

  

 4 

 
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. 
  
 9. 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. 
  
 10. 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. 
  
 11. Counterparts. 
  
 This Option Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 
  
 12. 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.

  

 5

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