EXHIBIT 10.3
NEW CENTURY FINANCIAL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "Agreement") dated as of the
17th day of May, 1999, by and between NEW CENTURY FINANCIAL CORPORATION, a
Delaware corporation (the "Company"), and Xxxxxxxx X. Xxxxxxx (the "Optionee").
W I T N E S S E T H
WHEREAS, the Optionee is a member of the Board of Directors of the Company
(the "BOARD"); and
WHEREAS, the Company has granted to the Optionee effective as of the 17th
day of May, 1999 (the "GRANT DATE") a nonqualified stock option to purchase all
or any part of 15,000 shares of the Company's Common Stock, par value $0.01 per
share (the "Common Stock"), subject to and upon the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants made
herein and the mutual benefits to be derived herefrom and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:
1. Grant of Option. This Agreement evidences the Company's grant to the
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Optionee of the right and option to purchase, subject to and on the terms
and conditions set forth herein, all or any part of 15,000 shares of the
Company's Common Stock (the "Shares") at the price of $12.00 per Share (the
"Option"), exercisable from time to time, subject to the provisions of this
Agreement, prior to the close of business on the day before the tenth
anniversary of the Grant Date (the "Expiration Date"), Unless Earlier
terminated pursuant to Section 4 or 6. Such price equals not less than the
fair market value of the Common Stock as of the Grant Date.
2. Exercisability of Option. The Option shall vest and become exercisable in
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installments in accordance with the following schedule: (i) 5,000 of the
total number of Shares subject to the Option shall vest and become
exercisable on the first anniversary of the Grant Date, (ii) an additional
5,000 of the total number of Shares subject to the Option shall vest and
become exercisable on the second anniversary of the Grant Date, and (iii)
the remaining 5,000 Shares subject to the Option shall vest and become
exercisable on the third anniversary of the Grant Date.
If the Optionee does not in any year purchase all or any part of the Shares
to which the Optionee is entitled, the Optionee has the right cumulatively
thereafter to purchase any Shares not so purchased and such right shall
continue until the Option terminates or
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expires. The Option shall only be exercisable in respect of whole Shares,
and fractional Share interests shall be disregarded. The Option may only be
exercised as to at least 100 Shares unless the number purchased is the
total number at the time available for purchase under the Option.
3. Method of Exercise of Option. The Option shall be exercisable by the
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delivery to the Secretary of the Company of a written notice stating the
number of Shares to be purchased pursuant to the Option and accompanied by
(i) delivery of an executed Exercise Agreement in the form attached hereto
as Exhibit A, (ii) payment of the full purchase price of the Shares to be
purchased, and (iii) payment in full of any tax withholding obligation
under federal, state or local law. Payment shall be made in the form of
cash, by check payable to the order of the Company, in shares of Common
Stock valued at their fair market value at the close of trading on the
trading date next preceding the date of exercise of the Option, or partly
in such shares and partly in cash. Any shares of Common Stock used by the
Optionee to exercise the Option must have been owned by the Optionee for at
least six months prior to such use. In addition, the Optionee (or the
Optionee's beneficiary or personal representative) must furnish any written
statements required pursuant to Section 9 of this Option Agreement.
4. Termination of Directorship. If the Optionee's services as a member of the
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Board terminate: (i) any portion of the Option which is not vested and
exercisable as of the date of such termination shall terminate; (ii) if
such termination is due to the Optionee's death or Total Disability, the
Optionee (or his successor in the event of his death, or personal
representative in the event of his incapacity) shall have until the date
that is one year after the date of such termination (subject to the term of
the Option set forth in Section 1) to exercise the Option to the extent
that it was vested and exercisable on the date of his termination (the
vested portion of the Option, to the extent not exercised at the end of
such one-year period, shall terminate); and (iii) if such termination is
due to any reason other than the Optionee's death or Total Disability, the
Optionee shall have until the date that is six months after the date of
such termination (subject to the term of the Option set forth in Section 1)
to exercise the Option to the extent that it was vested and exercisable on
the date of his termination (the vested portion of the Option, to the
extent not exercisable at the end of such six-month period, shall
terminate).
For purposes of the foregoing, "Total Disability" means a "permanent and
total disability" within the meaning of Section 22(c)(3) of the Internal
Revenue Code of 1986, as amended.
5. Option Not Transferable. The Option May Be Exercised Only By, And Shares
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issuable pursuant to the Option shall be issued only to the Optionee or, if
the Optionee has died, his beneficiary or, if the Optionee has suffered a
permanent and total disability, his personal representative, if any, or if
there is none, the Optionee or a third party pursuant to such conditions
and procedures as the Board may establish. Other than by will or the laws
of descent and distribution, no right or benefit under the Option shall be
transferrable by the Optionee or shall be subject in any manner to
anticipation, alienation,
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sale, transfer, assignment, pledge, encumbrance or charge and any such
attempted action shall be void.
6. Adjustments Upon Changes in Capitalization.
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If the outstanding shares of Common Stock are changed into or exchanged for
cash or a different number or kind of shares or securities of the Company
or of another issuer, or if additional shares or new or different
securities are distributed with respect to the outstanding shares of the
Common Stock, through a reorganization or merger to which the Company is a
party, or through a combination, consolidation, recapitalization,
reclassification, stock split, stock dividend, reverse stock split, stock
consolidation or other capital change or adjustment, an appropriate
adjustment shall be made in the number and kind of shares or other
consideration that is subject to or may be delivered under the Option.
Upon the occurrence of an Event, the Option shall become immediately
exercisable to the full extent theretofore not exercisable.
If the Option has been fully accelerated as described in the foregoing
paragraph but is not exercised prior to (i) a dissolution of the Company,
or (ii) an event described above that the Company does not survive, the
Option shall thereupon terminate.
For purposes of this Section 6, "Event" means any of the following: (i)
approval by the shareholders of the Company of the dissolution or
liquidation of the Company; (ii) approval by the shareholders of the
Company of an agreement to merge or consolidate, or otherwise reorganize,
with or into one or more entities other than subsidiaries, as a result of
which less than 50% of the outstanding voting securities of the surviving
or resulting entity are, or are to be, owned by former shareholders of the
Company; or (iii) approval by the shareholders of the Company of the sale
of substantially all of the Company's business assets to a person or entity
which is not a subsidiary of the Company.
7. Securities Law Compliance.
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7.1. Investment Representations. The Optionee acknowledges that the
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Option and Shares are not being registered under the Securities Act of
1933, as amended (the "Securities Act"), based, in part, on reliance that
the issuance of the Shares is exempt from registration under Regulation D
of the Securities Act and exempt from qualification under California
Corporate Securities Law (S) 25102(f) or other applicable exemption. The
Optionee acknowledges that by executing this Agreement he or she makes the
representations below:
No Intent to Sell. The Optionee represents that he/she is acquiring
the Option and if and when he/she exercises the Option will acquire
any Shares solely for his/her own account, for investment purposes
only, and not with a view to or an intent to sell, or to offer for
resale in connection with any unregistered distribution
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of all or any portion of the Shares within the meaning of the
Securities Act or applicable state securities laws.
No Reliance on Company. In evaluating the merits and risks of an
investment in the Shares, the Optionee represents that he/she has and
will rely upon the advice of his/her own legal counsel, tax advisors,
and/or investment advisors.
Relationship to and Knowledge About Company. The Optionee represents
that he/she is knowledgeable about the Company and has a preexisting
personal or business relationship with the Company. As a result of
such relationship, he/she is familiar with, among other
characteristics, its business and financial circumstances and has
access on a regular basis to or may request the Company's condensed
consolidated balance sheet and condensed consolidated income statement
setting forth information material to the Company's financial
condition, operations and prospects.
Risk of Loss. The Optionee represents that he/she is aware that the
Option may be of no practical value, that any value it may have
depends on its vesting and exercisability as well as an increase in
the fair market value of the underlying Shares from the date of grant
to the date of exercise.
Restrictions on Shares. The Optionee represents that he/she
understands that any Shares acquired on exercise of the Option will be
characterized as "restricted securities" under the federal securities
laws since the Shares are being acquired from the Company in a
transaction not involving a public offering and that under such laws
and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited
circumstances. The Optionee acknowledges receiving a copy of Rule 144
promulgated under the Securities Act, as presently in effect, and
represents that he/she is familiar with such rule, and understands the
resale limitations imposed thereby and by the Securities Act and
applicable state securities laws.
Additional Restrictions. The Optionee represents that he/she has read
and understands the restrictions and limitations imposed on the Option
and any Shares which may be acquired thereunder, including, but not
limited to, the non-transferability provisions of Section 5.
No Company Representations. The Optionee represents that at no time
was an oral representation made to him/her relating to the Option or
the purchase of Shares and that he/she was not presented with or
solicited by any promotional meeting or material relating to the
Option or the Shares.
Share Certificate Legend. The Optionee represents that he/she
understands and acknowledges that any certificate evidencing the
Shares (or evidencing any other securities issued with respect thereto
pursuant to any stock split, stock dividend,
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merger or other form of reorganization or recapitalization) if and
when issued shall bear, in addition to any other legends which may be
required by applicable state securities laws, the legend set forth in
Section 8.2.
7.2. Stock Certificate Legend. The Optionee understands and acknowledges
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that the certificate evidencing the shares (or evidencing any other
securities issued with respect thereto pursuant to any stock split, stock
dividend, merger or other form of reorganization or recapitalization) if
and when issued shall bear, in addition to any other legends which may be
required by the Exercise Agreement or applicable state securities laws, the
following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, BUT ARE ISSUED IN RELIANCE ON
THE REPRESENTATION THAT THEY ARE TAKEN FOR INVESTMENT AND NOT FOR
REDISTRIBUTION. AS A CONDITION OF ANY TRANSFER HEREOF, THE COMPANY MAY
REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO IT THAT ALL STATUTORY
REGISTRATION PROVISIONS HAVE BEEN MET OR DO NOT APPLY."
8. Assignment. This Agreement and all of the provisions hereof shall be
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binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assignees. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned
(except as otherwise expressly provided herein) by either party without the
prior written consent of the other.
9. Privileges of Stock Ownership. Except as otherwise expressly authorized by
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the Board, the Optionee shall not be entitled to any privilege of stock
ownership as to any Shares not actually delivered to and held of record by
him. No adjustment will be made for dividends or other rights as a
shareholder for which a record date is prior to such date of delivery.
10. Notices. Any notice to be given under the terms of this Agreement shall be
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in writing and addressed to the Company at its principal office to the
attention of the Secretary, and to the Employee at the address given
beneath the Employee's signature hereto, or at such other address as either
party may hereafter designate in writing to the other. Any such notice
shall be deemed to have been duly given when 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.
11. Entire Agreement. This Agreement and the Exercise Agreement, together,
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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. This Agreement and the Exercise Agreement may be
amended only by mutual agreement of the parties. Such amendment must be in
writing and signed by both parties. The Company may, however,
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unilaterally waive any provision hereof in writing to the extent such
waiver does not adversely affect the interests of the Optionee 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.
12. Governing Law. This Agreement shall be governed by and construed and
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enforced in accordance with the laws of the State of Delaware without
regard to conflict of law principles thereunder.
13. Rights of Optionee.
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Nothing contained in this Agreement or in any other documents related to
this Agreement shall confer upon the Optionee any right to continue in the
service or employ of the Company or constitute any contract or agreement of
service or employment, or interfere in any way with the right of the
Company to reduce the Optionee's compensation or other benefits or to
terminate the services or employment of the Optionee, with or without
cause, but nothing contained in this Agreement or any document related
thereto shall affect any independent contractual right of the Optionee.
Nothing contained in this Agreement or any document related hereto shall
influence the construction or interpretation of the Company's Certificate
of Incorporation or Bylaws regarding service on the Board.
The Option shall be payable in shares of Common Stock (subject to
adjustment as described above) and no special or separate reserve, fund or
deposit shall be made to assure payment of the Option. Neither the
Optionee nor any other person shall have any right, title or interest in
any fund or in any specific asset (including shares of Common Stock) of the
Company by reason of the Option. Neither the provisions of this Agreement
(or of any documents related hereto), nor the grant of the Option shall
create, or be construed to create, a trust of any kind or a fiduciary
relationship between the Company and the Optionee or other person.
14. Compliance With Laws. Notwithstanding anything else contained herein to
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the contrary, this Agreement, the granting and vesting of the Option and
the offer, issuance and delivery of Shares under this Agreement are subject
to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities laws
and federal margin requirements) and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel for
the Company, be necessary or advisable in connection therewith. Any
securities delivered in respect of this Agreement will be subject to such
restrictions, and to any restrictions the Company may require to preserve a
pooling of interests under generally accepted accounting principles, and
the person acquiring such securities will, if requested by the Company,
provide such assurances and representations to the Company as the Company
may deem necessary or desirable to assure compliance with all applicable
legal requirements.
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No holder of any Shares shall sell, pledge or otherwise transfer Shares
acquired pursuant to the Option or any interest in such Shares except in
accordance with the express terms of this Agreement. Any attempted
transfer in violation of this Agreement shall be void and of no effect.
Without in any way limiting the provisions set forth above and subject to
further limitations set forth herein, no holder of Shares shall make any
disposition of all or any portion of Shares acquired pursuant to an Option,
except in compliance with all applicable federal and state securities laws
and unless and until:
(a) there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(b) such disposition is made in accordance with Rule 144 under the
Securities Act; or
(c) such holder notifies the Company of the proposed disposition and
furnishes the Company with a statement of the circumstances
surrounding the proposed disposition, and, if requested by the
Company, such holder furnishes the Company with an opinion of counsel
acceptable to the Company's counsel, that such disposition will not
require registration under the Securities Act and will be in
compliance with all applicable state securities laws.
(Remainder of Page Intentionally Left Blank)
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by a duly authorized officer and the Optionee has hereunto set his or
her hand as of the date first written above.
NEW CENTURY FINANCIAL CORPORATION
a Delaware corporation
By: /s/ Xxxx X. Xxxxxxx
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Its: President
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OPTIONEE
/s/ Terreence X. Xxxxxxx
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Signature
Terreence X. Xxxxxxx
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Print Name
0000 Xxxxxxx Xxxx- XXXX0000
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Xxxxxxx
Xxxxx Xxxx, XX 00000
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City, State, Zip Code
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Nonqualified Stock
Option Agreement by New Century Financial Corporation, I, Xxx X Xxxxxxx, the
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spouse of the Optionee herein named, do hereby agree to be bound by all of the
terms and provisions thereof.
DATED: ___________, 1999 /s/ Xxx X. Xxxxxxx
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Signature of Spouse
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EXHIBIT A
NEW CENTURY FINANCIAL CORPORATION
EXERCISE AGREEMENT
THIS EXERCISE AGREEMENT (this "Agreement") dated as of the ____ day of
______________, _____, by and between NEW CENTURY FINANCIAL CORPORATION, a
Delaware corporation (the "Company"), and Xxxxxxxx X. Xxxxxxx (the "Purchaser").
R E C I T A L S
WHEREAS, the Company has granted to the Purchaser a nonqualified stock
option (the "Option") to purchase all or any part of a designated amount of
authorized but unissued shares of common stock of the Company and in connection
therewith, the Company and the Purchaser entered into that certain Nonqualified
Stock Option Agreement dated as of May 17, 1999 (the "Option Agreement") of
which this Agreement is a part and incorporated therein;
WHEREAS, the Purchaser desires to exercise the Option and purchase
from the Company and the Company wishes to issue and sell to the Purchaser
_______ shares of its common stock, par value $0.01 per share (the "Common
Stock"), to be sold at a price of $12.00 per share, in accordance with and
subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the above premises and the
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Purchase and Sale of Common Stock. The Company shall deliver to the
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Purchaser a stock certificate representing the shares of Common Stock
against delivery to the Company by the Purchaser of the purchase price in
the sum of $____________ (which represents the product of the $12.00 price
per share and the number of shares, the "Purchase Price").
2. Investment Representations. The Purchaser acknowledges that the shares of
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Common Stock are not being registered under the Securities Act of 1933, as
amended (the "Securities Act"). The Purchaser hereby affirms as made as of
the date hereof the representations made in Section 8.1 of the Option
Agreement and such representations are incorporated herein by this
reference. The Purchaser has no need for liquidity in this investment, has
the ability to bear the economic risk of this investment, and can afford a
complete loss of the Purchase Price. The Purchaser has received the
Company's consolidated financial information which includes information
material to the Company's financial condition, operations and prospects.
The Purchaser also understands and
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acknowledges the restrictive legend provision contained in Section 8.2 of
the Option Agreement.
3. Restrictions on Shares. The shares of Common Stock acquired pursuant to
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Section 1 hereof are subject to and the Purchaser agrees to be bound by the
provisions of Section 15 of the Option Agreement, incorporated herein by
this reference.
4. Miscellaneous. This Agreement shall be governed by and construed and
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enforced in accordance with the laws of the state of Delaware. This
Agreement and the Option Agreement, 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.
This Agreement may be amended by mutual agreement of the parties. Such
amendment must be in writing and signed by the Company. The Company may,
however, unilaterally waive any provision hereof in writing to the extent
such waiver does not adversely affect the interests of the Purchaser
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.
(Remainder of Page Intentionally Left Blank)
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
NEW CENTURY FINANCIAL CORPORATION
a Delaware corporation
By:_____________________________________
Its:____________________________________
OPTIONEE
________________________________________
Signature
________________________________________
Print Name
________________________________________
Address
________________________________________
City, State, Zip Code
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Exercise Agreement
by New Century Financial Corporation, I, ___________________________, the spouse
of the Optionee herein named, do hereby agree to be bound by all of the terms
and provisions thereof.
DATED:______________, ______ _________________________________
Signature of Spouse
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