EXHIBIT 10.1 New Century Financial Corporation Deferred Compensation Plan Amended and Restated July 1, 2004

EXHIBIT 10.1

 

New Century Financial Corporation

 

Deferred Compensation Plan

 

Amended and Restated July 1, 2004

 

ARTICLE 1

 

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

 

ARTICLE 2

DEFINITIONS

 

Affiliate. “Affiliate” means any firm, partnership, or corporation that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the Company. “Affiliate” also includes any other organization similarly related to the Company that is designated as such by the Board.

 

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

 

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

 

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

 

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

 

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

 

Change in Control. “Change in Control” means any of the following:

 

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

 

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the Securities Exchange Act of 1934, as amended) of 25% or more of either (1) the then-outstanding shares of common stock of the Corporation (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then-outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this definition, the following acquisitions shall not constitute a Change in Control; (A) any acquisition directly from the Corporation, (B) any acquisition by the Corporation, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any affiliate of the Corporation or a successor, or (D) any acquisition by any entity pursuant to a transaction that complies with Sections (a), (b), and (c) below;

 

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

 

(c) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Corporation or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Corporation, or the acquisition of assets or stock of another entity by the Corporation or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Corporation or all or substantially all of the Corporation’s assets directly or through one or more subsidiaries (a “Parent”)) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any entity resulting from such Business Combination or a Parent or any employee benefit plan (or related trust) of the Corporation or such entity resulting from such Business Combination or Parent) beneficially owns, directly or indirectly, 25% or more of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that the ownership in excess of 25% existed

 

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

 

(d) Approval by the stockholders of the Corporation of a complete liquidation or dissolution of the Corporation other than in the context of a transaction that does not constitute a Change in Control under clause (c) above.

 

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

 

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

 

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

 

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

 

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

 

Compensation. “Compensation” means the total amount of cash remuneration paid by the Company to an Eligible Employee for any calendar year of employment as wages, commissions, bonuses and other monetary incentives, including the Participant’s contributions under this Plan and under any other plan of deferred compensation maintained by the Company or an Affiliate but not taking into account any Company contributions to benefit plans, all fringe benefits, moving and relocation expenses and other forms of welfare benefits.

 

Compensation Deferral. “Compensation Deferral” means that portion of Compensation as to which a Participant has made an annual irrevocable election to defer receipt until the date specified under the In-Service Distribution Option or the Retirement Option.

 

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

 

Deduction Limitation. “Deduction Limitation” means the following described limitation on the annual benefit that may be distributed pursuant to the provisions of this Plan. The limitation shall be applied to distributions under this Plan as expressly set forth in this Plan. If the Company determines in good faith prior to a Change in Control that there is a reasonable

 

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

 

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

 

Discretionary Company Contribution. “Discretionary Company Contribution” are those credited to the Participant’s Retirement Distribution Account and/or In-Service Distribution Account by the Company pursuant to Section 4.4.

 

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

 

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

 

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

 

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

 

Distribution Option Account. “Distribution Option Account” or “Accounts” means, with respect to a Participant, the Retirement Distribution Account and/or the In-Service Distribution Account established on the books of account of the Company, pursuant to Section 5.1, for each Distribution Option Period.

 

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

 

Earnings Crediting Options. “Earnings Crediting Options” means the deemed investment options selected by the Participant from time to time pursuant to which deemed earnings are credited to the Participant’s Distribution Option Accounts pursuant to Section 5.2

 

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

 

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

 

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

 

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

 

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

 

Enrollment Agreement. “Enrollment Agreement” means a written agreement, as may be amended from time to time, which is entered into by and between the Company and a Participant. The terms of any Enrollment Agreement may vary any of the terms set forth in this Plan and such changes shall be binding on the Company and the Participant if the Enrollment Agreement is signed by the Participant and accepted by the Committee. Each Enrollment Agreement executed by a Participant shall provide for the entire benefit to which such Participant is entitled to under the Plan, and shall specify, the Company liable for the Participant’s benefits hereunder and the magnitude or extent of such liability. The Enrollment Agreement bearing the latest date of acceptance by the Committee shall govern such entitlement and each Employer’s liability. Upon the complete payment of a Participant’s Account Balance, each individual’s Enrollment Agreement and his or her status as a Participant shall terminate.

 

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ERISA. “ERISA” means the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

 

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

 

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

 

In-Service Distribution Option. “In-Service Distribution Option” means the Distribution Option pursuant to which benefits are payable in accordance with Section 7.2.

 

Participant. “Participant” means an Eligible Employee who has filed a completed and executed Enrollment Agreement with the Committee or its designee and is participating in the Plan in accordance with the provisions of Article 4. In the event of the death or incompetency of a Participant, the term shall mean his personal representative or guardian. An individual shall remain a Participant until that individual has received full distribution of any amount credited to the Participant’s Account.

 

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

 

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

 

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

 

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

 

Retirement Distribution Account. “Retirement Distribution Account” means the Account maintained for a Participant to which compensation Deferrals and Company Matching Contributions are credited pursuant to the Retirement Distribution Option.

 

Retirement Distribution Option. “Retirement Distribution Option” means the Distribution Option pursuant to which benefits are payable in accordance with Section 7.1.

 

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

 

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

 

Years of Service. “Years of Service” means the period of time during which an employment relationship exists between an Employee and the Company, including any period during which the Employee is on an approved leave of absence, whether paid or unpaid. “Years of Service” also includes employment with an Affiliate if an Employee transfers directly between the Company and the Affiliate. For purposes of this definition, a year of employment shall be a 365 day period (or 366 day period in the case of a leap year) that, for any subsequent year, commences on an anniversary of that hiring date. Any partial year of employment shall not be counted. Notwithstanding the previous sentence, a Participant’s first Year of Service shall be treated as a full Year of Service for purposes of this definition, even if it is only a partial Year of Service.

 

ARTICLE 3

ADMINISTRATION OF THE PLAN AND DISCRETION

 

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

 

3.2 Members of the Committee and the Plan Administrator shall serve without compensation for their services unless otherwise determined by the Board. All expenses of administering the Plan shall be paid by the Company.

 

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

 

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

 

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ARTICLE 4

PARTICIPATION

 

4.1 Deferred Compensation. For each Plan Year, a Participant may elect to defer Base Salary, Annual Bonus, Commissions, and/or Compensation. If no election is made, the amount deferred shall be zero.

 

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

 

4.2 Election to Participate. Each Employee who is an Eligible Employee for a Plan Year will be offered the opportunity to defer Compensation to be earned in that Plan Year. Any Eligible Employee may enroll in the Plan effective as of the first day of that Plan Year by filing a completed and fully executed Enrollment Agreement with the Committee by a date set by the Committee but in any event prior to the first day of that Plan Year. Pursuant to said Enrollment Agreement, the Eligible Employee shall irrevocably elect (a) the percentages, in whole percentages, by which (as a result of payroll reduction) an amount equal to any whole percentage of the Participant’s Compensation to be earned during that Plan Year, in each case after required nondeferrable payroll tax deductions, will be deferred, and (b) the Distribution Option Accounts to which such amounts will be credited, and shall provide such other information as the Plan Administrator shall require. The first Enrollment Agreement filed by an Eligible Employee during any Distribution Option Period must also set forth the Participant’s election as to the time and manner of distribution from the Retirement Distribution Account and In-Service Distribution Account and of amounts credited for that Distribution Option Period and related earnings. The Committee may establish minimum or maximum amounts that may be deferred under this Section and may change such standards from time to time. Any such limits shall be communicated by the Committee to the Plan Administrator and by the Plan administrator to the Participants prior to the commencement of a Plan Year.

 

4.3 New Eligible Employees. The Committee may, in its discretion, permit individuals who first become Employees after the beginning of a Plan Year and who are selected as Eligible Employees to enroll in the Plan for that Plan Year by filing a completed and fully executed Enrollment Agreement, in accordance with Section 4.1, as soon as practicable following the date the individual first becomes an Eligible Employee but, in any event, within 30 days after such date. Notwithstanding the foregoing, however, any election by an Eligible Employee, pursuant to this Section, to defer Compensation shall apply only to such amounts as are earned by the Eligible Employee after the date on which such Enrollment Agreement is filed.

 

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

 

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

 

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

 

ARTICLE 5

DISTRIBUTION OPTION ACCOUNTS

 

5.1 Distribution Option Accounts. The Committee shall establish and maintain separate Distribution Option Accounts with respect to a Participant for each Distribution Option Period.

 

A Participant’s Distribution Option Accounts shall consist of the Retirement Distribution Account and/or one or more In-Service Distribution Accounts. The amount of Compensation deferred pursuant to Sections 4.1, 4.2 or 4.3 shall be credited by the Company to the Participant’s Distribution Option Accounts as soon as administratively practicable after such compensation would otherwise have been paid, but in no event later than the fifteenth day of the month following the month in which such Compensation would otherwise have been paid, in accordance with the Distribution Option irrevocably elected by the Participant in the Enrollment Agreement. Any amount once taken into account as Compensation for purposes of this Plan shall not be taken into account thereafter. The Participant’s Distribution Option Accounts shall be reduced by the amount of the payments made by the Company to the Participant or the Participant’s Beneficiary pursuant to this Plan.

 

5.2 Earnings on Distribution Option Accounts. A Participant’s Distribution Option Accounts shall be credited with earnings according to the Earnings Crediting Options elected by the Participant. Participants may allocate their Retirement Distribution Account and/or each of their In-Service Distribution Accounts among the Earnings Crediting Options available under the Plan only in whole percentages of not less than five percent (5%) for any one Earnings Crediting Option and provided that allocation must total 100%. The Committee shall select the Earnings Crediting Options whose performance will measure the amounts to be credited under Section 5.3 to the Distribution Option Accounts of Participants. The selection of Earnings Crediting Options shall be for bookkeeping purposes only, and the Company shall not be obligated actually to invest any money in the Earnings Crediting Options, or to acquire or maintain any actual investment. The Committee m