-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ROEh7O/srYYRw06J9nANSlQLslpgALj3KbjuOPkcrmO9w974NlrjTn7gZYdUvlt9 rAZn4MncSp/qqrKGkiklIw== 0000912057-00-022357.txt : 20000509 0000912057-00-022357.hdr.sgml : 20000509 ACCESSION NUMBER: 0000912057-00-022357 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20000508 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NEW CENTURY FINANCIAL CORP CENTRAL INDEX KEY: 0001036075 STANDARD INDUSTRIAL CLASSIFICATION: MORTGAGE BANKERS & LOAN CORRESPONDENTS [6162] IRS NUMBER: 330683629 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-53469 FILM NUMBER: 622220 BUSINESS ADDRESS: STREET 1: 18400 VON KARMAN STREET 2: SUITE 1000 CITY: IRVINE STATE: CA ZIP: 92612 BUSINESS PHONE: 7148637243 MAIL ADDRESS: STREET 1: 18400 VON KARMAN STREET 2: SUITE 1000 CITY: IRWINE STATE: CA ZIP: 92612 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: US BANCORP \DE\ CENTRAL INDEX KEY: 0000036104 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 410255900 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: FIRST BANK PL STREET 2: 601 SECOND AVE S CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4302 BUSINESS PHONE: 6129731111 MAIL ADDRESS: STREET 1: 601 2ND AVENUE SOUTH-FIRST BANK PLACE STREET 2: 601 2ND AVENUE SOUTH-FIRST BANK PLACE CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4302 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BANK SYSTEM INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BANK STOCK CORP DATE OF NAME CHANGE: 19720317 SC 13D/A 1 SCHEDULE 13D/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 4) NEW CENTURY FINANCIAL CORPORATION (Name of Issuer) Common Stock, $.01 Par Value (Title of Class of Securities) 64352 D 10 1 (CUSIP Number) Lee R. Mitau, Esq. Executive Vice President - Corporate Development, General Counsel and Secretary U.S. Bancorp U.S. Bank Place 601 Second Avenue South, Minneapolis, Minnesota, 55402-4302 (612) 973-0363 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) April 28, 2000 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rules 13d-1(e), 13d-1(f) or 13d-1(g) check the following box. / / (Continued on following page(s)) CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 4 Page 2
- ------------------------------------------------------------------------------------------------------------ 1 NAMES OF REPORTING PERSONS: U.S. Bancorp IRS IDENTIFICATION NOS. OF ABOVE PERSONS: 41-0255900 - ------------------------------------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - ------------------------------------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------------------------------------ 4 SOURCE OF FUNDS: WC - ------------------------------------------------------------------------------------------------------------ 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT ITEMS 2(d) or 2(e): / / - ------------------------------------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - ------------------------------------------------------------------------------------------------------------ NUMBER OF 7 SOLE VOTING POWER: 4,689,400 SHARES ------------------------------------------------------------------------------- BENEFICIALLY OWNED BY 8 SHARED VOTING POWER: 0 EACH ------------------------------------------------------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER: 4,689,400 WITH ------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER: 0 - ------------------------------------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 4,689,400 - ------------------------------------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / / - ------------------------------------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 24.9% - ------------------------------------------------------------------------------------------------------------ 14 TYPE OF REPORTING PERSON: HC - ------------------------------------------------------------------------------------------------------------
CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 4 Page 3
- ------------------------------------------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS: U.S. Bank National Association IRS IDENTIFICATION NOS. OF ABOVE PERSONS: 41-0417860 - ------------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - ------------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: OO - ------------------------------------------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT ITEMS 2(d) or 2(e): / / - ------------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: United States - ------------------------------------------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 556,250* SHARES ------------------------------------------------------------------------------------- BENEFICIALLY OWNED BY 8 SHARED VOTING POWER: 0 EACH ------------------------------------------------------------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER: 556,250* WITH ------------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER: 0 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 556,250* - ------------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / / - ------------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 2.9%** - ------------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: BK - -------------------------------------------------------------------------------------------------------------------
*Represents shares of the Issuer's Common Stock that may be issued to the Reporting Person upon exercise of warrants as described in Item 4 hereof. **Assumes conversion of all shares of convertible preferred stock of the Issuer held by U.S. Bancorp, the parent of the U.S. Bank National Association. CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 4 Page 4 This Amendment No. 4 (the "Amendment") amends the statement on Schedule 13D filed by U.S. Bancorp with the Securities and Exchange Commission on December 4, 1998, as amended on January 7, 1999, May 12, 1999 and August 3, 1999 and (the "Statement"). This Amendment supplements and, to the extent inconsistent therewith, amends the information set forth in the Statement. In particular, this Amendment adds as a Reporting Person to the Statement, U.S. Bank National Association, a wholly owned subsidiary of U.S. Bancorp ("U.S. Bank"). ITEM 1. SECURITY AND ISSUER. The title and class of shares to which this statement relates is the Common Stock, par value $0.01 per share (the "Common Stock"), of New Century Financial Corporation, a Delaware corporation (the "Issuer"). The Issuer's principal executive office is 18400 Von Karman, Suite 1000, Irvine, California, 92612. ITEM 2. IDENTITY AND BACKGROUND.. The information previously reported in this Item of the Statement with respect to U.S. Bancorp is incorporated by reference herein. The following information relates to U.S. Bank: (a) Name: U.S. Bank National Association (b) Address of Principal Business Office: U.S. Bank Place 601 Second Avenue South Minneapolis, Minnesota 55402-4302 (c) Principal Business: U.S. Bank is a national banking association organized under the federal laws of the United States. The name, business address, present principal occupation or employment and citizenship of each director and executive officer of U.S. Bank are set forth in Annex A hereto and are incorporated herein by reference. (d) Criminal Proceedings: During the last five years, neither U.S. Bank nor any executive officer or director of U.S. Bank has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors). CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 4 Page 5 (e) Civil Proceedings: During the last five years, neither U.S. Bank nor any executive officer or director of U.S. Bank has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction resulting in a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws. (f) Place of Organization: U.S. Bank is a national banking association organized under the federal laws of the United States. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The information previously reported in this Item of the Statement with respect to the source of funds for U.S. Bancorp's investment in securities of the Issuer is incorporated by reference herein. No additional investment has been made in connection with the additional shares of the Issuer's Common Stock to which this Amendment relates. (See Item 4 for a description of the transactions effected on April 28, 2000 to which this Amendment relates.) ITEM 4. PURPOSE OF TRANSACTION. The information previously reported in this Item of the Statement with respect to the purpose of U.S. Bancorp's investment in securities of the Issuer is incorporated by reference herein. In addition, in connection with a subordinated loan agreement dated April 28, 2000 between U.S. Bank and New Century Mortgage Corporation, a wholly owned subsidiary of the Issuer ("NCMC"), pursuant to which U.S.Bank agreed to provide an addition $10 million in subordinated debt to NCMC over the course of 2000 and extended the term of certain existing subordinated debt to June 2002, the Issuer: (a) amended the terms of its Series 1999A Convertible Preferred Stock to change the conversion ratio of such series from 46.80 to 69.98; and (b) issued warrants to purchase an aggregate of 687,500 shares of its Common Stock (the "Warrants") to U.S. Bank. Of such Warrants, Warrants to purchase 556,250 shares of the Issuer's Common Stock are immediately exercisable, and Warrants to purchase 131,250 shares of the Issuer's Common Stock may vest, under the circumstances described in the Warrant Issuance Agreement filed as Exhibit 99.3 to this Amendment, on or before January 1, 2001. Of such Warrants, Warrants to purchase 37,500 shares of the Issuer's Common Stock have an exercise price of CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 4 Page 6 $6.875 per share, and the remainder of such Warrants have an exercise price of $9.5625 per share. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) As of April 28, 2000, based on U.S. Bancorp's ownership of (a) 20,000 shares of the Issuer's Series 1999A Convertible Preferred Stock, (b) 20,000 shares of the Issuer's Series 1998A Convertible Preferred Stock, and (c) 565,000 shares of the Issuer's Common Stock, U.S. Bancorp is deemed to be the beneficial owner of 4,689,400 shares (the "Shares") of the Issuer's Common Stock. These Shares represent approximately 24.86% of the Issuer's outstanding Common Stock (as such outstanding shares were reported by the Issuer as of March 24, 2000). As of April 28, 2000, based on U.S. Bank's ownership of the Warrants, U.S. Bank is deemed to be the beneficial owner of 556,250 shares (the "Warrant Shares") of the Issuer's Common Stock. These Warrant Shares represent approximately 2.86% of the Issuers' outstanding Common Stock (as such outstanding shares were reported by the Issuer as of March 24, 2000 and assuming conversion of all shares of Convertible Preferred Stock held by U.S. Bancorp). U.S. Bancorp may also be deemed to beneficially own shares of Common Stock held in client accounts with respect to which U.S. Bancorp Piper Jaffray Inc., an indirect wholly owned subsidiary of U.S. Bancorp ("Piper"), or employees of Piper have voting or investment discretion, or both ("Managed Accounts"). U.S. Bancorp and Piper disclaim beneficial ownership of the shares of Common Stock held in Managed Accounts. U.S. Bancorp and Piper may also be deemed to beneficially own from time to time shares of Common Stock acquired in ordinary course trading and market-making activities by Piper. (b) The Reporting Persons have sole voting and dispositive power as to the shares of Convertible Preferred Stock, the Conversion Shares and the Warrant Shares as described in paragraph (a) above, other than those shares held by Piper in ordinary course trading and market-making activities. (c) Except for the transactions to which this Schedule 13D relates and any shares bought or sold by Piper in ordinary course trading and market-making activities, neither of the Reporting Persons nor, to the best knowledge of the Reporting Persons, any of Reporting Person's executive officers or directors, has effected any transaction in the shares of the Issuer's Common Stock during the past sixty (60) days. (d) Not applicable. (e) Not applicable. CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 4 Page 7 ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. The information previously reported in this Item of the Statement with respect to contracts, arrangements, understandings or relationships with respect to securities of the Issuer is incorporated by reference herein. In addition, as described in the Warrant Issuance Agreement filed as Exhibit 99.3 hereto, the Issuer has agreed to issue warrants to purchase up to an additional 37,500 shares of its Common Stock to U.S. Bank under circumstances and on the terms described in such Warrant Issuance Agreement. ITEM 7. MATERIALS TO BE FILED AS EXHIBITS. 99.1 Agreement of U.S. Bancorp and U.S. Bank National Association to joint filing 99.2 Amended Certificate of Designations for Series 1999A Convertible Preferred Stock 99.3 Warrant Issuance Agreement, including forms of Warrants to be issued thereunder 99.4 Amended and Restated Registration Rights Agreement CUSIP No. 64352 D 10 1 SCHEDULE 13D, AMENDMENT NO. 4 Page 8 SIGNATURES After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: May 5, 2000 U.S. BANCORP By /s/ Lee R. Mitau --------------------------------- Lee R. Mitau its Executive Vice President - Corporate Development, General Counsel and Secretary U.S. BANK NATIONAL ASSOCIATION By /s/ Lee R. Mitau --------------------------------- Lee R. Mitau its Executive Vice President - Corporate Development, General Counsel and Secretary ANNEX A IDENTITY AND BACKGROUND The following table sets forth the names, addresses and principal occupations of the executive officers and directors of U.S. Bank National Association. Except as set forth below, the principal business address of each such director and executive officer is the address of U.S. Bank National Association, U.S. Bank Place, 601 Second Avenue South, Minneapolis, Minnesota, 55402-4302. Each of such directors and executive officers is a citizen of the United States. NAME AND PRINCIPAL BUSINESS ADDRESS OCCUPATION John F. Grundhofer Director; Chairman and Chief Executive Officer 601 Second Avenue South Minneapolis, MN 55402 Andrew J. Cecere Vice Chairman, Commercial Services 601 Second Avenue South Minneapolis, MN 55402 Andrew S. Duff Vice Chairman, Wealth Management and 222 South Ninth Street Capital Markets Minneapolis, MN 55402 Daniel J. Frate Vice Chairman, President of Payment Services 601 Second Avenue South Minneapolis, MN 55402 Philip G. Heasley Director; President and Chief Operating Officer 601 Second Avenue South Minneapolis, MN 55402 J. Robert Hoffmann Director; Executive Vice President and Chief Credit 601 Second Avenue South Officer Minneapolis, MN 55402 Susan E. Lester Director; Executive Vice President and Chief Financial 601 Second Avenue South Officer Minneapolis, MN 55402 Peter G. Michielutti Executive Vice President, Information Services 601 Second Avenue South Minneapolis, MN 55402 Lee. R. Mitau Director; Executive Vice President-Corporate 601 Second Avenue South Development, General Counsel and Secretary Minneapolis, MN 55402 Daniel M. Quinn Vice Chairman, Commercial Banking 918 17th Street, 2nd Floor Denver, CO 80202 Peter E. Raskind Director; Vice Chairman, Branch Channel 601 Second Avenue South Minneapolis, MN 55402 Daniel C. Rohr Vice Chairman, Corporate Banking 601 Second Avenue South Minneapolis, MN 55402 Robert H. Sayre Executive Vice President, Human Resources 601 Second Avenue South Minneapolis, MN 55402 Daniel W. Yohannes Vice Chairman, Consumer Banking 950 17th Street, Suite 530 Denver, CO 80202
EX-99.1 2 EXHIBIT 99.1 Exhibit 99.1 AGREEMENT This will confirm the agreement by and among all the undersigned that the Schedule 13D filed on or about this date with respect to the beneficial ownership of the undersigned of shares of common stock of New Century Financial Corporation is being filed on behalf of each of the entities named below. Dated: May 5, 2000 U.S. BANCORP By /s/ Lee R. Mitau ----------------------------- Lee R. Mitau its Executive Vice President - Corporate Development, General Counsel and Secretary U.S. BANK NATIONAL ASSOCIATION By /s/ Lee R. Mitau ----------------------------- Lee R. Mitau its Executive Vice President - Corporate Development, General Counsel and Secretary -2- EX-99.2 3 EXHIBIT 99.2 Exhibit 99.2 NEW CENTURY FINANCIAL CORPORATION --------------------- AMENDED CERTIFICATE OF DESIGNATIONS FOR SERIES 1999A CONVERTIBLE PREFERRED STOCK (PURSUANT TO DELAWARE GENERAL CORPORATION LAW, SECTION 242) --------------------- The undersigned, being respectively the Vice Chairman and President and the Secretary of New Century Financial Corporation (the "CORPORATION"), a corporation organized and existing under the Delaware General Corporation Law, in accordance with the provisions of the Delaware General Corporation Law, Section 242, do hereby certify that: Pursuant to the authority vested in the Board of Directors of the Corporation by the Certificate of Incorporation of the Corporation, the Board of Directors on July 23, 1999, in accordance with the Delaware General Corporation Law, Section 151, duly established a series of 20,000 shares of the Corporation's Preferred Stock, to be designated as its Series 1999A Convertible Preferred Stock; and Pursuant to (a) resolutions passed at a meeting of the Board of Directors of the Corporation on March 27, 2000, (b) resolutions passed at a meeting of the Executive Committee of the Board of Directors of the Corporation March 28, 2000 and (c) written consent of the sole holder of all shares of the Series 1999A Convertible Preferred Stock dated April 27, 2000, the Board of Directors and all shareholders entitled to vote have authorized the Corporation to amend and restate the Certificate of Designation for its Series 1999A Convertible Preferred Stock as follows: SERIES 1999A CONVERTIBLE PREFERRED STOCK Section 1. DESIGNATION; NUMBER OF SHARES. The shares of such series shall be designated as "Series 1999A Convertible Preferred Stock" (the "CONVERTIBLE PREFERRED STOCK"), and the number of shares constituting the Convertible Preferred Stock shall be 20,000. Such number of shares may be decreased by resolution of the Board of Directors adopted and filed pursuant to the Delaware General Corporation Law, Section 151(g), or any successor provision; provided, that no such decrease shall reduce the number of authorized shares of Convertible Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, warrants, convertible or exchangeable securities or other rights to acquire shares of Convertible Preferred Stock. Section 2. STATED CAPITAL. The amount to be represented in the stated capital of the Corporation for each share of Convertible Preferred Stock shall be $0.01. Section 3. RANK. The Convertible Preferred Stock (i) shall rank prior to all of the Corporation's Common Stock, par value $.01 per share (the "COMMON STOCK"), now outstanding or hereafter issued, both as to payment of dividends and as to distributions of assets upon the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary and (ii) shall rank on parity with all of the Corporation's Series 1998A Convertible Preferred Stock, par value $.01 per share (the 1998A Convertible Preferred Stock), now outstanding or hereafter issued, both as to payment of dividends and as to distributions of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. Section 4. DIVIDENDS AND DISTRIBUTIONS. (a) The holders of shares of Convertible Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for such purpose, dividends at the rate of $70.00 per annum per share. Such dividends shall be fully cumulative, shall accumulate without interest from the date of original issuance of the Convertible Preferred Stock and shall be payable quarterly in arrears in cash on each January 31, April 30, July 31 and October 31, commencing October 31, 1999 (provided, that if any such date is a Saturday, Sunday or legal holiday in the place where such dividend is to be paid, then such dividend shall be payable without interest on the next day that is not a Saturday, Sunday or legal holiday) to holders of record as they appear on the stock books of the Corporation on such record dates as shall be fixed by the Board of Directors. Such record dates shall be not more than 60 nor less than 10 days preceding the respective dividend payment dates. The amount of dividends payable per share of Convertible Preferred Stock for each full quarterly dividend period shall be computed by dividing the annual dividend amount by four. The amount of dividends payable for the initial dividend period and for any other period shorter than a full quarterly dividend period shall be computed on the basis of a 360-day year of twelve 30-day months. No dividends or other distributions, other than dividends payable solely in shares of Common Stock or other capital stock of the Corporation ranking junior as to payment of dividends to the Convertible Preferred Stock (such Common Stock and other capital stock being referred to herein collectively as "JUNIOR DIVIDEND STOCK"), shall be paid or set apart for payment on, and no purchase, redemption or other acquisition shall be made by the Corporation of, any shares of Junior Dividend Stock unless and until all accumulated and unpaid dividends on the Convertible Preferred Stock, including the full dividend for the then-current quarterly dividend period, shall have been paid or declared and set apart for payment. (b) Notwithstanding the provisions of Section 4(a), dividends shall not be declared or paid, but shall accumulate, on the Convertible Preferred Stock until such time as the execution and delivery of the Amendment (as defined in the Preferred Stock Purchase Agreement dated as of July 26, 1999 between the Corporation and U.S. Bancorp (the "1999 PREFERRED STOCK PURCHASE AGREEMENT")) to the Fourth Amended and Restated Credit Agreement dated as of May 26, 1999 by and among New Century Mortgage Corporation, the lenders party thereto and U.S. Bank -2- National Association, as Agent (the "CREDIT AGREEMENT"), by the Required Lenders (as defined in the Credit Agreement). (c) If at any time any dividend on any capital stock of the Corporation ranking senior as to payment of dividends to the Convertible Preferred Stock (such capital stock being referred to herein as "SENIOR DIVIDEND STOCK") shall be in default, in whole or in part, no dividend shall be paid or declared and set apart for payment on the Convertible Preferred Stock unless and until all accumulated and unpaid dividends with respect to the Senior Dividend Stock, including the full dividend for the then-current dividend period, shall have been paid or declared and set apart for payment, without interest. No full dividends shall be paid or declared and set apart for payment on any capital stock of the Corporation ranking, as to payment of dividends, on a parity with the Convertible Preferred Stock (such capital stock being referred to herein as "PARITY DIVIDEND STOCK") for any period unless full cumulative dividends have been, or contemporaneously are, paid or declared and set apart for payment on the Convertible Preferred Stock for all dividend periods terminating on or prior to the date of payment of such full cumulative dividends. No full dividends shall be paid or declared and set apart for payment on the Convertible Preferred Stock for any period unless full cumulative dividends have been, or contemporaneously are, paid or declared and set apart for payment on any Parity Dividend Stock for all dividend periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full upon the Convertible Preferred Stock and any Parity Dividend Stock, all dividends paid or declared and set apart for payment upon shares of Convertible Preferred Stock and Parity Dividend Stock shall be paid or declared and set apart for payment pro rata, so that the amount of dividends paid or declared and set apart for payment per share on the Convertible Preferred Stock and the Parity Dividend Stock shall in all cases bear to each other the same ratio that accumulated and unpaid dividends per share on the shares of Convertible Preferred Stock and Parity Preferred Stock bear to each other. (d) Any reference to "distribution" contained in this Section 4 shall not be deemed to include any distribution made in connection with a liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. Section 5. LIQUIDATION PREFERENCE. In the event of a liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of Convertible Preferred Stock shall be entitled to receive out of the assets of the Corporation, whether such assets constitute stated capital or surplus of any nature, an amount equal to the dividends accumulated and unpaid thereon to the date of final distribution to such holders, whether or not declared, without interest, plus a sum equal to $1,000 per share, and no more, before any payment shall be made or any assets distributed to the holders of Common Stock or any other capital stock of the Corporation ranking junior as to liquidation rights to the Convertible Preferred Stock (such Common Stock and other capital stock being referred to herein collectively as "JUNIOR LIQUIDATION STOCK"); provided, that such rights shall accrue to the holders of Convertible Preferred Stock only in the event that the Corporation's payments with respect to the liquidation preferences of the holders of capital stock of the Corporation ranking senior as to liquidation rights to the Convertible Preferred Stock (such capital stock being referred to herein as "SENIOR LIQUIDATION STOCK") are fully met. If upon liquidation, dissolution or winding up of -3- the Corporation, the assets of the Corporation available for distribution after the liquidation preferences of any Senior Liquidation Stock are insufficient to pay the holders of the Convertible Preferred Stock and any other capital stock of the Corporation which ranks on a parity as to liquidation rights with the Convertible Preferred Stock, the entire assets of the Corporation then available for distribution shall be distributed ratably among the holders of the Convertible Preferred Stock and any other capital stock of the Corporation which ranks on a parity as to liquidation rights with the Convertible Preferred Stock in proportion to the respective preferential amounts to which each is entitled (but only to the extent of such preferential amounts). After payment in full of the liquidation preference of the shares of the Convertible Preferred Stock, the holders of such shares shall not be entitled to any further participation in any distribution of assets by the Corporation. Neither a consolidation or merger of the Corporation with another corporation nor a sale or transfer of all or part of the Corporation's assets for cash, securities or other property will be deemed a liquidation, dissolution or winding up of the Corporation for purposes of this Section 5. Section 6. REDEMPTION AT OPTION OF THE CORPORATION. (a) Subject to Section 6(b), the Corporation may not redeem the Convertible Preferred Stock prior to July 26, 2003. The Corporation, at its option, may, on or after July 26, 2003, redeem at any time all, or from time to time any portion, of the Convertible Preferred Stock on any date set by the Board of Directors, at $1,000 per share, plus an amount per share in cash equal to all dividends on the Convertible Preferred Stock accumulated and unpaid on such share, whether or not declared, to the date fixed for redemption (such sum being hereinafter referred to as the "REDEMPTION PRICE"). (b) The Corporation may, at its option, redeem the Convertible Preferred Stock concurrently with an Acquisition Event (as defined herein) if each of the following conditions are met: (i) the Corporation has complied with the covenants contained in Sections 8.4 and 8.5 of the Preferred Stock Purchase Agreement dated October 18, 1998 between the Corporation and U.S. Bancorp (the "1998 PREFERRED STOCK PURCHASE AGREEMENT") in all material respects; (ii) the Purchaser (as defined in the 1998 Preferred Stock Purchase Agreement) has been notified in writing of all material terms of the Acquisition Proposal (as defined herein) that relates to such Acquisition Event; and (iii) either (A) such Purchaser, within 15 days of the first date on which it had been so notified of such Acquisition Proposal, failed to make an offer that is similar to, and on terms no less favorable to the Company and its shareholders than, the Acquisition Proposal; or (B) prior to the date of a definitive agreement with respect to an Acquisition Transaction with Purchaser or an affiliate of Purchaser, (x) the terms of the Acquisition Proposal are improved or a new proposal regarding an Acquisition Transaction that is financially superior to such original proposal (a "SUPERIOR PROPOSAL") is received by the Company and the Purchaser fails to match such improved terms or such Superior Proposal within five business days of Purchaser's receipt of written notice of all material terms thereof or (y) the Purchaser withdraws its offer. Any redemption pursuant to this Section 6(b) shall be at the Redemption Price, and the redemption date for any such redemption shall not be earlier than, but may be concurrent with, the effective time of the Acquisition Event. For purposes of this Section 6(b), the following terms shall have the following meanings: "ACQUISITION PROPOSAL" shall mean a proposal relating to any of the -4- following actions: (A) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company; or (B) a sale, lease or transfer of a material amount of assets of the Company, or a reorganization, recapitalization, dissolution or liquidation of the Company; "ACQUISITION TRANSACTION" shall mean any of the actions described in (A) or (B) of the definition of "ACQUISITION PROPOSAL"; and "ACQUISITION EVENT" shall mean the consummation of an Acquisition Transaction. (c) The following provisions will apply to any redemption pursuant to Section 6(a) or 6(b): (i) In case of the redemption of less than all of the then outstanding Convertible Preferred Stock, the Corporation shall designate by lot, or in such other manner as the Board of Directors may determine, the shares to be redeemed, or shall effect such redemption pro rata. Notwithstanding the foregoing, the Corporation shall not redeem less than all of the Convertible Preferred Stock at any time outstanding until all dividends accumulated and in arrears upon all Convertible Preferred Stock then outstanding shall have been paid for all past dividend periods. (ii) Not more than 60 nor less than 30 days prior to the redemption date, notice by first class mail, postage prepaid, shall be given to the holders of record of the Convertible Preferred Stock to be redeemed, addressed to such shareholders at their last addresses as shown on the stock books of the Corporation. Each such notice of redemption shall specify the date fixed for redemption; the redemption price; the place or places of payment; the then-effective Conversion Rate and Conversion Price (as defined in Section 7); that the right of holders of Convertible Preferred Stock called for redemption to exercise their conversion right pursuant to Section 7 shall expire as to such shares at the close of business on the date fixed for redemption (provided that there is no default in payment of the Redemption Price); that payment of the Redemption Price will be made upon presentation and surrender of certificates representing the shares of Convertible Preferred Stock; that accumulated but unpaid dividends to the date fixed for redemption will be paid on the date fixed for redemption; that accumulated but unpaid dividends will not be paid in the case of a conversion of Convertible Preferred Stock; and that on and after the redemption date, dividends will cease to accumulate on such shares. (iii) On or after the date fixed for redemption as stated in such notice, each holder of the shares called for redemption (other than shares which have been duly surrendered for conversion at or before the close of business on the date fixed for redemption) shall surrender the certificate or certificates evidencing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the Redemption Price. If fewer than all the shares represented by any such surrendered certificate or certificates are redeemed, a new certificate shall be issued representing the unredeemed shares. If, on the date fixed for redemption, funds necessary for the redemption shall be available therefor and shall have been irrevocably deposited or set aside, then, notwithstanding that the certificates evidencing any shares so called for redemption shall not have been surrendered, the dividends with respect to the shares so called shall cease to accumulate on and after the date fixed for redemption, such shares shall no longer be deemed outstanding, the holders thereof shall cease to be shareholders, and all -5- rights whatsoever with respect to such shares (except the right of the holders thereof to receive the Redemption Price without interest upon surrender of their certificates) shall terminate. Section 7. CONVERSION AT OPTION OF HOLDERS. Holders of Convertible Preferred Stock may, at their option upon surrender of the certificates therefor, convert any or all of their shares of Convertible Preferred Stock into fully paid and nonassessable shares of Common Stock (and such other securities and property as they may be entitled to, as hereinafter provided) at any time after issuance thereof; provided, that such conversion right shall expire at the close of business on the date, if any, fixed for the redemption of Convertible Preferred Stock in any notice of redemption given pursuant to Section 6 hereof if there is no default in payment of the Redemption Price. Each share of Convertible Preferred Stock shall be convertible at the office of any transfer agent for the Convertible Preferred Stock, and at such other office or offices, if any, as the Board of Directors may designate, into that number of fully paid and nonassessable shares of Common Stock (calculated as to each conversion to the nearest 1/100th of a share) as shall be equal to the Conversion Rate, determined as hereinafter provided, in effect at the time of conversion. Shares of Convertible Preferred Stock may initially be converted into full shares of Common Stock at the rate of 69.98 shares of Common Stock for each share of Convertible Preferred Stock, subject to adjustment from time to time as provided in Section 8 (such conversion rate, as so adjusted from time to time, being referred to herein as the "CONVERSION RATE"). The "CONVERSION PRICE" shall be equal to $1,000 divided by the Conversion Rate. Upon conversion, no adjustment or payment shall be made in respect of accumulated and unpaid dividends on the Convertible Preferred Stock surrendered for conversion. The right of holders of Convertible Preferred Stock to convert their shares shall be exercised by surrendering for such purpose to the Corporation or its agent, as provided above, certificates representing shares to be converted, duly endorsed in blank or accompanied by proper instruments of transfer. The Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of Common Stock or other securities or property upon conversion of Convertible Preferred Stock in a name other than that of the holder of the shares of Convertible Preferred Stock being converted, nor shall the Corporation be required to issue or deliver any such shares or other securities or property unless and until the person or persons requesting the issuance thereof shall have paid to the Corporation the amount of any such tax or shall have established to the satisfaction of the Corporation that such tax has been paid. A number of shares of the authorized but unissued Common Stock sufficient to provide for the conversion of the Convertible Preferred Stock outstanding upon the basis hereinbefore provided shall at all times be reserved by the Corporation, free from preemptive rights, for such conversion, subject to the provisions of the next paragraph. If the Corporation shall issue any securities or make any change in its capital structure which would change the number of shares of Common Stock into which each share of the Convertible Preferred Stock shall be convertible as herein provided, the Corporation shall at the same time also make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Convertible Preferred Stock on the new basis. The Corporation shall comply with all securities laws regulating the offer and -6- delivery of shares of Common Stock upon conversion of the Convertible Preferred Stock and shall use its best efforts to list such shares on each national securities exchange on which the Common Stock is listed or to have such shares admitted for quotation on the Nasdaq National Market if the Common Stock is admitted for quotation thereon. Upon the surrender of certificates representing shares of Convertible Preferred Stock to be converted, duly endorsed or accompanied by proper instruments of transfer as provided above, the person converting such shares shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, and all rights with respect to the shares surrendered shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets as herein provided. No fractional shares of Common Stock shall be issued upon conversion of Convertible Preferred Stock but, in lieu of any fraction of a share of Common Stock which would otherwise be issuable in respect of the aggregate number of such shares surrendered for conversion at one time by the same holder, the Corporation shall pay in cash an amount equal to the product of (a) the Closing Price of a share of Common Stock (as defined in the next sentence) on the last trading day before the conversion date and (b) such fraction of a share. The "CLOSING PRICE" for such day shall be the last reported sale price regular way or, in case no sale takes place on such day, the average of the closing bid and asked prices regular way on such day, in either case as reported on the New York Stock Exchange Composite Tape, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, on the Nasdaq National Market System, or, if the Common Stock is not admitted for quotation on the Nasdaq National Market System, the average of the high bid and low asked prices on such day as recorded by the National Association of Securities Dealers, Inc. through Nasdaq, or, if the National Association of Securities Dealers, Inc. through Nasdaq shall not have reported any bid and asked prices for the Common Stock on such day, the average of the bid and asked prices for such day as furnished by any New York Stock Exchange member firm selected from time to time by the Corporation for such purpose, or, if no such bid and asked prices can be obtained from any such firm, the fair market value of one share of the Common Stock on such day as determined in good faith by the Board of Directors of the Corporation. Section 8. ADJUSTMENTS TO CONVERSION RATE. Notwithstanding anything in this Section 8 to the contrary, no change in the Conversion Rate shall be made until the cumulative effect of the adjustments called for by this Section 8 since the date of the last change in the Conversion Rate would change the Conversion Rate by more than 1%. However, once the cumulative effect would result in such a change, then the Conversion Rate shall be changed to reflect all adjustments called for by this Section 8 and not previously made. Subject to the foregoing, the Conversion Rate shall be adjusted from time to time as follows: (a) In case of any consolidation or merger of the Corporation with any other corporation (other than a wholly owned subsidiary of the Corporation), or in case of any sale or transfer of all or substantially all of the assets of the Corporation, or in case of any -7- share exchange pursuant to which all of the outstanding shares of Common Stock are converted into other securities or property, the Corporation shall, prior to or at the time of such transaction, make appropriate provision or cause appropriate provision to be made so that holders of each share of Convertible Preferred Stock then outstanding shall have the right thereafter to convert such share of Convertible Preferred Stock into the kind and amount of shares of stock and other securities and property receivable upon such consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Common Stock into which such share of Convertible Preferred Stock could have been converted immediately prior to the effective date of such consolidation, merger, sale, transfer or share exchange. If in connection with any such consolidation, merger, sale, transfer or share exchange, each holder of shares of Common Stock is entitled to elect to receive either securities, cash or other assets upon completion of such transaction, the Corporation shall provide or cause to be provided to each holder of Convertible Preferred Stock the right to elect the securities, cash or other assets into which the Convertible Preferred Stock held by such holder shall be convertible after completion of any such transaction on the same terms and subject to the same conditions applicable to holders of the Common Stock (including, without limitation, notice of the right to elect, limitations on the period in which such election shall be made and the effect of failing to exercise the election). (b) In case the Corporation shall (i) pay a dividend or make a distribution on its Common Stock in shares of its capital stock, (ii) subdivide its outstanding Common Stock into a greater number of shares, (iii) combine the shares of its outstanding Common Stock into a smaller number of shares, or (iv) issue by reclassification of its Common Stock any shares of its capital stock, then in each such case the Conversion Rate in effect immediately prior thereto shall be proportionately adjusted so that the holder of any Convertible Preferred Stock thereafter surrendered for conversion shall be entitled to receive, to the extent permitted by applicable law, the number and kind of shares of capital stock of the Corporation which such holder would have owned or have been entitled to receive after the happening of such event had such Convertible Preferred Stock been converted immediately prior to the record date for such event (or if no record date is established in connection with such event, the effective date for such action). An adjustment pursuant to this subparagraph (b) shall become effective immediately after the record date in the case of a stock dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (c)(i) In case the Corporation shall issue Additional Shares of Common Stock (as defined herein) (including, without limitation, Additional Shares of Common Stock deemed to be issued pursuant to Section 8(c)(iii)) without consideration or for a consideration per share less than the Current Market Price (as defined herein) calculated as provided herein as of the date of and immediately prior to such issue, then in each such case the Conversion Rate in effect on such issue date shall be adjusted in accordance with the formula: -8- O + N ----- C(1) = C X O + N X P ----- M where C1 = the adjusted Conversion Rate. C = the current Conversion Rate. O = the number of shares of Common Stock outstanding immediately prior to such issue. N = the number of additional shares of Common Stock offered. P = the offering price per share of the additional shares. M = the Current Market Price per share of Common Stock immediately prior to such issue. For the purpose of such calculation, the number of shares of Common Stock outstanding immediately prior to such issue shall be calculated on a fully diluted basis, as if all shares of Convertible Preferred Stock and all Convertible Securities had been fully converted into shares of Common Stock immediately prior to such issuance and any outstanding warrants, options or other rights for the purchase of shares of stock or convertible securities had been fully exercised immediately prior to such issuance (and the resulting securities fully converted into shares of Common Stock, if so convertible) as of such date. (ii) For purposes of this Section 8(c), the following definitions shall apply: (A) "OPTIONS" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities; (B) "CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness, shares or other securities convertible into or exchangeable for Common Stock; (C) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common Stock issued (or, pursuant to Section 8(c)(iii), deemed to be issued) by the Corporation after July 26, 1999, other than shares of Common Stock issued or issuable: (1) upon conversion of shares of the Convertible Preferred Stock or upon conversion of shares of 1998A Convertible Preferred Stock; (2) pursuant to a stock grant, option plan or purchase plan, other employee stock incentive program or agreement approved by the Board of Directors which was disclosed in Schedule 5.3 of the 1999 Preferred Stock Purchase Agreement (the "OPTION POOL"); or (3) pursuant to the terms of any stock grant, option, warrant, employment agreement or other written obligation, agreement or commitment to which the Corporation was a party as of July 26, 1999 and which was disclosed in Schedule 5.3 of the 1999 Preferred Stock Purchase Agreement; and (D) "CURRENT MARKET PRICE" shall mean the average of the daily Closing Prices of the Common Stock (as defined in Section 7) on the 30 consecutive business days commencing 45 business days before such issue date, as applicable. (iii) In the event the Corporation at any time or from time to time after July 26, 1999 shall issue any Options (other than the issuance of Options pursuant to the Option Pool) or Convertible Securities or shall fix a record date for the determination of holders -9- of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share of such Additional Shares of Common Stock would be less than the Current Market Price calculated as provided herein as of the date of and immediately prior to such issue, or such record date, as the case may be, and provided further that in any such case in which Additional Shares of Common Stock are deemed to be issued no further adjustment in the Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities. (iv) Upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Conversion Price and Conversion Rate computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if: (A) in the case of Convertible Securities or Options for Common Stock the only Additional Shares of Common Stock issued were the shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration actually received by the Corporation upon such exercise, or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange; and (B) in the case of Options for Convertible Securities only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Corporation for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Corporation upon the issue of the Convertible Securities or Convertible Preferred Stock with respect to which such Options were actually exercised. (e) All calculations hereunder shall be made to the nearest cent or to the nearest 1/100 of a share, as the case may be. -10- (f) In the event that at any time, as a result of an adjustment made pursuant to subparagraph (a) or (b) above, the holder of any Convertible Preferred Stock thereafter surrendered for conversion shall become entitled to receive securities, cash or assets other than Common Stock, the number or amount of such securities or property so receivable upon conversion shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in subparagraphs (a) through (e) above. Except as otherwise provided above in this Section 8, no adjustment in the Conversion Rate shall be made in respect of any conversion for share distributions or dividends theretofore declared and paid or payable on the Common Stock. Whenever the Conversion Rate is adjusted as herein provided, the Corporation shall send to each transfer agent for the Convertible Preferred Stock and the Common Stock, and to the principal securities exchange, if any, on which the Convertible Preferred Stock and the Common Stock is traded, or the Nasdaq National Market if the Convertible Preferred Stock or Common Stock is admitted for quotation thereon, a statement signed by the Chairman of the Board, the President or any Vice President of the Corporation and by its Treasurer or its Secretary stating the adjusted Conversion Rate determined as provided in this Section 8; and any adjustment so evidenced, given in good faith, shall be binding upon all shareholders and upon the Corporation. Whenever the Conversion Rate is adjusted, the Corporation shall give notice by mail at the time of, and together with, the next dividend payment to the holders of record of Convertible Preferred Stock, setting forth the adjustment and the new Conversion Rate and Conversion Price. Notwithstanding the foregoing notice provisions, failure by the Corporation to give such notice or a defect in such notice shall not affect the binding nature of such corporate action of the Corporation. Whenever the Corporation shall propose to take any of the actions specified in subparagraphs (a), (b) or (c) of the first paragraph of this Section 8 which would result in any adjustment in the Conversion Rate, the Corporation shall cause a notice to be mailed at least 20 days prior to the date on which the books of the Corporation will close or on which a record will be taken for such action to the holders of record of the outstanding Convertible Preferred Stock on the date of such notice. Such notice shall specify the action proposed to be taken by the Corporation and the date as of which holders of record of the Common Stock shall participate in any such actions or be entitled to exchange their Common Stock for securities or other property, as the case may be. Failure by the Corporation to give such notice or any defect in such notice shall not affect the validity of the transaction. Anything herein to the contrary notwithstanding, no adjustment will be made to the Conversion Price or Conversion Rate by reason of (i) the issuance of Common Stock, Options or Convertible Securities to employees, directors, officers or consultants of the Corporation or any subsidiary of the Corporation pursuant to the Option Pool or the issuance of Common Stock upon the conversion, exercise or exchange thereof, (ii) the issuance of Common Stock upon the conversion, exercise or exchange of Options or Convertible Securities issued and outstanding on July 26, 1999, including, without limitation, the issuance of Common Stock upon the conversion -11- of any shares of 1998A Convertible Preferred Stock, (iii) the issuance of Common Stock upon the conversion of the Convertible Preferred Stock, (iv) rights to purchase Common Stock pursuant to a Corporation plan for reinvestment of dividends or interest, (v) the issuance of Common Stock upon the exercise, conversion or exchange of Options or Convertible Securities of the Corporation where the Conversion Price had previously been adjusted pursuant to this Section 8 upon the initial issuance of such Options or Convertible Securities. In addition, no adjustment in the Conversion Price need be made for a change in the par value of the Common Stock. Section 9. CONVERTIBLE PREFERRED STOCK NOT REDEEMABLE AT OPTION OF HOLDERS OR EXCHANGEABLE; NO SINKING FUND. The Convertible Preferred Stock shall not be redeemable upon the request of holders thereof or exchangeable for other capital stock or indebtedness of the Corporation or other property. The shares of Convertible Preferred Stock shall not be subject to the operation of a purchase, retirement or sinking fund. Section 10. VOTING RIGHTS. Except as herein provided or as otherwise required by law, holders of Convertible Preferred Stock shall be entitled to the same voting rights as, and shall vote together as one class with, holders of Common Stock, with each holder of shares of Convertible Preferred Stock having such voting rights as are attributable to the number of whole shares of Common Stock into which such shares of Convertible Preferred Stock are convertible in accordance with Sections 7 and 8 hereof as of the date of such vote. In addition to any matters requiring a separate vote of the Convertible Preferred Stock as a single class under applicable law, the approval of the holders of a majority of the issued and outstanding shares of Convertible Preferred Stock, voting as a class, shall be required as set forth in Section 11 hereof with respect to the priority and rights of the Convertible Preferred Stock hereunder and under the Corporation's Certificate of Incorporation, as amended. At each meeting of shareholders at which the holders of shares of Convertible Preferred Stock shall have the right, voting separately as a single class, to take any action, the presence in person or by proxy of the holders of record of at least 50% of the shares of Convertible Preferred Stock outstanding and entitled to vote on the matter shall be necessary and sufficient to constitute a quorum. At each such meeting, each holder of shares of Convertible Preferred Stock shall be entitled to vote for each share of Convertible Preferred Stock then held. In the absence of a quorum of the holders of shares of Convertible Preferred Stock, a majority of the holders of such shares present in person or by proxy shall have the power to adjourn the meeting as to the actions to be taken by the holders of shares of Convertible Preferred Stock from time to time and place to place without notice other than announcement at the meeting until a quorum shall be present. Section 11. CERTAIN ACTIONS NOT TO BE TAKEN WITHOUT VOTE OF HOLDERS OF CONVERTIBLE PREFERRED STOCK. Without the consent or affirmative vote of the holders of at least a majority of the outstanding shares of Convertible Preferred Stock, voting separately as a class, the Corporation shall not authorize, create or issue any shares of any other class or series of capital stock ranking senior to the Convertible Preferred Stock as to dividends or upon liquidation. The affirmative vote or consent of the holders of at least a majority of the outstanding shares of the -12- Convertible Preferred Stock, voting separately as a class, shall be required for any amendment, alteration or repeal, whether by merger or consolidation or otherwise, of the Corporation's Certificate of Incorporation (including any certificate of designations establishing any class or series of Preferred Stock of the Corporation) if the amendment, alteration or repeal adversely affects the rights or preferences of the Convertible Preferred Stock; provided, however, that any increase in the authorized Preferred Stock of the Corporation or the creation and issuance of any other capital stock of the Corporation ranking on a parity with or junior to the Convertible Preferred Stock shall not be deemed to materially affect such powers, preferences or special rights. Section 12. OUTSTANDING SHARES. For purposes of this Certificate of Designations, all shares of Convertible Preferred Stock shall be deemed outstanding except for (a) shares of Convertible Preferred Stock held of record or beneficially by the Corporation or any subsidiary of the Corporation; (b) from the date of surrender of certificates representing Convertible Preferred Stock for conversion pursuant to Section 7, all shares of Convertible Preferred Stock which have been converted into Common Stock or other securities or property pursuant to Section 7; and (c) from the date fixed for redemption pursuant to Section 6, all shares of Convertible Preferred Stock which have been called for redemption, provided that funds necessary for such redemption are available therefor and have been irrevocably deposited or set aside for such purpose. Section 13. STATUS OF CONVERTIBLE PREFERRED STOCK UPON RETIREMENT. Shares of Convertible Preferred Stock which are acquired or redeemed by the Corporation or converted pursuant to Section 7 shall be retired pursuant to the Delaware General Corporation Law, Section 243, or any successor provision, and thereupon shall return to the status of authorized and unissued shares of Preferred Stock of the Corporation without designation as to series. Upon the acquisition or redemption by the Corporation or conversion pursuant to Section 7 of all outstanding shares of Convertible Preferred Stock, all provisions of this Certificate of Designations shall cease to be of further effect. Upon the occurrence of such event, the Board of Directors of the Corporation shall have the power, pursuant to the Delaware General Corporation Law, Section 151(g), or any successor provision and without shareholder action, to cause this Certificate of Designations to be eliminated from the Corporation's Certificate of Incorporation. -13- IN WITNESS WHEREOF, New Century Financial Corporation has caused this certificate to be signed by Brad A. Morrice, its Vice Chairman and President, and attested by Stergios Theologides, its Secretary, this 27th day of April, 2000. NEW CENTURY FINANCIAL CORPORATION By /s/ Brad A. Morrice --------------------------- Brad A. Morrice Vice Chairman and President Attest: By /s/ Stergios Theologides ----------------------------- Stergios Theologides Secretary -14- EX-99.3 4 EXHIBIT 99.3 Exhibit 99.3 WARRANT ISSUANCE AGREEMENT This Warrant Issuance Agreement dated as of April 28, 2000 is made by and among New Century Financial Corporation, a Delaware corporation (the "Company"), U.S. Bancorp, a Delaware corporation ("USB"), and U.S. Bank National Association, a national banking association and a wholly owned subsidiary of USB ("US Bank"). WHEREAS, the Company proposes to issue warrants as hereinafter described (the "Warrants") to purchase up to 725,000 shares (the "Warrant Shares") of the Company's Common Stock, $.01 par value per share (the "Common Stock"), in connection with the Subordinated Loan Agreement dated as of April 28, 2000 (the "Subordinated Loan Agreement") by and between US Bank and New Century Mortgage Corporation ("NCMC"); WHEREAS, the Company has taken all necessary action to permit the issuance of the Warrants and the issuance of the Warrant Shares issuable upon exercise or conversion of the Warrants; and WHEREAS, the parties hereto desire to provide for the issuance of the Warrants to US Bank as herein provided and to set forth certain agreements of the Company in connection with the issuance of the warrants and other matters relating to its Common Stock. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1 DEFINITIONS. In addition to the definitions set forth elsewhere herein, as used herein: "AGREEMENT" shall mean this Warrant Issuance Agreement. "EXPIRATION DATE" shall mean 5:00 p.m., Minneapolis time, on April 28, 2005. "FIRST FUNDING DATE" shall mean such date, if any, during the second calendar quarter of 2000 that US Bank advances funds to NCMC pursuant to the Subordinated Loan Agreement. "PREFERRED STOCK" shall mean the Company's Series 1998A Convertible Preferred Stock and/or the Company's Series 1999A Convertible Preferred Stock. "REGISTERED HOLDER" or "HOLDER" shall mean the person in whose name any Warrant Certificate shall be registered on the books maintained by the Company. "SECOND FUNDING DATE" shall mean such date, if any, during the third calendar quarter of 2000 that US Bank advances funds to NCMC pursuant to the Subordinated Loan Agreement. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "THIRD FUNDING DATE" shall mean such date, if any, during the fourth calendar quarter of 2000 that US Bank advances funds to NCMC pursuant to the Subordinated Loan Agreement. "WARRANT CERTIFICATE" shall mean the certificates representing the Warrants issued as herein provided. "WARRANTS" shall mean the Warrants issued pursuant to this Agreement. ARTICLE II ISSUANCE OF WARRANTS; WARRANT CERTIFICATES Section 2.1 ISSUANCE OF WARRANTS. Subject to the conditions and on the terms specified herein, the Company shall issue Warrants as follows: (a) On the date hereof, the Company shall issue to US Bank Warrants to purchase 650,000 Warrant Shares at an exercise price of $9.5625 per Common Share with vesting to be in accordance with the following schedule:
Number of Warrant Shares Vesting Date ------------------------ ------------ 518,750 shares On the date hereof 43,750 shares July 1, 2000 43,750 shares October 1, 2000 43,750 shares January 1, 2001
Notwithstanding the foregoing, with respect to Warrants vesting after the date hereof, such Warrants will not vest nor be exercisable if as of the relevant vesting date NCMC has repaid all amounts owed to US Bank pursuant to the Subordinated Loan Agreement and the Second Amended and Restated Subordinated Promissory Note dated as of April 28, 2000 made by NCMC to US Bank. Warrants that fail to vest on the applicable vesting date in accordance with the immediately preceding sentence shall terminate as of such date and shall be of no further force and effect. (b) On the First Funding Date, the Company shall issue to US Bank Warrants to purchase that number of Warrant Shares equal to the product of (i) 75,000 times (ii) a fraction -2- equal to the amount funded by US Bank under the Subordinated Loan Agreement on such date divided by $10 million. (c) On the Second Funding Date, the Company shall issue to US Bank Warrants to purchase that number of Warrant Shares equal to the product of (i) 75,000 times (ii) a fraction equal to the amount funded by US Bank under the Subordinated Loan Agreement on such date divided by $10 million. (d) On the Third Funding Date, the Company shall issue to US Bank Warrants to purchase that number of Warrant Shares equal to the product of (i) 75,000 times (ii) a fraction equal to the amount funded by US Bank under the Subordinated Loan Agreement on such date divided by $10 million. Section 2.2 WARRANT CERTIFICATES. The Company shall execute and deliver the Warrant Certificates in accordance with the terms of, and subject to the conditions contained in, Section 2.1. The Warrant Certificates for Warrants issued pursuant to Section 2.1(a) shall be substantially as set forth in Exhibit A hereto and Warrants issued pursuant to Sections 2.1(b), (c) and (d) shall be substantially as set forth in Exhibit B hereto. Such Warrant Certificates may have such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement. The Warrant Certificates shall be dated as of the date of their issuance. Section 2.3 WARRANT TERMS AND CONDITIONS. The Warrants shall have the terms and shall be subject to the conditions set forth herein and in the form of Warrant Certificate attached hereto as Exhibit A or Exhibit B, as applicable. The exercise price per Warrant Share for any Warrant issued pursuant to Section 2.1(b), (c) or (d) hereof shall be equal to the closing price per share of Common Stock as reported on the Nasdaq Stock Market on the trading date immediately preceding the First Funding Date, the Second Funding Date or the Third Funding Date, respectively. Section 2.4 EXECUTION OF WARRANT CERTIFICATES. The Warrants shall be executed on behalf of the Company by a duly authorized officer of the Company. ARTICLE III EXERCISE OR CONVERSION OF WARRANTS Section 3.1 EXERCISE OR CONVERSION. Any or all of the Warrants represented by each Warrant Certificate which have vested pursuant to Section 2.1 may be exercised or converted, upon the terms and subject to the conditions set forth herein and in such Warrant Certificate, at any time on or after the date of such Warrant and before the Expiration Date. Each Warrant not exercised or converted on or before the Expiration Date shall thereupon become void and all rights of the Holder thereunder and under this Agreement shall cease. In the event that less than all of the Warrants evidenced by a Warrant Certificate surrendered upon the exercise of Warrants are exercised at any time prior to the Expiration Date, a new Warrant -3- Certificate or Certificates will be issued for the remaining number of Warrants evidenced by the Warrant Certificate so surrendered. Section 3.2 TIME OF EXERCISE OR CONVERSION. Each exercise or conversion of Warrants shall be deemed to have been effective immediately prior to the close of business on the business day on which the Warrant Certificate relating to such Warrant shall have been surrendered as provided in Section 3.1 and in such Warrant Certificate. Thereafter, the Holder shall have, with respect to the Warrant Shares purchased or otherwise acquired upon exercise or conversion, all the rights and obligations of any other stockholder of the Company holding Common Stock. ARTICLE IV CERTAIN OBLIGATIONS OF THE COMPANY Section 4.1 PERFORMANCE BY THE COMPANY. (a) The Company has reserved and shall at times keep reserved, out of the authorized and unissued capital stock of the Company, such number of Warrant Shares sufficient to provide for the exercise of the rights of purchase represented by all Warrants issued pursuant to this Agreement. The Company shall authorize and direct the transfer agent for the Common Stock (and any successor thereto, the "Transfer Agent") at all times to reserve such number of Warrant Shares as may be issuable upon exercise of outstanding Warrants under this Agreement. The Company shall provide a copy of this Agreement and each Warrant Certificate issued hereunder to the Transfer Agent. The Company shall, at its expense, use its best efforts to cause the Warrant Shares to be listed (subject to official notice of issuance) on the Nasdaq Stock Market and such other stock exchanges, if any, or markets on which the Common Stock may become listed from and after the date of issuance of such Warrants through the Expiration Date. (b) The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Agreement or the Warrant Certificate, but will at all times in good faith assist in the carrying out of all such terms. Without limiting the generality of the foregoing, the Company (i) shall take all such action as may be necessary or appropriate in order that the Company may validly and legally issue the Warrant Shares upon the exercise of all Warrants from time to time outstanding, and (ii) will not (A) transfer all or substantially all of its properties and assets to any other person or entity, (B) consolidate with or merge into any other entity where the Company is not the surviving entity, or (C) permit any other entity to consolidate with or merge into the Company, where the Company is not the surviving entity, where in connection with such transfer, consolidation or merger, the Warrant Shares then issuable upon the exercise of the Warrant shall be changed into or exchanged for shares or other securities or property of any other entity unless, in any such case, the other entity acquiring such properties and assets, continuing or surviving after such consolidation or merger or issuing or distributing such shares or other securities or property, as the case may be, shall expressly assume in writing and be bound by all the terms of this Agreement and the Warrant Certificates. -4- Section 4.2 REPURCHASE OR REDEMPTION OF COMMON STOCK. The Company will not repurchase or otherwise redeem outstanding shares of its Common Stock if such repurchase or redemption would cause USB's ownership of Common Stock (assuming conversion of all shares of Preferred Stock) to exceed 24.99% of the outstanding shares of Common Stock, without the consent of USB, unless or until the Company has made provision to redeem or otherwise repurchase a sufficient number of shares of the Preferred Stock or Common Stock then held by USB such that USB's ownership of Common Stock (assuming conversion of all shares of Preferred Stock) does not exceed 24.99% of the outstanding shares of Common Stock. Section 4.3 NO PREDATORY LENDING. For so long as USB owns any of the Preferred Stock or Common Stock of the Company, (i) the Company will not, and will not allow NCMC or any other subsidiary, to engage in any "predatory behaviors" (as defined in that certain letter dated April 4, 2000 from USB to the Company), and (ii) the Company will provide USB with a quarterly report, on or as soon as reasonably practicable after the last business day of each fiscal quarter, regarding the Company's and its subsidiaries' adherence to non-predatory lending practices during that fiscal quarter. Section 4.4 COOPERATION; FURTHER ASSURANCES. The Company shall cooperate with USB and use its commercially reasonable efforts to take such actions, or to cause to be made such amendments to this Agreement and the agreements and certificates referred to herein, as may be reasonably requested by USB as necessary, proper or advisable under applicable regulations, policies and guidelines of the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency or other applicable bank regulatory authority. ARTICLE V CERTAIN OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF WARRANT CERTIFICATES Section 5.1 NO RIGHTS OF HOLDERS OF COMMON STOCK. The Warrant Certificates shall be issued in registered form only. No Warrant Certificate shall entitle the Holder thereof to any of the rights of a holder of Common Stock of the Company, including, without limitation, the right to vote, to receive other distributions, to elect directors of the Company or to receive notice of or to attend the meetings of stockholders or any other proceeding of the Company. Section 5.2 LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT CERTIFICATES. In case any of the Warrant Certificates shall be lost, stolen, destroyed or mutilated, the Company will issue and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent right or interest, but (a) in the case of such loss, theft or destruction, only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant Certificate and indemnity, if requested, also satisfactory to it or (b) in the case of any such mutilation, only upon surrender to and cancellation by the Company of such Warrant Certificate. -5- ARTICLE VI TRANSFER AND EXCHANGE OF WARRANT CERTIFICATES Section 6.1 TRANSFER OR EXCHANGE OF WARRANT CERTIFICATES. The Warrants, the rights thereunder and the Warrant Shares may be sold, transferred or otherwise disposed of or in any manner transferred upon the books of the Company, in whole or in part, (a) to a successor to US Bank or any affiliate of US Bank and (b) to any other person or entity, subject to the requirements of the Securities Act and any applicable state securities law. Any such transfer may be made at the principal office of the Company by the Holder of such Warrant in person or by duly authorized attorney, upon surrender of the Warrant properly endorsed. Upon surrender for transfer or exchange of any Warrant Certificate, properly endorsed, to the Company, the Company will issue and deliver to or upon the order of the Holder thereof a new Warrant Certificate of like tenor, in the name of such Holder or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct. Any Warrant Certificate surrendered for transfer or exchange shall be canceled by the Company. ARTICLE VII REGISTRATION RIGHTS Section 7.1 REGISTRATION RIGHTS AGREEMENT. The Warrant Shares shall be subject to the registration rights as set forth in that Amended and Restated Registration Rights Agreement dated as of April 28, 2000 (the "Registration Rights Agreement") by and between USB and the Company (subject in all cases to any restrictions or limitations set forth in Section 9 thereof). ARTICLE VIII OTHER MATTERS Section 8.1 SUCCESSORS AND ASSIGNS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Holder shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 8.2 NOTICES. Any notice or demand authorized by this Agreement to be given or made by the Holder of any Warrant Certificate to the Company shall be sufficiently given or made if sent by first-class or registered mail, postage prepaid, addressed as follows: -6- New Century Financial Corporation 18400 Von Karman, Suite 1000 Irvine, California 92612 Attention: Brad A. Morrice Telecopy: 949-440-7033 Any notice pursuant to this Agreement to be given or made by the Company to the Holder of any Warrant shall be sufficiently given or made (unless otherwise specifically provided for herein) if sent by first-class or registered mail, postage prepaid, addressed to said registered Holder at his or her address appearing on the Warrant register. Section 8.3 GOVERNING LAW. This Agreement and each Warrant Certificate issued hereunder shall be governed by and construed in accordance with the laws of the State of Delaware. Section 8.4 NO BENEFITS CONFERRED. Nothing in this Agreement expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or to give to any person or entity other than the Company, USB and the Holders of Warrant Certificates any legal or equitable right, remedy or claim under or by reason of this Agreement, or of any covenant, condition, stipulation, promise or agreement herein; and all covenants, conditions, stipulations, promises and agreements in this Agreement shall be for the sole and exclusive benefit of the Company and its successors, USB and its successors and the Holders of Warrant Certificates and the Registrable Securities (as defined in the Registration Rights Agreement). Section 8.5 COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 8.6 HEADINGS. The descriptive headings used in this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. -7- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the day and year first above written. NEW CENTURY FINANCIAL CORPORATION By:_________________________________________ Its:_____________________________________ U.S. BANCORP By:_________________________________________ Its:_____________________________________ U.S. BANK NATIONAL ASSOCIATION By:_________________________________________ Its:_____________________________________ -8- EXHIBIT A THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE FOREGOING LAWS. ACCORDINGLY, THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT (i) AN OPINION OF COUNSEL SATISFACTORY TO NEW CENTURY FINANCIAL CORPORATION THAT SUCH SALE, TRANSFER OR OTHER DISPOSITION MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS OR (ii) SUCH REGISTRATION. NEW CENTURY FINANCIAL CORPORATION WARRANT TO PURCHASE SHARES OF COMMON STOCK For value received, U. S. Bank National Association, its successors or assigns ("Holder"), is entitled to purchase from New Century Financial Corporation, a Delaware corporation (the "Company"), up to Six Hundred and Fifty Thousand (650,000) fully paid and nonassessable shares (the "Warrant Shares") of the Company's common stock, $.01 par value per share (the "Common Stock"), or such greater or lesser number of such shares as may be determined by application of the vesting and anti-dilution provisions of this Warrant, at the price of Nine and 9/16ths dollars ($9.5625) per share, subject to adjustments as noted below (the "Warrant Exercise Price"). This Warrant, dated April 28, 2000, is issued pursuant to Section 2.1(a) of the Warrant Issuance Agreement dated as of April 28, 2000 by and between the Company and the initial Holder. This Warrant may be exercised as provided below at any time or from time to time prior to the close of business on April 28, 2005. This Warrant is subject to the following terms and conditions: 1. VESTING; EXERCISE. (a) The rights represented by this Warrant will vest and may be exercised by the Holder for the number of Warrant Shares and at the times set forth in the following schedule: -9- NUMBER OF WARRANT SHARES VESTING DATE 518,750 shares On the date hereof 43,750 shares July 1, 2000 43,750 shares October 1, 2000 43,750 shares January 1, 2001 Notwithstanding the foregoing, with respect to Warrants with possible vesting dates after the date hereof, such Warrants will not vest nor be exercisable if, as of the relevant date, New Century Mortgage Corporation ("NCMC") has repaid all amounts owed to U.S. Bank National Association pursuant to the Subordinated Loan Agreement dated as of April 28, 2000 by and between U.S. Bank National Association and NCMC and the Second Amended and Restated Subordinated Promissory Note dated as of April 28, 2000 made by NCMC to U.S. Bank National Association. Warrants that fail to vest on the applicable vesting date in accordance with the immediately preceding sentence shall terminate as of such date and shall be of no further force and effect. (b) The rights represented by this Warrant may be exercised by the Holder, in whole or in part, by written election in the form set forth below, by the surrender of this Warrant (properly endorsed if required) at the principal office of the Company and by payment to the Company by cash, certified check or bank draft of the Warrant Exercise Price. The shares so purchased shall be deemed to be issued as of the close of business on the date on which this Warrant has been exercised by payment to the Company of the Warrant Exercise Price. Certificates for the Warrant Shares so purchased, bearing an appropriate restrictive legend, shall be delivered to the Holder within fifteen (15) days after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new warrant representing the number of Warrant Shares, if any, with respect to which this Warrant has not been exercised shall also be delivered to the Holder hereof within such time. No fractional shares shall be issued upon the exercise of this Warrant. 2. WARRANT SHARES. All Warrant Shares that may be issued upon the exercise of the rights represented by this Warrant shall, upon issuance, be duly authorized and issued, fully paid and nonassessable shares. During the period within which the rights represented by this Warrant may be exercised, the Company shall at all times have authorized and reserved for the purpose of issue or transfer upon exercise of the subscription rights evidenced by this Warrant a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 3. ADJUSTMENT. The Warrant shall be subject to adjustment from time to time as hereinafter provided in this Section 3: (a) If the Company at any time divides the outstanding shares of its Common Stock into a greater number of shares (whether pursuant to a stock split, stock dividend or otherwise), and conversely, if the outstanding shares of its Common Stock are combined -10- into a smaller number of shares, or if the Company effects a transaction that has a similar effect, the Warrant Exercise Price in effect immediately prior to such division or combination shall be proportionately adjusted to reflect the reduction or increase in the value of each such common share. (b) If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation, or any other similar transaction shall be effected in such a way that holders of the Company's Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for such Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, the holder of this Warrant shall have the right to purchase and receive upon the basis and upon the terms and conditions specified in this Warrant and in lieu of the shares of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, such stock, securities or assets as would have been issued or delivered to the holder of this Warrant if it had exercised this Warrant and had received such shares of Common Stock prior to such reorganization, reclassification, consolidation, merger or sale. The Company shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument executed and mailed to the Holder at the last address of the Holder appearing on the books of the Company, the obligation to deliver to the Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to purchase. (c) Upon each adjustment of the Warrant Exercise Price, the Holder shall thereafter be entitled to purchase, at the Warrant Exercise Price resulting from such adjustment, the number of shares obtained by multiplying the Warrant Exercise Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment and dividing the product thereof by the Warrant Exercise Price resulting from such adjustment. (d) Upon any adjustment of the Warrant Exercise Price, the Company shall give written notice thereof, by first class mail, postage prepaid, addressed to the Holder at the address of the Holder as shown on the books of the Company, which notice shall state the Warrant Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 4. NO RIGHTS AS SHAREHOLDER. This Warrant shall not entitle the Holder to any voting rights or other rights as a shareholder of the Company. -11- 5. ADDITIONAL RIGHT TO CONVERT WARRANT. (a) The Holder of this Warrant shall have the right to require the Company to convert this Warrant (the "Conversion Right") at any time after it is exercisable, but prior to its expiration, into shares of the Company's Common Stock as provided for in this Section 5. Upon exercise of the Conversion Right, the Company shall deliver to the Holder (without payment to the Company of the Warrant Exercise Price) that number of shares of the Company's Common Stock equal to the quotient obtained by dividing (x) the value of the Warrant at the time the Conversion Right is exercised (determined by subtracting the Warrant Exercise Price for a Warrant Share in effect immediately prior to the exercise of the Conversion Right from the Fair Market Value of a Warrant Share immediately prior to the date of the exercise of the Conversion Right and multiplying that number by the number of Warrant Shares for which the Conversion Right is being exercised) by (y) the Fair Market Value of a Warrant Share immediately prior to the date of exercise of the Conversion Right. (b) The Conversion Right may be exercised by the Holder, at any time or from time to time, prior to the expiration of the Warrant, on any business day by delivering a written notice in the form attached hereto (the "Conversion Notice") to the Company at the offices of the Company stating that the Holder desires to exercise the Conversion Right and specifying (i) the total number of shares with respect to which the Conversion Right is being exercised and (ii) a place and date not less than five or more than 20 business days from the date of the Conversion Notice for the closing of such purchase. (c) At any closing under Section 5(b) hereof, (i) the Holder will surrender the Warrant and (ii) the Company will deliver to the Holder (A) a certificate or certificates for the number of shares of the Company's Common Stock issuable upon such conversion, together with cash, in lieu of any fraction of a share and (B) a new warrant representing the number of shares, if any, with respect to which the Warrant shall not have been exercised. (d) For purposes of this Section 5, Fair Market Value of a Warrant Share as of a particular date (the "Determination Date") shall mean: (i) If the Company's Common Stock is traded on an exchange or is quoted on Nasdaq, then the average closing or last sale prices, respectively, reported for the ten (10) business days immediately preceding the Determination Date, and (ii) If the Company's Common Stock is not traded on an exchange or on Nasdaq but is traded on the over-the-counter market, then the average closing bid and asked prices reported for the ten (10) business days immediately preceding the Determination Date. 6. TRANSFER. Subject to the requirements of federal and state securities laws, this Warrant and all rights hereunder are transferable, in whole or in part, at the principal office of the Company by the holder hereof in person or by duly authorized attorney, upon surrender of this -12- Warrant properly endorsed. The bearer of this Warrant, when endorsed, may be treated by the Company and all other persons dealing with this Warrant as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented by this Warrant, or to the transfer hereof on the books of the Company, any notice to the contrary notwithstanding; but until such transfer on such books, the Company may treat the registered owner hereof as the owner for all purposes. The Company shall not be required to pay any tax or other charge imposed in connection with the transfer of this Warrant, and the Company shall not be required to issue or deliver any stock certificate hereunder, until such tax or other charge has been paid or it has been established to the Company's satisfaction that no tax or other charge is due. 7. REGISTRATION RIGHTS. Holder shall be entitled to the registration rights as set forth in the Amended and Restated Registration Rights Agreement dated as of April 28, 2000, subject to the limitations and restrictions set forth in Section 9 thereof. 8. WRITING. This Warrant may not be changed, waived, discharged or terminated orally but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. The Holder, by its acceptance hereof, represents, warrants, covenants and agrees that the Warrant and Warrant Shares are being acquired for investment for the Holder's own account and not with a view to the distribution thereof, and that absent an effective registration statement under the Securities Act of 1933, as amended, covering the disposition of this Warrant or the Warrant Shares, they will not be sold, transferred, assigned, hypothecated or otherwise disposed of without first providing the Company with evidence satisfactory to the Company, including, at the Company's discretion, an opinion of counsel, satisfactory to the Company, to the effect that such sale, transfer, assignment, hypothecation or other disposal will be exempt from the registration and prospectus delivery requirements of applicable federal and state securities laws and regulations; and the Holder consents to the Company making a notation in its records or giving to any transfer agent of this Warrant or the Warrant Shares an order to implement such restriction on transferability. -13- IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and delivered by a duly authorized officer. Dated: April 28, 2000 NEW CENTURY FINANCIAL CORPORATION By ----------------------------------- President -14- WARRANT EXERCISE (To be signed only upon exercise of Warrant) The undersigned, the Holder of the foregoing Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, _________ of the shares of Common Stock of New Century Financial Corporation, to which such Warrant relates and herewith makes payment of $_________ therefor in cash, certified check or bank draft and requests that the certificates for such shares be issued in the name of, and be delivered to _______________________, whose address is set forth below the signature of the undersigned. Dated: ----------------------- ----------------------------- Signature ----------------------------- ----------------------------- ----------------------------- [Print Name and Address of Holder above] If shares are to be issued other Social Security or other Tax than to Holder: Identification No. - -------------------------------- ---------------------------- - -------------------------------- ---------------------------- - -------------------------------- ---------------------------- [Print Name and Address of Holder above] -15- WARRANT ASSIGNMENT (To be signed only upon exercise of Warrant) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _______________ the right represented by the foregoing Warrant to purchase the shares of Common Stock of New Century Financial Corporation, to which such Warrant relates and appoints ____________________ attorney to transfer such right on the books of New Century Financial Corporation, with full power of substitution in the premises. Dated: ----------------------- ----------------------------- Signature ----------------------------- ----------------------------- ----------------------------- [Print Name and Address of Holder above] If shares are to be issued other Social Security or other Tax than to Holder: Identification No. - -------------------------------- ---------------------------- - -------------------------------- ---------------------------- - -------------------------------- ---------------------------- [Print Name and Address of Holder above] -16- WARRANT CONVERSION NOTICE (To be signed only upon conversion of Warrant pursuant to Section 5) The undersigned, the Holder of the foregoing Warrant, hereby irrevocably elects to exercise the Conversion Right as provided for in Section 5 of the foregoing Warrant, with respect to ________ of the previously unexercised shares, which shall result pursuant to the conversion provisions of Section 5 in the purchase thereunder of _______ shares of Common Stock of New Century Financial Corporation, and herewith tenders the Warrant in full payment for the purchased shares, as provided for in Section 5 of the foregoing Warrant. If said number of shares shall not be all the shares purchasable under the Warrant, a new warrant is to be issued in the name of the undersigned for the remaining balance of the unexercised shares. The undersigned hereby requests that the certificates for such shares be issued in the name of, and be delivered to _________________ whose address is set forth below the signature of the undersigned. Dated: ----------------------- ----------------------------- Signature ----------------------------- ----------------------------- ----------------------------- [Print Name and Address of Holder above] If shares are to be issued other Social Security or other Tax than to Holder: Identification No. - -------------------------------- ---------------------------- - -------------------------------- ---------------------------- - -------------------------------- ---------------------------- [Print Name and Address of Holder above] -17- EXHIBIT B THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE FOREGOING LAWS. ACCORDINGLY, THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT (i) AN OPINION OF COUNSEL SATISFACTORY TO NEW CENTURY FINANCIAL CORPORATION THAT SUCH SALE, TRANSFER OR OTHER DISPOSITION MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS OR (ii) SUCH REGISTRATION. NEW CENTURY FINANCIAL CORPORATION WARRANT TO PURCHASE SHARES OF COMMON STOCK For value received, U. S. Bank National Association, its successors or assigns ("Holder"), is entitled to purchase from New Century Financial Corporation, a Delaware corporation (the "Company"), _____________ (________) fully paid and nonassessable shares (the "Warrant Shares") of the Company's common stock, $.01 par value per share (the "Common Stock"), or such greater or lesser number of such shares as may be determined by application of the anti-dilution provisions of this Warrant, at the price of _______________ dollars ($________) per share, subject to adjustments as noted below (the "Warrant Exercise Price"). This Warrant, dated _______________, 200___, is issued pursuant to Section 2.1[(b), (c) or (d)] of the Warrant Issuance Agreement dated as of April 28, 2000 by and between the Company and the initial Holder. This Warrant may be exercised in full or in part at any time or from time to time after the date hereof and prior to the close of business on April 28, 2005. This Warrant is subject to the following terms and conditions: 1. EXERCISE. The rights represented by this Warrant may be exercised by the Holder, in whole or in part, by written election in the form set forth below, by the surrender of this Warrant (properly endorsed if required) at the principal office of the Company and by payment to the Company by -18- cash, certified check or bank draft of the Warrant Exercise Price. The shares so purchased shall be deemed to be issued as of the close of business on the date on which this Warrant has been exercised by payment to the Company of the Warrant Exercise Price. Certificates for the Warrant Shares so purchased, bearing an appropriate restrictive legend, shall be delivered to the Holder within fifteen (15) days after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new warrant representing the number of Warrant Shares, if any, with respect to which this Warrant has not been exercised shall also be delivered to the Holder hereof within such time. No fractional shares shall be issued upon the exercise of this Warrant. 2. WARRANT SHARES. All Warrant Shares that may be issued upon the exercise of the rights represented by this Warrant shall, upon issuance, be duly authorized and issued, fully paid and nonassessable shares. During the period within which the rights represented by this Warrant may be exercised, the Company shall at all times have authorized and reserved for the purpose of issue or transfer upon exercise of the subscription rights evidenced by this Warrant a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 3. ADJUSTMENT. The Warrant shall be subject to adjustment from time to time as hereinafter provided in this Section 3: (a) If the Company at any time divides the outstanding shares of its Common Stock into a greater number of shares (whether pursuant to a stock split, stock dividend or otherwise), and conversely, if the outstanding shares of its Common Stock are combined into a smaller number of shares, or if the Company effects a transaction that has a similar effect, the Warrant Exercise Price in effect immediately prior to such division or combination shall be proportionately adjusted to reflect the reduction or increase in the value of each such common share. (b) If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation, or any other similar transaction shall be effected in such a way that holders of the Company's Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for such Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, the holder of this Warrant shall have the right to purchase and receive upon the basis and upon the terms and conditions specified in this Warrant and in lieu of the shares of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, such stock, securities or assets as would have been issued or delivered to the holder of this Warrant if it had exercised this Warrant and had received such shares of Common Stock prior to such reorganization, reclassification, consolidation, merger or sale. The Company shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written -19- instrument executed and mailed to the Holder at the last address of the Holder appearing on the books of the Company, the obligation to deliver to the Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to purchase. (c) Upon each adjustment of the Warrant Exercise Price, the Holder shall thereafter be entitled to purchase, at the Warrant Exercise Price resulting from such adjustment, the number of shares obtained by multiplying the Warrant Exercise Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment and dividing the product thereof by the Warrant Exercise Price resulting from such adjustment. (d) Upon any adjustment of the Warrant Exercise Price, the Company shall give written notice thereof, by first class mail, postage prepaid, addressed to the Holder at the address of the Holder as shown on the books of the Company, which notice shall state the Warrant Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 4. NO RIGHTS AS SHAREHOLDER. This Warrant shall not entitle the Holder to any voting rights or other rights as a shareholder of the Company. 5. ADDITIONAL RIGHT TO CONVERT WARRANT. (a) The Holder of this Warrant shall have the right to require the Company to convert this Warrant (the "Conversion Right") at any time after it is exercisable, but prior to its expiration, into shares of the Company's Common Stock as provided for in this Section 5. Upon exercise of the Conversion Right, the Company shall deliver to the Holder (without payment to the Company of the Warrant Exercise Price) that number of shares of the Company's Common Stock equal to the quotient obtained by dividing (x) the value of the Warrant at the time the Conversion Right is exercised (determined by subtracting the Warrant Exercise Price for a Warrant Share in effect immediately prior to the exercise of the Conversion Right from the Fair Market Value of a Warrant Share immediately prior to the date of the exercise of the Conversion Right and multiplying that number by the number of Warrant Shares for which the Conversion Right is being exercised) by (y) the Fair Market Value of a Warrant Share immediately prior to the date of exercise of the Conversion Right. (b) The Conversion Right may be exercised by the Holder, at any time or from time to time, prior to the expiration of the Warrant, on any business day by delivering a written notice in the form attached hereto (the "Conversion Notice") to the Company at the offices of the Company stating that the Holder desires to exercise the Conversion Right and specifying (i) the total number of shares with respect to which the Conversion Right is being exercised and (ii) a place and date not less than five or more than 20 business days from the date of the Conversion Notice for the closing of such purchase. -20- (c) At any closing under Section 5(b) hereof, (i) the Holder will surrender the Warrant and (ii) the Company will deliver to the Holder (A) a certificate or certificates for the number of shares of the Company's Common Stock issuable upon such conversion, together with cash, in lieu of any fraction of a share and (B) a new warrant representing the number of shares, if any, with respect to which the Warrant shall not have been exercised. (d) For purposes of this Section 5, Fair Market Value of a Warrant Share as of a particular date (the "Determination Date") shall mean: (i) If the Company's Common Stock is traded on an exchange or is quoted on Nasdaq, then the average closing or last sale prices, respectively, reported for the ten (10) business days immediately preceding the Determination Date, and (ii) If the Company's Common Stock is not traded on an exchange or on Nasdaq but is traded on the over-the-counter market, then the average closing bid and asked prices reported for the ten (10) business days immediately preceding the Determination Date. 6. TRANSFER. Subject to the requirements of federal and state securities laws, this Warrant and all rights hereunder are transferable, in whole or in part, at the principal office of the Company by the holder hereof in person or by duly authorized attorney, upon surrender of this Warrant properly endorsed. The bearer of this Warrant, when endorsed, may be treated by the Company and all other persons dealing with this Warrant as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented by this Warrant, or to the transfer hereof on the books of the Company, any notice to the contrary notwithstanding; but until such transfer on such books, the Company may treat the registered owner hereof as the owner for all purposes. The Company shall not be required to pay any tax or other charge imposed in connection with the transfer of this Warrant, and the Company shall not be required to issue or deliver any stock certificate hereunder, until such tax or other charge has been paid or it has been established to the Company's satisfaction that no tax or other charge is due. 7. REGISTRATION RIGHTS. Holder shall be entitled to the registration rights as set forth in the Amended and Restated Registration Rights Agreement dated as of April 28, 2000, subject to the limitations and restrictions set forth in Section 9 thereof. 8. WRITING. This Warrant may not be changed, waived, discharged or terminated orally but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. The Holder, by its acceptance hereof, represents, warrants, covenants and agrees that the Warrant and Warrant Shares are being acquired for investment for the Holder's own account and not with a view to the distribution thereof, and that absent an effective registration statement under the Securities Act of 1933, as amended, covering the disposition of this Warrant or the Warrant Shares, they will not be sold, transferred, assigned, hypothecated or otherwise disposed of without first providing the Company with evidence satisfactory to the Company, including, at -21- the Company's discretion, an opinion of counsel, satisfactory to the Company, to the effect that such sale, transfer, assignment, hypothecation or other disposal will be exempt from the registration and prospectus delivery requirements of applicable federal and state securities laws and regulations; and the Holder consents to the Company making a notation in its records or giving to any transfer agent of this Warrant or the Warrant Shares an order to implement such restriction on transferability. -22- IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and delivered by a duly authorized officer. Dated:______________________, 2000 NEW CENTURY FINANCIAL CORPORATION By__________________________________ President -23- WARRANT EXERCISE (To be signed only upon exercise of Warrant) The undersigned, the Holder of the foregoing Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, _________ of the shares of Common Stock of New Century Financial Corporation, to which such Warrant relates and herewith makes payment of $_________ therefor in cash, certified check or bank draft and requests that the certificates for such shares be issued in the name of, and be delivered to _______________________, whose address is set forth below the signature of the undersigned. Dated:_______________________ _____________________________ Signature _____________________________ _____________________________ _____________________________ [Print Name and Address of Holder above] If shares are to be issued other Social Security or other Tax than to Holder: Identification No. ________________________________ ____________________________ ________________________________ ________________________________ [Print Name and Address of Holder above] -24- WARRANT ASSIGNMENT (To be signed only upon exercise of Warrant) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _______________ the right represented by the foregoing Warrant to purchase the shares of Common Stock of New Century Financial Corporation, to which such Warrant relates and appoints ____________________ attorney to transfer such right on the books of New Century Financial Corporation, with full power of substitution in the premises. Dated:_______________________ _____________________________ Signature _____________________________ _____________________________ _____________________________ [Print Name and Address of Holder above] If shares are to be issued other Social Security or other Tax than to Holder: Identification No. ________________________________ ____________________________ ________________________________ ________________________________ [Print Name and Address of Holder above] -25- WARRANT CONVERSION NOTICE (To be signed only upon conversion of Warrant pursuant to Section 5) The undersigned, the Holder of the foregoing Warrant, hereby irrevocably elects to exercise the Conversion Right as provided for in Section 5 of the foregoing Warrant, with respect to ________ of the previously unexercised shares, which shall result pursuant to the conversion provisions of Section 5 in the purchase thereunder of _______ shares of Common Stock of New Century Financial Corporation, and herewith tenders the Warrant in full payment for the purchased shares, as provided for in Section 5 of the foregoing Warrant. If said number of shares shall not be all the shares purchasable under the Warrant, a new warrant is to be issued in the name of the undersigned for the remaining balance of the unexercised shares. The undersigned hereby requests that the certificates for such shares be issued in the name of, and be delivered to _________________ whose address is set forth below the signature of the undersigned. Dated:_______________________ _____________________________ Signature _____________________________ _____________________________ _____________________________ [Print Name and Address of Holder above] If shares are to be issued other Social Security or other Tax than to Holder: Identification No. ________________________________ ____________________________ ________________________________ ________________________________ [Print Name and Address of Holder above] -26- EX-99.4 5 EXHIBIT 99.4 Exhibit 99.4 AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of April 28, 2000, by and among New Century Financial Corporation, a Delaware corporation (the "Company"), and U.S. Bancorp, a Delaware corporation ("USB") and U.S. Bank National Association ("US Bank"). WHEREAS, the Company and USB are a party to the Amended and Restated Registration Rights Agreement dated as of July 26, 1999 (the "Registration Rights Agreement") relating to the Company's agreements to register under the Securities Act the shares of the Company's Common Stock issuable upon conversion of the Company's outstanding Series 1998A Convertible Preferred Stock and the Series 1999A Convertible Preferred Stock. WHEREAS, in connection with a Subordinated Loan Agreement dated as of April 28, 2000 between New Century Mortgage Corporation (a wholly owned subsidiary of the Company) and US Bank, the Company has agreed to issue to US Bank warrants to purchase up to an aggregate of 725,000 shares of the Company's Common Stock, $.01 par value per share, upon the terms and subject to the conditions set forth in the Warrant Issuance Agreement dated as of April 28, 2000 among the Company, USB and US Bank. WHEREAS, in connection with the issuance of such warrants, the Company and USB desire to amend and restate the Registration Rights Agreement to include certain arrangements with respect to the registration for public sale under the Securities Act of 1933, as amended (the "Securities Act"), of the shares of the Company's Common Stock issuable upon conversion of the warrants and to make US Bank a party to such Agreement. NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, USB and US Bank hereby agree as follows: 1. DEFINITIONS. 1.1 "AFFILIATE" shall mean any person that directly or indirectly controls or is controlled by, or is under common control with, another specified person. 1.2 "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. 1.3 "COMPANY" shall mean New Century Financial Corporation, a Delaware corporation. 1.4 "COMMON SHARES" shall mean the shares of common stock, par value $.01 per share, authorized by the Company's Certificate of Incorporation and any additional shares of common stock which may be authorized in the future by the Company, and any stock into which such Common Shares may hereafter be changed, and shall also include capital stock of any other class of the Company which is not preferred as to dividends or assets over any other class of stock of the Company and which is not subject to redemption. 1.5 "FOUNDING MANAGERS" shall mean Robert K. Cole, Brad A. Morrice, Steven G. Holder and Edward F. Gotschall. 1.6 "OTHER SHAREHOLDERS" shall mean Paul B. Akers and Kirk Redding, and their successors in interest, under that certain Merger Agreement, dated as of December 17, 1997, among the Company, NC Acquisition Corp., PFW Corporation and the shareholders named therein. 1.7 "PREFERRED STOCK" shall mean all outstanding shares of (a) the Series 1999A Convertible Preferred Stock, par value $.01 per share, of the Company, and any securities (other than Common Shares) into which such shares may hereafter be changed and (b) the Series 1998A Convertible Preferred Stock, par value $.01 per share, of the Company, and any Securities (other than the Common Shares) into which such shares may hereafter be changed. 1.8 "PUBLIC OFFERING" shall mean any offering of Common Shares to the public, either on behalf of the Company or any of its security holders, pursuant to an effective registration statement under the Securities Act. 1.9 "REGISTRABLE SECURITIES" shall mean (a) the Common Shares at any time issued or subject to issuance upon the conversion of the Preferred Stock, (b) the Common Shares at any time issued or subject to issuance upon exercise or conversion of the Warrants, and (c) any additional securities issued with respect to the above-described securities upon any stock split, stock dividend, recapitalization, or similar event. Registrable Securities shall cease to be Registrable Securities when (w) a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (x) such securities shall be eligible to be distributed pursuant to Rule 144(k) under the Securities Act, (y) such securities shall have ceased to be outstanding, or (z) such securities are transferred in a transaction in which the rights hereunder are not assigned as permitted by Section 9. 1.10 "REGISTRATION EXPENSES" shall mean the expenses described in Section 5. 1.11 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. 1.12 "STOCK PURCHASE AGREEMENT" shall mean the Preferred Stock Purchase Agreement dated October 18, 1998 between the Company and USB. 1.13 "USB" shall mean U.S. Bancorp, a Delaware corporation. -2- 1.14 "WARRANTS" shall mean the warrants to purchase up to 725,000 Common Shares issued or to be issued pursuant to the Warrant Issuance Agreement dated as of April 28, 2000 among the Company, USB and US Bank. 2. DEMAND REGISTRATION. 2.1 Subject to Sections 2.3, 2.4, 2.5 and 2.6, if at any time the Company shall receive a written request therefor from the record holder or holders of an aggregate of at least 51% of the Registrable Securities, the Company shall prepare and file a registration statement under the Securities Act covering such number of Registrable Securities as are the subject of such request and shall use its best efforts to cause such registration statement to become effective. Upon the receipt of a registration request meeting the requirements of this Section 2.1, the Company shall promptly give written notice to all other record holders of Registrable Securities that such registration is to be effected. The Company shall include in such registration statement such additional Registrable Securities as such other record holders request in writing within fifteen (15) days after the date of the Company's written notice to them. If (a) the holders of a majority of the Registrable Securities for which registration has been requested pursuant to this Section 2.1 determine for any reason not to proceed with the registration at any time before the related registration statement has been declared effective by the Commission, (b) such registration statement, if theretofore filed with the Commission, is withdrawn and (c) the holders of the Registrable Securities subject to such registration statement agree to bear their own Registration Expenses incurred in connection therewith and to reimburse the Company for the Registration Expenses incurred by it in such connection or if such registration statement, if theretofore filed with the Commission, is withdrawn at the initiative of the Company, then the holders of the Registrable Securities shall not be deemed to have exercised their demand registration right pursuant to this Section 2.1. 2.2 At the request of the holders of a majority of the Registrable Securities to be registered, the method of disposition of all Registrable Securities included in such registration shall be an underwritten Public Offering. The managing underwriter of any such Public Offering shall be selected by the majority of the Registrable Securities, provided that such managing underwriter is reasonably acceptable to the Company. 2.3 The Company shall be obligated to prepare, file and cause to be effective not more than two registration statements pursuant to Section 2.1. 2.4 Notwithstanding the foregoing, the Company may delay initiating the preparation and filing of any registration statement requested pursuant to Section 2.1 for a period not to exceed one hundred eighty (180) days if, in the good faith judgment of the Company's Board of Directors, filing the registration statement would reasonably be expected to have a Material Adverse Effect (as defined in the Stock Purchase Agreement), which Material Adverse Effect could reasonably be expected to be avoided by delaying such filing for such period. -3- 2.5 Notwithstanding anything to the contrary contained herein, at any time within thirty (30) days after receiving a demand for registration pursuant to Section 2.1, the Company may elect to effect an underwritten primary registration in lieu of the requested registration. If the Company so elects, the Company shall give prompt written notice to all holders of Registrable Securities of its intention to effect such a registration and shall afford such holders the rights contained in Article 3 with respect to "piggyback" registrations. In such event, the demand for registration pursuant to Section 2.1 shall be deemed to have been withdrawn. 2.6 The Company shall not be obligated to effect a demand registration within 180 days after the effective date of a previous demand registration or a previous registration in which the holders of Registrable Securities were given piggy-back registration rights pursuant to this Agreement and in which there was no reduction in the number of Registrable Securities requested to be included. 3. PIGGYBACK REGISTRATION. 3.1 Each time the Company shall determine to proceed with the actual preparation and filing of a registration statement under the Securities Act in connection with the proposed offer and sale for money of any of its securities by it or any of its security holders (other than a registration statement on Form S-8, Form S-4 or other limited purpose form), the Company will give written notice of its determination to all record holders of Registrable Securities. Upon the written request of a record holder of any Registrable Securities given within 15 days after the date of the receipt of any such notice from the Company, the Company will, except as herein provided, use its best efforts to cause all Registrable Securities the registration of which is requested to be included in such registration statement, all to the extent requisite to permit the sale or other disposition by the prospective seller or sellers of the Registrable Securities to be so registered; PROVIDED, HOWEVER, that nothing herein shall prevent the Company from, at any time, abandoning or delaying in its sole and absolute discretion any registration. 3.2 If any registration pursuant to Section 3.1 is underwritten in whole or in part, the Company may require that the Registrable Securities included in the registration be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters. If, in the good faith judgment of the managing underwriter of the Public Offering, marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter may exclude some or all of the Registrable Securities from such registration and underwriting. Any reduction in the number of securities of the Company included in such registration and underwriting shall be borne (i) first by the Founding Managers and the Other Shareholders pro rata based on the number of shares, if any, for which registration was requested by the Founding Managers and the Other Shareholders, (ii) second by the holders of Registrable Securities pro rata based on the number of shares, if any, for which registration was requested by such holders, and (iii) then equally by the other holders of securities of the Company requested to be included in such registration and underwriting, as a group, pro rata based on the number of shares for which registration was requested by such holders. The Registrable Securities which are thus excluded from the underwritten Public Offering shall be -4- withheld from the market by the holders thereof for a period which the managing underwriter reasonably determines is necessary in order to effect the Public Offering. 4. REGISTRATION PROCEDURES. If and whenever the Company is required by the provisions of Article 2 or Article 3 to effect a registration of Registrable Securities under the Securities Act, the Company will use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended methods of disposition specified by the holders participating therein. Without limiting the foregoing, the Company in each such case will, as expeditiously as possible: 4.1 In the case of a demand registration pursuant to Section 2.1, prepare and file with the Commission the requisite registration statement to effect such registration (including such audited financial statements as may be required by the Securities Act or the rules and regulations thereunder) and use its best efforts to cause such registration statement to become effective; PROVIDED, HOWEVER, that as far in advance as practical before filing such registration statement or any amendment thereto, the Company will furnish counsel for the requesting holders of Registrable Securities with copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits), and any such holder shall have the opportunity to object to any information pertaining solely to such holder that is contained therein and the Company will make the corrections reasonably requested by such holder with respect to such information prior to filing such registration statement or amendment. 4.2 Prepare and file with the Commission such amendments and supplements to such registration statement and any prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration statement and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities included in such registration statement, in accordance with the intended methods of disposition thereof, until the earlier of (a) such time as all of the Registrable Securities included in such registration statement have been disposed of in accordance with the intended methods of disposition by the holder or holders thereof as set forth in such registration statement or (b) 180 days (or, if the filing was on a Form S-3 registration statement, 365 days) after such registration statement becomes effective; provided, that, in the event the holder of Registrable Securities is required to discontinue such holder's disposition of Registrable Securities pursuant to Section 4.11 hereof, such 180-days (or 365 days, if applicable) shall be extended for such additional period as is equal to the period during which such holders was required to discontinue such disposition. 4.3 Promptly notify each requesting holder and the underwriter or underwriters, if any, of: (a) when such registration statement or any prospectus used in connection therewith, or any amendment or supplement thereto, has been filed and, with respect to such registration statement or any post-effective amendment thereto, when the same has become effective; -5- (b) any written request by the Commission for amendments or supplements to such registration statement or prospectus; (c) any notification received by the Company from the Commission regarding the Commission's initiation of any proceeding with respect to, or of the issuance by the Commission of, any stop order suspending the effectiveness of such registration statement; and (d) the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. 4.4 Furnish to each holder of Registrable Securities included in such registration statement such number of conformed copies of such registration statement and of each amendment and supplement thereto, and such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 promulgated under the Securities Act relating to such seller's Registrable Securities, and such other documents, as such holder may reasonably request to facilitate the disposition of its Registrable Securities. 4.5 Use its best efforts to register or qualify all Registrable Securities included in such registration statement under the securities or "blue sky" laws of such states as each holder of Registrable Securities shall reasonably request within twenty (20) days following the original filing of such registration statement and to keep such registration or qualification in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such holder to consummate the disposition in such states of the Registrable Securities owned by such holder, except that the Company shall not for any such purpose be required (a) to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this Section 4.5 be obligated to be so qualified, (b) to consent to general service of process in any such jurisdiction or (c) to subject itself to taxation in any such jurisdiction by reason of such registration or qualification. 4.6 Use its best efforts to cause all Registrable Securities included in such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable each holder thereof to consummate the disposition of such Registrable Securities. 4.7 Notify each holder whose Registrable Securities are included in such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which any prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and at the request of any such holder promptly prepare and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to each holder of such Registrable Securities, such -6- prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 4.8 Otherwise use its best efforts to comply with all applicable rules and regulations of the Commission. 4.9 Use its best efforts to cause all Registrable Securities included in such registration statement to be listed, upon official notice of issuance, on any securities exchange or quotation system on which any of the securities of the same class as the Registrable Securities are then listed. 4.10 The Company may require each holder whose Registrable Securities are being registered to, and each such holder, as a condition to including Registrable Securities in such registration statement, shall, furnish the Company and the underwriters with such information and affidavits regarding such holder and the distribution of such Registrable Securities as the Company and the underwriters may from time to time reasonably request in writing in connection with such registration statement. At any time during the effectiveness of any registration statement covering Registrable Securities offered by a holder, if such holder becomes aware of any change materially affecting the accuracy of the information contained in such registration statement or the prospectus (as then amended or supplemented) relating to such holder, it will immediately notify the Company of such change. 4.11 Upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4.7, each holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder receives the copies of the supplemented or amended prospectus contemplated by Section 4.7 and, if so directed by the Company, shall deliver to the Company all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities. 4.12 As used in this Agreement, the term "best efforts" shall not mean efforts which require the performing party to do any act that is unreasonable under the circumstances or to expend any funds other than reasonable out-of-pocket expenses incurred in satisfying its obligations hereunder, including but not limited to the fees, expenses and disbursements of its accountants, counsel and other professionals. 5. EXPENSES. With respect to any registration requested pursuant to Article 2 (except as otherwise provided in such Article with respect to a registration voluntarily terminated at the request of the requesting holders of Registrable Securities) the Company shall bear all of the expenses ("Registration Expenses") incident to the Company's performance of or compliance with its obligations under this Agreement in connection with such registration including, without limitation, all registration, filing, securities exchange listing and NASD fees, all registration, filing, qualification and other fees and expenses or complying with state securities or "blue sky" laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, -7- the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, premiums and other costs of any policies of insurance against liabilities arising out of the Public Offering of the Registrable Securities being registered obtained by the Company (it being understood that the Company shall have no obligation to obtain such insurance) and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities; but excluding underwriting discounts and commissions and transfer taxes, if any, in respect of Registrable Securities and any fees and disbursements of counsel and accountants to the holders of the Registrable Securities, which discounts, commissions, transfer taxes, fees and disbursements shall in any registration be payable by the holders of the Registrable Securities being registered, PRO RATA in proportion to the number of Registrable Securities being sold by them. 6. INDEMNIFICATION. 6.1 The Company will, to the full extent permitted by law, indemnify and hold harmless each holder of Registrable Securities which are included in a registration statement pursuant to the provisions of this Agreement, and its directors, officers and partners and each other person, if any, who controls such holder within the meaning of the Securities Act, from and against any and all losses, claims, damages, expenses or liabilities, joint or several (collectively, "Losses") to which such holder or any such director, officer, partner or controlling person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in a registration statement prepared and filed hereunder, any preliminary, final or summary prospectus contained therein or any amendment or supplement thereto or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, and the Company will reimburse the holder and each such director, officer, partner and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending against any such Losses (or action or proceeding in respect thereof); PROVIDED, HOWEVER, that the Company will not be liable in any such case to the extent that any such Losses arise out of or are based upon (a) an untrue statement or alleged untrue statement or omission or alleged omission made in conformity with written information furnished by such holder specifically for use in the preparation of the registration statement or (b) such holder's failure to send or give a copy of the final prospectus to the persons asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or any such director, officer, partner or controlling person of such holder and shall survive the transfer of such securities by such holder. The Company shall also indemnify each other person who participates (including as an underwriter) in the offering or sale of Registrable Securities, their officers and directors, and partners, and each other person, if any, who controls any such participating person -8- within the meaning of the Securities Act to the same extent provided above with respect to holders of Registrable Securities. 6.2 Each holder of Registrable Securities which are included in a registration pursuant to the provisions of this Agreement will, to the full extent permitted by law, indemnify and hold harmless the Company, its officers, directors and each other person, if any, who controls the Company within the meaning of the Securities Act from and against any and all Losses to which the Company or any such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in a registration statement prepared and filed hereunder, any preliminary, final or summary prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon and in strict conformity with written information furnished by such holder specifically for use in the preparation of such registration statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person of the Company. The holder of Registrable Securities included in a registration statement shall also indemnify each other person who participates (including as an underwriter) in the offering or sale of Registrable Securities, their officers and directors, and partners, and each other person, if any, who controls any such participating person within the meaning of the Securities Act to the same extent as provided above with respect to the Company. In no event shall the liability of any holder under this Section 6.2 exceed the gross proceeds received by such holder from the sale of their Registrable Securities. 6.3 Promptly after receipt by a party indemnified pursuant to the provisions of Section 6.1 or Section 6.2 of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of Section 6.1 or Section 6.2, promptly notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against any indemnified party, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; PROVIDED, HOWEVER, that if the defendants in any action include both the indemnified party and the indemnifying party and the indemnified party reasonably concludes that there is a conflict of interest that would prevent counsel for the indemnifying party from also representing the indemnified party, the indemnified party shall have the right to select one separate counsel to participate in the defense of such action on behalf of the indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party -9- will not be liable to such indemnified party pursuant to the provisions of Section 6.1 or Section 6.2 for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof unless (a) the indemnified party shall have employed counsel in accordance with the proviso of the preceding sentence, (b) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of the action or (c) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel for the indemnified parties with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of additional counsel or counsels for the indemnified parties, but only to the extent necessary to cure such conflict of interest. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation without the consent of the indemnified party. No indemnifying party shall be subject to any liability for any settlement made without its consent. An indemnified party may at any time elect to participate in the defense of any claim or proceeding at its own expense. 7. UNDERWRITTEN OFFERINGS. If a distribution of Registrable Securities pursuant to a registration statement is to be underwritten, the holders whose Registrable Securities are to be distributed by such underwriters shall be parties to such underwriting agreement. No requesting holder may participate in such underwritten offering unless such holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement. If any requesting holder disapproves of the terms of an underwriting, such holder may elect to withdraw therefrom and from such registration by notice to the Company and the managing underwriter, and each of the remaining requesting holders shall be entitled to increase the number of Registrable Securities being registered to the extent of the Registrable Securities so withdrawn in the proportion which the number of Registrable Securities being registered by such remaining requesting holder bears to the total number of Registrable Securities being registered by all such remaining requesting holders. 8. STAND-OFF AGREEMENT. Each holder of Registrable Securities agrees, so long as such holder holds at least 5% of the Company's outstanding voting equity securities, in connection with a Public Offering, upon request of the Company or the underwriters managing such Public Offering, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Common Shares of the Company without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not exceeding 180 days) from the effective date of the registration statement relating to such Public Offering as may be requested by the underwriters; PROVIDED, HOWEVER, that all other persons with registration rights (whether or not pursuant to this Agreement) and all of the executive officers -10- and directors of the Company who own stock of the Company must also agree to not less onerous restrictions. 9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to register the Registrable Securities pursuant to this Agreement may not be assigned by USB or US Bank except (a) to an Affiliate of USB or US Bank without limitation or (b) to a transferee or assignee of Registrable Securities representing or convertible into 5% or more of the Company's outstanding Common Shares. In the case of either (a) or (b) USB or US Bank shall, within a reasonable time after such transfer or assignment, furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned. Any transferee asserting registration rights hereunder shall be bound by the applicable provisions of this Agreement. 10. AMENDMENT. The Company shall not amend this Agreement without the written consent of the holders of more than 50% of the Registrable Securities. 11. TERMINATION. This Agreement, and all of the Company's obligations hereunder (other than its obligations pursuant to Article 6, which obligations shall survive such termination), shall terminate upon the earlier to occur of (i) the date on which there are no Registrable Securities outstanding and (ii) April 28, 2005. 12. SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law but if any provision of this Agreement is held to be invalid, illegal or unenforceable under any applicable law or rule, the validity, legality and enforceability of the other provision of this Agreement will not be affected or impaired thereby. 13. NOTICES. All notices, consents, requests, instructions, approvals or other communications provided for herein shall be in writing and delivered by personal delivery, overnight courier, mail or electronic facsimile addressed to the receiving party at the address set forth herein. All such communications shall be effective when received. (a) If to any holder of any Registrable Securities addressed to such holder at its address as shown on the books of the Company, or at such other address as such holder may specify by written notice to the Company, or (b) if to the Company, at New Century Financial Corporation, 18400 Von Karman, Suite 1000, Irvine, California 92612, Attention: Brad A. Morrice, Fax: 949-440-7033; or at such other address as the Company may specify by written notice to the holders of Registrable Securities hereunder. 14. COUNTERPARTS. This Agreement may be executed concurrently in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile signatures shall constitute original signatures for all purposes of this Agreement. -11- 15. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties. 16. GOVERNING LAW. This Agreement shall be governed by, interpreted under, and construed and enforced in accordance with the internal laws, and not the laws pertaining to the conflicts or choice of laws, of the State of Delaware. 17. ENTIRE AGREEMENT; EFFECTIVENESS. This Agreement is intended by the parties hereto to be the final expression of their agreement and constitutes and embodies the entire agreement and understanding between the parties hereto with regard to the subject matter hereof and is a complete and exclusive statement of the terms and conditions thereof, and shall supersede any and all prior oral or written correspondence, conversations, negotiations, agreements and understandings relating to the same subject matter. This Agreement shall take effect upon its execution by the Company, USB and US Bank and shall amend and replace the Registration Rights Agreement. Upon the effectiveness of this Agreement, the Registration Rights Agreement shall be of no further force and effect. -12- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by their proper and duly authorized representatives as of the day and year first above written. NEW CENTURY FINANCIAL CORPORATION By ---------------------------------- Its ---------------------------------- U.S. BANCORP By ---------------------------------- Its ---------------------------------- U.S. BANK NATIONAL ASSOCIATION By ---------------------------------- Its ---------------------------------- -13- -----END PRIVACY-ENHANCED MESSAGE-----