INVESTOR'S RIGHTS AGREEMENT
THIS INVESTOR'S RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of May 30, 2000, by and among Cypress Financial Services,
Inc., a Nevada corporation (the "Company"), and FBR Financial Fund II,
L.P., a Delaware limited partnership (the "Investor").
The parties hereby agree as follows:
SECTION 1
Definitions
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
(a) "Affiliate" shall mean with respect to any Person, any Person
which directly or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with such
Person.
(b) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(c) "Common Stock" shall mean the common stock of the Company, par
value $0.001 per share.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time
to time.
(e) "Holder" shall mean the Investor and any holder of Registrable
Securities to whom the registration rights conferred by this Agreement
have been transferred in compliance with Section 2.10 hereof.
(f) "Initiating Holders" shall mean any Holder or Holders who in the
aggregate hold not less than fifty percent (50%) of the then
outstanding Registrable Securities.
(g) "Other Shares" shall mean other securities of the Company with
registration rights.
(h) "Other Stockholders" shall mean persons other than Holders who, by
virtue of agreements with the Company, are entitled to include their
securities in certain registrations hereunder.
(i) "Person" shall mean an individual, a corporation, a partnership, a
limited liability company, a trust or an unincorporated organization
or any other entity or organization.
(j) "Registrable Securities" shall mean (i) the Shares and (ii) any
Common Stock issued as a dividend or other distribution with respect
to or in exchange for or in replacement of the shares referenced in
clause (i) above; provided, however, that Registrable Securities shall
not include any shares of Common Stock which have (x) previously been
registered, (y) been sold to the public or (z) been sold to a
transferee in a transaction in which the transferor's registration
rights were not assigned.
(k) The terms "register," "registered" and "registration" shall refer
to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules
and regulations thereunder, and the declaration or ordering of the
effectiveness of such registration statement.
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(l) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including,
without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for
the Company, blue sky fees and expenses, expenses of any regular or
special audits incident to or required by any such registration and
reasonable fees and disbursements of up to $10,000 for a single
counsel for the selling Holders, but shall not include the
compensation of regular employees of the Company (which compensation
shall be paid in any event by the Company) and Selling Expenses.
(m) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the
Commission.
(n) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the
Commission.
(o) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time
to time.
(p) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities.
(q) "Common Stock Purchase Agreement" shall mean the Common Stock
Purchase Agreement of even date herewith entered into between the
Company and the Investor.
(r) "Shares" shall mean the Common Stock issued pursuant to the Common
Stock Purchase Agreement.
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SECTION 2
Registration Rights
2.1 Requested Registration.
(a) Request for Registration. If the Company shall receive from
Initiating Holders at any time or times not earlier than twelve (12)
months after the date of this Agreement a written request that the
Company effect a registration with respect to Registrable Securities,
the Company will:
(i) promptly give written notice of the proposed registration to all
other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration (including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue sky or
other state securities laws, and appropriate compliance with the
Securities Act) as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as
are specified in such request, together with all or such portion of
the Registrable Securities of any Holder or Holders joining in such
request as are specified in a written request received by the Company
within twenty (20) days after such written notice from the Company is
effective in accordance with Section 3.5 hereof.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 2.1:
(A) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in
effecting such registration, qualification, or compliance, unless the
Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act;
(B) Except as provided in the last sentence of Section 2.1(b), after
the Company has initiated two (2) such registrations pursuant to this
Section 2.1(a) (counting for these purposes only (i) a registration
which has been declared or ordered effective and pursuant to which
securities have been sold and (ii) registrations which have been
withdrawn by the Holders as to which the Holders have not elected to
bear the Registration Expenses pursuant to Section 2.3 hereof and
would, absent such election, have been required to bear such
expenses); or
(C) during the period starting with the date sixty (60) days prior to
the Company's good faith estimate of the date of filing of, and ending
on a date one hundred eighty (180) days after the effective date of, a
Company-initiated registration; provided that the Company is actively
employing in good faith all reasonable efforts to cause such
registration statement to become effective.
(b) Deferment. Subject to the foregoing clauses (A) through (C), the
Company shall file a registration statement covering the Registrable
Securities so requested to be registered as soon as practicable after
receipt of the request or requests of the Initiating Holders;
provided, however, that if (i) in the good faith judgment of the Board
of Directors of the Company, such registration would be seriously
detrimental to the Company and the Board of Directors of the Company
concludes, as a result, that it is essential to defer the filing of
such registration statement at such time and (ii) the Company
furnishes to such Holders a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the
Company for such registration statement to be filed in the near future
and that it is, therefore, essential to defer the filing of such
registration statement, then the Company shall have the right to defer
such filing for the period during which such filing would be seriously
detrimental, provided that the Company may not defer the filing for a
period of more than ninety (90) days after receipt of the request of
the Initiating Holders, and, provided further, that the Company shall
not defer its obligation in this manner more than once in any
twelve-month period.
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The registration statement filed pursuant to the request of the
Initiating Holders may not include other securities of the Company
(except for securities with respect to which registration rights have
been granted prior to the date of this Agreement) unless the written
request of the Initiating Holders has been obtained. If written
consent is not obtained, the Company may nevertheless include other
securities in such registration; provided, however, that if the amount
of Registrable Securities actually sold is less than the amount of
Registrable Securities requested to be so registered by the Initiating
Holders, then the Initiating Holders shall have a subsequent demand
registration right or rights, pursuant to this Section 2.1, with
respect to any Registrable Securities requested to be registered but
not successfully sold.
(c) Underwriting. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their
request made pursuant to Section 2.1 and the Company shall include
such information in the written notice referred to in Section 2.1(a).
The right of any Holder to registration pursuant to Section 2.1 shall
be conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in
interest of the Initiating Holders and such Holder with respect to
such participation and inclusion) to the extent provided herein. A
Holder may elect to include in such underwriting all or a part of such
Holder's Registrable Securities.
(d) Procedures. If other Persons shall request inclusion in any
registration pursuant to Section 2.1, the Initiating Holders shall, on
behalf of all Holders, offer to include such securities in the
underwriting and may condition such offer on such other Person's
acceptance of the further applicable provisions of this Section 2
(including Section 2.11). The Company shall (together with all Holders
and other Persons proposing to distribute their securities through
such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters
selected for such underwriting by a majority in interest of the
Initiating Holders, which underwriters are reasonably acceptable to
the Company. Notwithstanding any other provision of this Section 2.1,
if the representative of the underwriters advises the Initiating
Holders in writing that marketing factors require a limitation on the
number of shares to be underwritten, the number of shares to be
included in the underwriting or registration shall be allocated as set
forth in Section 2.12 hereof. If a Person who has requested inclusion
in such registration as provided above does not agree to the terms of
any such underwriting, such Person shall be excluded therefrom by
written notice from the Company, the underwriter or the Initiating
Holders. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such
registration. If shares are so withdrawn from the registration and if
the number of shares to be included in such registration was
previously reduced as a result of marketing factors pursuant to this
Section 2.1(d), then the Company shall offer to all Holders and other
Persons who have retained rights to include securities in the
registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares so
withdrawn, with such shares to be allocated among such Holders and
other Persons requesting additional inclusion in accordance with
Section 2.12.
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2.2 Company Registration.
(a) Registration. If the Company shall determine to register any of
its securities either for its own account or the account of a security
holder or holders (other than pursuant to Section 2.1 or 2.4 hereof),
other than a registration relating solely to employee benefit plans,
or a registration relating solely to a Rule 145 transaction, or a
registration on any registration form that does not permit secondary
sales, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) use its best efforts to include in such registration (and any
related qualification under blue sky laws or other compliance), except
as set forth in Section 2.2(b) below, and in any underwriting involved
therein, all of such Holder's Registrable Securities specified in a
written request or requests received by the Company within twenty (20)
days after the written notice from the Company described in clause (i)
above is given. Such written request may specify all or a part of a
Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting,
the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 2.2(a)(i). In such event, the right
of any Holder to registration pursuant to this Section 2.2 shall be
conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together
with the Company and the other holders of securities of the Company
with registration rights to participate therein distributing their
securities through such underwriting) enter into an underwriting
agreement in customary form with the representative of the underwriter
or underwriters selected by the Company.
Notwithstanding any other provision of this Section 2.2, if the
representative of the underwriters advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set
forth below) exclude all Registrable Securities from, or limit the
number of Registrable Securities to be included in, the registration
and underwriting. If such registration is a Company-initiated
registered offering of the Company's securities to the general public,
the Company may limit, to the extent so advised by the underwriters,
the amount of securities to be included in the registration by the
Company's stockholders (including the Holders); provided, however,
that the aggregate value of Registrable Securities to be included in
such registration by Holders may not be so reduced to less than
thirty-five percent (35%) of the total amount of such securities
included in such registration without the consent of at least
two-thirds (2/3) of the Holders. The Company shall so advise all
Holders and other stockholders requesting registration pursuant to
this Section 2.2, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be
allocated first to the Company for securities being sold for its own
account (subject to the foregoing provisions of this paragraph) and
thereafter as set forth in Section 2.12. If any Person does not agree
to the terms of any such underwriting, he shall be excluded therefrom
by written notice from the Company or the underwriter. Any Registrable
Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
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If shares are so withdrawn from the registration and if the number of
shares of Registrable Securities to be included in such registration
was previously reduced as a result of marketing factors, the Company
shall then offer to all Persons who have retained the right to include
securities in the registration the right to include additional
securities in the registration in an aggregate amount equal to the
number of shares so withdrawn, with such shares to be allocated among
the Persons requesting additional inclusion in accordance with
Section 2.12 hereof.
(c) Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under this
Section 2.2 prior to the effectiveness of such registration whether or
not any Holder has elected to include securities in such registration.
The Registration Expenses and Selling Expenses, if any, of such
withdrawn registration shall be borne by the Company.
2.3 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant
to Sections 2.1, 2.2 or 2.4 hereof shall be borne by the Company;
provided, however, that if the Holders bear the Registration Expenses
for any registration proceeding begun pursuant to Section 2.1 and
subsequently withdrawn by the Holders registering shares therein, such
registration proceeding shall not be counted as a requested
registration pursuant to Section 2.1 hereof; and provided, further,
that in the event Holders withdraw a registration begun pursuant to
Section 2.1 and such withdrawal is based upon material adverse
information relating to the Company that is different from the
information known or available (upon request from the Company or
otherwise) to the Holders requesting registration at the time of their
request for registration under Section 2.1, such registration shall
not be treated as a counted registration for purposes of Section 2.1
hereof, even though the Holders do not bear the Registration Expenses
for such registration. All Selling Expenses incurred in connection
with any registration, qualification or compliance pursuant to
Sections 2.1, 2.2 and 2.4 hereof shall be borne by the holders of such
securities pro-rata on the basis of the number of shares of securities
so registered on their behalf.
2.4 Registration on Form S-3.
(a) In addition to the rights contained in the foregoing provisions of
this Section 1, the Holders of Registrable Securities shall have the
right to request registrations on Form S-3 (such requests shall be in
writing and shall state the number of shares of Registrable Securities
to be disposed of and the intended methods of disposition of such
shares by such Holder or Holders); provided, however, that the Company
shall not be obligated to effect any such registration if, in a given
twelve-month period, the Company has effected one (1) such
registration in any such period.
(b) If a request complying with the requirements of Section 2.4(a)
hereof is delivered to the Company, the provisions of Sections
2.1(a)(i) and (ii) and Section 2.1(b) hereof shall apply to such
registration. If the registration is for an underwritten offering, the
provisions of Sections 2.1(c) and 2.1(d) hereof shall also apply to
such registration.
2.5 Registration Procedures. In the case of each registration effected
by the Company pursuant to Section 2, the Company will keep each
Holder advised in writing as to the initiation of each registration
and as to the completion thereof. At its expense, the Company will use
its best efforts to:
<PAGE>
(a) Prepare and file with the Commission a registration statement on
any form for which the Company then qualifies or which counsel for the
Company shall deem appropriate and which form shall be available for
the sale of the Registrable Securities in accordance with the intended
method of distribution thereof, and use its best efforts to cause such
registration statement to become effective; provided that before
filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will (i) furnish to counsel selected
by the Holders of the Registrable Securities covered by such
registration statement copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel
and (ii) notify each Holder of Registrable Securities of any stop
order issued or threatened by the Commission or any state regulatory
authority and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered;
(b) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs; provided, however, that (i) such 120-day
period shall be extended for a period of time equal to the period the
Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or
other securities) of the Company and (ii)in the case of any
registration of Registrable Securities on Form S-3 which are intended
to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold, provided
that Rule 415, or any successor rule under the Securities Act, permits
an offering on a continuous or delayed basis; and provided further,
that applicable rules under the Securities Act governing the
obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment that (x) includes any prospectus
required by Section 10(a)(3) of the Securities Act or (y) reflects
facts or events representing a material or fundamental change in the
information set forth in the registration statement, the incorporation
by reference of information required to be included in (x) and (y)
above to be contained in periodic reports filed pursuant to Section 13
or 15(d) of the Exchange Act in the registration statement;
(c) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement;
(d) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus,
as a Holder from time to time may reasonably request;
(e) Use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such
jurisdictions as any Holder reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable
to enable such Holder to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such Holder,
provided that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (e), (ii)
subject itself to taxation in any such jurisdiction or (iii) consent
to general service of process in any such jurisdiction;
<PAGE>
(f) Use its best efforts to cause the Registrable Securities covered
by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary by
virtue of the business and operations of the Company to enable the
Holder or Holders thereof to consummate the disposition of such
Registrable Securities;
(g) Notify each Holder of such Registrable Securities 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 the
prospectus included in such registration statement contains 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 light of the circumstances under which they were made, not
misleading, and the Company will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein, or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(h) Use its best efforts to cause all such Registrable Securities to
be listed on each securities exchange on which similar securities
issued by the Company are then listed (or, if none are so listed, on
each securities exchange requested by the holders of a majority of the
Registrable Securities and Other Shares covered by the applicable
registration statement), in each case provided that the applicable
listing requirements are satisfied;
(i) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 2.1 hereof, the
Company will enter into an underwriting agreement reasonably necessary
to effect the offer and sale of Common Stock, provided such
underwriting agreement contains customary underwriting provisions and
provided further that if the underwriter so requests, the underwriting
agreement will contain customary contribution provisions;
(j) Use its best efforts to obtain an opinion letter from the
Company's legal counsel in customary form and covering such matters of
the type customarily covered by opinion letters as the holders of a
majority of the Registrable Securities and Other Shares being sold
reasonably request;
(k) Use its best efforts to take all other steps necessary to effect
the registration of the Registrable Securities covered by the
registration statement contemplated hereby; and
(l) Otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement
covering a period of twelve (12) months, beginning within three (3)
months after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder.
<PAGE>
2.6 Indemnification.
(a) The Company (i) will indemnify each of its officers, directors and
partners, legal counsel, and accountants, each Holder and each Person
who controls such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification, or
compliance has been effected pursuant to this Section 2, and each
underwriter, if any, and each Person who controls any such underwriter
within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the
like) incident to any such registration, qualification or compliance,
or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Company of
the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company
in connection with any such registration, qualification or compliance,
and (ii) will reimburse each of its officers, directors, partners,
legal counsel and accountants, each such Holder and each Person who
controls such Holder, each such underwriter and each Person who
controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability or action, provided
that the Company will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of
or is based on any untrue statement or omission based upon written
information furnished to the Company by such Holder or underwriter and
stated to be specifically for use therein. It is agreed that the
indemnity agreement contained in this Section 2.6(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent
of the Company (which consent has not been unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by him are
included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company,
each of its directors, officers, partners, legal counsel and
accountants, each underwriter, if any, of the Company's securities
covered by such registration statement, each Person who controls the
Company or such underwriter within the meaning of Section 15 of the
Securities Act, each other such Holder and Other Stockholders, and
each of their officers, directors and partners, and each Person
controlling such Holder or Other Stockholders, against all claims,
losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such
Holders, Other Stockholders, directors, officers, partners, legal
counsel and accountants, Persons, underwriters, or control Persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly
for use in such registration statement, prospectus, offering circular
or other document; provided, however, that the obligations of such
Holder hereunder shall not apply to amounts paid in settlement of any
such claims, losses, damages or liabilities (or actions in respect
thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld); and
provided further, that such Holder will not be liable under this
Section 2.6(b) for any losses, costs, damages or expenses exceeding
the gross proceeds received by Holder in such registration or
offering.
<PAGE>
(c) Each party entitled to indemnification under this Section 2.6 (the
"Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 2.6, to the extent such failure is not
prejudicial. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified
Party (which consent shall not be unreasonably withheld), consent to
entry of any judgment or enter into any settlement that 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. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as
an Indemnifying Party may reasonably request in writing and as shall
be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(d) If the indemnification provided for in this Section 2.6 is held by
a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense
referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such
loss, liability, claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party,
on the one hand, and of the Indemnified Party, on the other hand, in
connection with the statements or omissions that resulted in such
loss, liability, claim, damage or expense as well as any other
relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the
Indemnified Party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions
in the underwriting agreement shall control.
<PAGE>
2.7 Information by Holder. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably
request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this
Section 2.
2.8 Limitations on Registration of Issues of Securities. From and
after the date of this Agreement, the Company shall not, without the
prior written consent of a majority in interest of the Holders, enter
into any agreement with any holder or prospective holder of any
securities of the Company giving such holder or prospective holder any
registration rights, unless the terms of such agreement provide that
such registration rights are subordinate to the registration rights
granted to the Holders hereunder.
2.9 Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission that may permit the
sale of the Registrable Securities to the public without registration,
the Company agrees to use its best efforts to:
(a) make and keep public information regarding the Company available,
as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after ninety (90) days following
the effective date of the first registration under the Securities Act
filed by the Company for an offering of its securities to the general
public;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) so long as a Holder owns any Registrable Securities, furnish to
the Holder forthwith upon written request (i) a written statement by
the Company as to its compliance with the reporting requirements of
Rule 144 (at any time from and after ninety (90) days following the
effective date of the first registration statement filed by the
Company for an offering of its securities to the general public), the
Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), (ii) a copy of the most
recent annual or quarterly report of the Company and (iii) such other
reports and documents so filed as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a
holder to sell any such securities without registration.
2.10 Transfer or Assignment of Registration Rights. The rights to
cause the Company to register securities granted to a Holder by the
Company under this Section 2 may be transferred or assigned by a
Holder only to a transferee or assignee (a) who acquires at least
100,000 shares of Registrable Securities (as adjusted for any stock
splits, dividends and the like), (b) who is a Holder of Registrable
Securities and already possesses such registration rights or (c) hat
is a shareholder, member, partner, officer, director of a Holder or a
partnership, corporation, limited liability company or other
organization which is controlled by, controls or is under common
control with a Holder or its permitted transferees; provided that the
Company is given written notice at the time of or within a reasonable
time after said transfer or assignment, stating the name and address
of the transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or
assigned, and, provided, further, that the transferee or assignee
assumes the obligations of such Holder under this Section 2.
<PAGE>
2.11 "Market Stand-Off" Agreement. In respect of any underwritten
public offering by the Company, each Holder hereby agrees that such
Holder shall not sell or otherwise transfer or dispose of any Common
Stock (or other securities) of the Company held by such Holder (other
than those included in the registration) during a reasonable and
customary period of time as agreed to by the Company and the
underwriters, not to exceed the greater of (a)one hundred eighty
(180) days following the effective date of the registration statement
of the Company filed under the Securities Act in respect of such
offering and (b) such other period of time as agreed to by holders of
a majority of the then outstanding Shares, provided that:
(i) all officers and directors of the Company and all other Persons
with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements; and
(ii) any discretionary waiver or termination of the restrictions of
any such agreement by the Company or representatives of the
underwriters shall apply to Holders on a pro rata basis together with
any holder of securities other than a Holder.
Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company or the underwriter which are
consistent with the foregoing or which are necessary to give further
effect thereto. The obligations described in this Section 2.11 shall
not apply to a registration relating solely to employee benefit plans
on Form S-1 or Form S-8 or similar forms that may be promulgated in
the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-4 or similar forms that may be promulgated in
the future. The Company may impose stop-transfer instructions with
respect to the shares (or securities) subject to the foregoing
restriction until the end of such period.
2.12 Allocation of Registration Opportunities. In any circumstance in
which all of the Registrable Securities and Other Shares requested to
be included in a registration on behalf of the Holders or other
selling stockholders cannot be so included as a result of limitations
of the aggregate number of shares of Registrable Securities and Other
Shares that may be so included, the number of shares of Registrable
Securities and Other Shares that may be so included shall be reduced
pro rata amongst all Holders and other selling stockholders on the
basis of the number of shares of Registrable Securities to be included
in such registration, assuming conversion; provided, however, so that
such allocation shall not operate to reduce the aggregate number of
Registrable Securities and Other Shares to be included in such
registration, if any Holder or other selling stockholders does not
request inclusion of the maximum number of shares of Registrable
Securities and Other Shares allocated to him pursuant to the
above-described procedure, the remaining portion of his allocation
shall be reallocated among those requesting Holders and other selling
stockholders whose allocations did not satisfy their requests, and
this procedure shall be repeated until all the shares of Registrable
Securities and Other Shares which may be included in the registration
on behalf of the Holders and other selling stockholders have been so
allocated. The Company shall not limit the number of Registrable
Securities or Other Shares to be included in a registration pursuant
to this Agreement in order to include shares held by stockholders with
no registration rights or to include other shares of stock issued to
employees, officers, directors or consultants, or, with respect to
registrations under Section 2.1 or 2.4 hereof, in order to include in
such registration securities registered for the Company's own account.
<PAGE>
2.13 Termination of Registration Rights. The right of any Holder to
request registration or inclusion in any registration pursuant to
Section 2.1, 2.2 or 2.4 hereof shall terminate on such date as all
shares of Registrable Securities held or entitled to be held upon
conversion by such Holder may immediately be sold under Rule 144
during any three (3)-month period.
SECTION 3
Miscellaneous
3.1 Aggregation of Stock. All Registrable Securities held or acquired
by affiliated entities or Persons shall be aggregated together for the
purpose of determining the availability of any rights under this
Agreement.
3.2 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of California, without regard to the conflicts
of law principles thereof.
3.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
3.4 Entire Agreement; Amendment; Waiver. This Agreement (including the
schedules and exhibits hereto) constitutes the full and entire
understanding and agreement between the parties hereto with regard to
the subjects hereof and thereof. Neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated, except by a
written instrument signed by the Company and the Holders of at least
fifty percent (50%) of the Registrable Securities; and any such
amendment, waiver, discharge or termination shall be binding on all
the Holders, but in no event shall the obligation of any Holder
hereunder be materially increased, except upon the written consent of
such Holder.
3.5 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by confirmed
telex or facsimile, mailed by United States first-class mail, postage
prepaid, or delivered personally addressed by hand or special courier
(a)if to a Holder, as indicated below the Holder's signature hereto,
or at such other address as such Holders or permitted assignee shall
have furnished to the Company in writing, or (b) if to the Company, at
5400 Orange Avenue, Suite 200, Cypress, CA 90630, or at such other
address as the Company shall have furnished to each Holder in writing.
All such notices and other written communications shall be effective
(i)if sent by confirmed telex or facsimile, on the day sent if sent
during normal business hours of the recipient and, if not, on the next
business day, (ii) if mailed, five (5) days after mailing and (iii) if
delivered, upon delivery.
<PAGE>
3.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of
the Company under this Agreement shall impair any such right, power or
remedy of such Holder nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach
or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any Holder
of any breach or default under this Agreement or any waiver on the
part of any Holder of any provisions or conditions of this Agreement
must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any Holder, shall be
cumulative and not alternative.
3.7 Rights; Severability. Unless otherwise expressly provided herein,
any Holder's rights hereunder are several rights, not rights jointly
held with any of the other Holders. In case any provision of the
Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
3.8 Information Confidential. Each Holder acknowledges that the
information received by such Holder pursuant hereto may be
confidential and for such Holder's use only, and such Holder will not
use such confidential information in violation of the Exchange Act or
reproduce, disclose or disseminate such information to any other
Person (other than such Holder's employees or agents having a need to
know the contents of such information, and such Holder's attorneys),
except in connection with the exercise of rights under this Agreement,
unless the Company has made such information available to the public
generally or such Holder is required to disclose such information by a
governmental body.
3.9 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only
and are not to be considered in construing this Agreement.
3.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Investor's Rights Agreement effective as of the day and year first
above written.
CYPRESS FINANCIAL SERVICES, INC.
By:
Name:
Title:
FBR FINANCIAL FUND II, L.P.
By: FBR Financial Fund Management, L.L.C.,
Title: General Partner
By: Friedman, Billings, Ramsey
Investment Management, Inc.
Title: Managing Member
By:
Name:
Title:
Address: 1001 19th Street North
Arlington, VA 22209
