Document:

Registration Rights Agreement

 Exhibit 4.2 
  

REGISTRATION RIGHTS AGREEMENT 
  
 This Registration Rights Agreement (this “Agreement”) is made and entered into as of December 28, 2004, by and between People’s
Choice Financial Corporation, a Maryland corporation (together with any successor entity thereto, the “Company”), 1-2-3 Mortgage, LLC, a Wyoming limited liability company (“1-2-3 Mortgage”), Lehman Commercial Paper,
Inc., a New York corporation (“Lehman”), Friedman, Billings, Ramsey & Co., Inc., a Delaware corporation (“FBR”), and the other parties hereto for the benefit of 1-2-3 Mortgage and other persons listed on
Exhibit A attached hereto under the heading “Management Holders” (collectively, the “Management Holders”), the persons listed on Exhibit A attached hereto under the heading “Original
Holders” (collectively, the “Original Holders”), Lehman, FBR, the purchasers of the Company’s common stock, par value $0.01 per share, the participants (“Participants”) in the private placement by the
Company of shares of its common stock on December 28, 2004 (the “Private Placement”), and the direct and indirect transferees of FBR, each of Original Holders, each of the Management Holders, Lehman and each of the
Participants. 
  
 This Agreement is made pursuant to the
Purchase/Placement Agreement (the “Purchase/Placement Agreement”), dated as of December 21, 2004, by and among the Company, People’s Choice Home Loan, Inc., a Wyoming corporation (“PCHLI”), and
People’s Choice Funding, Inc., a Delaware corporation, 1-2-3 Mortgage and FBR. In order to induce the investors who are purchasing the Common Stock in the Private Placement to purchase such Common Stock and FBR to enter into the
Purchase/Placement Agreement, the Company has agreed to provide the registration rights provided for in this Agreement to FBR, the Participants, each of Original Holders, each of the Management Holders, Lehman and their respective direct and
indirect transferees. The execution and delivery of this Agreement is a condition to the closing of the transactions contemplated by the Purchase/Placement Agreement. 
  
 The parties hereto hereby agree as follows: 
  
 1. Definitions 
  
 As used in this Agreement, the following terms shall have the following meanings: 
  
 Accredited Investor Shares: The shares of Common Stock initially sold by the Company to
“accredited investors” (within the meaning of Rule 501(a) promulgated under the Securities Act) as Participants. 
  
 Additional Shares: Common Stock or other securities of the Company issued in respect of the Shares by reason of or in connection
with any stock dividend, stock distribution, stock split, purchase in any rights offering or in connection with any exchange for or replacement of such shares or any combination of shares, recapitalization, merger or consolidation, or any other
equity securities issued pursuant to any other pro rata distribution with respect to the Common Stock. 
  
 Agreement: As defined in the preamble hereof. 

 Affiliate: As to any specified Person, (i) any Person directly or indirectly
owning, controlling or holding, with power to vote, ten percent or more of the outstanding voting securities of such other Person, (ii) any Person ten percent or more of whose outstanding voting securities are directly or indirectly owned,
controlled or held, with power to vote, by such other Person, (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person, (iv) any executive officer, director, trustee, managing member
or general partner of such Person and (v) any legal entity for which such Person acts as an executive officer, director, trustee, managing member or general partner. For purposes of this definition, “control” (including the
correlative meanings of the terms “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly, or indirectly through one or more intermediaries or relationships, of
the power to direct or cause the direction of the management and policies of such Person, whether by contract, through the ownership of voting securities, partnership or member interests or other equity interests or otherwise. An indirect
relationship shall include circumstances in which a Person’s spouse, children, parents, siblings or mother-, father-, sister- or brother-in-law is or has been associated with a Person. 
  
 Business Day: With respect to any act to be performed
hereunder, each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York, New York or other applicable places where such act is to occur are authorized or obligated by applicable law, regulation or
executive order to close. 
  
 Closing Time:
December 28, 2004. 
  
 Commission: The
Securities and Exchange Commission. 
  
 Common
Stock: The common stock, par value $0.01 per share, of the Company. 
  
 Company: As defined in the preamble hereof. 
  
 Controlling Person: As defined in Section 6(a) hereof. 
  
 End of Suspension Notice: As defined in Section 5(b) hereof. 
  
 Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the Commission thereunder. 
  
 FBR: As defined in the preamble hereof. 
  
 Holder: Each owner of any Registrable Shares from time to time, including FBR and its Affiliates. 
  
 Indemnified Party: As defined in Section 6(c)
hereof. 
  

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 Indemnifying Party: As defined in Section 6(c) hereof. 
  
 IPO Registration Statement: As defined in
Section 2(b) hereof. 
  
 Lehman: As
defined in the preamble hereof. 
  
 Lehman
Shares: The shares of Common Stock that may be purchased by Lehman pursuant to that certain Amended and Restated Warrant Agreement dated December 28, 2004 by and between the Company, PCHLI and Lehman as of the Closing Time and any
Additional Shares with respect thereto. 
  
 Liabilities: As defined in Section 6(a) hereof. 
  
 Management Holders: As defined in the preamble hereof. 
  
 Management Shares: The shares of Common Stock collectively held or that may be purchased pursuant to the exercise of options by the
Management Holders as of the date of this Agreement, after giving effect to the sale of the Common Stock pursuant to the Offering Memorandum as of the Closing Time and any Additional Shares with respect thereto. 
  
 NASD: The National Association of Securities Dealers,
Inc. 
  
 Offering Memorandum: The Offering
Memorandum of the Company dated December 21, 2004 pursuant to which the Rule 144A Shares, the Regulation S Shares and the Accredited Investor Shares are offered and sold. 
  
 1-2-3 Mortgage: As defined in the preamble hereof. 
  
 Original Holder Shares: The shares of Common Stock in
the aggregate that may be purchased pursuant to the exercise of options by the Original Holders as of the date of this Agreement as of the Closing Time and any Additional Shares with respect thereto. 
  
 Original Holders: As defined in the preamble hereof.

  
 Participant: As defined in the preamble
hereof. 
  
 Person: An individual,
partnership, limited liability company, corporation, trust, unincorporated organization, government or agency or political subdivision thereof, or any other legal entity. 
  
 Private Placement: As defined in the preamble hereof. 
  
 Proceeding: An action (including a class action),
claim, suit, demand, arbitration or other proceeding (including without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or, to the knowledge of the Person subject thereto, threatened, by any Person.

  

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 Prospectus: The prospectus included in any Registration Statement, including any
preliminary prospectus, and all other amendments and supplements to any such prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference, if any, in such prospectus.

  
 Purchase/Placement Agreement: As
defined in the preamble, as amended from time to time in accordance with the terms thereof. 
  
 Purchaser Indemnitee: As defined in Section 6(a) hereof. 
  
 Registrable Shares: The Shares, upon original issuance thereof, and at all times subsequent thereto,
including upon the transfer thereof by the original holder or any subsequent holder and any Additional Shares, until the earliest to occur of (i) the date on which such shares have been sold pursuant to an effective Registration Statement,
(ii) the date on which such shares are sold, transferred or otherwise disposed of pursuant to Rule 144, (iii) the date on which, in the opinion of counsel to the Company, such shares not held by Affiliates of the Company are eligible for
sale without registration under the Securities Act pursuant to subparagraph (k) of Rule 144, (iv) the date on which such shares are sold to the Company or any of its subsidiaries, or (v) the second anniversary of the initial effective
date of the Shelf Registration Statement or, in the case of any Additional Shares for which tacking under Rule 144A is not available and which are not included in the Shelf Registration Statement, until the second anniversary of the issuance of the
Additional Shares (subject to extension pursuant to Section 5(c) hereof). 
  
 Registration Default: As defined in Section 2(f) hereof. 
  
 Registration Expenses: Any and all expenses incident to the Company’s performance of, or compliance with, this Agreement,
including, without limitation: (i) all Commission, securities exchange, NASD or other registration, listing, inclusion and filing fees, (ii) all fees and expenses incurred in connection with compliance with international, federal or state
securities or blue sky laws (including, without limitation, any registration, listing and filing fees and reasonable fees and disbursements of counsel in connection with blue sky qualification of any of the Registrable Shares and the preparation of
a blue sky memorandum and compliance with the rules of the NASD), (iii) all expenses of preparing or assisting in preparing, word processing, duplicating, printing, delivering and distributing any Registration Statement, any Prospectus, any
amendments or supplements thereto, any underwriting agreements, agreements among underwriters, securities sales agreements, certificates and any other documents relating to the performance by the Company under, and compliance by the Company with,
this Agreement, (iv) all fees and expenses incurred in connection with the listing or inclusion of any of the Registrable Shares on any securities exchange or national quotation system pursuant to Section 4(n) of this Agreement or
otherwise, (v) the fees and disbursements of counsel for the 

  

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Company and of the independent public accountants of the Company (including, without limitation, the expenses of any special audit and “cold
comfort” letters required by or incident to such performance), (vi) reasonable fees and disbursements of one Selling Holders’ Counsel for each Registration Statement and the amounts set forth in Section 4(m), and (vii) any
fees and disbursements customarily paid by issuers in connection with issues and sales of securities (including the fees and expenses of any experts retained by the Company in connection with any Registration Statement); provided, however,
that Registration Expenses shall exclude brokers’ or underwriters’ discounts and commissions any transfer taxes or transfer fees, if any, relating to the sale or disposition of Registrable Shares by a Holder and the fees and disbursements
of any counsel to the Holders, except as provided for in clause (vi) above. 
  
 Registration Statement: Any Shelf Registration Statement, Shelf Registration Statement or IPO Registration Statement of the Company
that covers the resale of any Registrable Shares, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto and all material incorporated by
reference or deemed to be incorporated by reference, if any, in such registration statement. 
  
 Regulation S: Regulation S (Rules 901-904) promulgated by the Commission under the Securities Act, as such rules may be amended
from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such regulation. 
  
 Regulation S Shares: The shares of Common Stock initially resold by FBR pursuant to the
Purchase/Placement Agreement to “non-U.S. persons” (in accordance with Regulation S) in an “offshore transaction” (in accordance with Regulation S). 
  
 Rule 144: Rule 144 promulgated by the Commission pursuant to the Securities Act, as such rule may be
amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule. 
  
 Rule 144A: Rule 144A promulgated by the Commission pursuant to the Securities Act, as such rule may
be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule. 
  
 Rule 144A Shares: The shares of Common Stock initially resold by FBR pursuant to the
Purchase/Placement Agreement to “qualified institutional buyers” (as such term is defined in Rule 144A) in accordance with Rule 144A. 
  
 Rule 158: Rule 158 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or
any similar 

  

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rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule. 
  
 Rule 415: Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule. 
  
 Rule 424: Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule. 
  
 Rule 429: Rule 429 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having substantially the same effect as such rule. 
  
 Securities Act: The Securities Act of 1933, as
amended, and the rules and regulations promulgated by the Commission thereunder. 
  
 Selling Holders’ Counsel: Counsel for the Holders that is selected by the Holders holding a majority of the Registrable Shares
included in any Registration Statement and that is reasonably acceptable to the Company. Notice of the appointment of any such Selling Holders’ Counsel shall be given to the Company as soon as reasonably practicable after such appointment,
provided that any delay in giving or failure to give such notice shall not relieve the Company of its obligations under this Agreement, except to the extent that such delay or failure prevents the Company from performing such obligations in a timely
manner. 
  
 Shares: The Original Holder
Shares, the Management Shares, the Lehman Shares, the Rule 144A Shares, the Accredited Investor Shares and the Regulation S Shares. 
  
 Shelf Registration Statement: As defined in Section 2(a) hereof. 
  
 Subsequent Shelf Registration Statement: As defined in Section 2(c) hereof. 
  
 Suspension Event: As defined in Section 5(b)
hereof. 
  
 Suspension Notice: As defined
in Section 5(b) hereof. 
  
 Underwritten
Offering: A sale of securities of the Company to an underwriter or underwriters for reoffering to the public. 
  

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 2. Registration Rights 
  
 (a) Mandatory Shelf Registration. As set forth in Section 4 hereof, the Company agrees to file with the
Commission as soon as reasonably practicable following the date of this Agreement (but in no event later than the date that is one hundred and eighty (180) days after the date of this Agreement) a shelf Registration Statement on Form S-11 or
such other form under the Securities Act then available to the Company providing for the resale of the Registrable Shares pursuant to Rule 415 from time to time by the Holders, including for the avoidance of doubt, any Additional Shares that are
issued prior to the initial effectiveness of such Shelf Registration Statement (such registration statement, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference, if any, in such registration statement, the “Shelf Registration Statement”). The Company shall use its
commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective by the Commission as soon as practicable. Such commercially reasonable efforts shall include, without limitation, responding to any comments issued
by the staff of the Commission with respect to any Registration Statement and filing any related amendment to such Registration Statement as soon as reasonably practicable after receipt of such comments. Any Shelf Registration Statement shall
provide for the resale from time to time, and pursuant to any method or combination of methods legally available (including, without limitation, an Underwritten Offering (provided, that such Underwritten Offering shall raise at least $25,000,000 of
gross proceeds and any managing underwriter(s) thereof shall be approved by the Company, such approval not to be unreasonably withheld), a direct sale to purchasers, a sale through brokers or agents, or sale over the Internet) by the Holders of any
and all Registrable Shares. 
  
 (b) IPO Registration. If
the Company proposes to file a registration statement on Form S-11 or such other form under the Securities Act providing for the initial public offering of shares of Common Stock (such registration statement, including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference, if any, in such registration
statement, the “IPO Registration Statement”), the Company will notify in writing each Holder of the filing, within the five (5) Business Days after the filing thereof, and afford each Holder an opportunity to include in such
IPO Registration Statement all or any part of the Registrable Shares then held by such Holder. Each Holder desiring to include in any such IPO Registration Statement all or part of the Registrable Shares held by such Holder shall, within fifteen
(15) Business Days after receipt of the above-described written notice by the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Registrable Shares such Holder wishes to include in such IPO
Registration Statement. Any election by any Holder to include any Registrable Shares in the IPO Registration Statement will not affect the inclusion of such Registrable Shares in the Shelf Registration Statement or any Subsequent Shelf Registration
Statement until such Registrable Shares have been sold under the IPO Registration Statement; provided, however, that at such time of sale, the Company shall have the right to remove from the Shelf Registration Statement or any Subsequent
Shelf Registration Statement the Registrable Shares sold pursuant to the IPO Registration Statement. 
  

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 (i) Right to Terminate IPO Registration. The Company shall have the right to
terminate or withdraw any IPO Registration Statement referred to in this Section 2(b) prior to the effectiveness of such registration whether or not any Holder has elected to include Registrable Shares in such registration; provided,
however, that the Company must provide each Holder that elected to include any Registrable Shares in such IPO Registration Statement prompt written notice of such termination. Furthermore, in the event the IPO Registration Statement is not
declared effective by the Commission within ninety (90) Business Days following delivery by the Company of notice to the Holders of their initial opportunity to include all or any part of the Registrable Shares then held by such Holders in the
IPO Registration Statement, unless a road show for the Underwritten Offering pursuant to the IPO Registration Statement is in progress at such time, the Company shall promptly provide a new written notice to all Holders giving them another
opportunity to elect to include Registrable Shares in the pending IPO Registration Statement. Each Holder desiring to include in any such IPO Registration Statement all or part of the Registrable Shares held by such Holder shall, within ten
(10) Business Days after receipt of the above-described written notice by the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Registrable Shares such Holder wishes to include in such IPO
Registration Statement. 
  
 (ii) Selection of
Underwriter. The Company shall have the sole right to select the managing underwriter(s) for its initial public offering, regardless of whether any Registrable Securities are included in the IPO Registration Statement or otherwise. 

 
 (iii) Shelf Registration not Impacted by IPO
Registration Statement. The Company’s obligation to file the Shelf Registration Statement or any Subsequent Shelf Registration Statement pursuant to Sections 2(a) and 2(c) hereof shall not be affected by the filing or effectiveness of
the IPO Registration Statement, except to the extent Registrable Shares are sold in pursuant to the IPO Registration Statement, in which case, the Company shall have the right to remove from the Shelf Registration Statement or any Subsequent Shelf
Registration Statement, as applicable, the Registrable Shares sold pursuant to the IPO Registration Statement; provided, however, if the Company files an IPO Registration Statement before the effective date of the Shelf Registration Statement
or such Subsequent Shelf Registration Statement, the Company shall have the right to defer causing the Commission to declare the Shelf Registration Statement or such Subsequent Shelf Registration Statement effective until sixty (60) days after
effective date of the IPO Registration Statement. 
  
 (iv) Underwriting. The Company shall give written notice to the Holders who elected to be included in the IPO Registration Statement of the managing underwriters for the Underwritten Offering proposed under the IPO Registration
Statement. The right of any such Holder’s Registrable Shares to be included in any IPO Registration Statement pursuant to this Section 2(b) shall be conditioned upon such Holder’s participation in such Underwritten Offering and the
inclusion of such Holder’s Registrable Shares in the Underwritten Offering to the extent provided herein. All Holders proposing to distribute their Registrable Shares through such Underwritten Offering shall enter into an underwriting agreement
in customary form with the managing underwriters selected by the Company for such underwriting and complete and execute any questionnaires, powers 

  

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of attorney, indemnities, securities escrow agreements, custody agreements, lock-up agreements and other documents reasonably required under the terms of
such underwriting, and furnish to the Company such information in writing as the Company may reasonably request for inclusion in the IPO Registration Statement; provided, however, that no Holder shall be required to make any
representations or warranties to or agreements (including indemnitees) with the Company or the underwriters other than representations, warranties or agreements (including indemnitees) as are customary and reasonably requested by the underwriters.
Notwithstanding any other provision of this Agreement, if at any time the managing underwriters determine in good faith that marketing factors require a limitation on the number of shares to be included, then the managing underwriters may exclude
shares (including Registrable Shares) from the IPO Registration Statement and the Underwritten Offering, and any shares included in the IPO Registration Statement and the Underwritten Offering shall be allocated, first, to the Company,
second, to each of the Holders (other than the Original Holders and Management Holders) requesting inclusion of their Registrable Shares in the IPO Registration Statement (on a pro rata basis based on the total number of Registrable
Shares then requested for inclusion by each such Holder), and third, to each of the Original Holders and Management Holders requesting inclusion of their Registrable Shares in such IPO Registration Statement (on a pro rata basis based
on the total number of Registrable Shares then requested for inclusion by each such Holder); provided, however, that the number of Registrable Shares (other than the Original Holder Shares and the Management Shares) to be included in
the IPO Registration Statement shall not be reduced unless all other securities of the Company held by (i) the Company’s directors, officers, other employees and consultants; and (ii) other holders of the Company’s capital stock
with registration rights that are inferior (with respect to such reduction) to the registration rights of the Holders set forth herein, are first entirely excluded from the underwriting and registration. 
  
 If any Holder disapproves of the terms of any such
Underwritten Offering that is undertaken in compliance with the terms hereof, such Holder may elect to withdraw therefrom by providing written notice to the Company and the managing underwriters, delivered not later than the later of (a) sixty
(60) days after the initial filing date of the IPO Registration Statement and (b) five (5) Business Days prior to the date the preliminary prospectus is printed; provided, however, in the event the IPO Registration Statement is
not declared effective by the Commission within ninety (90) Business Days following delivery by the Company of notice to the Holders of their initial opportunity to include all or any part of the Registrable Shares then held by such Holders in
the IPO Registration Statement, unless a road show for the Underwritten Offering pursuant to the IPO Registration Statement is in progress at such time, the Company shall promptly provide written notice to all Holders who have elected to be included
in the IPO Registration Statement giving them another opportunity to elect to withdraw from the pending IPO Registration Statement, and each Holder desiring to withdraw from such IPO Registration Statement shall, within ten (10) Business Days
after receipt of the above-described written notice by the Company, provide notice to the Company and the managing underwrite of such election. Any Registrable Shares excluded or withdrawn from such Underwritten Offering shall be excluded and
withdrawn from the IPO Registration Statement. 
  

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 (v) Hold-back Agreement. By electing to include Registrable Shares in the IPO
Registration Statement, if any, the Holder of such Registrable Shares shall be deemed to have agreed not to effect any sale or distribution of securities of the Company of the same or similar class or classes of the securities included in the IPO
Registration Statement or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 or Rule 144A under the Securities Act, during such periods as reasonably requested by the managing
underwriter (but in no event for a period longer than thirty (30) days prior to and one hundred eighty (180) days following the effective date of the IPO Registration Statement), if an Underwritten Offering, or by the Company in any other
registration; provided that each of the officers and directors of the Company that hold shares of Common Stock or securities convertible into or exchangeable or exercisable for shares of Common Stock are subject to restrictions at least as
burdensome as those applicable to the Holders for not less than the entire time period required of the Holders hereunder. 
  
 (c) Subsequent Shelf Registration for Additional Shares Issued after Effectiveness of the Mandatory Shelf Registration Statement. If any Additional
Shares are issued or distributed to Holders after the effectiveness of the Shelf Registration Statement, or such Additional Shares were otherwise not included in a prior Shelf Registration Statement, then the Company shall as soon as practicable,
but in no event later than sixty (60) days after the issuance of such Additional Shares, file an additional shelf Registration Statement on Form S-11 or such other form under the Securities Act then available to the Company providing for the
resale of the Additional Shares pursuant to Rule 415 from time to time by the Holders (such registration statement, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference, if any, in such registration statement, a “Subsequent Shelf Registration Statement”) in the same manner, and
subject to the same provisions in this Agreement as the Shelf Registration Statement; provided that the provisions of Section 2(e) and Section 9 (but, with respect to Section 9, only if the Company has at the time of the issuance of
the Additional Shares completed an Underwritten Offering pursuant to the IPO Registration Statement) hereof will not apply to any such Subsequent Shelf Registration Statement. 
  
 (d) Expenses. The Company shall pay all Registration Expenses in connection with the registration of the Registrable
Shares pursuant to this Agreement. Each Holder participating in a registration pursuant to this Section 2 shall bear such Holder’s proportionate share (based on the total number of Registrable Shares sold in such registration) of all
discounts and commissions payable to underwriters or brokers and all transfer taxes and transfer fees in connection with a registration of Registrable Shares pursuant to this Agreement and any other expense of the Holders not specifically allocated
to the Company pursuant to this Agreement relating to the sale or disposition of such Holder’s Registrable Shares pursuant to any Registration Statement. 
  

(e) Executive Bonuses. If the Company does not file a Registration Statement registering the resale of the Accredited Investor Shares, the Rule
144A Shares and the Regulation S Shares within 180 days after the date of this Agreement, other than as a result of the Commission being unable to accept such filings (a “Registration Default”), then Neil B. 

  

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Kornswiet, Chief Executive Officer, President and Chairman of the Board of Directors of the Company shall forfeit 1.0% of any cash bonus to which he became
entitled or earned as a result of performance during the 2005 fiscal year (whether payable during or after the 2005 fiscal year), whether under an employment agreement with the Company, a bonus plan or any other bonus arrangement, including any
bonus compensation for which payment would otherwise be deferred until after 2005, for each day the Registration Default continues; provided, however, that in no event shall the forfeiture provided for in this Section 2(f) apply at any
time when the Company has endeavored in good faith to file the Registration Statement within the time period specified but is unable to make such filing as of such date as a result of circumstances outside the reasonable control of the Company.

  
 3. Rules 144 and 144A 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 Shares to the public without registration, until such date as no Holder owns any Registrable Shares, the Company agrees to: 
  
 (a) use its commercially reasonable efforts to make and keep public
information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date of the first registration statement under the Securities Act filed by the Company for an offering of its
securities to the general public; 
  
 (b) use its commercially
reasonable efforts to file with the Commission in a timely manner all reports and other documents required to be filed by the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting
requirements); 
  
 (c) if the Company is not required to file
reports and other documents under the Securities Act and the Exchange Act, it will make available other information as required by, and so long as necessary to permit sales of Registrable Shares pursuant to, Rule 144 and Rule 144A; and 

 
 (d) to furnish to any Holder promptly upon request (i) a written
statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement under the Securities Act filed by the Company for an
offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to the reporting requirements of the Exchange Act), (ii) a copy of the most recent annual and quarterly
report(s) of the Company, and (iii) such other reports, documents or shareholder communications of the Company, and take such further actions consistent with this Section 3, as a Holder may reasonably request in availing, and as is
necessary to avail, itself of any rule or regulation of the Commission allowing a Holder to sell any such Registrable Shares without registration. 
  

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 4. Registration Procedures 
  
 In connection with the obligations of the Company with respect to any registration pursuant to this Agreement, the Company
shall, without limitation: 
  
 (a) notify FBR and Selling
Holders’ Counsel, if any, in writing, at least ten (10) Business Days prior to filing a Registration Statement, of its intention to file a Registration Statement with the Commission and, at least five (5) Business Days prior to
filing, provide a copy of the Registration Statement to FBR, its counsel and Selling Holders’ Counsel, if any, for review and comment; prepare and file with the Commission, as specified in this Agreement, a Registration Statement(s), which
Registration Statement(s) (x) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith and (y) shall be reasonably
acceptable to FBR and the Selling Holders’ Counsel, if any; notify FBR and Selling Holders’ Counsel, if any, in writing, at least five (5) Business Days prior to filing of any amendment or supplement to such Registration Statement
and, at least three (3) Business Days prior to filing, provide a copy of such amendment or supplement to FBR, its counsel and Selling Holders’ Counsel, if any, for review and comment; promptly following receipt from the Commission, provide
to FBR, its counsel and Selling Holders’ Counsel, if any, copies of any comments made by the staff of the Commission relating to such Registration Statement (whether pre-effective or post-effective) and of the Company’s responses thereto
for review and comment; and use its commercially reasonable efforts to cause such Registration Statement, in a form acceptable to FBR and the Selling Holders’ Counsel, if any, to become effective as soon as practicable after filing and to
remain effective, subject to Section 5 hereof, until the earlier of (i) such time as all Registrable Shares covered thereby have been sold in accordance with the intended methods of distribution of such Registrable Shares, and
(ii) there are no Registrable Shares outstanding; provided, however, that the Company shall not be required to cause any IPO Registration Statement to become effective; provided, further, that if the Company has an
effective Shelf Registration Statement or Subsequent Shelf Registration Statement on Form S-11 under the Securities Act and becomes eligible to use Form S-3 or such other short-form registration statement form under the Securities Act, the Company
may, upon twenty (20) Business Days prior written notice to FBR and all Holders, register any Registrable Shares registered but not yet distributed under the effective Shelf Registration Statement or Subsequent Shelf Registration Statement on
such a short-form Shelf Registration Statement and, once the short-form Shelf Registration Statement is declared effective, de-register such shares under the previous Shelf Registration Statement or any Subsequent Shelf Registration Statement or
transfer the filing fees from the previous Shelf Registration Statement (such transfer pursuant to Rule 429, if applicable) unless the Holders holding a majority of the shares registered by the Holders under the initial Shelf Registration Statement
or any Subsequent Shelf Registration Statement (excluding Registrable Shares held by the Original Holders, the Management Holders, the Company or any of their Affiliates) notify the Company within fifteen (15) Business Days of receipt of the
Company notice that such a registration under a new Registration Statement and de-registration of the initial Shelf Registration Statement or any Subsequent Shelf Registration Statement would materially interfere with such Holders’ distribution
of Registrable Shares already in progress, in which case the Company shall delay the effectiveness of the short-form Shelf Registration Statement and de-registration for a period of not less than thirty (30) Business Days from the date that the
Company receives the notice from such Holders requesting a delay; 
  

 12 

 (b) subject to Section 4(i) hereof, (i) prepare and file with the Commission such amendments
and post-effective amendments to each such Registration Statement as may be necessary to keep such Registration Statement effective for the period described in Section 4(a) hereof; (ii) cause each Prospectus contained therein to be
supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 or any similar rule that may be adopted under the Securities Act; and (iii) comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the methods of distribution set forth in the “Plan of Distribution” section (or similar section) of the
Prospectus; 
  
 (c) furnish to FBR and the Holders, without
charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as FBR or such Holder may reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Shares; the Company consents, subject to Section 5, to the use of such Prospectus, including each preliminary Prospectus, by FBR and the Holders, if any, in connection with the offering and sale of the Registrable
Shares covered by any such Prospectus; 
  
 (d) use its
commercially reasonable efforts to register or qualify, or obtain exemption from registration or qualification for, all Registrable Shares by the time the applicable Registration Statement is declared effective by the Commission under all applicable
state securities or “blue sky” laws of such United States jurisdictions as FBR or any Holder with Registrable Shares covered by a Registration Statement shall reasonably request in writing, keep each such registration or qualification or
exemption effective during the period such Registration Statement is required to be kept effective pursuant to Section 4(a) and do any and all other acts and things that may be reasonably necessary or advisable to enable such Holder to
consummate the disposition in each such jurisdiction of such Registrable Shares owned by such Holder; provided, however, that the Company shall not be required to take any action to comply with this Section 4(d) if it would require the
Company or any of its subsidiaries to (i) qualify generally to do business in any jurisdiction or to register as a broker or dealer in such jurisdiction where it would not otherwise be required to qualify but for this Section 4(d) and
except as may be required by the Securities Act, (ii) subject itself to taxation in any such jurisdiction, or (iii) submit to the general service of process in any such jurisdiction; 
  
 (e) use its commercially reasonable efforts to cause all Registrable Shares
covered by such Registration Statement to be registered and approved by such other United States governmental agencies or authorities as may be necessary to enable the Holders thereof to consummate the disposition of such Registrable Shares;
provided, however, that the Company shall not be required to take any action to comply with this Section 4(e) if it would require the Company or any of its subsidiaries to (i) qualify generally to do business in any jurisdiction or
to register as a broker or dealer in such jurisdiction where it would not otherwise be required to qualify but for this Section 4(e) and except as may be required by the Securities Act, (ii) subject itself to taxation in any such
jurisdiction, or (iii) submit to the general service of process in any such jurisdiction; 
  
 (f) notify FBR, Selling Holders’ Counsel, if any, and each Holder with Registrable Shares covered by a Registration Statement promptly and, if requested by FBR, Selling Holders’ 

  

 13 

 
Counsel, if any, or any such Holder, promptly confirm such advice in writing at the address determined in accordance with Section 10(c), (i) when
such Registration Statement has become effective and when any post-effective amendments thereto become effective or upon the filing of a supplement to any Prospectus, (ii) of the issuance by the Commission or any state securities authority of
any stop order suspending the effectiveness of such Registration Statement or the initiation, assertion or, to the extent known to the Company, threat of any Proceedings for that purpose, (iii) of any request by the Commission or any other
federal, state or foreign governmental authority for amendments or supplements to such Registration Statement or related Prospectus or for additional information, and (iv) of any reason, including without limitation, the happening of any event
during the period such Registration Statement is effective, as a result of which such Registration Statement or the related Prospectus or any document incorporated by reference therein contains any 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 (which information shall be accompanied by an instruction to suspend the
use of the Registration Statement and the related Prospectus until the requisite changes have been made); 
  
 (g) use its commercially reasonable efforts to avoid the issuance of, or if issued, to obtain the withdrawal of, any order enjoining or suspending the use
or effectiveness of a Registration Statement or suspending of the qualification (or exemption from qualification) of any of the Registrable Shares for sale in any jurisdiction, as promptly as practicable; 
  
 (h) promptly furnish to FBR, Selling Holders’ Counsel, if any, and each
requesting Holder with Registrable Shares covered by a Registration Statement, without charge, at least one (1) conformed copy of each Registration Statement and any post-effective amendment or supplement thereto (without documents incorporated
therein by reference or exhibits thereto, unless requested); 
  
 (i) except as provided in Section 5, upon the occurrence of any event contemplated by Section 4(f)(iv) hereof, use its commercially reasonable efforts to promptly prepare a supplement or post-effective amendment to a Registration
Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Shares, such Prospectus will not contain any 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; and promptly furnish to FBR,
Selling Holders’ Counsel, if any, and each requesting Holder, without charge, as many copies of such Prospectus and any supplement or post-effective amendment to the Registration Statement or Prospectus and any document incorporated therein by
reference or so filed, as FBR, Selling Holders’ Counsel, if any, or such Holder may reasonably request; 
  
 (j) if requested by FBR, Selling Holders’ Counsel, if any, the representative of the underwriters (in an Underwritten Offering), if any, or any
Holders of Registrable Shares being sold in connection with a Registration Statement, (i) as promptly as reasonably practicable incorporate in a Prospectus supplement or post-effective amendment such information as FBR, Selling Holders’
Counsel, if any, the representative of the underwriters, if any, or such Holders indicate in writing relates to them or otherwise reasonably request be included therein, and 

  

 14 

 
(ii) use its commercially reasonably efforts to make all required filings of such Prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment; 
  
 (k) in the case of an Underwritten Offering, use its commercially reasonable efforts to furnish or cause to be furnished to the underwriters a signed
counterpart, addressed to the underwriters, of: (i) an opinion of counsel for the Company, dated the date of each closing under the underwriting agreement, reasonably satisfactory to the underwriters; and (ii) a “comfort” letter,
dated the effective date of such Registration Statement and the date of each closing under the underwriting agreement, signed by the independent public accountants who have certified the Company’s financial statements included in such
Registration Statement, covering substantially the same matters with respect to such Registration Statement (and the Prospectus included therein) and with respect to events subsequent to the date of such financial statements, as are customarily
covered in accountants’ letters delivered to underwriters in underwritten public offerings of securities and such other financial matters as the underwriters may reasonably request (a “Comfort Letter”); a copy of any such
Comfort Letter shall be delivered to FBR; in the case of a Registration Statement that does not involve an Underwritten Offering, use its commercially reasonable efforts to furnish to FBR a signed counterpart, addressed to FBR, of a Comfort Letter,
dated the initial effective date of such Registration Statement and on the date of each quarterly or year-end post-effective amendment there to, in form and substance reasonably satisfactory to FBR; 
  
 (l) enter into customary agreements (including in the case of an Underwritten
Offering, an underwriting agreement in customary form and reasonably satisfactory to the Company) and take all other reasonable action in connection therewith in order to expedite or facilitate the distribution of the Registrable Shares included in
such Registration Statement and, in the case of an Underwritten Offering, make representations, warranties and agreements to FBR, the Holders covered by such Registration Statement and to the underwriters in such form and scope as are customarily
made by issuers to underwriters and holders in underwritten offerings and confirm the same to the extent customary if and when requested; 
  
 (m) to use commercially reasonable efforts to make available for inspection by FBR, Selling Holders’ Counsel, if any, and the representatives of any
underwriters participating in any disposition pursuant to a Registration Statement, all financial and other records, pertinent corporate documents and properties of the Company and cooperate with, and cause the respective officers, directors,
employees and agents of the Company to supply all information reasonably requested by, FBR, Selling Holders’ Counsel, if any, and the representatives of any underwriters in connection with a Registration Statement and the due diligence review
of the Registration Statement and the information contained or incorporated therein; provided, however, that such records, documents or information that the Company determines, in good faith, to be confidential and with respect to which the
Company notifies FBR, Selling Holders’ Counsel, if any, and the representatives of any underwriters in advance in writing of such confidential nature, shall not be disclosed by FBR, Selling Holders’ Counsel, if any, and the representatives
of any underwriters unless (i) the disclosure of such records, documents or information is necessary to avoid or correct a material misstatement or omission in a Registration Statement or Prospectus, (ii) the release of such records,
documents or information is ordered 

  

 15 

 
pursuant to a subpoena or other order from a court of competent jurisdiction, or (iii) such records, documents or information have been generally made
available to the public; provided, further, that FBR, Selling Holders’ Counsel, if any, and the representatives of any underwriters will use commercially reasonable efforts, to the extent reasonably practicable, to coordinate the
foregoing inspection and information gathering and not materially disrupt the Company’s business operations; 
  
 (n) use its commercially reasonable efforts to satisfy the criteria for listing and list or include (if the Company satisfies the criteria for listing or
inclusion on such exchange or market) all Registrable Shares on the New York Stock Exchange or The Nasdaq Stock Market as soon as practicable (including, without limitation, seeking to cure in the Company’s listing or inclusion application any
deficiencies cited by the exchange or market) and thereafter use commercially reasonable efforts to maintain such listing; 
  
 (o) to use commercially reasonable efforts to prepare and file in a timely manner all documents and reports required by the Exchange Act and, to the
extent the Company’s obligation to file such reports pursuant to Section 15(d) of the Exchange Act expires prior to the expiration of the effectiveness period of the Registration Statement as required by Section 4(a) hereof, the
Company shall to use commercially reasonable efforts to register the Registrable Shares under the Exchange Act and shall maintain such registration through the effectiveness period required by Section 4(a) hereof; 
  
 (p) provide a CUSIP number for all Registrable Shares, not later than the
effective date of the Registration Statement; 
  
 (q)
(i) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission and, as applicable, the New York Stock Exchange, Nasdaq National Market or other listing standard, (ii) make
generally available to its stockholders, as soon as reasonably practicable, earnings statements covering at least 12 months beginning after the effective date of the Registration Statement that satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 (or any similar rule promulgated under the Securities Act ) thereunder, but in no event later than forty-five (45) days after the end of each fiscal quarter of the Company occurring after the first anniversary of the
effective date of the Registration Statement (unless such fiscal quarter is the last fiscal quarter of the Company’s fiscal year, in which case such earnings statement shall be delivered no later than sixty (60) days after such fiscal
quarter occurring after the first anniversary of the effective date of the Registration Statement), and (iii) not file any Registration Statement or Prospectus or amendment or supplement to such Registration Statement or Prospectus to which
FBR, Selling Holders’ Counsel, if any, or any Holder of Registrable Shares covered by such Registration Statement shall have reasonably objected on the grounds that such Registration Statement or Prospectus or amendment or supplement does not
comply in all material respects with the requirements of the Securities Act; 
  
 (r) provide and cause to be maintained a registrar and transfer agent for all Registrable Shares covered by any Registration Statement from and after a date not later than the effective date of such Registration
Statement; 
  

 16 

 (s) in connection with any sale or transfer of the Registrable Shares (whether or not pursuant to a
Registration Statement) that will result in the security being delivered no longer being Registrable Shares, cooperate with the Holders and the representative of the underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing the Registrable Shares to be sold, which certificates shall not bear any transfer restrictive legends (other than as required by the Company’s Charter) and to enable such Registrable Shares to be in such denominations
and registered in such names as the representative of the underwriters, if any, or the Holders may reasonably request at least three (3) Business Days prior to any sale of the Registrable Shares; 
  
 (t) in connection with the initial filing of a Shelf Registration Statement
or any Subsequent Shelf Registration Statement and each amendment thereto with the Commission, prepare and, within one (1) Business Day of such filing with the Commission, file with the NASD all forms and information required or requested by
the NASD in order to obtain written confirmation from the NASD that the NASD does not object to the fairness and reasonableness of the underwriting terms and arrangements (including any deemed underwriting terms and arrangements) relating to the
resale of Registrable Shares pursuant to the Registration Statement, including, without limitation, information provided to the NASD through its COBRADesk system; and 
  
 (u) upon effectiveness of the first Registration Statement filed by the Company under this Agreement, take such actions and
make such filings as are necessary to effect the registration of the Common Stock under the Exchange Act simultaneously with or immediately following the effectiveness of the Registration Statement. 
  
 The Company may require the Holders to furnish to the Company such
information regarding the proposed distribution by such Holder of such Registrable Shares as the Company may from time to time reasonably request in writing or as shall be required to effect the registration of the Registrable Shares and no Holder
shall be entitled to be named as a selling stockholder in any Registration Statement and no Holder shall be entitled to use the Prospectus forming a part thereof if such Holder does not provide such information to the Company. Any Holder that sells
Registrable Shares pursuant to a Registration Statement shall be required to be named as a selling stockholder in the related Prospectus and to deliver or cause to be delivered a Prospectus to purchasers. Each Holder further agrees to furnish
promptly to the Company in writing all information required from time to time to make the information previously furnished by such Holder not misleading. 
  
 Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(f)(ii),
4(f)(iii) or 4(f)(iv) hereof, such Holder will immediately discontinue disposition of Registrable Shares pursuant to a Registration Statement until such Holder’s receipt of copies of the supplemented or amended Prospectus. If so directed by the
Company, such Holder will deliver to the Company (at the reasonable expense of the Company) all copies in its possession, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Registrable Shares
current at the time of receipt of such notice. 
  

 17 

 5. Black-Out Period 
  
 (a) Subject to the provisions of this Section 5 and a good faith determination by a majority of the independent members
of the Board of Directors of the Company that it is in the best interests of the Company to suspend the use of the Registration Statement, following the effectiveness of a Registration Statement (and the filings with any international, federal or
state securities commissions), the Company, by written notice to FBR, Selling Holders’ Counsel, if any, and the Holders, may direct the Holders to suspend sales of the Registrable Shares pursuant to a Registration Statement for such times as
the Company reasonably may determine is necessary and advisable (but in no event for more than an aggregate of ninety (90) days in any rolling twelve (12)-month period commencing on the closing date of the transactions contemplated by the
Purchase/Placement Agreement or more than sixty (60) days in any rolling ninety (90)-day period, except in the event of a refusal by the Commission to declare any post-effective amendment to the Registration Statement effective after the
Company has used all commercially reasonable efforts to cause such post-effective amendment to be declared effective (in which case suspension may continue until the Commission declares such post-effective amendment to be effective), if any of the
following events shall occur: (i) the representative of the underwriters of an Underwritten Offering of primary shares by the Company has advised the Company that the sale of Registrable Shares pursuant to the Registration Statement would have
a material adverse effect on the Company’s primary offering; (ii) a majority of the Board of Directors of the Company (including at least two of the independent directors) determines in good faith that (A) the offer or sale of any
Registrable Shares would materially impede, delay or interfere with any proposed financing, offer or sale of securities, acquisition, merger, tender offer, business combination, corporate reorganization, consolidation or other material transaction
involving the Company, (B) after the advice of counsel, the sale of Registrable Shares pursuant to the Registration Statement would require disclosure of non-public material information not otherwise required to be disclosed under applicable
law, or (C) (x) the Company has a bona fide business purposes for preserving the confidentiality of such transaction, (y) disclosure would have a material adverse effect on the Company or the Company’s ability to consummate such
transaction, or (z) such transaction renders the Company unable to comply with Commission requirements, in each case under circumstances that would make it impractical or inadvisable to cause the Registration Statement (or such filings) to
become effective or to promptly amend or supplement the Registration Statement on a post-effective basis, as applicable; or (iii) a majority of the Board of Directors of the Company (including at least two of the independent directors)
determines in good faith that it is required by law, rule or regulation to supplement the Registration Statement or file a post-effective amendment to the Registration Statement in order to incorporate information into the Registration Statement for
the purpose of (1) including in the Registration Statement any prospectus required under Section 10(a)(3) of the Securities Act; (2) reflecting in the prospectus included in the Registration Statement any facts or events arising after
the effective date of the Registration Statement (or of the most-recent post-effective amendment) that, individually or in the aggregate, represents a fundamental change in the information set forth therein; or (3) including in the prospectus
included in the Registration Statement any material information with respect to the plan of distribution not disclosed in the Registration Statement or any material change to such information. Upon the occurrence of any such suspension, the Company
shall use its commercially reasonable efforts to cause the Registration Statement to become effective or to promptly amend or supplement the Registration 

  

 18 

 
Statement on a post-effective basis or to take such action as is necessary to make resumed use of the Registration Statement as soon as possible. 

 
 (b) In the case of an event that causes the Company to suspend the use of
a Registration Statement (a “Suspension Event”), the Company shall give written notice (a “Suspension Notice”) to FBR and the Holders to suspend sales of the Registrable Shares and such notice shall state generally
the basis for the notice and that such suspension shall continue only for so long as the Suspension Event or its effect is continuing and the Company is using its commercially reasonable efforts and taking all reasonable steps to terminate
suspension of the use of the Registration Statement as promptly as possible. The Holders shall not effect any sales of the Registrable Shares pursuant to such Registration Statement (or such filings) at any time after it has received a Suspension
Notice from the Company and prior to receipt of an End of Suspension Notice (as defined below). If so directed by the Company, each Holder will deliver to the Company (at the expense of the Company) all copies other than permanent file copies then
in such Holder’s possession of the Prospectus covering the Registrable Shares at the time of receipt of the Suspension Notice. The Holders may recommence effecting sales of the Registrable Shares pursuant to the Registration Statement (or such
filings) following further notice to such effect (an “End of Suspension Notice”) from the Company, which End of Suspension Notice shall be given by the Company to the Holders and FBR in the manner described above promptly following
the conclusion of any Suspension Event and its effect. 
  
 (c)
Notwithstanding any provision herein to the contrary, if the Company shall give a Suspension Notice with respect to any Registration Statement pursuant to this Section 5, the Company agrees that it shall extend the period of time during
which such Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from the date of receipt by the Holders of the Suspension Notice to and including the date of receipt by the Holders
of the End of Suspension Notice and provide copies of the supplemented or amended Prospectus necessary to resume sales, with respect to each Suspension Event; provided such period of time shall not be extended beyond the date that shares of Common
Stock covered by such Registration Statement are no longer Registrable Shares. 
  
 6. Indemnification and Contribution 
  
 (a) The Company agrees to indemnify and hold harmless (i) each Holder and FBR, (ii) each Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act), any such Person described in clause (i) (any of the Persons referred to in this clause (ii) being hereinafter referred to as a “Controlling Person”), and (iii) the respective officers, directors,
partners, members, managers, employees, representatives and agents of any such Person or any Controlling Person (any Person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as a “Purchaser
Indemnitee”), from and against any and all losses, claims, damages, judgments, Proceedings, out-of-pocket expenses, and other liabilities (collectively, the “Liabilities”), including without limitation and as incurred,
reimbursement of all reasonable costs of investigating, preparing, pursuing or defending any Proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to any Purchaser Indemnitee,
joint or several, directly or indirectly related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (as amended 

  

 19 

 
or supplemented if the Company shall have furnished to such Purchaser Indemnitee any amendments or supplements thereto), or any preliminary Prospectus or any
other document prepared by the Company used to sell the Registrable Shares, 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 light of the circumstances
under which they were made, not misleading, except to the extent such Liabilities arise out of or are based upon (i) any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with
information relating to any Purchaser Indemnitee furnished to the Company or any underwriter in writing by such Purchaser Indemnitee expressly for use therein, (ii) any untrue statement contained in or omission from a preliminary Prospectus if
a copy of the Prospectus (as then amended or supplemented, if the Company shall have furnished to or on behalf of the Holder participating in the distribution relating to the relevant Registration Statement any such amendments or supplements
thereto) was not sent or given by or on behalf of such Holder to the Person asserting any such Liabilities who purchased Registrable Shares, if such Prospectus (or Prospectus as amended or supplemented) is required by law to be sent or given at or
prior to the written confirmation of the sale of such Registrable Shares to such Person and the untrue statement contained in or omission from such preliminary Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented), or (iii) use by a Holder participating in the distribution relating to the relevant Registration Statement of such Registration Statement or the related Prospectus during a period when a stop order has been issued in respect
thereof or any motion or proceeding for that purpose have been initiated or use of such Registration Statement or Prospectus has been suspended pursuant to Section 4(f)(ii), 4(f)(iii) or 4(f)(iv) and notice thereof has been given by the Company
to such Holder prior to such use pursuant to Section 4(f). The indemnity provided for herein shall remain in full force and effect regardless of any investigation made by or on behalf of any Purchaser Indemnitee. 
  
 (b) In connection with any Registration Statement in which a Holder is
participating and as a condition to such participation, such Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, each Person who signs the registration Statement or controls the Company within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act and the respective partners, directors, officers, members, managers, representatives, employees and agents of the Company and each such Person to the same extent as the
foregoing indemnity from the Company to each Purchaser Indemnitee, but only with reference to untrue statements or omissions or alleged untrue statements or omissions made in reliance upon and in strict conformity with information relating to such
Purchaser Indemnitee furnished to the Company in writing by such Purchaser Indemnitee expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary Prospectus. The liability of any Purchaser
Indemnitee pursuant to this paragraph shall in no event exceed the net proceeds received by such Purchaser Indemnitee from sales of Registrable Shares giving rise to such obligations. If the Holder elects to include Registrable Shares in an
Underwritten Offering pursuant to the IPO Registration Statement, the Holder shall be required to agree to such customary indemnification provisions as may be reasonably required by the underwriters in connection with such Underwritten Offering.

  

 20 

 (c) If any Proceeding (including any governmental or regulatory investigation) shall be brought or
asserted against any Person in respect of which indemnity may be sought pursuant to paragraph (a) or (b) above, such Person (the “Indemnified Party,” or if more than one Indemnified Party, the “Indemnified
Parties”), shall promptly notify the Person against whom such indemnity may be sought (the “Indemnifying Party”), in writing of the commencement thereof (but the failure to so notify an Indemnifying Party shall not relieve it
from any liability which it may have under this Section 6, except to the extent the Indemnifying Party is materially prejudiced by the failure to give notice), and the Indemnifying Party, upon request of the Indemnified Party, shall assume the
defense of such Proceeding and retain counsel chosen by the Indemnifying Party and approved by the Indemnified Party, which approval shall not be unreasonably withheld, to represent the Indemnified Party and any others the Indemnifying Party may
reasonably designate in such Proceeding and shall pay the reasonable fees and expenses actually incurred by such counsel related to such Proceeding. Notwithstanding the foregoing, in any such Proceeding, any Indemnified Party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party, unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed in writing to the contrary,
(ii) the Indemnifying Party failed within a reasonable time after notice of commencement of the Proceeding to assume the defense and engage counsel approved by the Indemnified Party (such approval not to be unreasonably withheld) as hereinabove
provided, (iii) the Indemnifying Party and its counsel do not in a reasonable manner pursue the defense of such Proceeding, or (iv) the named parties to any such Proceeding (including any impleaded parties), include both such Indemnified
Party and the Indemnifying Party, or any Affiliate of the Indemnifying Party, and such Indemnified Party shall have been reasonably advised by counsel that, either (x) there may be one or more legal defenses available to it which are different
from or additional to those available to the Indemnifying Party or such Affiliate of the Indemnifying Party or (y) a conflict may exist between such Indemnified Party and the Indemnifying Party or such Affiliate of the Indemnifying Party (in
which case the Indemnifying Party shall not have the right to assume nor direct the defense of such Proceeding on behalf of such Indemnified Party, it being understood, however, that the Indemnifying Party shall not, in connection with any one such
Proceeding or separate but substantially similar or related Proceedings arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one (1) separate firm of attorneys (in addition to any local
counsel), for all such Indemnified Parties, which firm shall be designated in writing by those Indemnified Parties who sold a majority of the Registrable Shares sold by all such Indemnified Parties (excluding Registrable Shares sold by the Original
Holders, the Management Holders, the Company or any of their Affiliates) and any such separate firm for the Company, the directors, the officers and such control Persons of the Company as shall be designated in writing by the Company). The
Indemnifying Party shall not be liable for any settlement of any Proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent or if there is a final judgment for the plaintiff,
the Indemnifying Party agrees to indemnify any Indemnified Party from and against any loss or Liability resulting from such settlement or judgment. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened Proceeding in respect of which any Indemnified Party is or could have been a party or the subject thereof and indemnity could have been sought hereunder by such Indemnified Party, unless (i) such
settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such 

  

 21 

 
Proceeding and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of the Indemnified
Party. 
  
 (d) If the indemnification provided for in paragraphs
(a) and (b) of this Section 6 is for any reason held to be unavailable to an Indemnified Party in respect of any Liabilities referred to therein (other than by reason of the exceptions provided therein) or is insufficient to hold
harmless a party indemnified thereunder, then each Indemnifying Party under such paragraphs, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such
Liabilities (i) in such proportion as is appropriate to reflect the relative benefits of the Indemnified Party on the one hand and the Indemnifying Party(ies) on the other in connection with the statements or omissions that resulted in such
Liabilities, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the
relative fault of the Indemnifying Party(ies) and the Indemnified Party, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and any Purchaser Indemnitees on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by such Purchaser Indemnitees and the
parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 
  
 (e) The parties agree that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro rata
allocation (even if such Indemnified Parties were treated as one entity for such purpose), or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph 6(d) above. The amount paid or
payable by an Indemnified Party as a result of any Liabilities referred to in paragraph 6(d) shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by such Indemnified Party
in connection with investigating or defending any such Proceeding. Notwithstanding the provisions of this Section 6, in no event shall a Purchaser Indemnitee be required to contribute any amount in excess of the amount by which proceeds
received by such Purchaser Indemnitee from sales of Registrable Shares exceeds the amount of any damages that such Purchaser Indemnitee has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. For purposes of this Section 6, each Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) FBR or a Holder shall have the same rights to contribution as
FBR or such Holder, as the case may be, and each Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) the Company, and each officer, director, partner, member, manager,
employee, representative or agent of the Company shall have the same rights to contribution as the Company. Any party entitled to contribution will, promptly after receipt of notice of commencement of any Proceeding against such party in respect of
which a claim for contribution may be made against another party or parties, notify each party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this Section 6 or otherwise, except to the extent that any party is actually and materially prejudiced by the failure to give notice. No Person guilty of fraudulent

  

 22 

 
misrepresentation (within the meaning of Section 11(f) of the Securities Act), shall be entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation. 
  
 (f) The indemnity and
contribution agreements contained in this Section 6 will be in addition to any liability which the Indemnifying Parties may otherwise have to the Indemnified Parties referred to above. The Purchaser Indemnitee’s obligations to contribute
pursuant to this Section 6 are several in proportion to the respective number of Registrable Shares sold by each of the Purchaser Indemnitees hereunder and not joint. 
  
 7. Market Stand-off Agreement 
  

Each Holder hereby agrees that it shall not, to the extent requested in writing by the Company or a managing underwriter of securities of the Company,
directly or indirectly sell, offer to sell (including without limitation any short sale), pledge, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of
or otherwise dispose of or transfer any Registrable Shares or other shares of Common Stock or any securities convertible into or exchangeable or exercisable for shares of Common Stock then owned by such Holder (other than to donees or partners of
the Holder who agree to be similarly bound) for a period commencing thirty (30) days prior to the effective date of the IPO Registration Statement of the Company filed under the Securities Act and ending (x) in the case of the Original
Holders and the Management Holders, one hundred eighty (180) days following such effective date; and (y) in the case of all other Holders, sixty (60) days following such effective date; provided, however, that:

  
 (a) the restrictions above shall not apply to Registrable
Shares sold pursuant to the IPO Registration Statement; 
  
 (b)
all executive officers and directors of the Company then holding shares of Common Stock or securities convertible into or exchangeable or exercisable for shares of Common Stock enter into similar agreements for not less than the entire time period
required of the Original Holders and the Management Holders hereunder; and 
  
 (c) the Holders shall be allowed any concession or proportionate release allowed to any Original Holders, Management Holder or executive officer or director of the Company that entered into similar agreements (with
such proportion being determined by dividing the number of shares being released with respect to such Original Holders, Management Holder, executive officer or director by the total number of issued and outstanding shares held by such Original
Holders, Management Holder, executive officer or director); provided, that nothing in this Section 7(c) shall be construed as a right to proportionate release for the Original Holders, the Management Holders or the executive officers and
directors of the Company upon the expiration of the sixty (60) day period applicable to all Holders other than the Original Holders, the Management Holders and the executive officers and directors of the Company. 
  
 In order to enforce the foregoing covenant, the Company shall have the right
to place restrictive legends on the certificates representing the securities subject to this Section 7 and to impose stop transfer instructions with respect to the Registrable Shares and such other securities 

  

 23 

 
of each Holder (and the securities of every other Person subject to the foregoing restriction) until the end of such period. 
  
 8. Termination of the Company’s Obligation 
  
 Subject to Section 10(l), the Company shall have no further obligations
pursuant to this Agreement at such time as no Registrable Shares are outstanding. 
  
 9. Limitations on Subsequent Registration Rights 
  
 From and after the date of this Agreement, the Company shall not, without the prior written consent of Holders beneficially owning not less than a majority of the then outstanding Registrable Shares, enter into any
agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder (a) to include such securities in any Registration Statement filed pursuant to the terms hereof, unless under
the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such holder’s or prospective holder’s securities will not reduce the amount of
Registrable Shares of the Holders included in the Registration Statement, or (b) to have such holder’s or prospective holder’s securities registered on a registration statement that could be declared effective prior to the effective
date of any Registration Statement filed pursuant to this Agreement. 
  
 10.
Miscellaneous 
  
 (a) Remedies.
In the event of a breach by the Company of any of its obligations under this Agreement, each Holder, in addition to being entitled to exercise all rights provided herein or, in the case of FBR, in the Purchase/Placement Agreement, or granted by law,
including recovery of damages, will be entitled to specific performance of its rights under this Agreement. Subject to Section 6, the Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. 
  
 (b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given, without the written consent of the Company and Holders beneficially owning
not less than a majority of the then outstanding Registrable Shares; provided, however, that for purposes of this Section 10(b), Registrable Shares that are owned, directly or indirectly, by an Affiliate of the Company shall not be
deemed to be outstanding. No amendment shall be deemed effective unless it applies uniformly to all Holders. Notwithstanding the foregoing, a waiver or consent to or departure from the provisions hereof with respect to a matter that relates
exclusively to the rights of a Holder whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of any other Holder may be given by such Holder;
provided that the provisions of this sentence may not be amended, 

  

 24 

 
modified or supplemented except in accordance with the provisions of the immediately preceding sentence. 
  
 (c) Notices. All notices and other communications, provided for or
permitted hereunder shall be made in writing and delivered by facsimile (with receipt confirmed), overnight courier or registered or certified mail, return receipt requested, or by telegram: 
  
 (i) if to a Holder, at the most current address given by the
transfer agent and registrar of the Common Stock; and 
  
 (ii) if to the Company at the offices of the Company at 7515 Irvine Center, Dr., Irvine, California, 92618, Attention: General Counsel; (facsimile (949) 341-2248). 
  
 Receipt of any notice sent pursuant to this Agreement shall be deemed to occur (x) One (1) Business Day after sending by facsimile
(with receipt confirmed), (y) two (2) Business Days after sending by overnight courier or (z) five (5) days after mailing by the party giving such notice. The Company shall cause the transfer agent to use commercially reasonable
efforts to maintain current addresses of the Holders. 
  
 (d)
Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties hereto, including, without limitation and without the need for an express assignment or
assumption, subsequent Holders. The Company agrees that the Holders shall be third party beneficiaries to the agreements made hereunder by FBR and the Company, and each Holder shall have the right to enforce such agreements directly to the extent it
deems such enforcement necessary or advisable to protect its rights hereunder; provided, however, that such Holder fulfills all of its obligations hereunder. 
  
 (e) Stock Legend. In addition to any other legend that may appear on the stock certificates evidencing the
Registrable Shares, for so long as any Shares remain Registrable Shares each stock certificate evidencing such Registrable Shares shall contain a legend to the following effect: “THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND
ENTITLED TO THE OBLIGATIONS AND BENEFITS OF A CERTAIN REGISTRATION RIGHTS AGREEMENT, DATED DECEMBER 28, 2004”. 
  
 (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 
  
 (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

  
 (h) Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE (INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW BUT EXCLUDING ALL OTHER CHOICE OF LAW
AND 

  

 25 

 
CONFLICTS OF LAWS RULES). EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT OF
THE SOUTHERN DISTRICT OF NEW YORK OR ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 
  
 (i) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties hereto that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable. 
  
 (j)
Entire Agreement. This Agreement, together with the Purchase/Placement Agreement, is intended by the parties hereto as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained herein and therein. Without limiting the foregoing, this Agreement supersedes, terminates and replaces all existing stockholders’ agreements and registration rights
agreements relating to the equity securities of the Company or PCHLI, including, without limitation, the Registration Rights Agreement dated as of May 5, 2002, by and among Lehman and PCHLI, and any and all amendments and/or supplements
thereto. 
  
 (k) Registrable Shares Held by the Company or its
Affiliates. Whenever the consent or approval of, or a selection by, the Holders of a specified percentage of Registrable Shares is required hereunder, Registrable Shares held by the Management Holders, the Original Holders, the Company or their
Affiliates (excluding, if necessary, FBR) shall not be counted in determining the number of then outstanding Registrable Shares or the number of Registrable Shares providing such consent, approval or selection. 
  
 (l) Survival. This Agreement is intended to survive the consummation
of the transactions contemplated by the Purchase/Placement Agreement. The indemnification and contribution obligations under Section 6 and the Company’s obligations under this Section 10 shall survive the termination of the
Company’s obligations under Section 2 and Section 8 of this Agreement. 
  
 [Signature Page Follows] 
  

 26 

 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

  

			
	PEOPLE’S CHOICE FINANCIAL CORPORATION
		
	By:	 	 /s/ Neil Kornswiet

	 Name: Neil Kornswiet

	 Title:

  

			
	FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
		
	By:	 	 /s/ James R. Kleeblatt

	 Name: James R. Kleeblatt

	 Title: Senior Managing Director

  
  
 [SIGNATURE PAGE TO PEOPLE’S CHOICE REGISTRATION RIGHTS AGREEMENT] 

			
	LEHMAN COMMERCIAL PAPER, LLC
		
	By:	 	 /s/ Fred Madonna

	 Name: Fred Madonna

	 Title: Authorized Signatory

  
  
 [SIGNATURE PAGE TO PEOPLE’S CHOICE REGISTRATION RIGHTS AGREEMENT] 

 MANAGEMENT HOLDERS 
  
  

			
	1-2-3 MORTGAGE, LLC
		
	By:	 	/s/ Neil Kornswiet
	 Name:

	 Title:

  

	
	
	/s/ Neil Kornswiet
	 Neil Kornswiet

  

			
	
	CLOUD NINE AVIATION LLC
		
	By:	 	/s/ Neil Kornswiet
	 Name:

	 Title:

  

	
	
	/s/ Brad Plantiko
	 Brad Plantiko

  

	
	
	/s/ Reyes Topete
	 Reyes Topete

  

	
	
	/s/ Dwayne Barfell
	 Dwayne Barfell

  
  
 [SIGNATURE PAGE TO PEOPLE’S CHOICE REGISTRATION RIGHTS AGREEMENT] 

 ORIGINAL HOLDERS 
  

	
	/S/ Rob Anthony
	 Rob Anthony

  

	
	
	/s/ Scott Gerrity
	 Scott Gerrity

  

	
	
	/s/ Pam Ingalls
	 Pam Ingalls

  

	
	
	/s/ Laura Kabir
	 Laura Kabir

  

	
	
	/s/ Dana Lantry
	 Dana Lantry

  

	
	
	/s/ David Rae
	 David Rae

  

	
	
	/s/ Denise Schnur
	 Denise Schnur

  

	
	
	/s/ Patrick Sheedy
	 Patrick Sheedy

  

	
	
	/s/ Ellis Weinstein
	 Ellis Weinstein

  

	
	
	/s/ George Valverde
	 George Valverde

  
  
 [SIGNATURE PAGE TO PEOPLE’S CHOICE REGISTRATION RIGHTS AGREEMENT] 

 Exhibit A 
  

Management Holders 
  
 1-2-3 Mortgage, LLC 
  
 Neil Kornswiet 
  
 Cloud Nine Aviation LLC 
  
 Brad Plantiko 
  
 Reyes Topete 
  
 Dwayne Barfell 
  
 Rob Anthony 
  
 Other Original Holders 
  
 Scott Gerrity 
  
 Pam Ingalls 
  
 Laura Kabir 
  
 Dana Lantry 
  
 David Rae 
  
 Denise Schnur 
  
 Patrick Sheedy 
  
 Ellis Weinstein 
  
 George ValverdeAmended and Restated Stockholders Agreement

 Exhibit 4.3 
  

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT 
  
 AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this “Agreement”), dated as of December 28, 2004, among PEOPLE’S CHOICE FINANCIAL
CORPORATION, a Maryland corporation (the “Company”), PEOPLE’S CHOICE HOME LOAN, INC., a Wyoming corporation (“PCHLI”), LEHMAN COMMERCIAL PAPER INC. (“Buyer” together with its respective successors and
assigns, being a “Tag-Along Investors” and, collectively, the “Tag-Along Investors”), Neil Kornswiet (together with his respective Related Parties, collectively, the “Principals”). In this Agreement, a
“Related Party” shall include, with respect to any Principal, (A) any spouse or immediate family member (in the case of an individual) of such Principal, or (B) a trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners or persons beneficially holding an 80% or more controlling interest of which consist of such Principal and/or such other persons referred to in the immediately preceding clause (A); provided, however, for purposes of the
Tag-Along Rights and the Right, a Related Party shall not include 1-2-3 Mortgage, LLC (“123”), to the extent that the circumstances or event that would otherwise give rise to the exercise by Buyer of such right is a transfer, sale or
disposition, directly or indirectly, of Shares issuable upon the exercise of options, or to the options themselves, contributed to 123 by Reyes Topete or Dwayne Barfell. 
  
 RECITALS 
  
 WHEREAS, PCHLI and the Buyer have entered into a Master Repurchase Agreement Governing Purchases and Sales of Mortgage Loans and Working Capital dated as
of May 5, 2000 (the “Master Repurchase Agreement”; capitalized terms used herein and not defined herein shall have the meanings specified in the Master Repurchase Agreement) pursuant to which Buyer agreed with PCHLI from time to
time to enter into transactions in which PCHLI would (A) on the designated purchase date sell to Buyer certain residential first and second lien mortgage loans which conform to PCHLI’s underwriting guidelines against transfer of the purchase
price therefor by Buyer and (B) simultaneously agree to purchase such mortgage loans from Buyer at a date subsequent to the purchase date against payment of the repurchase price. 
  
 WHEREAS in connection with the Master Repurchase Agreement, on May 5, 2000, PCHLI entered into a Stockholders Agreement,
dated May 5, 2000, with the Buyer and Neil Kornswiet (the “Stockholders Agreement”); 
  
 WHEREAS, the Company has entered into an agreement and plan of merger (the “Merger Agreement”), dated as of December 28, 2004, pursuant to which the Company will acquire all of the issued and outstanding
shares of capital stock of PCHLI; 
  
 WHEREAS, in connection with
the consummation of the transactions contemplated by the Merger Agreement, the Buyer shall, among other matters amend existing warrants to provide for the purchase shares of common stock of the Company rather than the purchase of shares of common
stock of PCHLI and shall be entitled to certain registration rights with respect thereto; 

 WHEREAS, further in connection with the consummation of the transactions contemplated by the Merger
Agreement, the parties to the Stockholders Agreement desire to add PCFC as a party and amend and restate such agreement in accordance with the terms hereof; 
  
 WHEREAS, immediately following the consummation of the transactions contemplated by the Merger Agreement, the Company expects to consummate a private
offering of securities (the “Private Placement”) as generally described in that certain preliminary offering memorandum dated December 6, 2004; 
  
 WHEREAS, the parties hereto desire to set forth the terms and conditions of this new stockholders agreement; 
  
 NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows. 
  
 AGREEMENT 
  
 SECTION 1. Defined Terms. 
  
 (a) Capitalized terms used and not otherwise defined herein are used with
the meanings attributed thereto in the Master Repurchase Agreement. 
  
 (b) As used in this Agreement: 
  
 “Common Stock” means the shares of common stock, par value $.01 per share, of the Company now owned and hereafter acquired by the Investors, together with any securities exercisable for or convertible into or exchangeable
for shares of Common Stock, sometimes referred to herein as the “Shares” (it being understood that all securities exercisable for or convertible into or exchangeable for shares of Common Stock shall be treated on any date as if they
had been exercised, converted or exchanged into Common Stock on that date and shall be deemed to represent the number of shares of Common Stock that would be issued upon such exercise, conversion or exchange). 
  
 “Investors” means the Tag-Along Investors
and the Principals. 
  
 SECTION 2. Tag-Along Right. 
  
 With respect to any proposed transfer, sale or other disposition (each, a
“proposed transfer”) of Shares by the Principals to a person (such other person being hereinafter referred to as the “proposed purchaser” each Tag-Along Investor shall each, have the right (the “Tag-Along,
Right”) to require the proposed purchaser to purchase all or any portion of such Tag-Along Investor’s Pro Rata Allocation (hereinafter defined) of the Shares proposed to be transferred simultaneously with consummating the proposed
transfer. A Tag-Along Investor’s “Pro Rata Allocation” of the Shares proposed to be transferred shall equal the total number of Shares proposed to be transferred, multiplied by a fraction, the numerator of which is the total
number of Shares held by such Tag-Along Investor, and the denominator of which is the total number of 

  

 2 

 
Shares held by all Tag-Along Investors and the Principal(s) proposing to transfer Shares in the proposed transfer. Any Shares purchased from Tag-Along
Investors pursuant to this Section 2 shall be purchased at the same price per share and upon terms and conditions no less favorable as such proposed transfer by the Principal(s), it being agreed, however, that (i) any Tag-Along Investor shall be
entitled to elect to be paid in cash in lieu of receiving any non-cash consideration (the amount of such cash to be determined based on the fair market value by an investment banking firm (or, if an investment banking firm is generally not qualified
to render such a determination, by an appraisal firm) of recognized national standing), and (ii) such terms and conditions shall not include the making of any representations and warranties, indemnities or other similar agreements other than
representations and warranties with respect to title of the Shares being sold and authority to sell such Shares and indemnities related thereto (“Title Representations”). The Principals shall, not less than 20 nor more than 60 days
prior to each proposed transfer, notify, or cause to be notified, each Tag-Along Investor in writing of each such proposed transfer. Such notice (the “Transfer Notice”) shall set forth: (i) the name of the transferor and the number
and description of Shares proposed to be transferred, (ii) the name and address of the proposed purchaser(s), (iii) the proposed amount and form of consideration and terms and conditions of payment offered by such proposed purchaser(s), (iv) each
Tag-Along Investor’s Pro Rata Allocation of the Shares proposed to be transferred, and (v) that the proposed purchaser has been informed of the Tag-Along Right provided for in this Section 2 and has agreed to purchase Shares in accordance with
the terms hereof. Each of the Principals hereby agrees not to transfer any Shares indirectly in a manner that would be inconsistent with the essential intent of this Section 2. For purposes of this Section 2, any transfer of an equity interest of an
entity that was formed for the purpose of acquiring Shares shall be deemed to be a transfer of such portion of the Shares, as applicable, owned by such entity as corresponds to the portion of the equity of such entity that has been so transferred,
including, but not limited to, Neil Kornswiet’s membership interest in 123; provided, however, that this Section 2 shall not apply to any transfer, sale or other disposition, directly or indirectly, of Shares issuable upon the exercise of
options, or to the options themselves, contributed to 123 by Reyes Topete or Dwayne Barfell. 
  
 The Tag-Along Right may be exercised by any Tag-Along Investor by delivery of a written notice to the Principal(s) proposing to sell Shares (the “Tag-Along Notice”) within 10 business days following
its receipt of the Transfer Notice. The Tag-Along Notice shall state the number of Shares (in each case, ‘Tag-Along Shares”) that such Tag-Along Investor proposes to include in such transfer to the proposed purchaser, which number
of Shares shall not exceed such Tag-Along Investor’s Pro Rata Allocation of the Shares proposed to be transferred. Delivery of the Tag-Along Notice by any Tag-Along Investor shall constitute an agreement by such Tag-Along Investor to sell, on
the terms and conditions specified in the Transfer Notice, the Tag-Along Shares to the proposed purchaser specified in the Transfer Notice. In the event that the proposed purchaser does not purchase the Tag-Along Shares from the Tag-Along Investors
on the same terms and conditions as specified in the Transfer Notice, then the Principal(s) shall not be permitted to sell any Shares to the proposed purchaser in the proposed transfer. If no Tag-Along Notice is received during the 10-business day
period referred to above, the Principal(s) shall have the right thereafter, prior to the expiration of 90 days from the date of the Transfer Notice, to transfer the Shares specified in the Transfer Notice (or a portion thereof) on terms and
conditions no more favorable than those stated in the Transfer Notice and in accordance with the provisions of this Section 2. Any Related Party who was a purchaser or other transferee of 

  

 3 

 
Shares pursuant to a transaction that was subject to the provisions of this Section 2 shall execute a counterpart to this Agreement and shall thereafter be
treated as a Principal for all purposes under this Agreement. 
  
 The Company agrees not to effect any transfer of Shares by any Investor, and to instruct the transfer agent for the Common Stock not to effect any such transfer of Shares, until the Company and each such transfer agent have received
evidence reasonably satisfactory to it that the Tag-Along Right, if applicable to such transfer, and all other requirements of this Section 2 have been complied with. 
  
 The provisions of this Section 2 shall not apply to (i) a sale to the public pursuant to Rule 144 or an effective
registration statement, (ii) any transfer of Shares the consideration paid with respect to which is no greater than the original cost of such Shares; provided that such transfer is from one or more Principals to one or more other Principals or their
respective Related Parties; provided, further, that all such transfers to other Principals or such Principals’ respective Related Party shall not exceed 10% of the issued and outstanding Shares held by a Principal, (iii) the contribution of
Shares by Neil Kornswiet, Reyes Topete and Dwayne Barfell into 123 (iv) the sale of shares by 123 attributable to Neil Kornswiet or Reyes Topete in connection with the Private Placement or (v) the transfer, sale or other disposition, directly or
indirectly, of Shares issuable upon the exercise of options, or the options themselves, contributed to 123 by Reyes Topete or Dwayne Barfell. 
  
 SECTION 3. Preemptive Rights. 
  
 The Company shall not issue (an “Issuance”) additional equity interests to any Principal or any Related Party of any Principal unless (i)
such issuance was pursuant to the terms of the 2004 Stock Incentive Plan of the Company, or other incentive plan of PCFC, in each case with such issuance being approved by a compensation committee comprised solely of independent directors or
approved by a majority of the independent directors of the full board of directors of PCFC or (ii) prior to such Issuance, the Company notifies each Tag-Along investor in writing of the Issuance and grants to such Tag-Along Investor the right (the
“Right”) to subscribe for and purchase such additional equity interests of the same class so issued at the same price and on the same terms and conditions as issued in the Issuance such that, after giving effect to the Issuance and
exercise of the Right (including, for purposes of this calculation, equity interests issuable upon conversion, exchange or exercise of any security so convertible, exchangeable or exercisable issued in the Issuance or subject to the Right), the
Shares owned by such Tag-Along Investor (rounded, in each case, to the newest whole Share) shall represent the same percentages of the outstanding Common Stock as were owned by such Tag-Along Investor prior to the Issuance relative to the Principal
or Related Party, as the case may be. The Right may be exercised by such Tag-Along Investor at any time by written notice to the Company received by the Company within 15 days after receipt of notice from the Company of the Issuance, and the closing
of the purchase and sale pursuant to the exercise of the Right shall occur at least 10 days after the Company receives notice of the exercise of the Right and prior to or concurrently with the closing of the Issuance. 
  

 4 

 Notwithstanding the foregoing, the Right shall not apply (i) prior to the exercise of the Warrants by the
Buyer, (ii) to any issuance, pro rata to all holders of Common Stock (or securities convertible into or exchangeable for, or options to purchase, Common Stock) as a dividend on, subdivision of, or other distribution in respect of; the Common Stock;
(iii) to the conversion or exchange of securities convertible or exchangeable for Common Stock outstanding on the date hereof; (iv) to the issuance of Common Stock upon the exercise of options, rights or warrants issued to the holders of Common
Stock outstanding on the date hereof (including the issuance of Common Stock upon the exercise of options contributed to 123 by Reyes Topete or Dwaye Barfell). 
  

SECTION 4. Miscellaneous. 
  
 (a) [Intentionally Deleted.] 
  
 (b) Legend. The Investors agree that each certificate representing any Shares (or securities exercisable for or convertible into or exchangeable
for Shares) shall bear the following legend until such time as the same is no longer applicable: 
  
 “THE SHARES OF COMMON STOCK OR OTHER SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF, AND ARE ENTITLED TO THE BENEFITS SET
FORTH IN, A STOCKHOLDERS AGREEMENT DATED AS OF DECEMBER      2004, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE COMPANY. THE COMPANY WILL FURNISH A COPY OF SUCH STOCKHOLDERS AGREEMENT TO THE RECORD HOLDER HEREOF WITHOUT
CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.” 
  
 Promptly after the date hereof, the Company will use its best efforts to reissue certificates representing any outstanding Shares (or
securities exercisable for or convertible into or exchangeable for Shares) which do not contain the legend set forth above with certificates bearing such legend. 
  
 (c) Successors, Assigns and Transferees. This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective legal representatives, heirs, legatees, successors and assigns including any Related Party to which any Investor has transferred or sold any of his or its Shares. Each Related Party, as transferee of Shares from a party
hereto, shall take such Shares subject to the same restrictions and entitled to the same benefits as existed in the hands of the transferor except that all Shares acquired by a Principal from whatever source will be treated as if they were owned by
such Principal on the date hereof. 
  

 5 

 (d) Specific Performance, Etc. The Company and each Investor, in addition to being entitled to
exercise all rights provided herein, in the Company’s Amended and Restated Articles of Incorporation or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and
each of the Investors agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate. 
  
 (e) Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE STATE OF NEW YORK. 
  
 (f) Interpretation. The headings of the sections contained in this Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not affect the meaning or interpretation of this Agreement. 
  
 (g) Notices. All notices, requests and other communications provided for herein shall be in writing and shall be delivered or sent by registered, certified or express mail, postage prepaid, return receipt
requested, or given or made by facsimile, in each case, to the parties at the following addresses; or, as to any party, at such other address as shall be designated by such party in a written notice to each other party. All such notices, requests
and other communications shall be deemed to have been duly given when transmitted by facsimile or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. The Company agrees to furnish the
addresses of the Principals in respect to clause (iii) below to a Tag-Along Investor at its request. 
  

	 	(i)	If to the Company, at: 

  
 People’s Choice Financial Corporation 
 7515 Irvine Center, Dr. 
 Irvine, California 92618 
 Attention: Neil Kornswiet 
 Facsimile No.: (949) 453-9146 
 Telephone No.: (949) 466-4131 
  
 with copies to: 
  
 Hunton & Williams LLP 
 951 East Byrd
Street 
 Richmond, Virginia 23219-4074 
 Attn: Daniel Lebey 
 Facsimile No.: (804) 343-4543 
 Telephone No.: (804) 788-7366 
  

	 	(ii)	If to any Tag-Along Investor, at: 

  
 Its address as shown below its signature hereto or, from and after the time it acquires any Shares, in the stock register of the Company 
  

 6 

	 	(iii)	If to a Principal, at: 

  
 Its address as shown in the stock register of the Company. 
  
 and, in the event of notice given under (i), (ii), or (iii) hereof, with a copy to: 
  
 Sidley Austin Brown & Wood LLP 
 787 Seventh Avenue 
 New York, New York 10019 
 Attention: Brian Krisberg 
 Facsimile No.:
(212) 839-5599 
 Telephone No.: (212) 839-8735 
  
 (h) Recapitalizations, Exchange, Etc, Affecting the Company’s Stock. The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to the Common Stock, to any and all shares of capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets, or otherwise) that may be issued in respect of, in
exchange for, or in substitution of the Common Stock and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof. 
  
 (i) Inspection and Compliance with Law. Copies of this Agreement will
be available for inspection or copying by any Investor at the offices of the Company through the Secretary of the Company. The Company shall take all reasonable action to insure that the provisions of New York law relating to agreements similar to
this Agreement are promptly complied with. 
  
 (j)
Counterparts. This Agreement may be executed in one or more counterparts, by the original parties hereto and any successor in interest, each of which shall be deemed to be an original and all of which together shall be deemed to constitute
one and the same agreement. 
  
 (k) Attorneys’ Fees.
In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys’ fees in addition to any
other available remedy. 
  
 (1) Severability. In the event
that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby. 
  

 7 

 (m) Prior Agreement. The parties hereto acknowledge and agree that the Stockholders Agreement is
amended and restated in its entirety and is replaced and superceded by this Amended and Restated Stockholders Agreement, and that this Amended and Restated Stockholders Agreement constitutes the entire understanding of the parties hereto with
respect to the subject matter hereof. 
  
 (n) Termination.
This Agreement shall terminate and have no further force or effect upon the effective date of the Company’s registration of the Common Stock under Section 13 or 15 of the Securities Exchange Act of 1934, as amended. 
  
 [Signature Page Follows] 
  

 8 

 IN WITNESS WHEREOF, the parties have executed this Stockholders Agreement as of the date first above
written. 
  

					
	PEOPLE’S CHOICE FINANCIAL CORPORATION
		
	By:	 	/s/    NEIL B.
KORNSWIET        
	 	 	 Name:
	 	 
	 	 	 Title:
	 	CEO
	
	LEHMAN COMMERCIAL PAPER INC.
		
	By:	 	/s/    FRED C.
MADONNA        
	 	 	 Name:
	 	Fred C. Madonna
	 	 	 Title:
	 	Authorized Signature
	
	Address for Notices:
	
	 Lehman Commercial Paper Inc.
 745-7th Avenue
 New York, New York 10019
 Attention: Fred Madonna
 Facsimile No.: (646) 758-2116
 Telephone No.: (212) 526-9249

	
	/s/    NEIL B.
KORNSWIET        
	Neil B. Kornswiet
	
	PEOPLE’S CHOICE HOME LOAN, INC.
		
	By:	 	/s/    NEIL B.
KORNSWIET        
	 	 	 Name:
	 	 
	 	 	 Title:
	 	CEO

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