Common Stock Warrant Agreement September 30, 2006
September
30, 2006
NEITHER
THIS WARRANT, NOR THE STOCK TO BE ISSUED UPON EXERCISE HEREOF, HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 SECURITIES
ACT"), OR QUALIFIED OR REGISTERED UNDER ANY STATE SECURITIES LAWS (THE "STATE
SECURITIES LAWS"), AND THIS WARRANT HAS BEEN, AND THE COMMON STOCK TO BE ISSUED
UPON EXERCISE HEREOF WILL BE, ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO,
OR
FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF. NO SUCH SALE OR OTHER
DISPOSITION MAY BE MADE WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
1933 SECURITIES ACT AND COMPLIANCE WITH THE APPLICABLE STATE SECURITIES LAWS,
OR
AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE ISSUER AND ITS COUNSEL,
THAT SAID REGISTRATION IS NOT REQUIRED UNDER THE 1933 SECURITIES ACT AND THAT
APPLICABLE STATE SECURITIES LAWS HAVE BEEN COMPLIED WITH.
This
certifies that Xxxxxxx X. Xxxx, an individual ("Holder"), a having his principal
residence at 0000 Xxxxx Xxxxx, Xxxxxx, XX 00000, or any party to whom this
Warrant is assigned in compliance with the terms hereof, is entitled to
subscribe to and purchase, during the period commencing at the date first set
forth above and ending at 11:59 p.m. local time in Fort Xxxxx, Indiana, on
_________,(date), _________ shares of fully paid and nonassessable common stock,
having a par value of $0.001 per share (the "Common Stock" or “Shares”) of
Freedom Financial Holdings, Inc. (the "Company"), a corporation organized and
existing under the laws of Maryland with its principal place of business at
000
Xxxx
Xxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000.
The
purchase price of each such share shall be the Warrant Price as defined below.
This Warrant was originally issued to Holder pursuant to the Amended and
Restated Official Offer to Purchase Real Estate (as defined below).
ARTICLE
I
DEFINITIONS
1.1 "Common
Stock Equivalents" shall mean Convertible Securities and Rights.
1.2 "Convertible
Securities" means any securities which are directly or indirectly convertible
into Common Stock.
1.3 "Effective
Price" means the quotient obtained by dividing (i) Minimum Consideration by
(ii)
Maximum Shares Upon Exercise.
1.4 "Maximum
Shares Upon Exercise" means the maximum number of shares of Common Stock
issuable under a Common Stock Equivalent upon complete exercise and full
conversion of all Rights or Convertible Securities represented thereby, computed
without regard to contingent adjustments to the number of shares issuable upon
exercise and conversion (other than adjustments caused solely by the passage
of
time which increase the number of shares issuable upon exercise and
conversion).
1
1.5 "Minimum
Consideration" means the minimum aggregate consideration paid or payable at
any
time for the purchase of the Common Stock Equivalents during the term of the
Common Stock Equivalents, and upon complete exercise and full conversion of
the
Common Stock Equivalents, computed without regard to contingent adjustments
to
exercise or conversion price (other than adjustments caused solely by the
passage of time which reduce such minimum aggregate consideration).
1.6 "Amended
and Restated Official Offer to Purchase Real Estate" shall mean that certain
Amended and Restated Official Offer to Purchase Real Estate dated September
30,
2006 between Holder and the Company.
1.7 "Rights"
means any options, warrants, or rights to purchase Common Stock or Convertible
Securities.
1.8 "Warrant
Price" shall mean the price for the Initial Public Offering of Common Stock
in a
registration statement on Form SB-2 pursuant to the Securities Act of 1933,
as
amended (the “Act”).
ARTICLE
II
EXERCISE
AND PAYMENT
2.1 Cash
Exercise.
The
purchase rights represented by this Warrant may be exercised by Holder, in
whole
or in part, by the surrender of this Warrant at the principal office of the
Company, and by the payment to the Company, by certified, cashier's or other
check acceptable to the Company, of an amount equal to the aggregate Warrant
Price of the shares being purchased; provided, however, that this Warrant shall
not be exercised until one (1) year after the closing date of the offering
in
the registration statement on form SB-2 pursuant to the Act. Warrants shall
expire five (5) years from the close of the Initial Public
Offering.
2.2 Stock
Certificate.
In the
event of any exercise of the rights represented by this Warrant, certificates
for the shares of Common Stock so purchased shall be delivered to Holder within
a reasonable time and, unless this Warrant has been fully exercised or has
expired, a new Warrant representing the Aggregate Price with respect to which
this Warrant shall not have been exercised shall also be issued to Holder within
such time.
2.3 Stock
Fully Paid; Reservation of Shares.
The
Company covenants and agrees that all Common Stock which may be issued upon
the
exercise of the rights represented by this Warrant will, upon issuance, be
fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof (excluding taxes based on the income of Holder). The
Company further covenants and agrees that during the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized and reserved for issuance a sufficient number of shares
of
its Common Stock as would be required upon the full exercise of the rights
represented by this Warrant.
2
2.7 Fractional
Shares.
No
fractional share of Common Stock will be issued in connection with any exercise
hereof, but in lieu of a fractional share upon complete exercise hereof, Holder
may purchase a whole share at the then effective Warrant Price.
ARTICLE
III
CERTAIN
ADJUSTMENTS OF NUMBER OF
SHARES
PURCHASABLE AND WARRANT PRICE
The
number and kind of securities purchasable upon the exercise of this Warrant
and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
3.1 Reclassification,
Consolidation or Merger.
In case
of: (i) any reclassification or change of outstanding securities issuable upon
exercise of this Warrant; (ii) any consolidation or merger of the Company with
or into another corporation (other than a merger with another corporation in
which the Company is a continuing corporation and which does not result in
any
reclassification, change or exchange of outstanding securities issuable upon
exercise of this Warrant); or (iii) any sale or transfer to another corporation
of all, or substantially all, of the property of the Company, then, and in
each
such event, the Company or such successor or purchasing corporation, as the
case
may be, shall execute a new Warrant which will provide that Holder shall have
the right to exercise such new Warrant and purchase upon such exercise, in
lieu
of each share of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of securities, money and property receivable upon
such reclassification, change, consolidation, merger, sale or transfer by a
holder of one share of Common Stock issuable upon exercise of this Warrant
had
this Warrant been exercised immediately prior to such reclassification, change,
consolidation, merger, sale or transfer. Such new Warrant shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided in this Section 3 and the provisions of this Section 3.1,
shall similarly apply to successive reclassifications, changes, consolidations,
mergers, sales and transfers.
3.2 Subdivision
or Combination of Shares.
If the
Company shall at any time while this Warrant remains outstanding and unexercised
in whole or in part: (i) divide its Common Stock, the Warrant Price shall be
proportionately reduced; or (ii) combine shares of its Common Stock, the Warrant
Price shall be proportionately increased.
3.3 Adjustment
for Issue or Sale of Shares at Less Than the Warrant Price.
If, in
a transaction other than an issuance excepted from these provisions as set
forth
below or an issuance that causes an adjustment under Sections 3.1 or 3.2, the
Company shall at any time or from time to time, issue any additional shares
of
Common Stock without consideration or for a net consideration per share less
than the Warrant Price in effect immediately prior to such issuance, then,
and
in each case, the Warrant Price shall be lowered to an amount equal to the
lowest per share price received, or deemed received, by the Company as
consideration for such Shares.
3
For
purposes of this Section 3.3:
(i) There
shall be no adjustment under this Section 3.3 for any sales or issuances: (a)
in
a transaction in which an adjustment will be made pursuant to Section 3.1 or
3.2; (b) of any shares of Common Stock or Common Stock Equivalents issued
pursuant to any equity incentive plan approved by the Company's shareholders
and
Board of Directors; or (c) upon exercise or conversion of Common Stock
Equivalents outstanding on the original date of issuance of this
Warrant;
(ii) The
issuance of Common Stock Equivalents shall be deemed an issuance at such time
of
the shares of Common Stock underlying the Common Stock Equivalents. If the
Effective Price shall be less than the Warrant Price at the time of such
issuance, then an adjustment in the Warrant Price shall be made upon each such
issuance in the manner provided in this Section 3.3. No adjustment of the
Warrant Price shall be made under this Section 3.3 upon the issuance of shares
of Common Stock upon the exercise or conversion of Common Stock Equivalents
if
an adjustment has previously been made as above provided. Any adjustment of
the
Warrant Price shall be disregarded, if, as and when such Common Stock
Equivalents expire or are cancelled without being exercised so that the Warrant
Price effective immediately upon such cancellation or expiration shall be equal
to the Warrant Price in effect at the time of the issuance of the expired or
cancelled Common Stock Equivalents, with such additional adjustments as would
have been made to the Warrant Price had the expired or cancelled Common Stock
Equivalents not been issued.
3.4 Other
Action Affecting Common Stock.
If the
Company takes any action affecting its Common Stock after the date hereof
(including dividends and distributions), other than an action described in
any
of Sections 3.1 and 3.2 hereof, which would have a material effect upon Holder's
rights hereunder, the Warrant Price shall be adjusted downward in such manner
and at such time as the Board of Directors of the Company shall in good faith
determine to be equitable under the circumstances.
3.5 Time
of Adjustments to the Warrant Price.
All
adjustments to the Warrant Price and the number of shares purchasable hereunder,
unless otherwise specified herein, shall be effective as of the earlier
of:
(i) the
date
of issue (or date of sale, if earlier) of the security causing the
adjustment;
(ii) the
effective date of a division or combination of shares;
(iii) the
record date of any action of holders of the Company's capital stock of any
class
taken for the purpose of dividing or combining shares or entitling shareholders
to receive a distribution or dividends.
3.6 Notice
of Adjustments.
In each
case of an adjustment in the Warrant Price and the number of shares purchasable
hereunder, the Company, at its expense, shall cause the Treasurer of the Company
to compute such adjustment and prepare a certificate setting forth such
adjustment and showing in detail the facts upon which such adjustment is based.
The Company shall promptly mail a copy of each such certificate to Holder
pursuant to Section 7.9 hereof.
4
3.7 Duration
of Adjusted Warrant Price.
Following each adjustment of the Warrant Price, such adjusted Warrant Price
shall remain in effect until a further adjustment of the Warrant
Price.
3.8 Adjustment
of Number of Shares.
Upon
each adjustment of the Warrant Price pursuant to this Section 3, the number
of
shares of Common Stock purchasable hereunder shall be adjusted to the nearest
whole share, to the number obtained by dividing the Aggregate Price by the
Warrant Price as adjusted.
ARTICLE
IV
TRANSFER,
EXCHANGE AND LOSS
4.1 Transfer.
This
Warrant is transferable on the books of the Company at its principal office
by
the registered Holder hereof upon surrender of this Warrant properly endorsed,
subject to compliance with federal and state securities laws. The Company shall
issue and deliver to the transferee a new Warrant or Warrants representing
the
Warrants so transferred. Upon any partial transfer, the Company will issue
and
deliver to Holder a new Warrant or Warrants with respect to the Warrants not
so
transferred.
4.2 Securities
Laws.
Upon
any issuance of shares of Common Stock upon exercise of this Warrant, it shall
be the Company's responsibility to comply with the requirements of: (1) the
1933
Securities Act; (2) the Securities Exchange Act of 1934, as amended; (3) any
applicable listing requirements of any national securities exchange; (4) any
state securities regulation or "Blue Sky" laws; and (5) requirements under
any
other law or regulation applicable to the issuance or transfer of such shares.
If required by the Company, in connection with each issuance of shares of Common
Stock upon exercise of this Warrant, the Holder will give: (i) assurances in
writing, satisfactory to the Company, that such shares are not being purchased
with a view to the distribution thereof in violation of applicable laws, (ii)
sufficient information, in writing, to enable the Company to rely on exemptions
from the registration or qualification requirements of applicable laws, if
available, with respect to such exercise, and (iii) its cooperation to the
Company in connection with such compliance.
4.3 Exchange.
This
Warrant is exchangeable at the principal office of the Company for Warrants
to
purchase the same Aggregate Price purchasable hereunder, each new Warrant to
represent the right to purchase such Aggregate Price as Holder shall designate
at the time of such exchange. Each new Warrant shall be identical in form and
content to this Warrant, except for appropriate changes in the number of shares
of Common Stock covered thereby, the Aggregate Price of such shares, the
percentage stated in Section 4.1 above, and any other changes which are
necessary in order to prevent the Warrant exchange from changing the respective
rights and obligations of the Company and the Holder as they existed immediately
prior to such exchange.
4.4 Loss
or Mutilation.
Upon
receipt by the Company of evidence satisfactory to it of the ownership of,
and
the loss, theft, destruction or mutilation of, this Warrant and (in the case
of
loss, theft, or destruction) of indemnity satisfactory to it, and (in the case
of mutilation) upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant.
5
ARTICLE
V
HOLDER
RIGHTS
5.1 No
Shareholder Rights Until Exercise.
No
Holder hereof, solely by virtue hereof, shall be entitled to any rights as
a
shareholder of the Company. Holder shall have all rights of a shareholder with
respect to securities purchased upon exercise hereof at the time of cash or
net
issue exercise pursuant to Sections 2.1 and 2.2 hereof, or at the time of
automatic exercise hereof (even if not surrendered) pursuant to Section 2.5
hereof.
ARTICLE
VI
REGISTRATION
RIGHTS
6.1 Agreement.
The Holder and the Company have entered in a Registration Rights Agreement
of
even date.
ARTICLE
VII
MISCELLANEOUS
7.1 Additional
Covenants by the Company.
The
Company further covenants and agrees that it will:
(a) Give
each
Holder prompt written notice of any intended changes to the composition of
its
capital structure, whether by issuance of new securities or
otherwise;
(b) Give
each
Holder written notice of any shareholders' meeting and will allow a
representative of each Holder to attend such meetings;
(c) Give
each
Holder five (5) days' prior written notice of any action that the Company
intends to take by shareholders' written consent;
(d) Allow,
upon reasonable notice and at reasonable times, the inspection of its minute
book and other corporate records by a representative of the Holder;
(e) Not
engage, other than on arm's-length terms, in any transaction with any of its
shareholders or affiliates (as such term is defined under Rule 144 issued by
the
Securities and Exchange Commission under the 1933 Securities Act, as
amended);
(f) Provide
Holder, within sixty (60) days after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Company, quarterly
financial statements reflecting its operations for the quarter, and within
ninety (90) days following the end of each fiscal year, consolidated financial
statements for the fiscal year; and
6
(g) Keep
its
properties insured in terms reasonably acceptable to Holder.
7.2 Governmental
Approvals.
The
Company will from time to time take all action which may be necessary to obtain
and keep effective any and all permits, consents and approvals of governmental
agencies and authorities and securities acts filings under federal and state
laws, which may be or become requisite in connection with the issuance, sale,
and delivery of this Warrant, and the issuance, sale and delivery of the shares
of Common Stock or other securities or property issuable or deliverable upon
exercise of this Warrant.
7.3 Governing
Laws.
It is
the intention of the parties hereto that except as set forth below, the internal
laws of Indiana (irrespective of its choice of law principles) shall govern
the
validity of this warrant, the construction of its terms, and the interpretation
and enforcement of the rights and duties of the parties hereto. Notwithstanding
the foregoing, if the Company is organized under the laws of a state other
than
Indiana, the corporation laws of that state shall govern the procedural and
substantive matters pertaining to the due authorization, issuance, delivery
and
exercise of this Warrant and the shares of Common Stock upon exercise hereof.
Except as set forth below, the parties hereby agree that any suit to enforce
any
provision of this Warrant arising out of or based upon this Warrant or the
business relationship between any of the parties hereto shall be brought in
the
federal district courts located in Indiana or the courts of such State. Each
party hereby agrees that such courts shall have personal jurisdiction and venue
with respect to such party and each party hereby submits to the personal
jurisdiction and venue of such courts. In addition to the foregoing
jurisdiction, Holder, at its sole option, may commence any such suit in any
jurisdiction in which the Company has a business office or is
incorporated.
7.4 Binding
Upon Successors and Assigns.
Subject
to, and unless otherwise provided in, this Warrant, each and all of the
covenants, terms provisions, and agreements contained herein shall be binding
upon, and inure to the benefit of the permitted successors, executors, heirs,
representatives, administrators and assigns of the parties hereto.
7.5 Severability.
If any
one or more provisions of this Warrant, or the application thereof, shall for
any reason and to any extent be invalid or unenforceable, the remainder of
this
Warrant and the application of such provisions to other persons or circumstances
shall be interpreted so as best to reasonably effect the intent of the parties
hereto. The parties further agree to replace any such void or unenforceable
provisions of this Warrant with valid and enforceable provisions which will
achieve, to the extent possible, the economic, business and other purposes
of
the void or unenforceable provisions.
7.6 Default,
Amendment and Waivers.
This
Warrant may be amended upon the written consent of the Company and the Holder.
The waiver by a party of any breach hereof for default in payment of any amount
due hereunder or default in the performance hereof shall not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
The failure to cure any breach of any term of this Warrant within thirty (30)
days of written notice thereof shall constitute an event of default under this
Warrant. Upon such event of default, the Warrant Price shall be reduced by
one-half and thereafter shall continue to be reduced by one-half from the then
adjusted Warrant Price for each successive 30-day period in which such breach
is
not cured.
7
7.7 No
Waiver.
The
failure of any party to enforce any of the provisions hereof shall not be
construed to be a waiver of the right of such party thereafter to enforce such
provisions.
7.8 Attorneys'
Fees.
Should
suit be brought to enforce or interpret any part of this Warrant, the prevailing
party shall be entitled to recover, as an element of the costs of suit and
not
as damages, reasonable attorneys' fees to be fixed by the court (including,
without limitation, costs, expenses and fees on any appeal). The prevailing
party shall be the party entitled to recover its costs of suit, regardless
of
whether such suit proceeds to final judgment. A party not entitled to recover
its costs shall not be entitled to recover attorneys' fees. No sum for
attorneys' fees shall be counted in calculating the amount of a judgment for
purposes of determining if a party is entitled to recover costs or attorneys'
fees.
7.9 Notices.
Whenever any party hereto desires or is required to give any notice, demand,
or
request with respect to this Warrant, each such communication shall be in
writing and shall be effective only if it is delivered by personal service
or
mailed, United States certified mail, postage prepaid, return receipt requested,
addressed to such party at its address stated at the beginning of this Warrant
or to such other address as such party may designate by written notice delivered
hereunder. Such communication shall be effective when they are received by
the
addressee thereof; but if sent by certified mail in the manner set forth above,
they shall be effective [number]
business days after being deposited in the United States mail. Any party may
change its address for such communications by giving notice thereof to the
other
party in conformity with this Section.
7.10 Time.
Time is
of the essence of this Warrant.
7.11 Construction
of Agreement.
This
Warrant has been negotiated by the respective parties hereto and their attorneys
and the language hereof shall not be construed for or against any
party.
7.12 No
Endorsement.
Holder
understands that no federal or state securities administrator has made any
finding or determination relating to the fairness of investment in the Company
or purchase of the Common Stock hereunder and that no federal or state
securities administrator has recommended or endorsed the offering of securities
by the Company hereunder.
7.13 Pronouns.
All
pronouns and any variations thereof shall be deemed to refer to the masculine,
feminine or neuter, singular or plural, as the identity of the person, persons,
entity or entities may require.
7.14 Further
Assurances.
Each
party agrees to cooperate fully with the other parties and to execute such
further instruments, documents and agreements and to give such further written
assurances, as may be reasonably requested by any other party to better evidence
and reflect the transactions described herein and contemplated hereby, and
to
carry into effect the intents and purposes of this Warrant.
8
| Freedom Financial Holdings, Inc. | Holder | |||
| |
|
|
||
| By: | // ss // | By: | // ss // | |
| Xxxxx Xxxxxxx, Chief Executive Officer | Xxxxxxx X. Xxxx | |||
9
