Registration Rights Agreement Class B Convertible Preferred
Class
B Convertible Preferred
THIS
REGISTRATION RIGHTS AGREEMENT is made as of the 6th
day of
February 2007 by and between Freedom Financial Holdings, Inc. (the “Company”), a
corporation organized and existing under the laws of the State of Maryland
having its principal place of business at Fort ▇▇▇▇▇, Indiana and ▇▇▇▇▇ ▇▇▇▇▇▇▇,
an individual, residing at ▇▇▇▇ ▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ who is referred
to
as the “Holder.” This agreement supersedes the registration rights agreement
between the Company and Holder dated December 2006.
In
consideration of the debt owed by the Company to Holder, by virtue of loans
Holder made to Company, the debt shall be converted into 152,294 shares of
the
Corporation's Class B Preferred Stock, $.001 par value, convertible to common
stock, $.001 par value in the aggregate (the "Shares") the parties agree as
follows:
1.
Definitions.
For
purposes of this Agreement:
(a)
The
term "Act" means the Securities Act of 1933, as amended, together with all
applicable regulations of the United States Securities and Exchange Commission
("SEC") promulgated thereunder.
(b)
The
term "register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement or similar document
in
compliance with the Securities Act of 1933, as amended, and the declaration
or
ordering of effectiveness of such registration statement or
document.
(c)
The
term "Registerable Securities" means: (1) the Shares; and (2) any Common Stock,
$.001 par value, of the Corporation issued as (or issuable upon the conversion
or exercise of any warrant, right, or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, any and all shares of the Corporation's preferred stock or
debt
instrument convertible by its terms into shares of the Corporation's Common
Stock, $.001 par value, now or hereafter owned by the Holder, excluding in
all
cases, however, any Registerable Securities sold by a person in a transaction
in
which his or her rights under this Agreement are not assigned.
(d)
The
number of shares of "Registerable Securities then outstanding" shall be
determined by the number of shares of Common Stock outstanding which are, and
the number of shares of Common Stock issuable pursuant to then exercisable
or
convertible securities which are, Registerable Securities.
(e)
The
term "Holder" means any person owning or having the right to acquire
Registerable Securities or any assignee thereof in accordance with Section
11 of
this Agreement.
2.
Incidental
or "Piggyback" Registration.
If
(but
without any obligation to do so) the Corporation proposes to register (including
for this purpose a registration effected by the Corporation for shareholders
other than the Holder) any of its Common Stock or other securities under the
Act
in connection with the public offering of such securities solely for cash (other
than a registration relating to the sale of securities to participants in a
Corporation stock option, stock purchase or similar plan, or a registration
on
any form which does not include substantially the same information as would
be
required to be included in a registration statement covering the sale of the
Registerable Securities), the Corporation shall, at that time, subject to the
provisions of Section 6 and any restrictions imposed by the Securities and
Exchange Commission and/or any state securities commissioners, cause to be
registered under the Act all of the Registerable Securities that such Holder
is
entitled to have registered pursuant to this Registration Rights Agreement,
the
Novation Agreement, and the Subscription Agreement between the Company and
Holder.
3.
Obligations
of the Corporation.
Whenever
required under this Agreement to effect the registration of any Registerable
Securities, the Corporation shall, as expeditiously as reasonably
possible:
(a)
Prepare and file with the SEC a registration statement with respect to such
Registerable Securities and use its best efforts to cause such registration
statement to become effective, and, upon the request of the Holder of a majority
of the Registerable Securities registered thereunder, keep such registration
statement effective for up to 180 days.
(b)
Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the
Act with respect to the disposition of all securities covered by such
registration statement.
(c)
Furnish to the Holder such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Act, and
such
other documents as they may reasonably request in order to facilitate the
disposition of Registerable Securities owned by them.
(d)
Use
its best efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holder, provided that
the
Corporation shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(e)
In
the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement.
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(f)
Notify each Holder of Registerable Securities covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the Act of the happening of any event as a result of which
the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(g)
Furnish, at the request of any Holder requesting registration of Registerable
Securities pursuant to this Agreement, on the date that such Registerable
Securities are delivered to the underwriters for sale in connection with a
registration pursuant to this Agreement, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective: (i) an opinion, dated such date, of the counsel
representing the Corporation for the purposes of such registration, in form
and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holder requesting
registration of Registerable Securities, and (ii) a letter dated such date,
from
the independent certified public accountants of the Corporation, in form and
substance as is customarily given by independent certified public accountants
to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holder requesting registration of Registerable
Securities.
4.
Furnish
Information.
It
shall
be a condition precedent to the obligations of the Corporation to take any
action pursuant to this Agreement with respect to the Registerable Securities
of
any selling Holder that such Holder shall furnish to the Corporation such
information regarding itself, the Registerable Securities held by it, and the
intended method of disposition of such securities as shall be required to effect
the registration of such Holder's Registerable Securities.
5.
Expenses
of Incidental or "Piggyback" Registration.
The
Corporation shall bear and pay all expenses incurred in connection with any
registration, filing or qualification of Registerable Securities with respect
to
the registrations pursuant to Section 2 for each Holder (which right may be
assigned as provided in Section 11), including without limitation all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the fees and disbursements of one counsel
for the selling Holder selected by them, but excluding underwriting discounts
and commissions relating to Registerable Securities.
6.
Underwriting
Requirements.
In
connection with any offering involving an underwriting of shares being issued
by
the Corporation, the Corporation shall not be required under Section 2 to
include any of the Holder's securities in such underwriting unless they accept
the terms of the underwriting as agreed upon between the Corporation and the
underwriters selected by it, and then only in such quantity as will not, in
the
opinion of the underwriters, jeopardize the success of the offering by the
Corporation. If the total amount of securities, including Registerable
Securities, requested by Holder to be included in such offering exceeds the
amount of securities sold other than by the Corporation that the underwriters
reasonably believe compatible with the success of the offering, then the
Corporation shall be required to include in the offering only that number of
such securities, including Registerable Securities, which the underwriters
believe will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling Holder according to the
total amount of securities entitled to be included therein owned by each selling
Holder or in such other proportions as shall mutually be agreed to by such
selling Holder) but in no event shall: (i) the amount of securities of the
selling Holder included in the offering be reduced below 50% of the total amount
of securities included in such offering, unless such offering is the initial
public offering of the Corporation's securities, in which case the selling
Holder may be excluded if the underwriters make the determination described
above and no other Holder's securities are included. For purposes of the
preceding parenthetical concerning apportionment, for any selling Holder which
is a partnership or corporation, the partners, retired partners and shareholders
of such Holder, or the estates and family members of any such partners and
retired partners and any trusts for the benefit of any of the foregoing persons
shall be deemed to be a single "selling Holder," and any pro rata reduction
with
respect to such "selling Holder" shall be based upon the aggregate amount of
shares carrying registration rights owned by all entities and individuals
included in such "selling Holder," as defined in this sentence.
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7.
Delay
of Registration.
No
Holder
shall have any right to obtain or seek an injunction restraining or otherwise
delaying any such registration as the result of any controversy that might
arise
with respect to the interpretation or implementation of this
Agreement.
8.
Indemnification.
In
the
event any Registerable Securities are included in a registration statement
under
this Agreement:
(a)
To
the extent permitted by law, the Corporation will indemnify and hold harmless
each Holder, any underwriters (as defined in the Act) for such Holder and each
person, if any, who controls such Holder or underwriters within the meaning
of
the Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"),
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively Violation): (i) any untrue statement
or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Corporation of the Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the act, the 1934
Act
or any state securities law; and the Corporation will pay as incurred to each
such Holder, underwriter or controlling person, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 8(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if
such
settlement is effected without the consent of the Corporation (which consent
shall not be unreasonably withheld), nor shall the Corporation be liable in
any
such case for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance
upon
and in conformity with written information furnished expressly for use in
connection with such registration by any such Holder, underwriter or controlling
person.
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(b)
To
the extent permitted by law, each selling Holder will indemnify and hold
harmless the Corporation, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the
Corporation within the meaning of the Act, any underwriter, any other Holder
selling securities in such registration statement and any controlling person
of
any such underwriter or other Holder, against any losses, claims, damages,
or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Act, the 1934 Act or other federal or state law, insofar
as
such losses, claims, damages, or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for
use
in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 8(b), in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
8(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided that
in no event shall any indemnity under this subsection 8(b) exceed the gross
proceeds from the offering received by such Holder.
(c)
Promptly after receipt by an indemnified party under this Section 8 of notice
of
the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against
any
indemnifying party under this Section 10, deliver to the indemnifying party
a
written notice of the commencement thereof and the indemnifying party shall
have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by
such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve
such
indemnifying party of any liability to the indemnified party under this Section
10, but the omission so to deliver written notice to the indemnifying party
will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10.
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(d)
The
obligations of the Corporation and Holder under this Section 10 shall survive
the completion of any offering of Registerable Securities in a registration
statement under this Agreement, and otherwise.
9. Reports
Under Securities Exchange Act of 1934.
With
a
view to making available to the Holder the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Corporation to the public without
registration the Corporation agrees to:
(a)
Make
and keep public information available, as those terms are understood and defined
in SEC Rule 144, at all times after 180 days after the effective date of the
first registration statement filed by the Corporation for the offering of its
securities to the general public;
(b)
File
with the SEC in a timely manner all reports and other documents required of
the
Corporation under the Act and the 1934 Act; and
(c)
Furnish to any Holder, so long as the Holder owns any Registerable Securities,
forthwith upon request: (i) a written statement by the Corporation that it
has
complied with the reporting requirements of SEC Rule 144 (at any time after
180
days after the effective date of the first registration statement filed by
the
Corporation), the Act and the 1934 Act (at any time after it has become subject
to such reporting requirements), (ii) a copy of the most recent annual or
quarterly report of the Corporation and such other reports and documents so
filed by the Corporation, and (iii) such other information as may be reasonable
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant
to
such form.
10.
Assignment
of Registration Rights.
The
rights to cause the Corporation to register Registerable Securities pursuant
to
this Agreement may be assigned by a Holder to a transferee or assignee of at
least 10,000 shares of such securities provided the Corporation is, within
a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect
to
which such registration rights are being assigned; and provided, further, that
such assignment shall be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignees
restricted under the Act. The foregoing 10,000 share limitation shall not apply,
however, to transfers by an Holder to shareholders or partners of such Holder
if
all such transferees or assignees agree in writing to appoint a single
representative as their attorney in fact for the purpose of receiving any
notices and exercising their rights under this Agreement.
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11. "Market
Stand-Off" Agreement.
Holder
hereby agrees that during the 180-day period following the close of the public
offering of the Corporation, it shall not, to the extent requested by the
Corporation and such underwriter, sell or otherwise transfer or dispose of
(other than to donees who agree to be similarly bound) any Common Stock of
the
Corporation held by it at any time during such period except Common Stock
included in such registration; provided, however, that:
(a)
Such
agreement shall be applicable only to the first such registration statement
of
the Corporation which covers Common Stock (or other securities) to be sold
on
its behalf to the public in an underwritten offering; and
(b)
All
officers and directors of the Corporation and all other persons with
registration rights (whether or not pursuant to this Agreement) enter into
similar agreements.
Additionally,
Holder hereby agrees that that for a
period
of up to 180 days after the Closing Date of the registration statement on Form
SB-2 relating to the public offering, Holder will not, directly or indirectly,
offer, sell, grant any options to purchase, or otherwise dispose of any shares
of Company Common Stock without prior written consent, except as
follows:
(a)
After
the
180 day period from the Closing Date, Holder may offer and sell 1/3 of the
Shares, subject to paragraph (d) below, provided that any such shares so sold
are sold for a price not less than 120% of the initial public offering
price;
(b)
After
the
270 day period from the Closing Date, each Investor may offer and sell up to
2/3
of the Shares, subject to paragraph (d) below, provided that any such shares
so
sold are sold for a price not less than 120% of the initial public offering
price;
(c)
After
the
360 day period from the Closing Date, each Investor may offer and sell all
of
the Shares, regardless of price, subject to paragraph (d) below;,
and
(d)
Each
Investor may transfer any number of such shares to his/her children, by gift
or
otherwise, provided that any such shares will continue to be subject to the
restrictions set forth in this letter.
Each
Investor acknowledges that the SEC may require that an Investor will not,
directly or indirectly, offer, sell, grant any options to purchase, or otherwise
dispose of any shares of Company Common Stock for a period longer than that
described in this Section 11.
In
order
to enforce the foregoing covenants, the Corporation may impose stop transfer
instructions with respect to the Registerable Securities of each Holder (and
the
shares or securities of ever other person subject to the foregoing restriction)
until the end of such period.
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12.
Amendment
of Registration Rights.
Any
provision of this Agreement may be amended and the observance thereof may be
waived (either generally or in a particular instance and either retroactively
or
prospectively), only with the written consent of the Corporation and the Holder
of a majority of the Registerable Securities then outstanding. Any amendment
or
waiver effected in accordance with this paragraph shall be binding upon each
Holder of any securities purchased under this Agreement at the time outstanding
(including securities into which such securities are convertible), each future
Holder of all such securities, and the Corporation.
13.
Termination
of Registration Rights.
No
Holder
shall be entitled to exercise any right provided for in this Agreement after
three (3) years following the consummation of the sale of securities pursuant
to
a registration statement filed by the Corporation under the Act in connection
with the initial firm commitment underwritten offering of its securities to
the
general public.
14. Termination
of Prior Registration Rights.
Any
and
all prior registration rights granted to any party hereto are hereby terminated
in their entirety and are replaced in their entirety with the rights contained
in this Agreement, effective on the date hereof. The provisions of this Section
14 shall be effective as to and as against all Holder of Registerable Securities
as defined herein.
15.
Miscellaneous.
(a)
Transfer; Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors
and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
(b)
Governing Law. This Agreement shall be governed by and construed under the
laws
of the State of Indiana as applied to agreements among Indiana residents entered
into and to be performed entirely within the State of Indiana.
(c)
Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(d)
Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.
(e)
Notices. Unless otherwise provided, any notice required or permitted under
this
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery to the party to be notified or upon deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party
on
the signature page hereof, or at such other address as such party may designate
by 20 days’ advance written notice to the other parties.
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(f)
Amendments and Waivers. Other than as provided in Section 16 above, any term
of
this Agreement may be amended and the observance of any term of this Agreement
my be waived either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the
Corporation and the Holder of a majority of the then outstanding Shares or
Registerable Securities issued hereunder. Any amendment or waiver affected
in
accordance with this Section shall be binding upon each transferee of any Share
or Registerable Securities, each future Holder of all such securities, and
the
Corporation.
(g)
Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
(h)
Entire Agreement. This Agreement constitutes the entire agreement between the
parties hereto pertaining to the subject matter hereof, and any and all other
written or oral agreements existing between the parties hereto are expressly
canceled.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
FREEDOM
FINANCIAL HOLDINGS, INC.
__________//s//______________
▇▇▇▇▇
▇▇▇▇, Secretary
HOLDER:
_______//s//________________
By:
▇▇▇▇▇
▇▇▇▇▇▇▇
Print
Name and Title: ▇▇▇▇▇
▇▇▇▇▇▇▇, CEO
| Address: | ▇▇▇▇ ▇. ▇▇▇ ▇ |
|
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
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