EXHIBIT 10.6
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT between FIRST EQUITY HOLDINGS CORP.,
COMPASS EQUITY PARTNERS and EMPIRE FUND MANAGERS, LLC, (referred to as the
"Investors"), and Pacific WebWorks, Inc., a corporation incorporated under the
laws of the State of Nevada, and having its principle place of business at 000
Xxxxx 000 Xxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000 (the "Company").
WHEREAS, simultaneously with the execution and delivery of this
Agreement and from time to time thereafter, the Investors are purchasing from
the Company, pursuant to the Unit Purchase Agreement dated the date hereof
(the "Purchase Agreement"), shares of Common Stock and Warrants (hereinafter
collectively referred to as the "Securities" of the Company); All capitalized
terms not hereinafter defined shall have the meaning assigned to them in the
Purchase Agreement; and
WHEREAS, the Company desires to grant to the Holders the registration
rights set forth herein.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term "Registrable
Security" means the Common Stock of the Company issued under the Purchase
Agreement or as the result of the execution of warrants issued under that
Agreement provided, however, that with respect to any particular Registrable
Security, such security shall cease to be a Registrable Security when, as of
the date of determination, (i) it has been effectively registered under the
Securities Act of 1933, as amended (the "1933 Act") and disposed of pursuant
thereto, (ii) registration under the 1933 Act is no longer required for the
immediate public distribution of such security as a result of the provisions
of Rule 144 promulgated under the 1933 Act, or (iii) it has ceased to be
outstanding. The term "Registrable Securities" means any and/or all of the
securities falling within the foregoing definition of a Registrable Security.
In the event of any merger, reorganization, consolidation, recapitalization
or other change in corporate structure affecting the Common Stock, such
adjustment shall be made in definition of Registrable Security as is
appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Section.
Section 2. Restrictions on Transfer. The Holders acknowledge and
understand that prior to the registration of the Registrable Securities as
provided herein, the Registrable Securities and the Securities are "restricted
securities" as defined in Rule 144 promulgated under the Act. The Holders
understand that no disposition or transfer of the Registrable Securities or
the Securities may be made by the Holders in the absence of (i) an opinion of
counsel to the Holders that such transfer may be made without registration
under the 1933 Act, or (ii) such registration.
Section 3. Registration Rights.
(a) The Company agrees that it will prepare and file with the
Securities and Exchange Commission ("SEC"), on or prior toAugust 31, 2005, a
registration statement (on Form SB-2, or other appropriate registration
statement) under the 1933 Act (the "Registration Statement"), at the sole
expense of the Company (except as provided in Section 3(c) hereof), in respect
of all holders of Registrable Securities, so as to permit a public offering
and sale of the Registrable Securities under the Act. The Company shall use
its best efforts to cause the Registration Statement to become effective on or
before October 31, 2005. The number of shares of Common Stock designated in
the Registration Statement to be registered shall be not less than (i) 100% of
the number of Common Shares acquired under the Purchase Agreement, plus (ii)
100% of the number of Warrant Shares issuable assuming all of the Warrants had
been issued pursuant to the Purchase Agreement and Consulting Agreement.
(b) The Company will maintain the Registration Statement, or
post-effective amendment filed under this Section 3 hereof current under the
1933 Act until the earlier of (i) the date that all of the Registrable
securities have been sold pursuant to the applicable Registration Statement,
(ii) the date the holders thereof receive an opinion of counsel that the
Registrable Securities may be sold under the provisions of Rule 144 (without
limitation) or (III) five years after the Subscription Date.
(c) All fees, disbursements and out-of-pocket expenses and costs
incurred by the Company in connection with the preparation and filing of the
Registration Statement under subparagraph 3(a) and in complying with
applicable securities and blue sky laws (including, without limitation, all
attorneys' fees) shall be borne by the Company. The Holders shall bear the
cost, pro rata, of underwriting discounts and commissions, if any, applicable
to the Registrable Securities being registered and the fees and expenses of
its counsel. The Company shall qualify any of the securities for sale in such
states as such Holder reasonably designates and shall furnish indemnification
in the manner provided in Section 6 hereof. The Company at its expense will
supply the Holders with copies of the Registration Statement and the
prospectus or offering circular included therein and other related documents
in such quantities as may be reasonably requested by the Holders.
(d) The Company shall not be required by this Section 3 to include
a Holder's Registrable Securities in any Registration Statement which is to be
filed if, in the opinion of counsel for both the Holder and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder and the Company)
the proposed offering or other transfer as to which such registration is
requested is exempt from applicable federal and state securities laws and
would result in all purchasers or transferees obtaining securities which are
not "restricted securities", as defined in Rule 144 under the 1933 Act.
(e) In the event the Registration Statement to be filed by the
Company pursuant to Section 3(a) above is not filed with the SEC on or before
August 31, 2005 and/or the Registration Statement is not declared effective by
the SEC on or before October 31, 2005, then the Company will pay the Holders
(pro rated on a daily basis), as liquidated damages for such failure and not
as a penalty, five percent of the purchase price of the then outstanding
Securities for every 30 calendar day period until the Registration Statement
has be filed and/or declared effective. Such payment of the liquidated damages
shall be made to the Holders in cash, immediately upon demand, provided,
however, that the payment of such liquidated damages shall not relieve the
Company from its obligations to register the Registrable Securities. If the
Company does not remit the damages to the Holder as set forth above, the
Company will pay the Holders reasonable costs of collection, including
attorneys fees, in addition to the liquidated damages. The registration of the
Securities pursuant to this provision shall not affect or limit Holder' other
rights or remedies as set forth in this Agreement.
(f) The Company agrees that it shall declare the Registration
Statement effective within three Business Days after being informed by the SEC
that it may do so. The Company also agrees that it shall respond to any
questions and/or comments from the SEC which relate to the Registration
Statement within five Business Days of receipt of such question or comment.
Section 4. Cooperation with Company. Each of the Holders will cooperate
with the Company in all respects in connection with this Agreement, including
timely supplying all information reasonably requested by the Company and
executing and returning all documents reasonably requested in connection with
the registration and sale of the Registrable Securities.
Section 5. Registration Procedures. If and whenever the Company is
required by any of the provisions of this Agreement to effect the registration
of any of the Registrable Securities under the Act, the Company shall (except
as otherwise provided in this Agreement), as expeditiously as possible:
(a) prepare and file with the SEC such amendments and supplements
to the Registration Statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to
comply with the provisions of the Act with respect to the sale or other
disposition of all securities covered by such registration statement whenever
the Holder shall desire to sell or otherwise dispose of the same (including
prospectus supplements with respect to the sales of securities from time to
time in connection with a registration statement pursuant to Rule 415
promulgated under the Act);
(b) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the
requirements of the Act, and such other documents, as such Holder may
reasonably request in order to facilitate the public sale or other disposition
of the securities owned by such Holder;
(c) register and qualify the securities covered by the
Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Holders shall reasonably request, and do any and all
other acts and things which may be necessary or advisable to enable each
Holder to consummate the public sale or other disposition in such jurisdiction
of the securities owned by such Holder, except that the Company shall not for
any such purpose be required to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified or to file
therein any general consent to service of process;
(d) list such securities on the Principal Market on which any
securities of the Company are then listed, if the listing of such securities
is then permitted under the rules of such Principal Market;
(e) enter into and perform its obligations under an underwriting
agreement, if the offering is an underwritten offering, in usual and customary
form, with the managing underwriter or underwriters of such underwritten
offering;
(f) notify each Holder of Registrable Securities covered by the
Registration Statement any time when a prospectus relating thereto covered by
the Registration Statement is required to be delivered under the Act, and of
the happening of any event of which it has knowledge as a result of which the
prospectus included in the 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.
Section 6. Information by Holder. Each Holder of Registrable Securities
included in any registration statement shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this
Section.
Section 7. Assignment. The rights granted the Holders under this
Agreement shall not be assigned without the written consent of the Company,
which consent shall not be unreasonably withheld. This Agreement is binding
upon and inures to the benefit of the parties hereto and their respective
heirs, successors and permitted assigns.
Section 8. Termination of Registration Rights. The rights granted
pursuant to this Agreement shall terminate as to each Holder (and permitted
transferee under Section 7 above) upon the occurrence of any of the following:
(a) all such Holder's securities subject to this Agreement have
been registered;
(b) all of such Holder's securities subject to this Agreement may
be sold without such registration pursuant to Rule 144 promulgated by the SEC
pursuant to the Securities Act;
(c) all of such Holder's securities subject to this Agreement can
be sold pursuant to Rule 144(k) without volume limitation; or five years from
the issuance of the Registrable Securities.
Section 9. Indemnification.
(a) In the event of the filing of any Registration Statement with
respect to Registrable Securities pursuant to Section 3 hereof, the Company
agrees to indemnify and hold harmless the Holders, and each officer, director
of the Holders or person, if any, who controls the Holders within the meaning
of the Securities Act ("Distributing Holders") against any losses, claims,
damages or liabilities, joint or several (which shall, for the purposes of
this Agreement, include, but not be limited to, all costs of defense, and
investigation and all attorneys' fees), to which the Distributing Holders may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in any such Registration Statement or any related
preliminary prospectus, final prospectus, offering circular, notification or
amendment or supplement thereto, or arise out of or are based upon 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;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement, preliminary prospectus,
final prospectus, offering circular, notification or amendment or supplement
thereto in reliance upon, and in conformity with, written information
furnished to the Company by the Distributing Holders, specifically for use in
the preparation thereof. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) In the event of the filing of any Registration Statement with
respect to Registrable Securities pursuant to Section 3 hereof, each
Distributing Holder agrees that it will indemnify and hold harmless the
Company, and each officer, director of the Company or person, if any, who
controls the Company within the meaning of the Securities Act, against any
losses, claims, damages or liabilities (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees) to which the Company or any such
officer, director or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
a Registration Statement, requested by such Distributing Holder, or any
related preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in such
Registration Statement, preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto in reliance upon,
and in conformity with, written information furnished to the Company by such
Distributing Holder, specifically for use in the preparation thereof and,
provided further, that the indemnity agreement contained in this Section 9(b)
shall not inure to the benefit of the Company with respect to any person
asserting such loss, claim, damage or liability who purchased the Registrable
Securities which are the subject thereof if the Company failed to send or give
(in violation of the Securities Act or the rules and regulations promulgated
thereunder) a copy of the prospectus contained in such Registration Statement
to such person at or prior to the written confirmation to such person of the
sale of such Registrable Securities, where the Company was obligated to do so
under the Securities Act or the rules and regulations promulgated thereunder.
This indemnity agreement will be in addition to any liability which the
Distributing Holders may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is made against the indemnifying party
under this Section, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified
party otherwise than as to the particular item as to which indemnification s
then being sought solely pursuant to this Section. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, assume the defense thereof, subject to
the provisions herein stated and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, unless the indemnifying party shall not pursue the
action to its final conclusion. The indemnified party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
provided that if the indemnified party is the Distributing Holder, the fees
and expenses of such counsel shall be at the expense of the indemnifying party
if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party, or (ii) the named parties to any such
action (including any impleaded parties) include both the Distributing Holder
and the indemnifying party and the Distributing Holder shall have been advised
by such counsel that there may be one or more legal defenses available to the
indemnifying party different from or in conflict with any legal defenses which
may be available to the Distributing Holder (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf
of the Distributing Holder, it being understood, however, that the
indemnifying party shall, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable only for the
reasonable fees and expenses of one separate firm of attorneys for the
Distributing Holder, which firm shall be designated in writing by the
Distributing Holder). No settlement of any action against an indemnified party
shall be made without the prior written consent of the indemnified party,
which consent shall not be unreasonably withheld.
Section 10. Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the
Distributing Holder makes a claim for indemnification pursuant to Section 9
hereof but is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact that the express
provisions of Section 9 hereof provide for indemnification in such case, or
(ii) contribution under the Securities Act may be required on the part of any
Distributing Holder, then the Company and the applicable Distributing Holder
shall contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees), in either such case (after contribution from others) on the
basis of relative fault as well as any other relevant equitable
considerations. The relative fault 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 on the one hand or the applicable
Distributing Holder, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Holder agree that it
would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
Section. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this Section shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. No person guilty of
fraudulent 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.
Section 11. Notices. Any notice pursuant to this Agreement by the
Company or by the Holders shall be in writing and shall be deemed to have been
duly given if delivered by (i) hand, (ii) by facsimile and followed by mail
delivery or (iii) if mailed by certified mail, return receipt requested,
postage prepaid, addressed as follows:
(a) If to the Company:
Pacific WebWorks, Inc.
000 Xxxxx 000 Xxxx Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
(b) If to the Investors:
See attached Exhibit "E"
Notices shall be deemed given at the time they are delivered personally
or five calendar days after they are mailed in the manner set forth above. If
notice is delivered by facsimile to the Company and followed by mail, delivery
shall be deemed given two calendar days after such facsimile is sent.
Section 12. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 13. Headings. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section 14. Choice of Law; Venue; Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the
State of Utah, except for matters arising under the Securities Act, without
reference to principles of conflicts of law. Each of the parties consents to
the jurisdiction of the U.S. District Court sitting in the State of Utah, for
the Central District of Utah in connection with any dispute arising under this
Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. Each party hereby
agrees that if another party to this Agreement obtains a judgment against it
in such a proceeding, the party which obtained such judgment may enforce same
by summary judgment in the courts of any country having jurisdiction over the
party against whom such judgment was obtained, and each party hereby waives
any defenses available to it under local law and agrees to the enforcement of
such a judgment. Each party to this Agreement irrevocably consents to the
service of process in any such proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to such party at its address
set forth herein. Nothing herein shall affect the right of any party to serve
process in any other manner permitted by law. Each party waives its right to a
trail by jury.
Section 15. Severability. If any provision of this Agreement shall for
any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof and this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained herein.
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[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed, on the day and year first above written.
PACIFIC WEBWORKS, INC.
Attest:
/s/ Xxxxxxx X. Xxxx
By: _______________________ By: _________________________
Xxxxxxx X. Xxxx
CEO
FIRST EQUITY HOLDINGS CORP.
/s/ Xxxx Xxxxxxx
By: ___________________________
Its: President
COMPASS EQUITY PARTNERS
/s/ Xxx Xxxxx
By: ___________________________
Its: Manager
EMPIRE FUND MANAGERS, LLC
/s/ Xxxxx X. Xxxxx
By: ___________________________
Its Member
