Exhibit 10.6
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is entered into
as of _________, 1996, by and between Xxxx Xx, an individual residing in the
State of Maryland ("Executive"), and Yurie Systems, Inc., a Delaware corporation
(the "Company").
WHEREAS, as a condition of that certain Employment Agreement dated as
of the date hereof (the "Employment Agreement") by and among the Executive and
the Company, and as partial consideration for the covenants of the Executive
contained therein, the Company has agreed to grant registration rights to the
Executive with respect to 4,000,000 shares currently owned by the Executive (the
"Li Shares"), of common stock, $.01 par value, of the Company (the "Shares") on
the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual promises contained
herein, and for other good and valuable consideration, receipt of which is
hereby acknowledged, the parties agree as follows:
Section 1. Piggy-Back Registration and Qualification.
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(a) Registration and Qualification. If the Company or any
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security holder of the Company proposes to register any securities of the
Company under the Securities Act of 1933, as amended (such Act, together with
any successor federal statute, and the rules and regulations of the Securities
and Exchange Commission (the "Commission") promulgated thereunder, all as in
effect from time to time, being the "Securities Act"), on any registration form
(otherwise than for the registration of securities to be offered and sold by the
Company pursuant to (i) an employee benefit plan, (ii) a dividend or interest
reinvestment plan, (iii) other similar plans, (iv) reclassifications of
securities, mergers, consolidations and acquisitions of assets or (v) an initial
public offering of the Shares in which no other stockholder is offering to sell
Shares), not less than forty-five (45) days prior to each such registration the
Company shall give to each Holder (as defined below) written notice of such
proposal which shall describe in detail the proposed registration and
distribution (including those jurisdictions where registration or qualification
under the securities or blue sky laws is intended) and, upon the written request
of any Holder furnished within fifteen (15) days after the date of any such
notice,
which request shall specify the maximum number of Li Shares intended to be sold
by such Holder, proceed to include in such registration such Li Shares ("Piggy-
Back Shares") as have been requested by such Holder to be included in such
registration. The term "Holder" means (i) the Executive, (ii) each Exempt
Assignee (defined below) and (iii) each Permitted Assignee (defined below). The
Company will upon receipt of each such written request use its best efforts in
each instance to cause all such Piggy-Back Shares to be registered under the
Securities Act and qualified under the securities or blue sky laws of any
jurisdiction requested by a Holder. "Exempt Assignee" means any affiliate of the
Executive or the Executive's spouse, direct lineal ancestors and descendants,
legal dependents, beneficiaries under a will or the laws of intestacy or a trust
exclusively for the benefit of some or all of the foregoing. "Permitted
Assignee" means any person to whom the Executive transfers a minimum of 400,000
Li Shares.
(b) Inclusion in Offerings. If the proposed registration giving rise
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to registration rights under this Section 1 is in connection with an
underwritten public offering (an "Offering') of Shares or securities exercisable
or convertible into Shares, the Company shall use its best efforts to ensure
that any Piggy-Back Shares registered pursuant to this Section 1 shall be
included in such Offering, if so requested, by the Holder who requested
registration of such Piggy-Back Shares. If the underwriter or underwriters of
such Offering (the "Underwriter") advises the Company in writing that, in its
opinion, the inclusion of the Piggy-Back Shares with securities being registered
by the Company would materially adversely affect the distribution of securities
to be sold by the Company ("Primary Shares") in such Offering, then the Piggy-
Back Shares (or such part thereof as is necessary to avoid such adverse effect)
may be excluded from such proposed registration. If any Shares other than
Primary Shares are registered in connection with any such Offering, then the
number of Piggy-Back Shares which must be registered in connection with such
Offering pursuant to this Section 1 shall be not less than either (A) if the
proposed registration was initiated by the Company, one-third of the number of
Shares other than Primary Shares registered in connection with such Offering or
(B) if the registration was initiated by a stockholder other than a Holder, one-
half of the number of Shares other than Primary Shares registered in connection
with such Offering. In the event fewer than all of the Piggy-Back Shares
requested to be registered by all Holders in connection with an Offering are
registered in connection with such Offering, the number of each Holder's Piggy-
Back Shares which are to be registered shall be determined on a pro rata basis,
according to the number of Piggy-Back Shares which such Holder has requested to
be registered.
(c) Underwriter. Each Holder who pursuant to subsection l(b) requests
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Piggy-Back Shares to be included in an Offering initiated by the Company agrees
to the selection by the Company of the Underwriter.
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(d) No Requirement to Proceed with Registration. Nothing in this
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Section 1 shall be deemed to require the Company to proceed with any
registration of its securities after giving notice as provided herein; provided,
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however, that the Company shall pay all expenses incurred pursuant to such
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notice in accordance with Section 4.
Section 2. Demand Registration. At any time and from time to time
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commencing one year after the Company has had a registration statement become
effective and has become a reporting company under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), any one or more of the Holders,
subject to the limitations set forth below, may request the Company to effect
the registration under the Securities Act of some or all of their Li Shares in
accordance with this Section (a "Registration Demand"); provided that,
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notwithstanding the foregoing, the Executive may request the Company to effect a
registration in accordance with this Section at any time commencing six months
after the Company has had a registration statement become effective and has
become a reporting company under the Exchange Act. The Registration Demand
shall specify whether the Holder(s) desires an underwritten offering or a shelf
registration. The Company will promptly, but in any event within 20 days, give
written notice of such requested registration and the intended method of
distribution thereof to all Holders and thereupon the Company will use its best
efforts to effect such registration under the Securities Act of (i) the Li
Shares which the Company has been requested to register and (ii) all other Li
Shares which the Company has been requested to register by Holders thereof by
written request given to the Company within 30 days after the giving of such
written notice by the Company. Thereafter, the Company will use its best
efforts to keep the registration statement current and effective for a period
(the "Registration Demand Period") of not less than six (6) months with respect
to a Registration Demand in connection with an underwritten public offering and
nine (9) months with respect to a Registration Demand in connection with a shelf
registration; provided, however, that the Company shall not be obligated to
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effect any registration under the Securities Act under this Section 2 except in
accordance with the following provisions:
(a) the Company shall not be obligated to file more than five
registration statements initiated pursuant to this Section 2 (not more than
three of which may be in connection with an underwritten public offering) which
become effective or are rescinded by the Holders without reimbursement referred
to in the Section 2(f);
(b) the Company may delay the filing or effectiveness of any
registration statement for a period not to exceed 90 days after the date of a
request for registration pursuant to this Section 2 if at the time of such
request the Company is engaged, or has fixed plans to engage within 45 days of
the time of such request, in a firm commitment underwritten public offering of
Primary Shares;
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(c) the Company shall be entitled once in any six-month period to
postpone for a reasonable period of time (but not exceeding 90 days) the filing
of any registration statement required to be prepared and filed by it if the
Board of Directors of the Company determines, in its reasonable judgment, that
such registration and offering would have a material adverse effect on the
Company;
(d) with respect to any registration pursuant to this Section 2, the
Company may include in such registration any other Shares of the Company or a
stockholder of the Company; provided, however, that if the managing underwriter
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advises the Company in writing that the inclusion of all such Shares would
interfere with the successful marketing (including pricing acceptable to the
Holders) of all such securities, then the number of Shares proposed to be
included in such registration shall be included in the following order:
(i) first, the Li Shares held by the Holders, pro rata based
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upon the total number of Li Shares owned by each Holder at the time of such
registration;
(ii) second, the Shares offered by the Company; and
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(iii) third, the Shares of other stockholders of the Company;
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(e) Notwithstanding anything in this Section 2 to the contrary, the
Company shall not be required to take any action pursuant to Section 2,
including, without limitation, using its best efforts to effect the registration
under the Securities Act of Li Shares, unless
(i) with respect to a Registration Demand for an underwritten
offering, the offering includes at least 400,000 Li Shares (without taking
into account adjustments made to Shares after the date hereof); or
(ii) with respect to a Registration Demand for a shelf
registration, the offering includes at least 200,000 Li Shares (without
taking into account adjustments made to Shares after the date hereof);
(f) a Registration Demand under this Section 2 may be rescinded by
written notice to the Company by the Holder(s) initiating such request;
provided, however, that such rescinded registration shall not count as a
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registration statement initiated pursuant to this Section 2 for purposes of
paragraph (b) above if the Holder(s)
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initiating such request reimburse the Company for all reasonable out-of-pocket
expenses incurred in complying with such request; and
(g) with respect to any Registration Demand for an underwritten
offering, the Company shall have the right to designate an underwriter or
underwriters; provided that the designation of such underwriter(s) shall be
subject to the approval of the Holder(s) holding a majority of the Li Shares to
be registered in the Registration Demand, which consent shall not be withheld
unreasonably.
Section 3. Registration and Qualification Procedures.
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(a) Procedures. Whenever the Company is required by the provisions of
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Section 1 or Section 2 to use its best efforts to effect the registration of any
securities held by a Holder under the Securities Act the Company will, as
expeditiously as is possible:
(i) prepare and file with the Commission a registration
statement with respect to such securities in connection with which the Company
will give such Holders and its counsel the opportunity to review and make
comments on such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, and
will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such Holder's counsel, to conduct a
reasonable investigation within the meaning of the Securities Act;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
the prospectus current for the Registration Demand Period and to comply with the
provisions of the Securities Act with respect to the sale of all securities
covered by such registration statement;
(iii) furnish to such Holder such numbers of copies of
preliminary prospectuses and prospectuses and each supplement or amendment
thereto and such other documents as such Holder may reasonably request in order
to facilitate the sale or other disposition of the securities owned by such
Holder in conformity with the requirements of the Securities Act;
(iv) use its best efforts to register or qualify the securities
covered by such registration statement under the securities or blue sky laws of
such jurisdictions
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within the United States as such Holder shall reasonably request, and do such
other reasonable acts and things as may be required of it to enable such Holder
to consummate the sale or other disposition in such jurisdictions of the
securities owned by such Holder; provided, however, that the Company shall not
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be required to (i) qualify as a foreign corporation or consent to a general and
unlimited service of process in any such jurisdiction, or (ii) qualify as a
dealer in securities;
(v) furnish, at the request of such Holder on the date such
securities are delivered to the Underwriter for sale pursuant to such
registration or, if such securities are not being sold through underwriters, on
the date the registration statement with respect to such securities becomes
effective, (i) an opinion, dated such date, of counsel representing the Company
for the purposes of such registration, addressed to the Underwriter, if any, and
to such Holder, covering such legal matters with respect to the registration in
respect of which such opinion is being given as such Holder may reasonably
request and are customarily included in such opinions and (ii) letters, dated,
respectively, (1) the effective date of the registration statement and (2) the
date such securities are delivered to the Underwriter, if any, for sale pursuant
to such registration, from a firm of independent certified public accountants of
recognized national standing selected by the Company, addressed to the
Underwriter, if any, and to such Holder, covering such financial, statistical
and accounting matters with respect to the registration in respect of which such
letters are being given as such Holder may reasonably request and are
customarily included in such letters;
(vi) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders as soon as reasonably practicable, but not later than sixteen (16)
months after the effective date of the registration statement, an earning
statement covering a period of at least twelve (12) months beginning after the
effective date of the registration statement, which earning statement shall
satisfy the provisions of Section 1 1 (a) of the Securities Act;
(vii) notify each seller at any time when a prospectus relating to
the registration is required to be delivered under the Securities Act, upon
discovery that, or upon 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
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material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made;
(viii) use its best efforts (A) to cause all such securities to be
listed on a national securities exchange and on each other securities exchange
on which similar securities issued by the Company are then listed, if the
listing of such securities is then permitted under the rules of such exchange;
or (B) to secure the designation of all such securities as a NASDAQ "national
market system security" within the meaning of Rule 11Aa2-1 of the Commission or,
failing that, to secure NASDAQ authorization for such securities and, without
limiting the generality of the foregoing, to arrange for at least two market
makers to register as such with respect to such securities with the National
Association of Securities Dealers;
(ix) provide and cause to be maintained a transfer agent and
registrar for all such securities from and after a date not later than the
effective date of such registration; and
(x) keep each seller advised as to the initiation and progress of
any registration under Section 1 or Section 2.
(b) Underwriting Agreement. In the case of any registration under
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Section 2 pursuant to an underwritten offering, or in the case of a registration
under Section 1 if the Company has determined to enter into an underwriting
agreement in connection therewith, all securities to be included in such
registration shall be subject to an underwriting agreement and no Holder may
participate in such registration unless such Holder agrees to sell such Holder's
securities on the basis provided therein and completes and executes all
reasonable questionnaires and other documents (including custody agreements and
powers of attorney) which must be executed in connection therewith, and provides
such other information to the Company or the underwriter as may be necessary to
register such Holder's securities. In connection with any underwriting
agreement respecting an Offering, no Holder shall be required to make any
representations or warranties regarding the Company, or to make any
representations or warranties to or agreements with the Company or any
Underwriter, other than customary representations, warranties or agreements and
any other representations required by law.
(c) Limitation on Sale or Distribution of Other Securities. Each
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Holder agrees not to effect any public sale or distribution of any Li Shares
during the 10-day period prior to, and during the 90-day period (or, if
requested by the managing underwriter in connection with the initial public
offering, the 180-day period) beginning on the later of, (i) the effective date
of the registration statement in connection with a registration requested
pursuant to Section 2 hereof or (ii) if applicable, the
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commencement of an underwritten offering in connection with a registration
requested pursuant to Section 1 hereof, in each case, if requested by the
underwriter(s) of such underwritten offering, or for such shorter period as the
underwriter(s) shall request.
(d) Information by Holders. Each Holder selling Li Shares in a
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proposed registration shall furnish to the Company such written information
regarding such Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement.
Section 4. Allocation of Expenses. If the Company is required by the
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provisions of Section 1 or Section 2 to use its best efforts to effect the
registration or qualification under the Securities Act or any state securities
or blue sky laws of any Li Shares, the Company shall pay all expenses in
connection therewith, including, without limitation, (a) all expenses incident
to filing with the National Association of Securities Dealers, Inc., (b)
registration fees, (c) printing expenses, (d) accounting and legal fees and
expenses (including legal fees and expenses for not more than one counsel
representing the Holder(s), not to exceed $10,000 in connection with any such
registration or qualification), (e) expenses of any special audits incident to
or required by any such registration or qualification and (f) expenses of
complying with the securities or blue sky laws of any jurisdictions in
connection with such registration or qualification; provided, however, the
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Company shall not be liable for (1) any discounts or commissions to any
underwriter attributable to Li Shares being sold; or (2) any stock transfer
taxes incurred in respect of the Li Shares being sold.
Section 5. Indemnification.
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(a) Obligations, In connection with any registration or qualification
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of securities under Section 1 or Section 2, the Company agrees to indemnify each
Holder and each Underwriter, if any, of any Offering in connection with such
registration, including each person, if any, who controls each Holder or
Underwriter within the meaning of Section 15 of the Securities Act, against all
losses, claims, damages, liabilities and expenses (including reasonable costs of
investigation) caused by any untrue, or alleged untrue, statement of a material
fact contained in any registration statement, preliminary prospectus, prospectus
or notification or offering circular (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or caused by any
omission, or alleged omission, to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses are
caused by any
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untrue statement or alleged untrue statement or omission or alleged omission
based upon information furnished in writing to the Company by any Holder or any
Underwriter expressly for use therein. The Company and each officer, director,
employee and controlling person of the Company shall be indemnified by each
Holder for all such losses, claims, damages, liabilities and expenses (including
the costs of reasonable investigation) caused by any such untrue, or alleged
untrue, statement or any such omission or alleged omission, based upon
information furnished in writing to the Company by such Holder expressly for use
therein; provided that, the indemnification liability of any Holder shall not
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exceed the amount by which the total price at which any Li Shares sold by such
Holder were offered to the public (less any applicable underwriting discounts
and commissions) exceeds the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or allegedly untrue
statement or omission or alleged omission.
(b) Procedures. Promptly upon receipt by a party indemnified under
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this Section 5 of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this Section 5, such indemnified party
shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve it
of any liability which it may have to any indemnified party otherwise than under
this Section 5 unless such failure shall materially adversely affect the defense
of such action. In case notice of commencement of any such action shall be
given to the indemnifying party as above provided, the indemnifying party shall
be entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (a) the
indemnifying party agrees to pay the same, (b) the indemnifying party fails to
assume the defense of such action with counsel satisfactory to the indemnified
party or (c) the named parties to any such action (including any impleaded
parties) have been advised by such counsel that representation of such
indemnified party and the indemnifying party by the same counsel would be
inappropriate under applicable standards of professional conduct (in which case
the indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party). No indemnifying party shall be
liable for any settlement effected without its written consent. 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 and indemnity could have been
sought hereunder by such indemnified
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party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
Section 6. Miscellaneous.
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(a) Amendment and Waiver. The provisions of this Agreement may be
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amended or waived only by a writing signed by all the parties hereto. This
Agreement and the Employment Agreement constitute the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and thereof
(b) Governing Law. This Agreement is made and shall be governed by
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and construed in all respects in accordance with the laws of the State of
Delaware, without regard to the principles of conflicts of laws thereof which
might refer such interpretation to the laws of a different state or
jurisdiction.
(c) Assignment. The provisions hereof shall inure to the benefit of,
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and be binding upon (i) any successor of the Company and (ii) all Holders.
(d) Notices. All notices required or permitted hereunder shall be in
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writing and shall be delivered by facsimile, courier or registered mail,
addressed as follows:
If to the Company:
Yurie Systems, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
If to the Executive:
Xxxx Xx
00000 Xxxxx Xxxxx
Xxxxxx Xxxxxx, XX 00000
If personally delivered, such communication shall be deemed delivered upon
actual receipt; if sent by telecopier or facsimile transmission, such
communication shall be deemed delivered the day of transmission (and sender
shall bear the burden of proof of delivery); if sent by overnight courier
pursuant to this Section, such communication shall
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be deemed delivered upon receipt; and if sent by registered mail pursuant to
this Section 5, such communication shall be deemed delivered as of the date of
delivery indicated on the receipt issued by the relevant postal service, or, if
the addressee fails or refuses to accept delivery, as of the date of such
failure or refusal. No objection may be made to the manner of delivery of any
notice actually received in writing by an authorized agent of a party.
(e) Nominees for Beneficial Owners. In the event that Li Shares are
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held by a nominee for the beneficial owner thereof, the beneficial owner thereof
may, at its option and by written notice to the Company, be treated as the
Holder of such Li Shares for purposes of any request or other action pursuant to
this Agreement.
(f) Specific Performance. The parties hereto recognize and agree that
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money damages may be insufficient to compensate any Holder for breaches by the
Company or Shareholder of the terms hereof and, consequently, that the equitable
remedy of specific performance of the terms hereof will be available in the
event of any such breach.
(g) Rule 144. If the Company shall have filed a registration
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statement pursuant to Section 12 of the Exchange Act or a registration statement
pursuant to the Securities Act, the Company will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder and will take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such holder to sell Li Shares without registration under
the Securities Act within the limitation of the exemptions provided by (i) Rule
144 under the Securities Act, as such Rule may be amended from time to time, or
(ii) any similar rule or regulation hereafter adopted by the Commission. Upon
the request of any Holder, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
(h) Severability. In case any provision of this Agreement shall be
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invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this agreement shall not in any way be affected or
impaired thereby.
(i) Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
XXXX XX
By:
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Xxxx Xx
YURIE SYSTEMS, INC.
By:
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Name:
Title:
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