Exhibit 4.2
ARCSOFT, INC.
INVESTORS RIGHTS
AGREEMENT
This INVESTORS RIGHTS AGREEMENT
(this “ Agreement ”) is made as of the
22nd day of December 2000, by and among ArcSoft, Inc., a California
corporation (the “ Company ”), the
holders of the Company’s Series A Preferred Stock listed on
Exhibit A (the “ Series A Holders
”) and the holders of the Company’s Series B Preferred
Stock listed on Exhibit B (the “ Series B
Holders ”). The Series A Holders and the Series B
Holders are referred to collectively as the “
Holders ”.
RECITALS
A. The Company and the Series A
Holders are parties to that certain Series A Preferred Stock
Purchase Agreement (the “ Series A Preferred Purchase
Agreement ”), and under which, among other things,
certain registration rights were granted by the Company to the
Series A Holders.
B. The Company and the Series B
Holders are parties to that certain Series B Preferred Stock
Purchase Agreement (the “ Series B Preferred Purchase
Agreement ”), under which, among other things,
certain registration rights were granted by the Company to the
Series B Holders.
C. The Company has determined to
issue and sell additional shares of its Series B Preferred Stock to
certain additional Series B Holders and has entered into a Second
Series B Preferred Stock Purchase Agreement dated the date hereof
(the “ Second Series B Preferred Purchase
Agreement ”, together with Series A Preferred
Purchase Agreement and the Series B Preferred Purchase Agreement
are referred to as “ Purchase Agreements
”). It is a condition to the closing of such transaction that
the Holders execute this Investors Rights Agreement.
D. Pursuant to the Series A
Preferred Purchase Agreement, any term thereof may be amended only
with the written consent of the Company and the holders of a
majority of the then-outstanding shares of Preferred (as defined
therein) including any shares of Common Stock (as defined herein)
of the Company into which such Preferred have been converted and
that any such amendment shall be binding upon each transferee of
any Preferred, and Common Stock issuable upon conversion of any
share of such Preferred, each future holder of all such securities
and the Company.
E. Pursuant to the Series B
Preferred Purchase Agreement, any term thereof may be amended only
with the written consent of the Company and the holders of a
majority of the then-outstanding shares of Preferred (as defined
therein) including any shares of Common Stock of the Company into
which such Preferred Stock have been converted and that any such
amendment shall be binding upon each transferee of any Preferred,
and Common Stock issuable upon conversion of any share of such
Preferred, each future holder of all such securities and the
Company.
F. The Company has determined it to
be in the best interests of the Company and its shareholders that
the Company and the Holders enter into this Investors Rights
Agreement and the Series A Preferred Purchase Agreement be amended
by deleting Sections 4, 5 and 7, and Series B Preferred Purchase
Agreement be amended by deleting Section 6 thereof, and to provide
certain integrated registration rights and other provisions as
described herein.
In consideration of the foregoing
and the promises and covenants contained herein and for other good
and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
SECTION 1
CERTAIN
DEFINITIONS
As used in this Agreement, the
following terms shall have the following respective
meanings:
1.1 “ Affiliate ”
shall mean any entity who is controlled by, who controls or who is
under common control with a person.
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1.2 “ Commission
” shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities
Act.
1.3 “ Common Stock
” shall mean the Common Stock of the Company.
1.4 “ Conversion Shares
” means the Common Stock issued or issuable upon conversion
of the Preferred Stock.
1.5 “ Holder ” or
“ Holders ” shall mean any person or persons
owning or having the right to acquire Registrable Securities or any
assignee thereof in accordance with Section 2.12 hereof.
1.6 “ Initiating
Holders ” shall mean Holders of at least forty percent
(40%) of Registrable Securities held by the Major
Holders.
1.7 “ IPO ” shall
mean the closing of the first sale of the Company’s
securities to the public pursuant to (i) a registration statement
under the Securities Act (as defined below), or (ii) the listing
requirements of an exchange which is qualified as a
“designated offshore securities market” under Rule 902
of the Securities Act.
1.8 “ Major Holder
” shall mean a Holder, individually or together with its
Affiliates, who holds at least 750,000 shares of Registrable
Securities (adjusted to reflect subdivisions, stock splits, stock
dividends, combinations, consolidations, recapitalizations and the
like of the Company).
1.9 “ Preferred Stock
” shall mean the shares of the Company’s Series A
Preferred Stock (“ Series A Preferred Stock ”)
and Series B Preferred Stock (“ Series B Preferred
Stock ”), issued pursuant to the Purchase
Agreements.
1.10 “ Purchase
Agreements ” shall have the meaning set forth in Recital
B.
1.11 “ Qualified IPO
” shall mean an IPO that (a) is made at a price of at least
$10 per share (adjusted to reflect subdivisions, stock splits,
stock dividends, combinations, consolidations, recapitalizations
and the like of the Company) and (b) results in gross proceeds to
the Company of at least $10,000,000.
1.12 “ Register
”, “ Registered ” and “
Registration ” refer to a registration effected by
preparing and filing a registration statement in compliance with
the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
1.13 “ Registrable
Securities ” shall mean (i) Conversion Shares, (ii) any
Common Stock issued in respect of, in exchange for or in
replacement of the Conversion Shares or other securities issued
pursuant to the conversion of the Preferred Stock or upon any
subdivision, stock split, stock dividend, combination,
consolidation, recapitalization or the like, and (iii) any other
shares of Common Stock now or later held by any holder of
Registrable Securities acquired by such Holder pursuant to the
Purchase Agreements or herein. Securities previously sold to the
public pursuant to a registered public offering or Rule 144 of the
Securities Act shall cease to be Registrable Securities
1.14 “ Registration
Expenses ” shall mean all expenses incurred in complying
with registrations, filings or qualifications under Sections 2.4,
2.5 and 2.6 hereof, including, without limitation, all
registration, qualification and filing fees, accounting fees,
printing expenses, exchange listing fees, escrow fees, fees of
transfer agents and registrars, fees and disbursements of counsel
for the Company and independent public accountants to the Company,
blue sky fees and expenses, the fees and disbursements of a single
special counsel to the Holders not to exceed $15,000, the expense
of any special audits incident to or required by any such
registration.
1.15 “ Restricted
Securities ” shall mean the securities of the Company
required to bear the legend set forth in Section 2.2 hereof (or any
similar legend).
1.16 “ Securities Act
” shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the
time.
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1.17 “ Securities Exchange
Act ” shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and
regulations of the Commission thereunder, all as the same shall be
in effect at the time.
1.18 “ Selling Expenses
” shall mean all underwriting discounts and selling
commissions applicable to the sale of the Registrable Securities
and the fees and disbursements of any counsel for the Holders,
other than the fees and disbursements of special counsel included
in the definition of Registration Expenses.
SECTION 2
RESTRICTIONS ON
TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES
ACT
2.1 Restrictions on
Transferability . The Preferred Stock and the Conversion Shares
shall not be transferable except upon the conditions specified in
Sections 2.2 and 2.3, which conditions are intended to ensure
compliance with the provisions of the Securities Act, or, in the
case of Section 2.14 hereof, which is intended to assist in an
orderly distribution. Until such time as the restrictive legend set
forth in Section 2.2 is no longer required to be placed on
Registrable Securities pursuant to Section 2.3(a) and under Section
2.14, each Holder will cause any proposed transferee of the
Preferred Stock and the Conversion Shares held by such Holder to
agree to take and hold such securities subject to the provisions
and upon the conditions specified in this Section 2 (including the
“market stand-off” provisions of Section
2.14).
2.2 Restrictive Legend . Each
certificate representing the Preferred Stock (and the Conversion
Shares), and any securities issued in respect thereof or exchange
therefor, shall (unless otherwise permitted by the provisions of
Section 2.3 below) be stamped or otherwise imprinted with a legend
in substantially the following form (in addition to any legend
required under applicable state securities laws):
“THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF
THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING
THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE
BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICE.”
2.3 Notice of Proposed
Transfers .
(a) The Holder of each certificate
representing Restricted Securities agrees to comply in all respects
with the provisions of this Section 2.3. Prior to any proposed
transfer of any Restricted Securities (unless there is in effect a
registration statement under the Securities Act covering the
proposed transfer), the Holder thereof shall give written notice to
the Company of such Holder’s intention to effect such
transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail, and
(except in transactions in compliance with Rule 144) if reasonably
requested by the Company shall be accompanied by either (i) a
written opinion of legal counsel, who shall be reasonably
satisfactory to the Company, addressed to the Company and
reasonably satisfactory in form and substance to the
Company’s counsel, to the effect that the proposed transfer
of the Restricted Securities may be effected without registration
under the Securities Act, or (ii) a “no action” letter
from the Commission to the effect that the transfer of such
Restricted Securities without registration will not result in a
recommendation by the staff of the Commission that action be taken
with respect thereto, whereupon the Holder of such Restricted
Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the Holder
to the Company. Each certificate evidencing the Restricted
Securities transferred pursuant to the above shall bear the legend
set forth in Section 2.2 above, except that such certificate shall
not bear such restrictive legend if such transfer occurred pursuant
to an effective registration statement or Rule 144 or, in the
opinion of counsel for the Company, such legend is not required in
order to establish compliance with any provision of the Securities
Act.
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(b) Notwithstanding the provisions
of Section 2.3(a), no such registration statement or opinion of
counsel shall be necessary for a transfer by a Holder which is (A)
a partnership to its partners or former partners in accordance with
partnership interests, (B) a corporation to its shareholders in
accordance with their interest in the corporation or to any
Affiliate of the corporation, (C) a limited liability company to
its members or former members in accordance with their interest in
the limited liability company, or (D) to the Holder’s family
member or trust for the benefit of an individual Holder; provided
that in each case the transferee will be subject to the terms of
this Agreement to the same extent as if such transferee were an
original Holder hereunder.
2.4 Company Registration
.
(a) Registration . If at any
time or from time to time, the Company shall determine to register
any of its securities, either for its own account or the account of
a security holder or holders exercising their respective demand
registration rights, other than (i) a registration on Form S-8 (or
a similar or successor form) relating solely to employee stock
option, stock purchase or other benefit plans, or (ii) a
registration on Form S-4 (or similar or successor form) relating
solely to a Commission Rule 145 transaction, the Company
will:
(i) promptly give to each Holder
written notice thereof (and, in the case of any Holder located
outside the continental United States, simultaneously provide a
copy of such notice by fax); and
(ii) include in such registration,
any related qualification or other compliance, and in any
underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made within twenty (20)
days after mailing of written notice by the Company by first-class
mail, postage prepaid, by any Holder or Holders (with a copy by fax
as provided above), except as set forth in Section 2.4(b)
below.
(b) Underwriting . If the
registration of which the Company gives notice is for a registered
public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant
to Section 2.4(a)(i). In such event, the right of any Holder to
registration pursuant to Section 2.4 shall be conditioned upon such
Holder’s participation in such underwriting and the inclusion
of such Holder’s Registrable Securities in the underwriting
to the extent provided herein.
All Holders proposing to distribute
their Registrable Securities through such underwriting shall
(together with the Company and the other Holders distributing their
Registrable Securities through such underwriting) enter into an
underwriting agreement in customary form with the
Underwriter’s Representative selected for such underwriting
by the Company. Notwithstanding any other provision of this Section
2.4, if the Underwriter’s Representative (or the Company
after consultation with the Holders if the offering is not
underwritten) determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten,
the Underwriter’s Representative may limit the number of
Registrable Securities to be included in the registration and
underwriting. The Company shall so advise all Holders and other
holders distributing their securities through such underwriting and
the number of shares of Registrable Securities that may be included
in the registration and underwriting shall be allocated pro rata
among all the Holders in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by such
Holder at the time of filing the Registration Statement. In no
event will shares of any other selling shareholder be included in
such registration which would reduce the number of shares which may
be included by Holders without the written consent of Holders of
not less than a majority of the Registrable Securities proposed to
be sold in the offering. The number of securities includable by any
Holder or other person may, in the discretion of the underwriter,
be rounded to the nearest one hundred (100) shares. No securities
excluded from the underwriting by reason of the Underwriter’s
Representative marketing limitation shall be included in such
registration.
If any Holder disapproves of the
terms of any such underwriting, he may elect to withdraw therefrom
by written notice to the Company and the managing underwriter. Any
securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
If the Underwriter’s
Representative has not limited the number of shares to be
underwritten for the Company’s account and the account of the
Holders, the Company may include securities for the account of
employees, officers, directors and consultants.
2.5 Requested Registration
.
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(a) Request for Registration
. In case the Company shall receive from Initiating Holders a
written request that the Company effect any registration,
qualification or compliance with respect to all or a part of the
Registrable Securities, and only in the event that (i) the request
is six (6) months after the date of the Company’s IPO and
(ii) the aggregate offering price of the Registrable Securities
proposed to be registered equals or exceeds $10,000,000, the
Company will:
(i) promptly give written notice of
the proposed registration, qualification or compliance to all other
Holders; and
(ii) use its best efforts to effect
such registration, qualification or compliance as soon as
practicable, as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request in writing
received by the Company within thirty (30) days after mailing of
such written notice from the Company by first-class mail, postage
prepaid; provided, that the Company shall not be obligated
to take any action to effect any such registration, qualification
or compliance pursuant to this Section 2.5:
(A) In any particular jurisdiction
in which the Company would be required to execute a general consent
to service of process in effecting such registration, qualification
or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities
Act;
(B) Prior to six (6) months after
the effective date of the Company’s Qualified IPO;
(C) After the Company has effected
one (1) such registration pursuant to this Section 2.5 and such
registration has been declared or ordered effective;
(D) If the Company is eligible to
use a Form S-3;
(E) Within one hundred eighty days
(180) days after the consummation of the Company’s initial
firm commitment underwritten offering of its securities to the
general public; or
(F) Within one hundred eighty (180)
days after the effective date of any registration under Section 2.5
or 2.6.
Subject to the foregoing clauses (A)
through (F), the Company shall file a registration statement
covering the Registrable Securities so requested pursuant to this
Section 2.5(a); provided, however, that if the Company shall
furnish to the Initiating Holders a certificate signed by the
President of the Company stating that the Board of Directors of the
Company (the “ Board of Directors ”) has
determined in its good faith judgment, that it would be seriously
detrimental to the Company and its stockholders for such
registration statement to be filed at such time, the Company shall
have the right to defer such filing for a period of not more than
one hundred twenty (120) days after receipt of the request of the
Initiating Holders (provided that such right shall not be used more
than once in any twelve month period).
(b) Underwriting . If the
Initiating Holders intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so
advise the Company as part of their request made pursuant to
Section 2.5 and the Company shall include such information in the
written notice referred to in Section 2.5(a)(i). The right of any
Holder to registration pursuant to Section 2.5 shall be conditioned
upon such Holder’s participation in such underwriting and the
inclusion of such Holder’s Registrable Securities in the
underwriting to the extent provided herein.
The underwriter shall be selected by
a majority in interest of the Initiating Holders, subject to the
reasonable consent of the Company, such consent not to be
unreasonably withheld. The Company shall (together with all Holders
and other parties proposing to distribute their securities through
such underwriting) enter into an underwriting agreement in
customary form with the representative(s) of the underwriter(s)
(collectively, the “ Underwriter’s
Representative ”) selected for such underwriting by the
Initiating Holders. Notwithstanding any other provision of this
Section 2.5, if the Underwriter’s Representative (or the
Company after consultation with the Initiating Holders if the
offering is not underwritten) advises the Initiating Holders in
writing that it has determined in good faith
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that the marketing factors require a
limitation of the number of shares to be underwritten, the Company
and the Underwriter’s Representative shall so advise the
Initiating Holders and all Holders of Registrable Securities, and
the Underwriter’s Representative may limit the number of
shares of Registrable Securities to be included in the registration
and underwriting on a pro rata basis based upon the total number of
Registrable Securities entitled to registration held by the Holders
exercising their respective registration rights under Section
2.5(a); provided, however, that the number of shares of Registrable
Securities to be included in such underwriting by the Holders shall
not be reduced unless all other securities proposed to be sold by
the Company or persons other than the Holders are first entirely
excluded from the underwriting. The number of securities includable
by any Holder or other person may, in the discretion of the
underwriters, be rounded to the nearest one hundred (100) shares.
No securities excluded from the underwriting by reason of the
underwriter’s marketing limitation shall be included in such
registration.
If any Holder of Registrable
Securities disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the
Company, the Underwriter’s Representative and the Initiating
Holders. The Registrable Securities and/or other securities so
withdrawn shall also be withdrawn from registration; provided,
however, that, if by the withdrawal of such Registrable Securities
a greater number of Registrable Securities held by other
participating Holders may be included in such registration (up to
the maximum of any limitation imposed by the Underwriter’s
Representative), then the Company shall allocate such greater
number of Registrable Securities to such Holders in proportion, as
nearly as practicable, to the respective amount of Registrable
Securities held by such participating Holders.
If the Underwriter’s
Representative has not limited the number of Registrable Securities
to be underwritten, the Company may include securities for its own
account or for the account of other stockholders of the Company in
such registration if the Underwriter’s Representative so
agrees.
2.6 S-3 Registrations . If
the Company is requested (and qualifies under applicable Commission
rules) to undertake a registration on Form S-3 (or a similar or
successor form) and any related qualification or compliance, of its
securities by the Holders of Registrable Securities which will be
reasonably estimated to result in aggregate gross proceeds of at
least $1,000,000, the Company shall promptly give notice of such
proposed registration to all Holders of Registrable Securities
(and, in the case of any Holder located outside the continental
United States, simultaneously provide a copy of such notice by fax)
and the Company shall, as expeditiously as possible, use its best
efforts to effect the registration on Form S-3 (or a similar or
successor form) of the Registrable Securities which the Company has
been requested to register (i) in each request and (ii) in any
response given within twenty (20) days after mailing of the written
notice by the Company by first-class mail, postage prepaid, of the
foregoing notice from the Company. Notwithstanding the foregoing,
however, such registration shall be subject to the
following:
(a) The Company shall not be
required to effect more than one (1) such registrations pursuant to
this Section 2.6 in any twelve (12) month period.
(b) The Company shall not be
required to effect a registration pursuant to this Section 2.6
within one hundred eighty (180) days of the effective date of any
registration referred to in Section 2.5.
The Company may include in the
registration under this Section 2.6 any other shares of Common
Stock (including issued and outstanding shares of Common Stock as
to which the holders thereof have contracted with the Company for
“piggyback” registration rights) so long as the
inclusion in such registration of such shares will not, in the
opinion of the Underwriter’s Representative (or in the
reasonable opinion of the Company after consultation with the
Holders in the event that the offering is not underwritten),
interfere with the successful marketing in accordance with the
intended method of sale or other disposition of all the shares of
Registrable Securities sought to be registered by the Holder or
Holders of Registrable Securities pursuant to this Section 2.6. If
it is determined as provided above that there will be such
interference, the other shares of Common Stock sought to be
included by the Company shall be excluded to the extent deemed
necessary by such Underwriter’s Representative (or the
Company after consultation with the Holders if the offering is not
underwritten), and all other shares of Common Stock held by other
parties shall be excluded before the exclusion of any shares of
Registrable Securities held by the Holders who desire to have their
shares included in the registration and offering. If, as
contemplated above, and after excluding all other shares of Common
Stock held by other parties, Registrable Securities of the Holders
are to be excluded, the number of Registrable Securities of each
participating Holder which are to be excluded shall be
proportionate to the number of shares which such party is seeking
to register.
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2.7 Expenses of Registration
. All Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Sections 2.4,
2.5 and 2.6 shall be borne by the Company; and, unless otherwise
stated, all Selling Expenses relating to securities registered by
the Holders, shall be borne by the Holders of such securities pro
rata on the basis of the number of shares so registered; provided,
that unless otherwise agreed, any Holder that retains its own
counsel (in addition to the single special counsel for all Holders)
shall be solely responsible for the fees and expenses of such
counsel.
2.8 Registration Procedures .
In the case of each registration, qualification or compliance
effected by the Company pursuant to this Section 2, the Company
will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the
completion thereof. The Company will:
(a) Prepare and file with the
Commission a registration statement with respect to such securities
and use its best efforts to cause such registration statement to
become and remain effective for a period of one hundred and twenty
(120) days or until the Holder or Holders have completed the
distribution described in the registration statement relating
thereto, whichever occurs first.
(b) Furnish to the Holders and to
each underwriter such number of copies of the registration
statement and the prospectus included therein (including each
preliminary prospectus) as such persons may reasonably request in
order to facilitate the intended disposition of the Registrable
Securities covered by such registration statement.
(c) Prepare and file with the
Commission 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 Securities Act with respect to the disposition of
all securities covered by such registration statement for the
period set forth in paragraph (a) above.
(d) Use its reasonable 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 Holders;
provided that the Company 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 unless the Company is already subject
to service in such jurisdiction and except as may be required by
the Securities Act.
(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
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