SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported): September 10, 1997
FOCUS Enhancements, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-11860 04-3186320
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
142 North Road, Sudbury, Massachusetts 01776
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 371-2000
(Former name or former address, if changed
since last report)
<PAGE>
Item 5. Other Events
On September 10, 1997 (the "Closing"), the Company sold 1,000,000
shares of its common stock, $.01 par value per share (the "Common Stock") in a
private placement to Smith Barney Fundamental Value Fund, Inc. (the "Purchaser")
pursuant to Regulation D promulgated under the Securities Act of 1933 (the
"Act"). The Common Stock was sold to the Purchaser at a price of $3.81 per
share. The net proceeds to the Company totaled $3,620,000 after payment of
commissions totaling $190,000 to Security Research Associates, Inc. (the
"Placement Agent"). The Company also issued to the Placement Agent warrants (the
"Warrants") to purchase 100,000 shares of Common Stock exercisable at a price of
$6.00 per share for a period of five years from the date of the Closing. The
Company also agreed to register pursuant to the Act, the Common Stock issued to
the Purchaser and issuable upon exercise of the Warrants within 90 days of the
Closing.
Item 7. Financial Statements and Exhibits
(a) Financial Statements and Exhibits
Not Applicable
(b) Pro Forma Financial Information
Not Applicable
(c) Exhibits. The following Exhibits are filed herewith:
Exhibit 4.1 Subscription Agreement between the Company and the Purchaser
dated September 10, 1997.
Exhibit 4.2 Form of Warrant dated September 10, 1997 issued to the
Placement Agent.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FOCUS ENHANCEMENTS, INC.
By: /s/ Harry G. Mitchell
Harry G. Mitchell
Senior Vice President and
Chief Financial Officer
Date: September 25, 1997
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EXHIBIT 4.1
FOCUS ENHANCEMENTS, INC.
(a Delaware Corporation)
Private Offering of up to 1,000,000 Shares of Common Stock
Offering Price - $3.81 per Share
Total Offering - $3,810,000
Subscription Documents
<PAGE>
Name of Investor: Smith Barney Fundamental Value Fund, Inc.
Number of Shares Subscribed for: 1,000,000
FOCUS ENHANCEMENTS, INC.
SUBSCRIPTION AGREEMENT
for
The Purchase of Shares of Common Stock of the Company
A. The undersigned hereby subscribes for and agrees to purchase 1,000,000 Shares
of Common Stock (the "Shares or "Securities") of FOCUS ENHANCEMENTS, INC., a
corporation organized and existing under the laws of the State of Delaware (the
"Company"). The Shares being offered are more fully described in the
Confidential Term Sheet of the Company dated September 2, 1997 and the Exhibits
thereto (the "Term Sheet"). The undersigned agrees to pay a purchase price equal
to $3.81 multiplied by the number of Shares subscribed for. In the event that
the last sale price of the Company's Common Stock (as reported on the Nasdaq
Small Cap Market or other exchange) is less than $3.00 per share for twenty
consecutive trading days during the twelve month period following the closing of
this offering, the undersigned shall receive one warrant to purchase one share
of Common Stock for every three Shares purchased hereunder (up to a maximum of
330,000 warrants) The warrants shall be exercisable for a period of seven years
after the closing date at a price of $3.00 per share; provided, however, that
the undersigned shall have purchased 1,000,000 of the Shares upon the terms set
forth herein. The undersigned herewith tenders to the Company the entire amount
of such purchase price by wire transfer or by check made payable to the order of
Sullivan & Worcester LLP, Escrow Agent.
B. The undersigned acknowledges that the Shares have not been registered under
the Securities Act of 1933, as amended (the "Act"), or the securities laws of
any state (i) that absent an exemption or registration under the Act, the
Securities cannot be resold, and (ii) the Securities are being offered for sale
in reliance upon exemptions from registration contained in the Act and
applicable state laws, and that the Company's reliance upon such exemption is
based in part upon the undersigned's representations, warranties and agreements
contained in this Subscription Agreement.
The offering (the "Offering") of Shares shall terminate on September
30, 1997, or such later date as may be determined by the Company and the
Placement Agent in their discretion (the "Termination Date"), unless sooner
terminated by reason of the sale of all the Shares prior to such time. The
Company and the Placement Agent have the right, in their discretion, to accept
or reject any subscription.
<PAGE>
C. The foregoing notwithstanding, the Company agrees to register the Shares in
accordance with the following terms and conditions:
(1) The Company will, within ninety (90) days of the Termination Date,
file pursuant to the Act a registration statement on Form S-3 or equivalent form
with respect to the Shares and the Company will use its best efforts to cause
such registration to become and remain effective (including the taking of such
steps as are necessary to obtain the removal of any stop order), provided that
the undersigned shall furnish the Company with appropriate information in
connection therewith as the Company may reasonably request in writing. All costs
and expenses of the registration statement shall be borne by the Company, except
that the undersigned shall bear the fees of his or her own counsel and any
underwriting discounts or commissions applicable to any of the securities sold
by them. The Company shall supply prospectuses, and such other documents as the
undersigned may request in order to facilitate the public sale or other
disposition of the Shares and use its best efforts to register and qualify any
of the Shares for sale in such states as the undersigned designates.
(2) The Company will indemnify and hold harmless each holder of the
securities covered by such registration statement, amendment or supplement (such
holder being hereinafter called the "Distributing Holder"), and each person, if
any, who controls (within the meaning of the Act) the Distributing Holder, and
each underwriter (within the meaning of the Act) of such securities and each
person, if any, who controls (within the meaning of the Act) any such
underwriter, against any losses, claims, damages or liabilities, joint or
several, to which the Distributing Holder, any such controlling person or any
such underwriter may become subject, under the 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 or any
material fact contained in any such registration statement or any preliminary
prospectus or final prospectus constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to the state therein of a material fact required to be stated
therein or necessary to make the statements therein not misleading. The Company
shall reimburse the Distributing Holder or such controlling person or
underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action; 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 untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus or said amendment or
supplement in reliance upon and in conformity with written information furnished
by such Distributing Holder or any other Distributing Holder for use in the
preparation thereof.
(3) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, and each
person, if any, who controls the Company (within the meaning of the Act) against
any losses, claims, damages or liabilities, joint or several, to which the
Company or any such director, officer or controlling person may
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<PAGE>
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities, or actions in respect thereof, arise out of or are based
upon (i) any untrue statement of any material fact contained in said
registration statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement, 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, in each case
to the extent, but only to the extent, that 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 said registration statement,
said final prospectus or said amendment or supplement in reliance upon and in
conformity with written information furnished by such Distributing Holder for
use in the preparation thereof or (ii) the Distributing Holder's failure to
deliver a prospectus as required under applicable federal or state securities
laws. The Distributing Holders shall reimburse the Company or any such director,
officer or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action.
(4) Promptly after receipt by an indemnified party under this Section C
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof, but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section C.
(5) In case any such action is brought against any indemnified party,
and it notified an 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, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, 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 C for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
(6) The obligations of the Company under this Section C to register the
Shares shall expire and terminate on the earlier of (i) two years from the
Termination Date or (ii) at such time as the Distributing Holder shall be
entitled to sell such securities without restriction and without a need for the
filing of a registration statement under the Act, including, without limitation,
for any resales of "Restricted Securities" made pursuant to Rule 144 as
promulgated by the SEC, or a sale made pursuant to Sections 4(1) and/or 4(2)
under the Act.
D. In order to induce the Company to accept this Subscription Agreement, the
undersigned represents and warrants to the Company and Security Research
Associates, Inc. (the "Placement Agent") as follows:
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<PAGE>
(l) The undersigned understands that (i) this Subscription Agreement
may be accepted or rejected in whole or in part in the discretion of the Company
or the Placement Agent, and (ii) this Subscription Agreement, unless properly
revoked before acceptance, shall survive the undersigned's death, disability or
insolvency, except that the undersigned shall have no obligations in the event
that this Subscription Agreement is rejected by the Company. In the event that
the Company does not accept the undersigned's subscription, or if the Offering
is terminated for any reason, the undersigned's payment will be returned to him
without interest or deduction.
(2) The undersigned has read carefully this Subscription Agreement and
the Term Sheet (including the Exhibits annexed thereto) and, to the extent
necessary, has discussed the representations, warranties and agreements which
the undersigned makes by signing it, and the applicable limitations upon the
undersigned's resale of the Securities with his or its counsel.
(3) The undersigned understands that no federal or state agency has
made any finding or determination regarding the fairness of the offering of the
Securities, or any recommendation or endorsement of the offering of the
Securities. Any representation to the contrary is a criminal offense.
(4) The undersigned is purchasing the Securities for the undersigned's
own account, with the intention of holding the Securities for investment
purposes, with no present intention of dividing or allowing others to
participate in this investment or of reselling or otherwise participating,
directly or indirectly, in a distribution of the Securities; and shall not make
any sale, transfer or other disposition of the Securities without registration
under the Act and applicable state securities laws unless an exemption from
registration is available under those laws.
(5) The undersigned's overall commitment to investments which are not
readily marketable is not disproportionate to the undersigned's net worth, and
the undersigned's investment in the Securities will not cause such overall
commitment to become excessive.
(6) The undersigned, if an individual, has adequate means of providing
for his current needs and personal and family contingencies and has no need for
liquidity in his investment in the Securities.
(7) The undersigned is an "accredited investor" as that Term is defined
in Section 501(a) under Regulation D promulgated by the Securities and Exchange
Commission under the Act which definition is attached hereto. The undersigned is
financially able to bear the economic risk of this investment, including the
ability to afford holding the Securities for an indefinite period or to afford a
complete loss of this investment.
(8) The address shown under the undersigned's signature at the end of
this Subscription Agreement is the undersigned's principal residence if he is an
individual, or its principal business address if a corporation or other entity.
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<PAGE>
(9) The undersigned, together with any purchaser representatives of the
undersigned (as identified herein) has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Securities.
(10) The undersigned has received and read the Term Sheet dated as of
September 2, 1997.
(11) The undersigned has been given the opportunity to ask questions of
and receive answers from the Company concerning the terms and conditions of the
Offering and to obtain additional information necessary to verify the accuracy
of the information contained in the Term Sheet or such other information as the
undersigned desired in order to evaluate the investment, and the undersigned
availed itself of such opportunity to the extent considered appropriate in order
to evaluate the merits and risks of the proposed investment. Notwithstanding the
foregoing, the only information upon which the undersigned has relied in making
the investment decision is that set forth in the Term Sheet and the exhibits
thereto. The undersigned acknowledges that the undersigned has received no
representations or warranties from the Company and its employees or the
Placement Agent and its employees other than as set forth in the Term Sheet.
(12) The undersigned has made an independent evaluation of the merits
of the investment and acknowledges the high risk nature of the investment.
(13) The undersigned has accurately completed the Qualified Purchaser
Questionnaire provided herewith and has executed such Qualified Purchaser
Questionnaire and any applicable exhibits thereto.
(14) The undersigned understands that although the Company is currently
a "reporting company" under the Securities Exchange Act of 1934, as amended, the
provisions of Rule 144 promulgated under the Act to permit resales of the
Securities will not be available for at least one (1) year from the date the
Securities are paid for and accepted, there can be no assurance that the
conditions necessary to permit routine sales of the Securities under Rule 144
will ever be satisfied, that such sales require that the Company be current in
filing periodic reports under the Securities Exchange Act of 1934, and, if Rule
144 should become available, sales made in reliance on its provisions could be
made only in limited amounts and in accordance with the terms and conditions of
the Rule. The undersigned further understands that in connection with the sale
of securities for which Rule 144 is not available, compliance with some other
registration exemption will be required. The undersigned understands that,
except as set forth in this Subscription Agreement, the Company is under no
obligation to the undersigned to register the Securities or to comply with the
conditions of Rule 144 or take any other action necessary in order to make
available any exemption for the resale of the Securities without registration.
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<PAGE>
(15)(a) The undersigned understands that none of the Securities have
been registered under the Act, or any state securities laws in reliance on
exemptions for private offerings; the Securities cannot be resold or otherwise
disposed of unless they are subsequently registered under the Act and applicable
sate securities laws or an exemption from registration is available. The
certificate(s) representing the Securities will bear the following legend until
(i) such securities shall have been registered under the Act and effectively
disposed of in accordance with the registration statement; or (ii) in the
opinion of counsel reasonable satisfactory to the Company such Securities may be
sold without registration under the Act:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OP 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE "BLUE SKY" OR SECURITIES LAWS OF ANY
STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR
TRANSFERRED AND ANY TRANSFER OR PURPORTED TRANSFER SHALL NOT BE RIGHTFUL UNDER
THE UNIFORM COMMERCIAL CODE AND THE COMPANY SHALL HAVE NO DUTY TO REGISTER A
TRANSFER OF THESE SECURITIES EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT
TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION
UNDER THE ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, THAT THE PROPOSED
DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT
AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES LAW." THE
RESTRICTIONS CONTAINED HEREIN ARE BINDING ON THE HOLDER HEREOF AND HIS
SUCCESSORS AND ASSIGNS.
(b) The undersigned understands that in the absence of registration by
the Company, the Securities will not be, and the undersigned will have no rights
to require that the Securities be registered under the 1933 Act or any state
securities laws; there will be no public market for the Securities and there is
no assurance one will develop in the future; the undersigned may have to hold
the Securities indefinitely and it may not be possible for the undersigned to
liquidate its investment in the Company; and the undersigned should not purchase
any Shares unless it can afford a complete loss of its investment and bear the
burden of such loss for an indefinite period of time.
(16) The undersigned, if an individual, is at least 21 years of age.
(17) If at any time prior to acceptance of the subscription for the
Securities of the undersigned, any representation or warranty of the undersigned
shall no longer be true, the undersigned promptly shall give written notice to
the Company and the Placement Agent specifying which representations and
warranties are not true and the reason therefor, whereupon the undersigned's
subscription may be rejected.
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<PAGE>
(18) Notwithstanding the place where this Subscription Agreement may be
executed by any of the parties hereto, all the terms and provisions hereof shall
be construed in accordance with and governed by the laws of The Commonwealth of
Massachusetts, without giving effect to its conflict of law principles. Any
dispute which may arise out of or in connection with this Subscription Agreement
shall be adjudicated before a court located in The Commonwealth of Massachusetts
and the parties hereby submit to the exclusive jurisdiction of the courts of The
Commonwealth of Massachusetts and of the federal courts in The Commonwealth of
Massachusetts with respect to any action or legal proceeding commenced by any
party, and irrevocably waive any objection they now or hereafter may have
respecting the venue of any action or proceeding brought in such a court or
respecting the fact that such court is an inconvenient forum, relating to or
arising out of this Subscription Agreement or any acts or omissions relating to
the sale of the Securities, and the undersigned consents to the service of
process in any such action or legal proceeding by means of registered or
certified mail, return receipt requested, in care of the address set forth below
or such other address as the undersigned shall furnish in writing to the Company
and the Placement Agent.
(19) The undersigned hereby waives trial by jury in any action or
proceeding involving, directly or indirectly, any matter (whether sounding in
tort, contract, fraud or otherwise) in any way arising out of or in connection
with this Subscription Agreement or the undersigned's purchase of the
Securities.
(20) The undersigned acknowledges that he understands the meaning and
legal consequences of the representations, warranties and acknowledgments
contained in this Subscription Agreement and in the Qualified Purchaser
Questionnaire, and hereby agrees to indemnify and hold harmless the Company and
the Placement Agent, and their respective shareholders, officers, directors,
affiliates, "controlling persons", agents and representatives, from and against
any and all loss, damage, expense, claim, action, suit or proceeding (including
the reasonable fees and expenses of legal counsel) as incurred arising out of or
in any manner whatsoever connected with a breach of any representation or
warranty of the undersigned contained in this Subscription Agreement or in the
Qualified Purchaser Questionnaire. The undersigned acknowledges that such damage
could be substantial since (a) the Shares are being offered without registration
under the Act in reliance upon the exemption pursuant to Section 4(2) of the Act
for transactions by an issuer not involving a public offering and, in various
states, pursuant to exemptions from registration, (b) the availability of such
exemptions is, in part, dependent upon the truthfulness and accuracy of the
representations made by the undersigned herein and in its Qualified Purchaser
Questionnaire, and (c) the Company will rely on such representations in
accepting the undersigned's Subscription Agreement.
(21) Except as expressly provided herein, this Subscription Agreement
contains the entire agreement between the parties with respect to the
transactions contemplated hereunder and may be amended only by a writing
executed by all of the parties hereto. This Subscription Agreement supersedes
all prior arrangements or understandings with respect thereto, whether verbal or
written. The terms and conditions of this Subscription Agreement shall inure to
the benefit of and be binding upon the parties and their respective successors,
heirs and assigns.
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ALL SUBSCRIBERS MUST COMPLETE THIS PAGE
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement on this 8th day of September, 1997.
1,000,000
- -------------------------------
Number of Shares Subscribed For
<TABLE>
<CAPTION>
Manner in which Title is to be held (Please Check One):
<S> <C> <C> <C> <C> <C>
1. / / Individual 7. / / Trust/Estate/Pension or Profits
Sharing Plan
Date Opened:
2. / / Joint Tenants With 8. / / As a Custodian for
Right of Survivorship
3. / / Community Property
Under the Uniform Gift to Minors
Act of the State of
4. / / Tenants in Common
5. /X/ Corporate/Partnership 9. / / Married with Separate Property
6. / / IRA 10. / / Keogh
</TABLE>
INDIVIDUAL SUBSCRIBERS MUST COMPLETE PAGE 9; SUBSCRIBERS THAT ARE ENTITIES MUST
COMPLETE PAGE 10.
Smith Barney Fundamental Value Fund Inc.
----------------------------------------
Name of Purchaser
Registered Representative
Please indicate whether or not you or any member of your immediate family
is affiliated with any member of the National Association of Securities Dealers,
Inc. A member of your immediate family includes parents, mother-in-law,
father-in-law, husband or wife, brother or sister, brother-in-law or
sister-in-law, son-in-law, daughter-in-law and children and any other person who
is supported, directly or indirectly to a material extent by the subscriber.
Check One: / / No Affiliates /X/ Affiliated with (explain)
Smith Barney is a member of the National Association of Securities Dealers, Inc.
8
<PAGE>
EXECUTION BY SUBSCRIBER THAT IS AN ENTITY
(Corporation, Partnership, Trust, Etc.)
Smith Barney Fundamental Value Fund Inc.
- ----------------------------------------
Name of Entity (Please Print)
c/o Smith Barney, Inc.
Attn: Thomas Reynolds
388 Greenwich St. 22nd Fl.
New York, NY 10013
- ----------------------------------------
Address of Principal Office of Entity
(seal) BY: /s/ John H. Goode
-----------------------
TITLE: Vice President
and Investment Officer
-----------------------
Attest:
(If Entity is a Corporation)
c/o Smith Barney, Inc.
Attn: Thomas Reynolds
388 Greenwich St. 22nd Fl.
New York, NY 10013
------------------------------
Address
212-816-6550
------------------------------
Telephone Number
91-1146641
------------------------------
Taxpayer Identification Number
ACCEPTED, this 10th day of September, 1997, on behalf of the Company.
FOCUS ENHANCEMENTS, INC.
By: /s/ Thomas L. Massie
---------------------
Name: Thomas L. Massie, CEO
---------------------
9
EXHIBIT 4.2
The security represented hereby has not been registered under the
Securities Act of 1933 or applicable state securities laws and may not be sold,
assigned or transferred without an effective registration statement for such
security under the Securities Act of 1933 or applicable state securities laws,
unless the Company has received the written opinion of counsel satisfactory to
the Company that such counsel is of the opinion that such sale, assignment or
transfer does not involve a transaction requiring registration of such security
under the Securities Act of 1933 or applicable state securities laws.
Warrant No.: W97/_ Right to Purchase ___________
Shares of Common Stock of
September 10, 1997 FOCUS Enhancements, Inc.
VOID UNLESS EXERCISED BEFORE 5:00 P.M., EASTERN TIME ON SEPTEMBER 9, 2002.
FOCUS Enhancements, Inc.
Common Stock Purchase Warrant
FOCUS Enhancements, Inc., a Delaware corporation (the "Company"),
hereby certifies that, for value received, ______________, or assigns, is
entitled, subject to the terms set forth below, to purchase from the Company,
commencing September 10, 1997, at any time or from time to time before 5:00
p.m., Eastern Time, on or before September 9, 2002, ______ fully paid and
nonassessable shares of Common Stock, $.01 par value, of the Company, at an
exercise price per share equal to $6.00. Such exercise price per share as
adjusted from time to time as herein provided is referred to herein as the
"Exercise Price." The number and character of such shares of Common Stock and
the Exercise Price are subject to adjustment as provided herein.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include FOCUS Enhancements, Inc., a
Delaware corporation, and any corporation which shall succeed or assume
the obligations of the Company hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.01 par value per share, as authorized, (b) any other capital stock of
any class or classes (however designated) of the Company, authorized on
or after such date, the holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of
dividends and distributions
<PAGE>
on any shares entitled to preference, and the holders of which shall
ordinarily, in the absence of contingencies, be entitled to vote for
the election of a majority of directors of the Company (even though the
right so to vote has been suspended by the happening of such a
contingency), (c) any other securities into which or for which any of
the securities described in (a) or (b) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of
assets or otherwise, or the conversion of promissory notes or other
obligations of the Company.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holder of this Warrant at any time
shall be entitled to receive, or shall have received, on the exercise
of the Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or
in replacement of Other Securities pursuant to Sections 3 or 4 or
otherwise.
1. Exercise of Warrant.
1.1. Full Exercise. This Warrant may be exercised in full by
the holder hereof by surrender of this Warrant, with the form of subscription at
the end hereof duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company, in the amount obtained by multiplying the
number of shares of Common Stock for which this Warrant is then exercisable by
the Exercise Price then in effect.
1.2 Partial Exercise. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in Section 1.1
except that the amount payable by the holder on such partial exercise shall be
the amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription at the end hereof by (b) the
Exercise Price then in effect. On any such partial exercise, the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
2. Delivery of Stock Certificates on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
sixty (60) days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which such holder shall be entitled on such exercise, plus, in
lieu of any fractional share to which such holder would otherwise be entitled,
cash equal to such fraction multiplied by the then current market value of one
full share, together with any other stock or other securities and property
(including cash, where applicable) to which such holder is entitled upon such
exercise pursuant to Section 1 or otherwise.
2
<PAGE>
3. Adjustment for Reorganization, Consolidation or Merger.
3.1 Reorganization, Consolidation or Merger. In case at any
time or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or entity, or (c) transfer all
or substantially all of its properties or assets to any other person under any
plan or arrangement contemplating the dissolution of the Company, then, in each
such case, the holder of the Warrant, on the exercise hereof as provided in
Section 1 at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as the case
may be, shall receive, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 4 and 5.
3.2 Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and Other
Securities and property receivable on the exercise of the Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant.
4. Adjustments for Stock Dividends and Stock Splits. In the event that
the Company shall (i) issue additional shares of Common Stock as a dividend or
other distribution on outstanding Common Stock, (ii) subdivide its outstanding
shares of Common Stock, or (iii) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Exercise Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then prevailing Exercise Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event (calculated assuming the conversion
or exchange of all outstanding shares of convertible or exchangeable securities
of the Company which are convertible or exchangeable into, or exercisable for,
shares of Common Stock) and the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such event (calculated
assuming the conversion or exchange of all outstanding shares of convertible or
exchangeable securities of the Company which are convertible or exchangeable
into, or exercisable for, shares of Common Stock), and the product so obtained
shall thereafter be the Exercise Price then in effect. The Exercise Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 4. The holder of
this Warrant shall thereafter, on the exercise hereof as provided in Section 1,
be entitled to receive that number of shares of Common Stock determined by
multiplying the number of shares of Common Stock which would otherwise (but for
the provisions of this Section 4) be issuable on such exercise, by a fraction of
which (i) the numerator
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is the Exercise Price which would otherwise (but for the provisions of this
Section 4) be in effect, and (ii) the denominator is the Exercise Price in
effect on the date of such exercise.
5. Adjustment for Dividends in Other Stock, Property and
Reclassifications. In case at any time or from time to time, the holders of
Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of stockholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which, in the case
of Common Stock, are provided for in Section 4), then and in each such case the
holder of this Warrant, on the exercise hereof as provided in Section 1, shall
be entitled to receive the amount of other or additional stock and other
securities and property (including cash in the cases referred to in subdivision
(b) of this Section 5) which such holder would hold on the date of such exercise
if on the date of distribution of such other or additional stock or other
securities and property, or on the record date fixed for determining the
shareholders entitled to receive such other or additional stock or other
securities and property, such holder had been the holder of record of the number
of shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the date thereof to and including the date of
such exercise, retained such shares and all such other or additional stock and
other securities and property (including cash in the cases referred to in
subdivision (b) of this Section 5) receivable by such holder as aforesaid during
such period, giving effect to all adjustments called for during such period by
Sections 3 and 4.
6. Notices of Record Date. In the event of
(a) any taking by the Company of a record of the holders of any class
or securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or to receive
any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of
all or substantially all the assets of the Company to or consolidation
or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company,
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then and in each such event the Company will mail or cause to be mailed to the
holder of this Warrant a notice specifying (i) the date on which any such record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, and
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for securities or
other property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be mailed at least twenty (20) days prior to the
date specified in such notice on which any such action is to be taken.
7. Reservation of Stock Issuable on Exercise on Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, all shares of Common Stock (or Other Securities)
from time to time issuable on the exercise of the Warrant; the shares of Common
Stock which the holder of this Warrant shall receive upon exercise of the
Warrant will be duly authorized, validly issued, fully paid and non-assessable.
8. Exchange of Warrant. On surrender for exchange of this Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
9. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
10. Warrantholder Not Deemed Stockholder; Restrictions on Transfer.
This Warrant is issued upon the following terms, to all of which each holder or
owner hereof by the taking hereof consents and agrees:
(a) No holder of this Warrant shall, as such, be deemed the holder of
Common Stock that may at any time be issuable upon exercise of this
Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon such holder, as such, any of the rights of
a stockholder of the Company until such holder shall have exercised the
Warrant and been issued shares of Common Stock in accordance with the
provisions hereof.
(b) Neither this Warrant nor any shares of Common Stock purchased
pursuant to this Warrant shall be registered under the Securities Act
of 1933 (the "Securities Act") and
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applicable state securities laws. Therefore, the Company may require,
as a condition of allowing the transfer or exchange of this Warrant or
such shares, that the holder or transferee of this Warrant or such
shares, as the case may be, furnish to the Company an opinion of
counsel acceptable to the Company to the effect that such transfer or
exchange may be made without registration under the Securities Act and
applicable state securities laws. The certificates evidencing the
shares of Common Stock issued on the exercise of the Warrant shall bear
a legend to the effect that the shares evidenced by such certificates
have not been registered under the Securities Act and applicable state
securities laws.
(c) This Warrant is not transferable or assignable to any party without
the prior written consent of the Company and an opinion of counsel
satisfactory to the Company that such transfer is permissible under
applicable law.
11. Notices. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by (i) first class mail, postage
prepaid, (ii) electronic facsimile transmission, or (iii) express overnight
courier service, at such address as may have been furnished to the Company in
writing by such holder or, until any such holder furnishes to the Company an
address, then to, and at the address of, the last holder of this Warrant who has
so furnished an address to the Company.
12. Registration Rights. The Company hereby grants the following
registration rights with respect to the shares of Common Stock issued or
issuable upon exercise of this Warrant (the "Warrant Shares").
12.1 The Company will within ninety (90) days of the date of
this Warrant file pursuant to the Securities Act a registration statement on
Form S-3 or equivalent form with respect to the Warrant Shares and the Company
will use its best efforts to cause such registration to become and remain
effective (including taking of such steps as are necessary to obtain the removal
of any stop order), provided that the undersigned shall furnish the Company with
appropriate information in connection therewith as the Company may reasonably
request in writing. The Company shall supply prospectuses, and such other
documents as the undersigned may request in order to facilitate the public sale
or other disposition of the Warrant Shares and use its best efforts to register
and qualify any of the Warrant Shares for sale in such states as the undersigned
designates.
12.2 "Piggy-Back Registrations": If at any time the Company
shall determine to register in a public offering for its own account (and not
the account of selling stockholders) under the Securities Act any of its Common
Stock, it shall send to the Warrantholder written notice of such determination
and, if within 15 days after receipt of such notice, the Warrantholder shall so
request in writing, the Company shall use its best efforts to include in such
registration statement all or any part of the Warrant Shares such holder
requests to be registered. This right shall not apply to a registration of
shares of Common Stock on Form S-4 or Form S-8 (or their then equivalents)
relating to shares of Common Stock to be issued by the Company in connection
with any acquisition of any entity or business, or shares of Common Stock
issuable in connection with any stock option or other employee benefits plan,
respectively.
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If, in connection with any offering involving an underwriting of Common
Stock to be issued by the Company for the account of the Company, the managing
underwriter shall impose a limitation on the number of shares of such Common
Stock which may be included in any such registration statement because, in its
judgment, such limitation is necessary to effect an orderly public distribution
of the Common Stock and to maintain a stable market for the securities of the
Company, then the Company shall be obligated to include in such registration
statement only such limited portion (which may be none) of the Warrant Shares
with respect to which the Warrantholder and all other selling stockholders have
requested inclusion thereunder.
12.3 Expenses. In the case of a registration under Sections
12.1 and 12.2, the Company shall bear all costs and expenses of such
registration, including, but not limited to, printing, legal and accounting
expenses, Securities and Exchange Commission (the "SEC") and NASD filing fees
and all related "Blue Sky" fees and expenses; provided, however, that the
Company shall have no obligation to pay or otherwise bear any portion of the
underwriters' commissions or discounts attributable to the Warrant Shares being
offered and sold by the Warrantholder or the fees and expenses of any counsel
for the Warrantholder in connection with any registration of the Warrant Shares.
12.4 Lock-Up Agreement for Public Offering. In connection with
any public offering of equity securities of the Company, the Warrantholder
agrees not to sell, pledge, transfer or otherwise dispose of, or grant any
option or purchase right with respect to, any shares of capital stock then owned
by him and not otherwise offered in the public offering, or engage in any short
sale, hedging transaction or other derivative security transaction involving the
Common Stock, or other shares of Common Stock of the Company held by him, for
such period of time commencing 30 days prior to the proposed effective date of
such public offering until such period of time following the offering as the
Company and the managing underwriter of such public offering deem necessary in
order to ensure a stable and orderly trading market.
12.5 Expiration of Registration Rights. The obligations of the
Company under this Section 12 to register the Warrant Shares shall expire and
terminate at such time as the Warrantholder shall be entitled to sell such
securities without restriction and without a need for the filing of a
registration statement under the Securities Act, including, without limitation,
for any resales of "Restricted Securities" made pursuant to Rule 144 as
promulgated by the SEC, or a sale made pursuant to Sections 4(1) and/or 4(2)
under the Securities Act. If the Warrantholder desires to exercise the
registration rights provided in this Section 12, the Warrantholder must exercise
this Warrant for cash consideration prior to the effectiveness of any
registration.
13. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant and the shares of Common Stock underlying this Warrant
shall be construed and enforced in accordance with and governed by the laws of
the State of Delaware. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The
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invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
14. Expiration. The right to exercise this Warrant shall expire at 5:00
p.m., Eastern Time, on September 9, 2002.
Dated: September 10, 1997
ATTEST: FOCUS ENHANCEMENTS, INC.
By:_______________________________ By:_______________________________
Title:____________________________ Title:____________________________
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FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO FOCUS Enhancements, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, ____________
shares of Common Stock of FOCUS Enhancements, Inc., a Delaware corporation, and
herewith makes payment of $____________ therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to
_________________________, whose address is _________________________.
Dated: __________________________________________________
(Signature must conform to name of holder as specified
on the face of the Warrant)
__________________________________________________
__________________________________________________
(Address)
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of FOCUS Enhancements,
Inc., a Delaware corporation, to which the within Warrant relates, and appoints
_________________________ Attorney to transfer such right on the books of FOCUS
Enhancements, Inc., a Delaware corporation, with full power of substitution in
the premises.
Dated: __________________________________________________
(Signature must conform to name of holder as specified
on the face of the Warrant)
__________________________________________________
__________________________________________________
(Address)
Signed in the presence of:
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