As filed with the Securities and Exchange Commission on May 12, 1997
Registration No. 333- _____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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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
(508) 371-2000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Harry G. Mitchell
Chief Financial Officer
FOCUS Enhancements, Inc.
142 North Road
Sudbury, Massachusetts 01776
(508) 371-2000
(Name, address, including zip code, telephone number, including area code,
of agent for service)
Copy to:
John A. Piccione, Esq.
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
(617) 338-2800
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Approximate date of commencement of proposed sale to the public: From
time to time or at one time after the effective date of the Registration
Statement as determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| _____________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_| _____________
<PAGE>
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. |_|
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Amount of
Title of Each Class of Securities to Amount to Maximum Registration
be Registered be Registered Price to Public Offering Price Fee(2)
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per 1,552,750 $1.78 $2,763,895 $837.54
share(1)
<FN>
(1) The Common Stock being registered consists of (i) 242,750 shares issued
to certain unaffiliated investors in connection with a private offering
in December 1995 (the "December 95 Offering") (ii) 100,000 shares
issuable upon exercise of common stock purchase warrants (the "Investor
Warrants") issued to the investors in the December 95 Offering;
(iii)1,100,000 shares issued to certain unaffiliated investors in
connection with a private offering in March 1997 (the "March 97
Offering"); and (iv) 110,000 shares issuable by the Company upon
exercise of certain common stock purchase warrants issued to the
placement agent in connection with the March 97 Offering all as
described in the "SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION"
sections of the Prospectus.
(2) The registration fee is calculated pursuant to Rule 457(c) of the
Securities Act of 1933 by taking the average of the bid and asked
prices of the registrant's Common Stock, $.01 par value per share, on
May 8, 1997 as reported on the NASDAQ SmallCap Market.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
(ii)
<PAGE>
Subject to Completion
Preliminary Prospectus Dated May 12, 1997
PROSPECTUS
FOCUS Enhancements, Inc.
1,552,750 Shares of Common Stock
This Prospectus relates to 1,552,750 shares of Common Stock, $.01 par
value per share ("Common Stock" or the "Shares"), of FOCUS Enhancements, Inc.
(the "Company", the "Registrant" or "FOCUS") consisting of (i) 242,750 Shares
issued to certain unaffiliated investors in connection with a private offering
in December 1995 (the "December 95 Offering"); (ii) 100,000 Shares issuable upon
exercise of common stock purchase warrants (the "Investor Warrants") issued to
the investors in the December 95 Offering; (iii) 1,100,000 Shares issued to
certain unaffiliated investors in connection with a private offering in March
1997 (the "March 97 Offering"); and (iv) 110,000 Shares issuable by the Company
upon exercise of certain common stock purchase warrants issued to the placement
agent (the "Broker Warrants" and together with the Investor Warrants are
referred to herein as the "Warrants") in connection with the March 97 Offering.
Each Investor Warrant is exercisable for one share of Common Stock and has an
exercise price of $2.063 per warrant. Each Broker Warrant is exercisable for one
share of Common Stock and has an exercise price of $1.6875 per warrant. To the
extent that the Warrants are exercised, the Company will receive proceeds equal
to the exercise price of the Warrants.
All Shares to be registered hereby are to be offered by the selling
stockholders listed herein (the "Selling Stockholders"), and the Company will
receive no proceeds from the resale by the Selling Stockholders of the Shares.
The Company has agreed to indemnify certain of the Selling Stockholders against
certain liabilities, including certain liabilities under the Securities Act of
1933, as amended (the "Act"), or to contribute to payments which such Selling
Stockholders may be required to make in respect thereof.
The Company's Common Stock is listed on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") and traded on the
NASDAQ SmallCap Market under the symbol "FCSE". The last reported bid price of
the Common Stock on the NASDAQ SmallCap Market on May 8, 1997 was $1.6875.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COM-
MISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" AT PAGES 5 THROUGH 8.
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It is anticipated that usual and customary brokerage fees will be paid
by the Selling Stockholders on the sale of the Common Stock registered hereby.
The Company will pay the other expenses of this offering. See "PLAN OF
DISTRIBUTION". The offer of 1,552,750 shares of Common Stock by the Selling
Stockholders as described in this Prospectus is referred to as the "Offering".
----------------------
The date of this Prospectus is May __, 1997.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus in connection with the offer contained in this Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or the Selling Stockholders. This
Prospectus does not constitute an offer to sell or solicitation of an offer to
buy securities in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create an implication that there
has been no change in the affairs of the Company since the date hereof or the
information contained or incorporated by reference herein is correct at any time
subsequent to the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The Registration
Statement, the exhibits and schedules forming a part thereof and the reports,
proxy statements and other information filed by the Company with the Commission
can be inspected and copies obtained at the public reference facilities
maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: Chicago Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and New York Regional Office, Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at its principal office at 450 Fifth Street, N.W., Washington,
D.C. 20549. Such materials may also be accessed electronically by means of the
Commission's home page at http://www.sec.gov. This prospectus, which constitutes
part of a Registration Statement filed by the Company with the Commission under
the Act omits certain information contained in the Registration Statement in
accordance with the rules and regulations of the Commission. Reference is hereby
made to the Registration Statement and the Exhibits relating thereto for further
information with respect to the Company and the Securities offered hereby. Any
statements contained herein concerning provisions of any documents are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an Exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission
pursuant to the Exchange Act, are hereby incorporated in this Prospectus and
specifically made a part hereof by reference: (i) the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996; (ii) the Company's Current
Report on Form 8K/A-1 filed on January 6, 1997 relating to the Company's
acquisition of TView , Inc.; (iii) the Company's Current Report on Form 8-K
filed on January 16, 1997 relating to the sale of securities pursuant to
Regulation S; (iv) the definitive Proxy Statement dated February 18, 1997
provided to stockholders in connection with a Special Meeting of Stockholders
held March 18, 1997; (v) the Company's Current Report on Form 8-K filed on March
3, 1997 relating to the sale of securities pursuant to Regulation S; (vi) the
preliminary Proxy Statement filed with the Commission on April 30, 1997 in
connection with the Annual Meeting of Stockholders to be held on June 6, 1997;
and (vii) the description of the Company's Common Stock contained in the
Registration Statement on Form SB-2 File No. 33-60248-B filed with the
Commission on March 29, 1993, as amended. All documents filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the
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Offering of the Shares shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the respective dates of filing of such
documents.
Any statement contained herein or in a document incorporated or deemed
to be incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in the applicable Prospectus Supplement), or in any
subsequently filed document that also is or is deemed to be incorporated herein
by reference, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom this Prospectus is delivered, upon the written or oral request of such
person, a copy of any and all of the information that has been incorporated by
reference in this Prospectus (excluding exhibits unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be made to the Company at its
principal executive offices, 142 North Road, Sudbury, Massachusetts 01776,
Attention: Harry G. Mitchell, telephone (508) 371-2000.
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<PAGE>
<TABLE>
<CAPTION>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
more detailed information appearing elsewhere in this Prospectus or incorporated
herein by reference and the financial statements which are incorporated herein
by reference.
<S> <C>
THE COMPANY........................... FOCUS Enhancements, Inc. (the "Company" or "FOCUS") internally develops, markets and sells
worldwide a proprietary line of PC-to-TV video conversion products and a diversified line of
high-quality, low-cost connectivity devices for Windows(TM) and Mac(TM)OS based personal
computers. The Company's proprietary PC-to-TV video conversion products include video output
devices marketed and sold under the Company's registered brand name, TView. All of the
Company's PC-to-TV conversion products enable users to transmit at low-cost, high quality,
computer generated images from any DOS, Windows or Mac OS based personal computer to any
television of any size with a standard RCA or S-Video interface. FOCUS's PC-to-TV technology
provides sharp, flicker-free, computer-generated images on televisions for
multimedia/business presentations, classroom/training sessions, game playing or even
collective viewing of spreadsheets or internet browsing. The Company's connectivity products
provide end users with a sophisticated, yet inexpensive, local area network for Mac OS based
personal computers. Personal computers equipped with the Company's EtherLAN Ethernet
connectivity products can also function as part of a larger, high speed network that
provides communications and connectivity to Mac OS compatible computers. The Company markets
and sells its FOCUS branded consumer products globally through a network of distributors,
volume resellers, mail order, value added resellers ("VARs") and original equipment
manufacturers ("OEMs").
RISK FACTORS............................The Offering involves substantial risk. See "RISK FACTORS".
SECURITIES OFFERED......................1,552,750 shares of Common Stock, $.01 par value per share.
OFFERING PRICE..........................All or part of the Shares offered hereby may be sold from time to time in amounts and on
terms to be determined by the Selling Stockholders at the time of sale.
USE OF PROCEEDS........................ The Company will receive no part of the proceeds from the sale of the shares registered
pursuant to this Registration Statement other than the exercise price of the Warrants.
NASDAQ TRADING SYMBOL................. FCSE
</TABLE>
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<PAGE>
RISK FACTORS
An investment in the Securities offered hereby involves a high degree
of risk and should only be purchased by investors who can afford to lose their
entire investment. The following factors, in addition to those discussed
elsewhere in the Prospectus, should be considered carefully in evaluating the
Company and its business.
Future Capital Needs. At December 31, 1996, the Company had a working
capital deficit of $607,509, cash and cash equivalents of $413,894 and was fully
drawn on its $900,000 line of credit (approximately $820,000 at December 31,
1996) with its bank and its $1.5 million term note with an unaffiliated lender.
Historically, the Company has been required to meet its short- and long-term
cash needs through debt and the sale of Common Stock in private placements in
that cash flow from operations has been insufficient. In December 1995, the
Company received gross proceeds of $1 million from the sale of Common Stock to
four investors in a private placement. During 1996, the Company received
approximately $6,116,000 in net proceeds from the exercise of warrants, stock
options and the sale of Common Stock.
The Company's future capital requirements will depend on many factors,
including cash flow from operations, continued progress in its research and
development programs, competing technological and market developments, and the
Company's ability to market its products successfully. During 1997, the Company
may be required to raise additional funds through equity or debt financing, of
which there can be no assurance. Any equity financing could result in dilution
to the Company's then-existing stockholders. Sources of debt financing may
result in higher interest expense. Any financing, if available, may be on terms
unfavorable to the Company. If adequate funds are not available, the Company may
be required to curtail its activities significantly.
Reliance on Major Customers. In the year ended December 31, 1996,
approximately 23% and 15% of the Company's revenues were derived from sales to
Zenith Electronics, Inc. ("Zenith") and Ingram Micro D, a national distributor,
respectively. Management expects that sales to Zenith and Ingram will continue
to represent a significant percentage of the Company's future revenues. In
October 1996, the Company entered into a two-year exclusive agreement with
Zenith, under which Zenith must purchase at least $12,000,000 of PC-to-TV
conversion products in 1997 and at least $30,000,000 of these products in 1998
in order to maintain exclusivity. There can be no assurances, however, that
Zenith will purchase the indicated quantities. Further, if the contract were to
be terminated by Zenith, there would be a material adverse effect to the Company
and its business.
Approximately 50% of the Company's net sales during the year ended
December 31, 1995 and approximately 8% of the Company's net sales during the
year ended December 31, 1996 were derived from sales of the Company's L-TV
product to Apple Computer, Inc. ("Apple"). In August 1994, the Company entered
into a two year Master Purchase Agreement with Apple under which Apple agreed to
bundle and distribute the Company's L-TV product with Apple's "Presentation
System" product offering. This agreement expired in August 1996. In the first
quarter of 1997, the Company received significant additional volume orders from
Apple for shipment in the first and second quarters of 1997. The Company
believes that in 1997, Apple will be a major customer. Although the orders are
irrevocable and non-cancelable, no assurances can be given that Apple will take
delivery on the products or continue to order products from the Company.
History of Operating Losses. The Company has experienced limited
profitability since its inception. Although the Company reported net income of
$328,761 in the year ended December 31, 1995, the Company
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<PAGE>
incurred net losses of $3,726,606, $4,458,483 and $9,208,431 in the years ended
December 31, 1993, 1994 and 1996, respectively. There can be no assurance that
the Company will return to profitability in 1997.
The Company's independent auditors have included an explanatory
paragraph in their report on the Company's financial statements for the year
ended December 31, 1996 to the effect that the Company's ability to continue as
a going concern is contingent upon its ability to secure financing and attain
profitable operations. In addition, the Company's ability to continue as a going
concern must be considered in light of the problems, expenses and complications
frequently encountered by its entrance into established markets and the
competitive environment in which the Company operates.
Limited Availability of Capital under Credit Arrangements with Lenders. The
Company maintains a $900,000 line of credit with Silicon Valley Bank. As of
December 31, 1996, approximately $820,000 is owed to the Bank under the line of
credit. Pursuant to its agreement with the Bank, the line of credit terminated
in April 1996, and was extended until March 7, 1997. At December 31, 1996, the
Company was in violation of certain debt covenants relating to the line of
credit with its commercial bank. In March 1997, the Company received a waiver of
the covenants from the commercial bank, a revision of the loan covenants and an
agreement to extend the line until March 1998.
In October 1994, the Company borrowed $2,500,000 from an unaffiliated
lender to help finance its inventory and accounts receivable under its Master
Purchase Agreement with Apple. The Company issued to this unaffiliated lender
its term note in the aggregate principal amount of $2,500,000. The term note
accrues interest at the revolving rate of prime plus 2%, is payable quarterly in
arrears at the end of December, March, June, and September, and was due February
1, 1996. The term note was originally secured by those specific assets financed
under the agreement with Apple, including accounts receivable, finished goods,
inventory, raw materials, work-in-process and contract rights arising under the
Apple agreement. The Company utilized the proceeds of this term note to finance
purchase orders received from Apple. In January 1996, the Company repaid
approximately $1 million of the amount owed under the term note. On June 28,
1996, the Company negotiated an amendment to the term note with the lender to
extend the due date of the term note to March 31, 1997. Pursuant to the
amendment, the Company granted the lender a second security interest in all the
assets of the Company. The Company is currently negotiating an additional
extension with the lender, however, there can be no assurances that the term
note will be extended on terms favorable to the Company.
Market Acceptance. The Company's sales and marketing strategy is targeted
to sales of its PC-to-TV videographics products to the Windows, Mac OS markets,
including computer manufacturers, VGA graphic card developers and VGA chip
developers, as well as to television manufacturers. Although the Company has to
date experienced success in penetrating these markets, there can be no assurance
that the Company's marketing strategy will continue to be effective and that
current customers will continue to buy the Company's products. Market acceptance
of the Company's current and proposed products will depend upon the ability of
the Company to demonstrate the advantages of its products over other PC-to-TV
videographics and connectivity products.
Reliance on Single Vendor. At December 31, 1996, approximately 60% of
the components for the Company's products were secured and manufactured on a
turnkey basis by a single vendor, Pagg Corporation. In the event that the vendor
were to cease supplying the Company, management believes there are alternative
vendors for the components for the Company's products. However, the Company
would experience short term delays in the shipment of its products.
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Adverse Effects of Reduced Apple Macintosh Sales. Although in the year
ended December 31, 1996, the Company increased the sales of Windows based
products as a percentage of total sales, a substantial portion of the Company's
sales to date have been derived from products designed for use on Mac OS based
personal computers, and the Company expects that sales of products for use with
Macintosh computers may represent up to 35% (including direct sales to Apple) of
its net sales in 1997. Although sales of Macintosh computers have increased from
year to year, there can be no assurance that the Macintosh operating system will
continue to be accepted as a platform for personal computer applications.
Management believes that other computer platforms, such as Windows, have gained
greater acceptance in the Company's markets as these platforms have evolved to
support applications similar to those offered for the Macintosh. In addition,
there can be no assurance that the Company will be able to make timely and
successful introductions of products for other platforms.
Dependence on Timely Delivery of the FOCUS Scan 300 Chip. The Company
is currently completing development of an ASIC called the FOCUS Scan 300 Chip
which the Company expects to incorporate into all of its next generation
PC-to-TV videographics Products. A significant portion of the Company's
anticipated revenues and gross margins for 1997 are dependent on the timely
completion and delivery of the FOCUS Scan 300 Chip. In the event that the Chip
is not available before the end of the second calendar quarter of 1997, the
Company's revenues and profitability for 1997 could be adversely effected.
Technological Obsolescence. The Windows and MAC OS markets are
characterized by extensive research and development and rapid technological
change resulting in product life cycles of nine to eighteen months. Development
by others of new or improved products, processes or technologies may make the
Company's products or proposed products obsolete or less competitive. The
Company will be required to devote substantial efforts and financial resources
to enhance its existing products and to develop new products. There can be no
assurance that the Company will succeed with these efforts.
Competition. The Windows and Mac OS markets are extremely competitive. The
Company currently competes with other developers of PC-to-TV conversion products
and expects to compete in the future with videographic integrated circuit
developers. Many of the Company's competitors have greater market recognition
and greater financial, technical, marketing and human resources than the
Company. Although the Company is not currently aware of any announcements by its
competitors that would have a material impact on the Company or its operations,
there can be no assurance that the Company will be able to compete successfully
against existing companies or new entrants to the marketplace.
Component Supply Problems. The Company purchases all of its parts from
outside suppliers and from time to time experiences difficulty in obtaining some
components or peripheral devices. The Company attempts to reduce the risk of
supply interruption by evaluating and obtaining alternative sources for various
components or peripheral devices. However, there can be no assurance that supply
shortages will not occur in the future which could significantly increase the
cost, or delay shipment of, the Company's products, which in turn could
adversely affect its results of operations.
Protection of Proprietary Information. Although the Company has filed two
patents and expects to file one additional patent in the second quarter of 1997
with respect to its PC-to-TV videographics products, the Company does not
currently have any patents. The Company treats its technical data as
confidential and relies on internal nondisclosure safeguards, including
confidentiality agreements with employees, and on laws protecting trade secrets
to protect its proprietary information. There can be no assurance that these
measures will adequately protect the confidentiality of the Company's
proprietary information or that others will not independently develop products
or technology that are equivalent or superior to those of the Company. While
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it may be necessary or desirable in the future to obtain licenses relating to
one or more of its products or relating to current or future technologies, there
can be no assurance that the Company will be able to do so on commercially
reasonable terms.
Dependence upon Key Personnel. The Company's success depends, to a
significant extent, upon a number of key employees. The loss of services of one
or more of these employees, especially the Company's Chief Executive Officer and
President, Thomas L. Massie, could have a material adverse effect on the
business of the Company. The Company believes that its future success will also
depend in part upon its ability to attract, retain and motivate qualified
personnel. Competition for such personnel in the computer industry is intense.
Although the Company has not in the past experienced difficulty in attracting
and retaining qualified personnel, there can be no assurance that the Company
will be successful in attracting and retaining such personnel in the future.
THE COMPANY
FOCUS Enhancements, Inc. (the "Company" or "FOCUS") internally develops,
markets and sells worldwide a proprietary line of PC-to-TV video conversion
products and a diversified line of high-quality, low-cost connectivity devices
for Windows(TM) and Mac(TM)OS based personal computers. Based on an independent
survey by PC Data Corp., the Company is an industry leader in the development
and marketing of PC-to-TV conversion products that make personal computers
"TV-ready" and televisions "PC-ready".
The Company's proprietary PC-to-TV video conversion products include video
output devices marketed and sold under the Company's registered brand name,
TView. All of the Company's PC-to-TV conversion products enable users to
transmit at low-cost, high quality, computer generated images from any DOS,
Windows or Mac OS based personal computer to any television of any size with a
standard RCA or S-Video interface. FOCUS's PC-to-TV technology provides sharp,
flicker-free, computer-generated images on televisions for multimedia/business
presentations, classroom/training sessions, game playing or even collective
viewing of spreadsheets or internet browsing. The Company's connectivity
products provide end users with a sophisticated, yet inexpensive, local area
network for Mac OS based personal computers. Personal computers equipped with
the Company's EtherLAN Ethernet connectivity products can also function as part
of a larger, high speed network that provides communications and connectivity to
Mac OS compatible computers.
The Company markets and sells its FOCUS branded consumer products globally
through a network of distributors, volume resellers, mail order, value added
resellers ("VARs") and original equipment manufacturers ("OEMs"). In North
America, the Company markets and sells its products through national
distributors such as Ingram Micro D, D & H, Academic and Nuvo; national volume
resellers such as CompUSA, Computer City, Micro Center, Staples and Egg Head;
and through third party mail order companies such as MicroWarehouse, Multiple
Zones, Global, PC Connection and Tiger Direct.
In addition, the FOCUS branded PC-to-TV products have been selected by
leading personal computer manufacturers to be marketed with the use of their
select brand of personal computers. Compaq, Toshiba and Apple have included the
Company's PC-to-TV products on their selected market price lists, and promote
the FOCUS PC-to-TV products in their box materials.
The Company also markets and sells its products internationally in over 30
countries by independent distributors in each country. These independent
distributors market and sell the FOCUS branded products to retailers, mail order
companies, and VARs in their respective countries.
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In addition to the FOCUS branded products, the Company markets, sells or
licenses its proprietary PC-to- TV technology to television manufacturers such
as Zenith Electronics, and to personal computer manufacturers such as Apple
Computer. The Company is currently in discussions with several other PC
manufacturers, television manufacturers, VGA chip developers and VGA card
developers globally.
The Company was founded in December 1991, as a Massachusetts
corporation and was reincorporated in Delaware in April 1993. In December 1993,
the Company acquired Lapis Technologies Inc. ("Lapis"), a developer of
high-quality, low-cost Macintosh multimedia graphics products. Effective
September 30, 1996, the Company consummated the acquisition of TView, Inc., a
developer of PC-to-TV video conversion technology. This acquisition has played a
major strategic role in allowing FOCUS to gain a major technological lead over
competitors in the video scan conversion category and has positioned FOCUS as a
leader in PC-to-TV video conversion technology.
The Company's principal executive offices are located at 142 North
Road, Sudbury, Massachusetts 01776. Its research and development center is
located at 9275 SW Nimbus Drive, Beaverton, Oregon 97008. The Company's European
sales and marketing office, FOCUS Enhancements B.V., is located at Schipholweg
118, Kantorenhuis, 2316 XD Leiden, The Netherlands. The Company's general
telephone number is (508) 371-2000 and its worldwide web address is
http://www.focusinfo.com.
USE OF PROCEEDS
The Company will receive no part of the proceeds from the resale by the
Selling Stockholders of the Shares. The gross proceeds to be received by the
Company from exercise of all of the Warrants (assuming that all of the Warrants
are exercised) are $391,925, and management intends to use such proceeds for
general working capital purposes including expenditures in connection with the
development, sales and marketing of future products for the Company.
SELLING STOCKHOLDERS
The following table sets forth information concerning the beneficial
ownership of Shares of Common Stock by the Selling Stockholders as of the date
of this Prospectus and the number of such shares included for sale in this
Prospectus assuming the sale of all Shares being offered by this Prospectus. To
the best of the Company's knowledge, none of the Selling Stockholders have held
any office or maintained any material relationship with the Company or its
predecessors or affiliates over the past three years. The Selling Stockholders
reserve the right to reduce the number of Shares offered for sale or to
otherwise decline to sell any or all of the Shares registered hereunder. The
calculation of the number of Shares owned after the Offering assumes that all of
the Shares offered hereby are sold.
-9-
<PAGE>
<TABLE>
<CAPTION>
Shares to be Sold in Offering
Shares Owned Shares from
Prior to Exercise of Shares Owned
Name of Selling Stockholder Offering Warrants After Offering
<S> <C> <C> <C>
December 1995 Offering
Jon D. Gruber.......................................... 24,000 9,890(1) 0
J. Patterson McBaine................................... 12,000 4,940(1) 0
Lagunitas Partners L.P................................. 176,000 72,500(1) 0
Gruber & McBaine International....................... 30,750 12,670(1) 0
March 1997 Offering
Gerald S. Casilli...................................... 100,000 0 0
Gerald S. Casilli & Jeanne L. Casilli, Trustees UTD
11/95 FBO the Casilli 1995 Unitrust.................... 50,000 0 0
Compass Technology Partners, L.P....................... 150,000 0 0
Jon D. Gruber & Linda W. Gruber........................ 21,000 0 0
Gruber & McBaine International......................... 20,000 0 0
Lagunitas Partners, L.P................................ 59,000 0 0
Heritage Education Trust Inc........................... 20,000 0 0
Marjac Investments, Inc................................ 30,000 0 0
Marjac Investments 401(k) Plan......................... 10,000 0 0
Safa Trust, Inc........................................ 20,000 0 0
Howard Miller.......................................... 50,000 0 0
Prism Partners I....................................... 200,000 0 0
Roy & Ruth Rogers Unit Trust........................... 66,667 0 0
Rogers Family Trust.................................... 200,000 0 0
Brian G. Swift and Suzanne B. Swift, Trustees UTD
3/31/91 FBO Brian and Suzanne Swift 1991 Living
Trust.................................................. 103,333 0 0
Brian G. Swift......................................... 0 66,000(2) 0
Roger L. Batty......................................... 0 22,000(2) 0
Jay L. Hayes........................................... 0 22,000(2) 0
-10-
<PAGE>
<FN>
(1) Represents shares of Common Stock issuable pursuant to Investor
Warrants, each exercisable for Common Stock at $2.063 per share for
three years from the date of issuance.
(2) Represents shares of Common Stock issuable pursuant to Broker Warrants,
each exercisable for Common Stock at $1.6875 per share for five years
from the date of issuance, which Warrants were issued to the placement
agent in connection with the March 97 Offering.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
Of the 1,552,750 Shares being registered herein for sale by the Selling
Stockholders, (i) 242,750 Shares were issued to certain unaffiliated investors
in connection with the December 95 Offering; (ii) 100,000 Shares are issuable
upon exercise of the Investor Warrants; (iii) 1,100,000 Shares were issued to
certain unaffiliated investors in connection with the March 97 Offering; and
(iv) 110,000 Shares are issuable upon exercise of the Broker Warrants. All
Shares to be registered hereby are to be offered by certain security holders of
the Company, and, other than the exercise price of the Warrants, the Company
will receive no proceeds from the sale of Shares offered hereby.
The Selling Stockholders may sell the Common Stock registered in
connection with this Offering on the NASDAQ market system or otherwise. There
will be no charges or commissions paid to the Company by the Selling
Stockholders in connection with the issuance of the Shares. It is anticipated
that usual and customary brokerage fees will be paid by the Selling Stockholders
upon sale of the Common Stock offered hereby. The Company will pay the other
expenses of this Offering. The Shares may be sold from time to time by the
Selling Stockholders, or by pledgees, donees, transferees or other successors in
interest. Such sales may be made on one or more exchanges or in the
over-the-counter market, or otherwise at prices and at terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions. The Shares may be sold by one or more of the following: (a) a
block trade in which the broker so engaged will attempt to sell the Shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as principal and
resale by such broker or dealer for its account pursuant to this Prospectus; (c)
an exchange distribution in accordance with the rules of NASDAQ; and (d)
ordinary brokerage transactions. In effecting sales, brokers or dealers engaged
by the Selling Stockholders may arrange for other brokers or dealers to
participate. Brokers or dealers will receive commissions or discounts from
Selling Stockholders in amounts to be negotiated prior to the sale. Such brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Act in connection with such sales. In
addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 of the Act may be sold under Rule 144 rather than pursuant
to this Prospectus.
The Company has agreed to indemnify certain of the Selling Stockholders
against certain liabilities, including certain liabilities under the Act, or to
contribute to payments which a Selling Stockholder may be required to make in
respect thereof.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Sullivan & Worcester LLP, One Post Office Square,
Boston, Massachusetts 02109. John A. Piccione, Esq., a partner at Sullivan &
Worcester LLP, holds options to purchase 30,000 shares of Common Stock and
warrants to purchase 20,000 shares of Common Stock.
-11-
<PAGE>
EXPERTS
The consolidated financial statements of the Company as of and for the
year ended December 31, 1996 appearing in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996, have been audited by Wolf &
Company, P.C. independent accountants as set forth in their report thereon,
which report includes an explanatory paragraph regarding the Company's ability
to continue as a going concern, included therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of FOCUS Enhancements, Inc. as of
and for the year ended December 31, 1995, included in the Annual Report on Form
10-KSB of the Company for the fiscal year ended December 31, 1996 referred to
above have been audited by Coopers & Lybrand L.L.P., independent accountants, as
set forth in their report dated April 11, 1996, which included an explanatory
paragraph related to the Company's ability to continue as a going concern,
accompanying such financial statements, and are incorporated herein by reference
in reliance upon the report of such firm, which report is given upon their
authority as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in such Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such Act and will
be governed by the final adjudication of such issue.
-12-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses in connection with the issuance and distribution of the
Common Stock to be registered are estimated (except for the Securities and
Exchange Commission filing fee) below. All such expenses will be paid by the
Registrant.
Registration Fee Under Securities Act $ 837.54
Blue Sky Fees and Expenses 2,000.00
Legal Fees and Expenses 10,000.00
Accounting Fees and Expenses 4,000.00
Printing and Mailing Costs 1,000.00
Miscellaneous Fees and Expenses 2,000.00
----------
Total Expenses $19,837.54
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify, subject to the standards therein prescribed, any
person in connection with any action, suit or proceeding brought or threatened
by reason of the fact that such person is or was a director, officer, employee
or agent of the corporation or was serving as such with respect to another
corporation or other entity at the request of such corporation.
The Delaware General Corporation Law, the Company's charter and by-laws
provide for indemnification of the Company's directors and officer for
liabilities and expenses that they may incur in such capacities. In general,
directors and officers are indemnified with respect to actions taken in good
faith in a manner reasonably believed to be in, or not opposed to, the best
interests of the Company, and with respect to any criminal action or proceeding,
actions that the indemnitee had no reasonable cause to believe were unlawful.
Reference is made to the Company's Second Restated Certificate of Incorporation,
as amended and Restated By-laws incorporated herein by reference.
The Underwriting Agreement executed in connection with the Company's
initial public offering provides that the underwriters are obligated, under
certain circumstances, to indemnify directors, officers and controlling persons
of the Company against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Act"). Reference is made to the form of
Underwriting Agreement previously filed as Exhibit 1.1 to the Company's
Registration Statement on Form SB-2, No. 33-60248-B.
The Company has obtained directors and officers liability insurance for
the benefit of its directors and certain of its officers.
Reference is made to the Underwriting Agreement described above,
pursuant to which the Registrant agreed to indemnify each underwriter and each
person, if any, who controls any underwriter within the meaning of the Act, or
the Securities Exchange Act of 1934, as amended, against certain types of civil
liabilities arising in connection with the aforementioned Registration Statement
or the prospectus contained therein.
II-1
<PAGE>
Item 16. Exhibits
The following documents have been previously filed as Exhibits and are
incorporated herein by reference except those exhibits indicated with an
asterisk which are filed herewith:
Exhibit No. Description
3.1 Second Restated Certificate of Incorporation, as amended,
incorporated by reference to Exhibit No. 3.1 of the Company's
Registration Statement on Form SB-2 [Reg. No. 33-60248-B] and
as an exhibit to the Company's Form 10-QSB dated November 13,
1995.
3.2 Restated By-laws of Registrant incorporated by reference to
Exhibit No. 3.2 of the Company's Registration Statement on
Form SB-2 [Reg. No. 33-60248-B].
5* Opinion of Sullivan & Worcester LLP regarding legality of
shares registered hereunder.
10.1* Form of Stock Subscription Agreement between the Company and
various investors in the December 95 Offering.
10.2* Form of Amendment No. 1 to Stock Subscription Agreement dated
April 1996 between the Company and various investors in the
December 95 Offering.
10.3* Form of Warrant issued to various investors pursuant to
Amendment No. 1.
10.4* Form of Subscription Agreement between the Company and various
investors in the March 97 Offering.
10.5* Form of Warrant issued to the placement agent in the March 97
Offering.
23.1* Consent of Wolf & Company, P.C., independent public
accountants
23.2* Consent of Coopers & Lybrand L.L.P.
23.3* Consent of KPMG Peat Marwick LLP
23.4* Consent of Sullivan & Worcester LLP (included in Exhibit 5)
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
(Section 230.424(b) of 17 C.F.R.) if, in the aggregate, the
changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and
II-2
<PAGE>
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in the periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
and Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the Securities offered herein, and the offering of such
Securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the Shares being registered which remain
unsold at the termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in such Act and is, therefore,
unenforceable.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective; and
(2) For purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the Town of Sudbury, Commonwealth of Massachusetts, on May
12, 1997.
FOCUS ENHANCEMENTS, INC.
By:/s/ Thomas L. Massie
Thomas L. Massie
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Form S-3 relating to Common Shares has been signed below on May 12, 1997 by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Thomas L. Massie President, Chief Executive Officer May 12, 1997
Thomas L. Massie and Director (Principal Executive
Officer)
Sr. Vice President, Chief Financial May 12, 1997
/s/ Harry G. Mitchell Officer and Treasurer (Principal
Harry G. Mitchell Financial and Accounting Officer
/s/ John C. Cavalier Director May 12, 1997
John C. Cavalier
/s/ William B. Coldrick Director May 12, 1997
William B. Coldrick
/s/ U. Haskell Crocker II Director May 12, 1997
U. Haskell Crocker II
/s/ Timothy E. Mahoney Director May 12, 1997
Timothy E. Mahoney
/s/ J. Daniel Shaver Director May 12, 1997
J. Daniel Shaver
II-4
</TABLE>
EXHIBIT 5
May 12, 1997
FOCUS Enhancements, Inc.
142 North Road
Sudbury, Massachusetts 01776
Gentlemen:
We are familiar with the Registration Statement on Form S-3 (the "S-3
Registration Statement") to which this opinion is an exhibit, to be filed by
FOCUS Enhancements, Inc., a Delaware corporation (the "Company"), with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
The S-3 Registration Statement relates to the proposed public offering by
certain securityholders of the Company of a total of 1,552,750 shares (the
"Shares") of the Company's Common Stock, $.01 par value per share ("Common
Stock"), consisting of (i) 242,750 shares issued to certain unaffiliated
investors in connection with a private offering in December 1995 (the "December
95 Offering") (ii) 100,000 shares issuable upon exercise of common stock
purchase warrants (the "Investor Warrants") issued to the investors in the
December 95 Offering; (iii)1,100,000 shares issued to certain unaffiliated
investors in connection with a private offering in March 1997 (the "March 97
Offering"); and (iv) 110,000 shares issuable by the Company upon exercise of
certain common stock purchase warrants issued to the placement agent in
connection with the March 97 Offering.
We have acted as counsel to the Company in connection with the
preparation of the S-3 Registration Statement, and we have examined and relied
on the originals or copies, certified or otherwise identified to our
satisfaction of all such corporate records of the Company and such other
instruments and other certificates of public officials, officers and
representatives of the Company and such other persons, and we have made such
investigations of law, as we have deemed appropriate as a basis for the opinion
expressed below. In making such examination, we have assumed the genuineness of
all signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals and the conformity to the originals of
<PAGE>
FOCUS Enahncements, Inc.
May 12, 1997
Page 2
all documents submitted to us as copies, which facts we have not independently
verified. As to various facts material to the opinions set forth herein, we have
relied without independent verification upon certificates of public officials
and upon facts certified to us by officers of the Company. We express no opinion
herein as to any laws other than the General Corporation Law of the State of
Delaware.
Based upon the foregoing, we are of the opinion that the Company has
corporate power adequate for the issuance of the Shares issuable in the manner
set forth in the S-3 Registration Statement and offered pursuant to the S-3
Registration Statement. The Shares issuable upon the exercise of the Warrants,
assuming conversion or exercise on the date hereof (the "Relevant Shares") have
been duly authorized and reserved for issuance. Upon the exercise of the
Warrants into Shares and delivery of such Shares in accordance with the terms of
the Warrants, the Relevant Shares so issued will be validly issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
S-3 Registration Statement.
Very truly yours,
SULLIVAN & WORCESTER LLP
EXHIBIT 10.1
----------------------------------------
Name of Investor (please print)
STOCK SUBSCRIPTION AGREEMENT
FOCUS Enhancements, Inc.
800 West Cummings Park
Suite 4500
Woburn, Massachusetts 01801
Attention: Thomas L. Massie, Chief Executive Officer
Gentlemen:
1. Subscription. Subject to the terms and conditions hereof, the
undersigned (the "Investor") hereby irrevocably subscribes for and agrees to
purchase __________ shares (the "Securities") of Common Stock of FOCUS
Enhancements, Inc., a Delaware corporation (the "Company") at a price of $4.12
per share. The Investor tenders herewith good funds in the amount of
$______________ payable to the Company by certified check or wire transfer. The
issuance of the Securities to the Investor is pursuant to an offering of up to
243,000 shares of Common Stock to accredited investors only (the "Offering").
2. Acceptance of Subscription. The Investor understands and agrees that
this subscription is made subject to the unconditional right of the Company to
reject any subscription, in whole or in part, for any reason whatsoever.
3. Representations and Warranties of the Undersigned. The Investor
understands and acknowledges that the Securities are being offered and sold
under one or more of the exemptions from registration provided for in Section
4(2) of the Securities Act of 1933, as amended (the "Securities Act"), including
Regulation D promulgated thereunder, and any applicable state securities laws.
The Investor is purchasing the Securities without being offered or furnished any
formal offering literature or prospectus other than the Company's periodic
reports (the "Offering Materials") filed pursuant to the Securities Act of 1934,
as amended (the "Exchange Act"). The Investor understands that this transaction
has not been reviewed and approved by the Securities and Exchange Commission
(the "SEC") or by any state regulatory authority. All documents pertaining to
this investment have been made available to the Investor and his
representatives, and that the books and records of the Company are available
upon reasonable notice for inspection by the Investor during reasonable business
hours at the Company's principal place of business.
<PAGE>
3.1. Suitability. The Investor confirms that he understands
and has fully considered the risks of this investment and understands that (i)
this investment is suitable only for an investor who is able to bear the
economic consequences of losing his entire investment, (ii) the purchase of the
Securities is a speculative investment which involves a high degree of risk, and
(iii) there are substantial restrictions on the transferability of, and there
will be no immediate public market for, the Securities, and accordingly, it may
not be possible for him to liquidate his investment in case of emergency. The
Investor's overall commitment to investments which are not readily marketable is
not disproportionate to the undersigned's net worth, and the Investor's
investment in the Company will not cause such overall commitment to become
excessive.
3.2 Lack of Liquidity. The Investor confirms that he is able
(i) to bear the economic risk of this investment, and (ii) to hold the
Securities for an indefinite period of time. The Investor has sufficient liquid
assets so that the illiquidity associated with this investment will not cause
any undue financial difficulties or affect the undersigned's ability to provide
for his current needs and possible financial contingencies, and that his
commitment to all speculative investments is reasonable in relation to his net
worth and annual income.
3.3 Knowledge and Experience. The Investor has such knowledge
and experience in financial and business matters that he is capable of
evaluating the merits and risks of this investment and of making an informed
investment decision.
The investor is an "accredited investor" as defined in Rule
501 of Regulation D of the Securities Act and, if an individual, has a net worth
in excess of $1,000,000 or annual income in excess of $200,000 in each of 1993
and 1994 and reasonably expects such income to be in excess of $200,000 for
1995.
3.4 Access to Management. The Investor confirms that, in
making his decision to purchase the Securities, he has relied solely upon
independent investigations made by him, and that he has been given the
opportunity to ask questions of, and to receive answers from, management and
other persons acting on behalf of the Company concerning the Company and the
terms and conditions of this offering.
3.5 Investment Intent. The Securities are being acquired by
the undersigned solely for his own personal account, for investment purposes
only, and not with a view to, or in connection with, any resale or distribution
thereof. The Investor has no contract, undertaking, understanding, agreement or
arrangement, formal or informal, with any person to sell, transfer or pledge to
any person the Securities for which he hereby subscribes, or any part thereof,
or any interest therein or any rights thereto. The Investor has no present plans
to enter into any such contract, undertaking, agreement or arrangement. The
Investor must bear the economic risk of the investment for an indefinite period
of time because the Securities have not been registered under the Securities Act
and applicable state securities laws and, therefore, cannot be sold unless they
are subsequently registered under the Securities Act and applicable state
securities laws or unless an exemption from such registration is available.
- 2 -
<PAGE>
3.6 Restrictive Legend. The Investor consents to the
placement of a restrictive legend on the certificate(s) for the Securities as
required by applicable securities laws.
4. Registration Rights. The Company hereby grants the following
registration rights with respect to the Securities.
4.1 "Piggy-Back" Registrations. For a period of nine (9)
months from the date hereof, 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 Investor written notice of such determination and, if within 15 days
after receipt of such notice, the Investor shall so request in writing, the
Company shall use its best efforts to include in such registration statement all
or any part of the Securities 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. In addition, the right shall not apply to
the Form SB-2 Registration Statement, File Number 33-80033, filed with the SEC
on December 5, 1995.
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 any 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
Securities with respect to which the Investor and all other selling stockholders
have requested inclusion thereunder.
4.2 Required Registration. Commencing nine (9) months from the
date of completion of the Offering, the Company will use its best efforts to
effect qualification and registration of the Securities under the Securities Act
on Form S-3, or any similar form promulgated by the SEC; provided, however, that
the Company may in its discretion delay such registration for up to 90 days
based on market conditions and disclosure requirements. The Company shall not be
required to effect a registration pursuant to this Section 4.2 unless the market
value of all securities to be sold in any such registration by all selling
stockholders shall be estimated to be at least $500,000 at the time of filing of
such registration statement. The Company shall not be required to effect more
than one registration pursuant to this Section 4.2 for the benefit of all
investors participating in the Offering.
4.3 Expenses. In the case of a registration under Sections 4.1
and 4.2, the Company shall bear all costs and expenses of each such
registration, including, but not limited to, printing, legal and accounting
expenses, 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
- 3 -
<PAGE>
Securities being offered and sold by the Investor or the fees and expenses of
any counsel for the Investor in connection with any registration of the
Securities.
4.4 Lock-Up Agreement. The Investor 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 Securities, or other
shares of Common Stock of the Company held by him, for a period of nine (9)
months from the date hereof.
4.5 Expiration of Registration Rights. The obligations of the
Company under this Section 4 to register the Securities shall expire and
terminate at such time as the Investor 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.
5. Transferability. The undersigned agrees not to transfer or assign
this Agreement, or any of his interest herein, and further agrees that the
assignment and transfer of the Securities acquired pursuant hereto shall be made
only in accordance with all applicable laws. The registration rights provided in
Section 4 are personal to the Investor and are not transferable without the
prior consent of the Company.
6. Miscellaneous. This Agreement constitutes the entire Agreement
between the parties relative to the subject matter hereof, and supersedes all
proposals or agreements, written or oral, and all other communications between
the parties relating to the subject matter of this Agreement. No provision of
this Agreement shall be waived, amended, modified, superseded, canceled,
terminated, renewed or extended except in a written instrument signed by the
party against whom any of the foregoing actions is asserted. Any waiver shall be
limited to the particular instance and for the particular purpose when and for
which it is given. The invalidity, illegality or unenforceability of any
provision of this Agreement shall in no way effect the validity, legality or
enforceability of any other provision of this Agreement. This Agreement shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the internal laws of the Commonwealth of Massachusetts. All
notices provided for in this Agreement shall be given in writing and shall be
effective when either served by personal delivery, express overnight courier
service, electronic facsimile transmission, or by first class mail, postage
prepaid, addressed to the parties at their respective addresses herein set
forth, or to such other address or addresses as either party may later specify
by written notice to the other. This Agreement may be executed in duplicate
counterparts, which, when taken together, shall constitute one instrument and
each of which shall be deemed to be an original instrument.
7. Continuing Effect of Representations, Warranties and
Acknowledgments. The representations and warranties of the Investor contained in
Section 3 are true and accurate as of the date of this Subscription Agreement
and shall be true and accurate as of the date of delivery
- 4 -
<PAGE>
to and acceptance by the Company, and shall survive such delivery and
acceptance. If in any respect such representations, warranties and
acknowledgments shall not be true and accurate prior to such delivery and
acceptance, the undersigned Investor shall give immediate written notice of such
fact to the Company and to his purchaser representative(s), if any, specifying
which representations and warranties and acknowledgments are not true and
accurate and the reasons therefor.
IN WITNESS WHEREOF, the undersigned has hereby executed this Stock
Subscription Agreement as of this _____ day of _______________, 1995.
- ------------------------------- -----------------------------------
Signature of Investor Street Address
- ------------------------------- -----------------------------------
Print Name of Investor City or Town
-----------------------------------
State Zip Code
- ------------------------------- -----------------------------------
Social Security Number Telephone Number
The Company hereby accepts the foregoing Subscription Agreement,
subject to the terms and conditions set forth herein, as of this _____ day of
_______________, 1995.
FOCUS ENHANCEMENTS, INC.
By:_________________________________
Its:_________________________________
- 5 -
EXHIBIT 10.2
AMENDMENT NO. 1 TO STOCK
SUBSCRIPTION AGREEMENT
THIS AMENDMENT NO. 1 to Stock Subscription Agreement is made as of the
23rd day of April, 1996, by and between FOCUS ENHANCEMENTS, INC. (the "Company")
and the undersigned (the "Investor").
WHEREAS, the Investor subscribed for and purchased on December 22,
1995, ______ shares of Common Stock (the "Shares") of the Company pursuant to a
Stock Subscription Agreement of even date therewith (the "Subscription
Agreement");
WHEREAS, the Investor expected the Company to report earnings for the
year ended December 31, 1995 of between $.15 and $.18 per share and in reliance
thereon agreed to purchase the Shares in accordance with the terms set forth in
the Subscription Agreement;
WHEREAS, in April, 1996, the Company reported earnings for the year
ended December 31, 1995 of $.04 per share;
WHEREAS, the Company and the Investor have agreed to amend the terms of
the Subscription Agreement so as to issue the Investor warrants to purchase
shares of Common Stock of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and obligations contained in the Subscription Agreement, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Warrant Issuance. The Company hereby issues to the Investor warrants
(the "Warrants") to purchase _______ shares of Common Stock of the Company
exercisable for a period of three years at a price of $2.063 in the form
attached hereto as Exhibit A.
2. Release of Claims. In consideration of receipt of the Warrants, the
Investor, including its successors and assigns, hereby releases the Company and
its servants, agents, representatives, attorneys, officers, directors,
shareholders and employees from any and all claims, demands, expenses, losses,
causes of action, liabilities, obligations, damages, liens and/or liabilities of
any kind or nature whatsoever, past or present, arising out of or in any way
connected with the matters recited above, and any and all facts, events or
circumstances alleged therein or related thereto, including, but not limited to,
any cause or claim arising out of any securities laws or regulations.
Except as expressly charged above, all other provisions of the
Subscription Agreement remain in full force and effect. The Company and the
Investor hereby reconfirm and affirm all of their respective obligations under
the Subscription Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereby executed this Amendment
No. 1 as of the date first written above.
INVESTOR:
FOCUS ENHANCEMENTS, INC. _______________________________
By:___________________________ By:_____________________________
Thomas L. Massie, President Title:__________________________
and CEO
-2-
EXHIBIT 10.3
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.: _____ Right to Purchase ________
Shares of Common Stock of
April 23, 1996 FOCUS Enhancements, Inc.
VOID UNLESS EXERCISED BEFORE 5:00 P.M., EASTERN STANDARD TIME ON APRIL
23, 1999.
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 April 23, 1996, at any time or from time to time before 5:00 p.m.,
Eastern Daylight Savings Time, on or before April 23, 1999, _______ fully paid
and nonassessable shares of Common Stock, $.01 par value, of the Company, at an
exercise price per share equal to $2.063. 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.
<PAGE>
(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 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
<PAGE>
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.
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
3
<PAGE>
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 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
4
<PAGE>
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.
5
<PAGE>
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,
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.
6
<PAGE>
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 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.
7
<PAGE>
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 "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.
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.
12.2 Expenses. In the case of a registration under Section
12.1, 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.
12.3 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
8
<PAGE>
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.
12.4 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 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 Daylight Saving Time, on April 23, 1999.
Dated: April 23, 1996
ATTEST: FOCUS ENHANCEMENTS, INC.
By:________________________________ By:_____________________________
Title:_____________________________ Title:__________________________
9
<PAGE>
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:
- ------------------------------------------
10
EXHIBIT 10.4
Name of Investor:
Number of Shares Subscribed for:
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 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 March 18, 1997 and the Exhibits thereto (the "Term Sheet").
The undersigned agrees to pay a purchase price equal to $1.50 multiplied by of
the number of Shares subscribed for. 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 March 31,
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.
C. The foregoing not withstanding, the Company agrees to register the Shares in
accordance with the following terms and conditions:
(1) The Company will within thirty (30) 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
<PAGE>
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 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
2
<PAGE>
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:
(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,
3
<PAGE>
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.
(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.
4
<PAGE>
(10) The undersigned has received and read the Term Sheet dated as of
March 18, 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.
(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
5
<PAGE>
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.
(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
6
<PAGE>
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.
7
<PAGE>
ALL SUBSCRIBERS MUST COMPLETE THIS PAGE
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement on
this _______ day of ______________, 1997.
<TABLE>
<CAPTION>
Number of Shares Subscribed For
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. / / 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.
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 / / Affiliated with (explain)
8
<PAGE>
EXECUTION BY SUBSCRIBER WHO IS A NATURAL PERSON
Exact Name in Which Title is to be Held
(Signature)
(If joint Tenant or Tenants in Common, both persons must sign and this page must
contain all information for both persons).
Name (Please Print)
Residence: Number and Street
City State Zip Code
Telephone Number
Social Security Number
ACCEPTED this day of , 1997, on behalf of the Company.
FOCUS ENHANCEMENTS, INC.
By:
Name:
9
<PAGE>
EXECUTION BY SUBSCRIBER THAT IS AN ENTITY
(Corporation, Partnership, Trust, Etc.)
Name of Entity (Please Print)
Address of Principal Office of Entity
(seal) BY:
TITLE:
Attest:
(If Entity is a Corporation)
Address
Telephone Number
Taxpayer Identification Number
ACCEPTED, this day of , 1997, on behalf of the Company.
FOCUS ENHANCEMENTS, INC.
By:
Name:
10
EXHIBIT 10.5
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.: _____ Right to Purchase ________
Shares of Common Stock of
March 31, 1997 FOCUS Enhancements, Inc.
VOID UNLESS EXERCISED BEFORE 5:00 P.M., EASTERN STANDARD TIME ON MARCH 30, 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 March 31, 1997, at any time or from time to time before 5:00 p.m.,
Eastern Daylight Time, on or before March 30, 2002, _______ fully paid and
nonassessable shares of Common Stock, $.01 par value, of the Company, at an
exercise price per share equal to $1.6875. 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
<PAGE>
current dividends and liquidating dividends after the payment of
dividends and distributions 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
2
<PAGE>
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.
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
3
<PAGE>
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 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.
4
<PAGE>
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,
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.
5
<PAGE>
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 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 thirty (30) 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
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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.
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
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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 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 Daylight Saving Time, on March 30, 2002.
Dated: March 31, 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:
- ------------------------------------------
9
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
FOCUS Enhancements, Inc. on Form S-3 of our report, which included an
explanatory paragraph about the Company's ability to continue as a going
concern, dated March 14, 1997, except for Notes 7 and 15 as to which the date is
March 31, 1997, on the consolidated financial statements of FOCUS Enhancements,
Inc. as of and for the year ended December 31, 1996, appearing in the Annual
Report on Form 10-KSB of FOCUS Enhancements, Inc. for the year ended December
31, 1996. We also consent to the reference to us under the heading "Experts" in
the Prospectus, which is part of this Registration Statement.
WOLF & COMPANY, P.C.
Boston, Massachusetts
May 9, 1997
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
FOCUS Enhancements, Inc. on Form S-3 of our report, dated April 11, 1996, which
included an explanatory paragraph related to the Company's ability to continue
as a going concern, on our audit of the consolidated financial statements of
FOCUS Enhancements, Inc. as of and for the year ended December 31, 1995, which
report is included in the Annual Report on Form 10-KSB of FOCUS Enhancements,
Inc. for the year ended December 31, 1996. We also consent to the reference to
our firm under the caption "Experts".
Coopers & Lybrand L.L.P.
Boston, Massachusetts
May 9, 1997
Exhibit 23.3
Consent of Independent Certified Public Accountants
The Board of Directors
T.View, Inc.:
We consent to the incorporation by reference in the registration statement on
Form S-3 to be filed by FOCUS Enhancements, Inc.of our report, dated September
13, 1996, with respect to the balance sheets of T. View, Inc. as of December 31,
1995 and 1994, and the related statements of operations, stockholders' equity,
and cash flows for the years ended December 31, 1995 and 1994, which report
appears in the Form 8-K/A-1 of FOCUS Enhancements, Inc., dated January 6, 1997.
KPMG Peat Marwick LLP
Portland, Oregon
May 9, 1997
