As filed with the Securities and Exchange Commission on June 21, 1999
Registration No. 333- _____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
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)
600 Research Drive
Wilmington, Massachusetts 01887
(978) 988-5888
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Christopher P. Ricci
Senior Vice President and General Counsel
FOCUS Enhancements, Inc.
600 Research Drive
Wilmington, Massachusetts 01887
(978) 988-5888
(Name, address, including zip code, telephone number, including
area code, of agent for service)
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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. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Amount to Proposed Maximum Amount of
Title of Each Class of Securities to Be Registered Price to Public Offering Price Registration
be Registered
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per 1,320,000 $ 1.2655 $ 1,670,460 $464.39
share(1)
<FN>
(1) The Common Stock being registered consists of (i) 600,000 shares issued
to AMRO International, S.A. ("AMRO") in a private placement completed
on June 11, 1999; (ii) 600,000 additional shares to be issued to AMRO
as part of such private placement upon the effectiveness of this
Registration Statement; and (iii) 120,000 shares issuable upon exercise
of a common stock purchase warrant issued to AMRO in connection with
the aforementioned private placement.
(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
June 18, 1999 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.
<PAGE>
The information in this prospectus is not complete and may be changed. The
selling shareholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not a solicitation
of an offer to buy these securities in any state where the offer and sale is not
permitted.
Subject to Completion, Dated June 21, 1999
REOFFER
PROSPECTUS
FOCUS ENHANCEMENTS, INC.
1,320,000 Shares of Common Stock
The shareholder of FOCUS Enhancements, Inc. described below is offering and
selling up to 1,320,000 shares of FOCUS common stock under this prospectus.
The selling shareholder obtained its shares of FOCUS stock in a private
placement transaction. On June 4, 1999, we entered into a Common Stock and
Warrants Purchase Agreement with AMRO International, S.A. for the private
placement of 1,200,000 shares of FOCUS common stock. This agreement also
required the issuance of a common stock purchase warrant, under the terms of
which AMRO may purchase up to 120,000 additional shares of FOCUS common stock.
In return, AMRO paid to Focus $1,200,000 in two installments of $600,000 each.
The first installment was paid at the closing of AMRO's initial purchase of
600,000 shares. The second installment was paid at the time the registration
with the Securities and Exchange Commission of AMRO's resale of the shares
covered by this prospectus became effective, at which time FOCUS issued the
remaining 600,000 shares to AMRO. The total number of shares that may be sold
under this prospectus by the selling shareholder will be subject to the
discretion of the selling shareholder.
The selling shareholder may offer its FOCUS stock through public transactions
executed through one or more broker-dealers at prevailing market prices, carried
out through the NASDAQ SmallCap Market or one or more stock exchanges (if the
shares are listed on an exchange at any time in the future), or in private
transactions directly with purchasers or at privately negotiated prices.
FOCUS stock is listed on the NASDAQ SmallCap Market with the ticker symbol:
"FCSE." On June ____, 1999, the closing price of one share of FOCUS common stock
on the NASDAQ SmallCap Market was $_____.
Our principal executive offices are located at 600 Research Drive, Wilmington,
Massachusetts, 01887, and our telephone number is (978) 988-5888.
----------------------
Neither the Securities and Exchange Commission, nor any state securities
commission, has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
----------------------
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" AT PAGES 2 and 3.
----------------------
The date of this prospectus is June __, 1999.
----------------------
<PAGE>
RISK FACTORS
An investment in the securities offered under this prospectus involves a high
degree of risk and should only be purchased by investors who can afford to lose
their entire investment. The following factors should be considered carefully in
evaluating the Company and our business.
Future Capital Needs. Historically, we have had to meet our 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. For example, during 1998,
we received $2,827,355 in net proceeds from private offerings of common stock
and $7,003,963 from the exercise of common stock options and warrants. Our
future capital requirements will depend on many factors, including cash flow
from operations, continued progress in our research and development programs,
competing technological and market developments, and our ability to market the
Company's products successfully. During 1999, we may be required to raise
additional funds through equity or debt financing, and there can be no assurance
that sufficient funds will be raised. Any equity financing could result in
dilution to our then-existing stockholders. Sources of debt financing may result
in higher interest expense. Any financing, if available, may be on terms
unfavorable to us. If adequate funds are not available, we may be required to
curtail our activities significantly.
Reliance on Major Customers. For the three months ended March 31, 1999,
approximately 40% of our revenues were derived from sales to a major
distributor, approximately 6% of our revenues were derived from sales to a major
retailer, and approximately 9% of our revenues were derived from sales to a
major consumer electronics manufacturer. Management expects that sales to these
customers will continue to represent a significant percentage of our future
revenues. We do not have long-term contracts requiring any customer to purchase
any minimum amount of products. There can be no assurance that we will continue
to receive orders of the same magnitude as in the past from existing customers
or we will be able to market our current or proposed products to new customers.
The loss of any major customer by the Company would have a material adverse
effect on our business as a whole.
History of Operating Losses. The Company has experienced limited profitability
since its inception and at March 31, 1999, had an accumulated deficit of
$35,095,945. We incurred net losses of $12,787,324 and $1,986,079 for the years
ended December 31, 1998 and 1997, respectively. We had net income of $102,990
and $364,748 for the first three months of 1999 and 1998, respectively. There
can be no assurance that we will be profitable in 1999.
Reliance on Two Vendors. Through the first three months of 1999, approximately
90% of the components for our products were secured and manufactured on a
turnkey basis by two vendors. In the event that either vendor were to cease
supplying to us, we would experience at least short-term delays in the shipment
of our products, while management arranged for production by alternative
vendors.
Technological Obsolescence. The computer peripheral markets are characterized by
extensive research and development and rapid technological change resulting in
short product life cycles. Development by others of new or improved products,
processes or technologies may make our products or proposed products obsolete or
less competitive. We will be required to devote substantial efforts and
financial resources to enhance our existing products and to develop new
products. There can be no assurance that we will succeed with these efforts.
Competition. The computer peripheral markets are extremely competitive. We
currently compete with other developers of video conversion products and with
video-graphic integrated circuit developers. Many of our competitors have
greater market recognition and greater financial, technical, marketing and human
resources than we have. Although we are not currently aware of any announcements
by our
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<PAGE>
competitors that would have a material impact on us or our operations, there can
be no assurance that we will be able to compete successfully against existing
companies or new entrants to the marketplace.
Channel Acceptance. Sales of our products through the Office Super Store is a
sales channel with which we have had limited success. We have limited our use of
this channel to the best performing stores and are making substantial
investments in marketing and inventory to supply this channel. However, this is
an unproven channel and there can be no assurance that we will be able to
compete successfully in this channel.
Component Supply Problems. We purchase all of our parts from outside suppliers
and from time to time experience delays in obtaining some components or
peripheral devices. We attempt 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, our products, which in turn could adversely affect our
results of operations.
Protection of Proprietary Information. Although we have filed six patent
applications and expect to file two additional patent applications in 1999 with
respect to our PC-to-TV video-graphics products, we currently only have one
patent issued. We treat our technical data as confidential and rely on internal
non-disclosure safeguards, including confidentiality agreements with employees,
and on laws protecting trade secrets to protect our proprietary information.
There can be no assurance that these measures will adequately protect the
confidentiality of our proprietary information or that others will not
independently develop products or technology that are equivalent or superior to
those of the Company. While it may be necessary or desirable in the future to
obtain licenses relating to one or more of our products or relating to current
or future technologies, there can be no assurance that we will be able to do so
on commercially reasonable terms.
THE COMPANY
FOCUS Enhancements, Inc. (which we refer to as "FOCUS" or the "Company" in this
prospectus) is an industry leader in the development and marketing of advanced,
proprietary multimedia video scan conversion products for the rapidly
converging, multi-billion dollar computer and television industries. FOCUS'
products, which are sold globally through Original Equipment Manufacturers
(OEMs) and resellers, merge computer generated graphics and television displays
for presentations, training, education, video teleconferencing, internet viewing
and home gaming markets. In addition, the Company is working to develop a family
of products that will enable the current installed base of televisions, VCRs,
and camcorders to remain functional in upcoming HDTV environments. It is FOCUS'
objective to design, develop, and deliver quality video conversion products to
the global marketplace.
USE OF PROCEEDS
The warrant that FOCUS has issued to the selling shareholder entitles the
selling shareholder to purchase up to 120,000 shares of FOCUS common stock for
$1.478125 per share on or before June 30, 2004. FOCUS will receive the proceeds
of any exercise of the warrant. However, all net proceeds from the sale of the
FOCUS shares being offered under this prospectus will go to the selling
shareholder. Accordingly, we will not receive any proceeds from sales of these
shares. The expenses of registration of the shares being offered under this
prospectus will be paid by the Company.
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<PAGE>
SELLING SHAREHOLDER
Under a Registration Rights Agreement dated as of June 4, 1999 between FOCUS and
AMRO, we agreed to register the shares issued to that selling shareholder and to
keep the registration statement effective until all of the registered shares are
sold under the registration statement or until such registration is no longer
necessary as described further in the agreement. Our registration of the FOCUS
shares being offered under this prospectus does not necessarily mean that the
selling shareholder will sell all or any of the shares.
The selling shareholder is AMRO International, S.A., which purchased 1,200,000
shares of common stock and a warrant to purchase an additional 120,000 shares of
common stock in connection with a private placement.
The selling shareholder identified above may choose to donate or transfer as a
gift some or all of the shares that may otherwise be sold directly by the
selling shareholder or the selling shareholder may choose to transfer some or
all of these shares for no value to one or more affiliated persons. If any of
the shares are so transferred by the selling shareholder listed above, then any
person who receives any of the shares would constitute an additional selling
shareholder under this prospectus.
PLAN OF DISTRIBUTION
The selling shareholder may offer its shares at various times in one or more of
the following transactions:
o on the NASDAQ SmallCap Market o on any United States securities exchange
where our common stock may be listed in the future
o in the overthecounter market
o in privately negotiated transactions directly with purchasers
o in a combination of any of the above transactions
The selling shareholder may sell its shares at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices. The selling shareholder may use broker-dealers to
sell its shares. If this happens, broker-dealers will either receive discounts
or commissions from the selling shareholder, or they will receive commissions
from purchasers of shares for whom they acted as agents
The selling shareholder may also pledge shares to a broker-dealer or other
financial institution, and, upon a default, such broker-dealer or other
financial institution, may effect sales of the pledged shares pursuant to this
prospectus (as supplemented or amended to reflect such transaction). In
addition, any shares covered by this prospecuts that qualify for sale pursuant
to Rule 144 of the Securities and Exchange Commission may be sold under Rule 144
rather than pursuant to this prospectus.
In effecting sales, brokers, dealers or agents engaged by the selling
shareholder may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
selling shareholder in amounts to be negotiated prior to the sale. The selling
shareholder and such brokers or dealers and any other participating brokers or
dealers may be deemed to be "underwriters" within the meaning of the Securities
Act of 1933 in connection with such sales, and any such commissions, discounts
or concessions may be deemed to be underwriting discounts
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<PAGE>
or commissions under the Securities Act of 1933. The selling shareholder may
indemnify any broker-dealer that participates in transactions involving the sale
of the shares against certain liabilities, including liabilities arising under
the Securities Act of 1933.
In order to comply with the securities laws of certain states, if applicable,
the shares must be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain states the shares may not
be sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
FOCUS has advised the selling shareholder that the anti-manipulation rules of
Regulation M under the Securities Exchange Act of 1934 may apply to sales of
FOCUS common stock in the market and to the activities of the selling
shareholder and its affiliates. In addition, FOCUS will make copies of this
prospectus available to the selling shareholder and has informed it of the need
for delivery of copies of this prospectus to purchasers at or prior to the time
of any sale of the shares offered hereby.
At the time a particular offer of shares is made, if required, a prospectus
supplement will be distributed that will set forth the number of shares being
offered and the terms of the offering including the name of any underwriter,
dealer or agent, the purchase price paid by any underwriter, and any discount,
commission and other item constituting compensation, any discount, commission or
concession allowed or re-allowed or paid to any dealer, and the proposed selling
price to the public.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1800SEC0330 for further information on
the public reference rooms. Copies of these materials can be obtained at
prescribed rates from the Public Reference Section of the SEC at its principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. Our SEC filings are
also available to the public from the SEC's Website at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and information that we file later with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings we will make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934:
1. Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998,
as amended;
2. Quarterly Report on Form 10-QSB for the quarter ended March 31, 1999;
3. the definitive Proxy Statement filed with the Commission dated April 30,
1998 provided to stockholders in connection with the Annual Meeting of
Stockholders held on July 31, 1998; and
4. 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.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
FOCUS Enhancements, Inc.
600 Research Drive
Wilmington, Massachusetts 01887
Attention: Christopher P. Ricci
(978) 988-5888
5
<PAGE>
This prospectus is part of a registration statement we filed with the SEC. You
should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of this prospectus.
LEGAL MATTERS
The validity of the shares of Common Stock offered under this prospectus was
passed upon for us by Christopher P. Ricci, Esq., Senior Vice President and
General Counsel of the Company.
EXPERTS
The consolidated financial statements of the Company incorporated in this
prospectus by reference to our Annual Report on Form 10KSB for the year ended
December 31, 1998, as amended, have been so incorporated in reliance on the
report of Wolf & Company, P.C., independent accountants, given on the authority
of said firm as experts in auditing and accounting.
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING STATEMENTS
The Company does not provide forecasts of the future financial performance of
the Company. However, this prospectus and the documents incorporated by
reference into this prospectus may contain "forward looking" information that
involves risks and uncertainties. In particular, statements contained in this
prospectus or any of the documents incorporated by reference into this
prospectus which are not historical facts (including, for example, statements
concerning international revenues, anticipated operating expense levels and such
expense levels relative to the Company's total revenues) constitute forward
looking statements. In addition, any of the words "believes," "expects,"
"anticipates" or similar expressions indicate forward-looking statements. The
Company's actual results of operations and financial condition have varied and
may in the future vary significantly from those stated in any forward-looking
statements. Factors that may cause such differences include, for example: the
availability of capital to fund the Company's future cash needs; reliance on
major customers; history of operating losses; reliance on a limited number of
vendors for the manufacturing of the Company's products; technological
obsolescence; competition; component supply problems; protection of proprietary
information; accuracy of the Company's internal estimates of revenue and
operating expense levels; and the Company's ability to achieve Year 2000
compliance in a timely manner.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
The Delaware General Corporation Law and the Company's certificate of
incorporation and by-laws provide for indemnification of the Company's directors
and officers for liabilities and expenses that they may incur in such
capacities. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable.
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You should rely only on the information incorporated by reference or
contained in this prospectus or any supplement. We have not authorized anyone
else to provide you with different or additional information. You should not
assume that the information in this prospectus or any supplement is accurate as
of any date other than the date on the front of this prospectus or any
supplement that may have a later date. The selling shareholder is not making an
offer of the common stock in any state where the offer is not permitted.
============================================================
TABLE OF CONTENTS
Page
Risk Factors 2
The Company 3
Use of Proceeds 3
Selling Shareholder 4
Plan of Distribution 4
Where You Can Find More Information 5
Legal Matters 6
Experts 6
Cautionary Statement Concerning
Forward Looking Statements 6
Disclosure Statement 6
============================================================
FOCUS
ENHANCEMENTS, INC.
1,320,000 Shares of
Common Stock
__________________
PROSPECTUS
__________________
JUNE __, 1999
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following statement sets forth the estimated amounts of expenses to be borne
by the Company in connection with the offering described in this Registration
Statement:
Registration Fee Under Securities Act $ 464.39
Blue Sky Fees and Expenses 2,000.00
Legal Fees and Expenses 5,000.00
Accounting Fees and Expenses 2,000.00
Printing and Mailing Costs 1,000.00
Miscellaneous Fees and Expenses 2,000.00
------------
Total Expenses $ 12,464.39
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 and the Company's certificate of
incorporation 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 Company has obtained directors and officers liability insurance for the
benefit of its directors and certain of its officers.
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 the Company (1).
4.1 Specimen certificate for Common Stock of the Company (1).
4.2 Common Stock and Warrants Purchase Agreement with AMRO International,
S.A.*
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4.3 Form of Stock Purchase Warrant issued to AMRO International, S.A.
(included as Exhibit A to the Common Stock and Warrants Purchase
Agreement).
4.4 Form of Registration Rights Agreement with AMRO International, S.A.
(included as Exhibit B to the Common Stock and Warrants Purchase
Agreement.
5.1 Opinion of Christopher P. Ricci, Esq.*
23.1 Consent of Wolf & Company, P.C., independent public accountants *.
2.3. Consent of Christopher P. Ricci, Esq. (included in Exhibit 5).
24 Power of Attorney (contained in signature page to this registration
statement).
(1) Filed as an exhibit to the Company's Registration Statement on Form
SB-2, No. 33-60248-B, and incorporated herein by reference.
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
(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 Securities being registered that remain
unsold at the termination of the offering.
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(b) The undersigned registrant hereby undertakes, that for purposes of
determining any liability under the Securities Act of 1933, each filing
of the Company's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement 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.
(c) 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.
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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 Wilmington, Commonwealth of Massachusetts, on June
21, 1999.
FOCUS ENHANCEMENTS, INC.
By: /s/ Thomas L. Massie
Thomas L. Massie
Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Form S-3 relating to Common Stock of the Registrant has been signed by the
following persons in the capacities and on the dates indicated. Each person
whose signature appears below hereby authorizes Thomas L. Massie and Christopher
P. Ricci, and each of them, to file one or more amendments (including additional
post-effective amendments) to this Registration Statement, which amendments may
make such changes as any of such persons deem appropriate, and each person,
individually and in each capacity stated below, hereby appoints each of such
persons as attorney-in-fact to execute in his name and on his behalf any of such
amendments to the Registration Statement.
Signature Title Date
/s/ Thomas L. Massie President, Chief Executive June 21, 1999
Thomas L. Massie Officer and Director
(Principal Executive Officer)
/s/ Gary M. Cebula Vice President of Finance and June 21, 1999
Gary M. Cebula Administration (Principal
Financial an Accounting Officer)
Director June __, 1999
John C. Cavalier
/s/ William B. Coldrick Director June 21, 1999
William B. Coldrick
Director June __, 1999
Timothy E. Mahoney
/s/ Robert C. Eimers Director June 21, 1999
Robert C. Eimers
/s/ William A. Dambrackas Director June 21, 1999
William A. Dambrackas
EXHIBIT 4.2
COMMON STOCK AND WARRANTS PURCHASE AGREEMENT
Between
FOCUS Enhancements, Inc.
and
the Investors Signatory Hereto
COMMON STOCK AND WARRANTS PURCHASE AGREEMENT dated as of June 4, 1999
(the "Agreement"), between the Investors signatory hereto (each an "Investor"
and together the "Investors"), and FOCUS Enhancements, Inc., a corporation
organized and existing under the laws of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investors,
and the Investors shall purchase in the aggregate, (i) 1,200,000 shares of
Common Stock (as defined below) and (ii) Warrants (as defined below) to purchase
up to 120,000 shares of the Common Stock (as defined below) at 110% of the
Closing Date Market Price for such Common Stock.
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and/or 4(6) of the United States Securities Act
and/or Regulation D ("Regulation D") and the other rules and regulations
promulgated thereunder (the "Securities Act"), and/or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments in securities to be made
hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1. "Capital Shares" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.2."Capital Shares Equivalents" shall mean any securities, rights, or
obligations that are convertible into or exchangeable for or give any right to
subscribe for any Capital Shares of the Company or any Warrants, options or
other rights to subscribe for or purchase Capital Shares or any such convertible
or exchangeable securities.
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Section 1.3. "Closing" shall mean the closing of the purchase and sale of the
Common Stock and Warrants pursuant to Section 2.1.
Section 1.4. "Closing Date" shall
mean the date on which all conditions to the Closing have been satisfied (as
defined in Section 2.1 (b) hereto) and the Closing shall have occurred.
Section 1.5. "Common Stock" shall mean the Company's common stock, $0.01 par
value per share.
Section 1.6. "Damages" shall mean any loss, claim, damage, judgment, penalty,
deficiency, liability, costs and expenses (including, without limitation,
reasonable attorney's fees and disbursements and reasonable costs and expenses
of expert witnesses and investigation).
Section 1.7. "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in the Registration Rights Agreement.
Section 1.8. "Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
Section 1.9. "Escrow Agreement" shall mean the Escrow Agreement in substantially
the form of Exhibit C hereto executed and delivered contemporaneously with this
Agreement.
Section 1.10. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
Section 1.11. "Legend" shall mean the legend set forth in Section 9.1.
Section 1.12. "Market Price" on any given date shall mean the average of the
closing bid prices on the Principal Market (as reported by Bloomberg L.P.) of
the Common Stock during the five Trading Day period ending on the Trading Day
immediately prior to the Closing Date.
Section 1.13. "Material Adverse Effect" shall mean any effect on the business,
operations, properties, stock price or financial condition of the Company that
is material and adverse to the Company and its subsidiaries and affiliates,
taken as a whole, and/or any condition, circumstance, or situation that would
prohibit or otherwise interfere with the ability of the Company to enter into
and perform any of its obligations under this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the or the Warrants in any material respect.
Section 1.14. "Outstanding" when used with reference to shares of Common Stock
or Capital Shares (collectively the "Shares"), shall mean, at any date as of
which the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.15. "Person" shall mean an individual, a corporation, a partnership,
an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
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Section 1.16. "Principal Market" shall mean the American Stock Exchange, the
New York Stock Exchange, the NASDAQ National Market, or the NASDAQ SmallCap
Market, whichever is at the time the principal trading exchange or market for
the Common Stock, based upon share volume.
Section 1.17. "Purchase Price" shall mean $1.00 per share of Common Stock,
adjusted for any splits, reverse splits or Common Stock dividends declared by
the Company between the first Closing and the second Closing.
Section 1.18. "Registrable Securities" shall mean the Shares and the Warrant
Shares until (i) the Registration Statement has been declared effective by the
SEC, and all Shares and Warrant Shares have been disposed of pursuant to the
Registration Statement, (ii) all Shares and Warrant Shares have been sold under
circumstances under which all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the Securities Act ("Rule 144") are met,
(iii) all Shares and Warrant Shares have been otherwise transferred to holders
who may trade such shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend or (iv) such time as, in the opinion
of counsel to the Company, all Shares and Warrant Shares may be sold without any
time, volume or manner limitations pursuant to Rule 144(k) (or any similar
provision then in effect) under the Securities Act.
Section 1.19. "Registration Rights Agreement" shall mean the agreement regarding
the filing of the Registration Statement for the resale of the Registrable
Securities, entered into between the Company and the Investors as of the Closing
Date in the form annexed hereto as Exhibit C.
Section 1.20. "Registration Statement" shall mean a registration statement on
Form S-3 (if use of such form is then available to the Company pursuant to the
rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate, and which form shall be available for the resale by the Investors
of the Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement, the Registration Rights Agreement and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable Securities under
the Securities Act.
Section 1.21. "Regulation D" shall have the meaning set forth in the recitals of
this Agreement.
Section 1.22. "SEC" shall mean the Securities and Exchange Commission.
Section 1.23. "Section 4(2)" and "Section 4(6)" shall have the meanings set
forth in the recitals of this Agreement.
Section 1.24. "Securities Act" shall have the meaning set forth in the recitals
of this Agreement.
Section 1.25. "SEC Documents" shall mean the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 and each report, proxy
statement or registration statement filed by the Company with the SEC pursuant
to the Exchange Act or the Securities Act since the filing of such Annual Report
through the date hereof.
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Section 1.26. "Shares" shall mean the shares of Common Stock purchased pursuant
to this Agreement.
Section 1.27. "Trading Day" shall mean any day during which the Principal Market
shall be open for business.
Section 1.28. "Warrants" shall mean the Warrants substantially in the form of
Exhibit A to be issued to the Investors hereunder.
Section 1.29. "Warrant Shares" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to exercise of the Warrants.
ARTICLE II
Purchase and Sale of Common Stock and Warrants
Section 2.1. Investment.
(a) Upon the terms and subject to the conditions set forth herein, the
Company agrees to sell, and the Investors agree to purchase the Shares together
with the Warrants at the Purchase Price on each Closing Date as follows:
(i) First Closing. Upon execution and delivery of this
Agreement, each Investor shall deliver to the Escrow
Agent immediately available funds in their
proportionate amount of the one half of the Purchase
Price as set forth on the signature pages hereto, and
the Company shall deliver the Common Stock
certificates representing the Shares so purchased and
all of the Warrants to the Escrow Agent, to be held
by the Escrow Agent pursuant to the Escrow Agreement.
(ii) Second Closing. Within five (5) Trading Days of
written notice from the Company to the Investors that
the Registration Statement has been declared
effective, each Investor shall deliver to the Escrow
Agent immediately available funds in their
proportionate amount of one-half of the Purchase
Price as set forth on the signature pages hereto, and
the Company shall deliver the Common Stock
certificates representing the remaining Shares so
purchased to the Escrow Agent, to be held by the
Escrow Agent pursuant to the Escrow Agreement.
(iii) Each Closing. Upon satisfaction of the conditions set
forth in Section 2.1(b), each Closing ("Closing")
shall occur at the offices of the Escrow Agent at
which the Escrow Agent (x) shall release the Shares
purchased and the Warrants (as to the first Closing)
to the Investors and (y) shall release the Purchase
Price (after all fees have been paid as set forth in
the Escrow Agreement), pursuant to the terms of the
Escrow Agreement.
(b) Each Closing is subject to the satisfaction of the following
conditions:
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(i) acceptance and execution by the Company and by the
Investors, of this Agreement and all Exhibits hereto;
(ii) delivery into escrow by each Investor of immediately
available funds in the amount of the Purchase Price
of the Common Stock and the Warrants, as applicable
to each Closing, as more fully set forth in the
Escrow Agreement;
(iii) all representations and warranties of the Investors
contained herein shall remain true and correct as of
the Closing Date (as a condition to the Company's
obligations);
(iv) all representations and warranties of the Company
contained herein shall remain true and correct as of
the Closing Date (as a condition to the Investors'
obligations);
(v) the Company shall have obtained all permits and
qualifications required by any state for the offer
and sale of the Common Stock and Warrants, or shall
have the availability of exemptions therefrom;
(vi) the sale and issuance of the Common Stock and the
Warrants hereunder, and the proposed issuance by the
Company to the Investors of the Common Stock
underlying the Warrants upon the exercise thereof
shall be legally permitted by all laws and
regulations to which the Investors and the Company
are subject and there shall be no ruling, judgment or
writ of any court prohibiting the transactions
contemplated by this Agreement;
(vii) delivery of the original fully executed Common Stock
certificates and Warrants certificates (as to the
first Closing) to the Escrow Agent;
(viii) delivery to the Escrow Agent of an opinion of
Sullivan & Worcester LLP, counsel to the Company, in
the form of Exhibit D hereto (as to the first
Closing);
(ix) delivery to the Escrow Agent of the Irrevocable
Instructions to Transfer Agent in the form attached
hereto as Exhibit E (as to the first Closing); and
(x) delivery to the Escrow Agent of the Registration
Rights Agreement (as to the first Closing).
Section 2.2. Liquidated Damages. The parties hereto acknowledge and agree that
the sums payable pursuant to the Registration Rights Agreement shall constitute
liquidated damages and not penalties. The parties further acknowledge that (a)
the amount of loss or damages likely to be incurred is incapable or is difficult
to precisely estimate, (b) the amounts specified in such Sections bear a
reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by the Investors in connection with the
failure by the
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Company to timely cause the registration of the Registrable Securities and (c)
the parties are sophisticated business parties and have been represented by
sophisticated and able legal and financial counsel and negotiated this Agreement
at arm's length.
ARTICLE III
Representations and Warranties of Investor
Each Investor, severally and not jointly, represents and warrants to the Company
that:
Section 3.1. Intent. The Investor is entering into this Agreement for its own
account and not with a view to or for sale in connection with any distribution
of the Common Stock. The Investor has no present arrangement (whether or not
legally binding) at any time to sell the Shares, the Warrants, or Warrant Shares
to or through any person or entity; provided, however, that by making the
representations herein, the Investor does not agree to hold such securities for
any minimum or other specific term and reserves the right to dispose of the
Shares and Warrant Shares at any time in accordance with federal and state
securities laws applicable to such disposition.
Section 3.2. Sophisticated Investor. The Investor is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of Regulation D), and Investor has such experience in
business and financial matters that it has the capacity to protect its own
interests in connection with this transaction and is capable of evaluating the
merits and risks of an investment in the Common Stock and the Warrants. The
Investor acknowledges that an investment in the Common Stock is speculative and
involves a high degree of risk.
Section 3.3. Authority. This Agreement and each agreement attached as an Exhibit
hereto which is required to be executed by Investor has been duly authorized and
validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4. Not an Affiliate. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5. Absence of Conflicts. The execution and delivery of this Agreement
and each agreement which is attached as an Exhibit hereto and executed by the
Investor in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the requirements hereof and
thereof by the Investor, will not violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on Investor or (a) violate
any provision of any indenture, instrument or agreement to which Investor is a
party or is subject, or by which Investor or any of its assets is bound; (b)
conflict with or constitute a material default thereunder; (c) result in the
creation or imposition of any lien pursuant to the terms of any such indenture,
instrument or agreement, or constitute a breach of any fiduciary duty owed by
Investor to any third party; or (d) require the approval of any third-party
(which
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has not been obtained) pursuant to any material contract, agreement, instrument,
relationship or legal obligation to which Investor is subject or to which any of
its assets, operations or management may be subject.
Section 3.6. Disclosure; Access to Information. The Investor has received all
documents, records, books and other publicly available information pertaining to
Investor's investment in the Company that have been requested by the Investor.
The Company is subject to the periodic reporting requirements of the Exchange
Act, and the Investor has reviewed copies of all SEC Documents deemed relevant
by Investor.
Section 3.7. Manner of Sale. At no time was Investor presented with or solicited
by or through any leaflet, public promotional meeting, television advertisement
or any other form of general solicitation or advertising.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and Warrants to the Investors that, except as set forth
on the Disclosure Schedule prepared by the Company and attached hereto:
Section 4.1. Organization of the Company. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries and does not own more that fifty percent (50%) of or control any
other business entity except as set forth in the SEC Documents. The Company is
duly qualified and is in good standing as a foreign corporation to do business
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2. Authority. (i) The Company has the requisite corporate power and
corporate authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Warrants and to issue the Shares, the Warrants and the Warrant Shares pursuant
to their respective terms, (ii) the execution, issuance and delivery of this
Agreement, the Registration Rights Agreement, the Escrow Agreement, the Common
Stock certificates and the Warrants by the Company and the consummation by it of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required, and (iii) this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Common Stock
certificates representing the Shares, and the Warrants have been duly executed
and delivered by the Company and at each Closing shall constitute valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application. The Company has duly and validly authorized and reserved
for issuance shares of Common Stock sufficient in number for the exercise of the
Warrants.
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Section 4.3. Capitalization. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock, $0.01 par value per share, of
which 18,005,090 shares are issued and outstanding as of May 31, 1999 and
3,000,000 shares of preferred stock, par value $0.01 per share, none of which
shares are issued and outstanding. Except for (i) outstanding options and
warrants as set forth in the SEC Documents, and (ii) as set forth in the
Disclosure Schedule, there are no outstanding Capital Shares Equivalents nor any
agreements or understandings pursuant to which any Capital Shares Equivalents
may become outstanding. Except as set forth in the SEC Documents or in the
Disclosure Schedule, the Company is not a party to any agreement granting
registration or anti-dilution rights to any person with respect to any of its
equity or debt securities. All of the outstanding shares of Common Stock of the
Company have been duly and validly authorized and issued and are fully paid and
non-assessable.
Section 4.4. Common Stock. The Company has registered its Common Stock pursuant
to Section 12(b) or (g) of the Exchange Act and is in full compliance with all
reporting requirements of the Exchange Act, and the Company is in compliance
with all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on, the Principal
Market. As of the date hereof, the Principal Market is the Nasdaq SmallCap
Market and the Company has not received any notice regarding, and to its
knowledge there is no threat, of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
Section 4.5. SEC Documents. The Company has made available to the Investors true
and complete copies of the SEC Documents. The Company has not provided to the
Investors any information that, according to applicable law, rule or regulation,
should have been disclosed publicly prior to the date hereof by the Company, but
which has not been so disclosed. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act, and
rules and regulations of the SEC promulgated thereunder and the SEC Documents
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the
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ordinary course of business consistent with the Company's past practices since
the last date of such financial statements.
Section 4.6. Exemption from Registration; Valid Issuances. Subject to the
accuracy of the Investors' representations in Article III, the sale of the
Shares, the Warrants and the Warrant Shares will not require registration under
the Securities Act and/or any applicable state securities law. When issued and
paid for in accordance with the Warrants, the Warrant Shares will be duly and
validly issued, fully paid, and non-assessable. Neither the sales of the Shares,
the Warrants or the Warrant Shares pursuant to, nor the Company's performance of
its obligations under, this Agreement, the Registration Rights Agreement, the
Escrow Agreement or the Warrants will (i) result in the creation or imposition
by the Company of any liens, charges, claims or other encumbrances upon the
Shares, the Warrants or the Warrant Shares or, except as contemplated herein,
any of the assets of the Company, or (ii) entitle the holders of Outstanding
Capital Shares to preemptive or other rights to subscribe for or acquire the
Capital Shares or other securities of the Company. The Shares, the Warrants and
the Warrant Shares shall not subject the Investors to personal liability to the
Company or its creditors by reason of the possession thereof.
Section 4.7. No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor, to the knowledge
of the Company, any person acting on its or their behalf (i) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to the sale of the Shares or
the Warrants, or (ii) made any offers or sales of any security or solicited any
offers to buy any security under any circumstances that would require
registration of the Shares, the Warrants or the Warrant Shares under the
Securities Act.
Section 4.8. No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Shares,
the Warrants and the Warrant Shares, do not and will not (i) result in a
violation of the Company's Certificate of Incorporation or By-Laws or (ii)
conflict with, or constitute a material default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture or instrument, or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state or local law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any material property or
asset of the Company is bound or affected, nor is the Company otherwise in
violation of, conflict with or default under any of the foregoing (except in
each case for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not have, individually or in the
aggregate, a Material Adverse Effect). The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate
would not have a Material Adverse Effect. The Company is not required under any
Federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Shares or the Warrants in
accordance with the terms hereof (other than any SEC, Principal Market or state
securities filings that may be required to be made by the
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Company subsequent to Closing, any registration statement that may be filed
pursuant hereto, and any shareholder approval required by the rules applicable
to companies whose common stock trades on the Principal Market); provided that,
for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Investors herein.
Section 4.9. No Material Adverse Change. Since March 31, 1999, no Material
Adverse Effect has occurred or exists with respect to the Company, except as
disclosed in the SEC Documents.
Section 4.10. No Undisclosed Events or Circumstances. Since March 31, 1999, no
event or circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
Section 4.11. No Integrated Offering. Other than pursuant to an effective
registration statement under the Securities Act, or pursuant to the issuance or
exercise of employee stock options, or pursuant to its discussion with the
Investors in connection with the transactions contemplated hereby, the Company
has not issued, offered or sold its Common Stock, or any securities convertible
into or exchangeable or exercisable for Common Stock within the six-month period
next preceding the date hereof, and the Company shall not permit any of its
directors, officers or affiliates directly or indirectly to take, any action
(including, without limitation, any offering or sale to any Person of the Shares
or Warrants), so as to make unavailable the exemption from Securities Act
registration being relied upon by the Company for the offer and sale to
Investors of the Shares or the Warrants (and the Warrant Shares) as contemplated
by this Agreement.
Section 4.12. Litigation and Other Proceedings. Except as disclosed in the SEC
Documents, there are no lawsuits or proceedings pending or, to the knowledge of
the Company, threatened, against the Company or any subsidiary, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which in either case could reasonably be expected to have a
Material Adverse Effect. Except as set forth in the SEC Documents, no judgment,
order, writ, injunction or decree or award has been issued by or, to the
knowledge of the Company, requested of any court, arbitrator or governmental
agency which could result in a Material Adverse Effect.
Section 4.13. No Misleading or Untrue Communication. The Company and, to the
knowledge of the Company, any person representing the Company or any other
person selling or offering to sell the Shares or the Warrants in connection with
the transaction contemplated by this Agreement, have not made, at any time, any
oral communication in connection with the offer or sale of the same which
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
Section 4.14. Material Non-Public Information. The Company has not disclosed to
the Investors any material non-public information that (i) if disclosed
publicly, would reasonably be expected to have a material effect on the price of
the Common Stock or (ii) according to
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applicable law, rule or regulation, should have been disclosed publicly by the
Company prior to the date hereof but which has not been so disclosed.
Section 4.15. Insurance. The Company and each subsidiary maintains property and
casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound and
reputable insurers that is adequate, consistent with industry standards and the
Company's historical claims experience. The Company has not received notice
from, and has no knowledge of any threat by, any insurer (that has issued any
insurance policy to the Company) that such insurer intends to deny coverage
under or cancel, discontinue or not renew any insurance policy presently in
force.
Section 4.16. Tax Matters.
(a) The Company and each subsidiary has filed all Tax Returns which it
is required to file under applicable laws; all such Tax Returns are true and
accurate and has been prepared in compliance with all applicable laws; the
Company has paid all Taxes due and owing by it or any subsidiary (whether or not
such Taxes are required to be shown on a Tax Return) and have withheld and paid
over to the appropriate taxing authorities all Taxes which it is required to
withhold from amounts paid or owing to any employee, stockholder, creditor or
other third parties; and since December 31, 1998, the charges, accruals and
reserves for Taxes with respect to the Company (including any provisions for
deferred income taxes) reflected on the books of the Company are adequate to
cover any Tax liabilities of the Company if its current tax year were treated as
ending on the date hereof.
(b) No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company or any subsidiary
is or may be subject to taxation by that jurisdiction. There are no foreign,
federal, state or local tax audits or administrative or judicial proceedings
pending or being conducted with respect to the Company or any subsidiary; no
information related to Tax matters has been requested by any foreign, federal,
state or local taxing authority; and, except as disclosed above, no written
notice indicating an intent to open an audit or other review has been received
by the Company or any subsidiary from any foreign, federal, state or local
taxing authority. There are no material unresolved questions or claims
concerning the Company's Tax liability. The Company (A) has not executed or
entered into a closing agreement pursuant to ss. 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law; or (B) has not agreed to or is required to make any
adjustments pursuant to ss. 481(a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or any of its subsidiaries or has any knowledge
that the IRS has proposed any such adjustment or change in accounting method, or
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real property holding
corporation within the meaning of ss. 897(c)(2) of the Internal Revenue Code
during the applicable period specified in ss. 897(c)(1)(A)(ii) of the Internal
Revenue Code.
(c) The Company has not made an election under ss. 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign
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law), (B) as a transferee or successor, (C) by contract or indemnity or (D)
otherwise. The Company is not a party to any tax sharing agreement. The Company
has not made any payments, is obligated to make payments or is a party to an
agreement that could obligate it to make any payments that would not be
deductible under ss. 280G of the Internal Revenue Code.
(d) For purposes of this Section 4.16:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign,
or other income, gross receipts, ad valorem, franchise,
profits, sales or use, transfer, registration, excise,
utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other
taxes of any kind whatsoever (including, without limitation,
deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or filing
with respect to Taxes, including any schedules attached
thereto and including any amendment thereof.
Section 4.17. Property. Neither the Company nor any of its subsidiaries owns any
real property. Each of the Company and its subsidiaries has good and marketable
title to all personal property owned by it, free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not materially interfere with the use made and proposed to
be made of such property by the Company; and to the Company's knowledge any real
property, mineral or water rights, and buildings held under lease by the Company
as tenant are held by it under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere with the use made and
intended to be made of such property, mineral or water rights, and buildings by
the Company.
Section 4.18. Intellectual Property. Each of the Company and its subsidiaries
owns or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") necessary for the conduct of its
business as now being conducted. To the Company's knowledge, except as disclosed
in the SEC Documents neither the Company nor any of its subsidiaries is
infringing upon or in conflict with any right of any other person with respect
to any Intangibles. Except as disclosed in the SEC Documents, no adverse claims
have been asserted by any person to the ownership or use of any Intangibles and
the Company has no knowledge of any basis for such claim.
Section 4.19. Internal Controls and Procedures. The Company maintains books and
records and internal accounting controls which provide reasonable assurance that
(i) all transactions to which the Company or any subsidiary is a party or by
which its properties are bound are executed with management's authorization;
(ii) the recorded accounting of the Company's consolidated assets is compared
with existing assets at regular intervals; (iii) access to the Company's
consolidated
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assets is permitted only in accordance with management's authorization; and (iv)
all transactions to which the Company or any subsidiary is a party or by which
its properties are bound are recorded as necessary to permit preparation of the
financial statements of the Company in accordance with U.S. generally accepted
accounting principles.
Section 4.20. Payments and Contributions. Neither the Company, any subsidiary,
nor any of its directors, officers or, to its knowledge, other employees has (i)
used any Company funds for any unlawful contribution, endorsement, gift,
entertainment or other unlawful expense relating to political activity; (ii)
made any direct or indirect unlawful payment of Company funds to any foreign or
domestic government official or employee; (iii) violated or is in violation of
any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other similar
payment to any person with respect to Company matters.
Section 4.21. No Misrepresentation. The representations and warranties of the
Company contained in this Agreement, any schedule, annex or exhibit hereto and
any agreement, instrument or certificate furnished by the Company to the
Investors pursuant to this Agreement, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE V
Covenants of the Investors
Each Investor, severally and not jointly, covenants with the Company
that:
Section 5.1. Compliance with Law. The Investor's trading activities with respect
to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed.
ARTICLE VI
Covenants of the Company
Section 6.1. Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
Section 6.2. Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to issue the Shares at the second Closing and the Warrant
Shares pursuant to any exercise of the Warrants. The number of shares so
reserved from time to time, as theretofore increased or reduced as hereinafter
provided, may be reduced by the number of shares actually delivered pursuant to
any
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exercise of the Warrants and the number of shares so reserved shall be
increased or decreased to reflect potential increases or decreases in the Common
Stock that the Company may thereafter be obligated to issue by reason of
adjustments to the Warrants.
Section 6.3. Listing of Common Stock. The Company hereby agrees to use all
commercially reasonable efforts to maintain the listing and trading of the
Common Stock on a Principal Market, and as soon as reasonably practicable
following the Closing to list the Shares and the Warrant Shares on the Principal
Market. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Principal Market, it will include in such application
the Shares and the Warrant Shares, and will take such other action as is
necessary or desirable in the opinion of the Investors to cause the Shares and
Warrant Shares to be listed on such other Principal Market as promptly as
possible. The Company will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market
and shall provide Investors with copies of any correspondence to or from such
Principal Market which questions or threatens delisting of the Common Stock,
within three (3) Trading Days of the Company's receipt thereof, until the
Investors have disposed of all of their Registrable Securities.
Section 6.4. Exchange Act Registration. The Company will cause its Common Stock
to continue to be registered under Section 12(b) or (g) of the Exchange Act,
will use all commercially reasonable efforts to comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Exchange Act or the
rules thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said Act until the Investors
have disposed of all of their Registrable Securities.
Section 6.5. Legends. The certificates evidencing the Registrable Securities
shall be free of legends, except as set forth in Article IX.
Section 6.6. Corporate Existence; Conflicting Agreements. The Company will take
all steps necessary to preserve and continue the corporate existence of the
Company. The Company shall not enter into any agreement, the terms of which
agreement would restrict or impair the right or ability of the Company to
perform any of its obligations under this Agreement or any of the other
agreements attached as exhibits hereto.
Section 6.7. Consolidation; Merger. The Company shall not, at any time after the
date hereof, effect any merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity (a "Consolidation Event") unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument or by operation of law
the obligation to deliver to the Investors such shares of stock and/or
securities as the Investors are entitled to receive pursuant to this Agreement.
Section 6.8. Issuance of Common Stock and Warrant Shares. The sale of the Shares
and the Warrants and the issuance of the Warrant Shares pursuant to exercise of
the Warrants shall be made in accordance with the provisions and requirements of
Section 4(2), 4(6) or Regulation D and any applicable state securities law. The
Company shall make any necessary SEC and "blue sky" filings required to be made
by the Company in connection with the sale of the Securities to
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the Investors as required by all applicable laws, and shall provide a copy
thereof to the Investors promptly after such filing.
Section 6.9. Limitation on Future Financing. The Company agrees that it will not
enter into any sale of its securities for cash at a discount to its then-current
bid price until 90 days after the effective date of the Registration Statement
except for any sales (i) pursuant to any presently existing employee benefit
plan which plan has been or will be, at the Company's annual meeting of
stockholders to be held on July 26, 1999, approved by the Company's
stockholders, (ii) pursuant to any compensatory or stock option plan for
directors, full-time employees or key consultants, (iii) pursuant to the
exercise of any other warrants or options which are issued and outstanding on
the date hereof (and which are not exercisable for more than 300,000 shares of
Common Stock in the aggregate) or (iv) with the prior approval of a majority in
interest of the Investors, which will not be unreasonably withheld, in
connection with a strategic partnership or other business transaction, the
principal purpose of which is not simply to raise money.
ARTICLE VII
Survival; Indemnification
Section 7.1. Survival. The representations, warranties and covenants made by
each of the Company and each Investor in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby. In the event of a
breach or violation of any of such representations, warranties or covenants, the
party to whom such representations, warranties or covenants have been made shall
have all rights and remedies for such breach or violation available to it under
the provisions of this Agreement, irrespective of any investigation made by or
on behalf of such party on or prior to the Closing Date.
Section 7.2. Indemnity. (a) The Company hereby agrees to indemnify and hold
harmless the Investors, their respective Affiliates and their respective
officers, directors, partners and members (collectively, the "Investor
Indemnitees"), from and against any and all Damages, and agrees to reimburse the
Investor Indemnitees for all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel), in each case promptly as
incurred by the Investor Indemnitees and to the extent arising out of or in
connection with:
(i) any misrepresentation, omission of fact or breach of any
of the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company
pursuant to this Agreement; or
(ii) any failure by the Company to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement, the annexes, schedules or exhibits hereto
or any instrument, agreement or certificate entered into or delivered
by the Company pursuant to this Agreement; or
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(iii) any action instituted against the Investors, or any of
them, by any stockholder of the Company who is not an Affiliate of an
Investor, with respect to any of the transactions contemplated by this
Agreement.
(b) Each Investor, severally and not jointly, hereby agrees to
indemnify and hold harmless the Company, its Affiliates and their respective
officers, directors, partners and members (collectively, the "Company
Indemnitees"), from and against any and all Damages, and agrees to reimburse the
Company Indemnitees for all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel), in each case promptly as
incurred by the Company Indemnitees and to the extent arising out of or in
connection with:
(i) any misrepresentation, omission of fact, or breach of any
of the Investor's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Investor
pursuant to this Agreement; or
(ii) any failure by the Investor to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement or any instrument, certificate or agreement
entered into or delivered by the Investor pursuant to this Agreement.
Section 7.3. Notice. Promptly after receipt by either party hereto seeking
indemnification pursuant to Section 7.2 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party from whom indemnification pursuant to Section
7.2 is being sought (the "Indemnifying Party") of the commencement thereof; but
the omission to so notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party, except to the
extent that the Indemnifying Party is actually prejudiced by such omission or
delay. In connection with any Claim as to which both the Indemnifying Party and
the Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying
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Party shall not, in connection with any Claim in the same jurisdiction, be
liable for the fees and expenses of more than one firm of legal counsel for the
Indemnified Party (together with appropriate local counsel). The Indemnifying
Party shall not, without the prior written consent of the Indemnified Party
(which consent shall not unreasonably be withheld), settle or compromise any
Claim or consent to the entry of any judgment that does not include an
unconditional release of the Indemnified Party from all liabilities with respect
to such Claim or judgment. 7.4. Direct Claims. In the event one party hereunder
should have a claim for indemnification that does not involve a claim or demand
being asserted by a third party, the Indemnified Party promptly shall deliver
notice of such claim to the Indemnifying Party. If the Indemnifying Party
disputes the claim, such dispute shall be resolved by mutual agreement of the
Indemnified Party and the Indemnifying Party or by binding arbitration conducted
in accordance with the procedures and rules of the American Arbitration
Association as set forth in Article X. Judgment upon any award rendered by any
arbitrators may be entered in any court having competent jurisdiction thereof.
ARTICLE VIII
Due Diligence Review; Non-Disclosure of Non-Public Information.
Section 8.1. Due Diligence Review. Subject to Section 8.2, the Company shall
make available for inspection and review by the Investors, advisors to and
representatives of the Investors (who may or may not be affiliated with the
Investors and who are reasonably acceptable to the Company), and any underwriter
participating in any disposition of the Registrable Securities on behalf of the
Investors pursuant to the Registration Statement, any amendment or supplement
thereto or any blue sky, Nasdaq or other filing, all SEC Documents and other
filings with the SEC, and all other publicly available corporate documents and
properties of the Company as may be reasonably necessary for the purpose of such
review, and cause the Company's officers, directors and employees to supply all
such publicly available information reasonably requested by the Investors or any
such representative, advisor or underwriter in connection with the Registration
Statement (including, without limitation, in response to all questions and other
inquiries reasonably made or submitted by any of them), prior to and from time
to time after the filing and effectiveness of the Registration Statement for the
sole purpose of enabling the Investors and such representatives, advisors and
underwriters and their respective accountants and attorneys to conduct initial
and ongoing due diligence with respect to the Company and the accuracy of the
Registration Statement.
Section 8.2. Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose material non-public information to
the Investors, advisors to or representatives of the Investors unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. Other than disclosure of any comment letters
received from the SEC staff with respect to the Registration Statement, the
Company may, as a condition
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to disclosing any non-public information hereunder, require the Investors'
advisors and representatives to enter into a confidentiality agreement in form
and content reasonably satisfactory to the Company and the Investors.
(b) Nothing herein shall require the Company to disclose material
non-public information to the Investors or their advisors or representatives,
and the Company represents that it does not disseminate material non-public
information to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts, provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, promptly notify the advisors and representatives of the
Investors and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting material non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements therein, in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.2 shall be construed to mean that such persons or entities
other than the Investors (without the written consent of the Investors prior to
disclosure of such information as set forth in Section 8.2(a)) may not obtain
non-public information in the course of conducting due diligence in accordance
with the terms of this Agreement and nothing herein shall prevent any such
persons or entities from notifying the Company of their opinion that based on
such due diligence by such persons or entities, that the Registration Statement
contains an untrue statement of a material fact or omits a material fact
required to be stated in the Registration Statement or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.
ARTICLE IX
Legends; Transfer Agent Instructions
Section 9.1. Legends. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend or equivalent
(the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED
OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH REGISTRATION.
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Section 9.2. Transfer Agent Instructions. Upon the execution and delivery
hereof, the Company is issuing to the transfer agent for its Common Stock (and
to any substitute or replacement transfer agent for its Common Stock upon the
Company's appointment of any such substitute or replacement transfer agent)
instructions substantially in the form of Exhibit E hereto. Such instructions
shall be irrevocable by the Company from and after the date hereof or from and
after the issuance thereof to any such substitute or replacement transfer agent,
as the case may be.
Section 9.3. No Other Legend or Stock Transfer Restrictions. No legend other
than the one specified in Section 9.1 has been or shall be placed on the share
certificates representing the Registrable Securities and no instructions or
"stop transfer orders," "stock transfer restrictions," or other restrictions
have been or shall be given to the Company's transfer agent with respect thereto
other than as expressly set forth in this Article IX.
Section 9.4. Investors' Compliance. Nothing in this Article shall affect in any
way each Investor's obligations to comply with all applicable securities laws
upon resale of the Common Stock.
ARTICLE X
Choice of Law; Arbitration
Section 10.1. Governing Law/Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
shall be submitted to arbitration under the American Arbitration Association
(the "AAA") in New York City, New York, and shall be finally and conclusively
determined by the decision of a board of arbitration consisting of three (3)
members (hereinafter referred to as the "Board of Arbitration") selected
according to the rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing party is
required to pay to the other party in respect of a claim filed. In connection
with rendering its decisions, the Board of Arbitration shall adopt and follow
the laws of the State of New York unless the matter at issue is the corporation
law of the Company's state of incorporation, in which event the corporation law
of such jurisdiction shall govern such issue. To the extent practical, decisions
of the Board of Arbitration shall be rendered no more than thirty (30) calendar
days following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. Any decision made by the Board of Arbitration (either
prior to or after the expiration of such thirty (30) calendar day period) shall
be final, binding and conclusive on the parties to the dispute, and entitled to
be enforced to the fullest extent permitted by law and entered in any court of
competent jurisdiction. The Board of Arbitration shall be authorized and is
hereby directed to enter a default judgment against any party failing to
participate in any proceeding hereunder within the time periods set forth in the
AAA rules. The non-prevailing party to any arbitration (as determined by the
Board of Arbitration) shall pay the expenses of the prevailing
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party, including reasonable attorney's fees, in connection with such
arbitration. Any party shall be entitled to obtain injunctive relief from a
court in any case where such relief is available.
ARTICLE XI
Assignment
Section 11.1. Assignment. Neither this Agreement nor any rights of the Investors
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Agreement shall inure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Shares or Warrants purchased or acquired by any Investor hereunder with respect
to the Shares or Warrants held by such person, and (b) upon the prior written
consent of the Company, which consent shall not unreasonably be withheld or
delayed, each Investor's interest in this Agreement may be assigned at any time,
in whole or in part, to any other person or entity (including any Affiliate of
the Investor) who agrees to make the representations and warranties contained in
Article III and who agrees to be bound by the terms of this Agreement.
ARTICLE XII
Notices
Section 12.1. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) hand delivered, (ii) deposited
in the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by facsimile, addressed as set forth below or to such other address
as such party shall have specified most recently by written notice. Any notice
or other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the first business day
following the date of sending by reputable courier service, fully prepaid,
addressed to such address, or (c) upon actual receipt of such mailing, if
mailed. The addresses for such communications shall be:
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If to the Company: 600 Research Drive
Wilmington, MA 01887
Attention:
Telephone: (978) 988-5888
Facsimile:
with a copy to (shall not constitute
notice): Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attention: Stephen J. Coukos
Telephone: (617) 338-2800
Facsimile: (617) 338-2880
if to the Investors: As set forth on the signature pages hereto
with a copy to: Joseph A. Smith, Esq.
(shall not constitute notice) Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York
Telephone: (212) 351-4500
Facsimile: (212) 661-0989
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving written notice of such changed
address or facsimile number to the other party hereto as provided in this
Section 12.1.
ARTICLE XIII
Miscellaneous
Section 13.1. Counterparts/ Facsimile/ Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2. Entire Agreement. This Agreement, the agreements attached as
Exhibits hereto, which include, but are not limited to the Warrants, the Escrow
Agreement, and the Registration Rights Agreement, set forth the entire agreement
and understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations
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and understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits to this
Agreement are incorporated herein by this reference and shall constitute part of
this Agreement as is fully set forth herein.
Section 13.3. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that such severability shall be ineffective if
it materially changes the economic benefit of this Agreement to any party.
Section 13.4. Headings. The headings used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 13.5. Number and Gender. There may be one or more Investors parties to
this Agreement, which Investors may be natural persons or entities. All
references to plural Investors shall apply equally to a single Investor if there
is only one Investor, and all references to an Investor as "it" shall apply
equally to a natural person.
Section 13.6. Reporting Entity for the Common Stock. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common
Stock on any given Trading Day for the purposes of this Agreement shall be
Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investors and the Company shall be required to employ any other reporting
entity.
Section 13.7. Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Shares or Warrants or any Warrant
Shares and (ii) in the case of any such loss, theft or destruction of such
certificate, upon delivery of an indemnity agreement or security reasonably
satisfactory in form to the Company (which shall not include the posting of any
bond) or (iii) in the case of any such mutilation, on surrender and cancellation
of such certificate, the Company at its expense will execute and deliver, in
lieu thereof, a new certificate of like tenor.
Section 13.8. Fees and Expenses. Each of the Company and the Investors agrees to
pay its own expenses incident to the performance of its obligations hereunder,
except that the Company shall pay the fees, expenses and disbursements of
Epstein Becker & Green, P.C., counsel to the Investors, in an amount equal to
$10,000 all as set forth in the Escrow Agreement.
Section 13.9. Brokerage. Each of the parties hereto represents that it has had
no dealings in connection with this transaction with any finder or broker who
will demand payment of any fee or commission from the other party except for
JWGenesis Securities, Inc., whose fee shall be paid by the Company. The Company
on the one hand, and the Investors, on the other hand, agree to indemnify the
other against and hold the other harmless from any and all liabilities to any
person claiming brokerage commissions or finder's fees on account of services
purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
Section 13.10. Publicity. The Company agrees that it will not issue any press
release or other public announcement of the transactions contemplated by this
Agreement without the prior consent of the Investors, which shall not be
unreasonably withheld nor delayed by more than two
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(2) Trading Days from their receipt of such proposed release; provided, however,
that if the Company is advised by its outside counsel that it is required by law
or the applicable rules of any Principal Market to issue any such press release
or public announcement, then it may do so without the prior consent of the
Investors, although it shall be required to provide prior notice (which may be
by telephone) to the Investors that it intends to issue such press release or
public announcement. No release shall name the Investors without their express
consent.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
FOCUS Enhancements, Inc.
By: /s/ Christopher P. Ricci
Christopher P. Ricci, Sr. Vice President
Address: c/o Ultra Finanz AG AMRO International, S.A.
Grossmunsterplatz 6
Zurich, CH-8022
Switzerland
Fax: 011-411-262-5515 By: /s/ H. U. Bachofen
Name: H. U. Bachofen, Director
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EXHIBIT A
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION
WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT.
STOCK PURCHASE WARRANT
To Purchase 120,000 Shares of Common Stock of
FOCUS ENHANCEMENTS, INC.
THIS CERTIFIES that, for value received, AMRO International, S.A. (the
"Holder"), is entitled, upon the terms and subject to the conditions hereinafter
set forth, at any time on or after July 1, 1999 (the "Initial Exercise Date")
and on or prior to the close of business on June 30, 2004 (the "Termination
Date") but not thereafter, to subscribe for and purchase from FOCUS
Enhancements, Inc., a corporation incorporated in Delaware (the "Company"), up
to One Hundred Twenty Thousand (120,000) shares (the "Warrant Shares") of Common
Stock, $.01 par value, of the Company (the "Common Stock"). The purchase price
of one share of Common Stock (the "Exercise Price") under this Warrant shall be
$1.478125 (110% of the Market Price on the Closing Date of the Common Stock and
Warrants Purchase Agreement dated as of June 4, 1999 pursuant to which this
Warrant has been issued (the "Purchase Agreement")). The Exercise Price and the
number of shares for which the Warrant is exercisable shall be subject to
adjustment as provided herein. In the event of any conflict between the terms of
this Warrant and the Purchase Agreement, the Purchase Agreement shall control.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth for such terms in the Purchase Agreement. Notwithstanding any other
provision to the contrary contained herein, this Warrant shall automatically
become null and void upon the Company's exercise of its option to repurchase the
Securities under Section 3(e) of the Registration Rights Agreement.
<PAGE>
1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Section 4 herein,
exercise of the purchase rights represented by this Warrant may be made at any
time or times on or after the Initial Exercise Date, and before the close of
business on the Termination Date by the surrender of this Warrant and the Notice
of Exercise Form annexed hereto duly executed, at the office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the registered holder hereof at the address of such holder appearing
on the books of the Company) and upon payment of the Exercise Price of the
shares thereby purchased by wire transfer or cashier's check drawn on a United
States bank, the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. Certificates
for shares purchased hereunder shall be delivered to the holder hereof within
three (3) Trading Days after the date on which this Warrant shall have been
exercised as aforesaid. This Warrant shall be deemed to have been exercised and
such certificate or certificates shall be deemed to have been issued, and Holder
or any other person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
Warrant has been exercised by payment to the Company of the Exercise Price and
all taxes required to be paid by Holder, if any, pursuant to Section 5 prior to
the issuance of such shares, have been paid. If this Warrant shall have been
exercised in part, the Company shall, at the time of delivery of the certificate
or certificates representing Warrant Shares, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be
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directed by the holder of this Warrant; provided, however, that in the event
certificates for shares of Common Stock are to be issued in a name other than
the name of the holder of this Warrant, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof; and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
6. Closing of Books. The Company will not close its shareholder books
or records in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination. (a) Subject to compliance with
any applicable securities laws, transfer of this Warrant and all rights
hereunder, in whole or in part, shall be registered on the books of the Company
to be maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by Holder or its
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and, if required, such payment,
the Company shall execute and deliver a new Warrant or Warrants in the name of
the assignee or assignees and in the denomination or denominations specified in
such instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be exercised by a
new holder for the purchase of shares of Common Stock without having a new
Warrant issued.
(b) This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by Holder or its agent or attorney.
Subject to compliance with Section 7(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 7.
(d) The Company agrees to maintain, at its aforesaid office,
books for the registration and the registration of transfer of the Warrants.
8. No Rights as Shareholder until Exercise. This Warrant does not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company prior to the exercise hereof. Upon the surrender of this Warrant
and the payment of the aggregate Exercise Price, the Warrant Shares so purchased
shall be and be deemed to be issued to such holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or
payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant certificate
or any stock certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
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satisfactory to it (which shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.
11. Adjustments of Exercise Price and Number of Warrant Shares. (a)
Stock Splits, etc. The number and kind of securities purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to adjustment
from time to time upon the happening of any of the following. In case the
Company shall (i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares of Common Stock, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock or (iv) issue any shares
of its capital stock in a reclassification of the Common Stock, then the number
of Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the holder of this Warrant shall be entitled
to receive the kind and number of Warrant Shares or other securities of the
Company which he would have owned or have been entitled to receive had such
Warrant been exercised in advance thereof. Upon each such adjustment of the kind
and number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the holder of this Warrant shall thereafter be entitled
to purchase the number of Warrant Shares or other securities resulting from such
adjustment at an Exercise Price per Warrant Share or other security obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing by the number of Warrant Shares or other securities
of the Company resulting from such adjustment. An adjustment made pursuant to
this paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
(b) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of
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shares of Common Stock for which this Warrant is exercisable immediately prior
to such event. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined in good faith by resolution of the Board of Directors
of the Company) in order to provide for adjustments of shares of Common Stock
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 11. For purposes of
this Section 11, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 11 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
12. Voluntary Adjustment by the Company. The Company may at any time
during the term of this Warrant, reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
13. Notice of Adjustment. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the holder of this Warrant notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of such
Warrant Shares (and other securities or property) after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth
the computation by which such adjustment was made. Such notice, in the absence
of manifest error, shall be conclusive evidence of the correctness of such
adjustment.
14. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
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then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 30
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 16(d).
15. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use all commercially reasonable
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations under this Warrant.
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Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
Before taking any action which would cause an adjustment reducing the
current Exercise Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock at
such adjusted Exercise Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
16. Miscellaneous.
(a) Jurisdiction. This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a contract
under the laws of New York without regard to its conflict of law principles or
rules, and be subject to arbitration pursuant to the terms set forth in the
Purchase Agreement.
(b) Restrictions. The holder hereof acknowledges that the
Warrant Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay
or failure to exercise any right hereunder on the part of Holder shall operate
as a waiver of such right or otherwise prejudice Holder's rights, powers or
remedies, notwithstanding all rights hereunder terminate on the Termination
Date. If the Company willfully fails to comply with any material provision of
this Warrant, the Company shall pay to Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees, including those of appellate proceedings, incurred
by Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof by the Company shall be
delivered in accordance with the notice provisions of the Purchase Agreement.
(e) Limitation of Liability. No provision hereof, in the
absence of affirmative action by Holder to purchase shares of Common Stock, and
no enumeration herein of the rights or privileges of Holder hereof, shall give
rise to any liability of Holder for the purchase price of any Common Stock or as
a stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
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(f) Remedies. Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities
laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of Holder. The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant
and shall be enforceable by any such Holder or holder of Warrant Shares.
(h) Indemnification. The Company agrees to indemnify and hold
harmless Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of any failure by the
Company to perform or observe in any material respect any of its covenants,
agreements, undertakings or obligations set forth in this Warrant; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a
judgment by a court to have resulted from Holder's negligence, bad faith or
willful misconduct in its capacity as a stockholder or warrantholder of the
Company.
(i) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.
(j) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
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(k) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: June __, 1999
FOCUS ENHANCEMENTS, INC.
By:______________________________
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NOTICE OF EXERCISE
To: FOCUS ENHANCEMENTS, INC.
(1) The undersigned hereby elects to purchase ________ shares of Common
Stock (the "Common Stock"), of FOCUS Enhancements, Inc. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the exercise price in
full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
______________________________
(Name)
______________________________
(Address)
______________________________
Dated:
______________________________
Signature
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing warrant, execut
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
________________________________________________________________.
________________________________________________________________
Dated: ______________, _______
Holder's Signature:_________________________________
Holder's Address:___________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
<PAGE>
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of June 4, 1999
between the investor or investors signatory hereto (each an "Investor" and
together the "Investors"), and FOCUS Enhancements, Inc., a Delaware corporation
(the "Company").
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Investor is purchasing from the Company, pursuant to a
Common Stock and Warrants Purchase Agreement dated the date hereof (the
"Purchase Agreement"), 1,200,000 shares of Common Stock and Warrants to purchase
up to 120,000 shares of the Company's Common Stock (terms not defined herein
shall have the meanings ascribed to them in the Purchase Agreement); and
WHEREAS, the Company desires to grant to the Investors the
registration rights set forth herein with respect to the Shares purchased
pursuant to the Purchase Agreement and shares of Common Stock issuable upon
exercise of the Warrants (hereinafter referred to as the "Stock" or "Securities"
of the Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term
"Registrable Security" means the Securities until (i) the Registration Statement
has been declared effective by the Commission, and all Securities have been
disposed of pursuant to the Registration Statement, (ii) all Securities have
been sold under circumstances under which all of the applicable conditions of
Rule 144 (or any similar provision then in force) under the Securities Act
("Rule 144") are met, (iii) all Securities have been otherwise transferred to
holders who may trade such Securities without restriction under the Securities
Act, and the Company has delivered a new certificate or other evidence of
ownership for such Securities not bearing a restrictive legend or (iv) such time
as, in the opinion of counsel to the Company, all Securities may be sold without
any time, volume or manner limitations pursuant to Rule 144(k) (or any similar
provision then in effect) under the Securities Act. The term "Registrable
Securities" means any and/or all of the securities falling within the foregoing
definition of a "Registrable Security." In the event of any merger,
reorganization, consolidation, recapitalization or other change in corporate
structure affecting the Common Stock, such adjustment shall be deemed to be made
in the definition of "Registrable Security" as is appropriate in order to
prevent any dilution or enlargement of the rights granted pursuant to this
Agreement.
Section 2. Restrictions on Transfer. Each Investor
acknowledges and understands that prior to the registration of the Securities as
provided herein, the Securities are "restricted securities" as defined in Rule
144 promulgated under the Act. Each Investor understands that no disposition or
transfer of the Securities may be made by Investor in the absence of (i) an
opinion of counsel to the Investor, in form and substance reasonably
satisfactory to the Company, that such transfer may be made without registration
under the Securities Act or (ii) such registration.
<PAGE>
With a view to making available to the Investors the benefits
of Rule 144 under the Securities Act or any other similar rule or regulation of
the Commission that may at any time permit the Investors to sell securities of
the Company to the public without registration ("Rule 144"), the Company agrees
to:
(a) comply with the provisions of paragraph (c)(1) of Rule
144; and
(b) file with the Commission in a timely manner all reports
and other documents required to be filed with the Commission pursuant to Section
13 or 15(d) under the Exchange Act by companies subject to either of such
sections, irrespective of whether the Company is then subject to such reporting
requirements.
Section 3. Registration Rights With Respect to the Securities.
(a) The Company agrees that it will prepare and file with the
Securities and Exchange Commission ("Commission"), within thirty (30) days after
the Closing Date a registration statement (on Form S-3, or, subject to the
Company's right to repurchase the Securities in lieu of such filing as set forth
in Section 3(e), other appropriate registration statement form) under the
Securities Act (the "Registration Statement"), at the sole expense of the
Company (except as provided in Section 3(c) hereof), in respect of the
Investors, so as to permit a public offering and resale of all of the Securities
under the Act by the Investors as selling stockholders and not as underwriters.
The Company shall use all commercially reasonable efforts to
cause such Registration Statement to become effective within ninety (90) days
from the Closing Date (or, if the Registration Statement receives a "full
review" from the Commission, 120 days from the Closing Date) or, if earlier,
within five (5) days of SEC clearance to request acceleration of effectiveness.
The Company will notify the Investors of the effectiveness of the Registration
Statement within one Trading Day of such event. In the event that the number of
shares so registered shall for any reason prove to be insufficient to register
the resale of all of the Securities, then the Company shall be obligated to
file, within thirty (30) days of notice from any Investor, a further
Registration Statement registering such remaining shares and shall use all
commercially reasonable efforts to prosecute such additional Registration
Statement to effectiveness within ninety (90) days (or, if the Registration
Statement receives a "full review" from the Commission, 120 days) of the date of
such notice.
(b) The Company will maintain the Registration Statement or
post-effective amendment filed under this Section 3 effective under the
Securities Act until the earlier of (i) the date that none of the Securities
covered by such Registration Statement are or may become issued and outstanding,
(ii) the date that all of the Securities have been sold pursuant to such
Registration Statement, (iii) the date the Investors receive an opinion of
counsel to the Company, which counsel shall be reasonably acceptable to the
Investors, that the Securities may be sold under the provisions of Rule 144
without limitation as to volume, (iv) all Securities have been otherwise
transferred to persons who may trade such shares without restriction under the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership
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for such securities not bearing a restrictive legend, or (v) all Securities may
be sold without any time, volume or manner limitations pursuant to Rule 144(k)
or any similar provision then in effect under the Securities Act in the opinion
of counsel to the Company, which counsel shall be reasonably acceptable to the
Investor (the "Effectiveness Period").
(c) All fees, disbursements and out-of-pocket expenses and
costs incurred by the Company in connection with the preparation and filing of
the Registration Statement under subparagraph 3(a) and in complying with
applicable securities and Blue Sky laws (including, without limitation, all
attorneys' fees of the Company) shall be borne by the Company. The Investors
shall bear the cost of underwriting and/or brokerage discounts, fees and
commissions, if any, applicable to the Securities being registered and the fees
and expenses of their counsel. The Investors and their counsel shall have a
reasonable period, not to exceed five (5) Trading Days, to review the proposed
Registration Statement or any amendment thereto, prior to filing with the
Commission, and the Company shall provide each Investor with copies of any
comment letters received from the Commission with respect thereto within two (2)
Trading Days of receipt thereof. The Company shall qualify any of the securities
for sale in such states as any Investor reasonably designates and shall furnish
indemnification in the manner provided in Section 6 hereof. However, the Company
shall not be required to qualify in any state which will require an escrow or
other restriction relating to the Company and/or the sellers, or which will
require the Company to qualify to do business in such state or require the
Company to file therein any general consent to service of process. The Company
at its expense will supply the Investors with copies of the applicable
Registration Statement and the prospectus included therein and other related
documents in such quantities as may be reasonably requested by the Investors.
(d) The Company shall not be required by this Section 3 to
include an Investor's Securities in any Registration Statement which is to be
filed if, in the opinion of counsel for both the Investor and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Investor and the Company)
the proposed offering or other transfer as to which such registration is
requested is exempt from applicable federal and state securities laws and would
result in all purchasers or transferees obtaining securities which are not
"restricted securities", as defined in Rule 144 under the Securities Act.
(e) In the event that (i) the Registration Statement to be
filed by the Company pursuant to Section 3(a) above is not filed with the
Commission within thirty (30) days from the Closing Date, (ii) such Registration
Statement is not declared effective by the Commission within the earlier of
ninety (90) days from the Closing Date (or, if the Registration Statement
receives a "full review" from the Commission, 120 days from the Closing Date)
(unless such failure to register is due in whole or in part to the Commission's
request that the Investors be named as underwriters in the prospectus included
in the Registration Statement) or five (5) days of clearance by the Commission
to request effectiveness, (iii) if the Securities have been registered as
contemplated by clause (ii), such Registration Statement is not maintained as
effective by the Company for the period set forth in Section 3(b) above or (iv)
the additional Registration Statement referred to in Section 3(a) is not filed
within thirty (30) days or declared effective within ninety (90) days as set
forth therein (or, if such additional Registration Statement
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receives a "full review" from the Commission, 120 days) (unless such failure to
register is due in whole or in part to the Commission's request that the
Investors be named as underwriters in the prospectus included in the
Registration Statement) (each a "Registration Default") then the Company will,
at its election, either (A) repurchase the Securities from the Investor at their
original purchase price (and Investor hereby agrees to permit such Securities to
be so repurchased) or (B) pay Investor (pro rated on a daily basis), as
liquidated damages for such failure and not as a penalty one percent (1%) of the
aggregate market value as of the Closing Date of shares of Common Stock
purchased from the Company and still held by the Investor for the first month
and two percent (2%) for every month thereafter until such Registration
Statement has been filed, and in the event of late effectiveness (in case of
clause (ii) above) or lapsed effectiveness (in the case of clause (iii) above),
one percent (1%) of the aggregate market value as of the Closing Date of shares
of Common Stock purchased from the Company and still held by the Investor for
the first month and two percent (2%) for every month thereafter (regardless of
whether one or more such Registration Defaults are then in existence) until such
Registration Statement has been declared effective. The election to repurchase
the Securities shall be made to the Investors in writing within five (5) Trading
Days of the date on which liquidated damages would otherwise begin to accrue,
and payment shall be made within five (5) Trading Days of such notice, or else
the Company's election shall be void and of no further effect. Payment of the
liquidated damages shall be made to the Investors in cash, within five (5)
calendar days of demand, provided, however, that the payment of such liquidated
damages shall not relieve the Company from its obligations to register the
Securities pursuant to this Section. The market value of the Common Stock for
this purpose shall be the closing price (or last trade, if so reported) on the
Principal Market for each day during such Registration Default. Notwithstanding
anything to the contrary contained herein, a failure to maintain the
effectiveness of an filed Registration Statement or the ability of an Investor
to use an otherwise effective Registration Statement to effect resales of
Securities during the period after 45 days and within 90 days from the end of
the Company's fiscal year resulting solely from the need to update the Company's
financial statements contained or incorporated by reference in such Registration
Statement shall not constitute a Registration Default and shall not trigger the
accrual of liquidated damages hereunder.
If the Company does not remit the payment to the Investors as
set forth above, the Company will pay the Investors reasonable costs of
collection, including attorneys' fees, in addition to the liquidated damages.
The registration of the Securities pursuant to this provision shall not affect
or limit the Investors' other rights or remedies as set forth in this Agreement.
(f) No provision contained herein shall preclude the Company
from selling securities pursuant to any Registration Statement in which it is
required to include Securities pursuant to this Section 3.
(g) If at any time or from time to time after the effective
date of any Registration Statement, the Company notifies the Investors in
writing of the existence of a Potential Material Event (as defined in Section
3(h) below), the Investors shall not offer or sell any Securities or engage in
any other transaction involving or relating to Securities, from the time of the
giving of notice with respect to a Potential Material Event until the Investors
receive
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written notice from the Company that such Potential Material Event either has
been disclosed to the public or no longer constitutes a Potential Material
Event; provided, however, that the Company may not so suspend the right to such
holders of Securities for more than thirty (30) days in the aggregate during any
twelve month period during the period the Registration Statement is required to
be in effect, and if such period is exceeded, such event shall be a Registration
Default. If a Potential Material Event shall occur prior to the date a
Registration Statement is required to be filed, then the Company's obligation to
file such Registration Statement shall be delayed without penalty for not more
than twenty (20) days, and such delay or delays shall not constitute a
Registration Default. The Company must, if lawful, give the Investors notice in
writing at least two (2) Trading Days prior to the first day of the blackout
period.
(h) "Potential Material Event" means any of the following: (a)
the possession by the Company of material information not ripe for disclosure in
a registration statement, as determined in good faith by the Chief Executive
Officer or the Board of Directors of the Company that disclosure of such
information in a Registration Statement would be detrimental to the business and
affairs of the Company; or (b) any material engagement or activity by the
Company which would, in the good faith determination of the Chief Executive
Officer or the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Chief Executive Officer or
the Board of Directors of the Company that the applicable Registration Statement
would be materially misleading absent the inclusion of such information.
Section 4. Cooperation with Company. The Investors will
cooperate with the Company in all respects in connection with this Agreement,
including timely supplying all information reasonably requested by the Company
(which shall include all information regarding the Investors and proposed manner
of sale of the Registrable Securities required to be disclosed in any
Registration Statement) and executing and returning all documents reasonably
requested in connection with the registration and sale of the Registrable
Securities and entering into and performing their obligations under any
underwriting agreement, if the offering is an underwritten offering, in usual
and customary form, with the managing underwriter or underwriters of such
underwritten offering. Nothing in this Agreement shall obligate any Investor to
consent to be named as an underwriter in any Registration Statement. The
obligation of the Company to register the Registrable Securities shall be
absolute and unconditional as and to the extent provided in this Agreement as to
those Securities which the Commission will permit to be registered without
naming the Investors as underwriters. Any delay or delays caused by the
Investors by failure to cooperate as required hereunder shall not constitute a
Registration Default.
Section 5. Registration Procedures. If and whenever the
Company is required by any of the provisions of this Agreement to effect the
registration of any of the Registrable Securities under the Act, the Company
shall (except as otherwise provided in this Agreement), as expeditiously as
possible, subject to the Investors' assistance and cooperation as reasonably
required with respect to each Registration Statement:
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(a) (i) prepare and file with the Commission such amendments
and supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective and to comply with the provisions of the Act with respect to the sale
or other disposition of all securities covered by such registration statement
whenever the Investors shall desire to sell or otherwise dispose of the same
(including prospectus supplements with respect to the sales of securities from
time to time in connection with a registration statement pursuant to Rule 415
promulgated under the Act) and (ii) take all lawful action such that each of (A)
the Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (B) the prospectus forming part of the Registration Statement,
and any amendment or supplement thereto, does not at any time during the
Registration Period include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(b) (i) prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the distribution
or delivery of any prospectus (including any supplements thereto), provide draft
copies thereof to the Investors as required by Section 3(c) and reflect in such
documents all such comments as the Investors (and their counsel) reasonably may
propose respecting the Selling Shareholders and Plan of Distribution sections
(or equivalents) and (ii) furnish to each Investor such numbers of copies of a
prospectus including a preliminary prospectus or any amendment or supplement to
any prospectus, as applicable, in conformity with the requirements of the Act,
and such other documents, as such Investor may reasonably request in order to
facilitate the public sale or other disposition of the securities owned by such
Investor;
(c) register and qualify the Registrable Securities covered by
the Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Investors shall reasonably request (subject to the
limitations set forth in Section 3(c) above), and do any and all other acts and
things which may be necessary or advisable to enable each Investor to consummate
the public sale or other disposition in such jurisdiction of the securities
owned by such Investor;
(d) list such Registrable Securities on the Principal Market,
if the listing of such Registrable Securities is then permitted under the rules
of such Principal Market;
(e) notify each Investor at any time when a prospectus
relating thereto covered by the Registration Statement is required to be
delivered under the Act, of the happening of any event of which it has knowledge
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and the Company shall prepare and file a curative amendment under
Section 5(a) as quickly as commercially possible;
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(f) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
(g) cooperate with the Investors to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates for
the Registrable Securities to be in such denominations or amounts, as the case
may be, as the Investors reasonably may request and registered in such names as
the Investors may request; and, within three (3) Trading Days after a
Registration Statement which includes Registrable Securities is declared
effective by the Commission, deliver and cause legal counsel selected by the
Company to deliver to the transfer agent for the Registrable Securities (with
copies to the Investors) an appropriate instruction and, to the extent
necessary, an opinion of such counsel;
(h) take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
prospectus which are customary for issuers to perform under the circumstances;
(i) in the event of an underwritten offering, promptly include
or incorporate in a prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment; and
(j) maintain a transfer agent and registrar for its Common
Stock.
Section 6. Indemnification.
(a) To the maximum extent permitted by law, the Company agrees
to indemnify and hold harmless the Investors and each person, if any, who
controls an Investor within the meaning of the Securities Act (each a
"Distributing Investor") against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees and expenses), to which the Distributing Investor may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement, or any related final prospectus or
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that the Company will not be liable in any such case to the extent, and
only to the extent, that any such loss, claim, damage or liability
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arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such Registration Statement, preliminary
prospectus, final prospectus or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company by
the Distributing Investor, its counsel, affiliates or any underwriter,
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) To the maximum extent permitted by law, each Distributing
Investor agrees that it will indemnify and hold harmless the Company, and each
officer and director of the Company or person, if any, who controls the Company
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement, include, but not
be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees and expenses) to which the Company or any such
officer, director or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement, or any related final prospectus or amendment or supplement thereto,
or arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in such Registration Statement, final prospectus or amendment or supplement
thereto in reliance upon, and in conformity with, written information furnished
to the Company by such Distributing Investor, its counsel, affiliates or any
underwriter, specifically for use in the preparation thereof. This indemnity
agreement will be in addition to any liability which the Distributing Investor
may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action against such indemnified
party, such indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 6, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve the indemnifying party from any liability
which it may have to any indemnified party except to the extent the failure of
the indemnified party to provide such written notification actually prejudices
the ability of the indemnifying party to defend such action. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section 6 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless the indemnifying party shall not
pursue the action to its final conclusion. The indemnified parties as a group
shall have the right to employ one separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party unless (i) the
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employment of such counsel has been specifically authorized in writing by the
indemnifying party, or (ii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying party
and the indemnified party shall have been advised by its counsel that there may
be one or more legal defenses available to the indemnifying party different from
or in conflict with any legal defenses which may be available to the indemnified
party or any other indemnified party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of such
indemnified party, it being understood, however, that the indemnifying party
shall, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable only for the reasonable fees and
expenses of one separate firm of attorneys for the indemnified party, which firm
shall be designated in writing by the indemnified party). No settlement of any
action against an indemnified party shall be made without the prior written
consent of the indemnified party, which consent shall not be unreasonably
withheld so long as such settlement includes a full release of claims against
the indemnified party.
Section 7. Contribution. In order to provide for just and
equitable contribution under the Securities Act in any case in which (i) the
indemnified party makes a claim for indemnification pursuant to Section 6 hereof
but is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
Section 6 hereof provide for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any indemnified party,
then the Company and the applicable Distributing Investor shall contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (which shall, for all purposes of this Agreement, include, but not be
limited to, all reasonable costs of defense and investigation and all reasonable
attorneys' fees and expenses), in either such case (after contribution from
others) on the basis of relative fault as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the applicable
Distributing Investor on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Investor agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
Section 7. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 7 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
Notwithstanding any other provision of this Section 7, in no event shall any (i)
Investor be required to undertake liability to any person under this Section 7
for any amounts in excess of the
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dollar amount of the proceeds received by such Investor from the sale of such
Investor's Registrable Securities (after deducting any fees, discounts and
commissions applicable thereto) pursuant to any Registration Statement under
which such Registrable Securities are registered under the Securities Act and
(ii) underwriter be required to undertake liability to any person hereunder for
any amounts in excess of the aggregate discount, commission or other
compensation payable to such underwriter with respect to the Registrable
Securities underwritten by it and distributed pursuant to such Registration
Statement.
Section 8. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) hand delivered,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by facsimile, addressed as set forth in the
Purchase Agreement or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the first business day following the date of sending
by reputable courier service, fully prepaid, addressed to such address, or (c)
upon actual receipt of such mailing, if mailed. Either party hereto may from
time to time change its address or facsimile number for notices under this
Section 8 by giving at least ten (10) days' prior written notice of such changed
address or facsimile number to the other party hereto.
Section 9. Assignment. This Agreement is binding upon and
inures to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns. The rights granted the Investors under this
Agreement may be assigned to any purchaser of substantially all of the
Registrable Securities (or the rights thereto) from an Investor, as otherwise
permitted by the Purchase Agreement.
Section 10. Additional Covenants of the Company. The Company
agrees that at such time as it otherwise meets the requirements for the use of
Securities Act Registration Statement on Form S-3 for the purpose of registering
the Registrable Securities, it shall file all reports and information required
to be filed by it with the Commission in a timely manner and take all such other
action within its reasonable control so as to maintain such eligibility for the
use of such form.
Section 11. Counterparts/Facsimile. This Agreement may be
executed in two or more counterparts, each of which shall constitute an
original, but all of which, when together shall constitute but one and the same
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other parties. In lieu of the
original, a facsimile transmission or copy of the original shall be as effective
and enforceable as the original.
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Section 12. Remedies. The remedies provided in this Agreement
are cumulative and not exclusive of any remedies provided by law. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their best efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction.
Section 13. Conflicting Agreements. The Company shall not
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement or otherwise prevents the Company from complying with all of its
obligations hereunder.
Section 14. Headings. The headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 15. Governing Law, Arbitration. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York applicable to contracts made in New York by persons domiciled in New York
City and without regard to its principles of conflicts of laws. Any dispute
under this Agreement shall be submitted to arbitration under the American
Arbitration Association (the "AAA") in New York City, New York, and shall be
finally and conclusively determined by the decision of a board of arbitration
consisting of three (3) members (hereinafter referred to as the "Board of
Arbitration") selected as according to the rules governing the AAA. The Board of
Arbitration shall meet on consecutive business days in New York City, New York,
and shall reach and render a decision in writing (concurred in by a majority of
the members of the Board of Arbitration) with respect to the amount, if any,
which the losing party is required to pay to the other party in respect of a
claim filed. In connection with rendering its decisions, the Board of
Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. Any decision made by the Board
of Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the parties to
the dispute, and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent jurisdiction. The Board of Arbitration
shall be authorized and is hereby directed to enter a default judgment against
any party failing to participate in any proceeding hereunder within the time
periods set forth in the AAA rules. The non-prevailing party to any arbitration
(as determined by the Board of Arbitration) shall pay the expenses of the
prevailing party, including reasonable attorneys' fees, in connection with such
arbitration. Any party shall be entitled to obtain injunctive relief from a
court in any case where such relief is available.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, on the day and year first above written.
FOCUS Enhancements, Inc.
By:_______________________________
AMRO International, S.A.
By:_______________________________
H.U. Bachofen, Director
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EXHIBIT C
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of June 4, 1999, by
and among FOCUS Enhancements, Inc., a corporation incorporated under the laws of
the State of Delaware (the "Company"), the investors signatory hereto (each an
"Investor" and together the "Investors"), and Epstein Becker & Green, P.C., (the
"Escrow Agent"). Capitalized terms used but not defined herein shall have the
meanings set forth in the Common Stock and Warrants Purchase Agreement referred
to in the first recital.
W I T N E S S E T H:
WHEREAS, the Investors will be purchasing from the Company 1,200,000
shares of Common Stock (the "Shares") and Warrants to purchase, in the
aggregate, up to 120,000 shares of Common Stock, at the purchase price set forth
in the Common Stock and Warrants Purchase Agreement (the "Purchase Agreement")
dated the date hereof between the Investors and the Company, which will be
issued as per the terms contained herein and in the Purchase Agreement; and
WHEREAS, it is intended that the purchase of the securities be
consummated in accordance with the requirements set forth by Sections 4(2)
and/or 4(6) and/or Regulation D promulgated under the Securities Act of 1933, as
amended; and
WHEREAS, the Company and the Investors have requested that the Escrow
Agent hold the Purchase Price with respect to each Closing in escrow until the
Escrow Agent has received the certificates representing the Shares and, as to
the first Closing, the Warrants and certain other closing documents specified
herein;
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE 1
TERMS OF THE ESCROW
1.1. The parties hereby agree to establish an escrow account with the
Escrow Agent whereby the Escrow Agent (i) shall hold the funds for the purchase
of the initial 600,000 Shares and the Warrants at the first Closing as
contemplated by the Purchase Agreement and (ii) shall hold the funds for the
purchase of the remaining 600,000 Shares at the second Closing as contemplated
by the Purchase Agreement.
1.2. (a) At each Closing, upon Escrow Agent's receipt of the applicable
Purchase Price for the Closing into its attorney trustee account from the
Investors, together with,
<PAGE>
at the first Closing, executed counterparts of this Agreement, the Purchase
Agreement and the Registration Rights Agreement, it shall telephonically advise
the Company, or the Company's designated attorney or agent, of the amount of
funds it has received into its account.
(b) Wire transfers to the Escrow Agent shall be made as follows:
Epstein Becker & Green, P.C.
Master Escrow Account
Chase Manhattan Bank
1411 Broadway - Fifth Floor
New York, New York 10018
ABA No. 021000021
Account No. 035-1-346036
Attention: L. Borneo
1.3. At the first Closing, the Company, upon receipt of said notice,
shall deliver to the Escrow Agent the certificates representing the initial
600,000 Shares and the Warrants to be issued to each Investor together with:
(i) the original executed Registration Rights Agreement
in the form of Exhibit B to the Purchase Agreement;
(ii) Instructions to Transfer Agent in the form of Exhibit
E to the Purchase Agreement;
(iii) the original executed opinion of Sullivan & Worcester
LLP, in the form of Exhibit D to the Purchase
Agreement; and
(iv) an original counterpart of this Escrow Agreement.
In the event that the foregoing items are not in the Escrow
Agent's possession within three (3) Trading Days of the Escrow Agent notifying
the Company that the Escrow Agent has custody of the Purchase Price, then each
Investor shall have the right to demand the return of said sum.
1.4. At the first Closing, once Escrow Agent confirms the validity of
the issuance of the Shares and the Warrants by means of its receipt of a Release
Notice in the form attached hereto as Exhibit X executed by the Company and each
Investor, it shall enter the Exercise Price of each Warrant on the face of each
Warrant, and then wire that amount of funds necessary to purchase the Shares and
the Warrants per the written instructions of the Company net of legal and escrow
administrative costs of ten thousand dollars ($10,000) to Epstein Becker &
Green, P.C. ("EB&G"), 250 Park Avenue, New York, NY 10177, and seven percent
(7%) of the Purchase Price as directed by JWGenesis, Inc. as payment of their
transaction fee.
Once the funds (as set forth above) have been sent per the Company's
instructions, the Escrow Agent shall then arrange to have the Shares
certificates, the Warrants, the Registration Rights Agreement and the opinion of
counsel delivered as per instructions from the Investors and to deliver the
Instructions to Transfer Agent to the Transfer Agent.
2
<PAGE>
1.5. At the second Closing, the Company, upon receipt of said notice of
receipt of funds, shall deliver to the Escrow Agent the certificates
representing the remaining 600,000 Shares to be issued to the Investor.
In the event that the foregoing items are not in the Escrow Agent's
possession within three (3) Trading Days of the Escrow Agent notifying the
Company that the Escrow Agent has custody of the Purchase Price applicable to
such Shares, then each Investor shall have the right to demand the return of
said sum.
Once Escrow Agent confirms the validity of the issuance of the Shares
by means of its receipt of a Release Notice in the form attached hereto as
Exhibit X executed by the Company and the Investor, it shall immediately wire
that amount of funds necessary to purchase the Shares per the written
instructions of the Company net of seven percent (7%) of the Purchase Price for
the remaining Shares as directed by JWGenesis Securities, Inc.
Once the funds (as set forth above) have been sent per the Company's
instructions, the Escrow Agent shall then arrange to have the Shares
certificates delivered as per instructions from the Investor.
ARTICLE 2
MISCELLANEOUS
2.1. No waiver or any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed any extension of
the time for performance of any other obligation or act.
2.2. All notices or other communications required or permitted
hereunder shall be in writing, and shall be sent as set forth in the Purchase
Agreement.
2.3. This Escrow Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and permitted assigns of the parties hereto.
2.4. This Escrow Agreement is the final expression of, and contains the
entire agreement between, the parties with respect to the subject matter hereof
and supersedes all prior understandings with respect thereto. This Escrow
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by its agent duly authorized in writing or as otherwise
expressly permitted herein.
2.5. Whenever required by the context of this Escrow Agreement, the
singular shall include the plural and masculine shall include the feminine. This
Escrow Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Escrow Agreement.
3
<PAGE>
2.6. The parties hereto expressly agree that this Escrow Agreement
shall be governed by, interpreted under and construed and enforced in accordance
with the laws of the State of New York. Any action to enforce, arising out of,
or relating in any way to, any provisions of this Escrow Agreement shall only be
brought in a state or Federal court sitting in New York City.
2.7. The Escrow Agent's duties hereunder may be altered, amended,
modified or revoked only by a writing signed by the Company, each Investor and
the Escrow Agent.
2.8. The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed by the Escrow Agent to be genuine and to have been signed or presented
by the proper party or parties. The Escrow Agent shall not be personally liable
for any act the Escrow Agent may do or omit to do hereunder as the Escrow Agent
while acting in good faith, and any act done or omitted by the Escrow Agent
pursuant to the advice of the Escrow Agent's attorneys-at-law shall be
conclusive evidence of such good faith.
2.9. The Escrow Agent is hereby expressly authorized to disregard any
and all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
2.10. The Escrow Agent shall not be liable in any respect on account of
the identity, authorization or rights of the parties executing or delivering or
purporting to execute or deliver the Purchase Agreement or any documents or
papers deposited or called for thereunder.
2.11. The Escrow Agent shall be entitled to employ such legal counsel
and other experts as the Escrow Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent's duties hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor (and the fees and expenses of any such counsel shall be
included in the escrow administrative costs referred to in Section 1.4 above
unless the Escrow Agent is entitled to indemnification under Section 2.14
below). The Escrow Agent has acted as legal counsel for the Investors, and may
continue to act as legal counsel for the Investors, from time to time,
notwithstanding its duties as the Escrow Agent hereunder. The Company consents
to the Escrow Agent in such capacity as legal counsel for the Investors and
waives any claim that such representation represents a conflict of interest on
the part of the Escrow Agent. The Company understands that the Investors and the
Escrow Agent are relying explicitly on the foregoing provision in entering into
this Escrow Agreement.
2.12. The Escrow Agent's responsibilities as escrow agent hereunder
shall terminate if the Escrow Agent shall resign by written notice to the
Company and the Investors.
4
<PAGE>
In the event of any such resignation, the Investors and the Company shall
appoint a successor Escrow Agent.
2.13. If the Escrow Agent reasonably requires other or further
instruments in connection with this Escrow Agreement or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
2.14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the documents
or the escrow funds held by the Escrow Agent hereunder, the Escrow Agent is
authorized and directed in the Escrow Agent's sole discretion (1) to retain in
the Escrow Agent's possession without liability to anyone all or any part of
said documents or the escrow funds until such disputes shall have been settled
either by mutual written agreement of the parties concerned or by a final order,
decree or judgment or a court of competent jurisdiction after the time for
appeal has expired and no appeal has been perfected, but the Escrow Agent shall
be under no duty whatsoever to institute or defend any such proceedings or (2)
to deliver the escrow funds and any other property and documents held by the
Escrow Agent hereunder to a state or Federal court having competent subject
matter jurisdiction and located in the City of New York in accordance with the
applicable procedure therefor.
The Company and each Investor agree jointly and severally to indemnify
and hold harmless the Escrow Agent and its partners, employees, agents and
representatives from any and all claims, liabilities, costs or expenses in any
way arising from or relating to the duties or performance of the Escrow Agent
hereunder or the transactions contemplated hereby or by the Purchase Agreement
other than any such claim, liability, cost or expense to the extent the same
shall have been determined by final, unappealable judgment of a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the Escrow Agent.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
FOCUS ENHANCEMENTS, INC.
By:___________________________________
INVESTOR: AMRO INTERNATIONAL, S.A.
By:___________________________________
H. U. Bachofen, Director
ESCROW AGENT:
EPSTEIN BECKER & GREEN, P.C.
By:___________________________________
Joseph A. Smith,
Authorized Signatory
6
<PAGE>
Exhibit X to
Escrow Agreement
RELEASE NOTICE
The UNDERSIGNED, pursuant to the Escrow Agreement, dated as of June 4,
1999 among FOCUS Enhancements, Inc., the Investors signatory thereto and Epstein
Becker & Green, P.C., as Escrow Agent (the "Escrow Agreement"; capitalized terms
used herein and not defined shall have the meaning ascribed to such terms in the
Escrow Agreement), hereby notify the Escrow Agent that each of the conditions
precedent to the purchase and sale of the Shares and Warrants set forth in the
Common Stock and Warrants Purchase Agreement have been satisfied. The Company
and the undersigned Investor hereby confirm that all of their respective
representations and warranties contained in the Purchase Agreement remain true
and correct and authorize the release by the Escrow Agent of the funds and
documents to be released at the Closing as described in the Escrow Agreement.
This Release Notice shall not be effective until executed by the Company and the
Investor.
The exercise price of the Warrants shall be $______ per share.
This Release Notice may be signed in one or more counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the undersigned have caused this Release Notice to
be duly executed and delivered as of this __ day of June, 1999.
FOCUS Enhancements, Inc.
By: ______________________
AMRO INTERNATIONAL, S.A.
By:_______________________
Name: H. U. Bachofen
Title: Director
<PAGE>
EXHIBIT D
FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL
[Date]
Address
Re: Common Stock and Warrants Purchase Agreement between the Investors
Signatory thereto and Focus Enhancements, Inc.
Ladies and Gentlemen:
This opinion is furnished to you pursuant to the Purchase Agreement by
and between the investors signatory thereto (the "Investors") and Focus
Enhancements, Inc., a Delaware corporation (the "Company"), dated as of June 4,
1999 (the "Purchase Agreement"), which provides for the issuance and sale by the
Company of (i) 1,200,000 shares of Common Stock and (ii) a warrant to purchase
up to 120,000 shares of Common Stock of the Company (the "Warrants"). All terms
used herein have the meanings defined for them in the Purchase Agreement unless
otherwise defined herein.
We have acted as counsel for the Company in connection with the
negotiation of the Purchase Agreement, the Warrants, and the Registration Rights
Agreement between the Investors and the Company, dated as of June 4, 1999 (the
"Registration Rights Agreement"), and the Escrow Agreement between the
Investors, the Company and Epstein Becker & Green, P.C., dated as of June 4,
1999 (the "Escrow Agreement", and together with the Purchase Agreement, the
Warrants and the Registration Rights Agreement, the "Agreements"). As counsel,
we have made such legal and factual examinations and inquiries as we have deemed
advisable or necessary for the purpose of rendering this opinion. In addition,
we have examined, among other things, originals or copies of such corporate
records of the Company, certificates of public officials and such other
documents and questions of law that we consider necessary or advisable for the
purpose of rendering this opinion. In such examination we have assumed the
genuineness of all signatures on original documents, the authenticity and
completeness of all documents submitted to us as originals, the conformity to
original documents of all copies submitted to us as copies thereof, the legal
capacity of natural persons, and the due execution and delivery of all documents
(except as to due execution and delivery by the Company) where due execution and
delivery are a prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge" refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company solely in connection with the Agreements and the
Warrants and the transactions contemplated thereby, and without any independent
investigation of any underlying facts or situations.
<PAGE>
For purposes of this opinion, we have assumed that you have all
requisite power and authority, and have taken any and all necessary corporate
action, to execute and deliver the Agreements, and we are assuming that the
representations and warranties made by each Investor in the Agreements and
pursuant thereto are true and correct.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business and to own, lease and
operate its properties and assets as described in the Company's SEC Documents.
To our knowledge, the Company does not have any subsidiaries and does not own
more than fifty percent (50%) of the outstanding capital stock of or control any
other business entity other than as disclosed in the SEC Documents.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Agreements and the Warrants and to
issue the Shares, the Warrants and the Warrant Shares. The execution and
delivery of the Agreements by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required. Each of the Agreements has been
duly executed and delivered, and the Shares certificates and the Warrants have
each been duly executed, issued and delivered by the Company and each of the
Agreements and the Warrants constitutes valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
3. The execution, delivery and performance of the Agreements by the
Company and the consummation by the Company of the transactions contemplated
thereby, including, without limitation, the issuance of the Shares, the Warrants
and the Warrant Shares, do not and will not (i) result in a violation of the
Company's Certificate of Incorporation or By-Laws; (ii) to our knowledge,
conflict with, or constitute a material default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture, instrument or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party; or (iii)
result in a violation of any federal or state law, rule or regulation applicable
to the Company or by which any property or asset of the Company is bound or
affected, except for such violations as would not, individually or in the
aggregate, have a Material Adverse Effect. To our knowledge, the Company is not
in violation of any terms of its Certificate of Incorporation or Bylaws.
4. The issuance of the Shares and the Warrants in accordance with the
Purchase Agreement, and the issuance of the Warrant Shares in accordance with
the Warrants, will be exempt from registration under the Securities Act of 1933,
as amended, and will be in compliance with the state securities laws of the
Company's principal place of business. When so issued, the Shares and the
Warrant Shares will be duly and validly issued, fully paid and nonassessable,
and free of any liens, encumbrances and preemptive or similar rights contained
in the Company's
2
<PAGE>
Certificate of Incorporation or Bylaws or, to our knowledge, in any agreement to
which the Company is party.
5. We have not been engaged to devote substantive attention to any
claims, actions, suits, proceedings or investigations that are pending against
the Company or its properties, or against any officer or director of the Company
in his or her capacity as such. To our knowledge, the Company is not a party to
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality.
6. The issuance of the Shares, the Warrants and the Warrant Shares will
not violate the applicable listing agreement between the Company and any
securities exchange or market on which the Company's securities are listed.
7. The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, $0.01 par value per share, and 3,000,000 shares of
Preferred Stock, $0.01 par value per share, none of which shares have been have
been designated as to series or class.
This opinion is furnished to the Investors solely for their benefit in
connection with the transactions described above and may not be relied upon by
any other person or for any other purpose without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT E
INSTRUCTIONS TO TRANSFER AGENT
FOCUS ENHANCEMENTS, INC.
_______________, 1999
[Address of Transfer Agent]
Dear Sirs:
Reference is made to the Common Stock and Warrants Purchase Agreement
and all Exhibits thereto (the "Agreement") dated as of June 4, 1999, between the
investors signatory thereto (the "Investors") and Focus Enhancements, Inc. (the
"Company"). Pursuant to the Agreement, and subject to the terms and conditions
set forth in the Agreement, the Company has issued to the Investors (i)
1,200,000 shares of Common Stock (the "Shares") and (ii) Warrants to purchase
120,000 shares of Common Stock (the "Warrants"). As a condition to the
effectiveness of the Agreement, the Company has agreed to issue to you, as the
transfer agent for the Common Stock (the "Transfer Agent"), these instructions
relating to the Common Stock to be issued to the Investors (or a permitted
assignee) pursuant to the Agreement or upon exercise of the Warrants. All
capitalized terms used herein and not otherwise defined shall have the meaning
set forth in the Agreement.
1. ISSUANCE OF COMMON STOCK WITHOUT THE LEGEND
Pursuant to the Agreement and the Registration Rights Agreement, the
Company is required to prepare and file with the Commission, and maintain the
effectiveness of, a registration statement or registration statements
registering the resale of the Common Stock to be acquired by the Investors
either directly or upon exercise of the Warrants all as provided in the
Registration Rights Agreement. The Company will advise the Transfer Agent in
writing of the effectiveness of any such registration statement promptly upon
its being declared effective, and shall deliver an opinion of its counsel to
that effect. The Transfer Agent shall be entitled to rely on such advice and
such opinion and shall assume that such registration statement remains in effect
unless the Transfer Agent is otherwise advised in writing by the Company or such
counsel, and the Transfer Agent shall not be required to independently confirm
the continued effectiveness of such registration statement. In the circumstances
set forth in the following three paragraphs, the Transfer Agent shall deliver to
the appropriate Investor certificates representing Common Stock not bearing the
Legend without requiring further advice or instruction or additional
documentation from the Company or its counsel or the Investor or its counsel or
any other party (other than as described in such paragraphs).
(a) At any time after the effective date of the registration statement
(provided that the Company has not informed the Transfer Agent in writing that
such registration
<PAGE>
statement is not effective) upon any surrender of one or more certificates
evidencing Common Stock which bear the Legend, to the extent accompanied by a
notice requesting the issuance of new certificates free of the Legend to replace
those surrendered, in such names and in such denominations as the Investor may
request, provided that in connection with any such event, the Investor (or its
permitted assignee) shall confirm in writing to the Transfer Agent that (i) the
Investor has sold, pledged or otherwise transferred or agreed to sell, pledge or
otherwise transfer such Common Stock in a bona fide transaction to a third party
that is not an affiliate of the Company; and (ii) the Investor confirms to the
transfer agent that the Investor has complied with the prospectus delivery
requirement.
(b) In the event a registration statement is not filed by the Company,
or for any reason the registration statement which is filed by the Company is
not declared effective by the Securities and Exchange Commission, the Investor,
or its permitted assignee, or its broker confirms to the Transfer Agent that (i)
the Investor has beneficially owned the shares of Common Stock for at least one
year, (ii) counting the shares surrendered as being sold upon the date the
unlegended Certificates would be delivered to the Investor (or the Trading Day
immediately following if such date is not a Trading Day), the Investor will not
have sold more than the greater of (a) one percent (1%) of the total number of
outstanding shares of Common Stock or (b) the average weekly trading volume of
the Common Stock for the preceding four weeks during the three months ending
upon such delivery date (or the Trading Day immediately following if such date
is not a Trading Day), and (iii) the Investor has complied with the manner of
sale and notice requirements of Rule 144 under the Securities Act; or
(c) The Investor (or its permitted assignee) shall represent that it is
permitted to dispose of such shares of Common Stock without limitation as to
amount or manner of sale pursuant to Rule 144(k) under the Securities Act.
In the case of subparagraphs (b) or (c), the Transfer Agent shall be
entitled to require an opinion of counsel to the Company or from counsel to the
Investor (which opinion shall be from an attorney or law firm reasonably
acceptable to the Transfer Agent and be in form and substance reasonably
acceptable to the Transfer Agent). Any advice, notice, or instructions to the
Transfer Agent required or permitted to be given hereunder may be transmitted
via facsimile to the Transfer Agent's facsimile number of [______________].
2. MECHANICS OF DELIVERY OF CERTIFICATES REPRESENTING COMMON STOCK
In connection with any exercise of Warrants pursuant to which the
Investor acquires Common Stock under the Agreement, the Transfer Agent is hereby
instructed to deliver to the Investor, certificates representing Common Stock
(with or without the Legend, as appropriate) within two (2) Trading Days of
receipt by the Transfer Agent of a copy of the Notice of Exercise from the
Investor, and to deliver such certificates to the Investor, in the case of
original issuance, and in the case of subsequent transfer, if the Transfer Agent
is able to deliver such Common Stock to the Investor's account pursuant to the
DWAC system of the Depository Trust Company, the Transfer Agent shall make
delivery pursuant to such system and provide the Investor with confirmation
thereof in lieu of such Common Stock certificates.
2
<PAGE>
3. FEES OF TRANSFER AGENT; INDEMNIFICATION
The Company agrees to pay the Transfer Agent for all fees incurred in
connection with these Irrevocable Instructions. The Company agrees to indemnify
the Transfer Agent and its officers, employees and agents, against any losses,
claims, damages or liabilities, joint or several, to which it or they become
subject based upon the performance by the Transfer Agent of its duties in
accordance with the Irrevocable Instructions, other than as a result of the
Transfer Agent's gross negligence or willful misconduct.
4. THIRD PARTY BENEFICIARY
The Company and the Transfer Agent acknowledge and agree that the
Investors are each an express third party beneficiary of these Irrevocable
Instructions and shall be entitled to rely upon, and enforce, the provisions
thereof.
Focus Enhancements, Inc.
By:__________________________
AGREED:
By:__________________________
Name:
Title:
3
EXHIBIT 5
June 21, 1999
Board of Directors
FOCUS Enhancements, Inc.
600 Research Drive
Wilmington, Massachusetts 01887
Re: Registration Statement on Form S-3 of 1,320,000 shares of Common Stock,
par value $0.01 per share
Gentlemen:
In connection with the registration under the Securities Act of 1933,
as amended (the "Act"), by FOCUS Enhancements, Inc., a Delaware corporation (the
"Company"), of 1,320,000 shares (the "Registered Shares") of its Common Stock,
par value $.01 per share ("Common Stock"), all of which Registered Shares are to
be offered for the account of a selling stockholder of the Company, the
following opinion is furnished to you to be filed with the Securities and
Exchange Commission (the "Commission") as Exhibit 5 to the Company's
registration statement on Form S-3 (the "Registration Statement") under the Act.
To the extent that any of the Registered Shares have not yet been
issued, I assume that at the time of the issuance of such Registered Shares,
there will exist, under the Company's Certificate of Incorporation, as amended
(the "Certificate"), the requisite number of authorized shares of Common Stock
for such issuance which are unissued, or held as treasury shares, and are not
otherwise reserved for issuance.
I am General Counsel and Secretary of the Company and I have examined
originals or copies, certified or otherwise identified to my satisfaction, of
the Registration Statement, the Certificate and the By-laws of the Company, a
certain Action of the Board of Directors by Unanimous Written Consent dated as
of June 4, 1999 and such other corporate records, certificates and statements of
officers and accountants of the Company and of public officials and other
documents as I have considered necessary or appropriate in order to furnish the
opinion hereinafter set forth.
This opinion is limited to the laws of the Commonwealth of
Massachusetts and I express no opinion with respect to the law of any other
jurisdiction.
Based upon and subject to the foregoing, I hereby advise you that, in
my opinion, (i) those Registered Shares that have been issued as of the date
hereof were duly authorized and have been validly issued and are fully paid and
nonassessable and (ii)
<PAGE>
-2-
those Registered Shares that may be issued after the date hereof shall be, upon
such issuance, duly authorized and validly issued and shall be fully paid and
nonassessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, I do not hereby admit that I
come within the category of persons whose consent is required under Section 7 of
the Act or the rules and regulations of the Commission promulgated thereunder.
This opinion may not be referred to or used for any other purpose or in any
other context or otherwise relied upon by any other person or entity without my
express written consent.
Respectfully,
/s/ Christopher P. Ricci
Christopher P. Ricci
Sr. V.P. & General Counsel
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, dated April 9, 1999 on the
consolidated financial statements of FOCUS Enhancements, Inc. as of and for the
year ended December 31, 1998, appearing in the Annual Report on Form 10-KSB/A of
FOCUS Enhancements, Inc. for the year ended December 31, 1998. We also consent
to the reference to us under the heading "Experts" in the Prospectus, which is
part of this Registration Statement.
/s/ WOLF & COMPANY, P.C.
WOLF & COMPANY, P.C.
Boston, Massachusetts
June 21, 1999
