<PAGE>
Exhibit 99.2
SECURITY AGREEMENT
DEBTOR:
Name: FOCUS Enhancements, Inc.
Address: 600 Research Drive
Wilmington, Massachusetts 01887
SECURED PARTY:
Name: Carl Berg
Address: 10050 Bandley Drive
Cupertino, California 95014
1. Debtor, in consideration of the agreement of Secured Party to lend
$2,362,494.20 to Debtor as evidenced by that certain Secured Convertible
Promissory Note, dated October 26, 2000 between Debtor and Secured Party (as
amended from time to time hereinafter, the "NOTE"), and for other good and
sufficient consideration, hereby grants to Secured Party a first priority
security interest in all of Debtor's right, title and interest in and to the
following property, including without limitation any and all additions,
accessions and substitutions thereto or therefor (hereinafter called the
"COLLATERAL"):
(a) all tangible personal property, machinery, electrical and electronic
components, equipment, fixtures, furniture, office machinery, vehicles,
trailers, implements and other tangible personal property of every kind and
description, all goods of like kind or type hereafter acquired in
substitution or replacement thereof, all additions and accessions thereto
and all rents, proceeds and products on or of any of the foregoing,
including, without limitation, the rights to insurance proceeds covering
the foregoing;
(b) all inventory, including without limitation, all merchandise, raw
materials, components, parts, supplies, unfinished goods, work-in-progress,
finished products intended for sale, lease or other disposition, and
packing and shipping materials of every kind, nature and description,
wherever any of the same may be located;
(c) all deposits, cash, cash equivalents and all drafts, checks,
certificates of deposit, notes, bills of exchange and other writings which
evidence a right to the payment of money;
(d) all insurance policies on which Debtor is named as an insured or
additional insured or loss payee and all proceeds which may be derived
therefrom;
(e) all "accounts" (as that term is defined in the Uniform Commercial Code
as in effect on the date hereof in the State of California, the "UNIFORM
COMMERCIAL CODE") and/or other rights to payment;
(f) all "general intangibles" (as that term is defined in the Uniform
Commercial Code);
<PAGE>
(g) all leasehold interests and other rights and interests of Debtor
respecting the use or ownership of or title to any real property, including
the interests, easements, licenses, all other rights and interests of any
kind;
(h) all Debtor's books and records and all computer software programs
relating to the Collateral, wherever located; and
(i) all products, proceeds and income of any of the foregoing and all
substitutions and replacement of, and additions and accessions to, any of
the foregoing to secure payment of the indebtedness evidenced by the Note.
2. Debtor expressly represents, warrants and covenants:
(a) That except for the first priority security interest granted hereby
and the subordinate security interests listed on Schedule A hereto, Debtor
is the owner of the Collateral free from any adverse lien, security
interest or encumbrances; and that Debtor will defend the Collateral
against all claims and demands of all persons at anytime claiming the same
or any interest therein.
(b) That Debtor has the full power and authority to enter into this
Security Agreement and deliver the Note, that each of this Security
Agreement and the Note has been duly authorized, executed, and delivered by
the Debtor and Debtor's obligations under the Note and this Security
Agreement are legal, valid, binding, absolute and unconditional.
(c) That Debtor's main office is as stated above and the Collateral will
be kept at the main office or at its other locations: 22867 NW Bennett Rd.,
Hillsburough, OR, 97124 and 322 Village Square, Orinda, CA 94563.
(d) That Debtor will promptly notify Secured Party of any change in the
location of the Collateral.
(e) That Debtor will pay all taxes and assessments of every nature which
may be levied or assessed against the Collateral.
(f) That Debtor will not permit or allow any adverse lien, security
interest or encumbrance whatsoever upon the Collateral and will not permit
the same to be attached or replevined.
(g) That Debtor has used, and will continue to use for the duration of
this Security Agreement, consistent standards of quality in its provision
of services sold under Debtor's patents, trademarks and copyrights,
including those listed on Schedule B hereto. Debtor shall use its best
efforts to do any and all acts required by Secured Party to ensure Debtor's
compliance with this subparagraph.
(h) That the Collateral is in good condition, and that Secured Party may
examine and inspect the Collateral at any time, wherever located.
2
<PAGE>
(i) That Debtor will not do any act, or omit to do any act, whereby
Debtor's patents, trademarks, copyrights, or any registration or
application appurtenant thereto, may become abandoned, invalidated,
unenforceable, avoided, avoidable, or will otherwise diminish in value, and
shall notify Secured Party immediately if it knows of any reason or has
reason to know of any ground under which this result may occur. Debtor
shall take appropriate action at its expense to halt the infringement of
Debtor's trademarks and shall properly exercise its duty to control the
nature and quality of the goods offered by any licensees in connection
therewith.
(j) That Debtor will not use the Collateral in violation of any applicable
statutes, regulations or ordinances or rights to any third parties.
(k) That Debtor will keep the Collateral at all times insured against
risks of loss or damage by fire, theft and such other casualties as Secured
Party may reasonably require, all in such amounts, under such forms of
policies, upon such terms, for such periods, and written by such companies
or underwriters as Secured Party may approve, losses in all cases to be
payable to Secured Party and Debtor as their interest may appear. Secured
Party may act as attorney for Debtor in making, adjusting and settling
claims under or canceling such insurance and endorsing Debtor's name on any
drafts drawn by insurers of the Collateral.
(l) At any time and from time to time, upon the request of Secured Party,
Debtor will promptly and duly execute and deliver any and all such further
instruments and documents and take such further action as Secured Party may
reasonably deem desirable in obtaining the full benefits of this Security
Agreement, including, without limitation, the filing of any financing or
continuation statement under the Uniform Commercial Code with respect to
the liens and security interests granted hereby. Debtor hereby authorizes
Secured Party to file any such financing or continuation statement without
the signature of Debtor to the extent permitted by applicable law.
(m) That Debtor hereby irrevocably appoints Secured Party, and its
successors and assigns, Debtor's true and lawful attorney, with full power
(in the name of Debtor or otherwise), after the occurrence and during the
continuance of an Event of Default (defined in Section 4 below), to ask,
require, demand, receive, compound and give acquittance for any and all
moneys, claims and other amounts due and to become due at any time under,
or arising out of, the Collateral; to endorse any checks or other
instruments or orders in connection therewith; to enforce all Secured
Party's rights hereunder, to enter into all agreements or instruments
required to carry out the terms hereof which are required to be performed
by Debtor; to execute such other assignments and mortgages of the
Collateral as Secured Party may deem to be necessary or advisable. Such
power of attorney shall be deemed a power coupled with an interest and,
therefore, irrevocable.
3. Until an Event of Default, Debtor may have possession of the
Collateral and use it in any lawful manner, and upon an Event of Default which
remains uncured after five days written notice by Secured Party, Secured Party
shall have the immediate right to the possession of the Collateral following
five days written notice by Secured Party.
3
<PAGE>
4. Debtor shall be in default under this Security Agreement upon the
happening of any of the following events or conditions (each an "EVENT OF
DEFAULT"):
(a) default in the payment or performance of any obligation, covenant or
liability contained or referred to herein or in any note evidencing the
same;
(b) the making or furnishing of any warranty, representation or statement
to Secured Party by or on behalf of Debtor which proves to have been false
in any material respect when made or furnished;
(c) any material loss, theft, damage, destruction, sale or encumbrance to
or of any of the Collateral, or the making of any levy seizure or
attachment thereof or thereon;
(d) dissolution, termination of existence, insolvency, business failure,
appointment of a receiver of any part of the property of, assignment for
the benefit of creditors by, or the commencement of any proceeding under
any bankruptcy or insolvency laws of, by or against Debtor or any guarantor
or surety for Debtor (which proceeding is not dismissed within 60 days
after the commencement thereof).
and Debtor shall give Secured Party immediate notice of the occurrence of any
matter referred to in clause (d) of this paragraph.
5. Upon such default and at any time thereafter, Secured Party may
declare all obligations secured hereby immediately due and payable and shall
have the remedies of a secured party under Article 9 of the Uniform Commercial
Code. Secured Party may require Debtor to assemble the Collateral and deliver or
make it available to Secured Party at a place to be designated by Secured Party
which is reasonably convenient to both parties. Expenses of retaking, holding,
preparing for sale, selling or the like shall include Secured Party's reasonable
attorneys' fees and legal expenses.
6. No waiver by Secured Party of any Event of Default shall operate as a
waiver of any other Event of Default or of the same Event of Default on a future
occasion. The taking of this Security Agreement shall not waive or impair any
other security said Secured Party may have or hereafter acquire for the payment
of the above indebtedness, nor shall the taking of any such additional security
waive or impair this Security Agreement; but said Secured Party may, resort to
any security it may have in the order it may deem proper, and notwithstanding
any collateral security, Secured Party shall retain its rights of set-off
against Debtor.
7. Secured Party's rights hereunder shall be senior to the rights of any
other person and all rights junior to Secured Party shall be listed on Schedule
A hereto.
8. All rights of Secured Party hereunder shall inure to the benefit of
its successors and assigns; and all promises and duties of Debtor shall bind his
heirs, executors or administrators or his or its successors or assigns. If there
be more than one Debtor, their liabilities hereunder shall be joint and several.
9. Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA,
EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS
OF ANY OTHER JURISDICTION.
4
<PAGE>
10. Modifications. None of the terms or provisions of this Security
Agreement may be excluded, modified, or amended expect by a written instrument
duly executed on behalf of Debtor and Secured Party expressly referring to this
Security Agreement and setting forth the provisions so excluded, modified, or
amended.
11. Integration. This Security Agreement is an integrated instrument
and taken together with the documents referred to herein or executed herewith,
are the final agreement of Debtor and Secured Party with respect to the subject
matter hereof and thereof.
12. Waiver of Jury Trial. DEBTOR AND SECURED PARTY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT
EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF DEBTOR OR
SECURED PARTY.
[signature page follows]
5
<PAGE>
Dated this 26th day of October, 2000.
Debtor: Secured Party:
FOCUS Enhancements, Inc. Carl Berg
By:/s/ Brett Moyer /s/ Carl E. Berg
------------------------------ -----------------------------------
Name: Brett Moyer Name: Carl Berg
Title: EVP, COO
6
<PAGE>
Schedule A
Senior or Subordinated Debt
See Attached
<PAGE>
[CSC LOGO APPEARS HERE] CSC - Boston
5th Floor
84 State Street
Boston, MA 02109-2202
800-225-6244
617-367-8314 (Fax)
Matter# 20634-002 Order# 874547-5 Order Date 10/24/2000
Subject Name: FOCUS ENHANCEMENTS INC.
Jurisdiction: Massachusetts-STATE OF MASSACHUSETTS
Request For: UCC Debtor Search
Result: Records found
File Type: Original
File Number: 451129
File Date: 02/26/1997
Secured Party: PITNEY BOWES CREDIT CORPORATION
File Type: Original
File Number: 451129
File Date: 02/26/1997
Secured Party: PITNEY BOWES CREDIT CORPORATION
File Type: Original
File Number: 460375
File Date: 04/10/1997
Secured Party: LEASING TECHNOLOGIES INTERNATIONAL, INC.
File Type: Original
File Number: 520809
File Date: 01/05/1998
Secured Party: PITNEY BOWES CREDIT CORPORATION
File Type: Original
File Number: 529235
File Date: 02/13/1998
Secured Party: SIEMENS CREDIT CORPORATION
File Type: Original
File Number: 529235
File Date: 02/13/1998
Secured Party: SIEMENS CREDIT CORPORATION
File Type: Original
File Number: 553928
File Date: 06/01/1998
Secured Party: SUN MICROSYSTEMS FINANCE
<PAGE>
CSC - Boston
[CSC LOGO APPEARS HERE] 5th Floor
84 State Street
Boston, MA 02109-2202
800-225-6244
617-367-8314
File Type: Original
File Number: 596698
File Date: 12/14/1998
Secured Party: GREEN TREE VENDOR SERVICES
File Type: Original
File Number: 606609
File Date: 01/28/1999
Secured Party: STANDARD CAPITAL CORP.
File Type: Original
File Number: 614001
File Date: 03/03/1999
Secured Party: SILICON VALLEY BANK
File Type: Original
File Number: 615461
File Date: 03/09/1999
Secured Party: STANDARD CAPITAL CORP.
File Type: Original
File Number: 615960
File Date: 03/11/1999
Secured Party: PITNEY BOWES CREDIT CORPORATION
File Type: Original
File Number: 620015
File Date: 03/29/1999
Secured Party: SILICON VALLEY BANK
File Type: Original
File Number: 630295
File Date: 05/07/1999
Secured Party: RED & WHITE ENTERPRISES
Ordered by JACKIE CANNATA, LEGAL ASST at MINTZ, LEVIN, COHN, FERRIS, GLOVSKY &
POPEO, P.C.
Thank you for using CSC. For real-time 24 hour access to the status of any order
placed with CSC, access our website at www.incspot.com.
If you have any questions concerning this order or IncSpot, please feel free to
contact us.
Tim O'Brien
[email protected]
The responsibility for verification of the rules and determination of the
information therein lies with the filing officer; we accept no liability for
errors or omissions.
<PAGE>
CSC - Boston
[CSC LOGO APPEARS HERE] 5th Floor
84 State Street
Boston, MA 02109-2202
800-225-6244
617-367-8314 (Fax)
Matter# 20634-002 Order# 874547-5 Order Date 10/24/2000
Subject Name: FOCUS ENHANCEMENTS INC.
Jurisdiction: Oregon-STATE OF OREGON
Request for: UCC Debtor Search
Result: Records found
File Type: Original
File Number: 424324
File Date: 05/29/1998
Secured Party: SUN MICROSYSTEMS FINANCE
File Type: Original
File Number: 462441
File Date: 04/05/1999
Secured Party: SILICON VALLEY BANK
Ordered by JACKIE CANNATA, LEGAL ASST at MINTZ, LEVIN, COHN, FERRIS, GLOVSKY &
POPEO, P.C.
Thank you for using CSC. For real-time 24 hour access to the status of any order
placed with CSC, access our website at www.incspot.com.
If you have any questions concerning this order or IncSpot, please feel free to
contact us.
Tim O'Brien
[email protected]
The responsibility for verification of the files and determination of the
information therein lies with the filing officer; we accept no liability for
errors or omissions.
10
<PAGE>
CSC - Boston
[CSC LOGO APPEARS HERE] 5th Floor
84 State Street
Boston, MA 02109-2202
800-225-6244
617-367-8314(Fax)
Oct. 24, 2000 UCC Search Report Page 1
Secretary of State of California effective Oct. 02, 2000
THIS DATA IS FOR INFORMATION PURPOSES ONLY. CERTIFICATION CAN ONLY BE OBTAINED
THROUGH THE OFFICE OF THE CALIFORNIA SECRETARY OF STATE.
State of California UCC Debtor Name Search results performed on the following
Search Key
Name = FOCUS%ENHANCEMENT
Exp./Term. Liens = No
1. 94014719 filed on Jan. 27, 1994 at 1546
expires on Jan. 27, 2004
Debtor FOCUS ENHANCEMENTS INC Tax#/SSN-043186320
1100 MARINA VILLAGE PKWY #100
ALAMEDA CA
Sec.Pty. SILICON VALLEY BK
3000 LAKESIDE DR
SANTA CLARA CA
Cont. #99029C0088 filed on Jan. 27, 1999
2. 9912660153 filed on Apr. 30, 1999 at 0800
expires on Apr. 30, 2004
Debtor FOCUS ACQUISITIONS CORP. Tax#/SSN-043346713
600 RESEARCH DR
WILMINGTON MA 01887
Debtor FOCUS ENHANCEMENTS, INC. Tax#/SSN-043186320
600 RESEARCH DR
WILMINGTON MA 01887
Sec.Pty. RED & WHITE ENTERPRISES, INC.
455 LA PAZ CT
MORGAN HILL CA 95122
Because we cannot independently verify the accuracy of the public information
maintained by the responsible government agency or other sources of this data,
we make no guarantee, representations, or warranties as to the accuracy or
completeness of this report. We cannot and do not accept any liability for
errors or omissions.
<PAGE>
SCHEDULE B
Patents, Trademarks and Copyrights
TRADEMARKS OWNED BY FOCUS ENHANCEMENTS, INC.
<TABLE>
<CAPTION>
TRADEMARK COUNTRY SERIAL NO. REG. NO. STATUS
DESCRIPTION
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tview USA 75/728,572 1,999,714 Registered
---------------------------------------------------------------------------------------------
PC Video Conversion USA 74/339,320 1,848,394 Registered
---------------------------------------------------------------------------------------------
Hyperconverter USA 74/339,098 1,790,215 Registered
---------------------------------------------------------------------------------------------
</TABLE>
PATENTS OWNED BY FOCUS ENHANCEMENTS, INC.
<TABLE>
<CAPTION>
PATENT DESCRIPTION DOCKET COUNTRY SERIAL NO. FILING STATUS PATENT #
NO. DATE
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bilinear Decimator 1009 USA 08/822,810 03/24/97 Awarded 5,862,268
with Error
Compensation
-------------------------------------------------------------------------------------------------------
Bilinear Decimator 009CIP USA 08/870,095 06/05/97 Pending
with Error
Compensation
-------------------------------------------------------------------------------------------------------
Bilinear Decimator 1009 PCT US98/05994 03/24/97 Granted
with Error
Compensation
-------------------------------------------------------------------------------------------------------
Video Synchronizing 1010 USA 08/823,804 03/24/97 Awarded 5,966,184
Signal Generator
-------------------------------------------------------------------------------------------------------
Video Synchronizing 1010 PCT US98/05992 03/24/97 Pending
Signal Generator
-------------------------------------------------------------------------------------------------------
Video Signal 1011 USA 08/870/091 06/05/97 Awarded 5,905,536
Converter
-------------------------------------------------------------------------------------------------------
Video Signal 1011 PCT US98/11364 06/05/97 Pending
Converter
-------------------------------------------------------------------------------------------------------
Electrical Cable 1013 USA 29/087,976 05/13/98 Awarded D409,572
Design
-------------------------------------------------------------------------------------------------------
Two-Dimensional 1014 USA 60/096,299 01/27/99 Pending
Adjustable Flicker
Filter
-------------------------------------------------------------------------------------------------------
Two-Dimensional 1014 PCT US99/17820 01/27/99 Pending
Adjustable Flicker
Filter
-------------------------------------------------------------------------------------------------------
*Improved 1015 USA 09/152,357 09/14/98 Awarded 6,004,145
Cable-to-Board
Arrangements for
Enhanced RF
Shielding
-------------------------------------------------------------------------------------------------------
Motion Adaptive 1016 USA 09/409,589 9/30/99 Pending
De-Interlace Filter
-------------------------------------------------------------------------------------------------------
Method and Apparatus 1017 USA 60/157,187 9/30/99 Pending
for Synchronous
Sampling with
Correlation
-------------------------------------------------------------------------------------------------------
</TABLE>
*This patent is owned jointly with Dicon, Inc.
COPYRIGHTS OWNED BY FOCUS ENHANCEMENTS, INC.
None.
