THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
FOCUS ENHANCEMENTS, INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance; Certain Definitions. In consideration of good and valuable
consideration, the receipt of which is hereby acknowledged by FOCUS
ENHANCEMENTS, INC., a Delaware corporation (the "Company"), VFINANCE
INVESTMENTS, INC., or registered assigns (the "Holder") is hereby granted the
right to purchase at any time until 5:00 P.M., New York City time, on December
27, 2004 (the "Expiration Date"), TWENTY-FIVE THOUSAND (25,000) fully paid and
nonassessable shares of the Company's Common Stock, $0.01 par value per share
(the "Common Stock"), at an initial exercise price per share (the "Exercise
Price") of $1.54 per share, subject to further adjustment as set forth herein.
This Warrant is being issued pursuant to the terms of that certain Financial
Advisory and Investment Banking Agreement, dated as of , 2001 (the "Agreement"),
to which the Company and Holder (or Xxxxxx's predecessor in interest) are
parties.
2. Exercise of Warrants.
(a) This Warrant is exercisable in whole or in part at any
time and from time to time. Such exercise shall be effectuated by submitting to
the Company (either by delivery to the Company or by facsimile transmission as
provided in Section 8 hereof) a completed and duly executed Notice of Exercise
(substantially in the form attached to this Warrant) as provided in this
paragraph. The date such Notice of Exercise is faxed to the Company shall be the
"Exercise Date," provided that the Holder of this Warrant tenders this Warrant
Certificate to the Company within five (5) business days thereafter. The Notice
of Exercise shall be executed by the Holder of this Warrant and shall indicate
the number of shares then being purchased pursuant to such exercise. Upon
surrender of this Warrant Certificate, together with appropriate payment of the
Exercise Price for the shares of Common Stock purchased, the Holder shall be
entitled to receive a certificate or certificates for the shares of Common Stock
so purchased.
(b) The Exercise Price per share of Common Stock for the
shares then being exercised shall be payable in cash or by certified or official
bank check.
(c) In no event shall Holder exercise Warrants for less than
one thousand (1,000) Warrant Shares. In the event the Holder has Warrants for
less than one thousand (1,000) Warrant Shares, Holder shall be required to
exercise Warrants for all remaining Warrant Shares on the Exercise Date.
(d) The Holder shall be deemed to be the holder of the shares
issuable to it in accordance with the provisions of this Section 2 on the
Exercise Date.
3. Reservation of Shares. The Company hereby agrees that at all times
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Protection Against Dilution and Other Adjustments.
6.1 Adjustment Mechanism. If an adjustment of the Exercise
Price is required pursuant to this Section 6, the Holder shall be entitled to
purchase such number of additional shares of Common Stock as will cause (i) the
total number of shares of Common Stock Holder is entitled to purchase pursuant
to this Warrant, multiplied by (ii) the adjusted Exercise Price per share, to
equal (iii) the dollar amount of the total number of shares of Common Stock
Holder is entitled to purchase before adjustment multiplied by the total
Exercise Price immediately before adjustment.
6.2 Capital Adjustments. In case of any stock split or reverse
stock split, stock dividend, reclassification of the Common Stock,
recapitalization, merger or consolidation, or like capital adjustment affecting
the Common Stock of the Company prior to the exercise of this Warrant or its
applicable portion, the provisions of this Section 6 shall be applied as if such
capital adjustment event had occurred immediately prior to the exercise date of
this Warrant and the original Exercise Price had been fairly allocated to the
stock resulting from such capital adjustment; and in other respects the
provisions of this Section shall be applied in a fair, equitable and reasonable
manner so as to give effect, as nearly as may be, to the purposes hereof.
6.3 Spin Off. If, for any reason, prior to the exercise of
this Warrant in full, the Company spins off or otherwise divests itself of a
part of its business or operations or disposes all or of a part of its assets in
a transaction (the "Spin Off") in which the Company does not receive
compensation for such business, operations or assets, but causes securities of
another entity to be issued to security holders of the Company, then the Company
shall notify the Holder at least thirty (30) days prior to the record date with
respect to such Spin-Off.
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7. Transfer to Comply with the Securities Act; Registration Rights.
7.1 Transfer. This Warrant has not been registered under the
Securities Act of 1933, as amended, (the "Act") and has been issued to the
Holder for investment and not with a view to the distribution of either the
Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant
Shares or any other security issued or issuable upon exercise of this Warrant
may be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act relating to such security or an opinion of
counsel satisfactory to the Company that registration is not required under the
Act. Each certificate for the Warrant, the Warrant Shares and any other security
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section.
7.2 Registration Rights. Reference is made to the Registration
Rights Agreement. The Company's obligations under the Registration Rights
Agreement and the other terms and conditions thereof with respect to the Warrant
Shares, including, but not necessarily limited to, the Company's commitment to
file a registration statement including the Warrant Shares, to have the
registration of the Warrant Shares completed and effective, and to maintain such
registration, are incorporated herein by reference.
(b) In addition to the registration rights referred
to in the preceding provisions of Section 7.2(a), effective after the expiration
of the effectiveness of the Registration Statement as contemplated by the
Registration Rights Agreement, the Holder shall have piggy-back registration
rights with respect to the Warrant Shares then held by the Holder or then
subject to issuance upon exercise of this Warrant (collectively, the "Remaining
Warrant Shares"), subject to the conditions set forth below. If, at any time
after the Registration Statement has ceased to be effective, the Company
participates (whether voluntarily or by reason of an obligation to a third
party) in the registration of any shares of the Company's stock (other than a
registration on Form S-8 or on Form S-4), the Company shall give written notice
thereof to the Holder and the Holder shall have the right, exercisable within
ten (10) business days after receipt of such notice, to demand inclusion of all
or a portion of the Holder's Remaining Warrant Shares in such registration
statement. If the Holder exercises such election, the Remaining Warrant Shares
so designated shall be included in the registration statement at no cost or
expense to the Holder (other than any costs or commissions which would be borne
by the Holder under the terms of the Registration Rights Agreement); provided,
however, that if there is a managing underwriter of the offering of shares
referred to in the registration statement and such managing underwriter advises
the Company in writing that the number of shares proposed to be included in the
offering will have an adverse effect on its ability to successfully conclude the
offering and, as a result, the number of shares to be included in the offering
is to be reduced, the number of Remaining Warrant Shares of the Holder which
were to be included in the registration (before such reduction) will be reduced
pro rata with the number of shares included for all other parties whose shares
are being registered. The Holder's rights under this Section 7 shall expire at
such time as the Holder can sell all of the Remaining Warrant Shares under Rule
144 without volume or other restrictions or limit.
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8. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
sent by facsimile transmission or sent by certified, registered or express mail,
postage pre-paid. Any such notice shall be deemed given when so delivered
personally, telegraphed, telexed or sent by facsimile transmission, or, if
mailed, four days after the date of deposit in the United States mails, as
follows:
(i) if to the Company, to:
FOCUS ENHANCEMENTS, INC.
0000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
ATTN: Xxxxxxx X'Xxxxx, President &
Chief Executive Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxxx & Xxxxxxxx, LLP
0000 Xxxx Xxxx Xxxx, Xxxx. 0
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
(ii) if to the Holder, to:
VFINANCE INVESTMENTS, INC.
0000 X. Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
Any party may give notice in accordance with this Section to the other parties
designate to another address or person for receipt of notices hereunder.
9. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented only by an instrument in writing signed by the parties
hereto. This Warrant contains the full understanding of the parties with respect
to the subject matter hereof and thereof and there are no representations,
warranties, agreements or understandings other than expressly contained herein
and therein.
10. Governing Law. This Warrant shall be deemed to be a contract made
under the laws of the State of Delaware for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the State of California,
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Santa Xxxxx County in connection with any dispute arising under this Warrant and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
11. JURY TRIAL WAIVER. The Company and the Holder hereby waive a trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other in respect of any matter arising out or in
connection with this Warrant.
12. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
13. Descriptive Headings. Descriptive headings of the several Sections
of this Warrant are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the 27th day of December, 2001.
FOCUS ENHANCEMENTS, INC.
By: /s/ Xxxxxxx X'Xxxxx
-----------------------------------
Xxxxxxx X'Xxxxx
President & Chief Executive Officer
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NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate dated as of , _____________ , ______ to
purchase shares ________________ of the Common Stock, $0.01 par value, of FOCUS
ENHANCEMENTS, INC., and tenders herewith payment in accordance with Section 1 of
said Common Stock Purchase Warrant.
_______ CASH:$_________________________ = (Exercise Price x Exercise Shares)
Payment is being made by:
_______ enclosed check
_______ wire transfer
_______ other
Please deliver the stock certificate to:
Dated:
------------------------------------------
[Name of Xxxxxx]
By:
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