Exhibit 10.23
FORM OF COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT is dated as of July 1,
2003 (this "Purchase Agreement" or "Agreement"), by and between FOCUS
ENHANCEMENTS, INC., a Delaware corporation, having its principal place of
business located at 0000 Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000 (the
"Company"), and each of the Investors listed on Annex A hereto (the "Investor",
and collectively the "Investors").
W I T N E S S E T H
WHEREAS, the Company wishes to sell to the respective Investors, and
such respective Investors are willing to buy from the Company, subject to the
terms and conditions set forth herein, Two Million Two Hundred Thousand
(2,200,000) shares of Common Stock, par value $.01 per share (the "Common
Stock") of the Company.
NOW, THEREFORE, for and in consideration of the premises and the mutual
agreement contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
A. Definitions. As used herein, each of the following terms has the
meaning set forth below, unless the context otherwise requires:
(i) "Closing Date" means the date of the closing of the
purchase and sale of the Shares and Warrants, as provided herein.
(ii) "Company Control Person" means each director, executive
officer, promoter, and such other Persons as may be deemed in control of the
Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act
(as hereinafter defined).
(iii) "Effective Date" means the effective date of the
Registration Statement covering the Registrable Securities (as those terms are
defined in the Registration Rights Agreement) relating to the Shares.
(iv) "Escrow Funds" means the Purchase Price delivered to the
Escrow Agent as contemplated by Sections 5(b) and (c) hereof.
(v) "Last Audited Date" means December 31, 2002.
(vi) "Investor Control Person" means each director, executive
officer, promoter, and such other Persons as may be deemed in control of the
Investor pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.
(vii) "Majority In Interest" means Investors owning in excess
of 51% of the Common Stock on the relevant date.
(viii) "Material Adverse Effect" means an event or combination
of events, which individually or in the aggregate, would reasonably be expected
to (w) adversely affect the legality, validity or enforceability of the Shares
or any of the Transaction Agreements, (x) have or result in a material adverse
effect on the results of operations, assets, or financial condition of the
Company and its subsidiaries, taken as a whole, (y) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
of the Transaction Agreements or the transactions contemplated thereby, or (z)
materially and adversely affect the value of the rights granted to the Investors
in the Transaction Agreements.
(ix) "Principal Trading Market" means the NASDAQ SmallCap
Market.
(x) "Registration Rights Agreement" means the Registration
Rights Agreement in the form annexed hereto as Annex IV, as executed by each
Investor and the Company simultaneously with the execution of this Agreement.
(xi) "Shares" means the shares of Common Stock issued to the
Investors.
(xii) "Transaction Agreements" means this Purchase Agreement,
the Joint Escrow Instructions, and the Registration Rights Agreement, and
includes all ancillary documents referred to in those agreements.
(xiii) "Warrants" means warrants to purchase 440,000 Shares in
the form attached hereto as Annex VI.
(xiv) "1933 Act" or "Securities Act" means the Securities Act
of 1933, as amended.
(xvi) "1934 Act" or "Exchange Act" means the Securities
Exchange Act of 1934, as amended.
1. PURCHASE AND SALE; MUTUAL DELIVERIES. (a) Upon the following terms
and conditions, the Company shall issue and sell to the Investors and the
Investors shall purchase from the Company that number of shares of Common Stock
equal to Two Million Two Hundred Thousand Dollars ($2,200,000) (the "Aggregate
Amount") divided by the Purchase Price (as hereinafter defined), resulting in an
aggregate of 2,200,000 shares (the "Shares") and Warrants to be issued upon the
payment of the Purchase Price by the respective Investors in the amounts and
denominations set forth in Annex I. The Purchase Price is $1.00 per share. The
Company's obligation to sell the Shares to each Investor and each Investor's
obligation to purchase Shares from the Company is several and represents a
separate agreement. Upon receipt of the Purchase Price by the Escrow Agent, the
Company shall deliver to the respective Investor one or more certificates
representing the Shares, bearing substantially the following legend:
THE SECURITIES REPRESENTED HEREBY (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), 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
2
OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED.
(b) (i) The respective Investor acknowledges that (1) the Shares and
the Warrants have not been and are not being registered under the
provisions of the 1933 Act and, except as provided in the Registration
Rights Agreement or otherwise included in an effective registration
statement, the Shares and the Warrants have not been and are not being
registered under the 1933 Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) the Investor shall have
delivered to the Company an opinion of counsel, reasonably satisfactory
in form, scope and substance to the Company, to the effect that the
Shares and/or Warrants to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (2) any
sale of the Shares and/or Warrants made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any
resale of such Shares and/or Warrants under circumstances in which the
seller, or the Person through whom the sale is made, may be deemed to
be an underwriter, as that term is used in the 1933 Act, may require
compliance with some other exemption under the 1933 Act or the rules
and regulations of the Securities and Exchange Commission ("Commission"
or the "SEC") thereunder; and (3) neither the Company nor any other
Person is under any obligation to register the Shares and Warrants
(other than pursuant to the Registration Rights Agreement) under the
1933 Act.
(ii) Within three (3) business days (such third business day,
the "Delivery Date") after the business day on which the Company has received a
notice of sale (by facsimile or other delivery), the original Common Stock
certificate (and if the same are not delivered to the Company on the same date,
the date of delivery of the second of such items) from a given Investor, and any
relevant state "blue sky" information (if necessary), the Company at its
expense, (i) shall deliver, and shall cause legal counsel selected by the
Company to deliver, to its transfer agent (with copies to Investor) an
appropriate instruction and opinion of such counsel, for the delivery of
unlegended Shares issuable pursuant to the registration statement for the
Shares, provided that such registration statement at the time of sale has been
declared effective by the Commission and is current (the "Unlegended Shares");
and (ii) transmit the certificates representing the Unlegended Shares (together,
unless otherwise instructed by the Investor, with Common Stock not sold), to the
Investor at the address specified in a notice of sale (which address may be the
Investor's address for notices as contemplated by Section 9 hereof or a
different address) via express courier, by electronic transfer or otherwise.
(iii) In lieu of delivering physical certificates representing
the Unlegended Shares, if the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program,
upon request of an Investor and its compliance with the provisions contained in
this paragraph, so long as the certificates therefor do not bear a legend and
the Investor holding same is not obligated to return such certificate for the
placement of a legend thereon, the Company shall use its best efforts to cause
its transfer
3
agent to electronically transmit the Unlegended Shares by crediting the account
of such Investor's Prime Broker with DTC through its Deposit Withdrawal Agent
Commission system.
(c) The Company shall also deliver, or cause to be delivered,
the original or execution copies of this Purchase Agreement.
(d) There are no preemptive rights of any shareholder of the
Company, as such, to acquire the Shares and/or the Warrants. No party has a
currently exercisable right of first refusal which would be applicable to any or
all of the transactions contemplated by the Transaction Agreements.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each respective Investor that:
(a) The Company has the corporate power and authority to enter
into this Purchase Agreement, and to perform its obligations hereunder. The
execution and delivery by the Company of this Purchase Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company.
This Purchase Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company enforceable against
it in accordance with its respective terms, subject to the effects of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and to general equitable principles.
(b) Except as set forth in the SEC Documents (as hereinafter
defined) or Annex V, there is no pending, or to the knowledge of the Company,
threatened, judicial, administrative or arbitral action, claim, suit, proceeding
or investigation which might affect the validity or enforceability of this
Purchase Agreement or which involves the Company and which if adversely
determined, could reasonably be expected to have a material adverse effect on
the Company and its subsidiaries taken as a whole.
(c) Except as contemplated by the Registration Rights
Agreement, no consent or approval of, or exemption by, or filing with, any party
or governmental or public body or authority is required in connection with the
execution, delivery and performance under this Purchase Agreement or the taking
of any action contemplated hereunder or thereunder.
(d) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation.
(e) The execution, delivery and performance of this Purchase
Agreement by the Company, and the consummation of the transactions contemplated
hereby, will not (i) violate any provision of the Company's certificate of
incorporation or bylaws, (ii) violate, conflict with or result in the breach of
any of the terms of, result in a material modification of the effect of,
otherwise, give any other contracting party the right to terminate, or
constitute (or with notice or lapse of time or both constitute) a default under,
any contract or other agreement to which the Company is a party or by or to
which the Company or any of the Company's assets or properties may be bound or
subject, (iii) violate any order, judgment, injunction, award or decree of any
court, arbitrator or governmental or regulatory body by which the Company, or
the assets or
4
properties of the Company are bound and (iv) to the Company's knowledge, violate
any statute, law or regulation.
(f) The Shares have been duly authorized and, when issued and
paid for in accordance with this Agreement, will be duly and validly issued,
fully paid and nonassessable, free and clear of all liens, claims or
encumbrances. The Company has reserved from its duly authorized capital stock
the maximum number of shares of Common Stock issuable pursuant to this Agreement
and the Warrants in order to issue the full number of Warrant Shares as are or
may become issuable in accordance with the Warrants.
(g) Assuming the accuracy of the Investors' respective
representations and warranties set forth herein, no registration under the
Securities Act is required for the offer and sale of the Shares and Warrant
Shares by the Company to the Investors. The Company is eligible to register the
resale of its Common Stock for resale by the Purchasers under Form S-3
promulgated under the Securities Act.
(h) The issuance and sale of the Shares hereunder does not
contravene the rules and regulations of the Nasdaq SmallCap Market and no
approval of the shareholders of the Company is required for the Company to issue
and deliver to the Investors the maximum number of Shares contemplated in this
transaction.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
hereby represents and warrants to the Company that:
(a) The Investor has the corporate power and authority to
enter into this Purchase Agreement and to perform its obligations hereunder. The
execution and delivery by the Investor of this Purchase Agreement, and the
consummation by the Investor of the transactions contemplated hereby, have been
duly authorized by all necessary corporate action on the part of the Investor.
This Purchase Agreement has been duly executed and delivered by the Investor and
constitutes the valid and binding obligation of the Investor, enforceable
against it in accordance with its respective terms, subject to the effects of
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally and to general equitable principles.
(b) The execution, delivery and performance by the Investor of
this Purchase Agreement, and the consummation of the transactions contemplated
hereby, do not and will not breach or constitute a default under any applicable
law or regulation or of any agreement, judgment, order, decree or other
instrument binding on the Investor.
(c) The Investor has such knowledge and prior substantial
investment experience in financial and business matters, including investment in
non-listed and non-registered securities, and has had the opportunity to read
the SEC Documents and to evaluate the merits and risks of investment in the
Company and the Shares.
(d) The Investor is an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D promulgated under the 1933 Act.
5
(e) Prior to the execution of this Purchase Agreement,
Investors and any affiliates of Investors have not participated in any hedging
transactions involving the Company's Common Stock.
(f) The Investor is acquiring the Shares and Warrants, solely
for the Investor's own account for investment and not with a view to or for sale
in connection with a distribution of any of the Shares or the Warrants.
(g) Except as set for in the Registration Rights Agreement,
the Investor does not have a present intention to sell the Shares or the
Warrants, nor a present arrangement or intention to effect any distribution of
any of the Shares or Warrants to or through any person or entity for purposes of
selling, offering, distributing or otherwise disposing of any of the Shares or
the Warrants.
(h) The Investor may be required to bear the economic risk of
the investment indefinitely because none of the Shares or Warrants may be sold,
hypothecated or otherwise disposed of unless subsequently registered under the
Securities Act and applicable state securities laws or an exemption from
registration is available. Any resale of any of the Shares can be made only
pursuant to (i) a registration statement under the Securities Act which is
effective and current at the time of sale or (ii) a specific exemption from the
registration requirements of the Securities Act. In claiming any such exemption,
the Investor will, prior to any offer or sale or distribution of any Shares
advise the Company and, if requested, provide the Company with a favorable
written opinion of counsel, in form and substance satisfactory to counsel to the
Company, as to the applicability of such exemption to the proposed sale or
distribution.
(i) The Investor understands that the exemption afforded by
Rule 144 promulgated by the Commission under the Securities Act ("Rule 144")
will not become available for at least one year from the date of payment for the
Shares and any sales in reliance on Rule 144, if then available, can be made
only in accordance with the terms and conditions of that rule, including, among
other things, a requirement that the Company then be subject to, and current, in
its periodic filing requirements under the Exchange Act, and, among other
things, a limitation on the amount of shares of Common Stock that may be sold in
specified time periods and the manner in which the sale can be made; that, while
the Company's Common Stock is registered under the Exchange Act and the Company
is presently subject to the periodic reporting requirements of the Exchange Act,
there can be no assurance that the Company will remain subject to such reporting
obligations or current in its filing obligations; and that, in case Rule 144 is
not applicable to a disposition of the Shares, compliance with the registration
provisions of the Securities Act or some other exemption from such registration
provisions will be required.
(j) The Investor understands that legends shall be placed on
the certificates evidencing the Shares to the effect that the Shares have not
been registered under the Securities Act or applicable state securities laws and
appropriate notations thereof will be made in the Company's stock books. Stop
transfer instructions will be placed with the transfer agent of the Shares. The
Investor understands that the Warrants will bear similar legends.
6
(k) Except as set forth in the letter agreement between the
Company and TN Capital Equities, Ltd. dated June 9, 2003 and the Term Sheet
between the Company and vFinance Investments, Inc., dated June 30, 2003
(collectively, the "Term Sheets"), the Investor has taken no action which would
give rise to any claim by any person for brokerage commission, finder's fees or
similar payments by Investor relating to this Purchase Agreement or the
transactions contemplated hereby. The Company shall have no obligation with
respect to such fees or with respect to any claims made by or on behalf of other
persons for fees of a type contemplated in this Section 3(k) that may be due in
connection with the transactions contemplated hereby. The Investor shall
indemnify and hold harmless the Company, its employees, officers, directors,
agents, and partners, and their respective Affiliates, from and against all
claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as and when incurred.
(l) The execution, delivery and performance of this Purchase
Agreement by the Investor, and the consummation of the transactions contemplated
hereby, will not (i) violate any provision of the Investor's corporate
organizational documents, (ii) violate, conflict with or result in the breach of
any of the terms of, result in a material modification of the effect of,
otherwise, give any other contracting party the right to terminate, or
constitute (or with notice or lapse of time or both) a default under, any
contract or other agreement to which the Investor is a party or by or to which
the Investor or any of the Investor's assets or properties may be bound or
subject, (iii) violate any order, judgment, injunction, award or decree of any
court, arbitrator or governmental or regulatory body by which the Investor, or
the assets or properties of the Investor are bound and (iv) to the Investor's
knowledge, violate any statute, law or regulation, including but not limited to
the USA Patriot Act.
(m) Except with respect to sale of the Shares pursuant to Rule
144, prior to having any legend removed from the Shares, Investor shall comply
with the applicable state blue sky laws and, to the extent practicable, notify
the Company of the State, if any, in which the sale of such Shares by Investor
has taken place.
4. COVENANTS OF THE COMPANY.
(a) Registration Rights Agreement. The Company covenants and
agrees to enter into a Registration Rights Agreement governing the registration
of the Shares and the Warrant Shares with the Investors dated as of the date
hereof.
(b) Current Public Information. The Company has furnished or
made available to each Investor true and correct copies of all registration
statements, reports and documents, including proxy statements (other than
preliminary proxy statements), filed with the Commission by or with respect to
the Company since December 31, 2002 and prior to the date of this Agreement,
pursuant to the Securities Act or the Exchange Act (collectively, the "SEC
Documents"). The SEC Documents are the only filings made by or with respect to
the Company since December 31, 2002 pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act or pursuant to the Securities Act. The Company has
filed all reports, schedules, forms, statements and other documents required to
be filed under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act since
December 31, 2002 and prior to the date of this Agreement.
7
(c) SEC Documents. Except pursuant to a confidentiality
agreement, if any, the Company has not provided to the Investor any information
which 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 or their restated dates (if so
restated), the SEC Documents complied, and all similar documents filed with the
SEC prior to the Closing Date will comply, in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
rules and regulations of the SEC promulgated thereunder and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC Documents contained, nor will any similar document filed with the SEC
prior to the Closing Date 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, as of the dates thereof (or the restated dates, if so
restated), complied, and all similar documents filed with the SEC prior to the
Closing Date will comply, as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC and
other applicable rules and regulations with respect thereto. Such financial
statements were 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 may not
include footnotes or may be condensed or summary statements as permitted by Form
10-QSB of the SEC) and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(d) Absence of Certain Changes. Since the Last Audited Date,
there has been no material adverse change and no Material Adverse Effect, except
as disclosed in the Company's SEC Documents. Since the Last Audited Date, except
as provided in the Company's SEC Documents or disclosed in the Transaction
Documents, the Company has not (i) incurred or become subject to any material
liabilities (absolute or contingent) except liabilities incurred in the ordinary
course of business consistent with past practices; (ii) discharged or satisfied
any material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to shareholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
(e) Absence of Litigation. Except as disclosed in the
Company's SEC Documents, (i) there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or
affecting the Company before or by any governmental authority or nongovernmental
department, commission, board, bureau, agency or instrumentality or any other
Person, wherein an unfavorable decision, ruling or finding would have a Material
Adverse Effect or which would adversely affect the validity or enforceability
of, or the authority or ability of the Company to perform its obligations under,
any of the Transaction Agreements; (ii) the Company is not aware of any valid
basis for any such claim that (either individually or in the aggregate with all
other such events and circumstances) could reasonably be expected to have a
Material Adverse Effect; or (iii) there are no outstanding or unsatisfied
judgments, orders, decrees, writs, injunctions or stipulations to which the
Company is a party or by which it or any of its properties is bound, that
involve the transaction contemplated herein or that, alone or in the aggregate,
could reasonably be expect to have a Material Adverse Effect.
(f) Public Announcement. As soon as practicable the Company
shall issue a press release disclosing the material terms of the transactions
contemplated hereby and file a Current Report on Form 8-K disclosing the
transactions contemplated hereby. In addition, the Company will make such other
filings and notices in the manner and time required by the Commission and the
Nasdaq SmallCap Market.
(g) Maintain Listing/S-3 Qualification. The Company shall use
commercially reasonable efforts to maintain the listing of the Shares, Warrant
Shares and the Common Stock on the Nasdaq SmallCap Market. The Company shall use
commercially reasonable efforts to continue to meet the "registrant eligibility"
requirements for a secondary offering as set forth in the general instructions
in Form S-3 to enable the registration of the Registrable Securities (as defined
in the Registration Rights Agreement).
(h) No Undisclosed Liabilities or Events. The Company has no
liabilities or obligations other than those disclosed in the Transaction
Agreements or the Company's SEC Documents or those incurred in the ordinary
course of the Company's business since the Last Audited Date, or which
individually or in the aggregate, do not or would not have a Material Adverse
Effect. No event or circumstances has occurred or exists with respect to the
Company or its properties, business, operations, financial condition, or results
of operations, which, 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. There are no proposals currently
under consideration or currently anticipated to be under consideration by the
Board of Directors or the executive officers of the Company which proposal would
(x) change the certificate of incorporation or other charter document or by-laws
of the Company, each as currently in effect, with or without shareholder
approval, which change would reduce or otherwise adversely affect the rights and
powers of the shareholders of the Common Stock or (y) materially or
substantially change the business, assets or capital of the Company, including
its interests in subsidiaries.
(i) Trading in Securities. The Company specifically
acknowledges that, except to the extent specifically provided herein or in any
of the other Transaction Agreements (but limited in each instance to the extent
so specified), and subject to applicable state and federal securities laws, the
Investor retains the right (but is not otherwise obligated) to buy, sell or
otherwise trade in the Shares of the Company, including, but not necessarily
limited to, the Shares, at any time before, contemporaneous with or after the
execution of this Purchase
9
Agreement or from time to time and in any manner whatsoever permitted by
applicable federal and state securities laws.
(j) Fees to Brokers, Finders and Others. Except as set forth
in the Term Sheets, the Company has taken no action which would give rise to any
claim by any person for brokerage commission, finder's fees or similar payments
by the Company relating to this Purchase Agreement or the transactions
contemplated hereby. Investor shall have no obligation with respect to such fees
or with respect to any claims made by or on behalf of other persons for fees of
a type contemplated in this Section 4(j) that may be due in connection with the
transactions contemplated hereby. The Company shall indemnify and hold harmless
each of Investor, its employees, officers, directors, agents, and partners, and
their respective Affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses suffered
in respect of any such claimed or existing fees, as and when incurred.
(k) Use of Proceeds. The Company will use the proceeds
received hereunder (excluding amounts paid by the Company for legal fees,
finder's fees and escrow fees in connection with the sale of the Shares) for the
purposes contemplated by the schedule attached hereto as Annex VII, and, unless
specifically consented to in advance in each instance by a majority in interest
of the Investors, the Company shall not, directly or indirectly, use such
proceeds for any loan to or investment in any other corporation, partnership
enterprise or other Person, including any of its Affiliates.
5. DELIVERY OF SHARES.
(a) In accordance with the Joint Escrow Instructions, attached
hereto as Annex II and made a part hereof, promptly following the delivery by
the respective Investor of the respective Purchase Price for the Shares in
accordance with Section 1 hereof, the Company will irrevocably instruct its
transfer agent to issue to such Investor legended certificates representing the
Shares and the respective Warrants.
(b) Form of Payment; Delivery of Certificates:
(i) The respective Investor shall pay the Purchase
Price for the Shares by delivering immediately available good funds in United
States Dollars to the Escrow Agent no later than the date prior to the Closing
Date.
(ii) No later than the Closing Date, but in any event
promptly following payment by the respective Investor to the Escrow Agent of the
Purchase Price, the Company shall deliver the Shares and the Warrants, each duly
executed on behalf of the Company and issued in the name of the respective
Investor, to the Escrow Agent.
(iii) By signing this Agreement, each respective
Investor and the Company, subject to acceptance by the Escrow Agent, agrees to
all of the terms and conditions of, and becomes a party to, the Joint Escrow
Instructions, all of the provisions of which are incorporated herein by this
reference as if set forth in full.
10
(c) Method of Payment. Payment of the Purchase Price shall be
made by wire transfer wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx LLP
Account No.: 637-0000000
Re: FOCUS Transaction
(d) [RESERVED]
(e) [RESERVED]
6. CLOSING DATE.
(a) The Closing Date shall occur on the date which is the
first NYSE trading day after each of the conditions contemplated by Sections 7
and 8 hereof shall have either been satisfied or been waived by the party in
whose favor such conditions run.
(b) The closing of the purchase and issuance of the Shares and
the Warrants shall occur on the Closing Date at the offices of the Escrow Agent
and shall take place no later than 3:00 P.M., New York time, on such day or such
other time as is mutually agreed upon by the Company and a majority in interest
of the Investors.
(c) Notwithstanding anything to the contrary contained herein,
the Escrow Agent will be authorized to release the Escrow Funds to the Company
and to others and to release the other Escrow Property on the Closing Date upon
satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
Each Investor understands that the Company's obligation to sell the
Shares and issue the Warrants to such Investor pursuant to this Agreement on the
Closing Date is conditioned upon:
(a) The execution and delivery of this Purchase Agreement and
the Registration Rights Agreement by such Investor;
(b) Delivery by such Investor to the Escrow Agent of good
funds as payment in full of an amount equal to the Purchase Price for the Shares
in accordance with this Purchase Agreement;
(c) The accuracy on such Closing Date of the representations
and warranties of such Investor contained in this Purchase Agreement, each as if
made on such date, and the
11
performance by such Investor on or before such date of all covenants and
agreements of the Investor required to be performed on or before such date; and
(d) There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
8. CONDITIONS TO THE INVESTORS' OBLIGATION TO PURCHASE.
The Company understands that the respective Investor's obligation to
purchase the Shares and receive the Warrants on the Closing Date is conditioned
upon:
(a) The execution and delivery of this Purchase Agreement and
the other Transaction Agreements by the Company;
(b) Delivery by the Company to the Escrow Agent of the
Certificates and Warrants in accordance with this Purchase Agreement;
(c) The accuracy in all material respects on such Closing Date
of the representations and warranties of the Company contained in this Purchase
Agreement, each as if made on such date, and the performance by the Company on
or before such date of all covenants and agreements of the Company required to
be performed on or before such date;
(d) On such Closing Date, the Registration Rights Agreement
shall be in full force and effect and the Company shall not be in default
thereunder;
(e) On such Closing Date, the respective Investor shall have
received an opinion of counsel for the Company (and delivered to the Escrow
Agent), dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Investor, substantially to the effect set forth in Annex III
attached hereto;
(f) There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained; and
(g) From and after the date hereof to and including such
Closing Date, each of the following conditions will remain in effect: (i) the
trading of the Common Stock shall not have been suspended by the SEC or on the
Principal Trading Market; (ii) no minimum prices shall been established for
Shares traded on the Principal Trading Market; and (iii) there shall not have
been any material adverse change in any financial market that, in the reasonable
judgment of the Investor, makes it impracticable or inadvisable to purchase the
Shares. In addition, on the Closing Date, trading in Common Stock or in
securities generally on the Principal Trading Market shall not have been
suspended or limited.
9. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given upon personal delivery or seven (7) business days after deposit in the
United States Postal Service, by (a) advance copy by fax, and/or (b) mailing or
delivery by express courier or registered or certified mail with
12
postage and fees prepaid, addressed to each of the other parties thereunto
entitled at the following addresses, or at such other addresses as a party may
designate by ten days advance written notice to each of the other parties
hereto.
COMPANY FOCUS ENHANCEMENTS, INC.
0000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
ATTN: Xxxxx Xxxxx, President & CEO
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to: Manatt, 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
Investor: As set forth in Annex I hereto.
with a copy to (with respect Xxxxxxx & Xxxxxx, LLP
to Investors provided by 00 Xxxxxxxx, Xxxxx 0000
vFinance only) : Xxx Xxxx, Xxx Xxxx 00000
ATTN: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
10. SEVERABILITY. If a court of competent jurisdiction determines that
any provision of this Purchase Agreement is invalid, unenforceable or illegal
for any reason, such determination shall not affect or impair the validity,
legality and enforceability of the other provisions of this Purchase Agreement
in any other jurisdiction. If any such invalidity, unenforceability or
illegality of a provision of this Purchase Agreement becomes known or apparent
to any of the parties hereto, the parties shall negotiate promptly and in good
faith in an attempt to make appropriate changes and adjustments to such
provision specifically and this Purchase Agreement generally to achieve as
closely as possible, consistent with applicable law, the intent and spirit of
such provision specifically and this Purchase Agreement generally.
11. EXECUTION IN COUNTERPARTS. This Purchase Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same Purchase Agreement. A facsimile signature of
this Agreement shall be legal and binding on all parties hereto.
12. JURY TRIAL WAIVER. The Company and the Investors hereby waive a
trial by jury in any action, proceeding or counterclaim brought by any Party
hereto against any of the others in respect of any matter arising out or in
connection with the Transaction Agreements.
13
13. GOVERNING LAW: MISCELLANEOUS.
(a) This Purchase Agreement 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, Santa Xxxxx County in connection with any dispute arising under this
Purchase Agreement 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.
(b) Failure of any party to exercise any right or remedy under
this Purchase Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.
(c) This Purchase Agreement shall inure to the benefit of and
be binding upon the successors and assigns of each of the parties hereto.
(d) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(e) The headings of this Purchase Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Purchase Agreement.
(f) This Agreement may be amended only by an instrument in
writing signed by both parties; no waiver shall be effective unless signed by
the person charged with making such waiver.
(g) This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and each
Investor's representations and warranties herein shall survive the execution and
delivery of this Purchase Agreement and the delivery of the Certificates and the
payment of the Purchase Price, and shall inure to the benefit of each respective
Investor and the Company and their respective successors and assigns.
15. INDEPENDENT NATURE OF INVESTORS' OBLIGATIONS AND RIGHTS. The
obligations of each Investor are several and not joint with the obligations of
any other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
14
IN WITNESS WHEREOF, this Agreement has been duly executed by the
respective Investor (if an entity, by one of its officers thereunto duly
authorized) as of the date set forth below.
AMOUNT AND PURCHASE PRICE OF COMMON STOCK: $ *
----------
NUMBER OF SHARES: *
----------
NUMBER OF WARRANTS: *
----------
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Common Stock
Purchase Agreement to be duly executed on its behalf this 30th day of June,
2003.
*
--------------------------------
Printed Name of Investor
By: *
-----------------------------
(Signature of Authorized Person)
*
--------------------------------
Printed Name and Title
If Investor is a partnership, corporation, limited liability company or
other entity:
I. Jurisdiction where Investor's investment decision was made:
- Jurisdiction of mailing address listed in Annex I
- Other: ____________________________
II. Jurisdiction of Incorporation or Organization: _____________
As of the date set forth below, the undersigned hereby accepts this
Purchase Agreement and represents that the foregoing statements are true and
correct and that it has caused this Purchase Agreement to be duly executed on
its behalf.
FOCUS ENHANCEMENTS, INC.
By: /s/ Xxxxx Xxxxx
----------------------------
Xxxxx Xxxxx
Title: President & CEO
Date: July 1, 2003
-------------
* Investors: White Investments Ltd.
SF Capital Partners Ltd.
ANNEX I SCHEDULE OF INVESTORS
ANNEX II JOINT ESCROW INSTRUCTIONS **
ANNEX III OPINION OF COUNSEL **
ANNEX IV REGISTRATION RIGHTS AGREEMENT **
ANNEX V COMPANY DISCLOSURE MATERIALS **
ANNEX VI FORM OF WARRANT **
ANNEX VII USE OF PROCEEDS SCHEDULE **
---------------
** Not Included
ANNEX I
TO
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
SCHEDULE OF INVESTORS
Name and Address of Investor (including Number of Shares
contact for Notices and telecopier number) Purchased Number of Warrants
------------------------------------------ --------- ------------------
SF Capital Partners Ltd. 1,100,000 220,000
c/o Staro Asset Management, LLC
0000 Xxxxx Xxxx Xxxxx
Xx. Xxxxxxx, Xxxxxxxxx 00000 Phone: 000-000-0000
Fax: 000-000-0000
White Investments Ltd. 1,100,000 220,000
c/o International First Secretarial Group, Ltd
POB 00
Xxxxx Xxxx
Turks & Caicos, BWI
Phone: 000-000-0000
Fax: 000-000-0000
