EXHIBIT 4.4
VOID AFTER 5:00 P.M., NEW YORK CITY
TIME, ON MARCH 3, 2005
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase 327,645 Shares of
Common Stock, par value $.01 per share
Date: March 3, 1998
FOCUS ENHANCEMENTS, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, JNC OPPORTUNITY FUND LTD., or
its registered assigns, is entitled to purchase from FOCUS ENHANCEMENTS, INC., a
corporation organized under the laws of the State of Delaware (the "Company"),
at any time or from time to time during the period specified in Section 2
hereof, Three Hundred Twenty-Seven Thousand Six Hundred Forty-Five (327,645)
fully paid and nonassessable shares of the Company's common stock, par value
$.01 per share (the "Common Stock"), at an exercise price per share (the
"Exercise Price") determined in accordance with Section 1 hereof. The number of
shares of Common Stock purchasable hereunder (the "Warrant Shares") and the
Exercise Price are subject to adjustment as provided in Section 5 hereof. The
term "Warrants" means this Warrant and the other warrants of the Company, if
any, issued pursuant to that certain Securities Purchase Agreement, dated as of
February 27, 1998, by and between the Company and the initial holder of this
Warrant (the "Securities Purchase Agreement").
This Warrant is subject to the following terms, provisions, and
conditions:
1. Determination of Exercise Price. The Exercise Price shall initially
equal the Market Price (as defined in Section 5(j) hereof) in effect on the date
of initial issuance of this Warrant (the "Issue Date") and shall be subject to
adjustment as provided below and in Section 5 hereof. If, at any time during the
five hundred forty (540) day period following the Issue Date (the "Reset
Period"), the average of the Closing Bid Prices (as defined in Section 5(j)
hereof) for the Common Stock for any period of twenty (20) consecutive trading
days is less than or equal to seventy-five percent (75%) of the Market Price in
effect on the Issue Date (the occurrence of such event being hereinafter
referred to as a "Reset Event" and the date immediately following the occurrence
of a Reset Event being hereinafter referred to as a "Reset Date"), then the
Exercise Price shall thereafter be adjusted to equal the lesser of (i) the
Market Price determined as of the Reset Date and (ii) the Closing Bid Price in
effect on the trading day immediately preceding such Reset Date. The Exercise
Price shall be similarly adjusted upon each additional occurrence of a Reset
Event during the Reset Period; provided, however, that in no event shall any
such adjustment result in an increase to the Exercise Price.
2. Period of Exercise. This Warrant shall be exercisable at any time
and from time to time on or after the initial occurrence of a Reset Event and
before 5:00 p.m., New York City time, on the seventh (7th) anniversary of the
Issue Date (the "Exercise Period"). If a Reset Event does not occur during the
Reset Period, this Warrant shall be null and void.
3. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 8 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day
during the Exercise Period at the Company's principal executive offices (or such
other office or agency of the Company as it may designate by notice to the
holder hereof), and upon (i) payment to the Company in cash, by certified or
official bank check or by wire transfer for the account of the Company, of the
Exercise Price for the Warrant Shares specified in the Exercise Agreement or
(ii) if the holder is effectuating a Cashless Exercise (as defined in Section
12(c) hereof) pursuant to Section 12(c) hereof, delivery to the Company of a
written notice of an election to effect a Cashless Exercise for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above or, if such date is not a business date, on the next succeeding
business date. The Warrant Shares so purchased, representing the aggregate
number of shares specified in the Exercise Agreement, shall be delivered to the
holder hereof within a reasonable time, not exceeding two (2) business days,
after this Warrant shall have been so exercised in accordance with the foregoing
(the "Delivery Period"). If the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and
so long as the certificates therefor do not bear a legend and the holder is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall cause its transfer agent to electronically
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transmit the Warrant Shares so purchased to the holder by crediting the account
of the holder or its nominee with DTC through its Deposit Withdrawal Agent
Commission system ("DTC Transfer"). If the aforementioned conditions to a DTC
Transfer are not satisfied, the Company shall deliver to the holder physical
certificates representing the Warrant Shares so purchased. Further, the holder
may instruct the Company to deliver to the holder physical certificates
representing the Warrant Shares so purchased in lieu of delivering such shares
by way of DTC Transfer. Any certificates so delivered shall be in such
denominations as may be reasonably requested by the holder hereof, shall be
registered in the name of such holder or such other name as shall be designated
by such holder and, following the date on which the Warrant Shares have been
registered under the Securities Act pursuant to that certain Registration Rights
Agreement, dated as of February 27, 1998, by and between the Company and the
other signatories thereto (the "Registration Rights Agreement") or otherwise may
be sold by the holder pursuant to Rule 144 promulgated under the Securities Act
(or a successor rule), shall not bear any restrictive legend. If this Warrant
shall have been exercised only in part, then, unless this Warrant has expired,
the Company shall, at its expense, at the time of delivery of such certificates,
deliver to the holder a new Warrant representing the number of shares with
respect to which this Warrant shall not then have been exercised.
If, at any time, a holder of this Warrant submits this Warrant, an
Exercise Agreement and payment to the Company of the Exercise Price for each of
the Warrant Shares specified in the Exercise Agreement (including pursuant to a
Cashless Exercise), and the Company fails for any reason to deliver, on or prior
to the fourth business day following the expiration of the Delivery Period for
such exercise, the number of shares of Common Stock to which the holder is
entitled upon such exercise (an "Exercise Default"), then the Company shall pay
to the holder payments ("Exercise Default Payments") for an Exercise Default in
an amount equal to One Hundred Fifty Dollars ($150.00) per day for each day
after the expiration of the Delivery Period through and until the date on which
the Company issues and delivers certificates for the shares of Common Stock to
which the holder is entitled upon such exercise. The accrued Exercise Default
Payment for each calendar month shall be paid in cash or shall be convertible
into Common Stock, at the holder's option, as follows:
(a) In the event holder elects to take such payment in cash,
cash payment shall be made to holder by the fifth (5th) day of the month
following the month in which it has accrued; and
(b) In the event holder elects to take such payment in Common
Stock, the holder may convert such payment amount into Common Stock at the lower
of the Exercise Price or the Market Price (as defined in Section 5(j)) (as in
effect at the time of conversion) at any time after the fifth (5th) day of the
month following the month in which it has accrued.
Nothing herein shall limit the holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock as required pursuant to the terms of Section 4(b) hereof or to
otherwise issue shares of Common Stock upon exercise of this Warrant in
accordance with the terms hereof, and the holder shall have the right to pursue
all remedies available at law or in equity (including a decree of specific
performance and/or injunctive relief).
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4. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, claims and encumbrances.
(b) Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance upon exercise of this
Warrant, a sufficient number of shares of Common Stock to provide for the
exercise in full of this Warrant (without giving effect to the limitations on
exercise set forth in Section 8(g) hereof).
(c) Listing. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of this Warrant upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed or become listed (subject to official
notice of issuance upon exercise of this Warrant) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all shares
of Common Stock from time to time issuable upon the exercise of this Warrant;
and the Company shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by
amendment of its charter 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 to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions 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.
(e) Successors and Assigns. This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all of the Company's assets.
(f) Blue Sky Laws. The Company shall, on or before the date of
issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain
exemption for the Warrant Shares for, sale to the holder of this Warrant upon
the exercise hereof under applicable securities or "blue sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the holder of this
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Warrant prior to such date; provided, however, that the Company shall not be
required to qualify as a foreign corporation or file a general consent to
service of process in any such jurisdiction.
5. Antidilution Provisions. The Exercise Price and the number of
Warrant Shares issuable hereunder shall be subject to adjustment from time to
time as provided in this Section 5.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
or down to the nearest cent.
(a) Subdivision or Combination of Common Stock. If the
Company, at any time after the Issue Date, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company, at
any time after the Issue Date, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased. In addition, upon any
adjustment of the Exercise Price in accordance with this Section 5(a), the
"Market Price in effect on the Issue Date" used for purposes of determining the
occurrence of a Reset Event pursuant to Section 1 hereof shall also be
proportionately adjusted.
(b) Adjustment in Number of Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 5, the number of
shares of Common Stock issuable upon exercise of this Warrant and for which this
Warrant is or may become exercisable shall be adjusted by multiplying a number
equal to the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Common Stock issuable or for which this Warrant is or
may become exercisable (as applicable) upon exercise of this Warrant immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
(c) Consolidation, Merger or Sale. In case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company at any time after the Issue Date, then as a condition
of such consolidation, merger or sale or conveyance, adequate provision will be
made whereby the holder of this Warrant will have the right to acquire and
receive upon exercise of this Warrant in lieu of the shares of Common Stock
immediately theretofore acquirable upon the exercise of this Warrant, such
shares of stock, securities, cash or assets as may be issued or payable with
respect to or in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exercise of this Warrant had such
consolidation, merger or sale or conveyance not taken place. In any such case,
the Company will make appropriate provision to insure that the provisions of
this Section 5 will thereafter be applicable as nearly as may be in relation to
any shares of stock or securities thereafter deliverable upon the exercise of
this Warrant. The Company will not effect any consolidation, merger or sale or
conveyance unless prior to the consummation thereof, the successor corporation
(if other than the Company) assumes by written instrument the obligations under
this
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Warrant and the obligations to deliver to the holder of this Warrant such shares
of stock, securities or assets as, in accordance with the foregoing provisions,
the holder may be entitled to acquire.
(d) Distribution of Assets. In case the Company shall declare
or make any distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a partial liquidating dividend, stock repurchase by
way of return of capital or otherwise (including any dividend or distribution to
the Company's shareholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "Distribution"), at any time after the Issue
Date, then the holder of this Warrant shall be entitled upon exercise of this
Warrant for the purchase of any or all of the shares of Common Stock subject
hereto, to receive the amount of such assets (or rights) which would have been
payable to the holder had such holder been the holder of such shares of Common
Stock on the record date for the determination of shareholders entitled to such
Distribution.
(e) Notice of Adjustment. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment and the
increase or decrease in the number of Warrant Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Such calculation shall be
certified by the chief financial officer of the Company.
(f) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(g) No Fractional Shares. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.
(h) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of any class or
other rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
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(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable estimate thereof by the Company)
when the same shall take place. Such notice shall also specify the date on which
the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least seventy-five
(75) days prior to the record date or the date on which the Company's books are
closed in respect thereto. Failure to give any such notice or any defect therein
shall not affect the validity of the proceedings referred to in clauses (i),
(ii), (iii) and (iv) above.
(i) Certain Events. If, at any time after the Issue Date, any
event occurs of the type contemplated by the adjustment provisions of this
Section 5 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 5(e) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
(j) Certain Definitions.
(i) "Closing Bid Price" means, as of any date, (i) the
closing bid price for the shares of Common Stock as reported on the Nasdaq
SmallCap Market by Bloomberg Financial Markets or a comparable reporting service
of national reputation selected by the Company and reasonably acceptable to the
holder hereof if Bloomberg Financial Markets is not then reporting closing bid
prices for the Common Stock (collectively, "Bloomberg"), or (ii) if the Nasdaq
SmallCap Market is not the principal trading market for the shares of Common
Stock, the last reported sale price reported by Bloomberg on the principal
trading market for the Common Stock, or, if there is no sale price reported, the
last bid price reported by Bloomberg, or (iii) if the foregoing do not apply,
the last sale price of such security in the over-the-counter market on the pink
sheets or bulletin board for such security as reported by Bloomberg, or if no
sale price is so reported for such security, the last bid price of such security
as reported by Bloomberg, or (iv) if the Closing Bid Price cannot be calculated
as of such date on any of the foregoing bases, the Closing Bid Price of the
Common Stock on such date shall be the fair market value as reasonably
determined by an investment banking firm selected by the Company and reasonably
acceptable to the holder, with the costs of the appraisal to be borne by the
Company. The manner of determining the Closing Bid Price of the Common Stock set
forth in the foregoing definition shall apply with respect to any other security
in respect of which a determination as to market value must be made hereunder.
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(ii) "Common Stock," for purposes of this Section 5,
includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only Common
Stock in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 5(c) hereof, the stock or other securities or
property provided for in such Section.
(iii) "Market Price" means, as of any date, the average of
the Closing Bid Prices for the Common Stock for the five (5) consecutive trading
days ending on the trading day immediately preceding such date of determination
(subject to equitable adjustment for any stock splits, stock dividends,
reclassifications or similar events occurring during such five (5) trading day
period).
6. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
7. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
8. Transfer, Exchange, Redemption and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights
granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Section 8(e) below, provided, however, that any transfer or assignment shall be
subject to the conditions set forth in Sections 8(f) and (g) hereof and to the
provisions of Sections 2(f) and 2(g) of the Securities Purchase Agreement. Until
due presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 9 hereof are assignable only in
accordance with the provisions of the Registration Rights Agreement.
(b) Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Section 8(e) below, for new
Warrants of like tenor of different denominations representing in the aggregate
the right to purchase the number of shares of Common Stock which
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may be purchased hereunder, each of such new Warrants to represent the right to
purchase such number of shares as shall be designated by the holder hereof at
the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Section 8, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes)
and all other expenses (other than legal expenses, if any, incurred by the
holder or transferees) and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Section 8. The Company
shall indemnify and reimburse the holder of this Warrant for all costs and
expenses (including legal fees) incurred by such holder in connection with the
enforcement of its rights hereunder.
(e) Warrant Register. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time
of the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable transactions
and reasonably acceptable to counsel for the Company) to the effect that such
exercise, transfer, or exchange may be made without registration under the
Securities Act and under applicable state securities or blue sky laws (the cost
of which shall be borne by the Company if the Company's counsel renders such an
opinion and up to $250 of such cost shall be borne by the Company if the
holder's counsel is requested to render such opinion), (ii) that the holder or
transferee execute and deliver to the Company an investment letter in form and
substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter, or status as an "accredited
investor" shall be required in connection with a transfer pursuant to Rule 144
under the Securities Act.
(g) Additional Restrictions on Exercise or Transfer.
Notwithstanding anything contained herein to the contrary, unless the holder
hereof delivers a waiver in accordance with the last sentence of this Section
8(g), this Warrant shall not be exercisable by a holder hereof to the extent
(but only to the extent) that (a) the number of shares of Common Stock
beneficially owned
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by such holder and its affiliates (other than shares of Common Stock which may
be deemed beneficially owned through the ownership of the unexercised portion of
the Warrants or the unexercised or unconverted portion of any other securities
of the Company subject to a limitation on conversion or exercise analogous to
the limitation contained herein) and (b) the number of shares of Common Stock
issuable upon exercise of the Warrant (or portion thereof) with respect to which
the determination described herein is being made, would result in beneficial
ownership by such holder and its affiliates of more than 9.99% of the
outstanding shares of Common Stock. To the extent the above limitation applies,
the determination of whether and to what extent this Warrant shall be
exercisable vis-a-vis other securities owned by such holder shall be in the sole
discretion of the holder and submission of this Warrant for full or partial
exercise shall be deemed to be the holder's determination of whether and the
extent to which this Warrant is exercisable, in each case subject to such
aggregate percentage limitation. No prior inability to exercise the Warrant
pursuant to this Section shall have any effect on the applicability of the
provisions of this Section with respect to any subsequent determination of
exerciseability. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
otherwise provided in clause (a) hereof. Except as provided in the immediately
succeeding sentence, the restrictions contained in this Section 8(g) may not be
amended without the consent of the holder of this Warrant and the holders of a
majority of the Company's then outstanding Common Stock. Notwithstanding the
foregoing, the holder hereof may waive the restrictions set forth in this
Section 8(g) by written notice to the Company upon not less than sixty-one (61)
days prior notice (with such waiver taking effect only upon the expiration of
such sixty-one (61) day notice period).
9. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement, including the right to assign such rights to certain assignees, as
set forth therein.
10. Notices. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
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If to the Company:
Focus Enhancements, Inc.
142 North Road
Sudbury, MA 01776
Telecopy: (978) 371-8471
Attn: Chief Financial Officer
with a copy simultaneously transmitted by like means to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Telecopy: (617) 338-2880
Attn: John Piccione, Esq.
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 10.
11. Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in the State of Delaware in any suit or proceeding based on
or arising under this Warrant and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in such courts. The Company
irrevocably waives any objection to the laying of venue and the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by certified or
registered mail shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect the
holder's right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
12. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the holder
hereof.
(b) Descriptive Headings. The descriptive headings of the
several Sections of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
(c) Cashless Exercise. Notwithstanding anything to the
contrary contained in this Warrant, if the resale of the Warrant Shares by the
holder is not then registered pursuant to an effective registration statement
under the Securities Act, this Warrant may be exercised at any time after the
first anniversary of the Issue Date until the end of the Exercise Period, by
presentation and
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surrender of this Warrant to the Company at its principal executive offices with
a written notice of the holder's intention to effect a cashless exercise,
including a calculation of the number of shares of Common Stock to be issued
upon such exercise in accordance with the terms hereof (a "Cashless Exercise").
In the event of a Cashless Exercise, in lieu of paying the Exercise Price in
cash, the holder shall surrender this Warrant for that number of shares of
Common Stock determined by multiplying the number of Warrant Shares to which it
would otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price of a share of the Common Stock
on the date of exercise and the Exercise Price, and the denominator of which
shall be the then current Market Price per share of Common Stock.
(d) Business Day. For purposes of this Warrant, the term
"business day" means any day, other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by
law, regulation or executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
FOCUS ENHANCEMENTS, INC.
By: /s/ Thomas L. Massie
Name: Thomas L. Massie
Title: Chief Executive Officer
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FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
To: FOCUS ENHANCEMENTS, INC.
142 North Road
Sudbury, MA 01776
Telecopy: (978) 371-8471
Attn: Chief Financial Officer
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of FOCUS ENHANCEMENTS, INC., a
corporation organized under the laws of the State of Delaware (the "Company"),
evidenced by the attached Warrant, and herewith makes payment of the Exercise
Price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws, and agrees that the following legend
may be affixed to the stock certificate for the Common Stock hereby subscribed
for if resale of such Common Stock is not registered or if Rule 144 is
unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
o The undersigned requests that the Company cause its transfer agent to
electronically transmit the Common Stock issuable pursuant to this
Exercise Agreement to the account of the undersigned or its nominee
(which is _________________) with DTC through its Deposit Withdrawal
Agent Commission System ("DTC Transfer").
o In lieu of receiving the shares of Common Stock issuable pursuant to
this Exercise Agreement by way of DTC Transfer, the undersigned hereby
requests that the Company cause its transfer agent to issue and deliver
to the undersigned physical certificates representing such shares of
Common Stock.
The undersigned requests that a Warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant, in the name of the Holder and
delivered to the undersigned at the address set forth below:
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Dated:_________________ _____________________________________
Signature of Holder
-------------------------------------
Name of Holder (Print)
Address:
-------------------------------------
-------------------------------------
-------------------------------------
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FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
Name of Assignee Address No of Shares
- ---------------- ------- ------------
, and hereby irrevocably constitutes and appoints
_____________________________________ as agent and attorney-in-fact to transfer
said Warrant on the books of the within-named corporation, with full power of
substitution in the premises.
Dated: _____________________, ____
In the presence of
- ------------------
Name: ____________________________
Signature: _______________________
Title of Signing Officer or Agent (if any):
Address:
------------------------
------------------------
------------------------
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant.