Exhibit 10.21
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of November 25,
2002 (this "Agreement"), is made by and between FOCUS ENHANCEMENTS, INC., a
Delaware corporation, with headquarters located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and each entity named on a signature page
hereto (each, an "Investor"), and vFINANCE INVESTMENTS, INC. ("VFIN") (each
agreement with an Investor being deemed a separate and independent agreement
between the Company and such Investor, except that each Investor acknowledges
and consents to the rights granted to each other Investor under such agreement).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Common Stock Purchase Agreement, dated as of November 25, 2002, between the
Investor and the Company (the " Purchase Agreement"; terms not otherwise defined
herein shall have the meanings ascribed to them in the Purchase Agreement), the
Company has agreed to issue and sell to the Investors the Common Stock of the
Company (the "Common Stock"); and
WHEREAS, the Company has agreed to issue the Warrants to VFIN
in connection with the issuance of the Common Stock, and the Warrants may be
exercised for the purchase of shares of Common Stock (the "Warrant Shares") upon
the terms and conditions of the Warrants; and
WHEREAS, to induce the Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investor hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Effective Date" means the date the SEC declares a
Registration Statement covering Registrable Securities and otherwise meeting the
conditions contemplated hereby to be effective.
(b) "Held Shares Value" means the Purchase Price for shares of
Common Stock acquired by the Investor and not yet sold.
(c) "Investor" means the Investor any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and who holds Registrable Securities and VFIN,
as the context may require.
(d) "Potential Material Event" means any of the following: (i)
the possession by the Company of material information not ripe for disclosure in
a registration statement, which shall be evidenced by a determination in good
faith by the Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to the business
and affairs of the Company or (ii) any material engagement or activity by the
Company which would, in the good faith determination of the Board of Directors
of the Company, be adversely affected by disclosure in a registration statement
at such time; in each case where such determination shall be accompanied by a
good faith determination by the Board of Directors of the Company that the
registration statement would be materially misleading absent the inclusion of
such information.
(e) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the Commission.
(f) "Registrable Securities" means the Common Stock, the
Warrants, and the Warrant Shares.
(g) "Registration Statement" means a registration statement of
the Company under the Securities Act covering Registrable Securities on Form
S-3, if the Company is then eligible to file using such form, and if not
eligible, on Form SB-2 or other appropriate form.
(h) "Required Effective Date" means June 1, 2003.
(i) "Restricted Sale Date" means the first date, other than a
date during a Permitted Suspension Period (as defined below), on which the
Investor is restricted from making sales of Registrable Securities covered by
any previously effective Registration Statement.
Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Common Stock Purchase
Agreement or in the Rules of the SEC.
2. Registration.
(a) Mandatory Registration.
(i) The Company shall prepare and file with the SEC, as soon
as practicable after the Closing Date, an amendment to an existing Registration
Statement or a new Registration Statement, in either event registering for
resale by the Investor a sufficient number of shares of Common Stock for the
Investors and VFIN to sell all of the Registrable Securities. The Registration
Statement shall also state that, in accordance with Rules 416 and 457 under the
Securities Act, it also covers such indeterminate number of additional shares of
Common Stock as may become issuable upon conversion of the Debentures or
exercise of the Warrants to prevent dilution resulting from stock splits, or
stock dividends. The Company will use its reasonable best efforts to cause such
Registration Statement to be declared effective on a date (the "Initial Required
Effective Date") which is no later than the earlier of (Y) five (5) days after
oral or written notice by the SEC that it may be declared effective or (Z) June
1, 2003.
(ii) The aggregate number of shares registered for the
Investors in each Registration Statement or amendment thereto shall be allocated
among the Investors on a pro rata basis among them according to their relative
Registrable Shares included in such Registration Statement.
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(b) Payments by the Company.
(i) [RESERVED]
(ii) If the Registration Statement covering the Registrable
Securities is not declared effective by the relevant Required Effective Date or
if there is a Restricted Sale Date within ninety (90) days after the effective
date of the Registration Statement, then the Company will make payments to the
Investor in such amounts and at such times as shall be determined pursuant to
this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the
Company to the Investor shall be determined as of each Computation Date (as
defined below) and such amount shall be equal to the Periodic Amount Percentage
(as defined below) of the Purchase Price for the Common Stock for the period
from the date following the Required Effective Date or a Restricted Sale Date,
as the case may be, to the first relevant Computation Date, and thereafter to
each subsequent Computation Date. The "Periodic Amount Percentage" means (A)
with respect to the Required Effective Date, two percent (2%) of the Purchase
Price of the Common Stock for the first, second and third Computation Dates and
three percent (3%) of the Purchase Price of the Common Stock to each Computation
Date thereafter, and (b) with respect to a Restricted Sale Date, one and
one-half (1 1/2%) percent of the Purchase Price of the Common Stock not
previously sold by the Investor after the Restricted Sale Date to each
Computation Date thereafter. Anything in the preceding provisions of this
paragraph (iii) to the contrary notwithstanding, after the relevant Effective
Date the Purchase Price shall be deemed to refer to the sum of the Held Shares
Value. By way of illustration and not in limitation of the foregoing, if the
Registration Statement is not declared effective by July 1, 2003, the Periodic
Amount will aggregate two (2%) percent of the Purchase Price.
(iv) Each Periodic Amount will be payable by the Company,
except as provided in the other provisions of this subparagraph (iv), in cash or
other immediately available funds to the Investor (1) on the day after the
Required Effective Date or a Restricted Sale Date, as the case may be, and (2)
on the earlier of (A) each thirtieth day thereafter, (B) the third business day
after the date the Registration Statement is filed or is declared effective, or
(C) the third business day after the Registration Statement has its restrictions
removed after the relevant Effective Date, in each case without requiring demand
therefor by the Investor. Notwithstanding the provisions of the first sentence
of this subparagraph (iv), at the mutual agreement of the Company and the
Investor, any time before the Periodic Amount is paid, all or a portion of the
Periodic Amount can be paid by the issuance of additional shares of Common Stock
to the Investor ("Periodic Amount Shares") in an amount equal to the Periodic
Amount being paid thereby divided by 90% of the average Closing Bid Price for
the last five (5) trading days prior to the Computation Date.
(v) The parties acknowledge that the damages which may be
incurred by the Investor if the Registration Statement has not been declared
effective by the Required Effective Date, including if the right to sell
Registrable Securities under a previously effective Registration Statement is
suspended or the shares of the Company's stock are not listed on the Principal
Trading Market, may be difficult to ascertain. The parties agree that the
Periodic Amounts represent a reasonable estimate on the part of the parties, as
of the date of this Agreement, of the amount of such damages.
(vi) Notwithstanding the foregoing, the amounts payable by the
Company pursuant to this provision shall not be payable to the extent any delay
in the effectiveness of the Registration Statement occurs because of an act of,
or a failure to act or to act timely by the Investor or its counsel.
(vii) "Computation Date" means (A) the date which is the
earlier of thirty (30) days after the Required Effective Date or a Restricted
Sale Date, or when the shares of Common Stock are listed on the Principal
Trading Market (with respect to payments due as contemplated by Section 2(b)(ii)
hereof), as the case may be, and (B) each date which is the earlier of (1)
thirty (30) days after the previous Computation Date or (2) the date after the
previous Computation Date on which the Registration Statement is declared
effective or has its restrictions removed or the shares of Common Stock are
listed on the Principal Trading Market (with respect to payments due as
contemplated by Section 2(b)(ii) hereof), as the case may be.
3. Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following:
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(a) Prepare and file, with the SEC a Registration Statement
with respect to not less than the number of Registrable Securities provided in
Section 2(a) above, and thereafter use its reasonable best efforts to cause such
Registration Statement relating to Registrable Securities to become effective by
the Required Effective Date and keep the Registration Statement effective at all
times during the period (the "Registration Period") continuing until the earlier
of (i) the date when the Investors may sell all Registrable Securities under
Rule 144(k) without volume or other restrictions or limits, (ii) the date the
Investors no longer own any of the Registrable Securities, which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or (iii) one (1) year after the Effective Date of the
Registration Statement;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Permit a single firm of counsel designated by the
Investors (which, until further notice, shall be deemed to be ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
LLP, Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq., which firm has requested to receive such
notification; each, an "Investor's Counsel") to review the Registration
Statement and all amendments and supplements thereto for a reasonable period of
time (but not less than three (3) business days) prior to their filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects;
(d) Notify the Investor's Counsel and any managing
underwriters immediately (and, in the case of (i)(A) below, not less than three
(3) business days prior to such filing) and (if requested by any such person)
confirm such notice in writing no later than one (1) business day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) whenever
the SEC notifies the Company whether there will be a "review" of such
Registration Statement; (C) whenever the Company receives (or a representative
of the Company receives on its behalf) any oral or written comments from the SEC
in respect of a Registration Statement (copies or, in the case of oral comments,
summaries of such comments (as such comments relate to the Investor) shall be
promptly furnished by the Company to the Investors); and (D) with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the SEC or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the SEC of any stop order suspending the effectiveness of the Registration
Statement covering any or all of the Registrable Securities or the initiation of
any proceedings for that purpose; (iv) if at any time any of the representations
or warranties of the Company contained in any agreement (including any
underwriting agreement) contemplated hereby ceases to be true and correct in all
material respects; (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose; and (vi) of the
occurrence of any event that to the best knowledge of the Company makes any
statement made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration Statement
or the Prospectus, as the case may be, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. In addition, the
Company shall furnish the Investor's Counsel with copies of all intended written
responses to the comments contemplated in clause (C) of this Section 3(d) that
relate to Investors not later than one (1) business day in advance of the filing
of such responses with the SEC so that the Investors shall have the opportunity
to comment thereon;
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(e) Furnish to Investor's Counsel (i) promptly after the same
is prepared and publicly distributed, filed with the SEC, or received by the
Company, one (1) copy of the Registration Statement, each preliminary prospectus
and prospectus, and each amendment or supplement thereto, all correspondence to,
with, or from the SEC, and (ii) such number of copies of a prospectus, and all
amendments and supplements thereto (as contemplated in Section 3(d) above) and
such other documents, as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Investor;
(f) As promptly as practicable after becoming aware thereof,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware thereof,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of a Notice of Effectiveness or any notice of effectiveness or any stop
order or other suspension of the effectiveness of the Registration Statement at
the earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time
to time after the date of effectiveness of the Registration Statement, the
Company notifies the Investors in writing of the existence of a Potential
Material Event, the Investors shall not offer or sell any Registrable
Securities, or engage in any other transaction involving or relating to the
Registrable Securities, from the time of the giving of notice with respect to a
Potential Material Event until such Investor receives written notice from the
Company that such Potential Material Event either has been disclosed to the
public or no longer constitutes a Potential Material Event; provided, however,
that the Company may not so suspend the right to such holders of Registrable
Securities during the periods the Registration Statement is required to be in
effect other than during a Permitted Suspension Period (and the applicable
provisions of Section 2(b) shall apply with respect to any such suspension other
than during a Permitted Suspension Period) . The term "Permitted Suspension
Period" means up to two such suspension periods, each of which suspension period
shall not either (i) be for more than fifteen (15) business days or (ii) begin
less than ten (10) business days after the last day of the preceding suspension
(whether or not such last day was during or after a Permitted Suspension
Period); provided further that the Company shall, if lawful to do so, provide
the Investor with at least two (2) business days' notice of the existence (but
not the substance of) a Potential Material Event. Investor shall treat any
information with respect to Potential Material Event as confidential. 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 regarding any trades by the Investor,
its affiliates or any person(s) acquiring information from the Investor as a
tippee or otherwise.
(i) Use its reasonable efforts to secure and maintain the
designation and listing of all the Registrable Securities covered by the
Registration Statement on the Principal Trading Market within the meaning of
Rule 11Aa2-1 of the SEC under the Exchange Act and the quotation of the
Registrable Securities on the Principal Trading Market;
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(j) Provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the initial
Effective Date;
(k) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within five (5) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel, which shall include, without limitation, directions to the
transfer agent to issue certificates of Registrable Securities(including
certificates for Registrable Securities to be issued after the Effective Date
and replacement certificates for Registrable Securities previously issued)
without legends or other restrictions;
(l) Take all other reasonable actions necessary to expedite
and facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement; and
(m) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold to underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company after the effective date of
the Registration Statement, which statement shall cover said 12-month period, or
end shorter periods as is consistent with the requirements of Rule 158.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement; and
(b) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or 3(g) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. Expenses of Registration. All reasonable expenses (other
than underwriting discounts and commissions of the Investor) incurred in
connection with registrations, filings or qualifications pursuant to Section 3,
but including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company shall be borne by the Company.
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6. Indemnification. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person" or
"Indemnified Party"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to clause (b) of this Section 6, the
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a) shall not (I) apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by or on behalf of any
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto,
after such prospectus was made available by the Company pursuant to Section 3(c)
hereof; (II) be available to the extent such Claim is based on a failure of the
Investor to deliver or cause to be delivered the prospectus made available by
the Company or the amendment or supplement thereto made available by the
Company; (III) be available to the extent such Claim is based on the delivery of
a prospectus by the Investor after receiving notice from the Company under
Section 3(f), (g) or (h) hereof (other than a notice regarding the effectiveness
of the Registration Statement or any amendment or supplement thereto), or (IV)
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld or delayed. Each Investor will indemnify the Company and
its officers, directors and agents (each, an "Indemnified Person" or
"Indemnified Party") against any claims arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information furnished in
writing to the Company, by or on behalf of such Investor, expressly for use in
connection with the preparation of the Registration Statement or the amendment
or supplement thereto, subject to such limitations and conditions as are
applicable to the indemnification provided by the Company to this Section 6.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the
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indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be. In case any such action is brought
against any Indemnified Person or Indemnified Party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the indemnifying
party to such Indemnified Person or Indemnified Party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
Indemnified Person or Indemnified Party under this Section 6 for any legal or
other reasonable out-of-pocket expenses subsequently incurred by such
Indemnified Person or Indemnified Party in connection with the defense thereof
other than reasonable costs of investigation, unless the indemnifying party
shall not pursue the action to its final conclusion. The Indemnified Person or
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and reasonable
out-of-pocket expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the Indemnified Person or
Indemnified Party provided such counsel is of the opinion that all defenses
available to the Indemnified Party can be maintained without prejudicing the
rights of the indemnifying party. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) except where the seller has committed fraud (other
than a fraud by reason of the information included or omitted from the
Registration Statement as to which the Company has not given notice as
contemplated under Section 3 hereof) or intentional misconduct, contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. Reports under Securities Act and Exchange Act. With a view
to making available to Investor the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit Investor to sell securities of the Company to the public without
Registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to Investor so long as Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of the Securities Act and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
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Company and such other reports and documents so filed by the Company and (iii)
such other information as may be reasonably requested to permit Investor to sell
such securities pursuant to Rule 144 without Registration.
(d) The Company will, at the request of any Holder of
Registrable Securities, upon receipt from such Holder of a certificate
certifying (i) that such Holder has held such Registrable Securities for a
period of not less than one (1) year, (ii) that such Holder has not been an
affiliate (as defined in Rule 144) of the company for more than the ninety (90)
preceding days, and (iii) as to such other matters as may be appropriate in
accordance with such Rule, remove from the stock certificate representing such
Registrable Securities that portion of any restrictive legend which relates to
the registration provisions of the Securities Act, provided, however, that, at
the Company's cost and expense, counsel to Investor may provide such
instructions and opinion to the transfer agent regarding the removal of the
restrictive legend.
9. Assignment of the Registration Rights. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities only if the Company is, within a reasonable time after such transfer
or assignment, furnished with written notice of (a) the name and address of such
transferee or assignee and (b) the securities with respect to which such
registration rights are being transferred or assigned.
10. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold a fifty (50%) percent interest of the Shares as of such date. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable 9Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Notices required or permitted to be given
hereunder shall be given in the manner contemplated by the Purchase Agreement,
(i) if to the Company or to the Investor, to their respective address
contemplated by the Purchase Agreement, and (ii) if to any other Investor, at
such address as such Investor shall have provided in writing to the Company, or
at such other address as each such party furnishes by notice given in accordance
with this Section 11(b).
(c) Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.
9
(d) This 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 ▇▇▇▇▇ County in connection with any dispute arising under this
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.
(e) The Company, the Investor and VFIN 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 of or in
connection with this Agreement or any of the other Transaction Agreements.
(f) If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
(g) Subject to the requirements of Section 9 hereof,
this Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto.
(h) All pronouns and any variations thereof refer to
the masculine, feminine or neuter, singular or plural, as the context may
require.
(i) The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning thereof.
(j) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
(k) The Company acknowledges that any failure by the
Company to perform its obligations under Section 3(a) hereof, or any delay in
such performance could result in loss to the Investors, and the Company agrees
that, in addition to any other liability the Company may have by reason of such
failure or delay, the Company shall be liable for all direct damages caused by
any such failure or delay, unless the same is the result of force majeure.
Neither party shall be liable for consequential damages.
(l) This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANY:
FOCUS ENHANCEMENTS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
Name:▇▇▇▇▇ ▇▇▇▇▇
Title:President & CEO
VFINANCE INVESTMENTS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
Name ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------
Title Managing Director
------------------------------
Alpha Capital A.G.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Name ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
Title Director
------------------------------
/s/ ▇▇▇▇▇▇▇▇ Visnstein
------------------------------------
▇▇▇▇▇▇▇▇ Visnstein
11