Exhibit 10.4

 

AMENDED AND RESTATED INTERCREDITOR AGREEMENT

 

This AMENDED AND RESTATED INTERCREDITOR AGREEMENT (“Agreement”), dated as of
February 7, 2008, is made by and between Carl E. Berg (“Berg”), on one hand, and
the purchasers of the Amended and Restated Senior Secured Notes due January 1,
2011 issued by Focus Enhancements, Inc., a Delaware corporation (the “Company”)
who are identified on Exhibit A attached hereto, (the “Purchasers”) and Thomas
O. Boucher, Jr., as agent for the Purchasers (“Purchasers’ Agent”), on the other
hand.

 

RECITALS

 

A.            The Company, Purchasers’ Agent, Berg, and the purchasers
identified on Exhibit A (the “Original Purchasers”) previously entered into an
Intercreditor Agreement dated as of January 24, 2006 (the “Original
Intercreditor Agreement”).  The Company, the Purchasers’ Agent, and the Original
Purchasers desire to amend and restate the Original Intercreditor Agreement on
the terms stated herein.  This Agreement is intended to and does completely
amend and restate, without novation, the Original Intercreditor Agreement.  All
security interests referred to in the Original Intercreditor Agreement are
hereby confirmed and ratified and shall continue to secure all obligations under
their respective agreements.

 

B.            In addition to the Original Purchasers, other purchasers
identified on Exhibit A (the “New Purchasers”) wish to become a party to this
intercreditor agreement under terms pari passu with the Original Purchasers. 
The Original Purchasers and the New Purchasers are referred to herein
collectively as the “Purchasers”.

 

C.            Collectively, the Purchasers have purchased $20,800,000 of Amended
and Restated Senior Secured Notes Due January 1, 2011 (the “Notes”) from the
Company pursuant to an Amended and Restated Senior Secured Note Purchase
Agreement dated as of the same date as this Agreement, which Notes are secured
by all of the assets of the Company pursuant to an Amended and Restated Security
Agreement dated as of the same date as this Agreement (the “Purchasers’ Security
Interest”).

 

D.            Berg has previously guaranteed a Loan and Security Agreement,
dated as of November 15, 2004, as amended subsequently through December 1, 2005
(“Bank Loan Agreement”) between Wells Fargo Bank, as successor-in-interest to
Venture Banking Group, a division of Greater Bay Bank N.A. (“Bank”) and the
Company pursuant to an Unconditional Guaranty dated as of November 15, 2004,
which guaranty is secured by all of the assets of the Company under a Security
Agreement between Berg and the Company dated as of October 26, 2000, as amended
subsequently through December 1, 2005 (the “Berg Security Interest”).

 

E.            The Bank and Berg are parties to an Intercreditor Agreement (the
“Bank Intercreditor Agreement”) dated as of November 15, 2004, amended by that
certain Amendment No. 1 to Intercreditor Agreement dated January 24, 2006 to add
the Original Purchasers, which has been further amended by that certain
Amendment No. 2 to Intercreditor Agreement of even date herewith to add the New
Purchasers as additional parties.

 

F.             This Agreement provides for certain matters of repayment and
sharing of Collateral between Berg and the Purchasers.

 

NOW THEREFORE, the parties agree as follows:

 

1.        Bank Collateral .   The recitals set forth above are hereby
incorporated by this reference as if they were part of the body of this
Agreement.  As used in this Agreement, “Bank Collateral” means all of the
Company’s present and future “Accounts” (such term as most broadly defined in
the Bank Loan Agreement and the California Uniform Commercial Code in effect on
the date hereof), and all proceeds of these Accounts.

 

2.        Collateral .  As used in this Agreement, “Collateral” means all of the
property of the Company now owned and hereafter acquired.

 

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3.        Pro Rata Security Interest and Subordination .

 

(a)           To the extent that the total amount of debt secured by the Berg
Security Interest does not exceed $6,500,000 plus all accrued and unpaid
interest and fees and expenses collectible under the applicable loan documents
(the “Maximum Priority Debt Amount”), the Purchasers agree that all security
interests in Bank Collateral and Creditor Collateral shall be shared pro rata by
Berg and the Purchasers based on the outstanding payment obligations of the
Company to Berg, if any under the Unconditional Guaranty and the Purchasers
under the Notes, subject to the first priority security interest of Bank in Bank
Collateral pursuant to the Bank Intercreditor Agreement to the extent, and only
to the extent, debt remains owed to the Bank by the Company under the Bank Loan
Agreement.  Berg agrees that the Purchasers shall have priority over Berg with
respect to all Collateral to the extent the total debt to Berg and Bank exceeds
the Maximum Priority Debt Amount and that the Purchasers shall be entitled to
the value or proceeds of all such Collateral to the extent of such excess amount
of debt.  In the event any Collateral is being sold or otherwise disposed of by
Berg pursuant to rights under the Berg Security Interest or by or for the
Purchasers pursuant to the Purchasers’ Security Interest in connection with the
liquidation of Company assets after an event of default, the party selling or
otherwise disposing of such Collateral shall (i) apply the proceeds thereof pro
rata in respect of its share of the total debt then owed by the Company to Berg
and the Purchasers, (ii) deduct the other party’s pro rata share of the
collectible enforcement fees and expenses, and (iii) shall pay over the
remaining share to the other party (so long as the debt to Berg does not exceed
the Maximum Priority Debt Amount).  Thus, by way of example, but not of
limitation, if the total debt owed by the Company to Berg is $6,500,000 and the
total debt owed by the Company to the Purchasers is $20,000,000, upon a sale of
Collateral by Berg that realizes gross proceeds of $5,000,000, Berg can retain
24.5283% of the proceeds plus 75.4717% of the expenses of sale, and must pay
over to the Purchasers or to the Purchasers’ Agent for their respective
accounts, all remaining proceeds.

 

(b)           The priorities specified in this Agreement shall be applicable
irrespective of the time or order of attachment or perfection of any security
interest or the time or order of filing of any financing statements or other
documents, or the giving of any notices of purchase money security interests or
other notices, or possession of any Collateral, or any statutes, rules or law,
or court decisions to the contrary.

 

(c)           The subordinations and priorities specified in this Agreement are
expressly conditioned upon the nonavoidability and perfection of the security
interest to which another security interest is subordinated, and if the security
interest to which another security interest is subordinated is not perfected or
is avoidable, for any reason, then the subordinations and relative priority
provided for in this Agreement shall not be effective as to the particular
Collateral which is the subject of the unperfected or avoidable security
interest.

 

(d)           Berg agrees that if there is an event of default by the Company
under the Bank Loan Agreement (as such an event is defined thereunder) which is
not cured, or otherwise resolved as evidenced by the Bank’s withdrawal of the
notice of default, within 30 days after notice of the default is given to the
Company, he will pay all amounts then owed to Bank by the Company that are
subject to his Unconditional Guaranty and will acquire the Bank Security
Interest, which he will hold subject to and in accordance with the terms of this
Agreement.

 

4.        Termination Statements .  In the event any Collateral is being sold or
otherwise disposed of in connection with the liquidation of assets upon or after
an event of default under any present or future instrument or agreement between
the Company and Berg, or by the Purchasers’ Agent pursuant to any present or
future instrument or agreement between the Company and the Purchasers, each such
party to this Agreement shall promptly deliver to the other a notice thereof,
and each party agrees to promptly execute and deliver to the other, upon its
request, all appropriate UCC termination statements or partial releases with
respect to any such Collateral.

 

5.        Purchasers’ and Berg’s Rights .  The Purchasers and Berg each agree
that the other may at any time, and from time to time, without the consent of
the other party and without notice to the other party, renew or extend any of
the indebtedness, liabilities or obligations owing to it from the Company (the
“Secured Obligations”) or that

 

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of any other person at any time directly or indirectly liable for the payment of
any Secured Obligations, accept partial payments of the Secured Obligations,
settle, release (by operation of law or otherwise), compound, compromise,
collect or liquidate any of the Secured Obligations, make loans or advances to
the Company secured in whole or in part by Collateral or refrain from making any
loans or advances to the Company, change, alter or vary the interest charge on,
or any other terms or provisions of the Secured Obligations or any present or
future instrument, document or agreement with the Company, and take any other
action or omit to take any other action with respect to its Secured Obligations
or its Collateral as it deems necessary or advisable in its sole discretion. 
The Purchasers and Berg each waive any right to require the other to marshal any
Collateral or other assets in favor of it or against or in payment of any or all
of its Secured Obligations.

 

6.        No Commitment by Berg or the Purchasers .  It is understood and agreed
that this Agreement shall in no way be construed as a commitment or agreement by
the Purchasers or Berg to continue financing arrangements with the Company, and
that the Purchasers and Berg, subject to the terms of such financing
arrangements, may terminate such arrangements at any time.

 

7.        Insurance .  The Purchasers and Berg each having a pro rata security
interest or lien in the Collateral shall, subject to such Purchaser’s or Berg’s
rights under its agreements with the Company and to the Bank Intercreditor
Agreement, have the right to any settlement of any insurance policy in the event
of any loss pro rata by Berg and the Purchasers based on the then outstanding
payment obligations of the Company to Berg and the Purchasers pursuant to the
Notes.

 

8.        Bankruptcy Financing .  In the event of any financing of the Company
by the Purchasers or Berg during any Bankruptcy, arrangement, or reorganization
of the Company, each of Berg and the Purchasers agrees that the other’s “Secured
Obligations” shall include without limitation all indebtedness, liabilities and
obligations incurred by the Company in any such proceeding, and the other’s
“Collateral” shall include without limitation all Collateral arising during any
such proceeding, and this Agreement shall continue to apply during any such
proceeding.

 

9.        Notices of Default; Consultation .  Berg and the Purchasers agree to
use their best efforts to give to the other copies of any written notice of the
occurrence or existence of an event of default sent to the Company,
simultaneously with the sending of such notice to the Company, and to consult
with each other for a reasonable period, not to exceed 60 days, as to
enforcement of their respective remedies against the Company and its property,
but the failure to do so shall not affect the validity of such notice or create
a cause of action against or liability on the part of the party failing to give
such notice, nor shall it create any claim or right on behalf of the other
party, the Company or any third party.  The sending of such notice shall not
give the recipient the obligation to cure such default or event of default.

 

10.      No Contest .  Neither Berg nor the Purchasers shall contest the
validity, perfection, priority or enforceability of any lien or security
interest granted to the other, and each agrees to cooperate in the defense of
any action contesting the validity, perfection, priority or enforceability of
such liens or security interest at the cost of the party defending such action.

 

11.      Financial Condition of Company .  Berg and the Purchasers are each
presently informed of the financial condition of the Company and of all other
circumstances which a diligent inquiry would reveal and which bear upon the risk
of non-payment of the Secured Obligations owing to them.  Berg and the
Purchasers each waive any right to require the other to disclose to it any
information which the other may now or hereafter acquire concerning the Company.

 

12.      Waiver of Jury Trial .  THE PURCHASERS AND BERG EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO:  (I) THIS AGREEMENT; OR (II) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN THE PURCHASERS AND BERG RELATING TO THE
COMPANY; OR (III) ANY CONDUCT, ACTS OR OMISSIONS OF THE PURCHASERS OR BERG OR
ANY OF THEIR

 

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DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS
AFFILIATED WITH THE PURCHASERS OR BERG, RELATING TO THE COMPANY, IN EACH OF THE
FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

 

13.      General .  Berg and the Purchasers are not in any manner to be
construed to be partners or joint venturers or to have any other legal
relationship other than as expressly set forth in written agreements between
them.  Berg and the Purchasers each agree to execute all such documents and
instruments and take all such actions as the other shall reasonably request in
order to carry out the purposes of this Agreement, including without limitation
appropriate amendments to financing statements executed by the Company in favor
of Berg or the Purchasers in order to refer to this Agreement (but this
Agreement shall remain fully effective notwithstanding any failure to execute
any additional documents, instruments, or amendments).  Berg and the Purchasers
each represents and warrants to the other that it has not heretofore transferred
or assigned any financing statement naming the Company as debtor and it as
secured party, and that it will not do so without first notifying the other in
writing, and delivering a copy of this Agreement to the proposed transferee or
assignee, and obtaining the acknowledgment of the proposed transferee or
assignee that the transfer or assignment is subject to all of the terms of this
Agreement.  This Agreement is solely for the benefit of the Purchasers and Berg
and their successors and assigns, and neither the Company nor any other person
shall have any right, benefit, priority or interest under, or because of the
existence of, this Agreement, provided that this Agreement extends certain
rights to Bank in concert with the Bank Intercreditor Agreement.  This Agreement
sets forth in full the terms of agreement between Berg and the Purchasers with
respect to the subject matter hereof, and may not be modified or amended, nor
may any rights hereunder be waived, except in a writing signed by Berg and the
Purchasers.  In the event of any litigation between the parties based upon or
arising out of this Agreement, the prevailing party shall be entitled to recover
all of its costs and expenses (including without limitation attorneys’ fees)
from the non-prevailing party.  This Agreement shall be binding upon the parties
hereto and their respective successors and assigns, and shall be construed in
accordance with, and governed by, the laws of California.  This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which shall constitute the same instrument.

 

14.      Purchasers’ Agent .  Berg acknowledges that Purchasers’ Agent has been
authorized by the Purchasers to act for the Purchasers in all matters under the
Security Agreement and he agrees to accept the acts and writings of the
Purchasers’ Agent on their behalf.  Each of the undersigned Purchasers agrees
that all acts and writings of the Purchasers’ Agent consistent with the terms of
this Agreement shall be binding on such Purchaser for all purposes under this
Agreement.

 

IN WITNESS WHEREOF, the undersigned have executed and delivered this
Intercreditor Agreement as of February 7, 2008.

 

 Signatures on following page.

 

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/s/ Carl E. Berg

 

 

CARL E. BERG

 

 

 

 

 

 

 

 

PURCHASERS’ AGENT

 

 

 

 

 

/s/ Thomas O. Boucher, Jr.

 

 

Thomas O. Boucher, Jr.

 

 

 

 

 

 

 

PURCHASER

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

 

SIGNATURE PAGE FOR AMENDED AND RESTATED INTERCREDITOR AGREEMENT

 

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COMPANY’S CONSENT AND AGREEMENT

 

The Company consents to the terms of this Intercreditor Agreement and agrees not
to take any actions inconsistent therewith.  The Company agrees to execute all
such documents and instruments and take all such actions as Berg or the
Purchasers’ Agent on behalf of the several Purchasers shall reasonably request
in order to carry out the purposes of this Agreement, including without
limitation appropriate amendments to financing statements.

 

 

 

 

 

FOCUS ENHANCEMENTS, INC.

 

 

 

 

 

 

 

 

By:

/s/ Brett Moyer

 

 

Brett Moyer

 

Title:

President & CEO

 

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EXHIBIT A

 

SCHEDULE OF PURCHASERS

 

ORIGINAL PURCHASERS

  Name

  Barbara Shingleton Trust

  Brad Shingleton Trust

  CFG Trust#1

  David Foote

  Donald L. Foote Trust#1

  Heritage Mark Foundation, Inc.

  Ingalls & Snyder Value Partners, L.P.

  Kenneth Foote

  Rhonda Foote-Judy

  Ronald Altman

  Steven Foote

  Steven Foote IRA

  Theresa Foote

 

  NEW PURCHASERS

  Name

  First National Bancshares Inc

  Blythefield Farms

  Inky Investments

  Steadfast LLC

  Shannah Ferguson

  Ferguson Children’s Trust

  Blake Ashdown IRA

  MacBay Partners

  Horace Boone

  John Boone

 

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