Exhibit 4.2


 


THESE SECURITIES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION
OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.


 


FOCUS ENHANCEMENTS, INC.


 


COMMON STOCK PURCHASE WARRANT


 


1.             Issuance;
Certain Definitions. For good and valuable consideration, the receipt of
which is hereby acknowledged by FOCUS ENHANCEMENTS, INC.,
a Delaware corporation (the “Company”), Carl E. Berg,
or registered assigns (the “Holder”) is hereby granted the right to purchase at
any time until 5:00 P.M., New York City time, on March 4,
2013 (the “Expiration Date”), 200,000 (two-hundred
thousand) fully paid and non-assessable shares of the Company’s
Common Stock, $0.01 par value per share (the “Common Stock”), at an initial
exercise price  (the “Exercise Price”) of
$0.40 (forty cents) per share, subject
to further adjustment as set forth herein. 
These shares are exercisable immediately.


 


2.             Exercise
of Warrants.


 


(a)                                 This Warrant is exercisable in whole or
in part at any time and from time to time. 
Such exercise shall be effectuated by submitting to the Company (either
by delivery to the Company or by facsimile transmission as provided in Section 8
hereof) a completed and duly executed Notice of Exercise (substantially in the
form attached to this Warrant) as provided in this paragraph.  The date such Notice of Exercise is faxed to
the Company shall be the “Exercise Date,” provided that the Holder of this
Warrant tenders this Warrant Certificate to the Company within five (5) business
days thereafter and at the time of such Notice of Exercise the Company has
received payment for the shares being purchased.  The Notice of Exercise shall be executed by
the Holder of this Warrant and shall indicate the number of shares then being
purchased pursuant to such exercise. 
Upon surrender of this Warrant Certificate, together with appropriate
payment of the Exercise Price for the shares of Common Stock purchased, the
Holder shall be entitled to receive a certificate or certificates for the
shares of Common Stock so purchased.


 


(b)                                 The Exercise Price per share of Common
Stock for the shares then being exercised shall be payable in cash by wire,
certified or official bank check.


 


(c)                                  In no event shall Holder exercise this
Warrant for less than ten thousand (10,000) Warrant Shares, as defined below,
unless the Holder has a Warrant for less than ten thousand (10,000) Warrant
Shares, in which case Holder shall be required to exercise the Warrant for all
remaining Warrant Shares on the Exercise Date.


 


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(d)                                 The Holder shall be deemed to be the
holder of the shares issuable to it in accordance with the provisions of this Section 2
only on and after the Exercise Date.


 


(e)                                  If at any time
after one year from the date of issuance of this Warrant there is no effective
Registration Statement registering the resale of the Warrant Shares by the
Holder, this Warrant may also be exercised at such time by means of a “cashless
exercise” in which the Holder shall be entitled to receive a certificate for
the number of Warrant Shares equal to the quotient obtained by dividing [(A-B)
(X)] by (A), where:


 


	
  (A) =

  	
   

  	
  the
  Closing Price on the trading day immediately preceding the date of such
  election;

  
	
  (B) =

  	
   

  	
  the
  Exercise Price of this Warrant, as adjusted; and

  
	
  (X) =

  	
   

  	
  the
  number of Warrant Shares issuable upon exercise of this Warrant in accordance
  with the terms 

  
	
   

  	
   

  	
   

  	
  of
  this Warrant by means of a cash exercise rather than a cashless exercise.

  



 


3.             Reservation
of Shares. At all times during the term of this Warrant the Company  shall 
reserve for issuance upon exercise of this Warrant such number of shares
of its Common Stock as shall be required for issuance upon exercise of this
Warrant (the “Warrant Shares”).


 


4.             Mutilation
or Loss of Warrant.  Upon receipt by
the Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction)
receipt of reasonably satisfactory indemnification, and (in the case of
mutilation) upon surrender and cancellation of this Warrant, the Company will
execute and deliver a new Warrant of like tenor and date and any such lost,
stolen, destroyed or mutilated Warrant shall thereupon become void.


 


5.             Rights
of the Holder.  Until the Warrant is
exercised in whole or in part, the Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or
equity, and the rights of the Holder shall be limited to those expressed in
this Warrant and are not enforceable against the Company except to the extent
set forth herein.


 


6.             Adjustments.


 


6.1          Adjustment
Mechanism.  If an adjustment of the
Exercise Price is required pursuant to this Section 6, the Holder shall be
entitled to purchase such number of shares of Common Stock as will cause (i) the
total number of shares of Common Stock Holder is entitled to purchase pursuant
to this Warrant, multiplied by (ii) the adjusted Exercise Price per share,
to equal (iii) the dollar amount of the total number of shares of Common
Stock Holder is entitled to purchase before adjustment multiplied by the total
Exercise Price immediately before adjustment.


 


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6.2          Capital
Adjustments.  In case of any stock
split or reverse stock split, stock dividend, reclassification of the Common
Stock, recapitalization, merger or consolidation, or like capital adjustment
affecting the Common Stock of the Company prior to the exercise of this Warrant
or its applicable portion, the provisions of this Section 6 shall be
applied as if such capital adjustment event had occurred immediately prior to
the exercise date of this Warrant and the original Exercise Price had been
fairly allocated to the stock resulting from such capital adjustment; and in
other respects the provisions of this Section shall be applied in a fair,
equitable and reasonable manner, as determined by the Company’s Board of
Directors in its absolute discretion,  so
as to give effect, as nearly as may be practicable, to the purposes hereof.


 


6.3          Spin
Off.  If, for any reason, prior to
the exercise of this Warrant in full, the Company spins off or otherwise
divests itself of a part of its business or operations or disposes all or of a
part of its assets in a transaction (the “Spin Off”) in which the Company does
not receive compensation for such business, operations or assets, but causes
securities of another entity to be issued to Common Stock security holders of
the Company, then the Company shall 
notify the Holder at least twenty 
(20) days prior to the record date with respect to such Spin-Off.


 


7.             Transfer
to Comply with the Securities Act; Restriction on Sales; Registration Rights.


 


7.1          Transfer.  This Warrant has not been registered under
the Securities Act of 1933, as amended, (the “Act”) and has been issued to the
Holder for investment and not with a view to the distribution of either the
Warrant or the Warrant Shares.  Neither
this Warrant nor any of the Warrant Shares or any other security issued or
issuable upon exercise of this Warrant may be sold, transferred, pledged or
hypothecated in the absence of an effective registration statement under the
Act relating to such security or an opinion of counsel satisfactory to the
Company that registration is not required under the Act.  Each certificate for the Warrant, the Warrant
Shares and any other security issued or issuable upon exercise of this Warrant
shall contain a legend on the face thereof, in form and substance satisfactory
to counsel for the Company, setting forth the restrictions on transfer
contained in this Section.


 


7.2          Registration
Rights. As set forth in Exhibit 1, Holder shall have piggy-back
registration rights with respect to the Warrant Shares then held by the Holder
or then subject to issuance upon exercise of this Warrant (collectively, the “Remaining
Warrant Shares”).


 


8.  Notices.  Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally
(including by recognized courier), sent by facsimile transmission, or sent by
certified, registered or express mail, postage pre-paid.  Any such notice shall be deemed given when so
delivered personally, or sent by facsimile transmission, or, if mailed, four
days after the date of prepaid deposit in the United States mail, certified, registered
or overnight delivery as follows:


 


(i)                                     if to the Company, to:


 


FOCUS ENHANCEMENTS, INC.


1370 Dell Avenue


Campbell, California 95008


ATTN: Gary Williams, Chief Financial Officer


Telephone No.: (408) 866-8300


Facsimile No.:  (408)
866-4795


 


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with a
copy to:


 


Manatt, Phelps & Phillips, LLP


1001 Page Mill Road, Bldg. 2


Palo Alto, California 94304


Attn: Jerrold F. Petruzzelli, Esq.


Telephone No.: (650) 812-1335


Telecopier No.: (650) 213-0260


 


(ii) if to the Holder, to:


Carl E. Berg


10050 Bandley Dr


Cupertino, CA 95014


 


Telecopier No.:


408-725-1626


 


                Any party may give notice to the
other parties designated in accordance with this Section to change its
respective address or addressee for notices.


 


9.   Supplements
and Amendments; Whole Agreement. 
This Warrant may be amended or supplemented only by an instrument in
writing signed by the parties hereto. 
This Warrant contains the full understanding of the parties with respect
to its subject matter,  and there are no
representations, warranties, agreements or understandings other than expressly
contained herein and therein.


 


10.          Governing
Law.  This Warrant shall be deemed to
be a contract made under the laws of the State of Delaware for contracts to be
wholly performed in such state and without giving effect to the principles
thereof regarding the conflict of laws. 
Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the State of California, Santa Clara County
in connection with any dispute arising under this Warrant and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of
any such proceeding in such jurisdictions.


 


11.  Jury
Trial Waiver.  The Company and the
Holder hereby waive a trial by jury in any action, proceeding or counterclaim
brought by either of the parties hereto against the other in respect of any
matter arising out or in connection with this Warrant.


 


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12.  Counterparts.  This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.


 


13.  Descriptive
Headings.  Descriptive headings of
the several Sections of this Warrant are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.


 


IN WITNESS WHEREOF, the parties hereto have executed
this Warrant as of the 4th day of March, 2008.


 


	
   

  	
  FOCUS ENHANCEMENTS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary Williams

  
	
   

  	
   

  
	
   

  	
  Name: Gary Williams

  
	
   

  	
  Title: EVP of Finance & CFO

  



 


 


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NOTICE OF EXERCISE OF WARRANT


 


The
undersigned hereby irrevocably elects to exercise the right, represented by the
Warrant Certificate dated as of                         ,
       , to purchase                          shares of the Common Stock, $0.01 par value,
of FOCUS ENHANCEMENTS, INC.,  and tenders herewith payment in accordance
with Section 1 of said Common Stock Purchase Warrant.


 


                CASH:$                                                 =   (Exercise Price x Exercise Shares)


 


Payment is being made by:


 


 


 


                    enclosed check


 


 


                    wire transfer


 


 


                    other


 


 


                    the cancellation of such number of
Warrant Shares as is necessary, in accordance with the formula set forth in
subsection 2(e), to exercise this Warrant with respect to the maximum number of
Warrant Shares purchasable pursuant to the cashless exercise procedure set
forth in subsection 2(e).


 


 


Please
deliver the stock certificate to:


 


Dated:


 


[Name of Holder]


 


By:


 


 


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