Exhibit 10.2


 


REGISTRATION
RIGHTS AGREEMENT


 


This Registration Rights Agreement (this “Agreement”)
is made and entered into as of November 3, 2005, by and among Focus
Enhancements, Inc., a Delaware corporation (the “Company”), and the
purchasers signatory hereto (each such purchaser, a “Purchaser” and
collectively, the “Purchasers”).


 


This Agreement is made pursuant to the
Securities Purchase Agreement, dated as of the date hereof, among the Company
and the Purchasers (the “Purchase Agreement”).


 


The Company and the Purchasers hereby agree
as follows:


 


1.             Definitions.  Capitalized terms used and not otherwise
defined herein that are defined in the Purchase Agreement shall have the
meanings given such terms in the Purchase Agreement.  As used in this Agreement, the following
terms shall have the following meanings:


 


“Advice”
shall have the meaning set forth in Section 6(d).


 


“Effectiveness
Date” means, with respect to the Registration Statement required to be
filed hereunder, the earlier of (a) the 90th calendar day (120th
in the event of a review by the Commission) following the Closing Date, and (b) the
fifth (5th) Trading Day following the date on which the Company is notified by
the Commission that the Registration Statement will not be reviewed or is no longer
subject to further review and comments.


 


“Effectiveness
Period” shall have the meaning set forth in Section 2(a).


 


“Event”
shall have the meaning set forth in Section 2(b).


 


“Event Date”
shall have the meaning set forth in Section 2(b).


 


“Filing
Date” means, with respect to the Registration Statement required to be
filed hereunder, the 45th calendar day following the Closing Date.


 


“Holder”
or “Holders” means the holder or holders, as the case may be, from time
to time of Registrable Securities.


 


“Indemnified
Party” shall have the meaning set forth in Section 5(c).


 


“Indemnifying
Party” shall have the meaning set forth in Section 5(c).


 


“Losses”
shall have the meaning set forth in Section 5(a).


 


“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.


 


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“Prospectus”
means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or supplemented
by any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration Statement,
and all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.


 


“Registrable
Securities” means all of the Shares and the Warrant Shares, together with
any shares of Common Stock issued or issuable upon any stock split, dividend or
other distribution, recapitalization or similar event with respect to the
foregoing.


 


“Registration
Statement” means the registration statements required to be filed
hereunder, including (in each case) the Prospectus, amendments and supplements
to the registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in the registration statement.


 


“Rule 415”
means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.


 


“Rule 424”
means Rule 424 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.


 


2.             Registration.


 


(a)           On
or prior to the Filing Date, the Company shall prepare and file with the
Commission the Registration Statement covering the resale of all of the
Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415.  The
Registration Statement required hereunder shall be on Form S-3 (except if
the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case the Registration shall be on another
appropriate form in accordance herewith). 
The Registration Statement required hereunder shall contain (except if
otherwise directed by the Holders) substantially the “Plan of Distribution”
attached hereto as Annex A. 
Subject to the terms of this Agreement, the Company shall use its best
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event not later than the Effectiveness Date, and shall use its best efforts to
keep the Registration Statement continuously effective under the Securities Act
until the date when all Registrable Securities covered by the Registration
Statement have been sold or may be sold without volume restrictions pursuant to
Rule 144(k) as determined by the counsel to the Company pursuant to a 


 


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written opinion letter to such effect,
addressed and acceptable to the Company’s transfer agent and the affected
Holders (the “Effectiveness Period”).


 


(b)           If:
(i) a Registration Statement is not filed on or prior to the Filing Date
(if the Company files a Registration Statement without affording the Holder the
opportunity to review and comment on the same as required by Section 3(a),
the Company shall not be deemed to have satisfied this clause (i)), or (ii) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act, within two
Trading Days of the date that the Company is notified in writing by the
Commission that a Registration Statement will not be “reviewed,” or is not
subject to further review, or (iii) prior to the date when such
Registration Statement is first declared effective by the Commission, the
Company fails to file a pre-effective amendment and otherwise respond in
writing to comments made by the Commission in respect of such Registration
Statement within 20 calendar days after the receipt of comments by or notice
from the Commission that such amendment is required in order for a Registration
Statement to be declared effective, or (iv) a Registration Statement filed
or required to be filed hereunder is not declared effective by the Commission
on or before the Effectiveness Date, or (v) after a Registration Statement
is first declared effective by the Commission, it ceases for any reason to
remain continuously effective as to all Registrable Securities for which it is
required to be effective, or the Holders are not permitted to utilize the
Prospectus therein to resell such Registrable Securities, for in any such case
10 calendar consecutive days but no more than an aggregate of 15 calendar days
during any 12 month period (which need not be consecutive Trading Days)(any
such failure or breach being referred to as an “Event,” and for purposes
of clause (i) or (iv) the date on which such Event occurs, or for
purposes of clause (ii) the date on which such two (2) Trading Day
period is exceeded, or for purposes of clause (iii) the date which such 20
calendar days is exceeded, or for purposes of clause (v) the date on which
such 10 or 15 calendar day period, as applicable, is exceeded being referred to
as “Event Date”), then in addition to any other rights the Holders may
have hereunder or under applicable law: (x) on each such applicable Event Date
the Company shall pay to each Holder an amount in cash, as partial liquidated
damages and not as a penalty, equal to 1.0% of the aggregate purchase price
paid by such Holder pursuant to the Purchase Agreement for any Registrable Securities
then held by such Holder; and (y) on each monthly anniversary of each such
Event Date (if the applicable Event shall not have been cured by such date)
until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as partial liquidated damages and not as a penalty, 1.5% of the
aggregate purchase price paid by such Holder pursuant to the Purchase Agreement
for any Registrable Securities then held by such Holder.  If the Company fails to pay any partial
liquidated damages pursuant to this Section in full within seven days
after the date payable, the Company will pay interest thereon at a rate of 12%
per annum (or such lesser maximum amount that is permitted to be paid by
applicable law) to the Holder, accruing daily from the date such partial
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full.  The partial liquidated
damages pursuant to the terms hereof shall apply on a daily pro-rata basis for
any portion of a month prior to the cure of an Event.


 


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3.             Registration
Procedures


 


In connection with the Company’s registration
obligations hereunder, the Company shall:


 


(a)           Not
less than five (5) Trading Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto, (i) furnish
to the Holders copies of all such documents proposed to be filed (including
documents incorporated or deemed incorporated by reference to the extent requested
by such Person) which documents will be subject to the review of such Holders,
and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be
necessary, in the reasonable opinion of respective counsel to conduct a
reasonable investigation within the meaning of the Securities Act.  The Company shall not file the Registration
Statement or any such Prospectus or any amendments or supplements thereto to
which the Holders of a majority of the Registrable Securities shall reasonably
object in good faith, provided that the Company is notified of such objection
in writing no later than four Trading Days after the Holders have been so
furnished copies of such documents.  Each
Holder agrees to furnish to the Company a completed Questionnaire in the form
attached to this Agreement as Annex B (a “Selling Shareholder
Questionnaire”) not less than the earlier to occur of two (2) Trading
Days prior to the Filing Date or the end of the fourth Trading Day following
the date on which such Holder receives draft materials in accordance with this
Section.


 


(b)           (i) Prepare
and file with the Commission such amendments, including post-effective
amendments, to the Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period and prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424; (iii) respond as promptly
as reasonably possible to any comments received from the Commission with
respect to the Registration Statement or any amendment thereto and, as promptly
as reasonably possible, upon request, provide the Holders true and complete
copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as
so amended or in such Prospectus as so supplemented.


 


(c)           Notify
the Holders of Registrable Securities to be sold as promptly as reasonably
possible and (if requested by any such Person) confirm such notice in writing
promptly 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) when the Commission notifies the Company whether
there will be a “review” of the Registration Statement and whenever the
Commission comments in writing on the 


 


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Registration Statement (the Company shall
upon request provide true and complete copies thereof and all written responses
thereto to each of the Holders); and (C) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective; (ii) of
any request by the Commission or any other Federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission or any
other federal or state governmental authority 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) 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 (v) of the occurrence of any event or
passage of time that makes the financial statements included in the
Registration Statement ineligible for inclusion therein or 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.


 


(d)           Use
commercially reasonable efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of the Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.


 


(e)           Furnish
to each Holder, without charge, at least one conformed copy of the Registration
Statement and each amendment thereto promptly after the filing of such
documents with the Commission.


 


(f)            Promptly
deliver to each Holder, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request in connection with
resales by the Holder of Registrable Securities.  Subject to the terms of this Agreement, the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto, except after the giving on any notice
pursuant to Section 3(c).


 


(g)           Prior
to any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders
in connection with the registration or qualification (or exemption from the
Registration or qualification) of such Registrable Securities for the resale by
the Holder under the securities or Blue Sky laws of such jurisdictions within
the United States as any 


 


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Holder reasonably requests in writing, to
keep each such Registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
reasonably necessary to enable the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statement; provided,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so subject or file a
general consent to service of process in any such jurisdiction.


 


(h)           If
requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to the Registration Statement, which
certificates shall be free, to the extent permitted by the Purchase Agreement,
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any such Holders may
request.


 


(i)            Upon
the occurrence of any event contemplated by Section 3(c)(v), as promptly
as reasonably possible, prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such Prospectus will contain
an 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 under which they were made, not misleading. If the
Company notifies the Holders in accordance with clauses (ii) through (v) of
Section 3(c) above to suspend the use of any Prospectus until the
requisite changes to such Prospectus have been made, then the Holders shall
suspend use of such Prospectus.  The
Company will use its best commercial efforts to ensure that the use of the
Prospectus may be resumed as promptly as is practicable.  The Company shall be entitled to exercise its
right under this Section 3(i) to suspend the availability of a
Registration Statement and Prospectus, subject to the payment of liquidated
damages pursuant to Section 2(b), for a period not to exceed 60 days
(which need not be consecutive days) in any 12 month period.


 


(j)            Comply
with all applicable rules and regulations of the Commission.


 


(k)           The
Company may require each Holder to furnish to the Company a certified statement
as to the number of shares of Common Stock beneficially owned by such Holder
and the person thereof that has voting and dispositive control over the Shares.
During any periods that the Company is unable to meet its obligations hereunder
with respect to the registration of the Registrable Securities solely because
any Holder fails to furnish such information within three Trading Days of the
Company’s request, any liquidated damages that are accruing at such time as to
such Holder only shall be tolled and any Event that may otherwise occur solely
because of such delay shall be suspended as to such Holder only, until such
information is delivered to the Company.


 


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4.             Registration
Expenses.  All fees and expenses
incident to the performance of or compliance with this Agreement by the Company
shall be borne by the Company whether or not any Registrable Securities are
sold pursuant to the Registration Statement. 
The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to
filings required to be made with the Trading Market on which the Common Stock
is then listed for trading, and (B) in compliance with applicable state
securities or Blue Sky laws), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities and of
printing prospectuses if the printing of prospectuses is reasonably requested
by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company and Lead Investor
Counsel for the Holders, in the case of the Lead Investor Counsel, up to a
maximum amount of $5,000 (which shall be in addition to the legal fees of Lead
Investor Counsel specified in Section 5.1 of the Purchase Agreement), (v) Securities
Act liability insurance, if the Company so desires such insurance, and (vi) fees
and expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement.  In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation
of the transactions contemplated by this Agreement (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit and the fees and
expenses incurred in connection with the listing of the Registrable Securities
on any securities exchange as required hereunder. In no event shall the Company
be responsible for any broker or similar commissions or, except to the extent
provided for in this Agreement or the other Transaction Documents, any legal
fees or other costs of the Holders.


 


5.             Indemnification


 


(a)           Indemnification
by the Company.  The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents and employees of each of them,
each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation, reasonable
attorneys’ fees) and expenses (collectively, “Losses”), as incurred,
arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any Prospectus or any
form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (i) such untrue statements or omissions are based solely upon
information regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, or to the extent that such information
relates to such Holder or such Holder’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Holder expressly for use in the Registration Statement, such Prospectus or
such form of 


 


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Prospectus or in any amendment or supplement
thereto (it being understood that the Holder has approved Annex A hereto for
this purpose) or (ii) in the case of an occurrence of an event of the type
specified in Sections 3(c)(ii)-(v), the use by such Holder of an outdated or
defective Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective and prior to the receipt by such Holder
of the Advice contemplated in Section 7(d).  The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the Company
is aware in connection with the transactions contemplated by this Agreement.


 


(b)           Indemnification
by Holders. Each Holder shall, severally and not jointly, indemnify and
hold harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as incurred,
to the extent arising out of or based solely upon: (x) such Holder’s failure to
comply with the prospectus delivery requirements of the Securities Act or (y)
any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (i) to the extent, but only to the extent, such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein or
to the extent that such information relates to such Holder or such Holder’s
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto (it being understood that the Holder has approved
Annex A hereto for this purpose) or (ii) in the case of an occurrence of
an event of the type specified in Sections 3(c)(ii)-(v), the use by such Holder
of an outdated or defective Prospectus after the Company has notified such
Holder in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 7(d).  In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.


 


(c)           Conduct
of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the
Indemnifying Party shall have the right to assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure shall
have prejudiced the Indemnifying Party.


 


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An Indemnified
Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party or Parties
unless:  (1) the Indemnifying Party
has agreed in writing to pay such fees and expenses; (2) the Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding and
to employ counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall reasonably believe that a material
conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
the reasonable fees and expenses of one separate counsel for all Indemnified
Parties shall be at the expense of the Indemnifying Party).  The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld.  No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.


 


Subject to the
terms of this Agreement, all reasonable fees and expenses of the Indemnified
Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten (10) Trading Days of written notice thereof
to the Indemnifying Party; provided, that the Indemnified Party shall
promptly reimburse the Indemnifying Party for that portion of such fees and
expenses applicable to such actions for which such Indemnified Party is not
entitled to indemnification hereunder, determined based upon the relative faults
of the parties.


 


(d)           Contribution.  If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable
considerations.  The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission.  The
amount paid or payable by a party as a result of any Losses shall be deemed to
include, subject to the limitations set forth in this Agreement, any reasonable
attorneys’ or other reasonable fees 


 


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or expenses incurred by such party in
connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.


 


The parties
hereto agree that it would not be just and equitable if contribution pursuant
to this Section 5(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the net proceeds actually received by such Holder
from the sale of the Registrable Securities exceeds the amount of any damages
that such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, except in the case of
fraud by such Holder.


 


The indemnity
and contribution agreements contained in this Section are in addition to
any liability that the Indemnifying Parties may have to the Indemnified
Parties.


 


6.             Miscellaneous


 


(a)           Remedies.  In the event of a breach by the Company or by
a Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this
Agreement.  The Company and each Holder
agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.


 


(b)           No
Piggyback on Registrations.  Except
as set forth on Schedule 6(b) attached hereto, neither the
Company nor any of its security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the Company in a
Registration Statement other than the Registrable Securities.  Except as set forth on Schedule 6(b),
no Person has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company.  Except as set forth on Schedule 6(b),
the Company shall not file any other registration statement until after the
Effective Date.


 


(c)           Compliance.  Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.


 


(d)           Discontinued
Disposition.  Each Holder agrees by
its acquisition of such Registrable Securities that, upon receipt of written
notice from the Company of the occurrence of any event of the kind described in
Section 3(c), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement 


 


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until such Holder’s receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement or until it
is advised in writing (the “Advice”) by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.  The Company will use its best efforts to
ensure that the use of the Prospectus may be resumed as promptly as it
practicable.  The Company agrees and
acknowledges that any periods during which the Holder is required to
discontinue the disposition of the Registrable Securities hereunder shall be
subject to the provisions of Section 2(b).


 


(e)           Piggy-Back
Registrations.  If at any time during
the Effectiveness Period there is not an effective Registration Statement
covering all of the Registrable Securities and the Company shall determine to
prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities, other than on Form S-4 or Form S-8
(each as promulgated under the Securities Act) or their then equivalents or on Form S-3
relating solely to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with the stock option or other employee benefit plans, then the
Company shall send to each Holder a written notice of such determination and,
if within fifteen days after the date of such notice, any such Holder shall so
request in writing, the Company shall include in such registration statement
all or any part of such Registrable Securities such Holder requests to be
registered, subject to customary underwriter cutbacks and discretion
exercisable with respect to all holders of registration rights.


 


(f)            Amendments
and Waivers.  The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and each Holder of the then outstanding Registrable
Securities.


 


(g)           Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be made in
accordance with the provisions of the Purchase Agreement.


 


(h)           Successors
and Assigns.  This Agreement shall
inure to the benefit of and be binding upon the successors and permitted
assigns of each of the parties and shall inure to the benefit of each
Holder.  Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.


 


(i)            Execution
and Counterparts.  This Agreement may
be executed in any number of counterparts, each of which when so executed shall
be deemed to be an original and, all of which taken together shall constitute
one and the same Agreement.  In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.


 


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(j)            Governing
Law.  All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be determined with the provisions of the Purchase Agreement.


 


(k)           Cumulative
Remedies.  The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.


 


(l)            Severability.
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction.  It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.


 


(m)          Headings.
 The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.


 


(n)           Independent
Nature of Purchasers’ Obligations and Rights.  The obligations of each Holder hereunder are
several and not joint with the obligations of any other Holder hereunder, and
no Holder shall be responsible in any way for the performance of the
obligations of any other Holder hereunder. 
Nothing contained herein or in any other agreement or document delivered
at any closing, and no action taken by any Holder pursuant hereto or thereto,
shall be deemed to constitute the Holders as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Holders are in any way acting in concert with respect to such obligations or
the transactions contemplated by this Agreement.  Each Holder shall be entitled to protect and
enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Holder to be joined as
an additional party in any proceeding for such purpose.


 


12





















 


IN WITNESS WHEREOF, the parties have executed
this Registration Rights Agreement as of the date first written above.


 


	
   

  	
  FOCUS ENHANCEMENTS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brett Moyer

  	
   

  
	
   

  	
   

  	
  Name: Brett
  Moyer

  
	
   

  	
   

  	
  Title:
  CEO & President

  



 


 


[SIGNATURE PAGE OF HOLDERS
FOLLOWS]


 


13





















 


[PURCHASER’S SIGNATURE PAGE TO
FCSE REGISTRATION RIGHTS AGREEMENT]


 


	
  Name of Investing Entity:

  	
   

  	
   

  
	
  Signature of Authorized Signatory of
  Investing entity:

  	
   

  	
   

  
	
  Name of Authorized Signatory:

  	
   

  	
   

  
	
  Title of Authorized Signatory:

  	
   

  	
   

  
								



 


[HOLDER SIGNATURE PAGE]


 


14





















 


ANNEX
A


 


Plan of
Distribution


 


We are registering the shares of stock being
offered by this prospectus for resale in accordance with certain registration
rights granted the selling stockholders, including their pledgees, donees,
transferees or other successors-in-interest, who may sell the shares from time
to time, or who may also decide not to sell any or all of the shares that may
be sold under this prospectus.  We will
pay all registration expenses including, without limitation, all the SEC and
blue sky registration and filing fees, printing expenses, transfer agents’ and
registrars’ fees, and the fees and disbursements of our outside counsel in
connection with this offering, but the selling shareholders will pay all
selling expenses including, without limitation, any underwriters’ or brokers’
fees or discounts relating to the shares registered hereby, or the fees or
expenses of separate counsel to the selling stockholders.


 


The selling stockholders and any of their
pledgees, assignees and successors-in-interest may, from time to time, sell any
or all of their shares of common stock on any stock exchange, market or trading
facility on which the shares are traded or in private transactions.  These sales may be at fixed or negotiated
prices.  The selling stockholders may use
any one or more of the following methods when selling shares:


 


•      ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;


 


•      block trades in
which the broker-dealer will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction;


 


•      purchases by a
broker-dealer as principal and resale by the broker-dealer for its account;


 


•      an exchange
distribution in accordance with the rules of the applicable exchange;


 


•      privately
negotiated transactions;


 


•      settlement of
short sales;


 


•      broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per share;


 


•      a combination
of any such methods of sale;


 


•      through the
writing or settlement of options or other hedging transactions, whether through
an options exchange or otherwise; or


 


•      any other
method permitted pursuant to applicable law.


 


The selling stockholders may also sell shares
under Rule 144 under the Securities Act of 1933, as amended, if available,
rather than under this prospectus.


 


15





















 


Broker-dealers engaged by the selling
stockholders may arrange for other brokers-dealers to participate in
sales.  Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated.  Each selling stockholder
does not expect these commissions and discounts relating to its sales of shares
to exceed what is customary in the types of transactions involved.


 


In connection with the sale of our common
stock or interests therein, the selling stockholders may enter into hedging
transactions with broker-dealers or other financial institutions, which may in
turn engage in short sales of the common stock in the course of hedging the
positions they assume.  The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities.  The selling stockholders may also enter into
option or other transactions with broker-dealers or other financial
institutions or the creation of one or more derivative securities which require
the delivery to such broker-dealer or other financial institution of shares
offered by this prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction).


 


The selling stockholders and any broker-dealers
or agents that are involved in selling the shares may be deemed to be “underwriters”
within the meaning of the Securities Act in connection with such sales.  Selling stockholders that are either
broker-dealers or affiliated with broker-dealers will be deemed to be
underwriters within the meaning of the Securities Act in connection with resale
of their shares.  First Montauk
Securities Corp. and Rodman & Renshaw LLC are underwriters within the
meaning of the Securities Act.  Any
commissions received by such broker-dealers, affiliates, or agents and any
profit on the resale of the shares purchased by them will be deemed to be
underwriting commissions or discounts under the Securities Act.  The selling stockholders have informed us
that at the time they purchased our common stock they did not, and currently do
not have, any agreement or understanding, directly or indirectly, with any
person to distribute the common stock being sold pursuant to this prospectus.


 


We are required to pay certain fees and
expenses incurred by us incident to the registration of the shares.  We have agreed to indemnify the selling
stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.


 


Because selling stockholders may be deemed to
be “underwriters” within the meaning of the Securities Act, they will be
subject to the prospectus delivery requirements of the Securities Act.  In addition, any securities covered by this
prospectus that qualify for sale pursuant to Rule 144 under the Securities
Act may be sold under Rule 144 rather than under this prospectus.  Each selling stockholder has advised us that
they have not entered into any agreements, understandings or arrangements with
any underwriter or broker-dealer regarding the sale of the resale shares.  There is no underwriter or coordinating
broker acting in connection with the proposed sale of the resale shares by the
selling stockholders.


 


We agreed to keep this prospectus effective
until the earlier of (i) the date on which the shares may be resold by the
selling stockholders without registration and without volume restrictions
pursuant to Rule 144(k) as determined by our counsel pursuant to a written
opinion 


 


16





















 


letter to such effect,
addressed and acceptable to our transfer agent and the selling stockholders or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under
the Securities Act or any other rule of similar effect.


 


The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws.  In addition, in certain
states, the resale shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.


 


Under applicable rules and regulations
under the Exchange Act, any person engaged in the distribution of the resale
shares may not simultaneously engage in market making activities with respect
to our common stock for a period of two business days prior to the commencement
of the distribution.  In addition, the
selling stockholders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including Regulation M,
which may limit the timing of purchases and sales of shares of our common stock
by the selling stockholders or any other person.  We will make copies of this prospectus
available to the selling stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time of
the sale.


 


Except for the exercise of warrants, we will
not receive any of the proceeds from the selling stockholders’ sale of our
common stock.


 


17





















 


Annex B


 


Focus
Enhancements, Inc.


 


Selling
Securityholder Notice and Questionnaire


 


The
undersigned beneficial owner of common stock, par value $0.01 per share (the “Common
Stock”), of Focus Enhancements, Inc., a Delaware corporation (the “Company”),
(the “Registrable Securities”) understands that the Company has filed or
intends to file with the Securities and Exchange Commission (the “Commission”)
a registration statement on Form S-3 (the “Registration Statement”)
for the registration and resale under Rule 415 of the Securities Act of
1933, as amended (the “Securities Act”), of the Registrable Securities,
in accordance with the terms of the Registration Rights Agreement, dated as of November 3,
2005 (the “Registration Rights Agreement”), among the Company and the
Purchasers named therein.  A copy of the
Registration Rights Agreement is available from the Company upon request at the
address set forth below.  All capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Registration Rights Agreement.


 


Certain legal consequences arise from being
named as a selling securityholder in the Registration Statement and the related
prospectus.  Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Registration Statement and the related
prospectus.


 


NOTICE


 


The undersigned beneficial owner (the “Selling
Securityholder”) of Registrable Securities hereby elects to include the
Registrable Securities owned by it and listed below in Item 3 (unless otherwise
specified under such Item 3) in the Registration Statement.


 


18





















 


The undersigned hereby provides the following information to the
Company and represents and warrants that such information is accurate:


 


QUESTIONNAIRE


 


1.             Name.


 


(a)           Full
Legal Name of Selling Securityholder


 


 


(b)           Full
Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities Listed in Item 3 below are held:


 


 


(c)           Full
Legal Name of Natural Control Person (which means a natural person who directly
you indirectly alone or with others has power to vote or dispose of the
securities covered by the questionnaire):


 


 


2.  Address for Notices to Selling
Securityholder:


 


 


Telephone:


Fax:


Contact Person:


Email Address:


 


3.  Beneficial Ownership of Registrable
Securities (Shares and/or Warrants received in current offering and to be
included on Registration Statement):


 


(a)           Type
and Number of Registrable Securities beneficially owned:


 


 


 


19





















 


4.  Broker-Dealer Status:


 


(a)           Are
you a broker-dealer?


 


Yes   o         No  o


 


Note:      If
yes, the Commission’s staff has indicated that you should be identified as an
underwriter in the Registration Statement.


 


(b)           Are
you an affiliate of a broker-dealer?


 


Yes   o         No  o


 


(c)           If
you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities in the ordinary course of business, and at the time of
the purchase of the Registrable Securities to be resold, you had no agreements
or understandings, directly or indirectly, with any person to distribute the
Registrable Securities?


 


Yes   o         No  o


 


Note:      If
no, the Commission’s staff has indicated that you should be identified as an
underwriter in the Registration Statement.


 


5.  Beneficial Ownership of Other Securities of
the Company Owned by the Selling Securityholder.


 


Except as set forth
below in this Item 5, the undersigned is not the beneficial or registered owner
of any securities of the Company other than the Registrable Securities listed
above in Item 3.


 


(a)           Type
and Amount of Other Securities of Focus Enhancements, Inc. beneficially
owned by the Selling Securityholder (excluding any securities listed above in
Item 3):


 


 


20





















 


6.  Relationships with the Company:


 


Except as set forth
below, neither the undersigned nor any of its affiliates, officers, directors
or principal equity holders (owners of 5% of more of the equity securities of
the undersigned) has held any position or office or has had any other material
relationship with the Company (or its predecessors or affiliates) during the
past three years.


 


State any
exceptions here:


 


 


The undersigned agrees to promptly notify the
Company of any inaccuracies or changes in the information provided herein that
may occur subsequent to the date hereof at any time while the Registration
Statement remains effective.


 


By signing below, the undersigned consents to
the disclosure of the information contained herein in its answers to Items 1
through 6 and the inclusion of such information in the Registration Statement
and the related prospectus.  The
undersigned understands that such information will be relied upon by the
Company in connection with the preparation or amendment of the Registration
Statement and the related prospectus.


 


IN WITNESS WHEREOF the undersigned, by
authority duly given, has caused this Notice and Questionnaire to be executed
and delivered either in person or by its duly authorized agent.


 


	
  Dated:

  	
  Beneficial Owner:

  	
   

  	
   

  



 


	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


PLEASE FAX A COPY OF THE COMPLETED AND
EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL,
TO:


 


Gary Williams


 


Focus
Enhancements, Inc.


 


1370 Dell
Avenue


 


Campbell,
California 95008


 


Fax (408) 866-4795


 


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