Exhibit 10.40


                              EMPLOYMENT AGREEMENT
                                  ("Agreement")

FOCUS Enhancements,  Inc., a Delaware  Corporation  (hereinafter  referred to as
"Employer")  and  Brett  Moyer  (hereinafter  referred  to  as  "Employee"),  in
consideration of the mutual promises made herein, agree as follows:

                                    ARTICLE 1
                               TERM OF EMPLOYMENT

                                Specified Period

Section 1.1

                  Employer hereby employs Employee,  and Employee hereby accepts
employment with Employer for the period  beginning on the effective date of this
Agreement as set forth below (the  "effective  date") and  terminating two years
after the effective date ("Initial Term").

                                 Succeeding Term

Section 1.2

                  This Agreement shall extend on the end of the Initial Term and
annually  thereafter at the annual  anniversary date for an additional  one-year
period (the "Succeeding Term"), unless terminated by either party for any reason
or not  renewed  upon  written  notice  given by one party to the other party at
least thirty (30) days before such applicable anniversary date.

                            "Employment Term" Defined

Section 1.3

                  As used  herein,  the phrase  "employment  term" refers to the
entire period of employment of Employee by Employer  hereunder,  whether for the
periods provided above, or whether terminated earlier as hereinafter provided or
extended automatically or by mutual agreement between Employer and Employee.

                                    ARTICLE 2
                       DUTIES AND OBLIGATIONS OF EMPLOYEE

                                 General Duties
Section 2.1

                  As of the date set forth in Section 8.8,  Employee shall serve
as Employer's  President & Chief Executive Officer, and he shall also serve as a
member of Employer's  Board of  Directors.  Prior to such date,  Employee  shall
continue to serve in his current  capacity as Executive  Vice-President  working
under the direction of and reporting to Michael D'Addio,  the Company's  current
President and Chief Executive Officer.

                  In his  capacity as  President  and Chief  Executive  Officer,
Employee  shall do and perform all services,  acts or things in accordance  with
the policies set by Employer's  Board of Directors.  Employee shall perform such
services primarily in Campbell,  California, which shall serve as the Employer's
principal facility,  except that the parties understand that temporary travel on
Employer's business to other sites shall be required.  The parties may designate
another  location  for  Employee to primarily  perform his  services;  provided,
however,  that Employee's  permanent place of employment  shall not be more than
fifty miles from Campbell, California absent Employee's written consent.


<PAGE>

                         Devotion to Employer's Business

Section 2.2

                  (a) Employee  shall devote  substantially  all his  productive
time,  ability and attention to the business of Employer  during the  employment
term.

                  (b) Employee shall not engage in any other business  duties or
pursuits  whatsoever,  or  directly  or  indirectly  render  any  services  of a
business, commercial or professional nature to any other person or organization,
whether for compensation or otherwise,  without the prior written consent of the
Board of Directors  except for (1) boards of  directors of private  companies on
which  Employee  currently  serves and (2) other  boards of  directors  to which
Employee  shall not devote more than 16 hours of service per month  (measured on
an annual basis).  However,  the  expenditure of reasonable  amounts of time for
education, charitable or professional activities shall not be deemed a breach of
this Agreement if those activities do not materially interfere with the services
required under this Agreement.

                  (c) In addition to Employee's  providing occasional service as
a member of the Board(s) of Directors as provided  above,  this Agreement  shall
not be interpreted to prohibit Employee from making passive personal investments
or conducting  private  business  affairs if those  activities do not materially
interfere with the services required under this Agreement.

       Confidential Information; Tangible Property; Competitive Activities

Section 2.3

                  (a) Employee  shall hold in confidence and not use or disclose
to any person or entity without the express written  authorization  of Employer,
either during the employment term or any time thereafter, secret or confidential
information of Employer.  Information and materials  received in confidence from
third  parties by Employee  with  respect to the  performance  of his duties for
Employer is included  within the meaning of this  section.  If any  confidential
information  described below is sought by legal process,  Employee will promptly
notify   Employer  and  will   cooperate   with  Employer  in   preserving   its
confidentiality in connection with any legal proceeding.

                  The parties hereto hereby  stipulate that, to the extent it is
not known  publicly,  the following  information is important,  material and has
independent  economic value (actual or potential) from not being generally known
to  others  who  could  obtain   economic  value  from  its  disclosure  or  use
("Confidential  Information"),  and that any breach of any terms of this Section
2.3 is a material breach of this Agreement:

                  (i)      The names,  buying habits and practices of Employer's
                           customers or prospective customers;
                  (ii)     Employer's marketing methods and related data;
                  (iii)    The names of Employer's vendors and suppliers;
                  (iv)     Cost of materials / services;
                  (v)      The prices  Employer  obtains or has  obtained or for
                           which it sells or has sold its products or services;
                  (vi)     Production costs;
                  (vii)    Compensation  paid to  employees  or  other  terms of
                           employment;
                  (viii)   Employer's past and projected sales volumes;
                  (ix)     Proposed new products / services;
                  (x)      Enhancements of existing products / services; and
                  (xi)     Any additional  information  deemed by Employer to be
                           confidential by marking or stamping "Confidential" or
                           similar  words on the cover of such  information,  by
                           advising  Employee  orally or in writing that certain
                           information is confidential.

                  All software  code,  methodologies,  models,  samples,  tools,
machinery, equipment, notes, books, correspondence,  drawings and other written,
graphical or electromagnetic records relating to any of the products of Employer
or relating to any of the  Confidential  Information  of Employer which Employee
shall prepare, use, construct,


<PAGE>

observe,  possess,  or control  shall be and shall  remain the sole  property of
Employer and shall be returned by Employee upon termination of employment.

                  (b) During the employment term,  Employee shall not,  directly
or indirectly,  either as an employee,  consultant,  agent, principal,  partner,
stockholder (except in a publicly held company), corporate officer, director, or
in any other individual or representative capacity, engage or participate in any
business that is in competition in any manner  whatsoever with the then business
of Employer.

                  (c) During the employment term,  Employee agrees that Employee
will  not  undertake  planning  for or  organization  of any  business  activity
competitive  with  Employer's  business,  or  combine  or  conspire  with  other
employees  or  representatives  of  Employer's   business  for  the  purpose  of
organizing any competitive business activity.

                  (d)  During  the  employment   term  and  for  two  (2)  years
thereafter,  Employee  agrees  that he will not  directly or  indirectly,  or by
action  in  concert  with  others,  induce  or  influence  (or seek to induce or
influence)  any person who is then engaged (as an employee,  agent,  independent
contractor,  or otherwise) by Employer to terminate his employment or engagement
for the purpose of employing  such person in any enterprise in which Employee is
a member of Management or has a material interest.

                  (e)  Covenants  of this  Section  2.3  shall be  construed  as
separate  covenants  covering  their  subject  matter  in each  of the  separate
counties  and  states in the  United  States  in which  Employer  transacts  its
business.  To the extent that any covenant shall be judicially  unenforceable in
any one or more of said counties or states, said covenants shall not be affected
with respect to each other county and state;  each covenant with respect to each
other county and state being construed as severable and independent.

                  (f) Employee  represents and warrants that Employee is free to
enter into this  Agreement and to perform each of its terms and  covenants,  and
that doing so will not violate the terms or  conditions  of any other  agreement
between Employee and any third party.

                          Inventions and Original Works
Section 2.4

                  (a) Employee  agrees that he will  promptly  make full written
disclosure  to  Employer,  will hold in trust for the sole right and  benefit of
Employer, and hereby assigns to Employer all of his right, title and interest in
and to any and all inventions (and patent rights with respect thereto), original
works of authorship  relating to the business of FOCUS  Enhancements  (including
all  copyrights  with  respect  thereto),  developments,  improvements  or trade
secrets  which  Employee may solely or jointly  conceive or develop or reduce to
practice,  or cause to be conceived or developed or reduced to practice,  during
the course of performing his duties under this Agreement.

                  (b)  Employee   acknowledges   that  all  original   works  of
authorship  relating to the business of FOCUS Enhancements which are made by him
(solely  or jointly  with  others)  within  the scope of his  duties  under this
Agreement and which are  protectable  by copyrights are "works made for hire" as
that term is defined in the United States  Copyright  Act (17 U.S.C.A.,  Section
101),  and that  Employee  is an employee  as defined  under that Act.  Employee
further  agrees from time to time to execute  written  transfers  to Employer of
ownership or specific original works or authorship (and all copyrights  therein)
made by  Employee  (solely or  jointly  with  others)  which  may,  despite  the
preceding sentence,  be deemed by a court of law not to be "works made for hire"
in such form as is acceptable to Employer in its reasonable discretion.

                             Maintenance of Records
Section 2.5

                  Employee  agrees to keep and  maintain  adequate  and  current
written records of all inventions,  original works of authorship,  trade secrets
developed or made by him (solely or jointly with others)  during the  employment
term.  The records  will be in the form of notes,  sketches,  drawings and other
formats that may be specified by Employer.  The records will be available to and
remain the sole property of Employer at all times.


<PAGE>

               Obtaining Letters Patent and Copyright Registration
Section 2.6

                  Employee  agrees to assist Employer to obtain United States or
foreign letters patent, and copyright registrations (as well as any transfers of
ownership thereof) covering inventions and original works of authorship assigned
hereunder to Employer.  Such obligation shall continue beyond the termination of
this Agreement, but after such termination Employer shall compensate Employee at
a reasonable  rate for time actually spent by Employee at Employer's  request on
such assistance.

                  If  Employer  is unable for any reason  whatsoever,  including
Employee's mental or physical incapacity to secure Employee's signature to apply
for or to pursue  any  application  for any United  States or  foreign  letters,
patent  or  copyright  registrations  (or any  document  transferring  ownership
thereof)  covering  inventions  or  original  works or  authorship  assigned  to
Employer  under this  Agreement,  Employee  hereby  irrevocably  designates  and
appoints  Employer and its duly  authorized  officers  and agents as  Employee's
agent and attorney-in-fact to act for and in his behalf and stead to execute and
file any such applications and documents and to do all other lawfully  permitted
acts to further the  prosecution  and  issuance of letters  patent or  copyright
registrations  or  transfers  thereof with the same legal force and effect as if
executed by Employee. This appointment is coupled with an interest in and to the
inventions  and  works of  authorship  and  shall  survive  Employee's  death or
disability. Employee hereby waives and quitclaims to Employer any and all claims
of  any  nature  whatsoever  which  Employee  now  or  may  hereafter  have  for
infringement of any patents or copyrights resulting from or relating to any such
application for letters, patent or copyright registrations assigned hereunder to
Employer.
                                    Article 3
                             OBLIGATIONS OF EMPLOYER

                               General Description
Section 3.1

                  Employer  shall  provide   Employee  with  the   compensation,
incentives and benefits specified in Section 4 of this Agreement.

                                Office and Staff
Section 3.2

                  Employer shall provide Employee with a private office,  office
and technical equipment,  supplies and other facilities,  equipment and services
suitable to Employee's position and adequate for the performance of his duties.

                                    Article 4
                            COMPENSATION OF EMPLOYEE

                                  Annual Salary
Section 4.1

                  As compensation for his services hereunder,  Employee shall be
paid at a base salary rate of $190,000 (one hundred ninety thousand  dollars) in
the first year of the Initial  Term.  For the second  year of the Initial  Term,
Employer  shall pay  Employee at a base salary  rate of  $200,000  (two  hundred
thousand  dollars).  Salary  shall  be  paid  in  equal  installments  not  less
frequently than once per month.

            Bonus Compensation and Relocation Expenses Reimbursement

Section 4.2

                  (a) In addition to his regular base salary,  Employee shall be
entitled to participate  in an incentive  bonus plan to earn up to an additional
$110,000 per year.  $55,000  (fifty five thousand  dollars) of this bonus amount
shall be based upon the  Employer's  quarterly  revenue  growth  year over year;
provided that no revenue  attributable to any existing  written  agreement as of
the effective date between  Employer and its major  undisclosed  OEM (contracted
with in June 2001)  shall be  included  in any  revenue  calculations.  From the
effective date of this Agreement until


<PAGE>

December 31, 2003, the bonus rate will be 1.34% of the quarterly  revenue growth
year over year.  From the effective  date of this  Agreement  until December 31,
2003, up to an additional  $55,000 (fifty five thousand dollars) in bonus amount
shall  be paid  based  upon the  Employer's  quarterly  cash  flow  provided  by
operations (as calculated using the Company's 10-Q and 10-K filings) as follows,
starting in the first full quarter  beginning  after the effective date: if more
than $25,000 and less than $100,000 in cash flow is provided by operations, this
will result in a bonus  payment of $6,000;  if more than  $100,000 and less than
$200,000  in cash flow is provided  by  operations,  this will result in a bonus
payment of $8,500;  if more than $200,000 and less than $500,000 in cash flow is
provided by operations,  this will result in a bonus payment of $13,500; if more
than  $500,000  and less than  $750,000 in cash flow is provided by  operations,
this will result in a bonus  payment of $20,000;  if more than  $750,000 in cash
flow is provided by operations,  this will result in a bonus payment of $25,000.
(For illustrative purposes see table below.)

     ---------------------------------------------------- ----------------------
     If quarterly cash flows from operations are:             Bonus Payment
     ---------------------------------------------------- ----------------------
     Greater than $25,000 but less than $100,000                   $6,000
     ---------------------------------------------------- ----------------------
     Greater than $100,000 but less than $200,000                  $8,500
     ---------------------------------------------------- ----------------------
     Greater than $200,000 but less than $500,000                 $13,500
     ---------------------------------------------------- ----------------------
     Greater than $500,000 but less than $750,000                 $20,000
     ---------------------------------------------------- ----------------------
     Greater than $750,000                                        $25,000
     ---------------------------------------------------- ----------------------

                  From January 1, 2004 through the termination of this Agreement
or  until  otherwise  agreed  to by the  Employee  and the  Board  of  Directors
(excluding  Employee),  whichever  is first,  the  bonus  plan  described  above
(Section 4.2 (a)) shall remain in effect  except that,  if any change is made in
calculating  the bonus,  Employee  shall receive a minimum  guaranteed  bonus of
$6,875 (six thousand eight hundred  seventy five dollars) per quarter under each
bonus  criteria  that is changed.  (Bonus  criteria are defined as (i) quarterly
revenue  growth  and  (ii)   quarterly   increases  in  cash  flow  provided  by
operations.) No change to any bonus criteria shall be effective unless agreed by
Employee  and the Board of  Directors  (excluding  Employee) at least 60 (sixty)
days prior to the start of a quarter.

                  (b)  Employer  shall  reimburse  Employee  for all  relocation
expenses reasonably incurred in moving Employee's  household and family from the
greater  Boston,  Massachusetts  area up to a maximum  of  $85,000  (eighty-five
thousand  dollars).  Relocation  costs include  reasonable  temporary family and
personal  living  expenses  in  California,  transportation,  lodging and living
expenses  while  moving  and  commission  costs  associated  with  the  sale  of
Employee's current home in the greater Boston,  Massachusetts area.  ("Temporary
family and personal living  expenses" as used in the above sentence shall not be
for more than 6 weeks and shall be paid only during the period  Employee and his
family have moved to California from the greater Boston  Massachusetts  area but
Employee has not yet sold his home in the greater Boston, Massachusetts area.)


                  (c)  If  Employer  terminates  Employee's  employment  in  the
Initial  Term other than for Cause as set forth below in Section  6.3,  Employer
shall pay Employee the reasonable  costs to move his family and household to the
greater Boston,  Massachusetts area. If the Employee does not elect to return to
the Boston area within a six-month window from such  termination  without Cause,
then the Employer is not  obligated to pay any  additional  remuneration  to the
Employee for relocation.

                  (d) If the Employee elects to terminate his employment  during
the Initial  Term,  the he is obligated to reimburse the Employer for a prorated
portion of the initial relocation costs.


                                 Tax Withholding
Section 4.3

                  Employer  shall have the right to deduct or withhold  from the
compensation  due to Employee  hereunder  any and all sums  required for federal
income and social  security taxes and all state or local taxes now applicable or
that may be enacted and become  applicable in the future,  for which withholding
is required by law.


<PAGE>

                           Non Qualified Stock Options
Section 4.4

                  Employee  shall be  granted  Non  Qualified  Stock  Options to
purchase 350,000 shares of Employer's  Common Stock under  Employer's  Available
Stock  Option  Plans,  said  grant  to be  made  on the  effective  date  by the
Employer's  Board of Directors.  Said Options shall be  exercisable  at the fair
market value on the day immediately  prior to the effective date,  shall vest in
equal installments at the rate of  one-thirty-sixth  (1/36) per month thereafter
over three (3) years,  and shall expire at the longer of (1) five (5) years from
the date of grant or (2) if  permitted  thereunder,  ten years  from the date of
grant.  The Company  shall  request the approval of an adequate  number of stock
options at the next  Shareholder  Meeting to grant to Employee the 150,000 stock
options immediately following that meeting.

                                    Article 5
                                EMPLOYEE BENEFITS

                                 Annual Vacation
Section 5.1
                  Employee  shall  be  entitled  to 20  business  days  of  paid
vacation  during each year of this  Agreement.  Employee  may be absent from his
employment for vacation only at such times the Employee notifies at a minimum of
10  (ten)  days in  advance  the  Employer's  Board  of  Directors  Compensation
Committee of the planned vacation. Unused vacation will carry over from one year
to the next but the maximum amount of vacation, which can be accrued (unused) at
any one time,  shall not exceed 20 business  days.  Unused  vacation will not be
paid in the form of cash, except upon termination of employment.


                                    Benefits
Section 5.2
                  Employee  shall  be  eligible  to  participate  in any and all
benefit plans provided by Employer, on the same basis as same are made available
to other employees,  including  health,  disability and life insurance  coverage
should Employee elect to participate in any such plans.

                                Business Expenses
Section 5.3
                  Employer shall reimburse Employee for all appropriate expenses
for travel and  entertainment  by Employee  for  legitimate  business  purposes,
provided that they are approved in writing by the Chief Financial Officer of the
Employer and provided that Employee  furnishes to Employer  adequate records and
documentary  evidence  for the  substantiation  of  each  such  expenditure,  as
required by the Internal Revenue Code of 1986, as amended.

                                    Article 6
                            TERMINATION OF EMPLOYMENT

                                   Termination
Section 6.1
                  Employer shall not terminate the Employee's  employment except
as provided in Section 6.3 and/or 6.4.  Employee's  employment  hereunder may be
terminated by Employee for any reason,  without further obligation or liability,
except as expressly provided herein.

                  Resignation, Retirement, Death or Disability
Section 6.2
                  Employee's  employment  hereunder  shall be  terminated at any
time  by  Employee's  resignation,  or by  Employee's  retirement  at  or  after
attainment of age sixty (60) at Employee's option ("Retirement"),  death, or his
inability to perform his duties under this Agreement on a full-time  basis for a
continuous  period of ninety  (90) days or more  because of a physical or mental
illness  ("Disability").  Employer  shall not be  liable  for  payment  of bonus
compensation  during any period of Disability,  though salary and benefits shall
continue to be paid during such period.


<PAGE>

                              Termination for Cause
Section 6.3
                  Employer may terminate Employee for Cause at any time. "Cause"
shall mean personal dishonesty, conflict of interest or breach of fiduciary duty
involving material personal or family profit, willfully engaging in conduct with
the  purpose  and  effect of  materially  injuring  Employer,  the  willful  and
continued failure by the Employee to substantially  perform his duties hereunder
in a reasonably  competent manner expected of similarly situated  executives for
comparable  public companies in the high technology  electronics  industry.  For
purposes of this Section 6.3, no act, or failure to act, on the Employee's  part
shall be considered  "willful" unless done, or omitted to be done, by him not in
good faith and without  reasonable belief that his action or omission was in the
best interest of the Employer. Notwithstanding the foregoing, the Employee shall
not be  terminated  for Cause  without  (i)  reasonable  notice to the  Employee
setting  forth the reasons for the  Employer's  intention to terminate for Cause
and a reasonable period of time to cure such "Cause" if same is capable of being
cured  within  such  period;  (ii) if not  capable  of being  so cured  within a
reasonable  period, an opportunity for the Employee,  together with his counsel,
to be heard  before  the Board of  Directors;  and (iii) if clause  (i) shall be
inapplicable,  then,  after the  opportunity  to be heard as set forth in clause
(ii),  delivery to the Employee of a Notice of Termination as defined in Section
6.6 hereof from the Board finding that in the good faith opinion of the majority
of the Board of Directors,  the Employee has engaged in conduct set forth above,
and specifying the particulars thereof in detail.

                            Termination Without Cause
Section 6.4
                  (a) Employer may terminate Employee without Cause at any time.
For the first year of the Initial Term, if Employer  terminates Employee without
Cause, Employee shall receive, as severance pay for the remainder of the Initial
Term, all regular salary and benefits otherwise which would be due to him on the
same schedule as same were paid at the time of termination,  as if he were still
employed  through such Initial Term. If Employee is terminated  without Cause or
this  Agreement is allowed to expire  without  renewal during the second year of
the Initial Term or in the first  Succeeding Year of the Initial Term,  Employee
shall  receive,  as severance pay for the twelve months  immediately  after such
termination  date,  regular salary and benefits  payable at the same rate he was
earning on the same  schedule as such were paid at the time of  termination.  If
Employee is  terminated  without  Cause or this  Agreement  is allowed to expire
without  renewal during the Initial Term or in the first  Succeeding  Year after
the Initial Term,  as described in this  paragraph,  any unvested  stock options
issued to Employee which have not lapsed and which are not otherwise exercisable
shall vest,  accelerate,  and become  immediately  exercisable  by Employee.  If
Employee is  terminated  without  Cause or this  Agreement  is allowed to expire
without  renewal during any Succeeding  Year which commences one or more year(s)
after the end of the Initial Term,  then Employee shall receive as severance pay
for the twelve months immediately after such termination date regular salary and
benefits payable at the same rate he was earning and on the same schedule at the
time of  termination.  In the event of  Employee's  subsequent  death  after his
termination by Employer  without Cause,  Employer shall continue to pay the same
payments and benefits to Employee's  surviving spouse, or if none, to Employee's
estate as Employee was entitled to at the date of his death.

                  Employee's  employment  hereunder  may be  terminated  without
Cause upon ten (10) business days' notice for any reason.

                  (b)  Employee may  terminate  this  Agreement  with or without
Cause for any reason at any time upon thirty (30) days prior  notice.  Upon such
termination by Employee, Employee shall receive all salary, benefits and options
vested through such termination date.

                                   Expiration
Section 6.5
                  Unless otherwise  renewed in accordance  herewith,  Employee's
employment  shall end upon  expiration  of the  employment  term as  provided in
Section(s) 1.1 and 1.2.

                             Notice for Termination
Section 6.6
                  Any  termination  of the  Employee's  employment  (other  than
termination  by reason of death)  shall be  communicated  by  written  Notice of
Termination  to the other party.  For purposes of this  Agreement,  a "Notice of
Termination"  shall mean a notice which shall  include the specific  termination
provision  in this  Agreement  relied  upon,  and shall set forth in  reasonable
detail the facts and circumstances claimed to provide a basis for termination.


<PAGE>

                               Date of Termination
Section 6.7
                  The "Date of Termination" shall be:


                  (a) if the  Employee's  employment is terminated by his death,
the date of his death;

                  (b) if the  Employee's  employment  is terminated by reason of
Employee's  Disability,  thirty (30) days after Notice of  Termination  is given
(provided  that the Employee  shall not have returned to the  performance of his
duties on a full-time basis during such thirty (30) day period);

                  (c) if the  Employee's  employment  is  terminated  for Cause,
subject to Section 6.3 above,  the date of the Notice of Termination is given or
after if so specified in such Notice of Termination;

                  (d) if the Employee's employment is terminated by either party
for any other reason than those set forth in clauses  6.7(a)-(c) above, the date
on which the Notice of Termination specifies.

                                    Article 7
                      PAYMENTS TO EMPLOYEE UPON TERMINATION

                         Death, Disability or Retirement
Section 7.1
                  Upon Employee's Retirement,  Death or Disability, all benefits
generally  available  to  Employer's  employees  as of the date of such an event
shall be  payable  to  Employee  or  Employee's  estate  without  reduction,  in
accordance with the terms of any plan,  contract,  understanding  or arrangement
forming  the basis for such  payment.  Employee  shall be entitled to such other
payments  as might  arise  from  any  other  plan,  contract,  understanding  or
arrangement between Employee and Employer at the time of any such event.


                      Termination for Cause or Resignation
Section 7.2
                  If  Employer   terminates   Employee  for  Cause  or  Employee
voluntarily  resigns  for reasons  other than  constructive  discharge,  neither
Employer nor any affiliate  shall have any further  obligation to Employee under
this  Agreement or otherwise,  except to the extent  provided in any other plan,
contract, understanding or arrangement, or as may be expressly required by law.


                                    Article 8
                               GENERAL PROVISIONS

                                     Notices
Section 8.1
                  Any notices to be given hereunder by either party to the other
shall be in writing  and may be  transmitted  by  personal  delivery or by mail,
registered or certified,  postage prepaid with return receipt requested.  Mailed
notices shall be addressed to the parties at:

                  "Employee"
                                            Brett Moyer
                                            38 Heritage Lane
                                            Stow, MA 01775

                  "Employer"
                                            FOCUS Enhancements, Inc.
                                            1370 Dell Avenue
                                            Campbell, California 95008

Each party may change that address or addressee by written  notice in accordance
with this section.  All notices delivered shall be deemed communicated as of the
date of actual receipt.


<PAGE>

                                   Arbitration
Section 8.2
                  (a) Any controversy  between  Employer and Employee  involving
the construction or application of any of the terms, provisions or conditions of
this  Agreement or the breach  thereof  shall be settled by binding  arbitration
before a single arbitrator selected by the American Arbitration Association,  in
accordance  with its then  current  commercial  rules.  Judgment  upon the award
rendered by the arbitrator(s)  may be entered in any court having  jurisdiction.
Arbitration  shall comply with and be governed by the provisions of the American
Arbitration Association, Commercial Division. No discovery shall be permitted in
such  arbitration  other than an exchange of documents,  and the parties  hereby
agree to limit the number of hearing days in  arbitration  to two (2) days.  The
arbitrator shall issue a written decision listing findings of fact,  reasons for
the decision,  and conclusions of law in any arbitration.  The arbitration award
shall be specifically enforceable.


<PAGE>

                  (b) The cost of arbitration  (including the prevailing party's
reasonable  attorneys'  fees)  shall  be borne  by the  non-prevailing  party as
determined by the arbitrator or in such proportions as the arbitrator decides.

                  (c) Such  arbitration  and any  litigation  shall  take  place
solely in Santa Clara County, California.

                            Attorneys' Fees and Costs
Section 8.3

         If any action at law or in equity is  necessary to enforce or interpret
the terms of this  Agreement,  the prevailing  party shall be entitled to obtain
from the non-prevailing  party,  reasonable attorneys' fees, costs and necessary
disbursements  in  addition  to any  other  relief  to which  that  party may be
entitled.  This  provision  shall be  construed  as  applicable  to this  entire
Agreement.


                                Entire Agreement
Section 8.4

                  This Agreement supersedes,  merges and voids any and all other
agreements,  either oral or in writing,  between the parties hereto with respect
to its subject matter and no other covenants and agreements  between the parties
exist with respect thereto.  Each party to this Agreement  acknowledges  that no
representations,  inducements, promises or agreements, orally or otherwise, have
been made by any party,  or anyone acting on behalf of any party,  which are not
embodied herein, and that no other agreement, statement or promise not contained
in this Agreement shall be valid or binding on either party.

                                  Modifications
Section 8.5

                  Any  modification  of this Agreement will be effective only if
it is in  writing  and  signed  by  the  Employee  and  properly  authorized  by
Employer's Board of Directors and signed by a  representative  thereof (who may,
but need not be, Chairman).

                                Effect of Waiver
Section 8.6

         The failure of either party to insist on strict  compliance with any of
the terms,  covenants or conditions  of this  Agreement by the other party shall
not be deemed a waiver of that term, covenant or condition, nor shall any waiver
or  relinquishment  of any  right or power at any one time or times be  deemed a
waiver or  relinquishment  of that right or power for all or any other times. No
waiver shall be effective  unless in a writing and signed by the person  charged
with making such waiver


                               Partial Invalidity
Section 8.7

        If any  provision  in this  Agreement  is held by a court  of  competent
jurisdiction  to be invalid,  void or  unenforceable,  the remaining  provisions
shall nevertheless  continue in full force without being impaired or invalidated
in any way.


<PAGE>

                                 Effective Date

Section 8.8

         The effective date of this Agreement  shall be the date it is signed by
both parties.  However,  Employee  shall become  President  and Chief  Executive
Officer and a member of the Company's Board of Directors on the earlier to occur
of (i) three (3) days after the  Company's  public  announcement  that  purchase
orders  for   commercial   quantities  of  units  have  been  placed  under  the
above-described undisclosed June 2001 OEM agreement or (ii) September 30, 2002.

IN WITNESS WHEREOF,  the parties have executed this Agreement on August 6, 2002,
at Campbell, California.

"Employer"                                           "Employee"

FOCUS Enhancements, Inc.

By:  /s/ Michael D'Addio                             By: /s/ Brett Moyer
     ------------------------                            ----------------------
       Michael D'Addio                                      Brett Moyer
       CEO


      Gary Williams
       Witness