Document:

QuickLinks
 -- Click here to rapidly navigate through this document

Exhibit 4.17  

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

 
 

FOCUS ENHANCEMENTS, INC.    
    
    COMMON STOCK PURCHASE WARRANT    

        1.    Issuance; Certain Definitions.    For good and valuable consideration, the receipt of which is hereby
acknowledged by FOCUS ENHANCEMENTS, INC., a Delaware corporation (the "Company"),
                        , or registered assigns (the "Holder") is hereby granted
the right to purchase at any time until 5:00 P.M., New York City time, on                          ,
2009 (the "Expiration Date"), XXXXX (XXXXXX) fully paid and non-assessable
shares of the Company's Common Stock, $0.01 par value per share (the "Common Stock"), at an initial exercise price (the "Exercise Price") of $X.XX
(XXXXX) per share, subject to further adjustment as set forth herein. These shares are exercisable immediately 

        2.    Exercise of Warrants.    

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

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

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

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

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

	 	 	(A)	 	=	 	the Closing Price on the trading day immediately preceding the    date of such election;
	 	 	(B)	 	=	 	the Exercise Price of this Warrant, as adjusted; and
	 	 	(X)	 	=	 	the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of    a cash exercise rather than a cashless exercise.

 

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

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

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

        6.    Adjustments.    

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

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

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

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

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

2

 

Company,
setting forth the restrictions on transfer contained in this Section. 7.2 Registration Rights. As set forth in Exhibit 1, Holder shall
have piggy-back registration rights with respect to the Warrant Shares then held by the Holder or then subject to issuance upon exercise of this Warrant (collectively, the "Remaining
Warrant Shares").

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

	(i)
	if
to the Company, to: 

FOCUS
ENHANCEMENTS, INC.

1370 Dell Avenue

Campbell, California 95008

ATTN: Gary Williams, Chief Financial Officer

Telephone No.: (408) 866-8300

Facsimile No.: (408) 866-4795 

                with
a copy to: 

Manatt,
Phelps & Phillips, LLP

1001 Page Mill Road, Bldg. 2

Palo Alto, California 94304

Attn: Jerrold F. Petruzzelli, Esq.

Telephone No.: (650) 812-1335

Telecopier No.: (650) 213-0260 

	(ii)
	if
to the Holder, to: 

	

 	
 	

	

 
	

 	
 	

	

 
	

 	
 	

	

 
	

 	
 	

Telecopier No.:	

 
	

 	
 	

	

 

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

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

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

3

 

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

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

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

        IN
WITNESS WHEREOF, the parties hereto have executed this Warrant as of the 28 day of June, 2005. 

	 	 	FOCUS ENHANCEMENTS, INC.
	

 	
 	

By:	

 
	 	 	 	
 Name: Gary Williams

Title: VP of Finance & CFO

4

 
 

NOTICE OF EXERCISE OF WARRANT    

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

        CASH:$                               
     
= (Exercise Price × Exercise Shares) 

        Payment
is being made by: 

                    
enclosed check 

                    
wire transfer 

                    
other 

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

        Please
deliver the stock certificate to: 

Dated:

[Name
of Holder] 

By:

QuickLinks

FOCUS ENHANCEMENTS, INC. COMMON STOCK PURCHASE WARRANT

NOTICE OF EXERCISE OF WARRANTQuickLinks
 -- Click here to rapidly navigate through this document
  

Exhibit 10.33  

 
 

SECURITIES PURCHASE AGREEMENT    
    

        This Securities Purchase Agreement (this "Agreement") is dated as of June 17, 2005, among Focus
Enhancements, Inc., a Delaware corporation (the "Company"), and each Purchaser identified on the signature pages hereto (each a
"Purchaser" and collectively the "Purchasers"), each a "party" and collectively the "parties"; and 

        WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act (as defined below), and Rule 506 promulgated
thereunder, the Company desires to issue and sell to the Purchasers, and the Purchasers, severally and not jointly, desire to purchase from the Company in the aggregate, up to $2,00,000 of shares of
Common Stock and Warrants on the Closing Date, each as set forth in the respective amounts of the signature pages attached hereto. 

        NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby
acknowledged, the Company and each Purchaser agrees as follows: 

 
 

ARTICLE I.
  DEFINITIONS    

        1.1    Definitions.    In addition to the terms defined elsewhere in this Agreement, for all purposes of this
Agreement, the following terms have the meanings indicated in this Section 1.1: 

        "Action" shall have the meaning ascribed to such term in Section 3.1(j). 

        "Affiliate" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under
common control with a Person as such terms are used in and construed under Rule 144. With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis
by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser. 

        "Business Day" means any day except Saturday, Sunday and any day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or other governmental action to close. 

        "Closing" means the closing of the purchase and sale of the Common Stock and the Warrants pursuant to Section 2.1. 

        "Closing Date" means the Trading Day when all of the Transaction Documents have been executed and delivered by the applicable parties
thereto, and all conditions precedent to the Purchasers' obligations to pay the Subscription Amount have been satisfied or waived. 

        "Commission" means the Securities and Exchange Commission. 

        "Common Stock" means the common stock of the Company, $0.01 par value per share, and any securities into which such common stock may
hereafter be reclassified. 

        "Common Stock Equivalents" means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at
any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock. 

1

 

        "Company Counsel" means Manatt, Phelps & Phillips, LLP with offices located at 1001 Page Mill Road, Bldg. 2, Palo Alto, California
94304-1006. 

        "Disclosure Schedules" means the Disclosure Schedules attached hereto. 

        "Effective Date" means the date that the Registration Statement is first declared effective by the Commission. 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended. 

        "Intellectual Property Rights" shall have the meaning ascribed to such term in Section 3.1(o). 

        "Liens" means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction. 

        "Material Adverse Effect" shall have the meaning ascribed to such term in Section 3.1(b). 

        "Material Permits" shall have the meaning ascribed to such term in Section 3.1(m). 

        "Per Share Purchase Price" equals $0.70, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations
and other similar transactions of the Common Stock that occur after the date of this Agreement. 

        "Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. 

        "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date of this Agreement, among the Company and
each Purchaser, in the form of Exhibit A hereto. 

        "Registration Statement" means a registration statement meeting the requirements set forth in the Registration Rights Agreement and
covering the resale by the Purchasers of the Shares and the Warrant Shares. 

        "Required Approvals" shall have the meaning ascribed to such term in Section 3.1(e). 

        "Rule 144" means Rule 144 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 effect as such Rule. 

        "SEC Reports" shall have the meaning ascribed to such term in Section 3.1(h). 

        "Securities" means the Shares, the Warrants and the Warrant Shares. 

        "Securities Act" means the Securities Act of 1933, as amended. 

        "Shares" means the shares of Common Stock issued or issuable to each Purchaser pursuant to this Agreement. 

        "Subscription Amount" means, as to each Purchaser, the amounts set forth below such Purchaser's signature block on the signature page
hereto, in United States dollars and in immediately available funds. 

        "Subsidiary" shall mean the subsidiaries of the Company, if any, set forth on Schedule 3.1(a). 

        "Trading Day" means (i) a day on which the Common Stock is traded on a Trading Market, or (ii) if the Common Stock is not
listed on a Trading Market, a day on which the Common Stock is traded on the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock
is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or
any similar organization or agency succeeding its functions of reporting prices); provided, that 

2

 

in
the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day. 

        "Trading Market" means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in
question: the American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market. 

        "Transaction Documents" means this Agreement, the Warrants and the Registration Rights Agreement and any other documents or agreements
executed in connection with the transactions contemplated hereunder. 

        "VWAP" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is
then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the primary Trading Market on which the Common
Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. ET to 4:02 p.m. Eastern Time) using the VAP function; (b) if the
Common Stock is not then listed or quoted on an Trading Market and if prices for the Common Stock are then quoted on the OTC Bulletin Board, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin Board and if prices for the Common Stock are then
reported in the "Pink Sheets" published by the National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price
per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by a nationally recognized-independent appraiser selected in
good faith by the Company and the Purchasers holding a majority of the Shares then outstanding. 

        "Warrants" means the Common Stock Purchase Warrants, in the form of Exhibit C,
issuable to the Purchasers at the Closing, which warrants shall have an exercise price equal to $0.70 and be exercisable for a period of 4 years. 

        "Warrant Shares" means the shares of Common Stock issuable upon exercise of the Warrants. 

 
 

ARTICLE II.
  PURCHASE AND SALE    

        2.1    Closing.    At the Closing, each Purchaser shall purchase from the Company, severally and not jointly with the
other Purchasers, and the Company shall issue and sell to each Purchaser, (a) a number of Shares equal to such Purchaser's Subscription Amount divided by the Per Share Purchase Price and
(b) the Warrants as determined pursuant to Section 2.2(a)(iii). The aggregate number of Shares sold hereunder shall be up to 2,857,143. Upon satisfaction of the conditions set forth in
Section 2.2, the Closing shall occur at the offices of Manatt Phelps & Phillips, LLP, or such other location as the parties shall mutually agree. 

        2.2    Closing Conditions; Deliveries.    

        (a)   At
the Closing the Company shall deliver or cause to be delivered to each Purchaser the following: 

          (i)  this
Agreement duly executed by the Company; 

         (ii)  a
copy of the irrevocable instructions to the Company's transfer agent instructing the transfer agent to deliver, on an expedited basis, a certificate evidencing a
number of Shares equal to such Purchaser's Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser; 

3

 

        (iii)  a
copy of a Warrant, registered in the name of such Purchaser, pursuant to which such Purchaser shall have the right to acquire up to the number of shares of Common
Stock equal to 30% of the Shares to be issued to such Purchaser at the Closing; 

        (iv)  the
Registration Rights Agreement duly executed by the Company; and 

         (v)  a
legal opinion of Company Counsel, in the form of Exhibit B attached hereto. 

        (b)   At
the Closing each Purchaser shall deliver or cause to be delivered to the Company the following: 

          (i)  this
Agreement duly executed by such Purchaser; 

         (ii)  such
Purchaser's Subscription Amount by wire transfer to the account of the Company as provided to the Purchasers in writing prior to the Closing Date; and 

        (iii)  the
Registration Rights Agreement duly executed by such Purchaser. 

        (c)   All
representations and warranties of the other party contained herein shall remain true and correct as of the Closing Date. 

        (d)   As
of the Closing Date, there shall have been no Material Adverse Effect with respect to the Company since the date hereof. 

        (e)   From
the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission (except for any suspension of trading of limited
duration agreed to by the Company, which suspension shall be terminated prior to the Closing), and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg
Financial Markets shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor
shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of each Purchaser, makes
it impracticable or inadvisable to purchase the Shares at the Closing. 

 
 

ARTICLE III.
  REPRESENTATIONS AND WARRANTIES    

        3.1    Representations and Warranties of the Company.    Except as set forth under the corresponding section of the
Disclosure Schedules delivered concurrently herewith, the Company hereby makes the following representations and warranties as of the date hereof and as of the Closing Date to each Purchaser: 

        (a)    Subsidiaries.    Except as disclosed in the SEC Reports, the Company has no direct or indirect subsidiaries.
Except as disclosed in the SEC Reports, the Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all the issued
and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. If the Company has no
subsidiaries, then references in the Transaction Documents to the Subsidiaries will be disregarded. 

        (b)    Organization and Qualification.    Each of the Company and the Subsidiaries is an entity duly incorporated or
otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its 

4

 

respective
certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business or financial condition of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company's ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i),
(ii) or (iii), a "Material Adverse Effect"). 

        (c)    Authorization; Enforcement.    The Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations thereunder. The execution and delivery of each of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the
Company in connection therewith other than in connection with the Required Approvals. Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies. 

        (d)    No Conflicts.    The execution, delivery and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of the Company's or any Subsidiary's certificate or articles
of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of
the Company or a Subsidiary is bound or affected, or (iv) conflict with or violate the terms of any agreement by which the Company or any Subsidiary is bound or to which any property or asset
of the Company or any Subsidiary is bound
or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect. 

        (e)    Filings, Consents and Approvals.    The Company is not required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than (i) filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the
Commission of the Registration Statement, (iii) application(s) to each applicable Trading Market for the listing of the Shares and Warrant Shares for trading thereon in the time and manner
required thereby, and (iv) the filing of Form D with the Commission and such filings as are 

5

 

required
to be made under applicable state securities laws, with each of the items listed in clauses (i)-(iv) inclusive being deemed a "Required
Approval"). 

        (f)    Issuance of the Securities.    The Shares and Warrants are duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer
provided for in the Transaction Documents. The Warrant Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and
clear of all Liens imposed by the Company. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement and the
Warrants. 

        (g)    Capitalization.    The capitalization of the Company is as described in the Company's most recent periodic
report filed with the Commission. The Company has not issued any capital stock since such filing other than pursuant to the exercise of employee stock options under the Company's stock option plans,
the issuance of shares of Common Stock to employees pursuant to the Company's employee stock purchase plan and pursuant to the conversion or exercise of outstanding Common Stock Equivalents. No Person
has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as a result of the
purchase and sale of the Securities, there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by
which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock, other than as
set forth in the SEC Reports or in connection with the Company's stock option plans. The issue and sale of the Securities will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such
securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws,
and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors of the Company or others is required for the issuance and sale of the Shares. Except as
disclosed in the SEC Reports, there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company's capital stock to which the Company is a party or, to the
knowledge of the Company, between or among any of the Company's stockholders. 

        (h)    SEC Reports; Financial Statements.    The Company has filed all reports required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law
to file such material) (the foregoing materials, including the exhibits thereto, being collectively referred to herein as the "SEC Reports") on a timely
basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied
in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when
filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements
and the rules and 

6

 

regulations
of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles applied
on a consistent basis during the periods involved ("GAAP"), except as may be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments. 

        (i)    Material Changes.    Since the date of the latest audited financial statements included within the SEC Reports,
except as disclosed in the SEC Reports (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities required to be reflected in the Company's financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission,
(iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property, with or without
consideration, to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company stock option plans. Except as disclosed in the SEC Reports, the Company does not have pending before the Commission any
request for confidential treatment of information. 

        (j)    Litigation.    Except as disclosed in the SEC Reports: There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an "Action") which
(i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a
claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or
contemplated, with respect to the Company, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop
order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act. 

        (k)    Labor Relations.    No material labor dispute exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect. 

        (l)    Compliance.    Except as disclosed in the SEC Reports, neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived) where the effect of such default or violation could be reasonably
expected to be a Material Adverse Effect, (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any 

7

 

statute,
rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business except in each case as could not have a
Material Adverse Effect. 

        (m)    Regulatory Permits.    The Company and the Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess
such permits could not have or reasonably be expected to result in a Material Adverse Effect ("Material Permits"), and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. 

        (n)    Title to Assets.    The Company and the Subsidiaries have good and marketable title in fee simple to all real
property owned by them that is material to the business of the Company and the Subsidiaries and
good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens as do
not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens as disclosed
in the SEC Reports and for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance. 

        (o)    Patents and Trademarks.    Except as set forth in the SEC Reports: To the knowledge of the Company and each
Subsidiary, the Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and
other similar rights (collectively, the "Intellectual Property Rights") that are necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so have could have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person unless such alleged violation or infringement
would not have a Material Adverse Effect. To the knowledge of the Company, all such Company Intellectual Property Rights are enforceable. 

        (p)    Insurance.    The Company and the Subsidiaries are insured by insurers against such losses and risks and in
such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business. 

        (q)    Transactions With Affiliates and Employees.    Except as set forth in the SEC Reports, none of the officers or
directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services
as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, in each case in excess of $60,000 other than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and 

8

 

(iii) for
other employee benefits, including stock option agreements under any stock option plan of the Company. 

        (r)    Sarbanes-Oxley.    The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002
which are applicable to it as of the Closing Date. 

        (s)    Certain Fees.    No brokerage or finder's fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. 

        (t)    Private Placement.    Assuming the accuracy of the Purchasers representations and warranties set forth in
Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the Trading Market. 

        (u)    Investment Company.    The Company is not, and is not an Affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. 

        (v)    Registration Rights.    Except as set forth on the disclosure schedule to the Registration Rights Agreement, no
Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company. 

        (w)    Listing and Maintenance Requirements.    The Company's Common Stock is registered pursuant to
Section 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. Except as disclosed in the SEC Reports, the Company has not, in
the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Trading Market. 

        (x)    Application of Takeover Protections.    Assuming the Purchasers beneficially own no shares of Common Stock
immediately prior to the date hereof, the Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company's Certificate of Incorporation (or similar charter
documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their
rights under the Transaction Documents, including without limitation the Company's issuance of the Securities and the Purchasers' ownership of the Securities. 

        (y)    Disclosure.    The Company confirms that, neither the Company nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any information that constitutes or might constitute material, non-public information. The Company understands and confirms
that the Purchasers will rely on the foregoing representations and covenants in effecting transactions in securities of the Company. All disclosure provided to the Purchasers regarding the Company,
its business and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, furnished by or on behalf of the Company are true and correct and do not contain any untrue
statement of a material fact or omit to state 

9

 

any
material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. 

        (z)    No Integrated Offering.    Neither the Company, nor any of its affiliates, nor any Person acting on its or
their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable shareholder approval provisions, including, without limitation, under the rules and regulations
of any exchange or automated quotation system on which any of the securities of the Company are listed or designated. 

        (aa)    Form S-3 Eligibility.    The Company is eligible to register the resale of its Common Stock
by the Purchasers under Form S-3 promulgated under the Securities Act. 

        (bb)    Taxes.    Except for matters that would not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect, the Company and, to the knowledge of the Company, each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns and has
paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary. 

        (cc)    General Solicitation.    Neither the Company nor, to the Company's knowledge, any person acting on behalf of
the Company has offered or sold any of the Shares by any form of general solicitation or general advertising. To the Company's knowledge, based upon representations by such Purchasers or other
investors, the Company has offered the Shares for sale only to the Purchasers and certain other "accredited investors" within the meaning of Rule 501 under the Securities Act. 

        (dd)    Acknowledgment Regarding Purchasers' Purchase of Shares.    The Company acknowledges and agrees that each of
the Purchasers is acting solely in the capacity of an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby. The Company further acknowledges that
no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by
any Purchaser or any of their respective representatives or agents in connection with
this Agreement and the transactions contemplated hereby is merely incidental to the Purchasers' purchase of the Shares. The Company further represents to each Purchaser that the Company's decision to
enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives. 

        (ee)    Acknowledgement Regarding Purchasers' Trading Activity.    Anything in this Agreement or elsewhere herein to
the contrary notwithstanding (except for Section 4.14 hereof), it is understood and agreed by the Company (i) that none of the Purchasers have been asked to agree, nor has any Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or "derivative" securities based on securities issued by the Company or to hold the Securities for any
specified term; (ii) that past or future open market or other transactions by any Purchaser, including Short Sales, and specifically including, without limitation, Short Sales or "derivative"
transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company's publicly-traded securities; (iii) that any
Purchaser, and counter parties in "derivative" transactions to which any such Purchaser is a party, directly or indirectly, presently may have a "short" position in the Common Stock, and
(iv) that each Purchaser shall not be deemed to have any affiliation with or control over any arm's length counter-party in any "derivative" transaction. 

10

  

        3.2    Representations and Warranties of the Purchasers.    Each Purchaser hereby, for itself and for no other
Purchaser, represents and warrants as of the date hereof and as of the Closing Date to the Company as follows: 

        (a)    Organization; Authority.    Such Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution, delivery and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action on the part of such Purchaser. Each Transaction Document to which it is party has been duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally,
(ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law. 

        (b)    Purchaser's Intent.    Such Purchaser understands that the Securities are "restricted securities" and have not
been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account (this representation and warranty not limiting such
Purchaser's right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. Such Purchaser does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities. 

        (c)    Purchaser Status.    At the time such Purchaser was offered the Securities, it was, and at the date hereof it
is an "accredited investor" as defined in Rule 501(a) under the Securities Act. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act. 

        (d)    Experience of Such Purchaser.    Such Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated
the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such
investment. 

        (e)    General Solicitation.    Such Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement. 

        (f)    Compliance with Patriot Act.    The funds utilized by such Purchaser for the purchase of the Securities do not
violate any provisions of the USA Patriot Act of 2001. 

        (g)    Beneficial Ownership.    Such Purchaser, to the extent such purchase of the Securities causes such Purchaser's
beneficial ownership to exceed 4.9% of the outstanding shares of the Company, will qualify for filing on a Schedule 13D under the Exchange Act. 

        (h)    Blue Sky Compliance.    Such Purchaser shall agree to comply with any state blue sky limitations on the resale
of the Securities, if any. 

11

 

        The
Company acknowledges and agrees that each Purchaser does not make or has not made any representations or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in this Section 3.2. 

 
 

ARTICLE IV.
  OTHER AGREEMENTS OF THE PARTIES    

        4.1    Transfer Restrictions.    The Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company, to an Affiliate of a Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form
and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act.
As a condition of transfer, any such transferee shall agree in writing to be bound by the applicable terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement. 

        (b)   The
Purchasers agree to the imprinting, so long as is required by this Section 4.1(b), of a legend on any of the Securities in the following form: 

THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT. 

        The
Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in
some or all of the Securities to a financial institution that is an "accredited investor" as defined in Rule 501(a) under the Securities Act and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal
opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser's
expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the
Securities, including, if the Securities are subject to registration pursuant to the Registration Rights Agreement, the preparation and filing of any required prospectus supplement under
Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder. 

        (c)   Certificates
evidencing the Shares and Warrant Shares shall not contain any legend (including the legend set forth in Section 4.1(b)), (i) while a
registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, or (ii) following any sale of such Shares or Warrant
Shares pursuant to Rule 144, or (iii) if such 

12

 

Shares
or Warrant Shares are eligible for sale under Rule 144(k), or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Company's transfer agent promptly after the Effective
Date if required by the Company's transfer agent to effect the removal of the legend hereunder, subject to any state blue sky law limitations. If all or any portion of a Warrant is exercised at a time
when there is an effective registration statement to cover the resale of the Warrant Shares for which the applicable portion of the Warrant has been exercised, such Warrant Shares shall be issued free
of all legends. The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 4.1(c), it will, no later than five Trading Days
following the delivery by a Purchaser to the Company or the Company's transfer agent of a certificate representing Shares or Warrant Shares, as the case may be, issued with a restrictive legend (such
date, the "Legend Removal Date"), deliver or cause to be delivered to such Purchaser a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in
this Section. 

        (d)   In
addition to such Purchaser's other available remedies, the Company shall pay to a Purchaser, in cash, as liquidated damages and not as a penalty, for each $1,000 of
Shares or Warrant Shares (based on the VWAP of the Common Stock on the date such Securities are delivered to the Company's transfer agent and written notice is delivered to the Company) subject to
Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day ten (10) Trading Days after such damages have begun to accrue) for each Trading Day after such fifth Trading Day
after the Legend Removal Date until such certificate is delivered. Nothing herein shall limit such Purchaser's right to pursue actual damages for the Company's failure to deliver certificates
representing any Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief. 

        (e)   Each
Purchaser, severally and not jointly with the other Purchasers, agrees that the removal of the restrictive legend from certificates representing Securities as set
forth in this Section 4.1 is predicated upon the Company's reliance that such Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an exemption therefrom. 

        4.2    Furnishing of Information.    As long as any Purchaser owns Securities, the Company covenants to timely file
(or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports pursuant to such laws, it will prepare and furnish to the Purchasers and make publicly available in accordance with
Rule 144(c) such information as is required for the Purchasers to sell the Securities under Rule 144. The Company further covenants that it will take such further reasonable action as
any holder of Securities may reasonably request, to the extent required from time to time to enable such Person to sell such Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144. 

        4.3    Integration.    The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in Section 2 of the Securities Act) that (X) would be integrated with the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the Purchasers or (Y) that would be integrated with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless such shareholder approval is obtained before the closing of such
subsequent transaction. 

13

 

        4.4    Securities Laws Disclosure; Publicity.    As soon as practical following the Closing Date, the Company shall
issue a press release or file a Current Report on Form 8-K, in each case reasonably acceptable to each Purchaser disclosing the transactions contemplated hereby. The Company
and each Purchaser shall consult with each other in issuing any press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such
press release or otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser,
with respect to any press release of the Company, which consent shall not unreasonably be withheld, except if such disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or communication. Other than for notices to be filed with the Commission, notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of
such Purchaser, except (i) as required by federal securities law in connection with the registration statement contemplated by the Registration Rights Agreement and (ii) to the extent
such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under subclause (i) or
(ii). 

        4.5    Shareholders Rights Plan.    No claim will be made or enforced by the Company or, to the knowledge of the
Company, any other Person that any Purchaser is an "Acquiring Person" under any shareholders rights plan or similar plan or arrangement in effect or hereafter adopted by the Company, or that any
Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company
and the Purchasers. 

        4.6    Non-Public Information.    The Company covenants and agrees that neither it nor any other Person
acting on its behalf will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing representations in effecting transactions in securities of the Company. 

        4.7    Use of Proceeds.    The Company shall use the net proceeds from the sale of the Securities hereunder for
working capital and general corporate purposes. 

        4.8    Reimbursement.    If any Purchaser becomes involved in any capacity in any Proceeding by or against any Person
who is a stockholder of the Company (except as a result of sales, pledges, margin sales and similar transactions by such Purchaser to or with any current stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will reimburse such Purchaser for its reasonable legal and other expenses (including the cost of any investigation
preparation and travel in connection therewith) incurred in connection therewith, as such expenses are incurred. The reimbursement obligations of the Company under this paragraph shall be in addition
to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any Affiliates of the Purchasers who are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling persons (if any), as the case may be, of the Purchasers and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the Company, the Purchasers and any such Affiliate and any such Person. The Company also agrees that neither the Purchasers
nor any such Affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the Company or any Person asserting claims on behalf of or in right of the Company
solely as a result of acquiring the Securities under this Agreement. 

        4.9    Indemnification of Purchasers.    The Company will indemnify and hold the Purchasers and their directors,
officers, shareholders, partners, employees and agents (each, a "Purchaser Party") 

14

 

harmless
from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to: (a) any misrepresentation, breach or inaccuracy of any of the
representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents; or (b) any cause of action, suit or claim brought or made
against such Purchaser Party and arising solely out of or solely resulting from the execution, delivery, performance or enforcement of this Agreement or any of the other Transaction Documents and
without causation by any other activity, obligation, condition or liability pertaining to such Purchaser. The Company will reimburse such Purchaser for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in connection therewith) incurred in connection therewith, as such expenses are incurred; provided, however, that absent an actual
conflict of interest with respect to all Purchasers involved in any such matter for which indemnification claim is made hereunder, the Company shall pay only one reasonable counsel fee for the
representation of all Purchasers in such matter 

        4.10    Reservation of Common Stock.    As of the date hereof, the Company has reserved and the Company shall continue
to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue Shares pursuant to this Agreement
and Warrant Shares pursuant to any exercise of the Warrants. 

        4.11    Listing of Common Stock.    The Company hereby agrees to use commercially reasonably efforts to maintain the
listing of the Common Stock on the Trading Market, and as soon as reasonably practicable following the Closing (but not later than the earlier of the Effective Date and the first anniversary of the
Closing Date) to list all of the Shares and Warrant Shares on the Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading Market, it
will include in such application all of the Shares and Warrant Shares, and will take such other action as is necessary to cause all of the Shares and Warrant Shares to be listed on such other Trading
Market as promptly as possible. The Company will take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules of the Trading Market. 

        4.12    Equal Treatment of Purchasers.    No consideration shall be offered or paid to any person to amend or consent
to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents. For clarification
purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended to treat for the Company the Purchasers as a
class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise. 

        4.13    Limitation on Future Financing.    From the date hereof until fifteen (15) Trading Days after the
Effective Date, the Company shall not effect a financing of its Common Stock or Common Stock Equivalents. Notwithstanding anything to the contrary herein, this Section 4.13 shall not apply to
the following: (a) the granting of options to employees, consultants, officers and directors of the Company pursuant to any stock option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, or
(b) the exercise of any security issued by the Company in connection with the offer and sale of the Company's securities pursuant to this Agreement, or (c) the exercise of or conversion
of any convertible securities, options or warrants issued and outstanding on the date hereof, provided such securities have not been amended since the date hereof, (d) the issuance of
securities in connection with a business combination, joint venture or development agreement or strategic partnership or similar agreement approved by the Company's board of directors, a primary
purpose of which is not to raise equity capital, or (e) any potential financing set forth on Schedule 4.13. 

15

 

        4.14    No Net Short Position.    Each Purchaser agrees, severally and not jointly with any other Purchasers, that
they or any Person acting at the request or direction of Purchaser, will not enter into any Short Sales (as hereinafter defined) from the period commencing on the Closing Date and ending on the date
that such Purchaser no longer holds any Shares. For purposes of this Section 4.14, a "Short Sale" by any Purchaser shall mean a sale of Common Stock by such Purchaser that is marked as a short
sale and that is made at a time when there is no equivalent offsetting long position in Common Stock held by such Purchaser. For purposes of determining whether there is an equivalent offsetting long
position in Common Stock held by the Purchaser, Warrant Shares that have not yet been exercised pursuant to the Warrants shall be deemed to be held long by the Purchaser, and the amount of shares of
Common Stock held in a long position shall be all Shares and Warrant Shares (ignoring any exercise limitations included therein) held by such Purchaser on such date, plus any shares of Common Stock
otherwise then held by such Purchaser. Additionally, each Purchaser understands and acknowledges, severally and not jointly with any other Purchaser, that the SEC currently takes the position that
coverage of short sales of shares of the Common Stock "against the box" prior to the Effective Date of the Registration Statement with the Shares purchased hereunder is a violation of Section 5
of the Securities Act, as set forth in Item 65, Section 5 under Section A, of the Manual of Publicly Available Telephone Interpretations, dated July 1997, compiled by the Office
of Chief Counsel, Division of Corporation Finance. Accordingly, each Purchaser hereby agrees not to use any of the Shares to directly cover any short sales made prior to the Effective Date. 

        4.15    Deliver of Securities After Closing.    The Company shall deliver, or cause to be delivered, the respective
Shares and Warrants purchased by each Purchaser to such Purchaser within three Trading Days of the Closing Date 

 
 

ARTICLE V.
  MISCELLANEOUS    

        5.1    Fees and Expenses.    Each party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all stamp
and other taxes and duties levied in connection with the sale of the Securities. 

        5.2    Entire Agreement.    The Transaction Documents, together with the exhibits and schedules thereto, contain the
entire understanding of the parties with respect to the subject matter hereof and supersede and void all prior agreements and understandings, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and schedules. 

        5.3    Notices.    Any and all notices or other communications or deliveries required or permitted to be provided
hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered (receipt confirmed)via
facsimile at the facsimile number set forth on the signature pages attached hereto prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered (receipt confirmed) via facsimile at the facsimile number set forth
on the signature pages attached hereto on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the second Trading Day following the date
of deposit with a carrier or service, if sent by U.S. nationally recognized overnight carrier or courier service, or (d) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. 

        5.4    Amendments; Waivers.    No provision of this Agreement may be waived or amended except in a written instrument
signed, in the case of an amendment, by the Company and each Purchaser or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other 

16

 

provision,
condition or requirement hereof (unless it so provides by its terms), nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of
any such right. 

        5.5    Construction.    The headings herein are for convenience only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. 

        5.6    Successors and Assigns.    This Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions hereof that apply to the "Purchasers". 

        5.7    No Third-Party Beneficiaries.    This Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.9. 

        5.8    Governing Law.    All questions concerning the construction, validity, enforcement and interpretation of the
Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought
against a party hereto or its respective affiliates, directors, officers, shareholders, employees or
agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by delivering a copy thereof via overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law. Each party hereto (including its affiliates, agents, officers, directors and employees) hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an
action or proceeding to enforce any provisions of a Transaction Document, then the prevailing party in such action or proceeding, as determined by the court hearing such matter, shall be reimbursed by
the other party for its reasonable attorneys' fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. 

        5.9    Survival.    The representations and warranties herein shall survive the Closing and delivery of the Shares and
Warrant Shares. 

        5.10    Execution.    This Agreement may be executed in two or more counterparts, all of which when taken together
shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need
not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing 

17

 

(or
on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof. 

        5.11    Severability.    If any provision of this Agreement is held to be invalid or unenforceable in any respect, the
validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. 

        5.12    Replacement of Securities.    If any certificate or instrument evidencing any Securities is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but
only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities. 

        5.13    Remedies.    In addition to being entitled to exercise all rights provided herein or granted by law, including
recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate. 

        5.14    Payment Set Aside.    To the extent that the Company makes a payment or payments to any Purchaser pursuant to
any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any
other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation
or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. 

        5.15    Independent Nature of Purchasers' Obligations and Rights.    The obligations of each Purchaser under any
Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers
as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each Purchaser shall be entitled independently to protect and enforce its rights, including without limitation, the rights
arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.
Each Purchaser has been or has had the opportunity to be represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. The Company has elected to provide
all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by the Purchasers. 

(Signature Page Follows)

18

 

        IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. 

	FOCUS ENHANCEMENTS, INC.	 	Address for Notice:
	 	 	 	1370 Dell Avenue
	 	 	 	Campbell, California 95008
	By:	 	 	Attn: Brett A. Moyer
	 	
	 	President and CEO
	 	Name: Brett A. Moyer	 	Tel: (408) 866-8300
	 	Title: President and Chief Executive Officer	 	Fax: (408)866-4795

With
copy to (which shall not constitute notice): 

Manatt,
Phelps & Phillips, LLP

1001 Page Mill Road, Bldg. 2

Palo Alto, California 94304-1006

Attn: Jerrold F. Petruzzelli, Esq.

Tel: (650) 812-1300

Fax: (650) 213-0260 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR PURCHASERS FOLLOW] 

19

 
[PURCHASER
SIGNATURE PAGES TO FCSE SECURITIES PURCHASE AGREEMENT] 

        IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. 

Name
of Investing Entity: ________________________________________________________
 Signature of Authorized Signatory of Investing Entity: ___________________________

Name of Authorized Signatory: ____________________________________________________

Title of Authorized Signatory: ___________________________________________________

Email Address of Authorized Entity: ______________________________________________

Address
for Notice of Investing Entity: 

Address
for Delivery of Securities for Investing Entity (if not same as above): 

Subscription
Amount:

Shares:

Warrant Shares:

EIN Number: [WE SUGGEST YOU PROVIDE THIS UNDER SEPARATE COVER] 

[PURCHASER
SIGNATURE PAGE] 

20

QuickLinks

SECURITIES PURCHASE AGREEMENT

ARTICLE I. DEFINITIONS

ARTICLE II. PURCHASE AND SALE

ARTICLE III. REPRESENTATIONS AND WARRANTIES

ARTICLE IV. OTHER AGREEMENTS OF THE PARTIES

ARTICLE V. MISCELLANEOUS

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00087-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00087-of-00352.parquet"}]]