Document:

Exhibit 10.5

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”)
is made and entered into as of January 24, 2006, by and among Focus
Enhancements, Inc., a Delaware corporation (the “Company”), the
purchasers signatory hereto (each such purchaser, a “Purchaser” and
collectively, the “Purchasers”), and Ingalls & Snyder LLC, a
New York limited liability company (the “Purchasers’ Agent”).

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

 

The Company and the Purchasers hereby agree as
follows:

 

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

 

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

 

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

 

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

 

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

 

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

 

“Filing Date” means, with respect to the
Registration Statement required to be filed hereunder, the 90th
calendar day following the Closing Date.

 

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

 

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

 

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

 

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

 

“Notes” means the Senior Secured Convertible
Notes Due January 1, 2011 for total principal of $10,000,000 issued to the
Purchasers by the Company as of the date

 

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hereof and all Notes issuable by the Company in lieu
of interest pursuant to Section 2.10(b) of the Purchase Agreement.

 

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

 

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

 

“Registrable Securities” means all of the
shares of Common Stock, $0.01 par value per share, issuable upon optional
conversion of the Notes by individual Purchasers, together with any shares of
Common Stock issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the foregoing.

 

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

 

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

 

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

 

2.                                       Registration.  On or prior to the Filing Date, the Company
shall prepare and file with the Commission the Registration Statement covering
the resale of all of the Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. 
The Registration Statement required hereunder shall be on Form S-3
(except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case the Registration shall
be on another appropriate form in accordance herewith).  The Registration Statement required hereunder
shall contain (except if otherwise directed by the Holders) substantially the “Plan
of Distribution” attached hereto as Annex A.  Subject to the terms of this

 

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Agreement, the Company
shall use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing
thereof, but in any event not later than the Effectiveness Date, and shall use
its best efforts to keep the Registration Statement continuously effective
under the Securities Act until the date when all Registrable Securities covered
by the Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144(k) as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company’s transfer agent and the affected Holders (the “Effectiveness
Period”).

 

3.                                       Registration
Procedures

 

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

 

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

 

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

 

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the intended
methods of disposition by the Holders thereof set forth in the Registration
Statement as so amended or in such Prospectus as so supplemented.

 

(c)                                  Notify
the Purchasers’ Agent on behalf of the Holders of Registrable Security to be
sold as promptly as reasonably possible and (if requested by any such Person)
confirm such notice in writing promptly following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission
notifies the Company whether there will be a “review” of the Registration
Statement and whenever the Commission comments in writing on the Registration
Statement (the Company shall upon request provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any
other Federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to
the Registration Statement or Prospectus or for additional information; (iii) of
the issuance by the Commission or any other federal or state governmental
authority of any stop order suspending the effectiveness of the Registration
Statement covering any or all of the Registrable Securities or the initiation
of any Proceedings for that purpose; (iv) of the receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that
makes the financial statements included in the Registration Statement
ineligible for inclusion therein or any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.

 

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

 

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

 

(f)                                    Except
during periods in which the delivery of the Prospectus is not required by
reason of Rule 174 (or any similar or successor SEC rule).  Promptly deliver to each Holder, without
charge, as many copies of the Prospectus or Prospectuses (including each form
of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request in connection with resales by the Holder of Registrable

 

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Securities.  Subject to the terms of this Agreement, the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto, except after the giving on any notice
pursuant to Section 3(c).

 

(g)                                 Prior
to any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders
in connection with the registration or qualification (or exemption from the
Registration or qualification) of such Registrable Securities for the resale by
the Holder under the securities or Blue Sky laws of such jurisdictions within
the United States as any Holder reasonably requests in writing, to keep each
such Registration or qualification (or exemption therefrom) effective during
the Effectiveness Period and to do any and all other acts or things reasonably necessary
to enable the disposition in such jurisdictions of the Registrable Securities
covered by the Registration Statement; provided, that the Company shall
not be required to qualify generally to do business in any jurisdiction where
it is not then so qualified, subject the Company to any material tax in any
such jurisdiction where it is not then so subject or file a general consent to
service of process in any such jurisdiction.

 

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

 

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

 

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

 

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(k)                                  The
Company may require each Holder to furnish to the Company a certified statement
as to the number of shares of Common Stock beneficially owned by such Holder
and the person thereof that has voting and dispositive control over the Shares.

 

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

 

5.                                       Indemnification

 

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

 

F-6

 

to the Company by
such Holder expressly for use therein, or to the extent that such information
relates to such Holder or such Holder’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Holder expressly for use in the Registration Statement, such Prospectus or
such form of Prospectus or in any amendment or supplement thereto (it being
understood that the Holder has approved Annex A hereto for this purpose) or (ii) in
the case of an occurrence of an event of the type specified in Sections
3(c)(ii)-(v), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d).

 

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

 

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

 

F-7

 

determined by a
court of competent jurisdiction (which determination is not subject to appeal
or further review) that such failure shall have prejudiced the Indemnifying
Party.

 

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

 

Subject to the terms of this Agreement, all reasonable
fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing
to defend such Proceeding in a manner not inconsistent with this Section) shall
be paid to the Indemnified Party, as incurred, within 45 days of written notice
thereof to the Indemnifying Party; provided, that the Indemnified Party
shall promptly reimburse the Indemnifying Party for that portion of such fees
and expenses applicable to such actions for which such Indemnified Party is not
entitled to indemnification hereunder, determined based upon the relative
faults of the parties.

 

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

 

F-8

 

opportunity to
correct or prevent such action, statement or omission.  The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in this Agreement, any reasonable attorneys’ or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party
in accordance with its terms.

 

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

 

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

 

6.                                       Miscellaneous

 

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

 

(b)                                 Authority
of Purchasers’ Agent.  The Purchasers
and the Company agree that Purchasers’ Agent is authorized to receive all
documents and notices to Holders under this Agreement and that the Company may
rely upon statements and writings by the Purchasers’ Agent made on behalf of
any Holder with respect to the exercise, or non-exercise of any right of a
Holder and the performance of any obligation of a Holder other than the
execution of any contract or any document to be submitted for filing with the
SEC.

 

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

 

(d)                                 Discontinued
Disposition.  Each Holder agrees by
its acquisition of such Registrable Securities that, upon receipt of written
notice from the Company of the

 

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occurrence of any
event of the kind described in Section 3(c), such Holder will forthwith
discontinue disposition of such Registrable Securities under the Registration
Statement until such Holder’s receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement or until it is advised in
writing (the “Advice”) by the Company that the use of the applicable Prospectus
may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.  The Company will use its best efforts to
ensure that the use of the Prospectus may be resumed as promptly as it
practicable.  The Company agrees and
acknowledges that any periods during which the Holder is required to
discontinue the disposition of the Registrable Securities hereunder shall be
subject to the provisions of Section 2(b).

 

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

 

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

 

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

 

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

 

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

 

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

 

(k)                                  Severability.
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find

 

F-10

 

and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.  It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.

 

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

 

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

 

F-11

 

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

 

	
   

  	
  FOCUS ENHANCEMENTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brett Moyer

  	
   

  
	
   

  	
  Name: Brett Moyer

  
	
   

  	
  Title: CEO & President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PURCHASERS’ AGENT

  
	
   

  	
   

  
	
   

  	
  Ingalls & Snyder LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas Boucher Jr.

  	
   

  
	
   

  	
  Name:

  	
  Thomas Boucher Jr.

  	
   

  
	
   

  	
  Title:

  	
  Manager

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PURCHASERS

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name of Investing Entity

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature of Authorized Signator of

  Investing entity

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name of Authorized Signatory

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title of Authorized Signatory

  
						

 

SIGNATURE PAGE FOR REGISTRATION RIGHTS AGREEMENT

 

F-12

 

ANNEX A

 

Plan of Distribution

 

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

 

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

 

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

 

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

 

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

 

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

 

•                  privately negotiated transactions;

 

•                  settlement of short sales;

 

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

 

•                  a combination of any such methods of
sale;

 

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

 

•                  any other method permitted pursuant
to applicable law.

 

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

 

F-13

 

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

 

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

 

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

 

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

 

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

 

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

 

F-14

 

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

 

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

 

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

 

We will not receive any of the proceeds from the
selling stockholders’ sale of our common stock.

 

F-15

 

ANNEX B

 

Focus
Enhancements, Inc.

 

Selling
Securityholder Notice and Questionnaire

 

The undersigned
beneficial owner of common stock, par value $0.01 per share (the “Common
Stock”), of Focus Enhancements, Inc., a Delaware corporation (the “Company”),
(the “Registrable Securities”) understands that the Company has filed or
intends to file with the Securities and Exchange Commission (the “Commission”)
a registration statement on Form S-3 (the “Registration Statement”)
for the registration and resale under Rule 415 of the Securities Act of
1933, as amended (the “Securities Act”), of the Registrable Securities,
in accordance with the terms of the Registration Rights Agreement, dated as of                      ,
2006 (the “Registration Rights Agreement”), among the Company and the
Purchasers named therein.  A copy of the
Registration Rights Agreement is available from the Company upon request at the
address set forth below.  All capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Registration Rights Agreement.

 

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

NOTICE

 

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

 

F-16

 

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

 

QUESTIONNAIRE

1.                                      Name.

 

	
  (a)                                  Full Legal Name of
  Selling Securityholder

  
	
   

  
	
   

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

  
	
   

  
	
   

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

  
	
   

  
	
   

  

 

2.  Address
for Notices to Selling Securityholder:

	
   

  
	
   

  
	
   

  
	
  Telephone:

  
	
  Fax:

  
	
  Contact Person:

  
	
  Email Address:

  

 

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

 

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

  
	
   

  
	
   

  

 

F-17

 

4. 
Broker-Dealer Status:

 

(a)                                                                                  Are you a broker-dealer?

 

Yes   o    No  o

 

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

 

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

 

Yes  o    No  o

 

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

Yes  o    No  o

 

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

 

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

 

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

 

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

 

	
   

  
	
   

  

 

F-18

 

6. 
Relationships with the Company:

 

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

 

State
any exceptions here:

	
   

  
	
   

  

 

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

 

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

 

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

 

	
  Dated:

  	
   

  	
   

  	
  Beneficial
  Owner:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
							

 

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

 

	
   

  	
  Gary Williams

  
	
   

  	
  Chief Financial Officer

  
	
   

  	
  Focus Enhancements, Inc.

  
	
   

  	
  1370 Dell Avenue

  
	
   

  	
  Campbell, California 95008

  
	
   

  	
  Fax (408) 866-4795

  

 

 

F-19Exhibit 10.33

 

2006 Base Salaries for Named
Executive Officers

 

	
  Name and Title

  	
   

  	
  Salary

  	
   

  
	
  James M. Gower

  	
   

  	
   

  	
   

  
	
  Chief Executive Officer, Chairman of the Board and
  Director

  	
   

  	
  $

  	
  455,000

  	
   

  
	
  Donald G. Payan

  	
   

  	
   

  	
   

  
	
  Executive Vice President and Scientific Officer and Director

  	
   

  	
  $

  	
  395,000

  	
   

  
	
  Elliot B. Grossbard

  	
   

  	
   

  	
   

  
	
  Senior Vice President, Medical Development

  	
   

  	
  $

  	
  365,200

  	
   

  
	
  Raul R. Rodriguez

  	
   

  	
   

  	
   

  
	
  Executive Vice President, Chief Operating Officer

  	
   

  	
  $

  	
  355,000

  	
   

  
	
  Dolly A. Vance

  	
   

  	
   

  	
   

  
	
  General Counsel and Vice President of Intellectual
  Property

  	
   

  	
  $

  	
  335,000

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