Document:

TERMINATION AGREEMENT

         AGREEMENT  (this  "Agreement")  dated January 4, 2002,  between  Euston
Investments Holdings Limited ("Euston") and FOCUS Enhancements,  Inc. ("FOCUS").
In  consideration  of the mutual covenants and agreements of the parties hereto,
and for other good and valuable  consideration,  the receipt and  sufficiency of
which are hereby  acknowledged,  the  parties  hereto,  intending  to be legally
bound, do hereby agree as follows:

         1.       Termination.

                  (a) (i)  that the  exercise  price  of that  certain  warrant,
         issued to Euston on June 9, 2000, representing the right to purchase up
         to 250,000  shares of FOCUS's common stock (the  "Warrant"),  is hereby
         reduced from $1.625 to $0.75  (subject to  adjustment  in the Warrant),
         for the  remainder  of the term of the  Warrant  and Euston  shall have
         until June 12, 2003 to exercise  the Warrant into such shares of common
         stock,  (ii) that,  except as otherwise set forth  herein,  the Private
         Equity  Line of Credit  Agreement,  dated July 28,  2000 (as amended on
         February 6, 2001) between Euston and FOCUS, the agreements entered into
         in connection therewith (except the Warrant) and any amendments thereto
         (collectively,   the  "Purchase   Agreement")  are  hereby  terminated,
         whereupon the Purchase  Agreement  shall become null and void and of no
         further force or effect whatsoever,  (iii) that no party shall have any
         further or continuing obligations under the Purchase Agreement,  except
         for any  registration  rights with respect to the Warrants  thereunder,
         and (iv) that,  except as otherwise set forth herein,  each party shall
         be  irrevocably,  unconditionally  and  generally  released and forever
         discharged  (each, a "Releasee")  from any and all debts,  obligations,
         reckonings, promises, covenants, agreements,  contracts,  endorsements,
         bonds, suits, actions, specialties,  claims,  controversies,  causes of
         action, defaults,  demands or judgments, at law or in equity, which any
         of such parties ever had, now has or hereafter  can, shall or may have,
         against such  Releasee  under or in  connection  with the  transactions
         contemplated by the Purchase Agreement;  provided,  however,  that this
         termination  and release shall have no force or effect  whatsoever with
         respect to Euston's rights and FOCUS's  obligations under the Warrants,
         including any registration rights under the Purchase Agreement.  Euston
         shall not exercise the Warrant by means of a "cashless  exercise" until
         after  March  31,  2002 and  thereafter  only if there is no  effective
         registration  statement  registering  for  resale by Euston  the shares
         underlying the Warrant.  The Warrants are and remain duly authorized by
         all necessary corporate action, including the reduction in the exercise
         price of the  Warrants  hereunder,  and,  when  paid for or  issued  in
         accordance  with  the  terms  thereof,   the  shares  of  common  stock
         underlying the warrants shall be validly issued and outstanding,  fully
         paid and  non-assessable,  and Euston  shall be  entitled to all rights
         accorded to a holder of such common stock.

                  (b) The parties  mutually  agree not to make any defamatory or
         derogatory  statements  to any third  party,  whether  written or oral,
         concerning  one another  from the  beginning of the world to the end of
         time.

         2.       Miscellaneous.
<PAGE>

                           (a) Entire  Agreement.  This  Agreement  embodies the
         entire agreement and understanding among the parties hereto relating to
         the subject  matter  hereof and  supersedes  any prior  agreements  and
         undertakings among the parties which relate to such subject matter.

                           (b)  Binding  Agreement.   This  Agreement  shall  be
         binding  upon and inure to the  benefit of the  parties  hereto,  their
         respective successors, representatives and permitted assigns.

                           (c) Governing Law. This  Agreement  shall be governed
         by and construed in accordance with the laws of the State of New York.

                           (d) Severability.  If any provision of this Agreement
         shall be held invalid, illegal or unenforceable, the validity, legality
         and  enforceability  of all other provisions  hereof shall in no way be
         affected thereby.

                           (e)  Counterparts.  This Agreement may be executed in
         any number of  counterparts,  each of which shall be deemed an original
         but all of  which  taken  together  shall  constitute  one  instrument.
         Execution may be made by delivery by facsimile.

                           ***************************

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<PAGE>

         IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the day and year first above written.

                                            FOCUS ENHANCEMENTS, INC.

                                            By: /s/ Gary Williams
                                                -------------------------------
                                                    Gary Williams
                                                    V.P. of Finance & CFO

                                            EUSTON INVESTMENTS HOLDINGS LIMITED

                                            By: /s/ David Sims
                                                -------------------------------
                                                    David Sims
                                                    Director

                                       3COMMON STOCK AND WARRANT PURCHASE AGREEMENT

         THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT is dated as of January
11, 2002 (this  "Purchase  Agreement"  or  "Agreement"),  by and  between  FOCUS
ENHANCEMENTS,  INC.,  a  Delaware  corporation,  having its  principal  place of
business  located  at  1370  Dell  Avenue,   Campbell,   California  95008  (the
"Company"),  and  each  of the  Investors  listed  on  Schedule  A  hereto  (the
"Investor", and collectively the "Investors").

                               W I T N E S S E T H

         WHEREAS,  the Company wishes to sell to the respective  Investors,  and
such  respective  Investors are willing to buy from the Company,  subject to the
terms and  conditions  set forth  herein,  Two Million Four Hundred  Thirty-Four
Thousand Four Hundred Ninety  (2,434,490) shares of Common Stock, par value $.01
per share (the "Common Stock"), of the Company.

         NOW, THEREFORE, for and in consideration of the premises and the mutual
agreement  contained herein and for other good and valuable  consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereto
agree as follows:

         A.  Definitions.  As used herein,  each of the following  terms has the
meaning set forth below, unless the context otherwise requires:

                  (i)  "Closing  Date"  means  the  date of the  closing  of the
purchase and sale of the Shares, as provided herein.

                  (ii) "Company  Control Person" means each director,  executive
officer,  promoter,  and such  other  Persons as may be deemed in control of the
Company  pursuant  to Rule 405 under the 1933 Act or  Section 20 of the 1934 Act
(as hereinafter defined).

                  (iii)  "Effective  Date"  means  the  effective  date  of  the
Registration  Statement covering the Registrable  Securities (as those terms are
defined in the Registration Rights Agreement) relating to the Shares.

                  (iv) "Escrow Funds" means the Purchase Price  delivered to the
Escrow Agent as contemplated by Sections 5(b) and (c) hereof.

                  (v) "Last Audited Date" means December 31, 2000.

                  (vi) "Investor Control Person" means each director,  executive
officer,  promoter,  and such  other  Persons as may be deemed in control of the
Investor pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.

                  (vii) "Majority In Interest" means Investors  owning in excess
of 51% of the Common Stock on the relevant date.
<PAGE>

                  (viii) "Material Adverse Effect" means an event or combination
of events, which individually or in the aggregate,  would reasonably be expected
to (w) adversely affect the legality,  validity or  enforceability of the Shares
or any of the Transaction  Agreements,  (x) have or result in a material adverse
effect on the results of  operations,  assets,  or  financial  condition  of the
Company  and its  subsidiaries,  taken  as a whole,  (y)  adversely  impair  the
Company's  ability to perform fully on a timely basis its obligations  under any
of the Transaction  Agreements or the transactions  contemplated thereby, or (z)
materially and adversely affect the value of the rights granted to the Investors
in the Transaction Agreements.

                  (ix)  "Principal  Trading  Market"  means the NASDAQ  SmallCap
Market.

                  (x)  "Registration  Rights  Agreement"  means the Registration
Rights  Agreement  in the form  annexed  hereto as Annex IV, as executed by each
Investor and the Company simultaneously with the execution of this Agreement.

                  (xi) "Shares" means the shares of Common Stock.

                  (xii) "Transaction  Agreements" means this Purchase Agreement,
the Joint Escrow Instructions, the Registration Rights Agreement, and the Common
Stock Purchase Warrants (as defined below) and includes all ancillary  documents
referred to in those agreements.

                  (xiii) "1933 Act" or "Securities Act" means the Securities Act
of 1933, as amended.

                  (xiv)  "1934  Act" or  "Exchange  Act"  means  the  Securities
Exchange Act of 1934, as amended.

         1. PURCHASE AND SALE; MUTUAL  DELIVERIES.  (a) Upon the following terms
and  conditions,  the  Company  shall  issue and sell to the  Investors  and the
Investors  shall purchase from the Company that number of shares of Common Stock
equal to Two Million Seven Hundred Fifty Thousand Dollars  ($2,750,000.00)  (the
"Aggregate  Amount")  divided by the Purchase  Price (as  hereinafter  defined),
resulting in an aggregate of 2,434,490  shares (the  "Shares") to be issued upon
the payment of the Purchase Price by the respective Investors in the amounts and
denominations set forth in Annex I. The Shares are part of an aggregate issuance
of 2,434,490 shares of Common Stock on substantially similar terms. The Purchase
Price is $1.1296 per share. The Company's  obligation to sell the Shares to each
Investor and each  Investor's  obligation to purchase Shares from the Company is
several and represents a separate agreement. Upon receipt of the Purchase Price,
the Company shall deliver to the Investor one or more certificates  representing
the Shares, bearing substantially the following legend:

                  THE SECURITIES  REPRESENTED HEREBY (THE "SECURITIES") HAVE NOT
                  BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED
                  (THE  "SECURITIES  ACT"),  OR THE SECURITIES LAWS OF ANY STATE
                  AND MAY NOT BE SOLD OR OFFERED  FOR SALE

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<PAGE>

                  IN THE ABSENCE OF AN EFFECTIVE  REGISTRATION STATEMENT FOR THE
                  SECURITIES  OR  AN  OPINION  OF  COUNSEL  OR  OTHER   EVIDENCE
                  ACCEPTABLE TO THE  CORPORATION  THAT SUCH  REGISTRATION IS NOT
                  REQUIRED.

         (b) (i) The Investor acknowledges that (1) the Shares have not been and
are not being  registered  under the  provisions of the 1933 Act and,  except as
provided  in the  Registration  Rights  Agreement  or  otherwise  included in an
effective  registration  statement,  the Shares  have not been and are not being
registered  under  the  1933  Act,  and  may  not  be  transferred   unless  (A)
subsequently  registered  thereunder or (B) the Investor shall have delivered to
the Company an opinion of counsel,  reasonably  satisfactory in form,  scope and
substance  to the  Company,  to  the  effect  that  the  Shares  to be  sold  or
transferred  may be sold or  transferred  pursuant  to an  exemption  from  such
registration;  (2)  any  sale  of the  Shares  made  in  reliance  on  Rule  144
promulgated  under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such Shares
under  circumstances in which the seller, or the Person through whom the sale is
made, may be deemed to be an underwriter,  as that term is used in the 1933 Act,
may require compliance with some other exemption under the 1933 Act or the rules
and regulations of the Securities and Exchange  Commission  ("Commission" or the
"SEC") thereunder; and (3) neither the Company nor any other Person is under any
obligation  to  register  the Shares  (other than  pursuant to the  Registration
Rights  Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.

                  (ii) Within three (3) business days (such third  business day,
the  "Delivery  Date")  after the business day on which the Company has received
both the notice of sale (by facsimile or other delivery) and the original Common
Stock  certificate (and if the same are not delivered to the Company on the same
date,  the date of delivery of the second of such items) from a given  Investor,
the Company at its expense,  (i) shall  deliver,  and shall cause legal  counsel
selected by the  Company to  deliver,  to its  transfer  agent  (with  copies to
Investor)  an  appropriate  instruction  and  opinion of such  counsel,  for the
delivery of unlegended  Shares issuable  pursuant to the registration  statement
for the Shares;  provided that such  registration  statement at the time of sale
has been declared  effective by the Commission  and is current (the  "Unlegended
Shares"); and (ii) transmit the certificates  representing the Unlegended Shares
(together,  unless otherwise  instructed by the Investor,  with Common Stock not
sold),  to the  Investor  at the  address  specified  in a notice of sale (which
address may be the Investor's  address for notices as  contemplated by Section 9
hereof or a different  address) via express courier,  by electronic  transfer or
otherwise.

                  (iii) In lieu of delivering physical certificates representing
the Unlegended  Shares, if the Company's  transfer agent is participating in the
Depository  Trust Company ("DTC") Fast Automated  Securities  Transfer  program,
upon request of an Investor and its compliance with the provisions  contained in
this paragraph,  so long as the  certificates  therefor do not bear a legend and
the  Investor  thereof  is not  obligated  to return  such  certificate  for the
placement of a legend  thereon,  the Company shall use its best efforts to cause
its transfer agent to

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<PAGE>

electronically  transmit the Unlegended  Shares by crediting the account of such
Investor's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system.

         (c) The  Company  shall also  deliver,  or cause to be  delivered,  the
original or execution copies of this Purchase Agreement.

         (d) There are no preemptive  rights of any  shareholder of the Company,
as such,  to  acquire  the  Warrants  or the  Shares.  No party has a  currently
exercisable  right of first  refusal  which would be applicable to any or all of
the transactions contemplated by the Transaction Agreements.

         2.   REPRESENTATIONS  AND  WARRANTIES  OF  THE  COMPANY.   The  Company
represents and warrants to each respective Investor that:

         (a) The Company has the  corporate  power and  authority  to enter into
this Purchase Agreement, and to perform its obligations hereunder. The execution
and delivery by the Company of this Purchase  Agreement and the  consummation by
the Company of the transactions contemplated hereby have been duly authorized by
all  necessary  corporate  action  on the  part of the  Company.  This  Purchase
Agreement has been duly executed and delivered by the Company and constitute the
valid and binding obligation of the Company enforceable against it in accordance
with its respective terms, subject to the effects of any applicable  bankruptcy,
insolvency,  reorganization,  moratorium  or similar laws  affecting  creditors'
rights generally and to general equitable principles.

         (b) Except as set forth in the SEC Documents (as hereinafter  defined),
there is no pending, or to the knowledge of the Company,  threatened,  judicial,
administrative  or arbitral  action,  claim,  suit,  proceeding or investigation
which might affect the validity or enforceability of this Purchase  Agreement or
which involves the Company and which if adversely  determined,  could reasonably
be  expected  to  have  a  material  adverse  effect  on  the  Company  and  its
subsidiaries taken as a whole.

         (c) No consent or approval  of, or exemption  by, or filing  with,  any
party or governmental or public body or authority is required in connection with
the execution,  delivery and  performance  under this Purchase  Agreement or the
taking of any action contemplated hereunder or thereunder.

         (d) The Company has been duly  organized  and is validly  existing as a
corporation  in  good  standing  under  the  laws  of  the  jurisdiction  of its
incorporation.

         (e) The execution,  delivery and performance of this Purchase Agreement
by the Company,  and the consummation of the transactions  contemplated  hereby,
will not (i) violate any provision of the Company's certificate of incorporation
or bylaws,  (ii)  violate,  conflict  with or result in the breach of any of the
terms of, result in a material  modification of the effect of,  otherwise,  give
any other  contracting  party the right to  terminate,  or  constitute  (or with
notice or lapse of time or both  constitute)  a default  under,  any contract or
other agreement to which the Company is a party or by or to which the Company or
any of the Company's assets or properties

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<PAGE>

may be bound or subject, (iii) violate any order, judgment, injunction, award or
decree of any court,  arbitrator or governmental or regulatory body by which the
Company,  or the assets or  properties  of the Company are bound and (iv) to the
Company's knowledge, violate any statute, law or regulation.

         3.  REPRESENTATIONS  AND  WARRANTIES  OF THE  INVESTORS.  Each Investor
hereby represents and warrants to the Company that:

         (a) The Investor has the  corporate  power and  authority to enter into
this Purchase Agreement and to perform its obligations hereunder.  The execution
and delivery by the Investor of this Purchase Agreement, and the consummation by
the Investor of the transactions  contemplated hereby, have been duly authorized
by all necessary  corporate  action on the part of the  Investor.  This Purchase
Agreement has been duly  executed and delivered by the Investor and  constitutes
the valid and binding  obligation  of the  Investor,  enforceable  against it in
accordance with its respective  terms,  subject to the effects of any applicable
bankruptcy,  insolvency,  reorganization,  moratorium or similar laws  affecting
creditors' rights generally and to general equitable principles.

         (b) The  execution,  delivery and  performance  by the Investor of this
Purchase  Agreement,  and  the  consummation  of the  transactions  contemplated
hereby,  do not and will not breach or constitute a default under any applicable
law  or  regulation  or of any  agreement,  judgment,  order,  decree  or  other
instrument binding on the Investor.

         (c) The Investor has such  knowledge and prior  substantial  investment
experience in financial and business matters, including investment in non-listed
and  non-registered  securities,  and has  had the  opportunity  to  engage  the
services  of an  investment  advisor,  attorney  or  accountant  to read the SEC
Documents  and to evaluate the merits and risks of investment in the Company and
the Shares.

         (d) The Investor is an "accredited investor" as that term is defined in
Rule 501(a) of Regulation D promulgated under the 1933 Act.

         (e) [RESERVED]

         (f) The Investor is acquiring  the Shares,  the Warrants (as defined in
Section  4(n)) and the shares of Common  Stock  issuable  upon  exercise  of the
Investor  Warrants (the "Warrant  Shares") solely for the Investor's own account
for  investment  and  not  with  a view  to or for  sale  in  connection  with a
distribution  of any of the Shares or the Warrant  Shares (the Shares,  Warrants
and Warrant Shares collectively, the "Shares").

         (g) The Investor does not have a present  intention to sell the Shares,
nor a present  arrangement or intention to effect any distribution of any of the
Shares to or through any person or entity for  purposes  of  selling,  offering,
distributing or otherwise disposing of any of the Shares.

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<PAGE>

         (h) The  Investor  may be  required  to bear the  economic  risk of the
investment  indefinitely because none of the Shares may be sold, hypothecated or
otherwise  disposed of unless  subsequently  registered under the Securities Act
and  applicable  state  securities  laws or an exemption  from  registration  is
available.  Any resale of any of the Shares can be made only  pursuant  to (i) a
registration  statement  under the Securities Act which is effective and current
at the  time  of  sale  or  (ii) a  specific  exemption  from  the  registration
requirements of the Securities Act. In claiming any such exemption, the Investor
will,  prior to any  offer or sale or  distribution  of any  Shares  advise  the
Company and, if requested,  provide the Company with a favorable written opinion
of counsel, in form and substance  satisfactory to counsel to the Company, as to
the applicability of such exemption to the proposed sale or distribution.

         (i) The Investor  understands  that the exemption  afforded by Rule 144
promulgated  by the  Commission  under the  Securities Act ("Rule 144") will not
become  available  for at least one year from the date of payment for the Shares
and any sales in reliance on Rule 144,  if then  available,  can be made only in
accordance  with the terms and conditions of that rule,  including,  among other
things, a requirement  that the Company then be subject to, and current,  in its
periodic filing  requirements under the Exchange Act, and, among other things, a
limitation on the amount of shares of Common Stock that may be sold in specified
time  periods  and the  manner  in which the sale can be made;  that,  while the
Company's  Common Stock is registered  under the Exchange Act and the Company is
presently  subject to the periodic  reporting  requirements of the Exchange Act,
there can be no assurance that the Company will remain subject to such reporting
obligations or current in its filing obligations;  and that, in case Rule 144 is
not applicable to a disposition of the Shares,  compliance with the registration
provisions of the Securities Act or some other exemption from such  registration
provisions will be required.

         (j) The  Investor  understands  that  legends  shall be  placed  on the
certificates  evidencing  the Shares to the effect that the Shares have not been
registered  under the Securities  Act or applicable  state  securities  laws and
appropriate  notations  thereof will be made in the Company's stock books.  Stop
transfer instructions will be placed with the transfer agent of the Shares.

         (k)  Except as set forth in the Term  Sheet  between  the  Company  and
Vfinance,  Investments,  Inc. dated December 27, 2001, the Investor has taken no
action  which  would  give  rise  to any  claim  by  any  person  for  brokerage
commission,  finder's  fees or similar  payments  by  Investor  relating to this
Purchase  Agreement or the transactions  contemplated  hereby. The Company shall
have no obligation  with respect to such fees or with respect to any claims made
by or on behalf of other persons for fees of a type contemplated in this Section
3(k) that may be due in connection with the  transactions  contemplated  hereby.
The Investor  shall  indemnify  and hold  harmless the Company,  its  employees,
officers, directors, agents, and partners, and their respective Affiliates, from
and  against  all  claims,  losses,  damages,  costs  (including  the  costs  of
preparation  and attorney's  fees) and expenses  suffered in respect of any such
claimed or existing fees, as and when incurred.

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<PAGE>

         4.  COVENANTS OF THE COMPANY.  (a) The Company  covenants and agrees to
enter into a Registration  Rights  Agreement  governing the  registration of the
Shares with the Investors dated as of the date hereof.

         (b) Current  Public  Information.  The Company  has  furnished  or made
available  to  each  Investor  true  and  correct  copies  of  all  registration
statements,  reports  and  documents,  including  proxy  statements  (other than
preliminary proxy  statements),  filed with the Commission by or with respect to
the Company  since  December  31, 2000 and prior to the date of this  Agreement,
pursuant to the  Securities  Act or the  Exchange  Act  (collectively,  the "SEC
Documents").  The SEC  Documents are the only filings made by or with respect to
the Company since December 31, 2000 pursuant to Sections  13(a),  13(c),  14 and
15(d) of the  Exchange  Act or pursuant to the  Securities  Act. The Company has
filed all reports,  schedules, forms, statements and other documents required to
be filed under  Sections  13(a),  13(c),  14 and 15(d) of the Exchange Act since
December 31, 2000 and prior to the date of this Agreement.

         (c) SEC  Documents.  The Company has not  provided to the  Investor any
information  which according to applicable law, rule or regulation,  should have
been  disclosed  publicly  prior to the date hereof by the Company but which has
not been so disclosed.  As of their respective dates or their restated dates (if
so restated),  the SEC Documents complied,  and all similar documents filed with
the SEC prior to the Closing Date will comply, in all material respects with the
requirements  of the Securities Act or the Exchange Act, as the case may be, and
rules and regulations of the SEC promulgated thereunder and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC Documents contained, nor will any similar document filed with the SEC
prior to the Closing Date  contain,  any untrue  statement of a material fact or
omit 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  Documents,  as of the dates  thereof (or the restated  dates,  if so
restated),  complied,  and all similar documents filed with the SEC prior to the
Closing Date will comply,  as to form in all material  respects with  applicable
accounting  requirements  and the published rules and regulations of the SEC and
other  applicable  rules and regulations  with respect  thereto.  Such financial
statements  were  prepared in  accordance  with  generally  accepted  accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial  statements or the notes thereto
or (ii) in the case of unaudited interim statements,  to the extent they may not
include footnotes or may be condensed or summary statements as permitted by Form
10-QSB of the SEC) and fairly  present in all material  respects  the  financial
position  of the  Company  and its  consolidated  subsidiaries  as of the  dates
thereof  and the  consolidated  results  of  operations  and cash  flows for the
periods  then ended  (subject,  in the case of unaudited  statements,  to normal
year-end audit adjustments).

         (d) Absence of Certain Changes.  Since the Last Audited Date, there has
been no  material  adverse  change and no  Material  Adverse  Effect,  except as
disclosed in the Company's SEC Documents. Since the Last Audited Date, except as
provided  in the  Company's  SEC  Documents  or  disclosed  in  the  Transaction
Documents,  the Company has not (i)  incurred or become  subject to any material
liabilities (absolute or contingent) except liabilities incurred in

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<PAGE>

the ordinary course of business consistent with past practices;  (ii) discharged
or satisfied any material lien or encumbrance or paid any material obligation or
liability  (absolute or contingent),  other than current liabilities paid in the
ordinary course of business  consistent  with past practices;  (iii) declared or
made any payment or distribution of cash or other property to shareholders  with
respect to its capital stock,  or purchased or redeemed,  or made any agreements
to purchase or redeem,  any shares of its capital stock; (iv) sold,  assigned or
transferred any other tangible assets,  or canceled any debts or claims,  except
in the ordinary course of business consistent with past practices;  (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business,  or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material  problems with labor or management in connection with the terms and
conditions of their employment.

         (e) Absence of  Litigation.  Except as disclosed in the  Company's  SEC
Documents,  (i) there is no action, suit,  proceeding,  inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of the
Company,   threatened  against  or  affecting  the  Company  before  or  by  any
governmental authority or nongovernmental department, commission, board, bureau,
agency or instrumentality or any other Person,  wherein an unfavorable decision,
ruling or finding would have a Material  Adverse Effect or which would adversely
affect the  validity or  enforceability  of, or the  authority or ability of the
Company to perform its obligations  under,  any of the  Transaction  Agreements;
(ii) the Company is not aware of any valid basis for any such claim that (either
individually  or in the aggregate with all other such events and  circumstances)
could reasonably be expected to have a Material  Adverse Effect;  or (iii) there
are no outstanding or unsatisfied judgments, orders, decrees, writs, injunctions
or  stipulations  to which the  Company  is a party or by which it or any of its
properties is bound, that involve the transaction  contemplated  herein or that,
alone or in the aggregate, could reasonably be expect to have a Material Adverse
Effect.

         (f) [RESERVED]

         (g) [RESERVED]

         (h)  No  Undisclosed   Liabilities  or  Events.   The  Company  has  no
liabilities  or  obligations  other  than  those  disclosed  in the  Transaction
Agreements  or the  Company's  SEC  Documents or those  incurred in the ordinary
course  of the  Company's  business  since  the  Last  Audited  Date,  or  which
individually  or in the aggregate,  do not or would not have a Material  Adverse
Effect.  No event or  circumstances  has  occurred or exists with respect to the
Company or its properties, business, operations, financial condition, or results
of operations, which, under applicable law, rule or regulation,  requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly  announced or disclosed.  There are no proposals  currently
under  consideration or currently  anticipated to be under  consideration by the
Board of Directors or the executive officers of the Company which proposal would
(x) change the certificate of incorporation or other charter document or by-laws
of the  Company,  each as  currently  in  effect,  with or  without  shareholder
approval, which change would reduce or otherwise adversely affect the rights and
powers  of  the   shareholders   of  the  Common  Stock  or  (y)

                                       8
<PAGE>

materially  or  substantially  change  the  business,  assets or  capital of the
Company, including its interests in subsidiaries.

         (i) Trading in Securities.  The Company specifically acknowledges that,
except  to the  extent  specifically  provided  herein  or in  any of the  other
Transaction   Agreements  (but  limited  in  each  instance  to  the  extent  so
specified),  and subject to applicable  state and federal  securities  laws, the
Investor retains the right (but is not otherwise obligated) to buy, sell, engage
in  hedging  transactions  or  otherwise  trade in the  Shares  of the  Company,
including,  but not  necessarily  limited  to, the Shares,  at any time  before,
contemporaneous  with or after the execution of this Purchase  Agreement or from
time to time and in any manner  whatsoever  permitted by applicable  federal and
state securities laws.

         (j) Fees to Brokers,  Finders  and  Others.  Except as set forth in the
Term Sheet between the Company and vFinance,  Investments,  Inc.  dated December
27, 2001,  the Company has taken no action which would give rise to any claim by
any person for brokerage  commission,  finder's fees or similar  payments by the
Company  relating to this Purchase  Agreement or the  transactions  contemplated
hereby.  Investor  shall have no  obligation  with  respect to such fees or with
respect to any claims  made by or on behalf of other  persons for fees of a type
contemplated  in this  Section  4(j)  that  may be due in  connection  with  the
transactions  contemplated hereby. The Company shall indemnify and hold harmless
each of Investor, its employees,  officers, directors, agents, and partners, and
their respective Affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's  fees) and expenses  suffered
in respect of any such claimed or existing fees, as and when incurred.

         (k)  Use of  Proceeds.  The  Company  will  use the  proceeds  received
hereunder  (excluding amounts paid by the Company for legal fees,  finder's fees
and escrow fees in  connection  with the sale of the  Shares)  for the  purposes
contemplated  by  the  schedule  attached  hereto  as  Annex  VII,  and,  unless
specifically  consented to in advance in each instance by a majority in interest
of the  Investors,  the  Company  shall not,  directly or  indirectly,  use such
proceeds for any loan to or  investment  in any other  corporation,  partnership
enterprise  or  other  Person,  including  any of  its  Affiliates,  or for  the
repayment of any  outstanding  loan by the Company to any other party or for any
purpose constituting a material change from such schedule.

         (l) [RESERVED]

         (m) [RESERVED]

         (n) Warrants.  The Company agrees to issue to the respective  Investors
at the Closing,  transferable  divisible  warrants (the "Investor  Warrants") to
purchase up to 243,449  shares of Common Stock in the form  attached as Annex VI
hereto.  Such Investor Warrants shall bear an exercise price per share of Common
Stock equal to $1.36 and shall be exercisable,  immediately  upon issuance,  and
for a period of four (4) years thereafter.

         (o) [RESERVED]

                                       9
<PAGE>

         (p) [RESERVED]

         5.  DELIVERY  OF  SHARES.  (a) In  accordance  with  the  Joint  Escrow
Instructions,  attached  hereto  as Annex II and  made a part  hereof,  promptly
following the delivery by the  respective  Investor of the  respective  Purchase
Price for the Shares in  accordance  with  Section 1 hereof,  the  Company  will
irrevocably  instruct  its  transfer  agent to issue to such  Investor  legended
certificates representing the Shares.

         (b) Form of Payment; Delivery of Certificates:

                  (i) The  respective  Investor shall pay the Purchase Price for
the Shares by  delivering  immediately  available  good  funds in United  States
Dollars to the Escrow Agent no later than the date prior to the Closing Date.

                  (ii) No later than the Closing Date, but in any event promptly
following payment by the respective Investor to the Escrow Agent of the Purchase
Price, the Company shall deliver the Shares, each duly executed on behalf of the
Company and issued in the name of the respective Investor, to the Escrow Agent.

                  (iii) By signing this Agreement,  each respective Investor and
the Company,  subject to acceptance  by the Escrow  Agent,  agrees to all of the
terms and conditions of, and becomes a party to, the Joint Escrow  Instructions,
all of the provisions of which are  incorporated  herein by this reference as if
set forth in full.

         (c) Method of Payment.  Payment into escrow of the Purchase Price shall
be made by wire transfer of funds to:

                       Bank of New York
                       350 Fifth Avenue
                       New York, New York 10001

                       ABA# 021000018
                       For credit to the account of Krieger & Prager LLP
                       Account No.:   637-2993136
                       Re: FOCUS  Transaction

         (d) [RESERVED]

         (e) [RESERVED]

         6. CLOSING DATE.

         (a) The  Closing  Date shall  occur on the date which is the first NYSE
trading day after each of the conditions contemplated by Sections 7 and 8 hereof
shall have either been satisfied or been waived by the party in whose favor such
conditions run.

                                       10
<PAGE>

         (b) The closing of the  purchase and issuance of the Shares shall occur
on the Closing  Date at the offices of the Escrow  Agent and shall take place no
later  than 3:00  P.M.,  New York  time,  on such day or such  other  time as is
mutually agreed upon by the Company and a majority in interest of the Investors.

         (c)  Notwithstanding  anything to the contrary  contained  herein,  the
Escrow Agent will be  authorized  to release the Escrow Funds to the Company and
to others and to release the other  Escrow  Property  on the  Closing  Date upon
satisfaction  of the  conditions  set forth in  Sections  7 and 8 hereof  and as
provided in the Joint Escrow Instructions.

         7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

         Each Investor  understands  that the  Company's  obligation to sell the
Shares to such  Investor  pursuant  to this  Agreement  on the  Closing  Date is
conditioned upon:

         (a) The  execution  and  delivery of this  Purchase  Agreement  and the
Registration Rights Agreement by such Investor;

         (b)  Delivery  by such  Investor  to the Escrow  Agent of good funds as
payment  in full of an amount  equal to the  Purchase  Price  for the  Shares in
accordance with this Purchase Agreement;

         (c) The  accuracy  on such  Closing  Date  of the  representations  and
warranties of such Investor  contained in this  Purchase  Agreement,  each as if
made on such date,  and the  performance by such Investor on or before such date
of all covenants and  agreements of the Investor  required to be performed on or
before such date; and

         (d)  There  shall  not  be  in  effect  any  law,  rule  or  regulation
prohibiting or restricting the transactions  contemplated  hereby,  or requiring
any consent or approval which shall not have been obtained.

         8. CONDITIONS TO THE INVESTORS' OBLIGATION TO PURCHASE.

         The Company  understands that the respective  Investor's  obligation to
purchase the Shares on the Closing Date is conditioned upon:

         (a) The execution and delivery of this Purchase Agreement and the other
Transaction Agreements by the Company;

         (b) Delivery by the Company to the Escrow Agent of the  Certificates in
accordance with this Purchase Agreement;

         (c) The accuracy in all  material  respects on such Closing Date of the
representations  and  warranties  of the  Company  contained  in  this  Purchase
Agreement,  each as if made on such date, and the  performance by the Company on
or before such date of all covenants and  agreements of the Company  required to
be performed on or before such date;

                                       11
<PAGE>

         (d) On such Closing Date, the Registration Rights Agreement shall be in
full force and effect and the Company shall not be in default thereunder;

         (e) On such Closing Date, the  respective  Investor shall have received
an opinion of counsel for the Company (and delivered to the Escrow Agent), dated
the Closing Date, in form,  scope and substance  reasonably  satisfactory to the
Investor, substantially to the effect set forth in Annex III attached hereto;

         (f)  There  shall  not  be  in  effect  any  law,  rule  or  regulation
prohibiting or restricting the transactions  contemplated  hereby,  or requiring
any consent or approval which shall not have been obtained; and

         (g) From and after the date hereof to and including  such Closing Date,
each of the following  conditions will remain in effect:  (i) the trading of the
Common  Stock  shall  not have  been  suspended  by the SEC or on the  Principal
Trading Market;  (ii) no minimum prices shall been established for Shares traded
on the  Principal  Trading  Market;  and  (iii)  there  shall  not have been any
material adverse change in any financial market that, in the reasonable judgment
of the Investor,  makes it  impracticable or inadvisable to purchase the Shares.
In  addition,  on the Closing  Date,  trading in Common  Stock or in  securities
generally  on the  Principal  Trading  Market  shall not have been  suspended or
limited.

         9. NOTICES.  Any notice required or permitted  hereunder shall be given
in writing (unless otherwise  specified herein) and shall be deemed  effectively
given upon  personal  delivery or seven (7) business  days after  deposit in the
United States Postal Service,  by (a) advance copy by fax, and/or (b) mailing or
delivery by express  courier or  registered  or certified  mail with postage and
fees prepaid,  addressed to each of the other parties thereunto  entitled at the
following addresses,  or at such other addresses as a party may designate by ten
days advance written notice to each of the other parties hereto.

              COMPANY:                FOCUS ENHANCEMENTS, INC.
                                      1370 Dell Avenue
                                      Campbell, California 95008
                                      ATTN: Michael D'Addio, President
                                      Telephone No.: (408) 866-8300
                                      Facsimile No.: (408) 866-1748

              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

              Investor:               As set forth on the execution page hereto.

                                       12
<PAGE>

              with a copy to:         Krieger & Prager, LLP
                                      39 Broadway, Suite 1440
                                      New York, New York  10006
                                      ATTN:  Samuel Krieger, Esq.
                                      Telephone No.:  (212) 363-2900
                                      Facsimile No.:  (212) 363-2999

         10. SEVERABILITY.  If a court of competent jurisdiction determines that
any provision of this Purchase  Agreement is invalid,  unenforceable  or illegal
for any  reason,  such  determination  shall not affect or impair the  validity,
legality and  enforceability of the other provisions of this Purchase  Agreement
in  any  other  jurisdiction.  If  any  such  invalidity,   unenforceability  or
illegality of a provision of this Purchase  Agreement  becomes known or apparent
to any of the parties hereto,  the parties shall negotiate  promptly and in good
faith  in an  attempt  to  make  appropriate  changes  and  adjustments  to such
provision  specifically  and this  Purchase  Agreement  generally  to achieve as
closely as possible,  consistent  with  applicable law, the intent and spirit of
such provision specifically and this Purchase Agreement generally.

         11. EXECUTION IN COUNTERPARTS.  This Purchase Agreement may be executed
in  counterparts,  each of which shall be deemed an  original,  but all of which
together shall constitute the same Purchase Agreement.  A facsimile signature of
this Agreement shall be legal and binding on all parties hereto.

         12. JURY TRIAL  WAIVER.  The Company and the  Investors  hereby waive a
trial by jury in any action, proceeding or counterclaim brought by either of the
Parties hereto against any of the others in respect of any matter arising out or
in connection with the Transaction Agreements.

         13. GOVERNING LAW: MISCELLANEOUS.

         (a) This Purchase Agreement 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 Purchase  Agreement 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.

         (b)  Failure of any party to  exercise  any right or remedy  under this
Purchase Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

         (c)  This  Purchase  Agreement  shall  inure to the  benefit  of and be
binding upon the successors and assigns of each of the parties hereto.

         (d) All pronouns and any  variations  thereof  refer to the  masculine,
feminine or neuter, singular or plural, as the context may require.

                                       13
<PAGE>

         (e) The headings of this  Purchase  Agreement  are for  convenience  of
reference  and shall not form part of, or affect  the  interpretation  of,  this
Purchase Agreement.

         (f) This  Agreement  may be amended  only by an  instrument  in writing
signed by both parties; no waiver shall be effective unless signed by the person
charged with making such waiver.

         (g) This Agreement  supersedes all prior agreements and  understandings
among the parties hereto with respect to the subject matter hereof.

14.  SURVIVAL  OF  REPRESENTATIONS  AND  WARRANTIES.   The  Company's  and  each
Investor's representations and warranties herein shall survive the execution and
delivery of this Purchase Agreement and the delivery of the Certificates and the
payment of the Purchase Price, and shall inure to the benefit of each respective
Investor and the Company and their respective successors and assigns.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       14
<PAGE>

         IN  WITNESS  WHEREOF,  this  Agreement  has been duly  executed  by the
respective  Investor  (if an  entity,  by one of  its  officers  thereunto  duly
authorized) as of the date set forth below.

              AMOUNT AND PURCHASE PRICE OF COMMON STOCK:       $    *

                                                 SHARES:            *
                                                               --------------

                             SIGNATURES FOR ENTITIES

         IN WITNESS  WHEREOF,  the  undersigned  represents  that the  foregoing
statements  are true and correct  and that it has caused  this Common  Stock and
Warrant  Purchase  Agreement  to be duly  executed  on its behalf  this * day of
January, 2002.

         Address for Notices
                                                            *
         ------------------------------       --------------------------------
         Address                              Printed Name of Investor

                                              By:           *
         ------------------------------          -----------------------------
         Telecopier No.                       (Signature of Authorized Person)
                       ----------------

         ------------------------------       Printed Name and Title

         If Investor is a partnership, corporation, limited liability company or
other entity:

         I.       Jurisdiction where Investor's investment decision was made:
                  _        Jurisdiction of mailing address listed above
                  _        Other:   ____________________________

         II.      Jurisdiction of Incorporation or Organization: _______________

----------------------
   *                 Purchaser                      Shares             Price
                     ---------                      ------             -----

        Stone Street Limited Partnership            221,317         $ 250,000
        Folkinburg Investments                      995,928         1,125,000
        Boat Basin Investments LLC                   88,527           100,000
        Papell Holdings Limited                   1,128,718         1,275,000
                                                  ---------         ---------
                          Total                   2,434,490        $2,750,000

                                       15
<PAGE>

         As of the date set forth below,  the  undersigned  hereby  accepts this
Purchase  Agreement and  represents  that the foregoing  statements are true and
correct and that it has caused this  Purchase  Agreement to be duly  executed on
its behalf.

         FOCUS ENHANCEMENTS, INC.

         By:      /s/ Michael D'Addio
            --------------------------------------------------
         Name:    Michael D'Addio
         Title:   President and Chief Executive Officer
         Date:    January 11, 2002

                                       16

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