Document:

Exhibit 10.7(c)

 

FOCUS ENHANCEMENTS, INC.

 

February 22, 2008

 

Mr. Carl Berg

10050 Bandley Drive

Cupertino, CA 95014

 

Dear Mr. Berg:

 

This refers to the following agreements between us:

 

A.                                   Security
Agreement between us dated October 26, 2000, wherein we granted you a
security interest in the items of Collateral described therein, as amended by
the First Amendment to Security Agreement between us dated as of February 28,
2001 (collectively, the “Security Agreement”);

 

B.                                     Collateral
Assignment, Patent Mortgage and Security Agreement dated as of October 26,
2000 (the “Assignment”).

 

C.                                     Letter
Agreement affirming the grant of a security interest to you dated June 27,
2005 (the “First Letter Agreement”).

 

Previously we obtained a loan from Venture Banking Group, a Division of
Greater Bay Bank, N.A. (“VBG”) pursuant to that certain Loan and Security
Agreement between us and VBG dated as of November 15, 2004, as amended
(collectively, the “VBG Loan Agreement”). 
To induce VBG to extend such credit accommodations, you executed and
delivered to VBG an Unconditional Guaranty dated as of November 15, 2004,
as amended and affirmed, and an Intercreditor Agreement dated as of November 15,
2004, as amended by that certain Amendment No. 1 to Intercreditor
Agreement dated January 24, 2006, and that certain Amendment No. 2 to
Intercreditor Agreement dated as of February 7, 2008 (collectively, the “Intercreditor
Agreement”).

 

We are terminating the VBG Loan Agreement and lending
relationship.  Concurrently with such
termination, we are executing that certain Loan and Security Agreement and
related loan documents dated February 22, 2008, whereby Heritage Bank of
Commerce (“Bank”) shall provide us with a revolving line of credit in the
amount of $6,500,000.  In connection
therewith, and as a condition thereto, you are requested to sign an
Unconditional Guaranty dated February 22, 2008 (the “Unconditional
Guaranty”) whereby you guarantee the obligations of us to Bank, and an
Amendment No. 3 to Intercreditor Agreement dated February 22, 2008
(the “Amendment No. 3 to Intercreditor Agreement”) whereby Bank replaces
VBG.

 

To induce you to enter into the Unconditional Guaranty and to affirm
and amend the Intercreditor Agreement via the Amendment No. 3 to
Intercreditor Agreement, we hereby confirm to you, as follows:

 

 

1.                                       We
granted and do hereby grant to you a security interest in (a) all present
and future items of property described as “Collateral” in the Security
Agreement, (b) all present and future goods, chattel paper, instruments, documents,
letter of credit rights, investment property and general intangibles and (c) all
proceeds of the foregoing.  The items of
property described in the foregoing clauses “(a),” “(b)” and “(c)” are referred
to herein as the “Collateral Security.”

 

2.                                       The
Collateral Security shall secure any and all obligations and indebtedness  owing by us to you, now in existence or
hereafter arising, direct or contingent, due or to become due (collectively,
the “Obligations”), including, but not limited to, Obligations arising by
reason of the Unconditional Guaranty and amounts that we owe to you as a
consequence of your paying to Bank pursuant to the terms of the Unconditional
Guaranty.  At such time as you pay any
sums to Bank pursuant to the Unconditional Guaranty, the amount thereof will
constitute a direct Obligation of us to you payable on demand.

 

3.                                       We
hereby ratify and confirm that all the terms of the Security Agreement, the
Assignment, and the First Letter Agreement (as same may have been modified by
the terms of this letter agreement) will apply with respect to the Obligations.

 

4.                                       We
agree to cooperate with you in all reasonable respects to maintain the priority
of the security interests heretofore and hereby granted to you, consistent in
all respects with the terms and conditions of the Intercreditor Agreement, as
amended.

 

Please sign the enclosed copy of this letter, which shall then
constitute an agreement between us.

 

	
   

  	
  Sincerely yours,

  
	
   

  	
   

  
	
   

  	
  FOCUS ENHANCEMENTS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary Williams

  
	
   

  	
  Name:

  	
  Gary Williams

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  	
   

  
	
  AGREED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/         Carl Berg

  	
   

  	
   

  
	
  Carl Berg

  	
   

  	
   

  
	
  Date: February 22, 2008Exhibit
10.19(a)

 

INTERCREDITOR
AGREEMENT

 

This
INTERCREDITOR AGREEMENT is made by and among CARL BERG (“Creditor”), and
VENTURE BANKING GROUP, A DIVISION OF GREATER BAY BANK N.A. (“Bank”).

 

RECITALS

 

A.            Bank proposes to lend
funds to FOCUS ENHANCEMENTS, INC. (“Borrower”) pursuant to a Loan and Security
Agreement of even date, as amended from time to time (the “Bank Loan Agreement”).

 

B.            Creditor has extended
loans or other credit accommodations to Borrower, and/or may extend loans or
other credit accommodations to Borrower from time to time.

 

C.            This Agreement
provides for certain matters of repayment and sharing of Collateral between
Bank and Creditor.

 

NOW
THEREFORE, the parties agree as follows:

 

1.             Bank Collateral.  As used in this Agreement, “Bank Collateral”
means the following:  all of Borrower’s
present and future “Accounts” (such term as most broadly defined in the Bank
Loan Agreement and the California Uniform Commercial Code in effect on the date
hereof); and all proceeds of the foregoing.

 

2.             Creditor
Collateral.  As used in this
Agreement, “Creditor Collateral” means all of the property of Borrower, now
owned and hereafter acquired, other than the Bank Collateral.  (“Collateral” as used in this Agreement shall
mean Bank Collateral or Creditor Collateral, as the case may be.)

 

3.             Subordination.

 

(a)           All
security interests now or hereafter acquired by Creditor in Creditor Collateral
shall at all times be prior and superior to any security interest or other
interest or claim now held or hereafter acquired by Bank in Creditor
Collateral.  (Bank and Creditor are
sometimes referred to herein as the “Lenders.”)

 

(b)           All
security interests now or hereafter acquired by Bank in the Bank Collateral
shall at all times be prior and superior to any security interest, ownership
interest, or other interest or claim now held or hereafter acquired by Creditor
in Bank Collateral.

 

(c)           The
priorities specified in this Agreement shall be applicable irrespective of the
time or order of attachment or perfection of any security interest or the time
or order of filing of any financing statements or other documents, or the
giving of any notices of purchase money security interests or other notices, or
possession of any Collateral, or any statutes, rules or law, or court
decisions to the contrary.

 

(d)           The
subordinations and priorities specified in this Agreement are expressly
conditioned upon the nonavoidability and perfection of the security interest to
which another security interest is subordinated, and if the security interest
to which another security interest is subordinated is not perfected or is
avoidable, for any reason, then the subordinations and relative priority
provided for in this Agreement shall not be effective as to the particular
Collateral which is the subject of the unperfected or avoidable security
interest.

 

4.             Termination
Statements.

 

(a)           Bank
agrees to execute and deliver to Creditor, promptly upon Creditor’s request,
appropriate UCC termination statements or partial releases with respect to any
Creditor Collateral being sold or otherwise disposed of in connection with the
liquidation of Borrower’s assets upon or after the declaration of a default or
an event of default by Creditor under any present or future instrument or
agreement between the Borrower and Creditor. 
The proceeds of any Creditor Collateral so sold or disposed of shall be
applied, after the deduction of any and all costs relating to such sale or
disposition (including attorneys’ fees, advertising costs and auctioneer’s

 

1

 

fees) to any and
all outstanding present or future indebtedness, liabilities, guaranties or
other obligations of the Borrower to Creditor (the “Creditor Obligations”) in
such order as Creditor may, in its discretion, determine and, only if all
Creditor Obligations have been indefeasibly paid in full, then to all or any
part of the present or future indebtedness, liabilities, guaranties or other
obligations of the Borrower to Bank (the “Bank Obligations”) in such order as
Bank may, in its discretion, determine.

 

(b)           Creditor
agrees to execute and deliver to Bank, promptly upon Bank’s request,
appropriate UCC termination statements or partial releases with respect to any
Bank Collateral being sold or otherwise disposed of in connection with the
liquidation of Borrower’s assets upon or after the declaration of default or an
event of default by Bank under any present or future instrument or agreement
between the Borrower and Bank.  The
proceeds of any Bank Collateral so sold or disposed of shall be applied, after
the deduction of any and all costs relating to such sale or disposition
(including attorney’s fees, advertising costs and auctioneer’s fees) to any and
all outstanding Bank Obligations in such order as Bank, in its discretion, may
determine, and only if all Bank Obligations have been indefeasibly paid in
full, then to all or any part of the Creditor Obligations in such order as
Creditor, in its discretion, may determine.

 

5.             Lenders’ Rights.  Bank and Creditor each agree that the other
may at any time, and from time to time, without the consent of the other party
and without notice to the other party, renew, extend or increase any of the
indebtedness, liabilities or obligations owing to it from the Borrower (the “Secured
Obligations”) or that of any other person at any time directly or indirectly
liable for the payment of any Secured Obligations, accept partial payments of
the Secured Obligations, settle, release (by operation of law or otherwise),
compound, compromise, collect or liquidate any of the Secured Obligations, make
loans or advances to the Borrower secured in whole or in part by its Collateral
or refrain from making any loans or advances to the Borrower, change, alter or
vary the interest charge on, or any other terms or provisions of the Secured
Obligations or any present or future instrument, document or agreement with the
Borrower, and take any other action or omit to take any other action with
respect to its Secured Obligations or its Collateral as it deems necessary or
advisable in its sole discretion.  Bank
and Creditor each waive any right to require the other to marshal any
Collateral or other assets in favor of it or against or in payment of any or
all of its Secured Obligations.

 

6.             Remedies.  Bank shall not collect, take possession of,
foreclose upon, or exercise any other rights or remedies with respect to
Creditor Collateral, judicially or nonjudicially, or attempt to do any of the
foregoing, without the prior written consent of Creditor, which shall be a matter
of Creditor’s sole discretion.  Creditor
shall not collect, take possession of, foreclose upon, or exercise any other
rights or remedies with respect to Bank Collateral, judicially or
nonjudicially, or attempt to do any of the foregoing, without the prior written
consent of Bank, which shall be a matter of Bank’s sole discretion.

 

7.             No Commitment by
Lenders.  It is understood and agreed
that this Agreement shall in no way be construed as a commitment or agreement
by Bank or Creditor to continue financing arrangements with the Borrower, and
that Bank and Creditor, subject to the terms of such financing arrangements,
may terminate such arrangements at any time.

 

8.             Insurance.  The Lender having a senior security interest
or lien in the Collateral shall, subject to such Lender’s rights under its
agreements with Borrower, have the sole and exclusive right, as against the
other Lender, to adjust settlement of such insurance policy in the event of any
loss.  All proceeds of such policy shall be
paid to the Lender having the senior claim as set forth in this Agreement.  After payment of such senior Lender’s claim
and all expenses of collection, including reasonable attorneys’ fees and other
costs, fees and expenses, any remaining proceeds shall be promptly remitted to
the other Lender for application to the Secured Obligations owing to it.

 

9.             Bankruptcy
Financing.  In the event of any
financing of the Borrower by Bank or Creditor during any bankruptcy,
arrangement, or reorganization of the Borrower, each Lender agrees that the
other’s “Secured Obligations” shall include without limitation all
indebtedness, liabilities and obligations incurred by the Borrower in any such
proceeding, and the other’s “Collateral” shall include without limitation all
Collateral arising during any such proceeding, and this Agreement shall
continue to apply during any such proceeding.

 

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10.           Notices of Default;
Consultation.  Creditor and Bank
agree to use their best efforts to give to the other copies of any written
notice of the occurrence or existence of an event of default sent to Borrower,
simultaneously with the sending of such notice to Borrower, and to consult with
each other for a reasonable period, not to exceed sixty (60) days, as to
enforcement of their respective remedies against Borrower and its property, but
the failure to do so shall not affect the validity of such notice or create a
cause of action against or liability on the part of the party failing to give
such notice, nor shall it create any claim or right on behalf of the other
party, the Borrower or any third party. 
The sending of such notice shall not give the recipient the obligation
to cure such default or event of default.

 

11.           No Contest.  Neither Creditor nor Bank shall contest the
validity, perfection, priority or enforceability of any lien or security
interest granted to the other, and each agrees to cooperate in the defense of
any action contesting the validity, perfection, priority or enforceability of such
liens or security interest at the cost of the party defending such action.

 

12.           Financial Condition
of Borrower.  Creditor and Bank are
each presently informed of the financial condition of the Borrower and of all
other circumstances which a diligent inquiry would reveal and which bear upon
the risk of non-payment of the Secured Obligations owing to them.  Creditor and Bank each waives any right to
require the other to disclose to it any information which the other may now or
hereafter acquire concerning the Borrower.

 

13.           Revivor.  If, after payment of the Creditor
Obligations, the Borrower thereafter becomes liable to Creditor on account of
the Creditor Obligations, or any payment made on the Creditor Obligations shall
for any reason be required to be returned or refunded by Creditor, this
Agreement shall thereupon in all respects become effective with respect to such
subsequent or reinstated Creditor Obligations, without the necessity of any
further act or agreement between Creditor and Bank.  If, after payment of the Bank Obligations,
the Borrower thereafter becomes liable to Bank on account of the Bank
Obligations, or any payment made on the Bank Obligations shall for any reason
be required to be returned or refunded by Bank, this Agreement shall thereupon
in all respects become effective with respect to such subsequent or reinstated
Bank Obligations, without the necessity of any further act or agreement between
Bank and Creditor.

 

14.           Waiver of Jury Trial.  BANK
AND CREDITOR EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO:  (I) THIS AGREEMENT; OR (II) ANY
OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN BANK AND CREDITOR
RELATING TO THE BORROWER; OR (III) ANY CONDUCT, ACTS OR OMISSIONS OF BANK
OR CREDITOR OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS
OR ANY OTHER PERSONS AFFILIATED WITH BANK OR CREDITOR, RELATING TO BORROWER, IN
EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

 

15.           General.  Creditor and Bank are not in any manner to be
construed to be partners or joint venturers or to have any other legal
relationship other than as expressly set forth in written agreements between
them.  Creditor and Bank each agrees to execute
all such documents and instruments and take all such actions as the other shall
reasonably request in order to carry out the purposes of this Agreement,
including without limitation appropriate amendments to Financing Statements
executed by the Borrower in favor of Creditor or Bank in order to refer to this
Agreement (but this Agreement shall remain fully effective notwithstanding any
failure to execute any additional documents, instruments, or amendments).  Creditor and Bank each represents and warrants
to the other that it has not heretofore transferred or assigned any Financing
Statement naming the Borrower as debtor and it as secured party, and that it
will not do so without first notifying the other in writing, and delivering a
copy of this Agreement to the proposed transferee or assignee, and obtaining
the acknowledgment of the proposed transferee or assignee that the transfer or
assignment is subject to all of the terms of this Agreement.  This Agreement is solely for the benefit of
Bank and Creditor and their successors and assigns, and neither the Borrower
nor any other person shall have any right, benefit, priority or interest under,
or because of the existence of, this Agreement. 
This Agreement sets forth in full the terms of agreement between
Creditor and Bank with respect to the subject matter hereof, and may not be
modified or amended, nor may any rights hereunder be waived, except in a
writing signed by Creditor and Bank.  In
the event of any litigation between the parties based upon or arising out of
this Agreement, the prevailing party shall be entitled to recover all of its
costs and expenses (including without limitation attorneys’

 

3

 

fees) from the
non-prevailing party.  This Agreement
shall be binding upon the parties hereto and their respective successors and
assigns, and shall be construed in accordance with, and governed by, the laws
of the State of California.  This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which shall constitute the same instrument.

 

IN
WITNESS WHEREOF, the undersigned have executed this Intercreditor Agreement as
of November 15, 2004.

 

 

	
   

  	
   

  	
  “Creditor”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Carl Berg

  
	
   

  	
   

  	
  CARL BERG

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “Bank”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  VENTURE BANKING GROUP,
  A DIVISION 

  OF GREATER BAY BANK N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jason Hartman

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Vice President

  
					

 

4

 

BORROWER’S
CONSENT AND AGREEMENT

 

Borrower
consents to the terms of this Intercreditor Agreement and agrees not to take
any actions inconsistent therewith. 
Borrower agrees to execute all such documents and instruments and take
all such actions as Creditor or Bank shall reasonably request in order to carry
out the purposes of this Agreement, including without limitation appropriate
amendments to financing statements.

 

 

	
   

  	
   

  	
  “Borrower”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FOCUS ENHANCEMENTS,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Brett Moyer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President & CEO

  
					

 

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