Document:

Exhibit 10.2

SECURITIES
PURCHASE AGREEMENT

This
Securities Purchase Agreement (this “Agreement”) is dated as of February 20, 2007, among Focus
Enhancements, Inc., a Delaware corporation (the “Company”), and each
Purchaser identified on the signature pages hereto (each a “Purchaser”
and collectively the “Purchasers”); the Company and each Purchaser are
individually referred to herein as a “party” and collectively as the “parties”.

WHEREAS,
the Company has filed with the Commission a Registration Statement (as defined
below) relating to the offer and sale from time to time of the Company’s
securities, including shares of its Common Stock and Warrants;

WHEREAS,
subject to the terms and conditions set forth in this Agreement, the Company
desires to issue and sell to the Purchasers pursuant to the Registration
Statement, and the Purchasers, severally and not jointly, desire to purchase
from the Company in the aggregate, up to 500,000 shares of Common Stock and
Warrants to purchase 50,000 shares of Common Stock on the Closing Date, each as
set forth in the respective amounts on the signature pages attached hereto.

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

ARTICLE
I.

DEFINITIONS

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

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

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

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

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

 1
 

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

“Commission” means the Securities and Exchange Commission.

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

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

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

“Disclosure Schedules”
means the Disclosure Schedules attached hereto.

 “Environmental Laws” shall have the
meaning ascribed to such term in Section 3.1(bb).

“Evaluation Date”
shall have the meaning ascribed to such term in Section 3.1(dd).

“Exchange Act”
means the Securities Exchange Act of 1934, as amended.

“GAAP” shall have
the meaning ascribed to such term in Section 3.1(h).

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

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

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

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

“Per Share Purchase
Price” shall be $1.26, subject to adjustment for reverse and forward stock
splits, stock dividends, stock combinations and other similar transactions of
the Common Stock that occur after the date of this Agreement but prior to the
Closing.

 2
 

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

“Registration
Statement” means the registration statement on Form S-3 (File No.
333-139224), including a prospectus, relating to the offer and sale of certain
of the Company’s Common Stock, which was declared effective by the Commission
on December 20, 2006.  References herein
to the term “Registration Statement” as of any date shall mean such effective
registration statement, as amended or supplemented to such date, including all
information and documents incorporated by reference therein.

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

“Rule 144” means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such Rule.

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

“Securities” means the Shares, the Warrants and the Warrant
Shares.

“Securities Act”
means the Securities Act of 1933, as amended.

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

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

“Subsidiary” shall
mean the subsidiaries of the Company, if any, set forth on Schedule 3.1(a)
or any business entity in which the Company now or in the future owns or has
the power to vote or control, at the time such is determined, twenty percent
(20%) or more of the equitable, beneficial, 
legal or other ownership interests thereof.

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

 3
 

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

“Transaction Documents”
means this Agreement and the Warrants and any other documents or agreements
executed in connection with the transactions contemplated hereunder.

“Warrants” means
the Common Stock Purchase Warrants, in the form of Exhibit A,
issuable to the Purchasers at the Closing, which warrants shall have an
exercise price equal to $2.00 per share and shall be exercisable for a period
of 5 years.

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

ARTICLE
II.

PURCHASE AND SALE

2.1 Purchase of Common Stock.

(a) At the Closing, each Purchaser shall purchase
from the Company, severally and not jointly, and the Company shall issue and
sell to each Purchaser, (a) a number of Shares equal to such Purchaser’s
Subscription Amount divided by the Per Share Purchase Price and (b) the
Warrants, registered in the name of each Purchaser, pursuant to which such
Purchaser shall have the right to acquire up to the number of shares of Common
Stock equal to 10% of the Shares to be issued to such Purchaser at the
Closing.  The aggregate number of Shares
sold hereunder (when aggregated with the aggregate number of Warrant Shares)
shall, in no event, exceed five hundred fifty thousand (550,000) shares.  The offering and sale of the Shares (the “Offering”)
are being made pursuant to (1) an effective Registration Statement on Form S-3
(including the Prospectus contained therein (the “Base Prospectus”) and (2) a
Prospectus Supplement (the “Prospectus Supplement” and together with the Base
Prospectus, the “Prospectus”) containing certain supplemental information
regarding the Shares and terms of the Offering that will be filed with the
Commission and delivered to the Purchaser (or made available to the Purchaser
by the filing by the Company of an electronic version thereof with the
Commission).

(b) Upon satisfaction of the conditions set forth
in Section 2.2, (i) each Purchaser shall deliver to the Company such Purchaser’s
Subscription Amount by wire transfer of immediately available funds to an
account designated by the Company as set forth on Schedule I hereto, which
funds will be delivered to the Company in consideration of the Shares and the
Warrants issued at the Closing and (ii) the Company shall deliver to each
Purchaser duly
executed certificates evidencing the Shares and the Warrants provided however
that the Company may deliver  the Shares through
the Depository Trust Company Deposit/Withdrawal at Custodian (“DWAC”) system to
the account that the Purchaser has specified in writing to the Company.  

 4
 

Delivery of the Shares may be
by electronic book-entry at The Depository Trust Company (“DTC”), registered in
the Purchaser’s name and address as set forth on Schedule I, and
released by the Company’s transfer agent to the Purchaser at the Closing.  The Closing shall occur at the offices of
Manatt Phelps & Phillips, LLP, or such other location as the parties shall
mutually agree.

(c) It is the Purchaser’s responsibility to (A)
make the necessary wire transfer or confirm the proper account balance in a
timely manner and (B) if the Shares are to be delivered through the DWAC
system, arrange for settlement by way of DWAC in a timely manner.  If the Purchaser does not deliver the
aggregate Subscription Amount for the Shares or does not make proper
arrangements for settlement in a timely manner, as applicable, the Shares may
not be delivered at Closing to the Purchaser or the Purchaser may be excluded
from the Closing altogether.

2.2 Closing Conditions; Deliveries.

(a)               Conditions
to the Purchasers’ Obligations. The obligation of each Purchaser to
purchase the Shares and Warrants at the Closing is subject to the fulfillment
to the Purchasers’ reasonable satisfaction, on or prior to the Closing Date, of
the following conditions, any of which may be waived in writing by the Purchasers:

(i)            The representations and warranties
made by the Company in Section 3.1 hereof shall be true and correct except
where the failure to be so true and correct does not have a Material Adverse
Effect.  The Company shall have performed
in all material respects all obligations and conditions herein required to be
performed or observed by it on or prior to the Closing Date.

(ii)           The Company shall have obtained in a
timely fashion any and all material consents, permits, approvals, registrations
and waivers necessary or appropriate for consummation of the purchase and sale
of the Shares and Warrants, all of which shall be and remain so long as
necessary in full force and effect.

(iii)          No judgment, writ, order, injunction,
award or decree of or by any court, or judge, justice or magistrate, including
any bankruptcy court or judge, or any order of or by any governmental
authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, or self-regulatory organization
enjoining or preventing the consummation of the transactions contemplated
hereby or in the other Transaction Documents.

(iv)          The Company shall have delivered a
Certificate, executed on behalf of the Company by its Chief Executive Officer
or its Chief Financial Officer, dated as of the Closing Date, certifying to the
fulfillment of the conditions specified in subsections (i), (ii), (iii)
and(vii) of this Section 2.2(a).

(v)           The Company shall have delivered a
Certificate, executed on behalf of the Company by its Secretary, dated as of
the Closing Date, certifying the resolutions 

 5
 

adopted by the Board of
Directors of the Company approving the transactions contemplated by this
Agreement and the other Transaction Documents and the issuance of the Shares
and Warrants, certifying the current versions of the Certificate of
Incorporation and Bylaws of the Company and certifying as to the signatures and
authority of persons signing the Transaction Documents and related documents on
behalf of the Company.

(vi)          The Prospectus shall have been filed
with the Commission pursuant to Rule 424(b) under the Securities Act within the
applicable time period prescribed for such filing; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; no stop order or suspension of trading shall have
been imposed by any Person with respect to public trading in the Common Stock;
and the Purchaser shall have received the Prospectus in accordance with the
federal securities laws.

(vii)         The Company’s Common Stock (including
the Shares and the Warrant Shares) shall be eligible for inclusion on the
Nasdaq Capital Market and listed and admitted and authorized for trading on the
Nasdaq Capital Market.

(b) Conditions to Obligations of the Company.
The Company’s obligation to sell and issue the Shares and Warrants at the
Closing is subject to the fulfillment to the satisfaction of the Company on or
prior to the Closing Date of the following conditions, any of which may be
waived by the Company:

(i)            The representations and warranties
made by each of the Purchasers in Section 3.2 hereof shall be true and correct
in all material respects when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date. 
The Purchasers shall have performed in all material respects all
obligations and conditions herein required to be performed or observed by them
on or prior to the Closing Date.

(ii)           Each of the Purchasers shall have
delivered such Purchaser’s Subscription Amount by wire transfer to the account
set forth on Schedule I attached hereto.

(iii)          No judgment, writ, order, injunction,
award or decree of or by any court, or judge, justice or magistrate, including
any bankruptcy court or judge, or any order of or by any governmental
authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, or self-regulatory organization
enjoining or preventing the consummation of the transactions contemplated
hereby or in the other Transaction Documents.

(c) Termination
of Obligations to Effect Closing; Effects.

(i)            The obligations of the Company, on
the one hand, and the Purchasers, on the other hand, to effect the Closing
shall terminate as follows:

 6
 

(A)          Upon
the mutual written consent of the Company and the Purchasers;

 (B)          By the Company if any of the conditions
set forth in Section 2.2(b) shall have become incapable of fulfillment, and
shall not have been waived by the Company;

 (C)          By a Purchaser (with respect to itself
only) if any of the conditions set forth in Section 2.2(a) shall have become
incapable of fulfillment, and shall not have been waived by such Purchaser; or

 (D)         By either the Company or any Purchaser
(with respect to itself only) if the Closing has not occurred on or prior to
February 23, 2007;

provided, however, that, except in the case
of clause (A) above, the party seeking to terminate its obligation to effect
the Closing shall not then be in breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or the other
Transaction Documents if such breach has resulted in the circumstances giving
rise to such party’s seeking to terminate its obligation to effect the Closing.

(ii)           Nothing in this Section 2.2(c) shall
be deemed to release any party from any liability for any breach by such party
of the terms and provisions of this Agreement or the other Transaction
Documents or to impair the right of any party to compel specific performance by
any other party of its obligations under this Agreement or the other
Transaction Documents.

(iii)          In the event of termination by a
Purchaser of its obligations to effect the Closing pursuant to this Section
2.2(c), written notice thereof shall forthwith be given by the Company to the
other Purchasers and the other Purchasers shall have the right to terminate
their obligations to effect the Closing upon written notice to the Company.

ARTICLE
III.

REPRESENTATIONS AND WARRANTIES

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

(a) Subsidiaries.  Except as set forth on Schedule 3.1(a),
the Company has no direct or indirect subsidiaries.  Except as set forth on Schedule 3.1(a),
the Company owns, directly or indirectly, all of the capital stock or other
equity interests of each Subsidiary free and clear of any Liens, and all the
issued and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar
rights.  If the Company has no
subsidiaries, then references in the Transaction Documents to the Subsidiaries
will be disregarded.

 7
 

(b) Organization
and Qualification.  Each of the
Company and the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. 
Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws
or other organizational or charter documents. 
Each of the Company and the Subsidiaries is duly qualified to conduct
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not have or
reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business or
financial condition of the Company and the Subsidiaries, taken as a whole, or
(iii) a material adverse effect on the Company’s ability to perform in any
material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse Effect”).

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

(d) No
Conflicts.  The execution, delivery
and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated thereby do not and
will not (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of, any agreement, credit facility, debt or other instrument (evidencing a
Company or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) subject to the Required
Approvals, conflict with or result in a violation of any law, rule, 

 8
 

regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or
affected, or (iv) conflict with or violate the terms of any agreement by which
the Company or any Subsidiary is bound or to which any property or asset of the
Company or any Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be expected to
result in a Material Adverse Effect.

(e) Filings,
Consents and Approvals.  The Company
is not required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) filings required pursuant to Section 4.1
of this Agreement, (ii) application(s) to each applicable Trading Market for
the listing of additional shares with respect to the Shares and Warrant Shares
for trading thereon in the time and manner required thereby, and (iii) such
filings as are required to be made under applicable state securities laws, with
each of the items listed in clauses (i)-(iii) inclusive being deemed a “Required
Approval”).

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

(g) Capitalization.  The authorized capital stock of the Company
consists of  150,000,000 shares of Common Stock and
3,000,000 shares of Preferred Stock.  The
Company has not issued any capital stock since such filing other than pursuant
to the exercise of employee stock options under the Company’s stock option
plans, the issuance of shares of Common Stock to employees pursuant to the
Company’s employee stock purchase plan and pursuant to the conversion or
exercise of outstanding Common Stock Equivalents.  No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents.  Except as a result of the purchase and sale
of the Securities, there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into shares
of Common Stock, other than as set forth in the SEC Reports, the Registration 

 9
 

Statement or the Prospectus or in connection with the Company’s stock
option plans.  The issue and sale of the
Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Purchasers) and will not result
in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities.  No further approval
or authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Securities.  Except as disclosed in the SEC Reports, the
Registration Statement or the Prospectus, there are no stockholders agreements,
voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.

(h) SEC
Reports; Financial Statements.  The
Company has filed all reports required to be filed by it under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing materials,
including the exhibits thereto, being collectively referred to herein as the “SEC
Reports”) on a timely basis or has received a valid extension of such time
of filing and has filed any such SEC Reports prior to the expiration of any
such extension.  As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  The financial statements
of the Company included in the SEC Reports and the Registration Statement and
the Prospectus comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect thereto
as in effect at the time of filing.  Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(“GAAP”), except as may be otherwise specified in such financial
statements or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.

(i)  Material
Changes.  Since the date of the
latest audited financial statements included within the SEC Reports or included
or incorporated by reference in the Registration Statement or Prospectus,
except as disclosed in the SEC Reports, the Registration Statement or
Prospectus (i) there has been no event, occurrence or 

 10
 

development that has had or that could reasonably be expected to result
in a Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities required to be reflected in the Company’s financial statements
pursuant to GAAP (which liabilities have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect) or required to
be disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property, with or without
consideration, to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock and (v) the
Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option plans.  Except as disclosed in the SEC Reports, the
Company does not have pending before the Commission any request for
confidential treatment of information.

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

(k) Employment
Matters.  The Company and its
Subsidiaries are in compliance with all federal, state, local and foreign laws
and regulations respecting labor, employment and employment practices and
benefits, terms and conditions of employment and wages and hours, except where
the failure to be in compliance would not, either individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement.  The Company and its Subsidiaries believe that
their overall relations with their employees are satisfactory.  No executive officer of the Company or any of
its Subsidiaries (as defined in Rule 501(f) of the Securities Act) has notified
the Company or any such Subsidiary that such officer intends to leave the
Company or any such Subsidiary or otherwise terminate such officer’s employment
with the Company or any such Subsidiary.

 11

(l)  Compliance.  Except as disclosed in the SEC Reports, the
Registration Statement or the Prospectus, neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit agreement or
any other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws applicable to its business, except in
each case as could not have a Material Adverse Effect.

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

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

(o) Patents and Trademarks.  Except as set forth in the SEC Reports, the
Registration Statement or the Prospectus, the Company and its Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
other similar rights (collectively, the “Intellectual Property Rights”)
that are necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so have
could have or reasonably be expected to result in a Material Adverse Effect.

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

 12
 

coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business.

(q) Transactions With
Affiliates and Employees.  Except as
set forth in the SEC Reports, the Registration Statement or the Prospectus, none
of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, other than
(i) for services as employees, officers and directors, (ii) reimbursement for
expenses incurred on behalf of the Company and (iii) for other employee
benefits, including stock option agreements under any stock option plan of the
Company.

(r)  Sarbanes-Oxley.  The Company is in material compliance with
all provisions of the Sarbanes-Oxley Act of 2002 and applicable rules and
regulations promulgated by the Commission thereunder, in each case which are
applicable to it as of the Closing Date.

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

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

(u) Registration Rights.  Except as set forth in the SEC Reports, the
Registration Statement or the Prospectus, no Person has any right to cause the
Company to effect the registration under the Securities Act of any securities
of the Company.

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

 13
 

quoted to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market.

(w) Disclosure.  The
Company confirms that, neither the Company nor any other Person acting on its
behalf has provided any of the Purchasers or their agents or counsel with any
information that constitutes or might constitute material, non-public
information.   The Company understands
and confirms that the Purchasers will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company.

(x)  Form S-3 Eligibility.  The Company meets the requirements for the
use of Form S-3 under the Securities Act for the primary issuance of
securities.  The Registration Statement
has been declared effective by the Commission and at the time it became
effective, and as of the date hereof, the Registration Statement complied and
complies with Rule 415 under the Securities Act.   No stop order suspending the effectiveness
of the Registration Statement has been issued and no proceeding for that
purpose has been initiated or, to the Company’s knowledge, threatened by the
Commission.  On the effective date of the
Registration Statement, the Registration Statement complied, and on the date of
the Prospectus, the Prospectus will comply, in all material respects with the
applicable provisions of the Securities Act and the applicable rules and
regulations of the Commission thereunder; on the effective date of the
Registration Statement, the Registration Statement did not, on the date of the
Prospectus, the Prospectus will not, and at the date of the Closing, the
Registration Statement and the Prospectus will not, contain an 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 (with respect to the Prospectus), not
misleading; and when filed with the Commission, the documents incorporated by
reference in the Registration Statement and the Prospectus, complied or will
comply in all material respects with the applicable provisions of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the
applicable rules and regulations of the Commission thereunder.  The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the Trading Market.

(y) Taxes.  Except for matters that would not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and each Subsidiary has timely prepared
and filed all necessary federal, state and foreign income and franchise tax
returns and has paid or accrued all taxes shown as due thereon, and the Company
has no knowledge of a tax deficiency which has been asserted or threatened
against the Company or any Subsidiary. All taxes and other assessments and
levies that the Company or any Subsidiary is required to withhold or to collect
for payment have been duly withheld and collected and paid to the proper
governmental entity or third party when due. 
There are no tax liens or claims pending or, to the Company’s knowledge,
threatened against the Company, any Subsidiary or any of their respective
assets or property.

 14
 

(z)  General Solicitation.  Neither the Company nor, to the Company’s
knowledge, any person acting on behalf of the Company has offered or sold any
of the Securities by any form of general solicitation or general advertising.

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

(bb)         Environmental
Matters.  To the Company’s knowledge,
the Company (i) is not in violation of any statute, rule, regulation, decision
or order of any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic substances or
relating to the protection or restoration of the environment or human exposure
to hazardous or toxic substances (collectively, “Environmental Laws”),
(ii) does not own or operate any real property contaminated with any substance
in violation of any Environmental Laws, (iii) is not liable for any off-site
disposal or contamination pursuant to any Environmental Laws, and (iv) is not
subject to any claim relating to any Environmental Laws; which violation,
contamination, liability or claim has had or could reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate; and there is
no pending or, to the Company’s knowledge, threatened investigation that might
lead to such a claim.

(cc)         Accounting
Controls.  The Company and its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, and (iii) access to assets is permitted only in accordance with
management’s general or specific authorization.

(dd)         Internal Controls. The Company has established disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) for the
Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company’s most recently filed period report under the Exchange Act,
as the case may be, is being prepared. 
The Company’s certifying officers have evaluated the effectiveness of
the Company’s disclosure controls and procedures as of the end of the most
recent periodic reporting period under the

 15
 

Exchange Act
(such date, the “Evaluation Date”). 
The Company presented in its most recently filed periodic report under
the Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. 
Since the Evaluation Date, except as described in the SEC Reports, there
have been no significant changes in the Company’s internal control over
financial reporting (as such term is defined in Item 308(c) of Regulation S-K)
or, to the Company’s knowledge, in other factors that could significantly
affect the Company’s internal control over financial reporting.  The Company maintains and will continue to
maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles and the applicable
requirements of the Exchange Act.

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

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

(b) Purchaser Acknowledgement.   Each Purchaser has received (or otherwise
had made available to it by the filing by the Company of an electronic version
thereof with the Commission) the Base Prospectus, dated December 20, 2006,
which is a part of the Company’s Registration Statement, including all
documents and information incorporated by reference therein and amendments
thereto and the Prospectus Supplement (collectively, the “Disclosure Package”),
prior to or in connection with the receipt of this Agreement.  Each Purchaser understands that no Person has
been authorized to give any information or to make any representations that
were not contained in the Disclosure Package, and such Purchaser has not relied
on any such other information or representations in making a decision to
purchase the Shares or the Warrants. 
Specifically, each Purchaser represents that it has reviewed the
Prospectus Supplement, dated February 20, 2007.

 16
 

(c) Purchaser Diligence.  Such Purchaser acknowledges that it has sole
responsibility for its own due diligence investigation and its own investment
decision, and that in connection with its investigation of the accuracy of the
information contained or incorporated by reference in the Registration
Statement and the Prospectus and its investment decision, Purchaser has not
relied on any representation or information not set forth in this Agreement,
the Registration Statement or the Prospectus. 
Each Purchaser represents and warrants that it is knowledgeable,
sophisticated and experienced in making, and is qualified to make decisions
with respect to, investments in shares presenting an investment decision like
that involved in the purchase of the Shares, including investments in
securities issued by the Company and investments in comparable companies and in
connection with its decision to purchase Shares has received and is relying
only upon the Disclosure Package and the documents incorporated by reference
therein.  Each Purchaser understands that
nothing in this Agreement, the Prospectus or any other materials presented to the
Purchaser in connection with the purchase and sale of the Shares constitutes
legal, tax or investment advice.  The
Purchaser has consulted such legal, tax and investment advisors as it, in its
sole discretion, has deemed necessary or appropriate in connection with its
purchase of Shares.  At the time such
Purchaser was offered the Securities, it was, and at the date hereof it is an “accredited
investor” as defined in Rule 501(a) under the Securities Act.  Such Purchaser is not required to be
registered as a broker dealer under Section 15 of the Exchange Act.

(d) Approvals.  No state, federal or foreign regulatory
approvals, permits, licenses or consents are required for Purchaser to enter
into this Agreement or purchase the Shares or the Warrants.

(e) Address.  Each Purchaser represents that the address
set forth for such Purchaser on such Purchaser’s signature page is its true and
correct principal address.

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

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

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1 Securities Laws
Disclosure; Publicity.  Except as set
forth below, no public release or announcement concerning the transactions
contemplated hereby shall be issued by the Company or the Purchasers without
the prior consent of the other party (which consent shall not be unreasonably
withheld), except as such release or announcement may be required by law or the
applicable rules or regulations of any securities exchange or securities market,
in which case the Company or the Purchasers, as the case may be, shall allow
the other party to the extent reasonably practicable in the circumstances,
reasonable time to comment on such release or

 17
 

announcement in
advance of such issuance.  The Company will
make such other filings and notices in the manner and time required by the
Commission.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser,
or include the name of any Purchaser in any filing with the Commission (other
than any exhibits to filings made in respect of this transaction in accordance
with periodic filing requirements under the Exchange Act) or any other
regulatory agency, without the prior written consent of such Purchaser, except
to the extent such disclosure is required by law or trading market regulations,
in which case the Company shall provide the Purchasers with prior notice of
such disclosure except to the extent such prior notice is provided in this
Agreement.

4.2 Non-Public Information.
 The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior to disclosure of such
information the Company identifies such information as being material nonpublic
information and provides such Purchaser with the opportunity to accept or
refuse to accept such material nonpublic information for review and any
Purchaser wishing to obtain such information shall have executed a written
agreement regarding the confidentiality and use of such information.

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

4.4 Indemnification of
Purchasers.   The Company will
indemnify and hold each Purchaser and each Purchaser’s Affiliates and the
directors, officers, shareholders, partners, employees and agents of each
Purchaser and each Purchaser’s Affiliates (each, a “Purchaser Party”) harmless
from any and all losses, liabilities, obligations, claims, contingencies,
damages, costs and expenses, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to: (a) any misrepresentation, breach or inaccuracy of any of the
representations, warranties, covenants or agreements made by the Company in
this Agreement or in the other Transaction Documents; or (b) any cause of
action, suit or claim brought or made against such Purchaser Party and arising
solely out of or solely resulting from the execution, delivery, performance or
enforcement of this Agreement or any of the other Transaction Documents and
without causation by any other activity, obligation, condition or liability
pertaining to such Purchaser Party. The Company will reimburse such Purchaser
Party for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred.

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

4.6 Listing of Common Stock.
Promptly following the date hereof, the Company shall take all necessary action
to cause the Shares and the Warrant Shares to be approved for inclusion in the
Nasdaq Capital Market.  Further, if the
Company applies to have its Common Stock or

 18
 

other securities traded on any other Trading
Market, it shall include in such application the Shares and the Warrant Shares
and will take such other action as is necessary to cause such Common Stock to
be so listed.  The Company will use
commercially reasonable efforts to continue the listing and trading of its
Common Stock on the Nasdaq Capital Market and, in accordance, therewith, will
use commercially reasonable efforts to comply in all respects with the Company’s
reporting, filing and other obligations applicable to issuers whose securities
are listed on such market.

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

4.8 No Net Short Position.  Each Purchaser agrees, severally and not
jointly with any other Purchasers, that it or any Person acting at the request
or direction of Purchaser, will not  use
the Shares or the Warrant Shares to cover any Short Sales (as hereinafter
defined) if doing so would be in violation of applicable securities laws.  For purposes of this Section 4.8, a “Short
Sale” by any Purchaser shall mean a sale of Common Stock by such Purchaser that
is marked as a short sale and that is made at a time when there is no
equivalent offsetting long position in Common Stock held by such Purchaser,
including, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act, whether or not against
the box, and all types of direct and indirect stock pledges, forward sales
contracts, options, puts, calls, short sales, swaps, “put equivalent positions”
(as defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements
(including on a total return basis) and sales and other transactions through
non-US broker dealers or foreign regulated brokers.

ARTICLE V.

MISCELLANEOUS

5.1 Fees and Expenses.  The Company and the Purchasers shall each
bear their own expenses in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement.  The Company shall pay all stamp and other
taxes and duties levied in connection with the sale of the Securities.

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

5.3 Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on

 19
 

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

5.4 Amendments; Waivers.  No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought.  No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof (unless it so
provides by its terms), nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right.

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

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

5.7 No Third-Party
Beneficiaries.  This Agreement is
intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person, except as otherwise set forth in
Section 4.4.

5.8 Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Agreement and any other Transaction
Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New
York.  Each party hereto hereby

 20
 

irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
New York for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper.  Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by delivering a copy thereof via
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law.
Each party hereto (including its affiliates, agents, officers, directors and
employees) hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of a Transaction Document, then the prevailing party in such action
or proceeding, as determined by the court hearing such matter, shall be
reimbursed by the other party for its reasonable attorneys’ fees and other
costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.

5.9 Survival.  The representations and warranties herein
shall not survive the Closing.

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

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

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

5.13 Remedies.  In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each
of the Purchasers and the Company will be

 21
 

entitled to specific performance under the
Transaction Documents.  The parties agree
that monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.

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

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

(Signature
Page Follows)

 22
 

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

	
  FOCUS ENHANCEMENTS, INC.

  	
   

  	
  Address for Notice:

  	
   

  
	
   

  	
   

  	
   

  	
  1370 Dell Avenue

  	
   

  
	
   

  	
   

  	
   

  	
  Campbell, California 95008

  	
   

  
	
  By:

  	
   

  	
   

  	
  Attn: Gary Williams

  	
   

  
	
   

  	
  Name: Gary Williams

  	
   

  	
  Chief Financial Officer

  	
   

  
	
   

  	
  Title: Executive VP of Finance and CFO

  	
   

  	
  Tel: (408) 866-8300

  	
   

  
	
   

  	
   

  	
   

  	
  Fax: (408)866-4795

  	
   

  
	
  With copy to (which shall not constitute notice):

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Manatt, Phelps & Phillips, LLP

  	
   

  	
   

  	
   

  
	
  1001 Page Mill Road, Bldg. 2

  	
   

  	
   

  	
   

  
	
  Palo Alto, California 94304-1006

  	
   

  	
   

  	
   

  
	
  Attn: Jerrold F. Petruzzelli, Esq.

  	
   

  	
   

  	
   

  
	
  Tel:

  	
  (650) 812-1300

  	
   

  	
   

  	
   

  
	
  Fax:

  	
  (650) 213-0260

  	
   

  	
   

  	
   

  

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR PURCHASERS FOLLOW]

 23
 

 [PURCHASER SIGNATURE PAGES TO FCSE SECURITIES
PURCHASE AGREEMENT]

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

	
  Name of Investing Entity:

  	
   

  
	
  Signature of Authorized Signatory of Investing Entity:

  	
   

  
	
  Name of
  Authorized Signatory:

  	
   

  
	
  Title of
  Authorized Signatory:

  	
   

  
	
  Email Address of
  Authorized Entity:

  	
   

  
	
  Fax Number of
  Authorized Signatory/Entity:

  	
   

  
	
  Address for
  Notice of Investing Entity:

  	
   

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

  	
   

  
								

 

Principal place of
residence (for individuals) or business (for corporations):

	
  Subscription Amount:

  	
   

  	
   

  	 

	
  Shares:

  	
   

  	
   

  
	
  Warrant Shares:

  	
   

  	
   

  	 

						

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

Please check one of the following:

o   Investing Entity is an existing stockholder
of the Company

o   Investing Entity is not
an existing stockholder of the Company

[PURCHASER SIGNATURE PAGE]

 

 24Exhibit
10.3

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This Fifth Amendment to Loan and Security Agreement
(this “Amendment”) is entered into as of February 21, 2007, by and between
Greater Bay Venture Banking, a division of Greater Bay Bank N.A. successor in
interest to Venture Banking Group, a division of Greater Bay Bank N.A. (“Bank”)
and Focus Enhancements, Inc. (“Borrower”).

RECITALS

Borrower and Bank
are parties to that certain Loan and Security Agreement dated as of November
15, 2004, as amended (the “Agreement”). 
Borrower and Bank desire to amend certain provisions of the Agreement,
all in accordance with the terms of this Amendment.

 

NOW, THEREFORE,
the parties agree as follows:

 

1.                                       Amendments
to Agreement.  The Agreement is
hereby amended as follows:

 

The following defined terms in Section 1.1 are amended to read as
follows:

 

“Bridge Maturity Date” means March 23, 2007.

 

“Revolving Maturity Date” means March 23, 2007.

 

2.                                       Conditions
Precedent to Effectiveness.  This
Amendment shall become effective only upon:

 

(a)           receipt by the Bank
of the following (each of which shall be in form and substance satisfactory to
Bank):

 

(i)            counterparts of
this Amendment duly executed on behalf of the Borrower and the Bank; and

 

(b)           completion of such
other matters and delivery of such other agreements, documents and certificates
as Bank may reasonably request.

 

3.                                       Representation
and Warranties.  Borrower represents
and warrants that the Representations and Warranties contained in the Agreement
are true and correct as of the date of this Amendment, and that no Event of
Default has occurred and is continuing.

 

4.                                       MISCELLANEOUS.

 

(a)           Successors and
Assigns.  This Amendment shall be
binding upon and shall inure to the benefit of Borrower and Bank and their
respective successors and assigns; provided, however, that the foregoing shall
not authorize any assignment by Borrower of its rights or duties hereunder.

 

(b)           Entire Agreement.  This Amendment and the Loan Documents contain
the entire agreement of the parties hereto and supersede any other oral or
written agreements or understandings.

 

(c)           Course of
Dealing; Waivers.  No course of
dealing on the part of Bank or its officers, nor any failure or delay in the
exercise of any right by Bank, shall operate as a waiver thereof, and any
single or partial exercise of any such right shall not preclude any later
exercise of any such right.  Bank’s
failure at any time to require strict performance by Borrower of any provision
shall not affect any

 

right of Bank
thereafter to demand strict compliance and performance.  Any suspension or waiver of a right must be
in writing signed by an officer of Bank.

 

(d)           Legal Effect.  Except as amended by this Amendment, the Loan
Documents remain in full force and effect. 
If any provision of this Amendment conflicts with applicable law, such
provision shall be deemed severed from this Amendment, and the balance of this
Amendment shall remain in full force and effect.  Unless otherwise defined, all capitalized
terms in this Amendment shall have the meaning set forth in the Agreement.

 

(e)           Counterparts.  This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.

 

IN WITNESS
WHEREOF, the undersigned have executed this Amendment as of the first date
above written.

 

	
  

  	
  FOCUS ENHANCEMENTS, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Gary Williams

  
	
   

  	
   

  
	
   

  	
  Title

  	
   CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GREATER BAY VENTURE BANKING, A

  
	
   

  	
  DIVISION OF GREATER BAY BANK N.A.

  
	
   

  	
  SUCCESSOR IN INTEREST TO

  
	
   

  	
  VENTURE BANKING GROUP, A DIVISION

  
	
   

  	
  OF GREATER BAY BANK N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Jennifer Schellenberg

  
	
   

  	
   

  
	
   

  	
  Title

  	
   SVP

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00117-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00117-of-00352.parquet"}]]