EXHIBIT 4.1
FOCUS ENHANCEMENTS, INC.
(a Delaware Corporation)
Private Offering of up to 1,000,000 Shares of Common Stock
Offering Price - $3.81 per Share
Total Offering - $3,810,000
Subscription Documents
Name of Investor: Xxxxx Xxxxxx Fundamental Value Fund, Inc.
Number of Shares Subscribed for: 1,000,000
FOCUS ENHANCEMENTS, INC.
SUBSCRIPTION AGREEMENT
for
The Purchase of Shares of Common Stock of the Company
A. The undersigned hereby subscribes for and agrees to purchase 1,000,000 Shares
of Common Stock (the "Shares or "Securities") of FOCUS ENHANCEMENTS, INC., a
corporation organized and existing under the laws of the State of Delaware (the
"Company"). The Shares being offered are more fully described in the
Confidential Term Sheet of the Company dated September 2, 1997 and the Exhibits
thereto (the "Term Sheet"). The undersigned agrees to pay a purchase price equal
to $3.81 multiplied by the number of Shares subscribed for. In the event that
the last sale price of the Company's Common Stock (as reported on the Nasdaq
Small Cap Market or other exchange) is less than $3.00 per share for twenty
consecutive trading days during the twelve month period following the closing of
this offering, the undersigned shall receive one warrant to purchase one share
of Common Stock for every three Shares purchased hereunder (up to a maximum of
330,000 warrants) The warrants shall be exercisable for a period of seven years
after the closing date at a price of $3.00 per share; provided, however, that
the undersigned shall have purchased 1,000,000 of the Shares upon the terms set
forth herein. The undersigned herewith tenders to the Company the entire amount
of such purchase price by wire transfer or by check made payable to the order of
Xxxxxxxx & Worcester LLP, Escrow Agent.
B. The undersigned acknowledges that the Shares have not been registered under
the Securities Act of 1933, as amended (the "Act"), or the securities laws of
any state (i) that absent an exemption or registration under the Act, the
Securities cannot be resold, and (ii) the Securities are being offered for sale
in reliance upon exemptions from registration contained in the Act and
applicable state laws, and that the Company's reliance upon such exemption is
based in part upon the undersigned's representations, warranties and agreements
contained in this Subscription Agreement.
The offering (the "Offering") of Shares shall terminate on September
30, 1997, or such later date as may be determined by the Company and the
Placement Agent in their discretion (the "Termination Date"), unless sooner
terminated by reason of the sale of all the Shares prior to such time. The
Company and the Placement Agent have the right, in their discretion, to accept
or reject any subscription.
C. The foregoing notwithstanding, the Company agrees to register the Shares in
accordance with the following terms and conditions:
(1) The Company will, within ninety (90) days of the Termination Date,
file pursuant to the Act a registration statement on Form S-3 or equivalent form
with respect to the Shares and the Company will use its best efforts to cause
such registration to become and remain effective (including the taking of such
steps as are necessary to obtain the removal of any stop order), provided that
the undersigned shall furnish the Company with appropriate information in
connection therewith as the Company may reasonably request in writing. All costs
and expenses of the registration statement shall be borne by the Company, except
that the undersigned shall bear the fees of his or her own counsel and any
underwriting discounts or commissions applicable to any of the securities sold
by them. The Company shall supply prospectuses, and such other documents as the
undersigned may request in order to facilitate the public sale or other
disposition of the Shares and use its best efforts to register and qualify any
of the Shares for sale in such states as the undersigned designates.
(2) The Company will indemnify and hold harmless each holder of the
securities covered by such registration statement, amendment or supplement (such
holder being hereinafter called the "Distributing Holder"), and each person, if
any, who controls (within the meaning of the Act) the Distributing Holder, and
each underwriter (within the meaning of the Act) of such securities and each
person, if any, who controls (within the meaning of the Act) any such
underwriter, against any losses, claims, damages or liabilities, joint or
several, to which the Distributing Holder, any such controlling person or any
such underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages, or liabilities, or actions in respect thereof, arise
out of or are based upon any untrue statement or alleged untrue statement or any
material fact contained in any such registration statement or any preliminary
prospectus or final prospectus constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to the state therein of a material fact required to be stated
therein or necessary to make the statements therein not misleading. The Company
shall reimburse the Distributing Holder or such controlling person or
underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus or said amendment or
supplement in reliance upon and in conformity with written information furnished
by such Distributing Holder or any other Distributing Holder for use in the
preparation thereof.
(3) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, and each
person, if any, who controls the Company (within the meaning of the Act) against
any losses, claims, damages or liabilities, joint or several, to which the
Company or any such director, officer or controlling person may
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become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities, or actions in respect thereof, arise out of or are based
upon (i) any untrue statement of any material fact contained in said
registration statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said final prospectus or said amendment or supplement in reliance upon and in
conformity with written information furnished by such Distributing Holder for
use in the preparation thereof or (ii) the Distributing Holder's failure to
deliver a prospectus as required under applicable federal or state securities
laws. The Distributing Holders shall reimburse the Company or any such director,
officer or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action.
(4) Promptly after receipt by an indemnified party under this Section C
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof, but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section C.
(5) In case any such action is brought against any indemnified party,
and it notified an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in and, to the extent that it
may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section C for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
(6) The obligations of the Company under this Section C to register the
Shares shall expire and terminate on the earlier of (i) two years from the
Termination Date or (ii) at such time as the Distributing Holder shall be
entitled to sell such securities without restriction and without a need for the
filing of a registration statement under the Act, including, without limitation,
for any resales of "Restricted Securities" made pursuant to Rule 144 as
promulgated by the SEC, or a sale made pursuant to Sections 4(1) and/or 4(2)
under the Act.
D. In order to induce the Company to accept this Subscription Agreement, the
undersigned represents and warrants to the Company and Security Research
Associates, Inc. (the "Placement Agent") as follows:
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(l) The undersigned understands that (i) this Subscription Agreement
may be accepted or rejected in whole or in part in the discretion of the Company
or the Placement Agent, and (ii) this Subscription Agreement, unless properly
revoked before acceptance, shall survive the undersigned's death, disability or
insolvency, except that the undersigned shall have no obligations in the event
that this Subscription Agreement is rejected by the Company. In the event that
the Company does not accept the undersigned's subscription, or if the Offering
is terminated for any reason, the undersigned's payment will be returned to him
without interest or deduction.
(2) The undersigned has read carefully this Subscription Agreement and
the Term Sheet (including the Exhibits annexed thereto) and, to the extent
necessary, has discussed the representations, warranties and agreements which
the undersigned makes by signing it, and the applicable limitations upon the
undersigned's resale of the Securities with his or its counsel.
(3) The undersigned understands that no federal or state agency has
made any finding or determination regarding the fairness of the offering of the
Securities, or any recommendation or endorsement of the offering of the
Securities. Any representation to the contrary is a criminal offense.
(4) The undersigned is purchasing the Securities for the undersigned's
own account, with the intention of holding the Securities for investment
purposes, with no present intention of dividing or allowing others to
participate in this investment or of reselling or otherwise participating,
directly or indirectly, in a distribution of the Securities; and shall not make
any sale, transfer or other disposition of the Securities without registration
under the Act and applicable state securities laws unless an exemption from
registration is available under those laws.
(5) The undersigned's overall commitment to investments which are not
readily marketable is not disproportionate to the undersigned's net worth, and
the undersigned's investment in the Securities will not cause such overall
commitment to become excessive.
(6) The undersigned, if an individual, has adequate means of providing
for his current needs and personal and family contingencies and has no need for
liquidity in his investment in the Securities.
(7) The undersigned is an "accredited investor" as that Term is defined
in Section 501(a) under Regulation D promulgated by the Securities and Exchange
Commission under the Act which definition is attached hereto. The undersigned is
financially able to bear the economic risk of this investment, including the
ability to afford holding the Securities for an indefinite period or to afford a
complete loss of this investment.
(8) The address shown under the undersigned's signature at the end of
this Subscription Agreement is the undersigned's principal residence if he is an
individual, or its principal business address if a corporation or other entity.
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(9) The undersigned, together with any purchaser representatives of the
undersigned (as identified herein) has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Securities.
(10) The undersigned has received and read the Term Sheet dated as of
September 2, 1997.
(11) The undersigned has been given the opportunity to ask questions of
and receive answers from the Company concerning the terms and conditions of the
Offering and to obtain additional information necessary to verify the accuracy
of the information contained in the Term Sheet or such other information as the
undersigned desired in order to evaluate the investment, and the undersigned
availed itself of such opportunity to the extent considered appropriate in order
to evaluate the merits and risks of the proposed investment. Notwithstanding the
foregoing, the only information upon which the undersigned has relied in making
the investment decision is that set forth in the Term Sheet and the exhibits
thereto. The undersigned acknowledges that the undersigned has received no
representations or warranties from the Company and its employees or the
Placement Agent and its employees other than as set forth in the Term Sheet.
(12) The undersigned has made an independent evaluation of the merits
of the investment and acknowledges the high risk nature of the investment.
(13) The undersigned has accurately completed the Qualified Purchaser
Questionnaire provided herewith and has executed such Qualified Purchaser
Questionnaire and any applicable exhibits thereto.
(14) The undersigned understands that although the Company is currently
a "reporting company" under the Securities Exchange Act of 1934, as amended, the
provisions of Rule 144 promulgated under the Act to permit resales of the
Securities will not be available for at least one (1) year from the date the
Securities are paid for and accepted, there can be no assurance that the
conditions necessary to permit routine sales of the Securities under Rule 144
will ever be satisfied, that such sales require that the Company be current in
filing periodic reports under the Securities Exchange Act of 1934, and, if Rule
144 should become available, sales made in reliance on its provisions could be
made only in limited amounts and in accordance with the terms and conditions of
the Rule. The undersigned further understands that in connection with the sale
of securities for which Rule 144 is not available, compliance with some other
registration exemption will be required. The undersigned understands that,
except as set forth in this Subscription Agreement, the Company is under no
obligation to the undersigned to register the Securities or to comply with the
conditions of Rule 144 or take any other action necessary in order to make
available any exemption for the resale of the Securities without registration.
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(15)(a) The undersigned understands that none of the Securities have
been registered under the Act, or any state securities laws in reliance on
exemptions for private offerings; the Securities cannot be resold or otherwise
disposed of unless they are subsequently registered under the Act and applicable
sate securities laws or an exemption from registration is available. The
certificate(s) representing the Securities will bear the following legend until
(i) such securities shall have been registered under the Act and effectively
disposed of in accordance with the registration statement; or (ii) in the
opinion of counsel reasonable satisfactory to the Company such Securities may be
sold without registration under the Act:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OP 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE "BLUE SKY" OR SECURITIES LAWS OF ANY
STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR
TRANSFERRED AND ANY TRANSFER OR PURPORTED TRANSFER SHALL NOT BE RIGHTFUL UNDER
THE UNIFORM COMMERCIAL CODE AND THE COMPANY SHALL HAVE NO DUTY TO REGISTER A
TRANSFER OF THESE SECURITIES EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT
TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION
UNDER THE ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, THAT THE PROPOSED
DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT
AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES LAW." THE
RESTRICTIONS CONTAINED HEREIN ARE BINDING ON THE HOLDER HEREOF AND HIS
SUCCESSORS AND ASSIGNS.
(b) The undersigned understands that in the absence of registration by
the Company, the Securities will not be, and the undersigned will have no rights
to require that the Securities be registered under the 1933 Act or any state
securities laws; there will be no public market for the Securities and there is
no assurance one will develop in the future; the undersigned may have to hold
the Securities indefinitely and it may not be possible for the undersigned to
liquidate its investment in the Company; and the undersigned should not purchase
any Shares unless it can afford a complete loss of its investment and bear the
burden of such loss for an indefinite period of time.
(16) The undersigned, if an individual, is at least 21 years of age.
(17) If at any time prior to acceptance of the subscription for the
Securities of the undersigned, any representation or warranty of the undersigned
shall no longer be true, the undersigned promptly shall give written notice to
the Company and the Placement Agent specifying which representations and
warranties are not true and the reason therefor, whereupon the undersigned's
subscription may be rejected.
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(18) Notwithstanding the place where this Subscription Agreement may be
executed by any of the parties hereto, all the terms and provisions hereof shall
be construed in accordance with and governed by the laws of The Commonwealth of
Massachusetts, without giving effect to its conflict of law principles. Any
dispute which may arise out of or in connection with this Subscription Agreement
shall be adjudicated before a court located in The Commonwealth of Massachusetts
and the parties hereby submit to the exclusive jurisdiction of the courts of The
Commonwealth of Massachusetts and of the federal courts in The Commonwealth of
Massachusetts with respect to any action or legal proceeding commenced by any
party, and irrevocably waive any objection they now or hereafter may have
respecting the venue of any action or proceeding brought in such a court or
respecting the fact that such court is an inconvenient forum, relating to or
arising out of this Subscription Agreement or any acts or omissions relating to
the sale of the Securities, and the undersigned consents to the service of
process in any such action or legal proceeding by means of registered or
certified mail, return receipt requested, in care of the address set forth below
or such other address as the undersigned shall furnish in writing to the Company
and the Placement Agent.
(19) The undersigned hereby waives trial by jury in any action or
proceeding involving, directly or indirectly, any matter (whether sounding in
tort, contract, fraud or otherwise) in any way arising out of or in connection
with this Subscription Agreement or the undersigned's purchase of the
Securities.
(20) The undersigned acknowledges that he understands the meaning and
legal consequences of the representations, warranties and acknowledgments
contained in this Subscription Agreement and in the Qualified Purchaser
Questionnaire, and hereby agrees to indemnify and hold harmless the Company and
the Placement Agent, and their respective shareholders, officers, directors,
affiliates, "controlling persons", agents and representatives, from and against
any and all loss, damage, expense, claim, action, suit or proceeding (including
the reasonable fees and expenses of legal counsel) as incurred arising out of or
in any manner whatsoever connected with a breach of any representation or
warranty of the undersigned contained in this Subscription Agreement or in the
Qualified Purchaser Questionnaire. The undersigned acknowledges that such damage
could be substantial since (a) the Shares are being offered without registration
under the Act in reliance upon the exemption pursuant to Section 4(2) of the Act
for transactions by an issuer not involving a public offering and, in various
states, pursuant to exemptions from registration, (b) the availability of such
exemptions is, in part, dependent upon the truthfulness and accuracy of the
representations made by the undersigned herein and in its Qualified Purchaser
Questionnaire, and (c) the Company will rely on such representations in
accepting the undersigned's Subscription Agreement.
(21) Except as expressly provided herein, this Subscription Agreement
contains the entire agreement between the parties with respect to the
transactions contemplated hereunder and may be amended only by a writing
executed by all of the parties hereto. This Subscription Agreement supersedes
all prior arrangements or understandings with respect thereto, whether verbal or
written. The terms and conditions of this Subscription Agreement shall inure to
the benefit of and be binding upon the parties and their respective successors,
heirs and assigns.
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ALL SUBSCRIBERS MUST COMPLETE THIS PAGE
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement on this 8th day of September, 1997.
1,000,000
-------------------------------
Number of Shares Subscribed For
Manner in which Title is to be held (Please Check One):
1. / / Individual 7. / / Trust/Estate/Pension or Profits
Sharing Plan
Date Opened:
2. / / Joint Tenants With 8. / / As a Custodian for
Right of Survivorship
3. / / Community Property
Under the Uniform Gift to Minors
Act of the State of
4. / / Tenants in Common
5. /X/ Corporate/Partnership 9. / / Married with Separate Property
6. / / IRA 10. / / Xxxxx
INDIVIDUAL SUBSCRIBERS MUST COMPLETE PAGE 9; SUBSCRIBERS THAT ARE ENTITIES MUST
COMPLETE PAGE 10.
Xxxxx Xxxxxx Fundamental Value Fund Inc.
----------------------------------------
Name of Purchaser
Registered Representative
Please indicate whether or not you or any member of your immediate family
is affiliated with any member of the National Association of Securities Dealers,
Inc. A member of your immediate family includes parents, mother-in-law,
father-in-law, husband or wife, brother or sister, brother-in-law or
sister-in-law, son-in-law, daughter-in-law and children and any other person who
is supported, directly or indirectly to a material extent by the subscriber.
Check One: / / No Affiliates /X/ Affiliated with (explain)
Xxxxx Xxxxxx is a member of the National Association of Securities Dealers, Inc.
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EXECUTION BY SUBSCRIBER THAT IS AN ENTITY
(Corporation, Partnership, Trust, Etc.)
Xxxxx Xxxxxx Fundamental Value Fund Inc.
----------------------------------------
Name of Entity (Please Print)
c/o Xxxxx Xxxxxx, Inc.
Attn: Xxxxxx Xxxxxxxx
000 Xxxxxxxxx Xx. 00xx Xx.
New York, NY 10013
----------------------------------------
Address of Principal Office of Entity
(seal) BY: /s/ Xxxx X. Xxxxx
-----------------------
TITLE: Vice President
and Investment Officer
-----------------------
Attest:
(If Entity is a Corporation)
c/o Xxxxx Xxxxxx, Inc.
Attn: Xxxxxx Xxxxxxxx
000 Xxxxxxxxx Xx. 00xx Xx.
New York, NY 10013
------------------------------
Address
000-000-0000
------------------------------
Telephone Number
00-0000000
------------------------------
Taxpayer Identification Number
ACCEPTED, this 10th day of September, 1997, on behalf of the Company.
FOCUS ENHANCEMENTS, INC.
By: /s/ Xxxxxx X. Xxxxxx
---------------------
Name: Xxxxxx X. Xxxxxx, CEO
---------------------
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