Exhibit 4.2
COMMON
STOCK PURCHASE WARRANT
To
Purchase «Shares» Shares of Common Stock of
FOCUS ENHANCEMENTS,
INC.
THIS COMMON STOCK PURCHASE WARRANT (the “
Warrant ”) is one of a series of Warrants (all
“Warrants”) issued under that certain Amended and
Restated Senior Secured Note Purchase Agreement (the “
Purchase Agreement ”) of even date herewith among the
Company and the purchasers signatory thereto.
For
value received, «Holder» (the “
Holder” hereof) is entitled, upon the terms and
subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date of issuance
of this Warrant (the “ Initial Exercise Date ”)
and on or prior to January 1, 2011 (the “ Termination
Date ”) but not thereafter, to subscribe for and purchase
from Focus Enhancements, Inc., a Delaware corporation (the
“ Company ”), up to
«Shares» shares (the “ Warrant Shares
”) of Common Stock, par value $0.01 per share, of the Company
(the “ Common Stock ”). The purchase price
of one share of Common Stock (the “ Exercise Price
”) under this Warrant shall be $0.80 , subject to
adjustment hereunder. The Exercise Price and the number of
Warrant Shares for which the Warrant is exercisable shall be
subject to adjustment as provided herein. Capitalized terms used
and not otherwise defined herein shall have the meanings set forth
in the Purchase Agreement.
1.
Title to Warrant . Prior to the Termination Date and
subject to compliance with applicable laws and Section 7 of
this Warrant, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the
Company by the Holder in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment
Form annexed hereto properly endorsed. The transferee
shall sign an investment letter in form and substance reasonably
satisfactory to the Company.
2.
Authorization of Shares . The Company covenants that
all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free
from all taxes, liens and charges in respect of the issue thereof
(other than taxes in respect of any transfer occurring
contemporaneously with such issue).
3.
Exercise of Warrant .
(a) Exercise of the purchase rights
represented by this Warrant may be made at any time or times on or
after the Initial Exercise Date and on or before the Termination
Date by delivery of the Notice of Exercise Form, surrender of this
Warrant and payment of the aggregate Exercise Price, in each case,
to the Company at its address set forth on the signature
page to the Purchase Agreement (or such other office or agency
of the Company as it may designate by notice in writing to the
registered Holder at the address of such Holder appearing on the
books of the Company). Certificates for shares purchased
hereunder shall be delivered to the Holder within five
(5) Trading Days from the delivery to the Company of the
Notice of Exercise Form, surrender of this Warrant and payment of
the aggregate Exercise Price as set forth above (“ Warrant
Share Delivery Date ”). This Warrant shall be
deemed to have been exercised on the date the Exercise Price is
received by the Company. The Warrant Shares shall be deemed
to have been issued, and Holder or any other person so designated
to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the Warrant
has been exercised by payment to the Company of the Exercise Price
and all taxes required to be paid by the Holder, if any, pursuant
to Section 5 prior to the issuance of such shares, have been
paid. If the Company fails to deliver to the Holder a
certificate or certificates representing the Warrant Shares
pursuant to this Section 3(a) by the Warrant Share
Delivery Date, then the Holder will have the right to rescind such
exercise. In addition to any other rights available to the
Holder, if the Company fails to deliver to the Holder a certificate
or certificates representing the Warrant Shares pursuant to an
exercise by the Warrant Share Delivery Date, and if after such day
the Holder is required by its broker to purchase (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which
the Holder anticipated receiving upon such exercise (a “
Buy-In” ), then the Company shall (1) pay in cash
to the Holder the amount by which (x) the
Holder’s
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total purchase
price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Warrant Shares that the Company
was required to deliver to the Holder in connection with the
exercise at issue times (B) the price at which the sell order
giving rise to such purchase obligation was executed, and
(2) at the option of the Holder, either reinstate the portion
of the Warrant and equivalent number of Warrant Shares for which
such exercise was not honored or deliver to the Holder the number
of shares of Common Stock that would have been issued had the
Company timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of
$10,000, under clause (1) of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000.
The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably
requested by the Company. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of
the Warrant as required pursuant to the terms hereof.
Notwithstanding the foregoing or any other provision of this
Warrant, Holder agrees that under no circumstances shall such
Holder aggregate or combine any of the securities issued upon
exercise of the Warrants with other securities issued to other
holders upon exercise of the Warrant such that same
constitutes 19.9% or more of the Company’s then outstanding
voting power or then outstanding securities.
(b)
If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased Warrant
Shares called for by this Warrant, which new Warrant shall in all
other respects be identical with this Warrant.
(c)
If at any time after one year from the date of issuance of this
Warrant there is no effective Registration Statement registering
the resale of the Warrant Shares by the Holder, this Warrant may
also be exercised at such time by means of a “cashless
exercise” in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:
(A) = the Market Price (as defined
below) of one share of Common Stock on the date that the Holder
delivers a complete Notice of Exercise Form to the Company as
provided herein
(B) = the Exercise Price of this
Warrant, as adjusted; and
(X) = the number of Warrant Shares
issuable upon exercise of this Warrant in accordance with the terms
of this Warrant by means of a cash exercise rather than a cashless
exercise.
(d) The term “ Market Price
” as of a particular date (the “ Valuation Date
”) shall mean the following: (a) if the Common Stock is
then listed or quoted on a Trading Market, the closing sale price
of one share of Common Stock on such exchange on the last Trading
Day prior to the Valuation Date or, if no such closing sale price
is available, the average of the high bid and the low asked price
quoted thereon on the last Trading Day prior to the Valuation Date;
(b) if the Common Stock is not then listed or quoted on a
Trading Market and if prices for the Common Stock are then quoted
on the OTC Bulletin Board or such similar exchange or association,
the closing sale price of one share of Common Stock on the OTC
Bulletin Board or such other exchange or association on the last
Trading Day prior to the Valuation Date or, if no such closing sale
price is available, the average of the high bid and the low asked
price quoted thereon on the last Trading Day prior to the Valuation
Date; or (c) if the Common Stock is not then listed or quoted
on a Trading Market or quoted on the OTC Bulletin Board or such
other exchange or association, the fair market value of one share
of Common Stock as of the Valuation Date shall be determined in
good faith by the Board of Directors of the Company and the
Holder. If the Common Stock is not then listed or quoted on a
Trading Market or quoted on the OTC Bulletin Board or such other
exchange or association, the Board of Directors of the Company
shall respond promptly, in writing, to an inquiry by the Holder
prior to the exercise hereunder as to the fair market value of a
share of Common Stock as determined by the Board of Directors of
the Company. In the event that the Board of Directors of the
Company and the Holder are unable to agree upon the fair market
value in respect of subpart (c) hereof, the Company and the
Holder shall jointly select an appraiser, who is experienced in
such matters. The decision of such appraiser shall be final
and conclusive, and the cost of such
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appraiser
shall be borne equally by the Company and the Holder. Such
adjustment shall be made successively whenever such a payment date
is fixed.
(e) Commencing on or after
January 1, 2009 and prior to December 21, 2010, if the
average of the closing prices of the Common Stock on the Nasdaq
National Market (or such other national securities exchange on
which the Common Stock is then listed or quoted for trading) for 30
consecutive calendar days is greater than $1.30, (as the same may
be adjusted pursuant to Section 7 hereof) (a “Trigger
Period”), then the Company shall have the right, upon 10
(ten) days’ notice to all Holders (the
“Redemption Notice”), to redeem 2,600,000 Warrants on a
pro rata basis among all Holders thereof based upon the proportion
that the Warrants represented hereby bear to all Warrants issued
under the Purchase Agreement. The redemption price shall be
$.01 (one cent) per Warrant Share then unexercised (the
“Redemption Price”), on the date set forth in the
Redemption Notice, but in no event earlier than 10 Trading Days
following the date of the Company’s transmission of
such Redemption Notice (the “Redemption Date”). The
Holder may exercise the called portion of this Warrant at any time
prior to the Redemption Date. Any called portion of this Warrant
not exercised by 6:30 p.m. (New York City time) on the
Redemption Date shall no longer be exercisable and shall be
returned to the Company; the Company, upon its receipt of the
unexercised called portion of this Warrant, shall issue therefor in
full and complete satisfaction of its obligations under such
remaining portion of this Warrant to the Holder an amount equal to
the number of shares of Common Stock then issuable hereunder and
not exercised multiplied by the Redemption Price of one cent per
such share (the “Total Redemption Price”). In such
circumstance, the Total Redemption Price shall be mailed to such
Holder at its address of record, and the Warrant shall be
canceled. Twenty (20) days after the Company has given
the first such Redemption Notice and the applicable Ten Trading
Days have lapsed, the Company may issue additional Redemption
Notice(s) provided that as of the date of each such additional
Redemption Notice the Common Stock then listed or quoted for
trading has previously been for 30 consecutive calendar days
greater than $1.30, and the Company may thereafter redeem
2,600,000 Warrants in the manner and for the Redemption Price as
set forth above in this paragraph. Subject to its meeting the
applicable conditions, the Company may continue to exercise its
redemption rights every thirty (30) days in the manner and at the
Redemption Price set forth herein until no further Warrants remain
outstanding. Notwithstanding the foregoing, the Company shall
not issue a Redemption Notice to any one Holder if such Holder,
upon exercise of all such Holder’s Warrants then subject to
the Redemption Notice, would cause such Holder’s
ownership or voting control of all Company securities then held by
such Holder or over which Holder has voting power to exceed
19.9% of the Company’s then outstanding voting power or
securities.
4.
No Fractional Shares or Scrip . No fractional shares
or scrip representing fractional shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which
Holder would otherwise be entitled to purchase upon such exercise,
the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the
Exercise Price.
5.
Charges, Taxes and Expenses . Issuance of certificates
for Warrant Shares shall be made without charge to the Holder for
any issue or transfer tax or other incidental expense in respect of
the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued
in the name of the Holder or in such name or names as may be
directed by the Holder; provided , however , that in
the event certificates for Warrant Shares are to be issued in a
name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment
Form attached hereto duly executed by the Holder; and the
Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental
thereto.
6.
Closing of Books . The Company will not close its
stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms hereof.
7.
Transfer, Division and Combination
.(a) Subject to
compliance with any applicable securities laws and the conditions
set forth herein and to the provisions of Purchase Agreement,
this Warrant and all rights hereunder are transferable, in whole or
in part, upon surrender of this Warrant at the principal office of
the Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its a
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