SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
SCHEDULE 13D/A
(Amendment No. 1)
Under the Securities Exchange Act of 1934
IMAGING TECHNOLOGIES CORPORATION
--------------------------------
(Name of Issuer)
COMMON STOCK
------------------------------
(Title of Class of Securities)
45244U-104
------------------------------
(CUSIP Number)
American Industries, Inc.
Suite 106
1750 N. W. Front Avenue
Portland, Oregon 97209
(503) 222-0060
------------------------------------
(Name, Address and Telephone Number)
of Person Authorized to Receive
Notices and Communications)
With a copy to:
Kenneth D. Stephens, Esq.
Tonkon Torp LLP
1600 Pioneer Tower
888 S. W. Fifth Avenue
Portland, Oregon 97204
(503) 802-2008
SEPTEMBER 21, 1998
------------------------------------
(Date of Event Which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
Schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
<PAGE>
CUSIP No. 45244U-104
1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above
Person
American Industries, Inc.
IRS Identification Number: 93-0331722
2. Check the appropriate box if a member of a group (a) / /
(b) / /
3. SEC USE ONLY
4. Source of Funds
WC, OO
5. Check box if disclosure of legal proceedings is required pursuant to
Items 2(d) or 2(e) / /
6. Citizenship or place of organization
Oregon
7. Sole Voting Power
1,035,000*
8. Shared Voting Power
-0-
9. Sole Dispositive Power
1,035,000*
- ---------------------------
* Does not include 7,400 shares of the issuer's Common Stock held by Juanita
Hedinger, the wife of the reporting person's Chairman and President and an
aggregate of 3,000 shares held by three minor children of the Hedingers. The
reporting person disclaims beneficial ownership of such shares.
<PAGE>
10. Shared Dispositive Power
-0-
11. Aggregate amount beneficially owned by each reporting person
1,035,000*
12. Check box if the aggregate amount in row (11) excludes certain shares
/ /
13. Percent of class represented by amount in row (11)
8.7% percent*
14. Type of Reporting Person
CO
- ---------------------------
* Does not include 7,400 shares of the issuer's Common Stock held by Juanita
Hedinger, the wife of the reporting person's Chairman and President and an
aggregate of 3,000 shares held by three minor children of the Hedingers. The
reporting person disclaims beneficial ownership of such shares.
<PAGE>
This Amendment No. 1 to the Schedule 13D dated July 21, 1998 is filed to amend
and restate in its entirety such Schedule 13D, as follows:
Item 1. Security and Issuer
- ---------------------------
Title of Class:
Common Stock
Name and Address of Principal Executive Offices of Issuer:
Imaging Technologies Corporation
Suite 100
11031 Via Frontera
San Diego, California 92127
Item 2. Identity and Background
- --------------------------------
Reporting Person:
The reporting person is American Industries, Inc., a
corporation organized under the laws of the State of Oregon
("American").
The principal business of American has historically been steel
fabrication and operation of steel service centers. At the
present time, its principal business is investments. Its
principal business address and its principal executive offices
are located at:
Suite 106
1750 N.W. Front Avenue
Portland, OR 97209
Persons enumerated pursuant to General Instruction C:
The following information is provided with respect to the
executive officers and directors of American and each person
controlling American:
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Business Principal Occupation
Address Citizenship or Employment
- ----------------- ----------- --------------------
Howard H. Hedinger USA Chairman and President
American Industries, Inc.
Suite 106
1750 N.W. Front Avenue
Portland, OR 97209
Robert M. Johnson USA Investor
917 S.W. Oak, #333
Portland, OR 97205
<PAGE>
Ellison C. Morgan USA Investor
11510 S.W. Summerville
Portland, OR 97219
M.J. Lampros USA President
Lampros Steel
8524 N. Crawford
Portland, OR 97203
Hillary M. Claussen USA Investor
62 Piedmont Road
Larkspur, CA 94939
</TABLE>
Other than as described in the next following paragraph, during the last
five years, neither the reporting person, nor any of the persons enumerated
above pursuant to General Instruction C has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or has been a
party to any civil proceeding of a judicial or administrative body of competent
jurisdiction and, as a result of such proceeding, been subjected to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
On September 30, 1998, Ellison C. Morgan entered into a settlement
agreement with the Securities and Exchange Commission (the "Commission")
pursuant to which, without admitting or denying the Commission's allegations,
Mr. Morgan consented to the issuance of a permanent injunction prohibiting him
from violating in the future Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 thereunder. The Commission alleged Mr. Morgan engaged in one
or more transactions in 1996 involving the securities of Portland General
Corporation while in possession of material non-public information regarding its
pending acquisition by Enron Corp. In settlement of the Commission's lawsuit,
Mr. Morgan also agreed to disgorge certain trading profits, and pay civil
penalties and pre-judgment interest, in an aggregate amount of $229,808.02.
Securities and Exchange Commission v. Ellison C. Morgan and Peter J. Brix,
United States District Court for the Southern District of New York, Civil Action
No. 98 CIV 6905 (DC).
ITEM 3. SOURCE AND AMOUNT OF FUNDS AND OTHER CONSIDERATION
- ----------------------------------------------------------
The funds used by American to purchase the shares held by it were provided
by general working capital funds of American, funds advanced through a margin
account with Black & Company, Inc., One S.W. Columbia Street, Portland, Oregon
97258, and from the proceeds of a working capital line of credit with U.S.
National Bank, 111 S.W. Fifth Avenue, Portland, Oregon 97204 in the ordinary
course of business. As of the date of this report, funds invested in the subject
security by American, not including funds loaned to the issuer, aggregated
$3,757,273.
<PAGE>
ITEM 4. PURPOSE OF TRANSACTION
- ------------------------------
The shares were purchased for investment. It is possible that American may,
from time to time, acquire additional shares, or dispose of shares, either
through brokerage firms or in privately negotiated transactions. American may
also acquire shares through the exercise of warrants described in Item 6 of this
Schedule or through conversion of all or a portion of the Convertible
Subordinated Promissory Note described in Item 6.
American's decisions with respect to the shares will be influenced by,
among other considerations, investment characteristics of the securities, as
well as both fundamental and technical analyses of the issuer and the securities
markets generally. Except as stated herein, American has no immediate plans or
proposals to either acquire additional shares or dispose of shares of the
issuer.
On or about September 21, 1998, American, and other lenders, consummated a
series of loans and other financial transactions with the issuer. As part of
these transactions, the issuer agreed to use its reasonable and diligent efforts
to cause the surrender of options or warrants to purchase an aggregate 800,000
shares of the issuer's Common Stock, which options or warrants are presently
outstanding.
Although American has discussed the possibility of representation on the
board of directors of the issuer, it has no present plans to seek representation
and has no present intention to take any action which relates to or which would
result in any of the transactions described in clauses (a) - (j) of Item 4 of
the General Instructions for Schedule 13D.
The foregoing discussion accurately represents the range of activities
presently contemplated by American with respect to the issuer and its Common
Stock. However, American reserves the right to change its intentions or the
scope of its possible activities at any time.
Ellison C. Morgan, a director of American, is also a shareholder of the
issuer and, together with Ellison Christopher Morgan, MCM Partners, LP, Ellison
C. Morgan Revocable Trust, 2030 Investors, LLC, and 2030 Investors 401(k)
(collectively, the "Morgan Reporting Persons"), has filed with the Commission a
separate Schedule 13D with respect to Common Stock of the issuer. American
denies that it is acting in concert with Mr. Morgan or any other Morgan
Reporting Persons. Upon information and belief, the Morgan Reporting Persons
hold an aggregate of 1,539,057 shares of the issuer's Common Stock, all as more
particularly described in the Schedule 13D filed on behalf of the Morgan
Reporting Persons, as amended. Additionally, upon information and belief, on or
about September 21, 1998, Ellison C. Morgan acquired an additional 100,000
shares of the issuer's Common Stock.
<PAGE>
ITEM 5. INTERESTS IN SECURITIES OF ISSUER
- ------------------------------------------
Ellison C. Morgan, one of the persons named in response to Item 2, together
with other Morgan Reporting Persons, has acquired an aggregate of 1,539,057
shares of the issuer's common stock, representing, in the aggregate,
approximately 12.9 percent of the outstanding common stock (based upon the
number of shares reported to have been outstanding as of May 12, 1998 in the
issuer's Quarterly Report on Form 10-Q for the period ended March 31, 1998).
Such shares are held with shared voting power and shared dispositive power.
American denies that it is acting in concert with Mr. Morgan or any other Morgan
Reporting Persons. See also response to Item 4. Upon information and belief,
during the lesser of 60 days or the period since the most recent Schedule 13D
filing by the Morgan Reporting Persons, Ellison C. Morgan acquired an additional
100,000 shares of the issuer's Common Stock.
American has acquired an aggregate of 1,035,000 shares of the issuer's
Common Stock, representing, in the aggregate, approximately 8.7% of the issuer's
outstanding Common Stock. American holds all such shares with sole voting power
and sole dispositive power. Such shares were acquired by American in
transactions effected by a registered broker/dealer on the Nasdaq Stock Market
as follows:
<TABLE>
<CAPTION>
DATE NUMBER OF SHARES PRICE PER SHARE AGGREGATE PRICE
- ---- ---------------- --------------- ---------------
<S> <C> <C> <C>
(adjusted
for split)
02/25/97 71,000 $7.40 $ 526,717.54
10/10/97 13,500 $6.25 $ 84,378.00
10/23/97 10,000 $6.13 $ 61,253.00
10/10/97 4,500 $6.13 $ 27,565.50
10/10/97 5,000 $6.06 $ 30,315.50
10/10/97 2,000 $6.00 $ 12,000.00
06/18/97 10,000 $6.03 $ 60,003.00
06/17/97 10,000 $6.03 $ 60,003.00
06/21/97 2,900 $6.00 $ 17,403.00
10/27/97 5,000 $5.75 $ 28,753.00
06/27/97 10,000 $5.52 $ 55,190.00
<PAGE>
03/06/97 20,000 $5.50 $ 110,003.00
10/28/97 20,000 $5.50 $ 110,003.00
11/17/97 4,200 $5.38 $ 22,578.00
11/12/97 10,000 $5.38 $ 53,753.00
11/13/97 10,000 $5.25 $ 52,503.00
11/12/97 2,000 $5.25 $ 10,500.00
11/14/97 900 $5.25 $ 4,728.00
03/10/97 8,000 $5.25 $ 42,003.00
03/07/97 11,000 $5.25 $ 57,753.00
11/06/97 10,000 $5.13 $ 51,253.00
03/13/97 10,000 $4.61 $ 46,128.00
12/31/97 15,000 $4.47 $ 67,053.00
04/17/97 50,000 $4.14 $ 206,875.50
06/30/98 14,000 $3.80 $ 53,203.00
07/17/98 20,000 $3.75 $ 67,503.00
03/03/98 5,000 $3.50 $ 17,503.00
02/26/98 10,000 $3.38 $ 33,818.63
07/15/98 20,000 $3.25 $ 65,003.00
07/21/98 40,000 $3.16 $ 126,400.00
07/20/98 20,000 $3.16 $ 63,300.00
04/29/98 8,500 $2.94 $ 24,971.75
04/21/98 2,500 $2.91 $ 7,268.75
04/21/98 7,500 $2.88 $ 21,565.50
04/23/98 1,500 $2.88 $ 4,315.50
05/18/98 50,000 $2.81 $ 140,628.00
05/26/98 20,000 $2.78 $ 55,625.00
06/08/98 20,000 $2.77 $ 55,340.00
<PAGE>
06/22/98 1,000 $2.61 $ 2,613.00
06/11/98 10,000 $2.54 $ 25,400.00
06/15/98 5,000 $2.53 $ 12,659.25
05/29/98 15,000 $2.48 $ 37,278.00
06/15/98 10,000 $2.44 $ 24,403.00
05/28/98 5,000 $2.41 $ 12,659.25
07/27/98 20,000 $3.06 $ 61,200.00
07/28/98 15,000 $3.06 $ 45,900.00
09/17/98 400,000 $2.50 $1,000,000.00
TOTAL $3,757,272.67
=============
</TABLE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
- -------------------------------------------------------------------------------
TO SECURITIES OF THE ISSUER
- ---------------------------
On or about September 21, 1998, American entered into the following
transactions involving securities of the issuer:
Subordinated Note Purchase Agreement dated as of
September 17, 1998, pursuant to which American purchased
from the issuer a $950,000 principal amount
Non-Convertible Subordinated Promissory Note (the
"Non-Convertible Note") and a $437,500 principal amount
Convertible Subordinated Promissory Note (the "Convertible
Note"). The Non-Convertible Note matures September 16,
1999, and the Convertible Note matures September 16, 2000.
The Convertible Note is convertible into the issuer's
Common Stock at any time prior to maturity at a purchase
price (subject to adjustment) of $2.025 per share.
On or about September 21, 1998, American consummated the
purchase of 400,000 shares of the issuer's Common Stock at
a purchase price of $2.50 per share, pursuant to the terms
of a Common Stock Purchase Agreement dated as of September
17, 1998.
On or about September 17, 1998, the issuer and American
entered into a Registration Rights Agreement pursuant to
which the issuer agreed to cause to be registered with the
Securities and Exchange Commission certain shares of its
Common Stock purchased, or which may be purchased, by
American pursuant to the above agreements.
<PAGE>
In connection with the above transaction, American
received a Common Stock Purchase Warrant to purchase an
aggregate of 190,000 shares of the issuer's Common Stock
at an exercise price of $2.025 per share. The Warrant
is exercisable on or prior to September 16, 2001.
In connection with the above transactions, the issuer directed to American
a letter pursuant to which the issuer agreed to use its reasonable and diligent
efforts to reduce by no later than December 31, 1998 the outstanding capital
stock of the issuer by terminating or otherwise eliminating, without payment of
any significant consideration therefor, warrants to purchase an aggregate of
800,000 shares of the issuer's Common Stock.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
- -----------------------------------------
Exhibit 1: Imaging Technologies Corporation Subordinated Note Purchase
Agreement dated as of September 17, 1998.
Exhibit 2: Imaging Technologies Corporation Non-Convertible Subordinated
Promissory Note dated as of September 17, 1998.
Exhibit 3: Imaging Technologies Corporation Convertible Subordinated
Promissory Note dated as of September 17, 1998.
Exhibit 4: Imaging Technologies Corporation Common Stock Purchase Warrant
dated as of September 17, 1998.
Exhibit 5: Imaging Technologies Corporation Common Stock Purchase Agreement
dated as of September 17, 1998.
Exhibit 6: Imaging Technologies Corporation Registration Rights Agreement
dated as of September 17, 1998.
<PAGE>
Exhibit 7: Imaging Technologies Corporation; Letter dated September 17,
1998.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
DATED: October 6, 1998 AMERICAN INDUSTRIES, INC.
By:/s/Howard H. Hedinger
-----------------------------------
Howard H. Hedinger, Chairman
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit No. Name Page
- ----------- ---- ----
1 Subordinated Note Purchase Agreement 13
2 Non-Convertible Subordinated Promissory Note 33
3 Convertible Subordinated Promissory Note 39
4 Common Stock Purchase Warrant 47
5 Common Stock Purchase Agreement 57
6 Registration Rights Agreement 73
7 Imaging Technologies Corporation; Letter 85
dated September 17, 1998
</TABLE>
- --------------------------------------------------------------------------------
IMAGING TECHNOLOGIES CORPORATION
SUBORDINATED NOTE PURCHASE AGREEMENT
September 17, 1998
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C> <C>
PAGE
Section 1 AUTHORIZATION AND SALE OF SUBORDINATED PROMISSORY NOTES AND WARRANTS 1
---------------------------------------------------------------------
1.1 AUTHORIZATION 1
-------------
1.2 SALE OF SUBORDINATED NOTES AND WARRANTS. 1
---------------------------------------
Section 2 CLOSING DATE; DELIVERY 1
-----------------------
2.1 CLOSING DATE 1
------------
2.2 DELIVERY 1
--------
Section 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY 2
---------------------------------------------------------
3.1 ORGANIZATION AND STANDING 2
-------------------------
3.2 CORPORATE POWER; AUTHORIZATION 2
------------------------------
3.3 ISSUANCE AND DELIVERY OF THE SECURITIES 2
---------------------------------------
3.4 GOVERNMENTAL CONSENTS 2
---------------------
3.5 SEC DOCUMENTS; FINANCIAL STATEMENTS 3
-----------------------------------
3.6 NO MATERIAL MISSTATEMENT 3
------------------------
3.7 NO MATERIAL ADVERSE CHANGE 3
--------------------------
3.8 USE OF PROCEEDS 3
---------------
Section 4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS 3
------------------------------------------------------------
4.1 AUTHORIZATION 4
-------------
4.2 INVESTMENT EXPERIENCE 4
---------------------
4.3 INVESTMENT INTENT 4
-----------------
4.4 REGISTRATION OR EXEMPTION REQUIREMENTS 4
--------------------------------------
4.5 NO LEGAL, TAX OR INVESTMENT ADVICE 4
----------------------------------
4.6 LEGENDS 4
-------
Section 5 CONDITIONS TO CLOSING OF PURCHASERS 5
------------------------------------
5.1 REPRESENTATIONS AND WARRANTIES 5
------------------------------
5.2 PERFORMANCE 5
-----------
5.3 QUALIFICATIONS 5
--------------
5.4 COMPLIANCE CERTIFICATE 5
----------------------
5.5 FULL PARTICIPATION 5
------------------
5.6 OPINION OF COMPANY COUNSEL 5
--------------------------
Section 6 CONDITIONS TO CLOSING OF COMPANY 5
---------------------------------
6.1 REPRESENTATIONS AND WARRANTIES 6
------------------------------
6.2 COVENANTS 6
---------
6.3 QUALIFICATIONS 6
--------------
<PAGE>
Section 7 MISCELLANEOUS 6
--------------
7.1 AMENDMENTS AND WAIVERS 6
----------------------
7.2 GOVERNING LAW 6
-------------
7.3 SURVIVAL 6
--------
7.4 SUCCESSORS AND ASSIGNS 6
----------------------
7.5 ENTIRE AGREEMENT 7
----------------
7.6 NOTICES, ETC 7
------------
7.7 SEVERABILITY OF THIS AGREEMENT 7
------------------------------
7.8 COUNTERPARTS 7
------------
7.9 FURTHER ASSURANCES 7
------------------
7.10 EXPENSES 7
--------
7.11 ACKNOWLEDGMENT 7
--------------
</TABLE>
Schedule A -- Schedule of Purchasers
Schedule B -- Schedule of Exceptions
Exhibit A-1 -- Form of Non-Convertible Subordinated Promissory Note
Exhibit A-2 -- Form of Convertible Subordinated Promissory Note
Exhibit B -- Form of Warrant
Exhibit C -- Form of Opinion of Company Counsel
<PAGE>
IMAGING TECHNOLOGIES CORPORATION
SUBORDINATED NOTE PURCHASE AGREEMENT
This Subordinated Note Purchase Agreement (the "Agreement") is made as of
September 17, 1998, by and among Imaging Technologies Corporation, a Delaware
corporation (the "Company"), with its principal office at 11031Via Frontera, San
Diego, California 92127, and the purchasers set forth on SCHEDULE A hereto (the
"Purchasers").
Section 1
AUTHORIZATION AND SALE OF SUBORDINATED PROMISSORY NOTES AND WARRANTS
--------------------------------------------------------------------
1.1 AUTHORIZATION. The Company has authorized the sale and issuance of
non-convertible subordinated promissory notes in the form of EXHIBIT A-1
attached hereto (the "Non-Convertible Notes") and convertible subordinated
promissory notes in the form of EXHIBIT A-2 attached hereto (the "Convertible
Notes" and together with the Non-Convertible Notes, the "Subordinated Notes") in
the aggregate principal amounts as set forth on Schedule A attached hereto under
the headings "Principal Amount of Non-Convertible Note" and "Principal Amount of
Convertible Note," respectively (collectively, the "Proceeds") and warrants in
the form of EXHIBIT B attached hereto ("the Warrants") to purchase up to the
number of shares of the Company's Common Stock (the "Common Stock") set forth
opposite each such Purchaser's name on SCHEDULE A hereto under the heading
"Number of Warrant Shares."
1.2 SALE OF SUBORDINATED NOTES AND WARRANTS. Subject to the terms and
conditions of this Agreement, the Company agrees to issue and sell to each
Purchaser, and each Purchaser agrees severally and not jointly to purchase from
the Company, both a Non-Convertible Note and a Convertible Note in the principal
amounts set forth opposite such Purchaser's name on SCHEDULE A attached hereto
under the headings "Principal Amount of Non-Convertible Note" and "Principal
Amount of Convertible Note," respectively (collectively, the "Purchase Price"),
and a Warrant to purchase up to the number of shares of Common Stock set forth
opposite the Purchaser's name on SCHEDULE A hereto under the heading "Number of
Warrant Shares.".
Section 2
CLOSING DATE; DELIVERY
----------------------
2.1 CLOSING DATE. The closing of the purchase and sale of the Subordinated
Notes hereunder (the "Closing") shall be held at the offices of Tonkon Torp LLP,
1600 Pioneer Tower, 888 SW Fifth Avenue, Portland, Oregon 97204, at 11:00a.m. on
September 17, 1998, or at such other time and place upon which the Company and
the Purchasers shall agree. The date of the Closing is hereinafter referred to
as the "Closing Date."
<PAGE>
2.2 DELIVERY. At the Closing, the Company will deliver to each Purchaser a
Non-Convertible Note and a Convertible Note each made payable to such Purchaser
in the principal amounts as set forth opposite the Purchaser's name on SCHEDULE
A hereto under the headings "Principal Amount of Non-Convertible Note" and
"Principal Amount of Convertible Note," respectively, and a Warrant to purchase
up to the number of shares of Common Stock set forth opposite the Purchaser's
name on SCHEDULE A hereto under the heading "Number of Warrant Shares." Such
delivery shall be against payment of the purchase price therefor by check or
wire transfer to the Company in the amount of the Purchase Price.
Section 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
--------------------------------------------------------
The Company represents and warrants to each Purchaser as of the Closing
Date that, except as set forth on the Schedule of Exceptions attached hereto as
SCHEDULE B (the "Schedule of Exceptions"), which exceptions shall be deemed to
be representations and warranties as if made hereunder:
3.1 ORGANIZATION AND STANDING. The Company is a corporation duly organized
and validly existing under, and by virtue of, the laws of the State of Delaware
and is in good standing as a domestic corporation under the laws of said state.
3.2 CORPORATE POWER; AUTHORIZATION. The Company has all requisite legal and
corporate power and has taken all requisite corporate action to execute and
deliver this Agreement, to sell and issue the Subordinated Notes and the
Warrants (collectively, the "Securities") and to carry out and perform all of
its obligations under this Agreement and the Securities. This Agreement and the
Securities each constitute the legal, valid and binding obligation of the
Company, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights generally and (ii)
as limited by equitable principles generally. The execution and delivery of this
Agreement and the Securities does not, and the performance of this Agreement and
the Securities and the compliance with the provisions hereof and thereof and the
issuance, sale and delivery of the Securities by the Company will not,
materially conflict with, or result in a material breach or violation of the
terms, conditions or provisions of, or constitute a material default under, or
result in the creation or imposition of any material lien pursuant to the terms
of, the Certificate of Incorporation or Bylaws of the Company or any statute,
law, rule or regulation or any state or federal order, judgment or decree or any
indenture, mortgage, lease or other material agreement or instrument to which
the Company or any of its properties is subject.
3.3 ISSUANCE AND DELIVERY OF THE SECURITIES. The issuance and delivery of
the Securities is not subject to preemptive or any other similar rights of the
stockholders of the Company or any liens or encumbrances.
<PAGE>
3.4 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement except for: (i) the filing of a Notice of Transaction pursuant to
Section 25102(f) of the California Corporate Securities Law of 1968, as amended,
and the rules thereunder (the "Law"), which filing will be effected within the
time prescribed by law; and (ii) such other qualifications or filings under the
Securities Act of 1933, as amended (the "Securities Act"), and the regulations
thereunder and all other applicable securities laws as may be required in
connection with the transactions contemplated by this Agreement, which filings
will be effected within the time prescribed by law.
3.5 SEC DOCUMENTS; FINANCIAL STATEMENTS. As of their respective filing
dates, all documents (the "SEC Documents") filed by the Company with the
Securities and Exchange Commission (the "SEC") complied in all material respects
with the requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or the Securities Act, as applicable. None of the SEC Documents
as of their respective dates contained any untrue statement of material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
3.6 NO MATERIAL MISSTATEMENT None of the representations or warranties of
the Company contained in this Agreement or in the Securities, and none of the
other information furnished to Purchasers or their representatives in connection
with this Agreement, when considered as a whole, contains, or will contain, any
misstatement of a material fact or omits to state any fact necessary in light of
the circumstances under which made, to make those statements which have been
made, not misleading.
3.7 NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed herein, since
March31, 1998, there have not been any changes in the assets, liabilities,
financial condition, business prospects or operations of the Company from that
reflected in the SEC Documents except changes in the ordinary course of business
which have not been, either individually or in the aggregate, materially
adverse.
3.8 USE OF PROCEEDS. The Company shall use the Proceeds for the purposes of
redeeming outstanding shares of its Series C Preferred Stock and for working
capital.
Section 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
-----------------------------------------------------------
Each Purchaser hereby represents and warrants to the Company as of the
Closing Date as follows:
4.1 AUTHORIZATION. Purchaser represents and warrants to the Company that:
(i) Purchaser has all requisite legal and corporate or other power and capacity
and has taken all requisite corporate or other action to execute and deliver
this Agreement and his or its Securities, to purchase his or its Securities and
<PAGE>
to carry out and perform all of his or its obligations under this Agreement; and
(ii) this Agreement and his or its Securities each constitute the legal, valid
and binding obligation of the Purchaser, enforceable in accordance with its
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, or similar laws relating to or affecting the enforcement of
creditors' rights generally and (b) as limited by equitable principles
generally.
4.2 INVESTMENT EXPERIENCE. Purchaser is an "accredited investor" as defined
in Rule501(a) under the Securities Act. Purchaser is aware of the Company's
business affairs and financial condition and has had access to and has acquired
sufficient information about the Company to reach an informed and knowledgeable
decision to purchase his or its Securities. Purchaser has such business and
financial experience as is required to give it the capacity to protect his or
its own interests in connection with the purchase of his or its Securities.
4.3 INVESTMENT INTENT. Purchaser is purchasing his or its Securities for
his or its own account as principal, for investment purposes only, and not with
a present view to, or for, resale, distribution or fractionalization thereof, in
whole or in part, within the meaning of the Securities Act. Purchaser
understands that its acquisition of his or its Securities has not been
registered under the Securities Act or registered or qualified under any state
securities law in reliance on specific exemptions therefrom, which exemptions
may depend upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein. Purchaser has, in connection with his or
its decision to purchase his or its Securities, relied solely upon the SEC
Documents and the representations and warranties of the Company contained
herein. Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) his or its Securities except in
compliance with the Securities Act, and the rules and regulations promulgated
thereunder.
4.4 REGISTRATION OR EXEMPTION REQUIREMENTS. Purchaser further acknowledges
and understands that his or its Securities may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available.
4.5 NO LEGAL, TAX OR INVESTMENT ADVICE. Purchaser understands that nothing
in this Agreement or any other materials presented to Purchaser in connection
with the purchase and sale of his or its Securities constitutes legal, tax or
investment advice. Purchaser has consulted such legal, tax and investment
advisors as he or it, in his or its sole discretion, has deemed necessary or
appropriate in connection with his or its purchase of his or its Securities.
4.6 LEGENDS. To the extent applicable, each of the Securities shall be
endorsed with the legend set forth below:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
<PAGE>
OF ANY STATE OF THE UNITED STATES. THE SECURITIES EVIDENCED BY THIS CERTIFICATE
MAY NOT BE OFFERED, SOLD OR TRANSFERRED FOR VALUE DIRECTLY OR INDIRECTLY, IN THE
ABSENCE OF SUCH REGISTRATION UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE
STATE LAWS, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
QUALIFICATION UNDER APPLICABLE STATE LAWS, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE REASONABLE SATISFACTION OF THE COMPANY."
Section 5
CONDITIONS TO CLOSING OF PURCHASERS
-----------------------------------
Each Purchaser's obligation to purchase his or its Securities at the
Closing is, at the option of the Purchaser, subject to the fulfillment or waiver
as of the Closing Date of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company contained in Section 3 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the date of such Closing.
5.2 PERFORMANCE. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 QUALIFICATIONS. All authorizations, approvals, or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required as of the Closing in connection with the lawful issuance
and sale of his or its Securities pursuant to this Agreement shall have been
duly obtained and shall be effective as of the Closing.
5.4 COMPLIANCE CERTIFICATE. The President and Chief Executive Officer of
the Company shall have delivered to Purchaser a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled.
5.5 FULL PARTICIPATION. Each other Purchaser shall have purchased the
Securities in the principal amounts set forth opposite such Purchaser's name on
SCHEDULE A attached hereto and Harry Saal (the "Other Investor"), who is
purchasing a subordinated note and warrant under a certain Subordinated Note
Purchase Agreement dated the date hereof, shall have purchased the subordinated
note and warrant in the amounts set forth opposite the Other Investor's name on
SCHEDULE A attached thereto.
<PAGE>
5.6 OPINION OF COMPANY COUNSEL. Each Purchaser shall have received from
Brobeck, Phleger & Harrison LLP, counsel for the Company, an opinion dated the
date of the Closing, in substantially the form as EXHIBIT C attached hereto.
Section 6
CONDITIONS TO CLOSING OF COMPANY
--------------------------------
The Company's obligation to sell and issue the Securities at the Closing
is, at the option of the Company, subject to the fulfillment or waiver of the
following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
each Purchaser contained in Section4 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the date of such Closing.
6.2 COVENANTS. Each Purchaser shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by the Purchaser on or before the
Closing.
6.3 QUALIFICATIONS. All authorizations, approvals, or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required as of the Closing in connection with the lawful issuance
and sale of his or its Securities pursuant to this Agreement shall have been
duly obtained and shall be effective as of the Closing.
Section 7
MISCELLANEOUS
-------------
7.1 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively but only if
so expressly stated), only with the written consent of the Company and the
holders of a majority of the aggregate principal amount of the Subordinated
Notes purchased hereunder. Any amendment or waiver effected in accordance with
this Section shall be binding upon each holder of any of the Securities
purchased under this Agreement at the time outstanding, each future holder of
all such Securities, and the Company.
7.2 GOVERNING LAW. This Agreement shall be governed in all respects by and
construed in accordance with the laws of the State of Oregon without any regard
to conflicts of laws principles. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in Portland,
Multnomah County, Oregon, for the adjudication of any dispute hereunder or in
connection herewith, and hereby 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 brought
<PAGE>
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address for such notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof.
7.3 SURVIVAL. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
the Purchasers and the Closing.
7.4 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement. Notwithstanding the foregoing,
no Purchaser shall assign its rights or obligations under this Agreement without
the prior written consent of the Company.
7.5 ENTIRE AGREEMENT. This Agreement, together with the Securities,
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
7.6 NOTICES, ETC. All notices and other communications required or
permitted under this Agreement shall be in writing and may be delivered in
person, by facsimile, overnight delivery service or registered or certified
mail, addressed to the Company at the address set forth at the beginning of this
Agreement, or to the Purchasers at their respective addresses set forth on the
signature pages hereto or at such other address as the Company or each Purchaser
shall have furnished to the other parties in writing. All notices and other
communications shall be effective upon the earlier of actual receipt thereof by
the person to whom notice is directed or (i) in the case of notices and
communications sent by personal delivery or facsimile, one business day after
such notice or communication arrives at the applicable address or was
successfully sent to the applicable facsimile number, (ii) in the case of
notices and communications sent by overnight delivery service, at noon (local
time) on the second business day following the day such notice or communication
was sent, and (iii) in the case of notices and communications sent by United
States mail, seven days after such notice or communication shall have been
deposited in the United States mail.
7.7 SEVERABILITY OF THIS AGREEMENT. If any provision of this Agreement
shall be determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.9 FURTHER ASSURANCES. Each party to this Agreement shall do and perform
or cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
<PAGE>
documents as the other party hereto may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
7.10 EXPENSES. Irrespective of whether the Closing is effected, the Company
shall pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement and the Securities. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees of a single special counsel for Mr. Morgan and American Industries, Inc.
and shall, upon receipt of a bill therefor, reimburse the out of pocket expenses
of such counsel.
7.11 ACKNOWLEDGMENT. By executing this Agreement, each Purchaser hereby
acknowledges and agrees that Brobeck, Phleger& Harrison LLP represents the
Company solely and that the Purchasers have each had an opportunity to consult
with their own attorney in connection with this Agreement and the Securities.
<PAGE>
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
IMAGING TECHNOLOGIES CORPORATION,
a Delaware corporation
By: /s/Brian Bonar
--------------------------
Brian Bonar, President and
Chief Executive Officer
"PURCHASERS"
AMERICAN INDUSTRIES, INC., An Oregon
corporation
By:/s/Howard Hedinger
--------------------------
Its: President
-------------------------
Address: 1750 NW Front Avenue, Suite 106
Portland, Oregon 97209
/s/Ellison Morgan
------------------------
Ellison Morgan
Address: 11510 SW Summerville Street
Portland, Oregon 97219
<PAGE>
SCHEDULE A
----------
SCHEDULE OF PURCHASERS
----------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Principal Principal
Amount of Amount of Total Principal Number
Purchaser Non-Convertible Convertible Amount of of Warrant
Name Note Note Notes Shares
--------- --------------- ----------- --------------- ----------
American $ 950,000 $ 437,500 $1,387,500 190,000
Industries, Inc.
Ellison Morgan $ -- $ 237,500 $ 237,500 $ --
----------- ----------- ---------- --------
TOTALS $ 950,000 $ 675,000 $1,625,000 190,000
=========== =========== ========== ========
</TABLE>
<PAGE>
SCHEDULE B
----------
SCHEDULE OF EXCEPTIONS
----------------------
The following are exceptions to the representations and warranties of Imaging
Technologies Corporation (the "Company") set forth in that certain Subordinated
Note Purchase Agreement dated as of September , 1998 (the "Agreement"), with
reference to the Section designations of the Agreement. The references to
specific Sections are not meant and should not be construed as limiting the
noted exceptions to a particular Section. Although the Company has used its
reasonable best efforts to cross-reference the exceptions to all applicable
representations and warranties, no assurance can be given that all necessary
cross-references have been identified and any exception noted below is therefore
deemed disclosed for purposes of all relevant Sections whether or not
cross-referenced. Capitalized terms not otherwise defined in this Schedule of
Exceptions have the meaning given them in the Agreement. Nothing herein
constitutes an admission of any liability or obligation of the Company nor an
admission against the Company's interest. The inclusion of any agreement or
other matter herein or any exhibit hereto should not be interpreted as
indicating that the Company has determined that such an agreement or other
matter is necessarily material to the Company.
SECTION NUMBER EXCEPTIONS
- -------------- ----------
Section 3.2 CORPORATE POWER; AUTHORIZATION
------------------------------
1. Pursuant to the terms of that certain Promissory
Note between McMican Corporation dba New Media Memory
and Bank of Yorba Linda (the "Lender"), dated June
17, 1997, that certain Commercial Security Agreement
between McMican Corporation dba New Media Memory and
Lender, dated June 17, 1997, that certain Loan
Agreement between McMican Corporation dba New Media
Memory and Lender, dated October 20, 1997 and that
certain Change in Terms Agreement between McMican
Corporation dba New Media Memory and Lender, dated
May 17, 1998 (collectively, the "Yorba Linda Line of
Credit"), the Company has outstanding approximately
$390,000 in principal amount of indebtedness. The
Yorba Linda Line of Credit matured on August 15, 1998
and requires that the Company obtain Lender's written
consent prior to issuing the Subordinated Notes. The
Company is currently in the process of obtaining
additional credit from Imperial Bank to pay off all
amounts owed to the Lender under the Yorba Linda Line
of Credit. As a result, the Company has not obtained
Lender's written consent to issuing the Subordinated
Notes.
<PAGE>
2. Pursuant to its agreements with Imperial Bank, the
Company is required to obtain the written consent of
Imperial Bank prior to the sale and issuance of
Notes and Warrants pursuant to the Agreement, and
prior to the sale of certain other notes and warrants
and certain shares of the Company's common stock
being sold in connection herewith. The Company has
not obtained Imperial Bank's written consent.
Section 3.3 ISSUANCE AND DELIVERY OF SECURITIES
-----------------------------------
The Company has agreed to issue the Warrants to the
Purchasers pursuant to the Agreement, and certain
warrants (the "Other Warrants") to other investors
(the "Other Investors") under separate purchase
agreements. In addition, pursuant to the Agreement,
the Company has agreed to issue and sell to the
Purchasers the Convertible Notes, which are
convertible at the option of the Purchasers into
shares of the Company's Common Stock. Under the terms
of Section 4(g) of that certain Securities Purchase
Agreement dated August 21, 1997, between the Company
and the holders of the outstanding shares of the
Company's Series C Preferred Stock (the "Series C
Holders"), the Company is required to offer any
equity or convertible debt securities it intends to
issue to the Series C Holders prior to offering the
securities to any third party. The Company has not
offered the Warrants, the Convertible Notes or the
Other Warrants to the Series C Holders, who will
retain their right of first offer until the closing
of the Company's settlement with the Series C
Holders, which will not occur until after the Company
has issued the Warrants and the Convertible Notes to
the Purchasers and the Other Warrants to the Other
Investors.
Section 3.4 GOVERNMENTAL CONSENTS
---------------------
In connection with the issuance of the Subordinated
Notes and the Warrants under this Agreement, the
Company was required to obtain and has obtained a
qualification by permit from the Commissioner of
Corporations of the State of California to exempt the
payment of the interest under the Subordinated Notes
from the usury laws of the State of California.
Section 3.7 NO MATERIAL ADVERSE CHANGE
--------------------------
1. On June 19, 1998, the Company delivered notice to
the Series C Holders of its election to redeem for
cash all shares of Series C Preferred Stock tendered
<PAGE>
for conversion in lieu of converting such shares.
Certain disputes have arisen between the Company and
the Series C Holders with respect to such notice and
the Company's right to redeem all shares of Series C
Preferred Stock tendered for conversion in lieu of
converting such shares. The Series C Holders have
asserted that the Company is in default of its
obligations to them.
2. The Company has recently been informed by Imperial
Bank, the Company's primary lender, that the Company
is not in compliance with all of the provisions of
its loan agreements with Imperial Bank, including
without limitation, the provisions regarding certain
minimum ratios the Company is required to maintain.
The Company's noncompliance with many of these
provisions results from the expected one-time charge
to earnings that the Company intends to include
in its financial statements as of and for the fiscal
year ended June 30, 1998, which one-time charge the
Company currently anticipates will be as much as
approximately $9,000,000.
3. On September 3, 1998, the Company issued unsecured
promissory notes to certain investors in the
aggregate principal amount of $500,000. Pursuant to
its agreements with Imperial Bank, the Company was
required to obtain Imperial Bank's consent prior to
issuing these notes. The Company did not obtain
Imperial Bank's consent.
4. See the disclosures in Section 3.3 above.
<PAGE>
EXHIBIT A-1
-----------
FORM OF NON-CONVERTIBLE SUBORDINATED PROMISSORY NOTE
----------------------------------------------------
<PAGE>
EXHIBIT A-2
-----------
FORM OF CONVERTIBLE SUBORDINATED PROMISSORY NOTE
------------------------------------------------
<PAGE>
EXHIBIT B
---------
FORM OF WARRANT
---------------
<PAGE>
EXHIBIT C
---------
FORM OF LEGAL OPINION
---------------------
THIS SUBORDINATED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED UNDER CIRCUMSTANCES THAT WOULD RESULT IN A
VIOLATION OF THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 OR SUCH
OTHER LAWS.
IMAGING TECHNOLOGIES CORPORATION
NON-CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$950,000.00 September 17, 1998
Imaging Technologies Corporation, a Delaware corporation (the "Company"),
for value received, hereby promises to pay to the order of American Industries,
Inc. (the "Holder"), the principal sum of Nine Hundred Fifty Thousand Dollars
($950,000), together with simple interest on the unpaid balance from the date
hereof until paid in accordance with the terms hereof at a rate of sixteen
percent (16%) per annum, interest to accrue on the basis of a 365-day year for
the number of days actually elapsed. Interest shall be payable monthly in
arrears with the first interest payment due September 30, 1998. Unless otherwise
provided in Sections 3 and 4 hereof, both principal and all outstanding interest
shall be due and payable on September16, 1999 (the "Maturity Date").
This Promissory Note is issued pursuant to that certain Subordinated Note
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),
between the Company and the purchasers listed on SCHEDULE A attached thereto,
and is entitled to the benefits thereof. All terms not otherwise defined herein
shall have the meaning given such terms in the Purchase Agreement.
Section 1 PAYMENT. All payments made in accordance with this Promissory
Note are to be made in lawful money of the United States of America at the
address of the Holder as indicated on the signature page hereof, or at such
other location as the Holder may designate from time to time by written notice
to the Company.
The Company shall pay all costs and expenses, including reasonable
attorney's fees, for services to collect this Promissory Note, regardless of
whether litigation ensues and, if so, for services prior to trial or hearing, on
trial and in any appeal or appeals therefrom. The Company hereby waives notice
of default, presentment or demand for payment, protest or notice of nonpayment
or dishonor and all other notices or demands relative to this instrument.
Section 2 PREPAYMENT. The Company, at its option, may at any time on or
after the date hereof, prepay in whole or in part, without penalty, the
principal sum, together with accrued interest to the date of payment,
outstanding under this Promissory Note by giving written notice (the "Prepayment
Notice") to the Holder at least ten (10) days prior to the date of such
prepayment (the "Prepayment Date"). The Company shall not prepay any of the
<PAGE>
other Subordinated Notes, the non-convertible subordinated promissory note
issued pursuant to that certain Subordinated Note Purchase Agreement, dated as
of the date hereof between the Company and Mr. Harry Saal (the "Saal Note"), the
non-convertible subordinated promissory notes issued pursuant to that certain
Subordinated Note Purchase Agreement, dated as of the date hereof among the
Company and NP Partners and Olympus Securities, Ltd. (together with the
Subordinated Notes and the Saal Note, the "Notes"), or any other subordinated
debt of the same rank as the Notes (the "Other Subordinated Debt") unless, at
the time of such prepayment, the Company pays to the holders of all of the Notes
(including the holder of this Promissory Note) a prepayment in the same
proportionate amount as the prepayment made to the holders of the other Notes or
to the holders of the Other Subordinated Debt (based on the total amount owed to
the holders of the other Notes or to the holders of the Other Subordinated
Debt).
Section 3 ACCELERATION OF MATURITY DATE OF PROMISSORY NOTE
------------------------------------------------
3.1 GENERAL. Upon the occurrence of an Acceleration Event (as hereinafter
defined), the entire unpaid principal amount, together with the accrued but
unpaid interest thereon, of this Promissory Note shall become immediately due
and payable in cash subject to Section 4 hereof (hereinafter, the
"Acceleration").
3.2 ACCELERATION EVENTS. An "Acceleration Event" shall be deemed to have
occurred upon the earlier of (i) (A) the acquisition by any person (as such term
is defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act") of the power to direct the management and business of
the Company, whether by ownership of voting securities, by contract or by other
arrangement; (B) the individuals who, as of the date of this Promissory Note,
are directors of the Company shall cease for any reason to constitute a majority
of the Board of Directors of the Company, unless the election or appointment, or
nomination for election or appointment, of any new member of the Board of
Directors was approved by a vote of a majority of the Board of Directors, in
which event such new member shall, for purposes of this Promissory Note, be
considered as a member of the Board of Directors; (C) a merger or consolidation
involving the Company, if the stockholders of the Company immediately before
such merger or consolidation, do not, as a result of such merger or
consolidation, own, directly or indirectly, more than 50 percent of the combined
voting power or ownership interests of the Company or the entity resulting from
such merger or consolidation; or (D) the dissolution or the complete or partial
liquidation, or the sale or other disposition of all or substantially all of the
assets, of the Company; (ii) the commencement by or against the Company of any
case or proceeding under any bankruptcy, reorganization, insolvency or
moratorium law, or any other law or laws for the relief of debtors, or the
appointment of any receiver, trustee or assignee to take possession of the
properties of the Company; provided, however, that in the event that such case,
proceeding or appointment does not occur with the consent of the Company, then
the Acceleration Event shall be deemed to occur only in the event that such
case, proceeding or appointment is not dismissed within ninety (90) days of the
commencement of such case, proceeding or appointment; (iii) the liquidation or
dissolution of the Company; (iv) the commencement of any lawsuit or foreclosure
proceeding against the Company by the holders of any Senior Indebtedness (as
defined in Section 4); (v) the Company's failure in a material respect to
observe any covenant or obligation binding on it under the Purchase Agreement or
this Promissory Note; (vi) any of the representations and warranties of the
<PAGE>
Company contained in Section 3 of the Purchase Agreement being false or
misleading in a material respect on and as of the Closing (as defined in the
Purchase Agreement); (vii) acceleration of the maturity date of any Senior
Indebtedness resulting from the Company's breach or default thereunder; or
(viii) upon the closing of any equity or convertible debt financing in which the
Company receives net proceeds in excess of $5,000,000.
3.3 SPECIAL LIMITED ACCELERATION. Upon the closing of any equity or
convertible debt financing in which the Company receives net proceeds in excess
of $2,000,000 but less than or equal to $5,000,000, fifty percent (50%) of the
entire unpaid principal amount, together with fifty percent (50%) of the accrued
but unpaid interest thereon, of this Promissory Note shall become immediately
due and payable in cash subject to Section 4 hereof (hereinafter, the "Special
Limited Acceleration").
3.4 ADDITIONAL INTEREST ON UNPAID AMOUNTS. All amounts due and owing to
Holder hereunder that are not paid by the Company when due shall accrue
additional interest at the rate of two percent (2%) per annum in excess of the
interest rate set forth hereunder, interest to accrue from the date of such
non-payment on the basis of a 365 day year for the number of days actually
elapsed.
Section 4 SUBORDINATION
-------------
4.1 SENIOR INDEBTEDNESS. As used herein, the term "Senior Indebtedness"
shall mean the principal of and unpaid interest on the following indebtedness of
the Company: (i) all secured indebtedness of the Company, whether now existing
or hereinafter incurred, (ii) the principal of and unpaid interest on any
amounts borrowed or to be borrowed from, or owing to, a bank, trust company,
insurance company or other financial institutions regularly engaged in the
business of lending money, or a combination thereof, on an unsecured basis,
whether now existing or hereinafter incurred, and (iii) amounts owed or to be
owed to equipment lessors pursuant to equipment lease lines approved by the
Company's Board of Directors, whether now existing or hereinafter incurred. In
no event (a) will the Senior Indebtedness owing to Imperial Bank and/or any
other financial institution that may lend money to the Company to replace all or
a portion of the debt owed to Imperial Bank exceed $12,000,000 in the aggregate
or (b) will all other Senior Indebtedness exceed $8,000,000 in the aggregate.
The Company shall give notice to the Holder of any additional Senior
Indebtedness incurred after the date hereof within a reasonable time period
after the date such additional Senior Indebtedness is incurred.
4.2 SUBORDINATION. The Company has agreed and the Holder, by its acceptance
of this Promissory Note, covenants, expressly for the benefit of the present and
future holders of Senior Indebtedness, that the payment of the principal of and
interest on this Promissory Note, and all other obligations of the Company to
pay money to the Holder under this Promissory Note, is expressly subordinated in
right of payment to the prior payment, or provision for payment, in full of the
Senior Indebtedness of the Company in accordance with the provisions of this
Section 4.2. The Company shall not pay, and the Holder shall not be entitled to
receive, other than in connection with the purchase of securities of the Company
through forgiveness of the indebtedness evidenced by this Promissory Note, any
amount in respect of the principal of or interest on this Promissory Note or any
other obligation of the Company to pay money to the Holder on this Promissory
Note upon the occurrence and continuance of any of the following: (a) with
respect to any payment that is contractually due hereunder, prior to the date on
<PAGE>
which the payment is contractually due (including, without limitation, any
payments which shall become due and payable on the Maturity Date, in case of an
Acceleration Event or in the event of the Special Limited Acceleration) as
provided under this Promissory Note, (b) an event of default under any agreement
evidencing solely the Senior Indebtedness, or (c) an event of default relating
to the payment when due of the principal of or interest on the Senior
Indebtedness. Notwithstanding any other provision of this Promissory Note or of
the Purchase Agreement to the contrary, the foregoing payment restrictions shall
not apply if (i) in the case of an event of default, such event of default shall
have been cured or permitted by the holder(s) of Senior Indebtedness, (ii) the
event of default, or the benefits of the subordination provisions hereunder,
shall have been waived in writing to the Holder by the holder(s) of the Senior
Indebtedness, (iii) the outstanding Senior Indebtedness shall have been paid in
full, or (iv) no event of default has occurred and is continuing under any of
the Senior Indebtedness and the payment is contractually due (including, without
limitation, any payments which shall become due and payable on the Maturity
Date, in case of an Acceleration Event or in the event of the Special Limited
Acceleration) as provided under this Promissory Note.
Section 5 MISCELLANEOUS
-------------
5.1 TRANSFER OF PROMISSORY NOTE. Except as prohibited or limited by the
terms of the Purchase Agreement, this Promissory Note shall be transferable or
assignable without the prior written consent of the Company. Any attempted
disposition of this Promissory Note (in whole or in part) not in accordance with
the Purchase Agreement shall be void and of no force or effect.
5.2 TITLES AND SUBTITLES. The titles and subtitles used herein are for
convenience only and are not to be considered in construing or interpreting this
Promissory Note.
5.3 NOTICES, ETC. All notices and other communications required or
permitted under this Promissory Note shall be in writing and may be delivered in
person, by facsimile, overnight delivery service or registered or certified
mail, addressed to the Company, or to the Holder at their respective addresses
set forth on the signature pages hereto or at such other address as the Company
or the Holder shall have furnished to the other party in writing. All notices
and other communications shall be effective upon the earlier of actual receipt
thereof by the person to whom notice is directed or (i)in the case of notices
and communications sent by personal delivery or facsimile, one business day
after such notice or communication arrives at the applicable address or was
successfully sent to the applicable facsimile number, (ii) in the case of
notices and communications sent by overnight delivery service, at noon (local
time) on the second business day following the day such notice or communication
was sent, and (iii) in the case of notices and communications sent by United
States mail, seven days after such notice or communication shall have been
deposited in the United States mail.
5.4 AMENDMENTS AND WAIVERS. Any term of this Promissory Note may be amended
and the observance of any term of this Promissory Note may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holder. Any
amendment or waiver effected in accordance with this Section 5.4 shall be
binding upon the Holder and the Company.
<PAGE>
5.5 SEVERABILITY. If any provision of this Promissory Note shall be
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
5.6 GOVERNING LAW. This Promissory Note shall be governed in all respects
by and construed in accordance with the laws of the State of Oregon without any
regard to conflicts of laws principles. Each party hereby irrevocably submits to
the non-exclusive jurisdiction of the state and federal courts sitting in
Portland, Multnomah County, Oregon, for the adjudication of any dispute
hereunder or in connection herewith, and hereby 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
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Promissory Note and agrees that such service shall constitute good and
sufficient service of process and notice thereof.
5.7 ENTIRE AGREEMENT. This Promissory Note, together with the Purchase
Agreement, constitutes the full and entire understanding and agreement between
the parties with regard to the subjects hereof and thereof.
5.8 COUNTERPARTS. This Promissory Note may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
5.9 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, permitted assigns, heirs,
executors and administrators of the parties to this Promissory Note.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Promissory Note has been duly executed and
delivered under its corporate seal as of the date first above written.
IMAGING TECHNOLOGIES CORPORATION
By: /S/Brian Bonar
------------------------------
Brian Bonar, President and
Chief Executive Officer
Address: 11031 Via Frontera
San Diego, CA 92127
ACKNOWLEDGED AND AGREED TO:
AMERICAN INDUSTRIES, INC.
By:/s/Howard Hedinger
--------------------------
Name: Howard Hedinger
Title: President
----------------------
Address: 1750 NW Front Avenue, Suite 106
Portland, Oregon 97209
THIS SUBORDINATED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED UNDER CIRCUMSTANCES THAT WOULD RESULT IN A
VIOLATION OF THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 OR SUCH
OTHER LAWS.
IMAGING TECHNOLOGIES CORPORATION
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$ 437,500.00 September 17, 1998
Imaging Technologies Corporation, a Delaware corporation (the "Company"),
for value received, hereby promises to pay to the order of American Industries,
Inc. (the "Holder"), the principal sum of Four Hundred Thirty Seven Thousand
Five Hundred Dollars ($437,500), together with simple interest on the unpaid
balance from the date hereof until paid in accordance with the terms hereof at a
rate of sixteen percent (16%) per annum, interest to accrue on the basis of a
365-day year for the number of days actually elapsed. Interest shall be payable
monthly in arrears with the first interest payment due September 30, 1998.
Unless otherwise provided in Sections 3 and 4 hereof, both principal and all
outstanding interest shall be due and payable on September 16, 2000 (the
"Maturity Date").
This Promissory Note is issued pursuant to that certain Subordinated Note
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),
between the Company and the purchasers listed on SCHEDULE A attached thereto,
and is entitled to the benefits thereof. All terms not otherwise defined herein
shall have the meaning given such terms in the Purchase Agreement.
Section 1 PAYMENT. All payments made in accordance with this Promissory
Note are to be made in lawful money of the United States of America at the
address of the Holder as indicated on the signature page hereof, or at such
other location as the Holder may designate from time to time by written notice
to the Company. The Company shall pay all costs and expenses, including
reasonable attorney's fees, for services to collect this Promissory Note,
regardless of whether litigation ensues and, if so, for services prior to trial
or hearing, on trial and in any appeal or appeals therefrom. The Company hereby
waives notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor and all other notices or demands relative to this
instrument.
Section 2 PREPAYMENT. The Company, at its option, may at any time on or
after the date hereof, prepay in whole or in part, without penalty, the
principal sum, together with accrued interest to the date of payment,
outstanding under this Promissory Note by giving written notice (the "Prepayment
Notice") to the Holder at least fifteen (15) days prior to the date of such
prepayment (the "Prepayment Date"). The Company shall not prepay any of the
other Subordinated Notes, the non-convertible subordinated promissory note
<PAGE>
issued pursuant to that certain Subordinated Note Purchase Agreement, dated as
of the date hereof between the Company and the purchaser listed on SCHEDULE A
thereto (together with the Subordinated Notes, the "Notes"), or any other
subordinated debt of the same rank as the Notes (the "Other Subordinated Debt")
unless, at the time of such prepayment, the Company pays to the holders of all
of the Notes (including the holder of this Promissory Note) a prepayment in the
same proportionate amount as the prepayment made to the holders of the other
Notes or to the holders of the Other Subordinated Debt (based on the total
amount owed to the holders of the other Notes or to the holders of the Other
Subordinated Debt).
Section 3 ACCELERATION OF MATURITY DATE OF PROMISSORY NOTE
------------------------------------------------
3.1 GENERAL. Upon the occurrence of an Acceleration Event (as hereinafter
defined), the entire unpaid principal amount, together with the accrued but
unpaid interest thereon, of this Promissory Note shall become immediately due
and payable in cash subject to Section 4 hereof (hereinafter, the
"Acceleration").
3.2 ACCELERATION EVENTS. An "Acceleration Event" shall be deemed to have
occurred upon the earlier of (i) (A) the acquisition by any person (as such term
is defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act") of the power to direct the management and business of
the Company, whether by ownership of voting securities, by contract or by other
arrangement; (B) the individuals who, as of the date of this Promissory Note,
are directors of the Company shall cease for any reason to constitute a majority
of the Board of Directors of the Company, unless the election or appointment, or
nomination for election or appointment, of any new member of the Board of
Directors was approved by a vote of a majority of the Board of Directors, in
which event such new member shall, for purposes of this Promissory Note, be
considered as a member of the Board of Directors; (C) a merger or consolidation
involving the Company, if the stockholders of the Company immediately before
such merger or consolidation, do not, as a result of such merger or
consolidation, own, directly or indirectly, more than 50 percent of the combined
voting power or ownership interests of the Company or the entity resulting from
such merger or consolidation; or (D) the dissolution or the complete or partial
liquidation, or the sale or other disposition of all or substantially all of the
assets, of the Company; (ii) the commencement by or against the Company of any
case or proceeding under any bankruptcy, reorganization, insolvency or
moratorium law, or any other law or laws for the relief of debtors, or the
appointment of any receiver, trustee or assignee to take possession of the
properties of the Company; provided, however, that in the event that such case,
proceeding or appointment does not occur with the consent of the Company, then
the Acceleration Event shall be deemed to occur only in the event that such
case, proceeding or appointment is not dismissed within ninety (90) days of the
commencement of such case, proceeding or appointment; (iii) the liquidation or
dissolution of the Company; (iv) the commencement of any lawsuit or foreclosure
proceeding against the Company by the holders of any Senior Indebtedness (as
defined in Section 4); (v) the Company's failure in a material respect to
<PAGE>
observe any covenant or obligation binding on it under the Purchase Agreement or
this Promissory Note; (vi) any of the representations and warranties of the
Company contained in Section3 of the Purchase Agreement being false or
misleading in a material respect on and as of the Closing (as defined in the
Purchase Agreement); (vii) acceleration of the maturity date of any Senior
Indebtedness resulting from the Company's breach or default thereunder; or
(viii) upon the closing of any equity or convertible debt financing in which the
Company receives net proceeds in excess of $5,000,000.
3.3 SPECIAL LIMITED ACCELERATION. Upon the closing of any equity or
convertible debt financing in which the Company receives net proceeds in excess
of $2,000,000 but less than or equal to $5,000,000, fifty percent (50%) of the
entire unpaid principal amount, together with fifty percent (50%) of the accrued
but unpaid interest thereon, of this Promissory Note shall become immediately
due and payable in cash subject to Section 4 hereof (hereinafter, the "Special
Limited Acceleration").
3.4 ADDITIONAL INTEREST ON UNPAID AMOUNTS. All amounts due and owing to
Holder hereunder that are not paid by the Company when due shall accrue
additional interest at the rate of two percent (2%) per annum in excess of the
interest rate set forth hereunder, interest to accrue from the date of such
non-payment on the basis of a 365 day year for the number of days actually
elapsed.
Section 4 SUBORDINATION
-------------
4.1 SENIOR INDEBTEDNESS. As used herein, the term "Senior Indebtedness"
shall mean the principal of and unpaid interest on the following indebtedness of
the Company: (i) all secured indebtedness of the Company, whether now existing
or hereinafter incurred, (ii) the principal of and unpaid interest on any
amounts borrowed or to be borrowed from, or owing to, a bank, trust company,
insurance company or other financial institutions regularly engaged in the
business of lending money, or a combination thereof, on an unsecured basis,
whether now existing or hereinafter incurred, and (iii) amounts owed or to be
owed to equipment lessors pursuant to equipment lease lines approved by the
Company's Board of Directors, whether now existing or hereinafter incurred. In
no event (a) will the Senior Indebtedness owing to Imperial Bank and/or any
other financial institution that may lend money to the Company to replace all or
a portion of the debt owed to Imperial Bank exceed $12,000,000 in the aggregate
or (b) will all other Senior Indebtedness exceed $8,000,000 in the aggregate.
The Company shall give notice to the Holder of any additional Senior
Indebtedness incurred after the date hereof within a reasonable time period
after the date such additional Senior Indebtedness is incurred.
4.2 SUBORDINATION. The Company has agreed and the Holder, by its acceptance
of this Promissory Note, covenants, expressly for the benefit of the present and
future holders of Senior Indebtedness, that the payment of the principal of and
interest on this Promissory Note, and all other obligations of the Company to
pay money to the Holder under this Promissory Note, is expressly subordinated in
right of payment to the prior payment, or provision for payment, in full of the
Senior Indebtedness of the Company in accordance with the provisions of this
Section 4.2. The Company shall not pay, and the Holder shall not be entitled to
receive, other than in connection with the purchase of securities of the Company
through forgiveness of the indebtedness evidenced by this Promissory Note, any
amount in respect of the principal of or interest on this Promissory Note or any
other obligation of the Company to pay money to the Holder on this Promissory
Note upon the occurrence and continuance of any of the following: (a) with
<PAGE>
respect to any payment that is contractually due hereunder, prior to the date on
which the payment is contractually due (including, without limitation, any
payments which shall become due and payable on the Maturity Date, in case of an
Acceleration Event or in the event of the Special Limited Acceleration) as
provided under this Promissory Note, (b) an event of default under any agreement
evidencing solely the Senior Indebtedness, or (c) an event of default relating
to the payment when due of the principal of or interest on the Senior
Indebtedness. Notwithstanding any other provision of this Promissory Note or of
the Purchase Agreement to the contrary, the foregoing payment restrictions shall
not apply if (i) in the case of an event of default, such event of default shall
have been cured or permitted by the holder(s) of Senior Indebtedness, (ii) the
event of default, or the benefits of the subordination provisions hereunder,
shall have been waived in writing to the Holder by the holder(s) of the Senior
Indebtedness, (iii) the outstanding Senior Indebtedness shall have been paid in
full, or (iv) no event of default has occurred and is continuing under any of
the Senior Indebtedness and the payment is contractually due (including, without
limitation, any payments which shall become due and payable on the Maturity
Date, in case of an Acceleration Event or in the event of the Special Limited
Acceleration) as provided under this Promissory Note.
Section 5 CONVERSION
----------
5.1 OPTION TO CONVERT PROMISSORY NOTE. The Holder shall have the option,
exercisable in the manner set forth in Section 5.3 below prior to the Maturity
Date or earlier payment in full of the entire principal amount and any accrued
but unpaid interest on this Promissory Note, to convert at any time and from
time to time in minimum increments of $100,000 all or any portion of the
principal amount outstanding on this Promissory Note into fully paid and
nonassessable shares of the Company's Common Stock. The number of shares of
Common Stock to be issued upon such conversion shall be equal to the quotient
obtained by dividing (x) the entire principal amount of this Promissory Note by
(y) $2.025 (the "Conversion Price," which is subject to adjustment as provided
in Section 5.2 below).
5.2 ADJUSTMENT TO CONVERSION PRICE. In the event the Company does not, for
any reason by December 31, 1998, reduce its outstanding capital stock by
terminating or otherwise eliminating without the payment of any significant
consideration therefore (other than the settlement of any claims or the
termination of any agreements or relationships) warrants to purchase an
aggregate of 800,000 shares of Common Stock (the "Warrant Reduction Target")
currently held by the individuals and entities set forth on SCHEDULE 1 attached
hereto, then for all or any portion of each 100,000 warrants less than the
Warrant Reduction Target that the Company is not able to terminate or otherwise
eliminate, the Conversion Price with respect to ten percent (10%) of the
outstanding principal amount of this Promissory Note will be reduced to $1.0125;
PROVIDED, HOWEVER, that the Conversion Price with respect to all of the
remaining outstanding principal amount of this Promissory Note shall remain at
$2.025.
5.3 MECHANICS AND EFFECT OF CONVERSION. No fractional shares of Common
Stock will be issued upon any conversion of this Promissory Note. In lieu of any
fractional share to which the Holder would otherwise be entitled, the Company
will pay to the Holder in cash that amount of the unconverted principal and
interest on this Promissory Note. Upon any conversion of this Promissory Note
pursuant to this Section 5, the Holder shall surrender this Promissory Note,
duly endorsed, at the principal offices of the Company or any transfer agent for
the Company. At its expense, the Company will, as soon as practicable
thereafter, issue and deliver to the Holder at such principal office, a
<PAGE>
certificate or certificates for the number of shares of Common Stock to which
the Holder is entitled upon such conversion, together with the payment of all
accrued but unpaid interest on this Promissory Note and any cash payable in lieu
of any fractional share to which the Holder is entitled upon such conversion
under the terms of this Promissory Note. The conversion will be deemed effective
on the date the Holder surrenders this Promissory Note to the Company and, from
and after such date, the Company will be forever released from all its
obligations and liabilities under this Promissory Note with regard to the entire
principal amount and accrued interest, including without limitation the
obligation to pay such principal amount and accrued interest.
5.4 NOTICES TO HOLDER. In the event of: (i) any taking by the Company of a
record of the holders of the Company's Common Stock for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend payable out of earned surplus at the same rate as that of
the last such cash dividend theretofore paid) or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right; or
(ii) any capital reorganization of the Company, any reclassification or
recapitalization of the Company's Common Stock or any transfer of all or
substantially all of the assets of the Company to any other person, or any
consolidation or merger involving the Company; or (iii) any voluntary or
involuntary dissolution, liquidation or winding-up of the Company; the Company
will mail to the Holder, at least fifteen (15) days prior to any record date or
prior to any date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding-up is expected to
become effective, a notice specifying: (a) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right; and (b) the date
on which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding-up is expected to become effective
and the record date for determining the stockholders entitled to vote thereon,
if any.
Section 6 MISCELLANEOUS
-------------
6.1 TRANSFER OF PROMISSORY NOTE. Except as prohibited or limited by the
terms of the Purchase Agreement, this Promissory Note shall be transferable or
assignable without the prior written consent of the Company. Any attempted
disposition of this Promissory Note (in whole or in part) not in accordance with
the Purchase Agreement shall be void and of no force or effect.
6.2 TITLES AND SUBTITLES. The titles and subtitles used herein are for
convenience only and are not to be considered in construing or interpreting this
Promissory Note.
6.3 NOTICES, ETC. All notices and other communications required or
permitted under this Promissory Note shall be in writing and may be delivered in
person, by facsimile, overnight delivery service or registered or certified
mail, addressed to the Company, or to the Holder at their respective addresses
set forth on the signature pages hereto or at such other address as the Company
or the Holder shall have furnished to the other party in writing. All notices
and other communications shall be effective upon the earlier of actual receipt
thereof by the person to whom notice is directed or (i) in the case of notices
<PAGE>
and communications sent by personal delivery or facsimile, one business day
after such notice or communication arrives at the applicable address or was
successfully sent to the applicable facsimile number, (ii) in the case of
notices and communications sent by overnight delivery service, at noon (local
time) on the second business day following the day such notice or communication
was sent, and (iii) in the case of notices and communications sent by United
States mail, seven days after such notice or communication shall have been
deposited in the United States mail.
6.4 AMENDMENTS AND WAIVERS. Any term of this Promissory Note may be amended
and the observance of any term of this Promissory Note may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holder. Any
amendment or waiver effected in accordance with this Section 6.4 shall be
binding upon the Holder and the Company.
6.5 SEVERABILITY. If any provision of this Promissory Note shall be
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
6.6 GOVERNING LAW. This Promissory Note shall be governed in all respects
by and construed in accordance with the laws of the State of Oregon without any
regard to conflicts of laws principles. Each party hereby irrevocably submits to
the non-exclusive jurisdiction of the state and federal courts sitting in
Portland, Multnomah County, Oregon, for the adjudication of any dispute
hereunder or in connection herewith, and hereby 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
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Promissory Note and agrees that such service shall constitute good and
sufficient service of process and notice thereof.
6.7 ENTIRE AGREEMENT. This Promissory Note, together with the Purchase
Agreement, constitutes the full and entire understanding and agreement between
the parties with regard to the subjects hereof and thereof.
6.8 COUNTERPARTS. This Promissory Note may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.9 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, permitted assigns, heirs,
executors and administrators of the parties to this Promissory Note.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Promissory Note has been duly executed and
delivered under its corporate seal as of the date first above written.
IMAGING TECHNOLOGIES CORPORATION
By: /s/ Brian Bonar
--------------------------------
Brian Bonar, President and
Chief Executive Officer
Address: 11031 Via Frontera
San Diego, CA 92127
ACKNOWLEDGED AND AGREED TO:
AMERICAN INDUSTRIES, INC.
By:/s/Howard Hedinger
-------------------
Name: Howard Hedinger
Title: President
Address: 1750 NW Front Avenue, Suite 106
Portland, Oregon 97209
<PAGE>
SCHEDULE 1
----------
NAME
Robinson International, Inc.
Brian Bonar
Software Technologies, Inc.
Ralph Barry
Al Dubrow
Frank Kavanaugh
Irwin Roth
Ed Savarese
THE TRANSFER OF THIS WARRANT IS SUBJECT TO RESTRICTIONS CONTAINED HEREIN.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
IMAGING TECHNOLOGIES CORPORATION
Common Stock Purchase Warrant
To Purchase 190,000 Shares of September 17, 1998
the Common Stock of
Imaging Technologies Corporation
THIS CERTIFIES that, for value received, American Industries, Inc. or its
registered assigns (the "Holder"), is entitled to purchase from Imaging
Technologies Corporation, a Delaware corporation (hereinafter called the
"Corporation"), up to 190,000 shares (subject to adjustment as provided in
Section 4) (the "Warrant Shares") of fully paid and non-assessable Common Stock
of the Corporation (the "Common Stock"), subject to the provisions and upon the
terms and conditions set forth herein.
1. TERM OF WARRANT. Subject to the terms and conditions set forth herein,
this Warrant shall be exercisable, in whole or in part, during the term
commencing on the date hereof (the "Exercise Date") and ending at 5:00 p.m.
Pacific Daylight Time on the date three (3) years after the Exercise Date (the
"Exercise Period").
2. EXERCISE PRICE. The exercise price at which this Warrant may be
exercised shall be $2.025 per share of Common Stock (the "Exercise Price), as
adjusted from time to time pursuant to Section 4 hereof. The parties hereto
acknowledge that this in no way is an attempt to identify the fair market value
of shares of Common Stock, but is rather an arbitrary assignment of value for
the purposes of this Warrant only.
3. EXERCISE OF WARRANT. (a) Subject to the terms and conditions hereof,
this Warrant may be exercised by the Holder, in whole or in part, at any time
during the Exercise Period by (i) delivery of the completed purchase form
annexed hereto, which purchase form shall specify the number of Warrant Shares
to be purchased, (ii) payment to the Corporation of an amount equal to the
<PAGE>
Exercise Price multiplied by the number of Warrant Shares as to which the
Warrant is being exercised (plus any applicable issue or transfer taxes) (the
"Aggregate Exercise Price") in cash or by check or wire transfer, and (iii) the
surrender of this Warrant, at the principal office of the Corporation; provided,
that if such Warrant Shares are to be issued in any name other than that of the
Holder, such issuance shall be deemed a transfer and the provisions of Section
13 shall be applicable. In the event of any exercise of the rights represented
by this Warrant in compliance with this Section 3(a), a certificate or
certificates for the Warrant Shares so purchased, in such denominations as may
be requested by the Holder and registered in the name of, or as directed by, the
Holder, shall be delivered at the Corporation's expense to, or as directed by,
the Holder as soon as practicable after such rights shall have been so
exercised, and in any event no later than three business days after such
exercise.
(b) Unless the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Corporation shall, as soon as practicable
and in no event later than ten business days after any exercise and at its own
expense, issue a new Warrant identical in all respects to the Warrant exercised
except (i) it shall represent rights to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under the Warrant exercised, less
the number of Warrant Shares with respect to which such Warrant is exercised,
and (ii) the Holder thereof shall be deemed for all corporate purposes to have
become the Holder of record of such Warrant Shares immediately prior to the
close of business on the date on which the Warrant is surrendered and payment of
the amount due in respect of such exercise and any applicable taxes is made,
irrespective of the date of delivery of certificates evidencing such Warrant
Shares, except that, if the date of such surrender and payment is a date when
the stock transfer books of the Corporation are properly closed, such person
shall be deemed to have become the holder of such Warrant Shares at the opening
of business on the next succeeding date on which the stock transfer books are
open.
(c) No fractional shares of Common Stock are to be issued upon the exercise
of this Warrant, but rather the number of shares of Common Stock issued upon
exercise of this Warrant shall be rounded up or down to the nearest whole
number.
4. STOCK SPLITS, CONSOLIDATION, MERGER AND SALE. In the event that before
the issuance of the shares of Common Stock into which this Warrant may be
exercised the outstanding shares of Common Stock shall be split, combined or
consolidated, by dividend, reclassification or otherwise, into a greater or
lesser number of shares of Common Stock, the Exercise Price in effect
immediately prior to such combination or consolidation and the number of shares
purchasable under this Warrant shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately adjusted. If there shall
be effected any consolidation or merger of the Corporation with another
corporation, or a sale of all or substantially all of the Corporation's assets
to another corporation, and if the holders of Common Stock shall be entitled
pursuant to the terms of any such transaction to receive stock, securities or
assets with respect to or in exchange for Common Stock, then, as a condition of
such consolidation, merger or sale, lawful and adequate provisions shall be made
whereby the Holder of this Warrant shall thereafter have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore receivable upon the exercise
of such Warrant, such shares of stock, securities or assets as may be issuable
<PAGE>
or payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such Common Stock immediately
theretofore so receivable had such consolidation, merger or sale not taken
place, and in any such case appropriate provisions shall be made with respect to
the rights and interests of the Holder to the end that the provisions hereof
shall thereafter be applicable, as nearly as may be, in relation to any shares
of stock, securities or assets thereafter deliverable upon the exercise of this
Warrant. In the event the Corporation shall declare a distribution payable in
securities of other persons, evidences of indebtedness issued by the Corporation
or other persons, assets (excluding cash dividends) or options or rights not
otherwise referred to in this Section 4, then, in each such case, upon exercise
of this Warrant the Holder shall be entitled to a proportionate share of any
such distribution as though the Holder was the holder of the number of shares of
Common Stock of the Corporation issuable upon exercise of this Warrant as of the
record date fixed for the determination of the holders of Common Stock of the
Corporation entitled to receive such distribution.
5. STOCK TO BE RESERVED. The Corporation will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon the exercise of this Warrant as herein provided, such number of shares of
Common Stock as shall then be issuable upon the exercise of this Warrant. The
Corporation shall from time to time in accordance with applicable law increase
the authorized amount of its Common Stock if at any time the number of shares of
Common Stock remaining unissued and available for issuance shall not be
sufficient to permit exercise of this Warrant. The Corporation covenants that
all shares of Common Stock which shall be so issued shall be duly and validly
issued and fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, and, without limiting the generality
of the foregoing, the Corporation will take all such action as may be necessary
to assure that all such shares of Common Stock may be so issued without
violation of any applicable law or regulation, or of any requirements of any
national securities exchange upon which shares of capital stock of the
Corporation may be listed.
6. ISSUE TAX. The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Holder for any
issuance tax in respect thereof provided that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
Holder of this Warrant.
7. CLOSING OF BOOKS. The Corporation will at no time close its transfer
books against the transfer of the shares of Common Stock issued or issuable upon
the exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant.
8. NOTICES OF RECORD DATES. In the event of:
(a) any taking by the Corporation of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution (other than cash
dividends out of earned surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation or any transfer of all
<PAGE>
or substantially all the assets of the Corporation to or consolidation or merger
of the Corporation with or into any other corporation, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Corporation, then and in each such event the Corporation will give notice to
the Holder of this Warrant specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right and stating
the amount and character of such dividend, distribution or right, and (ii) the
date on which any such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock will be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be given at least ten
(10) days and not more than ninety (90) days prior to the date therein
specified, and such notice shall state that the action in question or the record
date is subject to the effectiveness of a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") or to a favorable vote
of stockholders, if either is required.
9. NO STOCKHOLDER RIGHTS OR LIABILITIES. Subject to Sections 4 and 8 of
this Warrant, this Warrant shall not entitle the Holder hereof to any voting
rights or other rights as a stockholder of the Corporation. No provision hereof,
in the absence of affirmative action by the Holder hereof to purchase shares of
Common Stock, and no mere enumeration hereon of the rights or privileges of the
Holder hereof, shall give rise to any liability of such Holder for the Exercise
Price or as a stockholder of the Corporation, whether such liability is asserted
by the Corporation or by creditors of the Corporation.
10. LISTING. The Corporation shall use its best efforts to cause all of the
shares of Common Stock issuable upon exercise of this Warrant to be approved for
listing on the Nasdaq SmallCap Market. The Corporation shall maintain the Common
Stock's authorization for quotation on the Nasdaq National Market, the Nasdaq
SmallCap Market, the New York Stock Exchange, Inc. ("NYSE") or the American
Stock Exchange, Inc. ("AMEX"). Neither the Corporation nor any of its
subsidiaries shall take any action which may result in the delisting or
suspension of the Common Stock on the Nasdaq SmallCap Market, the Nasdaq
National Market, NYSE or AMEX. The Corporation shall promptly provide Holder
copies of any notices it receives from the Nasdaq SmallCap Market, the Nasdaq
National Market, NYSE or AMEX regarding the continued eligibility of the Common
Stock for listing on such automated quotation system or securities exchange. The
Corporation shall pay all fees and expenses in connection with satisfying its
obligation under this Section 10.
11. TRANSFER AGENT INSTRUCTIONS. The Corporation shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates, registered in the name of the Holder or its respective nominee(s),
for the Warrant Shares in such amounts as specified from time to time by the
Holder to the Corporation upon exercise of this Warrant (the "Irrevocable
Transfer Agent Instructions"). All such certificates shall bear the restrictive
legend specified in Section 12 of this Warrant. The Corporation warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
<PAGE>
in this Section 11 and the stop transfer instructions to give effect to Section
12 hereof will be given by the Corporation to its transfer agent and that the
Warrant Shares shall otherwise be freely transferable on the books and records
of the Corporation as and to the extent provided in this Warrant and that
certain Subordinated Note Purchase Agreement dated as of the date hereof, among
the Corporation and the entities listed on the signature pages thereto. If
Holder provides the Corporation with an opinion of counsel, reasonably
satisfactory in form, and substance to the Corporation, that registration of a
resale by such Holder of any of such Warrant Shares is not required under the
Securities Act, the Corporation shall permit the transfer, and promptly instruct
its transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Holder and without any restrictive legends.
The Corporation acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Holder hereof by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Corporation
acknowledges that the remedy at law for a breach of its obligations under this
Section 11 will be inadequate and agrees, in the event of a breach or threatened
breach by the Corporation of the provisions of this Section 11, that the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
12. COMPLIANCE WITH SECURITIES LAWS.
(a) The Holder of this Warrant, by acceptance hereof, acknowledges that
this Warrant and the shares of Common Stock to be issued upon exercise hereof
(collectively, the "Securities") are being acquired solely for the Holder's own
account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the Securities Act; provided, however, that
by making the representations herein, the Holder does not agree to hold any of
the Securities for any minimum or other specific term.
(b) This Warrant and the stock certificates representing the Warrant
Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN
GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR APPLICABLE STATE SECURITIES LAWS OR
<PAGE>
UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID ACT.
The legend set forth above shall be removed and the Corporation shall issue
a certificate without such legend to the Holder of the Warrant Shares upon which
it is stamped, if, unless otherwise required by state securities laws, (i) such
Warrant Shares are registered for sale under the Securities Act, (ii) in
connection with a sale transaction, such Holder provides the Corporation with an
opinion of counsel, in a generally acceptable form, to the effect that a public
sale, assignment or transfer of such Warrant Shares may be made without
registration under the Securities Act, or (iii) such Holder provides the
Corporation with reasonable assurances that such Warrant Shares can be sold
pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold. The Holder
acknowledges, covenants and agrees to sell the Warrant Shares represented by a
certificate(s) from which the legend has been removed, only pursuant to (i) a
registration statement effective under the Securities Act, or (ii) advice of
counsel that such sale is exempt from registration required by Section 5 of the
Securities Act.
13. TRANSFER. Subject to the terms and conditions contained in Section 12
hereof, this Warrant and all rights hereunder are transferable in whole or in
part by the Holder and any successor transferee; provided, however, in no event
shall the aggregate number of transfers of the rights and interests in all of
the Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Corporation upon receipt by the Corporation of an assignment form
in the form attached hereto ("Assignment Form"), at its principal office and the
payment to the Corporation of all transfer taxes and other governmental charges,
if any, imposed on such transfer.
14. PRESENTMENT. Prior to due presentment of this Warrant together with a
completed Assignment Form for registration of transfer, the Corporation may deem
and treat the Holder as the absolute owner of the Warrant, notwithstanding any
notation of ownership or other writing thereon, for the purpose of any exercise
thereof and for all other purposes, and the Corporation shall not be affected by
any notice to the contrary.
15. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Corporation may, on such terms as to
indemnity or otherwise as it may in its discretion reasonably impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed.
16. GOVERNING LAW. This Warrant shall be governed in all respects by and
construed in accordance with the laws of the State of Oregon without any regard
to conflicts of laws principles. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in Portland,
Multnomah County, Oregon, for the adjudication of any dispute hereunder or in
connection herewith, and hereby 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 brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
<PAGE>
thereof to such party at the address for such notices to it under this Warrant
and agrees that such service shall constitute good and sufficient service of
process and notice thereof.
17. SUCCESSORS, ASSIGNS. All the terms and provisions of the Warrant shall
be binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto.
18. AMENDMENT. This Warrant may only be modified, amended or terminated by
a writing signed by the Corporation and the Holder.
19. SEVERABILITY. If any provision of this Warrant shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Warrant in that
jurisdiction or the validity or enforceability of any provision of this Warrant
in any other jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be duly
executed and delivered on and as of the day and year first above written by one
of its officers thereunto duly authorized.
IMAGING TECHNOLOGIES CORPORATION
Dated: September , 1998 By: /s/Brian Bonar
--- -----------------------------
Brian Bonar, President and Chief
Executive Officer
The undersigned Holder agrees and accepts this Warrant and acknowledges
that it has read and confirms each of the representations contained in Section
12.
AMERICAN INDUSTRIES, INC.
By: /s/ Howard Hedinger
--------------------
Howard Hedinger
Its: President
-------------------
Address: 1750 NW Front Avenue, Suite 106
Portland, Oregon 97209
[SIGNATURE PAGE TO COMMON STOCK PURCHASE WARRANT]
<PAGE>
PURCHASE FORM
(To be executed by the Warrant Holder if desires to exercise the Warrant in
whole or in part)
To: Imaging Technologies Corporation
The undersigned, whose Social Security or other identifying number is
, hereby irrevocably elects the right of purchase represented by
- --------------
the within Warrant for, and to purchase thereunder,
---------------------------
shares of Common Stock provided for therein and tenders payment herewith to the
order of
Imaging Technologies Corporation
in the amount of
$
--------------------
The undersigned requests that certificates for such shares be issued as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
and, if said number of shares shall not be all the shares purchasable hereunder,
that a new Warrant for the balance remaining of the shares purchasable under the
within Warrant be registered in the name of, and delivered to, the undersigned
at the address stated below
Address:
---------------------------------------------------
Dated: , 19
--------------- ---
Signature
(Signature must conform in all respects to
the name of the Warrant Holder as specified
on the face of the Warrant, without
alteration, enlargement or any change
whatsoever)
<PAGE>
ASSIGNMENT
(To be executed by the Warrant Holder if he desires to effect a transfer of the
Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
whose Social Security or
- -------------------------------------------------------
other identification number is [residing/located] at
---------------------------
the attached Warrant, and appoints
- ------------------------------
residing at
- --------------------------- ------------------------------------
- --------------------------------------------------------------------------------
the undersigned's attorney-in-fact to transfer said Warrant on the books of the
Corporation, with full power of substitution in the premises.
Dated: , 19 .
--------------- ---
In the presence of:
- --------------------------
(Signature must conform in all respects
to the name of the Warrant Holder as
specified on the face of the Warrant,
without alteration, enlargement or any
change whatsoever).
- -------------------------------------------------------------------------------
IMAGING TECHNOLOGIES CORPORATION
COMMON STOCK PURCHASE AGREEMENT
SEPTEMBER 17, 1998
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C> <C>
Page
Section 1 AUTHORIZATION AND SALE OF COMMON STOCK 1
--------------------------------------
1.1 AUTHORIZATION 1
-------------
1.2 SALE OF COMMON STOCK 1
--------------------
Section 2 CLOSING DATE; DELIVERY 1
----------------------
2.1 CLOSING DATE 1
------------
2.2 DELIVERY 1
--------
Section 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 1
---------------------------------------------
3.1 ORGANIZATION AND STANDING 2
-------------------------
3.2 CORPORATE POWER; AUTHORIZATION 2
------------------------------
3.3 ISSUANCE AND DELIVERY OF THE SHARES 2
-----------------------------------
3.4 CONSENTS 2
--------
3.5 SEC DOCUMENTS; FINANCIAL STATEMENTS 2
-----------------------------------
3.6 NO MATERIAL MISSTATEMENT 3
------------------------
3.7 NO MATERIAL ADVERSE CHANGE 3
--------------------------
Section 4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS 3
-----------------------------------------------------------
4.1 AUTHORIZATION 4
-------------
4.2 INVESTMENT EXPERIENCE 4
---------------------
4.3 INVESTMENT INTENT 4
-----------------
4.4 REGISTRATION OR EXEMPTION REQUIREMENTS 4
--------------------------------------
4.5 NO LEGAL, TAX OR INVESTMENT ADVICE 4
----------------------------------
4.6 LEGENDS 4
-------
Section 5 CONDITIONS TO CLOSING OF PURCHASERS 5
-----------------------------------
5.1 REPRESENTATIONS AND WARRANTIES 5
------------------------------
5.2 PERFORMANCE 5
-----------
5.3 QUALIFICATIONS 5
--------------
5.4 COMPLIANCE CERTIFICATE 5
----------------------
5.5 OPINION OF COMPANY COUNSEL 5
--------------------------
5.6 REGISTRATION RIGHTS AGREEMENT 5
-----------------------------
Section 6 CONDITIONS TO CLOSING OF COMPANY 5
--------------------------------
6.1 REPRESENTATIONS AND WARRANTIES 6
------------------------------
6.2 PERFORMANCE 6
-----------
6.3 QUALIFICATIONS 6
--------------
6.4 REGISTRATION RIGHTS AGREEMENT 6
-----------------------------
Section 7 MISCELLANEOUS 6
-------------
<PAGE>
7.1 AMENDMENTS AND WAIVERS 6
----------------------
7.2 GOVERNING LAW 6
-------------
7.3 SURVIVAL 6
--------
7.4 SUCCESSORS AND ASSIGNS 6
----------------------
7.5 ENTIRE AGREEMENT 6
----------------
7.6 NOTICES, ETC 6
------------
7.7 SEVERABILITY OF THIS AGREEMENT 7
------------------------------
7.8 COUNTERPARTS 7
------------
7.9 FURTHER ASSURANCES 7
------------------
7.10 EACH PURCHASER ACTING SEVERALLY 7
-------------------------------
7.11 ACKNOWLEDGEMENT 8
---------------
</TABLE>
Schedule A -- Schedule of Purchasers
Schedule B -- Schedule of Exceptions
Exhibit A -- Registration Rights Agreement
Exhibit B -- Form of Legal Opinion
<PAGE>
IMAGING TECHNOLOGIES CORPORATION
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (the "Agreement") is made as of
September 17, 1998, by and among Imaging Technologies Corporation, a Delaware
corporation (the "Company"), with its principal office at 11031 Via Frontera,
San Diego, California 92127, and the purchasers listed on SCHEDULE A hereto
(each a "Purchaser" and together the "Purchasers").
Section 1
AUTHORIZATION AND SALE OF COMMON STOCK
--------------------------------------
1.1 AUTHORIZATION. The Company has authorized the sale and issuance of
500,000 shares of its Common Stock pursuant to this Agreement (the "Shares").
1.2 SALE OF COMMON STOCK. Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to each Purchaser and each
Purchaser agrees, severally, to purchase from the Company that number of shares
of the Company's Common Stock set forth opposite each such Investor's name on
SCHEDULE A hereto for the purchase price set forth thereon (the "Purchase
Price").
Section 2
CLOSING DATE; DELIVERY
----------------------
2.1 CLOSING DATE. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall be held at the offices of Brobeck, Phleger &
Harrison LLP, 550 West "C" Street, Suite 1200, San Diego, California 92101 at
11:00 a.m. on September 17, 1998, or at such other time and place upon which the
Company and the Purchasers shall mutually agree. The date of the Closing is
hereinafter referred to as the "Closing Date."
2.2 DELIVERY. At the Closing, the Company will deliver to each Purchaser a
certificate, registered in such Purchaser's name, representing the number of
Shares to be purchased by the Purchaser. Such delivery shall be against payment
of the purchase price therefor by check or wire transfer in the amount of the
Purchase Price.
Section 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to each Purchaser as of the Closing
Date that, except as set forth on the Schedule of Exceptions attached hereto as
SCHEDULE B (the "Schedule of Exceptions"), which exceptions shall be deemed to
be representations and warranties as if made hereunder:
<PAGE>
3.1 ORGANIZATION AND STANDING. The Company is a corporation duly organized
and validly existing under, and by virtue of, the laws of the State of Delaware
and is in good standing as a domestic corporation under the laws of said state.
3.2 CORPORATE POWER; AUTHORIZATION. The Company has all requisite legal and
corporate power and has taken all requisite corporate action to execute and
deliver this Agreement and the Registration Rights Agreement of even date
herewith in the form attached hereto as EXHIBIT A (the "Registration Rights
Agreement"), to sell and issue the Shares and to carry out and perform all of
its obligations under this Agreement and the Registration Rights Agreement. This
Agreement and the Registration Rights Agreement each constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally and (ii) as limited by equitable principles
generally. The execution and delivery of this Agreement and the Registration
Rights Agreement does not, and the performance of this Agreement and the
Registration Rights Agreement, the compliance with the provisions hereof and
thereof and the issuance, sale and delivery of the Shares by the Company will
not, materially conflict with, or result in a material breach or violation of
the terms, conditions or provisions of, or constitute a material default under,
or result in the creation or imposition of any material lien pursuant to the
terms of, the Certificate of Incorporation or Bylaws of the Company or any
statute, law, rule or regulation or any state or federal order, judgment or
decree or any indenture, mortgage, lease or other material agreement or
instrument to which the Company or any of its properties is subject.
3.3 ISSUANCE AND DELIVERY OF THE SHARES. The Shares, when issued in
compliance with the provisions of this Agreement for the consideration expressed
herein, will be validly issued, fully paid and nonassessable. The issuance and
delivery of the Shares is not subject to preemptive or any other similar rights
of the stockholders of the Company or any liens or encumbrances.
3.4 CONSENTS. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement except for (i) the filing of a Notice of Transaction pursuant to
Section 25102(f) of the California Corporate Securities Law of 1968, as amended,
and the rules thereunder (the "Law"), which filing will be effected within the
time prescribed by law; and (ii) such other qualifications or filings under the
Securities Act of 1933, as amended (the "Securities Act"), and the regulations
thereunder and all other applicable securities laws as may be required in
connection with the transactions contemplated by this Agreement, which filings
will be effected within the time prescribed by law. The Company has obtained all
consents, waivers and approvals under any of the Company's agreements,
contracts, licenses or leases required to be obtained in connection with the
consummation of the transactions contemplated by this Agreement.
3.5 SEC DOCUMENTS; FINANCIAL STATEMENTS. As of their respective filing
dates, all documents (the "SEC Documents") filed by the Company with the
Securities and Exchange Commission (the "SEC") complied in all material respects
with the requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or the Securities Act, as applicable. None of the SEC Documents
<PAGE>
as of their respective dates contained any untrue statement of material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
3.6 NO MATERIAL MISSTATEMENT. None of the representations or warranties of
the Company contained in this Agreement or in the Registration Rights Agreement,
and none of the other information furnished to the Purchasers or their
representatives in connection with this Agreement, when considered as a whole,
contains, or will contain, any misstatement of a material fact or omits to state
any fact necessary in light of the circumstances under which made, to make those
statements which have been made, not misleading.
3.7 NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed herein, since
March31, 1998, there have not been any changes in the assets, liabilities,
financial condition, business prospects or operations of the Company from that
reflected in the SEC Documents except changes in the ordinary course of business
which have not been, either individually or in the aggregate, materially
adverse.
Section 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
------------------------------------------------------------
Each Purchaser hereby represents and warrants to the Company, separately
and not jointly, of the Closing Date as follows:
4.1 AUTHORIZATION. Purchaser represents and warrants to the Company that:
(i) Purchaser has all requisite legal and corporate or other power and capacity
and has taken all requisite corporate or other action to execute and deliver
this Agreement and the Registration Rights Agreement, to purchase the Shares and
to carry out and perform all of its obligations under this Agreement; and (ii)
this Agreement and the Registration Rights Agreement each constitutes the legal,
valid and binding obligation of the Purchaser, enforceable in accordance with
its terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, or similar laws relating to or affecting the enforcement of
creditors' rights generally and (b) as limited by equitable principles
generally.
4.2 INVESTMENT EXPERIENCE. Purchaser is an "accredited investor" as defined
in Rule501(a) under the Securities Act. Purchaser is aware of the Company's
business affairs and financial condition and has had access to and has acquired
sufficient information about the Company to reach an informed and knowledgeable
decision to acquire his or its Shares. Purchaser has such business and financial
experience as is required to give it the capacity to protect his or its own
interests in connection with the purchase of his or its Shares.
4.3 INVESTMENT INTENT. Purchaser is purchasing the Shares for his or its
own account as principal, for investment purposes only, and not with a present
view to, or for, resale, distribution or fractionalization thereof, in whole or
in part, within the meaning of the Securities Act. Purchaser understands that
its acquisition of the Shares has not been registered under the Securities Act
or registered or qualified under any state securities law in reliance on
specific exemptions therefrom, which exemptions may depend upon, among other
things, the bona fide nature of Purchaser's investment intent as expressed
herein. Purchaser will not, directly or indirectly, offer, sell, pledge,
<PAGE>
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Shares except in compliance
with the Securities Act, and the rules and regulations promulgated thereunder.
4.4 REGISTRATION OR EXEMPTION REQUIREMENTS. Purchaser further acknowledges
and understands that the Shares may not be resold or otherwise transferred
except in a transaction registered under the Securities Act or unless an
exemption from such registration is available.
4.5 NO LEGAL, TAX OR INVESTMENT ADVICE. Purchaser understands that nothing
in this Agreement or any other materials presented to Purchaser in connection
with the purchase and sale of the Shares constitutes legal, tax or investment
advice. Purchaser has consulted such legal, tax and investment advisors as he or
it, in his or its sole discretion, has deemed necessary or appropriate in
connection with his or its purchase of the Shares.
4.6 LEGENDS. To the extent applicable, each certificate or other document
evidencing any of the Shares shall be endorsed with the legends set forth below,
and the Purchaser covenants that, except to the extent such restrictions are
waived by the Company, the Purchaser shall not transfer the Shares represented
by any such certificate without complying with the restrictions on transfer
described in the legends endorsed on such certificate:
(a) "THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT,
OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE
COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) "THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS
OF A CERTAIN REGISTRATION RIGHTS AGREEMENT, AS AMENDED FROM TIME TO TIME, WHICH
INCLUDE, WITHOUT LIMITATION, MARKET STAND-OFF RIGHTS IN FAVOR OF THE COMPANY.
THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE
HOLDER HEREOF WITHOUT CHARGE."
Section 5
CONDITIONS TO CLOSING OF PURCHASERS
-----------------------------------
Each Purchaser's obligation to purchase his or its Shares at the Closing
is, at the option of the Purchaser, subject to the fulfillment or waiver as of
the Closing Date of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company contained in Section 3 shall be true on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of the date of such Closing Date.
<PAGE>
5.2 PERFORMANCE. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 QUALIFICATIONS. All authorizations, approvals, or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required as of the Closing in connection with the lawful issuance
and sale of the Shares pursuant to this Agreement shall have been duly obtained
and shall be effective as of the Closing.
5.4 COMPLIANCE CERTIFICATE. The President and Chief Executive Officer of
the Company shall have delivered to Purchaser a certificate certifying that the
conditions specified in Sections 5.1, 5.2 and 5.3 have been fulfilled.
5.5 OPINION OF COMPANY COUNSEL. Each Purchaser shall have received from
Brobeck, Phleger & Harrison LLP, counsel for the Company, an opinion dated the
date of the Closing, in substantially the form as EXHIBIT B attached hereto. 5.6
REGISTRATION RIGHTS AGREEMENT. The Company and each Purchaser shall have entered
into the Registration Rights Agreement in the form attached hereto as EXHIBIT A.
Section 6
CONDITIONS TO CLOSING OF COMPANY
--------------------------------
The Company's obligation to sell and issue the Shares at the Closing is, at
the option of the Company, subject to the fulfillment or waiver as of the
Closing Date of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Purchasers contained in Section 4 shall be true on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of the date of such Closing Date.
6.2 PERFORMANCE. The Purchasers shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by the Purchasers on or before the
Closing.
6.3 QUALIFICATIONS. All authorizations, approvals, or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required as of the Closing in connection with the lawful issuance
and sale of the Shares pursuant to this Agreement shall have been duly obtained
and shall be effective as of the Closing.
6.4 REGISTRATION RIGHTS AGREEMENT. The Company and each Purchaser shall
have entered into the Registration Rights Agreement in the form attached hereto
as EXHIBIT A.
<PAGE>
Section 7
MISCELLANEOUS
-------------
7.1 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of a majority of the Shares
purchased hereunder. Any amendment or waiver effected in accordance with this
Section shall be binding upon each holder of any securities purchased under this
Agreement at the time outstanding, each future holder of all such securities,
and the Company.
7.2 GOVERNING LAW. This Agreement shall be governed in all respects by and
construed in accordance with the laws of the State of California without any
regard to conflicts of laws principles.
7.3 SURVIVAL. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
the Purchasers and the Closing.
7.4 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement. Notwithstanding the foregoing,
no Purchaser shall assign his or its rights or obligations under this Agreement
without the prior written consent of the Company.
7.5 ENTIRE AGREEMENT. This Agreement, together with the Registration Rights
Agreement, constitutes the full and entire understanding and agreement between
the parties with regard to the subjects hereof and thereof.
7.6 NOTICES, ETC. All notices and other communications required or
permitted under this Agreement shall be in writing and may be delivered in
person, by facsimile, overnight delivery service or registered or certified
mail, addressed to the Company at the address set forth at the beginning of this
Agreement, or to the Purchasers at their respective addresses set forth on the
signature pages hereto, or at such other address as the Company or each
Purchaser shall have furnished to the other parties in writing. All notices and
other communications shall be effective upon the earlier of actual receipt
thereof by the person to whom notice is directed or (i) in the case of notices
and communications sent by personal delivery or facsimile, one business day
after such notice or communication arrives at the applicable address or was
successfully sent to the applicable facsimile number, (ii) in the case of
notices and communications sent by overnight delivery service, at noon (local
time) on the second business day following the day such notice or communication
was sent, and (iii) in the case of notices and communications sent by United
States mail, seven days after such notice or communication shall have been
deposited in the United States mail.
7.7 SEVERABILITY OF THIS AGREEMENT. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
<PAGE>
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.9 FURTHER ASSURANCES. Each party to this Agreement shall do and perform
or cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as the other party hereto may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
7.10 EACH PURCHASER ACTING SEVERALLY. Each Purchaser undertakes his or its
obligations hereunder and makes the representations, warranties and covenants as
set forth hereunder severally and not jointly.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
7.11 ACKNOWLEDGEMENT. By executing this Agreement, each Purchaser hereby
acknowledges and agrees that Brobeck, Phleger& Harrison LLP represents the
Company solely and that the Purchasers have each had an opportunity to consult
with their own attorney in connection with this Agreement and the Registration
Rights Agreement.
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
IMAGING TECHNOLOGIES CORPORATION,
a Delaware corporation
By: /s/Brian Bonar
-------------------
Brian Bonar, President and
Chief Executive Officer
"PURCHASERS"
AMERICAN INDUSTRIES, INC., An Oregon
corporation
By:/s/Howard Hedinger
-------------------
Its: President
-----------------
Address: 1750 NW Front Avenue, Suite 106
Portland, Oregon 97209
/s/ Ellison Morgan
------------------
Ellison Morgan
Address: 11510 SW Summerville Street
Portland, Oregon 97219
[SIGNATURE PAGE TO COMMON STOCK PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
----------
SCHEDULE OF PURCHASERS
----------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Purchase Price Number of Shares
Purchaser Name Paid at Closing to be Issued at Closing
-------------- --------------- -----------------------
American Industries, Inc. $1,000,000 400,000
Ellison Morgan $ 250,000 100,000
---------- -------
TOTAL $1,250,000 500,000
========== =======
</TABLE>
<PAGE>
SCHEDULE B
----------
SCHEDULE OF EXCEPTIONS
----------------------
The following are exceptions to the representations and warranties of Imaging
Technologies Corporation (the "Company") set forth in that certain Common Stock
Purchase Agreement dated as of September , 1998 (the "Agreement"), with
reference to the Section designations of the Agreement. The references to
specific Sections are not meant and should not be construed as limiting the
noted exceptions to a particular Section. Although the Company has used its
reasonable best efforts to cross-reference the exceptions to all applicable
representations and warranties, no assurance can be given that all necessary
cross-references have been identified and any exception noted below is therefore
deemed disclosed for purposes of all relevant Sections whether or not
cross-referenced. Capitalized terms not otherwise defined in this Schedule of
Exceptions have the meaning given them in the Agreement. Nothing herein
constitutes an admission of any liability or obligation of the Company nor an
admission against the Company's interest. The inclusion of any agreement or
other matter herein or any exhibit hereto should not be interpreted as
indicating that the Company has determined that such an agreement or other
matter is necessarily material to the Company.
SECTION NUMBER EXCEPTIONS
- -------------- -----------------------------------------------------
Section 3.3 ISSUANCE AND DELIVERY OF THE SHARES.
-----------------------------------
Pursuant to the Agreement, the Company has agreed to
issue and sell to the Purchasers the Shares. Under
the terms of Section 4(g) of that certain Securities
Purchase Agreement dated August 21, 1997, between the
Company and the holders of the outstanding shares of
the Company's Series C Preferred Stock (the "Series C
Holders"), the Company is required to offer any
equity or convertible debt securities it intends to
issue to the Series C Holders prior to offering the
securities to any third party. The Company has not
offered the Shares to the Series C Holders, who will
retain their right of first offer until the closing
of the Company's settlement with the Series C
Holders, which will not occur until after the Company
has issued the Shares to the Purchasers.
Section 3.7 NO MATERIAL ADVERSE CHANGE.
---------------------------
1. On June 19, 1998, the Company delivered notice to
the Series C Holders of its election to redeem for
cash all shares of Series C Preferred Stock tendered
for conversion in lieu of converting such shares.
Certain disputes have arisen between the Company and
the Series C Holders with respect to such notice and
the Company's right to redeem all shares of Series C
Preferred Stock tendered for conversion in lieu of
converting such shares. The Series C Holders have
asserted that the Company is in default of its
obligations to them.
<PAGE>
2. The Company has recently been informed by Imperial
Bank, the Company's primary lender, that the Company
is not in compliance with all of the provisions of
its loan agreements with Imperial Bank, including
without limitation, the provisions regarding certain
minimum ratios the Company is required to maintain.
The Company's noncompliance with many of these
provisions results from the expected one-time charge
to earnings that the Company intends to include in
its financial statements as of and for the fiscal
year ended June 30, 1998, which one-time charge the
Company currently anticipates will be as much as
approximately $9,000,000.
3. On September 3, 1998, the Company issued unsecured
promissory notes to certain investors in the
aggregate principal amount of $500,000. Pursuant to
its agreements with Imperial Bank, the Company was
required to obtain Imperial Bank's consent prior to
issuing these notes. The Company did not obtain
Imperial Bank's consent.
4. See the disclosures in Section 3.3 above.
<PAGE>
EXHIBIT A
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
<PAGE>
EXHIBIT B
---------
FORM OF LEGAL OPINION
---------------------
- --------------------------------------------------------------------------------
IMAGING TECHNOLOGIES CORPORATION
REGISTRATION RIGHTS AGREEMENT
SEPTEMBER 17, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C> <C>
Page
1. Registration Rights 1
-------------------
1.1 Definitions 1
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1.2 Mandatory Registration 2
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1.3 Obligations of the Company 2
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1.4 Furnish Information 4
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1.5 Expenses of Registration 4
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1.6 Indemnification 4
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1.7 Reports Under Securities Exchange Act of 1934 6
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1.8 "Market Stand-Off" Agreement 6
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1.9 Termination of Registration Rights 7
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1.10 Other Registration Rights; Eligibility for Form S-3 7
--------------------------------------------------------------------
1.11 Payment upon Effectiveness of Registration Statement 7
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2. Miscellaneous 7
-------------
2.1 Successors and Assigns 7
--------------------------------------------------------------------
2.2 Governing Law 7
--------------------------------------------------------------------
2.3 Counterparts 7
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2.4 Titles and Subtitles 8
--------------------------------------------------------------------
2.5 Notices 8
--------------------------------------------------------------------
2.6 Expenses 8
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2.7 Amendments and Waivers 8
--------------------------------------------------------------------
2.8 Severability 8
--------------------------------------------------------------------
2.9 Entire Agreement 8
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2.10 Each Investor Acting Severally 8
--------------------------------------------------------------------
2.11 Representation 9
--------------------------------------------------------------------
</TABLE>
Schedule A Schedule of Investors
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 17th day of September
1998 (the "Effective Date"), by and between Imaging Technologies Corporation, a
Delaware corporation (the "Company"), and the investors listed on SCHEDULE A
hereto, each of which is herein referred to individually as an "Investor" and
all of which are herein referred to collectively as the "Investors."
RECITALS
--------
WHEREAS, the Company and two of the Investors are parties to the Common
Stock Purchase Agreement of even date herewith (the "Stock Purchase Agreement")
pursuant to which the Company has agreed to sell and such Investors have agreed
to purchase shares of the Common Stock of the Company;
WHEREAS, the Company has entered into certain Subordinated Note Purchase
Agreements of even date herewith with the Investors (the "Note Purchase
Agreements" and together with the Stock Purchase Agreement, the "Purchase
Agreements") pursuant to which the Company has agreed to sell and two of the
Investors have each agreed to purchase a subordinated promissory note (the
"Notes") and warrant (the "Warrants") to purchase up to an aggregate of 490,000
shares of the Common Stock of the Company; and
WHEREAS, in order to induce the Company to enter into the Purchase
Agreements and to induce the Investors to purchase shares of the Common Stock
and the Notes and Warrants from the Company, as applicable, pursuant to the
Purchase Agreements, the Investors and the Company hereby agree that this
Agreement shall govern the rights of the Investors to cause the Company to
register the shares of Common Stock sold by the Company and purchased by certain
of the Investors pursuant to the Stock Purchase Agreement and to register the
490,000 shares of Common Stock issuable upon exercise of the Warrants (the
"Warrant Shares") sold by the Company and purchased by the Investors pursuant to
the Note Purchase Agreements and certain other matters as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in effect
on the date hereof or any registration form under the Act subsequently adopted
by the SEC which permits inclusion or incorporation of substantial information
by reference to other documents filed by the Company with the SEC
<PAGE>
(c) The term "1934 Act" means the Securities Exchange Act of 1934,
as amended.
(d) The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(e) The term "Registrable Securities" means (i) the Common Stock
purchased by the Investors pursuant to the Stock Purchase Agreement as set forth
on SCHEDULE A hereto, (ii) the Warrant Shares issued or issuable upon exercise
of the Warrants purchased by the Investors pursuant to the Note Purchase
Agreements as set forth on SCHEDULE A hereto and (iii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of the shares referenced
in (i) and/or (ii) above.
(f) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are Registrable Securities.
(g) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 MANDATORY REGISTRATION. The Company shall prepare, and, on or prior to
sixty (60) days after the Effective Date, file with the SEC a registration
statement on Form S-3 (or, if such form is unavailable for such a registration,
on such other form as is available for such a registration, subject to the
consent of the Investors holding a majority of the Registrable Securities which
consent will not be unreasonably withheld), covering the resale of all of the
Registrable Securities. The Company shall use its best efforts to have the
registration statement declared effective by the SEC as soon as practicable, but
in no event later than one hundred fifty (150) days after the Effective Date.
1.3 OBLIGATIONS OF THE COMPANY. In connection with the registration
statement filed pursuant to Section1.2, the Company shall:
(a) Keep such registration statement effective for a period of up to the
earlier of one hundred twenty (120) days or until the distribution contemplated
in the Registration Statement has been completed; provided, however, that (i)
such 120-day period shall be extended for a period of time equal to (A) the
period the Investor refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company plus (B) the period, if any, during which the
Investor's ability to sell its Registrable Securities pursuant to the
registration statement has been deferred by the Company pursuant to this Section
1.3(a); and (ii) in the case of any registration of Registrable Securities on
Form S-3 which are intended to be offered on a continuous or delayed basis, such
120-day period shall be extended, if necessary, to keep the registration
statement effective until all such Registrable Securities are sold, provided
that Rule 415, or any successor rule under the Act, permits an offering on a
continuous or delayed basis, and provided further that applicable rules under
the Act governing the obligation to file a post-effective amendment permit, in
lieu of filing a post-effective amendment which (I) includes any prospectus
required by Section 10(a)(3) of the Act or (II) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the incorporation by reference of information
<PAGE>
required to be included in (I) and (II) above to be contained in periodic
reports filed pursuant to Section 13 or 15(d) of the 1934 Act in the
registration statement. In order to sell any Registrable Securities pursuant to
such registration statement, the Investor must first give written notice to the
Company's Chief Financial Officer of such Investor's present intention to sell
some or all of such Registrable Securities (a "Notice of Resale"). Upon receipt
of such Notice of Resale, the Company will give written notice to the Investor
as soon as practicable, but in no event more than three (3) business days after
such receipt, that the prospectus contained in the registration statement is
current and that the sale may commence or that the Company is required under the
Securities Act to amend the registration statement in order to cause the
prospectus to be current. In the event that the Company determines an amendment
to the registration statement is necessary, it will file and cause the amendment
to become effective as soon as practicable, whereupon it will notify the
Investor that the sale may commence. Furthermore, if the Company furnishes to
the Investor a certificate signed by the President of the Company stating that,
in the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
registration to be effected or amended at such time due to the existence of a
material development or potential material development involving the Company
which the Company would be obligated to disclose in the prospectus contained in
the Form S-3 registration statement, which disclosure would in the good faith
judgment of the Board of Directors of the Company be premature or otherwise
inadvisable at such time and would have a material adverse affect upon the
Company and its shareholders, the Company will have the right to defer the sale
by an Investor pursuant to the Form S-3 registration statement for a period of
not more than forty-five (45) days after receipt of the Notice of Resale;
PROVIDED, HOWEVER, that the Company will not utilize this right more than twice
in any twelve (12) month period.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Investors such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Investors;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
1.4 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Investor that such Investor
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Investor's Registrable
Securities.
<PAGE>
1.5 EXPENSES OF REGISTRATION. The Company shall bear and pay all expenses
incurred in connection with any registration, filing or qualification of
Registrable Securities with respect to the registrations pursuant to Section 1.2
for each Investor, including (without limitation) all registration, filing, and
qualification fees and printers and accounting fees relating or apportionable
thereto, but excluding underwriting discounts and commissions relating to
Registrable Securities and fees and disbursements of counsel for the selling
Investors.
1.6 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under this Section 1:
(a) To the extentpermitted by law, the Company will indemnify and
hold harmless each Investor, any underwriter (as defined in the Act) for such
Investor and each person, if any, who controls such Investor or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, or the 1934 Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act, or any rule or regulation promulgated under
the Act, or the 1934 Act; and the Company will pay to each such Investor,
underwriter or controlling person, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; PROVIDED, HOWEVER, that the indemnity
agreement contained in this subsection 1.6(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
to an Investor, underwriter or controlling person for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Investor, underwriter or controlling person.
(b) To the extent permitted by law, each selling Investor will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Investor selling securities in such registration statement and any controlling
person of any such underwriter or other Investor, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto arise out of or
are based upon any Violation, in each case to the extent (and only to the extent
) that such Violation occurs in reliance upon and in conformity with written
information furnished by such Investor expressly for use in connection with such
registration; and each such Investor will pay any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
subsection 1.6(b), in connection with investigating or defending any such loss,
<PAGE>
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.6(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Investor, which consent shall
not be unreasonably withheld; provided further that in no event shall any
indemnity under this subsection 1.6(b) exceed the gross proceeds from the
offering received by such Investor.
(c) Promptly after receipt by an indemnified party under this
Section 1.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.6, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.6, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.6.
(d) If the indemnification provided for in this Section 1.6 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Investors under this Section
1.6 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1 and the termination of this
Agreement.
<PAGE>
1.7 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making
available to the Investors the benefits of Rule 144 promulgated under the Act
and any other rule or regulation of the SEC that may at any time permit an
Investor to sell securities of the Company to the public without registration,
the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after the date hereof;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Investor, so long as the Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144,
the Act and the 1934 Act (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Investor of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.8 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees that during
the period of duration not to exceed 90 days specified by the Company and an
underwriter of capital stock of the Company, following the effective date of a
registration statement pursuant to which the Company is offering securities
under the Securities Act, it shall not, to the extent requested by the Company
and such underwriter (and provided the same restriction is agreed to by the
officers and directors of the Company), directly or indirectly sell, offer to
sell, contract to sell (including, without limitation, any short sale), grant
any option to purchase or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) any securities of the Company held by it at any
time during such period except Common Stock included in such registration. In
order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to all securities of the Company held by such Investor
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
1.9 TERMINATION OF REGISTRATION RIGHTS. No Investor shall be entitled to
exercise any right provided for in this Section 1 after the earlier of (i) such
time as Rule 144 or another similar exemption under the Act is available for the
sale of all of such Investor's Registrable Securities during a three (3)-month
period without registration or (ii) after all of such Investor's Registrable
Securities have been sold under a registration statement filed pursuant to the
provisions of this Section 1.
1.10 OTHER REGISTRATION RIGHTS; ELIGIBILITY FOR FORM S-3. The Company
represents and warrants that as of the date hereof it has entered into
agreements granting registration rights to the holders of certain warrants to
purchase an aggregate of 360,000 shares of its Common Stock, which number of
shares under each of such warrants is subject to certain antidilution and other
adjustments. The Company further represents and warrants that as of the date
hereof it meets the requirements for use of Form S-3 for registration of the
resale by the Investors of the Registrable Securities and the Company has filed
all reports required to be filed by the Company with the SEC so as to obtain
such eligibility for the use of Form S-3.
<PAGE>
1.11 PAYMENT UPON EFFECTIVENESS OF REGISTRATION STATEMENT. Within five (5)
business days after the date (the "Measurement Date") the SEC declares effective
the registration statement filed pursuant to Section 1.2 above, the Company
shall pay to each Investor an amount equal to the quotient obtained by dividing
(i) the aggregate purchase price paid by such Investor for such Investor's
Registrable Securities multiplied by the product of (a) the number of calendar
days elapsed between the date of this Agreement and the Measurement Date and (b)
0.16, by (ii) 365.
2. MISCELLANEOUS
2.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties (including transferees
of any shares of Registrable Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
2.2 GOVERNING LAW. This Agreement shall be governed in all respects by and
construed in accordance with the laws of the State of California without any
regard to conflicts of laws principles.
2.3 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
2.5 NOTICES. Unless otherwise provided, any notice required or permitted
under this Agreement shall be sent to the address indicated for such party on
the signature page hereof (provided that any party at any time may change its
address by ten (10) days' advance written notice to the other parties), and
shall be deemed effectively given upon the earlier of actual receipt thereof by
the person to whom notice is directed or (i)in the case of notices and
communications sent by personal delivery or facsimile, one business day after
such notice or communication arrives at the applicable address or was
successfully sent to the applicable facsimile number, (ii)in the case of notices
and communications sent by overnight delivery service, at noon (local time) on
the second business day following the day such notice or communication was sent,
and (iii)in the case of notices and communications sent by United States mail,
seven days after such notice or communication shall have been deposited in the
United States mail.
2.6 EXPENSES. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
<PAGE>
2.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
2.8 SEVERABILITY. If any provision of this Agreement shall be judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
2.9 ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreements, constitutes the full and entire understanding and agreement between
the parties with regard to the subjects hereof and thereof.
2.10 EACH INVESTOR ACTING SEVERALLY. Each Investor undertakes his or its
obligations hereunder and makes the representations, warranties and covenants as
set forth hereunder severally and not jointly.
2.11 REPRESENTATION. By executing this Agreement, each Investor
acknowledges and agrees that Brobeck, Phleger & Harrison LLP represents the
Company solely and that such Investor has been advised to, and has had an
opportunity to, consult with its own attorney in connection with this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE COMPANY:
IMAGING TECHNOLOGIES CORPORATION,
a Delaware corporation
By: /s/Brian Bonar
--------------------------------
Brian Bonar, President and Chief
Executive Officer
Address: 11031 Via Frontera
San Diego, CA 92127
INVESTORS:
AMERICAN INDUSTRIES, INC., An Oregon
corporation
By: /s/Howard Hedinger
----------------------------
Its: President
---------------------------
Address: 1750 NW Front Avenue, Suite 106
Portland, Oregon 97209
/s/Ellison Morgan
--------------------------
Ellison Morgan
Address: 11510 SW Summerville Street
Portland, Oregon 97219
/s/Harry Saal
--------------------------
Harry Saal
Address: c/o Imaging Technologies Corporation
11031 Via Frontera
San Diego, CA 92127
<PAGE>
SCHEDULE A
----------
SCHEDULE OF INVESTORS
---------------------
American Industries, Inc.
Ellison Morgan
IMAGING TECHNOLOGIES CORPORATION
11031 Via Frontera
San Diego, California 92127
September 17, 1998
Mr. Howard Hedinger
American Industries, Inc.
1750 NW Front Avenue, Suite 106
Portland, Oregon 97209
Mr. Ellison Morgan
11510 SW Summerville Street
Portland, OR 98219
Re: Directors' and Officers' Compensation Packages
Dear Sirs:
This letter will summarize the efforts of Imaging Technologies
Corporation (the "Company") to date, and will confirm our agreement in
connection with your purchase of certain unconvertible and convertible
subordinated promissory notes from the Company, regarding the compensation
packages of all the Company's current officers and directors and Dr. Edward
Savarese and Mr. Irwin Roth, both former officers and directors of the Company.
With respect to the compensation packages of all of the Company's current
officers and directors, the Board of Directors has appointed Stephen MacDonald,
one of the Company's outside directors, to conduct a through and expeditious
review if these compensation packages, comparing them to the compensation
packages of similar executives at similarly situated companies in the Company's
industry (the "Market Rate"). In the event the Company's Board of Directors
determines that any of its current off8icers or directors are compensated above
the Market Rate, it will use its best efforts to renegotiate such compensation
package to a level that is consistent with Market Rate.
With respect to the compensation packages of Dr. Savarese and Mr.
Roth, to date the Company has made the following progress: As of April 1, 1998,
Dr. Savarese was entitled under his agreements with the Company to aggregate
compensation of approximately $1.2 million. As of August 1, 1998, the Company
had reduced the aggregate compensation owing to Dr. Savarese to approximately
$725,000, or a reduction of approximately $475,000. As of April 1, 1998 Mr. Roth
was entitled under his agreement with the Company to aggregate compensation of
approximately $555,000. As of August 1, 1998, the Company had reduced the
aggregate compensation owing to Mr. Roth to approximately $210,000, or a
reduction of $345,000. In aggregate, Dr. Savarese and Mr. Roth hold warrants to
purchase approximately 600,000 share of Common Stock..
At the Company's August 11, 1998 meeting of its Board of Directors,
the Board appointed Mr. Warren Lazarow, one of the Company's outside directors
and a partner at Brobeck, Phleger & Harrison LLP, to lead the review of the
remaining compensation owing to Dr. Savarese and Mr. Roth and to explore any and
all possible claims the Company may have against Dr. Savarese and Mr. Roth, the
settlement of which may form a part of a compromise to further reduce the
<PAGE>
compensation owing to Dr. Savarese and/or Mr. Roth. The Board charged Mr.
Lazarow to conduct his investigation as expeditiously as possible. The Company
hereby agrees to complete this review as expeditiously as possible to ascertain
the validity of compensation owing to, and the number of warrants exercisable by
Dr. Savarese and Mr. Roth. The determination of these amounts cannot be
ascertained at this time, but will be determined by the Board based upon all of
the facts, including the strength of any claims the Company may have against Dr.
Savarese and Mr. Roth. It is the express goal of the Board of Directors with
regard to this matter to achieve the best possible result for the stockholders
of the Company under the circumstances, as determined in good faith by the
Board.
The Company is making progress with respect to the compensation paid
to several of its current board members. Al Dubrow and Frank Kavanaugh have
agreed to enter into discussions with the Company to terminate their employment
contracts prior to September 30, 1998. These terminations will also reduce the
overall compensation paid to the Company's officers and directors.
Through all of these efforts, the Company intends, and hereby agrees
to use its reasonable and diligent efforts, to reduce by no later than December
31, 1998, the outstanding capital stock of the Company by terminating and
otherwise eliminating without payment of any significant consideration therefore
(other than the settlement of any claims or the termination of any agreements or
relationships) warrants to purchase an aggregate of 800,000 shares of Common
Stock (the "Warrant Reduction Target") currently held by the individuals and
entities set forth on SCHEDULE A attached hereto. In the Event the Company does
not, for any reason by December 31, 1998, achieve the Warrant Reduction Target,
then for all or any portion of each 100,000 warrants less than the Warrant
Reduction Target that the Company is not able to terminate or otherwise
eliminate, the price at which you will be permitted to convert ten percent (10%)
of the outstanding principal amount of your convertible subordinated promissory
notes into shares of the Company's Common Stock (which initially will be set at
$2.025 per share, or the average of the closing bid price for the Company's
Common Stock as reported on the Nasdaq Small-Cap Market for the 5 trading days
ended September 14, 1998) will be reduced to $1.0124; PROVIDED, HOWEVER, that
the price at which you will be permitted to convert all of the remaining
outstanding principal amount of your convertible subordinated promissory notes
shall remain at $2.025.
Very truly yours,
IMAGING TECHNOLOGIES CORPORATION
By: /s/Brian Bonar
----------------------------
Brian Bonar
President and Chief Executive Officer
By: /s/Harry J. Saal
----------------------------
Harry J. Saal
Chairman of the Board of Directors
<PAGE>
AGREED and ACCEPTED
this day of September , 1998:
--------
AMERICAN INDUSTRIES, INC.
By:
-------------------------
Its:
-------------------------
- -----------------------------
Ellison Morgan
<PAGE>
SCHEDULE A
Name
----
Robinson International, Inc.
Brian Bonar
Software Technologies, Inc.
Ralph Barry
Al Dubrow
Frank Kavanaugh
Irwin Roth
Ed Savarese
