As filed with the Securities and Exchange Commission on May 3, 1999
Registration No.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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IMAGING TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 33-0021693
(State or other jurisdiction (IRS employer
of incorporation or organization) Identification number)
15175 INNOVATION DRIVE
SAN DIEGO, CA 92128-3401
(619) 613-1300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
BRIAN BONAR
15175 INNOVATION DRIVE
SAN DIEGO, CA 92128-3401
(619) 613-1300
(Name, address, including zip code, telephone number, including area code, of
agent for service)
COPY TO:
Martin Eric Weisberg, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, NY 10036-8735
(212) 704-6050
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
[ ] _____________
If this Form is a post-effective amendment filed pursuant to Rule 462(b) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed
Amount Maximum Proposed Maximum
To Be Aggregate Aggregate Offering Amount of
Title of each class of Registered (1) Price Per Price Registration Fee
Securities to be registered Share
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<S> <C> <C> <C> <C>
Common Stock, par value
$0.005 per share 5,150,000 $1.078125 (5) $5,552,344 $1,543.56
Common Stock, par value
$0.005 per share 28,717,500 (2) $1.078125 (5) $30,961,054 $8,607.18
Common Stock, par value
$0.005 14,358,750 (3) $1.078125 (6) $15,480,527 $4,303.59
Common Stock, par value
$0.005 1,315,333 (4) $1.078125 (6) $1,418,094 $394.23
Common Stock, par value
$0.005 190,000 (4) $1.09 (6) $207,100 $57.58
Common Stock, par value
$0.005 500,000 (4) $2.025 (6) $1,012,500 $281.48
Common Stock, par value
$0.005 100,000 (4) $4.00 (6) $400,000 $111.20
Common Stock, par value
$0.005 150,000 (4) $1.28 (6) $192,000 $53.38
Common Stock, par value
$0.005 110,000 (4) $1.50 (6) $165,000 $45.87
Common Stock, par value
$0.005 180,740 (4) $1.078125 (6) $194,861 $54.17
Common Stock, par value
$0.005 2,253,750 (4) $1.078125 (6) $2,429,825 $675.50
Common Stock, par value
$0.005 666,667 (7) $1.078125 (6) $718,751 $199.82
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53,692,740 $58,732,056 $16,327.56
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(1) Represents the shares of common stock being registered for resale by the
selling stockholders.
(2) The shares of common stock offered hereby is our good faith estimate of the
number of shares of common stock as shall be issued by us upon the
conversion of the Series D and E preferred stock issued in connection with
separate private placements with the selling stockholders. The number of
shares is an estimate and is 175% of the number of shares that would be
issuable upon conversion of the preferred stock based on the closing price
of the common stock when the preferred stock was sold. Such number is
subject to adjustment and could be materially greater or less than the
amount of shares being registered hereby depending upon the future price of
the common stock. Pursuant to Rule 416, the shares of common stock covered
hereby include such indeterminate number of shares that may be issued as a
result of anti-dilution provisions included in separate securities purchase
agreements, including, among others, stock splits, stock dividends and
similar transactions. This presentation is not intended to constitute a
prediction of the future market price of the common stock or the number of
shares of common stock issuable upon conversion of the preferred stock.
(3) Represents shares issuable upon exercise of warrants evidencing the right
to purchase shares of common stock. This number of shares is an estimate
and is 175% of the number of shares of common stock that would be issuable
upon exercise of the warrants. Pursuant to Rule 416, the shares of common
stock offered hereby also include such presently indeterminate number of
shares of common stock that may be issued as a result of anti-dilution
provisions included in the warrants, including, among others, stock splits,
stock dividends and similar transactions.
(4) Represents shares of common stock issuable upon exercise of warrants
evidencing the right to purchase shares of common stock. Pursuant to Rule
416, the shares of common stock offered hereby also include such presently
indeterminate number of shares of common stock that may be issued as a
result of anti-dilution provisions included in the warrants, including,
among others, stock splits, stock dividends and similar transactions.
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(5) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and (g) of the Securities Act of 1933, as amended,
based on the average ($1.078125) of the bid ($1.03125) and asked ($1.125)
price of the common stock on the Nasdaq SmallCap Market on April 27, 1999.
(6) Estimated solely for the purpose of calculating the registration fee. In
accordance with Rule 457(g), the registration fee for these shares is
calculated based upon a price which represents the highest of: (i) the
price at which the warrants may be exercised; (ii) the offering price of
securities of the same class included in the registration statement; and
(iii) the price of securities of the same class, as determined by Rule
457(c).
(7) Represents shares of common stock issuable upon conversion of convertible
subordinated promissory notes.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
An Exhibit Index appears on page E-1.
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The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not seeking an offer to buy these securities in
any state where the offer or sale is not permitted.
PROSPECTUS
IMAGING TECHNOLOGIES CORPORATION
53,692,740 SHARES OF COMMON STOCK
o The shares of common stock offered by this prospectus are
being sold by the stockholders listed in the section of this
prospectus called "selling stockholders". We will not receive
any proceeds from the exercise of these shares. We will
receive proceeds from the exercise of the warrants by the
selling stockholders and those proceeds will be used for our
general corporate purposes.
o Our common stock is traded on the Nasdaq SmallCap Market under
the symbol ITEC.
o On April 23, 1999, the closing bid price of our common stock
on the Nasdaq SmallCap Market was $1.0625.
THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF
RISK. YOU SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING
"RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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May __, 1999
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TABLE OF CONTENTS
Risk Factors...................................................................3
Forward-Looking Statements....................................................10
Use of Proceeds...............................................................10
Dividend Policy...............................................................10
Dilution......................................................................10
Shares Eligible for Future Sale...............................................12
Selling Stockholders..........................................................13
Description of Securities.....................................................21
Plan of Distribution..........................................................23
Where You Can Find More Information...........................................24
Indemnification of Directors and Officers.....................................25
Legal Matters.................................................................26
Experts..................................................................... 26
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RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK, INCLUDING THOSE RISKS
DESCRIBED BELOW. YOU SHOULD CAREFULLY CONSIDER THESE RISK FACTORS, TOGETHER WITH
ALL OF THE OTHER INFORMATION IN THIS PROSPECTUS, BEFORE DECIDING TO INVEST IN
SHARES OF OUR COMMON STOCK.
RISKS ASSOCIATED WITH OUR PAST FINANCIAL RESULTS
WE COULD BE REQUIRED TO CUT BACK OR STOP OPERATIONS IF WE ARE UNABLE TO RAISE OR
OBTAIN NEEDED FUNDING
Our ability to continue operations will depend on our positive cash
flow, if any, from future operations and on our ability to raise additional
funds through equity or debt financing. We do not know if we will be able to
raise additional funding or if such funding will be available on favorable
terms. We could be required to cut back or stop operations if we are unable to
raise or obtain needed funding.
Our cash requirements to run our business have been and will continue
to be significant. Since 1996, our negative cash flow from operations has been
as follows:
Fiscal year ended: Negative Cash Flow
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o June 30, 1996 $1,263,000
o June 30, 1997 $4,063,000
o June 30, 1998 $7,100,000
Six Months ended: Negative Cash Flow
o December 31, 1998 $2,820,000
WE HAVE A HISTORY OF LOSSES AND IF WE DO NOT ACHIEVE PROFITABILITY WE MAY NOT BE
ABLE TO CONTINUE OUR BUSINESS IN THE FUTURE
As of December 31, 1998 we accumulated losses of approximately
$38,557,000. We anticipate incurring additional losses until we can successfully
market and distribute our products and develop new technologies and commercially
viable future products. If we are unable to do so, we will continue to have
losses and might not be able to continue our operations.
THE "GOING CONCERN" QUALIFICATION ON THE REPORT OF OUR INDEPENDENT ACCOUNTANTS
MAY HURT OUR ABILITY TO RAISE ADDITIONAL FINANCING
The report of our independent accountants on our June 30, 1998
consolidated financial statements contains an explanatory paragraph regarding
our ability to continue as an ongoing business. Our independent accountants
cited a significant decline in working capital and net worth, that raised
substantial doubt as to our
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ability to continue as an ongoing business. The "going concern" qualification
may reduce our ability to obtain necessary financing in the future to run our
business.
RISKS ASSOCIATED WITH OUR BUSINESS
OUR DIGITAL IMAGING PRODUCTS MAY NOT BE SUCCESSFULLY COMPLETED OR ACCEPTED BY
THE PUBLIC WHICH COULD RESULT IN LOWER REVENUES
Our success will depend on our ability to market our current products,
including our digital printers and our hardware and software products used in
digital imaging, and to rapidly introduce and market additional products. We
have no control over the demand for digital imaging products, including the
preferences of users and the capability of personal computers to run our digital
imaging software and hardware products and use our printers. We cannot assure
you that the products we introduce will achieve acceptance, or that other
digital imaging products companies will not develop and market products which
render our products obsolete or less competitive. Failure to obtain significant
customer satisfaction or market share for our products would significantly and
negatively affect our revenues.
WE MAY HAVE TO LOWER PRICES OR SPEND MORE MONEY TO EFFECTIVELY COMPETE AGAINST
COMPANIES WITH GREATER RESOURCES THAN US WHICH COULD RESULT IN LOWER REVENUES
AND/OR PROFITS
The success of our products in the marketplace depends on many factors,
including product performance, price, ease of use, support of industry
standards, and customer support and service. We cannot assure you that we will
be able to compete successfully given these factors. For example, a key element
of our business strategy is to provide competitively-priced, quality products,
however, if our competitors offer lower prices, we could be forced to lower
prices which would result in reduced margins and a decrease in revenues. If we
do not lower prices we could lose sales and market share. In either case, if we
are unable to compete against companies who can afford to cut prices, we would
not be able to generate sufficient revenues to grow the company or reverse our
history of losses.
Furthermore, many of our current and prospective competitors have
significantly greater financial, technical, sales and marketing resources than
we do. Our competitors may develop products comparable or superior to ours and
may adapt more quickly than we do to new technologies, evolving industry trends
and customer requirements. Therefore, we may have to spend more money to
effectively compete for market share, including funds to expand our
infrastructure, which is a capital and time extensive process. In addition, if
other companies aggressively compete against us, we may have to spend more money
on advertising, promotion, trade shows, product development, marketing and
overhead expenses, hiring and retaining personnel, and developing new
technologies. These higher expenses would hurt our net income and profits.
SYSTEM FAILURES OF OUR CUSTOMERS OR SUPPLIERS MAY ARISE BECAUSE OF THE YEAR 2000
PROBLEM AND WOULD DISRUPT OUR BUSINESS
The concerns about the upcoming year 2000 have arisen because older
computer programs that used two digits rather than four to define the applicable
year could malfunction. Although we believe that our products and
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internal computer systems will not be affected by the year 2000 problem, system
failures of our customers or suppliers due to the year 2000 problem could
disrupt our business. For example, software drivers used to modify and direct
the output and performance of our digital printers, although not using
time-specific codes, mirror time- specific codes resident in the applicable
operating systems running our systems, and, accordingly, if these operating
systems are not year 2000 compliant, our products may not work and our business
would be disrupted.
BECAUSE OF OUR SIGNIFICANT RESEARCH AND DEVELOPMENT COSTS, THE FAILURE TO
DEVELOP NEW PRODUCTS WOULD RESULT IN SUBSTANTIAL LOSSES
The development of sophisticated digital imaging products is a lengthy
and intensive process and is subject to unforeseen risks, delays, problems and
costs. Unanticipated technical or other problems may occur which would result in
delays in our development program. If we fail to complete development of new
products or enhance existing products, we could suffer complete loss of the
funds committed by us to those products or enhancements. The losses could be
substantial.
WE DEPEND ON OUR RELATIONSHIP WITH ADOBE AND TERMINATION OF THIS RELATIONSHIP
WOULD RESULT IN REDUCED REVENUES
Our relationship with Adobe as an authorized co-development partner in
implementing Adobe's PostScript(R) language on our printer controllers and in
our software products is an integral part of our business strategy. If this
relationship is not successful or Adobe decides to terminate this relationship
we would lose many of our customers which would result in a substantial loss of
revenues.
SINCE WE DEPEND ON ONE MANUFACTURER, WE MAY NOT BE ABLE TO ASSEMBLE OUR PRODUCTS
IF THE MANUFACTURER IS UNABLE TO MANUFACTURE OUR PRODUCTS
We presently outsource the production of most of our manufactured
products through one vendor located in California. This vendor assembles
products, using components purchased by us from other sources or from its own
inventory. If our present manufacturer does not have sufficient capacity to meet
projected market demand for our products, our production will stop and
replacement of the manufacturer could take several months and cause substantial
disruption to our operations.
WE DEPEND HEAVILY ON THIRD-PARTY SUPPLIERS TO PROVIDE US WITH COMPATIBLE
HARDWARE AND SOFTWARE FOR OUR DIGITAL IMAGING PRODUCTS
Many of our products use technology licensed from third-party
suppliers. We rely heavily on Adobe for upgrades and support of the
PostScript(R) language. In the case of our font products, we license the fonts
from outside suppliers, including Adobe, who also own the intellectual property
rights to the fonts. Our reliance on third-party suppliers involves many risks,
including our limited control over potential hardware and software
incompatibilities with our products.
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WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE OUR NEW ACQUISITIONS INTO OUR
BUSINESS
During 1998 fiscal year, we made a number of acquisitions to complement
our technical position in the imaging market, including CSI, a producer of color
management software and AMT, our master stocking distributor of printers and
supplies in the European Community and on the European continent. Our future
performance will depend in part on our ability to integrate and grow these
acquired businesses. If we do not integrate these businesses efficiently,
including the management structures of these diverse companies, there could be a
negative adverse effect.
Furthermore, over time we may realize that we need to divest unwanted
assets or products and assume unknown liabilities associated with these recent
acquisitions. In addition, client satisfaction or performance problems with an
acquired business could also have a material adverse effect on our reputation,
and any acquired business could significantly underperform relative to our
expectations. We are currently facing all of these challenges and our ability to
meet them over the long term has not been established. As a result, we cannot be
certain that we will be able to successfully or in a timely manner integrate
these acquired businesses and their products and technologies into our business,
which could have a material adverse effect on our overall financial performance.
WE RELY ON INDIRECT, INDEPENDENT DISTRIBUTION CHANNELS TO SELL OUR PRODUCTS AND
DISRUPTION OF THESE DISTRIBUTION CHANNELS WOULD RESULT IN REDUCED SALES AND
REVENUES
Our products are marketed and sold through established relationships
with value-added resellers, manufacturers' representative, retail vendors and
systems integrators. We have a network of dealers and distributors in the United
States and Canada, in the European Community and on the European continent, as
well as a growing number of resellers in Africa, Asia, the Middle East, Latin
America and Australia, which we support through our centralized manufacturing,
distribution and repair operations in San Diego and London. The sales of our
products are principally made through distributors which may carry competing
product lines. These distributors could reduce or discontinue sales of our
products, and they may not devote the resources necessary to provide effective
sales and marketing support of our products, which could materially and
adversely affect our sales.
In addition, we are dependent upon the continued viability and
financial stability of these distributors, many of which are small organizations
with limited capital who are substantially dependent on general economic
conditions and factors affecting particularly the digital imaging markets. Our
business could be materially adversely affected if our distributors fail to pay
amounts to us that exceed reserves that we have established.
WE CURRENTLY HOLD NO PATENTS IN OUR PRODUCTION PROCESSES AND COULD BE PROHIBITED
FROM MARKETING SOME OF OUR PRODUCTS
We currently hold no patents relating to the production of our
products. However, from time to time, some of our competitors have asserted that
we infringe on their patent rights. We expect that this will continue. If we
fail to establish that we have not violated the asserted rights, we could be
prohibited from marketing the products that incorporate any patented technology
and we could be liable for damages. We also could incur substantial costs in
redesigning our products or defending any legal action taken against us.
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THE FINANCIAL CRISIS IN ASIA RESULTED IN THE CANCELLATION OF ORDERS AND
SUBSTANTIAL LOSSES, AND OUR OTHER INTERNATIONAL OPERATIONS AND EXPORT SALES MAY
BE EFFECTED BY FUTURE TRENDS AND FOREIGN RESTRICTIONS
We conduct business globally and intend to pursue international markets
as key avenues for growth hoping to increase the percentage of sales generated
in international markets. In fiscal year 1998, we experienced contract
cancellations and write-offs of significant receivables related to the continued
economic deterioration in Asia. As we continue to expand our international
operations, our business and overall financial performance may be further
negatively affected by a variety of uncontrollable and changing factors,
including:
o foreign currency exchange fluctuations;
o regulatory, political or economic conditions in specific
countries and regions;
o difficulties in staffing and managing international
operations; and
o difficulties in collecting accounts receivable.
RISKS ASSOCIATED WITH OUR SECURITIES
WE HAVE A SUBSTANTIAL NUMBER OF SHARES RESERVED FOR FUTURE ISSUANCES WHICH COULD
CAUSE DILUTION OF STOCKHOLDER INTERESTS
The issuance of reserved shares would dilute the equity interest of
existing stockholders and could have a significant adverse effect on the market
price of our common stock. As of April 20, 1999, we had 54,449,986 shares of
common stock reserved for possible future issuances upon, among other things,
conversion of preferred stock and exercise of outstanding options and warrants.
See "Dilution."
In addition, we may seek additional financing which could result in the
issuance of additional shares of our capital stock and/or rights to acquire
additional shares of our capital stock. Those additional issuances of capital
would result in a reduction of your percentage interest in our company.
Furthermore, the book value per share of common stock may be reduced. This
reduction would occur if the exercise price of the options or warrants or the
conversion ratio of the preferred stock were lower than the book value per share
of common stock at the time of such exercise or conversion.
The addition of a substantial number of shares of common stock,
including the shares offered by this prospectus, into the market or by the
registration of any other of our securities under the Securities Act may
significantly and negatively affect the prevailing market price for the common
stock. In addition, future sales of shares of common stock issuable upon the
exercise of outstanding warrants and options may have a depressive effect on the
market price of the common stock, as such warrants and options would be more
likely to be exercised at a time when the price of the common stock is in excess
of the applicable exercise price.
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THE CONVERSION OF OUTSTANDING PREFERRED STOCK MAY HAVE A SIGNIFICANT NEGATIVE
EFFECT ON THE PRICE OF THE COMMON STOCK AND CAUSE THE SELLING STOCKHOLDERS TO
RECEIVE A GREATER NUMBER OF SHARES UPON SUBSEQUENT CONVERSIONS OF THE PREFERRED
STOCK
The Series D preferred stock and Series E preferred stock are
convertible at a floating rate that may be below the market price of the common
stock. As a result, the lower the stock price at the time the holder converts,
the more common stock the holder will get upon conversion. To the extent the
selling shareholders convert and then sell their common stock, the common stock
price may decrease due to the additional shares in the market. This could allow
the selling stockholders to convert their convertible preferred stock into
greater amounts of common stock, the sales of which could further depress the
stock price. The significant downward pressure on the price of the common stock
as the selling stockholders convert and sell material amounts of common stock
could encourage short sales by the selling stockholders and others in which the
short-sellers borrow common stock at the current market price in hope to buy it
in the future at a lower price.
This could place further downward pressure on the price of the common stock.
In addition, the conversion of the convertible preferred stock may
result in substantial dilution to the interests of other holders of common stock
since each holder of convertible preferred stock may ultimately convert and sell
the full amount issuable on conversion. Although each selling stockholder owning
Series D preferred stock may not convert their preferred stock if, as a result,
they would own more than 9.99% of the then outstanding common stock, this
restriction does not prevent those selling stockholders from converting and
selling some of their holdings and then converting the rest of their holdings.
In this way, an individual selling stockholder owning Series D preferred stock
could sell more than 9.99% of the outstanding common stock while never holding
more than 9.99% at one time.
WE ARE CONTROLLED BY OUR MANAGEMENT AND OTHER RELATED PARTIES
As of April 20, 1999, our chairman of the board of directors and our
officers, directors and related parties, as a group, beneficially own
approximately 22.1% and 24.9%, respectively, of our outstanding common stock.
These amounts include common stock issuable upon the exercise of warrants and/or
options as well as indirect ownership of common stock. As a result, these
stockholders will be able to exercise significant influence over matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions.
OUR STOCK PRICE IS EXTREMELY VOLATILE AND MAY DECREASE RAPIDLY
The trading price and volume of our common stock has historically been
subject to wide fluctuation in response to variations in actual or anticipated
operating results, announcements of new products or technological innovations by
us or our competitors, and general conditions in the digital imaging and
computer industries. In addition, stock markets generally have experienced
extreme price and volume trading volatility in recent years. This volatility has
had a substantial effect on the market prices of securities of many
high-technology companies for reasons frequently unrelated to the operating
performance of the specific companies. These broad market fluctuations may
significantly and negatively affect the market price of our common stock.
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YOUR EQUITY INTEREST IN US MAY BE DILUTED BY THE ISSUANCE OF PREFERRED STOCK
WITH GREATER RIGHTS THAN THE COMMON STOCK WHICH WE CAN SELL OR ISSUE AT ANY TIME
The sale or issuance of any shares of preferred stock having rights
superior to those of the common stock may result in a decrease in the value or
market price of the common stock. The issuance of preferred stock could have the
effect of delaying, deferring or preventing a change of ownership without
further vote or action by the stockholders and may adversely affect the voting
and other rights of the holders of common stock.
If a currently proposed resolution is passed by our stockholders later
this year, our board of directors will be authorized to issue up to 100,000
shares of preferred stock. The board has the power to establish the dividend
rates, preferential payments on our liquidation, voting rights, redemption and
conversion terms and privileges for any series of preferred stock.
IF WE CANNOT MEET THE NASDAQ SMALLCAP MARKET MAINTENANCE REQUIREMENTS AND NASDAQ
RULES, NASDAQ MAY DELIST THE COMMON STOCK WHICH COULD NEGATIVELY AFFECT THE
PRICE OF THE COMMON STOCK AND YOUR ABILITY TO SELL THE COMMON STOCK
In the future, we may not be able to meet the listing maintenance
requirements of the Nasdaq SmallCap Market and Nasdaq rules, which require,
among other things, minimum net tangible assets of $2 million, a minimum bid
price for our common stock of $1.00, and shareholder approval prior to the
issuance of securities in connection with a transaction involving the sale or
issuance of common stock equal to 20 percent or more of a company's outstanding
common stock before the issuance for less than the greater of book or market
value of the stock. Although we currently comply with Nasdaq's listing
maintenance requirements, it is possible we may not meet the requirements in the
future as in the past we have not always been in compliance and are presently
subject to a six month review period with Nasdaq. For example, the dilution
resulting from the issuance of the convertible preferred stock discussed above
and subsequent conversion and sale of common stock could have a substantial
depressive effect on the common stock bid price causing it to decrease below
$1.00. If we were no longer in compliance with Nasdaq rules and were unable to
receive a waiver or achieve compliance, and if our common stock were to be
delisted from the SmallCap market, an investor in our company may find it more
difficult to sell our common stock. This lack of liquidity also may make it more
difficult for us to raise capital in the future.
IF NASDAQ DELISTS OUR COMMON STOCK YOU WOULD NEED TO COMPLY WITH THE PENNY STOCK
REGULATIONS WHICH COULD MAKE IT MORE DIFFICULT TO SELL YOUR COMMON STOCK
In the event that our securities are not listed on the SmallCap,
trading of the common stock would be conducted in the "pink sheets" or through
the NASD's Electronic Bulletin Board and covered by Rule 15g-9 under the
Securities Exchange Act of 1934. Under such rule, broker/dealers who recommend
these securities to persons other than established customers and accredited
investors must make a special written suitability determination for the
purchaser and receive the purchaser's written agreement to a transaction prior
to sale. Securities are exempt from this rule if the market price is at least
$5.00 per share.
The Securities and Exchange Commission adopted regulations that
generally define a penny stock as any equity security that has a market price of
less than $5.00 per share, with certain exceptions. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of
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a disclosure schedule explaining the penny stock market and the risks associated
with it. If our common stock were considered a penny stock, the ability of
broker/dealers to sell the common stock and the ability of purchasers in this
offering to sell their securities in the secondary market would be limited. As a
result, the market liquidity for the common stock would be severely and
adversely affected. We cannot assure you that trading in our securities will not
be subject to these or other regulations in the future which would negatively
affect the market for such securities.
FORWARD-LOOKING STATEMENTS
This prospectus contains some forward-looking statements which involve
substantial risks and uncertainties. These forward-looking statements can
generally be identified by the use of forward-looking words like "may," "will,"
"except," "anticipate," "intend," "estimate," "continue," "believe" or other
similar words. Similarly, statements that describe our future expectations,
objectives and goals or contain projections of our future results of operations
or financial condition are also forward-looking statements. Our future results,
performance or achievements could differ materially from those expressed or
implied in these forward-looking statements as a result of certain factors,
including those listed under the heading "Risk Factors" and in other cautionary
statements in this prospectus.
USE OF PROCEEDS
The selling stockholders are selling all of the shares covered by this
prospectus for their own accounts. Accordingly, we will not receive any proceeds
from the resale of the shares. We will receive proceeds from the exercise of the
warrants, but, to date, none of the warrants have been exercised. However, if
all the warrants were exercised as of April 20, 1999, we would receive
approximately $11,289,882. We would use any of the net proceeds from the sale of
these warrants for general corporate purposes, including working capital. We
will bear all expenses relating to this registration except for (a) brokerage or
underwriting discounts, commissions and expenses and (b) any fees and
disbursements over $5,000, if any, paid to the counsels of some of the selling
shareholders who are employed to review this prospectus, which the selling
stockholders will pay.
DIVIDEND POLICY
We have never declared nor paid cash dividends on our common stock. We
currently anticipate that we will retain all available funds for use in the
operation of our business. As such, we do not anticipate paying any cash
dividends on our common stock in the foreseeable future.
DILUTION
As of April 20, 1999, we had issued and outstanding:
o 19,820,915 shares of our common stock,
o 875 shares of Series D preferred stock,
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o 881 shares of Series E preferred stock, and
o 420.5 shares of 5% convertible preferred stock.
At that date, there were an additional 54,449,986 shares of our common
stock reserved, or which will be reserved, for possible future issuances as
follows:
o 8,400,000 shares of our common stock for issuance
upon conversion of the Series D Preferred stock.
o 20,317,500 shares of our common stock for issuance
upon conversion of the Series E Preferred stock.
o 60,002 shares of our common stock for issuance upon
conversion of the 5% convertible preferred stock.
o 14,358,750 shares of our common stock for issuance
upon exercise of outstanding warrants issued
pursuant to the Series D and E private placements
and the exchange agreement. These warrants are
exercisable at $.875 per share.
o 100,000 shares of our common stock for issuance upon
exercise of outstanding warrants issued pursuant to
the lease letter agreement. These warrants are
exercisable at $1.50 per share.
o 150,000 shares of our common stock for issuance upon
exercise of outstanding warrants issued pursuant to
the letter of credit reimbursement agreement. These
warrants are exercisable at $1.28 per share.
o 490,000 shares of our common stock for issuance upon
exercise of outstanding warrants issued pursuant to
the subordinated note purchase agreement. Of these
490,000 warrants, 300,000 warrants shall have an
exercise price of $2.025 per share and 190,000
warrants shall have an exercise price of $1.09 per
share.
o 300,000 shares of our common stock for issuance upon
exercise of outstanding warrants issued pursuant to
the settlement and mutual release agreement. Of
these 300,000 warrants, 100,000 warrants shall have
an exercise price of $4.00 per share and 200,000
warrants shall have an exercise price of $2.025 per
share.
o 2,253,750 shares of our common stock for issuance
upon exercise of outstanding warrants issued
pursuant to placement agent arrangements. These
warrants are exercisable at $0.40.
o 1,315,333 shares of our common stock for issuance
upon exercise of outstanding warrants issued
pursuant to a warrant agreement. These warrants are
exercisable at $0.80.
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o 180,740 shares of our common stock for issuance upon
exercise of outstanding warrants issued pursuant to a
warrant agreements. These warrants are exercisable at
$1.00.
o 10,000 shares of our common stock for issuance upon
exercise of outstanding warrants issued pursuant to
real estate service agreements. These warrants are
exercisable at $1.50.
o 666,667 shares of our common stock upon the
conversion of convertible promissory notes at
$1.0125.
o 699,082 shares of our common stock for issuance upon
the exercise of outstanding stock options under
various of our stock option plans. These options are
exercisable at prices ranging from $1.00 to $8.45 per
share.
o 1,500,000 shares for issuance upon the exercise of
options which may be granted in the future under our
1999 Stock Option Plan. The exercise price of these
options has not yet been determined.
o 3,648,162 shares for issuance upon exercise of other
outstanding warrants held by unaffiliated third
parties. These warrants are exercisable at prices
ranging from $1.00 to $7.50 per share.
SHARES ELIGIBLE FOR FUTURE SALE
Of the 19,820,915 shares of our common stock outstanding as of April
20, 1999, approximately 13,230,915 shares were presently freely transferable
without restriction under the Securities Act.
Of the remaining approximately 6,590,000 outstanding shares of our
common stock:
o 500,000 are "restricted securities" issued in September 1998
which are covered by this prospectus. These shares will be
freely tradeable without restriction on the effective date of
the registration statement of which this prospectus is a part.
o 2,000,000 shares are "restricted securities" issued in
December 1998 through January 1999 which are covered by this
prospectus. These shares will be freely tradeable without
restrictions on the effective date of the registration
statement.
o 2,000,000 shares are "restricted securities" issued in March
1999 which are covered by this prospectus. These shares will
be freely tradeable without restrictions on the effective date
of the registration statement.
o 150,000 shares are "restricted securities" issued in April
1999 which are covered by this prospectus. These shares will
be freely tradeable without restrictions on the effective date
of the registration statement.
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<PAGE>
o 500,000 shares are "restricted securities" issued in April
1999 which are covered by this prospectus. These shares will
be freely tradeable without restrictions on the effective date
of the registration statement.
o The remaining approximately 1,440,000 of those shares are
"restricted securities" that were acquired more than two years
ago or are not "restricted securities" because they were
acquired in the market or under a registration statement under
the Securities Act.
"Restricted securities" may be sold:
(1) under a prospectus under an effective registration
statement under the Securities Act,
(2) in compliance with the exemption provisions of Rule 144,
or
(3) under another exemption under the Securities Act.
Rule 144 permits sales of "restricted securities" by any person,
whether or not an affiliate, after one year. At that time, sales can be made
subject to this rule's volume and other limitations and after two years by
non-affiliates without adhering to Rule 144's volume or other limitations.
Shares of our common stock owned by our "affiliates" which are not "restricted
securities" may be sold at any time by complying with Rule 144's volume and
other limitations.
In general, an "affiliate" is a person with the power to manage and
direct our policies. The Securities and Exchange Commission has stated that,
generally, executive officers and directors of an entity are deemed affiliates
of the entity.
SELLING STOCKHOLDERS
We will issue the shares of common stock covered by this prospectus to
the selling stockholders pursuant to the private placements of Series D and E
preferred stock, an exchange agreement, a letter of credit reimbursement
agreement, common stock purchase agreement, a subordinated note purchase
agreement, settlement and mutual release agreement, debt forgiveness letter
agreements, various warrant agreements, partial settlement agreement, placement
agent arrangements, employment settlement agreements and lease letter agreement.
This prospectus covers the resale by the selling stockholders of:
o 28,717,500 shares of our common stock to be issued upon the
conversion of the Series D and E preferred stock, which amount
of shares is an estimate and is not a prediction of the actual
number of shares of common stock we will issue upon conversion
of the Series D and E preferred stock;
o 14,358,750 shares of our common stock to be issued upon the
exercise of the warrants issued pursuant to the Series D and E
private placements and the exchange agreement;
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<PAGE>
o 150,000 shares of our common stock to be issued upon the
exercise of the warrants issued pursuant to the letter of
credit reimbursement agreement;
o 500,000 shares of our common stock issued pursuant to the
common stock purchase agreement;
o 650,000 shares of our common stock issued pursuant to the
employment settlement agreements;
o 490,000 shares of our common stock to be issued upon exercise
of the warrants issued pursuant to the subordinated note
purchase agreement;
o 300,000 shares of our common stock to be issued upon exercise
of the warrants issued pursuant to the settlement and mutual
release agreement;
o 2,000,000 shares of our common stock issued pursuant to debt
forgiveness letter agreements;
o 1,506,073 shares of our common stock to be issued upon
exercise of the warrants issued pursuant to various warrant
agreements;
o 2,000,000 shares of our common stock issued pursuant to the
partial settlement agreement;
o 100,000 shares of our common stock to be issued upon exercise
of the warrants issued pursuant to the lease letter agreement;
o 2,253,750 shares of our common stock to be issued upon
exercise of warrants issued pursuant to placement agent
arrangements; and
o 666,667 shares of our common stock to be issue upon conversion
of convertible promissory notes.
We are registering the shares of common stock offered in this
prospectus with the Securities and Exchange Commission to permit public
secondary trading. As a result, the selling stockholders may offer all or part
of the shares for resale to the public from time to time.
The table on the following page lists information regarding the selling
stockholders' ownership of shares of our common stock, assuming the conversion
of the Series D and E preferred stock at 4,000 shares of common stock per share
of Series D preferred stock and 10,000 shares of common stock per share of
Series E preferred stock, and the exercise of all the warrants, and as adjusted
to reflect the sale of the shares of our common stock. Information concerning
the selling stockholders may change from time to time. To the extent that the
selling stockholders or any of their representatives advise us of changes, and
if required, we will report the changes in a supplement to this document. See
"Plan of Distribution". Except as set forth in this prospectus, to our
knowledge, no selling stockholder has held any position or office, or has had
any material relationship, with us or any parties related to us within the past
three years.
The number of shares of common stock indicated is an estimate and
includes 175% of the number of shares that would be issuable upon conversion of
1,200 shares of the Series D preferred stock and 1,161 shares of the Series E
preferred stock based on the closing price of the common stock when the
preferred stock was sold plus the shares issuable upon exercise of warrants
(which are subject to adjustment) evidencing the right to purchase shares of
common stock and issued in connection with the Series D and E private
placements. The
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<PAGE>
actual amount could be materially more than this estimated amount depending upon
factors that we cannot predict at this time.
The "Amount Offered" and "Amount Beneficially Owned Following Offering"
columns assume no sales are effected by the selling stockholders during the
offering period other than under this registration statement.
<TABLE>
<CAPTION>
Amount Amount Percentage
Beneficially Beneficially Beneficially
Owned Prior to Owned Owned
Offering (as of Amount Following Following
Name March 16, 1999) Offered Offering Offering
- -------------------------------------- ----------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C>
BALMORE FUNDS S.A. 3,937,500 (1) 5,250,000(2) 0 0
AUSTOST ANSTALT SCHAAN 3,937,500 (3) 5,250,000(2) 0 0
NESHER, INC. 1,050,000 (4) 1,312,500(5) 0 0
GUARANTEE & FINANCE CORP. 525,000 (6) 1,050,000(7) 0 0
HARRY J. SAAL TRUST UTA DATED 8,383,083 (8) 8,279,823(9) 103,260 (10) *
7/19/72
SAAL FAMILY CHARITABLE LEAD 1,490,017 (11) 866,250(11) 623,767 *
TRUST UTA DATED 2/25/98
MANOR INVESTMENT 131,250 (12) 131,250(12) 0 0
GUILHERME DUQUE 262,500 (13) 262,500(13) 0 0
MANCHESTER ASSET MANAGEMENT 1,562,500 (14) 1,968,750(15) 0 0
GILSTON CORPORATION, LTD. 1,312,500 (16) 2,218,750(17) 0 0
R.T. MERCER 681,250 (18) 656,250(18) 25,000 *
CASHCO FLP 525,000 (19) 525,000(19) 0 0
THE CUTTYHUNK FUND, LIMITED 2,625,000 (20) 2,625,000(20) 0 0
MIDDLETON SECURITIES, LTD. 682,500 (21) 682,500(21) 0 0
OLYMPUS SECURITIES, LTD. 3,208,750 (22) 3,168,750(23) 40,000 (24) *
NP PARTNERS 3,208,750 (22) 3,168,750(23) 40,000 (24) *
FILTER INTERNATIONAL CORP. 3,399,521 (25) 2,825,000(25) 574,521 2.5
BET TRUST 1,063,750 (26) 823,750(27) 240,000 1.2
PACIFIC INVESTMENTS TRUST 1,063,750 (28) 823,750(27) 240,000 1.2
GREENHAVEN INTERNATIONAL LTD. 262,500 (29) 262,500(29) 0 0
CARL C. PERKINS 131,250 (30) 131,250(30) 0 0
SKIP BRADEN 131,250 (31) 131,250(31) 0 0
AMERICAN INDUSTRIES, INC. 3,172,099 (32) 3,172,099(32) 0 0
ELLISON C. MORGAN 334,568 (33) 334,568(33) 0 0
CARMEL MOUNTAIN #8 ASSOCIATES, 50,000 (34) 50,000(34) 0 0
L.P.
CARMEL MOUNTAIN 50,000 (34) 50,000(34) 0 0
ENVIRONMENTAL LLC
SOFTWARE TECHNOLOGY, INC. 4,915,000 (35) 3,625,000(36) 1,290,000 (37) 5.7
DK CAPITAL LLC 1,063,750 (38) 823,750(39) 240,000 1.2
MARK OSMAN 152,300 (40) 80,000 72,300 (40) *
CARMINE J. BUA 40,000 (41) 40,000 0 0
GERRY BERG 235,000 (42) 40,000 195,000 (42) *
JOSEPH PFEUFFER 86,000 (43) 40,000 46,000 (43) *
CHRISTOPHER MCKEE 60,833 (44) 40,000 20,833 (44) *
DAVID CARVER 60,000 (45) 20,000 40,000 (45) *
PAUL BARBER 20,000 (46) 20,000 0 0
DALE RICHMOND 20,000 (47) 20,000 0 0
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<PAGE>
Amount Amount Percentage
Beneficially Beneficially Beneficially
Owned Prior to Owned Owned
Offering (as of Amount Following Following
Name March 16, 1999) Offered Offering Offering
- -------------------------------------- ----------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C>
DANIEL CALDWELL 128,000 (48) 20,000 108,000 *
ALAN HIER 1,575,000 (49) 1,575,000(49) 0 0
BRIAN DROR 262,500 (50) 262,500(50) 0 0
FRED NESSERI 0 25,000(51) 0 0
C. NIVEN BONAR 67,500 (52) 67,500 0 0
PAULINE M. BONAR 67,500 (53) 67,500 0 0
PHYLLIS A. LEONARDI 40,000 (54) 40,000 0 0
JOHN M. LEONARDI 40,000 (55) 40,000 0 0
FRANK J. LEONARDI, JR. 40,000 (56) 40,000 0 0
PATRICIA M. LEONARDI 40,000 (57) 40,000 0 0
HIRAM T. FRENCH 0 150,000(58) 0 0
J. STEVE TIRITILLI 5,000 (59) 5,000(59) 0 0
JOHN P. MULDER 5,000 (59) 5,000(59) 0 0
EDWARD W. SAVARESE 275,000 (60) 500,000(61) 287,500 (62) 1.5
BI COASTAL CONSULTING CORP. 650,000 (63) 650,000(63) 0 0
LIBRA FINANCE 752,250 (64) 752,250(64) 0 0
TALBIYA LTD. 331,500 (65) 331,500(65) 0 0
- ------------------------------
* Represents less than one percent.
</TABLE>
(1) The number of shares of common stock issuable pursuant to conversion of
Series D preferred stock is 2,625,000. Includes also 1,312,500 shares of
common stock issuable upon exercise of warrants. The natural person who
exercises control over these shares is Mr. Francois Morax.
(2) The number of shares of common stock issuable pursuant to conversion of
Series D preferred stock is 3,500,000, including 875,000 shares of common
stock issuable pursuant to conversion of Series D preferred stock which
would be issued within two business days of the declaration of
effectiveness by the SEC of the registration statement of which this
prospectus is a part. Includes also 1,750,000 shares of common stock
issuable upon the exercise of warrants, including 437,500 shares of
common stock issuable upon the exercise of warrants which would be issued
within two business days of the declaration of effectiveness by the SEC
of the registration statement of which this prospectus is a part.
(3) The number of shares of common stock issuable pursuant to conversion of
Series D preferred stock is 2,625,000. Includes also 1,312,500 shares of
common stock issuable upon the exercise of warrants. The natural person
who exercises control over these shares is Mr. Thomas Hackl.
(4) The number of shares of common stock issuable pursuant to conversion of
Series D stock is 525,000. The number of shares of common stock issuable
pursuant to conversion of Series E stock is 175,000. Includes also
350,000 shares of common stock issuable upon the exercise of warrants.
The material person who exercises control over these shares is Mr. John
Clarke.
(5) The number of shares of common stock issuable pursuant to conversion of
Series D preferred stock is 700,000, including 175,000 shares of common
stock issuable pursuant to conversion of Series D preferred stock which
would be issued within two business days of the declaration of
effectiveness by the SEC of the registration statement of which this
prospectus is a part. The number of shares of common stock issuable
pursuant to conversion of Series E is 175,000. Includes also 437,500
shares of common stock issuable upon the exercise of warrants, including
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<PAGE>
87,500 shares of common stock issuable upon the exercise of warrants
which would be issued within two business days of the declaration of
effectiveness by the SEC of the registration statement of which this
prospectus is a part.
(6) The number of shares of common stock issuable pursuant to conversion of
Series D preferred stock is 350,000. Includes also 175,000 shares of
common stock issuable upon the exercise of warrants. The material person
who exercises control over these shares is Mr. Ricardo Durling.
(7) The number of shares of common stock issuable pursuant to conversion of
Series D preferred stock is 700,000, including 350,000 shares of common
stock issuable pursuant to conversion of Series D preferred stock which
would be issued within two business days of the declaration of
effectiveness by the SEC of the registration statement of which this
prospectus is a part. Includes also 350,000 shares of common stock
issuable upon the exercise of warrants, including 175,000 shares of
common stock issuable upon the exercise of warrants which would be issued
within two business days of the declaration of effectiveness by the SEC
of the registration statement of which this prospectus is a part.
(8) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock in 4,322,500. Includes also 3,957,323 shares of
common stock issuable upon the exercise of warrants. Includes also
100,000 shares of common stock issuable upon the conversion of stock
options. The natural person who exercises control over these shares is
Harry J. Saal, the Trustee of the Harry J. Saal Trust UTA dated 7/19/72
and our Chairman of the Board of Directors.
(9) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock in 4,322,500. Includes also 3,957,323 shares of
common stock issuable upon the exercise of warrants.
(10) Includes 100,000 shares of common stock issuable upon the exercise of
stock options.
(11) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 577,500. Includes also 288,750 shares of
common stock issuable upon the exercise of warrants. The natural person
who exercises control over these shares is Leonard J. Shustek, the
Trustee of the Saal Family Charitable Lead Trust UTA Dated 2/25/98.
(12) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 87,500. Includes also 43,750 shares of common
stock issuable upon the exercise of warrants.
(13) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 175,000. Includes also 87,500 shares of
common stock issuable upon the exercise of warrants.
(14) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 875,000. Includes also 437,500 shares of
common stock issuable upon the exercise of warrants. The natural person
who exercises control over these shares is Mr. Anthony L.M. Inder Rieden.
Manchester Asset Management has been retained by us for consulting
services within the last three years.
(15) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 1,312,500, including 437,500 shares of common
stock issuable pursuant to conversion of Series E preferred stock which
would be issued within two business days of the declaration of
effectiveness by the SEC of the registration statement of which this
prospectus is a part. Includes also 656,250 shares of common stock
issuable upon the exercise of warrants, including 218,750 shares of
common stock issuable upon the exercise of warrants which would be issued
within two business days of the declaration of effectiveness by the SEC
of the registration statement of which this prospectus is a part.
(16) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 875,000. Includes also 687,500 shares of
common stock issuable upon the exercise of warrants. The natural person
who exercises control over these shares is Ms. Dawn Davies.
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<PAGE>
(17) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 1,312,500, including 437,500 shares of common
stock issuable pursuant to conversion of Series E preferred stock which
would be issued within two business days of the declaration of
effectiveness by the SEC of the registration statement of which this
prospectus is a part. Includes also 906,250 shares of common stock
issuable upon the exercise of warrants, including 218,750 shares of
common stock issuable upon the exercise of warrants which would be issued
within two business days of the declaration of effectiveness by the SEC
of the registration statement of which this prospectus is a part.
(18) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 437,500. Includes also 218,750 shares of
common stock issuable upon the exercise of warrants.
(19) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 350,000. Includes also 175,000 shares of
common stock issuable upon the exercise of warrants.
(20) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 1,750,000. Includes also 875,000 shares of
common stock issuable upon the exercise of warrants. The natural person
who exercises control over these shares is Mr. Christopher Lewis.
(21) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 455,000. Includes also 227,500 shares of
common stock issuable upon the exercise of warrants.
(22) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 2,012,500. Includes also 1,196,250 shares of
common stock issuable upon the exercise of warrants. The 2,012,500 shares
of common stock issuable pursuant to conversion of Series E preferred
stock and 1,006,250 of the shares of common stock issuable upon the
exercise of warrants would only become beneficially owned by this
investor if the terms and conditions of an exchange agreement, dated
February 19, 1999, by and among Olympus Securities, Ltd., NP Partners and
us are met. As of March 16, 1999 the terms and conditions of this
exchange agreement had not been met and therefore the shares of common
stock issuable pursuant to the exchange agreement had not been issued and
accordingly were not beneficially owned by this investor. Citadel Limited
Partnership is the managing general partner of NP Partners and the
trading manager of Olympus Securities, Ltd. and consequently has voting
control and investment discretion over securities held by NP Partners and
Olympic Securities, Ltd. The ownership for each of Olympus Securities,
Ltd. and NP Partners does not include the ownership information for the
other entities. Citadel Limited Partnership disclaims beneficial
ownership of the securities held by NP Partners and Olympus Securities,
Ltd. Each of NP Partners and Olympic Securities, Ltd. disclaims
beneficial ownership of the securities held by the other entities.
(23) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 2,012,500. Includes also 1,156,250 shares of
common stock issuable upon the exercise of warrants. The 2,012,500 shares
of common stock issuable pursuant to conversion of Series E preferred
stock and 1,006,250 of the shares of common stock issuable upon the
exercise of warrants would only become beneficially owned by this
investor if the terms and conditions of an exchange agreement, dated
February 19, 1999, by and among Olympus Securities, Ltd., NP Partners and
us are met. As of March 16, 1999 the terms and conditions of this
exchange agreement had not been met and therefore the shares of common
stock issuable pursuant to the exchange agreement had not been issued and
accordingly were not beneficially owned by this investor.
(24) Includes 40,000 shares of common stock issuable upon the exercise of
warrants.
(25) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 1,750,000. Includes also 1,075,000 shares of
common stock issuable upon the exercise of warrants. The material person
who exercises control over these shares is Mr. A.C. Davies.
(26) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 87,500. Includes also 43,750 shares of common
stock issuable upon the exercise of warrants issued to BET Trust. The
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<PAGE>
natural person who exercises control over these shares is Frank
Kavanaugh, the Trustee of the BET Trust and a former director and officer
of ours as well as a current employee of ours. Includes also 430,000
shares of common stock beneficially owned by DK Capital LLC of whom Frank
Kavanaugh is President and A.L. Dubrow is Chairman of the Board and of
which 70,000 shares of common stock are issuable upon the exercise of
warrants. Furthermore, includes also 175,000 shares of common stock
issuable pursuant to conversion of Series E preferred stock and 87,500
shares of common stock issuable upon the exercise of warrants
beneficially owned by Pacific Investments Trust. Includes also 240,000
shares of common stock beneficially owned by A.L. Dubrow.
(27) Includes also 175,000 shares of common stock issuable pursuant to
conversion of Series E preferred stock and 87,500 shares of common stock
issuable upon the exercise of warrants beneficially owned by Pacific
Investments Trust, of which the children of Frank Kavanaugh are the
beneficial owners. Furthermore, includes also 87,500 shares of common
stock issuable pursuant to conversion of Series E preferred stock and
43,750 shares of common stock issuable upon the exercise of warrants
beneficially owned by BET Trust, of which Frank Kavanaugh is Trustee.
(28) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 175,000. Includes also 87,500 shares of
common stock issuable upon the exercise of warrants. . The natural person
who exercises control over the shares is George Krajacic. Furthermore,
includes also 87,500 shares of common stock issuable pursuant to
conversion of Series E preferred stock and 43,750 shares of common stock
issuable upon the exercise of warrants beneficially owned by BET Trust,
of which Frank Kavanaugh is Trustee. In addition, includes also 430,000
shares of common stock and 70,000 shares of common stock issuable upon
the exercise of warrants beneficially owned by DK Capital LLC.
(29) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 175,000. Includes also 87,500 shares of
common stock issuable upon the exercise of warrants.
(30) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 87,500. Includes also 43,750 shares of common
stock issuable upon the exercise of warrants. Carl C. Perkins is a former
general manager of NewGen Imaging Systems, Incorporated, a subsidiary of
ours, having resigned in October 1997.
(31) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 87,500. Includes also 43,750 shares of common
stock issuable upon the exercise of warrants.
(32) Includes 340,000 shares of common stock issuable upon exercise of
warrants. Includes also 432,099 shares of common stock issuable upon
conversion of a convertible subordinated promissory note. The natural
person who exercises control over these shares is Mr. Howard Hedinger.
The information contained in this footnote is based solely upon the
information contained in a Schedule 13 D/A dated April 5, 1999 filed with
the SEC and the Company by American Industries, Inc.
(33) Includes 234,568 shares of common stock issuable upon conversion of a
convertible subordinated promissory note.
(34) Includes 50,000 shares of common stock issuable upon the exercise of
warrants.
(35) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 1,750,000. Includes 1,045,000 shares of
common stock issuable upon the exercise of warrants.
(36) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 1,750,000. Includes also 875,000 shares of
common stock issuable upon the exercise of warrants.
(37) Includes 170,000 shares of common stock issuable upon the exercise of
warrants.
(38) Includes 70,000 shares of common stock issuable upon the exercise of
warrants issued to DK Capital LLC. Frank Kavanaugh, the President of DK
Capital LLC, is a former director and officer of ours and is a current
employee of ours. A.L. Dubrow, Chairman of the Board of Directors of DK
Capital LLC, is a current director and employee of
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ours and is the beneficial owner of 240,000 shares of common stock.
Includes also 175,000 shares of common stock issuable pursuant to
conversion of Series E preferred stock and 87,500 shares of common stock
issuable upon the exercise of warrants beneficially owned by the Pacific
Investments Trust, of which the children of Frank Kavanaugh are the
beneficial owners. Furthermore, includes also 87,500 shares of common
stock issuable pursuant to conversion of Series E preferred stock and
43,750 shares of common stock issuable upon the exercise of warrants
beneficially owned by BET Trust, of which Frank Kavanaugh is Trustee.
(39) Includes 70,000 shares of common stock issuable upon the exercise of
warrants to DK Capital LLC. Frank Kavanaugh, the President of DK Capital
LLC, is a former director and officer of ours and is a current employee
of ours. A.L. Dubrow, Chairman of the Board of Directors of DK Capital
LLC, is a current director and employee of ours and the beneficial owner
of 240,000 shares of common stock. Includes also 175,000 shares of common
stock issuable pursuant to conversion of Series E preferred stock and
87,500 shares of common stock issuable upon the exercise of warrants
beneficially owned by Pacific Investments Trust, of which the children of
Frank Kavanaugh are the beneficial owners. Furthermore, includes also
87,500 shares of common stock issuable pursuant to conversion of Series E
preferred stock and 43,750 shares of common stock issuable upon the
exercise of warrants beneficially owned by BET Trust, of which Frank
Kavanaugh is Trustee.
(40) Includes 70,000 shares of common stock issuable upon the exercise of
warrants. Mark A. Osman has been retained by us as outside legal counsel
on various matters and at various times and our subsidiaries within the
past three years.
(41) Carmine J. Bua has been retained by us as outside legal counsel on
various matters within the past four years.
(42) Includes 190,000 shares of common stock issuable upon the exercise of
warrants. Gerry Berg was our Vice President of Operations and acting
chief financial officer from February 1998 to August 1998, and served as
our Senior Vice President of Worldwide Business Development and acting
Secretary from August 1998 to February 1999.
(43) Includes 45,000 shares of common stock issuable upon the exercise of
warrants. Joseph J. Pfeuffer currently is our Senior Vice President of
Engineering.
(44) Includes 20,833 shares of common stock issuable upon the exercise of
warrants. Christopher McKee currently is our Vice President of Finance
and Operations.
(45) Includes 40,000 shares of common stock issuable upon the exercise of
warrants. David Carver is a member of our Board of Directors.
(46) Paul Barber currently is our Director of Sales for North America.
(47) Dale Richmond currently is our Vice President of Marketing.
(48) Daniel Caldwell currently is the Vice President of our Software Products
Division.
(49) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 175,000. The number of shares of common stock
issuable pursuant to conversion of Series E preferred stock is 1,050,000.
Includes also 525,000 shares of common stock issuable upon the exercise
of warrants.
(50) The number of shares of common stock issuable pursuant to conversion of
Series E preferred stock is 175,000. Includes up to a maximum of 87,500
shares of common stock issuable upon the exercise of warrants.
(51) Includes 25,000 shares of common stock acquired after March 16, 1999.
(52) C. Niven Bonar is a son of Brian Bonar, our current Chief Executive
Officer and President.
(53) Pauline M. Bonar is a daughter of Brian Bonar, our current Chief
Executive Officer and President.
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(54) Phyllis A. Leonardi is the daughter of Frank J. Leonardi, the Senior Vice
President of our Sales and Marketing Division, and the mother of Frank J.
Leonardi, Jr., one of our inside sales support representatives.
(55) John M. Leonardi is a son of Frank J. Leonardi, the Senior Vice President
of our Sales and Marketing Division, and a brother of Frank J. Leonardi,
Jr., one of our inside sales support representatives.
(56) Frank J. Leonardi, Jr. is one of our inside sales support representatives
and a son of Frank J. Leonardi, the Senior Vice President of our Sales
and Marketing Division.
(57) Patricia M. Leonardi is a daughter of Frank J. Leonardi, the Senior Vice
President of our Sales and Marketing Division, and a sister to Frank J.
Leonardi, Jr., one of our inside sales support representatives.
(58) Includes 150,000 shares of common stock acquired after March 16, 1999.
Hiram T. French was the President of Color Solutions, Inc., one of our
subsidiaries.
(59) Includes 5,000 shares of common stock issuable upon the exercise of
warrants.
(60) Includes 275,000 shares of common stock issuable upon the exercise of
warrants. Edward W. Savarese has been our Chief Executive Officer, an
Executive Vice President for Strategic Business Affairs and a Manager of
Strategic Business Affairs for us and was a former member of our Board of
Directors.
(61) Includes 500,000 shares of common stock acquired after March 16, 1999.
(62) Includes 287,500 shares of common stock issuable upon the exercise of
warrants beneficially owned by Dr. Savarese as of April 20, 1999.
(63) Includes 650,000 shares of common stock issuable upon the exercise of
warrants. Bi Coastal Consulting Corp. has been retained by us for
consulting services within the last three years.
(64) Includes 752,250 shares of common stock issuable upon the exercise of
warrants. Libra Finance has been retained by us for consulting services
within the last three years.
(65) Includes 331,500 shares of common stock issuable upon the exercise of
warrants. Talbiya Ltd. has been retained by us for consulting services
within the last three years.
DESCRIPTION OF SECURITIES
SERIES D AND E PREFERRED STOCK
In January and February 1999, we entered into separate securities
purchase agreements to sell up to 1,200 shares of Series D preferred stock with
accompanying Series D warrants and 1,250 shares of Series E preferred stock with
accompanying Series E warrants. Each share of Series D and E preferred stock
have a stated value, or "liquidation preference", of $2,000 and $5,000,
respectively, which means, for example, that if we go bankrupt and all of our
assets are sold, the holders of each share would be entitled to a preferential
payment of $2,000 and $5,000, respectively, before holders of our common stock
would receive any of the proceeds from the bankruptcy sale. Certificates of
designation filed with the Secretary of State of Delaware govern the terms and
conditions of the Series D and E preferred stock. The following is a brief
description of key terms of the Series D and E preferred stock.
DIVIDENDS
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The holders of the Series D and E preferred stock are not entitled to
receive any dividends.
CONVERSION RIGHTS
The holders of Series D and E preferred stock shall have the right to
convert their shares of preferred stock as follows:
(1) the Series D and E preferred stock may be converted at any time
after the date on which the preferred stock was originally issued at the "market
price", which is the closing bid price per share of common stock as quoted on
The Nasdaq SmallCap Market, or other market, exchange or quotation service on
which our common stock is being quoted;
(2) in regard to the Series D preferred stock, up to 1,240,560 shares
of our common stock may be converted at any time before "stockholder approval"
at a conversion price of the lesser of (a) $0.50 and (b) an amount equal to 70%
of the average market price of the three trading days with the lowest market
prices in the 30 trading days immediately preceding an investor's "notice of
conversion", which is the notice given to us by an investor informing us of its
intention to convert its preferred stock; and
(3) in regard to the Series E preferred stock, up to 1,359,446 shares
of our common stock may be converted at any time before "stockholder approval"
at the conversion price of the lesser of (a) $0.50 and (b) an amount equal to
70% of average market price of the three trading days with the lowest market
prices in the last 30 trading days immediately preceding an investor's notice of
conversion.
"Stockholder approval" means in respect to sections (2) and (3)
directly above, the approval by a majority of the total votes cast on a proposal
of the issuance by us of shares of our common stock exceeding 20% of the shares
of our common stock outstanding before conversion of the preferred stock at a
meeting of our stockholders.
After stockholder approval, the number of shares of common stock into
which each share of the Series D and E preferred stock may be converted is
determined by dividing the respective liquidation preference of a share of
Series D and E preferred stock by an amount equal to the lesser of: (a) $0.50
and (b) an amount equal to 70% of the average market price of the three trading
days with the lowest market prices in the 30 trading days immediately preceding
and investor's notice of conversion.
We will reserve and keep available a sufficient number of authorized
shares of common stock to enable the conversion of the outstanding shares of
Series D and E preferred stock at one share of Series D preferred stock to 4,000
shares of our common stock and one share of Series E preferred stock to 10,000
shares of our common stock.
VOTING RIGHTS
Each of the Series D and E preferred stockholders has the right to
vote, except as otherwise required by Delaware law, on all matters which
stockholders of our common shares have a right to vote on. Each preferred
stockholder has a right to cast one vote for each whole share of our common
stock into which each preferred share held by that stockholder is convertible on
the prescribed record date for the determination of stockholders entitled to
vote on the matters at issue. However, no Series D stockholder is entitled to
vote more than 9.99% of the number of shares entitled to be voted on any single
matter at issue.
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PLAN OF DISTRIBUTION
The selling stockholders may offer their shares of common stock at
various times in one or more of the following transactions:
o On any U.S. securities exchange on which our common stock may be
listed at the time of such sale;
o In the over-the-counter market;
o In transactions other than on such exchanges or in the over-the-
counter market;
o In connection with short sales; or
o In a combination of any of the above transactions.
The selling stockholders may offer their shares of common stock at
prevailing market prices, at prices related to the prevailing market prices, at
negotiated prices or at fixed prices.
The selling stockholders may use broker-dealers to sell their shares of
common stock. If this occurs, broker-dealers will either receive discounts or
commission from the selling stockholder, or they will receive commissions from
the purchasers of shares of common stock for whom they acted as agents. These
brokers may act as dealers by purchasing any and all of the shares covered by
this prospectus either as agents for others or as principals for their own
accounts and reselling these securities under the prospectus.
The selling stockholders and any broker-dealers or other persons acting
on the behalf of parties that participate in the distribution of the shares may
be considered underwriters under the Securities Act. As such, any commissions or
profits they receive on the resale of the shares may be considered underwriting
discounts and commissions under the Securities Act.
As of the date of this prospectus, we are not aware of any agreement,
arrangement or understanding between any broker or dealer and any of the selling
stockholders with respect to the offer or sale of the shares under this
prospectus. If we become aware of any agreement, arrangement or understanding,
to the extent required under the Securities Act, we will file a supplemental
prospectus to disclose:
(1) the name of any of the broker-dealers;
(2) the number of shares involved;
(3) the price at which the shares are to be sold;
(4) the commissions paid or discounts or concessions
allowed to the broker-dealers, where applicable;
(5) that the broker-dealers did not conduct any
investigation to verify the information set out in
this prospectus, as supplemented; and
(6) other facts material to the transaction.
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The registration agreements relating to the Series D and E private
placements, the registration rights agreement relating to the settlement and
mutual release agreement and the subordinated note agreement have certain
reciprocal indemnification provisions between us and each selling stockholder to
indemnify each other against certain liabilities, including liabilities under
the Securities Act, which may be based upon, among other things, any untrue
statement or alleged untrue statement of a material fact or any omission or
alleged omission of a material fact. The letter of credit reimbursement
agreement provides that we must indemnify the selling stockholders party to that
agreement for certain liabilities caused by our failure to follow the terms and
conditions of that agreement.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file at the Securities and Exchange Commission's public
reference rooms in Washington, DC, New York, NY, and Chicago, IL. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further information
on the public reference rooms. Our Securities and Exchange Commission filings
are also available to the public from the Securities and Exchange Commission's
website at "http://www.sec.gov."
We have filed a registration statement on Form S-3 with the Securities
and Exchange Commission to register shares of our common stock. This prospectus
is part of that registration statement and, as permitted by the Securities and
Exchange Commission's rules, does not contain all of the information included in
the registration statement. For further information about us, this offering and
our common stock, you may refer to the registration statement and its exhibits
and schedules as well as the documents described below. You can review and copy
these documents at the public reference facilities maintained by the Securities
and Exchange Commission or on the Securities and Exchange Commission's website
as described above.
This prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement or incorporated in the registration statement by
reference.
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information we incorporate by reference is considered to be an important part of
this prospectus, and information that we file with the Securities and Exchange
Commission at a later date will automatically update or supersede this
information. We incorporate by reference the following documents as well as any
future filing we will make with the Securities and Exchange Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
1. Our annual report on Form 10-K for the fiscal year ended June 30,
1998;
2. Our definitive proxy statement on Schedule 14A for the annual
meeting of shareholders scheduled for on or about May 27, 1999;
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3. Our quarterly reports on Form 10-Q for the periods ended September
30, 1998 and December 31, 1998;
4. Our current report on Form 8-K filed on February 26, 1999; and
5. Our registration statement on Form 8-A containing the description
of our common stock, filed on July 6, 1994.
You may request a copy of these filings, at no cost, by writing to:
Imaging Technologies Corporation, 15175 Innovation Drive, San Diego, CA
92128-3401 Attention: Philip J. Englund, Senior Vice President and General
Counsel.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law allows companies to
indemnify their directors and officers against expenses, judgments, fines and
amounts paid in settlement under the conditions and limitations described in the
law.
Article Seventh of our certificate of incorporation provides that the
registrant shall indemnify all persons whom it may indemnify pursuant to Section
145 of the Delaware General Corporation Law to the full extent permitted by
Section 145. Article Ninth of our certificate of incorporation provides that no
director of our shall be personally liable to the corporation or its
stockholders for monetary damages for any breach of fiduciary duty by the
director as a director, except for a breach of the director's duty of loyalty to
the corporation or its stockholders, for any acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, an
unlawful stock purchase or payment of a dividend under Delaware law or for any
transaction from which the director derived an improper personal benefit.
Article X of our bylaws provides that the registrant shall indemnify
its officers, directors and employees. The rights to indemnity thereunder
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors, and administrators
of the person. In addition, expenses incurred by a director or officer in
defending any action, suit or proceeding by reason of the fact that he or she is
or was a director or officer of the registrant shall be paid by the registrant
unless such officer, director or employee is adjudged liable for negligence or
misconduct in the performance of his or her duties.
We have entered into indemnification agreements with all of our
officers and directors. In some cases, the provisions of these indemnification
agreements may be broader than the specific indemnification provisions contained
in our certificate of incorporation or otherwise permitted under Delaware law.
Each indemnification agreement may require us to indemnify an officer or
director against liabilities that may arise by reason of his status or service
as an officer or director, or against liabilities arising from the director's
willful misconduct of a culpable nature.
We maintain a directors and officers liability policy with Carolina
Casualty that contains an aggregate limit of liability of $5,000,000.
Furthermore, we maintain an excess directors and officers liability policy with
Philadelphia Insurance Company for liability in excess of $5,000,000 that
contains an aggregate limit of liability of $5,000,000 and also an excess
directors and officers liability policy with Fireman's Fund for liability in
excess of $10,000,000 that contains an aggregate limit of $5,000,000. All of
these policies expire on October 1, 1999.
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Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to these provisions, or otherwise, we have been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
LEGAL MATTERS
Parker Chapin Flattau & Klimpl, LLP, New York, New York will pass upon
the validity of the securities offered hereby.
EXPERTS
The audited consolidated financial statements, including the related
notes to those statements, for the year ended June 30, 1998 incorporated by
reference in this prospectus and elsewhere in the registration statement, have
been so incorporated in reliance on the report (which contains an explanatory
paragraph relating to the ability of our company to continue as a going concern,
as described in Note 1 to the financial statements) of Boros & Farrington APC,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
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- --------------------------------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER,
SALESPERSON OR ANY OTHER PERSON TO GIVE
ANY INFORMATION OR TO REPRESENT ANYTHING
NOT CONTAINED IN THIS PROSPECTUS. YOU
MUST NOT RELY ON ANY UNAUTHORIZED 53,692,740 SHARES OF COMMON STOCK
INFORMATION. THIS PROSPECTUS DOES NOT
OFFER TO SELL OR BUY ANY SHARES IN ANY
JURISDICTION WHERE IT IS UNLAWFUL. THE
INFORMATION IN THIS PROSPECTUS IS
CURRENT AS OF MAY __, 1999.
IMAGING TECHNOLOGIES
TABLE OF CONTENTS CORPORATION
PAGE
Risk Factors 3
Forward-Looking Statements 10
Use of Proceeds 10 ------------------
Dividend Policy 10
Dilution 10 PROSPECTUS
Shares Eligible For Future Sale 12 ------------------
Selling Stockholders 13
Description of Securities 21
Plan of Distribution 23
Where You Can Find More Information 24
Indemnification of Directors
and Officers 25
Legal Matters 26
Experts 26 May __, 1999
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses which will be paid
by us in connection with the issuance and distribution of the securities being
registered on this registration statement. The selling stockholders will not
incur any of the expenses set forth below. All amounts shown are estimates.
Securities and Exchange Commission Registration Fee $ 16,328
Legal Fees and Expenses 30,000
Accounting Fees and Expenses 5,000
Miscellaneous Expenses 5,000
Total 56,328
================
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
provides, in general, that a corporation incorporated under the laws of the
State of Delaware, such as the registrant, may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (other than a derivative action by or in
the right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another enterprise, against expenses (including attorney's fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful. In the case of a derivative action, a Delaware corporation
may indemnify any such person against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or any other court in which such
action was brought determines such person is fairly and reasonable entitled to
indemnity for such expenses.
Our certificate of incorporation provides that directors shall not be
personally liable for monetary damages to our company or our stockholders for
breach of fiduciary duty as a director, except for liability resulting from a
breach of the director's duty of loyalty to our company or our stockholders,
intentional misconduct or willful violation of law, actions or inactions not in
good faith, an unlawful stock purchase or payment of a dividend under Delaware
law, or transactions from which the director derives improper personal benefit.
Such limitation of liability does not affect the availability of equitable
remedies such as injunctive relief or rescission. Our certificate of
incorporation also authorizes us to indemnify our officers, directors and other
agents to the fullest extent permitted under Delaware law. Our bylaws provide
that the registrant shall indemnify our officers, directors and employees. The
rights to indemnity thereunder continue as to a person who has ceased
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to be a director, officer, employee or agent and shall inure to the benefit of
the heirs, executors, and administrators of the person. In addition, expenses
incurred by a director or officer in defending any action, suit or proceeding by
reason of the fact that he or she is or was a director or officer of our company
shall be paid by the registrant unless such officer, director or employee is
adjudged liable for negligence or misconduct in the performance of his or her
duties.
This means that our certificate of incorporation provides that a
director is not personally liable for monetary damages to us or our stockholders
for breach of his or her fiduciary duties as a director. A director will be held
liable for a breach of his or her duty of loyalty to us or our stockholders, his
or her intentional misconduct or willful violation of law, actions or in actions
not in good faith, an unlawful stock purchase or payment of a dividend under
Delaware law, or transactions from which the director derives an improper
personal benefit. This limitation of liability does not affect the availability
of equitable remedies against the director including injunctive relief or
rescission. Our certificate of incorporation authorizes us to indemnify our
officers, directors and other agent to the fullest extent permitted under
Delaware law. We have entered into indemnification agreements with all of our
officers and directors. In some cases, the provisions of these indemnification
agreements may be broader than the specific indemnification provisions contained
in our certificate of incorporation or otherwise permitted under Delaware law.
Each indemnification agreement may require us to indemnify an officer or
director against liabilities that may arise by reason of his status or service
as an officer or director, or against liabilities arising from the director's
willful misconduct of a culpable nature.
We maintain a directors and officers liability policy with Carolina
Casualty that contains an aggregate limit of liability of $5,000,000.
Furthermore, we maintain an excess directors and officers liability policy with
Philadelphia Insurance Company for liability in excess of $5,000,000 that
contains an aggregate limit of liability of $5,000,000 and also an excess
directors and officers liability policy with Fireman's Fund for liability in
excess of $10,000,000 that contains an aggregate limit of $5,000,000. All of
these policies expire on October 1, 1999.
ITEM 16. EXHIBITS.
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- -------------------------------------------------------------------
4.1 Certificate of Designation, Powers, Preferences and Rights of the
Series of Preferred Stock to be Designated Series D Convertible
Preferred Stock. Incorporated by reference to Exhibit 4.1 to the
Company's Report on Form 10-Q for the period ended December 31,
1998.
4.2 Certificate of Designation, Powers, Preferences and Rights of the
Series of Preferred Stock to be Designated Series E Convertible
Preferred Stock. Incorporated by reference to Exhibit 4.2 to the
Company's Report on Form 10-Q for the period ended December 31,
1998.
4.3 Letter of Credit Reimbursement Agreement. Incorporated by reference
to Exhibit 10.2 to the Company's Report on Form 10-Q for the period
ended December 31, 1998.
4.4 Securities Purchase Agreement. Incorporated by reference to Exhibit
10.6 to the Company's Report on Form 10-Q for the period ended
December 31, 1998.
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EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- -------------------------------------------------------------------
4.5 Registration Rights Agreement. Incorporated by reference to Exhibit
10.4 to the Company's Report on Form 10-Q for the period
ended December 31, 1998.
4.6 Registration Rights Agreement. Incorporated by reference to Exhibit
10.7 to the Company's Report on Form 10-Q for the period ended
December 31, 1998.
4.7 Exchange Agreement. Incorporated by reference to Exhibit 10.9 to
the Company's Report on Form 10-Q for the period ended December 31,
1998.
4.8 Form of Warrant. Incorporated by reference to Exhibit 10.5 to the
Company's Report on Form 10-Q for the period ended December 31,
1998.
4.9* Form of Warrant to Purchase 50,000 shares of Common Stock of ITEC
at $1.50 per share, dated March 5, 1999, between ITEC and Carmel
Mountain Environmental L.L.C.
4.10* Form of Warrant to Purchase 50,000 Shares of Common Stock of
ITEC at $1.50 per share, dated March 5, 1999, between ITEC and
Carmel Mountain #8 Associates, L.P.
4.11* Lease Letter Agreement, dated March 1, 1999, by and among ITEC,
Carmel Mountain #8 Associates, L.P. and Carmel Mountain
Environmental L.L.C.
4.12* Form of Warrant to Purchase 5,000 Shares of Common Stock of
ITEC at $1.50 per share, dated March 5, 1999 between ITEC and
John P.
Mulder.
4.13* Form of Warrant to Purchase 5,000 Shares of Common Stock of ITEC
at $1.50 per share, dated March 5, 1999 between ITEC and Steve
Tiritilli.
4.14* Partial Settlement Agreement, dated March 30, 1999, by and
between ITEC and the party listed on the signature page
thereto.
4.15* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Software Technology, Inc.
4.16* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Mark A. Osman.
4.17* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Carmine J. Bua, III.
4.18* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Frank Leonardi.
4.19* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Brian Bonar.
4.20* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and A.L. Dubrow, including assignment of rights
documentation.
4.21* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Frank Kavanaugh, including assignment of rights
documentation.
4.22* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Gerry Berg.
4.23* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Joseph Pfeuffer.
4.24* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Christopher McKee.
4.25* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and David Carver.
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EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- -------------------------------------------------------------------
4.26* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Paul Barber.
4.27* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Dale Richmond.
4.28+ Debt Forgiveness Agreement, dated December 30, 1998, by and
between ITEC and Daniel Caldwell.
4.29 Common Stock Purchase Agreement. Incorporated by reference to
Exhibit 10.1 to the Company's Report on Form 10-Q for the period
ended September 30, 1998.
4.30 Form of Subordinated Note Purchase Agreement. Incorporated by
reference to Exhibit 10.2 to the Company's Report on Form 10-Q for
the period ended September 30, 1998.
4.31 Settlement and Mutual Release Agreement. Incorporated by reference
to Exhibit 10.7 to the Company's Report on Form 10-Q for the period
ended September 30, 1998.
4.32 Registration Rights Agreement. Incorporated by reference to Exhibit
10.6 to the Company's Report on Form 10-Q for the period ended
September 30, 1998.
4.33 Form of Convertible Subordinated Promissory Note. Incorporated by
reference to Exhibit 10.4 to the Company's Report on Form 10-Q for
the period ended September 30, 1998.
4.34 Form of Common Stock Purchase Warrant. Incorporated by reference
to Exhibit 10.12 to the Company's Report on Form 10-Q for the
period ended September 30, 1998.
4.35 Form of Common Stock Purchase Warrant. Incorporated by reference
to Exhibit 10.9 to the Company's Report on Form 10-Q for the period
ended September 30, 1998.
4.36 Form of Common Stock Purchase Warrant. Incorporated by reference
to Exhibit 10.5 to the Company's Report on Form 10-Q for the period
ended September 30, 1998.
4.37 Form of Standard Warrant Agreement. Incorporated by reference to
the Company's Report on Form 10-KSB for the period ended June 30,
1998.
4.38+ Employment Settlement Agreement, dated April 1999, by and between
ITEC and Hiram French
4.39+ Employment Settlement Agreement, dated April, 1999, by and
between ITEC and Edward W. Savarese
5.1+ Opinion of Parker Chapin Flattau & Klimpl, LLP
23.1+ Consent of Parker Chapin Flattau & Klimpl, LLP (included in Exhibit
5.1)
23.2* Consent of Boros & Farrington APC
24.1 Powers of Attorney of certain directors and officers of Imaging
Technologies Corporation incorporated by reference to page II-8 of
this filing.
- -------------------------------------------
* Filed herewith.
+ To be filed by amendment.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in the volume
of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424 (b) if, in the aggregate the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer, or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
of controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
II-5
<PAGE>
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bonafide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on April 29, 1999.
IMAGING TECHNOLOGIES CORPORATION
By: /s/ Brian Bonar
---------------------------------------
Brian Bonar
President and Chief Executive Officer
II-7
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below
constitutes and appoints Brian Bonar or Philip Englund, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement (or any other registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933), and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or either of them or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated.
Signature Title Date
--------- ----- -----
/s/ Harry J. Saal Chairman of the Board April 29, 1999
- ----------------------------
Harry J. Saal
President, Chief Executive
Officer and Director (Acting April 29, 1999
/s/ Brian Bonar Chief Financial Officer)
- ----------------------------
Brian Bonar
/s/ A.L. Dubrow Director April 29, 1999
- ----------------------------
A.L. Dubrow
/s/ David M. Carver Director April 29, 1999
- ----------------------------
David M. Carver
Director April __, 1999
- ----------------------------
Warren T. Lazarow
/s/ Philip Englund Senior Vice President, General April 29, 1999
- ---------------------------- Counsel and Secretary
Philip Englund
/s/ Christopher W. McKee Vice President Finance and April 29, 1999
- ----------------------------- Operations (Chief Accounting
Christopher W. McKee Officer)
II-8
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- -------------------------------------------------------------
4.1 Certificate of Designation, Powers, Preferences and Rights of the
Series of Preferred Stock to be Designated Series D Convertible
Preferred Stock. Incorporated by reference to Exhibit 4.1 to the
Company's Report on Form 10-Q for the period ended December 31,
1998.
4.2 Certificate of Designation, Powers, Preferences and Rights of the
Series of Preferred Stock to be Designated Series E Convertible
Preferred Stock. Incorporated by reference to Exhibit 4.2 to the
Company's Report on Form 10-Q for the period ended December 31,
1998.
4.3 Letter of Credit Reimbursement Agreement. Incorporated by reference
to Exhibit 10.2 to the Company's Report on Form 10-Q for the period
ended December 31, 1998.
4.4 Securities Purchase Agreement. Incorporated by reference to Exhibit
10.6 to the Company's Report on Form 10-Q for the period ended
December 31, 1998.
4.5 Registration Rights Agreement. Incorporated by reference to Exhibit
10.4 to the Company's Report on Form 10-Q for the period ended
December 31, 1998.
4.6 Registration Rights Agreement. Incorporated by reference to Exhibit
10.7 to the Company's Report on Form 10-Q for the period ended
December 31, 1998.
4.7 Exchange Agreement. Incorporated by reference to Exhibit 10.9 to the
Company's Report on Form 10-Q for the period ended December 31,
1998.
4.8 Form of Warrant. Incorporated by reference to Exhibit 10.5 to the
Company's Report on Form 10-Q for the period ended December 31,
1998.
4.9* Form of Warrant to Purchase 50,000 shares of Common Stock of ITEC
at $1.50 per share, dated March 5, 1999, between ITEC and Carmel
Mountain Environmental L.L.C.
4.10* Form of Warrant to Purchase 50,000 Shares of Common Stock of
ITEC at $1.50 per share, dated March 5, 1999, between ITEC and
Carmel Mountain #8 Associates, L.P.
4.11* Lease Letter Agreement, dated March 1, 1999, by and among ITEC,
Carmel Mountain #8 Associates, L.P. and Carmel Mountain
Environmental L.L.C.
4.12* Form of Warrant to Purchase 5,000 Shares of Common Stock of
ITEC at $1.50 per share, dated March 5, 1999 between ITEC and
John P.
Mulder.
4.13* Form of Warrant to Purchase 5,000 Shares of Common Stock of ITEC
at $1.50 per share, dated March 5, 1999 between ITEC and Steve
Tiritilli.
4.14* Partial Settlement Agreement, dated March 30, 1999, by and
between ITEC and the party listed on the signature page
thereto.
E-1
<PAGE>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- -------------------------------------------------------------------
4.15* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Software Technology, Inc.
4.16* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Mark A. Osman.
4.17* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Carmine J. Bua, III.
4.18* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Frank Leonardi.
4.19* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Brian Bonar.
4.20* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and A.L. Dubrow, including assignment of rights
documentation.
4.21* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Frank Kavanaugh, including assignment of rights
documentation.
4.22* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Gerry Berg.
4.23* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Joseph Pfeuffer.
4.24* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Christopher McKee.
4.25* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and David Carver.
4.26* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Paul Barber.
4.27* Debt Forgiveness Agreement, dated as of December 30, 1998, by and
between ITEC and Dale Richmond.
4.28+ Debt Forgiveness Agreement, dated December 30, 1998, by and
between ITEC and Daniel Caldwell.
4.29 Common Stock Purchase Agreement. Incorporated by reference to
Exhibit 10.1 to the Company's Report on Form 10-Q for the period
ended September 30, 1998.
4.30 Form of Subordinated Note Purchase Agreement. Incorporated by
reference to Exhibit 10.2 to the Company's Report on Form 10-Q for
the period ended September 30, 1998.
4.31 Settlement and Mutual Release Agreement. Incorporated by reference
to Exhibit 10.7 to the Company's Report on Form 10-Q for the period
ended September 30, 1998.
4.32 Registration Rights Agreement. Incorporated by reference to Exhibit
10.6 to the Company's Report on Form 10-Q for the period ended
September 30, 1998.
4.33 Form of Convertible Subordinated Promissory Note. Incorporated by
reference to Exhibit 10.4 to the Company's Report on Form 10-Q for
the period ended September 30, 1998.
4.34 Form of Common Stock Purchase Warrant. Incorporated by reference
to Exhibit 10.12 to the Company's Report on Form 10-Q for the period
ended September 30, 1998.
E-2
<PAGE>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- -------------------------------------------------------------------
4.35 Form of Common Stock Purchase Warrant. Incorporated by reference
to Exhibit 10.9 to the Company's Report on Form 10-Q for the
period ended September 30, 1998.
4.36 Form of Common Stock Purchase Warrant. Incorporated by reference
to Exhibit 10.5 to the Company's Report on Form 10-Q for the period
ended September 30, 1998.
4.37 Form of Standard Warrant Agreement. Incorporated by reference to
the Company's Report on Form 10-KSB for the period ended June 30,
1998.
4.38+ Employment Settlement Agreement, dated April 1999, by and between
ITEC and Hiram French
4.39+ Employment Settlement Agreement, dated April, 1999, by and
between ITEC and Edward W. Savarese
5.1+ Opinion of Parker Chapin Flattau & Klimpl, LLP
23.1+ Consent of Parker Chapin Flattau & Klimpl, LLP (included in Exhibit
5.1)
23.2* Consent of Boros & Farrington APC
24.1 Powers of Attorney of certain directors and officers of Imaging
Technologies Corporation incorporated by reference to page II-8 of
this filing
- ----------------------------
* Filed herewith.
+ To be filed by amendment.
E-3
NEITHER THESE WARRANTS NOR THE SHARES ISSUABLE UPON THE EXERCISE OF THESE
WARRANTS HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THEY MAY NOT
BE TRANSFERRED EXCEPT PURSUANT TO REGISTRATION (OR AN EXEMPTION FROM
REGISTRATION) THEREUNDER. THESE WARRANTS HAVE BEEN ISSUED IN RELIANCE UPON THE
REPRESENTATION OF THE WARRANTHOLDER THAT THESE WARRANTS HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD THE RESALE OR OTHER DISTRIBUTION
OF THESE WARRANTS OR THE UNDERLYING SHARES. THE TRANSFER OF THESE WARRANTS IS
SUBJECT TO RESTRICTIONS CONTAINED HEREIN.
March 5, 1999
50,000 Warrants
IMAGING TECHNOLOGIES CORPORATION
COMMON STOCK PURCHASE WARRANTS
(Void after 5:00 p.m. California time, March 4, 2002)
Certificate Evidencing 150,000 Warrants
(One Warrant is required for the purchase of one share of Common Stock,
subject to adjustment as provided below)
This is to certify that, for value received and subject to the
conditions herein set forth, CARMEL MOUNTAIN ENVIRONMENTAL L.L.C., c/o Bruce E.
Tabb, Manager Member, 402 West Broadway, #2175, San Diego, CA 92101 (the
"Warrantholder") is entitled to purchase, at any time after 9:00 a.m. California
time on March 5, 1999, and in any event no later than 5:00 p.m. California time
on March 4, 2002 (the "Expiration Date"), such number of shares of Common Stock,
$0.005 par value, of Imaging Technologies Corporation, a Delaware corporation
(the "Company"), as shall equal the number of Warrants evidenced by this
Certificate (such shares purchasable upon exercise of the Warrants are herein
called the "Warrant Stock"), at $1.50 per share; provided that such right of
exercise shall be limited by the following vesting schedule:
(i) 50,000 underlying shares of the Warrants shall first vest and
become exercisable on the date of this Agreement herein
provided above; and
The amount per share specified above, as adjusted from time to time pursuant to
the provisions hereinafter set forth, is herein called the "Purchase Price."
1. (a) If the Company shall, prior to the exercise of these Warrants,
divide its outstanding shares of Common Stock by recapitalization,
reclassification or split-up thereof, or if the Company shall declare a stock
dividend or distribute shares of Common Stock to its stockholders, the number of
shares of Common Stock purchasable upon exercise of these Warrants immediately
prior to such subdivision shall be proportionately increased, and if the Company
shall at any time combine the outstanding shares of Common Stock by
recapitalization, reclassification or combination thereof, the number of shares
of Common Stock purchasable upon exercise of these Warrants
-1-
<PAGE>
immediately prior to such combination shall be proportionately decreased. Any
such adjustment to the number of shares shall be effective at the close of
business on the effective date of such subdivision or combination or if any
adjustment is the result of a stock dividend or distribution then the effective
date for such adjustment based thereon shall be the record date therefor.
(b) Whenever the number of shares of Common Stock purchasable
upon the exercise of these Warrants is required to be adjusted as provided in
this Section 1, the Purchase Price shall be adjusted (to the nearest cent) by
multiplying such Purchase Price immediately prior to such adjustment by a
fraction (x) the numerator of which shall be the number of shares of Common
Stock purchasable upon the exercise of these Warrants immediately prior to such
adjustment, and (y) the denominator of which shall be the number of shares of
Common Stock so purchasable immediately thereafter.
(c) In case of any reclassification of the outstanding shares
of Common Stock, other than a change covered by paragraph 1(a) hereof or which
solely affects the par value of such shares of Common Stock, or in the case of
any merger or consolidation of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or capital
reorganization of the outstanding shares of Common Stock), or in the case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved, the holder of these Warrants shall have the right thereafter (until
the expiration of the right of exercise of these Warrants) to receive upon the
exercise thereof, for the same aggregate Purchase Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property receivable upon such reclassification, capital
reorganization, merger or consolidation, or upon the dissolution following any
sale or other transfer, which a holder of the number of shares of Common Stock
of the Company would obtain upon exercise of these Warrants immediately prior to
such event; and if any reclassification also results in a change in shares of
Common Stock covered b paragraph 1(a), then such adjustment shall be made
pursuant to both paragraph 1(a) and this paragraph 1(c). The provisions of this
paragraph 1(c) shall similarly apply to successive reclassifications, or capital
reorganization, mergers or consolidations, sales or other transfers.
(d) When any adjustment is required to be made pursuant to
this Section 1, the Company, upon the subsequent written request of any holder
of the Warrants, shall promptly mail to said holder a certificate setting forth
the Purchase Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Such certificate shall also set forth, if
applicable, the kind and amount of stock or other securities or property into
which the Warrants shall be exercisable following the occurrence of any of the
events specified.
(e) The Company shall not be required upon the exercise of any
of the Warrants evidenced hereby to issue any fraction of shares, but shall make
any adjustment therefor in cash on the basis of the fair market value of any
such fractional interest as it shall appear on the public market
-2-
<PAGE>
for such shares, or, if there is no public market for such shares, then as shall
be reasonably determined by the Company.
(f) The Company may at any time in its sole discretion which
shall be conclusive make any change in the form of Warrant Certificate that the
Company may deem appropriate and that does not affect the substance thereof; and
any Warrant Certificate thereafter issued or signed, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as changed.
2. The Company agrees that (i) a number of shares of Common Stock
sufficient to provide for the exercise of all outstanding Warrants upon the
basis hereinbefore set forth shall at all times during the term of said Warrants
be reserved for the exercise thereof, (ii) it shall from time to time, in
accordance with the laws of the State of Delaware, increase the authorized
number of shares 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 these Warrants, and (iii) during the term of
the Warrants it will keep current in filing all forms and other materials, if
any, required to be filed with the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the
Securities Exchange Act of 1934, as amended.
3. Exercise may be made of all or any part of the Warrants evidenced by
this Certificate by surrendering it, with the purchase form provided for herein
duly executed by the registered owner hereof, at the office of the Company,
11031 Via Frontera, San Diego, California 92127 or at such other office or
agency as the Company may designate, accompanied by payment in full, of the
Purchase Price payable in respect of the Warrants being exercised as follows:
(i) by payment in cash or by certified or official bank check, or (ii) with
prior approval by the board of directors, and only with such prior approval, by
any combination of payment by means described in (i) above and payment in the
form of a promissory note with a maximum of a two year term, bearing interest at
the prime rate of interest as reported by Bank of America in San Francisco,
California, from time to time, plus one percent (1%) and the collateral and
terms for which, as determined at the sole discretion of the board of directors,
shall consist of the Common Stock issued at the time of the exercise; provided
that with respect of the exercise of any of the Warrants evidenced by this
Certificate, payment by the means described in (i) above must be made for an
amount equal to at least the par value of the Common Stock of the Company
multiplied by the number of shares of Warrant Stock issued upon exercise. If
less than all of the Warrants evidenced by any Certificate are exercised, the
Company will, upon such exercise, execute and deliver to the registered owner
hereof a new certificate (dated the date hereof) evidencing the Warrants not so
exercised.
4. By acceptance of this Warrant Certificate the Warrantholder hereby
represents, warrants and acknowledges to the Company as follows:
(a) The Warrantholder acknowledges that the purchase, if made,
of the Warrant Stock involves a high degree of risk and further acknowledges
that he can bear the economic risk of the acquisition of the Warrant Stock,
including the total loss of his investment.
-3-
<PAGE>
(b) By reason of his business and financial experience, the
Warrantholder has the capacity to protect his own interests in this transaction
and is acquiring (and will acquire) the Warrant Stock for his own account and
not with a view to distribution.
(c) The Warrantholder understands that the Warrants and the
Warrant Stock are being and will be offered and sold to him in reliance on
specific exemptions from the registration requirements of Federal and State
securities laws and that the Company is relying upon the truth and accuracy of
the representations, warranties, and acknowledgments of the Warrantholder set
forth herein in order to determine the applicability of such exemptions and the
suitability of the Warrantholder to acquire the Warrants and the Warrant Stock.
(d) The Warrantholder understands that no federal or state
agency has passed on or made any recommendation or endorsement of the Warrants
and/or the Warrant Stock.
5. (a) The exercise of the Warrants and the issuance of Warrant Stock
upon such exercise shall be subject to compliance by the Company and the
Warrantholder with all applicable requirements of law relating thereto and with
all applicable regulations of any stock exchange on which shares of the
Company's Common Stock may be listed at the time of such exercise and issuance.
(b) In connection with and as a condition to the exercise of
the Warrants, the Warrantholder shall execute and deliver to the Company such
representations in writing as may be requested by the Company in order for it to
comply with the applicable requirements of federal and state securities.
(c) Share certificates issued upon exercise of the Warrants
shall contain appropriate restrictive legends in connection with federal and
state securities laws.
6. All shares of Common Stock or other securities delivered upon the
exercise or conversion of the Warrants evidenced hereby shall be validly issued,
fully paid and nonassessable.
7. This Certificate and the Warrants evidenced hereby shall be
nontransferable by the Warrantholder, except to the Warrantholder's heirs or
legatees. In the event of the Warrantholder's death, the Warrantholder's
administrator or executor shall give notice of said transfer to the Company,
which notice shall contain a request that the Company reissue the certificate or
certificates evidencing the Warrants to reflect said transfer upon surrender of
the certificate evidencing the Warrants being so transferred.
8. The Warrantholder shall not, by virtue of ownership of Warrants, be
entitled to any rights whatsoever of a shareholder of the Company.
9. This Certificate and these Warrants shall be governed by and
construed and interpreted in accordance with the internal laws of the State of
California. All disputes arising hereunder shall
-4-
<PAGE>
be tried in federal or state court located in San Diego County, California (the
parties hereby submitting to the exclusive person jurisdiction of and exclusive
venue in such courts) and the parties agree that their remedies at law hereunder
are adequate and exclusive.
10. Notice pursuant to these Warrants shall be sufficiently given, if
sent by first-class mail, postage pre-paid, addressed, if to the Warrantholder,
to such holder at his last known address as it shall appear in the records of
the Company, and if to the Company, at 11031 Via Frontera, San Diego, California
92127, Attn.: Secretary. The parties may alter the addresses to which
communications are to be sent hereunder by giving notice of such change of
address to the other party in conformity with the provisions of this Section for
the giving of notice.
11. Subject to the restrictions on transfer contained in Section 7
hereof, all the terms and provisions of these Warrants shall be binding upon and
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
12. No amendment, modification, or supplement of this Certificate shall
be binding unless executed in writing and signed by the Company and the
Warrantholder.
Executed as of March 5, 1999 in San Diego, California.
IMAGING TECHNOLOGIES CORPORATION
By: /s/ Brian Bonar
---------------------------------
Title: Brian Bonar
Chief Executive Officer
-5-
<PAGE>
IMAGING TECHNOLOGIES CORPORATION
SUBSCRIPTION FORM
To be Executed by the
Warrantholder in Order to Exercise
Warrants
[ ] I hereby deliver $______ and irrevocably elect to exercise ________
Common Stock Purchase Warrants represented by this Warrant Certificate,
and to purchase the securities issuable upon the exercise of such
Common Stock Purchase Warrants.
[ ] I hereby deliver $_____ and a promissory note, the terms of which have
been approved by the Board of Directors of the Company, in the
principal amount of $______ and irrevocably elect to exercise ________
Common Stock Purchase Warrants represented by this Warrant Certificate,
and to purchase the securities issuable upon the exercise of such
Common Stock Purchase Warrants.
The certificates for the securities to be acquired shall be issued
(bearing the appropriate legends) in the name of:
(Please Insert Name and Social Security or Other Identifying Number)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
and be delivered to
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
and if such number of Common Stock Purchase Warrants shall not be all of the
Common Stock Purchase that a new Warrant Certificate for the balance of such
Common Stock Purchase Warrants be registered in Warrantholder at the address
stated below.
- ----------------
Date
------------------------------------
Name (Printed)
------------------------------------
Signature
------------------------------------
Address
------------------------------------
Social Security No.
------------------------------------
-6-
NEITHER THESE WARRANTS NOR THE SHARES ISSUABLE UPON THE EXERCISE OF THESE
WARRANTS HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THEY MAY NOT
BE TRANSFERRED EXCEPT PURSUANT TO REGISTRATION (OR AN EXEMPTION FROM
REGISTRATION) THEREUNDER. THESE WARRANTS HAVE BEEN ISSUED IN RELIANCE UPON THE
REPRESENTATION OF THE WARRANTHOLDER THAT THESE WARRANTS HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD THE RESALE OR OTHER DISTRIBUTION
OF THESE WARRANTS OR THE UNDERLYING SHARES. THE TRANSFER OF THESE WARRANTS IS
SUBJECT TO RESTRICTIONS CONTAINED HEREIN.
March 5, 1999
50,000 Warrants
IMAGING TECHNOLOGIES CORPORATION
COMMON STOCK PURCHASE WARRANTS
(Void after 5:00 p.m. California time, March 4, 2002)
Certificate Evidencing 150,000 Warrants
(One Warrant is required for the purchase of one share of Common Stock,
subject to adjustment as provided below)
This is to certify that, for value received and subject to the
conditions herein set forth, CARMEL MOUNTAIN #8 ASSOCIATES, L.P., Chancellor
Development Corporation, General Partner, c/o Roger A. P. Joseph, President,
4510 Executive Drive, #125, San Diego, CA 92121 (the "Warrantholder") is
entitled to purchase, at any time after 9:00 a.m. California time on March 5,
1999, and in any event no later than 5:00 p.m. California time on March 4, 2002
(the "Expiration Date"), such number of shares of Common Stock, $0.005 par
value, of Imaging Technologies Corporation, a Delaware corporation (the
"Company"), as shall equal the number of Warrants evidenced by this Certificate
(such shares purchasable upon exercise of the Warrants are herein called the
"Warrant Stock"), at $1.50 per share; provided that such right of exercise shall
be limited by the following vesting schedule:
(i) 50,000 underlying shares of the Warrants shall first vest and
become exercisable on the date of this Agreement herein provided above;
and
The amount per share specified above, as adjusted from time to time pursuant to
the provisions hereinafter set forth, is herein called the "Purchase Price."
1. (a) If the Company shall, prior to the exercise of these Warrants,
divide its outstanding shares of Common Stock by recapitalization,
reclassification or split-up thereof, or if the Company shall declare a stock
dividend or distribute shares of Common Stock to its stockholders, the number of
shares of Common Stock purchasable upon exercise of these Warrants immediately
prior to such subdivision shall be proportionately increased, and if the Company
shall at any time combine the outstanding shares of Common Stock by
recapitalization, reclassification or combination
-1-
<PAGE>
thereof, the number of shares of Common Stock purchasable upon exercise of these
Warrants immediately prior to such combination shall be proportionately
decreased. Any such adjustment to the number of shares shall be effective at the
close of business on the effective date of such subdivision or combination or if
any adjustment is the result of a stock dividend or distribution then the
effective date for such adjustment based thereon shall be the record date
therefor.
(b) Whenever the number of shares of Common Stock purchasable
upon the exercise of these Warrants is required to be adjusted as provided in
this Section 1, the Purchase Price shall be adjusted (to the nearest cent) by
multiplying such Purchase Price immediately prior to such adjustment by a
fraction (x) the numerator of which shall be the number of shares of Common
Stock purchasable upon the exercise of these Warrants immediately prior to such
adjustment, and (y) the denominator of which shall be the number of shares of
Common Stock so purchasable immediately thereafter.
(c) In case of any reclassification of the outstanding shares
of Common Stock, other than a change covered by paragraph 1(a) hereof or which
solely affects the par value of such shares of Common Stock, or in the case of
any merger or consolidation of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or capital
reorganization of the outstanding shares of Common Stock), or in the case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved, the holder of these Warrants shall have the right thereafter (until
the expiration of the right of exercise of these Warrants) to receive upon the
exercise thereof, for the same aggregate Purchase Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property receivable upon such reclassification, capital
reorganization, merger or consolidation, or upon the dissolution following any
sale or other transfer, which a holder of the number of shares of Common Stock
of the Company would obtain upon exercise of thee Warrants immediately prior to
such event; and if any reclassification also results in a change in shares of
Common Stock covered by paragraph 1(a), then such adjustment shall be made
pursuant to both paragraph 1(a) and this paragraph 1(c). The provisions of this
paragraph 1(c) shall similarly apply to successive reclassifications, or capital
reorganization, mergers or consolidations, sales or other transfers.
(d) When any adjustment is required to be made pursuant to
this Section 1, the Company, upon the subsequent written request of any holder
of the Warrants, shall promptly mail to said holder a certificate setting forth
the Purchase Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Such certificate shall also set forth, if
applicable, the kind and amount of stock or other securities or property into
which the Warrants shall be exercisable following the occurrence of any of the
events specified.
(e) The Company shall not be required upon the exercise of any
of the Warrants evidenced hereby to issue any fraction of shares, but shall make
any adjustment therefor in cash on the basis of the fair market value of any
such fractional interest as it shall appear on the public market
-2-
<PAGE>
for such shares, or, if there is no public market for such shares, then as shall
be reasonably determined by the Company.
(f) The Company may at any time in its sole discretion which
shall be conclusive make any change in the form of Warrant Certificate that the
Company may deem appropriate and that does not affect the substance thereof; and
any Warrant Certificate thereafter issued or signed, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as changed.
2. If the Company agrees that (i) a number of shares of Common Stock
sufficient to provide for the exercise of all outstanding Warrants upon the
basis hereinbefore set forth shall at all times during the term of said Warrants
be reserved for the exercise thereof, (ii) it shall from time to time, in
accordance with the laws of the State of Delaware, increase the authorized
number of shares 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 these Warrants, and (iii) during the term of
the Warrants it will keep current in filing all forms and other materials, if
any, required to be filed with the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the
Securities Exchange Act of 1934, as amended.
3. Exercise may be made of all or any part of the Warrants evidenced by
this Certificate by surrendering it, with the purchase form provided for herein
duly executed by the registered owner hereof, at the office of the Company,
11031 Via Frontera, San Diego, California 92127 or at such other office or
agency as the Company may designate, accompanied by payment in full, of the
Purchase Price payable in respect of the Warrants being exercised as follows:
(i) by payment in cash or by certified or official bank check, or (ii) with
prior approval by the board of directors, and only with such prior approval, by
any combination of payment by means described in (i) above and payment in the
form of a promissory note with a maximum of a two year term, bearing interest at
the prime rate of interest as reported by Bank of America in San Francisco,
California, from time to time, plus one percent (1%) and the collateral and
terms for which, as determined at the sole discretion off the board of
directors, shall consist of the Common Stock issued at the time of the exercise;
provided that with respect of the exercise of any of the Warrants evidenced by
this Certificate, payment by the means described in (i) above must be made for
an amount equal to at least the par value of the Common Stock of the Company
multiplied by the number of shares of Warrant Stock issued upon exercise. If
less than all of the Warrants evidenced by any Certificate are exercised, the
Company will, upon such exercise, execute and deliver to the registered owner
hereof a new certificate (dated the date hereof) evidencing the Warrants not so
exercised.
4. By acceptance of this Warrant Certificate the Warrantholder hereby
represents, warrants and acknowledges to the Company as follows:
(a) The Warrantholder acknowledges that the purchase, if made,
of the Warrant Stock involves a high degree of risk and further acknowledges
that he can bear the economic risk of the acquisition of the Warrant Stock,
including the total loss of his investment.
-3-
<PAGE>
(b) By reason of his business and financial experience, the
Warrantholder has the capacity to protect his own interests in this transaction
and is acquiring (and will acquire) the Warrant Stock for his own account and
not with a view to distribution.
(c) The Warrantholder understands that the Warrants and the
Warrant Stock are bing and will be offered and sold to him in reliance on
specific exemptions from the registration requirements of Federal and State
securities laws and that the Company is relying upon the truth and accuracy of
the representations, warranties, and acknowledgments of the Warrantholder set
forth herein in order to determine the applicability of such exemptions and the
suitability of the Warrantholder to acquire the Warrants and the Warrant Stock.
(d) The Warrantholder understands that no federal or state
agency has passed on or made any recommendation or endorsement of the Warrants
and/or the Warrant Stock.
5. (a) The exercise of the Warrants and the issuance of Warrant
Stock upon such exercise shall be subject to compliance by the Company and the
Warrantholder with all applicable requirements of law relating thereto and with
all applicable regulations of any stock exchange on which shares of the
Company's Common Stock may be listed at the time of such exercise and issuance.
(b) In connection with and as a condition to the exercise of
the Warrants, the Warrantholder shall execute and deliver to the Company such
representations in writing as may be requested by the Company in order for it to
comply with the applicable requirements of federal and state securities laws.
(c) Share certificates issued upon exercise of the Warrants
shall contain appropriate restrictive legends in connection with federal and
state securities laws.
6. All shares of Common Stock or other securities delivered upon the
exercise or conversion of the Warrants evidenced hereby shall be validly issued,
fully paid and nonassessable.
7. This Certificate and the Warrants evidenced hereby shall be
nontransferable by the Warrantholder, except to the Warrantholder's heirs or
legatees. In the event of the Warrantholder's death, the Warrantholder's
administrator or executor shall give notice of said transfer to the Company,
which notice shall contain a request that the Company reissue the certificate or
certificates evidencing the Warrants to reflect said transfer upon surrender of
the certificate evidencing the Warrants being so transferred.
8. The Warrantholder shall not, by virtue of ownership of Warrants, be
entitled to any rights whatsoever of a shareholder of the Company.
9. This Certificate and these Warrants shall be governed by and
construed and interpreted in accordance with the internal laws of the State of
California. All disputes arising hereunder shall
-4-
<PAGE>
be tried in federal or state court located in San Diego County, California (the
parties hereby submitting to the exclusive personal jurisdiction of and
exclusive venue in such courts) and the parties agree that their remedies at law
hereunder are adequate and exclusive.
10. Notice pursuant to these Warrants shall be sufficiently given, if
sent by first-class mail, postage pre-paid, addressed, if to the Warrantholder,
to such holder at his last known address as it shall appear in the records of
the Company, and if to the Company, at 11031 Via Frontera, San Diego, California
92127, Attn.: Secretary. The parties may alter the addresses to which
communications are to be sent hereunder by giving notice of such change of
address to the other party in conformity with the provisions of this Section for
the giving of notice.
11. Subject to the restrictions on transfer contained in Section 7
hereof, all the terms and provisions of these Warrants shall be binding upon and
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
12. No amendment, modification, or supplement of this Certificate shall
be binding unless executed in writing and signed by the Company and the
Warrantholder.
Executed as of March 5, 1999 in San Diego, California.
IMAGING TECHNOLOGIES CORPORATION
By: /s/ Brian Bonar
-----------------------------
Title: Brian Bonar
Chief Executive Officer
-5-
<PAGE>
IMAGING TECHNOLOGIES CORPORATION
SUBSCRIPTION FORM
To be Executed by the
Warrantholder in Order to Exercise
Warrants
[ ] I hereby deliver $______ and irrevocably elect to exercise ________
Common Stock Purchase Warrants represented by this Warrant Certificate,
and to purchase the securities issuable upon the exercise of such
Common Stock Purchase Warrants.
[ ] I hereby deliver $_____ and a promissory note, the terms of which have
been approved by the Board of Directors of the Company, in the
principal amount of $______ and irrevocably elect to exercise ________
Common Stock Purchase Warrants represented by this Warrant Certificate,
and to purchase the securities issuable upon the exercise of such
Common Stock Purchase Warrants.
The certificates for the securities to be acquired shall be issued
(bearing the appropriate legends) in the name of:
(Please Insert Name and Social Security or Other Identifying Number)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
and be delivered to
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
and if such number of Common Stock Purchase Warrants shall not be all of the
Common Stock Purchase that a new Warrant Certificate for the balance of such
Common Stock Purchase Warrants be registered in Warrantholder at the address
stated below.
- ----------------
Date
------------------------------------
Name (Printed)
------------------------------------
Signature
------------------------------------
Address
------------------------------------
Social Security No.
------------------------------------
-6-
March 1, 1999
Carmel Mountain #8 Associates, L.P.
Roger A. P. Joseph, President
Chancellor Development Corporation, General Partner
Bruce E. Tabb, Managing Member
Carmel Mountain Environmental LLC
Re: Lease of Property at 15175 Innovation Drive
Gentlemen:
As partial consideration for the subject lease to Imaging Technologies
Corporation (ITEC), ITEC hereby agrees to grant to Lessors fully-vested warrants
to purchase One Hundred Thousand (100,000) shares of the common stock of ITEC at
the closing price per share on the NASDAQ market on the date of the signing of
said lease by all parties, valid for a period of three (3) years, on the terms
and conditions of Warrant Agreements.
Imaging Technologies Corporation, by
/s/ Philip J. Englund
- --------------------------------------
Philip J. Englund
Senior Vice President, General Counsel
NEITHER THESE WARRANTS NOR THE SHARES ISSUABLE UPON THE EXERCISE OF THESE
WARRANTS HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THEY MAY NOT
BE TRANSFERRED EXCEPT PURSUANT TO REGISTRATION (OR AN EXEMPTION FROM
REGISTRATION) THEREUNDER. THESE WARRANTS HAVE BEEN ISSUED IN RELIANCE UPON THE
REPRESENTATION OF THE WARRANTHOLDER THAT THESE WARRANTS HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD THE RESALE OR OTHER DISTRIBUTION
OF THESE WARRANTS OR THE UNDERLYING SHARES. THE TRANSFER OF THESE WARRANTS IS
SUBJECT TO RESTRICTIONS CONTAINED HEREIN.
March 5, 1999
5,000 Warrants
IMAGING TECHNOLOGIES CORPORATION
COMMON STOCK PURCHASE WARRANTS
(Void after 5:00 p.m. California time, March 4, 2002)
Certificate Evidencing 5,000 Warrants
(One Warrant is required for the purchase of one share of Common Stock,
subject to adjustment as provided below)
This is to certify that, for value received and subject to the
conditions herein set forth, JOHN P. MULDER, c/o J. Steve Tiritilli Realty,
29379 Rancho California Road, Suite 108, Temecula, California 92591 (the
"Warrantholder") is entitled to purchase, at any time after 9:00 a.m. California
time on March 5, 1999, and in any event no later than 5:00 p.m. California time
on March 4, 2002 (the "Expiration Date"), such number of shares of Common Stock,
$0.005 par value, of Imaging Technologies Corporation., a Delaware corporation
(the "Company"), as shall equal the number of Warrants evidenced by this
Certificate (such shares purchasable upon exercise of the Warrants are herein
called the "Warrant Stock"), at $1.50 per share; provided that such right of
exercise shall be limited by the following vesting schedule:
(i) 5,000 underlying shares of the Warrants shall first vest and become
exercisable on the date of this Agreement herein provided above; and
The amount per share specified above, as adjusted from time to time pursuant to
the provisions hereinafter set forth, is herein called the "Purchase Price."
1. (a) If the Company shall, prior to the exercise of these Warrants,
divide its outstanding shares of Common Stock by recapitalization,
reclassification or split-up thereof, or if the Company shall declare a stock
dividend or distribute shares of Common Stock to its stockholders, the number of
shares of Common Stock purchasable upon exercise of these Warrants immediately
prior to such subdivision shall be proportionately increased, and if the Company
shall at any time combine the outstanding shares of Common Stock by
recapitalization, reclassification or combination thereof, the number of shares
of Common Stock purchasable upon exercise of these Warrants
-1-
<PAGE>
immediately prior to such combination shall be proportionately decreased. Any
such adjustment to the number of shares shall be effective at the close of
business on the effective date of such subdivision or combination or if any
adjustment is the result of a stock dividend or distribution then the effective
date for such adjustment based thereon shall be the record date therefor.
(b) Whenever the number of shares of Common Stock purchasable
upon the exercise of these Warrants is required to be adjusted as provided in
this Section 1, the Purchase Price shall be adjusted (to the nearest cent) by
multiplying such Purchase Price immediately prior to such adjustment by a
fraction (x) the numerator of which shall be the number of shares of Common
Stock purchasable upon the exercise of these Warrants immediately prior to such
adjustment, and (y) the denominator of which shall be the number of shares of
Common Stock so purchasable immediately thereafter.
(c) In case of any reclassification of the outstanding shares
of Common Stock, other than a change covered by paragraph 1 (a) hereof or which
solely affects the par value of such shares of Common Stock, or in the case of
any merger or consolidation of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or capital
reorganization of the outstanding shares of Common Stock), or in the case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved, the holder of these Warrants shall have the right thereafter (until
the expiration of the right of exercise of these Warrants) to receive upon the
exercise thereof, for the same aggregate Purchase Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property receivable upon such reclassification, capital
reorganization, merger or consolidation, or upon the dissolution following any
sale or other transfer, which a holder of the number of shares of Common Stock
of the Company would obtain upon exercise of these Warrants immediately prior to
such event; and if any reclassification also results in a change in shares of
Common Stock covered by paragraph l(a), then such adjustment shall be made
pursuant to both paragraph l(a) and this paragraph l(c). The provisions of this
paragraph l(c) shall similarly apply to successive reclassifications, or capital
reorganization, mergers or consolidations, sales or other transfers.
(d) When any adjustment is required to be made pursuant to
this Section 1, the Company, upon the subsequent written request of any holder
of the Warrants, shall promptly mail to said holder a certificate setting forth
the Purchase Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Such certificate shall also set forth, if
applicable, the kind and amount of stock or other securities or property into
which the Warrants shall be exercisable following the occurrence of any of the
events specified.
(e) The Company shall not be required upon the exercise of any
of the Warrants evidenced hereby to issue any fraction of shares, but shall make
any adjustment therefor in cash on the basis of the fair market value of any
such fractional interest as it shall appear on the public market
-2-
<PAGE>
for such shares, or, if there is no public market for such shares, then as shall
be reasonably determined by the Company.
(f) The Company may at any time in its sole discretion which
shall be conclusive make any change in the form of Warrant Certificate that the
Company may deem appropriate and that does not affect the substance thereof; and
any Warrant Certificate thereafter issued or signed, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as changed.
2. The Company agrees that (i) a number of shares of Common Stock
sufficient to provide for the exercise of all outstanding Warrants upon the
basis hereinbefore set forth shall at all times during the term of said Warrants
be reserved for the exercise thereof, (ii) it shall from time to time, in
accordance with the laws of the State of Delaware, increase the authorized
number of shares 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 these Warrants, and (iii) during the term of
the Warrants it will keep current in filing all forms and other materials, if
any, required to be filed with the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the
Securities Exchange Act of 1934, as amended.
3. Exercise may be made of all or any part of the Warrants evidenced by
this Certificate by surrendering it, with the purchase form provided for herein
duly executed by the registered owner hereof, at the office of the Company,
11031 Via Frontera, San Diego, California 92127 or at such other office or
agency as the Company may designate, accompanied by payment in full, of the
Purchase Price payable in respect of the Warrants being exercised as follows:
(i) by payment in cash or by certified or official bank check, or (ii) with
prior approval by the board of directors, and only with such prior approval, by
any combination of payment by means described in (i) above and payment in the
form of a promissory note with a maximum of a two year term, bearing interest at
the prime rate of interest as reported by Bank of America in San Francisco,
California, from time to time, plus one percent (1 %) and the collateral and
terms for which, as determined at the sole discretion of the board of directors,
shall consist of the Common Stock issued at the time of the exercise; provided
that with respect of the exercise of any of the Warrants evidenced by this
Certificate, payment by the means described in (i) above must be made for an
amount equal to at least the par value of the Common Stock of the Company
multiplied by the number of shares of Warrant Stock issued upon exercise. If
less than all of the Warrants evidenced by any Certificate are exercised, the
Company will, upon such exercise, execute and deliver to the registered owner
hereof a new certificate (dated the date hereof) evidencing the Warrants not so
exercised.
4. By acceptance of this Warrant Certificate the Warrantholder hereby
represents, warrants and acknowledges to the Company as follows:
(a) The Warrantholder acknowledges that the purchase, if made,
of the Warrant Stock involves a high degree of risk and further acknowledges
that he can bear the economic risk of the acquisition of the Warrant Stock,
including the total loss of his investment.
-3-
<PAGE>
(b) By reason of his business and financial experience, the
Warrantholder has the capacity to protect his own interests in this transaction
and is acquiring (and will acquire) the Warrant Stock for his own account and
not with a view to distribution.
(c) The Warrantholder understands that the Warrants and the
Warrant Stock are being and will be offered and sold to him in reliance on
specific exemptions from the registration requirements of Federal and State
securities laws and that the Company is relying upon the truth and accuracy of
the representations, warranties, and acknowledgments of the Warrantholder set
forth herein in order to determine the applicability of such exemptions and the
suitability of the Warrantholder to acquire the Warrants and the Warrant Stock.
(d) The Warrantholder understands that no federal or state
agency has passed on or made any recommendation or endorsement of the Warrants
and/or the Warrant Stock.
5. (a) The exercise of the Warrants and the issuance of Warrant Stock
upon such exercise shall be subject to compliance by the Company and the
Warrantholder with all applicable requirements of law relating thereto and with
all applicable regulations of any stock exchange on which shares of the
Company's Common Stock may be listed at the time of such exercise and issuance.
(b) In connection with and as a condition to the exercise of
the Warrants, the Warrantholder shall execute and deliver to the Company such
representations in writing as may be requested by the Company in order for it to
comply with the applicable requirements of federal and state securities laws.
(c) Share certificates issued upon exercise of the Warrants
shall contain appropriate restrictive legends in connection with federal and
state securities laws.
6. All shares of Common Stock or other securities delivered upon the
exercise or conversion of the Warrants evidenced hereby shall be validly issued,
fully paid and nonassessable.
7. This Certificate and the Warrants evidenced hereby shall be
nontransferable by theWarrantholder, except to the Warrantholder's heirs or
legatees. In the event of the Warrantholder's death, the Warrantholder's
administrator or executor shall give notice of said transfer to the Company,
which notice shall contain a request that the Company reissue the certificate or
certificates evidencing the Warrants to reflect said transfer upon surrender of
the certificate evidencing the Warrants being so transferred.
8. The Warrantholder shall not, by virtue of ownership of Warrants, be
entitled to any rights whatsoever of a shareholder of the Company.
9. This Certificate and these Warrants shall be governed by and
construed and interpreted in accordance with the internal laws of the State of
California. All disputes arising hereunder shall
-4-
<PAGE>
be tried in federal or state court located in San Diego County, California (the
parties hereby submitting to the exclusive personal jurisdiction of and
exclusive venue in such courts) and the parties agree that their remedies at law
hereunder are adequate and exclusive.
10. Notice pursuant to these Warrants shall be sufficiently given, if
sent by first-class mail, postage pre-paid, addressed, if to the Warrantholder,
to such holder at his last known address as it shall appear in the records of
the Company, and if to the Company, at 11031 Via Frontera, San Diego, California
92127, Attn.: Secretary. The parties may alter the addresses to which
communications are to be sent hereunder by giving notice of such change of
address to the other party in conformity with the provisions of this Section for
the giving of notice.
11. Subject to the restrictions on transfer contained in Section 7
hereof, all the terms and provisions of these Warrants shall be binding upon and
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
12. No amendment, modification, or supplement of this Certificate shall
be binding unless executed in writing and signed by the Company and the
Warrantholder.
Executed as of March 5, 1999 in San Diego, California.
IMAGING TECHNOLOGIES CORPORATION
By:
/s/ Brian Bonar
------------------------------
Title: Brian Bonar
Chief Executive Officer
-5-
<PAGE>
IMAGING TECHNOLOGIES CORPORATION
SUBSCRIPTION FORM
To be Executed by the
Warrantholder In Order to Exercise
Warrants
[ ] I hereby deliver $_______ and irrevocably elect to exercise _______
Common Stock Purchase Warrants represented by this Warrant Certificate,
and to purchase the securities issuable upon the exercise of such
Common Stock Purchase Warrants.
[ ] I hereby deliver $_______ and a promissory note, the terms of which
have been approved by the Board of Directors of the Company, in the
principal amount of $_________ and irrevocably elect to exercise
_______ Common Stock Purchase Warrants represented. by this Warrant
Certificate, and to purchase the securities issuable upon the exercise
of such Common Stock Purchase Warrants.
The certificates for the securities to be acquired shall be issued
(bearing the appropriate legends) in the name of:
(Please Insert Name and Social Security or Other Identifying Number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
and be delivered to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-6-
<PAGE>
and if such number of Common Stock Purchase Warrants shall not be all of the
Common Stock Purchase Warrants that a new Warrant Certificate for the balance of
such Common Stock Purchase Warrants be registered in Warrantholder at the
address stated below.
- -------------------------
Date
--------------------------
Name (Printed)
--------------------------
Signature
--------------------------
Address
--------------------------
Social Security No.
Signature Guaranteed
-7-
NEITHER THESE WARRANTS NOR THE SHARES ISSUABLE UPON THE EXERCISE OF THESE
WARRANTS HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THEY MAY NOT
BE TRANSFERRED EXCEPT PURSUANT TO REGISTRATION (OR AN EXEMPTION FROM
REGISTRATION) THEREUNDER. THESE WARRANTS HAVE BEEN ISSUED IN RELIANCE UPON THE
REPRESENTATION OF THE WARRANTHOLDER THAT THESE WARRANTS HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD THE RESALE OR OTHER DISTRIBUTION
OF THESE WARRANTS OR THE UNDERLYING SHARES. THE TRANSFER OF THESE WARRANTS IS
SUBJECT TO RESTRICTIONS CONTAINED HEREIN.
March 5, 1999
5,000 Warrants
IMAGING TECHNOLOGIES CORPORATION
COMMON STOCK PURCHASE WARRANTS
(Void after 5:00 p.m. California time, March 4, 2002)
Certificate Evidencing 5,000 Warrants
(One Warrant is required for the purchase of one share of Common Stock,
subject to adjustment as provided below)
This is to certify that, for value received and subject to the
conditions herein set forth, J. STEVE TIRITILLI, c/o J. Steve Tiritilli Realty,
29379 Rancho California Road, Suite 108, Temecula, California 92591 (the
"Warrantholder") is entitled to purchase, at any time after 9:00 a.m. California
time on March 5, 1999, and in any event no later than 5:00 p.m. California time
on March 4, 2002 (the "Expiration Date"), such number of shares of Common Stock,
$0.005 par value, of Imaging Technologies Corporation., a Delaware corporation
(the "Company"), as shall equal the number of Warrants evidenced by this
Certificate (such shares purchasable upon exercise of the Warrants are herein
called the "Warrant Stock"), at $1.50 per share; provided that such right of
exercise shall be limited by the following vesting schedule:
(i) 5,000 underlying shares of the Warrants shall first vest and become
exercisable on the date of this Agreement herein provided above; and
The amount per share specified above, as adjusted from time to time pursuant to
the provisions hereinafter set forth, is herein called the "Purchase Price."
1. (a) If the Company shall, prior to the exercise of these Warrants,
divide its outstanding shares of Common Stock by recapitalization,
reclassification or split-up thereof, or if the Company shall declare a stock
dividend or distribute shares of Common Stock to its stockholders, the number of
shares of Common Stock purchasable upon exercise of these Warrants immediately
prior to such subdivision shall be proportionately increased, and if the Company
shall at any time combine the outstanding shares of Common Stock by
recapitalization, reclassification or combination thereof, the number of shares
of Common Stock purchasable upon exercise of these Warrants
1
<PAGE>
immediately prior to such combination shall be proportionately decreased. Any
such adjustment to the number of shares shall be effective at the close of
business on the effective date of such subdivision or combination or if any
adjustment is the result of a stock dividend or distribution then the effective
date for such adjustment based thereon shall be the record date therefor.
(b) Whenever the number of shares of Common Stock purchasable
upon the exercise of these Warrants is required to be adjusted as provided in
this Section 1, the Purchase Price shall be adjusted (to the nearest cent) by
multiplying such Purchase Price immediately prior to such adjustment by a
fraction (x) the numerator of which shall be the number of shares of Common
Stock purchasable upon the exercise of these Warrants immediately prior to such
adjustment, and (y) the denominator of which shall be the number of shares of
Common Stock so purchasable immediately thereafter.
(c) In case of any reclassification of the outstanding shares
of Common Stock, other than a change covered by paragraph 1(a) hereof or which
solely affects the par value of such shares of Common Stock, or in the case of
any merger or consolidation of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or capital
reorganization of the outstanding shares of Common Stock), or in the case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved, the holder of these Warrants shall have the right thereafter (until
the expiration of the right of exercise of these Warrants) to receive upon the
exercise thereof, for the same aggregate Purchase Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property receivable upon such reclassification, capital
reorganization, merger or consolidation, or upon the dissolution following any
sale or other transfer, which a holder of the number of shares of Common Stock
of the Company would obtain upon exercise of these Warrants immediately prior to
such event; and if any reclassification also results in a change in shares of
Common Stock covered by paragraph l(a), then such adjustment shall be made
pursuant to both paragraph l(a) and this paragraph l(c). The provisions of this
paragraph l(c) shall similarly apply to successive reclassifications, or capital
reorganization, mergers or consolidations, sales or other transfers.
(d) When any adjustment is required to be made pursuant to
this Section 1, the Company, upon the subsequent written request of any holder
of the Warrants, shall promptly mail to said holder a certificate setting forth
the Purchase Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Such certificate shall also set forth, if
applicable, the kind and amount of stock or other securities or property into
which the Warrants shall be exercisable following the occurrence of any of the
events specified.
(e) The Company shall not be required upon the exercise of any
of the Warrants evidenced hereby to issue any fraction of shares, but shall make
any adjustment therefor in cash on the basis of the fair market value of any
such fractional interest as it shall appear on the public market
2
<PAGE>
for such shares, or, if there is no public market for such shares, then as shall
be reasonably determined by the Company.
(f) The Company may at any time in its sole discretion which
shall be conclusive make any change in the form of Warrant Certificate that the
Company may deem appropriate and that does not affect the substance thereof; and
any Warrant Certificate thereafter issued or signed, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as changed.
2. The Company agrees that (i) a number of shares of Common Stock
sufficient to provide for the exercise of all outstanding Warrants upon the
basis hereinbefore set forth shall at all times during the term of said Warrants
be reserved for the exercise thereof, (ii) it shall from time to time, in
accordance with the laws of the State of Delaware, increase the authorized
number of shares 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 these Warrants, and (iii) during the term of
the Warrants it will keep current in filing all forms and other materials, if
any, required to be filed with the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the
Securities Exchange Act of 1934, as amended.
3. Exercise may be made of all or any part of the Warrants evidenced by
this Certificate by surrendering it, with the purchase form provided for herein
duly executed by the registered owner hereof, at the office of the Company,
11031 Via Frontera, San Diego, California 92127 or at such other office or
agency as the Company may designate, accompanied by payment in full, of the
Purchase Price payable in respect of the Warrants being exercised as follows:
(i) by payment in cash or by certified or official bank check, or (ii) with
prior approval by the board of directors, and only with such prior approval, by
any combination of payment by means described in (i) above and payment in the
form of a promissory note with a maximum of a two year term, bearing interest at
the prime rate of interest as reported by Bank of America in San Francisco,
California, from time to time, plus one percent (1%) and the collateral and
terms for which, as determined at the sole discretion of the board of directors,
shall consist of the Common Stock issued at the time of the exercise; provided
that with respect of the exercise of any of the Warrants evidenced by this
Certificate, payment by the means described in (i) above must be made for an
amount equal to at least the par value of the Common Stock of the Company
multiplied by the number of shares of Warrant Stock issued upon exercise. If
less than all of the Warrants evidenced by any Certificate are exercised, the
Company will, upon such exercise, execute and deliver to the registered owner
hereof a new certificate (dated the date hereof) evidencing the Warrants not so
exercised.
4. By acceptance of this Warrant Certificate the Warrantholder hereby
represents, warrants and acknowledges to the Company as follows:
(a) The Warrantholder acknowledges that the purchase, if made,
of the Warrant Stock involves a high degree of risk and further acknowledges
that he can bear the economic risk of the acquisition of the Warrant Stock,
including the total loss of his investment.
3
<PAGE>
(b) By reason of his business and financial experience, the
Warrantholder has the capacity to protect his own interests in this transaction
and is acquiring (and will acquire) the Warrant Stock for his own account and
not with a view to distribution.
(c) The Warrantholder understands that the Warrants and the
Warrant Stock are being and will be offered and sold to him in reliance on
specific exemptions from the registration requirements of Federal and State
securities laws and that the Company is relying upon the truth and accuracy of
the representations, warranties, and acknowledgments of the Warrantholder set
forth herein in order to determine the applicability of such exemptions and the
suitability of the Warrantholder to acquire the Warrants and the Warrant Stock.
(d) The Warrantholder understands that no federal or state
agency has passed on or made any recommendation or endorsement of the Warrants
and/or the Warrant Stock.
5. (a) The exercise of the Warrants and the issuance of Warrant Stock
upon such exercise shall be subject to compliance by the Company and the
Warrantholder with all applicable requirements of law relating thereto and with
all applicable regulations of any stock exchange on which shares of the
Company's Common Stock may be listed at the time of such exercise and issuance.
(b) In connection with and as a condition to the exercise of
the Warrants, the Warrantholder shall execute and deliver to the Company such
representations in writing as may be requested by the Company in order for it to
comply with the applicable requirements of federal and state securities laws.
(c) Share certificates issued upon exercise of the Warrants
shall contain appropriate restrictive legends in connection with federal and
state securities laws.
6. All shares of Common Stock or other securities delivered upon the
exercise or conversion of the Warrants evidenced hereby shall be validly issued,
fully paid and nonassessable.
7. This Certificate and the Warrants evidenced hereby shall be
nontransferable by the Warrantholder, except to the Warrantholder's heirs or
legatees. In the event of the Warrantholder's death, the Warrantholder's
administrator or executor shall give notice of said transfer to the Company,
which notice shall contain a request that the Company reissue the certificate or
certificates evidencing the Warrants to reflect said transfer upon surrender of
the certificate evidencing the Warrants being so transferred.
8. The Warrantholder shall not, by virtue of ownership of Warrants, be
entitled to any rights whatsoever of a shareholder of the Company.
4
<PAGE>
9. This Certificate and these Warrants shall be governed by and
construed and interpreted in accordance with the internal laws of the State of
California. All disputes arising hereunder shall be tried in federal or state
court located in San Diego County, California (the parties hereby submitting to
the exclusive personal jurisdiction of and exclusive venue in such courts) and
the parties agree that their remedies at law hereunder are adequate and
exclusive.
10. Notice pursuant to these Warrants shall be sufficiently given, if
sent by first-class mail, postage pre-paid, addressed, if to the Warrantholder,
to such holder at his last known address as it shall appear in the records of
the Company, and if to the Company, at 11031 Via Frontera, San Diego, California
92127, Attn.: Secretary. The parties may alter the addresses to which
communications are to be sent hereunder by giving notice of such change of
address to the other party in conformity with the provisions of this Section for
the giving of notice.
11. Subject to the restrictions on transfer contained in Section 7
hereof, all the terms and provisions of these Warrants shall be binding upon and
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
12. No amendment, modification, or supplement of this Certificate shall
be binding unless executed in writing and signed by the Company and the
Warrantholder.
Executed as of March 5, 1999 in San Diego, California.
IMAGING TECHNOLOGIES CORPORATION
By: /s/ Brian Bonar
----------------------------
Title: Brian Bonar
Chief Executive Officer
5
<PAGE>
IMAGING TECHNOLOGIES CORPORATION
SUBSCRIPTION FORM
To be Executed by the
Warrantholder In Order to Exercise
Warrants
[ ] I hereby deliver $_______ and irrevocably elect to exercise
_______Common Stock Purchase Warrants represented by this Warrant
Certificate, and to purchase the securities issuable upon the exercise
of such Common Stock Purchase Warrants.
[ ] I hereby deliver $________ and a promissory note, the terms of which
have been approved by the Board of Directors of the Company, in the
principal amount of $________ and irrevocably elect to exercise
________ Common Stock Purchase Warrants represented by this Warrant
Certificate, and to purchase the securities issuable upon the exercise
of such Common Stock Purchase Warrants.
The certificates for the securities to be acquired shall be issued
(bearing the appropriate legends) in the name of:
(Please Insert Name and Social Security or Other Identifying Number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
and be delivered to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
and if such number of Common Stock Purchase Warrants shall not be all of the
Common Stock Purchase Warrants that a new Warrant Certificate for the balance of
such Common Stock Purchase Warrants be registered in Warrantholder at the
address stated below.
- --------------------------
Date
------------------------
Name (Printed)
------------------------
Signature
------------------------
Address
------------------------
Social Security No.
Signature Guaranteed
6
Partial Settlement Agreement
($950,000 Note Claim Only)
This Partial Settlement Agreement ("Agreement") is entered into on
March 30, 1999 by and between American Industries, Inc., an Oregon corporation
("American") and Imaging Technologies Corporation, a Delaware corporation
("ITEC").
Recitations
1. On or about September 17, 1998, for value received, ITEC executed in favor of
American a non-convertible, subordinated promissory note dated as of September
17, 1998 in the principal amount of Nine Hundred Fifty Thousand Dollars
($950,000) (the "Note"). A copy of the Note is attached hereto as Exhibit A and
by reference incorporated herein.
2. The Note currently remains unpaid and outstanding in the full principal
amount plus accumulated interest.
3. As a result of negotiations between ITEC and American, ITEC and American
desire to allow American to surrender the Note in exchange for issuance of
shares of common stock as provided in this Agreement and to resolve all disputes
relating to the Note while preserving remaining disputes between ITEC and
American.
Operative Provisions
4. Within five (5) business days following execution of this Agreement,
concurrent with the acts required of American specified in paragraph 5, below,
ITEC shall issue to American Two Million (2,000,000) shares of ITEC fully paid
and nonassessable common stock, valued by the company at $0.50 per share (the
"Shares").
5. Concurrent with the issuance of shares as specified in paragraph 4, above,
American shall mark the Note "canceled", and shall surrender the original Note
to ITEC. If the original Note is lost, destroyed, mutilated or otherwise
incapable of being, surrendered to ITEC, American, in lieu of delivering the
original Note, shall deliver to ITEC at such time its lost security affidavit
and indemnity agreement in form reasonably satisfactory to ITEC.
1
<PAGE>
6. Within ten (10) working days after the date of this Agreement, ITEC shall
include the Shares in an S3 registration statement with the United States
Securities and Exchange Commission.
7. Except for the rights reserved in this Agreement, American, for itself and
for its officers, directors, shareholders, agents and all other persons or
entities, releases ITEC, its officers, directors, shareholders, agents and all
other persons or entities from the Released Claim set forth in subparagraph 7a,
below, without affecting or releasing any of the Reserved Claims set forth in
paragraph 8b, below.
a. The term "Released Claim" means any claim, cause of demand or action,
liquidated or unliquidated, known or unknown, arising out of or relating to the
Note.
b. The term "Reserved Claims" shall mean all claims of American against
ITEC except for the Released Claims.
8. If suit, action or other proceeding, including, without limitation, any
arbitration or bankruptcy proceeding, shall be necessary to enforce or interpret
any provision in this Agreement, the prevailing party in such proceeding shall
be entitled to recover, in addition to such other sums and relief as the court
or tribunal shall award, such party's reasonable attorneys' fees at trial and on
any appeal therefrom.
9. This Agreement shall be governed in all respects by, and construed in
accordance with, the internal laws of Oregon, without regard to principles of
conflicts of law. Each party hereby submits to the exclusive jurisdiction of the
state and federal court sitting in Multnomah County, Oregon for the adjudication
of any dispute or controversy, or for the perfection or exercise of any right or
remedy, in connection herewith, and hereby waives, and agrees not to assert in
any such suit, action or proceeding, any claim that such party is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought an inconvenient forum or that the venue of such suit,
action or proceeding is improper.
2
<PAGE>
10. American and ITEC each acknowledge that the settlement memorialized in this
Agreement is the result of settlement negotiations in which each party was
represented by counsel, and that each party enters into this Agreement following
discussions with such party's counsel.
AMERICAN INDUSTRIES, INC. IMAGING TECHNOLOGIES
CORPORATION
By: /s/ Howard Hedinger By: /s/ Brian Bonar
----------------------- ------------------------
Title: President Title:
3
Agreement
This Agreement is entered into as of December 30, 1998, by and between Software
Technologies, Inc., #501 Dongwoo Bldg., Kangnam Gu., Seoul, Korea 135-080 Mr.
Woo Young Kim, President ("STI"), and Imaging Technologies Corporation ("ITEC").
ITEC is indebted to STI in the amount of $500,000 at December 30, 1998 and STI
is indebted to ITEC in the amount of $120,000 at December 30, 1998. These shares
shall be made part of the next registration statement to be filed by ITEC, which
the Company expects to file by March 31, 1999.
In accordance with this Agreement, STI agrees to convert the full amount of Five
Hundred Thousand ($500,000) into One Million (1,000,000) shares of ITEC Common
Stock.
In addition, in accordance with this Agreement, STI agrees to remit in full the
amount of $120,000 to ITEC prior to March 31, 1999.
Software Technology, Inc.:
/s/ Woo Y. Kim
- ---------------------------
Mr. Woo Young Kim
President
Imaging Technologies Corporation:
/s/ Brian Bonar
- -----------------------------
Brian Bonar
Chief Executive Officer
Agreement
This Agreement is entered into as of December 30, 1998, by and between Mark A.
Osman, Esq. and Imaging Technologies Corporation ("ITEC").
ITEC is indebted to Mark A. Osman, Esq. in the amount of $40,000 for accrued
legal fees at December 30, 1998.
In accordance with this Agreement, Mark A. Osman, Esq. agrees to convert the
full amount of Forty Thousand Dollars ($40,000) into Eighty Thousand (80,000)
shares of ITEC Common Stock. These shares shall be made part of the next
registration statement to be filed by ITEC, which the Company expects to file by
March 31, 1999.
Mark A. Osman, Esq.
/s/ Mark A. Osman
- ----------------------------------
Mark A. Osman, Esq.
Imaging Technologies Corporation:
/s/ Brian Bonar
- ----------------------------------
Brian Bonar
Chief Executive Officer
Agreement
This Agreement is entered into as of December 30, 1998, by and between Carmine
J. Bua, III and Imaging Technologies Corporation ("ITEC").
ITEC is indebted to Carmine J. Bua, III in the amount of $20,000 for accrued
legal fees at December 30, 1998.
In accordance with this Agreement, Carmine J. Bua, III agrees to convert the
full amount of Twenty Thousand Dollars ($20,000) into Forty Thousand (40,000)
shares of ITEC Common Stock. These shares shall be made part of the next
registration statement to be filed by ITEC, which the Company expects to file by
March 31, 1999.
Carmine J. Bua, III
/s/ Carmine J. Bua, III
- ----------------------------------
Carmine J. Bua, III
Imaging Technologies Corporation:
/s/ Brian Bonar
- ----------------------------------
Brian Bonar
Chief Executive Officer
Agreement
This Agreement is entered into as of December 30, 1998, by and between Frank
Leonardi and Imaging Technologies Corporation ("ITEC").
ITEC is indebted to Frank Leonardi in the amount of $80,000 for accrued
vacation, accrued expenses and commissions at December 30, 1998.
In accordance with this Agreement, Frank Leonardi agrees to convert the full
amount of Eighty Thousand Dollars ($80,000) into One Hundred Sixty Thousand
(160,000) shares of ITEC Common Stock. These shares shall be made part of the
next registration statement to be filed by ITEC, which the Company expects to
file by March 31, 1999.
Frank Leonardi
/s/ Frank Leonardi
- ----------------------------------
Frank Leonardi
Imaging Technologies Corporation:
/s/ Brian Bonar
- ----------------------------------
Brian Bonar
Chief Executive Officer
Agreement
This Agreement is entered into as of December 30, 1998, by and between Brian
Bonar and Imaging Technologies Corporation ("ITEC").
ITEC is indebted to Brian Bonar in the amount of $80,000 for accrued vacation,
commissions and other liabilities at December 30, 1998.
In accordance with this Agreement, Brian Bonar agrees to convert the full amount
of Eighty Thousand Dollars ($80,000) into One Hundred Sixty Thousand (160,000)
shares of ITEC Common Stock. These shares shall be made part of the next
registration statement to be filed by ITEC, which the Company expects to file by
March 31, 1999.
Brian Bonar
/s/ Brian Bonar
- ----------------------------------
Brian Bonar
Imaging Technologies Corporation
/s/ Christopher McKee
- ----------------------------------
Christopher McKee
Vice President, Operations and Finance
/s/ Gerry B. Berg
- ----------------------------------
Gerry B. Berg
Senior Vice President
Agreement
This Agreement is entered into as of December 30, 1998, by and between A.L.
Dubrow and Imaging Technologies Corporation ("ITEC").
ITEC is indebted to A.L. Dubrow in the amount of $90,000 for accrued salaries
and reduction of current employment agreement.
In accordance with this Agreement, A.L. Dubrow agrees to convert the full amount
of Ninety Thousand Dollars ($90,000) into One Hundred Eighty Thousand (180,000)
shares of ITEC Common Stock to be issued in the name of DK Capital. These shares
shall be made part of the next registration statement to be filed by ITEC, which
the Company expects to file by March 31, 1999.
A.L. Dubrow
/s/ A.L. Dubrow
- ----------------------------------
A.L. Dubrow
Imaging Technologies Corporation:
/s/ Brian Bonar
- ----------------------------------
Brian Bonar
Chief Executive Officer
<PAGE>
February 25, 1999
Imaging Technologies Corporation
11031 Via Frontera
San Diego, CA 92127
Re: Our Agreement of December 28, 1998
Gentlemen:
Please be advised that I have assigned all of my rights under the
subject agreement to DK Capital and hereby request that all stock to be issued
to me under that agreement be issued in the name of DK Capital.
Very truly yours,
/s/ A.L. Dubrow
A.L. Dubrow
-2-
Agreement
This Agreement is entered into as of December 30, 1998, by and between Frank
Kavanaugh and Imaging Technologies Corporation ("ITEC").
ITEC is indebted to Frank Kavanaugh in the amount of $90,000 for accrued
salaries and reduction of current employment agreement.
In accordance with this Agreement, Frank Kavanaugh agrees to convert the full
amount of Ninety Thousand Dollars ($90,000) into One Hundred Eighty Thousand
(180,000) shares of ITEC Common Stock to be issued in the name of DK Capital.
These shares shall be made part of the next registration statement to be filed
by ITEC, which the Company expects to file by March 31, 1999.
Frank Kavanaugh
/s/ Frank Kavanaugh
- ----------------------------------
Frank Kavanaugh
Imaging Technologies Corporation:
/s/ Brian Bonar
- ----------------------------------
Brian Bonar
Chief Executive Officer
<PAGE>
February 25, 1999
Imaging Technologies Corporation
11031 Via Frontera
San Diego, CA 92127
Re: Our Agreement of December 28, 1998
Gentlemen:
Please be advised that I have assigned all of my rights under the
subject agreement to DK Capital and hereby request that all stock to be issued
to me under that agreement be issued in the name of DK Capital.
Very truly yours,
/s/ Frank P. Kavanaugh
Frank P. Kavanaugh
-2-
Agreement
This Agreement is entered into as of December 30, 1998, by and between Gerry
Berg and Imaging Technologies Corporation ("ITEC").
ITEC is indebted to Gerry Berg in the amount of $20,000 for accrued bonuses at
December 30, 1998.
In accordance with this Agreement, Gerry Berg agrees to convert the full amount
of Twenty Thousand Dollars ($20,000) into Forty Thousand (40,000) shares of ITEC
Common Stock. These shares shall be made part of the next registration statement
to be filed by ITEC, which the Company expects to file by March 31, 1999.
Gerry Berg
/s/ Gerry Berg
- ----------------------------------
Gerry Berg
Imaging Technologies Corporation:
/s/ Brian Bonar
- ----------------------------------
Brian Bonar
Chief Executive Officer
Agreement
This Agreement is entered into as of December 30, 1998, by and between Joseph
Pfeuffer and Imaging Technologies Corporation ("ITEC").
ITEC is indebted to Joseph Pfeuffer in the amount of $20,000 for accrued bonuses
at December 30, 1998.
In accordance with this Agreement, Joseph Pfeuffer agrees to convert the full
amount of Twenty Thousand Dollars ($20,000) into Forty Thousand (40,000) shares
of ITEC Common Stock. These shares shall be made part of the next registration
statement to be filed by ITEC, which the Company expects to file by March 31,
1999.
Joseph Pfeuffer
/s/ Joseph Pfeuffer
- ----------------------------------
Joseph Pfeuffer
Imaging Technologies Corporation:
/s/ Brian Bonar
- ----------------------------------
Brian Bonar
Chief Executive Officer
Agreement
This Agreement is entered into as of December 30, 1998, by and between
Christopher McKee and Imaging Technologies Corporation ("ITEC").
ITEC is indebted to Christopher McKee in the amount of $20,000 for accrued
bonuses at December 30, 1998.
In accordance with this Agreement, Christopher McKee agrees to convert the full
amount of Twenty Thousand Dollars ($20,000) into Forty Thousand (40,000) shares
of ITEC Common Stock. These shares shall be made part of the next registration
statement to be filed by ITEC, which the Company expects to file by March 31,
1999.
Christopher McKee
/s/ Christopher McKee
- ----------------------------------
Christopher McKee
Imaging Technologies Corporation:
/s/ Brian Bonar
- ----------------------------------
Brian Bonar
Chief Executive Officer
Agreement
This Agreement is entered into as of December 30, 1998, by and between David
Carver and Imaging Technologies Corporation ("ITEC").
ITEC is indebted to David Carver in the amount of $10,000 for accrued director
at December 30, 1998.
In accordance with this Agreement, David Carver agrees to convert the full
amount of Ten Thousand Dollars ($10,000) into Twenty Thousand (20,000) shares of
ITEC Common Stock. These shares shall be made part of the next registration
statement to be filed by ITEC, which the Company expects to file by March 31,
1999.
David Carver
/s/ David Carver
- ---------------------------
David Carver
Imaging Technologies Corporation:
/s/ Brian Bonar
- -----------------------------
Brian Bonar
Chief Executive Officer
Agreement
This Agreement is entered into as of December 30, 1998, by and between Paul
Barber and Imaging Technologies Corporation ("ITEC").
ITEC is indebted to Paul Barber in the amount of $10,000 for accrued expenses
and commissions at December 30, 1998.
In accordance with this Agreement, Paul Barber agrees to convert the full amount
of Ten Thousand Dollars ($10,000) into Twenty Thousand (20,000) shares of ITEC
Common Stock. These shares shall be made part of the next registration statement
to be filed by ITEC, which the Company expects to file by March 31, 1999.
Paul Barber
/s/ Paul Barber
- --------------------------
Paul Barber
Imaging Technologies Corporation:
/s/ Brian Bonar
- -----------------------------
Brian Bonar
Chief Executive Officer
Agreement
This Agreement is entered into as of December 30, 1998, by and between Dale
Richmond and Imaging Technologies Corporation ("ITEC").
ITEC is indebted to Dale Richmond in the amount of $10,000 for accrued expenses
and commissions at December 30, 1998.
In accordance with this Agreement, Dale Richmond agrees to convert the full
amount of Ten Thousand Dollars ($10,000) into Twenty Thousand (20,000) shares of
ITEC Common Stock. These shares shall be made part of the next registration
statement to be filed by ITEC, which the Company expects to file by March 31,
1999.
Dale Richmond
/s/ Dale Richmond
- ----------------------------------
Dale Richmond
Imaging Technologies Corporation:
/s/ Brian Bonar
- ----------------------------------
Brian Bonar
Chief Executive Officer
Exhibit 23.2
Boros & Farrington
Certified Public Accountants
A Professional Corporation
1770 Bernardo Plaza Court, Suite 210
San Diego, CA 92128-2424
(858) 487-8518 Fax (858) 487-6794
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
October 5, 1998 appearing in ITEC Corporation's Annual Report on Form 10-K for
the fiscal year ended June 30, 1998.
/s/ Boros & Farrington APC
BOROS & FARRINGTON APC
San Diego, California
April 30, 1999
