As filed with the Securities and Exchange Commission on July 15, 1999
Registration No. 333-77629
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------------------
IMAGING TECHNOLOGIES CORPORATION
(Exact Name of Registrant as Specified In Its Charter)
Delaware 33-0021693
(State or Other Jurisdiction of (I.R.S. Employer
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)
--------------------------
MARTIN ERIC WEISBERG, ESQ.
PARKER CHAPIN FLATTAU & KLIMPL, LLP
1211 Avenue of the Americas
New York, New York 10036
(212) 704-6000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
--------------------------
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(c) 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. [ ]
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 the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
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.
SUBJECT TO COMPLETION, DATED JULY 13, 1999
PROSPECTUS
IMAGING TECHNOLOGIES CORPORATION
54,522,740 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 sale of these shares. We could receive
up to $11,514,481 in proceeds from the exercise of 13,564,823
warrants, the underlying shares of which we are registering in
this prospectus, by the selling stockholders, which proceeds
would be used for our general corporate purposes. As of the
date of this prospectus, none of these warrants have been
exercised.
o Our common stock is traded on the Nasdaq SmallCap Market under
the symbol ITEC.
o On July 13, 1999, the closing bid price of our common stock on
the Nasdaq SmallCap Market was $1.4375.
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.
--------------------------------------------------
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.
--------------------------------------------------
The date of this prospectus is ______, 1999
<PAGE>
Table of Contents
Risk Factors.................................................................3
Forward-Looking Statements..................................................10
Use of Proceeds.............................................................10
Dividend Policy.............................................................11
Dilution....................................................................11
Shares Eligible for Future Sale.............................................13
Selling Stockholders........................................................13
Description of Securities...................................................20
Plan of Distribution........................................................21
Where You Can Find More Information.........................................22
Indemnification of Directors and Officers...................................22
Legal Matters...............................................................23
Experts.....................................................................23
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Risk Factors
This offering involves a high degree of risk. You should carefully
consider the risks described below, 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 additional 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
----------------------------------------------------------
o June 30, 1996 $1,263,000
o June 30, 1997 $4,063,000
o June 30, 1998 $7,100,000
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Six Months ended: Negative Cash Flow
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o December 31, 1998 $2,820,000
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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 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.
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<PAGE>
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
our competitors
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.
Many of our current and prospective competitors have significantly greater
financial, technical, sales and marketing resources than we do
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. 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.
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<PAGE>
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 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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<PAGE>
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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<PAGE>
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
The conversion of outstanding Series D and E 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
As of January and February 1999, we completed two transactions selling
Series D and E preferred stock to some of the selling stockholders listed in the
selling stockholders' table on page 16 of this prospectus. See "Selling
Stockholders" and "Description of Securities" for additional information. The
Series D preferred stock and Series E preferred stock are convertible at a
floating rate that will 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 conversion of the Series D and E preferred stock may result in
substantial dilution to the interests of other holders of common stock since
each holder of Series D and E preferred stock may ultimately convert and sell
the full amount of common stock issuable upon conversion of its preferred stock.
The following table describes the amount of shares of our common stock
into which the Series D and E preferred stock is convertible at various
percentages of the market price as of June 15, 1999 and the percentages of our
total outstanding common stock represented by conversion of Series D and E
preferred stock following the conversion and exercise of the warrants issued
pursuant to the private sale of the Series D and E preferred stock:
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<PAGE>
<TABLE>
<CAPTION>
Percentage of our outstanding
common stock represented by the
shares of common stock issuable
upon conversion of the Series D and
Number of shares E preferred stock following
of conversion and exercise of the
common stock warrants issued pursuant to the
issuable upon private sale of the Series D and E
Percentage of market conversion of the preferred stock (assuming these
price per share of our Conversion Series D and E warrants are exercised at
common stock price preferred stock $.875 per share)
-------------- ------- ----------------- -----------------
<S> <C> <C> <C>
At $0.84375 per share, market
price at June 15, 1999 $0.50 per share 16,410,000 54.6%
- ------------------------------------------------------------------------------------------------------------------------
At $0.63281 per share (75% of
market price at June 15, 1999) $0.50 per share 16,410,000 54.6%
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At $0.42188 per share (50% of $0.42188 per
market price at June 15, 1999) share 19,448,644 57.5%
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At $0.21094 per share (25% of $0.21094 per 38,897,314 69.7%
market price at June 15, 1999) share
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</TABLE>
However, each selling stockholder owning Series D preferred stock may
not convert its Series D preferred stock if, as a result, the selling
stockholder would own more than 9.99% of the then outstanding common stock. This
restriction, however, does not prevent a selling stockholder from converting
some of its Series D preferred stock, up to 9.99% of the outstanding common
stock, and then selling all or a portion if its common stock, and then
converting more of its Series D preferred stock, up to 9.99% of the outstanding
common stock, at a later date. In this way, a 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 any one time.
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 55,009,986 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, if the exercise price of the options or warrants or the conversion
ratio of the preferred stock was lower than the dollar value per share of common
stock at the time of the exercise or conversion, the dollar value per share of
common stock would decrease because the number of shares of common stock
outstanding would increase without a corresponding increase in the dollar amount
assigned to shareholders' equity.
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 these 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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<PAGE>
Short selling of our common stock could result from significant downward
pressure on the price of our common stock
Significant downward pressure on the price of the common stock could
occur as the selling stockholders convert their shares of Series D and E
preferred stock into common stock and sell material amounts of common stock. In
response, a selling stockholder and others may engage in short sales by
borrowing common stock at the current market price in hope of buying the common
stock in the future at a lower price. Short selling may depress the price of the
common stock.
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.
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.
Our board of directors currently is 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
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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 this 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.
Although 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, our common stock, albeit currently less than
$5,00 per share, does not constitute penny stock because our common stock is
quoted on Nasdaq and our net tangible assets currently exceed $2.0 million. If
in the future our common stock falls within the definition of penny stock, these
regulations would require the delivery, prior to any transaction involving our
common stock, of a disclosure schedule explaining the penny stock market and the
risks associated with it. Furthermore, 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
these 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,
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<PAGE>
if all the warrants of which we are registering the underlying shares on this
prospectus were exercised as of April 20, 1999, we would receive approximately
$11,514,481 in proceeds. We would use any of these 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. Because of this expectation, 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,
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 55,009,986 shares of our common
stock reserved for possible future issuances pursuant to the various documents
described below:
<TABLE>
<CAPTION>
Number of
Common Shares
Type of Security into which Equity
Convertible or Type of Agreement may be
Exercisable into Shares Pursuant to which Convertible or Conversion Ratio or Exercise Price
of Common Stock Securities Issued Exercisable of Security
---------------- ------------------- ------------- ----------------
<S> <C> <C> <C>
Series D preferred stock Series D preferred 8,400,000 4,000 shares of common stock per
stock purchase share of Series D preferred stock
agreement
Series E preferred stock Series E preferred 20,317,000 10,000 shares of common stock per
stock purchase share of Series E preferred stock
agreement
5% convertible preferred securities purchase 60,002 142.69203 shares of common stock
stock agreement per share of 5% convertible preferred stock
Warrants issued Series D preferred 4,200,000 $0.875 per share of common stock
pursuant to the private stock agreement
sale of Series D
preferred stock
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<PAGE>
Common Shares
Type of Security into which Equity
Convertible or Type of Agreement may be
Exercisable into Shares Pursuant to which Convertible or Conversion Ratio or Exercise Price
of Common Stock Securities Issued Exercisable of Security
---------------- ------------------- ------------- ----------------
Warrants issued Series E preferred 10,158,750 $0.875 per share of common stock
pursuant to the private stock agreement
sale of Series E
preferred stock
Warrants lease letter agreement 100,000 $1.50 per share of common stock
Warrants letter of credit 150,000 $1.28 per share of common stock
reimbursement
agreement
Warrants subordinated note (a) 300,000 (a) $2.025 per share of common stock
purchase agreement
(b) 190,000 (b) $1.09 per share of common stock
Warrants settlement and mutual (a) 100,000 (a) $4.00 per share of common stock
release agreement
(b) 200,000 (b) $2.025 per share of common stock
Warrants placement agent 2,753,750 $0.40 per share of common stock
arrangements
Warrants warrant agreement 1,315,333 $0.80 per share of common stock
Warrants warrant agreement 60,000 $0.40 per share of common stock
Warrants warrant agreements 180,740 $1.00 per share of common stock
Warrants real estate services 10,000 $1.50 per share of common stock
agreements
Warrants various third party 3,648,162 $1.00-$7.50 per share of common
agreements stock
Stock options various stock option 699,082 $1.00-$8.45 per share of common
plans stock
Stock options 1998 stock option plan 1,500,000 not yet determined
Convertible promissory subordinated note 666,667 $1.0125 per share of common stock
notes purchase agreement
</TABLE>
Conversion of our shares of outstanding preferred stock and the
exercise of our outstanding warrants would substantially dilute the value of our
common stock. Investors should review the risk factor on pages 7 and 8
describing the dilutive effect the conversion of outstanding Series D and E
preferred stock could have on our common stock to better understand the dilutive
nature of our outstanding preferred stock and warrants.
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<PAGE>
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 6,590,000 shares of our common stock, 5,150,000 of
these shares will become unrestricted on the effective date of the registration
statement of which this prospectus is a part, and 1,440,000 of these shares are
already freely tradeable as they were acquired more than two years ago or in the
market or are already registered.
"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 sales 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 private sales
of Series D and E preferred stock and the exchange agreement;
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;
- 13 -
<PAGE>
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 1,566,073 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 270,000 shares of common stock issued pursuant to settlement
agreements;
o 100,000 shares of our common stock to be issued upon exercise
of the warrants issued pursuant to the lease letter agreement;
o 2,753,750 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 tables 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 section
"Selling Stockholders" and the footnotes to the selling stockholders' tables
below, to our knowledge, no selling stockholder has held any position or office,
or has had any material relationship or material arrangement, with us or any
parties related to us within the past three years. See also "Description of
Securities" for a discussion of the rights and obligations of the selling
shareholders' holdings of the Series D and E preferred stock and warrants.
The number of shares of common stock indicated in the tables below 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 issued in connection with the private
- 14 -
<PAGE>
sales of Series D and E preferred stock. The actual number of shares of common
stock could be materially more than this estimated number 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>
Total Amount Total Amount Percentage Beneficially
Name of Selling Stockholder Beneficially Owned Beneficially Owned Following
(the natural person who exercises cont Prior to Offering Amount Offered Owned Following Offering
over the shares of Common Stock)(1) (as of March 16, 1999) Offering
- ------------------------------------- ------------------- -------------- --------------- -----------------------
<S> <C> <C> <C> <C>
Balmore Funds S.A. 3,937,500 5,250,000 0 0
(Francois Morax)
Austost Anstalt Schaan 3,937,500 5,250,000 0 0
(Thomas Hackl)
Nesher, Inc. (John Clarke) 1,050,000 1,312,500 0 0
Guarantee & Finance Corp. 525,000 1,050,000 0 0
(Ricardo Durling)
Harry J. Saal Trust UTA Dated 8,383,083(2) 8,279,823 103,260(2) *
7/19/72 (Harry J. Saal)
Saal Family Charitable Lead 1,490,017 866,250 623,767 *
Trust UTA Dated 2/25/98
(Leonard J. Shustek)
Manor Investment (Miriam Freilich) 131,250 131,250 0 0
Guilherme Duque 262,500 262,500 0 0
Manchester Asset Management 1,562,500 2,218,750 0 0
(Anthony L.M. Inder Rieden)
Gilston Corporation, Ltd. 1,312,500 1,968,750 0 0
(Dawn Davies)
R.T. Mercer 681,250 656,250 25,000 *
Cashco FLP (David Lieberman) 525,000 525,000 0 0
The Cuttyhunk Fund, Limited 2,625,000 2,625,000 0 0
(Christopher Lewis)
Middleton Securities, Ltd. 682,500 682,500 6 0
(John Dyrud)
Olympus Securities, Ltd. 3,208,750(3)(4) 3,168,750(3) 40,000(4) *
NP Partners 3,208,750(3)(4) 3,168,750(3) 40,000(4) *
Filter International Corp. 3,899,521 3,325,000 574,521 2.5
(A C. Davies)
BET Trust (Frank Kavanaugh) 1,063,750(5) 823,750(6) 240,000 1.2
Pacific Investments Trust 1,063,750(7) 823,750(8) 240,000 1.2
(George Krajacic)
Greenhaven International Ltd. 262,500 262,500 0 0
(Abbas Padldar)
Carl C. Perkins 131,250 131,250 0 0
Skip Braden 131,250 131,250 0 0
American Industries, Inc. 3,172,099(9) 3,172,099(9) 0 0
(Howard Hedinger)
Ellison C. Morgan 334,568 334,568 0 0
Carmel Mountain #8 Associates, 50,000 50,000 0 0
L.P. (Roger Joseph)
Carmel Mountain 50,000 50,000 0 0
Environmental LLC (Bruce Tabb)
</TABLE>
- 15 -
<PAGE>
<TABLE>
<CAPTION>
Total Amount Total Amount Percentage Beneficially
Name of Selling Stockholder Beneficially Owned Beneficially Owned Following
(the natural person who exercises cont Prior to Offering Amount Offered Owned Following Offering
over the shares of Common Stock)(1) (as of March 16, 1999) Offering
- ------------------------------------- ------------------- -------------- --------------- -----------------------
<S> <C> <C> <C> <C>
Software Technology, Inc. 4,915,000(10) 3,625,000 1,290,000(10) 5.7
(Woo Young Kim)
DK Capital LLC (Frank Kavanaugh) 1,063,750(11) 823,750(12) 240,000 1.2
Mark Osman 152,300(13) 80,000 72,300(13) *
Carmine J. Bua 40,000 40,000 0 0
Gerry Berg 235,000(14) 40,000 195,000(14) *
Joseph Pfeuffer 86,000(15) 40,000 46,000(15) *
Christopher McKee 60,833(16) 40,000 20,833(16) *
David Carver 60,000(17) 20,000 40,000(17) *
Paul Barber 20,000 20,000 0 0
Dale Richmond 20,000 20,000 0 0
Daniel Caldwell 128,000 20,000 108,000 *
Alan Hier 1,575,000 1,575,000 0 0
Brian Dror 262,500 262,500 0 0
Fred Nesseri 25,000(18) 25,000 0 0
C. Niven Bonar 67,500 67,500 0 0
Pauline M. Bonar 67,500 67,500 0 0
Phyllis A. Leonardi 40,000 40,000 0 0
John M. Leonardi 40,000 40,000 0 0
Frank J. Leonardi, Jr. 40,000 40,000 0 0
Patricia M. Leonardi 40,000 40,000 0 0
Hiram T. French 150,000(19) 150,000 0 0
J. Steve Tiritilli 5,000 5,000 0 0
John P. Mulder 5,000 5,000 0 0
Edward W. Savarese 787,500(20) 500,000(21) 287,500(20) 1.5
Bi Coastal Consulting Corp. 650,000 650,000 0 0
(Peter Benz)
Libra Finance (Seymour Braun) 752,250 752,250 0 0
Talbiya Ltd. (David Grin) 331,500 331,500 0 0
Imperial Bancorp (Michael Berrier) 60,000 60,000 0
Doron Ben Yehezkel 100,000(22) 100,000 0 0
Timothy E. McCanna 170,000(23) 170,000 0 0
</TABLE>
- ------------------------------
* Represents less than one percent.
(1) For more information in regard to the selling shareholders and their
holdings of our securities, please see the table directly below on page
17 of this registration statement.
(2) Includes 100,000 shares of common stock issuable upon the exercise of
stock options of which the underlying shares of common stock are not
being registered pursuant to this registration statement.
(3) Includes 50,000 shares of common stock issuable upon the exercise of
warrants of which the underlying shares of common stock are not being
registered pursuant to this registration statement. 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
- 16 -
<PAGE>
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.
(4) Includes 40,000 shares of common stock issuable upon the exercise of
warrants of which the underlying shares of common stock are not being
registered pursuant to this registration statement.
(5) Includes 430,000 shares of common stock beneficially owned by DK Capital
LLC of which 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, of which the children of
Frank Kavanaugh are the beneficial owners. Includes also 240,000 shares
of common stock beneficially owned by A.L. Dubrow. Frank Kavanaugh is a
former director and officer of ours as well as a current employee of ours
and A.L. Dubrow is a current employee and director of ours.
(6) Includes 430,000 shares of common stock beneficially owned by DK Capital
LLC 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 Investment Trust.
(7) Includes 430,000 shares of common stock beneficially owned by DK Capital
LLC of which 70,000 shares of common stock are issuable upon the exercise
of warrants. Includes also 87,500 shares of common stock issuable upon
the exercise of warrants beneficially owned by BET Trust. Includes also
240,000 shares of common stock beneficially owned by A.L. Dubrow
(8) Includes 430,000 shares of common stock beneficially owned by DK Capital
LLC of which 70,000 shares of common stock are issuable upon the exercise
of warrants. Includes also 87,500 shares of common stock issuable upon
conversion of Series E preferred stock and 43,750 shares of common stock
issuable upon the exercise of warrants beneficially owned by BET Trust.
(9) 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.
(10) Includes 170,000 shares of common stock issuable upon the exercise of
warrants of which the underlying shares of common stock are not being
registered pursuant to this registration statement.
(11) Includes 240,000 shares of common stock beneficially owned by A.L.
Dubrow. 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.
(12) Includes 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.
(13) Includes 70,000 shares of common stock issuable upon the exercise of
warrants of which the underlying shares of common stock are not being
registered pursuant to this registration statement.
(14) Includes 190,000 shares of common stock issuable upon the exercise of
warrants of which the underlying shares of common stock are not being
registered pursuant to this registration statement.
(15) Includes 45,000 shares of common stock issuable upon the exercise of
warrants of which the underlying shares of common stock are not being
registered pursuant to this registration statement.
(16) Includes 20,833 shares of common stock issuable upon the exercise of
warrants of which the underlying shares of common stock are not being
registered pursuant to this registration statement.
(17) Includes 40,000 shares of common stock issuable upon the exercise of
warrants of which the underlying shares of common stock are not being
registered pursuant to this registration statement.
(18) Includes 25,000 shares of common stock acquired after March 16, 1999.
(19) Includes 150,000 shares of common stock acquired after March 16, 1999.
(20) Includes 500,000 shares of common stock acquired after March 16, 1999.
(21) Includes 287,500 shares of common stock issuable upon the exercise of
warrants, and of which 12,500 warrants were issued after April 20, 1999
of which the underlying shares of common stock are not being registered
pursuant to this registration statement.
(22) Includes 100,000 shares of common stock acquired after March 16, 1999.
(23) Includes 170,000 shares of common stock acquired after March 16, 1999.
- 17 -
<PAGE>
The following table describes in greater detail the material
relationships the selling stockholders have with us and the type of securities
held by the selling stockholders of which we are registering the underlying
shares of common.
<TABLE>
<CAPTION>
Total Amount
Name of Selling Stockholder Shares from Shares from
(the natural person who exercises Converted Series Exercised Serie Shares Other Warrants,
control over the shares of Common D and E Preferred D and E Common Convertible Note
Stock) Stock Warrants Stock and Stock Options
- --------------------------------- ---------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C>
Balmore Funds S.A. 3,500,000 1,750,000 0 0
(Francois Morax)(1)
Austost Anstalt Schaan 3,500,000 1,750,000 0 0
(Thomas Hackl)(1)
Nesher, Inc. (John Clarke)(2) 875,000 437,500 0 0
Guarantee & Finance Corp. 700,000 350,000 0 0
(Ricardo Durling)(3)
Harry J. Saal Trust UTA Dated 4,322,500 2,161,250 0 1,796,073
7/19/72 (Harry J. Saal)(4)
Saal Family Charitable Lead 577,500 288,570 0 0
Trust UTA Dated 2/25/98
(Leonard J. Shustek)
Manor Investment (Miriam Freilich) 87,500 43,750 0 0
Guilherme Duque 175,000 87,500 0 0
Manchester Asset Management 1,312,500 656,250 0 250,000
(Anthony L.M. Inder Rieden)(5)
Gilston Corporation, Ltd. 1,312,500 656,250 0 0
(Dawn Davies)
R.T. Mercer 437,500 218,570 0 0
Cashco FLP (David Lieberman) 350,000 175,000 0 0
The Cuttyhunk Fund, Limited 1,750,000 875,000 0 0
(Christopher Lewis)
Middleton Securities, Ltd. 455,000 227,500 0 0
(John Dyrud)
Olympus Securities, Ltd. 2,112,500 1,056,250 0 150,000
NP Partners 2,112,500 1,056,250 0 150,000
Filter International Corp. 2,750,000 875,000 0 700,000
(A C. Davies)(6)
BET Trust (Frank Kavanaugh) 87,500 43,750 0 0
Pacific Investments Trust 175,000 87,500 0 0
(George Krajacic)
Greenhaven International Ltd. 175,000 87,5000 0 0
(Abbas Padldar)
Carl C. Perkins 87,500 43,750 0 0
Skip Braden 87,500 43,750 0 0
American Industries, Inc. 0 0 2,400,000 772,099
(Howard Hedinger)(7)
Ellison C. Morgan 0 0 0 234,568
Carmel Mountain #8 Associates, 0 0 0 50,000
L.P. (Roger Joseph)
Carmel Mountain 0 0 0 50,000
Environmental LLC (Bruce Tabb)
Software Technology, Inc. 1,750,000 875,000 1,000,000 0
(Woo Young Kim)
DK Capital LLC (Frank Kavanaugh) 0 0 360,000 0
Mark Osman(8) 0 0 80,000 0
Carmine J. Bua (9) 0 0 40,000 0
Gerry Berg(10) 0 0 40,000 0
Joseph Pfeuffer(11) 0 0 40,000 0
Christopher McKee(12) 0 0 40,000 0
David Carver(13) 0 0 20,000 0
Paul Barber (14) 0 0 20,000 0
Dale Richmond (15) 0 0 20,000 0
-18-
<PAGE>
Total Amount
Name of Selling Stockholder Shares from Shares from
(the natural person who exercises Converted Series Exercised Serie Shares Other Warrants,
control over the shares of Common D and E Preferred D and E Common Convertible Note
Stock) Stock Warrants Stock and Stock Options
- --------------------------------- ---------------- --------------- ------------- ----------------
Daniel Caldwell (16) 0 0 20,000 0
Alan Hier 1,050,000 525,000 1,575,000 0
Brian Dror 175,000 87,500 262,500 0
Fred Nesseri 0 0 25,000 0
C. Niven Bonar (17) 0 0 67,500 0
Pauline M. Bonar(18) 0 0 67,500 0
Phyllis A. Leonardi (19) 0 0 40,000 0
John M. Leonardi (20) 0 0 40,000 0
Frank J. Leonardi, Jr. (21) 0 0 40,000 0
Patricia M. Leonardi (22) 0 0 40,000 0
Hiram T. French(23) 0 0 150,000 0
J. Steve Tiritilli 0 0 0 5,000
John P. Mulder 0 0 0 5,000
Edward W. Savarese(24) 0 0 500,000 0
Bi Coastal Consulting Corp. 0 0 0 650,000
(Peter Benz)(25)
Libra Finance (Seymour Braun)(26) 0 0 0 752,250
Talbiya Ltd. (David Grin)(27) 0 0 0 331,500
Imperial Bancorp(Michael Berrier)(28) 0 0 0 60,000
Doron Ben Yehezkel(29) 0 0 100,000 0
Timothy E. McCanna(30) 0 0 170,000 0
</TABLE>
- ------------------------------
(1) Includes 875,000 shares of common stock issuable pursuant to conversion
of Series D preferred stock and 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.
(2) Includes 175,000 shares of common stock issuable pursuant to conversion
of Series D preferred stock and 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.
(3) Includes 350,000 shares of common stock issuable pursuant to conversion
of Series D preferred stock and also 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.
(4) Harry J. Saal is our Chairman of the Board of Directors.
(5) Manchester Asset Management has been retained by us for consulting
services within the last three years.
(6) Filter International Corp. has been retained by us for consulting
services within the last three years.
(7) 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.
(8) 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.
(9) Carmine J. Bua has been retained by us as outside legal counsel on
various matters within the past four years.
(10) 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.
(11) Joseph J. Pfeuffer currently is our Senior Vice President of Engineering.
(12) Christopher McKee currently is our Vice President of Finance and
Operations.
(13) David Carver is a member of our Board of Directors.
(14) Paul Barber currently is our Director of Sales for North America.
(15) Dale Richmond currently is our Vice President of Marketing.
(16) Daniel Caldwell currently is the Vice President of our Software Products
Division.
(17) C. Niven Bonar is a son of Brian Bonar, our current Chief Executive
Officer and President.
(18) Pauline M. Bonar is a daughter of Brian Bonar, our current Chief
Executive Officer and President.
(19) 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.
(20) 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.
(21) 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.
- 19 -
<PAGE>
(22) 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.
(23) Hiram T. French was the President of Color Solutions, Inc., one of our
subsidiaries.
(24) 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.
(25) Bi Coastal Consulting Corp. has been retained by us for consulting
services within the last three years.
(26) Libra Finance has been retained by us for consulting services within the
last three years.
(27) Talbiya Ltd. has been retained by us for consulting services within the
last three years.
(28) Imperia l Bancorp's subsidiary Imperial Bank has a line of credit and an
installment loan with us.
(29) Doron Ben Yehezkel has been a Vice President of Engineering for NewGen
Imaging Systems, Incorporated, one of our subsidiaries, within the past
three years.
(30) Timothy E. McCanna has been a Vice President of OEM Sales for us within
the last three years.
Description of Securities
Series D and E Preferred Stock
As of January 13 and February 2, 1999, pursuant to separate securities
purchase agreements and an exchange agreement, we agreed to sell 1,200 shares of
Series D preferred stock with accompanying Series D warrants and up to 1,161
shares of Series E preferred stock with accompanying Series E warrants. Each
share of Series D preferred stock coupled with 2,000 Series D warrants and each
share of Series E preferred stock coupled with 5,000 Series E warrants, were
sold for $2,000 and $5,000, respectively. Certificates of designation filed with
the Secretary of State of Delaware govern the particular 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.
Conversion Rights
A holder of Series D or E preferred stock shall have the right to
convert its shares of Series D or E preferred stock at any time after informing
us of its intention to convert its Series D or Series E preferred stock pursuant
to a notice of conversion.
The actual 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 purchase price of a share of Series D and E preferred stock,
$2,000 and $5,000, respectively, 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. Currently, a holder may convert each share
of Series D and E preferred stock into 4,000 and 10,000 shares of common stock,
respectively.
Dividends
The holders of Series D and E preferred stock are not entitled to
receive any dividends.
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 Series D and
Series E preferred stockholder has a right to cast one vote for each whole share
of our common stock into which each Series D and Series E 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.
Series D and E Warrants
Each selling stockholder who purchased Series D and E preferred stock
in the private sales received one Series D or E warrant for each dollar invested
in those preferred stocks. These warrants have an exercise price of $.875 and an
exercise term of five years from the date of issuance, meaning that the exercise
term will expire on various dates in spring 2004. In the event we issue shares
of common stock at a price below the market price, the exercise price of the
warrants will be adjusted downward
- 20 -
<PAGE>
resulting in the issuance of additional shares upon exercise of the warrants.
However, shares of common stock issued upon conversion of the Series D or E
preferred stock will not result in the downward adjustment of the exercise price
of the warrants. In addition, the exercise price of the warrants and the number
of shares of common stock issuable upon exercise of the warrants may be adjusted
upon the occurrence of, among other things, a merger or sale of our company,
recapitalization, reorganization or reclassification of our capital.
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 sale;
o In the over-the-counter market;
o In transactions other than on U.S. securities 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. Because of this
possibility, 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.
The registration agreements relating to the private sales of Series D
and E preferred stock, the registration rights agreement relating to the
settlement and mutual release agreement and the subordinated note agreement have
reciprocal indemnification provisions between us and each selling stockholder to
indemnify each other against 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
- 21 -
<PAGE>
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 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;
3. Our quarterly reports on Form 10-Q for the periods ended September
30, 1998, December 31, 1998 and March 31, 1999;
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, 1984.
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
- 22 -
<PAGE>
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 the officer or director 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.
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, this type of 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 shares of common stock sold pursuant to this prospectus.
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, are
based 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 that firm as experts in accounting and auditing.
- 23 -
<PAGE>
================================================================================
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 information. 54,522,740 Shares of Common Stock
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
July __, 1999. IMAGING TECHNOLOGIES
CORPORATION
TABLE OF CONTENTS
==========
Risk Factors 3 PROSPECTUS
Forward-Looking Statements 10 ==========
Use of Proceeds 10
Dividend Policy 11
Dilution 11
Shares Eligible For Future Sale 13
Selling Stockholders 13
Description of Securities 20 July __, 1999
Plan of Distribution 21
Where You Can Find More Information 22
Indemnification of Directors and Officers 22
Legal Matters 23
Experts 23
================================================================================
<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 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
II-1
<PAGE>
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 SEQUENTIAL
NO. DESCRIPTION OF EXHIBIT PAGE NO./REF.
- ----------- -----------------------------------------------------------------
4.1 (1) Certificate of Designation, Powers, Preferences and
Rights of the Series of Preferred Stock to be
Designated Series D Convertible Preferred Stock.
4.2 (1) Certificate of Designation, Powers, Preferences and
Rights of the Series of Preferred Stock to be
Designated Series E Convertible Preferred Stock.
4.3 (1) Letter of Credit Reimbursement Agreement.
4.4 (1) Securities Purchase Agreement.
4.5 (1) Registration Rights Agreement.
4.6 (1) Registration Rights Agreement.
4.7 (1) Exchange Agreement.
4.8 (1) Form of Warrant.
4.9 (2) 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 (2) 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 (2) 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 (2) 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 (2) 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 (2) Partial Settlement Agreement, dated March 30, 1999,
by and between ITEC and the party listed on the
signature page thereto.
4.15 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Software
Technology, Inc.
4.16 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Mark A. Osman.
4.17 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Carmine J. Bua,
III.
4.18 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Frank Leonardi.
4.19 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Brian Bonar.
4.20 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and A.L. Dubrow,
including assignment of rights documentation.
4.21 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Frank Kavanaugh,
including assignment of rights documentation.
4.22 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Gerry Berg.
II-2
<PAGE>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION OF EXHIBIT PAGE NO./REF.
- ----------- -----------------------------------------------------------------
4.23 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Joseph Pfeuffer.
4.24 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Christopher
McKee.
4.25 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and David Carver.
4.26 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Paul Barber.
4.27 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Dale Richmond.
4.28 * 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 * Settlement Agreement, dated April 1999, by and
between ITEC and Hiram French.
4.39 * Settlement Agreement, dated April, 1999, by and
between ITEC and Edward W. Savarese.
4.40 * Form of Warrant to Purchase 60,000 Shares of
Common Stock of ITEC at $2.50 per share, dated June
23, 1998, between ITEC and Imperial Bank.
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 with this Amendment No. 2.
(1) Incorporated by reference to the same numbered exhibit filed with the
Company's Report on Form 10-Q for the period ended December 31, 1998.
(2) Previously filed with the original filing of this registration
statement, file number 333-72629.
II-3
<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
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-4
<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 Amendment
No.1 to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on July [ ], 1999.
IMAGING TECHNOLOGIES CORPORATION
By: /s/ Philip Englund
---------------------------------------------
Philip Englund
Senior Vice President and Corporate Secretary
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board July 14, 1999
- -----------------------------------------------
Harry J. Saal
President, Chief Executive
Officer and Director (Acting
* Chief Financial Officer) July 14, 1999
- -----------------------------------------------
Brian Bonar
* Director July 14, 1999
- -----------------------------------------------
A.L. Dubrow
* Director July 14, 1999
- -----------------------------------------------
David M. Carver
Senior Vice President, General
/s/ Philip Englund Counsel and Secretary July 14, 1999
- -----------------------------------------------
Philip Englund
Vice President Finance and
Operations (Chief Accounting
* Officer) July 14, 1999
- -----------------------------------------------
Christopher W. McKee
Vice President and Chief
/s/ Charles J. Olson II Financial Officer July 14, 1999
- -----------------------------------------------
Charles J. Olson II
* By: /s/ Philip Englund
-----------------------
Philip Englund
Attorney-in-fact
</TABLE>
II-5
<PAGE>
SECURITIES AND
EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
-------------
EXHIBITS
TO
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FILE NUMBER 333-77629
-------------
IMAGING TECHNOLOGIES CORPORATION
(EXACT NAME OF ISSUER AS SPECIFIED
IN ITS CHARTER)
JULY 15, 1999
II-6
<PAGE>
ITEM 16. EXHIBITS.
EXHIBIT SEQUENTIAL
NO. DESCRIPTION OF EXHIBIT PAGE NO./REF.
- ----------- -----------------------------------------------------------------
4.1 (1) Certificate of Designation, Powers, Preferences and
Rights of the Series of Preferred Stock to be
Designated Series D Convertible Preferred Stock.
4.2 (1) Certificate of Designation, Powers, Preferences and
Rights of the Series of Preferred Stock to be
Designated Series E Convertible Preferred Stock.
4.3 (1) Letter of Credit Reimbursement Agreement.
4.4 (1) Securities Purchase Agreement.
4.5 (1) Registration Rights Agreement.
4.6 (1) Registration Rights Agreement.
4.7 (1) Exchange Agreement.
4.8 (1) Form of Warrant.
4.9 (2) 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 (2) 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 (2) 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 (2) 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 (2) 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 (2) Partial Settlement Agreement, dated March 30, 1999,
by and between ITEC and the party listed on the
signature page thereto.
4.15 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Software
Technology, Inc.
4.16 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Mark A. Osman.
4.17 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Carmine J. Bua,
III.
4.18 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Frank Leonardi.
4.19 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Brian Bonar.
4.20 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and A.L. Dubrow,
including assignment of rights documentation.
4.21 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Frank Kavanaugh,
including assignment of rights documentation.
4.22 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Gerry Berg.
4.23 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Joseph Pfeuffer.
E-1
<PAGE>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION OF EXHIBIT PAGE NO./REF.
- ----------- -----------------------------------------------------------------
4.24 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Christopher
McKee.
4.25 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and David Carver.
4.26 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Paul Barber.
4.27 (2) Debt Forgiveness Agreement, dated as of December
30, 1998, by and between ITEC and Dale Richmond.
4.28 * 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 * Settlement Agreement, dated April 1999, by and
between ITEC and Hiram French.
4.39 * Settlement Agreement, dated April, 1999, by and
between ITEC and Edward W. Savarese.
4.40 * Form of Warrant to Purchase 60,000 Shares of
Common Stock of ITEC at $2.50 per share, dated June
23, 1998, between ITEC and Imperial Bank.
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 with this Amendment No. 2.
(1) Incorporated by reference to the same numbered exhibit filed with the
Company's Report on Form 10-Q for the period ended December 31, 1998.
(2) Previously filed with the original filing of this registration
statement, file number 333-72629.
E-2
Exhibit 4.28
Agreement
This Agreement is entered into as of December 30, 1998, by and between Daniel
Caldwell and Imaging Technologies Corporation ("ITEC").
ITEC is indebted to Daniel Caldwell in the amount of $10,000 for accrued
vacation at December 30, 1998.
In accordance with this Agreement, Daniel Caldwell 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.
Daniel Caldwell
/s/ Daniel Caldwell
- -------------------------------
Daniel Caldwell
Imaging Technologies Corporation:
/s/ Brian Bonar
- -------------------------------
Brian Bonar
Chief Executive Officer
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Exhibit 4.38
SETTLEMENT AGREEMENT AND
MUTUAL RELEASE OF CLAIMS
THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE OF CLAIMS ("Agreement") is
executed this 15th day of June, 1999, by and between Imaging Technologies
Corporation, a Delaware corporation, its subsidiaries, related entities, or
business concerns, past or present, including Color Solutions, Inc.,
predecessors, successors, officers, agents, employees and assigns and each of
them (hereinafter collectively called the "Company") and Hiram T. French ("Mr.
French").
The purpose of this Agreement is to resolve completely and mutually
release each and every claim for relief and cause of actions which Mr. French
and the Company has or may have against each other and all persons and entities
being released herein. These include, but are not limited to, all claims arising
out of or related to Mr. French's employment with the Company and the Agreement
and Plan or Merger and Plan of Reorganization, dated November 30, 1997, between
the Company and Color Solutions, Inc., a California corporation, ("Merger
Agreement").
This Agreement is made for good and valuable consideration which but
for this settlement Mr. French is not otherwise entitled to receive certain
consideration. That the parties now desire to enter into a binding agreement
regarding their future relationship and to settle and compromise, once and
forever, all of the disputes and controversies which now exist or may in the
future arise from the employment relationship and termination thereof.
WHEREFORE, the parties agree as follows:
1. Mr. French's employment with the Company terminated affective August 14,
1998. After August 14, 1998, Mr. French was not entitled to any salary, wages,
commissions, options, common shares, bonuses, profit sharing, benefits, accrued
vacation, insurance or other compensation from Company or any related entity
except as set forth in paragraph (2) below.
2. In consideration for the execution of this Agreement and the performance of
the terms and conditions herein, the Company agrees that it will issue a
restricted certificate for 150,000 shares of Imaging Technologies Corporation
Common Stock ("ITEC Shares") to Mr. French, within ten (10) days of the
Company's receipt of an executed original of this Agreement. The Company shall
include said shares within its next appropriate registration filed with the SEC.
If such registration is not effective within thirty (30) days of the signing of
this Agreement, then this Agreement shall be null and void.
3. Mr. French agrees and recognizes that by signing this Agreement, his
employment relationship with Company is permanently and irrevocably severed as
of the date set forth in Paragraph 1 above, and that the Company and its
related, affiliated, parent or subsidiary companies, past or present,
predecessors or successors, have no obligation, contractual or otherwise, to
hire, rehire, re-employ, or recall Mr. French in the future.
4. Mr. French represents and warrants that he has not initiated and is not a
party to any pending lawsuit, administrative or other proceeding against any of
the parties released herein.
5. Mr. French understands and acknowledges that during the course of his
employment by the Company and its related entities, including Color Solutions,
Inc., he had access to and became acquainted with trade secrets and other
confidential information of the Company including but not limited to personnel
files, customer names, client names, compilations of information, records,
product information, compilations, devices, methods, processes, computer
programs, financial information, publication information, inventions
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<PAGE>
or research projects, information of a business nature, such as information
about costs, projects, markets, sales and other information of a similar nature
not available to the public and plans for future developments, (collectively
"Confidential Information"), and vendor information which are owned by the
Company and which are regularly used in the operation of the business of the
Company. Mr. French further understands and acknowledges that despite
termination of his relationship with the Company, he has a continuing legal
obligation not to disclose, an not to use, directly or indirectly, any such
trade secrets or Confidential Information owned by the Company or related
entitles.
6. Mr. French understands and acknowledges that all personnel files, customer
names, client names, compilations of information records, product information,
compilations, devices, methods, processes, computer programs, financial
information, publication information, inventions or research projects,
information of business nature, such as information about costs, profits,
markets, sales and other information of a similar nature not available to the
public, and plans for future developments, documents, equipment, computer
programs, printouts, memoranda, lists, notes, work product, journal documents,
production documents, photographic material advertising materials or other items
utilized for promotion, vendor information and similar material relating to the
business of the Company, and all copies of same, whether prepared by him or
otherwise coming into his possession during the term of his employment with the
Company and its predecessor, Color Solutions, Inc., are the exclusive property
of the Company. Mr. French agrees that to the extent he has any such material or
items in his possession, he will return all such material or items to the
Company on or before June 1, 1999.
7. In consideration of the covenants set forth in this Agreement, and for other,
good and valuable consideration, receipt of which is hereby acknowledged, Mr.
French releases the Company and its parents, subsidiaries, affiliates, related
entities or business concerns, past or present, predecessors, successors and
agents and their respective offices, directors, members, attorneys, agents,
executors, administrators and representatives, present and former employees from
any and all claims of any kind, known or unknown, that arose on or before the
Effective Date of this Agreement. The claims Mr. French releases include,
without limitation, all claims in any way related to or arising out of any
aspect of Mr. French's employment by the Company, including any employment
agreement with the Company and the related Merger Agreement. This includes,
without limitation, all claims for wrongful termination, constructive
termination, emotional distress, age discrimination under Federal Age
Discrimination and Employment Act, 29 U.S.C. ss.621 et seq and California
Government Code ss. 12940 et seq, hostile work environment, retaliation,
defamation, breach of contract. false light, disparagement, negligent hiring or
supervision or retention, negligence, all claims for compensation or unpaid
accrued vacation, claims arising out of agreements, representations or policies
related to Mr. French's employment, claims arising under federal, state or local
laws or ordinances prohibiting discrimination or retaliation on the basis or
race, color, national origin, sex, equal pay, disability or any other status,
claims for violation of public policy, including California Fair Employment and
Housing Act claims, claims under Title VII of the Civil Rights Act of 1964,
Americans With Disabilities Act, Federal Family and Medical Leave Act,
California Family Rights Act, and the California Pregnancy Disability Leave Act,
an claims for attorneys' fees, costs or expenses incurred in connection with
raising any such claims. This release includes any and all claims, demands,
rights, causes of action, obligations and liabilities of any kind whatsoever,
known or unknown, at law or in equity, which Mr. French may have or claims to
have, which are or which may be based upon any facts, acts, conduct, omissions,
documents, representations, proposals, contracts, claims, events or other things
occurring at any time on or before the date of execution of this Agreement, and
relating to or arising from any aspect of the Company's employment of Mr. French
and/or relating to the Merger Agreement.
8. After the issuance of the ITEC Shares, the Company shall have no further
obligation to Mr. French with regard to compensation, salary, employee benefits,
accrued vacation or personal time or any compensation whatsoever. Moreover, Mr.
French shall be solely responsible for determining the tax consequences of the
tender of ITEC Shares pursuant to this Agreement, reporting the same to the
appropriate governmental authorities, and the payment of any taxes due thereon.
Mr. French shall defend, indemnify, and hold the Company and each of their
respective affiliates, successors and assigns, harmless from and against any and
all losses, including, but not limited to attorneys' fees, costs, back taxes,
and interest and penalties,
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<PAGE>
which any suffers as a result of such tax determination by Mr. French, the
report or non-reporting thereof, and/or the payment or failure to pay any tax
thereon. In the event of any audit or governmental inquiry with respect to the
settlement payment made to Mr. French, Mr. French agrees to provide his full
cooperation of the Company, including, but not limited to providing the Company
with copies of all tax returns filed with respect to such tender of ITEC Shares.
9. It is expressly agreed that confidentiality of the terms of this Agreement is
of material importance to the parties and was a material inducement to the
execution of this Agreement. Therefore, the parties each agree that the terms of
this Agreement shall remain strictly confidential and that neither shall make
any disclosure to any third person of the terms of this Agreement, except as
required by law and the Company shall advise its appropriate corporate officers
or managing agents, attorneys, or its auditors, of the terms of this Agreement.
Mr. French may advise his spouse, attorney or tax advisor of the terms of the
Agreement. Mr. French further agrees that he shall not in any way characterize
this Agreement. In the case of an inquiry, Mr. French may only indicate that all
claims have been settled and that the terms are confidential. Mr. French
warrants and covenants that he has not communicated to any person, other than
his spouse, attorney or tax advisor, prior to the execution of this Agreement
any term of this Agreement, including but not limited to the amount of the
consideration to be received. Mr. French further agrees and promises not to
encourage, facilitate, provide or otherwise support any claim by a third party
against any of the Releases, and he will not participate in any civil litigation
of any third party claim against any of the Releases, including providing a
witness statement, declaration, affidavit or testimony, unless compelled to do
so by a lawful court order or subpoena. A breach of this provision of this
Agreement shall be deemed a material violation of the Agreement.
10. Each party represents and warrants that such party is not relying, has not
relied upon, any representations or statements made by any other party with
regard to the facts involved in this controversy or the execution and terms of
this Agreement. Each party has consulted with an attorney regarding the terms of
this Agreement and has entered into this Agreement freely, willingly and without
any coercion or duress from anyone.
11. This Agreement and the payment provided for in this Agreement do not
constitute an admission of liability on the part Mr. French or the Company or
its parents, subsidiaries, affiliates, past or present, predecessors, successors
and agents and their respective officers, directors, members, attorneys, agents,
executors, administrators and representatives, present and former employees,
directly or by implication, that any of the parties have violated any law, rule,
regulation, policy or any contractual right or other obligation owed to any
party. The Company specifically denies any allegations of improper or unlawful
conduct or breach of contract allegations in relation to his separation from
employment. Mr. French denies any allegations of impropriety on his part.
Neither this Agreement nor anything in it shall be construed to be or shall be
admissible in any proceedings as evidence of or an admission by the Company of
any violation of any contract, rule, regulation, order or other law. This
Agreement may be introduced, however, in any proceeding to enforce its terms.
Such introduction shall be pursuant to an order protecting its confidentiality.
12. Mr. French represents and warrants that he has not heretofore assigned,
transferred or purported to assign or transfer to any other person or entity any
rights, claims or causes of action herein released and discharged and no other
person or entity has any interest in the matters herein released and discharged.
Furthermore, Mr. French shall indemnify and hold the Company, and all its
persons or entities released herein harmless from and against any rights, claims
or causes of action which arise from or have been assigned or transferred
contrary to the foregoing representations, or in violation of the foregoing
warranties, and shall hold such persons or entities harmless from any and all
loss, expense and/or liability arising directly or indirectly out of the breach
of any of the foregoing representations or warranties.
13. If the Company is contacted by any prospective or future employer of Mr.
French, the Company will only provide the dates of Mr. French's employment and
his last position held. His departure shall be characterized as a voluntary
resignation. No additional information shall be provided.
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<PAGE>
14. Mr. French expressly waives any and all rights which he might have under
Section 1542 of the Civil Code of the State of California which reads as
follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THE CREDITOR DOES NOT KNOW OR
SUSPECT TO WHICH EXIST IN ITS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
Notwithstanding Section 1542 of the Civil Code of California, Mr. French and the
Company expressly agree that this Agreement shall be given full force, and
effect according to each and all of its express terms and provisions, including
as well those relating to unknown a d unspecified actions, causes of action,
claims or other proceedings, judgments, obligations, damages, or other
liabilities, if any.
15. Except as provided herein, Mr. French and the Company expressly agree that
neither they nor their spouses, employees, its parents, subsidiaries,
affiliates, predecessors, successors and agents and their respective officers,
directors, members, attorneys, agents, executors, administrators and
representatives will institute or maintain any legal or administrative
proceedings against any party to this Agreement, or any person or entity
released in this Agreement, before any court, administrative agency, arbitrator
or any other tribunal whatsoever, by reason of any claim, liability or cause of
action, whether known or unknown, being released herein.
16. Mr. French agrees to cooperate with the Company in relation to any lawsuits
or legal proceedings involving the Company to the extent the request(s) for his
participation are reasonable in scope, including personal interviews with the
Company's legal counsel in preparation for his potential testimony regarding
human resource or related matters at the Company.
17. This Agreement shall be construed and governed by the laws of the State of
California. In the event that any provision of this Release of Claims Agreement
is held to be void, null or unenforceable, the remaining portions shall remain
in full force and effect. To this end, the provisions of this Agreement are
severable.
18. Mr. French acknowledges that Mr. French may later discover facts different
from or in addition to those which he knows or believes to be true with respect
to all or any of the liabilities, claims, defenses, causes of action, costs or
demands released in this Agreement; however Mr. French agrees that the general
release set forth above shall be and shall remain effective in al respects,
notwithstanding the discovery of such different or additional facts. Mr. French
and Company each acknowledge and represent that no promise or representation not
contained in this Agreement has been made to them, and acknowledge and represent
that this Agreement contains all terms and conditions pertaining to the
compromise and settlement of the potential claims and causes of actions
referenced in this Agreement are contractual and not a mere recital. The terms
of this Agreement can only be modified by a writing signed by the parties
expressly stating that such modification is intended.
19. This Agreement and the provisions contained herein shall not be construed or
interpreted for or against any party hereto because the party drafted or caused
that party's legal representative to draft any of its provisions.
20. In the event of dispute between the parties regarding the terms, conditions
or enforceability of this Agreement, the dispute shall be resolved by binding
arbitration under the National Rules for the Resolution of Employment Disputes
of the American Arbitration Association in front of a mutually agreeable
arbitrator and shall be held in San Diego, California. This Agreement shall be
construed in accordance with and may be deemed governed by the laws of the State
of California in any arbitration proceeding.
21. The parties to this Agreement shall execute any and all further documents
that may be required to effectuate the purposes of this Agreement.
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<PAGE>
22. This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and to their respective representatives, successors, agents and
assigns.
23. This Agreement may be executed in counterparts, and if so executed each such
counterpart shall have the force and effect of an original, including facsimile
signatures.
24. The invalidity of any provisions of this Agreement as determined by a court
or arbitrator of competent jurisdiction shall in no way affect the validity of
any other provision hereof.
25. No breach of any provision of this Agreement can be waived unless in
writing. Waiver of any one breach shall not be deemed to be a waiver of any
other breach of the same or any other provision of this Agreement.
26. Mr. French understands, represents and certifies that he has carefully read
and fully understood all of the provisions and effects of this Agreement and
that he is knowingly and voluntarily entering into this Agreement free of any
duress or coercion.
27. In compliance with the Older Worker's benefit protection (at P.L. 101-433)
Mr. French and the Company acknowledge as follows:
a) Mr. French has been given a period of twenty-one (21) days
within which to consider whether to sign this Agreement, and as
freely elected in consultation with his attorneys to execute the
Agreement on the date set forth below;
b) Mr. French has consulted with his attorneys before signing the
Agreement;
c) This Agreement shall be revocable for the seven (7) day period
following the execution of this Agreement. Revocation must be
made by delivering written notice to Mark A. Osman, Esq., 501 W.
Broadway, Suite 500, San Diego, California 92101, no later than
the close of business on the seventh calendar day after Mr.
French signs the Agreement. If Mr. French revokes this
Agreement, it shall not be effective in any respect.
IMAGING TECHNOLOGIES CORPORATION and its
related subsidiaries and divisions
/s/ Hiram T. French By: /s/ Brian Bonar
- ------------------------------- -------------------------------
Hiram T. French Brian Bonar, Chief Executive Officer and
President
Dated: 6/15/99 Dated: 6/15/99
-------------------------- --------------------------
APPROVED AS TO FORM
LAW OFFICES OF MARK A. OSMAN & ASSOCIATES
Dated: By:
-------------------------- -------------------------------
Mark A. Osman, Attorneys for
IMAGING TECHNOLOGIES
CORPORATION and its related
subsidiaries and divisions
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<PAGE>
Dated: By:
-------------------------- -------------------------------
Attorneys for Hiram T. French
E-9
Exhibit 4.39
SEPARATION AGREEMENT
AND GENERAL RELEASE OF ALL CLAIMS
This Separation Agreement and General Release of all Claims
("Agreement") is made by and between Dr. Edward W. Savarese ("Dr. Savarese") on
the one hand, and Imaging Technologies, Inc. ("ITEC") on the other.
(Collectively, Savarese and ITEC shall be referred to as "the Parties.")
1. Dr. Savarese is currently an employee of ITEC. In accordance with
this Agreement with ITEC, his employment will terminate as of the Effective Date
of this Agreement as defined in Paragraph 10.
2. The parties desire to resolve any claims relating to Dr. Savarese's
separation from employment and therefore enter into this Agreement.
3. In consideration of and in return for the promises and releases
undertaken by ITEC and Dr. Savarese in this Agreement, the Parties agree as
follows:
a. Except for the provisions of paragraph 3c, this Agreement is
neither enforceable nor effective until the Effective Date as
defined in paragraph 10.
b. ITEC has filed with the Securities and Exchange Commission
(the "SEC") a Registration statement on Form S-3 (the
"Registration Statement"). ITEC agrees to contact Dr. Savarese
immediately upon receipt of the "Effectivity Letter" from the
SEC or actions or interactions on the part of the SEC to
indicate the effectivity of the Registration Statement. Within
three trading days after the effective date of this
Registration Statement, ITEC shall issue to Dr. Savarese
500,000 fully registered shares of ITEC common stock.
c. Dr. Savarese will use his reasonable efforts to collect the
debts from the companies listed on Exhibit 1 to this Agreement
that are indebted to ITEC. ITEC agrees to use its best efforts
to assist Dr. Savarese in collecting the debts listed on
Exhibit 1. Dr. Savarese shall have until December 31, 1999 to
make initial contact with the companies listed on Exhibit 1.
Dr. Savarese shall have until December 31, 1999 to make
initial contact with the companies listed on Exhibit 1. If Dr.
Savarese has made contact with said companies then any monies
paid by said companies to ITEC after this Agreement's
Effective Date shall be divided evenly between Dr. Savarese
and ITEC. The parties hereby confirm that any monies paid to
Dr. Savarese in accordance with this paragraph 3c are in
consideration for his efforts in collecting the monies owed to
ITEC by the companies listed on Exhibit 1.
d. Assuming Dr. Savarese elects COBRA continuation coverage, ITEC
will pay all applicable premiums for Dr. Savarese to continue
receiving medical, dental and vision insurance provided to
current employees, through COBRA continuation coverage, for 18
months from the Effective Date of this Agreement or until such
time as Dr. Savarese is covered under the medical insurance
plan of another employer, whichever occurs first. Dr. Savarese
shall be responsible for his own medical, dental and vision
insurance payments under COBRA or otherwise after that time.
e. ITEC represents that Dr. Savarese was a named insured in
ITEC's current insurance policy for officers' and directors'
coverage. ITEC agrees that it will inform Dr. Savarese
concerning any litigation against the Company that names Dr.
Savarese as a defendant.
f. Dr. Savarese waives the right to receive his unpaid salary
from ITEC as well as payment for any accrued but unused
vacation.
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<PAGE>
g. Except for any rights or claims created by or contained in
this Agreement, Dr. Savarese does hereby release ITEC and
ITEC's parents, subsidiaries, related companies and business
concerns, past and present, and each of them, as well as each
of their partners, trustees, directors, officers, agents,
attorneys, servants and employees, past and present, and each
of them (collectively referred to as "Releasees") from any and
all claims, demands, warranties, debts, obligations,
liabilities, costs, expenses, rights of action, and causes of
action of any kind or character whatsoever, whether known or
unknown, suspected or unsuspected, arising prior to the date
of this Agreement. Dr. Savarese specifically releases the
Releasees from any claim for attorneys' fees. DR. SAVARESE
ALSO SPECIFICALLY AGREES AND ACKNOWLEDGES DR. SAVARESE IS
WAIVING ANY RIGHT TO RECOVERY BASED ON STATE OR FEDERAL AGE,
SEX, PREGNANCY, RACE, COLOR, NATIONAL ORIGIN, MARITAL STATUS,
RELIGION, VETERAN STATUS, DISABILITY, SEXUAL ORIENTATION,
MEDICAL CONDITION OR OTHER ANTI- DISCRIMINATION LAWS,
INCLUDING, WITHOUT LIMITATION, TITLE VII, THE AGE
DISCRIMINATION IN EMPLOYMENT ACT, THE AMERICANS WITH
DISABILITIES ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING
ACT AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT, ALL AS
AMENDED, WHETHER SUCH CLAIM BE BASED UPON AN ACTION FILED BY
DR. SAVARESE OR BY A GOVERNMENTAL AGENCY.
h. Except for any rights or claims created by or contained in
this Agreement, ITEC and ITEC's parents, subsidiaries, related
companies and business concerns, past and present, and each of
them, as well as each of their partners, trustees, directors,
officers, attorneys, past and present, and each of them
(collectively referred to as "Releasors") do hereby release
Dr. Savarese from all claims, demands, warranties, debts,
obligations, liabilities, costs, expenses, rights of action,
and causes of action, whether known or unknown, suspected or
unsuspected, arising prior to the date of this Agreement. ITEC
and the Releasors specifically release Dr.
Savarese from any claim for attorneys' fees.
i. Dr. Savarese and ITEC, and the Releasors, and each of them,
understand and agree that as to all of the claims released in
this Agreement, the release when effective includes all claims
of every nature and kind whatsoever, known or unknown,
suspected or unsuspected, except as expressly provided in this
Agreement, and that all rights, if any, that any party may
have under California Civil Code section 1542 are expressly
waived. Section 1542 provides as follows:
"A general release does not extend to claims which
the creditor does not know or suspect to exist in his
favor at the time of executing the release, which is
known by him must have materially affected his
settlement with the debtor."
Dr. Savarese, ITEC, and the Releasors acknowledge that they may discover facts
different from, or in addition to, those which they know or believe to be true
with respect to the claims released in this Agreement and agree that the
Agreement and the releases contained in it shall be and remain effective in all
respects notwithstanding such different or additional facts or the discovery of
them.
4. If any provision of this Agreement or application thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement which can be given effect without the invalid provision or
application. To this end, the provisions of this Agreement are severable.
5. This Agreement and all covenants and releases set forth in this
Agreement shall be binding upon and shall inure to the benefit of the respective
Parties, their legal successors, heirs, assigns, partners,
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<PAGE>
representatives, parent companies, subsidiary companies, agents, attorneys,
officers, employees, directors and shareholders.
6. The Parties acknowledge each has read this Agreement, that each
fully understands its rights, privileges and duties under the Agreement, and
that each enters this Agreement freely and voluntarily. Each Party further
acknowledges each has had the opportunity to consult with an attorney of its
choice to explain the terms of this Agreement and the consequences for signing
it.
7. The Parties each acknowledge and represent that no promise or
representation not contained in this Agreement has been made to them and
acknowledge and represent that this Agreement contains the entire understanding
between the parties and contains all terms and conditions pertaining to the
compromise and settlement of the subjects referenced in this Agreement.
8. ITEC hereby advises Dr. Savarese in writing to discuss this
Agreement with an attorney before executing it. Dr. Savarese acknowledges ITEC
has provided him at least 21 days within which to review and consider this
Agreement before signing it. Should Dr. Savarese decide not to use the full 21
days, then Dr. Savarese knowingly and voluntarily waives any claims that he was
not in fact given that period of time or did not use the entire 21 days to
consult an attorney and/or consider this Agreement.
9. The Parties acknowledge and agree that Dr. Savarese may revoke this
Agreement for up to seven calendar days following Dr. Savarese's execution of
this Agreement and that it shall not become unenforceable until the revocation
period has expired. The Parties further acknowledge and agree that such
revocation must be in writing addressed to Phillip Englund, Esq., Imaging
Technologies, Inc. 11031 Via Frontera, San Diego, California 92127 and received
by Mr. Englund not later than midnight on the seventh day following execution of
this Agreement by Dr. Savarese.
10. If Dr. Savarese does not revoke this Agreement in the time frame
specified in Paragraph 9 above, the Agreement shall become effective at 12:00
a.m. on the 8th day after it is signed by Dr. Savarese (the "Effective Date").
11. This Agreement shall be construed in accordance with, and be deemed
governed by, the laws of the State of California.
12. This Agreement may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original and such counterparts
shall together constitute one and the same agreement.
13. ITEC is executing this Agreement for itself and on behalf of all
other Releasees and Releasors.
14. The signatories to this Agreement who are executing this Agreement
in a representative capacity specifically represent that they are authorized to
do so.
I have read the foregoing Separation Agreement and General Release of
All Claims and I accept and agree to the provisions contained in this Agreement
and hereby execute it voluntarily and with full understanding of its
consequences.
Dated: June 10, 1999 /s/ Edward W. Savarese
-------------------------------
Dr. Edward W. Savarese
Dated: June 10, 1999 Imaging Technologies, Inc.
By: /s/ Brian Bonar
---------------------------
Brian Bonar
E-12
Exhibit 4.40
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation Imaging Technologies Corporation,
a Delaware Corporation
Number of Shares: 60,000
Class of Stock: Common
Initial Exercise Price: $2.50 per share
Issue Date: June 23, 1998
Expiration Date: June 23, 2003
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00
and for other good and valuable consideration, IMPERIAL BANK or registered
assignee ("Holder") is entitled to purchase the number of fully paid and
non-assessable shares of the class of securities (the "Shares") of the
corporation (the "Company") at the initial exercise price per Share (the
"Warrant Price") all as set forth above and as adjusted pursuant to Article 2 of
this Warrant, subject to the provisions and upon the terms and conditions set
forth of this Warrant.
ARTICLE 1. EXERCISE
1.1 Method of Exercise. Holder may exercise this Warrant by
delivering this Warrant and a duly executed Notice of Exercise in substantially
the form attached as Appendix 1 to the principal office of the Company. Unless
Holder is exercising the conversion right set forth in Section 1.2, Holder shall
also deliver to the Company a check for the aggregate Warrant Price for the
Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as
specified in Section 1.1, Holder from may from time to time convert this
Warrant, in whole or in part, into a number of Shares determined by dividing (a)
the aggregate fair market value of the Shares or other securities otherwise
issuable upon exercise of this Warrant minus the aggregate Warrant Price of such
Shares by (b) the fair market value of one Share. The fair market value of the
Shares shall be determined pursuant to Section 1.5
1.3 Alternative Stock Appreciation Right. At Holder's option,
the Company shall pay Holder the fair market value of the Shares issuable upon
conversion of this Warrant pursuant to Section 1.2 in cash in lieu of such
Shares.
1.4 Fair Market Value. If the Shares are traded regularly in a
public market, the fair market value of the Shares will be the closing price of
the Shares (or the closing price of the Company's stock into which the Shares
are convertible) reported for the business day immediately before Holder
delivers its Notice of Exercise to the Company. If the Shares are not regularly
traded in a public market, the Board of Directors of the Company shall determine
fair market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that Holder
disagrees with such determination, then the Company and Holder shall promptly
agree upon a reputable investment banking firm to undertake such valuation. If
the valuation of such investment banking firm is greater than determined by the
Board of Directors, then all fees and expenses of such investment banking firm
shall be paid by the Company. In all other circumstances, such fees and expenses
shall be paid by Holder.
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<PAGE>
1.5 Delivery of Certificate and New Warrant. Promptly after
Holder exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the
Company.
1.7.1 "Acquisition". For the purpose of this
Warrant, "Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets (including intellectual property) of the
Company, or any reorganization, consolidation, or merger of the Company where
the holders of the Company's securities before the transaction beneficially own
less than 50% of the outstanding voting securities of the surviving entity after
the transaction.
1.7.2 Assumption of Warrant. If upon the closing
of any Acquisition the successor entity assumes the obligations of this Warrant,
then this Warrant shall be exercisable for the same securities, cash and
property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on the
record date for the Acquisition and subsequent closing. The Warrant Price shall
be adjusted accordingly. The Company shall use reasonable efforts to cause the
surviving corporation to assume the obligations of the Warrant.
1.7.3 Nonassumption. If upon the closing of any
Acquisition the successor entity does not assume the obligations of this Warrant
and Holder has not otherwise exercised this Warrant in full, then the
unexercised portion of this Warrant shall be deemed to have been automatically
converted pursuant to Section 1.2 and thereafter Holder shall participate in the
Acquisition on the same terms as other holders of the same class of securities
of the Company.
1.7.4 Purchase Right. Notwithstanding the
foregoing, at the election of Holder, the Company shall purchase the unexercised
portion of this Warrant for cash upon the closing of any Acquisition for an
amount equal to (a) the fair market value of any consideration that would have
been received by Holder in consideration of the Shares had Holder exercised the
unexercised portion of this Warrant immediately before the record date for
determining the shareholders entitled to participate in the proceeds of the
Acquisition, less (b) the aggregate Warrant Price of the Shares, but in no event
less than zero.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or
pays a dividend on its common stock payable in common stock, or other
securities, subdivides the outstanding common stock into a greater amount of
common stock, then upon exercise of this Warrant, for each Share acquired,
Holder shall receive, without cost to Holder, the total number and kind of
securities to which Holder would have been entitled had Holder owned the Shares
of record as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other
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<PAGE>
event. Such an event shall include any automatic conversion of the outstanding
or issuable securities of the Company of the same class or series as the Shares
to common stock pursuant to the terms of the Company's Articles of Incorporation
upon the closing of a registered public offering of the Company's common stock.
The Company or its successor shall promptly issue to Holder a new Warrant for
such new securities or other property. The new Warrant shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding
Shares are combined or consolidated, by reclassification or otherwise, into a
lesser number of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and
the number of Shares issuable upon exercise of this Warrant shall be subject to
adjustment, from time to time, in the manner set forth on Exhibit B, if
attached, in the event of Diluting Issuances (as defined on Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment. If the Company
takes any action affecting the Shares or its common stock other than as
described above that adversely affects Holder's rights under this Warrant, the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
2.6 Certificate as to Adjustments. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.
The Company shall, upon written request, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby
represents and warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of
this Warrant is not greater than the fair market value of the Shares as of the
date of this Warrant.
(b) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any
time (a) to declare any dividend or distribution upon its common stock, whether
in cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of common
stock; (d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or
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<PAGE>
wind up; or (e) offer holders of registration rights the opportunity to
participate in an underwritten public offering of the company's securities for
cash, then, in connection with each such event, the Company shall give Holder
(1) at least 20 days prior written notice of the date on which a record will be
taken for such dividend, distribution, or subscription rights (and specifying
the date on which the holders of common stock will be entitled thereto) or for
determining rights to vote, if any, in respect of the matters referred to in (c)
and (d) above; (2) in the case of the matter referred to in (c) and (d) above at
least 20 days prior written notice of the date when the same will take place
(and specifying the date on which the holders of common stock will be entitled
to exchange their common stock for securities or other property deliverable upon
the occurrence of such event); and (3) in the case of the matter referred to in
(e) above, the same notice as is given to the holders of such registration
rights.
3.3 Information Rights. So long as the Holder holds this
Warrant and/or any of the Shares, the Company shall deliver to the Holder (a)
promptly after mailing, copies of all communiques to the shareholders of the
Company, (b) within ninety (90) days after the end of each fiscal year of the
Company, the annual audited financial statements of the Company certified by
independent public accountants of recognized standing and (c) within forty-five
(45) days after the end of each of the first three quarters of each fiscal year,
the Company's quarterly, unaudited financial statements.
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<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase shares of the Common Stock
of Imaging Technologies Corporation pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
with respect to of the Shares covered by the Warrant.
[Strike paragraph that does not apply]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as specified below:
Chief Financial Officer
Controllers Department
Imperial Bank
P.O. Box 92991
Los Angeles, CA 90009
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
IMPERIAL BANK
- ----------------------------
(Signature)
- ----------------------------
(Date)
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<PAGE>
APPENDIX 2
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
- ------------------------------- --------------------------, ------------
Chief Financial Officer
Controllers Department
Imperial Bank
P.O. Box 92991
Los Angeles, CA 90009
Gentleperson:
This is to advise you that the Warrant issued to you described below
will expire on June 23, 2003.
Issuer: Imaging Technologies Corporation
Issue Date: June 23, 1998
Class of Security Issuable: Common
Exercise Price Per Share: $2.50
Number of Shares Issuable: 60,000
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your
only notice of pending expiration.
Imaging Technologies Corporation
By:
----------------------------
Its:
----------------------------
By:
----------------------------
Its:
----------------------------
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<PAGE>
EXHIBIT A
---------
IMPERIAL BANK
ANTIDILUTION AGREEMENT
This Antidilution Agreement is entered into as of June 23, 1998, by and
between Imperial Bank ("Purchaser") and Imaging Technologies Corporation ("the
Company").
RECITALS
--------
A. Concurrently with the execution of this Antidilution Agreement, the
Purchaser is purchasing from the Company a Warrant to Purchase Stock (the
"Warrant") pursuant to which Purchaser has the right to acquire from the Company
the Shares (as defined in the Warrant).
B. By this Antidilution Agreement, the Purchaser and the Company desire
to set forth the adjustment in the number of Shares issuable upon exercise of
the Warrant as a result of a Diluting Issuance (as defined below).
C. Capitalized terms used herein shall have the same meaning as set
forth in the Warrant.
NOW, THEREFORE, in consideration of the mutual promises,
covenants and conditions hereinafter set forth, the parties hereto mutually
agree as follows:
1. Definitions. As used in this Antidilution Agreement, the
following terms have the following respective meanings:
(a) "Option" means any right, option or warrant to subscribe
for, purchase or otherwise acquire common stock or Convertible Securities.
(b) "Convertible Securities" means any evidences of
indebtedness, shares of stock or other securities directly or indirectly
convertible into or exchangeable for common stock.
(c) "Issue" means to grant, issue, sell, assume or fix a
record date for determining persons entitled to receive any security (including
Options), whichever of the foregoing is the first to occur.
(d) "Additional Common Shares" means all common stock
(including reissued shares) Issued (or deemed to be issued pursuant to Section
2) after the date of the Warrant. Additional Common Shares does not include,
however, any common stock Issued in a transaction described in Sections 2.1 and
2.2 of the Warrant; any common stock Issued upon conversion of preferred stock
outstanding on the date of the Warrant; the Shares; or common stock Issued as
incentive or in a nonfinancing transaction to employees, officers, directors or
consultants to the Company.
(e) The shares of common stock ultimately Issuable upon
exercise of an Option (including the shares of common stock ultimately Issuable
upon conversion or exercise of a Convertible Security Issuable pursuant to an
Option) are deemed to be Issued when the Option is Issued. The shares of common
stock ultimately Issuable upon conversion or exercise of a Convertible Security
(other than a Convertible Security Issued pursuant to an Option) shall be deemed
Issued upon Issuance of the Convertible Security.
2. Deemed Issuance of Additional Common Shares. The shares of common
stock ultimately Issuable upon exercise of an Option (including the shares of
common stock ultimately Issuable upon conversion or exercise of a Convertible
Security Issuable pursuant to an Option) are deemed to be Issued when the Option
is Issued. The shares of common stock ultimately Issuable upon conversion or
exercise of a Convertible Security (other than a Convertible Security Issued
pursuant to an Option) shall be deemed Issued upon Issuance
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<PAGE>
of the Convertible Security. The maximum amount of common stock Issuable is
determined without regard to any future adjustments permitted under the
instrument creating the Options or Convertible Securities.
3. Adjustment of Warrant Price for Diluting Issuances
3.1 Ratchet Adjustment. If the Company issues Additional
Common Shares after the date of the Warrant and the consideration per Additional
Common Share (determined pursuant to Section 9) is less than the Warrant Price
in effect immediately before such Issue (a "Diluting Issuance"), the Warrant
Price shall be reduced to the letter of:
(a) the amount of such consideration per Additional Common
Share; or
(b) if the Company's common stock is traded on a national
securities exchange or the National Association of Securities Dealers Automated
Quotation System, the last reported bid or sale price of the Company's common
stock on the first trading day following a public announcement of the Issuance.
3.2 Adjustment of Number of Shares. Upon each adjustment of
the Warrant Price, the number of Shares Issuable upon exercise of the Warrant
shall be increased to equal the quotient obtained by dividing (a) the product
resulting from multiplying (i) the number of Shares Issuable upon exercise of
the Warrant and (ii) the Warrant Price, in each case as in effect immediately
before such adjustment, by (b) the adjusted Warrant Price.
3.3 Securities Deemed Outstanding. For the purpose of this
Section 3, all securities Issuable upon exercise of any outstanding Convertible
Securities or Options, Warrants, or other rights to acquire securities of the
Company shall be deemed to be outstanding.
4. No Adjustment for Issuances Following Deemed Issuances. No
adjustment to the Warrant Price shall be made upon the exercise of Options or
conversion of Convertible Securities.
5. Adjustment Following Changes in Terms of Options or Convertible
Securities. If the consideration payable to, or the amount of common stock
Issuable by, the Company increases or decreases, respectively, pursuant to the
terms of any outstanding Options or Convertible Securities, the Warrant Price
shall be recomputed to reflect such increase or decrease. The recomputation
shall be made as of the time of the Issuance of the Options or Convertible
Securities. Any changes in the Warrant Price that occurred after such Issuance
because other Additional Common Shares were Issued or deemed Issued shall also
be recomputed.
6. Recompuation Upon Expiration of Options or Convertible Securities.
The Warrant Price computed upon the original Issue of any Options or Convertible
Securities, and any subsequent adjustments based thereon, shall be recomputed
when any options or rights of conversion under Convertible Securities expire
without having been exercised. In the case of Convertible Securities or Options
for common stock, the Warrant Price shall be recomputed as if the only
Additional Common Shares Issued were the shares of common stock actually Issued
upon the exercise of such securities, if any, and as if the only consideration
received therefor was the consideration actually received upon the Issue,
exercise or conversion of the Options or Convertible Securities. in the case of
Options for Convertible Securities, the Warrant Price shall be recomputed as if
the only Convertible Securities Issued were the Convertible Securities actually
Issued upon the exercise thereof, if any, and as if the only consideration
received therefor was the consideration actually received by the Company
(determined pursuant to Section 9), if any, upon the Issue of the Options for
the Convertible Securities.
7. Limit on Readjustments. No readjustment of the Warrant Price
pursuant to Sections 5 or 6 shall increase the Warrant Price more than the
amount of any decrease made in respect of the Issue of any Options or
Convertible Securities.
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<PAGE>
8. 30 Day Options. In the case of any Options that expire by their
terms not more than 30 days after the date of Issue thereof, no adjustment of
the Warrant Price shall be made until the expiration or exercise of all such
Options.
9. Computation of Consideration. The consideration received by the
Company for the Issue of any Additional Common Shares shall be computed as
follows:
(a) Cash shall be valued at the amount of cash received by the
Corporation, excluding amounts paid or payable for accrued interest or accrued
dividends.
(b) Property. Property, other than cash, shall be computed at
the fair market value thereof at the time of the Issue as determined in good
faith by the Board of Directors of the Company.
(c) Mixed Consideration. The consideration for Additional
Common Shares Issued together with other property of the Company for
consideration that covers both shall be determined in good faith by the Board of
Directors.
(d) Options and Convertible Securities. The consideration per
Additional Common Share for Options and Convertible Securities shall be
determined by dividing:
(i) the total amount, if any, received or
receivable by the Company for the Issue of the Options or Convertible
Securities, plus the minimum amount of additional consideration (as set forth in
the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
Company upon exercise of the Options or conversion of the Convertible
Securities, by
(ii) the maximum amount of common stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) ultimately
Issuable upon the exercise of such Options or the conversion of such Convertible
Securities.
10. General.
10.1 Governing Law. This Antidilution Agreement shall be
governed in all respects by the laws of the State of California as such laws are
applied to agreements between California residents entered into and to be
performed entirely within California.
10.2 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
10.3 Entire Agreement. Except as set forth below, this
Antidilution Agreement and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
10.4 Notices, etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by first
class mail, post prepaid, certified or registered mail, return receipt
requested, addressed (a) if to Purchaser at Purchaser's address as set forth
below, or at such other address as Purchaser shall have furnished to the Company
in writing, or (b) if to the Company, at the Company's address set forth below,
or at such other address as the Company shall have furnished to the Purchaser in
writing.
10.5 Severability. In case any provision of this Antidilution
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Antidilution Agreement shall
not in any way be affected or impaired thereby.
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<PAGE>
10.6 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Antidilution Agreement.
10.7 Counterparts. This Antidilution Agreement may be executed
in any number of counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.
PURCHASER ISSUER
IMPERIAL BANK IMAGING TECHNOLOGIES CORPORATION
By: /s/ Michael A. Berrier By: /s/ Brian Bonar
---------------------------- ----------------------------
Name: Name:
Title: Title:
Address: Address:
By:
----------------------------
Name:
Title:
Address
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<PAGE>
EXHIBIT B
---------
Registration Rights
The Shares shall be deemed "registrable securities" or otherwise
entitled to "piggy back" registration rights in accordance with the terms of the
following agreement (the "Agreement") between the Company and its investor(s):
None
-----------------------------------------------------------
[Identify Agreement by date, title and parties. If no
Agreement exists, indicate by "none."]
The Company agrees that no amendments will be made to the Agreement
which would have an adverse impact on Holder's registration thereunder without
the consent of Holder. By acceptance of the Warrant to which this Exhibit C is
attached, Holder shall not be deemed to be a party to the Agreement, but solely
entitled to the registration rights created thereby.
If no Agreement exists, then the Company and the Holder shall enter
into Holder's standard form of Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
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EXHIBIT 5.1
PARKER CHAPIN FLATTAU & KLIMPL, LLP
1211 Avenue of the Americas
New York, NY 10036
(212) 704-6000
July 16, 1999
Imaging Technologies Corporation
15175 Innovation Drive
San Diego, CA 92128-3401
Attn.: Brian Bonar, President and CEO
Ladies and Gentlemen:
We have acted as counsel to Imaging Technologies Corporation (the "Company") in
connection with a Registration Statement on Form S-3 filed by the Company with
the Securities and Exchange Commission (the "Registration Statement") relating
to up to 54,522,740 shares (the "Shares") of the Company's common stock, par
value $0.005 per share (the "Common Stock"). Of such Shares, 28,717,500 may be
issued upon conversion of the Series D Convertible Preferred Stock (the "Series
D Preferred Stock") and of the Series E Convertible Preferred Stock (the "Series
E Preferred Stock", and together with the Series D Preferred Stock, the
"Preferred Stock"), 14,358,750 may be issued upon the exercise of warrants
issued or issuable to the holders of the Preferred Stock (the "Preferred
Warrants"), 5,359,823 may be issued upon the exercise of warrants issued or
issuable to holders of certain Company warrants that are not Preferred Warrants
(the "Other Warrants") and 6,086,667 shares of common stock have been issued by
the Company (the "Other Shares").
In connection with the foregoing, we have examined, among other things, the
Registration Statement, the Preferred Warrants, the Other Warrants and originals
or copies, satisfactory to us, of all such corporate records and of all such
agreements, certificates and other documents as we have deemed relevant and
necessary as a basis for the opinion hereinafter expressed. In such examination,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity with the original
documents submitted to us as copies. As to any facts material to such opinion,
we have, to the extent that relevant facts were not independently established by
us, relied on certificates of public officials and certificates, oaths and
declarations of officers or other representatives of the Company.
Based upon the foregoing, we are of the opinion that: (i) the Shares issuable
upon conversion of the Series D Preferred Stock (when such shares are paid for
and issued in accordance with the terms of the Series D Preferred Stock) will be
legally issued, fully paid and non-assessable; (ii) the Shares issuable upon
conversion of the Series E Preferred Stock (when such shares are paid for and
issued in accordance with the terms of the Series E Preferred Stock) will be
legally issued, fully paid and non-assessable; (iii) the Shares issuable upon
the exercise of the Preferred Warrants (when such Shares are paid for and issued
in accordance with the terms of the Preferred Warrants) will be legally issued,
fully paid and non-assessable; (iv) the Shares issuable upon the exercise of the
Other Warrants (when such Shares are paid for and issued in accordance with the
terms of the Other Warrants)
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<PAGE>
will be legally issued, fully paid and non-assessable; and (v) the Other Shares
are legally issued, fully paid and non-assessable. We hereby consent to the use
of our name under the caption "Legal Matters" in the Prospectus constituting a
part of the Registration Statement and to the filing of a copy of this opinion
as an exhibit.
Very truly yours,
/s/ Parker Chapin Flattau & Klimpl, LLP
PARKER CHAPIN FLATTAU & KLIMPL, LLP
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LETTERHEAD OF BOROS & FARRINGTON
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 of our report dated October 5, 1998 appearing in Imaging
Technologies Corporation's Annual Report on Form 10-K for the fiscal year
ended June 30, 1998.
/S/ BOROS & FARRINGTON
BOROS & FARRINGTON
San Diego, California
July 15, 1999
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