EXHIBIT 10.10
IMAGING TECHNOLOGIES CORPORATION
SUBORDINATED NOTE PURCHASE AGREEMENT
September 18, 1998
TABLE OF CONTENTS
PAGE
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Section 1 AUTHORIZATION AND SALE OF SUBORDINATED PROMISSORY NOTES AND WARRANT. . . .1
1.1 AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 SALE OF SUBORDINATED NOTES AND WARRANT.. . . . . . . . . . . . . . . . .1
Section 2 CLOSING DATE; DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.1 CLOSING DATE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.2 DELIVERY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY . . . . . . . . .2
3.1 ORGANIZATION AND STANDING. . . . . . . . . . . . . . . . . . . . . . . .2
3.2 CORPORATE POWER; AUTHORIZATION.. . . . . . . . . . . . . . . . . . . . .2
3.3 ISSUANCE AND DELIVERY OF THE SECURITIES. . . . . . . . . . . . . . . . .2
3.4 GOVERNMENTAL CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . .2
3.5 SEC DOCUMENTS; FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . .3
3.6 NO MATERIAL MISSTATEMENT . . . . . . . . . . . . . . . . . . . . . . . .3
3.7 NO MATERIAL ADVERSE CHANGE.. . . . . . . . . . . . . . . . . . . . . . .3
Section 4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER . . . . . . . .3
4.1 AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
4.2 INVESTMENT EXPERIENCE. . . . . . . . . . . . . . . . . . . . . . . . . .4
4.3 INVESTMENT INTENT. . . . . . . . . . . . . . . . . . . . . . . . . . . .4
4.4 REGISTRATION OR EXEMPTION REQUIREMENTS.. . . . . . . . . . . . . . . . .4
4.5 NO LEGAL, TAX OR INVESTMENT ADVICE.. . . . . . . . . . . . . . . . . . .4
4.6 LEGENDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Section 5 CONDITIONS TO CLOSING OF PURCHASER . . . . . . . . . . . . . . . . . . . .5
5.1 REPRESENTATIONS AND WARRANTIES.. . . . . . . . . . . . . . . . . . . . .5
5.2 PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
5.3 QUALIFICATIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
5.4 COMPLIANCE CERTIFICATE.. . . . . . . . . . . . . . . . . . . . . . . . .5
5.5 OPINION OF COMPANY COUNSEL.. . . . . . . . . . . . . . . . . . . . . . .5
Section 6 CONDITIONS TO CLOSING OF COMPANY . . . . . . . . . . . . . . . . . . . . .5
6.1 REPRESENTATIONS AND WARRANTIES.. . . . . . . . . . . . . . . . . . . . .5
6.2 COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
6.3 QUALIFICATIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 7 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
7.1 AMENDMENTS AND WAIVERS.. . . . . . . . . . . . . . . . . . . . . . . . .6
7.2 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
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TABLE OF CONTENTS
(continued)
PAGE
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7.3 SURVIVAL.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
7.4 SUCCESSORS AND ASSIGNS.. . . . . . . . . . . . . . . . . . . . . . . . .7
7.5 ENTIRE AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
7.6 NOTICES, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
7.7 SEVERABILITY OF THIS AGREEMENT.. . . . . . . . . . . . . . . . . . . . .7
7.8 COUNTERPARTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
7.9 FURTHER ASSURANCES.. . . . . . . . . . . . . . . . . . . . . . . . . . .7
7.10 EXPENSES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
7.11 ACKNOWLEDGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Schedule A -- Schedule of Purchasers
Schedule B -- Schedule of Exceptions
Exhibit A -- Form of Subordinated Promissory Note
Exhibit B -- Form of Warrant
Exhibit C -- Form of Opinion of Company Counsel
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IMAGING TECHNOLOGIES CORPORATION
SUBORDINATED NOTE PURCHASE AGREEMENT
This Subordinated Note Purchase Agreement (the "Agreement") is made as
of September 18, 1998, by and among Imaging Technologies Corporation, a Delaware
corporation (the "Company"), with its principal office at 00000 Xxx Xxxxxxxx,
Xxx Xxxxx, Xxxxxxxxxx 00000, and the purchasers set forth on SCHEDULE A hereto
(the "Purchasers").
Section 1
AUTHORIZATION AND SALE OF SUBORDINATED PROMISSORY NOTES AND WARRANT
1.1 AUTHORIZATION. The Company has authorized the sale and issuance of
subordinated promissory notes in the form of EXHIBIT A attached hereto (the
"Subordinated Notes") in the aggregate principal amounts as set forth on
SCHEDULE A hereto under the heading "Principal Amount of Note" and warrants in
the form of EXHIBIT B attached hereto ("the Warrants") to purchase up to the
number of shares of the Company's Common Stock (the "Common Stock") set forth
opposite each such Purchaser's name on SCHEDULE A hereto under the heading
"Number of Warrant Shares."
1.2 SALE OF SUBORDINATED NOTES AND WARRANT. Subject to the terms and
conditions of this Agreement, the Company agrees to issue and sell to each
Purchaser, and each Purchaser agrees severally and not jointly to purchase from
the Company, a Subordinated Note in the principal amount set forth opposite such
Purchaser's name on SCHEDULE A attached hereto under the heading "Principal
Amount of Note" (the "Purchase Price") and a Warrant to purchase up to the
number of shares of Common Stock set forth opposite such Purchaser's name on
SCHEDULE A hereto under the heading "Number of Warrant Shares."
Section 2
CLOSING DATE; DELIVERY
2.1 CLOSING DATE. The closing of the purchase and sale of the
Subordinated Notes and the Warrants hereunder (the "Closing") shall be held at
the offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, 000 Xxxx X Xxxxxx, Xxxxx 0000,
Xxx Xxxxx, Xxxxxxxxxx 00000, at 11:00 a.m. on September 18, 1998, or at such
other time and place upon which the Company and the Purchasers shall agree. The
date of the Closing is hereinafter referred to as the "Closing Date."
2.2 DELIVERY. At the Closing, the Company will deliver to each
Purchaser a Subordinated Note made payable to such Purchaser in the principal
amount as set forth opposite such Purchaser's name on SCHEDULE A attached hereto
under the heading "Principal Amount of Notes" and a Warrant to purchase up to
the number of shares of Common Stock set forth opposite such Purchaser's name on
SCHEDULE A hereto under the heading "Number of Warrant
Shares." Such delivery shall be against execution by the Purchasers of that
certain Settlement and Mutual Release Agreement dated as of the date hereof
among the Company and the Series C Investors (as defined therein) (the
"Settlement Agreement") and shall fulfill the Company's obligations to the
Purchasers under Section 1.2(B) of the Settlement Agreement.
Section 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
The Company represents and warrants to each Purchaser as of the
Closing Date that, except as set forth on the Schedule of Exceptions attached
hereto as SCHEDULE B (the "Schedule of Exceptions"), which exceptions shall be
deemed to be representations and warranties as if made hereunder:
3.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing as a domestic corporation under the laws of
said state.
3.2 CORPORATE POWER; AUTHORIZATION. The Company has all requisite
legal and corporate power and has taken all requisite corporate action to
execute and deliver this Agreement, to sell and issue the Subordinated Notes and
the Warrants (along with the shares of Common Stock issuable upon exercise of
the Warrants, collectively, the "Securities") and to carry out and perform all
of its obligations under this Agreement and the Securities. This Agreement and
the Securities each constitute the legal, valid and binding obligation of the
Company, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights generally and (ii)
as limited by equitable principles generally. The execution and delivery of this
Agreement and the Securities does not, and the performance of this Agreement and
the Securities and the compliance with the provisions hereof and thereof and the
issuance, sale and delivery of the Securities by the Company will not,
materially conflict with, or result in a material breach or violation of the
terms, conditions or provisions of, or constitute a material default under, or
result in the creation or imposition of any material lien pursuant to the terms
of, the Certificate of Incorporation or Bylaws of the Company or any statute,
law, rule or regulation or any state or federal order, judgment or decree or any
indenture, mortgage, lease or other material agreement or instrument to which
the Company or any of its properties is subject.
3.3 ISSUANCE AND DELIVERY OF THE SECURITIES. The issuance and delivery
of the Securities is not subject to preemptive or any other similar rights of
the stockholders of the Company or any liens or encumbrances. The Company has
duly authorized and reserved for issuance 200,000 shares of Common Stock for
issuance upon exercise of the Warrants. The issuance by the Company of the
Securities is exempt from registration under the Securities Act.
3.4 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, or local
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governmental authority on the part of the Company is required in connection with
the consummation of the transactions contemplated by this Agreement except for:
(i) the filing of a Notice of Transaction pursuant to Section 25102(f) of the
California Corporate Securities Law of 1968, as amended, and the rules
thereunder (the "Law"), which filing will be effected within the time prescribed
by law; and (ii) such other qualifications or filings under the Securities Act
of 1933, as amended (the "Securities Act"), and the regulations thereunder and
all other applicable securities laws as may be required in connection with the
transactions contemplated by this Agreement, which filings will be effected
within the time prescribed by law.
3.5 SEC DOCUMENTS; FINANCIAL STATEMENTS. As of their respective filing
dates, all documents (the "SEC Documents") filed by the Company with the
Securities and Exchange Commission (the "SEC") complied in all material respects
with the requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or the Securities Act, as applicable. None of the SEC Documents
as of their respective dates contained any untrue statement of material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
3.6 NO MATERIAL MISSTATEMENT None of the representations or warranties
of the Company contained in this Agreement or in the Securities, and none of the
other information furnished to Purchasers or their representatives in connection
with this Agreement, when considered as a whole, contains, or will contain, any
misstatement of a material fact or omits to state any fact necessary in light of
the circumstances under which made, to make those statements which have been
made, not misleading.
3.7 NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed herein,
since March 31, 1998, there have not been any changes in the assets,
liabilities, financial condition, business prospects or operations of the
Company from that reflected in the SEC Documents except changes in the ordinary
course of business which have not been, either individually or in the aggregate,
materially adverse.
Section 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
Each Purchaser hereby, severally and not jointly, represents and
warrants to the Company as of the Closing Date as follows:
4.1 AUTHORIZATION. Purchaser represents and warrants to the Company
that: (i) Purchaser has all requisite legal and corporate or other power and
capacity and has taken all requisite corporate or other action to execute and
deliver this Agreement, to purchase its Securities and to carry out and perform
all of its obligations under this Agreement; and (ii) this Agreement, the
Subordinated Note and the Warrant each constitute the legal, valid and binding
obligation of the Purchaser, enforceable against it in accordance with its
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, or similar laws relating to or
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affecting the enforcement of creditors' rights generally and (b) as limited by
equitable principles generally.
4.2 INVESTMENT EXPERIENCE. Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Purchaser is aware of the
Company's business affairs and financial condition and has had access to and has
acquired sufficient information about the Company to reach what it believes is
an informed and knowledgeable decision to purchase its Securities. Purchaser has
such business and financial experience as is required to give it the capacity to
protect its own interests in connection with the purchase of its Securities.
4.3 INVESTMENT INTENT. Purchaser is purchasing its Securities for its
own account as principal, for investment purposes only, and not with a present
view to, or for, resale, distribution or fractionalization thereof, in whole or
in part, within the meaning of the Securities Act; provided, however, that by
making the representation herein, such Purchaser does not agree to hold any of
the Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act. Purchaser
understands that its acquisition of its Securities has not been registered under
the Securities Act or registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the bona fide nature of Purchaser's investment intent as
expressed herein. Purchaser has, in connection with its decision to purchase its
Securities, relied solely upon the SEC Documents and the representations and
warranties of the Company contained herein. Purchaser will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) its
Securities except in compliance with the Securities Act, and the rules and
regulations promulgated thereunder.
4.4 REGISTRATION OR EXEMPTION REQUIREMENTS. Purchaser further
acknowledges and understands that its Securities may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available.
4.5 NO LEGAL, TAX OR INVESTMENT ADVICE. Purchaser understands that
nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of its Securities constitutes legal, tax
or investment advice. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of its Securities.
4.6 LEGENDS. To the extent applicable, the Subordinated Note shall be
endorsed with the legend set forth below:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES EVIDENCED BY
THIS CERTIFICATE MAY NOT BE OFFERED, SOLD OR
4
TRANSFERRED FOR VALUE DIRECTLY OR INDIRECTLY, IN THE ABSENCE OF SUCH
REGISTRATION UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAWS, OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND QUALIFICATION UNDER
APPLICABLE STATE LAWS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
REASONABLE SATISFACTION OF THE COMPANY."
Section 5
CONDITIONS TO CLOSING OF PURCHASER
The Purchaser's obligation to purchase its Securities at the Closing
is, at the option of the Purchaser, subject to the fulfillment or waiver as of
the Closing Date of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Section 3 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of such Closing.
5.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 QUALIFICATIONS. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required as of the Closing in connection with the lawful issuance
and sale of its Securities pursuant to this Agreement shall have been duly
obtained and shall be effective as of the Closing.
5.4 COMPLIANCE CERTIFICATE. The President and Chief Executive Officer
of the Company shall have delivered to Purchaser a certificate certifying that
the conditions specified in Sections 5.1 and 5.2 have been fulfilled.
5.5 OPINION OF COMPANY COUNSEL. Each Purchaser shall have received
from Xxxxxxx, Phleger & Xxxxxxxx LLP, counsel for the Company, an opinion dated
the date of the Closing, in substantially the form as EXHIBIT C attached hereto.
Section 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Securities at the
Closing is, at the option of the Company, subject to the fulfillment or waiver
of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of each Purchaser contained in Section 4 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of such Closing.
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6.2 COVENANTS. Each Purchaser shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by such Purchaser on or before the
Closing.
6.3 QUALIFICATIONS. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required as of the Closing in connection with the lawful issuance
and sale of its Securities pursuant to this Agreement shall have been duly
obtained and shall be effective as of the Closing.
Section 7
MISCELLANEOUS
7.1 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively but only
if so expressly stated), only with the written consent of the Company and the
Purchasers. Any amendment or waiver effected in accordance with this Section
shall be binding upon the holder of the Securities purchased under this
Agreement at the time outstanding, each future holder of such Securities, and
the Company.
7.2 GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting the City of
New York, borough of Manhattan, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
7.3 SURVIVAL. The representations, warranties, covenants and
agreements made in this Agreement shall survive any investigation made by the
Company or the Purchasers and the Closing.
7.4 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement. Notwithstanding the foregoing,
no Purchaser shall assign its rights or obligations under this Agreement without
the prior written consent of the Company, other than to an affiliate of such
Purchaser, including, without limitation, a person with the same investment
advisors as such Purchaser.
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7.5 ENTIRE AGREEMENT. This Agreement, together with the Securities,
the Settlement Agreement, the Amended Registration Rights Agreement (as defined
in the Settlement Agreement) and the New Warrants (as defined in the Settlement
Agreement) constitutes the full and entire understanding and agreement between
the parties with regard to the subjects hereof and thereof.
7.6 NOTICES, ETC. All notices and other communications required or
permitted under this Agreement shall be in writing and may be delivered in
person, by facsimile, overnight delivery service or registered or certified
mail, addressed to the Company at the address set forth at the beginning of this
Agreement, or to the Purchasers at their respective address set forth on the
signature pages hereto in each case with a copy to Citadel Investment Group,
L.L.C., 000 Xxxx Xxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention: Xxxx
Xxxxxx, or at such other address as the Company or each Purchaser shall have
furnished to the other party in writing. All notices and other communications
shall be effective upon the earlier of actual receipt thereof by the person to
whom notice is directed or (i) in the case of notices and communications sent by
personal delivery or facsimile, one business day after such notice or
communication arrives at the applicable address or was successfully sent to the
applicable facsimile number, (ii) in the case of notices and communications sent
by overnight delivery service, at noon (local time) on the second business day
following the day such notice or communication was sent, and (iii) in the case
of notices and communications sent by United States mail, seven days after such
notice or communication shall have been deposited in the United States mail.
7.7 SEVERABILITY OF THIS AGREEMENT. If any provision of this Agreement
shall be determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.9 FURTHER ASSURANCES. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
7.10 EXPENSES. Irrespective of whether the Closing is effected, each
party hereto shall bear its own costs and expenses that it incurs with respect
to the negotiation, execution, delivery and performance of this Agreement and
the Securities.
7.11 ACKNOWLEDGEMENT. By executing this Agreement, each Purchaser
hereby acknowledges and agrees that Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP represents
the Company solely and that such Purchaser has had an opportunity to consult
with its own attorney in connection with this Agreement and the Securities.
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The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
IMAGING TECHNOLOGIES CORPORATION, a Delaware
corporation
By: /S/ XXXXX XXXXX
--------------------------
Xxxxx Xxxxx, President and
Chief Executive Officer
"PURCHASERS"
NP PARTNERS, formerly known as Xxxxxx Partners
By: /S/ ILLEGIBLE
--------------------------
Its: AUTHORIZED SIGNATORY
Address: c/o Leeds Management Services
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx XX00 Xxxxxxx
Attention: Xxxx Xxxxx
OLYMPUS SECURITIES, LTD.
By: /S/ ILLEGIBLE
--------------------------
Its: AUTHORIZED SIGNATORY
Address: c/o Leeds Management Services
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx XX00 Xxxxxxx
Attention: Xxxx Xxxxx
[SIGNATURE PAGE TO SUBORDINATED NOTE PURCHASE AGREEMENT]
SCHEDULE A
SCHEDULE OF PURCHASER
PURCHASER NAME PRINCIPAL AMOUNT OF NOTE NUMBER OF WARRANT SHARES
-------------- ------------------------ ------------------------
NP Partners $ 500,000 100,000
Olympus Securities, Ltd. $ 500,000 100,000
----------- -------
TOTALS $1,000,000 200,000
----------- -------
----------- -------
SCHEDULE A-1
SCHEDULE B
SCHEDULE OF EXCEPTIONS
The following are exceptions to the representations and warranties of Imaging
Technologies Corporation (the "Company") set forth in that certain Subordinated
Note Purchase Agreement dated as of September 18, 1998 (the "Agreement"), with
reference to the Section designations of the Agreement. The references to
specific Sections are not meant and should not be construed as limiting the
noted exceptions to a particular Section. Although the Company has used its
reasonable best efforts to cross-reference the exceptions to all applicable
representations and warranties, no assurance can be given that all necessary
cross-references have been identified and any exception noted below is therefore
deemed disclosed for purposes of all relevant Sections whether or not
cross-referenced. Capitalized terms not otherwise defined in this Schedule of
Exceptions have the meaning given them in the Agreement. Nothing herein
constitutes an admission of any liability or obligation of the Company nor an
admission against the Company's interest. The inclusion of any agreement or
other matter herein or any exhibit hereto should not be interpreted as
indicating that the Company has determined that such an agreement or other
matter is necessarily material to the Company.
SECTION NUMBER EXCEPTIONS
-------------- -----------------------------------------------------------------
Section 3.2 CORPORATE POWER; AUTHORIZATION.
1. Pursuant to the terms of that certain Promissory Note between
McMican Corporation dba New Media Memory and Bank of Xxxxx Xxxxx
(the "Lender"), dated June 17, 1997, that certain Commercial
Security Agreement between McMican Corporation dba New Media
Memory and Lender, dated June 17, 1997, that certain Loan
Agreement between McMican Corporation dba New Media Memory and
Lender, dated October 20, 1997 and that certain Change in Terms
Agreement between McMican Corporation dba New Media Memory and
Lender, dated May 17, 1998 (collectively, the "Xxxxx Xxxxx Line
of Credit"), the Company has outstanding approximately $390,000
in principal amount of indebtedness. The Xxxxx Xxxxx Line of
Credit matured on August 15, 1998 and requires that the Company
obtain Lender's written consent prior to issuing the Subordinated
Notes. The Company is currently in the process of obtaining
additional credit from Imperial Bank to pay off all amounts owed
to the Lender under the Xxxxx Xxxxx Line of Credit. As a result,
the Company has not obtained Lender's written consent to issuing
the Subordinated Notes.
SCHEDULE B-1
2. Pursuant to its agreements with Imperial Bank, the Company is
required to obtain the written consent of Imperial Bank prior to
the sale and issuance of the Subordinated Notes and the Warrants
pursuant to the Agreement, and prior to the sale of certain other
notes and warrants and certain shares of the Company's common
stock being sold in connection herewith. The Company has not
obtained Imperial Bank's written consent.
Section 3.3 ISSUANCE AND DELIVERY OF SECURITIES.
The Company has agreed to issue the Warrants to the Purchasers
pursuant to the Agreement, and certain warrants (the "Additional
Warrants") to other investors under separate purchase agreements.
In addition, pursuant to a certain subordinated note purchase
agreement among the Company and American Industries, Inc. and
Xxxxxxx Xxxxxx (collectively, the "Other Investors"), the Company
has agreed to issue and sell to the Other Investors certain
promissory notes (the "Convertible Notes") that are convertible
at the option of the Other Investors into shares of the Company's
Common Stock and certain warrants (together with the Additional
Warrants, the "Other Warrants") exercisable for shares of the
Company's Common Stock. Under the terms of Section 4(g) of that
certain Securities Purchase Agreement dated August 21, 1997,
between the Company and the holders of the outstanding shares of
the Company's Series C Preferred Stock (the "Series C Holders"),
the Company is required to offer any equity or convertible debt
securities it intends to issue to the Series C Holders prior to
offering the securities to any third party. The Company has not
offered the Warrants, the Convertible Notes or the Other Warrants
to the Series C Holders, who will retain their right of first
offer until the closing of the Company's settlement with the
Series C Holders, which will not occur until after the Company
has issued the Warrants, the Convertible Notes and the Other
Warrants.
Section 3.4 GOVERNMENTAL CONSENTS.
In connection with the issuance of the Subordinated Notes and the
Warrants under this Agreement, the Company was required to obtain
and has obtained a qualification by permit from the Commissioner
of Corporations of the State of California to exempt the payment
of the interest under the Subordinated Notes from the usury laws
of the State of California.
Section 3.7 NO MATERIAL ADVERSE CHANGE.
1. On June 19, 1998, the Company delivered notice to the Series C
Holders of its election to redeem for cash all shares of Series C
Preferred
SCHEDULE B-2
Stock tendered for conversion in lieu of converting such shares.
Certain disputes have arisen between the Company and the Series C
Holders with respect to such notice and the Company's right to
redeem all shares of Series C Preferred Stock tendered for
conversion in lieu of converting such shares. The Series C
Holders have asserted that the Company is in default of its
obligations to them.
2. The Company has recently been informed by Imperial Bank, the
Company's primary lender, that the Company is not in compliance
with all of the provisions of its loan agreements with Imperial
Bank, including without limitation, the provisions regarding
certain minimum ratios the Company is required to maintain. The
Company's noncompliance with many of these provisions results
from the expected one-time charge to earnings that the Company
intends to include in its financial statements as of and for the
fiscal year ended June 30, 1998, which one-time charge the
Company currently anticipates will be as much as approximately
$9,000,000.
3. On September 3, 1998, the Company issued unsecured promissory
notes to certain investors in the aggregate principal amount of
$500,000. Pursuant to its agreements with Imperial Bank, the
Company was required to obtain Imperial Bank's consent prior to
issuing these notes. The Company did not obtain Imperial Bank's
consent.
4. See the disclosures in Section 3.3 above.
SCHEDULE B-3
EXHIBIT A
FORM OF SUBORDINATED PROMISSORY NOTE
See Exhibit 10.11
EXHIBIT A-1
EXHIBIT B
FORM OF WARRANT
See Exhibit 10.12
EXHIBIT B-1
EXHIBIT C
FORM OF LEGAL OPINION
EXHIBIT C-1
[FORM OF LEGAL OPINION]
September 18, 1998
To the Purchasers Listed
on Schedule A to the
Imaging Technologies Corporation
Subordinated Note Purchase Agreement
dated September 18, 1998
Ladies and Gentlemen:
We have acted as counsel for Imaging Technologies Corporation,
a Delaware corporation (the "Company"), in connection with the issuance and sale
of its Subordinated Promissory Notes pursuant to the Imaging Technologies
Corporation Subordinated Note Purchase Agreement dated September 18, 1998 (the
"Note Purchase Agreement") among the Company and you. This opinion letter is
being rendered to you pursuant to Section 5.5 of the Note Purchase Agreement in
connection with the Closing of the sale of the Subordinated Notes. Capitalized
terms not otherwise defined in this opinion letter have the meaning given them
in the Note Purchase Agreement.
In connection with the opinions expressed herein we have made
such examination of matters of law and of fact as we considered appropriate or
advisable for purposes hereof. As to matters of fact material to the opinions
expressed herein, we have relied upon the representations and warranties as to
factual matters contained in and made by the Company pursuant to the Note
Purchase Agreement and upon certificates and statements of government officials
and of officers of the Company. We have also examined originals or copies of
such corporate documents or records of the Company as we have considered
appropriate for the opinions expressed herein. We have assumed for the purposes
of this opinion letter the genuineness of all signatures, the legal capacity of
natural persons, the authenticity of the documents submitted to us as originals,
the conformity to the original documents of all documents submitted to us as
certified, facsimile or photostatic copies, and the authenticity of the
originals of such copies.
As used in this opinion letter, the expression "we are not
aware" or the phrase "to our knowledge", or any similar expression or phrase
with respect to our knowledge of matters of fact, means as to matters of fact
that, based on the actual knowledge of individual attorneys within the firm
principally responsible for handling this matter for the Company (and not
including any constructive or imputed notice of any information), and after an
examination of documents referred to herein and after inquiries of certain
officers of the Company, no facts have been disclosed to us that have caused us
To the Purchasers Listed on September 18, 1998
Schedule A to the Subordinated Page 2
Note Purchase Agreement
to conclude that the opinions expressed are factually incorrect; but beyond that
we have made no factual investigation for the purposes of rendering this opinion
letter. Specifically, but without limitation, we have made no inquiries of
securities holders or employees of the Company, other than such officers.
This opinion letter relates solely to the laws of the State of
California, the Delaware General Corporation Law and the federal law of the
United States, and we express no opinion with respect to the effect or
application of any other laws. Special rulings of authorities administering such
laws or opinions of other counsel have not been sought or obtained.
Based upon our examination of and reliance upon the foregoing
and subject to the limitations, exceptions, qualifications and assumptions set
forth below and except as set forth in the Note Purchase Agreement or the
Schedule of Exceptions thereto, we are of the opinion that as of the date
hereof:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, and the
Company has the requisite corporate power and authority to own its properties
and to conduct its business as, to our knowledge, it is presently conducted.
2. The Company is qualified to do business as a foreign
corporation in California and is in good standing under the laws of the State of
California.
3. The Company has the requisite corporate power and authority
to execute, deliver and perform the Note Purchase Agreement, the Subordinated
Notes and the Warrants. Each of the foregoing has been duly and validly
authorized by the Company, and duly executed and delivered by an authorized
officer of the Company. The Common Stock issuable upon exercise of the Warrants
to be issued at the Closing has been duly and validly reserved for issuance and,
when and if issued upon such exercise pursuant to the terms of the Warrants,
will be validly issued, fully paid and nonassessable.
4. The Company's execution and delivery of, and its
performance and compliance as of the date hereof with the terms of, the Note
Purchase Agreement, the Subordinated Notes and the Warrants do not violate any
provision of any federal, California or Delaware corporate law, rule or
regulation applicable to the Company or any provision of the Company's
Certificate of Incorporation, as amended, or Bylaws, and do not conflict with or
constitute a default under the material provisions of any agreement specifically
identified on Schedule A attached hereto, other than a default under the
agreements related to the Company's loans from Imperial Bank and Bank of Xxxxx
Xxxxx, one or more of which require the Company to obtain Imperial Bank's and
Bank of Yorba Linda's prior written consent (which consent the Company has not
obtained prior
To the Purchasers Listed on September 18, 1998
Schedule A to the Subordinated Page 3
Note Purchase Agreement
to entering into the Note Purchase Agreement and consummating the transactions
contemplated thereby).
5. The Purchasers' loans to the Company evidenced by the
Subordinated Notes are exempt from the usury laws of the State of California.
6. Based in part upon the representations of you in the Note
Purchase Agreement, the offer and sale of the Subordinated Notes and the
Warrants to you pursuant to the terms of the Note Purchase Agreement are exempt
from the registration requirements of Section 5 of the Securities Act of 1933,
as amended, by virtue of Section 4(2) thereof and, under the Securities Act of
1933, as amended, as it presently exists, the issuance of Common Stock to you
upon exercise of the Warrants pursuant to the terms of the Warrants would also
be exempt from such registration requirements.
We express no opinion as to the Company's compliance or
noncompliance with applicable federal or state antifraud or antitrust statutes,
laws, rules and regulations.
We express no opinion concerning the past, present or future
fair market value of any securities.
We assume that all of the information contained in the
applications for qualification by permit filed by the Company on July 17, 1998
and September 15, 1998, under Section 25113 of the California Corporations Code,
including without limitation all of the information contained in any amendments
or supplements to the applications, was accurate, that no information required
to be included in the applications or in any amendments or supplements to the
applications was not so included, and that the qualifications by permit were
therefore properly obtained by the Company.
We express no opinion as to the effect of subsequent issuances
of securities of the Company, to the extent that further issuances which may be
integrated with the Closing may include purchasers which do not meet the
definition of "accredited investors" under Rule 501 of Regulation D and to the
extent that notwithstanding its reservation of shares the Company may issue so
many shares of Common Stock (or may issue securities which as a result of
antidilution adjustments reduce the conversion or exercise ratio of any
outstanding derivative securities) that there are not enough remaining
authorized but unissued shares of Common Stock for the exercise of the Warrants.
This opinion letter is rendered as of the date first written
above solely for your benefit in connection with the Note Purchase Agreement and
may not be delivered to, quoted or relied upon by any person other than you, or
for any other purpose, without our prior written consent. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to the
Company. We assume no obligation to advise you of facts, circumstances,
To the Purchasers Listed on September 18, 1998
Schedule A to the Subordinated Page 4
Note Purchase Agreement
events or developments which hereafter may be brought to our attention and which
may alter, affect or modify the opinions expressed herein.
Very truly yours,
XXXXXXX, XXXXXXX & XXXXXXXX LLP
To the Purchasers Listed on September 18, 1998
Schedule A to the Subordinated Page 5
Note Purchase Agreement
SCHEDULE A
1. Promissory Note between Imperial Bank and the Company, dated June 23,
1998.
2. Security and Loan Agreement and Addendum thereto (Eximbank Facility)
between Imperial Bank and the Company, dated June 23, 1998.
3. Security and Loan Agreement and Addendum thereto (Foreign Insured A/R
Line) between Imperial Bank and the Company, dated June 23, 1998.
4. Security and Loan Agreement and Addendum thereto (Domestic Line)
between Imperial Bank and the Company, dated June 23, 1998.
5. Corporate Resolution to Borrow by the Company, dated June 23, 1998 (re:
Loan No 711062536-4).
6. Promissory Note between Bank of Xxxxx Xxxxx and McMican Corporation dba
New Media Memory, dated June 17, 1997 ("Loan No. 1054468601").
7. Loan Agreement between Bank of Xxxxx Xxxxx and XxXxxxx Corporation dba
New Media Memory, dated October 20, 1997.
8. Change in Terms Agreement (to Loan No 1054468601) between BYL Bank
Group and McMican Corporation (dba New Media Memory), dated May 17,
1998.
9. Commercial Security Agreement between Bank of Xxxxx Xxxxx and XxXxxxx
Corporation dba New Media Memory, dated June 17, 1997.
10. Commercial Guaranty by Xxxxxxx X. XxXxxxx in connection with Loan No
1054468601, dated May 17, 1998.
11. Commercial Guaranty by the Company in connection with Loan No
1054468601, dated May 17, 1998.
12. Corporate Resolution to Borrow by McMican Corporation (dba New Media
Memory), dated May 17, 1998 (re: Loan No 1054468601).
13. Export-Import Bank of the United States Working Capital Guarantee
Program, Borrower Agreement between the Company and Imperial Bank,
dated June 29, 1998.
14. Imperial Bancorp Registration Rights Agreement, dated June 23, 1998.
To the Purchasers Listed on September 18, 1998
Schedule A to the Subordinated Page 5
Note Purchase Agreement
15. Development and Manufacturing Agreement between the Company and Elesys,
Inc., dated September 30, 1997.
16. Development and Manufacturing Agreement between the Company. and Nissei
Sangyo America, Ltd., dated June 30, 1998.
17. Amendment No. 1 to Postscript Software Development and OEM Distribution
License Agreement between the Company and Adobe Systems Incorporated,
dated October 13, 1997.
18. Licensed System Appendix No. 3 to the Postscript Software Development
and OEM Distribution License Agreement between the Company and Adobe
Systems Incorporated, dated October 13, 1997.
19. Multi-Tenant Industrial Lease between Sunhala Enterprises, LLC and the
Company, dated April 1998.
20. Standard Industrial/Commercial Single-Tenant Lease between Xxxxxx X.
Xxxxx Trust and the Company, dated May 2, 1997.
21. Stipulation for Entry of Judgment in Dornsife & Associates, Inc. v.
Color Solutions, Inc.- Settlement for a 10/1/95 promissory note.
22. Promissory Note between the Company and Xxxxx Xxxxxxx and Xxxxxxxx &
Associates, Inc., dated October 1, 1995
23. Convertible Promissory Note between Xxxxx X. Xxxx and the Company,
dated December 31, 1997.
24. Promissory Note between the Company and Dataproducts Corporation, dated
as of June 30, 1998.
25. Stipulation for Entry of Judgment in Syquest Technology, Inc. v. Prima
International.
26. Consulting Agreement between the Company and Xxxxx Xxxx, dated April 1,
1994 and Amendments thereto dated June 12, 1998 and January 22, 1997,
respectively.
27. Executive Employment Agreement between the Company and Xxxxx Xxxxx,
dated September 1, 1994 and Amendments thereto dated January 22, 1997
and April 1, 1998, respectively.
To the Purchasers Listed on September 18, 1998
Schedule A to the Subordinated Page 7
Note Purchase Agreement
28. Executive Employment Agreement between the Company and Xxxxxx Xxxxxxxx,
dated July 1, 1990, as amended February 25, 1994, and Amendments
thereto dated January 22, 1997, April 1, 1998 and June 12, 1998,
respectively.
