<PAGE>


                                                                  Exhibit 10.7


                                   SETTLEMENT
                          AND MUTUAL RELEASE AGREEMENT


          This Settlement and Mutual Release Agreement (this "Agreement") is
entered into as of this 18th day of September, 1998, by and among Imaging
Technologies Corporation, a Delaware corporation ("ITEC"), and each of NP
Partners, formerly known as Nelson Partners ("Nelson"), Olympus Securities, Ltd.
("Olympus"), Ramius Fund, Ltd. ("Ramius"), Raphael, L.P. ("Raphael"), AG Super
Fund International Partners, L.P. ("AG"), GAM Arbitrage Investments, Inc.
("GAM"),  Hick Investments, Ltd. ("Hick"), Leonardo, L.P. ("Leonardo"), Themis
Partners L.P. ("Themis"), Heracles Fund ("Heracles") and Samyang Merchant Bank
("Samyang," and together with Nelson, Olympus, Ramius, Raphael, AG, GAM, Hick,
Leonardo, Themis and Heracles, the "Series C Investors").

                                R E C I T A L S:

          WHEREAS, ITEC and the Series C Investors entered into a Securities
Purchase Agreement, dated as of August 21, 1997 (the "Purchase Agreement"),
pursuant to which ITEC sold, and the Series C Investors purchased, an aggregate
of 500 shares of ITEC's Series C Redeemable Convertible Preferred Stock, par
value $1,000 per share (the "Series C Preferred Stock"), which were convertible
into shares of ITEC's Common Stock, par value $0.005 per share (the "Common
Stock"), in accordance with the terms of the Certificate of Designations,
Preferences and Rights of Series C Convertible Preferred Stock of Imaging
Technologies Corporation as filed with the Secretary of State of the State of
Delaware on August 21, 1997 (the "Certificate of Designations");

          WHEREAS, in connection with the sale and purchase of the Series C
Preferred Stock pursuant to the Purchase Agreement, ITEC also issued, and the
Series C Investors also received, warrants (the "Warrants") to acquire 400
shares of Common Stock for each share of Series C Preferred Stock purchased by
the Series C Investors;

          WHEREAS, in connection with the sale and purchase of the Series C
Preferred Stock pursuant to the Purchase Agreement, ITEC and the Series C
Investors also entered into a Registration Rights Agreement dated as of August
21, 1997 (the "Registration Rights Agreement"), providing the Series C Investors
with certain rights of registration and certain other rights as set forth
therein;

          WHEREAS, on various dates between June 9, 1998 and June 29, 1998,
Nelson, Olympus, Ramius and Raphael tendered for conversion into Common Stock an
aggregate of 235 shares of Series C Preferred Stock (the "Tendered Shares"),
representing all shares of Series C Preferred held by such Series C Investors;

          WHEREAS, on June 19, 1998, ITEC delivered notice (the "Redemption
Notice") to Nelson, Olympus, Ramius, Raphael and Themis (the "Remaining
Holders") of its election to redeem for cash all shares of Series C Preferred
Stock tendered for conversion in lieu of converting such shares;



<PAGE>


          WHEREAS, certain disputes have arisen between ITEC and Nelson,
Olympus, Ramius and Raphael with respect to the Redemption Notice and ITEC's
right to redeem all shares of Series C Preferred Stock tendered for conversion
in lieu of converting such shares;

          WHEREAS, although no disputes have arisen between ITEC and Themis,
ITEC has requested, and Themis has agreed, to permit ITEC to redeem the
remaining 1 share of Series C Preferred Stock now held by Themis and to grant
the mutual release and other agreements between the parties set forth herein;
and

          WHEREAS, the parties wish to settle (i) all disputes, claims, causes
of action, offsets, defenses and all other matters related to, arising out of or
in connection with the Series C Investors' purchase and ownership of the Series
C Preferred Stock and the Warrants including, but not limited to, all disputes,
claims, causes of action, offsets, defenses and all other matters related to,
arising out of or connected in any way to the Purchase Agreement, the
Registration Rights Agreement, the Warrants, the Certificate of Designations,
the Redemption Notice and all other agreements, letters, documents, instruments,
conduct and actions related to, arising out of or connected in any way to the
Series C Investors' purchase and ownership of the Series C Preferred Stock and
the Warrants (collectively, the "Series C Documents"), and (ii) all other
disputes, claims, causes of action, offsets, defenses and all other matters that
may exist between ITEC and each of the Series C Investors, and the parties
further wish to fix and establish in this Agreement their respective rights and
future obligations.

          NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and sufficient consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:

1.   TERMS OF SETTLEMENT.

     1.1 CLOSING. The closing of the settlement set forth in this Agreement and
the consummation of the transactions contemplated hereby shall take place at the
offices of Brobeck, Phleger & Harrison LLP, 550 West C Street, Suite 1300, San
Diego, California 92101, at 10:00 A.M. local time, on September 18, 1998, or at
such other time and place as the parties hereto mutually agree orally or in
writing (which time and place are designated as the "Closing"). At the Closing,
ITEC shall execute and deliver to each of the Series C Investors the
deliverables set forth in Section 1.2 hereto, and each of the Series C Investors
shall execute and deliver to ITEC this Agreement and such other applicable
documents as set forth herein.

     1.2 DELIVERIES BY ITEC. At the Closing, ITEC shall deliver to the Series C
Investors an originally executed copy of this Agreement and the Amendment No. 1
to Registration Rights Agreement, in substantially the form attached hereto as
EXHIBIT A (the "Amendment"), and shall:

          (A)  CASH PAYMENTS.

               (1) Pay to Nelson the amount of one million dollars ($1,000,000)
by wire transfer in accordance with the wire transfer instructions provided by
Nelson;



                                       2
<PAGE>


               (2) Pay to Olympus the amount of one million dollars ($1,000,000)
by wire transfer in accordance with the wire transfer instructions provided by
Olympus;

               (3) Pay to Ramius the amount of sixty two thousand five hundred
dollars ($62,500) by wire transfer in accordance with the wire transfer
instructions provided by Ramius;

               (4) Pay to Raphael the amount of one hundred twenty-five thousand
dollars ($125,000) by wire transfer in accordance with the wire transfer
instructions provided by Raphael; and

               (5) Pay to Themis the amount of twenty-seven thousand five
hundred dollars ($27,500) by wire transfer in accordance with the wire transfer
instructions provided by Themis.

               (6) Pay to Heracles the amount of twelve thousand five hundred
dollars ($12,500) by wire transfer in accordance with the wire transfer
instructions provided by Heracles.

          (B) SUBORDINATED PROMISSORY NOTES AND WARRANTS.

               (1) Deliver to Nelson a subordinated promissory note (the "Nelson
Subordinated Note") in the principal amount of $500,000 and a warrant (the
"Nelson Warrant") to purchase up to 100,000 shares of Common Stock, all pursuant
to a certain Subordinated Note Purchase Agreement dated as of the date hereof
among the Company and Nelson and Olympus (the "Subordinated Note Purchase
Agreement"); and

               (2) Deliver to Olympus a subordinated promissory note (the
"Olympus Subordinated Note") in the principal amount of $500,000 and a warrant
(the "Olympus Warrant") to purchase up to 100,000 shares of Common Stock, all
pursuant to the Subordinated Note Purchase Agreement.

          (C)  COMMON STOCK.

               (1) Deliver to Ramius seventy seven thousand seven hundred twenty
six (77,726) shares of Common Stock; and

               (2) Deliver to Raphael fifty thousand four hundred thirty five
(50,435) shares of Common Stock.

          (D)  NEW WARRANTS.

               (1) Deliver to Nelson a Warrant, in substantially the form
attached hereto as EXHIBIT B (the "New Warrant"), to purchase 50,000 shares of
Common Stock; and



                                       3
<PAGE>


               (2) Deliver to Olympus a New Warrant to purchase 50,000 shares of
Common Stock.

     1.3  DELIVERIES BY THE SERIES C IVESTORS.

          (A) NELSON AND OLYMPUS. At the Closing, each of Nelson and Olympus
shall deliver to ITEC (1) an originally executed copy of this Agreement, the
Amendment, the New Warrants and the Subordinated Note Purchase Agreement, and
(2) the certificates for all outstanding shares of Series C Preferred Stock held
by them, each properly endorsed for transfer to ITEC. In addition, Nelson shall
deliver to ITEC an originally executed copy of the Nelson Subordinated Note and
the Nelson Warrant and Olympus shall deliver to ITEC an originally executed copy
of the Olympus Subordinated Note and the Olympus Warrant

          (B) RAMIUS, RAPHAEL, AG, GAM, HICK AND LEONARDO. At the Closing, each
of Ramius, Raphael, AG, GAM, Hick and Leonardo shall deliver to ITEC (1) an
originally executed copy of this Agreement and the Amendment and (2) all
certificates for any outstanding shares of Series C Preferred Stock held by
them, each properly endorsed for transfer to ITEC.

          (C) THEMIS, HERACLES AND SAMYANG. At the Closing, each of Themis,
Heracles and Samyang shall deliver to ITEC (1) an originally executed copy of
this Agreement and the Amendment and (2) all certificates for any outstanding
shares of Series C Preferred Stock held by them, each properly endorsed for
transfer to ITEC.

     1.4 TERMINATION OF RIGHTS UNDER SERIES C DOCUMENTS. ITEC and each of the
Series C Investors hereby agree that, effective as of the Closing, all rights,
privileges, restrictions, obligations, duties and terms contained in the Series
C Documents shall be terminated in their entirety and shall be of no further
force or effect; PROVIDED, HOWEVER, that (A) each of the Series C Investors
shall retain their respective Warrants, and all rights, privileges,
restrictions, obligations, duties and terms set forth therein shall survive and
remain effective after the Closing in accordance with the terms of the Warrants
and (B) all rights, privileges, restrictions, obligations, duties and terms set
forth in the Registration Rights Agreement, as amended by the Amendment (the
"Amended Registration Rights Agreement"), shall survive and remain effective
after the Closing in accordance with the terms set forth therein.

     1.5. RELEASE OF CLAIMS.

          (A)  RELEASE BY ITEC.

               (1) Effective as of the Closing and except as provided in
subsection 1.5(A)(2) below, ITEC, on behalf of itself and its predecessors,
successors, former or current subsidiaries, affiliates, officers, directors,
shareholders, agents, attorneys, representatives, investment advisors, insurers,
employees and assigns (collectively with ITEC, the "ITEC Releasees"), hereby
releases and forever discharges each of the Series C Releasees (as defined
below) and all persons acting by, through, under, or in concert with them, or
any of them, from any and all liabilities, obligations, indebtedness, claims,
causes of action, rights or defenses, and any legal, equitable or other
obligations or duties, whether known or unknown, liquidated or 



                                       4
<PAGE>


contingent, matured or unmatured, of any kind whatsoever which existed, arose or
occurred at any time prior to or concurrently with the Closing, including, but
not limited to, any and all liabilities, obligations, indebtedness, claims,
causes of action, rights or defenses, and any legal, equitable or other
obligations or duties, whether known or unknown, liquidated or contingent,
matured or unmatured, of any kind whatsoever that arise out of, relate to or are
connected in any way to the Series C Investors' purchase and ownership of the
Series C Preferred Stock and/or any of the Series C Documents.

               (2) ITEC hereby acknowledges and agrees, on behalf of itself and
each of the other ITEC Releasees, that the release contained in subsection
1.5(A)(1) shall not apply to, and the Series C Releasees shall retain after the
Closing, all rights, privileges, restrictions, obligations, duties and terms set
forth in (i) the Warrants, (ii) the Amended Registration Rights Agreement,
including but not limited to any claims for indemnification under Section 6 of
the Amended Registration Rights Agreement, (iii) this Agreement, (iv) the New
Warrants, (v) the Nelson Subordinated Note and the Olympus Subordinated Note,
(vi) the Nelson Warrant and the Olympus Warrant and (vii) the Subordinated Note
Purchase Agreement.

          (B) RELEASE BY SERIES C INVESTORS.

               (1) Effective as of the Closing and except as provided in
subsection 1.5(B)(2) below, each of the Series C Investors, on behalf of itself
and its predecessors, successors, former or current subsidiaries, affiliates,
officers, directors, shareholders, agents, attorneys, representatives,
investment advisors, insurers, employees and assigns (collectively with the
Series C Investors, the "Series C Releasees"), hereby releases and forever
discharges each of the ITEC Releasees and all persons acting by, through, under,
or in concert with them, or any of them, from any and all liabilities,
obligations, indebtedness, claims, causes of action, rights or defenses, and any
legal, equitable or other obligations or duties, whether known or unknown,
liquidated or contingent, matured or unmatured, of any kind whatsoever which
existed, arose or occurred at any time prior to or concurrently with the
Closing, including, but not limited to, any and all liabilities, obligations,
indebtedness, claims, causes of action, rights or defenses, and any legal,
equitable or other obligations or duties, whether known or unknown, liquidated
or contingent, matured or unmatured, of any kind whatsoever that arise out of,
relate to or are connected in any way to the Series C Investors' purchase and
ownership of the Series C Preferred Stock and/or any of the Series C Documents.

               (2) Each of the Series C Investors hereby acknowledges and
agrees, on behalf of itself and each of the other Series C Releasees, that the
release contained in subsection 1.5(B)(1) shall not apply to, and the ITEC
Releasees shall retain after the Closing, all rights, privileges, restrictions,
obligations, duties and terms set forth in (i) the Warrants, (ii) the Amended
Registration Rights Agreement, including but not limited to any claims for
indemnification under Section 6 of the Amended Registration Rights Agreement,
(iii) this Agreement, (iv) the New Warrants, (v) the Nelson Subordinated Note
and the Olympus Subordinated Note, (vi) the Nelson Warrant and the Olympus
Warrant and (vii) the Subordinated Note Purchase Agreement.



                                       5
<PAGE>


          (C) NO ADMISSION BY EITHER PARTY. ITEC denies that any of the Series C
Releasees has any claim, cause of action, defense or offset which has been or
could be asserted against any of the ITEC Releasees, including, but not limited
to, any claim, cause of action, defense or offset arising out of, relating to,
or connected in any way to the Series C Investors' purchase and ownership of the
Series C Preferred Stock and/or any of the Series C Documents. Each of the
Series C Investors denies that any of the ITEC Releasees has any claim, cause of
action, defense or offset which has been or could be asserted against any of the
Series C Releasees, including, but not limited to, any claim, cause of action,
defense or offset arising out of, relating to, or connected in any way to the
Series C Investors' purchase and ownership of the Series C Preferred Stock
and/or any of the Series C Documents. ITEC and each of the Series C Investors
understands and agrees that this Agreement shall not be construed (nor shall it
be admissible in any legal action or proceeding) as an admission by ITEC or any
of the other ITEC Releasees, on the one hand, or by any of the Series C
Investors or any of the other Series C Releasees, on the other hand, of the
existence of any liability, indebtedness, claim, cause of action, defense,
offset or other right or obligation within the scope of this Agreement. This
Agreement and the negotiations, discussions and other communications between the
parties hereto leading to execution of this Agreement constitute offers to
compromise as contemplated by California Evidence Code Section 1152 and Rule 408
of the Federal Rules of Evidence.

          (D) ADDITIONAL FACTS. ITEC and each of the Series C Investors each
acknowledges and agrees that it may discover facts different from or in addition
to those which it now knows or believes to be true with respect to the
liabilities, indebtedness, claims, causes of action, defenses, offsets and other
rights and obligations released pursuant to this Agreement, and agrees that this
Agreement shall continue and remain in effect in all respects notwithstanding
the discovery or existence of such different or additional facts.

          (E) WAIVER OF CIVIL CODE SECTION 1542. ITEC and each of the Series C
Investors acknowledges that it has been advised by legal counsel and is familiar
with the provisions of California Civil Code Section 1542, which 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 A
          RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY EFFECTED HIS
          SETTLEMENT WITH THE DEBTOR.

ITEC AND EACH OF THE SERIES C INVESTORS EACH AGREES TO ASSUME THE RISK OF ANY
AND ALL UNKNOWN, UNANTICIPATED OR MISUNDERSTOOD LIABILITIES, INDEBTEDNESS,
CLAIMS, CAUSES OF ACTION, DEFENSES, OFFSETS AND OTHER RIGHTS AND OBLIGATIONS
WHICH ARE RELEASED HEREBY IN FAVOR OF ANY AND/OR ALL OTHER PARTIES TO WHICH THE
RELEASES CONTAINED HEREIN APPLY, AND EACH HEREBY WAIVES AND RELEASES ALL RIGHTS
AND BENEFITS WHICH IT MIGHT OTHERWISE HAVE UNDER THE AFOREMENTIONED SECTION 1542
OF THE CALIFORNIA CIVIL CODE WITH REGARD TO THE RELEASE OF SUCH UNKNOWN,
UNANTICIPATED OR MISUNDERSTOOD LIABILITIES, INDEBTEDNESS, CLAIMS, CAUSES OF



                                       6
<PAGE>


ACTION, DEFENSES, OFFSETS AND OTHER RIGHTS AND OBLIGATIONS. TO THE EXTENT (IF
ANY) WHICH SUCH LAWS MAY BE APPLICABLE, EACH PARTY WAIVES AND RELEASES (TO THE
MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH IT MIGHT OTHERWISE
HAVE UNDER ANY OTHER LAW OF ANY APPLICABLE JURISDICTION WHICH MIGHT LIMIT OR
RESTRICT THE EFFECTIVENESS OR SCOPE OF ANY OF ITS WAIVERS OR RELEASES HEREUNDER.

     1.6 WAIVER OF CERTAIN ADJUSTMENTS UNDER WARRANTS. Each of the Investors
hereby agrees that the issuance and sale by ITEC of up to 500,000 shares of its
Common Stock at a purchase price per share less than the current Warrant
Exercise Price (as defined in the Investor's Warrant), the issuance by ITEC of
warrants to purchase up to 925,000 shares of its Common Stock at an exercise
price per share less than the current Warrant Exercise Price and the issuance by
ITEC of promissory notes in the aggregate principal amount of $675,000
convertible into shares of its Common Stock at a price per share less than the
current Warrant Exercise Price in connection with the transactions contemplated
by this Agreement shall not cause or result in any adjustment to the Warrant
Exercise Price (as defined in the Investor's Warrant) of the Investor's Warrant
or the number of shares of Common Stock issuable upon exercise of the Investor's
Warrant, and each of the Investors hereby waives any and all rights it may have
under its Warrant, including without limitation any and all rights under Section
8 of its Warrant, to receive an adjustment to the Warrant Exercise Price (as
defined in the Investor's Warrant) of the Investor's Warrant or the number of
shares of Common Stock issuable upon exercise of the Investor's Warrant arising
from the issuance and sale by ITEC of such Common Stock, warrants and promissory
notes.

2.   REPRESENTATIONS AND WARRANTIES.

     2.1 ITEC. ITEC represents and warrants to each of the Series C Investors
that:

          (A) It has all requisite corporate power and authority to execute and
deliver, and fulfill its obligations under, this Agreement. This Agreement, upon
execution and delivery by ITEC and assuming due and proper execution and
delivery by each of the Series C Investors, will constitute a valid and binding
obligation of ITEC, enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, moratorium and other laws
of general application affecting the enforcement of creditors' rights.

          (B) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state or
local governmental authority on the part of ITEC is required in connection with
the execution, delivery and performance of this Agreement by ITEC.

          (C) No consent, approval, waiver or other action by any person under
any contract, agreement, indenture, lease, instrument or other document to which
ITEC is a party or by which it is bound is necessary for the execution, delivery
and performance of this Agreement by ITEC.



                                       7
<PAGE>


          (D) Neither it, nor any of the other ITEC Releasees, has assigned or
transferred to any other person or entity, either directly or indirectly,
voluntarily or involuntarily, any liability, indebtedness, claim, cause of
action, defense, offset or other right or obligation released hereunder by the
ITEC Releasees. ITEC hereby agrees to indemnify and hold harmless each of the
Series C Releasees from any and all liabilities, indebtedness, claims, causes of
action, defenses, offsets and other rights and obligations released hereunder by
the ITEC Releasees that may be asserted against any of the Series C Releasees by
any third party in the event that the foregoing representation and warranty
shall prove to be false or misleading.

     2.2 SERIES C INVESTORS. Each of the Series C Investors represents and
warrants, severally and not jointly, to ITEC that:

          (A) It has all requisite corporate power and authority to execute and
deliver, and fulfill its obligations under, this Agreement. This Agreement, upon
execution and delivery by such Series C Investor, and assuming due and proper
execution and delivery by ITEC, will constitute a valid and binding obligation
of such Series C Investor, enforceable in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency, moratorium and other
laws of general application affecting the enforcement of creditors' rights.

          (B) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state or
local governmental authority on the part of such Series C Investor is required
in connection with the execution, delivery and performance of this Agreement by
such Series C Investor.

          (C) No consent, approval, waiver or other action by any person under
any contract, agreement, indenture, lease, instrument or other document to which
such Series C Investor is a party or by which it is bound is necessary for the
execution, delivery and performance of this Agreement by such Series C Investor.

          (D) Neither it, nor any of the other Series C Releasees on whose
behalf such Series C Investor has given the release contained in this Agreement
(the "Series C Investor's Affiliates"), has assigned or transferred to any other
person or entity, either directly or indirectly, voluntarily or involuntarily,
any liability, indebtedness, claim, cause of action, defense, offset or other
right or obligation released hereunder by such Series C Investor or the Series C
Investor's Affiliates. Each of the Series C Investors hereby agrees to indemnify
and hold harmless each of the ITEC Releasees from any and all liabilities,
indebtedness, claims, causes of action, defenses, offsets and other rights and
obligations released hereunder by such Series C Investor or by the Series C
Investor's Affiliates that may be asserted against any of the ITEC Releasees by
any third party in the event that the foregoing representation and warranty
shall prove to be false or misleading.

3. CONFIDENTIALITY. No party to this Agreement shall, except as may be mandated
by statutory or regulatory requirements, as may be required by legal process in
the course of actual litigation or in the case of a subpoena, disclose to others
the fact or terms of this settlement, the amounts referred to in this Agreement
or the fact of the payment of said amounts, except that each such party may make
such disclosure to each such party's attorneys, accountants or other 



                                       8
<PAGE>


advisors to whom the disclosure is necessary to effectuate the purposes for
which such party has consulted with such professional advisors and except that
(i) ITEC may file this Agreement and the exhibits hereto with any governmental
or regulatory body, describe it and refer to it in any filing it makes pursuant
to federal and state securities laws or to its Board of Directors or
stockholders, and (ii) ITEC may issue a press release describing the terms of
this Agreement and the exhibits hereto.

4.   MISCELLANEOUS.

     4.1 SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

     4.2 PRIOR AGREEMENTS. Except for the Warrants, the Amended Registration
Rights Agreement, the New Warrants, the Subordinated Note Purchase Agreement,
the Nelson Subordinated Note, the Olympus Subordinated Note, the Nelson Warrant
and the Olympus Warrant, this Agreement shall supersede and render null and void
any and all prior agreements between ITEC and/or any of the ITEC Releasees, on
one hand, and any of the Series C Investors and/or any of the Series C
Releasees, on the other hand, including, but not limited to, all of the Series C
Documents.

     4.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind and benefit each of
the Series C Investors, each of the other Series C Releasees and each of their
successors and assigns and shall also bind and benefit ITEC, each of the other
ITEC Releasees and each of their successors and assigns.

     4.4 GOVERNING LAW; JURISDICTION AND VENUE. 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.

     4.5 EXPENSES. ITEC and each of the Series C Investors shall each bear their
own attorneys' fees and costs incurred in connection with this Agreement and the
settlement of the disputes contemplated hereby.



                                       9
<PAGE>


     4.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     4.7 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.

     4.8 AMENDMENT AND WAIVER; REMEDIES CUMULATIVE. No amendment, modification
or waiver of this Agreement or any part thereof shall be effective unless it is
in writing and is signed by ITEC and each of the Series C Investors. No delay on
the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege.

     4.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.

     4.10 NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically generated and kept on file by the
sending party); (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:

          If to ITEC:

          Imaging Technologies Corporation
          11031 Via Frontera
          San Diego, CA 92127
          Attention:  President
          Facsimile:   (619) 613-1311

          with a copy to:

          Brobeck, Phleger & Harrison LLP
          550 West C Street, Suite 1300
          San Diego, California 92101
          Attention: John R. Cook, Esq.
          Facsimile:   (619) 234-3848



                                       10
<PAGE>


          If to Nelson or Olympus:

          Addressed to the appropriate party
          c/o Leeds Management Services
          129 Front Street, 5th Floor
          Hamilton HM12 Bermuda
          Attention:  Anne Dupuy
          Facsimile:  (441) 292-2239

          with a copy to:

          Citadel Investment Group, L.L.C.
          225 West Washington Street
          Chicago, Illinois 60606
          Attention:  Mike Hughes
          Facsimile:  (312) 338-0780

          If to Ramius, Raphael, Leonardo, Gam, AG or Hick:

          Addressed to the appropriate party
          c/o Angelo, Gordon & Co., L.P.
          245 Park Avenue - 26th Floor
          New York, New York 10167
          Attention:  Gary Wolf
          Facsimile:  (212) 867-6449

          If to Themis, Heracles or Samyang:

          Addressed to the appropriate party
          c/o Promethean Investment Group, L.L.C.
          40 West 57th Street, Suite 1520
          New York, New York 10019
          Attention:  James F. O'Brien, Jr.
          Facsimile:  (212) 698-0505

or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party
(provided that notice of a change of address shall be effective only upon
receipt thereof).

     7.11 NO STRICT CONSTRUCTION. This Agreement is the result of arms-length
negotiations between the parties hereto and has been prepared jointly by the
parties. In applying and interpreting the provisions of this Agreement, there
shall be no presumption that the Agreement was prepared by any one party or that
the Agreement shall be construed in favor of or against any one party.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]



                                       11
<PAGE>


          IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.

                        IMAGING TECHNOLOGIES CORPORATION


                         By: /S/  BRIAN BONAR
                            ----------------------------
                            Brian Bonar, President and
                            Chief Executive Officer


                         SERIES C INVESTORS:

                         NP PARTNERS, formerly known as Nelson Partners


                         By: /S/  ILLEGIBLE
                            ----------------------------
                           Title: AUTHORIZED SIGNATORY


                         OLYMPUS SECURITIES, LTD.


                         By: /S/  ILLEGIBLE
                            ----------------------------
                           Title: AUTHORIZED SIGNATORY


                         RAMIUS FUND, LTD.


                         By: /S/  MICHAEL L. GORDON
                            ----------------------------
                         Title:  MANAGING OFFICER


                         RAPHAEL, L.P.


                         By: /S/  MICHAEL L. GORDON
                            ----------------------------
                         Title: CHIEF OPERATING OFFICER


          [SIGNATURE PAGE TO SETTLEMENT AND MUTUAL RELEASE AGREEMENT]



<PAGE>


                         LEONARDO, L.P.


                         By: /S/  MICHAEL L. GORDON
                            ----------------------------
                         Its: CHIEF OPERATING OFFICER


                         GAM ARBITRAGE INVESTMENTS, INC.


                         By: /S/  MICHAEL L. GORDON
                            ----------------------------
                         Its: CHIEF OPERATING OFFICER


                         AG SUPER FUND INTERNATIONAL PARTNERS, L.P.

                         By: /S/  MICHAEL L. GORDON
                            ----------------------------
                         Its: CHIEF OPERATING OFFICER


                         HICK INVESTMENTS, LTD.


                         By: /S/  MICHAEL L. GORDON
                            ----------------------------
                         Its:  MANAGING OFFICER


                         THEMIS PARTNERS L.P.


                         By: /S/  ILLEGIBLE
                            ----------------------------
                         Its:






           [SIGNATURE PAGE TO SETTLEMENT AND MUTUAL RELEASE AGREEMENT]



<PAGE>


                         HERACLES FUND


                         By: /S/  ILLEGIBLE
                            ----------------------------
                         Its:

                         SAMYANG MERCHANT BANK

                         By: /S/  ILLEGIBLE
                            ----------------------------
                         Its:





























           [SIGNATURE PAGE TO SETTLEMENT AND MUTUAL RELEASE AGREEMENT]



<PAGE>


                                    EXHIBIT A

                 Amendment No.1 to Registration Rights Agreement



                                See Exhibit 10.8

                                       A-1




<PAGE>


                                   EXHIBIT B

         Form of New Warrant to Purchase 50,000 shares of Common Stock





                                See Exhibit 10.9




















                                      B-1