LETTER OF CREDIT REIMBURSEMENT AGREEMENT


                                     BETWEEN


                        IMAGING TECHNOLOGIES CORPORATION


                                       AND


                            AMERICAN INDUSTRIES, INC.


                          DATED AS OF NOVEMBER 13,1998


                                   $1,500,000



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                    LETTER OF CREDIT REIMBURSEMENT AGREEMENT


         This Letter of Credit Reimbursement Agreement (the "Agreement"),  dated
as of November 13, 1998, is between IMAGING TECHNOLOGIES CORPORATION, a Delaware
corporation  doing  business as "ITEC" and "IMATECH" at 11031 Via Frontera,  San
Diego,  California  92127  ("Borrower"),  and AMERICAN  INDUSTRIES,  INC.  doing
business at 1750 NW Front Avenue, Suite 106, Portland, Oregon 97209 ("Lender").

                                    PREAMBLE

         A. Borrower has requested  that Lender make  available to Borrower on a
revolving basis one or more commercial and irrevocable standby letters of credit
(individually,  a "Letter of Credit" and collectively,  the "Letters of Credit")
issued by U.S. Bank National  Association (the "Bank") in an aggregate principal
amount not to exceed the sum of $1,500,000 (the  "Commitment").  Forms of Bank's
commercial  and  standby  Letters of Credit are  attached to this  Agreement  as
Exhibit A-1 and Exhibit A-2. To induce Lender to enter into this  accommodation,
Borrower has issued to Lender warrants to purchase  150,000 shares of Borrower's
common stock at $1.28/share (the "Warrants").

         B. To  accommodate  Borrower,  Lender  has  entered  into a  Continuing
Agreement  for  Commercial  Letters of Credit  and a  Continuing  Agreement  for
Irrevocable  Standby  Letters of Credit with Bank, each dated November 13, 1998,
copies of which are  attached to this  Agreement as Exhibit B- I and Exhibit B-2
(the "Bank Agreements").

         C. Lender has agreed to make Letters of Credit available to Borrower on
the terms and subject to the conditions set forth below.


                              TERMS AND CONDITIONS

                                    ARTICLE 1
                                   DEFINITIONS

         SECTION 1.1  Definition of Terms.  The terms defined in this  Agreement
are set forth below.

                  "Accounts"  means  accounts,   contract  rights,  instruments,
documents,  chattel paper and all other forms of obligations  owing to a Person,
including those arising out of the sale or lease of goods, whether or not earned
by performance, and any and all credit insurance, guaranties and other security,
as well as all merchandise returned to or reclaimed.

                  "Agreement"   means  this   Letter  of  Credit   Reimbursement
Agreement.


                                       -2-

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                  "Available  Amount"  means the amount by which the  Commitment
exceeds  the sum of (a) the  maximum  amount  available  to be drawn at any time
under all outstanding  Letters of Credit plus (b) the amount of all unreimbursed
Draws, provided that the number is a positive number.

                  "Bank" has the meaning assigned to that term in Paragraph A of
the Preamble of this Agreement.

                  "Borrower's  Books" means all of Borrower's  books and records
(including  minute books and ledgers)  indicating,  summarizing,  evidencing  or
relating  to the  Collateral;  and all  computer  programs,  disk or tape files,
printouts,  runs and  other  computer  prepared  information  and the  equipment
containing such information.

                  "Business Day" means any day other than a Saturday,  a Sunday,
a day on which Banking  institutions  in the state of Oregon or  California  are
closed as authorized or obligated by law or  administrative  order,  or a day on
which the New York Stock Exchange is closed.

                  "Claims"  has the  meaning  assigned  to that term in  Section
7.5(c) of this Agreement.

                  "Collateral"  means all goods  purchased  under any  Letter of
Credit,  whether  now in  existence  or  arising  or  created at any time in the
future, wherever they may be located, including: (a) equipment and fixtures; (b)
inventory, whether held for sale or lease or to be furnished under a contract of
service,  including raw materials,  work in process,  finished goods;  (c) goods
held for use or  consumption;  (d) packing and shipping  materials;  and (e) all
Accounts and General  Intangibles  arising  therefrom and all other products and
proceeds  thereof,  and any  Negotiable  Collateral or other  documents of title
representing any of the above, and all of Borrower's Books.

                  "Commitment"   has  the  meaning  assigned  to  that  term  in
Paragraph A of the Preamble of this Agreement.

                  "Credit Termination Date" means October 30, 1999.

                  "Default  Rate"  means ten  percent  (10%) per  annum.  If the
Default  Rate at any time  exceeds the rate  permitted  by law, the Default Rate
will be automatically reduced to the maximum rate permitted by law.

                  "Deposit  Deadline"  has the meaning  assigned to that term in
Section 2.3 of this Agreement.

                  "Draw" means any draw under a Letter of Credit.

                  "Event of Default"  has the  meaning  assigned to that term in
Section 6.1 of this Agreement.


                                       -3-

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                  "Final  Judgment"  means an order  or  judgment  that has been
entered by a court and that has not been  revised,  stayed,  modified or amended
and as to which the time to appeal,  petition for certiari,  or seek re-argument
or rehearing has expired.

                  "General  Intangibles"  means  general  intangibles  and other
personal property  (including any and all choses or things in action,  goodwill,
patents,  trade names,  trademarks,  licenses,  permits,  blueprints,  drawings,
purchase orders,  customer lists,  computer programs,  computer disks,  computer
tapes,  literature,  reports,  catalogs,  deposit  accounts,  Tax refunds,  life
insurance and other insurance policies).

                  "including" is not in any way limiting.

                  "Indebtedness" means all sums for which Borrower may now or at
anytime in the future be indebted or obligated  to Lender under this  Agreement,
including principal, interest, costs of collection,  attorney and paralegal fees
and any other  expenses of Lender which  Borrower is obligated to pay under this
Agreement, whether such amounts are due or not and whether the obligation to pay
such amounts is direct or indirect,  absolute or  contingent,  joint or several.
"Indebtedness"  includes the  Reimbursement  Obligations  and also  includes all
other obligations,  covenants and duties owing by Borrower to Lender of any kind
and description under this Agreement and under the Related Documents.

                  "Letters of Credit"  has the meaning  assigned to that term in
Paragraph A of the Preamble of this Agreement.

                  "Negotiable  Collateral" has the meaning assigned to that term
in Section 2.13 of this Agreement.

                  "Permitted Encumbrances" has the meaning assigned to that term
in Section 4.9 of this Agreement.

                  "Permitted  Substances" has the meaning  assigned to that term
in Section 4.7 of this Agreement.

                  "Person"  means an individual or a  corporation,  partnership,
limited liability company,  trust,  incorporated or unincorporated  association,
joint venture,  government (or an agency or political  subdivision  thereof), or
any entity of any kind.

                  "Prime Rate" means the variable  rate of interest  used in the
pricing of loans which is publicly  announced from time to time as Bank's "Prime
Rate," which Borrower  acknowledges  is one of Bank's index rates and may not be
the lowest rate at which Bank calculates interest or extends credit.

                                       -4-

<PAGE>



                  "Reimbursement  Obligations"  has the meaning assigned to that
term in Section 2.4 of this Agreement.

                  "Related   Documents"   means   all   agreements,    opinions,
instruments,  and documents relating to this Agreement,  the Bank Agreements and
to the Letters of Credit.

                  "Special  Account" means Account No.  1536-9086-8671 at Bank's
Main Portland, Oregon branch.

                  "Taxes"  means any present or future taxes,  levies,  imposts,
duties, charges, fees, deductions,  withholdings,  restrictions or conditions of
any nature whatsoever, now or hereafter imposed, levied, collected,  withheld or
assessed by any governmental  entity (or by any political  subdivision or taxing
authority thereof or therein).

                  "Warrants" has the meaning  assigned to that term in Paragraph
A of the Preamble of this Agreement.

         SECTION  1.2  Singular  and Plural  Forms.  The  meanings  of the terms
defined in Section 1.1 of this Agreement will be equally  applicable to both the
singular and plural forms of such terms.

         SECTION 1.3  Amendments to Documents.  All references in this Agreement
to  this  Agreement  and  to the  Related  Documents  will  also  be  considered
references to any amendments,  supplements or  replacements to those  agreements
and documents.


                                    ARTICLE 2
                    AMOUNT AND TERMS OF THE LETTERS OF CREDIT

         SECTION  2.1 The  Letters of Credit.  In  consideration  of  Borrower's
delivery of the Warrants to Lender, Lender agrees to use commercially reasonable
efforts  to cause  Bank to issue and  deliver  one or more  Letters of Credit on
behalf of Borrower.  The aggregate amount of (a) the maximum amount available to
be drawn  under all  Letters  of Credit  outstanding  at any time,  plus (b) all
unreimbursed  Draws, will not at any time exceed the Commitment.  No new Credits
will be issued  after July 31,  1999.  All  Letters of Credit  will expire on or
before the Credit Termination Date.

         SECTION 2.2 Fees. Borrower will pay to Bank the following fees:

                  (a) A Letter  of  Credit  fee  equal to the  amount of the fee
charged by Bank to Lender under the Bank  Agreements.  Such fees will be payable
in advance of and as a  condition  precedent  to the  issuance of each Letter of
Credit.

                  (b) A draw fee equal to the amount of the draw fee  charged by
Bank to Lender under the Bank  Agreements,  plus  reasonable  costs and expenses
related to such Draw.

                                       -5-

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                  (c) Upon each  transfer of the Letter of Credit in  accordance
with its terms,  a transfer  fee equal to the amount of the transfer fee charged
by Bank to Lender under the Bank Agreements.

                  (d) Upon each amendment of the Letter of Credit,  an amendment
fee equal to the amount of the amendment fee charged by Bank to Lender under the
Bank Agreements.

                  (e) Any other fees due and owing under the Bank Agreements.

         SECTION 2.3 Payment.  Immediately  upon  Borrower's  receipt of oral or
written  notice  from Bank as to the amount of a Draw  received  by Bank under a
Letter of Credit, Borrower will deposit into the Special Account, in immediately
available Portland, Oregon funds, the full amount of that Draw together with all
fees and other  costs  payable  in  connection  with that Draw (the  "Deposit").
Borrower  will make the  Deposit  into the Special  Account by wire  transfer as
follows:

                  U.S. Bank National Association
                  ABA No. 123 000 220
                  Re:  American Industries, Inc./ITEC Special Account
                       Account No. 1536-9086-8671
                  Contact:  Janis Coppola at (503) 275-5930
                            Richard Ferguson at (503) 275-6354

If Borrower  fails to make any Deposit  with respect to a Draw by 12 noon on the
date Bank pays that Draw (the  "Deposit  Deadline"),  all of  Borrower's  rights
under this Agreement and under the Bank Agreements will terminate immediately.

         SECTION  2.4  Reimbursement.  If at any time and for any reason  Lender
becomes liable to Bank under the Bank Agreements,  Borrower will, without notice
or demand,  immediately reimburse Lender for any and all amounts owing by Lender
to Bank under the Bank  Agreements,  including  all Draws  under the  Letters of
Credit and for all fees payable pursuant to Section 2.2 above (collectively, the
"Reimbursement   Obligations").   Borrower   will   reimburse   Lender  for  the
Reimbursement Obligations and for any other amounts payable under this Agreement
on demand.  No payment by Borrower to Lender  under this Section 2.4 will in any
way cure Borrower's default under Section 2.2 or under Section 2.3 unless Lender
delivers a written  waiver of that default to Bank and to Borrower in the manner
specified in Section 7.2 below.

         SECTION 2.5 Interest on Reimbursement Obligations.

                  (a) If Bank receives from Borrower the Deposit with respect to
a Draw by the Deposit  Deadline for that Draw,  no interest  will accrue on that
Draw.

                                       -6-

<PAGE>



                  (b)  Notwithstanding  the interest rate  specified in the Bank
Agreements or in any agreement between Bank and Lender, if Bank does not receive
the Deposit  from  Borrower by the  Deposit  Deadline,  each such Draw will bear
interest at the Default Rate from the Deposit  Deadline  until Borrower pays the
Deposit, together with all accrued interest, as specified in Section 2.6 below.
Interest will be payable on demand by Lender.

         SECTION 2.6  Payments  and  Computations.  All  payments by Borrower to
Lender under this Agreement will be made in lawful currency of the United States
of America and in immediately  available funds to Lender's  operating account at
Bank as follows:

                  U.S. Bank National Association
                  ABA No. 123 000 220
                  Re:  American Industries, Inc.  Operating Account,
                       Account No. 1536-0337-3520
                  Contact:  Janis Coppola at (503) 275-5930
                            Richard Ferguson at (503) 275-6354

or at such other  location in the United States as Lender may specify by written
notice to Borrower.  Computations  of the Prime Rate,  the Default Rate, and any
fees or commissions  under this Agreement will be made by Lender on the basis of
a year of 360 days for the actual  number of days  (including  the first day but
excluding  the last day)  elapsed.  Whenever  any  payment to be made under this
Agreement is stated to be due on a day that is not a Business  Day, such payment
will be made on the next  succeeding  Business  Day, and such  extension of time
will  in  such  case  be  included  in the  computation  of  interest,  fees  or
commissions, as the case may be.

         SECTION 2.7 Increased Costs. If any law or regulation, or any change in
any law or regulation or in any interpretation of any law or regulation,  or any
ruling, decree,  judgment,  guideline or directive (including any imposed by the
Board of Governors  of the Federal  Reserve  System),  by any  regulatory  body,
court,  central  bank or  administrative  or  government  authority  charged  or
claiming  to be  charged  with  the  administration  of such  law or  regulation
(including  a request  or  requirement  that  affects  the  manner in which Bank
allocates capital resources to its commitments,  including its obligations under
the Bank  Agreement),  occurs and the result is to increase  the costs to Lender
under the Bank  Agreements  in any way,  then  Borrower  will,  upon  receipt of
written  notice to Borrower  from Lender,  promptly pay to Bank or to Lender all
such additional  amounts  necessary to compensate  Lender for all such increased
costs.

         SECTION  2.8 No  Reduction  by Taxes,  Setoffs and  Counterclaims.  All
payments by Borrower  under this  Agreement  will be made free and clear of, and
without  reduction for or on account of, set-off or  counterclaim.  In addition,
all payments made by Borrower  under this  Agreement will be made free and clear
of, and without reduction for or on account of, Taxes. If any Taxes are required
to be withheld from any amounts  payable to Bank or Lender under this Agreement,
the  amounts  so  payable  to Bank or Lender  will be  increased  to the  extent
necessary to

                                       -7-

<PAGE>



yield to Bank and Lender  (after  payment  of all Taxes) the full  amount of all
interest  and other sums  payable  under this  Agreement  at the rates or in the
amounts specified in this Agreement.

         SECTION 2.9 Evidence of Debt. Lender will maintain,  in accordance with
its  usual  practice,  an  account  or  accounts  evidencing  the  Reimbursement
Obligations of Borrower  resulting from each Draw under the Letter of Credit and
the amounts of  principal,  interest and fees payable and paid from time to time
under this Agreement.  In any legal action or proceeding in connection with this
Agreement,  the  entries  made in such  account or accounts  will be  conclusive
evidence  of the  existence  and  amounts of the  Reimbursement  Obligations  of
Borrower recorded in such account or accounts, absent manifest error by Lender.

         SECTION 2.10 Obligations Absolute.  The payment obligations of Borrower
under this Agreement are absolute,  unconditional  and irrevocable,  and will be
paid  strictly  in  accordance  with  the  terms  of this  Agreement  under  all
circumstances, including the following circumstances:

                  (a) Any lack of  validity or  enforceability  of all or any of
the Letters of Credit or any of the other Related Documents;

                  (b) Any  amendment  or waiver of, or any consent to  departure
from,  any of the ten- ns and  conditions of all or any of the Letters of Credit
or any of the other Related Documents;

                  (c) The  existence  of any  claim,  set-off,  defense or other
rights that Borrower may have at any time against any beneficiary of a Letter of
Credit,  any  transferee  of a Letter of Credit  (or any  Person for whom or for
which any such beneficiary,  or any such transferee may be acting), Lender, Bank
or any other Person,  whether in  connection  with this  Agreement,  the Related
Documents or any unrelated transaction;

                  (d) Any certificate, statement or any other document presented
under all or any of the  Letters  of Credit  proves  to be  forged,  fraudulent,
invalid or insufficient in any respect, or any statement in such document proves
to be untrue or inaccurate in any respect;

                  (e)  Payment  by Bank  under  any  Letter  of  Credit  against
presentation  by any Person of a draft or certificate  that does not comply with
the terms of that Letter of Credit; or

                  (f) Any other circumstances or happening  whatsoever,  whether
or not similar to any of the preceding.

         SECTION  2.13 Grant of  Purchase  Money  Security  Interest.  To secure
prompt repayment of any and all Indebtedness, Borrower hereby grants to Lender a
continuing  security  interest  in all  presently  existing  Collateral  and all
Collateral arising or acquired at any time in the future, and in all proceeds of
every nature  whatsoever.  Lender's  security  interest in the  Collateral  will
attach  to all  Collateral  without  further  action  on the part of  Lender  or
Borrower. In the event that any Collateral,  including proceeds, is evidenced by
or consists of a letter of credit, advice of credit, instrument,

                                       -8-

<PAGE>



money, negotiable documents,  chattel paper or similar property (the "Negotiable
Collateral"),   Borrower  will   immediately  upon  receipt  of  any  Negotiable
Collateral,  endorse and assign such  Negotiable  Collateral  over to Lender and
deliver actual  physical  possession of the  Negotiable  Collateral to Borrower.
THIS IS A PURCHASE MONEY SECURITY INTEREST;  consequently,  notwithstanding  any
other agreement or  understanding  between  Borrower and Lender,  whether now in
existence  or  arising  or created  at any time in the  future,  the  Collateral
secures  only the  Indebtedness  and does not  secure  any other  obligation  or
indebtedness of Borrower to Lender.  Borrower  expressly  authorizes and directs
Lender  to give any and all  notices  to  Borrower's  other  creditors  that are
necessary to ensure that Lender has a purchase  money  security  interest in the
Collateral from time to time without further notice to or consent of Borrower.


                                    ARTICLE 3
                             CONDITIONS OF ISSUANCE

         SECTION 3.1  Conditions  Precedent to Issuance of the Letter of Credit.
The  obligation of Lender to use  commercially  reasonable  efforts to cause the
Bank to  issue  one or more  Letters  of  Credit  is  subject  to the  following
conditions precedent:

                  (a) Fees Payable. Borrower has paid all fees that are required
to be paid on or before the issuance of the Letter of Credit as specified  under
the Bank  Agreements  and has made all Deposits and paid all other sums that are
otherwise required to be paid under this Agreement.

                  (b) No Default.  No event has occurred and is continuing  that
constitutes an Event of Default or would  constitute an Event of Default but for
the giving of notice, the lapse of time, or both.

                  (c) New Developments.  No material adverse change has occurred
in Borrower's  operations or condition  since the date of Borrower's most recent
audited  financial  statements except as disclosed in writing to and accepted in
writing by Lender.


                                    ARTICLE 4
                         REPRESENTATIONS AND WARRANTIES

         Borrower represents and warrants and, upon each request for issuance of
a Letter of Credit and upon each Draw, reaffirms each of the following:

         SECTION 4.1 Status.  Borrower is a corporation  duly formed and validly
existing  under the laws of the state of Delaware.  Borrower  has all  requisite
power and authority to own its  properties and to conduct its business in all of
the states in which it owns property and conducts business.

                                       -9-

<PAGE>



         SECTION 4.2  Authority.  The  execution,  delivery and  performance  by
Borrower of this Agreement and the Related Documents are within Borrower's power
and authority,  have been duly authorized by all necessary corporate action, and
do not contravene (i) any provision of Borrower's  Certificate of  Incorporation
or  Bylaws,  or  (ii)  any  law,  regulation,   contract,  agreement,  or  other
restriction  binding on or  affecting  Borrower,  and (except as provided in, or
contemplated  by, this  Agreement or the Related  Documents) do not result in or
require the creation of a lien, security interest or other charge or encumbrance
upon or with respect to any of Borrower's properties.

         SECTION 4.3 Governmental Authorization.  No authorization,  approval or
other action by, and no notice to or filing with, any governmental  authority or
regulatory body is required for the due execution.,  delivery and performance by
Borrower of this  Agreement  and the Related  Documents  to which it is a party,
except as have been duly obtained or made (including filings and recordings with
respect to the Related Documents) and are in full force and effect.

         SECTION  4.4  Binding  Obligations.  This  Agreement  and  the  Related
Documents  are legal,  valid and binding  obligations  of Borrower,  enforceable
against  Borrower in  accordance  with their  respective  terms,  except as such
enforceability  may  be  limited  by  Bankruptcy,  insolvency,   reorganization,
moratorium  or other  equitable  principles  or laws  relating  to or limiting a
creditors' rights or contractual obligations generally.

         SECTION  4.5  No  Conflict.  There  is no  provision  of  any  existing
mortgage,  indenture,   undertaking  or  agreement  binding  upon  Borrower,  or
affecting  its assets or  properties,  which would  conflict  with or in any way
prevent the execution,  delivery and full  performance of this Agreement and the
Related Documents, and the execution, delivery and performance of this Agreement
and the Related  Documents will not result in the breach of any provision of any
such mortgage, indenture, undertaking or other agreement.

         SECTION 4.6  Knowledge of Borrower.  There is no fact known to Borrower
that  materially  and adversely  affects,  or in the future may  materially  and
adversely  affect,  the  business,  property,  assets or financial  condition of
Borrower.

         SECTION 4.7 Hazardous Waste. No hazardous  substance is currently being
used,  generated,  stored or disposed of on or in the Real Property or any Other
Real  Property  except for  chemicals  and fuels  stored or used in the ordinary
course of  Borrower's  business  in  compliance  with all laws  (the  "Permitted
Substances").  All Permitted  Substances  are being used,  generated,  stored or
disposed of in accordance  with all local,  state and federal laws governing the
use,  generation,  storage and disposal of such chemicals and fuels. To the best
of Borrower's knowledge,  other than Permitted Substances,  neither Borrower nor
any other  Person has ever caused or  permitted  any  hazardous  substance to be
used,  generated,  stored or disposed of on or in any real property. To the best
of Borrower's knowledge, neither Borrower nor any other Person has ever used any
real property as a dump site, permanent storage site or transfer station for any
hazardous  substance.  Borrower  has not received any notice of, nor is Borrower
aware of, any actual or alleged  violation  with respect to any real property of
any federal,  state or local statute,  ordinance,  rule, regulation or other law
relating

                                      -10-

<PAGE>



to hazardous  substances.  There is no action or  proceeding  pending  before or
appealable from any court, quasi-judicial body or administrative agency relating
to any  hazardous  substances  affecting  or  alleged to be  affecting  any real
property owned, lease or otherwise used by Borrower.

         SECTION  4.8  Litigation.  There are no actions,  suits or  proceedings
pending or threatened against Borrower before any court,  arbiter,  governmental
or administrative agency affecting any of Borrower's assets or properties which,
if adversely determined, would have a material adverse effect on the business or
financial  condition of  Borrower.  Borrower is not in violation or default with
respect  to any  applicable  laws or  regulations  which  materially  affect the
operation or financial condition of Borrower.

         SECTION 4.9 Ownership.  Borrower is the record and beneficial  owner of
all of the Collateral, free and clear of all mortgages, deeds of trust, pledges,
liens,  security  interests  and other charges or  encumbrances,  except for the
encumbrances described in Exhibit 4.9 (the "Permitted Encumbrances").

         SECTION  4.10 Taxes.  Borrower  has filed or caused to be filed all tax
returns  which are  required to be filed by it and has paid all Taxes which have
become  due.  Borrower  knows of no proposed  material  tax  assessment  or lien
against it or any of its  properties.  The  charges,  accruals  and  reserves on
Borrower's books with respect to Taxes are adequate.

         SECTION 4.11 Offices. The chief executive office and principal place of
business of Borrower and the office where Borrower  keeps it records  concerning
the Collateral, is at the address set forth in Section 7.2 of this Agreement.

         SECTION 4.12 Accuracy.  All information furnished or to be furnished by
Borrower to Lender in connection with this Agreement,  the Related  Documents or
any transaction  contemplated  by this Agreement or the Related  Documents is or
will be true and accurate in every material respect on the date such information
is furnished or  certified.  No such  information  is or will be  incomplete  by
omitting to state any  material  fact  necessary  to make such  information  not
misleading.

         SECTION 4.13 Financial  Statements.  All balance sheets,  statements of
income and  expenses,  statements  of changes in  financial  position  and other
financial information which have been or may in the future be furnished by or on
behalf of Borrower to Lender in connection with this Agreement have been or will
be  prepared  in  accordance  with  generally  accepted  accounting   principles
consistently applied throughout the periods involved,  and each presents or will
present fairly the financial  condition of Borrower or other Persons covered and
the results of operations for the periods covered.

         SECTION  4.14  Absence of  Default.  Borrower  is not in default in the
payment  of any  indebtedness  to any  Person or under  any law or  governmental
regulation  or court decree or order  materially  affecting any of its assets or
properties or its business;  nor is Borrower aware of any facts or circumstances
which would give rise to any such default.

                                      -11-

<PAGE>




         SECTION 4.15 Compliance with OSHA and ERISA.  Borrower is in compliance
with the  federal  Occupational  Safety  and Health  Administration  and has not
received  notice of any  noncompliance.  The  provisions  of each of  Borrower's
pension,  profit sharing or retirement  plan which is covered by Title IV of the
Retirement Income Security Act of 1974, as amended,  (ERISA) and with respect to
which  Borrower is an "Employer" as defined in Section 3(5) of ERISA,  comply in
all material  respects with all applicable  requirements of ERISA.  Borrower has
not incurred any "accumulated  funding  deficiency"  within the meaning of ERISA
which is material and has not  incurred  any  material  liability to the Pension
Benefit Guaranty Corporation in connection with any such pension, profit sharing
or retirement plan.

         SECTION  4.19  Incorporation  of  Bank  Agreements  and  other  Related
Documents.  The Bank  Agreements and the Related  Documents are  incorporated in
this Agreement by this reference.  Borrower hereby agrees to pay and perform all
of  Lender's  obligations  to Bank  under the Bank  Agreements  and the  Related
Documents  and to  indemnify,  defend and hold Lender  harmless  for all losses,
claims,  demands,  liabilities,  damages,  actions,  causes of  actions  paid or
payable by Lender to Bank or to any other Person under the Bank  Agreements  and
the Related  Documents,  as fully and  completely as if Borrower were  expressly
named in the Bank  Agreements and the Related  Documents.  Without  limiting the
preceding, all of the statements, representations, warranties and covenants made
by Lender in the Bank Agreements and/or in the Related Documents shall be deemed
to have  been  made by  Borrower  to  Lender  in this  Agreement,  and all  such
representations  and  warranties   together  with  all  other   representations,
warranties  and covenants  contained in this Agreement will survive the delivery
of this  Agreement,  and any  investigation  or  knowledge  of  Lender  will not
diminish its right to rely on such representations and warranties.


                                    ARTICLE 5
                              COVENANTS OF BORROWER

         SECTION 5.1  Affirmative  Covenants.  So long as there is any Letter of
Credit  outstanding or any Available Amount under the Commitment,  or Lender has
any  obligations  to  Borrower  under  this  Agreement  or any  of  the  Related
Documents, or Borrower has any obligation to pay any amount to Lender under this
Agreement or any of the Related Documents, Borrower covenants and agrees that:

                  (a)  Performance  of  and  Compliance  with  Other  Covenants.
Borrower  will perform and comply,  in all material  respects,  with each of the
covenants that are set forth in this Agreement and in the Related Documents,  as
such  covenants may be amended or  supplemented  in the future and will promptly
pay the Reimbursement Obligations and any other Indebtedness when and as due.

                  (b)  Preservation  of  Corporate   Existence.   Borrower  will
preserve and maintain its corporate existence, rights, franchises and privileges
in the jurisdiction of its incorporation, and

                                      -12-

<PAGE>



qualify and remain  qualified as a foreign  corporation in each  jurisdiction in
which such  qualification  is necessary or desirable in view of its business and
operations or the ownership of its properties.

                  (c)  Compliance  with  Laws.  Borrower  will  comply  with the
requirements  of all  applicable  laws,  rules,  regulations  and  orders of any
governmental authority including environmental statutes,  regulations and orders
governing the use, generation, storage or disposal of hazardous substances.

                  (d) Maintain  Properties.  Borrower will maintain and preserve
all properties necessary or useful in the proper conduct of its business in good
working order and  condition,  ordinary wear and tear excepted and will keep all
of its properties free from all mechanic's,  laborer's and materialmen's  liens,
except such as are actively  being  contested in good faith if (i) adequate bond
has been obtained  therefore;  or (ii) an amount adequate to discharge such lien
has  been  deposited  in an  escrow  account  pursuant  to an  escrow  agreement
satisfactory  in form and substance to Lender;  provided that in either case, no
portion of the Collateral will be in danger of being sold, forfeited, interfered
with or lost.

                  (e) Pay  Taxes.  Borrower  will pay and  discharge  all  Taxes
imposed  upon it or upon its income,  profits or  properties,  prior to the date
upon which penalties attach.

                  (f)  Insurance.   Borrower,  at  its  expense,  will  maintain
insurance on the Collateral and on all of its other assets and properties, real,
personal  and mixed,  and will keep the  Collateral  and such  other  assets and
property insured against loss or damage by fire,  theft,  explosion,  sprinklers
and all other hazards and risks for their full replacement value.  Borrower will
also keep and maintain business interruption  insurance and public liability and
property damage insurance  relating to Borrower's  operation of its business and
the ownership and use of the Collateral and its other assets and properties. All
such policies of insurance  will be in such form,  with such  companies,  and in
such amounts as may be satisfactory  to Lender.  Borrower will deliver to Lender
certified  copes of such  policies of insurance  and evidence of the payments of
all premiums for such insurance.  All such policies of insurance  (except public
liability) will contain an endorsement in a form  satisfactory to Lender showing
Lender as a loss payee,  with a waiver of  warranties  in form  satisfactory  to
Lender,  and all  proceeds  payable  under  such  policies  with  respect to the
Collateral will, at the option of Lender,  be payable to Lender to be applied to
the  Reimbursement  Obligations and the other  Indebtedness.  Borrower's  public
liability  policies  of  insurance  will name Lender as an  additional  insured.
Borrower  hereby  irrevocably  appoints  Lender (and any of  Lender's  officer's
employees or agents designated by Lender) as Borrower's attorney for the purpose
of making,  settling and adjusting  claims with respect to the Collateral  under
such policies of insurance,  endorsing the name of Borrower on any check, draft,
instrument  or other  item of  payment  for the  proceeds  of such  policies  of
insurance with respect to the Collateral and for making all  determinations  and
decisions  with respect to such policies of insurance.  Borrower will not cancel
any such policies  without  Lender's  prior written  consent.  Each insurer will
agree by  endorsement  upon the policy or policies of insurance  issued by it to
Borrower,  or by independent  instruments  furnished to Lender, that the insurer
will give  Lender at least 30 days'  written  notice  before any such  policy or
policies of insurance

                                      -13-

<PAGE>



will be altered or  canceled,  and that no act or  default of  Borrower,  or any
other  Person,  will affect the right of Lender to recover  under such policy or
policies of insurance.

                  (g) Notice. Borrower will immediately deliver to Lender copies
of all notices Borrower is required and permitted to give to any party to any of
the Related Documents and Borrower will immediately give notice to Lender of the
occurrence of an Event of Default,  any litigation,  arbitration or governmental
investigation or proceeding not previously disclosed by Borrower to Lender which
is instituted by or against  Borrower or with respect to any of its  properties,
which if adversely determined, might materially adversely affect the business or
financial condition of Borrower or impair the ability of Borrower to perform its
obligations under this Agreement or any of the Related  Documents,  any material
adverse  development  which  will  occur  in  any  litigation,   arbitration  or
governmental  investigation  or proceeding  previously  disclosed by Borrower to
Lender, any significant  change in the management of Borrower,  any termination,
resignation,   dismissal  or  other  change  of  Borrower's  independent  public
accountants  or  attorneys,  and any other  material  change in the  business or
operations of Borrower.

                  (h)  Inspection.  Borrower will at any reasonable  time permit
Lender or any agent or  representative  of Lender to visit its  premises  and to
examine  and make copies of  abstracts  from the records and books of account of
Borrower,  and to discuss the affairs,  finances  and accounts of Borrower  with
Borrower's officers, directors, agents and employees.

                  (i) Further  Assurances.  Borrower  will  promptly  and at all
reasonable  times,  upon request by Lender,  do all such further acts and things
and execute such further documents as Lender may require to assure Lender of the
preservation of its rights under this Agreement and the Related Documents.

                  (j) Records.  Borrower will keep adequate records and books of
account,  in which  complete  entries will be made in accordance  with generally
accepted accounting principles  consistently  applied,  reflecting all financial
transactions of Borrower.

                  (k) Use of Letters of Credit. Borrower will use the Letters of
Credit only to purchase  equipment  and  merchantable  inventory in the ordinary
course of its  business  consistent  with its past  practice and with respect to
inventory, only of the types described in Exhibit 5.1 (k).

         SECTION  5.2  Negative  Covenants.  So long as there is any  Letter  of
Credit  outstanding  or any Available  Amount under the Commitment or Lender has
any  obligations  to  Borrower  under  this  Agreement  or any  of  the  Related
Documents,  or Borrower has any  obligation  to pay any amount to Lender or Bank
under this  Agreement or any of the Related  Documents,  Borrower  covenants and
agrees that, without the prior written consent of Lender:

                  (a) Change of Name; Structure;  Dissolution. Borrower will not
change its name or in any way alter its corporate structure,  liquidate,  windup
or dissolve or otherwise  dispose of all or  substantially  all of its assets or
consolidate or merge into one or more corporations or permit one

                                      -14-

<PAGE>



or more  corporations  to consolidate  with or merge into Borrower,  acquire the
capital  stock of any  Person,  or amend its  organizational  documents  without
obtaining Lender's prior written consent, which may be conditioned,  among other
requirements,  upon receipt by Lender of an opinion from Borrower's counsel that
all actions  necessary to protect the  Collateral  and Lender's  interest in the
Collateral have been taken.

                  (b)  Liens.  Except  for the  Permitted  Encumbrances  and the
liens, encumbrances and security interests in favor of Lender, Borrower will not
incur,  assume or suffer  to exist any lien upon or with  respect  to any of its
assets,  whether not owned or acquired at any time in the future,  or assign any
right to receive income, or to secure any indebtedness to any Person.

                  (c) Transfer Assets.  Borrower will not sell, lease,  transfer
or otherwise dispose of any of its assets,  except in the ordinary course of its
business.

                  (d) Additional Indebtedness.  Borrower will not incur, create,
assume or permit to exist any indebtedness except (i) the Indebtedness and other
indebtedness to Lender; (ii) indebtedness to financial institutions under credit
accommodations  existing  as  of  the  date  of  this  Agreement;   (iii)  trade
indebtedness  incurred  in the  ordinary  course of  Borrower's  business;  (iv)
purchase money indebtedness for the purchase of equipment;  and (v) indebtedness
that is by its terms  expressly  subordinated  to the  repayment  in full of the
Indebtedness in a manner acceptable to Lender.

                  (e)  Guaranty  Obligations.  Borrower  will  not  guaranty  or
otherwise  become  liable with  respect to or provide any  collateral  for,  the
obligations of any third person.

                  (f) Loans.  Borrower will not,  either directly or indirectly,
make any advance or loan except in the ordinary  course of business as presently
conducted, or make any loan or advance to any officer, director or shareholder.

                  (g)  Prepayments.   Borrower  will  not,  either  directly  or
indirectly, prepay any existing or future indebtedness owing to any third party,
including indebtedness owing to employees, officers, directors or shareholders.

                  (h)  Distributions  and Dividends.  Borrower will not,  either
directly  or  indirectly,  make any  distribution  or declare or pay any cash or
other  dividends on, or purchase,  acquire,  redeem or retire any of its capital
stock.

                  (i) Increase  Salaries.  Borrower will not, either directly or
indirectly,  increase  the  salaries of any of its  shareholders,  directors  or
officers by an amount that exceeds 105 percent of such shareholder's, director's
or officer's salary during the immediately preceding fiscal year.

                  (j) Assignment.  Borrower will not assign any of its rights or
obligations  under this  Agreement  or under the  Related  Documents;  provided,
however, nothing in this Agreement will

                                      -15-

<PAGE>



in any way prevent Lender from selling or otherwise assigning all or any part of
its interests  under this Agreement or under the Related  Documents to any other
Person.


                                    ARTICLE 6
                                EVENTS OF DEFAULT

         SECTION 6.1 Events of Default.  At the option of Lender, the occurrence
of any of the following events is an Event of Default under this Agreement:

                  (a)  Failure  to Pay  Amounts  Due.  Borrower  fails to make a
Deposit by the Deposit  Deadline or  otherwise  fails to pay any amount  payable
under this Agreement or under any of the Related Documents on the date when due.

                  (b)  Cross-Default.  Any default  under (i) any of the Related
Documents,  (ii) any other  agreement  with or  undertaking on behalf of Lender;
(iii) any other debt instrument or other agreement to which Borrower is a party,
that occurs and is continuing.

                  (c) Breach of Warranty. Any representation or warranty made by
Borrower in or in connection with this Agreement or any of the Related Documents
proves to have been incorrect in any material respect when made.

                  (d) Failure to Perform.  Borrower  fails to perform or observe
any other term,  covenant or agreement contained in this Agreement or any of the
Related Documents to which it is a party.

                  (e)  Invalidity of Agreement.  Any material  provision of this
Agreement or the Related  Documents at any time and for any reason  ceases to be
valid and  binding  on  Borrower,  or is  declared  to be null and void,  or the
validity or  enforceability  of such  provision is  contested by Borrower,  or a
proceeding  is  commenced  by  any  governmental   agency  or  authority  having
jurisdiction   over  Borrower   that  seeks  to  establish  the   invalidity  or
unenforceability  of  such  provision,  or  Borrower  denies  that it has any or
further liability or obligation under this Agreement.

                  (f)  Invalidity of Security  Interests.  All or any portion of
the security interests and/or liens created by any of this Agreement ceases, for
any reason, to be valid and perfected first priority security interests in favor
of Lender.

                  (g) Invalidity of Related Documents. Any Related Document, for
any reason, ceases to be in full force and effect.

                  (h)  Governmental   Approvals.   Any  governmental   approval,
registration  or filing with any  governmental  authority,  now or in the future
required in connection with the performance by Borrower of its obligations under
this Agreement or under any of the Related Documents, is

                                      -16-

<PAGE>



revoked,  withdrawn  or  withheld,  or fails to remain in full force and effect,
except that  Borrower  will have 45 days after  notice of any such event to take
whatever  action is necessary to obtain all necessary  approvals,  registrations
and filings.

                  (i)  Other  Governmental  Action.  Any  action is taken by any
governmental authority that (a) in the sole opinion of Lender, deprives Borrower
of any right,  privilege  or  franchise  required  to operate its  business,  or
substantially restrict the exercise of such right,  privilege or franchise,  (b)
in the sole opinion of Lender,  materially  affects the likelihood of Borrower's
full and timely performance of its obligations under this Agreement,  and (c) is
not revoked or rescinded within 45 days after it becomes effective.

                  (j)  Change  in  Financial  Statements.  There  is a  material
adverse change from the financial statements dated as of June 30, 1998.

                  (k) Act of  Bankruptcy.  Borrower  becomes  the subject of any
debtor  relief law,  including a proceeding  under Title 11 of the United States
Code,  and if such  proceeding  is an  involuntary  proceeding,  it has not been
dismissed or withdrawn within 30 days.

         SECTION 6.2  Consequences  of Default.  If any Event of Default occurs,
Lender, in its sole discretion, may do any or all of the following:

                  (a) Reduce Commitment.  Reduce the amount of the Commitment.

                  (b) Terminate Bank  Agreements.  Terminate the Bank Agreements
and/or  cause  the  Bank to cease  issuing  Letters  of  Credit  under  the Bank
Agreements.

                  (c)  Acceleration.  Declare  all  amounts  payable  under this
Agreement  and  the  Related  Documents  immediately  due and  payable,  without
presentment,  demand,  protest or further  notice of any kind,  all of which are
expressly waived by Borrower.

                  (d) Assembly of  Collateral.  Require  Borrower  (and Borrower
hereby agrees to comply with such request) to assemble the  Collateral  and make
it available to Lender at such location as Lender may designate.

                  (e)  Exercise  Other  Rights.  Exercise any right and remedies
available  to Lender  under any or all of the  Related  Documents,  by law or at
equity, and under any other agreement.

                                      -17-

<PAGE>



                                    ARTICLE 7
                                  MISCELLANEOUS

         SECTION 7.1 Amendments.  This Agreement may not be amended  orally.  It
may only be amended in writing. No waiver of any breach of this Agreement or any
consent by Lender under this Agreement will be effective unless it is in writing
and signed by Lender,  and such  amendments  and any waivers or consents will be
effective only in the specific  instance and for the specific  purpose for which
they are given.

         SECTION 7.2 Notices. All notices and other  communications  required by
or otherwise  furnished in connection with this Agreement will be in writing and
sent by receipted hand delivery  (including  Federal  Express or other receipted
courier service), telecopier or regular mail,

if to Borrower:   Imaging Technologies Corporation
                           11301 Via Frontera
                           San Diego, CA 92127
                           Attention:  Chris McKee
                           Telephone:  (619) 487-8944 x. 2012
                           Telecopier: (619) 613-1311

with a copy to:   Brobeck Phleger & Harrison LP
                           550 West C Street, Suite 1300
                           San Diego, CA 92101-3532
                           Attention:  John Cook
                           Telephone:  (619) 699-0236
                           Telecopier: (619) 234-3848

or, if to Lender: American Industries, Inc.
                           1750 NW Front Avenue, Suite 106
                           Portland, OR 97209
                           Attention:  Howard H. Hedinger
                           Telephone:  (503) 222-0060
                           Telecopier: (503) 222-0070

with a copy to:   Tonkon Torp LP
                           1600 Pioneer Tower
                           888 S.W. Fifth Avenue
                           Portland, OR 97204-2099
                           Attention:  Kenneth D. Stephens
                           Telephone:  (503) 802-2008
                           Telecopier: (503) 972-3708

                                      -18-

<PAGE>



or, if to Bank:            U.S. Bank National Association
                           111 S.W. Fifth Avenue, T-4
                           Portland, OR 97204
                           Attention:  Richard Ferguson
                           Telephone:  (503) 275-6354
                           Telecopier: (503) 275-5795

or, as to each  party,  at such other  address as is may be  designated  by such
party  in  a  written   notice  to  the  other  party.   All  such  notices  and
communications  will,  when delivered or faxed, be effective when deposited with
the courier or sent by facsimile, respectively, addressed as set forth above.

         SECTION  7.3  Waiver;  Remedies.  No  failure  on the part of Lender to
exercise,  and no delay in  exercising,  any right  under  this  Agreement  will
operate as a waiver of such right.  The single or partial  exercise of any right
under this  Agreement  will not preclude  any other or further  exercise of such
right or the  exercise  of any  other  right.  The  remedies  set  forth in this
Agreement  are  cumulative  with,  and not exclusive of, any rights and remedies
otherwise available to Lender.

         SECTION 7.4   Right of Set-off. [Deleted]

         SECTION 7.5  Indemnification.  Borrower will  indemnify and hold Lender
harmless  from and  against any and all claims,  damages,  losses,  liabilities,
costs or  expenses  ("Claims")  that  Lender  may  incur or that may be  claimed
against  Lender by any person or entity by reason of or in  connection  with the
following:

                  (a) The execution,  delivery or performance of this Agreement,
any Related Document,  or any transaction  contemplated by this Agreement or any
Related Document.

                  (b) The  execution  and delivery or transfer of, or payment or
failure to make  payment  under,  the  Letters of Credit,  including  any Claims
caused by Bank's  willful  misconduct or gross  negligence  including (i) Bank's
determinations of whether a sight draft or certificate  presented under a Letter
of Credit  complies  with the terms of that  Letter of  Credit,  or (ii)  Bank's
failure to make lawful payment under the Letter of Credit after the presentation
to it of  documents  strictly  complying  with the terms and  conditions  of the
Letter of Credit.

Nothing in this Section is intended to limit Borrower's obligations contained in
Article 2 of this  Agreement.  Without  prejudice  to the  survival of any other
obligation of Borrower under this  Agreement,  the indemnities and obligation of
Borrower contained in this Section will survive payment in full, or satisfaction
through foreclosure,  of amounts payable pursuant to Article 2 of this Agreement
and termination of the Letters of Credit.

         SECTION 7.6  Limitation of Liability of Lender.  In addition,  Borrower
assumes all risks of the acts or omissions of any beneficiary or transferee of a
Letter of Credit or with respect to such

                                      -19-

<PAGE>



parties'  use of a Letter of Credit.  Neither  Lender nor any of its officers or
directors will be liable or responsible for any one or more of the following:

                  (a) The use that may be made of the  Letters  of Credit or any
acts or  omissions of any  beneficiary  or  transferee  in  connection  with the
Letters of Credit.

                  (b) The  validity,  sufficiency  or  genuineness  of documents
presented in connection  with the Letters of Credit,  or of any  endorsement  on
such documents,  even if the documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged.

                  (c) Payment by Bank against  presentation of documents that do
not strictly comply with the terms of the Letters of Credit,  including  failure
of any documents to bear any  reference or adequate  reference to the Letters of
Credit.

                  (d) Any other circumstances whatsoever in making or failing to
make  payment  under the Letters of Credit,  including as a result of (i) Bank's
gross  negligence  or  willful  misconduct  in  determining   whether  documents
presented  under a Letter of  Credit  comply  with the  terms of that  Letter of
Credit,  and (ii) Bank's  willful  failure to pay under a Letter of Credit after
the  presentation  to it by a  beneficiary  in  accordance  with its  terms)  of
documents  strictly  complying  with the terms and  conditions of the Letters of
Credit.  In furtherance and not in limitation of the preceding,  Bank may accept
documents that appear on their face to be in order,  without  responsibility for
further investigation, regardless of any notice or information to the contrary.

Without limiting the preceding, Borrower agrees not to assert against Lender any
Claim in connection with Bank's performance of or its failure to perform, any of
Bank's  obligations under the Bank Agreements or any of the Related Documents or
in  connection  with the  termination  of the Bank  Agreements  for any  reason,
including a default by Lender.

         SECTION 7.7 Costs, Expenses and Taxes. Borrower will immediately pay on
demand all costs and expenses in  connection  with the  preparation,  execution,
delivery,  filing, recording and enforcement of or monitoring of compliance with
this Agreement and the Related Documents, irrespective of whether any Letters of
Credit are actually  issued,  including the  reasonable  fees and  out-of-pocket
expenses  of Lender and of counsel to Lender  with  respect to such  matters and
with respect to advising Lender as to its rights and responsibilities under this
Agreement  and the  Related  Documents,  and all costs and  expenses  (including
counsel fees and expenses  both at trial and on appeal) in  connection  with (a)
the  enforcement  of this  Agreement,  the  Related  Documents,  and such  other
documents that may be delivered in connection with this Agreement or the Related
Documents,  and  (b)  any  action  or  proceeding  relating  to a  court  order,
injunction or other process or decree  restraining or seeking to restrain Lender
from paying any amount under the Letters of Credit.  In addition,  Borrower will
pay any and all Taxes and fees payable or determined to be payable in connection
with the  execution,  delivery,  filing and  recording  of this  Agreement,  the
Related  Documents,  and such other documents and will hold Lender harmless from
and against any and all liabilities  with respect to or resulting from any delay
in paying or omitting to pay such Taxes and fees.

                                      -20-

<PAGE>




         SECTION 7.8 Binding Effect.  This Agreement will become  effective when
it is executed by Borrower and Lender,  and will  thereafter be binding upon and
inure to the benefit of Borrower and Lender (and their respective successors and
assigns),  except  that  Borrower  will not have the right to assign  its rights
under this Agreement or any interest in this Agreement without the prior written
consent of Lender.

         SECTION  7.9 Consent to  Jurisdiction.  Borrower,  at Lender's  option,
irrevocably submits to the non-exclusive  jurisdiction of any court of the State
of Oregon or the United States of America sitting in Multnomah  County,  Oregon,
in any action or proceeding  arising out of or relating to this Agreement or the
Related Documents,  and Borrower irrevocably agrees that all claims with respect
to such  action or  proceeding  may be heard and  determined  in any such court.
Borrower also irrevocably  waives, to the fullest extent that it may effectively
do so, the defense of an inconvenient forum to the maintenance of such action or
proceeding.  Borrower  also  irrevocably  consents to the service of any and all
process  in any such  action  or  proceeding  by the  mailing  of copies of such
process  to it at its  address  specified  in  Section  7.2 of  this  Agreement.
Borrower  agrees that a Final Judgment in any such action or proceeding  will be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other  manner  provided by law.  Nothing in this  Section will affect the
right of Lender to serve legal  process in any other manner  permitted by law or
affect the right of Lender to bring any action or proceeding against Borrower or
its property in the courts of any other jurisdictions.

         SECTION 7.10  Governing  Law. This  Agreement  will be governed by, and
construed in accordance with, the laws of the state of Oregon.

         SECTION 7.11  Severability.  Any  provision of this  Agreement  that is
prohibited, unenforceable or not authorized in any jurisdiction will, as to such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or  nonauthorization  without  invalidating  the  remaining  provisions  of this
Agreement  or  affecting  the  validity,  enforceability  or  legality  of  such
provision in any other jurisdiction.

         SECTION  7.12  Headings.   Section  and  subsection  headings  in  this
Agreement are included for convenience of reference only and will not constitute
a part of this Agreement for any other purpose.

         SECTION 7.13 Complete  Understanding.  This Agreement contains the full
and  complete  understanding  with  respect to the  subjects  contained  in this
Agreement  and  completely  and  fully  supersedes  all  prior  undertakings  or
agreements,  both  written and oral,  between  Borrower  and Lender  relating to
issuance of the Letters of Credit. In connection therewith,  Lender incorporates
the following statutory notice:

         Under Oregon law, most agreements,  promises and commitments made by us
after October 3, 1989,  concerning  loans and other credit  extensions which are
not for personal,

                                      -21-

<PAGE>



family or household purposes or secured solely by the borrower's  residence must
be in writing, express consideration and be signed by us to be enforceable.

         SECTION 7.14  Counterparts/Facsimile  Delivery . This  Agreement may be
executed in any number of counterparts and by different  parties,  each of which
when so executed  will be deemed to be an original,  and all of which when taken
together  will be  deemed  to be one and the  same  instrument.  Delivery  of an
executed  counterpart  of a  signature  page  to  this  Agreement  by  facsimile
transmission will be effective as delivery of an original  executed  counterpart
of this Agreement.


BORROWER:                               IMAGING TECHNOLOGIES CORPORATION



                                        By:___________________________________
                                        Its:___________________________________




LENDER:                                 AMERICAN INDUSTRIES, INC.




                                        By:___________________________________
                                        Its:___________________________________




                                      -22-

<PAGE>


                                   EXHIBIT A-1
                       Form of Commercial Letter of Credit