SECURITIES PURCHASE AGREEMENT
                                      Among
                        IMAGING TECHNOLOGIES CORPORATION,
                     HARRY J. SAAL TRUST UTA DATED 7/19/72,
              SAAL FAMILY CHARITABLE LEAD TRUST UTA DATED 2/25/98,
                                MANOR INVESTMENT,
                                GUILHERME DUQUE,
                                  NESHER, INC.,
                          MANCHESTER ASSET MANAGEMENT,
                           GILSTON CORPORATION, LTD.,
                                  R.T. MERCER,
                           THE CUTTYHUNK FUND, LIMITED
                                       AND
                                   CASHCO FLP

                          Dated as of February 2, 1999











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                                TABLE OF CONTENTS

                                                                           Page

ARTICLE I   PURCHASE AND SALE OF UNITS........................................1
   1.1   Purchase and Sale....................................................1
   1.2   Purchase Price.......................................................2
   1.3   The Closing..........................................................2

ARTICLE II   REPRESENTATIONS AND WARRANTIES...................................3
   2.1   Representations, Warranties and Agreements of the Company............3
   2.2   Representations and Warranties of the Purchasers....................10

ARTICLE III   OTHER AGREEMENTS OF THE PARTIES................................11
   3.1   Transfer Restrictions...............................................11
   3.2   Stop Transfer Instruction...........................................12
   3.3   Furnishing of Information...........................................13
   3.4   Blue Sky Laws.......................................................13
   3.5   Integration.........................................................13
   3.6   Certain Agreements..................................................13
   3.7   Listing and Reservation of Underlying Shares and Warrant Shares;
           Compliance with Law...............................................14
   3.8   Notice of Breaches..................................................14
   3.9   Conversion Obligations of the Company...............................15
   3.10   Use of Proceeds....................................................15
   3.11   Indemnification....................................................15
   3.12   Sales of Preferred Stock...........................................17
   3.13   Subsequent Sales and Registrations.................................17
   3.14   Shareholder Approval...............................................17
   3.15   Interim Financing..................................................17
   3.16   Incorporation of Certificate of Designation By Reference...........18
   3.17   Board of Directors.................................................18
      3.18   Conversion of Preferred Stock and Exercise of Warrants..........18

ARTICLE IV   CONDITIONS......................................................18
   4.1   Conditions Precedent to Sale of the Units...........................18

ARTICLE V   MISCELLANEOUS....................................................21
   5.1   Fees and Expenses...................................................21
   5.2   Entire Agreement; Amendments........................................21
   5.3   Notices.............................................................21
   5.4   Amendments; Waivers.................................................21
   5.5   Headings............................................................22
   5.6   Successors and Assigns..............................................22
   5.7   No Third Party Beneficiaries........................................22
   5.8   Governing Law.......................................................22
   5.9   Survival............................................................22


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   5.10   Execution..........................................................22
   5.11   Publicity..........................................................23
   5.12   Consent to Jurisdiction; Attorneys' Fees...........................23
   5.13   Waiver of Jury Trial...............................................24
   5.14   Severability.......................................................24
   5.15   Remedies...........................................................24
   5.16   Independent Nature of Purchasers' Obligations and Rights...........24


Schedules and Exhibits

Schedule 1          -    Purchasers of Units
Schedule 2.1(a)     -    Organization and Qualification; Subsidiaries
Schedule 2.1(c)     -    Capitalization; Rights to Acquire Capital Stock
Schedule 2.1(f)     -    Consents and Approvals
Schedule 2.1(g)     -    Litigation; Proceedings
Schedule 2.1(n)     -    Certain Fees
Schedule 2.1(r)     -    Listing and Maintenance Requirements Compliance
Schedule 2.1(u)     -    Registration Rights, Rights of Participation
Schedule 2.1(v)     -    Title
Schedule 2.1(aa)    -    Year 2000 Compliance
Schedule 3.13       -    Other Transactions
Schedule 3.18       -    Conversion of Preferred Shares and Exercise of Warrants

Exhibit A           -    Certificate of Designation
Exhibit B           -    Warrants
Exhibit C           -    Registration Rights Agreement
Exhibit D           -    Legal Opinion of Parker Chapin Flattau & Klimpl, LLP
Exhibit E           -    Transfer Agent Instructions


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                          SECURITIES PURCHASE AGREEMENT


         SECURITIES PURCHASE AGREEMENT (this "Agreement"),  dated as of February
2, 1999, among Imaging  Technologies  Corporation,  a Delaware  corporation (the
"Company"),  and each of the  Purchasers  listed on Schedule 1 attached  hereto.
Each of the  Purchasers  listed on  Schedule 1 attached  hereto are  referred to
herein  as a  "Purchaser"  and  are  collectively  referred  to  herein  as  the
"Purchasers."

         WHEREAS,  subject  to the  terms  and  conditions  set  forth  in  this
Agreement,  the  Company  desires to issue and sell to the  Purchasers,  and the
Purchasers  desire to acquire from the Company,  for cash or in exchange  and/or
cancellation for certain  indebtedness owed by the Company to certain Purchasers
in the amounts and in the form listed on Schedule 1 attached  hereto,  shares of
the Company's  Series E Convertible  Preferred Stock, par value $1,000 per share
and stated value of $5,000 per share (the "Preferred Stock"),  and warrants (the
"Warrants") to purchase  shares of common stock,  par value $.005 per share,  of
the Company (the "Common Stock").

         NOW,  THEREFORE,  in consideration of the mutual covenants contained in
this Agreement, the Company and each Purchaser agree as follows:

                                    ARTICLE I

                           PURCHASE AND SALE OF UNITS

         1.1      Purchase and Sale.

                  (a) Subject to the terms and conditions set forth herein,  the
         Company  shall issue and sell to the  Purchasers,  and the  Purchasers,
         severally and not jointly,  shall purchase from the Company up to 1,250
         units (the "Units"),  each Unit  consisting of (i) a share of Preferred
         Stock and (ii)  Warrants  to  purchase  5,000  shares of Common  Stock.
         Notwithstanding  anything to the contrary set forth in this  Agreement,
         the  aggregate  number of Units to be sold  hereunder  shall not exceed
         1,250.

                  (b) The  Preferred  Stock  shall have the  respective  rights,
         preferences  and privileges set forth in the Certificate of Designation
         of the Company (the  "Certificate of Designation") the form of which is
         annexed  hereto as Exhibit A, which shall be approved by the Purchasers
         and the Company's  Board of Directors  (the "Board of  Directors")  and
         filed  and  accepted  for  filing on or prior to the  Closing  Date (as
         defined  below) by the Company with the Secretary of State of the State
         of  Delaware.  The  Warrants  shall be in the form of Exhibit B annexed
         hereto.

         For purposes of this Agreement, "Trading Day," "Per Share Market Value"
and "Original  Issue Date" shall have the meanings set forth in the  Certificate
of Designation.
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         1.2     Purchase Price. The purchase price per Unit shall be $5,000.00.
                  
         1.3     The Closing.

                           (a) The closing of the purchase and sale of the Units
                  (as  defined  below) (the  "Closing")  shall take place at the
                  offices of Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of
                  Americas, New York, New York 10036,  immediately following the
                  execution  hereof or such later date or different  location as
                  the parties shall agree in writing,  but not prior to the date
                  that the  conditions  set  forth  in  Section  4.1  have  been
                  satisfied or waived by the appropriate  party. The date of the
                  Closing, is hereinafter  referred to as the "Closing Date." At
                  the  Closing,   the  Company  shall  sell  and  issue  to  the
                  Purchasers,  and  the  Purchasers  shall,  severally  and  not
                  jointly,  purchase  from the  Company  up to 1,250  Units (the
                  "Units")  for an aggregate  purchase  price of $5,000 per Unit
                  (the "Purchase Price").

                           (b) At the Closing (a) the Company  shall  deliver to
                  each Purchaser (1) stock certificates  representing the shares
                  of  Preferred  Stock  included  in the  Units  (the  "Shares")
                  purchased  by  such  Purchaser  as  set  forth  next  to  such
                  Purchaser's   name  on  Schedule  1  attached   hereto,   each
                  registered  in the name of such  Purchaser,  (2) the  Warrants
                  included  in the  Units  (the  "Warrants")  purchased  by such
                  Purchaser  as set  forth  next  to  such  Purchaser's  name on
                  Schedule 1  attached  hereto,  registered  in the name of such
                  Purchaser,  (3)  and  all  other  documents,  instruments  and
                  writings  required to have been  delivered  at or prior to the
                  Closing by the  Company  pursuant  to this  Agreement  and the
                  Registration  Rights Agreement,  dated the date hereof, by and
                  among the Company and the Purchasers, in the form of Exhibit C
                  annexed hereto (the "Registration Rights Agreement"),  and (b)
                  each Purchaser shall deliver to the Company the Purchase Price
                  set forth next to its name on Schedule 1, in (i) United States
                  dollars in immediately  available funds by wire transfer to an
                  account  designated in writing by the Company for such purpose
                  on  or  prior  to  the  Closing   Date,  or  (ii)  such  other
                  consideration,  in outstanding debt of the Company,  agreed to
                  by the Company and set forth on Schedule 1, and all documents,
                  instruments and writings required to have been delivered at or
                  prior  to the  Closing  by  such  Purchaser  pursuant  to this
                  Agreement and the Registration Rights Agreement.

                           (c) Notwithstanding  anything in the foregoing to the
                  contrary, Manchester Asset Management and Gilston Corporation,
                  Ltd. (together,  the "Tranche  Purchasers") shall purchase the
                  number of Units  listed  opposite  their  names on  Schedule 1
                  hereto in three  tranches.  On the Closing  Date,  each of the
                  Tranche Purchasers shall purchase,  severally and not jointly,
                  up to 15 Units for an  aggregate  purchase  price of $150,000.
                  Within ten (10) days of the Company's filing of a registration
                  statement in accordance with the Registration Rights Agreement
                  with   the   Securities   and   Exchange    Commission    (the
                  "Commission"),  each of the Tranche Purchasers shall purchase,
                  severally  and not  jointly,  an  additional  15 Units  for an
                  aggregate purchase price of $150,000.  Within ten (10) days of
                  the date on which the


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                  Company's registration statement filed with the Commission has
                  been declared effective by the Commission, each of the Tranche
                  Purchasers  shall  purchase,  severally  and not  jointly,  an
                  additional  45  Units  for  an  aggregate  purchase  price  of
                  $450,000.  In no case shall the  Tranche  Purchasers  purchase
                  additional  Units  unless and until the  conditions  listed in
                  Section  4.1(b) have been  satisfied or waived by each Tranche
                  Purchaser.


                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

         2.1  Representations,  Warranties  and  Agreements of the Company.  The
Company hereby makes the following representations and warranties to each of the
Purchasers:

                  (a) Organization and Qualification;  Subsidiaries. The Company
         is a corporation, duly organized, validly existing and in good standing
         under the laws of the State of Delaware,  with the requisite  corporate
         power and  authority  to own and use its  properties  and assets and to
         carry on its  business  as  currently  conducted.  The  Company  has no
         subsidiaries other than as set forth in Schedule 2.1(a)  (collectively,
         the  "Subsidiaries").  Each of the Subsidiaries is a corporation,  duly
         organized,  validly existing and in good standing under the laws of the
         jurisdiction of its incorporation or organization (as applicable), with
         the full  corporate  power and authority to own and use its  properties
         and assets and to carry on its business as currently conducted. Each of
         the Company and the  Subsidiaries  is duly qualified to do business and
         is in good standing as a foreign  corporation in each  jurisdiction  in
         which the nature of the  business  conducted  or  property  owned by it
         makes such qualification  necessary,  except where the failure to be so
         qualified  or in  good  standing,  as  the  case  may  be,  would  not,
         individually  or in the aggregate,  (x) adversely  affect the legality,
         validity  or  enforceability  of  the  Preferred  Stock  or  any of the
         Transaction  Documents  (as  defined  below),  (y) have or  result in a
         material adverse effect on the results of operations, assets, prospects
         insofar as it may reasonably be foreseen, or financial condition of the
         Company and the Subsidiaries,  taken as a whole or (z) adversely impair
         the  Company's   ability  to  perform  fully  on  a  timely  basis  its
         obligations  under  any  Transaction   Document,   including,   without
         limitation,  the  Company's  covenant  under Section 3.7 hereof (any of
         (x), (y) or (z), being a "Material Adverse Effect").

                  (b) Authorization;  Enforcement. The Company has the requisite
         corporate  power and  authority  to enter  into and to  consummate  the
         transactions  contemplated by this Agreement and the other  Transaction
         Documents,  and  otherwise to carry out its  obligations  hereunder and
         thereunder.  This Agreement,  the Registration  Rights  Agreement,  the
         Certificate of  Designation,  the Transfer Agent  Instructions  and the
         Warrants are collectively  referred to as the "Transaction  Documents."
         The execution and delivery of each of the Transaction  Documents by the
         Company and the  consummation  by it of the  transactions  contemplated
         hereby and thereby have been duly authorized by all necessary action on
         the part of the  Company  and no  further  action  is  required  by the
         Company. Each of the


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         Transaction  Documents  has been duly  executed by the Company and when
         delivered  in  accordance  with the terms  hereof will  constitute  the
         legal, valid and binding obligation of the Company, enforceable against
         the Company in accordance with its terms, except as such enforceability
         may be limited by applicable  bankruptcy,  insolvency,  reorganization,
         moratorium,  liquidation  or similar  laws  relating  to, or  affecting
         generally  the  enforcement  of,  creditors'  rights and remedies or by
         other equitable principles of general application.  Neither the Company
         nor any  Subsidiary  is in  violation of any of the  provisions  of its
         respective certificate of incorporation, bylaws or other organizational
         documents. Prior to the Closing Date the Certificate of Designation has
         been filed with the  Secretary  of State of the State of  Delaware  and
         will be in full force and  effect,  enforceable  against the Company in
         accordance with the terms thereof.

                  (c)  Capitalization;  Rights to  Acquire  Capital  Stock.  The
         authorized,  issued and outstanding  capital stock of the Company as of
         February  2,  1999,  is set forth in  Schedule  2.1(c).  All issued and
         outstanding  shares of capital stock of the Company and each Subsidiary
         have been duly  authorized  and  validly  issued and are fully paid and
         non-assessable.  Except as disclosed in Schedule  2.1(c),  no shares of
         the capital  stock of the Company are entitled to preemptive or similar
         rights,  nor is any holder of the capital stock of the Company entitled
         to  preemptive  or  similar  rights  arising  out of any  agreement  or
         understanding  with the  Company  by virtue  of any of the  Transaction
         Documents.  Except as disclosed in Schedule  2.1(c),  as of February 2,
         1999,  there are no  outstanding  options,  warrants,  script rights to
         subscribe to, calls,  written  commitments  or, to the knowledge of the
         Company,  oral  commitments  relating to, or, except as a result of the
         purchase  and sale of the  Units,  securities,  rights  or  obligations
         convertible into or exchangeable for, or giving any Person any right to
         subscribe  for or acquire  any shares of Common  Stock,  or  contracts,
         commitments,  understandings, written arrangements or, to the knowledge
         of  the  Company,  oral  arrangements  by  which  the  Company  or  any
         Subsidiary is or may become bound to issue additional  shares of Common
         Stock, or securities or rights  convertible or exchangeable into shares
         of Common Stock.  Except as set forth on Schedule  2.1(c),  and, to the
         best  knowledge of the Company,  no Person or group of related  Persons
         beneficially  owns (as  determined  pursuant to Rule 13d-3  promulgated
         under the  Securities  Exchange Act of 1934, as amended (the  "Exchange
         Act")) or has the right to acquire by agreement  with or by  obligation
         binding upon the Company beneficial ownership of in excess of 5% of the
         Common  Stock.   A  "Person"   means  an  individual  or   corporation,
         partnership,  trust, incorporated or unincorporated association,  joint
         venture, limited liability company, joint stock company, government (or
         an agency or  subdivision  thereof)  or other  entity of any kind.  The
         Common Stock is quoted and is listed for trading on The Nasdaq SmallCap
         Market.  Except  as set  forth on  Schedule  2.1(c),  the  Company  has
         received  no  notice,  either  oral or  written,  with  respect  to the
         continued  eligibility  of the Common Stock for such  listing,  and the
         Company has maintained all  requirements  for the  continuation of such
         listing.

                  (d) Issuance of Units. The Units are duly authorized, and when
         issued  and paid for in  accordance  with the  terms  hereof,  shall be
         validly  issued,  fully paid and  nonassessable,  free and clear of all
         liens,   encumbrances,   and  rights  of  first  refusal  of  any  kind
         (collectively,


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         "Liens").  The Units upon issuance will not subject the holders thereof
         to personal liability by reason of being such holders.  The Company has
         and, at the Closing  Date,  will have and at all times while the Shares
         and the Warrants are outstanding  will maintain an adequate  reserve of
         duly  authorized  shares of Common  Stock to enable it to  perform  its
         obligations  under this Agreement,  the Warrants and the Certificate of
         Designation  with respect to the number of Shares and  Warrants  issued
         and outstanding at the Closing Date and in no circumstances  shall such
         reserved and available  shares of Common Stock be less than 175% of the
         maximum  number of shares of Common Stock which would be issuable  upon
         conversion  of the  Shares and upon  exercise  of the  Warrants  issued
         pursuant to the terms  hereof with  respect to the number of Shares and
         Warrants   issued  and  outstanding  at  the  Closing  Date  were  such
         conversion  or  exercise,  as the case may be,  effected on the Closing
         Date. The shares of Common Stock issuable upon conversion of the Shares
         are  referred  to herein as the  "Underlying  Shares."  When  issued in
         accordance with the Certificate of Designation,  the Underlying  Shares
         will be duly authorized,  validly issued, fully paid and nonassessable,
         free and clear of all Liens.  The shares of Common Stock  issuable upon
         exercise  of the  Warrants  are  referred  to  herein  as the  "Warrant
         Shares." When issued and paid for in accordance with the Warrants,  the
         Warrant Shares will be duly authorized,  validly issued, fully paid and
         nonassessable,  free and clear of all Liens. The Shares,  the Warrants,
         the Underlying  Shares and the Warrant Shares are referred to herein as
         the "Securities."

                  (e) No Conflicts.  The execution,  delivery and performance of
         this Agreement and the other  Transaction  Documents by the Company and
         the consummation by the Company of the transactions contemplated hereby
         and  thereby  do not and  will not (i)  conflict  with or  violate  any
         provision  of  its  certificate  of  incorporation,   bylaws  or  other
         organizational  documents  (each as amended through the date hereof) or
         (ii) subject to obtaining the consents  referred to in Section  2.1(f),
         conflict  with,  or constitute a default (or an event which with notice
         or lapse of time or both  would  become a  default)  under,  or give to
         others  any  rights  of   termination,   amendment,   acceleration   or
         cancellation of, any agreement,  indenture or instrument  (evidencing a
         Company debt or  otherwise) to which the Company is a party or by which
         any property or asset of the Company is bound or affected, (iii) result
         in  a  violation  of  any  law,  rule,  regulation,   order,  judgment,
         injunction,  decree or other  restriction of any court or  governmental
         authority to which the Company is subject  (including Federal and state
         securities laws and regulations),  or by which any material property or
         asset of the  Company  is  bound or  affected,  or (iv)  result  in the
         creation of imposition  of a Lien upon any of the  Securities or any of
         the assets of the Company,  or any of its  Affiliates  (as such term is
         defined under Rule 405 promulgated under the Securities Act), except in
         the case of each of clauses (ii) and (iii),  such conflicts,  defaults,
         terminations,  amendments, accelerations,  cancellations and violations
         as would not,  individually  or in the  aggregate,  have or result in a
         Material  Adverse  Effect.  The  business  of the  Company is not being
         conducted  in  violation of any law,  ordinance  or  regulation  of any
         governmental  authority  except  for any such  violation  as would not,
         individually or in the aggregate,  have or result in a Material Adverse
         Effect.

                  (f) Consents and Approvals.  Except as specifically  set forth
         in Schedule 2.1(f),  neither the Company nor any Subsidiary is required
         to obtain any consent, waiver,


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         authorization  or order of,  give any  notice to, or make any filing or
         registration  with, any court or other federal,  state,  local or other
         governmental   authority  or  other  Person  in  connection   with  the
         execution,  delivery and  performance by the Company of the Transaction
         Documents,  other than (i) the approval of the Board of  Directors  and
         the  filing of the  Certificate  of  Designation  with  respect  to the
         Preferred  Stock with the  Secretary of State of the State of Delaware,
         which filing and approvals with respect to the Preferred Stock shall be
         effected prior to the Closing Date, (ii) the filing of the Registration
         Statement with the Commission,  which shall be filed in accordance with
         and in the time periods set forth in the Registration Rights Agreement,
         (iii) the  application(s)  or any  letter(s)  acceptable  to The Nasdaq
         SmallCap  Market  for the  listing  of the  Underlying  Shares  and the
         Warrant  Shares  with The Nasdaq  SmallCap  Market  (and with any other
         national  securities  exchange  or market on which the Common  Stock is
         then  listed),  and (iv) any filings,  notices or  registrations  under
         applicable  federal  and  state  securities  laws  (together  with  the
         consents, waivers, authorizations, orders, notices and filings referred
         to in Schedule 2.1(f), the "Required Approvals").

                  (g) Litigation;  Proceedings. Except as specifically set forth
         in  Schedule  2.1(g)  there is no action,  suit,  notice of  violation,
         proceeding  or  investigation  pending  or,  to  the  knowledge  of the
         Company,  threatened  against or  affecting  the  Company or any of the
         Subsidiaries  or any of their  respective  properties  before or by any
         court,  governmental or administrative  agency or regulatory  authority
         (federal,  state, county, local or foreign) which (i) adversely affects
         or challenges the legality,  validity or  enforceability  of any of the
         Transaction  Documents or the  Securities  or (ii) would  reasonably be
         expected to, individually or in the aggregate,  have a Material Adverse
         Effect.

                  (h) No Default  or  Violation.  Neither  the  Company  nor any
         Subsidiary  (i) is in default  under or in violation of any  indenture,
         loan or credit  agreement or any other agreement or instrument to which
         it is a party or by which it or any of its  properties  is bound  which
         would reasonably be expected to, individually or in the aggregate, have
         a Material  Adverse  Effect,  (ii) is in  violation of any order of any
         court, arbitrator or governmental body applicable to it, or (iii) is in
         violation  of any  statute,  rule  or  regulation  of any  governmental
         authority to which it is subject,  which violation would  reasonably be
         expected to, individually or in the aggregate,  have a Material Adverse
         Effect.

                  (i) Schedules. The Schedules to this Agreement furnished by or
         on behalf of the  Company  do not  contain  any untrue  statement  of a
         material fact or omit to state any material fact  necessary in order to
         make the statements made therein not misleading.

                  (j) Private  Offering.  The Company and all Persons  acting on
         its  behalf  have not made,  and will not make,  offers or sales of the
         Preferred  Stock,  and any  securities  that might be  integrated  with
         offers  and  sales  of  the  Preferred  Stock,  except  to  "accredited
         investors"  (as  defined in  Regulation  D  ("Regulation  D") under the
         Securities Act of 1933, as amended (the "Securities  Act")) without any
         general  solicitation  or advertising  and otherwise in compliance with
         the  conditions  of  Regulation D. The offer and sale by the Company to
         the Purchasers of the Shares and the Warrants and the Underlying Shares
         and the Warrant Shares


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<PAGE>



         into which the Shares and the Warrants are  convertible or exercisable,
         as the case may be, is exempt from the registration requirements of the
         Securities Act.

                  (k) SEC Documents;  Financial  Statements;  No Adverse Change.
         The Company has filed all reports  required to be filed by it under the
         Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
         the three years  preceding  the date hereof  (the  foregoing  materials
         being  collectively  referred  to herein as the "SEC  Documents")  on a
         timely basis or has  received a valid  extension of such time of filing
         and has filed any such SEC  Documents  prior to the  expiration  of any
         such  extension.  As of  their  respective  dates,  the  SEC  Documents
         complied in all material respects with the requirements of the Exchange
         Act  and  the  rules  and  regulations  of the  Commission  promulgated
         thereunder,  and none of the SEC Documents,  when filed,  contained any
         untrue statement of a material fact or omitted to state a material fact
         required  to be  stated  therein  or  necessary  in  order  to make the
         statements therein not misleading. All material agreements to which the
         Company is a party or to which the  property  or assets of the  Company
         are  subject  have  been  filed as  exhibits  to the SEC  Documents  as
         required;  neither the Company nor any of the Subsidiaries is in breach
         of any  agreement  where such breach would  reasonably  be expected to,
         individually or in the aggregate,  have a Material Adverse Effect.  The
         financial  statements  of the  Company  included  in the SEC  Documents
         comply in all material respects with applicable accounting requirements
         and the rules and regulations of the Commission with respect thereto as
         in effect at the time of filing.  Such financial  statements  have been
         prepared in accordance with United States generally accepted accounting
         principles  applied on a consistent basis during the periods  involved,
         except as may be otherwise  specified in such  financial  statements or
         the notes  thereto,  and fairly  present in all  material  respects the
         financial  position of the Company as of and for the dates  thereof and
         the results of  operations  and cash flows for the periods  then ended,
         subject, in the case of unaudited statements,  to normal year-end audit
         adjustments. Since the date of the financial statements included in the
         Company's last filed Quarterly Report on Form 10-Q for the period ended
         September 30, 1998, there has been no event,  occurrence or development
         that has had,  or would  reasonably  be  expected  to have,  a Material
         Adverse  Effect  which  has  not  been  specifically  disclosed  to the
         Purchasers  by the Company.  The Company last filed  audited  financial
         statements  with  the  Commission  on  October  13,  1998,  and has not
         received any comments from the Commission in respect thereof.

                  (l)  Seniority.  Except  for the  Company's  series  of (i) 5%
         Convertible  Preferred  Stock and (ii) Series D  Convertible  Preferred
         Stock ("Series D Stock"),  no class of equity securities of the Company
         is senior to or on parity with the Preferred Stock in right of payment,
         whether upon liquidation, dissolution or otherwise.

                  (m)  Investment  Company.  The  Company  is  not,  and  is not
         controlled  by or  under  common  control  with  an  affiliate  of,  an
         "investment  company" within the meaning of the Investment  Company Act
         of 1940, as amended.



                                        7

<PAGE>



                  (n) Certain Fees. Except as specifically set forth in Schedule
         2.1(n),  no fees or  commissions  will be payable by the Company to any
         broker,  financial  advisor,  finder,  investment  banker, or bank with
         respect  to  the  transactions  contemplated  by  this  Agreement.  The
         Purchasers  shall have no  obligation  with respect to any fees or with
         respect to any claims made by or on behalf of other Persons for fees of
         a  type  contemplated  in  this  Section  2.1(n)  that  may  be  due in
         connection with the  transactions  contemplated by this Agreement.  The
         Company shall indemnify and hold harmless each of the  Purchasers,  its
         employees,   officers,  directors,  agents,  and  partners,  and  their
         respective Affiliates,  from and against all claims,  losses,  damages,
         costs  (including  the costs of preparation  and  attorney's  fees) and
         expenses suffered in respect of any such claimed or existing fees.

                  (o)  Solicitation  Materials.  The Company has not distributed
         any offering  materials in connection with the offering and sale of the
         Securities.   The  Company  confirms  that  it  has  not  provided  the
         Purchasers  or  their  agents  or  counsel  with any  information  that
         constitutes or might constitute  material non-public  information.  The
         Company  understands and confirms that the Purchasers  shall be relying
         on  the  foregoing   representations   in  effecting   transactions  in
         securities of the Company.

                  (p) Form S-3 Eligibility.  The Company is, and at each Closing
         Date will be, eligible to register securities (including the Underlying
         Shares and the Warrant  Shares) for resale  with the  Commission  under
         Form S-3 promulgated under the Securities Act.

                  (q)  Exclusivity.  The  Company  shall  not issue and sell the
         Preferred  Stock to any Person  other than the  Purchasers  pursuant to
         this Agreement  other than with the specific  prior written  consent of
         each of the Purchasers.

                  (r) Listing and Maintenance Requirements Compliance. Except as
         set forth on  Schedule  2.1(r),  the Company has not in the three years
         preceding the date hereof  received  notice  (written or oral) from any
         stock exchange, market or trading facility on which the Common Stock is
         or has been listed (or on which it has been  quoted) to the effect that
         the  Company  is not in  compliance  with the  listing  or  maintenance
         requirements  of such exchange or market.  Except as  specifically  set
         forth on  Schedule  2.1(r),  after  giving  effect to the  transactions
         contemplated  in this  Agreement,  the Company  believes  that it is in
         compliance with all such maintenance requirements.

                  (s) Patents and Trademarks.  The Company has, or has rights to
         use,   all  patents,   patent   applications,   trademarks,   trademark
         applications,  service  marks,  trade names,  copyrights,  licenses and
         rights  (collectively,  the  "Intellectual  Property Rights") which are
         necessary  for  use in  connection  with  its  business,  as  currently
         conducted and as described in the SEC Documents,  and which the failure
         to so have would have a Material Adverse Effect.

                  (t) Acknowledgment of Dilution.  The Company acknowledges that
         the issuance of (i) the Underlying Shares upon conversion of the Shares
         in accordance  with the Certificate of Designation and (ii) the Warrant
         Shares upon exercise of the Warrants may result in


                                        8

<PAGE>



         dilution of the outstanding  shares of Common Stock, which dilution may
         be substantial  under certain market  conditions.  The Company  further
         acknowledges  that its  obligation to issue (i) the  Underlying  Shares
         upon  conversion of the Shares in accordance  with the  Certificate  of
         Designation  and (ii) the Warrant  Shares upon exercise of the Warrants
         is  unconditional  and  absolute  regardless  of the effect of any such
         dilution.

                  (u) Registration  Rights;  Rights of Participation.  Except as
         described on Schedule 2.1(u) hereto, (A) the Company has not granted or
         agreed  to grant  to any  Person  any  rights  (including  "piggy-back"
         registration  rights) to have any securities of the Company  registered
         with the Commission or any other  governmental  authority which has not
         been  satisfied and (B) except as set forth on Schedule  2.1(c) hereto,
         no  Person,   including,   but  not  limited  to,   current  or  former
         shareholders of the Company,  underwriters,  brokers or agents, has any
         right of first refusal,  preemptive right,  right of participation,  or
         any similar right to participate in the  transactions  contemplated  by
         this Agreement or any other Transaction Document.

                  (v) Title. Except as disclosed in Schedule 2.1(v), the Company
         and the Subsidiaries have good and marketable title to, or the right to
         use,  all  personal  property  owned by them which is  material  to the
         business  of the Company  and the  Subsidiaries,  in each case free and
         clear of all Liens,  except for liens, claims or encumbrances as do not
         materially  affect the value of such property and do not interfere with
         the use made and  proposed  to be made of such  property by the Company
         and the  Subsidiaries.  Neither the Company nor any of its Subsidiaries
         owns any real  property.  Any real property and  facilities  held under
         lease by the Company and the Subsidiaries are held by them under valid,
         subsisting  and  enforceable  leases  with such  exceptions  as are not
         material and do not interfere with the use made and proposed to be made
         of such property and buildings by the Company and the Subsidiaries.

                  (w)  Regulatory  Permits.  The  Company  and the  Subsidiaries
         possess all  franchises,  certificates,  licenses,  authorizations  and
         permits or similar authority issued by the appropriate  federal,  state
         or foreign regulatory authorities necessary to conduct their respective
         businesses as described in the SEC  Documents  except where the failure
         to possess such permits would not,  individually  or in the  aggregate,
         have a Material Adverse Effect  ("Material  Permits"),  and neither the
         Company nor any such  Subsidiary has received any notice of proceedings
         relating to the revocation or modification of any Material Permit.

                  (x)  Insurance.  The  Company  and each  Subsidiary  maintains
         property  and  casualty,  general  liability,   workers'  compensation,
         environmental  hazard,  personal  injury  and  other  similar  types of
         insurance  with  financially  sound  and  reputable  insurers  that  is
         adequate,  consistent with industry standards.  Neither the Company nor
         any Subsidiary  has received  notice from, and has any knowledge of any
         threat by, any  insurer  (that has issued any  insurance  policy to the
         Company or any  Subsidiary)  that such insurer intends to deny coverage
         under  or  cancel,  discontinue  or  not  renew  any  insurance  policy
         presently in force.

                  (y) Taxes.  All applicable tax returns required to be filed by
         the Company and each of the Subsidiaries have been filed, or if not yet
         filed have been granted extensions of the filing


                                        9

<PAGE>



         dates which  extensions have not expired,  and all taxes,  assessments,
         fees and other governmental charges upon the Company, the Subsidiaries,
         or upon any of their respective properties, income or franchises, shown
         in such  returns  and on  assessments  received  by the  Company or the
         Subsidiaries to be due and payable have been paid, or adequate reserves
         therefor  have been set up if any of such taxes are being  contested in
         good faith; or if any of such tax returns have not been filed or if any
         such taxes have not been paid or so  reserved  for,  the  failure to so
         file  or to pay  would  not in the  aggregate  or  individually  have a
         Material Adverse Effect.

                  (z) No Integrated  Offering.  Neither the Company,  nor any of
         its  Affiliates,  nor any  Person  acting on its or their  behalf,  has
         directly  or  indirectly  made any offers or sales in any  security  or
         solicited any offers to buy any  securities  under  circumstances  that
         would require  registration of any such securities under the Securities
         Act or cause the offering of the Securities  pursuant to this Agreement
         to be  integrated  with prior  offerings,  except for the  offering  of
         Series D Convertible  Preferred  Stock,  by the Company for purposes of
         the Securities Act or any applicable  shareholder  approval provisions,
         including,  without limitation,  under the rules and regulations of The
         Nasdaq Stock Market,  as applicable.  The Company has not conducted any
         offering  that will be integrated  with the issuance of the  Securities
         solely for purpose of Rule 4460(i) of The Nasdaq Stock  Market,  Inc.'s
         Marketplace Rules.

                  (aa) Year 2000 Compliance.  The Company has initiated a review
         and assessment of all areas within its and each Subsidiaries'  business
         and  operations  that  could be  adversely  affected  by the "Year 2000
         Problem"  (that is,  the risk that  computer  applications  used by the
         Company  or any of the  Subsidiaries  may be  unable to  recognize  and
         perform  properly date-  sensitive  functions  involving  certain dates
         prior to and any date after December 31, 1999). Based on the foregoing,
         except as set forth on Schedule 2.1(aa),  the Company believes that the
         computer  applications  that  are  currently  material  to  its  or any
         Subsidiaries'  business and operations  are  reasonably  expected to be
         able to perform properly date-sensitive  functions for all dates before
         and after January 1, 2000, except to the extent that a failure to do so
         would not reasonably be expected to have a Material Adverse Effect.

                  (bb) Series D Stock  Documentation.  The Company has  provided
         each of the  Purchasers  with true,  complete and correct copies of the
         closing  documentation  relating to the sale by the Company of Series D
         Stock to the Series D Investors.

                  (cc)  Rights   Agreement.   The  Company  has  not  adopted  a
         shareholder   rights   plan  or   similar   arrangement   relating   to
         accumulations  of  beneficial  ownership of Common Stock or a change in
         control of the Company.

         2.2  Representations  and  Warranties  of the  Purchasers.  Each of the
Purchasers,  severally and not jointly,  hereby  represents  and warrants to the
Company as follows:



                                       10

<PAGE>



                  (a)  Investment  Intent.   Such  Purchaser  is  acquiring  the
         Securities  for its own account for  investment  purposes  only and not
         with a view to or for  distributing or reselling such Securities or any
         part thereof or interest therein,  without prejudice,  however, to such
         Purchaser's right,  subject to the provisions of this Agreement and the
         Registration  Rights  Agreement,  at all  times  to sell  or  otherwise
         dispose of all or any part of such Securities  pursuant to an effective
         registration  statement under the Securities Act and in compliance with
         applicable  State  securities  laws or under  an  exemption  from  such
         registration.

                  (b) Purchaser  Status.  At the time such Purchaser was offered
         the  Securities,  and at each Closing Date,  (i) it was and will be, an
         "accredited  investor"  (as  defined  in  Regulation  D),  or (ii) such
         Purchaser  either alone or together with its  representatives,  had and
         will have such knowledge, sophistication and experience in business and
         financial  matters  so as to be capable  of  evaluating  the merits and
         risks of the prospective investment in the Securities, and had and will
         have so  evaluated  the  merits  and  risks  of such  investment.  Such
         Purchaser  has the  authority  and is duly  and  legally  qualified  to
         purchase and own the Securities.

                  (c)  Ability of  Purchaser  to Bear Risk of  Investment.  Such
         Purchaser is able to bear the  economic  risk of an  investment  in the
         Securities  and, at the present time, is able to afford a complete loss
         of such investment.

                  (d) Reliance. Each Purchaser understands and acknowledges that
         (i) the Securities are being offered and sold to the Purchaser  without
         registration  under the Securities  Act in a private  placement that is
         exempt from the  registration  provisions of the  Securities  Act under
         Section  4(2)  of  the  Securities  Act  or  Regulation  D  promulgated
         thereunder and (ii) the availability of such exemption, depends in part
         on, and the Company will rely upon the accuracy  and  truthfulness  of,
         the foregoing  representations  and such Purchaser  hereby  consents to
         such reliance.

                                   ARTICLE III

                         OTHER AGREEMENTS OF THE PARTIES

         3.1      Transfer Restrictions.

                  (a) If any  Purchaser  should  decide to dispose of any Shares
         (and upon conversion  thereof any of the Underlying Shares) or Warrants
         (and upon exercise  thereof any of the Warrant Shares) held by it, each
         Purchaser  understands and agrees that it may do so only pursuant to an
         effective  registration  statement  under the  Securities  Act,  to the
         Company or pursuant to an  available  exemption  from the  registration
         requirements  of the Securities Act. In connection with any transfer of
         any  Securities  other  than  pursuant  to  an  effective  registration
         statement  or pursuant to Rule 144 under the  Securities  Act or to the
         Company,  the Company may require the transferor  thereof to provide to
         the Company a written  opinion of counsel,  the form and  substance  of
         which opinion shall be reasonably  satisfactory to the Company,  to the
         effect  that  such  transfer  does  not  require  registration  of such
         transferred


                                       11

<PAGE>



         securities under the Securities Act. Notwithstanding the foregoing, the
         Company  hereby  consents to and agrees to register (i) any transfer of
         Securities  by one Purchaser to another  Purchaser,  and agrees that no
         documentation  other than executed transfer documents shall be required
         for any such  transfer,  and (ii) any  transfer by any  Purchaser to an
         Affiliate of such Purchaser or to an Affiliate of another Purchaser, or
         any  transfer  among  any such  Affiliates,  provided  that  transferee
         certifies in writing to the Company that it is an "accredited investor"
         (as  defined in  Regulation  D).  Any such  transferee  shall  agree in
         writing to be bound by the terms of this  Agreement  and shall have the
         rights of a Purchaser under this Agreement and the Registration  Rights
         Agreement.

                  (b) Each Purchaser,  severally and not jointly,  agrees to the
         imprinting,  so long as is  required  by this  Section  3.1(b),  of the
         following legend on the Securities:

                  THE  SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN  REGISTERED
         WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  IN  RELIANCE  UPON AN
         EXEMPTION  FROM  REGISTRATION  UNDER  THE  SECURITIES  ACT OF 1933,  AS
         AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
         SOLD EXCEPT PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT UNDER THE
         SECURITIES  ACT OR PURSUANT TO AN  AVAILABLE  EXEMPTION  FROM,  OR IN A
         TRANSACTION  NOT  SUBJECT  TO,  THE  REGISTRATION  REQUIREMENTS  OF THE
         SECURITIES ACT.

                  The Underlying  Shares  issuable upon conversion of the Shares
         and the Warrant Shares issuable upon exercise of the Warrants shall not
         contain the legend set forth above if (a) such  conversion  or exercise
         occurs at any time while the Registration  Statement is effective under
         the Securities  Act and upon the sale of the  Underlying  Shares or the
         Warrant  Shares by the  Purchasers  or (b) in the event there is not an
         effective  Registration  Statement  at  such  time,  if in the  written
         opinion of counsel to the Company  (such opinion to be furnished at the
         sole expense of the Company at the request of a Purchaser)  such legend
         is not required  under  applicable  requirements  of the Securities Act
         (including judicial  interpretations  and pronouncements  issued by the
         staff of the  Commission)  or (c) a holder  provides  the Company  with
         reasonable  assurance that such securities can be sold pursuant to Rule
         144 without any  restriction as to the number of securities that can be
         sold.  The Company  agrees that it will  provide each  Purchaser,  upon
         request,  with a certificate or  certificates  representing  Underlying
         Shares  and/or  Warrant  Shares,  free from such legend at such time as
         such legend is no longer required hereunder.

         3.2 Stop Transfer Orders; Suspension of Qualification.  The Company may
not make any notation on its records or give  instructions to any transfer agent
of the Company which enlarge the  restrictions  of transfer set forth in Section
3.1. The Company will advise the  Purchasers,  promptly after it receives notice
of issuance by the  Commission,  any state  securities  commission  or any other
regulatory  authority of any stop order or of any order preventing or suspending
the use of any offering of any  securities of the Company,  or of the suspension
of  the  qualification  of  the  Common  Stock  for  offering  or  sale  in  any
jurisdiction, or the initiation of any proceeding for any such purpose.


                                       12

<PAGE>




         3.3  Furnishing  of  Information.  As long as any  Purchaser  owns  any
Securities,  the  Company  covenants  to timely  file (or obtain  extensions  in
respect  thereof  and file  within the  applicable  grace  period)  all  reports
required  to be filed by the Company  after the date hereof  pursuant to Section
13(a) or 15(d) of the Exchange Act and to promptly  furnish the Purchasers  with
true and complete  copies of all such  filings.  As long as any  Purchaser  owns
Securities,  if the Company is not required to file reports  pursuant to Section
13(a)  or  15(d)  of the  Exchange  Act,  it will  prepare  and  furnish  to the
Purchasers  and  make  publicly   available  in  accordance   with  Rule  144(c)
promulgated under the Securities Act annual and quarterly financial  statements,
together with a discussion and analysis of such financial statements in form and
substance  substantially similar to those that would otherwise be required to be
included in reports  required by Section  13(a) or 15(d) of the Exchange Act, as
well as any other  information  required  thereby,  in the time period that such
filings  would have been  required to have been made under the Exchange Act. The
Company further covenants that it will take such further action as any holder of
Units may reasonably  request,  all to the extent  required from time to time to
enable such Person to sell  Underlying  Shares  and/or  Warrant  Shares  without
registration  under the  Securities  Act within the limitation of the exemptions
provided by Rule 144 promulgated  under the Securities Act,  including the legal
opinion  referenced  above in Section 3.1.  Upon the request of any such Person,
the  Company  shall  deliver to such  Person a written  certification  of a duly
authorized officer as to whether it has complied with such requirements.

         3.4  Blue  Sky  Laws.  In  accordance  with  the  Registration   Rights
Agreement,  the  Company  shall  qualify the  Underlying  Shares and the Warrant
Shares  under  the  securities  or Blue  Sky laws of such  jurisdictions  as the
Purchasers  may  request  and shall  continue  such  qualification  at all times
through the third anniversary of the last Closing Date.

         3.5 Integration.  The Company shall not sell, offer for sale or solicit
offers to buy or  otherwise  negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities (a) in a manner that would require the registration  under the
Securities Act of the sale of any or all of such  securities to any Purchaser or
(b) for purposes of any applicable  shareholder approval  provisions,  including
without  limitation,  under the rules and  regulations  of the  Nasdaq  SmallCap
Market.

         3.6 Certain Agreements.  As long as any Purchaser owns Securities,  the
Company shall not and shall cause the  Subsidiaries  not to, without the consent
of the holders of all of the Shares then outstanding,  (i) amend its certificate
of  incorporation,  bylaws or other charter  documents so as to adversely affect
any rights of any Purchaser or holder of the Shares;  (ii)  declare,  authorize,
set aside or pay any dividend or other  distribution  with respect to the Common
Stock except as permitted  under the Certificate of Designation and as would not
adversely  affect the rights of any Purchaser or holder of the Shares  hereunder
or under the  Certificate of  Designation;  (iii) repay,  repurchase or offer to
repay, repurchase or otherwise acquire shares of its Common Stock in any manner;
(iv) issue any series of preferred stock or other  securities with rights senior
(in respect of liquidations, dividends, preferences and similar rights) to those
of the  Shares;  or (v) enter  into any  agreement  with  respect  to any of the
foregoing.



                                       13

<PAGE>



         3.7  Listing and  Reservation  of Underlying Shares and Warrant Shares;
Compliance with Law.

                  (a) The Company shall (i) within the time periods  required by
         the Nasdaq SmallCap  Market,  but not later than the tenth Business Day
         following the applicable Closing Date, prepare and file with The Nasdaq
         SmallCap Market (as well as any other national  securities  exchange or
         market on which the Common Stock is then listed) an  additional  shares
         listing  application  or a letter  acceptable  to The  Nasdaq  SmallCap
         Market covering and listing a number of shares of Common Stock which is
         at least equal to 175% of the maximum  number of Underlying  Shares and
         Warrant  Shares then issuable,  (ii) take all steps  necessary to cause
         the Underlying Shares and the Warrant Shares to be approved for listing
         in The  Nasdaq  SmallCap  Market  (as  well  as on any  other  national
         securities exchange or market on which the Common Stock is then listed)
         as soon as possible  thereafter,  and (iii)  provide to the  Purchasers
         evidence of such listing, and the Company shall maintain the listing of
         its Common Stock on such market.  As used herein,  "Business Day" means
         any day  except  Saturday,  Sunday  and any day which  shall be a legal
         holiday  or a day  on  which  banking  institutions  in  the  State  of
         California  generally  are  authorized  or  required  by law  or  other
         government actions to close.

                  (b)  The  Company  shall  at all  times  have  authorized  and
         reserved for issuance  upon  conversion  of the Shares  pursuant to the
         terms  of the  Certificate  of  Designation  and upon  exercise  of the
         Warrants  pursuant to the Warrant the number of shares of Common  Stock
         required to provide for the  conversion  of the Shares and the exercise
         of the Warrants  without  regard to any  limitations  on conversions or
         exercise.

                  (c) Until at least two (2) years  after the last of the Shares
         has been converted into  Underlying  Shares or the last of the Warrants
         has been exercised for the Warrant  Shares,  (i) the Company will cause
         its Common Stock to continue to be registered  under  Sections 12(b) or
         12(g)  of the  Exchange  Act,  will  comply  in all  respects  with its
         reporting and filing  obligations  under such Exchange Act, will comply
         with all  requirements  related  to any  registration  statement  filed
         pursuant to this  Agreement or the  Registration  Rights  Agreement and
         will not take any action or file any document (whether or not permitted
         by the Securities Act or the Exchange Act or the rules and  regulations
         thereunder) to terminate or suspend such  registration  or to terminate
         or suspend its reporting and filing  obligations  under the  Securities
         Act and Exchange Act,  except as permitted  herein and (ii) the Company
         will take all  action  within  its power to  continue  the  listing  or
         trading of its  Common  Stock on The  Nasdaq  SmallCap  Market and will
         comply in all respects with the Company's  reporting,  filing and other
         obligations  under the bylaws or rules of the NASD and The Nasdaq Stock
         Market.

         3.8      Notice of Breaches.

                  (a) Each of the Company and each  Purchaser  shall give prompt
         written  notice  to the  other  of any  breach  by  such  party  of any
         representation,   warranty  or  other   agreement   contained  in  this
         Agreement,  the  Certificate  of  Designation,   the  Warrants  or  the
         Registration


                                       14

<PAGE>



         Rights  Agreement,  as well as any events or occurrences  arising after
         the date hereof and prior to any Closing Date,  which would  reasonably
         be likely to cause any representation or warranty or other agreement of
         such party,  as the case may be,  contained  herein to be  incorrect or
         breached as of such Closing Date.  However,  no disclosure by any party
         pursuant to this  Section 3.8 shall be deemed to cure any breach of any
         representation,  warranty or other agreement contained herein or in the
         Registration Rights Agreement.

                  (b)  Notwithstanding  the  generality of Section  3.8(a),  the
         Company  shall  promptly  notify each  Purchaser of any notice or claim
         (written  or oral) that it  receives  from any lender of the Company to
         the  effect  that the  consummation  of the  transactions  contemplated
         hereby,  by the Certificate of Designation,  by the Warrants and by the
         Registration  Rights  Agreement  violates or would  violate any written
         agreement or understanding between such lender and the Company, and the
         Company shall promptly furnish by facsimile to each Purchaser a copy of
         any  written  statement  in  support  of or  relating  to such claim or
         notice.

                  (c) The default by any  Purchaser  of any of its  obligations,
         representations or warranties under any Transaction  Document shall not
         be imputed to, and shall have no effect  upon,  any other  Purchaser or
         affect the Company's obligations under the Transaction Documents to any
         non-defaulting  Purchaser,  or to the defaulting Purchaser with respect
         to any  outstanding  Shares,  Warrants,  Underlying  Shares or  Warrant
         Shares.

         3.9  Conversion  Obligations of the Company.  The Company  covenants to
convert Shares and to deliver the Underlying Shares in accordance with the terms
and  conditions  and within  the time  period  set forth in the  Certificate  of
Designation.

         3.10 Use of Proceeds.  The Company  shall use all of the proceeds  from
the sale of the Units for working capital and general corporate purposes and not
for the  satisfaction  of any portion of Company  borrowings  outside the normal
course of business,  including,  without limitation, any obligation or liability
of any kind owed to a  shareholder,  officer or director of the  Company,  or to
redeem Company equity or  equity-equivalent  securities.  Pending application of
the proceeds of this placement in the manner permitted hereby,  the Company will
invest such proceeds in interest bearing accounts and/or short-term,  investment
grade interest bearing securities.

         3.11  Indemnification.  The Company  also will  indemnify  and hold the
Purchasers harmless against any and all losses,  claims,  damages or liabilities
to any such  Person  (including,  without  limitation,  in  connection  with any
action,  proceeding  or  investigation  brought by or against  any such  Person,
including by  shareholders  of the Company) in connection with or as a result of
any  matter  referred  to  in  the  Transaction  Documents,  including,  without
limitation,   for  any   misrepresentation  by  the  Company,  for  breaches  of
representations  and warranties  contained in any of the Transaction  Documents,
and for any  breach,  non-compliance  or  nonfulfillment  by the  Company of any
covenant,  agreement  or  undertaking  to be complied  with or  performed  by it
contained in or pursuant to the Transaction Documents, except to the extent that
it is  finally  judicially  determined  that such  losses,  claims,  damages  or
liabilities  resulted  solely  from the  gross  negligence  or bad  faith of the
Purchasers.  If for any reason the foregoing  indemnification  is unavailable to
such Purchaser or is insufficient to


                                       15

<PAGE>



hold such Person harmless,  then the Company shall contribute to the amount paid
or  payable  by such  Purchaser  as a result  of such  loss,  claim,  damage  or
liability in such proportion as is appropriate to reflect the relative  economic
interests of the Company and its shareholders on the one hand and the Purchasers
on the other hand in the matters  contemplated by the  Transaction  Documents as
well as the  relative  fault of the Company and the  Purchasers  with respect to
such  loss,  claim,  damage  or  liability  and  any  other  relevant  equitable
considerations. The reimbursement, indemnity and contribution obligations of the
Company under this  paragraph  shall be in addition to any  liability  which the
Company may otherwise  have,  shall extend upon the same terms and conditions to
any affiliate of the Purchasers and the partners,  directors,  agents, employees
and controlling  persons (if any), as the case may be, of the Purchasers and any
such  affiliate,  and  shall be  binding  upon and inure to the  benefit  of any
successors,  assigns,  heirs and personal  representatives  of the Company,  the
Purchasers, any such affiliate and any such Person. The Company also agrees that
neither the Purchasers nor any of such Affiliates,  partners, directors, agents,
employees or controlling  persons shall have any liability to the Company or any
Person  asserting  claims on behalf of or in right of the Company in  connection
with or as a result of any matter  referred to in this  Agreement  except to the
extent  that it is  finally  judicially  determined  that  any  losses,  claims,
damages,  liabilities or expenses incurred by the Company result solely from the
gross  negligence or bad faith of, or knowing  breach of this  Agreement by, the
Purchasers. Promptly after receipt by the Purchasers or any affiliate, partners,
directors,  agents,  employees and controlling  persons,  as the case may be, of
notice of any claim or other  commencement  of any  action in  respect  of which
indemnity  may be sought,  such party will  notify the Company in writing of the
receipt or  commencement  thereof and the Company shall have the right to assume
the  defense  of such  claim or action  (including  the  employment  of  counsel
reasonably  satisfactory to the indemnified  parties and the payment of fees and
expenses  of such  counsel).  The  indemnified  party shall  cooperate  with the
Company and the  Company's  counsel in the defense of such claim or action.  The
Purchasers understand that the Company shall not in connection with any one such
claim or action or separate but substantially  similar related claims or actions
in the  same  jurisdiction  arising  out  of the  same  general  allegations  or
circumstances,  be liable for the reasonable  fees and expenses of more than one
separate firm of attorneys for all of the indemnified parties unless the defense
of one indemnified party is unique or separate from that of another  indemnified
party or one or more legal  defenses are available to an  indemnified  party but
not to other  indemnified  parties  subject to the same claim or action.  In the
event the Company does not promptly assume the defense of a claim or action, the
indemnified   parties  shall  have  the  right  to  employ  counsel   reasonably
satisfactory to the Company,  at the Company's expense,  to defend such claim or
action.  The indemnified party shall not admit any liability with respect to the
claim or action or settle,  compromise,  pay or  discharge  the same without the
prior  written  consent  of the  Company so long as the  Company  is  reasonably
contesting  or  defending  the  same  in  good  faith.  The  Company  shall  not
compromise,  settle or  discharge  any claim or action  without the  Purchasers'
consent, as applicable,  which consent will not be unreasonably withheld, unless
there is no  finding  or  admission  of any  violation  of any law  against  the
indemnified  party and the sole relief is monetary  damages  paid in full by the
Company.  Any right to trial by jury with  respect to any  action or  proceeding
arising  in  connection  with or as a result of any matter  referred  to in this
Agreement is hereby waived by the parties hereto. The provisions of this Section
3.11 shall survive any termination or completion of the Transaction Documents.



                                       16

<PAGE>



         3.12     [intentionally omitted]

         3.13     Subsequent Sales and Registrations.

                  (a) Until the later of (i) 180 days after the Closing Date and
         (ii) 60 days after all  Underlying  Shares and Warrant Shares have been
         registered   under  the   Securities   Act  pursuant  to  an  effective
         registration statement,  the Company shall not, directly or indirectly,
         without the prior written consent of 66 2/3% of the Purchasers,  offer,
         sell,  grant any  option  to  purchase,  or  otherwise  dispose  of (or
         announce  any offer,  sale,  grant of any option to  purchase  or other
         disposition) any of its or its Affiliates' equity or  equity-equivalent
         securities or any instrument that permits the holder thereof to acquire
         Common  Stock,  except  (i) the  granting  of options  or  warrants  to
         employees,  officers  and  directors,  and the  issuance of shares upon
         exercise of options granted,  under any stock option plan heretofore or
         hereinafter  duly  adopted by the  Company,  (ii)  shares  issued  upon
         exercise of any currently  outstanding  warrants and upon conversion of
         any  currently  outstanding  convertible  preferred  stock in each case
         disclosed in Schedule 2.1(c),  (iii) shares of Common Stock issued upon
         conversion of Shares or upon exercise of the Warrants,  and (iv) shares
         of Common Stock issued in connection with the transactions described on
         Schedule 3.13.

                  (b) Other than  Underlying  Shares,  Warrant  Shares and other
         "Registrable   Securities"  (as  defined  in  the  Registration  Rights
         Agreement) to be registered in accordance with the Registration  Rights
         Agreement,  the  Company  shall  not,  for a period of not less than 90
         Trading Days after the dates that any registration  statement  relating
         to the Securities is declared effective by the Commission,  without the
         prior written  consent of 66 2/3% of the  Purchasers,  (i) register for
         resale any securities of the Company,  or (ii) issue or sell any of its
         or any of its Affiliates' equity or equity-equivalent securities except
         for (A)  securities  issued  upon the  exercise  or  conversion  of the
         securities set forth on Schedule 2.1(c) or (B) securities sold pursuant
         to the Company's employee benefit plans. Any days that any Purchaser is
         unable  to  sell   Underlying   Shares  or  Warrant  Shares  under  the
         Registration Statement shall be added to such 90 Trading Day period for
         the purposes of (i) and (ii) above.

         3.14 Shareholder Approval.  The Company shall, as promptly as possible,
but  in no  event  later  than  65  days  after  the  Closing  Date,  convene  a
shareholders'  meeting,  held in accordance  with the Company's  Certificate  of
Incorporation  and  bylaws,  and use its best  efforts  to obtain  the  approval
("Shareholder  Approval")  by a majority of the total votes cast on the proposal
at such shareholders' meeting, in person or by proxy, of (i) the issuance of the
Underlying  Shares as a consequence of the conversion of the Shares and (ii) the
issuance of the Warrant Shares as a consequence of the exercise of the Warrants,
in each case in a number  exceeding the maximum number of shares of Common Stock
issuable  without  shareholder  approval at a price less than the greater of the
book or market  value on the Original  Issue Date as and to the extent  required
pursuant to Rule 4460(i) of The Nasdaq Stock Market,  Inc.'s  Marketplace  Rules
(or any successor or replacement provision thereof).

         3.15     [intentionally omitted]



                                       17

<PAGE>



         3.16  Incorporation  of Certificate  of  Designation By Reference.  The
Certificate of Designation is hereby incorporated herein by reference and made a
part hereof.

         3.17 Board of  Directors.  If more than ten percent (10%) of the Shares
(other  than Shares  held by Olympus  Securities,  Ltd. or NP Partners or any of
their  assignees)  remain  outstanding,   the  Purchasers  (other  than  Olympus
Securities, Ltd. and NP Partners or any of their assignees) shall have the right
to approve  the  appointment  of any new or  replacement  member to the Board of
Directors,  such approval not to be unreasonably  withheld;  provided,  however,
this provision shall not affect the ability of a Purchaser to vote its Shares in
the manner it deems fit.

         3.18 Conversion of Preferred Stock and Exercise of Warrants. Each share
of Series E Preferred Stock held by the Purchasers listed on Schedule A shall be
convertible  into  shares of Common  Stock at the option of such  Purchasers  in
whole or in part at any time after the Original Issue Date;  provided,  however,
that the  number  of  shares  of Common  Stock  issued  by the  Company  to such
Purchasers (together with any shares of Common Stock issued upon exercise of the
Warrants)  shall not exceed the number of shares set forth  opposite each of the
Purchasers'  names on  Schedule  A attached  hereto  until the date on which the
Company receives Shareholder  Approval.  Each Purchaser not listed on Schedule A
attached  hereto  shall  not  convert  shares of  Series E  Preferred  Stock (or
exercise Warrants issued to such Purchaser) until the earlier of (i) the date on
which the Company  receives  Shareholder  Approval and (ii) the date which is 65
days  after  the  Original  Issuance  Date.  If  the  Company  does  not  obtain
Shareholder  Approval and on a Conversion Date (as defined in the Certificate of
Designation)  the Company is listed for trading on the Nasdaq  National  Market,
the New York Stock Exchange,  the American Stock Exchange or the Nasdaq SmallCap
Market,  each  share of  Series  E  Preferred  Stock  shall  be  convertible  in
accordance with Section 5(a)(ii) of the Certificate of Designation.


                                   ARTICLE IV

                                   CONDITIONS

         4.1 Conditions Precedent to Sale of the Units.

                  (a)  Conditions  Precedent to the Obligation of the Company to
         Sell the  Units.  The  obligation  of the  Company  to sell  the  Units
         hereunder is subject to the  satisfaction or waiver by the Company,  at
         or before the Closing, of each of the following conditions:

                           (i) Accuracy of the Purchasers'  Representations  and
                  Warranties.   The   representations  and  warranties  of  each
                  Purchaser  shall be true and correct in all material  respects
                  as of the date when made and as of the Closing Date, as though
                  made on and as of such date;

                           (ii)  Performance by the  Purchasers.  Each Purchaser
                  shall have  performed,  satisfied and complied in all material
                  respects with all covenants,


                                       18

<PAGE>



                  agreements  and  conditions  required by this  Agreement to be
                  performed,  satisfied or complied with by such Purchaser at or
                  prior to the Closing; and

                           (iii) No Injunction.  No statute,  rule,  regulation,
                  executive order, decree,  ruling or injunction shall have been
                  enacted,  entered,  promulgated  or  endorsed  by any court or
                  governmental   authority  of  competent   jurisdiction   which
                  prohibits  the   consummation  of  any  of  the   transactions
                  contemplated  by this  Agreement  or the  Registration  Rights
                  Agreement.

                  (b)  Conditions  Precedent to the Obligation of the Purchasers
         to Purchase the Units.  The obligation of each  Purchaser  hereunder to
         acquire and pay for the Units is subject to the  satisfaction or waiver
         by such Purchaser,  at or before the Closing,  of each of the following
         conditions:

                           (i)  Accuracy of the  Company's  Representations  and
                  Warranties.  The representations and warranties of the Company
                  set forth in this  Agreement  and in the  Registration  Rights
                  Agreement  shall be true and correct in all material  respects
                  as of the date when made and as of the Closing  Date as though
                  made on and as of such date;

                           (ii)  Performance  by the Company.  The Company shall
                  have  performed,  satisfied  and complied with in all material
                  respects all covenants,  agreements and conditions required by
                  this Agreement to be performed,  satisfied or complied with by
                  the Company at or prior to the Closing;

                           (iii) No Injunction.  No statute,  rule,  regulation,
                  executive order, decree,  ruling or injunction shall have been
                  enacted,  entered,  promulgated  or  endorsed  by any court or
                  governmental   authority  of  competent   jurisdiction   which
                  prohibits  the   consummation  of  any  of  the   transactions
                  contemplated   by   this   Agreement,   the   Certificate   of
                  Designation,   the   Warrants  or  the   Registration   Rights
                  Agreement;

                           (iv) Adverse Changes. Since the date of the financial
                  statements  included in the Company's Quarterly Report on Form
                  10-Q or Annual Report on Form 10-K,  whichever is more recent,
                  last filed prior to the date of this Agreement, no event which
                  had a Material  Adverse Effect and no material  adverse change
                  in the financial  condition of the Company shall have occurred
                  (for purposes hereof changes in the market price of the Common
                  Stock may be  considered  as a factor in  determining  whether
                  there has  occurred an event which has had a Material  Adverse
                  Effect or whether a material adverse change has occurred);

                           (v) No  Suspensions  of Trading in Common Stock.  The
                  trading in the Common  Stock shall not have been  suspended by
                  the  Commission  or  on  The  Nasdaq   SmallCap  Market  which
                  suspension shall remain in effect;



                                       19

<PAGE>



                           (vi) Legal Opinion.  The Company shall have delivered
                  to each of the Purchasers the opinion of Parker Chapin Flattau
                  &  Klimpl,   LLP,   outside   counsel  to  the   Company,   in
                  substantially the forms annexed hereto as Exhibit D;

                           (vii)  Required  Approvals.  All  approvals  required
                  pursuant  to  clauses  (i)  and  (iv)  of  the  definition  of
                  "Required Approvals" shall have been obtained;

                           (viii)  Shares  of Common  Stock.  On or prior to the
                  Closing Date,  the Company shall have duly reserved the number
                  of  Underlying  Shares  and  Warrant  Shares  required  by the
                  Transaction   Documents  to  be  reserved  for  issuance  upon
                  conversion of the Shares and upon exercise of the Warrants;

                           (ix)  Delivery  of  Stock  Certificates  and  Warrant
                  Certificates.   The  Company  shall  have  delivered  to  each
                  Purchaser  or  such  Purchaser's   designee,   (i)  the  stock
                  certificate(s) representing the Shares, registered in the name
                  of such Purchaser,  each in form satisfactory to the Purchaser
                  and (ii) warrant  certificate(s)  representing  the  Warrants,
                  registered in the name of such Purchaser, in form satisfactory
                  to the Purchaser;

                           (x) Registration Rights Agreement.  The Company shall
                  have executed and delivered the Registration Rights Agreement;

                           (xi)  Certificate of Designation.  The Certificate of
                  Designation  shall  have  been duly  approved  by the Board of
                  Directors  and filed with and  accepted  by the  Secretary  of
                  State of the State of  Delaware,  and the  Company  shall have
                  delivered a copy thereof to each Purchaser  certified as filed
                  by the  office  of the  Secretary  of  State  of the  State of
                  Delaware;

                           (xii) Transfer Agent  Instructions.  The  Irrevocable
                  Transfer Agent Instructions,  in the form of Exhibit E annexed
                  hereto,  shall  have been  delivered  to and  acknowledged  in
                  writing by the Company's transfer agent; and

                           (xiii) Officer's Certificate. On the Closing Date the
                  Company   shall   deliver  to  the   Purchasers  an  Officer's
                  Certificate dated the Closing Date and signed by the President
                  and the Chief Financial Officer of the Company  confirming the
                  accuracy  of the  Company's  representations,  warranties  and
                  covenants  as  of  such  Closing  Date  and   confirming   the
                  compliance  by the Company with the  conditions  precedent set
                  forth in this Section 4.1 as of the Closing Date.

                           (xiv)  Secretary's  Certificate.  On the Closing Date
                  the  Company  shall  deliver to the  Purchaser  a  Secretary's
                  Certificate dated the Closing Date and signed by the President
                  and the  Secretary  of the  Company  certifying  to (a)  board
                  resolutions  approving  this  Agreement  and the  transactions
                  contemplated  hereby,  (b) the  Company's  Bylaws  and (c) the
                  Company's Certificate of Incorporation.


                                       20
<PAGE>



                                    ARTICLE V

                                  MISCELLANEOUS

         5.1 Fees and  Expenses.  The Company shall pay the fees and expenses of
its advisers,  counsel,  accountants  and other  experts,  if any, and all other
expenses  incurred by the  Company  incident  to the  negotiation,  preparation,
execution,  delivery and performance of this Agreement and the other Transaction
Documents.  The Company shall pay all stamp and other taxes and duties levied in
connection  with the  issuance of the  Securities  pursuant  to the  Transaction
Documents.

         5.2 Entire  Agreement;  Amendments.  This Agreement,  together with the
Exhibits and Schedules hereto and the other Transaction  Documents,  contain the
entire  understanding  of the parties with respect to the subject  matter hereof
and supersede all prior  agreements and  understandings,  oral or written,  with
respect to such matters.

         5.3 Notices.  Any and all notices or other communications or deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and  effective on the earlier of (i) the date of  transmission,  if
such  notice or  communication  is  delivered  via  facsimile  at the  facsimile
telephone  number  specified for notice prior to 5:00 p.m., San Diego time, on a
Business  Day,  (ii) the  Business Day after the date of  transmission,  if such
notice or  communication  is delivered via facsimile at the facsimile  telephone
number  specified  for notice later than 5:00 p.m.,  San Diego time, on any date
and earlier than 11:59 p.m.,  San Diego time,  on such date,  (iii) the Business
Day following the date of mailing,  if sent by nationally  recognized  overnight
courier  service  or (iv)  actual  receipt  by the party to whom such  notice is
required  to be  given.  The  addresses  for such  communications  shall be with
respect to each  Purchaser at its address set forth under its name on Schedule 1
attached hereto, or with respect to the Company, addressed to:

                  Imaging Technologies Corporation
                  11031 Via Frontera
                  San Diego, California  92127
                  Attention:  Brian Bonar
                  Facsimile No.:  (619) 613-1311

or to such other address or addresses or facsimile number or numbers as any such
party may most recently have  designated in writing to the other parties  hereto
by such  notice.  Copies  of  notices  to any  Purchaser  shall  be sent to such
addresses as set forth on Schedule 1 attached hereto,  if applicable.  Copies of
notices to the Company  shall be sent to Parker  Chapin  Flattau & Klimpl,  LLP,
1211 Avenue of the Americas, New York, New York 10036, Attention: Christopher S.
Auguste, Esq., Facsimile No.: (212) 704-6288.

         5.4 Amendments;  Waivers.  No provision of this Agreement may be waived
or amended except in a written  instrument  signed, in the case of an amendment,
by both the Company and the


                                       21

<PAGE>



Purchasers;  or, in the case of a waiver,  by the party against whom enforcement
of any such  waiver is  sought.  No waiver of any  default  with  respect to any
provision,  condition or requirement  of this Agreement  shall be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition or
requirement  hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it  thereafter.  Notwithstanding  the foregoing,  no such amendment  shall be
effective  to the extent  that it applies to less than all of the holders of the
Units  outstanding.  The Company shall not offer or pay any  consideration  to a
Purchaser  for  consenting  to such an  amendment  or  waiver  unless  the  same
consideration is offered to each Purchaser and the same consideration is paid to
each Purchaser which consents to such amendment or waiver.

         5.5  Headings.  The headings  herein are for  convenience  only, do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof.

         5.6  Successors and Assigns.  This Agreement  shall be binding upon and
inure to the benefit of the parties and their successors and permitted  assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Purchasers.  Each Purchaser may
assign  this  Agreement  or  any  rights  or  obligations  hereunder  (i) to its
affiliates  or to another  Purchaser  without the prior  written  consent of the
Company  and (ii) to any other  Person  with the prior  written  consent  of the
Company, such consent not to be unreasonably withheld,  except that any assignee
must  make the  representations  and  warranties  set forth in  Section  2.2 and
otherwise  comply with the terms of this Agreement  otherwise  applicable to its
assignor.  This  provision  shall  not  limit a  Purchaser's  right to  transfer
securities or transfer or assign rights under the Registration Rights Agreement.

         5.7 No Third Party  Beneficiaries.  This  Agreement is intended for the
benefit of the parties  hereto and their  respective  permitted  successors  and
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person.

         5.8 Governing  Law. This  Agreement  shall be governed by and construed
and enforced in  accordance  with the laws of the State of  California,  without
regard to the principles of conflicts of law thereof.

         5.9 Survival. The agreements,  covenants,  representations,  warranties
and  provisions  contained in this  Agreement  shall survive the delivery of the
Units pursuant to this  Agreement and each Closing  hereunder and any conversion
of the Shares or exercise of the Warrants.

         5.10  Execution.  This  Agreement  may  be  executed  in  two  or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each  party and  delivered  to the other  party,  it being  understood  that all
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission,  such  signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.


                                       22

<PAGE>




         5.11 Publicity.  The Company and each Purchaser shall consult with each
other in issuing any press releases or otherwise  making public  statements with
respect to the  transactions  contemplated  hereby and neither party shall issue
any such press release or otherwise make any such public  statement  without the
prior written  consent of the other,  which  consent  shall not be  unreasonably
withheld or  delayed,  except  that no prior  consent  shall be required if such
disclosure  is required by law,  in which such case the  disclosing  party shall
provide the other Party with prior notice of such public statement.  The Company
shall not  publicly or  otherwise  disclose  the names of any of the  Purchasers
without each such Purchaser's prior written consent unless otherwise required by
law, in which case the Company shall inform such Purchaser of such disclosure in
writing prior to making such disclosure.

         5.12     Consent to Jurisdiction; Attorneys' Fees

                  (a)  The   Company   (including,   but  not  limited  to,  its
         affiliates,  subsidiaries, officers, directors and controlling persons)
         and each Purchaser hereby (i) irrevocably  submits to the non-exclusive
         jurisdiction of any California  State court or Federal court sitting in
         San Diego in any action  related to,  connected with or arising out of,
         in whole or in part,  the  Transaction  Documents,  including,  but not
         limited to, transactions in the securities of the Company subsequent to
         the purchase by such Purchaser or Persons claimed to be affiliated with
         such  Purchaser,  (ii) agrees  that all claims in such action  shall be
         decided in such  court,  (iii)  waives,  to the  fullest  extent it may
         effectively do so, the defense of inconvenient  forum and (iv) consents
         to the service of process by certified mail, return receipt  requested.
         Nothing  herein  shall  affect  the right of any  party to serve  legal
         process in any manner permitted by law or affect its right to bring any
         action in any other court.

                  (b) In connection with any dispute between the Company and any
         Purchaser, related to, connected with or arising out of, in whole or in
         part,  the  Transaction  Documents  including,   but  not  limited  to,
         transactions  in  the  securities  of  the  Company  subsequent  to the
         purchase,  by a  Purchaser  or Persons  claimed to be  affiliated  to a
         Purchaser,  the  prevailing  party  shall  be  awarded  all  reasonable
         attorneys'  fees and expenses  incurred by it. In that  connection fees
         and expenses actually paid by a party in connection with the litigation
         of any dispute shall be deemed presumably reasonable.

                  (c) In the event that any  Purchaser or any Person  claimed to
         be affiliated or associated with such Purchaser becomes involved in any
         capacity  in any  action,  proceeding  or  investigation  brought by or
         against  any  Person,   including   shareholders  of  the  Company,  in
         connection  with  or as a  result  of  any  matter  referred  to in the
         Transaction Documents, the Company will reimburse such Purchaser and/or
         those claimed to be affiliated  or associated  with such  Purchaser for
         its legal fees and expenses and other  expenses  (including the cost of
         any investigation and preparation) incurred in connection therewith, as
         those fees and expenses are incurred; provided, however, that if at the
         conclusion  of such action,  proceeding  or  investigation  it shall be
         finally judicially determined by a court of competent jurisdiction that
         indemnity  for such fees and  expenses is contrary to law, or that such
         Purchaser is not the


                                       23

<PAGE>



         prevailing  party then in that event,  such Purchaser  and/or any other
         Person  having  received  such  advances  of fees  and  expenses  shall
         reimburse the Company in full for the sums advanced.

                  (d) The  provisions  of this  Section  5.12 shall  survive any
         termination or completion of the Transaction Documents.

         5.13     Waiver of Jury Trial 

                  (a) The parties hereto each waive their respective rights to a
         trial by jury of any claim or cause of action based upon or arising out
         of or  related  to  the  Transaction  Documents,  or  the  transactions
         contemplated by the Transaction Documents, in any action, proceeding or
         other  litigation of any type brought by any of the parties against any
         other party or parties,  whether with respect to contract claims,  tort
         claims, or otherwise. The parties hereto each agree that any such claim
         or cause of  action  shall be tried by a court  trial  without  a jury.
         Without  limiting the foregoing,  the parties  further agree that their
         respective  right to a trial by jury is  waived  by  operation  of this
         Section 5.13 as to any action,  counterclaim or other  proceeding which
         seeks, in whole or in part, to challenge the validity or enforceability
         of any of the Transaction Documents or any provision hereof or thereof.
         The  waiver  shall  apply  to  any  subsequent  amendments,   renewals,
         supplements or modifications to any of the Transaction Documents.

                  (b) The  provisions  of this  Section  5.13 shall  survive any
         termination or completion of the Transaction Documents.

         5.14 Severability.  If any term, provision,  covenant or restriction of
this  Agreement is held to be invalid,  illegal,  void or  unenforceable  in any
respect, the remainder of the terms, provisions,  covenants and restrictions set
forth  herein  shall  remain  in full  force and  effect  and shall in no way be
affected,  impaired  or  invalidated,  and the  parties  hereto  shall use their
reasonable  efforts to find and employ an alternative  means to achieve the same
or substantially the same result as that  contemplated by such term,  provision,
covenant  or  restriction.  It is  hereby  stipulated  and  declared  to be  the
intention of the parties  that they would have  executed  the  remaining  terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

         5.15  Remedies.  In addition to being  entitled to exercise  all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the  Transaction  Documents and injunctive  relief.  Each of the Company and the
Purchasers  (severally and not jointly) agree that monetary damages would not be
adequate  compensation  for any loss  incurred  by reason  of any  breach of its
obligations  described in the  foregoing  sentence and hereby agrees to waive in
any action for specific  performance of any such obligation or injunctive relief
the defense that a remedy at law would be adequate.



                                       24

<PAGE>



         5.16  Independent  Nature of Purchasers'  Obligations  and Rights.  The
obligations  of each  Purchaser  hereunder  is  several  and not joint  with the
obligations  of the  other  Purchasers  hereunder,  and no  Purchaser  shall  be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser  hereunder.  Nothing  contained  herein or in any other  agreement  or
document delivered at any Closing, and no action taken by any Purchaser pursuant
hereto  or  thereto,   shall  be  deemed  to  constitute  the  Purchasers  as  a
partnership,  an  association,  a joint venture or any other kind of entity,  or
create a presumption  that the  Purchasers are in any way acting in concert with
respect to such obligations or the transactions  contemplated by this Agreement.
Each  Purchaser  shall be entitled to protect and enforce its rights,  including
without  limitation the rights arising out of this Agreement or out of the other
Transaction Documents,  and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.

         IN WITNESS  WHEREOF,  the parties  hereto  have caused this  Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.


                                     IMAGING TECHNOLOGIES CORPORATION


                                     By:_____________________________________
                                           Name: Brian Bonar
                                           Title: President

                                     HARRY J. SAAL TRUST UTA DATED 7/19/92


                                     By:_____________________________________
                                            Name:
                                            Title:


                                     SAAL FAMILY CHARITABLE LEAD TRUST
                                       UTA DATED 2/25/98


                                     By:_____________________________________
                                           Name:
                                           Title:


                                      ---------------------------------------
                                                       R.T. MERCER

                                       25

<PAGE>



                                       NESHER, INC.


                                       By:_____________________________________
                                             Name:
                                             Title:


                                       MANOR INVESTMENT


                                       By:_____________________________________
                                             Name:
                                             Title:


                                       ---------------------------------------
                                                     GUILHERME DUQUE


                                       CASHCO FLP


                                       By:_____________________________________
                                             Name:
                                             Title:


                                       MANCHESTER ASSET MANAGEMENT


                                       By:_____________________________________
                                             Name:
                                             Title:

                                       GILSTON CORPORATION, LTD.


                                       By:_____________________________________
                                             Name:
                                             Title:






<PAGE>


                                       THE CUTTYHUNK FUND, LIMITED


                                       By:_____________________________________
                                             Name:
                                             Title: