EXHIBIT 2.2
NEITHER THIS CONVERTIBLE LOAN NOTE NOR THE SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN REGISTERED WITH
THE U.S. SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER REGULATIONS S PROMULGATED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NEITHER
THIS CONVERTIBLE LOAN NOTE NOR THE SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE MAY BE OFFERED OR SOLD IN
THE UNITED STATES OR TO ANY U.S. PERSON (AS SUCH TERM IS DEFINED
IN REGULATION S) EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR PURSUANT TO APPLICABLE EXEMPTION FROM
THE PROVISIONS OF THE ACT.
PRINCIPAL AMOUNT OF THIS LOAN NOTE: US$1,000,000
ALPHAREL, INC.
CONVERTIBLE LOAN NOTE
This Note is authorised by a resolution of the Board of Directors
passed on the 7th day of December, 1995.
1. Alpharel, Inc. whose principal place of business is at
9339 Carroll Park Drive, San Diego, California, United
States of America ("the Company") will pay to Document
Management Systems Limited of Tropic Isle Buildings,
Tortola, Road Town, British Virgin Islands being the
Registered Holder of this Note the principal sum of
US$1,000,000 in accordance with and subject to the
Conditions attached hereto ("the Conditions").
2. The Company will also pay to such Registered Holder interest
at the rate and in the manner specified in the Conditions.
3. This Note is issued subject to, and with the benefit of, the
Conditions.
Given under the hand of an authorised signatory of the Company
this 27th day of December, 1995.
ALPHAREL, INC.
By: /s/Robert T. Bruce
Robert T. Bruce, Chairman
This Note is not transferable.
THE CONDITIONS
1. STATUS
(A) This Note is a convertible loan note (the "Note") for a
principal sum of US$1,000,000 secured by the assets of the
Company excluding the US$1,000,000 letter of credit issued
by Merrill Lynch.
(B) The Company hereby undertakes that within 30 days of the
date of this Note it will secure the amount due hereunder on
the assets of the Company by way of a valid and enforceable
continuing security interest in priority to the creditors of
the Company subject only to the prior interest of Merrill
Lynch in relation to a US$1,000,000 letter of credit issued
to the Company. Such security interest shall be in a form
to the reasonable satisfaction of the Registered Holder.
In the event that (a) the Company fails to provide such
security interest within the said period of 30 days (b) the
Registered Holder converts this Note pursuant to Condition 3
and immediately sells all of the Shares arising on
conversion at the current market price of the Shares and (c)
the proceeds (less reasonable brokerage) realised upon such
sale is less than the principal sum of this Note, then and
in such event the Company shall on demand pay to the
Registered Holder an amount equal to the difference between
such proceeds and the principal sum of this Note.
2. REPAYMENT
(A) Subject to clause 3 and sub-clause (B) below, the principal
amount of this Note shall be repaid at par on the expiry of
nine months from the date of issue of this Note together
with interest accrued thereon (less tax) to the date of
repayment.
(B) The Company may repay the principal amount of this Note,
together with accrued interest, at any time.
3. CONVERSION
(A) Subject to clause 3(E), the Registered Holder may elect, at
any time prior to repayment of the Note, to convert the
whole of this Note (but not less than the whole of this
Note) into common stock of the Company (the "Shares") by
giving written notice of such election to the Company in
accordance with clause 3(E).
(B) Upon receipt of the written notice from the Registered
Holder, the Company shall issue the Shares in accordance
with clause 3(C) to the Registered Holder within 14 days of
receipt of such written notice from the Registered Holder.
(C) The number of the Shares to be issued to the Registered
Holder by the Company shall be equal to the aggregate of the
principal amount of this Note up until and including the
Trading Day before the date on which the Shares are issued
to the Registered Holder, divided by a price per Share equal
to the "Conversion Price" as defined in clause 3(D).
Accrued interest will be paid up to and including the date
on which the Shares are issued. If the number of Shares to
be issued under this clause is not a whole number, it shall
be rounded to the nearest whole number. For purposes of
this Note, the term "Trading Day" means:
(a) a day on which the Company's common stock is traded on
The Nasdaq National Market or principal stock exchange
on which the common stock has been listed; or
(b) if the common stock is not listed on The Nasdaq
National Market or any stock exchange, a day on which
the common sock is traded in the over-the-counter
market, as reported by The NASDAQ Stock Market; or
(c) if the common stock is not quoted on The NASDAQ Stock
Market, a day on which the common stock is quoted in
the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar
organisation or agency succeeding its functions of
reporting prices).
(D) For the purposes of clause 3(C), the Conversion Price shall
be a price per Share equal to 80% of the Per Share Market
Value on the Trading Day immediate preceding the date of
this Note. For purposes of this Note, the term "Per Share
Market value" means on any particular date:
(a) the last sale price per share of the Company's common
stock on such date on The Nasdaq National Market or
other stock exchange on which the common stock has been
listed or if there is no such price on such date, then
th last price on such exchange on the date nearest
preceding such date; or
(b) if the common stock is not listed on The Nasdaq
National Market or any stock exchange, the average of
the bid and asked price for a share of common stock in
the over-the-counter market, as reported by the NASDAQ
Stock Market at the close of business on such date; or
(c) if the common stock is not quoted on The NASDAQ Stock
Market, the average of the bid and asked price for a
shares of common stock in the over-the-counter market
as reported by the National Quotation Bureau
Incorporated (or similar organisation or agency
succeeding to its functions of reporting prices).
(E) In the written notice given in accordance with clause 3(A),
the Registered Holder shall:
(a) acknowledge that this Note and the Shares have not and
will not be registered under the Act and may not be
offered or sold in the United States or to "US persons"
(as that term is defined in Rule 902(o) of Regulation S
of the US Securities and Exchange Commission) unless
they are registered under the Act, or an exemption from
the registration requirements of the Act is available;
and
(b) undertake that it will not take a short position in
common stock of the Company or engage in any hedging
transaction with respect to the Shares prior to the
expiration of 40 days after the issuance of the Shares
to the Registered Holder.
(F) The issue of the Shares by the Purchaser to the Registered
Holder in accordance with this clause shall satisfy all of
the Purchaser's obligations under this Note and the
Purchaser shall have no further liability to repay any
principal or pay any interest to the Registered Holder.
4. EVENTS OF DEFAULT
The principal amount of this Note together with interest
accrued thereon (less tax) shall become immediately due and
repayable upon written demand by the Registered Holder of
this Note following the happening of any of the following
events:
(a) if the Company fails to pay within 14 days of the due
date any monies payable on or in respect of the Note;
or
(b) if the Company fails to issue any of the Common Stock
within 14 days of the due date under these Conditions
after compliance by the Registered Holder of the terms
and conditions of clause 3; or
(c) if any order is made or an effective resolution passed
for winding-up the Company (other than a solvent
winding-up for the purposes of amalgamation or
reconstruction); or
(d) if an encumbrancer takes possession or any
administrator or administrative or other receiver is
appointed of the whole or a substantial part of the
assets or undertaking of the Company.
5. INTEREST
(a) Subject to clause 3, this Note bears interest from and
including the date of issue of this note and such interest
will be payable monthly, in arrears, in respect of the
period from the date of this Note up to and including the
date or repayment of the principal amount of this Note.
(b) Interest will cease to accrue on this Note (or, in the case
of partial repayment, on the amount to be repaid) on the
date of repayment thereof.
(c) The rate of interest payable on this Note will be seven per
cent. per annum.
6. TITLE
The Registered Holder will be regarded as exclusively
entitled to the benefit of this Note and all persons may act
accordingly, and the Company shall not be bound to enter in
the Register notice of any Trust or to recognise any right
in any other person, save as herein provided or as ordered
by a Court of competent jurisdiction.
7. TRANSFERS
The Note may not be transferred or assigned either in whole
or in part.
8. PAYMENTS
(A) The receipt of the Registered Holder hereof for such
principal sum and interest shall be a good discharge to the
Company for the same.
(B) In respect of any payment on this Note, a bank draft drawn
on the Company's bankers, payable to the order of the
Registered Holder hereof, will be sent by post to the
registered address of such Holder and the Company shall not
be responsible for any loss in transmission and the payment
of the warrant or cheque shall be a good discharge to the
Company for payment of the amount for which it was drawn.
9. UNLISTED SECURITY
No application will be made for a listing for or permission
to deal in this Note upon any Stock Exchange (in the United
Kingdom, the United States of America or elsewhere) or any
alternative securities market and the Note shall not be
offered to the public for subscription or purchase.
10. NOTICES
(A) A notice may be served by the Company upon the Registered
Holder by sending it through the post in a pre-paid envelope
addressed to him or them at the registered address of such
Registered Holder.
(B) A notice may be served by the Registered Holder of this Note
upon the Company by sending it through the post in a pre-
paid envelope addressed to the Company at its registered
office for the time being.
(C) Any notice served by post shall be deemed to have been
served at the expiration of four business days after it is
posted and in providing such service it shall be sufficient
to prove that the envelope or wrapper containing the notice
was properly addressed and stamped and put into the post.
11. NO VOTING RIGHTS
The Registered Holder shall not be entitled, by virtue of
this Note, to vote or receive dividends or distributions or
be considered a shareholder of the Company for any purpose,
nor shall anything in this Note be construed to confer on
the Registered Holder, as such, any rights of a shareholder
of the Company or any right to vote, to give or withhold
consent to any corporate action, to receive notice of
meetings of shareholders or to receive dividends,
distributions or subscription right or otherwise.
12. GOVERNING LAW
This Note will be construed in accordance with English Law.