EXHIBIT 4.5
ALPHAREL, INC.
9339 CARROLL PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
January 2, 1996
Newsun Limited
c/o ABN Amro Trust
80 Rue du Rhone
CH 1704
Geneva Switzerland
and
THC, Inc.
1183 Finch Avenue W.
Suite 604
N. York, Ontario M332G2
Re: SERIES B CONVERTIBLE PREFERRED STOCK
Gentlemen:
This will confirm our agreement with respect to matters
set forth herein in connection with the transactions contemplated
by the Convertible Preferred Stock Purchase Agreement dated
December 20, 1995 between Alpharel, Inc., a California corporation
(the "Company"), and Newsun Limited, a British Virgin Islands
corporation ("Newsun"), and the Convertible Preferred Stock
Purchase Agreement dated December 20, 1995 between the Company and
THC, Inc., an Ontario corporation ("THC" and collectively with
Newsun, the "Purchasers"). Such Convertible Preferred Stock
Purchase Agreements are hereinafter referred to collectively as
the "Purchase Agreements." The Purchase Agreements provide for
the issuance and sale of an aggregate of 172,500 shares of the
Company's newly issued Series B Convertible Preferred Stock (the
"Series B Preferred Stock") to the Purchasers.
The parties understand that a revised Certificate of
Determination (a copy of which is attached hereto as Exhibit A)
setting forth the rights, preferences and privileges of the Shares
has been presented to the Secretary of State of the State of
California for filing. The parties acknowledge that such
Certificate of Determination will not be deemed filed until
reviewed and approved by the staff of the Secretary of State.
Unless otherwise defined herein, capitalized terms used herein
shall have their respective meanings set forth in the Certificate
of Determination.
The parties hereto agree, subject to the condition that
the Certificate of Determination be reviewed and approved by the
Secretary of State in the form attached as Exhibit A, that:
1. Neither of the Purchasers shall deliver any
Conversion Notice to the Company or exercise any right of
conversion provided in Section 5 of the Certificate of
Determination with respect to fewer than 12,500 shares.
2. At any time on or after the expiration of 120 days
after the Original Issue Date, the Company shall have the right to
cause the holders of the Series B Preferred Stock in whole or in
part to exercise their conversion rights pursuant to Section 5 of
the Certificate of Determination. The Company shall exercise the
right under this paragraph by delivering to the holders of such
shares of the Series B Preferred Stock as to which the Company
desires to exercise such right a written notice (a "Company
Exercise Notice"), which Company Exercise Notice, once given,
shall be irrevocable; provided, however, that during the period of
two years after the Original Issue Date, the Company shall have no
right to deliver a Company Exercise Notice and cause the holders
of shares of Series B Preferred Stock to effect any conversion
unless either (i) all of such shares may be converted into shares
of Common Stock in accordance with Section 5(a)(ii) of the
Certificate of Determination; or (ii) all of such shares may be
either converted into shares of Common Stock in accordance with
such Section 5(a)(ii) or may be redeemed and the entire redemption
price paid in full in accordance with Section 6 of the Certificate
of Determination without violating the CGCL. Each Company
Exercise Notice delivered pursuant to this paragraph shall specify
the number of shares of Series B Preferred Stock that the Company
desires to cause to be converted and the date on which conversion
is to be effected (the "Company Exercise Date"). The Conversion
Date for any conversion effected pursuant to the Company's
election under this paragraph shall be deemed to be the Company
Exercise Date. The Company shall give such Company Exercise
Notice at least two Trading Days before the Company Exercise Date
and shall send such Company Exercise Notice by facsimile and by
mail, postage prepaid, to the facsimile telephone number and
address of each holder appearing on the stock transfer books of
the Company. Any exercise of the rights granted pursuant to this
paragraph shall be effected on a pro rata basis among the holders
of the Series B Preferred Stock. Upon the conversion of shares of
Series B Preferred Stock, the holders of the Series B Preferred
Stock shall surrender the certificates representing such shares at
the office of the Company or of any transfer agent for the Series
B Preferred Stock or Common Stock. If the Company is exercising
its rights hereunder with respect to less than all shares of the
Series B Preferred Stock, the Company shall, upon conversion of
such shares subject to such Company Exercise Notice and receipt of
the certificate or certificates representing such shares of Series
B Preferred Stock, deliver to the holder or holders a certificate
for such number of shares of Series B Preferred Stock as have not
been converted by such holder or holders. Each of the Purchasers
hereby appoints the Company as attorney-in-fact for such Purchaser
for the purpose of delivering any notices or executing any
documents that may be necessary in order to effect the conversion
of the Series B Preferred Stock in accordance with the provisions
of Section 5(a) of the Certificate of Determination upon the
election of the Company to exercise its rights under this
paragraph.
3. In addition to the restrictions and limitations
contained in Section 3.7 of each of the Purchase Agreements, each
of the Purchasers hereby agrees that no transfer of any shares of
Series B Preferred Stock held by such Purchaser shall be made
unless the transferee thereof agrees to be bound by the terms of
this letter agreement.
2
Please confirm your agreement to the foregoing by
signing and returning a copy of this letter.
Very truly yours,
ALPHAREL, INC.
By: /s/ JOHN W. LOW
-----------------------------
Its: Chief Financial Officer
-----------------------
ACKNOWLEDGED AND AGREED TO
this day of January, 1996
---
NEWSUN LIMITED
By: /s/ RAZ STEINMETZ
---------------------------
Name: Raz Steinmetz
--------------------
Title: Proxy
-------------------
THC, INC.
By: /s/ JOSAIF YARMUCH
---------------------------
Name: Josaif Yarmuch
--------------------
Title: President
-------------------
3