EXHIBIT 10.3
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE
SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO
THE ISSUER, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER
THE ACT, (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER THE ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN A TRANSACTION THAT DOES NOT
REQUIRE REGISTRATION UNDER THE ACT OR ANY APPLICABLE STATE LAWS, AND THE HOLDER
HAS, PRIOR TO SUCH SALE, FURNISHED TO THE ISSUER AN OPINION OF COUNSEL OR OTHER
EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE ISSUER.
DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. THE HOLDER HEREOF WILL NOT, DIRECTLY
OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THIS SECURITY,
EXCEPT AS PERMITTED BY THE ACT.
SECURED CONVERTIBLE DEBENTURE
THIS SECURED CONVERTIBLE DEBENTURE, dated as of May 30, 2007 (the "Agreement")
is made
BETWEEN:
NAME: 0761291 B.C. Ltd.
ADDRESS: 4968 Pinetree Crescent
West Vancouver, B.C., Canada, V7W-3A3
(the "LENDER");
AND:
RECLAMATION CONSULTING AND APPLICATIONS, INC., a company organized under
the laws of the State of Colorado, of 940 Calle Amanecer, Suite E, San
Clemente, CA 92673 (the "Borrower").
WHEREAS, the Lender is willing to lend to the Borrower FOUR HUNDRED THOUSAND
DOLLARS ($400,000) (the "Principal") on the terms of this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and
the mutual covenants and agreements hereinafter set forth, the parties hereto
agree as follows:
1. DEFINITIONS
Where used in this Agreement, the following words and phrases shall have the
following meaning:
1.1 "Accredited Investor" has the meaning assigned in subsection 6.2.6;
1.2 "Act" as the meaning assigned in subsection 6.2.4;
1.3 "Agreement" means this Secured Convertible Debenture and the
schedules hereto, as at any time amended or modified and in effect;
1.4 "Conversion Amount" has the meaning assigned in subsection 4.1;
1.5 "Conversion Date" has the meaning assigned in subsection 4.1;
1.6 "Conversion Notice" has the meaning assigned in subsection 4.1;
1.7 "Conversion Price" means the lower of (i) $0.20 per share or (i) the
simple moving average of the Borrower's common stock on the OTC
Bulletin Board over 10 consecutive trading days commencing on May
25, 2007;
1.8 "Conversion Shares" means shares of Borrower's common stock to be
received by Lender pursuant to a conversion under Section 4 of the
outstanding balance of Principal and unpaid accrued interest due
under this Agreement;
1.9 "Conversion Warrants" has the meaning assigned in subsection 4.7;
1.10 "Event of Default" means any event specified in subsection 8.1;
1.11 "Lender's Security" means the collateral referenced on SCHEDULE C;
1.12 "Loan" means the loan by the Lender to the Borrower established
pursuant to subsection 3.1;
1.13 "Maturity Date" means November 29, 2008;
1.14 "Note" means a promissory note to be made by the Borrower to the
Lender as evidence of the Loan which shall substantially be in the
form set out in SCHEDULE A and "Notes" means the plural thereof;
1.15 "Principal" means the principal amount of the loan set forth in the
Preamble;
1.16 "Securities" has the meaning assigned in subsection 4.3; and
1.17 "U.S. Person" has the meaning assigned in subsection 6.2.7.
2. INTERPRETATION
2.1 GOVERNING LAW AND VENUE
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of California applicable to the performance and
enforcement of contracts made within such state, without giving effect to the
law of conflicts of laws applied thereby. In the event that any dispute shall
occur between the parties arising out of or resulting from the construction,
interpretation, enforcement or any other aspect of this Agreement, the parties
hereby agree to accept the exclusive jurisdiction of the Courts of the State of
California sitting in and for the County of Orange.
2.2 SEVERABILITY
If any one or more of the provisions contained in this Agreement is found to be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein will not in any way
be affected or impaired thereby.
2.3 PARTIES IN INTEREST
This Agreement enures to the benefit of and is binding on the parties hereto and
their respective successors and permitted assigns.
2.4 HEADINGS AND MARGINAL REFERENCES
The division of this Agreement into sections, subsections, paragraphs and
subparagraphs and the insertion of headings are for convenience of reference
only and do not affect the construction or interpretation of this Agreement.
2.5 CURRENCY
All statements of, or references to, dollar amounts in this Agreement means
lawful currency of the United States.
3. THE LOAN
3.1 ESTABLISHMENT OF THE LOAN
The Lender agrees, on the terms and conditions set forth in this Agreement, to
lend to the Borrower the Principal as the "Loan." Immediately upon the execution
of this Agreement, Lender shall wire the Principal into Borrower's escrow
account, using instructions to be provided by the Borrower.
3.2 EVIDENCE OF INDEBTEDNESS
Indebtedness of the Borrower to the Lender in respect of the Loan will be
evidenced by one or more Notes, which will be provided by the Borrower to the
Lender within five business days following the date the Loan is advanced under
subsection 3.1.
3.3 INTEREST
The Borrower will pay simple interest to the Lender on the unpaid Principal from
the issue date of the Note at a rate of 12% per annum until the Loan is repaid
in full. Interest will be calculated and accrued monthly in arrears and will be
payable to the Lender monthly (except as to such amounts as were converted by
Lender as future interest under Section 4 and is therefore deemed already paid),
within 15 days following the end of each calendar month until the earlier of (i)
the Maturity Date, (ii) the date the Loan is repaid in full, or (iii) the
Principal and interest are converted to Borrower's common stock pursuant to
section 4.
3.4 REPAYMENT OF THE LOAN
Subject to conversion pursuant to section 4, the Borrower will repay the
Principal and any accrued but unpaid interest to the Borrower on or before the
Maturity Date.
3.5 PREPAYMENT OF LOAN
The Borrower may prepay the Principal and interest outstanding under the Loan
without penalty, bonus or charges.
4. CONVERSION OF THE LOAN
4.1 CONVERSION
At any time, and from time to time, prior to the Maturity Date, the Lender may
elect, by providing to Borrower a written notice in the form of SCHEDULE B,
attached hereto (the "Conversion Notice"), to convert all or any portion of the
then-outstanding Principal, accrued but unpaid interest, and/or up to six months
future interest (the aggregate amount thereof being the "Conversion Amount") as
of the date of such Conversion Notice (the "Conversion Date").
4.2 ISSUANCE OF CONVERSION SHARES
Within 15 days of receipt of a properly completed Conversion Notice, the
Borrower will issue Conversion Shares to the Lender in an amount equal to a
fraction, the numerator of which is the Conversion Amount to be converted and
the denominator of which is the Conversion Price. All Conversion Shares so
issued shall be deemed to have been issued as fully paid and non-assessable at a
price equal to the Conversion Price.
4.3 LEGEND
This Agreement, and any Conversion Shares (collectively, the "Securities") shall
bear such form of restrictive legends as may be necessary, as determined by
Borrower in Borrower's reasonable discretion, to comply with applicable laws or
regulations of any stock exchange or other applicable authority, including but
not limited to the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").
THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (A) TO THE ISSUER, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH
REGULATION S UNDER THE ACT, (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE ACT PROVIDED BY RULE 144 THEREUNDER,
IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR
(D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE ACT OR
ANY APPLICABLE STATE LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE,
FURNISHED TO THE ISSUER AN OPINION OF COUNSEL OR OTHER EVIDENCE OF
EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE ISSUER. DELIVERY
OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. THE HOLDER HEREOF WILL NOT,
DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO
THIS SECURITY, EXCEPT AS PERMITTED BY THE ACT.
4.4 CONVERSION DISCHARGES THE BORROWER
Conversion of Principal and interest in accordance herewith shall operate to
discharge the Borrower's obligations with respect to repayment of the Principal
amount and interest so converted, provided that delivery of the appropriate
number of Conversion Shares issued upon such conversion is made by the Borrower.
The Borrower shall not be bound to enquire into the title of the Lender, save as
ordered by a court of competent jurisdiction or as required by statute. The
Borrower shall not be bound to see to the execution of any trust affecting the
ownership of the Note(s) surrendered in connection with any conversion of
Principal and interest nor be charged with notice of any equity that may be
subsisting in respect thereof, unless the Borrower has actual notice thereof.
4.5 NO REQUIREMENT TO ISSUE FRACTIONAL SECURITIES
The Borrower shall not be required to issue fractions of securities upon any
conversion of Principal and interest pursuant to this section 4. If any
fractional interest in securities would be issuable upon the conversion of
Principal and interest, the Borrower shall not be required to make any payment
in lieu of delivering any certificates representing such fractional interest.
4.6 CANCELLATION OF NOTES
Upon conversion of the Principal amount of the Loan in whole or in part pursuant
to the provisions of this section 4, each Note representing the Principal
converted shall be forthwith delivered to and cancelled by the Borrower.
4.7 NO. CONVERSION WARRANTS.
The Lender understands that other investors purchasing secured convertible
debentures are, within 15 days of Borrower's receipt of a properly completed
Conversion Notice from such lenders, entitled to warrants for the purchase of a
number of shares of Borrower's common stock equal to a percentage of the number
of Conversion Shares received by the Lender for such conversion (the "Conversion
Warrants"). Such Conversion Warrants will be exercisable until the sooner of (i)
5:00 PM Pacific Time on the third year anniversary of the Conversion Date or
(ii) 5:00 PM Pacific Time on the Call Date (as defined in the certificates
evidencing the Conversion Warrants. For each such lender receiving Conversion
Warrants, half of such warrants will have an exercise price of $0.22 per share
and half shall have an exercise price of $0.24 per share. PURSUANT TO THE TERMS
THE LENDER HAS NEGOTIATED, THE LENDER IS NOT ENTITLED TO ANY CONVERSION
WARRANTS.
5. SECURITY FOR THE LOAN
The Borrower grants to the Lender, a security interest in the Collateral, as
defined in SCHEDULE C attached hereto, to secure the payment of all of the
indebtedness under the Notes. Lender acknowledges that the Borrower is selling
secured convertible debentures to other parties and that its rights and priority
to the Collateral are PARI PASSU with rights and priority to the Collateral
provided to all other lenders who purchase secured convertible debentures from
the Borrower in May 2007. The Borrower agrees to take all actions requested by
the Lender and reasonably necessary to perfect, to continue the perfection of,
and to otherwise give notice of, the lien granted hereunder, including, but not
limited to, execution of financing statements.
6. REPRESENTATIONS AND WARRANTIES
6.1 The Borrower represents and warrants to the Lender as of the date
hereof that:
6.1.1 the Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of Colorado;
6.1.2 the Borrower has all requisite corporate power and
authority to enter into this Agreement and to grant the
Lender's Security and to carry out the obligations
contemplated herein and therein;
6.1.3 this Agreement and the Lender's Security have been duly and
validly authorized, executed and delivered by the Borrower
and are valid obligations of it; and
6.1.4 no Event of Default and no event which, with the giving of
notice or lapse of time would become an Event of Default,
has occurred or is continuing.
6.2 The Lender hereby represents and warrants to the Borrower, as of the
date hereof, the following:
6.2.1 the Lender has full power and capacity to enter into,
execute and perform this Agreement, which Agreement, once
executed by the Lender, shall be the valid and binding
obligation of such party, enforceable against such party by
any court of competent jurisdiction in accordance with its
terms;
6.2.2 the Lender is not bound by or subject to any contract,
agreement, law, court order or judgment, administrative
ruling, regulation or any other item which prohibits or
restricts such party from entering into and performing this
Agreement in accordance with its terms, or requiring the
consent of any third party prior to the entry into or
performance of this Agreement in accordance with its terms
by such party;
6.2.3 the Lender acknowledges that it is acquiring the Securities
its own account, and not with a view toward the
subdivision, resale, distribution, or fractionalization
thereof; the Lender has no contract, undertaking, or
arrangement with any person to sell, transfer, or otherwise
dispose of the Securities (or any portion thereof hereby
subscribed for), and has no present intention to enter into
any such contract, undertaking, agreement or arrangement;
6.2.4 the execution of this Agreement by the Lender is not the
result of any form of General Solicitation or General
Advertising (as used under Rule 502(c) promulgated under
the Securities Act of 1933, as amended (the "Act"));
6.2.5 the Lender hereby acknowledges that: (A) the offering of
the Secured Convertible Debentures was made only through
direct, personal communication between the Lender and the
Borrower; (B) the Lender has had full access to material
concerning the Borrower's planned business and operations,
which material was furnished or made available to the
Lender by officers or representatives of the Borrower,
including the Borrower's SEC filings available on the SEC
web site at www.sec.gov; (C) the Borrower has given the
Lender the opportunity to ask any questions and obtain all
additional information desired in order to verify or
supplement the material so furnished; and (D) the Lender
understands and acknowledges that purchasers of the Secured
Convertible Debentures must be prepared to bear the
economic risk of such investment for an indefinite period
because of: (I) the heightened nature of the risks
associated with an investment in the Borrower due to its
status as a development stage company; (II) illiquidity of
the Securities due to the fact that (1) the Securities have
not been registered under the Act or any state securities
act (nor passed upon by the SEC or any state securities
commission), and (2) the Securities may not be registered
or qualified by the Lender under federal or state
securities laws solely in reliance upon an available
exemption from such registration or qualification, and
hence such Securities cannot be sold unless they are
subsequently so registered or qualified, or are otherwise
subject to any applicable exemption from such registration
requirements; and (3) substantial restrictions on transfer
of the Securities, as may set forth by legend on the face
or reverse side of every certificate evidencing the
ownership of the Securities;
6.2.6 the Lender is an "Accredited Investor" as such term is
defined in Rule 501 of Regulation D promulgated by the
Securities and Exchange Commission under the Act and as
such term is defined under Canadian securities laws;
6.2.7 the Lender is not a "U.S. Person" as such term is defined
in Rule 902 of Regulation S promulgated by the SEC.
("Regulation S");
6.2.8 the Lender understands that the Borrower is the seller of
the Securities and that, for purposes of Regulation S, a
"distributor" is any underwriter, dealer or other person
who participates, pursuant to a contractual arrangement in
the distribution of securities sold in reliance on
Regulation S and that an "affiliate" is any partner,
officer, director or any person directly or indirectly
controlling, controlled by or under common control with any
persons in question;
6.2.9 the Lender agrees that it will not, during the one-year
distribution compliance period for the Securities, act as a
distributor, either directly or through any affiliate, or
sell, transfer, hypothecate or otherwise convey the
Securities other than to a non-U.S. Person;
6.2.10 the Lender acknowledges and understands that in the event
the Securities are offered, sold or otherwise transferred
by the Lender to a non-U.S. Person prior to the expiration
of the applicable distribution compliance period, the
purchaser or transferee must agree not to resell such
securities except in accordance with the provisions of
Regulation S, pursuant to registration under the Act, or
pursuant to an available exemption from registration; and
must further agree not to engage in hedging transactions
with regard to such securities unless in compliance with
the Act;
6.2.11 the Lender shall not offer, sell or otherwise dispose of
the Securities in the United States or to a U.S. Person
unless (A) the Borrower has consented to such offer, sale
or disposition and such offer, sale or disposition is made
in accordance with an exemption from the registration
requirements under the Act and the securities laws of all
applicable states of the United States or (B) such
securities have been registered with the SEC;
6.2.12 the Lender has been advised to consult with an attorney
regarding legal matters concerning the purchase and
ownership of the Conversion Shares, and with a tax advisor
regarding the tax consequences of purchasing such
Conversion Shares; and
6.2.13 the Lender understands that this is a separately negotiated
Agreement and that other investors are purchasing secured
convertible debentures on terms different from the Lender,
as disclosed to the Lender by a letter from the Borrower
dated May 30, 2007, receipt of which is acknowledged by the
Lender.
7. COVENANTS OF THE BORROWER
7.1 POSITIVE COVENANTS
The Borrower covenants and agrees with the Lender that, at all times during the
currency of this Agreement, it will:
7.1.1 pay the principal sum, interest and all other monies
required to be paid to the Lender pursuant to this
Agreement in the manner set forth herein;
7.1.2 duly observe and perform each and every of its covenants
and agreements set forth in this Agreement and the Lender's
Security;
7.1.3 provide the Lender with immediate notice of any Event of
Default;
7.1.4 do all things necessary to obtain and maintain the Lender's
Security in good standing and make payment of all fees and
charges in respect thereto; and
7.1.5 reimburse the Lender for all fees and charges reasonably
incurred by the Lender in respect of maintaining or
reviewing the Lender's Security.
7.2 NEGATIVE COVENANTS
The Borrower covenants and agrees with the Lender that, except as otherwise set
out herein or in the Lender's Security, at all times while the Principal remains
outstanding, unless it has received the prior written consent of the Lender to
do so (which consent shall not be unreasonably withheld, conditioned or
delayed), it will not:
7.2.1 enter into any agreement, or initiate any corporate or
other proceedings, that may adversely affect the Lender's
Security;
7.2.2 sell, lease, assign, transfer or otherwise dispose of any
of its assets except in the ordinary course of business; or
7.2.3 make a fundamental change in the nature of its business.
8. EVENT OF DEFAULT
8.1 DEFINITION OF EVENT OF DEFAULT
The principal balance of the Loan, costs and any other money owing to the Lender
under this Agreement will immediately become payable upon written demand by the
Lender in any of the following events, unless otherwise waived in writing by the
Lender:
8.1.1 if the Borrower defaults in any payment when due under this
Agreement;
8.1.2 if the Borrower commits any default under any of the
Lender's Security;
8.1.3 if the Borrower becomes insolvent or makes a general
assignment for the benefit of its creditors, or if any
order is made or an effective resolution is passed for the
winding-up of the Borrower or if the Borrower is declared
bankrupt or if a custodian or receiver is appointed for the
Borrower under the applicable bankruptcy or insolvency
legislation, or if a compromise or arrangement is proposed
by the Borrower to its creditors or any class of its
creditors, or if a receiver or other officer with like
powers is appointed for the Borrower; or
8.1.4 if the Borrower defaults in observing or performing any
other covenant or agreement of this Agreement on its part
to be observed or performed and such default has continued
for a period of 14 days after notice in writing has been
given by the Lender to the Borrower specifying the default.
8.2 RIGHTS AND REMEDIES OF THE LENDER
Upon the occurrence of an Event of Default and at any time thereafter:
8.2.1 the Lender may exercise any or all rights and remedies
available to the Lender whether available under this
Agreement, the Lender's Security or available at law or in
equity, provided always that the Lender acts in a
commercially reasonable manner in exercising such rights;
and
8.2.2 the Lender will have the right, but not the obligation, to
inform any creditor of the Borrower of any Event of Default
by the Borrower.
9. GENERAL
9.1 WAIVER OR MODIFICATION
No failure on the part of the Lender in exercising any power or right hereunder
will operate as a waiver of the power or right nor will any single or partial
exercise of such right or power preclude exercise of any other right or power
hereunder. No amendment, modification or waiver of any condition of this
Agreement or consent to any departure by the Borrower therefrom will be
effective unless it is in writing signed by the Lender. No notice to or demand
on the Borrower will entitle the Borrower to any other further notice or demand
in similar or other circumstances unless specifically provided for in this
Agreement.
9.2 TIME
Time is of the essence of this Agreement.
9.3 FURTHER ASSURANCES
The parties to this Agreement will do, execute and deliver or will cause to be
done, executed and delivered all such further acts, documents and things as may
be reasonably required for the purpose of giving effect to this Agreement.
9.4 ASSIGNMENT
The Borrower may not assign this Agreement or its interest herein or any part
hereof except with the prior written consent of the Lender. The Lender may
assign the Loan, this Agreement, or the Lender's Security or its interest in the
Loan, this Agreement, or the Lender's Security or any part thereof upon ten
days' written notice to the Borrower and provided that the assignee agrees to be
bound by the terms of this Agreement and the Lender's Security to the extent of
such assignment.
10. NOTICES
All notices, requests, demands and other communications to be given hereunder
shall be in writing and shall be deemed to have been duly given on the date of
personal service or transmission by fax if such transmission is received during
the normal business hours of the addressee, or on the first business day after
sending the same by overnight courier service or by telegram, or on the third
business day after mailing the same by first class mail, or on the day of
receipt if sent by certified or registered mail, addressed as set forth below,
or at such other address as any party may hereafter indicate by notice delivered
as set forth in this Section 10:
If to Borrower: Reclamation Consulting &
Applications, Inc.
940 Calle Amanecer, Suite E
San Clemente, CA 92673
Attn: Mr. Gordon W. Davies
President
With a copy (which shall
not constitute notice) to: August Law Group, P.C.
19200 Von Karman, Suite 900
Irvine, California 92614
Attn: Kenneth S. August, Esquire
President
If to Lender: 0761291 B.C. Ltd.
4968 Pinetree Crescent
West Vancouver, B.C., Canada, V7W-3A3
Attn: Blair Calkins
With a copy (which shall
not constitute notice) to: Calvin Patterson
Barrister & Solicitor
Suite 107 - 20644 Eastleigh Crescent
Langley, B.C., Canada, V3A 4C4
Telephone: (604) 533-4708
Facsimile: (604) 533-4758
E-mail: cp-law@telus.net
11. AMENDMENTS
This Agreement may be amended, waived, discharged or terminated only with the
agreement of the party against whom enforcement of the amendment, waiver,
discharge or termination is sought and only in writing signed by both parties to
this agreement.
12. COUNTERPART AND FAX EXECUTION
This Agreement may be executed in two or more counterparts and by fax
transmission, each of which will be deemed to be an original and all of which
will constitute one agreement, effective as of the date given above.
IN WITNESS WHEREOF, the parties hereto have executed this Secured Convertible
Debenture as of the date first written above.
LENDER
0761291 B.C. LTD.
/s/ Blair Calkins
- ---------------------------------------
By: Blair Calkins
BORROWER
RECLAMATION CONSULTING AND APPLICATIONS, INC.
A Colorado corporation
/s/ Gordon W. Davies
- ---------------------------------------
By: Gordon W. Davies
Its: President
SCHEDULE A
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to Secured Convertible Debenture.
- --------------------------------------------------------------------------------
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE
SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO
THE ISSUER, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER
THE ACT, (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER THE ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN A TRANSACTION THAT DOES NOT
REQUIRE REGISTRATION UNDER THE ACT OR ANY APPLICABLE STATE LAWS, AND THE HOLDER
HAS, PRIOR TO SUCH SALE, FURNISHED TO THE ISSUER AN OPINION OF COUNSEL OR OTHER
EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE ISSUER.
DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. THE HOLDER HEREOF WILL NOT, DIRECTLY
OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THIS SECURITY,
EXCEPT AS PERMITTED BY THE ACT.
PROMISSORY NOTE
$[_______] MAY 30, 2007
This Promissory Note is being issued pursuant to a Secured Convertible Debenture
dated for reference May 30, 2007 between [BORROWER NAME] and Reclamation
Consulting and Applications, Inc. (the "Secured Convertible Debenture")
FOR VALUE RECEIVED, Reclamation Consulting and Applications, Inc. (the
"Borrower"), of 940 Calle Amanecer, Suite E, San Clemente, CA 92673, PROMISES TO
PAY on November 29, 2008, or on demand in accordance with the terms of the
Secured Convertible Debenture, to the order of [BORROWER NAME] (the "Lender"),
[ADDRESS], the sum of $[________] (the "Principal") with simple interest at the
rate of 12% per annum, calculated and accrued monthly in arrears, both before
and after the time payment is due and until actual payment, and payable in
accordance with the Secured Convertible Debenture.
The obligations of the Borrower to pay the Principal to the Lender will
terminate if and to the extent that the Principal and interest are converted in
accordance with section 4 of the Secured Convertible.
The Borrower waives presentment for payment, notice of protest and notice of
non-payment.
The Borrower may prepay the Principal and interest outstanding under the Secured
Convertible Debenture without penalty, bonus or charges.
Reclamation Consulting and Applications, Inc
a Colorado corporation
/s/ Gordon W. Davies
---------------------------------------------
By: Gordon W. Davies
Its: President
SCHEDULE B
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to Secured Convertible Debenture
NOTICE OF CONVERSION
TO: RECLAMATION CONSULTING AND APPLICATIONS, INC. (the "Company")
1. The undersigned hereby elects to convert to Company common stock the
amounts of outstanding Principal, unpaid accrued interest and/or future interest
under the attached Secured Convertible Debenture and the attached Promissory
Note(s), all pursuant to the terms of the Secured Convertible Debenture, in the
amounts designated below:
Principal: $_____________
Accrued Interest: $_____________
Future Interest: $_____________
2. The undersigned hereby certifies that it is not a U.S. Person (as defined
by Rule 902 of the Securities Act of 1933, as amended) and that this conversion
is not being effected for the account or benefit of or on behalf of a U.S.
Person.
3. Please issue a certificate or certificates representing said shares of
Company common stock in the name of the undersigned or in such other name as is
specified below:
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(Name)
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(Address)
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(Date) (Name of Lender)
By:
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Title:
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(Name of Lender, and title and
signature of authorized person)
SCHEDULE C
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to Secured Convertible Debenture
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COLLATERAL
"Collateral" means all assets and property of the Borrower whatsoever and
wheresoever located, together with all additions and accessions thereto and
replacements therefor and all proceeds of the foregoing, including but not
limited to real property, personal property, money, accounts, deposit accounts,
chattel paper, documents, notes, drafts, instruments, goods, inventory,
equipment, general intangibles, insurance proceeds, other tangible or intangible
property received upon the sale or disposition of the foregoing, and any and all
books and records, in whatever form or medium, that at any time evidence or
contain information relating to any of the foregoing properties or interests in
properties or are otherwise necessary or helpful in the collection thereof or
realization thereon.