Exhibit 4.1
OMNIBUS AMENDMENT
THIS OMNIBUS AMENDMENT (this "Amendment"), dated as of March 28, 2008 (the
"Amendment Date"), is made
BY AND BETWEEN:
PALA INVESTMENTS HOLDINGS LIMITED, of 12 Castle Street, St Helier,
Jersey,JE2 3RT (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 and the Borrower are parties to a Secured Convertible
Debenture, dated as of December 12, 2007 (the "Debenture"), pursuant to which
the Lender loaned the Borrower Three Million Dollars ($3,000,000) and, under the
terms and subject to the conditions set forth therein, provided for the
potential further loan of Two Million Dollars ($2,000,000);
WHEREAS, in connection with the Debenture, the Lender and the Borrower entered
into a Voting and Right of First Refusal Agreement, dated as of December 12,
2007 (the "Voting Agreement"), a Registration Rights Agreement, dated as of
December 12, 2007 (the "Registration Rights Agreement"), and a Patent and
Trademark Security Agreement, dated as of December 12, 2007 (the "Security
Agreement"; the Debenture, the Voting Agreement, the Registration Rights
Agreement and the Security Agreement are referred to collectively as the
"Debenture Agreements"); and
WHEREAS, the Lender is willing to lend to the Borrower an additional Two and
One-half Million Dollars ($2,500,000) (the "Third Tranche") which shall be
extended to the Borrower on the Amendment Date following the mutual execution of
this Amendment and pursuant to the terms of the Debenture Agreements, in each
case as amended by this Amendment.
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
Unless a definition is provided for a capitalized term in this Amendment, each
such term shall have the meaning provided to it in the Debenture.
2. INTERPRETATION
The provisions of Section 2 of the Debenture shall apply to this Amendment as if
set forth herein, in each case with references to "this Agreement" being
replaced with "this Amendment."
3. THE AMENDMENTS
3.1 AMENDMENTS TO THE DEBENTURE
The follow amendments are hereby made to the Debenture:
3.1.1 For the avoidance of doubt, the term "Principal" in
the Debenture shall include the principal amount of
the Third Tranche, the indebtedness comprising the
Third Tranche shall be included in the term "Loan" in
the Debenture, the Amendment Note (as defined below)
shall constitute a "Note" under the Debenture and the
Amendment Warrant (as defined below) shall constitute
a "Warrant" under the Debenture.
3.1.2 The term "Conversion Price" is amended in its
entirety to provide as follows:
""Conversion Price" means, with respect to the
Principal amount of the First Tranche, Fourteen Cents
($0.14) per share, and, with respect to the Principal
amount of each of the Second Tranche and Third
Tranche, Seven Cents ($0.07) per share, provided that
if Borrower, at any time while the Principal is
outstanding, (i) pays a stock dividend on its common
stock, (ii) subdivides outstanding shares of common
stock into a larger number of shares, or (iii)
combines outstanding shares of common stock into a
smaller number of shares, then in each such case the
applicable Conversion Price shall be adjusted by
multiplying (a) such Conversion Price in effect
immediately prior to such event, by (b) a fraction of
which the numerator shall be the number of shares of
common stock outstanding immediately before such
event and of which the denominator shall be the
number of shares of common stock outstanding
immediately after such event;"
3.1.3 Each reference to "Conversion Price" shall refer to
the Conversion Price applicable to the relevant
Principal amount of the First Tranche, Second Tranche
or Third Tranche, as the case may be.
3.1.4 Section 5.2.8 and Section 5.2.9 of the Debenture are
deleted in their entirety.
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March 28, 2008
Page 2 of 22
3.1.5 Section 6.1.17 of the Debenture is amended in its
entirety to provide as follows:
"Complete a share reorganization such that the
capital structure of the Borrower is substantially as
detailed in Schedule K (the "Share Reorganization")
by no later than May 25, 2008;"
3.1.6 Section 6.2.1 (iii) is amended by replacing the text
"Additional advances on Borrower's existing line of
credit from Canvasback Company Limited (the "Existing
Line of Credit"), provided that the aggregate amount
of indebtedness outstanding under the Existing Line
of Credit at any time shall not exceed $500,000" with
the text "Additional advances on Borrower's existing
line of credit from Canvasback Company Limited (the
"Existing Line of Credit"), provided that the
aggregate amount of indebtedness outstanding under
the Existing Line of Credit at any time shall not
exceed $230,000".
3.1.7 Sections 9.1.1 through 9.1.3 of thee Debenture are
deleted in their entirety and replaced with the
following Sections 9.1.1 and 9.1.2:
"9.1.1 The Borrower has generated positive net cash
provided from operating activities (as
defined under U.S. Generally Accepted
Accounting Principals) for the second
quarter of its 2009 fiscal year (which
quarter commences October 1, 2008 and ends
December 31, 2008); and
9.1.2 The Borrower has signed orders or contracts
for the sale of at least one million
(1,000,000) gallons of Alderox during
calendar year 2009."
3.1.8 Section 10.8 is amended by replacing the text "which
shall fall within sixty (60) days of the Effective
Date" with the text "which shall be no later than May
25, 2008".
3.2 AMENDMENTS TO THE REGISTRATION RIGHTS AGREEMENT
The follow amendments are hereby made to the Registration Rights Agreement:
3.2.1 For the avoidance of doubt, the term "Registrable
Securities" in the Registration Rights Agreement
shall include the shares of Common Stock issuable
upon conversion of the Amendment Note and upon
exercise of the Amendment Warrant.
3.3 AMENDMENTS TO THE SECURITY AGREEMENT
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March 28, 2008
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The follow amendments are hereby made to the Security Agreement:
3.3.1 For the avoidance of doubt, the term "Indebtedness"
in the Security Agreement shall include indebtedness
comprising the Third Tranche.
3.4 AMENDMENTS TO THE WARRANT
The follow additional section is added to the certificate representing the
Warrants and shall be included in the certificate representing any Additional
Warrants:
"SECTION 13. CASHLESS EXERCISE. Notwithstanding the foregoing, in lieu of paying
the Exercise Price in connection with the exercise of this Warrant, the Holder
shall have the right to exercise this Warrant or any portion of this Warrant
into Warrant Shares by a cashless exercise by executing and delivering to the
Company at its principal office a written Notice of Exercise in the form
attached to this Warrant marked "CASHLESS EXERCISE". The number of Warrant
Shares to be issued to Holder upon such conversion shall be computed using the
following formula:
X = ((P)(Y)(A-B))/A
where
X = the number of Warrant Shares to be issued to the
Holder for the portion of the Warrant being converted.
P = the portion of the Warrant being converted expressed as a
decimal fraction.
Y = the total number of Warrant Shares issuable upon exercise
of the Warrant in full.
A = the market price of a share of Common Stock for the
date of exercise (the market price determined, for any
date, as the average of the closing prices of the
Common Stock on the principal securities exchange or
automated quotation system upon which the Common Stock
may then be listed for public trading for the five
immediately preceding trading days on such exchange).
B = the then current Exercise Price (as adjusted to the date
of such calculation)."
3.5 LIMITED AMENDMENT
Any future reference to any Debenture Agreement (including any reference to any
particular Debenture Agreement in any other Debenture Agreement) and any
document or instrument delivered in connection therewith shall, from and after
the date of this Amendment, be deemed to be a reference to such Debenture
Agreement as modified by this Amendment. Except as expressly modified by this
Amendment, each of the Debenture Agreements shall continue to be and remain in
full force and effect in accordance with their respective terms and the Borrower
hereby reaffirms its obligations under each such agreement.
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March 28, 2008
Page 4 of 22
4. REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE BORROWER
The Borrower hereby represents and warrants to the Lender that, except as
provided on Annex A hereto, each of the representations and warranties set forth
in Section 5.1 of the Debenture are true and correct as of the Amendment Date,
in each case with references to "this Agreement" referring to the Debenture as
amended by this Amendment.
4.2 REPRESENTATIONS OF THE LENDER
The Lender hereby represents and warrants to the Borrower that each of the
representations and warranties set forth in Section 5.2 of the Debenture (as
amended by this Amendment) are true and correct as of the Amendment Date, in
each case with references to "this Agreement" referring to the Debenture as
amended by this Amendment.
5. CONDITIONS PRECEDENT
The Lender's obligation to advance the Third Tranche and the amendments
contemplated hereby shall be subject to the following conditions precedent:
5.1 DOCUMENTS
The Lender shall have received each of the following, each properly executed by
the Borrower and in form and substance satisfactory to the Lender:
5.1.1 This Amendment;
5.1.2 A Note substantially in the form of Schedule O (the
"Amendment Note");
5.1.3 A Warrant certificate, substantially in the form of
Schedule P (the "Amendment Warrant"), evidencing two
and one-half million (2,500,000) warrants for the
purchase of an aggregate of Two and One-half Million
(2,500,000) shares of Borrower's common stock,
representing one (1) warrant for every One Dollar
($1.00) of Principal provided to Borrower pursuant to
this Agreement. The Amendment Warrants shall be
exercisable until 5:00 PM Pacific Time three (3)
years from the Amendment Date. The Amendment Warrants
shall have an exercise price of Twenty One Cents
($0.21) per share.
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March 28, 2008
Page 5 of 22
5.2 SECRETARY'S CERTIFICATE
The Lender shall have received a certificate of the Secretary of the Borrower,
dated as of the Amendment Date, (a) attesting to the corporate action taken by
the Borrower with respect to this Amendment, including resolutions of the Board
of Directors authorizing (i) the execution of this Amendment, (ii) the issuance
of the Amendment Note and Amendment Warrant, (iii) the execution of, delivery,
and performance by the Borrower of all other agreements or matters contemplated
hereby or executed in connection herewith, (b) certifying the names and true
signatories of the officers of the Borrower authorized to sign this Agreement,
the Amendment Note, the Amendment Warrant and other documents, instruments or
certificates to be delivered pursuant hereto and thereto, together with the true
signatures of such officers and (c) verifying that the Articles of Incorporation
and the By-Laws of the Borrower attached thereto are true, correct and complete
as of the Amendment Date.
5.3 OFFICER'S CERTIFICATE
The Lender shall have received a certificate of the President of the Borrower,
dated as of the Amendment Date, which shall certify that the representations and
warranties contained in Section of this Amendment are true and correct as of the
Amendment Date and that all conditions required to be performed prior to the
Amendment Date have been so performed.
5.4 GOOD STANDING CERTIFICATES
The Lender shall have received a certificate of the appropriate public official
in the jurisdiction of incorporation of the Borrower and each Subsidiary
certifying the due incorporation and good standing of the Borrower and such
Subsidiary together with, in the case of the Borrower, a certified copy of the
Articles of Incorporation of the Borrower.
5.5 NO PROCEEDINGS OF LITIGATION
No action, suit or proceeding before any arbitrator or any governmental
authority shall have been commenced, and no investigation by any governmental
authority shall have been threatened, against the Borrower or any Subsidiary, or
any of the officers or directors of the Borrower or any Subsidiary seeking to
restrain, prevent or change the transactions contemplated by the Debenture, as
amended by this Amendment Agreement, or seeking damages in connection with such
transactions.
5.6 NO EVENT OF DEFAULT
No event has occurred and is continuing, or would result from the advance of the
Third Tranche, as the case may be, which constitutes an Event of Default.
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March 28, 2008
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6. GENERAL
6.1 COUNTERPART AND FAX EXECUTION
This Amendment 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.
6.2 ADDITIONAL AGREEMENT
As soon as reasonably practicable following the execution of this Amendment, the
Borrower agrees to enter into a consulting agreement with Melior AG, an indirect
wholly-owned subsidiary of the Lender, having the terms substantially as set
forth on Annex B hereto. For the avoidance of doubt, a breach of the covenant
contained in this section shall constitute an Event of Default under the
Debenture.
SIGNATURES ON NEXT PAGE
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March 28, 2008
Page 7 of 22
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
Amendment Date.
LENDER
PALA INVESTMENTS HOLDINGS LIMITED
/s/Susan Garrod
- ----------------------------------
BORROWER
RECLAMATION CONSULTING AND APPLICATIONS, INC.,
a Colorado corporation
/s/ Michael Davies
- -------------------------------------
By: Michael C. Davies
Its: Chief Executive Officer
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March 28, 2008
Page 8 of 22
SCHEDULE O
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. 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
$2,500,000 March 28, 2008
This Promissory Note is being issued pursuant to a Secured Convertible Debenture
dated for reference as of December 12, 2007 between Pala Investments Holdings
Limited and Reclamation Consulting and Applications, Inc., as amended to date
(the "Convertible Debenture"). Capitalized terms used in this Promissory Note
are defined in the Convertible Debenture shall have the same meanings as defined
therein, unless otherwise defined herein.
FOR VALUE RECEIVED, Reclamation Consulting and Applications, Inc. (the
"Borrower"), of 940 Calle Amanecer, Suite E, San Clemente, CA 92673, PROMISES TO
PAY on December 11, 2010 or on demand in accordance with the terms of the
Convertible Debenture, to the order of Pala Investments Holdings Limited (the
"Lender"), at 12 Castle Street, St. Helier, Jersey, JE2 3RT, Channel Islands,
the sum of Two and One-half Million Dollars ($2,500,000), together with any
accrued unpaid interest and costs and expenses outstanding as of such date (the
"Indebtedness"). Interest on the Indebtedness at the rate of Twelve Percent
(12%) per annum (or the highest interest rate permissible by applicable law,
whichever is lower) (the "Interest Rate"), compounded on the last day of each
fiscal quarter of the Borrower, will accrue until the earlier of (i) the
Maturity Date, (ii) the date the Loan is repaid in full, or (iii) the date that
the Indebtedness is converted to Borrower's common stock pursuant to the terms
of the Convertible
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March 28, 2008
Page 9 of 22
Debenture. Notwithstanding the foregoing, following the occurrence of an Event
of Default and pursuant to Subsection 7.2.3. of the Convertible Debenture, the
Interest Rate shall be Sixteen Percent (16%) per annum (or the highest interest
rate permissible by applicable law, whichever is lower), until the earlier of
(i) the date such Event of Default is cured, (ii) the date the Indebtedness is
repaid in full, or (iii) the date that the Indebtedness is converted to
Borrower's common stock pursuant to the terms of the Convertible Debenture.
The obligations of the Borrower to pay the Indebtedness to the Lender will
terminate if and to the extent that the Indebtedness is converted in accordance
with Section 4 of the Convertible Debenture.
The Borrower waives presentment or other demand for payment, notice of dishonor,
protest and non-payment.
The Borrower may prepay all or any portion of the Indebtedness at any time or
from time to time without penalty, bonus or charges.
The Borrower shall pay all costs of collection, including reasonable attorneys'
fees and legal expenses if this Promissory Note is not paid when due, whether or
not legal proceedings are commenced.
Reclamation Consulting and Applications, Inc.,
a Colorado corporation
---------------------------------------
By: Michael C. Davies
Its: Chief Executive Officer
OMNIBUS AMENDMENT
March 28, 2008
Page 10 of 22
SCHEDULE P
WARRANT CERTIFICATE
No. _____________ 2,500,000 Warrants
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. THE
HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING
TRANSACTION WITH REGARD TO THIS SECURITY, EXCEPT AS PERMITTED BY THE ACT.
WARRANTS FOR THE
PURCHASE OF COMMON STOCK
THIS CERTIFIES THAT, FOR VALUE RECEIVED, PALA INVESTMENTS HOLDINGS LIMITED, (the
"Holder"), is the owner of warrants (the "Warrants") for the purchase of up to
an aggregate of 2,500,000 shares of validly-issued, fully-paid and
non-assessable Common Stock (as defined below) of RECLAMATION CONSULTING AND
APPLICATIONS, INC., a corporation organized and existing under the laws of the
State of Colorado (the "Corporation"). Such purchase may be made at any time,
and from time to time, prior to the Expiration Date (as defined below) upon the
presentation and surrender of this Warrant Certificate with a written notice in
the form of Attachment 1, attached hereto, signed by the Holder stating the
number of shares of Common Stock with respect to which such exercise is being
made, at the principal corporate address of the Corporation, accompanied by
payment of the Exercise Price (as defined below) for each Warrant exercised in
lawful money of the United States of America in cash or by official bank or
certified check made payable to RECLAMATION CONSULTING AND APPLICATIONS, INC.
The Exercise Price is subject to modification or adjustment as set forth herein.
The Warrants represented by this Warrant Certificate have been issued by the
Corporation in connection with the Secured Convertible Debenture, dated as of
December 12, 2007, by and between the Corporation and the Holder, as amended to
date.
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Page 11 of 22
SECTION 1. DEFINITIONS. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the common stock of the Corporation,
which has the right to participate in the distribution of earnings and
assets of the Corporation without limit as to amount or percentage.
(b) "Corporate Office" shall mean the office of the Corporation at
which, at any particular time, its principal business shall be
administered, which office is currently located at 940 Calle Amanecer,
Suite E, San Clemente, CA 92673.
(c) "Exercise Date" shall mean, as to any Warrant, the date on which
the Corporation shall have received both (i) this Warrant Certificate,
together with a written notice of exercise in accordance herewith, duly
executed by the Holder hereof, or his attorney duly authorized in
writing, and indicating that the Holder is thereby exercising such
Warrant(s), and (ii) payment by wire transfer, or by official bank or
certified check made payable to the Corporation, of an amount in lawful
money of the United States of America equal to the applicable Exercise
Price for such Warrant(s).
(d) "Exercise Period" shall mean the period commencing as of December
12, 2007 and expiring on the Expiration Date.
(e) "Exercise Price" shall mean, as to any Warrant, the price at which
a Warrant may be exercised for the purchase of Warrant Shares, which
shall be $0.21, subject to adjustment from time to time pursuant to the
provisions of Section 5 hereof.
(f) "Expiration Date" shall mean 5:00 P.M. (Pacific Time) on March 27,
2011. If such date shall be a holiday or a day on which banks are
authorized to be closed in the State of California, then the Expiration
Date shall mean 5:00 P.M. (Pacific Time) of the next consecutive day
which does not fall on a holiday or a day on which banks are authorized
to be closed in the State of California.
(g) "Securities Act" shall mean the Securities Act of 1933, and any
amendments or modifications, or successor legislation, thereto adopted,
and all regulations, rules or other laws enacted or adopted pursuant
thereto.
(h) "Warrant Certificate" shall mean this certificate.
(i) "Warrant Registry" means the official record maintained by the
Corporation in which are recorded, with respect to the Warrant
Certificate and any other certificate representing the Warrants issued
by the Corporation, the date of issuance, the name and address of the
Holder, the name and address of each subsequent transferee of the
Holder, and the identifying number, of such certificate.
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March 28, 2008
Page 12 of 22
(j) "Warrant Shares" shall have the meaning given to it in Section 2 of
this Warrant Certificate.
SECTION 2. EXERCISE OF WARRANTS.
(a) Each Warrant evidenced hereby may be exercised by the Holder upon
the terms and subject to the conditions set forth herein prior the
Expiration Date. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the Exercise Date and the
person entitled to receive shares of Common Stock deliverable upon such
exercise ("Warrant Shares") shall be treated for all purposes as the
holder of a Warrant Share upon the exercise of the applicable Warrant
as of the close of business on the Exercise Date. Promptly following,
and in any event within ten (10) business days after, the date on which
the Corporation first receives clearance of all funds received in
payment of the Exercise Price pursuant to this Warrant Certificate, the
Corporation shall cause to be issued and delivered to the person or
persons entitled to receive the same, a certificate or certificates
evidencing the issuance to the Holder of the applicable number of
Warrant Shares (plus a Warrant Certificate for any remaining issued but
unexercised Warrants of the Holder). Notwithstanding the foregoing
sentence, in the event that any registration or qualification (or
filing for exemption from any such requirements) is required prior to
the issuance of such Warrant Shares by the Corporation in accordance
with Section 3(b) below, then the obligation to deliver any such
certificates shall arise only upon completion of such requirements and
at such time as the Corporation may lawfully do so.
(b) Upon the exercise of the Warrants represented hereby, if the
Corporation so requests, the Holder shall certify to the Corporation
that it is not exercising such Warrants with a view to distribute the
Warrant Shares in violation of the Securities Act, and shall provide
such other investor representations as the Corporation may require to
confirm the ability of the Corporation to rely upon the exemption from
registration under the Securities Act which applies to the distribution
of Warrant Shares at the time of such distribution.
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Page 13 of 22
SECTION 3. RESERVATION OF SHARES; TAXES; ETC.
(a) The Corporation covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely for the
purpose of issue upon the valid exercise of Warrants, such number of
Warrant Shares as shall then be issuable upon the exercise of all
Warrants then outstanding. The Corporation covenants that all shares of
Common Stock which shall be issuable upon exercise of the Warrants
shall, at the time of delivery, be duly and validly issued, fully-paid,
non-assessable and free from all taxes, liens and charges with respect
to the issuance thereof (other than those which the Corporation shall
promptly pay or discharge, or any liens created thereon by the Holder
and/or any predecessor of the Holder).
(b) The Corporation shall not be obligated to deliver any Warrant
Shares pursuant to the exercise of the Warrants represented hereby
unless and until a registration statement under the Securities Act
and/or under any applicable state securities laws and regulations, with
respect to such securities is effective, or an exemption from such
registration is available to the Corporation at the time of such
exercise. The Corporation covenants that if any Warrant Shares reserved
for the purpose of exercise of Warrants hereunder require registration
with, or approval of, any governmental authority under any federal or
state securities law before such securities may be validly issued or
delivered upon such exercise, then the Corporation will in good faith
and as expeditiously as reasonably possible, endeavor to secure such
registration or approval. However, in the event that this Warrant
Certificate represents Warrants which have been transferred by the
Holder, the Warrants represented hereby may not be exercised by, nor
shares of Common Stock issued to, the holder hereof in any state in
which such exercise and issuance would be unlawful.
(c) The Corporation shall pay all documentary, stamp or similar taxes
and other governmental charges that may be imposed with respect to the
issuance of the Warrants, or the issuance or delivery of any shares of
Common Stock upon exercise of the Warrants; provided, however, that if
the shares of Common Stock are to be delivered in a name other than the
name of the Holder, then no such delivery shall be made unless the
person requesting the same has paid to the Corporation the amount of
transfer taxes or charges incident thereto, if any.
SECTION 4. LOSS OR MUTILATION. Upon receipt by the Corporation of evidence
satisfactory to it of the ownership of, and loss, theft, destruction or
mutilation of, this Warrant Certificate and (in case of loss, theft or
destruction) of indemnity satisfactory to the Corporation, and (in the case of
mutilation) upon surrender and cancellation thereof, the Corporation shall
execute and deliver to the Holder in lieu thereof a new Warrant Certificate of
like tenor representing an equal aggregate number of Warrants as was indicated
to be outstanding on the prior lost or mutilated Warrant Certificate; provided,
however, that to the extent that any discrepancy may exist between the number of
Warrants purported to be outstanding in respect of the Holder as evidenced by a
Warrant Certificate that has been lost or mutilated and the number attributable
to the Holder in the Warrant Registry, then the Warrant Registry shall control
for all purposes, absent a showing of manifest error. If the Holder requests a
substitute Warrant Certificate due to loss, theft or destruction shall, prior to
receiving such substitute certificate, the Holder shall provide an affidavit to
the Corporation in the form prescribed thereby and signed by (and notarized on
behalf of) the Holder. Applicants for a substitute Warrant Certificate shall
comply with such other reasonable regulations and pay such other reasonable
charges as the Corporation may prescribe.
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March 28, 2008
Page 14 of 22
SECTION 5. ADJUSTMENT OF EXERCISE PRICE. Subject to the provisions of this
Warrant Certificate and applicable law, in the event the Corporation, at any
time or from time to time after the date hereof while the Warrants are
outstanding, (i) pays a stock dividend on its common stock, (ii) subdivides
outstanding shares of common stock into a larger number of shares, or (iii)
combines outstanding shares of common stock into a smaller number of shares,
then in each such case the Exercise Price shall be adjusted to be equal to $0.21
multiplied by a fraction of which the numerator shall be the number of shares of
common stock outstanding immediately before such event and of which the
denominator shall be the number of shares of common stock outstanding
immediately after such event.
SECTION 6. RESTRICTIVE LEGEND.
(a) Except as otherwise provided in this Section 6, each Warrant
Certificate and each certificate evidencing the issuance of Warrant
Shares (whether issued in the name of the Holder of this Warrant
Certificate or of any subsequent transferee thereof), shall be stamped
or otherwise imprinted with a legend in substantially the following
form:
"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. THE
HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY
HEDGING TRANSACTION WITH REGARD TO THIS SECURITY, EXCEPT AS
PERMITTED BY THE ACT."
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March 28, 2008
Page 15 of 22
(b) Each certificate evidencing the issuance of Warrant Shares and each
Warrant Certificate may also bear such other restrictive legends as may
be necessary to comply with applicable law in the Corporation's
reasonable discretion. The legend requirements of Section 6(a) above
shall terminate as to any particular Warrant or Warrant Share: (i) if
and so long as such security shall have been effectively registered
under the Securities Act and is disposed of pursuant thereto; or (ii)
when the Corporation shall have received an opinion of counsel
reasonably satisfactory to it that such shares may be sold to the
public without registration thereof under the Securities Act. Whenever
the legend requirements imposed by this Section 6 shall terminate as to
any Warrant Share, as hereinabove provided, the Holder hereof shall be
entitled to receive from the Corporation, at the Corporation's expense,
a new certificate representing such Warrant Shares and not bearing the
restrictive legend set forth in Section 6(a).
SECTION 7. RIGHTS OF ACTION. All rights of action with respect to the Warrants
are vested in the Holder of the Warrants, and the Holder of the Warrant, without
consent of the holder of any other warrants of the Corporation, may, in the
Holder's own behalf and for his own benefit, enforce against the Corporation the
Holder's right to exercise the Holder's Warrants for the purchase of Warrant
Shares in the manner provided in this Warrant Certificate.
SECTION 8. AGREEMENT OF WARRANT HOLDERS. Every holder of a Warrant, by his or
her acceptance thereof, consents and agrees with the Corporation and every other
holder of a Warrant that:
(a) the Warrant Registry shall be maintained by the Corporation's
Secretary, and shall be the official register of all Warrants issued to
any person in connection with the Convertible Debenture. The Warrant
Registry shall be dispositive as to the issuance, ownership, transfer
and other aspects of each Warrant issued by the Corporation which are
recorded therein and, absent manifest error, such records shall control
for all purposes;
(b) the Warrants are transferable only on the Warrant Registry by the
Holder thereof in person or by his attorney duly authorized in writing
and only if the Warrant Certificates representing such Warrants are
surrendered at the Corporate Office of the Corporation, duly endorsed
or accompanied by a proper instrument of transfer satisfactory to the
Corporation in its sole discretion, together with payment of the amount
of any applicable transfer taxes; and
(c) the Corporation may deem and treat the person in whose name the
Warrant Certificate is registered on the Warrant Registry as the Holder
and as the absolute, true and lawful owner of the Warrants represented
thereby for all purposes, and the Corporation shall not be affected by
any notice or knowledge to the contrary, except as otherwise expressly
provided in this Warrant Certificate.
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March 28, 2008
Page 16 of 22
SECTION 9. MODIFICATION OF WARRANTS. Other than with respect to any adjustment
made by the Corporation in accordance with the provisions of Section 5 hereof,
this Warrant Certificate may only be modified, supplemented or altered by the
Corporation, and only with the consent in writing of the Holder.
SECTION 10. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed first class registered or certified mail, postage prepaid as
follows: if to the Holder of a Warrant Certificate, at the address of such
Holder as shown on the Warrant Registry maintained by the Corporation; and if to
the Corporation, addressed as set forth below, or at such other address as may
be designated by the Corporation from time to time in accordance with this
Section 10:
If to the Corporation: Reclamation Consulting and
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
SECTION 11. GOVERNING LAW; VENUE. This Warrant Certificate 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 Warrant Certificate, 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.
SECTION 12. ENTIRE UNDERSTANDING. This Warrant Certificate contains the entire
understanding among the Corporation and the Holder relating to the subject
matter covered herein, and merges all prior discussions, negotiations and
agreements, if any between them. Neither of the Holder nor the Corporation shall
be bound by any representations, warranties, covenants, or other understandings
relating to such subject matter, other than as expressly provided for or
referred to herein.
SECTION 13. CASHLESS EXERCISE. Notwithstanding the foregoing, in lieu of paying
the Exercise Price in connection with the exercise of this Warrant, the Holder
shall have the right to exercise this Warrant or any portion of this Warrant
into Warrant Shares by a cashless exercise by executing and delivering to the
Company at its principal office a written Notice of Exercise in the form
attached to this Warrant marked "CASHLESS EXERCISE". The number of Warrant
Shares to be issued to Holder upon such conversion shall be computed using the
following formula:
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March 28, 2008
Page 17 of 22
X = ((P)(Y)(A-B))/A
where
X = the number of Warrant Shares of Common Stock to be
issued to the Holder for the portion of the Warrant
being converted.
P = the portion of the Warrant being converted expressed as
a decimal fraction.
Y = the total number of Warrant Shares issuable upon
exercise of the Warrant in full.
A = the market price of a share of Common Stock for the
date of exercise (the market price determined, for any
date, as the average of the closing prices of the
Common Stock on the principal securities exchange or
automated quotation system upon which the Common Stock
may then be listed for public trading for the five
immediately preceding trading days on such exchange).
B = the then current Exercise Price (as adjusted to the date
of such calculation).
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IN WITNESS WHEREOF, the Corporation has caused this Warrant Certificate
to be duly executed, manually or in facsimile, by an officer thereunto duly
authorized, as of the date set forth below.
Date: March 28, 2008
RECLAMATION CONSULTING AND APPLICATIONS, INC.,
a Colorado corporation
- ------------------------------------
By: Michael C. Davies
Its: Chief Executive Officer
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Page 19 of 22
ATTACHMENT 1
------------
TO WARRANTS FOR THE
PURCHASE OF COMMON STOCK
NOTICE OF EXERCISE
TO: RECLAMATION CONSULTING AND APPLICATIONS, INC. (THE "CORPORATION")
1. The undersigned hereby elects to purchase ____________ shares of
Corporation common stock, pursuant to the terms of the attached
Warrant, and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
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
the warrant is not being exercised 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
Corporation common stock in the name of the undersigned or in such
other name as is specified below:
----------------------------------
(Name)
----------------------------------
(Address)
- --------------------- -----------------------------
(Date) (Name of Warrant Holder)
By:
------------------------------------
Title:
-------------------------------
(Name of purchaser, and title
and signature of authorized
person)
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Page 20 of 22
ANNEX A
SCHEDULE OF EXCEPTIONS
SHARES OUTSTANDING
Current Fully Diluted
127,482,048 258,361,307
SHARES OUTSTANDING POST-REORGANIZATION
Current Fully Diluted
63,741,024 146,246,361
EXISTING INDEBTEDNESS (PRINCIPAL AND INTEREST)
Current ($) Post-Financing ($)
- -----------------------------------------------------------------------------
Convertible Notes 1,400,091 1,400,091
Secured Convertible Debentures(1) 4,307,951 5,602,575
Unsecured Convertible Debentures 995,056 995,056
Line of Credit 165,622 165,622
Other Loans 269,834 269,834
- ----------------------------------------------------------------------
Total 7,138,554 8,433,178
1. Includes the $2,500,000 Third Tranche
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ANNEX B
CONSULTING AGREEMENT TERMS
1. Term of two years from the date of signing the consulting agreement.
2. For year one, Melior AG will receive $200,000, payable in shares at the
Consulting Agreement Conversion Price (as defined in Section 5 to this Annex B).
3. For year two, Melior AG will receive $350,000, payable either in shares or
cash at the option of the Borrower. If paid in shares, Melior AG will receive
the number of shares to which it is entitled using the Consulting Agreement
Conversion Price (as defined in Section 5 to this Annex B).
4. Melior AG will provide the services of Allan Bulckaert (Chief Executive
Officer, Melior AG) and Steven Chambers (Chief Financial Officer, Melior AG) to
provide certain management and consultancy services to be described in detail in
the final agreement.
5. The "Consulting Agreement Conversion Price" shall be $0.07 per share,
provided that if Borrower, (i) pays a stock dividend on its common stock, (ii)
subdivides outstanding shares of common stock into a larger number of shares, or
(iii) combines outstanding shares of common stock into a smaller number of
shares, then in each such case the applicable Consulting Agreement Conversion
Price shall be adjusted by multiplying (a) such Consulting Agreement Conversion
Price in effect immediately prior to such event, by (b) a fraction of which the
numerator shall be the number of shares of common stock outstanding immediately
before such event and of which the denominator shall be the number of shares of
common stock outstanding immediately after such event.
6. The consulting agreement will contain an indemnity from the Borrower in favor
of Melior AG and its related parties in the standard form used by Melior AG in
its agreements.
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