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.
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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(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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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
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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.
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."
(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
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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.
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.
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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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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
/s/ Michael Davies
- --------------------------------
By: Michael C. Davies
Its: Chief Executive Officer
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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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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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