EXHIBIT 10.6
RECLAMATION CONSULTING AND APPLICATIONS, INC.
AMENDMENT NO. 2 TO
CONVERTIBLE NOTE PURCHASE AGREEMENT
THIS AMENDMENT NO. 2 ("AMENDMENT NO. 2") is entered into as of the 18th
day of July, 2007 (the "AMENDMENT NO. 2 EFFECTIVE DATE"), by and between
RECLAMATION CONSULTING AND APPLICATIONS, INC., a corporation duly organized and
validly existing under the laws of the State of Colorado (the "COMPANY") and
CANVASBACK COMPANY LIMITED, a company organized and validly existing under the
laws of Anguilla ("CANVASBACK") and amends the Convertible Note Purchase
Agreement entered into between the Company and Canvasback as of October 17, 2006
and subsequently amended on December 15, 2006 (the "AGREEMENT"). Unless
otherwise expressly defined herein, all capitalized terms and Section references
used herein shall have the meanings set forth in the Agreement.
WHEREAS, as of the Amendment 2 Effective Date, the Company and
Canvasback desire to amend the terms of the Convertible Notes issued pursuant to
the Agreement;
Whereas, a Conversion Event has occurred under the Agreement and
Canvasback wishes to convert debt payable pursuant to the Convertible Notes into
shares of Company common stock pursuant to the terms hereof;
NOW THEREFORE, in consideration of the mutual promises contained in
this Amendment and the Agreement, the Company and Canvasback hereby agree to
amend the Agreement as follows:
1. OUTSTANDING BALANCE OF LOANS. The parties agree that the outstanding
balance of all principal and unpaid accrued interest under the Convertible Notes
issued or issuable under the Agreement is Three Million Two Hundred and Three
Thousand, Eight Hundred Eighty-Nine Dollars and Ninety-Seven Cents,
($3,203,889.97) (the "CURRENT OUTSTANDING BALANCE") as of the Amendment 2
Effective Date, consisting of Two Million Nine Hundred Thirty-Three Thousand,
Eight Hundred Ninety-Six Dollars ($2,933,896) in principal and Two Hundred
Sixty-Nine Thousand, Nine Hundred Eighty-Five Dollars and Ninety-Seven Cents
($269,985.97) of accrued unpaid interest
2. REPRESENTATIONS OF CANVASBACK. Canvasback represents and warrants
that (i) as of the Amendment 2 Effective Date, Canvasback is an "accredited
investor" as defined by Rule 502 of Regulation D promulgated under the
Securities Act of 1933, as amended, (ii) Canvasback has not sold, transferred,
assigned, pledged or otherwise hypothecated any of the Convertible Notes or any
rights pursuant to the Convertible Notes or the Agreement, and (iii) that it
will deliver to the Company all Convertible Notes within five business days
following the Amendment 2 Effective Date for conversion or reissuance pursuant
to Section 3 of this Amendment No. 2.
3. INITIAL CONVERSION OF SHARES AND ISSUANCE OF NEW CONVERTIBLE NOTE.
(a) The Parties agree that Canvasback is hereby converting One
Million, Seven Hundred Eighty-Seven Thousand Eight Hundred Dollars ($1,787,800)
of the Current Outstanding Balance into Sixty-Five Million (65,000,000) shares
of Company Common Stock (the "INITIAL CONVERSION SHARES") and that the remaining
balance of One Million Four Hundred Sixteen Thousand and Eighty-Nine Dollars and
Ninety-Seven Cents ($1,416,089.97) shall be consolidated into a single
convertible note in the form attached hereto as Exhibit B (the "NEW CONVERTIBLE
NOTE") with a maturity date of July 18, 2009.
(b) Within five business days following the Amendment No. 2
Effective Date, the Company shall issue the Sixty-Five Million (65,000,000)
Initial Conversion Shares.
4. SUBSEQUENT CONVERSION SHARES.
(a) Within five business days following any conversion
pursuant to Section 6 of this Amendment No. 2 of the outstanding balance of
principal and unpaid accrued interest of the New Convertible Note, the Company
shall issue such shares ("SUBSEQUENT CONVERSION SHARES") to Canvasback.
5. REGISTRATION RIGHTS. Article IV of the Agreement, pertaining to
Registration Rights, is hereby deleted in its entirety. Holders of the Initial
Conversion Shares or Subsequent Conversion Shares shall not be entitled to any
rights to have such shares registered on any registration statements filed by
the Company with the Securities and Exchange Commission or any equivalent
filings in any state for foreign jurisdiction.
6. CONVERSION RIGHTS.
(a) Section 2.2(d) of Article II, pertaining to Conversion
Rights is hereby deleted in its entirety and the outstanding balance of the New
Convertible Note shall have the conversion rights only as provided in this
Section 6 of Amendment No. 2. From the Subsequent Conversion Commencement Date
(as defined below) until the Maturity Date (the "CONVERSION PERIOD"), the
outstanding balance of the New Convertible Note may be converted at the option
of Canvasback in whole or in part, at once or from time to time, into shares
(the "SUBSEQUENT CONVERSION SHARES") of the Company's common stock, par value
$0.01 per share. The number of Conversion Shares to be issued upon such
conversion shall be equal to the quotient obtained by dividing (a) the aggregate
amount of principal and accrued but unpaid interest on this Note as of the date
of conversion, by (b) the Conversion Price (as defined below). The "CONVERSION
PRICE" is Two and One-half Cents ($0.025), subject to adjustment pursuant to
Section 6(b) of this Amendment No. 2. The "SUBSEQUENT CONVERSION COMMENCEMENT
DATE" shall be such date following the Amendment No. 2 Effective Date on which
the Company effects an increase in its authorized common stock and/or a reverse
split of its common stock, such that the Company has sufficient authorized
unissued shares of Common Stock to effect the conversion of the balance of the
New Convertible Note. Canvasback acknowledges that the Company can provide no
guaranty that the Subsequent Conversion Commencement Date will occur commencing
the Conversion Period. To exercise the conversion rights provided by this
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Section 6 of Amendment No. 2, Canvasback must provide written notice requesting
such conversion to the Company during the Conversion Period. The Initial
Conversion Shares and the Subsequent Conversion Shares are collectively referred
to as the "CONVERSION SHARES."
(b) If the Company, at any time while the New Convertible Note
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 Conversion Price shall be adjusted to be equal to Two
and One-half Cents ($0.025) 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.
7. RESTRICTIONS ON TRANSFER,.
(a) Canvasback shall not sell, contract to sell, transfer,
assign, pledge or otherwise hypothecate the New Convertible Note or any of its
rights under the Agreement without the prior written consent of the Company,
which the Company may withhold at its sole discretion.
(b) For the period commencing on the Amendment No. 2 Effective
Date and terminating on the third anniversary of the Amendment No. 2 Effective
Date (the "TRICKLE-OUT TERM") Canvasback shall not sell, contract to sell,
transfer, assign, pledge or otherwise hypothecate any number of Conversion
Shares exceeding Five Percent (5%) of the Company's Outstanding Shares (as
defined below) in any calendar month without the Company's prior written
permission which the Company may withhold at its sole discretion (the
"TRICKLE-OUT RESTRICTIONS"). "OUTSTANDING SHARES" shall refer to the number of
the Company's outstanding shares of common stock and shall be determined for any
particular calendar month pursuant to the most recent public report or public
statement released by the Company stating such number during or preceding such
month. Canvasback acknowledges that, in addition to the Trickle-Out
Restrictions, the Conversion Shares are subject to the restrictions on resale
imposed by federal and state securities laws and/or the securities laws of any
applicable foreign jurisdiction. Canvasback further acknowledges that for the
period of time it is considered an "affiliate" of the Company (as defined by the
Securities Act of 1933, as amended, and the rules promulgated thereunder)
whether during the Trickle-Out Term or after, any sale of Company shares held by
Canvasback will be subject to Rule 144 promulgated under the Securities Act of
1933, as amended, including certain volume limitations on sales by affiliates.
(c) The Company may cause its transfer agent to place a stop
transfer order on all Conversion Shares. The Company may also cause a
restrictive legend to be placed on all certificates evidencing the Conversion
Shares in substantially the following form:
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THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, or OTHERWISE HYPOTHECATED
EXCEPT IN COMPLIANCE WITH THE RESTRICTIONS OF THE CONVERTIBLE
NOTE PURCHASE AGREEMENT DATED OCTOBER 17, 2006, AS AMENDED,
ENTERED INTO BY AND BETWEEN THE CORPORATION AND CANVASBACK
COMPANY LIMITED.
Such restrictive legend shall be in addition, and not in place of any applicable
restrictive legends the Company reasonably believes to be necessary under
applicable securities laws.
(d) During the Trickle-Out Term, the Company may cause its
transfer agent to place a stop transfer order on the Conversion Shares, to
prevent the transfer of Conversion Shares on the books of the Company except in
compliance with Trickle-Out Restrictions.
(e) In the event that the Company's shares are to be listed on
the TSX Venture Exchange, Canvasback agrees to execute an escrow agreement in
the form requested by the TSX Venture Exchange (the "TSX ESCROW AGREEMENT"),
restricting the sale of all Company stock (including Conversion Shares) then
held by Canvasback and causing all such shares to be escrowed. The Parties agree
that the terms of any such fully executed TSX Escrow Agreement shall supersede
the terms of this Section 7 of Amendment No. 2.
8. As hereby amended and supplemented, the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
the Agreement as of the Amendment Effective Date above.
RECLAMATION CONSULTING
AND APPLICATIONS, INC.: ATTEST:
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx
President Secretary
CANVASBACK COMPANY LIMITED:
By: /s/ Xxxxxxxxx Xxxxxx
Name: Xxxxxxxxx Xxxxxx
Authorized Signatory
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EXHIBIT B
TO
AMENDMENT NO. 2 TO
CONVERTIBLE NOTE PURCHASE AGREEMENT
CONVERTIBLE PROMISSORY NOTE
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THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), NOR UNDER THE LAWS OF ANY STATE, AND MAY NOT BE RESOLD,
ASSIGNED, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
CONVERTIBLE PROMISSORY NOTE
$1,416,089.97 July 18, 2007
FOR VALUE RECEIVED, RECLAMATION CONSULTING AND APPLICATIONS, INC., a
corporation organized and existing under the laws of the State of Colorado
(hereinafter referred to as the "BORROWER"), hereby promises to pay to the order
of CANVASBACK COMPANY LIMITED, an Anguilla company, (hereinafter referred to as
the "LENDER"), at his/her/its principal address located at Hannah Waiver House,
The Valley, Anguilla BWI, or such other place or places as the Lender may
hereafter direct from time to time, in lawful money of the United States and in
immediately available funds, the principal sum of One Million Four Hundred
Sixteen Thousand and Eighty-Nine Dollars and Ninety-Seven Cents
($1,416,089.97).. This Convertible Promissory Note (hereinafter referred to as
the "NOTE") shall accrue simple interest at the rate of ten percent (10%) per
annum, calculated on the basis of a 365-day year from the date of this Note. The
aggregate amount of all principal and accrued interest shall be due and payable
on the second (2nd) anniversary of the date hereof (hereinafter referred to as
the "MATURITY DATE"). This Note shall be unsecured by the Borrower or any other
person, and non-recourse to any shareholder, officer, director, employee, agent
or representative of the Borrower.
1. PURCHASE AGREEMENT. This Note is issued pursuant to that certain Note
Purchase Agreement, dated as of October 17, 2006 and as amended on December 15,
2006 by Amendment No. 1 and on July 18, 2007 by Amendment No. 2, by and between
the Borrower and the Lender (as amended, the "PURCHASE AGREEMENT"), and is
subject to the provisions thereof. If any dispute arises between the terms of
the Purchase Agreement and the terms of this Note, the terms of the Purchase
Agreement shall prevail. Unless otherwise expressly defined herein, all
capitalized terms used herein shall have the meanings set forth in the Purchase
Agreement
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2. CONVERSION. If, during the Conversion Period, in the sole and exclusive
option of the Lender, the Lender should desire to convert the amount of
indebtedness represented hereby, or a portion thereof, into Subsequent
Conversion Shares in lieu of the repayment obligation of such Borrower pursuant
to this Note, then Lender shall give notice to such effect prior to the Maturity
Date and in compliance with the terms and restrictions of the Purchase
Agreement. The number of Subsequent Conversion Shares to be issued upon such
conversion shall be equal to the quotient obtained by dividing (a) the aggregate
amount of principal and accrued but unpaid interest on this Note as of the date
of conversion, by the Conversion Price. If this Note, or any portion of
indebtedness represented hereby, is converted into Subsequent Conversion Shares
as provided herein, then the provisions of this Note relating to the obligation
of the Borrower to pay principal and interest to Lender, set forth above, shall
be null and void and no payment of principal and interest shall be owed or paid
by Borrower thereafter with respect to the amount of indebtedness converted into
Subsequent Conversion Shares.
3. INTEREST PAYMENTS. With the Lender's prior written approval, the Borrow may
pay the accrued interest on the principal amount of this Note, in whole or in
part, at any time and from time to time, without penalty, during the term of
this Note or at the Maturity Date.
4. NO VOTING RIGHTS. This Note shall not entitle Lender to any voting rights or
other rights as a stockholder of Borrower.
5. TRANSFERS. This Note may be transferred only in compliance with the Note
Purchase Agreement and with applicable federal and state securities laws, and
only upon surrender of the original Note for registration of transfer, duly
endorsed, or accompanied by a duly executed written instrument of transfer in
form satisfactory to Borrower. Thereupon, a new promissory note for like
principal amount and interest will be issued to, and registered in the name of,
the transferee. Interest and principal are payable only to the registered holder
of this Note. Lender agrees to provide a form W-9 to Borrower on request.
6. WAIVER. No waiver of any provision of this Note shall be deemed to be or
shall constitute a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver. This Note shall inure
to the benefit of the Lender, his heirs, executors, successors and permitted
assigns, PROVIDED, however, that this Note shall not be assignable to any party
by contract or by operation of law without the prior written consent of the
Borrower. The obligations of the Borrower arising hereunder shall become the
obligations of any successor in interest or assignee thereof, whether by
contract or by operation of law.
7. GOVERNING LAW; VENUE. This Note 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 Note, the
parties hereby agree to accept the exclusive jurisdiction of the Courts of the
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State of California sitting in and for the County of Orange. In the event either
party shall be forced to bring any legal action to protect or defend its rights
hereunder, then the prevailing party in such proceeding shall be entitled to
reimbursement from the non-prevailing party of all fees, costs and other
expenses (including, without limitation, the reasonable expenses of its
attorneys) in bringing or defending against such action.
THE BORROWER:
RECLAMATION CONSULTING ATTEST:
AND APPLICATIONS, INC.
By: _________________________ By: ___________________________
Xxxxxx Xxxxxx Mr. Xxxx Xxxxxx
President Secretary
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