EXHIBIT 1
THIRD AMENDED AND RESTATED
GUARANTY AGREEMENT
This agreement is made and entered into as of 29th day of November,
2001, by and between AmerAlia, Inc., a Utah corporation whose address is 000
Xxxxxxxxxxxx Xxxx., Xxxxx, Xxxxxxxx 00000 ("AmerAlia") and Xxxxxxxxxx Xxxx as
trustee for the Xxxxxxxxxx Xxxxxx Mars Trust, whose address is 0000 Xxx Xxxxxx,
XxXxxx, Xxxxxxxx 00000 (the "Trust").
RECITALS
A. AmerAlia has commenced operations necessary to build a plant for the
production of sodium bicarbonate on property near Rifle, Colorado (the "Rock
School Project"), and is seeking permanent financing to permit the Company to
commence construction activities.
B. AmerAlia has previously borrowed approximately $7,326,000 from the Bank of
America, N.A. (the "Bank") for working capital purposes and to fund an escrow
account established in accordance with the requirements of a Design/Build
Contract entered into between AmerAlia and U.S. Filter Wastewater Group, Inc., a
Delaware corporation, d/b/a U.S. Filter Corporation, HPD Products ("U.S.
Filter"), which amounts the Trust has previously guaranteed pursuant to a
Guaranty Agreement dated September 13, 1999, a Guaranty Agreement dated January
21, 2000, a Guaranty Agreement dated June 30, 2000, and an amended and restated
guaranty agreement dated as of September 14, 2000; and
C. AmerAlia also previously borrowed an additional loan of approximately
$1,600,000 (the "First Additional Loan") from the Bank to provide working
capital to AmerAlia for certain expenses incurred and its continuing operations
which was reflected in a Second Amended and Restated Guaranty Agreement dated
December 1, 2000; and
D. AmerAlia is seeking an additional loan of approximately $1,000,000 (the
"Second Additional Loan") from the Bank to provide working capital to AmerAlia
for certain expenses incurred and its continuing operations; and
E. The Trust and AmerAlia wish to consolidate all existing loans with the Bank
into a single loan of not more than $10,000,000 (the "Aggregate Loan" which
includes the Second Additional Loan); and
F. AmerAlia has previously granted the Trust a security interest in its assets,
which security interest is intended to and does extend to the Second Additional
Loan and the Aggregate Loan as set forth herein.
G. The Trust is willing to facilitate the Second Additional Loan and the
Aggregate Loan by guaranteeing the repayment of the loan in a manner
satisfactory to the Bank provided the Company expends the proceeds of the loan
only for continuing operations necessary to maintain the Company and to permit
the Company to complete its negotiations for permanent financing necessary to
complete the construction of the Rock School Project and/or the acquisition of
other business activities, as discussed between officers of the Company and the
Trust (with the expectation that the funds will not be used for actual
construction activities); and
H. AmerAlia is willing to subject the use of the proceeds from the loan to such
limitations, and to compensate the Trust for providing this guarantee.
Guaranty Agreement - AmerAlia, Inc. Page 1
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and for other good and valuable consideration the receipt and
sufficiency whereof is hereby acknowledged, AmerAlia and the Trust: (A) agree
that this Third Amended and Restated Guaranty by its terms supercedes the
previous guaranties on this matter which are described in Recitals B and C,
above, and which are hereby cancelled and terminated and upon the execution
hereof become void and of no force or effect; and (B) further agree as follows:
1. AmerAlia will execute and deliver to the Bank an application for a loan
for a period of four months in an amount no greater than $10,000,000
(which amount includes all existing loans between AmerAlia and the Bank
which have been guaranteed by the Trust), the proceeds of which will be
used for AmerAlia's working capital purposes.
2. The Trust will execute and deliver to the Bank such forms as may be
necessary or appropriate to provide a guaranty for the repayment of the
Aggregate Loan in a form that is satisfactory to the Bank and to the
Trust, and is consistent with this Agreement (the "Guaranty").
3. AmerAlia will use the Additional Loan and any additional funds
available from the Bank pursuant to the Aggregate Loan (the "Loan
Proceeds") for the following purposes:
(1) to pay any interest accrued on the Aggregate Loan through the
date hereof to the extent not previously paid;
(2) to request an advance from the Bank in an amount not greater
than $1,000,000 pursuant to the following procedure:
o AmerAlia will make a written request to the Bank to
withdraw funds pursuant to the loan documents.
o AmerAlia will provide the Trust written notice of the
amount requested and a description of the intended
use of proceeds as well as AmerAlia's efforts to
accomplish Development Arrangements as described in
paragraph 4(3), below. AmerAlia will also provide a
copy of the written request to the Bank to draw the
funds requested from the Aggregate Loan.
o The Bank will advance the funds to AmerAlia at the
earlier of: (i) the date the Trust agrees in writing
to permit the advance; and (ii) seven days after
AmerAlia's written request unless the Trust objects
in writing to the advance.
o If the Trust objects in writing to the advance
requested by AmerAlia, the Bank will not advance the
funds to AmerAlia.
4. As a condition of the Trust's willingness to enter into this Guaranty
Agreement and to make the funds to be provided by the Additional Loan
available to AmerAlia, AmerAlia agrees as follows:
(1) AmerAlia will continue to reduce its corporate, general, and
administrative expenses (including, without limitation, salary
expenses) to the maximum extent possible, with the requirement
that compensation paid to corporate officers shall be
reasonably related to the services they are expected to
perform for AmerAlia;
Guaranty Agreement - AmerAlia, Inc. Page 2
(2) AmerAlia hereby grants the Trust as collateral for the
repayment of the Aggregate Loan and the Trust's liability
under this Guaranty, AmerAlia's entire interest in Natural
Soda, Inc., a recently-formed Colorado corporation to acquire
AmerAlia's entire interest in the Rock School Project and the
federal lease associated therewith.
(3) AmerAlia will use its best efforts to obtain necessary
financing or a strategic alliance for the development of the
Rock School Project, including the acquisition of business
activities, ("Development Arrangements") as soon as reasonably
possible. AmerAlia will make a report to the Trust regarding
its progress in achieving a Development Arrangement no later
than January 31, 2002.
o When used in the foregoing paragraph, the term
"necessary financing" means construction financing or
permanent financing reasonably sufficient to
carry-out AmerAlia's business plan as reviewed by the
Trust; and
o When used in the foregoing paragraph, the term
"strategic alliance" means a joint venture,
partnership, or other business combination with an
affiliated or unaffiliated entity which will provide
capital or other resources reasonably sufficient for
the development of the Rock School Project.
(4) AmerAlia will apply the net proceeds of any Development
Arrangement, as received, to repay the Aggregate Loan, and the
amount of the Guaranty will be reduced to the extent of such
repayments. If the Development Arrangement provides for the
repayment of the Aggregate Loan in full by no later than
February 28, 2002, the Development Arrangement will be
"reasonably satisfactory" to the Trust and will meet the
requirements of paragraph 4(3). If AmerAlia has not achieved
an acceptable Development Arrangement by February 28, 2002,
the Trust may in its sole discretion terminate this Guaranty
agreement. If the Trust terminates this Guaranty agreement,
the Trust may repay the aggregate loan, take assignment from
the Bank of its collateral position and other rights under the
Bank's loan documents with AmerAlia, and take such further
action (including demanding repayment of the aggregate loan
and foreclosing on any collateral held) as the Trust in its
discretion may deem appropriate.
5. AmerAlia will pay the Trust compensation for executing and delivering
the Guaranty to the Bank in an amount equal to $1,780,000, payable in
shares of AmerAlia's restricted common stock valued at the average
closing price as reported by The Nasdaq Stock Market, Inc. SmallCap
Market for the 30 days following the announcement by AmerAlia of the
Development Arrangement or the announcement of a determination under
paragraph 4(4) to pursue other arrangements, but not greater than $2.50
per share. If the rules of the Nasdaq Stock Market require that the fee
be approved by the shareholders, then the payment of the fee in shares
will be subject to shareholder approval and, if not approved by the
shareholders, will be payable in cash not later than the date for
repayment of the Aggregate Loan.
If AmerAlia's common stock is not quoted on the Nasdaq SmallCap Market
during any portion of the 30 days following the announcement, the price
will be determined by reference to the prices quoted on the OTC
Bulletin Board (if quoted on the OTC Bulletin Board) or as set forth in
the National Quotation Bureau sheet listing AmerAlia common stock
during such period, or (if not publicly traded or quoted in any
independent source) as may be otherwise determined by the Board of
Directors in good faith after reviewing all relevant facts and
circumstances.
Guaranty Agreement - AmerAlia, Inc. Page 3
If at the time the fee is payable, the average price is $4.25, the
maximum price to be used to determine compensation to the Trust will be
$2.50. Consequently, AmerAlia will issue 800,000 shares of restricted
common stock to the Trust. If, on the other hand, the average price of
AmerAlia common stock is $1.50 per share, AmerAlia will issue 1,333,333
shares of its restricted common stock to the Trust as full compensation
for this Guaranty. The shares will be issued to the Trust within three
business days of this determination.
6. If the Trust makes any payment to the Bank under the Guaranty, AmerAlia
will indemnify and hold the Trust harmless for any such payment, and
for all other costs and expenses, including reasonable attorneys' fees
incurred in connection therewith.
7. The Trust acknowledges that such shares, when issued, will be
restricted as that term is defined in Rule 144 of the Rules and
Regulations promulgated by the Securities and Exchange Commission. The
Trust further acknowledges, represents and warrants to AmerAlia that:
(1) The Trust is an `accredited investor' as that term is defined
in Section 2(a)(15) of the Securities Act of 1933 (the "1933
Act") and Rule 215 thereunder, and in Rule 501(a) of
Regulation D of the 1933 Act.
(2) AmerAlia has given the Trust and its legal, financial, tax,
and investment advisors the opportunity to ask questions of
and to receive answers from persons acting on AmerAlia's
behalf concerning the terms and conditions of this transaction
and the opportunity to obtain any additional information
regarding AmerAlia, its business and financial condition which
AmerAlia possesses or can acquire without unreasonable effort
or expense including (without limitation) all minutes of the
meetings of the Board of Directors of AmerAlia or committees
thereof, and other relevant documents requested by the Trust.
In addition, the Trust has spoken with the independent
auditors for AmerAlia and has made financial or other
inquiries as the Trust or its advisors have deemed necessary
or appropriate in the conduct of the Trust's due diligence
investigation.
(3) The Trust acknowledges and understands that, although there is
currently a market for AmerAlia's common stock, the market is
dependent on a number of factors beyond the control of
AmerAlia and may not continue. Furthermore the Trust
acknowledges that although AmerAlia believes that it is in
compliance with all requirements for continued listing of the
Common Stock on the Nasdaq SmallCap Market, continued listing
on the Nasdaq SmallCap Market is subject to a number of
objective and subjective criteria. Although AmerAlia believes
it is in material compliance with all objective criteria,
there can be no assurance that the staff of the Nasdaq
SmallCap Market may not reach a different conclusion or that
the Nasdaq staff may not reach a conclusion that AmerAlia is,
for some reason, not in compliance with subjective criteria
which is not specified in the rules applicable to the Nasdaq
SmallCap Market.
(4) The Trust understands that the securities being acquired
hereby are and will continue to be restricted securities
within the meaning of Rule 144, and applicable state statutes.
The Trust consents to the placement of an appropriate
restrictive legend or legends on any certificates evidencing
the securities and any certificates issued in replacement or
exchange therefor and acknowledges that AmerAlia will cause
its stock transfer records to note the restrictions.
Guaranty Agreement - AmerAlia, Inc. Page 4
o The Trust must bear the economic risks of the
investment in the securities for an indefinite period
of time because they have not been registered under
the 1933 Act or any state securities laws;
o As "restricted securities" (unless registered for
resale or another exemption from registration is
available for any transfer), the securities must be
held for a minimum of one year following the
purchase. Thereafter, the securities may be sold in
only limited amounts in a specified manner in
accordance with the terms and conditions of Rule 144
(the "Rule") if the Rule is applicable (there being
no representation by AmerAlia that it will be
applicable). In case the Rule is not applicable, any
sales may be made only pursuant to an effective
registration statement or an available exemption from
registration.
o The securities cannot be sold unless they are
registered under the 1933 Act and any applicable
state securities laws or unless an exemption from the
registration requirements is available. To the extent
that AmerAlia files any registration statement under
the 1933 Act (not including a registration statement
on Form X-0, X-0, X-00, or other inappropriate form),
AmerAlia will endeavor to include the Securities in
such registration statement, subject to any
requirements that may be imposed by any underwriter
named in the registration statement (which
requirements may include, but are not limited to, a
delay in the ability of the selling security holder
to sell the shares, a requirement that any sales be
made through the underwriter, or a prohibition on any
sales by the selling security holder pursuant to the
registration statement in certain specified
circumstances, in the underwriter's sole discretion).
(5) The Trust has reviewed the terms of this agreement and the
transaction contemplated by this agreement with its legal,
investment, tax, and financial advisors to the extent the
Trust has deemed such consultation appropriate. The Trust has
also consulted with such advisors with regard to the
advisability of this investment to the extent the Trust has
deemed such consultation to be appropriate. The Trust
acknowledges that AmerAlia has advised the Trust that it
recommends that the Trust obtain advice and consultation. The
Trust further acknowledges that it has neither sought nor
received any advice from AmerAlia or any of its agents or
affiliates with respect to any aspect of this Agreement.
(6) The Trust acknowledges that the investment contemplated herein
is one of significant risk, and there can be no assurance that
the securities will ever be valuable. The Trust hereby
represents that the investment in the securities is a suitable
investment for it, taking into consideration the restrictions
on transferability and the other considerations affecting the
securities and AmerAlia as described herein and in AmerAlia's
reports filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended
(the "1934").
(7) The Trust acknowledges that the acquisition of the securities
as contemplated herein will impose certain reporting
obligations on the Trust pursuant to Sections 13(d) and 16(a)
of the 1934 Act, and may impose certain obligations under the
Internal Revenue Code of 1986, as amended. The Trust will make
all necessary filings.
Guaranty Agreement - AmerAlia, Inc. Page 5
8. All prior agreements for the Trust's guaranty of any portion of the
Aggregate Loan (including, without limitation, the agreements described
in Recital B, above) be and hereby are terminated. The Trust and
AmerAlia affirmatively state and agree that no compensation has been
paid under any prior agreement, and none is currently payable because
(although the Trust has performed its obligations under the prior
guaranties) all of the conditions precedent to payment have not been
met. The compensation payable by AmerAlia for the Trust's guaranty of
the Aggregate Loan pursuant to this Guaranty Agreement and all prior
guaranty agreements relating to any portion of the Aggregate Loan will
be determined by this Guaranty Agreement.
9. All notices under this Agreement are to be delivered by (i) depositing
the notice in the mail, using registered mail, return receipt
requested, addressed to the address below or to any other address as
the party may designate by providing notice, (ii) telecopying the
notice by using the telephone number set forth below or any other
telephone number as the party may designate by providing notice, (iii)
overnight delivery service addressed to the address below or to any
other address as the party may designate by providing notice, or (iv)
hand delivery to the individual designated below or to any other
individual as the party may designate by providing notice. The notice
shall be deemed delivered (i) if by registered mail, four (4) days
after the notice is deposited in the mail, (ii) if by telecopy, on the
date the notice is delivered, (iii) if by overnight delivery service,
on the date of delivery, and (iv) if by hand delivery, on the date of
delivery.
If to AmerAlia, to the address set forth in the first
paragraph hereof (telecopy number 879-625-9137), with a copy
(which does not constitute notice) to:
Norton A Xxxxxxxx, X.X.
Xxxxx 000, Xxx Xxxxxxxx
0000 XXX Xxxxxxx
Xxxxxxxxx Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx, Xx., Esq.
Telecopy: 000-000-0000
If to the Trust, to the attention of Xxxxx Xxxxx (telecopy number) 703-519-7075)
at the address set forth in the first paragraph hereof with a copy (which does
not constitute notice) to:
Hills & Xxxxx
0000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxxx X. Hills, Esq.
Telecopy: 000-000-0000
10. General Provisions
(1) Complete Agreement. The parties agree that this Agreement is
the complete and exclusive statement of the agreement between
the parties, which supersedes and merges all prior proposals,
understandings and all other agreements, oral or written,
between the parties relating to this Agreement.
(2) Amendment. This Agreement may not be modified, altered or
amended except by written instrument duly executed by both
parties.
Guaranty Agreement - AmerAlia, Inc. Page 6
(3) Waiver. The waiver or failure of either party to exercise in
any respect any right provided for in this Agreement shall not
be deemed a waiver of any further right under this Agreement.
(4) Severability. If any provision of this Agreement is invalid,
illegal or unenforceable under any applicable statute or rule
of law, it is to that extent deemed omitted. The remainder of
the Agreement shall be valid and enforceable to the maximum
extent possible.
(5) Governing Law. This Agreement and performance hereunder shall
be governed by the laws of the State of Colorado.
Each party acknowledges that it has read and understands this Agreement and
agrees to be bound by its terms.
AmerAlia, Inc. The Xxxxxxxxxx Xxxxxx Mars Trust
By: /s/ Xxxx X. Xxxx By: Xxxxxxxxxx X. Mars
---------------- ------------------
Xxxx X. Xxxx, President Xxxxxxxxxx X. Mars, Trustee
Guaranty Agreement - AmerAlia, Inc. Page 7
