EXHIBIT 10.33
NATURAL SODA HOLDINGS, INC.
DEBENTURE
PURCHASE AGREEMENT
WITH
SENTIENT EXECUTIVE GP I, LIMITED, ACTING ON BEHALF OF THE
GENERAL PARTNER OF SENTIENT GLOBAL RESOURCES FUND I,
L.P.,
SENTIENT (AUST) PTY. LIMITED, ACTING ON BEHALF OF SENTIENT
GLOBAL RESOURCES TRUST NO. 1.,
AMERALIA, INC.
AND
NATURAL SODA, INC.
AS PURCHASERS
MARCH 19, 2004
DEBENTURE PURCHASE AGREEMENT
THIS DEBENTURE PURCHASE AGREEMENT (the "Agreement") is executed this
19th day of March, 2004, by and among NATURAL SODA HOLDINGS, INC., a Colorado
corporation (the "Company"), AMERALIA, INC., a Utah corporation ("AmerAlia"),
NATURAL SODA, INC., a Colorado corporation (the "Subsidiary") and Sentient
Executive GP I, Limited, acting on behalf of the General Partner of Sentient
Global Resources Fund I, L.P. and Sentient (Aust) Pty. Limited, acting on behalf
of Sentient Global Resources Trust No. 1. ("Sentient Entities").
R E C I T A L S:
A. The Subsidiary acquired the assets of White River Nahcolite
Minerals Ltd. Liability Co. ("WRNM," a limited liability company formed under
Colorado law and operating in the Piceance Creek basin of western Colorado)
pursuant to the Asset Purchase Agreement.
B. Currently, and as a result of a recapitalization and amended
and restated articles of incorporation that the Company has filed with the
Colorado Secretary of State, AmerAlia owns 100% of the outstanding capital stock
of the Company. The Company owns 100% of the outstanding capital stock of the
Subsidiary.
C. The Sentient Entities have entered into the Closing Agreement
dated February 20, 2003 with AmerAlia and the Company and, pursuant thereto,
have loaned the Company $24,000,000 pursuant to a promissory note dated February
20, 2003 (the "Note"), with which the Company completed the Acquisition
Transaction.
D. In consideration for the Sentient Entities waiving the closing
conditions contained in the Closing Agreement, AmerAlia wishes to provide the
Sentient Entities with Warrants and the Company wishes to provide Contingent
Interest on the Series B1 and B2 Debentures issued to the Sentient Entities.
E. AmerAlia and the Sentient Entities wish to provide an
additional $5,775,000 investment in the Company in consideration for the
issuance by the Company of Series A Debentures.
F. In consideration for the exchange of the Note which shall be
cancelled, the Company wishes to issue the Sentient Entities Series A Debentures
and Series B Debentures.
G. AmerAlia wishes to purchase Series A Debentures, Series C
Debentures, Series A Preferred Stock and Common Stock in consideration for the
cancellation of an intercompany loan to the Company.
H. The Subsidiary wishes to purchase Series A Debentures in
consideration for increasing an intercompany loan from the Company by $750,000.
I. AmerAlia, the Company, the Subsidiary and the Sentient
Entities desire to enter into this Agreement for the purpose of exchanging the
Note, providing additional investment to the Company, canceling the intercompany
loan from AmerAlia and creating an intercompany loan from the Company to the
Subsidiary.
J. The parties have agreed to a complex set of agreements because
(i) the Sentient Entities are supplying most of the capital that enabled the
purchase of the assets of White River Nahcolite Minerals Ltd. Liability Co.
pursuant to the Asset Purchase Agreement (the "Business"), (ii) AmerAlia had
made significant investments in a prospect that will not be developed in the
near future as a result of
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the acquisition, and (iii) AmerAlia's desire to own a controlling interest in
the Business while providing the Sentient Entities with the potential for
significant returns on their respective investments through the payment of high
rates of interest coupled with rights to convert into equity of the Subsidiary
or AmerAlia.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the above recitals and the mutual
agreements, covenants, representations and warranties contained below in this
Agreement, the parties agree as follows:
I. DEFINITIONS.
"Acquisition Transaction" means the transaction by which the Subsidiary
acquired the assets of WRNM.
"Adjusted EBITDA" means the Subsidiary's earnings (calculated in
accordance with generally accepted accounting principles, consistently applied)
(A) before any deduction for (i) interest, taxes, depreciation, write downs,
revaluations and amortization and (ii) payments to the Company for payment by
the Company under the Management Cost and Reimbursement Agreement, and (B) but
including amortization of well-field capital expense.
"Agreement" means, and the words "herein", "hereof", "hereunder" and
words of similar import refer to, this instrument and any amendments hereto.
"Affiliate" means with respect to any Person, (i) any Person directly
or indirectly controlling, controlled by, or under common control with such
Person, (ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of such Person, (iii) any officer, director, or
general partner of such Person, or (iv) any Person who is an officer, director,
general partner, trustee, or holder of ten percent (10%) or more of the voting
interests of any Person described in clauses (i) through (iii) of this sentence.
For purposes of this definition, the term "controls," "is controlled by," or "is
under common control with" shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"AmerAlia" means AmerAlia, Inc., a Utah corporation.
"Articles of Incorporation" means the amended and restated articles of
incorporation of the Company attached hereto as Exhibit A as filed with the
Colorado Secretary of State.
"Asset Purchase Agreement" means that certain agreement between Natural
Soda, Inc., White River Nahcolite Minerals Ltd. Liability Co. and IMC Global,
Inc. dated January 9, 2003, for the completion of the Acquisition Transaction.
"Closing" has the meaning set forth in Section 2.1(e).
"Code" is the United States Internal Revenue Code of 1986, as amended.
"Collateral Holding and Liquidation Agreement" means the agreement
between the Company and the holders of the Series A Debentures, Series B
Debentures and Sentient Resources USA, Inc., as the Collateral Agent, in
substantially the form of Exhibit G.
"Common Stock" means shares of the authorized $.01 par value common
stock of the Company.
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"Continuing Guarantee" means the guarantee of the Subsidiary of the
performance of the Company under the Debentures, substantially in the form as
attached hereto as Exhibit E.
"Controlled Group" means any group of organizations within the meaning
of Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, of
which the Company is a member.
"Debentures" means the Series A Debentures, the Series B Debentures,
and the Series C Debentures, collectively and individually, as the context may
require.
"Employee Benefit Plan" means any employee benefit plan, as defined in
Section 3(3) of ERISA, which is, previously has been, or will be established or
maintained by any member of a Controlled Group.
"Environmental Laws" means all federal, state, or local laws,
ordinances, rules, regulations, interpretations and orders of courts or
administrative agencies or authorities relating to pollution or protection of
the environment (including, without limitation, ambient air, surface water,
ground water, land surface, and subsurface strata), and other laws relating to
(a) Polluting Substances or (b) the manufacture, processing, distribution, use,
treatment, handling, storage, disposal, or transportation of Polluting
Substances.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar Federal statute that replaces said Exchange Act and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at the
time.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question.
"Indemnification Letter" means that letter signed by the Trust,
Xxxxxxxxxx X. Mars and AmerAlia dated the date hereof and attached hereto as
Exhibit M.
"Intellectual Property" means all patents, patent rights, patent
applications, licenses, inventions, trade secrets, know-how, proprietary
techniques (including processes and substances), trademarks, service marks,
trade names and copyrights.
"Lien" means any lien, mortgage, security interest, tax lien, pledge,
encumbrance, financing statement, or conditional sale or title retention
agreement, or any other interest in property designed to secure the repayment of
indebtedness or any other obligation, whether arising by agreement, operation of
law, or otherwise, and including claims of a right to a security interest and
encumbrances whether properly attached, perfected, or recorded.
"Management and Cost Reimbursement Agreement" means the agreement
between AmerAlia, the Sentient Entities, the Subsidiary and the Company in
substantially the form of Exhibit C.
"Material Adverse Effect" means a material adverse effect upon (a) the
business, operations, properties, assets or condition (financial or otherwise)
of the Company or, as the case may be, of the Company and the Subsidiary taken
as a whole or (b) the ability of any party other than any Sentient Entities to
perform its obligations under this Agreement or any of the Other Agreements to
which it is a party.
"Notional Share" shall have the meaning set forth in Section 2.1
hereof.
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"Other Agreements" means the Management and Cost Reimbursement
Agreement, the Securityholder Agreement, the Security Agreements, the Warrants,
the Debentures and all other agreements, instruments and documents and all
renewals, amendments, modifications and extensions thereof, whether heretofore,
now or hereafter executed and delivered pursuant to transactions described
herein or therein.
"Party" or "parties" means the Company, AmerAlia and/or any Sentient
Entity.
"Person" means any individual, sole proprietorship, corporation,
business trust, unincorporated organization, association, company, partnership,
joint venture, governmental authority (whether a national, federal, state,
county, municipality or otherwise, and shall include without limitation any
instrumentality, division, agency, body or department thereof), or other entity.
"Polluting Substance" means all pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes and shall include, without
limitation, any flammable explosives, radioactive materials, oil, hazardous
materials, hazardous or solid wastes, hazardous or toxic substances or related
materials defined in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986,
the Resource Conservation and Recovery Act of 1976, the Hazardous and Solid
Waste Amendments of 1984, and the Hazardous Materials Transportation Act, as any
of the same are hereafter amended, and in the regulations adopted and
publications promulgated thereto; provided, in the event any of the foregoing
Environmental Laws is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date of
such amendment and, provided, further, to the extent that the applicable laws of
any state establish a meaning for "hazardous substance," "hazardous waste,"
"hazardous material," "solid waste," or "toxic substance" which is broader than
that specified in any of the foregoing Environmental Laws, such broader meaning
shall apply.
"Release" shall mean a release of claims substantially in the form of
Exhibit L.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute which replaces such Securities Act and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at the
time.
"SEC" means the Securities and Exchange Commission.
"Security Agreements" mean the agreements providing the Sentient
Entities, the Subsidiary and AmerAlia with a security interest in the assets of
the Company and the Subsidiary in substantially the form of Exhibit F.
"Securityholder Agreement" means the agreement between AmerAlia, the
Subsidiary and the Sentient Entities with respect to management of the Company,
restrictions on the securities of the Company and other rights and
responsibilities in substantially the form of Exhibit B.
"Sentient Entities" means Sentient Executive GP I, Limited, acting on
behalf of the General Partner of Sentient Global Resources Fund I, L.P. and
Sentient (Aust) Pty. Limited, acting on behalf of Sentient Global Resources
Trust No. 1.
"Series A Debentures" means the Senior Secured Series A 10% Debentures
of the Company in a total principal amount of approximately $9,525,000 to be
issued to the Sentient Entities, to the Subsidiary and to AmerAlia, in
substantially the form of Exhibit I.
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"Series A Preferred Stock" means 4,949 shares of Series A Preferred
Stock of the Company pursuant to the Articles of Incorporation.
"Series B1 Debentures" means the Secured Subordinated Series B1
Debentures of the Company in a total principal amount of $11,300,000 to be
issued to the Sentient Entities pursuant to this Agreement, in substantially the
form of Exhibit J-1.
"Series B2 Debentures" means the Secured Subordinated Series B2
Convertible Debentures of the Company in a total principal amount of $9,700,000
to be issued to the Sentient Entities pursuant to this Agreement, in
substantially the form of Exhibit J-2.
"Series B Debentures" means the Series B1 Debentures and the Series B2
Debentures, collectively.
"Series C Debentures" means the Unsecured Subordinated Series C
Debentures of the Company in a total principal amount of $12,000,000 to be
issued to AmerAlia, in substantially the form of Exhibit K.
"Subsidiary Common Stock" means shares of the authorized $.01 par value
common stock of the Subsidiary.
"Warrants" means the warrants to purchase an aggregate of 600,000
shares of common stock of AmerAlia in substantially the form of Exhibit H.
II. SALE AND ISSUANCE OF CAPITAL STOCK AND DEBENTURES.
2.1 PURCHASE AND SALE.
(a) Subject to the terms and conditions of this
Agreement, the Company sells to each of the Sentient Entities and each of the
Sentient Entities (for itself and not jointly) purchases from the Company,
Series A Debentures, Series B1 Debentures, and Series B2 Debentures for a total
investment as follows (all set forth in U.S. dollars):
SENTIENT EXECUTIVE GP I,
LIMITED, ACTING ON BEHALF OF
THE GENERAL PARTNER OF SENTIENT (AUST) PTY. LIMITED,
TOTAL TO SENTIENT GLOBAL RESOURCES ACTING ON BEHALF OF SENTIENT
SENTIENT ENTITIES FUND I, L.P. GLOBAL RESOURCES TRUST NO. 1
------------------------------------------------------------------------------------------------------------
Series A Debentures $ 5,000,000 $ 4,099,493 $ 900,507
------------------------------------------------------------------------------------------------------------
Series B1 Debentures $ 11,300,000 $ 9,265,260 $ 2,034,740
------------------------------------------------------------------------------------------------------------
Series B2 Debentures $ 9,700,000 $ 7,953,365 $ 1,746,635
------------------------------------------------------------------------------------------------------------
Total $ 26,000,000 $ 21,318,118 $ 4,681,882
------------------------------------------------------------------------------------------------------------
In addition, at the Closing, the Company will issue one share of Common
Stock (the "Notional Share") to Sentient Executive GP I, Limited, acting on
behalf of the General Partner of Sentient Global Resources Fund I, L.P. in
consideration of the overall transaction.
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(b) Subject to the terms and conditions of this
Agreement, the Company sells to AmerAlia and AmerAlia purchases from the
Company, Series A Debentures and Series C Debentures for a total investment as
follows (all set forth in U.S. dollars):
TOTAL TO AMERALIA
------------------------------------------
Series A Debentures $ 3,775,000
------------------------------------------
Series C Debentures $ 12,000,000
------------------------------------------
Total $ 15,775,000
------------------------------------------
(c) Subject to the terms and conditions of this
Agreement, the Company sells to AmerAlia and AmerAlia purchases from the
Company, Series A Preferred Stock and Common Stock in the share amounts and the
price per share as follows (all set forth in U.S. dollars):
SHARES PRICE PER SHARE TOTAL PROCEEDS
-----------------------------------------------------------------------
Series A Preferred Stock 4,949 $ 1,000 $ 4,949,000
-----------------------------------------------------------------------
Common Stock 50,900 $ 8.25 $ 420,000
-----------------------------------------------------------------------
$ 5,369,000
-----------------------------------------------------------------------
(d) Subject to the terms and conditions of this
Agreement, the Company sells to the Subsidiary and the Subsidiary purchases from
the Company a Series A Debenture with a principal amount of $750,000.
(e) Subject to the terms and conditions of this
Agreement, AmerAlia sells to Sentient and Sentient purchases from AmerAlia the
Warrants.
(f) The closing of the sale and purchase of the Notional
Share, the Debentures, the Series A Preferred Stock, the Warrants and the Common
Stock pursuant to this Agreement will take place at such times and places as the
parties may mutually agree (the "Closing").
2.2 THE CLOSING.
(a) At the Closing, the Company will deliver to the
Sentient Entities, AmerAlia and the Subsidiary duly issued and executed
Debentures and (in the case of AmerAlia and the Sentient Entities, certificates
for the Series A Preferred Stock and Common Stock, as applicable) registered in
such Person's name, against payment of the purchase price thereof.
(b) At the Closing, the Sentient Entities, AmerAlia and
the Subsidiary will pay for the Debentures, Series A Preferred Stock and Common
Stock as follows:
(i) AmerAlia will pay the purchase price for:
(A) the Series A Debentures by paying certified check, wire transfer,
cancellation of debt or other immediately-available funds to the Company of
$3,775,000; (B) the Series C Debentures, Common Stock and the Series A Preferred
Stock by canceling intercompany indebtedness between AmerAlia and the Company
for the price allocable to the Series C Debentures, Common Stock and the Series
A Preferred Stock.
(ii) The Sentient Entities will pay the purchase
price for the Series A Debentures, the Series B1 Debentures, and the Series B2
Debentures by exchanging the promissory note evidencing the Loan, which shall be
canceled, and by paying an additional $2,000,000 by certified check, wire
transfer, cancellation of debt or other immediately available funds to the
Company.
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(c) The Subsidiary will pay the purchase price for the
Series A Debenture by increasing the intercompany indebtedness between the
Subsidiary and the Company for the price allocable to the Series A Debenture.
(d) At the Closing, AmerAlia will deliver the Warrants to
Sentient in consideration for the waiver of closing conditions in the Closing
Agreement.
2.3 USE OF PROCEEDS FROM THE PURCHASE. The Company will use the
cash proceeds that it receives from the acquisition of the Debentures in
accordance with the use of proceeds set forth in Exhibit D.
III. CONDITIONS OF THE SENTIENT ENTITIES', THE SUBSIDIARY'S AND AMERALIA'S
OBLIGATIONS.
The obligation of the Sentient Entities (or either of them), the
Subsidiary and AmerAlia to complete the transactions contemplated herein at the
Closing is subject to the satisfaction on or before the date of the Closing of
the following conditions, all or any of which may be waived in writing by the
Sentient Entities, the Subsidiary and AmerAlia as to its obligation to complete
the transactions so contemplated:
3.1 REPRESENTATIONS AND WARRANTIES. Each of the Company's
representations and warranties contained in this Agreement and in any other
documents delivered by the Company to the Sentient Entities at the Closing will
be true and correct at and as of the date of the Closing as though then made
(except to the extent of changes caused by the transactions expressly
contemplated herein).
3.2 PERFORMANCE. Each of the Company, AmerAlia and the Subsidiary
shall have duly performed and complied in all material respects with each of the
terms, agreements and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing; and the Company shall have
delivered a certificate executed by the President or Secretary of the Company to
such effect.
3.3 CLOSING DOCUMENTS. The Company will have delivered to the
Sentient Entities copies of the following specifically named documents
referenced in this Agreement or the Schedules hereto, including but not limited
to:
(a) Articles of Incorporation as filed with the Colorado
Secretary of State, and bylaws of the Company, certified to such effect on the
date of the Closing by the Secretary of the Company;
(b) A fully executed Management and Cost Reimbursement
Agreement and Securityholders' Agreement;
(c) A fully executed Security Agreement along with
executed deeds of trust to the Rock School lease and UCC-1 financing statements.
(d) Fully-executed Debentures purchased at the Closing in
the appropriate principal amount;
(e) an Officer's Certificate from the Company dated the
date of the Closing stating that all the preconditions specified in this Article
III have been satisfied;
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(f) correct and complete copies of the resolutions
adopted by the board of directors of the Company certified to such effect on the
date of the Closing by the Secretary of the Company authorizing the execution,
delivery and performance of this Agreement and any other agreements contemplated
hereby, and authorizing all other transactions contemplated by this Agreement;
(g) correct and complete copies of the Articles of
Incorporation, Bylaws, and minutes of the shareholders and the board of
directors of the Subsidiary certified to such effect on the date of the Closing
by the Secretary of the Company;
(h) a good standing certificate issued by the Colorado
Secretary of State for each of AmerAlia, the Company and the Subsidiary;
(i) a fully executed Continuing Guarantee of the
Subsidiary and Security Agreement along with a deed of trust in its assets and
UCC-1 financing statements;
(j) the Warrants;
(k) a fully executed Collateral Holding and Liquidation
Agreement by the parties thereto substantially in the form attached as Exhibit
G;
(l) fully executed agreements from each of Xxxx Xxxx and
Xxxxxx xxx Xxxxxx not to declare an event of default under the amounts owed to
them as of the Closing as set forth in such agreements, unless an Event of
Default has been declared under the Debentures;
(m) an opinion from the Company's counsel dated the date
of the Closing, reasonably acceptable to the Sentient Entities; and
(n) such other documents referenced within any Schedule
hereto or relating to the transactions contemplated by this Agreement as the
Sentient Entities may reasonably request.
3.4 PROCEEDINGS. All corporate and other proceedings taken or to
be taken in connection with the transactions contemplated hereby to be completed
at or prior to each Closing and all documents incident thereto or required to be
delivered prior to or at such Closing will be satisfactory in form and substance
to the Sentient Entities and AmerAlia.
3.5 SHAREHOLDER VOTING AGREEMENTS. The Sentient Entities shall
have received executed Shareholder Voting Agreements from Xxxxxxxxxx X. Mars, as
Trustee of the Xxxxxxxxxx Xxxxxx Mars Trust dated February 5, 1975, as amended
(the "Xxxxxxxxxx Xxxxxx Mars Trust") and the directors of AmerAlia satisfactory
in form and substance to the Sentient Entities. The Sentient Entities shall have
also received an executed Agreement to Share Proceeds from the Xxxxxxxxxx Xxxxxx
Mars Trust satisfactory in form and substance to the Sentient Entities.
3.6 RELEASE OF CLAIMS AND SECURITY INTEREST. The Xxxxxxxxxx Xxxxxx
Mars Trust, Xxxxxxx X. X'Xxxxxx and Xxxxxx Xxxxxxx shall have released their
security interests in the assets of the Company and the Subsidiary. In addition,
the Xxxxxxxxxx Xxxxxx Mars Trust, Xxxxxxx X. X'Xxxxxx and Xxxxxx Xxxxxxx shall
have executed and delivered a Release.
3.7 SETTLEMENT. The Sentient Entities shall have received evidence
that the Company and AmerAlia shall have settled or paid all matters relating to
the following matters which shall be paid at Closing or pursuant to the terms of
such settlement agreement:
(a) XxXxxxxxx Xxxxx
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(b) Xxxxxx Xxxxx
(c) Xxxxxxx Xxxxxx v. AmerAlia
3.8 CONSENTS. The Company shall have obtained any and all consents
(including all governmental or regulatory consents, approvals or authorizations
required in connection with the valid execution and delivery of this Agreement),
permits and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement.
IV. CONDITIONS OF THE COMPANY'S OBLIGATIONS.
The obligation of the Company to issue the Series A Debentures, the
Series B1 Debentures, and the Series B2 Debentures to the Sentient Entities, the
Series A Debentures, the Series C Debentures, and the Series A Preferred Stock
to AmerAlia and the Series A Debentures to the Subsidiary is subject to the
satisfaction on or before the date of the Closing of the following conditions
with respect to each of the Sentient Entities (individually and not jointly)
AmerAlia and the Subsidiary, all or any of which may be waived in writing by the
Company:
4.1 PERFORMANCE. Each of the Sentient Entities, AmerAlia and the
Subsidiary shall have duly performed and complied in all material respects with
each of the terms, agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing. Without limitation
of the foregoing, the Sentient Entities, the Subsidiary and AmerAlia shall have
each purchased and paid for the Debentures to be issued at the Closing, and
AmerAlia shall have purchased the Series A Preferred Stock and Common Stock to
be issued at the Closing.
4.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Sentient Entities, the Subsidiary and AmerAlia (and each of
them) contained in this Agreement and in any other documents delivered at or
prior to the Closing shall be true and accurate on and as of the Closing with
the same effect as though made on and as of the date of the Closing.
4.3 INSTRUMENTS AND DOCUMENTS. All instruments and documents
required to carry out this Agreement or incidental thereto shall be reasonably
satisfactory to the Company and its counsel.
4.4 WAIVER. AmerAlia shall have received from the Sentient
Entities a fully executed waiver of the closing conditions contained in the
Closing Agreement.
4.5 AMENDMENT TO PLEDGE AGREEMENT. AmerAlia and the Subsidiary
shall have received a fully executed amendment to the Pledge Agreement dated
February 20, 2003 between the Company and the Sentient Entities adding AmerAlia
and the Subsidiary as parties to such Agreement.
4.6 COVENANTS. All covenants, agreements and conditions contained
in this Agreement to be performed by the Sentient Entities and AmerAlia (or
either of them) on or prior to the Closing shall have been performed or complied
with in all material respects.
4.7 RELEASE OF CLAIMS AND SECURITY INTEREST. The Xxxxxxxxxx Xxxxxx
Mars Trust, Xxxxxxx X. X'Xxxxxx, and Xxxxxx Xxxxxxx, shall have released their
security interests in the assets of the Company and the Subsidiary. In addition,
the Xxxxxxxxxx Xxxxxx Mars Trust, Xxxxxxx X. X'Xxxxxx and Xxxxxx Xxxxxxx shall
have executed and delivered a Release.
4.8 SETTLEMENT. The Company and AmerAlia shall have settled or
paid all matters set forth in Section 3.6 which shall be paid at Closing or
pursuant to the terms of each such settlement agreement.
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V. REPRESENTATIONS AND WARRANTIES OF AMERALIA AND THE COMPANY.
Except as set forth on any Schedules attached hereto and incorporated
herein by reference, AmerAlia or the Company or both, whichever is applicable,
hereby represents and warrants to the Sentient Entities, AmerAlia and the
Subsidiary, as applicable as of the date hereof and as of the Closing as
follows:
5.1 CORPORATE EXISTENCE AND AUTHORITY.
(a) The Company (i) is a corporation duly organized,
validly existing, and in good standing under the laws of Colorado; (ii) has all
requisite corporate power and authority to own its assets and carry on its
business as now conducted; and (iii) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a Material Adverse Effect.
The Company has the corporate power and authority to execute, deliver, and
perform its obligations under this Agreement and all Other Agreements to which
it is, or in connection with the transactions contemplated hereby, may become, a
party. The Company's Articles of Incorporation are as filed with the Colorado
Secretary of State.
(b) The Subsidiary (i) is a corporation duly organized,
validly existing, and in good standing under the laws of Colorado; (ii) has all
requisite corporate power and authority to own its assets and carry on its
business as now conducted; and (iii) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a Material Adverse Effect.
(c) AmerAlia (i) is a corporation duly organized, validly
existing, and in good standing under the laws of Utah; (ii) has all requisite
corporate power and authority to own its assets and carry on its business as now
conducted; and (iii) is qualified to do business in all jurisdictions in which
the nature of its business makes such qualification necessary and where failure
to so qualify would have a Material Adverse Effect. AmerAlia has the corporate
power and authority to execute, deliver, and perform its obligations under this
Agreement and all Other Agreements to which it is, or in connection with the
transactions contemplated hereby, may become, a party.
5.2 FINANCIAL STATEMENTS AND REPORTS.
(a) Except for the Form 10-KSB for the fiscal year ended
June 30, 2003, the Form 10-QSB for the quarter ended September 30, 2003, the
Form 10-QSB for the quarter ended December 31, 2003, which has not been filed
with the SEC, since March 19, 2003, AmerAlia has timely filed all required
forms, reports, statements and documents with the SEC, all of which have
complied in all material respects with all applicable requirements of the
Exchange Act and the Securities Act, as the case may be. AmerAlia has delivered
or made available to the Sentient Entities true and complete copies of (i)
AmerAlia's Annual Report on Form 10-KSB for the fiscal year ended June 30, 2002,
(ii) AmerAlia's Annual Report on Form 10-KSB for the fiscal year ended June 30,
2003, (iii) all other forms, reports, statements and documents filed by AmerAlia
with the SEC pursuant to the Exchange Act since June 30, 2002, and (iv) all
reports, statements and other information provided by AmerAlia to its
stockholders since July 1, 2002 (collectively, the "SEC Reports").
(b) The Company has provided the Sentient Entities,
through the Closing, with such information regarding its and the Subsidiary's
financial condition, assets (and assets to be acquired in the Acquisition
Transaction), operations and proposed operations, management and proposed
management, and business plan, the Acquisition Transaction, and other
information (collectively, the "Corporate Disclosure") as the Sentient Entities
may have requested. The term "Corporate Disclosure" includes
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(without limitation) confidential and non-public information that the Company
has provided to the Sentient Entities with respect to the Acquisition
Transaction.
(c) As of their respective dates, neither the SEC Reports
nor the Corporate Disclosure contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(d) Each of the consolidated financial statements of
AmerAlia included or incorporated by reference in the SEC Reports were prepared
in accordance with GAAP applied on a consistent basis (except as otherwise
stated in such financial statements or, in the case of audited statements, the
related report thereon of independent certified public accounts), and present
fairly the financial position and results of operations, cash flows and of
changes in stockholders' equity of AmerAlia and its consolidated subsidiaries as
of the dates and for the periods indicated, subject, in the case of unaudited
interim financial statements, to normal year-end audit adjustments, and except
that the unaudited interim financial statements do not contain all of the
disclosures required by GAAP. Since June 30, 2002 there has been no change in
any of the significant accounting (including tax accounting) policies,
practices, or procedures of AmerAlia or any of its consolidated subsidiaries
except as disclosed in the SEC Reports. AmerAlia is and has been subject to the
reporting requirements of the Exchange Act and except as set forth in Section
5.2(a), has timely filed with the SEC all periodic reports required to be filed
by it pursuant thereto and all reports required to be filed under Sections 13,
14 or 15(d) of the Exchange Act since March 19, 2003. Since June 30, 2002, the
only change of significance to AmerAlia that has not been included in an SEC
Report has been (i) the removal of the AmerAlia common stock from the Nasdaq
SmallCap Market on or about August 21, 2002, as a result of AmerAlia's failure
to meet the minimum bid price requirement imposed by Nasdaq and (ii) AmerAlia's
continuing accrual of unpaid salaries, fees, expense reimbursement, legal fees,
and accounting fees since the date of the last SEC Report.
5.3 INDEBTEDNESS.
(a) The Company's indebtedness as of the Closing (and
after application of the proceeds received from the purchase of the Debentures,
the Common Stock and the Series A Preferred Stock), consists of:
(i) No remaining indebtedness between AmerAlia
and the Company in excess of $35,000 and between the Company and the Subsidiary
except for the intercompany loan pursuant to Recital H and the transfer of the
Subsidiary's deferred financing costs to the Company up to $550,000.
(ii) Liabilities assumed by the Company as a
result of the completion of the Acquisition Transaction;
(iii) Liabilities related to the Debentures;
(iv) The Management and Cost Reimbursement
Agreement; and
(v) No other debts or obligations owed by the
Company except for the Debentures and such other obligations as may be set forth
on Exhibit D.
(b) The Subsidiary's indebtedness as of the Closing (and
after application of the proceeds received from the purchases of the Debentures,
the Common Stock and the Series A Preferred Stock), consists of:
11
(i) No other debts or obligations owed by the
Subsidiary, except those incurred in the ordinary course of business since the
close of the Acquisition Transaction on February 20, 2003.
(ii) Liabilities in connection with the bond
support agreement from the Xxxxxxxxxx Xxxxxx Mars Trust.
5.4 DEFAULT. After diligent investigation, to their knowledge and
except as disclosed in Sections 5.9 and 5.10, below, neither AmerAlia, neither
the Company nor the Subsidiary is in default under any loan agreement,
indenture, mortgage, security agreement, lease, franchise, permit, license or
other agreement or obligation to which it is a party or by which any of its
properties may be bound which default could be reasonably expected to cause a
Material Adverse Effect.
5.5 AUTHORIZATION.
(a) All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization of this
Agreement, the Other Agreements and the other documents and instruments to be
executed and delivered by the Company pursuant hereto and the consummation of
the transactions contemplated hereby and thereby have been taken. This
Agreement, the Other Agreements and the other documents and instruments to be
executed and delivered by the Company pursuant hereto, when executed and
delivered, will constitute, the legal, valid and binding obligations of the
Company, enforceable against Company in accordance with its terms, except as
such enforcement may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the rights of
creditors generally and by general principles of equity.
(b) All corporate action on the part of AmerAlia, its
officers, directors and shareholders necessary for the authorization of this
Agreement, the Other Agreements and the other documents and instruments to be
executed and delivered by AmerAlia pursuant hereto and the consummation of the
transactions contemplated hereby and thereby have been taken. This Agreement,
the Other Agreements and the other documents and instruments to be executed and
delivered by AmerAlia pursuant hereto, when executed and delivered, will
constitute, the legal, valid and binding obligations of AmerAlia, enforceable
against AmerAlia in accordance with its terms, except as such enforcement may be
limited by the effect of bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally and by general
principles of equity.
(c) All corporate action on the part of the Subsidiary,
its officers, directors and shareholders necessary for the authorization of this
Agreement, the Other Agreements and the other documents and instruments to be
executed and delivered by the Subsidiary pursuant hereto and the consummation of
the transactions contemplated hereby and thereby have been taken. This
Agreement, the Other Agreements and the other documents and instruments to be
executed and delivered by the Subsidiary pursuant hereto, when executed and
delivered, will constitute, the legal, valid and binding obligations of the
Subsidiary, enforceable against the Subsidiary in accordance with its terms,
except as such enforcement may be limited by the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
rights of creditors generally and by general principles of equity.
5.6 COMPLIANCE WITH LAWS AND MATERIAL AGREEMENTS.
(a) The execution, delivery and performance by the
Company of this Agreement and the Other Agreements to which it is or may in
connection with the transactions contemplated hereby become a party, do not and
will not violate the Articles of Incorporation or Bylaws or any law or any order
of any court, governmental authority or arbitrator, and do not and will not upon
the completion of the transactions contemplated hereby conflict with, result in
a breach of, or constitute a default under, or
12
result in the imposition of any Lien upon any assets of the Company pursuant to
the provisions of any loan agreement, indenture, mortgage, security agreement,
franchise, permit, license or other instrument or agreement by which the Company
or any of its properties is bound.
(b) Except for the `drag along rights' described in
Section 2.04(c) of the Securityholder Agreement, the execution, delivery and
performance by AmerAlia of its obligations under the Agreement, the Other
Agreements to which it is or may in connection with the transactions
contemplated hereby become a party, do not and will not violate the Articles of
Incorporation or Bylaws of AmerAlia or any law or any order of any court,
governmental authority or arbitrator, and do not and will not upon the
completion of the transactions contemplated hereby conflict with, result in a
breach of, or constitute a default under, or result in the imposition of any
Lien upon any assets of AmerAlia pursuant to the provisions of any loan
agreement, indenture, mortgage, security agreement, franchise, permit, license
or other instrument or agreement by which AmerAlia or any of its properties is
bound (which may require shareholder approval), except for the Lien of U.S.
Filter Corporation, HPD Products, relating to the Confidential Settlement
Agreement and Full and Final Release dated February 21, 2003 and the rights
thereunder regarding the Management and Cost Reimbursement Agreement.
(c) The execution, delivery and performance by the
Subsidiary of its obligations under the Other Agreements to which it is or may
in connection with the transactions contemplated hereby become a party, do not
and will not violate the Articles of Incorporation or Bylaws of the Subsidiary
or any law or any order of any court, governmental authority or arbitrator, and
do not and will not upon the completion of the transactions contemplated hereby
conflict with, result in a breach of, or constitute a default under, or result
in the imposition of any Lien upon any assets of the Subsidiary pursuant to the
provisions of any loan agreement, indenture, mortgage, security agreement,
franchise, permit, license or other instrument or agreement by which the
Subsidiary or any of its properties is bound.
(d) Except as set forth in Section 2.04(c) of the
Securityholder Agreement, no authorization, approval or consent of, and no
filing or registration with, any court, governmental authority or third Person
is necessary for the execution, delivery or performance by AmerAlia, the
Company, or the Subsidiary of this Agreement and the Other Agreements to which
it is a party or the validity or enforceability thereof. Neither AmerAlia, the
Company nor the Subsidiary is in violation of any term of its Articles of
Incorporation or Bylaws or any contract, agreement, judgment, permit, or decree
and is in full compliance with all applicable permits, laws, regulations and
rules where such violation would cause a Material Adverse Effect.
5.7 AUTHORIZATION OF SECURITIES.
(a) When issued in compliance with this Agreement and the
Articles of Incorporation, the Series A Debentures, the Series B1 Debentures,
the Series B2 Debentures, the Series C Debentures, the Series A Preferred Stock,
the Notional Share and the issuance of the Subsidiary Common Stock upon
conversion of the Series B2 Debentures (the "Conversion Shares"), will be fully
paid and non-assessable, with no personal liability attached to the ownership
thereof, and free of restrictions on transfer other than under applicable state
and federal securities laws and as contained herein and in the Securityholder
Agreement.
(b) When issued in compliance with the Securityholder
Agreement, the AmerAlia common stock issued in exchange for the Series B
Debentures or the Subsidiary Common Stock (the "Exchange Shares") will be fully
paid and non-assessable, with no personal liability attached to the ownership
thereof, and free of restrictions on transfer other than under applicable state
and federal securities laws and as contained herein and in the Securityholder
Agreement.
13
(c) The Warrants and, when issued in compliance with the
Warrants, the underlying AmerAlia common stock (the "Warrant Shares"), will be
fully paid and non-assessable, with no personal liability attached to the
ownership thereof, and free of restrictions on transfer other than under
applicable state and federal securities laws and as contained herein and in the
Securityholder Agreement.
5.8 ENVIRONMENTAL CONDITION OF THE PROPERTY.
(a) After diligent investigation, to AmerAlia's and the
Company's knowledge, the location, construction, occupancy, operation and use of
AmerAlia's properties and the Company's properties do not violate any applicable
permit, law, statute, ordinance, rule, regulation, order or determination of any
governmental authority or other body exercising similar functions, or any
restrictive covenant or deed restriction (recorded or otherwise) affecting such
properties, including, without limitation, all applicable zoning ordinances and
building codes, flood disaster, occupational health and safety laws and
Environmental Laws and regulations (as referred to in this Section 5.8,
collectively, "applicable laws") where such violation could reasonably be
expected to cause a Material Adverse Effect;
(b) Without limitation of clause (a) of this Section 5.8
and to AmerAlia's and the Company's knowledge, neither AmerAlia, the Company,
the Subsidiary nor such properties are subject to any existing, pending or
threatened investigation or inquiry by any governmental authority or subject to
any remedial obligations due to violations of applicable laws;
(c) After diligent investigation, to AmerAlia's and the
Company's knowledge, neither AmerAlia, the Company nor the Subsidiary is subject
to any liability or obligation relating to (i) the environmental conditions on,
under or about such properties, including, without limitation, the soil and
ground water conditions at such properties, or (ii) the use, management,
handling, transport, treatment, generation, storage, disposal, release or
discharge of any Polluting Substance which could reasonably be expected to cause
a Material Adverse Effect;
(d) After diligent investigation, to AmerAlia's and the
Company's knowledge, there is no Polluting Substance or other substance that may
pose any risk to safety, health or the environment on, under or about any such
properties that could reasonably be expected to cause a Material Adverse Effect;
(e) AmerAlia and/or the Company, whichever is applicable,
have undertaken a detailed investigation and all other reasonable steps to
determine the environmental condition of such properties, and each hereby
represents and warrants that, to their knowledge, no Polluting Substances have
been disposed of or otherwise released on, onto, into, or from their properties
by AmerAlia, the Company the Subsidiary, or third parties and the use which
AmerAlia, the Company and/or the Subsidiary makes and intends to make of such
properties does not and will not result in the disposal or other release of any
Polluting Substances on, onto, into or from such properties; and
(f) AmerAlia, the Company, and the Subsidiary, whichever
is applicable, have been issued all required federal, state and local licenses,
certificates or permits relating to, and their properties, AmerAlia, the
Company, the Subsidiary and AmerAlia's, the Company's and the Subsidiary's
facilities, business, assets, leaseholds and equipment are all in compliance in
all material respects with all applicable federal, state and local laws, rules
and regulations relating to, air emissions, water discharge, noise emissions,
solid or liquid waste disposal, Polluting Substances, or other environmental,
health or safety matters where non-compliance could reasonably be expected to
have a Material Adverse Effect.
5.9 LITIGATION AND JUDGMENTS. There is no suit, action, proceeding
or investigation pending or, after reasonable inquiry, to the best knowledge of
AmerAlia, or the Company, threatened against or affecting AmerAlia, the Company
or the Subsidiary, that has not been disclosed in writing to the Sentient
14
Entities or that the outcome of which, in the reasonable judgment of the
Company, could reasonably be expected to have a Material Adverse Effect, except
for claims by Xxxx Xxxxxxxx, nor except with respect to (i) the matter entitled
Xxxxxx v. AmerAlia, Inc., et al. (case no. 99-CV-3050, Division 5, El Paso
County, Colorado) in which the court entered judgment against AmerAlia on June
4, 2002 in the amount of $374,100, (ii) the matter entitled Xxxxxxx Xxxxxx v.
AmerAlia, Inc. (case no. XX00-000, Xxxxxxx Xxxxx, Xxxxxxxx Xxxxxx, Xxxxxxxx) in
which the court entered judgment against AmerAlia on August 12, 2003 in the
amount of $47,600, and (iii) the matter entitled Xxxxxx Xxxxx & Xxxxxxx LLP v.
AmerAlia, Inc. (index no. 111546/2003, Supreme Court, New York County, New York)
in the amount of $25,000, is there any judgment, decree, injunction, ruling or
order of any court, governmental, regulatory or administrative department,
commission, agency or instrumentality, arbitrator or any other person
outstanding against AmerAlia, the Company or the Subsidiary, that has not been
disclosed to the Sentient Entities or which could reasonably be expected to have
either individually or in the aggregate, a Material Adverse Effect.
5.10 RIGHTS IN PROPERTIES; LIENS. AmerAlia, the Company, and the
Subsidiary have good and marketable title to all properties and assets reflected
on their balance sheets, and none of such properties or assets is subject to any
Liens, except for those released at Closing. AmerAlia, the Subsidiary, and the
Company enjoy peaceful and undisturbed possession under all leases necessary for
the operation of their other properties, assets, and businesses and all such
leases are valid and subsisting and are in full force and effect. There exists
no default under any provision of any lease which would permit the lessor
thereunder to terminate any such lease or to exercise any rights under such
lease which, individually or together with all other such defaults, could have a
Material Adverse Effect. AmerAlia, the Company, and the Subsidiary have the
exclusive right to use all of the Intellectual Property necessary to their
business as presently conducted, to the best of AmerAlia's, the Company's and
the Subsidiary's knowledge, and AmerAlia's, the Company's and the Subsidiary's
use of the Intellectual Property does not infringe on the rights of any other
Person where such nonexclusively or infringement would have a Material Adverse
Effect. To the best of AmerAlia's and the Company's knowledge, no other Person
is infringing the rights of AmerAlia or the Company in any of the Intellectual
Property. Neither AmerAlia, the Company, nor the Subsidiary owes any royalties,
honoraria or fees to any Person by reason of its use of the Intellectual
Property.
5.11 TAXES. AmerAlia, the Company, and the Subsidiary have timely
filed all tax returns (federal, state, and local) required to be filed,
including, without limitation, all income, franchise, employment, property, and
sales taxes, and have timely paid all of their tax liabilities, other than
immaterial amounts and taxes that are being contested by AmerAlia, the Company,
or the Subsidiary in good faith by appropriate actions or proceedings diligently
pursued, and for which adequate reserves in conformity with GAAP with respect
thereto have been established. Neither AmerAlia nor the Company know of any
pending investigation of AmerAlia, the Company, or the Subsidiary by any taxing
authority or pending but unassessed tax liability of AmerAlia, the Company, or
the Subsidiary. AmerAlia, the Company, and the Subsidiary have made no presently
effective waiver of any applicable statute of limitations or request for an
extension of time to file a tax return, and neither AmerAlia, the Company, nor
the Subsidiary is a party to any tax-sharing agreement.
5.12 USE OF PROCEEDS; MARGIN SECURITIES. Neither AmerAlia, the
Company, nor the Subsidiary is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations T, U or X of the Board
of Governors of the Federal Reserve System), and no part of the proceeds of any
extension of credit under this Agreement will be used to purchase or carry any
such margin stock or to extend credit to others for the purpose of purchasing or
carrying margin stock. Neither AmerAlia, the Company, the Subsidiary nor any
Person acting on their behalf has taken any action that might cause the
transactions contemplated by this Agreement or any Other Agreements to violate
Regulations T, U or X or to violate the Exchange Act.
15
5.13 ERISA. All members of any Controlled Group have complied with
all applicable minimum funding requirements and all other applicable and
material requirements of ERISA and the Code, applicable to the Employee Benefit
Plans it or they sponsor or maintain, and there are no existing conditions that
would give rise to material liability thereunder. With respect to any Employee
Benefit Plan, all members of any Controlled Group have made all contributions or
payments to or under each Employee Benefit Plan required by law, by the terms of
such Employee Benefit Plan or the terms of any contract or agreement. No
Termination Event has occurred in connection with any Pension Plan, and there
are no unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA,
with respect to any pension plan which poses a risk of causing a Lien to be
created on the assets of the Company or which will result in the occurrence of a
Reportable Event. No member of any Controlled Group has been required to
contribute to a multiemployer plan, as defined in Section 4001(a)(3) of ERISA,
since September 2, 1974. No material liability to the Pension Benefit Guaranty
Corporation has been, or is expected to be, incurred by any member of a
Controlled Group. The term "liability," as referred to in this Section 5.13,
includes any joint and several liability. No prohibited transaction under ERISA
or the Code has occurred with respect to any Employee Benefit Plan which could
have a Material Adverse Effect or a material adverse effect on the condition,
financial or otherwise, of an Employee Benefit Plan.
5.14 DISCLOSURE. No representation, warranty or statement made by
AmerAlia or the Company in this Agreement, any of the Other Agreements, or in
any of the documents, instruments, exhibits or Schedules attached to such
agreements or delivered in connection herewith or therewith, contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary to make any statements made herein or therein not
misleading. There is no fact that does, or with the passage of time, could
reasonably be expected to materially and adversely affect the condition
(financial or otherwise), results of operations, business, properties, or
prospects of AmerAlia, the Company, or the Subsidiary that has not been
disclosed in the documents provided to the Sentient Entities. When used in this
context in this Article 5, "disclosure to the Sentient Entities" includes but is
not limited to disclosure made to The Sentient Group and its representatives as
agents for the Sentient Entities.
5.15 SUBSIDIARIES AND CAPITALIZATION.
(a) The Company has no subsidiaries, other than the
Subsidiary. AmerAlia has no subsidiaries other than the Company. All the issued
and outstanding shares of capital stock of AmerAlia and the Company are duly
authorized, validly issued, fully paid and nonassessable.
(b) Subject to the completion of the transactions
contemplated in this Agreement, the Other Agreements, and the Acquisition
Transaction, the capitalization of AmerAlia is as represented as of the dates
indicated in the SEC Reports.
(c) Subject to the completion of the transactions
contemplated in this Agreement and the Other Agreements, the capitalization of
the Company is 51,000 shares of outstanding Common Stock.
(d) No violation of any preemptive rights of shareholders
of AmerAlia or the Company has occurred by virtue of the transactions
contemplated under this Agreement or any Other Agreement. Subject to the
completion of the transactions contemplated in this Agreement and the Other
Agreements, there are no outstanding contracts, options, warrants, instruments,
documents or agreements binding upon the Company granting to any Person or group
of Persons any right to purchase or acquire shares of the Company's capital
stock.
(e) Subject to the completion of the transactions
contemplated in this Agreement and the Other Agreements, there are no
outstanding contracts, options, warrants, instruments, documents or agreements
binding upon the Subsidiary granting to any Person or group of Persons any right
to purchase
16
or acquire shares of the Subsidiary's capital stock except for the conversion
rights associated with the Series B2 Debentures.
5.16 INVESTMENT COMPANY ACT. Neither the Company, the Subsidiary
nor AmerAlia is required to be registered as an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
5.17 PUBLIC UTILITY HOLDING CORPORATION ACT. Neither the Company
nor the Subsidiary is a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or a "public utility"
within the meaning of the Public Utility Holding Corporation Act of 1935, as
amended.
5.18 SECURITIES LAWS. Assuming the truthfulness and accuracy of the
representations and warranties in Article 6, AmerAlia and the Company have each
complied with or is exempt from the registration and/or qualification
requirements of all federal and state securities or blue sky laws applicable to
the issuance or sale of the Common Stock, the Series A Preferred Stock, the
Series A Debentures, the Series B Debentures, and the Series C Debentures.
5.19 NO LABOR DISPUTES. Neither AmerAlia, the Company nor the
Subsidiary is involved in any labor dispute except as set forth in Section 5.9.
Neither AmerAlia, the Company, nor the Subsidiary is a party to any collective
bargaining agreement, and there are no strikes or walkouts or union organization
of any of AmerAlia's, the Company's or the Subsidiary's employees threatened or
in existence and no labor contract is scheduled to expire during the term of
this Agreement.
5.20 BROKERS. Except with respect to amounts owed to XxXxxxxxx
Xxxxx Securities Co. and RBC Xxxx Xxxxxxxx, neither AmerAlia, the Company, the
Subsidiary nor any of its shareholders has dealt with any broker, finder,
commission agent or other Person in connection with the transactions referenced
in or contemplated by this Agreement, nor is AmerAlia, the Company, the
Subsidiary, or any of its shareholders under any obligation to pay any broker's
fee or commission in connection with such transactions.
5.21 INSURANCE. The amount and types of insurance carried by
AmerAlia, the Company and the Subsidiary, and the terms and conditions thereof,
are substantially similar to the coverage maintained by companies in the same or
similar business as AmerAlia, the Company and the Subsidiary and similarly
situated companies.
VI. REPRESENTATIONS AND WARRANTIES OF THE SENTIENT ENTITIES, AMERALIA AND
THE SUBSIDIARY.
As of the Closing, each of the Sentient Entities, the Subsidiary and
AmerAlia represents and warrants to the Company as to itself (and not as to the
other Sentient Entities, the Subsidiary and AmerAlia) that:
6.1 INVESTMENT REPRESENTATIONS OF AMERALIA. AmerAlia is acquiring
the Series A Debentures, the Series C Debentures, Common Stock and the Series A
Preferred Stock for investment purposes only for its own account, and not with a
view toward, or for resale in connection with, any distribution thereof, and it
has no present intention of selling or distributing any such securities.
AmerAlia understands that the Series A Debentures, the Series C Debentures,
Common Stock and the Series A Preferred Stock have not been registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment as expressed herein.
17
6.2 Investment Representations of the Subsidiary. The Subsidiary
is acquiring the Series A Debentures for investment purposes only for its own
account, and not with a view toward, or for resale in connection with, any
distribution thereof, and it has no present intention of selling or distributing
such securities. The Subsidiary understands that the Series A Debentures have
not been registered under the Securities Act by reason of a specific exemption
from the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment as expressed herein.
6.3 INVESTMENT. Each Sentient Entity is acquiring the Series A
Debentures, the Series B1 Debentures, the Series B2 Debentures, the Warrants,
the Notional Share, and if issued, the Warrant Shares, the Conversion Shares and
the Exchange Shares (collectively, the "Securities"); for investment purposes
only for its own account, and not with a view toward, or for resale in
connection with, any distribution thereof, and it has no present intention of
selling or distributing any such securities. Sentient Entities understands that
the Securities have not been registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment as
expressed herein.
6.4 RULE 144. Each Sentient Entity acknowledges that because the
Securities have not been registered under the Securities Act, the Securities
must be held indefinitely unless subsequently registered under the Securities
Act or an exemption from such registration is available. It is aware of the
provisions of Rule 144 promulgated under the Securities Act, which permits
limited resale of shares purchased in a private placement under certain
circumstances that are not applicable to the Securities because neither class of
securities of the Company is registered under the Exchange Act.
6.5 ACCESS TO DATA. Each Sentient Entity and its legal, financial,
tax, accounting, and investment advisors have had an opportunity to discuss the
Acquisition Transaction (and all due diligence and other data assembled with
respect to the Acquisition Transaction), the historical and proposed business,
management and financial affairs of AmerAlia, the Company and the Subsidiary
with their respective management to the extent they deemed such consultation
necessary or appropriate and to obtain any additional information necessary or
appropriate for deciding whether or not to purchase the Securities.
6.6 KNOWLEDGE AND EXPERIENCE. Each Sentient Entity has such
knowledge and experience in financial and business matters, including
investments in other companies that are in a financial condition substantially
similar to the financial condition of AmerAlia and the Company immediately prior
to the Closing, that it (together with its advisors) is capable of evaluating
the merits and risks of the investment in the Securities, and it is able to bear
the economic risk of such investment. Further, the individual executing this
Agreement on behalf of each Sentient Entity has such knowledge and experience in
financial and business matters that it is capable of utilizing the information
made available to it and reviewed by each Sentient Entity in connection with the
offer and purchase of the Securities, of evaluating the merits and risks of an
investment in the Securities, and of making an informed investment decision with
respect to the Securities.
6.7 REQUISITE POWER. Each Sentient Entity has all requisite power
and authority necessary to enter into and to carry out the provisions of this
Agreement and the transactions contemplated hereby.
6.8 DULY AUTHORIZED.
(a) All action on the part of each Sentient Entity necessary for
the purchase of the Securities and the performance of each Sentient Entity's
obligations hereunder has been taken or will be taken prior to the Closing. Upon
their execution and delivery, this Agreement, the Other Agreements and the other
documents and instruments to be executed and delivered by the Sentient Entities
will be legal, valid and binding obligations of each Sentient Entity enforceable
in accordance with their terms, except as
18
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws and equitable principles relating to or affecting the
enforcement of creditors' rights in general and by general principles of equity.
(b) All action on the part of AmerAlia necessary for the purchase
of the Securities and the performance of AmerAlia's obligations hereunder has
been taken or will be taken prior to the Closing. Upon their execution and
delivery, this Agreement, the Other Agreements and the other documents and
instruments to be executed and delivered by AmerAlia will be legal, valid and
binding obligations of AmerAlia enforceable in accordance with their terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws and equitable principles relating to or
affecting the enforcement of creditors' rights in general and by general
principles of equity.
(c) All action on the part of the Subsidiary necessary for the
performance of the Subsidiary's obligations hereunder has been taken or will be
taken prior to the Closing. Upon their execution and delivery, this Agreement,
the Other Agreements and the other documents and instruments to be executed and
delivered by the Subsidiary will be legal, valid and binding obligations of the
Subsidiary enforceable in accordance with their terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other laws and equitable principles relating to or affecting the enforcement
of creditors' rights in general and by general principles of equity.
6.9 ACCREDITED INVESTOR. Each Sentient Entity is an "accredited
investor" as that term is defined in Regulation D and Rule 215 promulgated by
the Securities and Exchange Commission.
6.10 RESIDENT. Each Sentient Entity has its principal residence or
principal executive offices outside of the United States, and is not a U.S.
Person as that term is defined in SEC Regulation S, Rule 902(k).
VII. COVENANTS.
7.1 RESTRICTIONS ON TRANSFER OF SECURITIES. The Securities are not
and will not become transferable except upon the conditions specified in this
Article VII and the Securityholder Agreement of even date with this Agreement,
which conditions are intended to ensure compliance with the provisions of the
Securities Act and applicable state securities laws in respect of the transfer
of any of such securities. Each instrument representing the securities (or any
of them) shall be stamped or otherwise imprinted with legends substantially in
the following form until such time as the conditions set forth in such legends
have been met:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
QUALIFIED UNDER ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, OR THE HOLDER RECEIVES AN OPINION OF COUNSEL (IN A
FORM ACCEPTABLE TO THE CORPORATION) STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT
AND THE QUALIFICATION REQUIREMENTS UNDER STATE LAW."
19
The Company may also impose a legend on the certificates for the
securities as described in the Securityholder Agreement. The Company shall be
entitled to enter stop transfer notices on its stock books with respect to the
securities until the conditions as set forth in the legend above with respect to
the transfer of such securities have been met.
7.2 WAIVER. By execution of this Agreement, the Sentient Entities
hereby waive all closing conditions contained in the Closing Agreement and agree
to close the Financial Closing (as defined therein).
7.3 INDEMNIFICATION. The amounts owed by the Company as of the
Closing, pursuant to Section 6(a)(iii) of the Management and Cost Reimbursement
Agreement, and set forth on Exhibit D attached hereto shall be paid from the
proceeds of this transaction; provided, however, that if any such amounts remain
unpaid sixty (60) days after the Closing, all amounts required to discharge that
obligation shall be the sole obligation of AmerAlia.
VIII. MISCELLANEOUS.
8.1 REMEDIES. Any Person having any rights under any provision of
this Agreement will be entitled to enforce such rights specifically, to recover
damages by reason of any breach of any provision of this Agreement, and to
exercise all other rights granted by law, which rights may be exercised
cumulatively and not alternatively.
8.2 COURSE OF DEALING NOT AN AMENDMENT. No course of dealing
between the Company and the Sentient Entities (or either of them) or any delay
in exercising any rights hereunder or under the Company's Articles of
Incorporation will operate as a waiver of any rights of the Sentient Entities,
the Subsidiary or the Company.
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made in writing by any party
in connection herewith will survive the execution and delivery of this Agreement
for a period of two (2) years after the Closing. Any due diligence investigation
by the Sentient Entities shall not limit the representations and warranties
given by AmerAlia, the Subsidiary and the Company.
8.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
8.5 SEVERABILITY. Each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
8.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts when taken together shall constitute one and
the same Agreement.
8.7 DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
8.8 NOTICES. Except as otherwise expressly provided herein, all
communications provided for hereunder shall be in writing and delivered by
Federal Express or other overnight international
20
commercial courier service, (a) if to the Sentient Entities, addressed to the
respective Sentient Entity at the address specified below, or to such other
address as such Sentient Entity may in writing designate, or (b) if to the
Company, AmerAlia, or the Subsidiary, addressed to the address set forth below
or to such other address as any of them in writing may designate. Notices shall
be deemed to have been validly served, given or delivered (and "the date" of
such notice or words of similar effect shall mean the date) one day after
deposit with Federal Express or other overnight international commercial courier
service, with all charges for next business day delivery prepaid, or upon actual
receipt thereof (whether by noncertified mail, telecopy, telegram, facsimile, or
otherwise), whichever is earlier.
IF TO THE COMPANY, AMERALIA c/o AmerAlia, Inc.
OR THE SUBSIDIARY: Attn: Chairman
00000 Xxxx Xxxxx Xxxx Xx
Xxxxxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
WITH A COPY TO: Holland & Xxxx, LLP
000 Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
IF TO THE SENTIENT ENTITIES Sentient Executive GP I, Limited
(OR EITHER OF THEM): (on behalf of the General Partner of
Sentient Global Resources Fund 0, X.X.)
Xxxxx Xxxxx, Xxxxxxx Xxxxxx
PO Box 10795APO
Xxxxxx Town, Grand Cayman
Cayman Islands
Attn: Xxx XxXxxxxxxx
Tel: (000) 000 0000
Fax: (000) 000 0000
Sentient (Aust) Pty Limited Sentient Asset Management Canada Limited
Trustee of Sentient Global Resources 0000 Xxxxxxxxxx Xxxxxx West
Trust Xx. 0
Xxxxx 0, 00 Xxxxxx Xxxxxx Xxxxx 0000
Xxxxxx, XXX 2000 Xxxxxxxx, Xxxxxx X0X-0X0 Xxxxxx
Australia Attn: Xxxx Xxxxxxx, Director
Attn: Xxxxx Xxxxxxx, Director Tel: (000) 000-0000
Tel: (000) 0000-0000 Fax: (000) 000-0000
Fax: (000) 0000-0000
21
WITH A COPY (WHICH DOES NOT CONSTITUTE NOTICE) TO:
Xxxxx & Xxxxxx LLP
0000 Xxxxxx Xxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
8.9 GOVERNING LAW. The validity, meaning and effect of this
Agreement shall be determined in accordance with the laws of Colorado applicable
to contracts made and to be performed entirely in Colorado as if by and between
Colorado residents. Venue for any dispute arising under this Agreement will be
in the federal courts for the District of Colorado, or the courts in and for
Arapahoe County, Colorado.
8.10 SCHEDULES AND EXHIBITS. All schedules and exhibits are an
integral part of this Agreement.
8.11 LITIGATION COSTS. If any legal action, arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
therein shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it or they may be entitled.
8.12 FINAL AGREEMENT. This Agreement and the exhibits and schedules
attached hereto constitute the only agreement of the parties concerning the
matters herein, and supersedes, merges and renders void all prior written/oral,
and/or contemporaneous agreements and understandings related thereto.
8.13 CONFIDENTIALITY. The Sentient Entities (and each of them as to
itself) agrees to keep confidential any information delivered by AmerAlia, the
Company or the Subsidiary under this Agreement that AmerAlia, the Company or the
Subsidiary or any other person on the behalf of AmerAlia, the Company, or the
Subsidiary clearly indicates in writing to be confidential information;
provided, however, that nothing in this Section will prevent the Sentient
Entities from disclosing such information (a) to any Affiliate of such Sentient
Entity or any actual or potential purchaser, participant, assignee, or permitted
transferee of such Sentient Entity's rights or obligations hereunder that agrees
to be bound by the terms of this Section, (b) upon order of any court or
administrative agency, (c) upon the request or demand of any regulatory agency
or authority having jurisdiction over such Sentient Entity, (d) that is in the
public domain, (e) that has been obtained from any Person that is not a party to
this Agreement or an Affiliate of any such party without breach by such Person
of a confidentiality obligation known to such Sentient Entity, (f) if necessary
and only to the extent necessary for the exercise of any remedy under this
Agreement, (g) to the certified public accountants for such Sentient Entity or
(h) that has been independently developed by such Sentient Entity without use or
reference to any confidential information of AmerAlia, the Company or the
Subsidiary and such independent development can be shown by documentary
evidence. The Sentient Entities further agree that, to the extent the Sentient
Entities (or either of them) have received any confidential information from any
other source relating to AmerAlia, the Company, the Subsidiary, or the
Acquisition Transaction, it or they (as applicable) will maintain the
confidentiality and non-public nature of the information in accordance with any
other confidentiality or non-disclosure agreements entered into.
8.14 PUBLIC DISCLOSURE. Except as may be required to comply with
applicable law, no Party shall make or cause to be made any press release or
similar public announcement. The Sentient Entities
22
acknowledge that AmerAlia must make appropriate announcements to comply with its
obligations under the Exchange Act. AmerAlia agrees that it will provide the
Sentient Entities with a copy of any proposed announcement relating to the
subject matter of this Agreement not less than two business days prior to
AmerAlia's planned release of such announcement to the public, and that AmerAlia
will endeavor to conform the announcement to the Sentient Entities' reasonable
comments, provided AmerAlia can do so and still provide the information to the
public that, in AmerAlia's reasonable opinion, is required by law or regulation.
If the Sentient Entities do not provide comments to AmerAlia within such period,
they will not be deemed to have accepted the announcement in substantially the
form proposed by AmerAlia.
23
IN WITNESS WHEREOF, the Company, AmerAlia and the Subsidiary and the
Sentient Entities have caused this Agreement to be executed and delivered by
their respective officers thereunto duly authorized.
NATURAL SODA HOLDINGS, INC.
By: /s/ XXXX X. XXXX
-------------------------------------
Xxxx X. Xxxx, Chairman
AMERALIA, INC.
By: /s/ XXXX X. XXXX
-------------------------------------
Xxxx X. Xxxx, President
NATURAL SODA, INC.
By: /s/ XXXX X. XXXX
-------------------------------------
Xxxx X. Xxxx, Chairman
SENTIENT ENTITIES:
SENTIENT EXECUTIVE GP I, LIMITED, SENTIENT (AUST) PTY. LIMITED,
ON BEHALF OF THE GENERAL PARTNER OF AS TRUSTEE OF
SENTIENT GLOBAL RESOURCES FUND I, L.P. SENTIENT GLOBAL RESOURCES TRUST NO. 1
By: /s/ XXXX X. XXXXXXX By: /s/ XXXXX XXXXXXX
------------------------------------ -------------------------------------
Xxxx X. Xxxxxxx, Director Xxxxx Xxxxxxx, Director
DEBENTURE PURCHASE AGREEMENT
Exhibit A Amended and Restated Articles of Incorporation
Exhibit B The Securityholder Agreement between AmerAlia and the Sentient
Entities with respect to the Company.
Exhibit C The Management and Cost Reimbursement Agreement among AmerAlia, the
Sentient Entities and the Company.
Exhibit D Debts of the Company following the Closing and Use of Proceeds
Exhibit E Continuing Guarantee
Exhibit F Form of Security Agreement
Exhibit G Collateral Holding and Liquidation Agreement
Exhibit H Warrant Agreement
Exhibit I Series A Debenture
Exhibit J-1 Series B1 Debenture
Exhibit J-2 Series B2 Debenture
Exhibit K Series C Debenture
Exhibit L Release
Exhibit M Indemnification Letter
25
