EXHIBIT F
NEITHER THIS DEBENTURE NOR THE SECURITIES FOR WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
No. B2-2 U.S. $1,746,635
March 19, 2004
SECURED SUBORDINATED SERIES B2
CONVERTIBLE DEBENTURE
DUE FEBRUARY 19, 2008
THIS SERIES B2 DEBENTURE is one of a duly authorized issue of secured
subordinated convertible debentures of NATURAL SODA HOLDINGS, INC., a Colorado
corporation, having a principal place of business at 00000 X. Xxxxx Xxxx Xx.,
Xxxxxxxxxx, XX 00000 (Tel: (000) 000-0000; Fax: (000) 000-0000) (the "Company"),
designated as its Secured Subordinated Series B2 Convertible Debentures, due
February 19, 2008 (the "Secured Series B2 Debentures"), in an aggregate
principal amount of $9,700,000 plus accrued but unpaid interest. This Series B2
Debenture is purchased by Sentient (Aust) Pty. Limited, as Trustee of Sentient
Global Resources Trust No. 1, pursuant to the terms of the Debenture Purchase
Agreement.
Capitalized words used in this Series B2 Debenture not defined in the preceding
paragraph are defined in Section 1 below.
FOR VALUE RECEIVED, the Company promises to pay to the Holder: (i) on or
before the Maturity Date (a) the principal sum stated above; (b) interest to the
Holder on the principal sum at the Rate per annum from the date hereof payable
quarterly in arrears beginning June 30, 2004 ("Interest"); and (ii) Contingent
Interest, if owed. Interest shall be calculated for the actual number of days
elapsed for any period less than a full quarter. The principal of, Interest and
Contingent Interest on, this Series B2 Debenture are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address of the Holder
last appearing on the Company's records on the date such amounts become due.
This Series B2 Debenture is subject to the terms of the Debenture Purchase
Agreement and the Securityholder Agreement and the following additional
provisions.
Section 1. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Adjusted EBITDA" means the earnings of Natural Soda, Inc. (calculated in
accordance with generally accepted accounting principles, consistently
applied) (A) before any
Series B2 Debenture
1
EXHIBIT F
deduction for (i) interest, taxes, depreciation, write downs, revaluations
and amortization and (ii) payments to the Company for payment by the
Company of the Management Cost and Reimbursement Agreement dated as of the
date hereof, and (B) but including amortization of well-field capital
expense.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the
State of Colorado are authorized or required by law or other government
action to close.
"Collateral" is as defined in Section 2(d).
"Collateral Agent" means Sentient Resources USA, Inc., a Colorado
corporation.
"Company" means Natural Soda Holdings, Inc., a Colorado corporation.
"Contingent Interest" means a payment of additional interest, which when
added to the other payments of principal and interest on the Debentures,
shall provide an internal rate of return of thirty percent per annum
compounded annually. In computing such Contingent Interest, February 20,
2003 shall be used as the issue date for the Debentures.
"Debenture Purchase Agreement" means that certain Debenture Purchase
Agreement dated as of the date hereof between the Company, AmerAlia, the
Subsidiary, 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.
Debentures" means the Series A Debentures, the Series B Debentures, the
Series C Debentures, or any of them, as the context may require.
"Holder" means any person who is a registered holder of these B2
Debentures as listed in the books of the Company and any person who is a
permitted transferee of a Holder.
"Interest" is as defined in the paragraph entitled "FOR VALUE RECEIVED,"
above.
"Majority of the Holders" is as defined in Section 6(b).
"Material Adverse Effect" means a material adverse effect upon the
business, operations, properties, assets or condition (financial or
otherwise) of AmerAlia, the Company or, as the case may be, of the Company
and the Subsidiary taken as a whole.
"Maturity Date" means February 19, 2008 or (if earlier) the date of any
prepayment or acceleration.
"Person" means a corporation, an association, a partnership, organization,
a business, an individual, a government or political subdivision thereof
or a governmental agency.
Series B2 Debenture
2
EXHIBIT F
"Rate" means the interest rate for the periods set forth below.
INTEREST RATE
PERIOD PER ANNUM
------ ---------
March 19, 2004 - June 30, 2004 1.5%
July 1, 2004 - June 30, 2005 4.5%
July 1, 2005 - June 30, 2006 7.5%
July 1, 2006 - June 30, 2007 10.5%
July 1, 2007 - February 19, 2008 13.5%
"Security Agreements" means the Security Agreement between the Company and
the Collateral Agent for the benefit of AmerAlia, the Subsidiary and
Sentient dated as of the date hereof and the Security Agreement between
the Subsidiary and the Collateral Agent for the benefit of AmerAlia, the
Subsidiary and Sentient dated as of the date hereof.
"Sentient" means any of Sentient Executive GP I, Limited, acting on behalf
of the General Partner of Sentient Global Resources Fund I, L.P., or
Sentient (Aust) Pty. Limited, acting on behalf of Sentient Global
Resources Trust No. 1.
"Series A Debentures" means the Company's secured Senior Secured Series A
10% Debentures.
"Series B Debentures" means the Company's Secured Subordinated Series B1
Debentures and the Secured Subordinated Series B2 Convertible Debentures.
"Series C Debentures" means the Company's Unsecured Subordinated Series C
Debentures.
"Securityholder Agreement" means the Securityholder Agreement, dated as of
the Original Issue Date between the Company, AmerAlia, Inc., the
Subsidiary and Sentient.
"Subsidiary" means Natural Soda, Inc., a Colorado corporation and
wholly-owned subsidiary of the Company.
Section 2. Subordination, Seniority, Pari Passu, and Collateral.
(a) The Secured Series B2 Debentures are subordinated to the Series A
Debentures and the Series B1 Debentures, such subordination occurring with no
action of the Holders. The Holder understands that the Company intends to make
no payments of (i) Interest with respect to the Secured Series B2 Debentures
except to the extent the corresponding Interest has been paid on the Series A
Debentures and (ii) principal with respect to the Secured Series B2 Debentures
unless the principal on the Series A Debentures has been paid and except as set
forth herein. Nothing in this Series B2 Debenture shall be interpreted to impose
any restrictions whatsoever on the ability of any holder of a Series A
Debentures or Series B1 Debentures or any person acting on behalf of such holder
to take any action authorized by the documents defining the Series A Debentures
and the Series B1 Debentures.
(b) Except as set forth in Section 5 and Section 7 below, the Series B1
Debentures, the Secured Series B2 Debentures and the Series C Debentures shall
be treated in pari passu in all respects with respect to all payments of
principal and Interest, unless the holders of the Series B Debentures declare an
Event of Default. During the continuation of such Event of Default, the Series C
Debentures will be treated as junior to the Series B Debentures, and no payments
Series B2 Debenture
3
EXHIBIT F
will be made to the holders of Series C Debentures, until the Series A
Debentures and the Series B Debentures have been paid in full, including any
Contingent Interest.
(c) This Series B2 Debenture is one of a series of debentures known as the
Secured Subordinated Series B2 Convertible Debentures in a total principal
amount of $9,700,000 plus accrued but unpaid Interest. No payments will be made
to the holder of this Series B2 Debenture unless a proportional payment (based
on outstanding principal amount) is made with respect to all other Secured
Series B2 Debentures, the Series B1 Debentures and, except as provided in
Section 2(b) above, the Series C Debentures; provided, however, that the Company
may prepay the Series B1 Debentures and the Secured Series B2 Debentures
pursuant to Section 7 hereof prior to making any prepayments on the Series C
Debentures.
(d) Pursuant to the terms of a Collateral Holding and Liquidation
Agreement, the Security Agreements and the Pledge Agreement, Collateral Agent
holds as a security interest, as collateral for repayment of all of the Series
B1 Debentures, the Series A Debentures, and the Secured Series B2 Debentures,
including all Contingent Interest, all of the outstanding shares of common stock
of the Subsidiary plus all other assets of the Company and the Subsidiary (the
"Collateral"). The Collateral Holding and Liquidation Agreement is incorporated
herein as if fully set forth, and the rights of the Holder are subject to the
terms of said agreements.
Section 3. No Sale or Transfer. This Series B2 Debenture may not be sold,
transferred, assigned, hypothecated or divided into two or more Debentures of
smaller denominations, except in accordance with the Securityholder Agreement.
Subject to the foregoing, transfers of this Debenture shall be registered upon
registration books maintained for such purpose by or on behalf of Company. Prior
to presentation of this Series B2 Debenture for registration of transfer,
Company shall treat the registered holder hereof as the owner and holder of this
Series B2 Debenture for the purpose of receiving all payments of principal and
Interest hereon and for all other purposes whatsoever, whether or not this
Series B2 Debenture shall be overdue and Company shall not be affected by notice
to the contrary.
Section 4. Provisions Regarding Payment of Interest. Subject to the
subordination provisions in paragraph 2(a) hereof and to the in pari passu
provisions of paragraphs 2(b) and 2(c), Interest hereunder will be paid to the
Holder on each Interest payment date; provided, however, that the Interest
payable including any Contingent Interest, if owed, shall not be higher than the
maximum interest allowable under applicable law. If the Interest payable is
higher than the maximum interest payable under applicable law, the Company shall
only pay the amount allowable under applicable law.
Section 5. Trade Sale. Except as provided in the Securityholder Agreement,
if the Company (i) should (a) assign, transfer or sell its interest in the
Subsidiary to a Person unaffiliated with the Company, or (b) assign, transfer or
sell substantially of its Assets, or (ii) should the Subsidiary sell, assign or
transfer, all or substantially all of its Assets, the Company shall be obligated
to prepay this Series B2 Debenture pari passu with the other Secured Series B2
Debentures including accrued and unpaid Interest and Contingent Interest, but
after the Series A Debentures and the Series B1 Debentures have been fully
repaid, including any Contingent Interest pursuant to the Series B1 Debenture,
and prior to any payment to the Series C Debentures, to the extent of the
consideration received by the Company or the Subsidiary in such a transaction.
Section 6.
(a) "Event of Default" wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation
Series B2 Debenture
4
EXHIBIT F
of law or pursuant to any judgment, decree or order of any court, or any order,
rule or regulation of any administrative or governmental body):
(i) any default in the payment of the principal or interest or Contingent
Interest on this Series B2 Debenture as and when the same shall become due
and payable, (whether on the Maturity Date or by acceleration or
otherwise);
(ii) the Company or AmerAlia, Inc., shall fail to observe or perform any
other covenant, agreement or warranty contained in, or otherwise commit
any breach of, this Series B2 Debenture or the Securityholder Agreement,
and such failure or breach shall not have been remedied within 15 days
after the date on which notice of such failure or breach shall have been
given;
(iii) The occurrence or existence of any condition that constitutes an
event of default or that would constitute an event of default with the
giving of notice, the passage of time, or both, under the terms of any of
the Debentures, or any other material indebtedness of the Company or the
Subsidiary;
(iv) The occurrence of any event that would, upon passage of time or
otherwise, have a Material Adverse Effect on AmerAlia, the Company, or the
Subsidiary;
(v) the Company shall commence a voluntary case under the United States
Bankruptcy Code or insolvency laws as now or hereafter in effect or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against the Company under the Bankruptcy Code and the petition
is not controverted within 30 days, or is not dismissed within 60 days,
after commencement of such involuntary case; or a "custodian" (as defined
in the Bankruptcy Code) is appointed for, or takes charge of, all or any
substantial part of the property of the Company or the Company commences
any other proceeding under any reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to the
Company or there is commenced against the Company any such proceeding
which remains undismissed for a period of 60 days; or the Company is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Company suffers
any appointment of any custodian or the like for it or any substantial
part of its property which continues undischarged or unstayed for a period
of 60 days; or the Company makes a general assignment for the benefit of
creditors; or the Company shall fail to pay, or shall state that it is
unable to pay its debts generally as they become due; or the Company shall
call a meeting of all of its creditors with a view to arranging a
composition or adjustment of its debts; or the Company shall by any act or
failure to act indicate its consent to, approval of or acquiescence in any
of the foregoing; or any corporate or other action is taken by the Company
for the purpose of effecting any of the foregoing; or
(vi) AmerAlia shall have failed to: (i) file a proxy statement with the
Securities and Exchange Commission for shareholder approval of the
transactions contemplated by the Debenture Purchase Agreement by not later
than April 15, 2004; (ii) diligently pursue the finalization of the proxy
statement in accordance with the rules of the Securities and Exchange
Commission; and (iii) obtain the approval of its shareholders of the
transactions contemplated by the Debenture Purchase Agreement as soon
after finalization of the proxy statement as possible, but no later than
June 30, 2004.
Series B2 Debenture
5
EXHIBIT F
(b) Remedies. For so long as Sentient holds any of the Secured Series B2
Debentures, only Sentient may declare an Event of Default under the Secured
Series B2 Debentures on 15 days' written notice to the Company. If Sentient does
not hold any of the Secured Series B2 Debentures, the Holder, together with all
other holders of Secured Series B2 Debentures based on a majority vote by
principal amount of the Holders of all Secured Series B2 Debentures (a "Majority
of the Holders") may declare an Event of Default on 15 days' written notice to
the Company. Neither Sentient nor (if applicable) a Majority of the Holders may
declare an Event of Default while there are any Series A Debentures outstanding
unless an Event of Default has been declared with respect to the Series A
Debentures. If the Company fails to cure an Event of Default within such period
(or if the cure cannot be reasonably completed within such period, commence the
cure of the Event of Default and diligently pursue such cure), Sentient or (if
applicable) a Majority of the Holders may:
(i) Declare all amounts due under the Secured Series B2 Debentures and all
other Debentures owned by Sentient immediately due and owing and exercise
all rights with respect thereto permitted by law;
(ii) Subject to the rights of the Series A Debentures and to the terms of
the Collateral Holding and Liquidation Agreement, the Security Agreements
and the Pledge Agreement, cause the Company and the Subsidiary to transfer
ownership of the Collateral on its books to Collateral Agent on behalf of
the Holder and all other holders of the Series A Debentures, the Series B1
Debentures, and the Secured Series B2 Debentures, and exercise all rights
to vote with respect to the Pledged Shares (including the right to elect
the board of directors of the Subsidiary by shareholder consent);
(iii) Apply to a court with its seat in Colorado that has jurisdiction
over the Company or the Subsidiary for the appointment of a receiver to
manage the assets and operations of the Company or the Subsidiary; or
(iv) Assert any other remedy available at law or in equity.
Section 7. Prepayment. Provided the Series A Debentures and the Series B1
Debentures have been paid in full, including any Contingent Interest pursuant to
the Series B1 Debentures, and prior to the payment of the Series C Debentures,
the Company may prepay the Secured Series B2 Debentures in whole (and not in
part) at any time prior to the Maturity Date upon not less than 30 days' notice
to the Holder. Any prepayment shall include payment of accrued and unpaid
Interest.
Section 8. Conversion. At any time before this Series B2 Debenture has
been paid, upon written notice to the Company, and provided that the Holders of
all of the outstanding Secured Series B2 Debentures elect to do so, the Holders
of all of the outstanding Secured Series B2 Debentures may collectively convert
the outstanding principal amounts of all of the Series B2 Debentures in their
entirety and all accrued but unpaid Interest in full into 49% of the
Subsidiary's common stock. If the Holders elect to convert all of the
outstanding Secured Series B2 Debentures, the Company shall not pay any
Contingent Interest. When issued, the shares of the Subsidiary's common stock
issuable upon conversion of this Series B2 Debenture will be legally and validly
issued, fully-paid and non-assessable. Upon conversion, this Series B2 Debenture
will be cancelled and no longer outstanding.
Section 9. Contingent Interest. Except as provided in Section 8 above, the
Company shall pay Contingent Interest on the amounts represented by the Secured
Series B2 Debentures to the holders of the Debentures (a) on the Maturity Date
of the Secured Series B2 Debentures, if owed, subject to the achievement of the
contingencies described herein, (b) if the Company
Series B2 Debenture
6
EXHIBIT F
prepays any of the Secured Series B2 Debentures, without regard to the
contingencies described herein, as to the amount prepaid, (c) without regard to
the contingencies if there is a trade sale, and (d) without regard to the
contingences described herein, upon the declaration of a default pursuant to the
Secured Series B2 Debentures. Subject to the preceding sentence, Contingent
Interest shall not be payable if: the Adjusted EBITDA is less than $ 500,000 for
the 12-month period prior to the Maturity Date; provided, however, that if the
Adjusted EBITDA is less than $ 500,000, then if the Adjusted EBITDA is in excess
of $ 1,000,000 in the aggregate for the 36-month period immediately prior to the
Maturity Date, the Contingent Interest shall be due and payable on the Maturity
Date. Notwithstanding the foregoing, if an Event of Default occurs, the
Contingent Interest shall be immediately due and payable.
Section 10. No Impairment. Except as expressly provided herein, no
provision of this Series B2 Debenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of, and
Interest and Contingent Interest on, this Series B2 Debenture at the time,
place, and rate, and in the coin or currency, herein prescribed. This Series B2
Debenture is a direct obligation of the Company subject, however, to the
subordination provisions set forth in Section 2, above.
Section 11. No Rights as a Shareholder. This Series B2 Debenture shall not
entitle the Holder to any of the rights of a stockholder of the Company,
including without limitation, the right to vote, to receive dividends and other
distributions, or to receive any notice of, or to attend, meetings of
stockholders or any other proceedings.
Section 12. Mutilated, Lost or Stolen Debentures. If this Series B2
Debenture shall be mutilated, lost, stolen or destroyed, the Company shall
execute and deliver, in exchange and substitution for and upon cancellation of a
mutilated Debenture, or in lieu of or in substitution for a lost, stolen or
destroyed debenture, a new Debenture for the principal amount of this Series B2
Debenture so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Debenture, and of the
ownership hereof, and adequate indemnity, if requested, all reasonably
satisfactory to the Company.
Section 13. Governing Law. This Series B2 Debenture shall be governed by
and construed in accordance with the laws of the State of Colorado. Each of the
parties consents to the exclusive jurisdiction of the federal courts whose
districts encompass any part of Denver, Colorado, or the state courts of the
State of Colorado sitting in Arapahoe County, Colorado in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
coveniens, to the bringing of any such proceeding in such jurisdictions. To the
extent determined by such court, the Company shall reimburse the Holder for any
reasonable legal fees and disbursements incurred by the Holder in enforcement of
or protection of any of its rights under any of this Series B2 Debenture.
Section 14. Waiver of Jury Trial; No Other Waivers. The Company and the
Holder hereby waive the right to a trial by jury in any action, proceeding or
counterclaim in respect of any matter arising out or in connection with this
Debenture. Any waiver by the Company or the Holder of a breach of any provision
of this Series B2 Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Series B2 Debenture. The failure of the Company or the Holder to insist
upon strict adherence to any term of this Series B2 Debenture on one or more
occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Series B2 Debenture. Any waiver must be in writing.
Series B2 Debenture
7
EXHIBIT F
Section 15. Severability. If any provision of this Series B2 Debenture is
invalid, illegal or unenforceable, the balance of this Series B2 Debenture shall
remain in effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other persons and
circumstances.
Section 16. Obligations Due on a Business Day. Whenever any payment or
other obligation hereunder shall be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day (or, if such next
succeeding Business Day falls in the next calendar month, the preceding Business
Day in the appropriate calendar month).
Section 17. Notices. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery at the
respective addresses of the parties as set forth in the Debenture Purchase
Agreement or on the register maintained by Company. Notice shall conclusively be
deemed to have been given when received.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
Series B2 Debenture
8
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer duly authorized for such purpose, as of the date first
above indicated.
NATURAL SODA HOLDINGS, INC.
By: /s/ Xxxx X. Xxxx
--------------------------------
Xxxx X. Xxxx, Chairman
Attest:
By: /s/ Xxxxxx X.X. xxx Xxxxxx
---------------------------------------
Xxxxxx X.X. xxx Xxxxxx, Secretary
Accepted this 19th day of March, 2004 by the undersigned, thereunto duly
authorized, in accordance with the terms of the Debenture Purchase Agreement.
SENTIENT (AUST) PTY. LIMITED, AS
TRUSTEE OF SENTIENT GLOBAL RESOURCES
TRUST NO. 1
By: /s/ Xxxxx Xxxxxxx
---------------------------------------
Xxxxx Xxxxxxx, Director
Series B2 Debenture
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
Debenture)
CHECK ONE OF THE FOLLOWING BOXES, AND COMPLETE THE DATE AND OTHER APPLICABLE
BLANKS:
___________, 200_ (Date of Notice)
The undersigned hereby elects to convert Debenture No. [ ] and all accrued but
unpaid interest into shares of common stock of Natural Soda, Inc., calculated as
set forth in Section 8, above.
Number of shares of Natural Soda's, Inc. Common Stock to be issued: __________
Signature _____________________________
Name __________________________________
Address _______________________________
Tax ID Number: ________________________
