EXHIBIT 10.39
THIS DEBENTURE HAS NOT 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. C- U.S. [____________]
_________ __, 2004
UNSECURED SUBORDINATED SERIES C
DEBENTURE DUE FEBRUARY 19, 2008
THIS SERIES C DEBENTURE is one of a duly authorized issue of unsecured
subordinated 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 Unsecured Subordinated Series C Debentures (the "Series C Debentures"), in
an aggregate principal amount of $12,000,000) plus accrued but unpaid interest.
This Series C Debenture is purchased by
AmerAlia, Inc., a Utah corporation, having a principal place of
business at 00000 X. Xxxxx Xxxx Xx., Xxxxxxxxxx, XX 00000 (Tel:
(000) 000-0000; Fax: (000) 000-0000).
Capitalized words used in this Series C Debenture not defined in the preceding
paragraph are defined in Section 1, below.
FOR VALUE RECEIVED, the Company promises to pay to the Holder: on or
before the Maturity Date (i) the principal sum stated above; (ii) interest to
the Holder on the principal sum at the Rate per annum payable quarterly in
arrears beginning June 30, 2004 ("Interest"); and (iii) 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, and Interest and Contingent
Interest on, this Series C 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 C Debenture is subject to the Debenture Purchase Agreement,
the Securityholder Agreement, and the following additional provisions.
Section 1. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
Series C Debentures
1
"Adjusted EBITDA" means the earnings of Natural Soda, Inc. (calculated
in accordance with generally accepted accounting principles, consistently
applied) (A) before any deduction for (i) interest, taxes, depreciation,
writedowns, 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.
"Contingent Interest" means an additional interest payment sufficient
to provide the Holder with an internal rate of return on the principal sum of
15% per annum compounded annually (including payment of any other amounts). In
computing such Contingent Interest, February 20, 2003 shall be used as the issue
date for the Series C Debentures.
"Company" means Natural Soda Holdings, Inc., a Colorado corporation.
"Debenture Purchase Agreement" means that certain Debenture Purchase
Agreement dated as of the Original Issue Date 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
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 5(b).
"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.
"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 17, 2008 13.5%
Series C Debentures
2
"Securityholder Agreement" means the Securityholder Agreement, dated as
of the Original Issue Date between the Company, AmerAlia, Inc., the Subsidiary
Sentient Global.
"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 Senior Secured Series A 10%
Debentures, or any of them.
"Series B Debentures" means the Company's Secured Subordinated Series
B1 Debentures and the Secured Subordinated Series B2 Convertible Debentures, or
any of them.
"Subsidiary" means Natural Soda, Inc., a Colorado corporation.
Section 2. Subordination, Seniority, and Pari Passu.
(a) The Series C Debentures are subordinated to the Series A Debentures
and the Series B 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 Series C Debentures except to the extent the
corresponding Interest has been paid on the Series A Debentures and (ii)
principal with respect to the Series C Debentures unless the principal and
Contingent Interest, if owed, on the Series A Debentures have been paid. Nothing
in this Series C Debenture shall be interpreted to impose any restrictions
whatsoever on the ability of any holder of a Series A Debenture or Series B
Debentures, or any person acting on behalf of such holder to take any action
authorized by the Series A Debentures or the Series B Debentures.
(b) Notwithstanding the foregoing, to the extent that the initial
Holder is in default under any obligations owing to the Company, the Company may
offset these obligations against the amounts payable under this Series C
Debenture.
(c) This Series C Debenture is one of a series of debentures known as
the Unsecured Subordinated Series C Debentures in a total principal amount of
$12,000,000 plus accrued but unpaid Interest. This Series C Debenture will be
treated in pari passu in all respects with all other Series C Debentures and
(except as provided in Section 2(d), below) the Series B Debentures.
(d) While there are any Series B Debentures outstanding:
(i) the holder of this Series C Debenture may not declare
an Event of Default. The Holder acknowledges that while the
Series B Debentures are outstanding, only the holder(s) of the
Series B Debentures may declare the existence of an Event of
Default or elect remedies with respect thereto in both cases
pursuant to the terms of the Series B Debentures.
(ii) if the holders of the Series B Debentures declare an
Event of Default under the Series B Debentures, the Series C
Debentures will be treated for all purposes as junior to the
Series B Debentures during the continuation of such Event of
Default.
Series C Debentures
3
Section 3. No Sale or Transfer. This Series C 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
and the Series C Debenture Pledge Agreement. Subject to the foregoing, transfers
of this Series C Debenture shall be registered upon registration books
maintained for such purpose by or on behalf of Company. Prior to presentation of
this Series C Debenture for registration of transfer, Company shall treat the
registered holder hereof as the owner and holder of this Series C Debenture for
the purpose of receiving all payments of principal and Interest hereon and for
all other purposes whatsoever, whether or not this Series C 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 all 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 C Debenture pari passu with the other
Series C Debentures including accrued and unpaid Interest and Contingent
Interest, but after the Series A Debentures, the Series B Debentures have been
fully repaid, including any Contingent Interest pursuant to the Series B
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 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 of or
interest on this Series C Debenture as and when the same shall
become due and payable;
(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 C
Debenture, and such failure or breach shall not have been
remedied within 30 days after the date on which notice of such
failure or breach shall have been given;
(iii) 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
Series C Debentures
4
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
(iv) 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.
(b) Remedies. For so long as there are any Series B Debentures
outstanding, the holders of the Series C Debentures may not declare an Event of
Default. If there are no Series B Debentures outstanding, the Holder, together
with all other holders of Series C Debentures based on a majority vote by
principal amount of the Holders of all other Series C Debentures (a "Majority of
the Holders") may declare an Event of Default on 30 days' notice to the Company.
If the Company fails to cure an Event of Default within such 30 day period (or
if the cure cannot be reasonably completed within such 30 day period, commence
the cure of the Event of Default and diligently pursue such cure), a Majority of
the Holders may:
(i) Declare all amounts due under the Series C Debentures
immediately due and owing and exercise all rights with respect
thereto permitted by law;
(ii) 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
(iii) Assert any other remedy available at law or in
equity.
Section 7. Prepayment. Provided the Series A Debentures and Series B
Debentures have been paid in full (or converted), including any Contingent
Interest under the Series B Debentures, the Company may prepay this Series C
Debenture in whole or 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 and shall include the Contingent Interest, if the
Company is repaying the full principal amount of the Series C Debentures or
repaying the Series C Debentures below an aggregate principal amount of $
1,000,000.
Series C Debentures
5
Section 8. Contingent Interest. The Company shall pay Contingent
Interest on the amounts represented by the Series C Debentures to the Holder (a)
on the Maturity Date of the Series C Debentures, if owed, subject to the
achievement of the contingencies described herein, (b) without regard to the
contingencies described herein, if the Company prepays any of the Series C
Debentures, (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 Series C Debentures. 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 9. No Impairment. Except as expressly provided herein, no
provision of this Series C 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 C Debenture at the time, place,
and rate, and in the coin or currency, herein prescribed. This Series C
Debenture is a direct obligation of the Company subject, however, to the
subordination provisions set forth in Section 2, above.
Section 10. No Rights as a Shareholder. This Series C 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 11. Mutilated, Lost or Stolen Debentures. If this Series C
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 C
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 12. Governing Law. This Series C 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 C Debenture.
Section 13. 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 C 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
Series C Debentures
6
provision of this Series C Debenture. The failure of the Company or the Holder
to insist upon strict adherence to any term of this Series C 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 C Debenture. Any waiver must be in writing.
Section 14. Severability. If any provision of this Series C Debenture
is invalid, illegal or unenforceable, the balance of this Series C 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 15. 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 16. 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 C Debentures
7
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: _______________________________
Xxxx X. Xxxx, Chairman
Attest:
By: ________________________________
Xxxxxx X.X. xxx Xxxxxx, Secretary
Accepted this _____ day of ________, 2004 by the undersigned, thereunto duly
authorized, in accordance with the terms of the Debenture Purchase Agreement.
AMERALIA, INC.
By: ________________________________
Authorized Officer
Title: _____________________________
Series C Debentures