ex10_53.htm


    
      

    

    EXHIBIT
10.53

    


    AmerAlia,
Inc.

    
      
        
          	 
      	 
      
	 
      	
                  9233
      Park Meadows Dr., Suite 431

                
	 
      	
                  Lone
      Tree, CO  80124

                
	 
      	
                  Telephone:
      (720) 876 2373 Facsimile: (720) 876
2374

                


        

      

    

    


    [FORM
OF LETTER TO CREDITORS]

    


    October
13, 2008

    


    


    [Name
& Address of Creditor]

    


    


    Dear
[Creditor]

    


    Introduction

    


    We are
writing to offer you the opportunity to subscribe for shares of AmerAlia Common
Stock in consideration for the cancellation of our obligations to
you.  We estimate as at October 15, 2008 these obligations will be
approximately:

    


    


    [Included
here a summary of obligations owed]

    


    


    On
September 25, 2008 we entered into a Restructuring Agreement (the “Agreement”)
with the Sentient Entities.  We expect the restructuring transaction
pursuant to the Agreement will close late in October and anticipate AmerAlia
will become substantially debt free and own 18% of its subsidiary, Natural Soda
Holdings (“Holdings”).  Sentient will exchange all its existing loans
to Holdings and its 53.5% ownership of Natural Soda (“NSI”) for the other 82% of
Holdings.  Holdings will then own all of NSI, the operating
subsidiary.

    


    As you
will see below, we are offering you the opportunity to subscribe for shares of
AmerAlia Common Stock at $0.36 per share in consideration for the cancellation
of any outstanding obligations that we owe to you.  This is the same
price that Sentient is paying.

    


    Restructuring

    


    We
anticipate that AmerAlia will have approximately up to 70 million shares
outstanding after the closing of the restructuring transaction and that Sentient
will own between 55% and 77% of our equity.  The exact amount of
Sentient’s ownership will depend on the level of subscriptions for AmerAlia
Common Stock by note holders and creditors.  We believe that following
the restructuring transaction, we will have only one other holder of AmerAlia
Common Stock that beneficially owns in excess of 5% if a trust affiliated with
one of our directors accepts this offer for a sufficient amount of the
obligations due to it.

    


    Under the
Agreement, in addition to converting its loans for shares of AmerAlia and
Holdings, Sentient will subscribe $11,880,000 to purchase 33,000,000
shares.  This subscription will be reduced to the extent that holders
of our Series A Debenture Secured Promissory Notes (the “Notes”) subscribe for
AmerAlia shares for the principal and interest owed to them.


    
      
         


      

      
        1

        
          

        

      

      
         


      

    


    After the
repayment of the Notes (whether through conversion into shares or cash
repayment) we will have approximately $6.5 million in cash which we are obliged
to use as follows:

    


    
      	
               
      

            	
              ·

            	
              for
      the payment of withholding taxes,

            


    

    
      	
               
      

            	
              ·

            	
              to
      reserve $2,880,000 for the expected capital contribution to Holdings (our
      share of the $16 million discussed below)
and

            


    

    
      	
               
      

            	
              ·

            	
              for
      an additional cash reserve of
$1,000,000.

            


    

    


    Any
remaining cash, subject to limitations, will be used to pay
creditors.  We anticipate that after the repayment of the Notes at
closing, our remaining obligations will total approximately $4.7
million.  We cannot use cash to pay all remaining creditors as that
would cause us to fail to meet our obligation to reserve $3.88 million in
cash.  We would not be able to close the restructuring transaction and
our future would become very uncertain and perilous.

    


    The
executive officers and directors of AmerAlia are owed significant obligations
for past service and loans to AmerAlia.  As part of the restructuring
transaction, they will convert some of their Notes and obligations into AmerAlia
shares and will have the opportunity to receive cash for at least a portion of
their outstanding obligations.  They will receive AmerAlia shares on
the same terms we are offering to other note holders and creditors.

    


    We need
creditors holding at least $2,100,000 of these remaining obligations to
subscribe for shares of AmerAlia Common Stock so that we will have at least
$1,000,000 of net working capital at closing.

    


    Any
subscriptions we receive will be accepted only if we close the restructuring
transaction pursuant to the Agreement.  If there are insufficient
subscriptions to enable us to close then all AmerAlia’s obligations will remain
outstanding.

    


    A full
description of the Agreement is included in our Current Report on Form 8-K dated
September 25, 2008 filed with the Securities and Exchange
Commission.  A complete copy of the Agreement is included as an
exhibit to the filing.

    


    Description
of Business

    


    Our
objective is to be a profitable natural products company through our ownership
of natural sodium leases and water rights.  We currently produce
various grades of sodium bicarbonate recovered from our naturally occurring
nahcolite resource using solution mining.  Our efforts to improve our
business performance are based on three objectives:

    
       

    

    
      	
               
      

            	
              ·

            	
              being
      a low cost producer of all grades of sodium
  bicarbonate,

            


    

    
      	
               
      

            	
              ·

            	
              increasing
      our market penetration of the North American market
  and

            


    

    
      	
               
      

            	
              ·

            	
              increasing
      the price at which we sell our
product.

            


    

    


    We
believe that NSI is now the second largest supplier of sodium bicarbonate in
North America.  We have invested heavily in our production capacity,
particularly our cavities which are the source of both our natural sodium
bicarbonate and our strategic low cash cost of production advantage over our
competitors.

    


    In
addition to the development of the sodium bicarbonate business, Holdings and NSI
own and have developed significant water rights.  The water rights are
used in the operation of the sodium bicarbonate business.  NSI has
entered into an agreement to sell up to one hundred and twenty (120) acre feet
of water per year to Shell Frontier Oil & Gas, Inc. through December 31,
2011, with specific options for renewal.  Holdings and NSI intend to
continue to develop the water rights and evaluate their use.


    
      
         


      

      
        2

        
          

        

      

      
         


      

    


    Holding’s
and NSI’s sodium leases are situated in an area that is receiving extensive
interest and publicity for the prospective development of its oil shale
resources.  While we do not own rights to the oil shale Holdings
and/or NSI intend to apply for a lease to develop the oil shale if appropriate
regulations are promulgated and approved by the federal government.

    


    Our
business activities are comprehensively described in our reports to the
Securities and Exchange Commission (the “SEC”).

    


    During
fiscal year ended June 30, 2008, we had the following unaudited operating
revenues and expenses for the periods shown:

    


    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            Period

                                          	 	
                                            Qtr
      ended

                                          	 	 	
                                            Qtr
      ended

                                          	 	 	
                                            Qtr
      ended

                                          	 	 	
                                            Qtr
      ended

                                          	 	 	
                                            Totals

                                          	 
	 
      	 	
                                            Sept.
      30, 2007

                                          	 	 	
                                            Dec.
      31, 2007

                                          	 	 	
                                            March
      31, 2008

                                          	 	 	
                                            June
      30, 2008

                                          	 	 	
                                            FY2008

                                          	 
	
                                            Revenues

                                          	 	$	4,212,711	 	 	$	4,308,294	 	 	$	4,847,006	 	 	$	4,579,789	 	 	$	17,947,800	 
	
                                            Expenses

                                          	 	 	3,441,720	 	 	 	3,754,237	 	 	 	4,317,371	 	 	 	4,631,043	 	 	 	16,144,371	 
	
                                            Gross
      Profit (Loss)

                                          	 	 	770,991	 	 	 	554,057	 	 	 	529,635	 	 	 	(51,254	)	 	 	1,803,429	 


                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    


    


    Benefits
to AmerAlia on Completion of the Restructuring

    


    
      	
               
      

            	
              ·

            	
              Sentient
      is an independent private equity investment firm specializing in the
      global resources industry.  We
      believe that as a major shareholder in AmerAlia it will be committed to
      the development of our project.  Private equity funds managed by
      Sentient will own 82% of Holdings.

            


    

    
      	
               
      

            	
              ·

            	
              Our
      debentures, Notes and related securities carried high rates of interest
      and contingent interest.  Without that accruing interest and
      contingent interest, we believe that NSI’s cash flow from operations will
      be profitable.

            


    

    
      	
               
      

            	
              ·

            	
              Sentient
      has rights to indemnification as a result of the Mars Trust repaying our
      $10 million Bank of America loan in September 2007.  As part of
      the restructuring transaction Sentient will surrender these
      rights.

            


    

    
      	
               
      

            	
              ·

            	
              We
      anticipate regaining our listing on the OTC Bulletin Board as we bring our
      SEC filings up to date and it is our objective after the restructuring is
      completed to apply to list our shares on the NASDAQ Capital
      Market.

            


    

    
      	
               
      

            	
              ·

            	
              The
      infusion of new capital provides us with the opportunity to retain our
      established management team.

            


    

    
      	
               
      

            	
              ·

            	
              NSI
      owns significant world class sodium and water assets in an area that is
      noted for its undeveloped oil shale resources.  We believe that
      with the support of Sentient we will have the resources to obtain and
      develop oil shale leases if appropriate regulations are approved by the
      federal government.

            


    

    
      	
               
      

            	
              ·

            	
              Assuming
      we receive subscriptions from holders of at least $2.1 million of
      obligations, AmerAlia and Holdings will be essentially debt
      free.

            


    

    
      	
               
      

            	
              ·

            	
              AmerAlia
      will have cash reserves of at least $3.88 million for working capital and
      investment in Holdings after the restructuring is
      completed.  AmerAlia’s further investment in Holdings will be
      matched by additional contributions from Sentient in proportion to its
      ownership.  Holdings will have up to $16 million available to
      invest in further development to ensure reliable supply of brine to the
      plant, reduce energy costs and improve plant efficiencies thereby
      increasing our output at a time when all major producers have announced
      price increases.

            


    

    


    Background
to the Restructuring Agreement

    


    In
October 2006, we entered into a Memorandum of Understanding with the Jacqueline
Badger Mars Trust (the “Trust”) and the other holders of our Series C notes to
exchange these obligations for NSHI shares.  We did not complete that
agreement but when Sentient became our largest shareholder in August 2007 after
buying the Trust’s AmerAlia shares, loans and obligations, it agreed to fulfill
a variation of that original understanding by accepting AmerAlia shares for the
cancellation of indemnification obligations owed to Sentient that are secured by
a pledge of a Series C Debenture.


    
      
         


      

      
        3

        
          

        

      

      
         


      

    


    Sentient
acquired 7,929,820 shares of AmerAlia directly from the Trust and will receive
an additional 5,977,800 shares of AmerAlia in the restructuring transaction that
the Trust would have received under the variation of the original
understanding.  Since Sentient paid the Trust $5 million and will
receive a total of 13,907,620 shares, its average cost is $0.36 per
share.

    


    As a
result, the subscription price is $0.36 per share, the same price that Sentient
is paying.  Sentient will also subscribe for additional shares at
$0.36 per share.

    


    Corporate
Governance

    


    
      	
               
      

            	
              ·

            	
              Under
      the Agreement, Sentient has a right to nominate its Chairman, Mr. Peter
      Cassidy, and up to three additional suitable candidates for election to
      the AmerAlia board of directors at its next meeting of
      shareholders.  Under the Agreement we are obliged to use
      commercially reasonable efforts to hold a meeting before December 1, 2008,
      although we anticipate requesting an extension of this date from
      Sentient.

            


    

    
      	
               
      

            	
              ·

            	
              The
      Holdings board of directors will comprise representatives from Sentient,
      AmerAlia and management with a majority of the representatives appointed
      by Sentient.

            


    

    
      	
               
      

            	
              ·

            	
              Mr.
      Bill H. Gunn and Mr. Robert van Mourik, executive officers of AmerAlia,
      will continue to supervise the management of Holdings and NSI as they have
      in the past, reporting to the Board of
  Directors.

            


    

    


    Additional
Information

    


    
      	
               
      

            	
              ·

            	
              AmerAlia
      has filed with the SEC its Annual report on Form 10-KSB for the year ended
      June 30, 2007 and its Quarterly reports for the periods ended September
      30, 2007 and December 31, 2007.  The Quarterly report for the
      period ended March 31, 2008 will be filed with the SEC prior to the
      deadline for your subscription.

            


    

    
      	
               
      

            	
              ·

            	
              AmerAlia
      has filed with the SEC a report on Form 8-K dated September 25, 2008 that
      includes and summarizes the Restructuring
  Agreement.

            


    

    


    These
reports provide extensive and comprehensive discussion of our business and
plans.  They are available online at www.sec.gov or
through various stock price reporting websites.   We will give
you copies of these reports upon request.

    


    Risks

    


    
      	
               
      

            	
              ·

            	
              The
      restructuring transaction pursuant to the Agreement may not
      close.  If we cannot obtain sufficient acceptances for this
      offer of shares, we will be unable to close the restructuring transaction
      pursuant to the Agreement and our future will become very uncertain and
      perilous.

            


    

    
      	
               
      

            	
              ·

            	
              Sentient
      may not fund its share of the expected $16 million capital call for NSHI
      for NSI’s further development with the effect that NSI will not be able to
      expand its well-field and production
capacity.

            


    

    
      	
               
      

            	
              ·

            	
              Our
      shareholders may be further diluted through the issuance of stock to raise
      additional capital at lower prices after the restructuring is
      completed.

            


    

    
      	
               
      

            	
              ·

            	
              Sentient
      may exercise its rights to subscribe for additional shares at $0.36 per
      share to ensure that potential creditor claims defined in the Agreement
      are extinguished.

            


    

    
      	
               
      

            	
              ·

            	
              We
      may become subject to the requirements of the Investment Company Act of
      1940, as we will be a minority shareholder in NSHI, which would require us
      to comply with significant restrictions on our operations and transactions
      with affiliates.

            


    


    
      
         


      

      
        4

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              ·

            	
              AmerAlia
      stockholders may not be able to exercise any control over decisions made
      by Holdings because AmerAlia will become a minority stockholder in
      NSHI.

            


    

    
      	
               
      

            	
              ·

            	
              Holdings
      and/or NSI may not be able to obtain an oil shale lease even if
      regulations for their issue are promulgated and approved by the federal
      government.

            


    

    
      	
               
      

            	
              ·

            	
              NSI
      may not profitably achieve increased sales after it has increased its
      investment in greater well field and production
  capacity.

            


    

    
      	
               
      

            	
              ·

            	
              The
      SEC may deregister AmerAlia as a public reporting company because of
      AmerAlia’s delays in filing its periodic reports with the SEC, including
      our annual report on Form 10-KSB for the fiscal year ended June 30,
      2008.  If AmerAlia is not a public reporting company you will
      not be able to sell your shares unless the shares are registered under the
      Securities Act of 1933, as amended (the “Act”), or there is an exemption
      available.

            


    

    


    Tax
Matters

    


    Creditors
who subscribe for shares in satisfaction of our obligations should seek their
own advice as to any potential tax consequences related to the cancellation of
their obligations and the treatments of any accrued interest.

    


    Restrictions
on Transfer

    


    The
shares of AmerAlia common stock that you subscribe for have not been registered
under the Act, and are restricted.  The shares can only be transferred
if they are registered or there is an available exemption from registration
under the Act.  We do not have any present intention to register the
shares for resale under the Act.

    


    Pursuant
to Rule 144 of the Act, an exemption from registration under the Act, the shares
will not be transferable on the public market for six months after you acquire
them from us.  Following the six month period, if you are not an
affiliate of AmerAlia, you will be able to transfer the shares on the public
market for the next six month period so long as we are current with the filing
of our SEC periodic reports.  After one year, non-affiliates will be
able to transfer the shares without restriction.

    


    If you
are an affiliate of AmerAlia, following the six month period, you will be able
to transfer your shares in the public market subject to volume restrictions, so
long as you file a Form 144 and we are current with our SEC periodic reporting
requirements.

    


    AmerAlia
is currently not current with the filing of its periodic reports with the SEC
and has a history of late filings.  In addition, the market for
AmerAlia shares has historically had low volume.

    


    Subscriptions

    


    We have
included a subscription agreement with this offer for your use if you choose to
subscribe for AmerAlia Common Stock on the terms described herein for some or
all of our obligations to you.  Please contact us if you require any
additional information concerning our obligations.


    
      
         


      

      
        5

        
          

        

      

      
         


      

    


    This offer is open until 5 p.m. Mountain Time October 24,
2008.  Subscriptions should be delivered by courier or fax
to:

    


    
      
        
          
            
              
                
                  
                    	
                            Holland
      & Hart, LLP

                          
	
                            8390
      E. Crescent Parkway, CO 80111

                          
	
                            Attention:

                          	
                            Michael
      Weiner, Esq.

                          
	
                            Telephone:

                          	
                            (303)
      290–1638

                          
	
                            Facsimile:

                          	
                            (303)
      672-6511

                          


                  

                

              

            

          

        

      

    

    


    Please
also return the original debt instruments along with the executed debt
assignment form.  If you cannot find an original document please ask
us for a lost certificate and indemnification agreement.

    


    Any
subscriptions we receive for our offer will be accepted only if we close the
restructuring transaction pursuant to the Agreement.

    


    If you
have any questions about this offer, I invite you to call me at (970)
948-0901.

    


    Sincerely

    


    


    /s/ Bill H.
Gunn

    Bill H.
Gunn

    Chairman
& CEO

    


    
      
        	
                Enc:

              	
                Subscription
      agreement

              
	 
      	
                Debt
      assignment form.

              


      

    

    


    


    FORWARD
LOOKING STATEMENTS DISCLAIMER

    The
future conduct of the business of our companies is dependent upon a number of
factors.  There can be no assurance that AmerAlia, Natural Soda
Holdings or Natural Soda will be able to conduct their operations as
contemplated herein.  Certain statements contained in this report use
terms denoting future possibilities and are forward-looking
statements.  The accuracy of these statements cannot be guaranteed as
they are subject to a variety of risks (including, without limitation, those
risks described herein and in AmerAlia’s reports filed with the Securities and
Exchange Commission).  They are beyond the companies’ ability to
predict or control and may cause actual results to differ materially from the
projections or estimates contained herein.  It is important that each
person reviewing this report understand the significant risks attendant to the
operations of AmerAlia.  AmerAlia disclaims any obligation to update
any forward-looking statement made herein.

     

     

    
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