**Memorandum          of Understanding**

**11          September 2006**

**AmerAlia,          Inc. **

**The          Jacqueline B. Mars Trust **

**Robert          C. Woolard & Charles D. O’Kieffe**

**Preamble**

|   | 1) | Sentient                    has agreed to convert all of (i) its Series A debentures and                    all accrued                    interest thereon, (ii) its Series B1 and B2 debentures and all                    accrued                    interest thereon, (iii) its entitlement to contingent interest,                    and (iv)                    the outstanding $1,000,000 working capital loan provided to NSI                    and                    interest thereon, into an approximate 49% direct equity interest                    in                    NSI. |
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|   | 2) | In                    the event of a sale of NSI, to protect Sentient from an unfavorable                    sale                    price, Sentient will be granted an option to increase its share                    of the                    sale proceeds at the time of sale. This option will be capped                    at the                    lesser of (a) 66% of the sale proceeds or (b) a maximum additional                    realized value to Sentient of $18,000,000 as a result of the                    sale. By way                    of illustration, the Sentient option would result in an increase                    of                    Sentient’s share of proceeds to 66% only if a sale price were negotiated                    at or below approximately $105,900,000 since this is the number                    at which                    Sentient’s 66% has its maximum $18 MM value.  Any sale price above                    this level caps the value of Sentient’s increased share of proceeds at $18                    MM. |
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|   | 3) | AmerAlia                    is requesting that Sentient redeem the principal amount of the                    NSHI Series                    A Debenture held by AmerAlia. As an incentive to Sentient to                    provide this                    additional funding, the $18,000,000 cap described in item 2 above                    may be                    increased to $22,000,000. |
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|   | 4) | To                    protect all shareholders of NSI, both NSHI and Sentient will                    have drag                    along and tag along rights in similar form to those rights defined                    in the                    Securityholder agreement between the Sentient entities, NSHI                    and AmerAlia                    and described in AmerAlia’s SEC filings - included here as Exhibit                    A. |
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|   | 5) | An                    integral part of the recapitalization plan is the replacement                    of the BLM                    land reclamation bonds currently guaranteed by Mars Trust. This                    is an                    obligation of NSI even though the Mars Trust guaranty is currently                    secured                    by a Series A Debenture issued by NSHI to NSI. |
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|   | 6) | NSHI                    will be the sole shareholder of all NSI shares not held by                    Sentient. |
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|   | 7) | The                    value of the NSHI holding in NSI must be determined and also                    the resulting                    value of equity in NSHI. Sentient has placed a value of approximately                    $60,000,000 on its exchange of debt for a 49% interest in NSI                    (see item 1                    above). This implies an overall value slightly in excess of $120,000,000                    for all of NSI. After the exchange of the Sentient obligations                    for equity                    in NSI, it is expected that there will not be any remaining inter-company                    loans between NSHI and NSI. Also, that the net balance of any                    remaining                    loan accounts between AmerAlia and NSHI will not be materially                    significant. Consequently, for purposes of this recapitalization                    an                    overall value of NSI shall be deemed to be $100,000,000 and NSHI’s share                    of this value shall be deemed to be                    $51,000,000. |
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|   | 8) | NSHI                    currently has 420,000 shares of common stock issued and                    outstanding. |
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**General          Statements of Agreement: **

|   | 9) | The                    Jacqueline B. Mars Trust (the “Trust”) has advanced funds to AmerAlia and                    guaranteed a loan from the Bank of America as                    follows: |
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|   | · | Promissory                    Note dated March 1, 2004 for                    $469,628; |
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|   | · | A                    number of additional promissory notes issued under a guaranty                    agreement; |
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|   | · | Advances                    for travel and legal fees of approximately                    $16,800; |
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|   | · | Loan                    from the Bank of America for                    $9,921,583; |
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|   | · | The                    estimated total amount of these obligations due to the Trust                    and the Bank                    of America together with accrued interest, collectively known                    as “the                    Trust Debts”, as at September 30, 2006 will be approximately                    $11,930,000. |
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|   | · | The                    Trust has agreed to repay the Bank of America loan and convert                    the Trust                    Debts into a direct common equity interest in NSHI. The replacement                    of the                    BLM bonding currently guaranteed by the Trust is a pre-condition                    to the                    conversion of the Trust Debts into NSHI common stock. |
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|   | 10) | The                    Trust shall retain its common shares representing approximately                    46% of                    AmerAlia and agree to a waiver of its voting rights on these                    shares for                    some time mutually agreed by the Trust and AmerAlia. |
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|   | 11) | Messrs                    Woolard and O’Kieffe hold Series C Debenture Secured Promissory notes and                    an additional unsecured promissory note, also issued by AmerAlia,                    which                    have a total balance owing of principal and accrued interest                    estimated to                    be approximately $2,739,000 as at September 30, 2006. These obligations                    are collectively known as the “W/OK notes”. Woolard and O’Kieffe have                    agreed to convert their W/OK notes into NSHI common                    stock. |
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|   | 12) | AmerAlia                    holds NSHI Series A Preferred stock with a liquidation value                    estimated to                    be $6,355,000 as at September 30, 2006. AmerAlia agrees to hold                    a meeting                    of NSHI stockholders to authorize an amendment to NSHI’s Articles of                    Incorporation to enable the conversion of the preferred stock                    into common                    stock on the same basis as the Trust Debts and the W/OK                    notes. |
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|   | 13) | NSHI                    has issued Series A Debentures for $4,375,000 to AmerAlia and                    accrued                    interest thereon is estimated to be approximately $751,000 as                    at September                    30, 2006. AmerAlia has used its NSHI Series A Debenture (“Series A                    Debentures”) to secure promissory notes (known as “Series A Notes”) issued                    to various investors. |
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|   | 14) | Should                    Sentient not fund the redemption of the remaining Series A Debentures                    due                    to AmerAlia in exchange for an increase in the $18 MM as proposed                    in item                    2. above, AmerAlia will convert the Series A Debenture and its                    accrued                    interest into NSHI common stock on the same basis as the Trust                    Debts and                    W/OK notes and raise new capital to fund the repayment of its                    Series A                    Notes. |
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|   | 15) | AmerAlia                    will assume all responsibility to fund the repayment of NSHI’s current                    creditors for past due amounts still                    outstanding. |
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|   | 16) | Discrete                    share certificates of NSHI’s common stock reflecting each party’s direct                    ownership interest will be held by AmerAlia, the Trust, and Robert                    C.                    Woolard/Charles D. O’Kieffe and a definitive shareholder agreement will be                    executed by all shareholders. The shareholder agreement shall                    determine                    the conduct of the parties and the management of NSHI concerning,                    amongst                    other things: |
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|   | · | The                    appointment of a Board of Directors representative of the relative                    ownership of the company held by each                    shareholder. |
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|   | · | The                    distribution of free cash flow to shareholders whether by dividends                    or                    from funds of any other nature representing profits paid by NSI                    to                    NSHI. |
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|   | · | The                    obligations of shareholders to contribute additional capital                    to NSHI to                    support NSHI’s share of any additional capital investment in NSI. |
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|   | · | NSHI                    shares must be convertible into NSI shares at some future date                    upon the                    occurrence of specific triggering events. These events are the                    bankruptcy                    of AmerAlia or the failure of NSI to remit its free cash flow                    to its                    shareholders according to criteria still to be determined. |
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|   | · | AmerAlia’s                    first right of refusal to acquire NSHI shares offered for sale                    by other                    shareholders. |
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|   | 17) | NSI                    shall execute a formal management contract with AmerAlia and                    AmerAlia                    shall be compensated for these services directly by NSI. Such                    funds shall                    not be flowed through NSHI nor be subject to any claim by NSHI                    shareholders. |
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|   | 18) | The                    resulting equity value of NSHI must be apportioned to the three                    shareholder entities consisting of AmerAlia, the Trust, and                    Woolard/O’Kieffe by some equitable and justifiable means. |
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|   | 19) | NSI                    and NSHI may both have to be re-incorporated as LLCs to provide                    workable                    tax treatment of funds flowing from NSI operations to Sentient                    and the                    NSHI shareholders. This issue shall be left to the company taxation                    advisors for final determination. |
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|   | 20) | All                    parties to this Memorandum acknowledge that there may be final                    fine tuning                    of the dollars and percentages contained herein based upon their                    determination as of September 30, 2006; and once determined shall                    form the                    basis for calculating the number of shares of common stock issued                    in                    satisfaction of those obligations. |
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**Apportionment          of shares within NSHI: **

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|                                             | Estimatedobligation            | Outcome                    if all converted to common stock |
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|                                             | #                    Shares    | %                                                           |
| Series                    A Debentures           | $                    4,375,000 | 73,885                                                      | 8.6 |
| Series                    A Interest             | 751,000                        | 12,683                                                      | 1.5 |
| Mars                    Trust                    | 11,930,000                     | 201,473                                                     | 23.4 |
| Woolard/O’Kieffe                           | 2,739,000                      | 46,256                                                      | 5.4 |
| AmerAlia                    - preferred stock    | 6,355,000                      | 106,987                                                     | 12.4 |
| AmerAlia                    current shareholding | 24,850,000                     | 420,000                                                     | 45.9 |
|                                             | $51,000,000                    | 861,283                                                     | 100.0 |

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