PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
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AMERALIA, INC.
--------------
(Name of Registrant as Specified In Its Charter)
Robert C.J. van Mourik, Executive Vice President
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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AMERALIA, INC.
20971 East Smoky Hill Rd.
Centennial, CO 80015
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 25, 2004
- --------------------------------------------------------------------------------
May 20, 2004
TO THE SHAREHOLDERS OF AMERALIA, INC.:
The Annual Meeting of Shareholders of AmerAlia, Inc., a Utah corporation,
("AmerAlia" or "we") will be held at the DoubleTree Hotel, 9599 Skokie Blvd,
Skokie, Chicago, Illinois, on June 25, 2004 at 10:00 a.m. local time, to
consider and take action on:
1. The election of seven directors to serve until the next annual
meeting of shareholders and until their successors have been
elected and qualified.
2. To ratify the actions of the directors in the acquisition of
the assets and certain liabilities of White River Nahcolite
Minerals and the financing arrangements entered into with the
Sentient Entities.
3. To confirm the appointment of HJ &Associates as Auditors for
the fiscal year ended June 30, 2004.
4. Such other business as may properly come before the meeting,
or any adjournments or postponements thereof.
This is only a summary of the proposals and is entirely qualified by the
information contained in the accompanying Proxy Statement.
Only holders of record of common stock at the close of business on May 20, 2004,
will be entitled to notice of and to vote at this Annual Meeting, and any
postponements or adjournments thereof.
WE INVITE ALL SHAREHOLDERS TO ATTEND THE MEETING AND WE HOPE YOU WILL COME.
Shareholders, whether or not they expect to be present at the meeting, are
requested to sign and date the enclosed proxy and return it promptly in the
envelope enclosed for that purpose. Any person giving a proxy has the power to
revoke it at any time by following the instructions provided in the Proxy
Statement.
By Order of the Board of Directors:
Bill H. Gunn, President
PLEASE DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES MAY BE
VOTED IN ACCORDANCE WITH YOUR WISHES. GIVING ANYONE YOUR PROXY DOES NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
YOUR VOTE IS IMPORTANT
AMERALIA, INC.
20971 EAST SMOKY HILL RD.
CENTENNIAL, CO 80015
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 25, 2004
This Proxy Statement is being provided to shareholders of AmerAlia, Inc.
("AmerAlia" or "we") in connection with the solicitation of proxies by and on
behalf of AmerAlia's Board of Directors for use at the Annual Meeting of
shareholders of AmerAlia (the "Annual Meeting") and at any adjournments or
postponements thereof. The Annual Meeting will be held at 10:00 a.m. local time,
at the DoubleTree Hotel, 9599 Skokie Blvd, Skokie, Chicago, Illinois, on June
25, 2004. This Proxy Statement will be first mailed to the shareholders on or
about May 27, 2004.
VOTING SECURITIES
Holders of record of AmerAlia's common stock (the "Common Stock") at the close
of business on May 20, 2004 (the "Record Date") will be entitled to vote on all
matters. On the Record Date, we had 16,866,301 shares of Common Stock
outstanding and 82 shares of Series E Preferred Stock outstanding. The holders
of shares of Common Stock are entitled to one vote per share; the holders of the
Series E Preferred Stock are not entitled to vote.
A majority of the issued and outstanding shares of the Common Stock entitled to
vote, represented in person or by proxy, constitutes a quorum for the
transaction of business at the meeting. As described in more detail below, if
there is a quorum present the seven nominees for the Board receiving the
greatest number of affirmative votes will be elected as directors (Proposal 1).
Again if there is a quorum present, Proposal 3 will be determined by a majority
of those present but Proposal 2 will require a majority of all the issued shares
of the Company to be carried.
Management may, in its discretion, seek an adjournment of the meeting to a
specific time and place if a quorum is not present.
Abstentions will be treated as shares present or represented and entitled to
vote for purposes of determining the presence of a quorum, but will not be
considered as votes cast in determining whether a matter has been approved by
the shareholders. Any shares a broker indicates on its proxy that it does not
have the authority to vote on any particular matter because it has not received
direction from the beneficial owner thereof, will not be counted as voting on a
particular matter. Proxies returned without specific voting directions will be
voted in favor of the proposals.
A shareholder who gives his proxy pursuant to this solicitation may revoke it at
any time before it is voted either by giving notice of the revocation thereof to
our Secretary, by filing another proxy with the Secretary or by attending the
Annual Meeting and voting in person. All properly executed and unrevoked
proxies, if received in time, will be voted in accordance with the instructions
of the beneficial owners contained thereon.
We will bear the cost of the solicitation. In addition to solicitation by mail,
we will request banks, brokers and other custodian nominees and fiduciaries to
supply proxy materials to the beneficial owners of AmerAlia's Common Stock for
whom they hold shares and will reimburse them for their reasonable expenses.
AMERALIA, INC. PROXY STATEMENT 1 INTRODUCTION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
At May 10, 2004, we had one class of outstanding voting securities, our common
stock (referred to herein as the "Common Stock"). The following table sets forth
information as of May 10, 2004 on the ownership of the Common Stock and Series E
Preferred Stock for all directors, individually, all executive officers named in
the compensation table, all executive officers and directors as a group, and all
beneficial owners of more than five percent of the Common Stock (not including
shares held in the name of known depositories, such as CEDE & Co., for the
benefit of the underlying beneficial shareholders). The following shareholders
have sole voting and investment power with respect to the shares unless
indicated otherwise.
<Table>
<Caption>
Name & Address Amount & Nature Percent
of of Beneficial of Common
Beneficial Owner Ownership Stock
---------------- --------------- ---------
Bill H. Gunn 624,060 (1) 3.7%
Robert van Mourik 470,384 (2) 2.8%
James V. Riley 544,900 (3) 3.2%
Geoffrey C. Murphy 307,500 (4) 1.8%
Neil E. Summerson 262,500 (5) 1.6%
Robert A. Cameron 262,500 (6) 1.6%
(retiring director)
Robert C. Woolard 1,320,793 (7) 7.7%
J. Jeffrey Geldermann 6,100 0.0%
(nominee for election as director)
OFFICERS & DIRECTORS
AS A GROUP (7 PERSONS) 4,088,937 (8) 22.0%
Jacqueline Badger Mars, as trustee 7,929,820 (9) 47.6%
6885 Elm St., McLean, VA 22101
Karen O. Woolard
708 Park Ave., Kenilworth, IL 60043 1,320,793 (10) 7.7%
Charles D. O'Kieffe
523 Washington Ave., Wilmette, IL 60091 1,102,545 (12) 6.4%
</Table>
(1) Mr. Gunn: Includes 96,125 shares of Common Stock owned by Gunn Development
Pty. Ltd. (of which Mr. Gunn is a controlling shareholder); options to
acquire 140,000 shares of Common Stock at $1.50 per share until June 28,
2006 held by Gunn Development Pty Ltd; and options held directly to acquire
150,000 shares of Common Stock at $1.09 per share until April 30, 2005.
Does not include 70,000 Stock Appreciation Rights issued at $1.50 per share
expiring June 28, 2006.
(2) Mr. van Mourik: Includes 240,759 shares of Common Stock owned by Ahciejay
Pty. Ltd. as Trustee for The R.C.J. Trust, and 54,125 shares of Common
Stock owned by the R.C.J. Superannuation Fund, as to both of which Mr. van
Mourik and his family are beneficiaries. Also includes options held by
Ahciejay Pty Ltd to acquire 75,000 shares of Common Stock at $1.50 per
share expiring on June 28, 2006 and options held directly to acquire
100,000 shares of Common Stock at $1.09 per share expiring April 30, 2005.
(3) Mr. Riley: Includes 274,900 shares of Common Stock held by the James V.
Riley Revocable Trust, options held directly to acquire 75,000 shares of
Common stock at $0.71 per share exercisable through October 24, 2004,
options to acquire 37,500 shares of Common Stock at $0.55 per share
exercisable through June 30, 2005, options to acquire 37,500 shares of
Common Stock at $0.55 per share exercisable through June 30, 2006; and
options held by the Trust to acquire 120,000 shares of common stock at
$1.00 per share until March 19, 2009.
AMERALIA, INC. PROXY STATEMENT 2 INTRODUCTION
(4) Mr. Murphy: Includes options to acquire 75,000 shares at $1.09 per share
expiring April 30, 2005, options to acquire 37,500 shares at $1.45 expiring
June 30, 2004, options to acquire 37,500 shares at $0.55 expiring June 30,
2005 and options to acquire 37,500 shares at $0.55 expiring June 30, 2006.
(5) Mr. Summerson: Represents 150,000 shares and options to acquire 75,000
shares of common stock for $1.50 per share expiring June 28, 2006, held by
held by Glendower Investments Pty Ltd as trustee for a trust of which Mr.
Summerson and his family are beneficiaries; and options held directly to
acquire 75,000 shares of Common Stock at $1.09 per share expiring April 30,
2005, options to acquire 37,500 shares at $1.45 expiring June 30, 2004,
options to acquire 37,500 shares at $0.55 expiring June 30, 2005 and
options to acquire 37,500 shares at $0.55 expiring June 30, 2006.
(6) Mr. Cameron: Represents 140,200 shares and options to acquire 75,000 shares
of Common Stock at $1.50 per share expiring on June 28, 2006 held by
Jacinth Pty Ltd, a company in which Mr. Cameron has a controlling interest;
and options held directly to acquire 75,000 shares of Common Stock at $1.09
per share expiring April 30, 2005, options to acquire 37,500 shares at
$1.45 expiring June 30, 2004, options to acquire 37,500 shares at $0.55
expiring June 30, 2005 and options to acquire 37,500 shares at $0.55
expiring June 30, 2006.
(7) Mr. Woolard: Includes 166,875 shares held by the Robert C Woolard Trust,
22,000 shares held in Mr. Woolard's IRA account, and options to acquire
12,500 shares at $1.09 until April 30, 2005 held by the Robert C Woolard
Trust. Also includes the following shares in which Mr. Woolard disclaims
any beneficial interest: 392,295 shares and options to acquire 440,000
shares at $1.00 until March 19, 2009 held by Karen O Woolard, his spouse;
22,000 shares held in an IRA account for Karen O Woolard and 252,623 shares
and options to acquire 12,500 shares at $1.09 until April 30, 2005 held by
the Karen O Woolard Trust
(8) All officers and directors: Includes beneficial ownership of Messrs. Gunn,
van Mourik, Riley, Murphy, Summerson, Cameron and Woolard who are currently
directors and Mr. Geldermann, a nominee for director, as described in notes
1, 2, 3, 4, 5, 6 and 7, above.
(9) Mars Trusts: Includes 5,974,008 shares of Common Stock held as trustee for
the Jacqueline Badger Mars Trust dated Feb 5, 1975 as amended and 1,955,812
shares of common stock held as trustee for Jacqueline Badger Mars 2002
GRAT.
(10) Mrs. Woolard: Mrs. Woolard is Mr. Woolard's spouse and these shares include
252,623 shares held by the Karen O Woolard Trust, 22,000 shares held in
Mrs. Woolard's IRA account, options to acquire 440,000 shares at $1.00
until March 19, 2009 held directly and options to acquire 12,500 shares at
$1.09 until April 30, 2005 held by the Karen O Woolard Trust. Also includes
the following shares in which Mrs. Woolard disclaims any beneficial
interest: 166,875 shares and options to acquire 12,500 shares at $1.09
until April 30, 2005 held by the Robert C Woolard Trust and 22,000 shares
held in an IRA account for Robert C Woolard.
(11) Mr. O'Kieffe: Includes options to acquire 440,000 shares at $1.00 until
March 19, 2009 and options to acquire 25,000 shares at $1.09 until April
30, 2005. Also includes 121,295 shares held in a trust for the benefit of
Mrs. Cornelia O'Kieffe in which Mr. O'Kieffe disclaims any beneficial
interest.
The Series E Stock consists of 82 shares issued at $1,000 per share. Under the
Statement of Preferences governing the Series E preferred stock, the rights of
the preferred stockholders to convert their shares expired October 31, 2000.
Holders of 2,904 shares of preferred stock exercised their conversion rights
during October. The outstanding 82 shares of preferred stock, held by a single
person, have a liquidation preference of $1,000 per share plus accrued dividends
and are entitled to a dividend of 10% of the liquidation preference when
declared by the Board. The dividends are cumulative if unpaid. The preferred
stock does not have voting rights.
To the best of our knowledge, there are no arrangements, understandings or
agreements relative to the disposition of any of our securities, the operation
of which would at a subsequent date result in a change in control of AmerAlia,
other than the exchange provisions of the Securityholder agreement with the
Sentient Entities which is discussed more fully in Proposal 2.
AMERALIA, INC. PROXY STATEMENT 3 INTRODUCTION
PROPOSAL 1
ELECTION OF DIRECTORS
The following seven persons are nominated as directors of AmerAlia for a term of
one year and until the election and qualification of their successors:
Bill H. Gunn Robert C.J. van Mourik
Neil E. Summerson Geoffrey C. Murphy
James V. Riley Robert C. Woolard
J. Jeffrey Geldermann
These persons will constitute the entire Board of Directors. The person named in
the proxy intends to vote for those nominees, each of whom has been recommended
for election by our Board of Directors, unless a shareholder withholds authority
to vote for any or all of the nominees. The seven nominees receiving the
greatest number of affirmative votes will be elected as directors. If any
nominee is unable to serve, or will not serve for good cause, the person named
in the proxy reserves the right to substitute another person of his choice as
nominee in his place. Each of the nominees has agreed to serve, if elected.
DIRECTORS OF THE COMPANY
IDENTIFICATION OF DIRECTORS.
The following table sets forth the names and ages of all the Directors of
AmerAlia, positions held by each such person, and when such person was first
elected or appointed. The directors each serve until their successors are duly
elected and qualified; officers are appointed by, and serve at the pleasure of,
the Board of Directors.
<Table>
<Caption>
First
Elected or
Name & Age Position Appointed
- ---------- -------- ---------
Bill H. Gunn Chairman of the Board, 02/84
Age 62 President, & Chief
Executive Officer of AmerAlia, Inc.
Robert C.J. van Mourik Director, 09/90
Age 51 Executive Vice President 01/89
Chief Financial Officer,
Secretary & Treasurer of AmerAlia, Inc.
Neil E. Summerson Director, Professional Company Director 09/90
Age 56 (1,2)
Robert A. Cameron Director, Retired 09/90
Age 65 (3)
Geoffrey C. Murphy Director, Senior VP of Citrico Holdings, Inc. 06/99
Age 62 (1,2)
James V. Riley Director, Chairman of Clear Channel Airports, Inc. 10/01
Age 67 (1,2)
Robert C. Woolard Chairman of Wool-RACKS Holdings, Inc. 05/04
Age 68
J. Jeffrey Geldermann Nominee for election as Director ----
Age 54 President, Credentials, Inc.
</Table>
(1) Members of the Compensation Committee.
(2) Members of the Audit Committee
(3) Retires at next Annual General Meeting
AMERALIA, INC. PROXY STATEMENT 4 PROPOSAL 1
There are no family relationships among the officers or directors. No
arrangement exists between any of the above officers and directors pursuant to
which any one of those persons was elected to such office or position
Directors hold office until the next annual meeting of shareholders and a
successor is elected and qualified, or until their resignation. Executive
officers are elected at annual meetings of the Board of Directors. Each such
officer holds office for one year or until a successor has been duly elected and
qualified or until death, resignation or removal.
A brief summary of the business experience of each person who is currently an
officer or director of AmerAlia, and their service with us is as follows:
BILL H. GUNN
Mr. Gunn graduated in Commerce from the University of Queensland, Australia in
1963, achieving his Accounting Certificate from the University of Queensland in
the same year. Subsequently, he was admitted as a member of the Australian
Society of Certified Practising Accountants and has successfully completed and
passed the examinations for admittance as a Certified Public Accountant (CPA) in
the USA.
Mr. Gunn has been a self-employed investor, CPA, and a director of several
Australian Stock Exchange listed public companies, as well as a number of
majority owned private corporations. Since February 1984 he has been Chairman,
CEO and President of AmerAlia.
ROBERT VAN MOURIK
Mr. van Mourik graduated in 1974 with a Bachelor of Applied Science (Applied
Chemistry) from the Gordon Institute of Technology, Australia and in 1981 with a
Master's Degree in Business Administration from the University of Newcastle,
Australia. He has served as Executive Vice President, Chief Financial Officer,
Treasurer and Secretary of AmerAlia since 1989 and was elected a director in
September 1990.
NEIL E. SUMMERSON
Until July 1997, Mr. Summerson was the Senior Partner, and for five years prior
was Managing Partner, in the international accounting firm of Ernst & Young, at
its offices in Brisbane, Australia. Prior to 1992, he worked in the Corporate
Recovery and Insolvency Division, which is involved in the administration of
insolvent companies, as well as providing counsel to small businesses in the
area of taxation, audit procedures and management advisory services. Mr.
Summerson received his Bachelor of Commerce degree from the University of
Queensland in 1968. He is a Fellow of the Institute of Chartered Accountants and
a director of several Australian public and private companies since leaving
Ernst & Young in 1997.
GEOFFREY C. MURPHY
Mr. Murphy, since September 1, 2001 is the Senior Vice President of Citrico
Holdings, Inc., a company engaged in the manufacture of lemon products
Previously, he was, for more than the past five years, a principal of Coloney
Von Soosten + Associates Inc., a consulting firm located in Kenilworth,
Illinois. Mr Murphy graduated with a Bachelor's degree from Dartmouth College,
and a Master's of Business Administration from the Amos Tuck School of Business
Administration at Dartmouth College.
JAMES V. RILEY
Since 1975, Mr. Riley has served as Founder, President and Chief Executive
Officer for transportation Media, Inc., which was sold to Clear Channel
Communications in February 1998. The corporation is now known as
AMERALIA, INC. PROXY STATEMENT 5 PROPOSAL 1
Clear Channel Airports, which specializes in the operation, marketing and sales
of media programs at most major airports. Mr. Riley is currently the Chairman of
Clear Channel Airports.
ROBERT C. WOOLARD
Mr. Woolard retired in August 2003 after being in the brokerage business for 45
years. His last 5 years were spent at Stifel, Nicolaus & Company, a member firm
of the New York Stock Exchange as a Vice-President/Account Supervisor in the
Investment Banking Department. Mr. Woolard is currently Chairman of Wool-RACKS
Holdings, a real estate investment/development and venture capital firm.
J. JEFFREY GELDERMANN
Mr. J. Jeffrey Geldermann is and has been since 1997, President of Credentials,
Inc., a company offering computer based electronic academic qualifications
services used by Colleges and Universities. Previously, he was President of GMI
Software, Inc.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES.
The Board of Directors held four formal meetings during the fiscal year ended
June 30, 2003. Each director attended all of the formal meetings either in
person or by telephone. The Board of Directors has since held four meetings
through March 31, 2004. In addition, regular communications were maintained
throughout the year among all of our officers and directors and the directors
acted by unanimous consent twice during fiscal 2003. We have standing audit and
compensation committees. We do not have a standing nomination committee because
we believe the independent directors, who form a majority of the board, serve
that function.
AUDIT COMMITTEE.
The audit committee comprises Messrs. Summerson, Murphy and Riley. Each of the
members of the audit committee is independent as that term is defined in Rule
4400(a)(15) of the Nasdaq listing standards. The committee held four formal
meetings during the fiscal year ended June 30, 2003 and three meetings
subsequently through March 31, 2004. The Board of Directors has adopted a
written charter for the audit committee, a copy of which is attached hereto as
Appendix A. The Board has also determined that both Messrs. Summerson and Murphy
meet the requirements for a financial expert on the Audit Committee. The
following constitutes the report the Audit Committee has made to the Board of
Directors:
REPORT OF THE AUDIT COMMITTEE
To the Board of Directors of AmerAlia, Inc.
We hereby report to the Board of Directors of AmerAlia, Inc. that, in connection
with the financial statements for the year ended June 30, 2003, and the
anticipated preparation of the financial statements for the year ending June 30,
2004, we have:
o reviewed and discussed the audited financial statements with management;
o recommended the appointment of independent accountants;
o reviewing the arrangements and standards for and the scope of the audit
by independent accountants;
o reviewed the independence of the independent accountants;
o considered the adequacy of the system of internal accounting controls
and reviewing any proposed corrective actions;
AMERALIA, INC. PROXY STATEMENT 6 PROPOSAL 1
o reviewed and monitoring our policies regarding business ethics and
conflicts of interest;
o reviewed the activities and recommendations of our accounting
department;
o discussed with the independent auditors the matters required to be
discussed by SAS 60 (Codification of Statements on Auditing Standards,
AU section 380), as may be modified or supplemented; and
o received the written disclosures and the letter from the independent
accountants required by Independence Standards Board Standard No. 1
(Independence Standards Board Standard No.1, Independence Discussions
with Audit Committees), as may be modified or supplemented, and
discussed with the independent accountant the accountant's independence.
Based on those disclosures and discussions, we are not aware of any relationship
between the independent auditors and AmerAlia that affects the objectivity or
independence of the independent auditors. Based on the discussions and our
review discussed above, we recommended to the Board of Directors that the
audited financial statements for fiscal 2003 be included in AmerAlia's 2003
Annual Report to shareholders as included in the Company's filing on Form 10-KSB
for the year ended June 30, 2003.
Respectfully submitted,
The AmerAlia, Inc. Audit Committee
Neil E. Summerson, Chairman
Geoffrey C. Murphy, Member
James V. Riley, Member
COMPENSATION COMMITTEE.
A compensation committee comprising the non-executive directors of the Board of
Directors was formed early in 1993 and determined the management fees payable to
Messrs. Gunn and van Mourik, as set out below. The compensation committee now
comprises Mr. Murphy, Mr. Summerson and Mr. Riley, none has been an officer nor
an employee of AmerAlia or any of our subsidiaries during the fiscal year ended
June 30, 2003, or subsequently. Neither Mr. Murphy, Mr. Summerson nor Mr. Riley
has any other direct or indirect relationship with AmerAlia requiring disclosure
by us pursuant to Item 401 of Regulation S-K. Furthermore, no executive officer
of AmerAlia served as a member of the compensation committee (or similar
committee) of another entity that dealt with compensation paid to any member of
our compensation committee, or with which any other interlocking relationship
exists.
The compensation committee held one formal meeting during the fiscal year ended
June 30, 2003. The compensation committee has the authority to review and make
recommendations to our Board of Directors with respect to the compensation of
our executive officers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SECTION 16(a) DISCLOSURE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires AmerAlia's directors and officers and persons who own more than 10% of
AmerAlia's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC"). Directors,
officers, and greater-than-10% shareholders are required by SEC regulation to
furnish us with copies of all Section 16(a) reports filed.
Based solely on its review of the copies of the reports it received from persons
required to file, AmerAlia believes that during the period from July 1, 2002
through June 30, 2003, all filing requirements applicable to
AMERALIA, INC. PROXY STATEMENT 7 PROPOSAL 1
officers, directors, and greater-than-10% shareholders were met in accordance
with the requirements of Section 16(a).
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding compensation paid to our
officers during the three fiscal years ended June 30, 2003. Messrs. Gunn and van
Mourik were the only executive officers receiving or accruing compensation
exceeding $100,000 during fiscal 2003, as shown below. None of our officers are
subject to employment agreements.
We have no plans for the payment or accrual for payment of any amounts to any
executive officer in connection with his resignation, retirement, or other
termination, or change of control or change in the executive officer's
responsibilities.
<Table>
<Caption>
Annual Compensation (c) Long Term Compensation
----------------------------------- ---------------------------------
Awards Payout
---------------------- ----------
Name and Restricted Options LTIP All Other
Position Year Salary Bonus Other Awards & SAR's Payout Compensation
------------------ ------ -------- ----- ------------- ----------- ---------- ---------- --------------
Bill H. Gunn,
President and 2003 $200,000 -0- $14,000 (a,b) -0- -0- -0- -0-
Chief Executive 2002 $200,000 -0- $14,000 (a) -0- -0- -0- -0-
Officer 2001 $150,000 -0- $14,000 (a) -0- -0- -0- -0-
------------------ -------- ---------- ---------- ------------- ----------- ---------- ---------- --------------
Robert
van Mourik, 2003 $150,000 -0- $14,000 (a,b) -0- -0- -0- -0-
Chief Financial 2002 $133,000 -0- $14,000 (a,b) -0- -0- -0- -0-
Officer & EVP 2001 $133,000 -0- $14,000 (a,b) -0- -0- -0- -0-
------------------ -------- ---------- ---------- ------------- ----------- ---------- ---------- --------------
</Table>
Notes: (a) Directors fees
(b) These fees have not been paid but have been accrued as
liabilities.
(c) At June 30, 2003 accrued unpaid compensation, expenses
and advances to AmerAlia of $254,115 were due to Mr. Gunn
and $306,633 were owing to Mr. van Mourik.
OPTIONS/SAR GRANTED DURING YEAR ENDED JUNE 30, 2003
2001 DIRECTORS' INCENTIVE PLAN:
In March 2001, the Board of Directors adopted a plan by which each director (who
is not an employee or officer) is granted:
o An option to purchase 75,000 shares at a current market price when
such person joins the Board of Directors; and
o An option to purchase 37,500 shares if such director is a director
at July 1 of each year.
The exercise price for these options is the average market price of our Common
Stock during the month of June preceding each grant date, and the options have a
three-year term. All options granted under this plan are exercisable six months
after the date of grant.
AMERALIA, INC. PROXY STATEMENT 8 PROPOSAL 1
Under this plan on July 1, 2002 (during the fiscal year ended June 30, 2003), we
granted 37,500 options to acquire shares of Common Stock at $0.55 per share
until June 30, 2005 to each of the following the non-executive directors:
o Geoffrey C. Murphy;
o Neil E. Summerson;
o James V Riley; and
o Robert A. Cameron,
Under this plan on July 1, 2003 (during the current fiscal year), we also
granted 37,500 options to acquire shares of Common Stock at $0.55 per share
until June 30, 2006 to each of the following the non-executive directors:
o Geoffrey C. Murphy;
o Neil E. Summerson;
o James V Riley; and
o Robert A. Cameron,
2001 STOCK OPTION PLAN:
In March 2001, the Board of Directors also adopted a stock option plan for its
officers, employees, and consultants. The Board of Directors (through its
compensation committee) can issue options to acquire up to 1,000,000 shares to
officers, employees and consultants to provide incentives to attract, retain and
motivate eligible persons whose present and potential contributions are
important to our success by offering them an opportunity to participate in our
future performance through awards of stock options. In each case, the Board of
Directors (through its compensation committee) will determine the price at which
options may be issued, the term of the options, and the number of options to be
issued. In no case may the exercise price be less than the market value of the
underlying shares at the time of grant. Our shareholders approved this plan at
the annual meeting of shareholders held in June 2001. At the present time, we
have not granted any options under this plan.
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE.
No officer exercised stock options during the fiscal year ended June 30, 2003,
or subsequently. The following table sets forth information regarding the
year-end value of options and Stock Appreciation Rights held by the Chief
Executive Officer and the other named officers on June 30, 2003. No other Stock
Appreciation Rights have been granted, or are held by, any such person.
<Table>
<Caption>
Shares # of unexercised options $ Value of in-the-money
acquired Value at FY end (exercisable/ options at FY end (exercisable/
Name on exercise realized unexercisable) unexercisable)
-------------------- --------------- ----------- ---------------------------- -------------------------------
Bill H. Gunn -0- -0- 290,000/-0- -0-/-0-
-------------------- --------------- ----------- ---------------------------- ------------------------------
Robert van Mourik -0- -0- 175,000/-0- -0-/-0-
-------------------- --------------- ----------- ---------------------------- ------------------------------
</Table>
<Table>
<Caption>
Shares # of unexercised SAR's at $ Value of in-the-money
acquired Value FY end (exercisable/ SAR's at FY end (exercisable/
Name on exercise realized unexercisable) unexercisable)
------------------- ----------- -------- ------------------------- -----------------------------
Bill H. Gunn -0- -0- 70,000/-0- -0-/-0-
------------------- ----------- -------- ------------------------- -----------------------------
</Table>
AMERALIA, INC. PROXY STATEMENT 9 PROPOSAL 1
LONG TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
AmerAlia has no long term incentive compensation plans, defined benefit plans,
or actuarial plans. There are no plans to pay bonuses or deferred compensation
to employees of AmerAlia.
We do not have a group medical insurance plan for our employees although we have
reimbursed Mr. Gunn for certain medical expenses and insurance premiums. Our
subsidiary, Natural Soda has a comprehensive group medical insurance plan for
its employees. We currently have no stock ownership, other profit-sharing or
pension plans, but may adopt such plans in the future. We have no retirement
plans and, therefore, have not made contributions to any such plan on behalf of
the named officers.
COMPENSATION OF DIRECTORS
STANDARD ARRANGEMENTS.
Our directors are authorized to receive $14,000 cash compensation per year for
their services as directors each year. In addition, the Chairman of the Audit
Committee receives $6,000 per year and other Audit Committee members $4,000 per
year; the Chairman of the Compensation Committee receives an additional $2,000
per year. These additional arrangements were approved September 10, 2002 as of
July 1, 2002. We also reimburse directors for expenses incurred on behalf of
AmerAlia on a fully accountable basis.
OTHER ARRANGEMENTS.
Except as described herein, no officer or director of AmerAlia has been or is
being paid any cash compensation, or is otherwise subject to any deferred
compensation plan, bonus plan or any other arrangement and understanding whereby
such person would obtain any cash compensation for his services for and on
behalf of AmerAlia except that for the financial year ended June 30, 2003 an
allowance for interest on unpaid outstanding compensation, directors fees and
expenses reimbursement was accrued as follows:
<Table>
Bill H. Gunn $ 9,638
Robert van Mourik 32,641
Geoffrey C. Murphy 8,974
Neil E. Summerson 8,284
Robert A. Cameron 10,991
James V. Riley 950
---------
Total: $ 71,478
---------
</Table>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS.
AmerAlia has no compensation plan or arrangement with respect to any executive
officer which plan or arrangement results or will result from the resignation,
retirement or any other termination of such individual's employment with
AmerAlia. AmerAlia has no plan or arrangement with respect to any such persons
which will result from a change in control or a change in the individual's
responsibilities following a change in control. We currently have no employment
contracts.
REPORT ON REPRICING OF OPTIONS/SARS.
Not applicable, as no options or SARs were repriced during the fiscal year ended
June 30, 2003.
AMERALIA, INC. PROXY STATEMENT 10 PROPOSAL 1
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The following sets out information regarding transactions between officers,
directors and significant shareholders of AmerAlia during the most recent two
fiscal years and subsequently.
CORPORATE LOANS - LOANS TO AMERALIA.
During the fiscal years ended June 30, 2002 and 2003, certain related parties
advanced loans to AmerAlia as detailed in the Notes to the Financial Statements
presented in the Company's Annual Report on From 10-KSB for the year ended June
30, 2003. This comprised advances to us, as well as accrued but unpaid
compensation, directors' fees and interest. The following summarises our
liabilities to related parties:
<Table>
<Caption>
June 30, June 30,
Related Party 2003 2002
------------- ---------- ----------
Robert van Mourik $ 306,633 $ 173,237
Bill H. Gunn 254,115 96,381
Jacinth Pty. Ltd. (an affiliate of Robert A. Cameron) 68,108 43,117
Geoffrey C. Murphy 71,499 42,000
James V. Riley 28,450 9,500
Neil E. Summerson 79,632 45,000
---------- ----------
Total: $ 808,437 $ 409,235
---------- ----------
</Table>
RELATED PARTY TRANSACTIONS.
SATISFACTION OF BONDING REQUIREMENTS:
AmerAlia was not able to complete the asset acquisition and the financial
closing of the assets of White River Nahcolite Minerals, LLC ("WRNM") without
the assistance of its majority shareholder, the Mars Trust. This asset
acquisition and its financial closing are discussed comprehensively in Proposal
2 as well as in our filings with the Securities & Exchange Commission.
References to Series A Debentures, Series C Debentures and other terms that
follow are explained in Proposal 2.
As reported in filings made by AmerAlia, the Mars Trust has provided support for
AmerAlia in the past, including providing a letter of credit to support a
$400,000 reclamation bond required for the maintenance of the Rock School Lease.
In order to complete the asset acquisition, AmerAlia's subsidiaries, Natural
Soda Holdings, Inc. ("NSHI") and Natural Soda, Inc. ("NSI") had to provide bonds
or other financial security covering various federal permits, totaling
approximately $960,000, including the prior bond for the Rock School lease which
was reduced to $35,000, as follows:
<Table>
BLM Mineral Lease Bonds - WRNM leases $ 542,000
Rock School Lease $ 35,000
Letter of credit re: EPA underground injection control permit $ 231,730
Letter of credit re: DMG mining permit $ 150,750
</Table>
Neither AmerAlia nor NSHI had the financial capability to satisfy the bonding
requirements imposed by the government agencies. The Mars Trust agreed to
provide support for these bonding requirements to NSHI and NSI subject to their
agreement to:
AMERALIA, INC. PROXY STATEMENT 11 PROPOSAL 1
o reimburse the Mars Trust for its expenses in obtaining these bonds
(which totaled approximately $24,000);
o pay the Mars Trust a fee of $75,000 per year to maintain the bonds; and
o remove the Mars Trust from liability for the bonds within two years.
As part of the financial closing, NSI pledged a $750,000 Series A Debenture to
the Mars Trust to collateralize any indemnification obligation that might arise
under the bonds. The $75,000 due to the Mars Trust under this agreement for the
first year of the agreement was paid at the financial closing and NSI must pay
the second year fee of $75,000 within sixty days of the financial closing.
CONTINUING GUARANTEE OF BANK OF AMERICA INDEBTEDNESS:
The Mars Trust arranged a loan for AmerAlia from the Bank of America in 1999 and
guaranteed its repayment. The loan has been renewed on a year-to-year basis and
is now due December 31, 2005. Over time, the amount of the loan has increased to
$9,921,583. Substantially all the loan proceeds were used for obligations to
U.S. Filter under the May 1999 Design/Build Agreement, for other activities in
connection with the development of the Rock School Lease, and for other AmerAlia
working capital expenses (including the expenses of negotiating for the
acquisition of the WRNM assets).
Under an agreement to amend the terms of the Third and Fourth Amended and
Restated Guaranty Agreements, the Mars Trust and the Company have agreed:
o AmerAlia shall pledge Series C Debentures to the Mars Trust in the
current amount of the loan ($9,921,583);
o The Trust shall receive the interest and any contingent interest or
principal on the Series C Debenture and use any amounts received to pay
any outstanding interest or principal under the Bank of America loan and
to reduce amounts owed by AmerAlia to the Trust;
o If the amount of interest paid by the Trust to the Bank of America
exceeds the amount of interest received by the Trust from the pledged
Series C Debentures, the Trust agrees, upon AmerAlia's written notice,
to pay (i) 65% of the total amount of interest due on the Bank of
America loan during calendar year 2004, and; (ii) 50% of the total
amount of interest due on the Bank of America loan during calendar year
2005. Such interest paid by the Trust using its own funds will become an
AmerAlia obligation evidenced by a promissory note;
o To the extent that the Series C Debenture interest exceeds the Bank of
America interest payments, the Trust will allow AmerAlia to reduce the
outstanding interest and principal due under the promissory note issued
to the Trust at the financial closing. After all the outstanding
interest and principal due under any additional promissory notes and the
promissory note issued at the financial closing has been paid, any
excess Series C interest may be kept by the Trust as consideration for
providing the guaranty; and
o The Mars Trust released its existing security interest in NSHI and
AmerAlia upon the financial closing.
REPAYMENT OF NSHI INDEBTEDNESS TO THE MARS TRUST:
In May 2002, the Mars Trust lent NSHI $250,000 pursuant to two promissory notes
bearing interest at 8% per annum. NSHI used a substantial portion of these funds
to pay expenses in connection with negotiating the asset transaction with WRNM
and the financing transaction with Sentient. In addition, NSHI paid a portion of
the proceeds to AmerAlia (which owns 100% of NSHI common stock) which AmerAlia
used to pay some of its obligations. The Mars Trust also made various short term
loans at 8% interest to NSHI to enable AmerAlia to meet its interest obligations
to the Bank of America. At the time of the financial closing the total of these
advances and accrued interest was $969,628. The Company repaid $500,000 at the
financial closing and has issued a 7% unsecured promissory note due December 31,
2005 for the balance.
AMERALIA, INC. PROXY STATEMENT 12 PROPOSAL 1
SENTIENT ENTITIES:
In order to facilitate the completion of the WRNM Purchase Transaction and the
subsequent financial closing as presented more fully in Proposal 2, the Sentient
Entities and the Mars Trust entered into an Agreement to Share Proceeds. This
agreement provides that if Natural Soda Holdings, Inc. defaults on its
obligations to the Sentient Entities and the Sentient Entities recover any
proceeds from a disposal of the Rock School Lease, then the Sentient Entities
and the Mars Trust will share those proceeds.
LETTERS OF FORBEARANCE:
A condition to the financial closing was that Mr. Bill H. Gunn, Chairman and
CEO, and Mr. Robert van Mourik, Executive Vice President and Chief Financial
Officer of AmerAlia sign letters forgoing their rights to take action against
the Company to recover unpaid compensation, expenses and advances made to the
Company.
LOANS FROM ROBERT C. WOOLARD AND KAREN O WOOLARD:
AmerAlia has previously disclosed that it has received loans and guaranty
support from two accredited investors. One of these investors was Robert C.
Woolard, now a nominee for election to the board of directors. At the financial
closing, we renegotiated the terms of the loans to Mr. Woolard and the other
investor. We issued a new promissory note to Mr. Woolard for $853,400 to repay
the old obligations and accrued interest. This promissory note is secured by
$762,295 of NSHI Series C Debenture and 132 shares of NSHI Series A Preferred
Stock. Under the guaranty arrangements to secure the original obligations, we
were required to pay outstanding guaranty fees to Mrs. Woolard of $121,295 at
the financial closing which we met through the issue of 121,295 shares. Mrs.
Woolard also contributed $1,100,000 towards funding the $3,500,000 that AmerAlia
raised to complete the financial closing. She received 440,000 warrants as
discussed in Proposal 2 on the same terms as the other investors.
AMERALIA, INC. PROXY STATEMENT 13 PROPOSAL 1
PROPOSAL 2
RATIFICATION OF FINANCING ARRANGEMENTS
& PURCHASE OF ASSETS OF WHITE RIVER NAHCOLITE MINERALS, LLC.
Although not specifically required by Utah corporate law, AmerAlia seeks
shareholder ratification of the various transactions described more fully below.
AmerAlia asks its shareholders to approve:
- pledging as collateral substantially all of the assets of AmerAlia's
subsidiary NSHI and its subsidiary, NSI;
- pledging as collateral the Series A Debentures, the Series C Debentures
and the Series A Preferred Stock that AmerAlia has acquired from NSHI;
- agreeing to issue AmerAlia common stock in exchange for the Series B1
Debentures, the Series B2 Debentures, and the NSI common stock if
required to do so under the Securityholder agreement;
- approving the drag along and tag along rights described below; and
- other aspects of the asset acquisition transaction and the financing
transaction.
The acquisition of the assets of WRNM ("Purchase Transaction") and the financial
arrangements to fund the acquisition ("Financial Closing and Long-Term Financing
Agreements") are discussed more fully below. It was a condition of the financial
closing that these transactions be presented for shareholder approval before
June 30, 2004. Shareholder and voting agreements between the directors of
AmerAlia (but not including Mr. Woolard) and the Mars Trust require the Mars
Trust to vote at the shareholders' meeting for or against each resolution put
forward in connection with these transactions in the same way and in proportion
to how each individual director votes his own shares. Therefore, as each of the
directors intends to vote his own shares in favor of the proposals, the Mars
Trust will be obliged to vote all its shares in favor of all the proposals. As
the AmerAlia directors subject to this agreement own about 7.6% of the
outstanding AmerAlia common stock and the Mars Trust owns approximately 47.6% of
the outstanding common stock, we expect that a majority of the shareholders will
approve the transactions. Proposal 2 requires a majority of all the issued
shares of the Company to be carried. The agreement between the directors and the
Mars Trust ensures a majority of all the issued shares will vote in favor of the
Proposal.
HOWEVER, IF THE AMERALIA SHAREHOLDERS DO NOT APPROVE THE TRANSACTIONS AT THIS
SHAREHOLDERS' MEETING, THEN THIS WILL BE AN EVENT OF DEFAULT UNDER THE SERIES B1
AND SERIES B2 DEBENTURES, THEREBY ENTITLING THE SENTIENT ENTITIES TO FORECLOSE
ON THEIR COLLATERAL.
If the shareholders approve this proposal, the success of the Company will still
be subject to some significant risk factors that we have discussed in our
regulatory filings, including the risk that we shall require very profitable
operations to service the cost of the new long term debt and the risk that we
may be unable to refinance this debt with lower cost debt or equity. The
following discussion summarizes the Purchase Transaction and then the Financial
Closing and long term financing arrangements. However, we firstly discuss here
what may happen to the interests of the AmerAlia shareholders if our lenders
exercise their rights under certain provisions of these financing agreements.
POTENTIAL ADVERSE CONSEQUENCES TO AMERALIA SHAREHOLDERS
THAT MAY RESULT FROM THE FINANCING TRANSACTIONS
As security for their loans to NSHI, the Sentient Entities and our other lenders
have rights over all our equity interests in NSHI and NSI and all the assets
these subsidiaries own. Consequently, they have all the rights lenders usually
have to recover their loans, interest, costs and penalties in accordance with
the loan agreements. In addition, as discussed more fully below, the Sentient
Entities have rights that may impact on AmerAlia's ownership of its assets and
those assets held by its subsidiaries and also the ownership of AmerAlia itself.
In summary, these restrictions and rights include:
AMERALIA, INC. PROXY STATEMENT 14 PROPOSAL 2
o Restrictions on the transfer to third parties of our debentures and
interests in our shares in NSHI and NSI.
o The Sentient Entities have the right to convert the Series B2 debentures
into 49% of the common stock of NSI.
o After September 30, 2004 the Sentient Entities can exchange their Series
B1 and Series B2 debentures for common stock in AmerAlia. If they have
already converted the Series B2 debenture into NSI equity, then they can
exchange these new NSI shares for our common stock.
o If the Sentient Entities exercise these rights to exchange their
interests for our common stock at our current stock prices, then they
will substantially dilute the interests of all the existing stockholders
and could exercise control of AmerAlia.
o If the Sentient Entities wish to sell their shares in NSI to a third
party and we cannot purchase those shares for the same terms and
conditions, then we can be forced to sell our shares in NSI to a third
party on the same terms and conditions (known as Drag Along Rights)' and
o If we wish to sell our controlling equity interest in NSI to a third
party then we must require that the third party buy the shares owned by
the Sentient Entities on the same terms and conditions (known as Tag
Along rights).
These provisions are discussed more fully below under "Financial Closing and
Long-Term Financing Arrangements".
PURCHASE TRANSACTION
On February 20, 2003, AmerAlia, Inc., through its indirect, wholly-owned
subsidiary, Natural Soda, Inc. ("NSI"), purchased the WRNM assets and certain
related contracts held by IMC Chemicals Inc. ("IMC Chemicals") with short-term
financing provided by funds associated with The Sentient Group of Grand Cayman.
As discussed more fully below in "Financial Closing and Long-Term Financing
Arrangements", this short-term financing was converted into long term financing
at the financial closing completed March 19, 2004. NSI is owned by Natural Soda
Holdings, Inc. ("NSHI"), although the Sentient entities (described below) hold
all the outstanding NSHI and NSI common stock as collateral for the repayment of
their loans. The primary reasons for the acquisition were to acquire operating
assets and an established customer base, gain cash flow and secure substantial
additional resources of naturally occurring sodium bicarbonate. AmerAlia owns
100% of the outstanding stock of NSHI. WRNM was an indirect, wholly-owned
subsidiary of IMC Global, Inc. ("IMC"). IMC Chemicals is a subsidiary of IMC.
DESCRIPTION OF THE TRANSACTION.
NSI acquired all of the assets, subject to all of the liabilities, of WRNM for a
total purchase price of $20.6 million. (See "Description of the Assets", below.)
WRNM and IMC assigned to NSI all of their interests in the assets (including
property, plant, equipment, water rights, accounts receivables, and four federal
sodium leases issued by the Bureau of Land Management). NSI assumed WRNM's
accounts payable. All of the 22 employees previously working for WRNM accepted
employment from NSI. None of the employees are members of a collective
bargaining unit. The Company has accounted for the acquisition as a purchase
under the provisions of SFAS No. 141. Accordingly, the Company has recorded the
assets acquired and the liabilities assumed at their fair market values. The
excess purchase price has been allocated to the assets purchased. No amount was
allocated to goodwill.
AMERALIA, INC. PROXY STATEMENT 15 PROPOSAL 2
DESCRIPTION OF THE ASSETS.
The principal assets NSI acquired from WRNM are four federal sodium leases
(Federal Sodium Mineral Leases C-0118326, C-37474, C-0118327 and C-0119986) and
the 26,500 square foot processing plant located on one of the leases. NSI also
acquired federal rights of way, operating permits, water rights, ownership of an
existing water reservoir, rights with respect to an additional potential
reservoir site, approximately 3,900 tons of inventory, and receivables. In order
to transfer the operations of the business at the closing, NSI and NSHI posted
reclamation bonds and other financial security with federal and state agencies
totaling about $924,500. NSI also assumed WRNM's accounts payables and other
liabilities of approximately $2,240,000, as well as equipment and other leases
necessary for the business operations. The leases and the plant are located
about 54 miles north of Rifle, Colorado, and are accessible all year by paved
road.
THE SODIUM LEASES:
NSI acquired four sodium leases containing nahcolite, a naturally occurring
mineral form of sodium bicarbonate, commonly called baking soda. They are
located in the Piceance Creek Basin in northwest Colorado and have been combined
into a single operational unit, the "Wolf Ridge Mining Unit", established by the
Bureau of Land Management in 1993. The sodium leases cover an area of 8,223
acres or nearly 13 square miles. When combined with the Rock School Lease which
has been described in AmerAlia's previous reports, the total lease area is 9,543
acres. Unique to the WRNM leases is the Boies Bed, an approximately eighty feet
thick bed of almost pure nahcolite located at an approximate depth of 1,900
feet.
Each of the four WRNM sodium leases was renewed effective July 1, 2001 for a ten
year term with a preferential right to subsequent renewals provided that sodium
is being produced in paying quantities. Under the unit agreement, production in
paying quantities from one lease is sufficient to extend all four WRNM leases.
The leases bear a production royalty payable to the federal government of 5% of
the gross value of the leased deposits at the point of shipment to the market
(the processing plant). Each of these leases contains covenants to protect the
in situ oil shale, water, and historical resources.
During the last ten years, WRNM and its predecessors have been solution mining
nahcolite from the Boies Bed from horizontal cavities. Each horizontal cavity
may be expected to produce approximately 150,000 to 200,000 tons over time.
Horizontal drilling into the Boies Bed has the advantage of being a proven
technology and avoids any disturbance of oil shale resources.
THE PLANT:
The plant consists of a single building with boilers, centrifuge, and other
equipment capable of producing various grades of sodium bicarbonate at greater
than 100,000 tons per year. There are also several other buildings associated
with the plant which are used for bulk storage (one building of approximately 50
feet in diameter with a storage capacity of 3,000 tons) and three sheds (lube
storage shed, fire pump house shed, and hazardous materials shed all of which
are very small). The plant, the bulk storage facility, and one of the sheds are
of metal construction; the other two sheds are of wood construction, each on
concrete pads.
Underground cavities constitute a material part of the plant and its operations.
Solution mining requires pumping hot water into the nahcolite-bearing rock zone
at a depth of approximately 1,900 feet. The nahcolite dissolves and is pumped to
the surface in solution and brought into the plant. The equipment in the plant
recrystallizes and then dries the sodium bicarbonate. The dried sodium
bicarbonate is then stored for bulk sales or is bagged at the plant in 50 pound
or 2,000 pound bags. The plant is capable of producing all commercial grades of
sodium bicarbonate from animal feed grade to USP-5, the highest commercial
grade.
Historically, the plant has shipped approximately 55% of its production as bulk
product and the remainder as bagged product. There is no rail transportation to
the plant. Product that is to be shipped by rail must be transported by truck to
a rail loading facility in Rifle, Colorado that is operated by a third party
under a contract assigned to NSI. Historically, about 25% of the plant's
production has been shipped to its final destination by truck rather than by
rail.
AMERALIA, INC. PROXY STATEMENT 16 PROPOSAL 2
WATER RIGHTS:
WRNM also transferred all of its water rights to NSI, including the production
well used to obtain water for solution mining operations, well water rights
(mostly conditional) associated with 13 wells located on the land covered by the
federal sodium leases, absolute surface water rights from the White River
drainage, a water storage reservoir and rights relating to future expansion of
the reservoir, and rights associated with an augmentation plan governing
substitution and exchange of water withdrawn from wells located on the sodium
leases.
FEE PROPERTY:
WRNM transferred to NSI real property owned in fee simple that is used for the
existing water storage reservoir of about 35.8 acres, about 25 miles east of the
plant.
OTHER ASSETS:
In addition to the federal sodium leases and the assets associated with the
plant, NSI acquired approximately 3,900 tons of sodium bicarbonate inventory in
storage at the plant site and in a warehouse located in Rifle, Colorado.
In consideration for the settlement of certain amounts that AmerAlia owed it
resulting from the May 1999 Design/Build Contract, U.S. Filter assigned
equipment to NSI that it had fabricated for AmerAlia under the May 1999
Design/Build Contract. This equipment included a centrifuge, six silos, a dryer
system, baghouse equipment, air compressors, pumps and pump parts, and is
located in storage facilities in Colorado, Illinois, Kentucky, Maryland,
Michigan, Mississippi, New York, Oregon, Pennsylvania, Utah, Virginia, and
Wisconsin. AmerAlia originally intended to use this equipment in the plant it
had contemplated constructing for production from the Rock School Lease,
however, AmerAlia now plans to use this equipment to expand its new NSI plant.
MARKETING:
IMC Chemicals, on behalf of WRNM, had entered into a number of marketing
contracts with various distributors and users of the sodium bicarbonate products
that the plant produces. Of these, the most significant (in tonnage as well as
revenue) had been an agreement with Bioproducts Incorporated of Fairlawn, Ohio
to distribute animal feed grade products. Notice was issued to Bioproducts in
accordance with this agreement that had the effect of terminating this contract
December 31, 2003. The Company is now entering into new marketing agreements
with Bioproducts and others on more favourable terms. NSI has put its own
marketing arrangements into place and will actively solicit product orders in
all markets where it is permitted to do so. The majority of industrial and USP
grade products is distributed by an agent, Vitusa Products, Inc. of Berkeley
Heights, New Jersey. There is no distribution contract with Vitusa. There are no
other significant marketing relationships.
OTHER CONTRACTUAL ARRANGEMENTS:
NSI assumed a number of WRNM's other contractual arrangements. Among these were
the following:
o A sublease from an IMC affiliate of 55 rail cars leased by that
affiliate from a third party for transporting the bulk product from
Rifle;
o Contract providing for use of six airslide railcars used for
transporting product from Rifle;
o Contracts with third parties to provide trucking services from the plant
to Rifle;
o Contracts with CSXT for the transportation of product by rail;
o Freight shipping contracts for transportation of product from the plant
by truck;
o Lease of a piece of heavy equipment used at the plant;
o Lease covering the warehouse space in Rifle, Colorado used for product
storage;
o Contract for electric service to the plant; and
o Contracts relating to the water rights acquired by NSI.
In addition, NSI has the right to operate temporarily under certain WRNM and IMC
Chemicals contracts that have not yet been assigned to NSI, pending completion
of consents and other arrangements to obtain consent to assignment of such
contracts. These contracts include:
o Contracts for the supply and delivery of natural gas to the plant from
an unaffiliated third party (since terminated and replaced with an
agreement with an alternative supplier);
o Contracts with Union Pacific and other railroads for the transportation
of product by rail;
AMERALIA, INC. PROXY STATEMENT 17 PROPOSAL 2
o Lease of two boilers on the plant site which heat the liquor that is
injected into the nahcolite cavities; and
o An additional freight shipping contract for transportation of product
from the plant by truck.
DESCRIPTION OF THE SHORT-TERM FINANCING.
At the time the asset purchase agreement with IMC Global was due for completion,
AmerAlia and Sentient Global Resource Fund I, LP and Sentient Global Resource
Trust No. 1 of George Town, Grand Cayman, Cayman Islands (the "Sentient
entities") had not yet finalized their own agreements with respect to the final
structure and commercial arrangements between them in funding and competing this
acquisition. Therefore, as an interim measure, AmerAlia and the Sentient funds
entered into a "Closing Agreement" which provided for temporary short-term
funding to be replaced by the long term funding structure when the final
structure and commercial arrangements were resolved.
Consequently, the Sentient entities loaned $24,000,000 to NSHI. NSHI used these
funds to pay the purchase price to WRNM (approximately $20.6 million), payment
of deposits to certain vendors to the WRNM business that NSI acquired, a portion
of the fee to U.S. Filter for termination of the May 1999 Design/Build Contract,
transaction costs, and working capital.
The two Sentient entities loaned the funds to NSHI on a short-term basis and
took a security interest in 100% of the outstanding shares of NSI capital stock.
As a result, NSHI was obliged to repay the entire amount of the loan on or
before March 24, 2003. This due date was periodically extended until January 30,
2004. The agreement was not extended again as the Sentient entities and NSHI
completed their agreements on March 19, 2004 for the financial closing and
long-term financing for the acquisition as discussed below.
PRO-FORMA FINANCIAL STATEMENTS.
This information has been provided in our filings on Form 8-K/A-1 filed May 6,
2003 and Form 8-K/A-2 filed June 1, 2003. A copy of these filings can be
obtained through the internet at www.sec.gov or by writing to our Corporate
Secretary.
FINANCIAL CLOSING AND LONG-TERM FINANCING AGREEMENTS
On March 19, 2004 NSHI and the Sentient Entities completed their arrangements
known as the financial closing. The principal agreement is the Debenture
Purchase Agreement which provided for the repayment of the short-term financing
and the raising of additional funding. A Securityholder Agreement between
AmerAlia, NSHI, NSI and the Sentient Entities defines their mutual expectations
and conduct with respect to the restrictions on transfer of the debentures and
other securities issued in the transaction; board representations and
appointment of management; budget approvals and minimum voting majority;
limitations on the actions of NSHI and NSI; restrictions on transfer of
securities and/or a trade sale including drag along/tag along rights;
forbearance agreements; agreements for the exchange of Series B2 Debentures into
49% of NSI common stock and exchange of the NSI common stock for AmerAlia common
stock; exchange of the Series B1 and Series B2 Debentures for AmerAlia common
stock and dispute resolution procedures. The agreements include a Management &
Cost Reimbursement Agreement whereby AmerAlia will provide management services
for a fee through September 30, 2005. This agreement has been pledged to US
Filter as security for moneys owed to US Filter. Finally, in consideration for
amending the terms of the original closing agreement completed with the Sentient
Entities on February 20, 2003 to allow a closing, the Company has granted the
Sentient Entities warrants to purchase 600,000 shares of AmerAlia's restricted
common stock exercisable at $1.00 per share until March 19, 2009.
Under these agreements, NSHI raised additional debt of $5,500,000 through the
issue of new debentures, as follows:
- AmerAlia received $3,500,000 in NSHI Series A Secured 10% Debentures
utilizing funds it raised from accredited investors (see "AmerAlia
Funding", below);
- The Sentient Entities invested an additional $2,000,000 in NSHI Secured
Series A 10% Debentures.
AMERALIA, INC. PROXY STATEMENT 18 PROPOSAL 2
In addition at the financial closing, NSHI issued to the Sentient Entities in
exchange for its $24 million short term loan:
- $3,000,000 in Secured Series A 10% Debentures;
- $11,300,000 in Secured Subordinated Series B1 Debentures;
- $9,700,000 in Secured Subordinated Series B2 Convertible Debentures.
NSHI also issued to AmerAlia in cancellation of its loan to NSHI of
approximately $17,678,100:
- $275,000 of Secured Series A 10% Debentures;
- $12,000,000 of Unsecured Subordinated Series C Debentures;
- 4,949 shares of Series A Preferred Stock having a liquidation value of
$4,949,000;
- an additional issue of common stock bringing the total common stock held
by AmerAlia to 51,000 shares, being all the common stock issued.
NSHI also issued $750,000 of Secured Series A 10% Debentures to NSI in exchange
for an obligation by NSI to pay $750,000 to NSHI. The purpose of the issue of
the $750,000 Series A Debenture to NSI was to enable NSI to provide the
debenture as collateral to the Mars Trust for its bonding support as discussed
above in Proposal 1 at "Related Party Transactions".
In addition, the board of directors of NSHI and of NSI will be expanded to five
members comprising two representatives from AmerAlia, two representatives from
the Sentient Entities and one member with industry experience mutually
acceptable to all parties.
DESCRIPTION OF THE DEBENTURES.
The Series A Debentures were issued March 19, 2004 and are due September 30,
2005. The interest rate is 10% per annum, payable quarterly with the first
interest payment due June 30, 2004. The Series A Debentures are senior to all
other debentures and are collateralized by all of the assets of NSI and NSHI, as
well as by all of NSHI's common stock of NSI. These assets also collateralize
the Series B1 Debentures and the Series B2 Debentures held by the Sentient
Entities. Sentient Resources USA, Inc. acts as agent holding the collateral for
the benefit of all of the secured debenture holders.
The Series B1 and Series B2 Debentures are subordinate to the Series A
Debentures but rank equally with the Series C Debentures with respect to all
payments of principal and interest unless the Series B Debenture holders declare
an event of default. The Series B1, Series B2 and Series C debentures were
issued March 19, 2004, pay interest quarterly and have interest rates as
follows:
<Table>
<Caption>
PERIOD INTEREST RATE 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%
</Table>
The Series B1 Debentures have a right to earn "Contingent Interest" which means
a payment of additional interest, which when added to the other payments of
principal and interest on the Debentures held by the Sentient Entities, could
provide the Sentient Entities with an internal rate of return of 34.8766% per
annum compounded annually, using February 20, 2003 as the commencement date.
Contingent Interest shall be paid on the amounts represented by the Series B1
Debentures to the Sentient Entities only (a) on the Maturity Date of the Series
B1 Debentures, if owed, subject to the achievement of the contingencies
described below, (b) without regard to the contingencies described below, if the
Company prepays any of the Series B Debentures, and (c) without regard to the
contingences described herein, upon the declaration of a default pursuant to the
Series B Debentures. Contingent Interest shall not be payable if the Adjusted
EBITDA of the Company 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 of the Company is in excess of $1,000,000
in the aggregate for a 36 month period immediately prior to the Maturity Date,
the Contingent Interest shall be due and payable on the Maturity Date. In
addition to the quarterly
AMERALIA, INC. PROXY STATEMENT 19 PROPOSAL 2
payments of interest in accordance with the interest rate table above, a
mandatory prepayment of principal of $4,029,760 is required on September 30,
2005.
The Series B2 Debentures also have similar terms and conditions as the Series B1
Debentures except that the "Contingent Interest" internal rate of return is
thirty percent (30%) per annum compounded annually, commencing February 20,
2003.
The Sentient Entities have the option to convert the Series B2 Debentures into
49% of the common stock of NSI. The Sentient Entities also have the option to
exchange the Series B1 Debentures and/or the Series B2 Debentures into shares of
AmerAlia common stock. This right to exchange the debentures (or the underlying
NSI common stock if the Sentient Entities convert the Series B2 Debentures)
provides for the issuance of AmerAlia common stock at a price equal to 85% of
the market price for the AmerAlia common stock. If the Sentient Entities were to
exchange these debentures, they would acquire a significant majority of
AmerAlia's shares based on today's stock prices and could exercise control of
AmerAlia.
The Unsecured Subordinated Series C Debentures held by AmerAlia earn the same
interest rate as the Series B Debentures and have a right to earn contingent
interest up to a total internal rate of return of fifteen per cent (15%) per
annum compounded annually, commencing February 20, 2003. They rank equally with
the Series B1 and Series B2 Debentures with respect to all payments of principal
and interest unless the Series B Debenture holders declare an event of default
in which case the Series B1 and Series B2 Debentures will be senior to and be
repaid prior to the Series C Debentures. The Series C Debentures have been
pledged by AmerAlia to secure guarantees and loans as discussed below under
"Other Loans" and "Continuing Guarantee of Bank of America Indebtedness".
The Series B and the Series C Debentures have a provision that if NSHI sells NSI
or substantially all of the assets of NSI in a trade sale, then the proceeds
must be used to repay the Series A Debentures, then the Series B1 Debentures,
then the Series B2 Debentures and then the Series C Debentures.
DRAG ALONG & TAG ALONG RIGHTS.
The drag along and tag along rights apply to the Sentient Entities and to
AmerAlia if the Sentient Entities own NSI common stock and the remaining Series
B1 Debentures have been repaid. They are defined in the Securityholder
Agreement.
Under the drag along rights, if the Sentient Entities wish to sell all (and not
less than all) of the shares of NSI common stock they own, the Sentient Entities
shall make a written offer to sell the shares to AmerAlia naming a price and the
terms of purchase. If AmerAlia does not elect irrevocably and in writing to
purchase the shares within 30 days, the Sentient Entities may complete the sale
of the shares to a third party at the same price and on the same terms within 90
days of AmerAlia's receipt of the written offer. The Sentient Entities may
further require that AmerAlia or NSHI sell all the shares of NSI common stock it
then owns to the third party on the same terms. If the AmerAlia shareholders are
required to approve the sale of the NSI common stock by AmerAlia and fail to do
so, then there is a mechanism whereby the Sentient Entities can gain a majority
of the board and a majority of the common stock of NSHI. Thereafter, the
Sentient Entities shall have 90 days to complete the sale of the shares to the
third party. If the Sentient Entities are unable to complete the sale within
that time, the Sentient Entities will rescind the actions that gave them
control.
Alternatively, under the tag along rights, if AmerAlia wishes to sell the NSI
shares of common stock it owns, AmerAlia shall make a written offer to the
Sentient Entities naming a price and terms. If the Sentient Entities do not
elect irrevocably and in writing to purchase the shares within 30 days, AmerAlia
may complete the sale of the shares to a third party at the same price and on
the same terms within 90 days of the Sentient Entities receipt of the written
offer, provided that the Sentient Entities may require the purchaser to purchase
its shares at the same price and on the same terms. If the purchaser will not
buy the shares held by the Sentient Entities, AmerAlia may not sell its shares
unless AmerAlia buys the Sentient Entities shares on the same terms and
conditions.
AMERALIA, INC. PROXY STATEMENT 20 PROPOSAL 2
MANAGEMENT & COST REIMBURSEMENT AGREEMENT.
This agreement provides for the payment of $700,000 per year commencing October
1, 2003 for two years to AmerAlia for providing management services to NSHI and
NSI. The agreement also provides for indemnification of NSHI and the Sentient
Entities from certain AmerAlia creditors. AmerAlia's rights to this agreement
have been pledged as security to U.S. Filter under its settlement agreement with
U.S. Filter completed on February 21, 2003 and discussed in AmerAlia's filings
on Form 8-K.
AMERALIA FUNDING.
The Company has raised $3,500,000 from a group of accredited, unaffiliated
investors through the issue of 10% promissory notes due September 30, 2005. The
Company also granted four warrants for each $10 of their promissory notes to
subscribe for shares of restricted common stock in the Company at $1.00 per
share until March 19, 2009. The Promissory notes are secured by an equal value
of NSHI Series A Debentures held by the Company. The warrant agreements are on
the same terms and conditions as the warrants issued to the Sentient Entities. A
total of 1,400,000 warrants were granted to these accredited investors.
Consequently, as a result of her participation in this funding, Mrs. Karen O.
Woolard, spouse of Mr. Robert C. Woolard, a nominee for election as a director
in Proposal 1, became a five percent shareholder.
FINDERS' FEES.
The Company has agreed to pay finders' fees of $55,000 in cash to RBC Dain
Rauscher and 210,000 shares of restricted common stock to Mrs. Karen O. Woolard
for negotiating these funding arrangements.
In February, 2003 the Company reached an agreement to pay a finder's fee to
McFarland Dewey Securities Co, LLP of $1,000,000 and the reimbursement of
expenses of approximately $11,000. At the financial closing, the Company and
McFarland Dewey completed a new settlement agreement under which McFarland Dewey
agreed to accept $750,000 in cash, a $250,000 promissory note secured by an
equal value NSHI Series A Debenture, an unsecured promissory note due May 10,
2004 for $18,000 for expenses reimbursement, the issue of the 503,979 shares of
restricted common stock, the grant of 300,000 warrants on the same terms as
those granted to the Sentient Entities and the investors above, and the release
of any and all claims under the prior agreement.
OTHER LOANS.
Prior to the financial closing, the Company was obligated under guaranty and
loan agreements to two accredited investors who had provided loan funds with
accrued interest totaling approximately $2,317,700 at the time of the financial
closing. The Company has met these obligations by issuing 121,295 shares of
restricted common stock in satisfaction of outstanding guarantee fees to each of
two accredited investors, one of them Mrs. Karen O. Woolard; and two promissory
notes secured by the remainder of the Company's Series C Debentures and 359
shares of its NSHI Series A Preferred Stock. One of these promissory notes in an
amount of $853,400, secured by $765,295 of Series C Debenture and 132 shares of
Series A Preferred Stock, has been issued to Mr. Robert C. Woolard. Any
interest, contingent interest, dividends or principal repayments received by the
Company from the pledged securities must be applied to meeting the obligations
on these notes.
RELATED PARTY TRANSACTIONS.
For a discussion of Related Party transactions see "Certain Relationships and
Related Party Transactions" under Proposal 1.
RECOMMENDATION
The Board of Directors recommends a vote FOR Proposal 2 to ratify the
acquisition and financing of the assets and liabilities of White River Nahcolite
Minerals, LLC and the financing arrangements entered into with the Sentient
Entities as discussed above.
AMERALIA, INC. PROXY STATEMENT 21 PROPOSAL 2
PROPOSAL 3
CONFIRMATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors selected the independent accounting firm of HJ &
Associates with respect to the audit of our consolidated financial statements
for the fiscal year ending June 30, 2004, as well as many prior fiscal years. A
representative of H J & Associates will not be present at the Annual Meeting.
Audit Fees. In connection with professional services rendered for the audit of
our annual financial statements for the most recent fiscal year and the reviews
of the financial statements included in our quarterly reports filed on Form
10-QSB for the most recent fiscal year and the preparation of taxation returns,
we were billed fees in the aggregate amount of $79,798 ($49,037 for the year
ended June 30, 2002).
Audit Related and Consultation Fees. In connection with other services prided by
the auditors, we were billed $15,810 for the year ended June 30, 2003 (Nil in
2002).
Tax Related Fees. In connection with tax related services we were billed $2,457
for the year ended June 30, 2003 and $4,632 for the year ended June 30, 2002.
All Other Fees. No fees other than those mentioned above were billed for
services rendered by our principal accountant for the most recent fiscal year.
The audit committee has considered the information described in "Financial
Information Systems Design and Implementation Fees" and "All Other Fees" above
and believes that it is compatible with maintaining the principal accountant's
independence.
Our principal accountant (through its full time employees) performed all work
regarding the audit of our financial statements for the most recent fiscal year.
RECOMMENDATION
The Board of Directors recommends a vote FOR Proposal 3 to approve the
appointment of HJ & Associates as the independent Auditors.
AMERALIA, INC. PROXY STATEMENT 22 PROPOSAL 3
PROPOSALS FROM SHAREHOLDERS
Proposals from shareholders intended to be present at the next Annual Meeting of
shareholders should be addressed to AmerAlia, Inc., Attention: Corporate
Secretary, 20971 East Smoky Hill Rd., Centennial, CO 80015 and we must receive
the proposals by November 15, 2004. Upon receipt of any such proposal, we shall
determine whether or not to include any such proposal in the Proxy Statement and
proxy in accordance with applicable law. It is suggested that shareholders
forward such proposals by Certified Mail-Return Receipt Requested. After
November 15, 2004, any shareholder proposal submitted outside the process of
Rule 14a-8 will be considered to be untimely.
ANNUAL REPORT TO SHAREHOLDERS
This proxy statement is being accompanied by a report to shareholders that
includes our audited financial statements as presented in our filing on Form
10-KSB for the year ended June 30, 2003 and our Quarterly Report on Form 10-QSB
for the quarter ended March 31, 2004.
ANNUAL REPORT ON FORM 10-K AND QUARTERLY REPORTS ON FORM 10-Q
OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 2003, OUR QUARTERLY
REPORTS ON FORM 10-QSB AND OTHER REPORTS FILED UNDER THE SECURITIES EXCHANGE ACT
OF 1934, ARE AVAILABLE TO ANY SHAREHOLDER AT NO COST UPON REQUEST TO: CORPORATE
SECRETARY, 20971 EAST SMOKY HILL RD., CENTENNIAL, COLORADO 80015, OR BY
TELEPHONE: (720) 876-2373, OR THROUGH THE INTERNET AT WWW.SEC.GOV AND SEARCHING
AMERALIA FOR COPIES OF ALL OUR FILINGS.
OTHER MATTERS
We do not know of any other matters to be brought before the meeting. Should any
other matter requiring a vote of shareholders arise at the meeting, the persons
named in the proxy will vote the proxies in accordance with their best judgment.
By Order of the Board of Directors:
AMERALIA, INC.
Bill H. Gunn, President
AMERALIA, INC. PROXY STATEMENT 23
APPENDIX A
AMERALIA, INC.
AUDIT COMMITTEE CHARTER
Adopted by the Board of Directors effective May 6, 2000, as amended
April 16, 2001, as amended May 6, 2002, and
as amended September 9, 2002
ORGANIZATION AND QUALIFICATIONS
There shall be a committee of the Board of Directors of AmerAlia, Inc. to be
known as the Audit Committee.
Independence. The Audit Committee shall be composed of a minimum of
three directors, each of whom is independent of the management of the
Corporation and is free of any relationship that, in the opinion of the Board of
Directors, would interfere with his or her exercise of independent judgment as a
member of the Audit Committee. Each member shall otherwise be considered
"independent" as defined in Nasdaq Marketplace Rule 4200(a)(14), as such rule
may be amended from time-to-time.1
Financial Literacy. All members of the Audit Committee must be able to
read and understand fundamental financial statements (including a balance sheet,
income statement, and cash flow statement) and shall have a working familiarity
with basic finance and accounting practices.
At least one member of the Audit Committee must have past employment
experience in finance or accounting, requisite professional certification in
accounting, or other comparable experience or background (including a current or
past position as a chief executive or financial officer or other senior officer
with financial oversight responsibilities).
- ----------
1 As of September 10, 2002, Nasdaq Marketplace Rule 4200(a)(14) reads as
follows: "Independent director" means a person other than an officer or employee
of the company or its subsidiaries or any other individual having a relationship
which, in the opinion of the company's board of directors, would interfere with
the exercise of independent judgment in carrying out the responsibilities of a
director. The following persons shall not be considered independent:
(A) a director who is employed by the corporation or any of its
affiliates for the current year or any of the past three years;
(B) a director who accepts any compensation from the corporation or any
of its affiliates in excess of $60,000 during the current or previous
fiscal year, other than compensation for board service, benefits under a
tax-qualified retirement plan, or non-discretionary compensation.
Immediate family includes a person's spouse, parents, children, siblings,
mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law, and anyone who resides in such person's home;
(C) a director who is a member of the immediate family of an individual
who is, or has been in any of the past three years, employed by the
corporation or any of its affiliates as an executive officer;
(D) a director who is a partner in, or a controlling shareholder or an
executive officer of, any organization to which the corporation made, or
from which the corporation received, payments (other than those arising
solely from investments in the corporation's securities) that exceed 5% of
the corporation's or organization's consolidated gross revenues for that
year, or $200,000, whichever is more, in any of the past three years;
(E) a director who is employed as an executive of another entity where
any of the company's executives serve on that entity's compensation
committee.
Under ss.10A(m)(3) of the Securities Exchange Act of 1934 (as amended by the
Sarbanes Oxley Act of 2002), no membeR of the Audit Committee may accept any
consulting, advisory or other compensatory fee from AmerAlia (other than in his
or her capacity as a member of the Audit Committee, another committee, or the
board of directors), or be an affiliated person of AmerAlia or any subsidiary
thereof.
AMERALIA, INC. PROXY STATEMENT 24 APPENDIX A: AUDIT COMMITTEE CHARTER
Selection. The members of the committee shall be elected by the Board
of Directors at its annual meeting and shall serve thereafter until their
successors shall be duly elected. The members of the Audit Committee may
designate a Chair by majority of the full committee membership.
PURPOSE
The Audit Committee shall provide assistance to the corporate directors
in fulfilling their responsibility to the shareholders, potential shareholders,
and investment community relating to corporate accounting, reporting practices
of the corporation, and the quality and integrity of the financial reports of
the corporation.
In doing so, it is the responsibility of the Audit Committee to
maintain free and open means of communication between the directors, the
independent auditors, and the financial management of the corporation. The Audit
Committee shall establish procedures for the receipt, retention, and treatment
of complaints received by the issuer regarding accounting, internal accounting
controls or auditing matters; and for the confidential, anonymous submission by
employees of AmerAlia and its subsidiaries of concerns regarding questionable
accounting or auditing matters. These procedures shall be set forth in
AmerAlia's employee manual or other appropriate document, and shall be adapted
to comply with rules that the Securities and Exchange Commission may adopt under
Section 10A(m)(4) of the Securities Exchange Act of 1934.
The independent auditors shall be accountable to the Audit Committee
and to the Board of Directors as representative of the shareholders.
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible in order to best react to
changing conditions; and to ensure to the directors and shareholders the
corporate accounting and reporting practices of the corporation are in
accordance with all requirements and are of the highest quality. In carrying out
these responsibilities, the Audit Committee will:
o Appoint, approve the compensation for, and oversee the work of the
independent auditors to be selected for the purpose of preparing or
issuing an audit report or related work for the corporation and its
divisions and subsidiaries.2
o Pre-approve all audit services that the auditor may provide to AmerAlia
or any subsidiary (including, without limitation, providing comfort
letters in connection with securities underwritings or statutory audits)
as required by Section 10A(i)(1)(A) of the Securities Exchange Act of
1934 (as amended by the Sarbanes-Oxley Act of 2002).
o Pre-approve all non-audit services (other than certain de minimis
services described in Section 10A(i)(1)(B) of the Securities Exchange
Act of 1934 (as amended by the Sarbanes-Oxley Act of 2002) that the
auditors propose to provide to AmerAlia or any of its subsidiaries.
o Receive from the independent auditors on not less than an annual basis a
formal written statement delineating all relationships between the
auditor and AmerAlia. This statement shall be consistent with
Independence Standard Board Standard #1. (i) The Audit Committee shall
thereafter engage in a dialogue with the auditor with respect to any
disclosed relationships or services that (in the opinion of the Audit
Committee) may impact the objectivity and independence of the auditor.
(ii) The Audit Committee shall take, or recommend the Board of Directors
take, appropriate action to oversee the independence of the outside
auditor, including (without limitation) consideration of appointment of
a new firm of independent auditors.
o Meet with the independent auditors and financial management of the
corporation at a minimum of once a quarter (i) to review any comments or
recommendations of the independent auditors; (ii) to discuss the matters
required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards, AU section 380), as may be modified or supplemented;
(iii) to review the adequacy and effectiveness of the accounting and
financial controls of the corporation; (iv) to assess the quality of
earnings; and (v) to review the annual report to shareholders to ensure
the independent auditors are satisfied with the disclosure and content
of the financial statements and other financial information presented to
the shareholders.
o Review current financial results and interim financial statements with
management and the independent auditor as the Audit Committee deems
appropriate.
o Inquire of management and the independent auditor about significant
risks or exposures and assess the steps management has taken to minimize
such risk to the company.
- ----------
2 Pursuant to ss.10A(m)(2) of the Securities Exchange Act of 1934 (as amended by
the Sarbanes-Oxley Act of 2002), AmerAlia's auditors shall report directly to
the Audit Committee.
AMERALIA, INC. PROXY STATEMENT 25 APPENDIX A: AUDIT COMMITTEE CHARTER
o Review accounting and financial human resources and succession planning
within the company.
o Submit the minutes of all meetings of the Audit Committee to, or discuss
the matters discussed at each committee meeting with, the Board of
Directors.
o Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
o Conduct an appropriate review of and approve all related party
transactions3 on an ongoing basis and the Audit Committee shall review
potential conflict of interest situations where appropriate.4
o In addition to the above-mentioned meetings and as part of the Audit
Committee's job to foster open communication, the committee should meet
at least annually with management and the independent auditors in
separate executive sessions to discuss any matters the committee or each
of these groups believe should be discussed privately.
Sarbanes-Oxley Act of 2002
Under Section 10A(m)(2) of the Securities Exchange Act of 1934 (as
amended by the Sarbanes-Oxley Act of 2002), the Audit Committee understands its
obligations to be directly responsible for the appointment, compensation, and
oversight of the work of AmerAlia's auditors. This responsibility includes the
resolution of disagreements between management and the auditor regarding
financial reporting matters.
The Audit Committee will work with management, AmerAlia's auditors, and
counsel to develop a code of ethics for senior financial officers of AmerAlia as
proposed by Section 406 of the Sarbanes-Oxley Act of 2002, and which will be the
subject of future Securities and Exchange Commission rule-making.
In addition to the foregoing, the Audit Committee acknowledges
AmerAlia's responsibility to provide for appropriate funding as the Audit
Committee may determine for the payment of compensation to the auditors employed
by AmerAlia for the purpose of rendering or issuing an audit report and to any
advisers employed by the Audit Committee, which advisors the Audit Committee may
determine to be necessary for it to carry out its duties under this charter or
otherwise as may be required by law.5
Annual Review and Assessment
The Audit Committee will review and assess this charter and (to the
extent necessary) amend or modify this charter on not less than an annual basis.
- ----------
3 The term "related party transaction" should be read consistent with SEC
Regulation S-K, Item 404(a). Generally, a related party is one who has the
ability to exercise control or significant influence over another party, to the
extent that one of the parties may be prevented from pursuing its own separate
interests.
4 Nasdaq Marketplace Rule 4350(h). The Audit Committee recognizes that
management must bring such transactions to the attention of the audit committee,
and consequently requests management to do so prior to the completion of any
related party or conflicting interest transaction.
5 The Audit Committee is authorized by the AmerAlia board of directors and
ss.10A(m)(5) of the Securities Exchange Act of 1934 (as amended by the
Sarbanes-Oxley Act of 2002) to engage independent counsel and other advisers as
it determines necessary to carry out its duties. ss.10A(m)(6) of the Securities
and Exchange Act of 1934 (as amended by the Sarbanes-Oxley Act of 2002) requires
AmerAlia to provide appropriate funding.
AMERALIA, INC. PROXY STATEMENT 26 APPENDIX A: AUDIT COMMITTEE CHARTER
AMERALIA, INC.
20971 East Smoky Hill Rd.
Centennial, CO 80015
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Bill H. Gunn and Robert van Mourik, or
either one of them, as Proxy, each with the power to appoint his substitute, and
hereby authorizes them to vote, as designated below, all of the shares of Common
Stock of AmerAlia, Inc. held of record by the undersigned on May 20, 2004, at
the Annual Meeting of Shareholders to be held on June 25, 2004 and at any
adjournments or postponements thereof.
<Table>
1. ELECTION OF DIRECTORS FOR all nominees listed below [ ] WITHHOLD AUTHORITY [ ]
(except as marked to the contrary below) to vote for all nominees listed below
</Table>
(INSTRUCTION) To withhold authority to vote for any individual nominee
mark the box next to the nominee's name below.
<Table>
[ ] Bill H. Gunn [ ] Robert C.J. van Mourik [ ] Geoffrey C. Murphy
[ ] Neil E. Summerson [ ] James V. Riley [ ] J. Jeffrey Geldermann
[ ] Robert C. Woolard
</Table>
2. TO RATIFY THE FINANCING ARRANGEMENTS AND PURCHASE OF ASSETS OF WHITE RIVER
NAHCOLITE MINERALS, LLC.
[ ] FOR [ ] AGAINST
3. TO CONFIRM THE APPOINTMENT OF HJ & ASSOCIATES AS INDEPENDENT AUDITORS.
[ ] FOR [ ] AGAINST
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(over)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION AS DIRECTORS OF ALL NOMINEES AND WILL ABSTAIN FROM
VOTING ON ALL OTHER MATTERS.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, AS EXECUTOR, ADMINISTRATOR,
TRUSTEE, OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
Signature
Date: ,2004
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Signature if held jointly
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PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY IN THE ENCLOSED ENVELOPE
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