Proposed Acquisition of N2J Limited
We are in negotiations to acquire N2J Limited, a United Kingdom limited company, pursuant to the terms of a Letter of Intent (LOI) dated April 14, 2006. The LOI is subject to the execution of a definitive agreement, and thereafter to the approval of our shareholders. In the event we acquire N2J, we will have a broader platform of markets to sell our products. We believe N2J's ability to liberally conduct trading from the United Kingdom will provide synergies to both Ace and Tricell as their network of purchasers and suppliers will now only be enhanced. We believe that the acquisition will significantly accelerate future profitability. We intend to seek the approval of our shareholders to acquire N2J at our 2006 annual meeting.
According to the terms of the LOI, we would acquire 100% of N2J from the in exchange for a total of 210 million shares of our common stock. However, of the total 210 million shares to be issued the acquisition specifies that Tricell will have the right to purchase 120 million shares over a twelve month period at a fixed price of $0.11 per share. Tricell will only be entitled to repurchase a maximum of 10 million shares per month, and may repurchase less shares in the event N2J's operating profit is not at least $1.5 million per month. The purchase of these shares would be financed through the operating profits of N2J. The remaining 90 million shares issuable to the N2J Shareholders would be subject to a four year vesting schedule. The remaining 90 million Shares ("non-Put Shares") will vest in four equal annual installments, beginning on January 1, 2007 and ending on January 1, 2010. The non-Put Shares will only vest if the N2J Shareholders remain employed by Tricell at the time of vesting.
A performance guarantee will require that N2J earn $18 million in operating profit within twelve months of acquisition, or otherwise forfeit a number of the 210 million shares equal to any proportionate shortfall between the actual profits and the target of $18 million.
Tricell and N2J are currently negotiating the final terms of a definitive acquisition agreement, and conducting due diligence in anticipation of the acquisition. Tricell anticipates submitting the N2J acquisition to a vote of security holders at its 2006 annual meeting, which is expected to be held within the next few months....
