Terms of Proposed Acquistion of N2J
Consideration: Tricell will acquire 100% of N2J from the N2J Shareholders in exchange for 21 million preferred class A shares* (the “A-Shares”) of Tricell’s equal too 10 X Tricell common stock shares *(the " Shares). The N2J Shareholders will split the A-Shares equally at 5.25 million A-Shares apiece.
Issuance Dates: Tricell will issue 16 million of the A-Shares on the closing date of the N2J acquisition. Tricell will issue the remaining 5 million A-Shares on January 1, 2007.
Put Option: 12 million of the A-Shares (“Put A-Shares”) will be subject to put options (“Put Options”). The Put Options provide each N2J Shareholder the unilateral option to put, or sell, to Tricell 375 thousand Put A-Shares each month for a period of 8 months following the execution of the SPA (“Put Option Period”), for a total monthly repurchase of 1.5 million Put A-Shares by Tricell. However, the Put Options will be available only if N2J satisfies the N2J Profit Requirement.
In order for the N2J Shareholders to exercise their Put Options during the Put Option Period, N2J’s profits for the exercise month must meet or exceed $1.5 million (“N2J Profit Requirement”). However, N2J may satisfy this N2J Profit Requirement subsequently by achieving aggregate net profits such that each completed month of the Put Option Period averages at least $1.5 million in profit per month. Therefore, in the event N2J does not meet the N2J Profit Requirement in any month during the Put Option Period, the N2J shareholders’ right to exercise their Put Options will be reduced on a pro-rata basis. However, when and if the N2J Profit Requirement is subsequently met, the N2J Shareholders will regain any and all Put Options that had previously been reduced.
In the event the N2J Profit Requirement is met and each N2J Shareholder exercises the Put Option for said month or any prior month where the Put Option was not exercised, Tricell will be obliged to repurchase for each month of the Put Option Period 1 million Put A-Shares at $1.10 per Put A-Share. If on December 31, 2006, N2J total net profits are less than $18 million, the N2J shareholders will return to Tricell the corresponding percentage of the Put Shares equal to the proportion of total N2J Profit Requirement not met. Net profits shall equal, for purposes of this Agreement, the gross revenues of N2J, as an operating subsidiary of the Company, from the sale of products less (a) cost of goods sold, (b) rent and utilities, (c) direct labor and salary costs, (d) cost of internal accounting and bookkeeping, and (f) repayment of any financing incurred specifically to allow for the purchase of goods. The parties expressly agree that all intergroup management charges will be excluded from the net profit calculation.
The determination of whether the N2J Profit Requirement has been met will be based upon N2J monthly financial statements. Each N2J Shareholder shall have 30 days following the last day of each month during the Put Option Period to notify Tricell that, pending confirmation that the N2J Profit Requirement has been met, the N2J Shareholder intends to exercise his Put Option for that month. While Tricell is obligated to repurchase shares during each month the N2J Profit Requirement is met, the N2J Shareholders are not required to exercise their Put Options.
Sales of Non-Put Shares: The N2J Shareholders shall be eligible to collectively sell 9 million non-Put A-Shares as long as they remain in the employment of Tricell on each of the following vesting dates:
(i) Twenty five percent (25%) of the non-Put A-Shares
.....shall vest on January 1, 2007;
(ii} Twenty five percent (25%) of the non-Put A-Shares
......shall vest on January 1, 2008;
(iii) Twenty five percent (25%) of the non-Put A-Shares
......shall vest on January 1, 2009; and
(iv) Twenty five percent (25%) of the non-Put A-Shares
......shall vest on January 1, 2010.
In event Tricell undergoes a change of control,
the non-Put A-Shares will vest immediately.
* The A-Shares shall be issued pursuant to an exemption from registration under the Securities Act of 1933 (the “1933 Act”) and from registration under any and applicable State securities laws. The certificates representing the A-Shares shall bear the restrictive legend set forth in Rule 144 of the Regulations of the 1933 Act and appropriate legend required under applicable state securities laws. The A-Shares will not be available for transfer or resale for a period of twelve months
* The A-Shares shall hold a transfer value of or equal to 10 X common stock.
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Clarified N2J Merger Proposal
*Transfer all 100m Preferred Shares into Class A-Shares
*Reduce Class A-Shares to 30m Authorized Shares
*Each A-Share has a value of 10 Common Shares
*Transfer TCLL Directors shares into Class A-Shares
*Reduces Common Shares O/S 30% = 70m Common O/S
*Purchase N2J for 21m A-Shares
*12m Put A-Shares + 9m A-Shares = 21m A-Shares
*Put A-Shares are collateral for payment to N2J owners
*Buy-Back 12m Put A-Shares in 8mths with N2J Profits
*N2J satisfies $1.5m monthly Profit Requirement
*N2J satisfies 18m 12/31/06 Net Profit Requirement after Costs
*9m A-Shares remain = 2.25m A-Shares each (4) N2J owners
*TCLL CEO Andre Salt Common Shares transfered = 2.5m A-Shares
*All Directors have equal Share ownership of TCLL
*After N2J deal complete approximate share count .........
......... 12.5m A-Shares .... 70m Common Shares
In process of transfering the approximate 30% of Common Shares that are owed by Directors in the O/S into A-Shares ... it would reduce the Common Shares from 101m to approximate 70m Common O/S.
After the N2J 100% Merger is complete within 8 mths there would be approximate 12.5m Class A Preferred Shares O/S of the 30m A-Shares Authorized for future Mergers and Acquitions ...
In regards to the N2J dealing as is and was valued for purchase by Tricell. This proposal I have submitted would be in the best regards to Tricell Shareholders and the Board of Directors. After studying Tricell filings I have come to the conclusuion the Board of Directors are qualified for Class A with comparison to common shareholders.
TCLL Directors should be allowed to transfer common shares into Class A Preferred Stock (*A-Shares)
(1) Class A Preferred share equal to (10) Common shares ...
In regards to this N2J merger proposal, it would help the shareholders by reducing the Outstanding Share count of Common Stock along with giving Board of Directors more protection of any Assets brought into the company for strong book value. N2J is a private company therefore it should fall into a differant class upon merger to protect the Assets the owners bring into the company. The owners of N2J are being paid very well for the company whose Revenue may exceed Tricell Revenue of $662m yr and N2J in probable has +net earnings exceeding $18m yr or $1.5m a month. N2J is being bought with the profits from N2J and it is being paid for contigent to N2J meeting +profit performance of $1.5m a month or $18m +net profit after cost are reduced from revenue on 12/31/06. The put A-shares issued are a form of collateral that are bought back by Tricell and the non-put A-shares give the four N2J Board of Directors equal control of Tricell Inc along with TCLL CEO Andre Salt's current share ownership.
