Earthworks Industries Inc. and its subsidiary, Cortina Integrated Waste Management Inc. (referred to together as “EWK”) are parties to an agreement with North Bay Corporation and its subsidiary, Cortina Landfill Company (together herein referred to as “North Bay”) which has been amended by a series of amendment agreements, the most recent of which is dated May 20, 2016 (the “Settlement Agreement”). North Bay have given notice to EWK that North Bay has assigned to James Ratto (“Ratto”) all of its rights and obligations under the Settlement Agreement.
EWK accepts that assignment, and EWK hereby agrees to amend the Settlement Agreement as follows:
(a) the Amendment Agreement dated May 20, 2016 is hereby cancelled and is wholly replaced by this Amendment Agreement;
(b) the principal amount due from EWK pursuant to the Settlement Agreement is $5,144,916 (the “Balance Amount”);
(c) EWK will pay Ratto $200,000 on the signing of this Amendment Agreement;
(d) the $200,000 paid to Ratto pursuant to sub-clause (c) will be:
(i) applied to reduce the Balance Amount and be deemed paid on account of the $500,000 now due March 31, 2018: or
(ii) if EWK exercises the Payout Option, will be deducted from the amount required to exercise the Payout Option, reducing the required amount to $2,050,000;
(e) EWK is hereby granted an option (the “Payout Option”) to wholly settle the Balance Amount and all accrued interest by paying Ratto, on or before March 31, 2018 $2,250,000 less the $200,000 paid pursuant to sub-clause (c) – net $2,050,000;
(f) the Balance Amount shall, if the Payout Option is not exercised, be paid by EWK to Ratto by 8 annual payments of $500,000 each on March 31st commencing March 31, 2018 and a final annual payment of the whole of the amount of Balance Amount remaining unpaid and of all accrued and unpaid interest;
(g) the Balance Amount shall bear interest of 7.0% per annum calculated yearly on December 31st and not in advance, from March 31, 2016, on the amount of the Balance Amount remaining unpaid from time to time;
(h) if EWK effects any equity financing prior to the full payment of the Balance Amount, Ratto shall have an option to apply all or part of any accrued and unpaid interest to the purchase of securities of EWK on the same terms as are being given to all others participating in the equity financing.
If any of EWK’s commitments above are not fulfilled within 30 days after their due date, ownership of 100% of the issued shares of Cortina Integrated Waste Management Inc. (“CIWM”) will automatically and without notice vest in Ratto. EWK and Ratto will forthwith thereafter do everything necessary to have such shares of CIWM registered in the name of Ratto in the records of CIWM and take all other actions required to vest 100% ownership of CIWM in Ratto under all laws governing that transfer. The duties and powers of the trustee appointed by the parties to this Agreement pursuant to paragraph 2 of the Compromise and Settlement Agreement between the parties dated August 1, 2013, and the escrow instructions thereby approved, remain in full effect and any failure by EWK or CIWM to satisfy their obligations under the Settlement Agreement, as amended, or under this Amendment Agreement, shall automatically trigger the obligation of the trustee to convey 100% of the shares of CIWM to Ratto.
Earthworks will immediately undertake non-brokered private placement sales of 6.25 million units at $0.20 per unit to provide the Company with gross proceeds of $1,250,000. Each unit will consist of one share of the Company and one share purchase warrant. A warrant will be exercisable to purchase one additional share of the Company for $0.20 for one year with a forced exercise should the Company’s share price close at or above $0.40 for 20 consecutive trading days. A fee will be paid for the placement.
Funds raised from the placement will go to the Ratto payment, on-going cost at Cortina and general working capital. The placements are subject to final documentation and acceptance for filing by the TSX Venture Exchange.