LETTER OF UNDERSTANDING - JANUARY, 24, 2005
EAPI ENTERTAINMENT, INC. (Name to be changed to Organic Recycling
Technologies, Inc.)
Known as (the "Purchaser");
And
ORGANIC MATERIALS, LLC AN LLC OF NEW YORK
Known as (the "Seller");
The parties above agree that the Purchaser will purchase certain assets and
certain contracts of the Seller and they jointly agree to the following:
A. The Purchaser and Seller agree that they are entering into a letter of
understanding in which the Purchaser will purchase certain physical assets
and certain multi-year waste contracts for hauling solid waste from the
Seller;
B. The Purchaser will use these acquired assets to build a trucking fleet
supporting its expansion and projects in the Organic and Solid Waste
businesses in the New York area supported by its various organic recycling
and waste management technologies;
C. The Purchaser and the Seller anticipates this purchase will generate in
excess of US$2 million in revenue for the Company in the first operating
year expanding to over US$5 million in 3 years;
D. The Purchaser agrees to acquire from the Seller the following Physical
Equipment:
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1) Grinder - 2002 Morbark Model 4600 Wood Hog , processing up to 300 CY
per hour, including leaves, grass clippings, manure, straw, tree
stumps and logs. Value US$195,000.00.
2) Tractors - Five (5) 2001 Western Star Tractors geared and powered for
off-road conditions similar to landfills, tree clearing sites, farm
fields and garden center yards. Each tractor US$60,000, total value
US$300,000.00
3) Tractors - One (1) 1995 Western Star Tractors geared and powered for
off-road conditions similar to landfills, tree clearing sites, farm
fields and garden center yards. Value US$20,000.00.
4) Trailers - Five (5) 2003 East including One (1) East Walking floor
trailer. All designed for hauling bulk commodities such as mulch,
compost and waste. Each trailer value US$37,000, total value
US$185,000.00.
5) Dump Trailer - One (1) dump trailer suited for biosolids, soil,
compost, waste and aggregate. Value US$30,000.00.
6) Caterpillar - 970 Caterpillar Bucket Loader equipped with a 7 CY
bucket, designed for bulk items such as soil, compost, yard and solid
waste, etc. Value US$90,000.00.
Total Net Value of Equipment, less the outstanding equipment loans
and liabilities directly associated with equipment purchase of
US$481,718.00, to be purchased is US$338,282.00.
E. The Purchaser agrees to acquire the following multi-year waste contracts
for hauling solid waste:
1) Existing, three year contract, with two years remaining, with Cassela
Waste Management hauling Solid Waste from Xxxxx Hollow Transfer
station in Xxxxxx, New York to numerous permitted disposal
destinations. The Contract fee includes adjustments for increases in
fuel, insurance and other items. Contract Revenue exceeds US$430,000
per year. Contract Value US$238,046.00.
2) New, three year contract with Cassela Waste Management hauling Solid
Waste from Xxxxx Hollow Transfer station in Xxxxxx, New York to
numerous permitted disposal destinations. The Contract fee includes
adjustments for increases in fuel, insurance and other items.
Contract Revenue exceeds $675,000 per year. Contract Value
US$534,768.00.
Total Net Value of multi-year waste contracts US$772,814.00
F. The Seller represents to the Purchaser that the issuer of the contracts,
Xxxxxxx Waste Management, agrees to the assignment of these contracts to
the Purchaser.
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G. The Purchaser and the Seller agree that the total purchase price is
US$1,120,000.
H. The Purchaser will issue a convertible debenture in the amount of
US$1,120,000 to the Seller for the Purchase Price.
I. The Convertible Debenture has the following terms:
1) Principal Sum of US$1,120,000.00;
2) Interest of 7% payable at time of conversion;
3) Term 1 year;
4) Convertible and payable in cash at the following dates:
i) US$100,000 plus accrued interest on the US$100,000 in 3
months;
ii) US$200,000 plus accrued interest on the US$200,000 in 6
months;
iii)US$300,000 plus accrued interest on the US$300,000 in 9
months;
iv) US$400,000 plus accrued interest on the US$400,000 in 12
months.
If any of the payments are not made on the above dates a 10%
penalty is added and the next payment includes unpaid amount, the new
payment, the penalty and the accrued interest as the total amount
payable.
5) In addition to the amounts payable in items 4 above, at the
Purchasers option, any amount of the debenture plus accrued interest
can be paid at any time until the expiration of the 1 year term;
6) At the end of the 1 year term the outstanding amount of the debenture
plus all accrued interest and penalties is convertible into common
shares of Organic Recycling Technologies Inc. The common shares will
be issued at the previous three-day average market value less a 15%
discount. The issued common shares will then be registered by the
Company with a registration statement allowing the common shares to
be traded without restriction;
7) If the Convertible Debenture is paid in cash in full prior to the 1
year term, the holders of the debenture will receive a bonus of 10%
of the debenture ($112,000) in common shares of Organic Recycling
Technologies Inc. issued at the previous three day average market
value less a 10% discount.
J. The principals of the Seller will remain as guarantors on the outstanding
debt's of the equipment. The Purchaser has agreed to pay a bonus to each
of the two Guarantors that guarantee the outstanding debt's, 25,000 common
shares each (50,000 total) of Organic Recycling Technologies Inc. These
shares will be issued as 144 restricted common shares. If the Company does
a registration statement these shares will be registered.
K. The Seller agrees that with the funds received from the Purchase Price they
will repay the outstanding liabilities of US$481,718.00.
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REQUIREMENTS:
A) Asset purchase agreement with Organic Materials, LLC and Organic
Recycling Technologies Inc. (Name to be changed from EAPI
Entertainment, Inc.);
B) Convertible debenture agreement for US$1,120,000 for the Purchase
Price;
C) Issuance of common Shares for the $50,000 Guarantee fee;
D) Board meeting of all the Directors of the Company reviewing and
approving the Asset purchase agreement;
E) Review and approval of implementation with the Management executive
committee;
F) Prepare new release and disclosure documents as required;
IN WITNESS WEREOF the parties have agreed to the above letter of understanding
on the day and year first above written.
Agreed to by Organic Materials, LLC,
/s/ Xxxxx Xxxxxxxx
---------------------------------
Authorized signature
January 24, 2005
---------------------------------
Date
Agreed to by EAPI Entertainment, Inc. (Name to be changed to Organic Recycling
Technologies, Inc.):
/s/ Xxxx Xxxxxxx
---------------------------------
Authorized Signature
January 24, 2005
---------------------------------
Date
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