EXHIBIT 2
STOCK EXCHANGE AGREEMENT
Agreement and plan of merger (Agreement), executed and
entered into February 25, 1999:
Between:
RECYCLENET CORPORATION, an
Ontario Corporation
Hereinafter called "RecycleNet"
and
GARBALIZER MACHINERY CORPORATION, a Utah corporation
Hereinafter called "Garbalizer"
PLAN OF REORGANIZATION
In order to consummate the plan of merger herein
contemplated and in consideration of the mutual benefits to
be derived by the parties hereto and of the mutual
agreements herein, the parties hereto represent, warrant,
covenant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF RECYCLENET
CORPORATION
RecycleNet warrants and represents that:
(a) RecycleNet is a corporation duly organized and
existing under the laws of the province of Ontario.
(b) The unaudited financial statements of RecycleNet
including applicable reporting documents, as of the 31st day
of December, 1998 (attached hereto and made a part hereof
for all purposes labelled Exhibit "A") have been prepared in
accordance with generally accepted accounting practices and
fairly presents the financial position of RecycleNet at such
date.
(c) RecycleNet has good and marketable title to all
the property it purports to own by this Agreement as
described in the balance sheet as of the 31st day of
December, 1998 herein referred to.
(d) RecycleNet is not a party to any pending or
threatened litigation which might adversely affect the
assets of RecycleNet.
(e) All taxes which RecycleNet is required by law to
pay in regard to its assets have been duly paid for all
periods up to and including the closing of this agreement.
(f) The assets to be transferred by RecycleNet have
not, since negotiations commenced between the parties, been
materially and adversely affected as a result of any fire,
explosion, earthquake, flood, drought, wind storm, accident,
strike, embargo, confiscation of vital equipment, materials
or inventory, transactions, or acts of God.
(g) RecycleNet is acquiring shares of Amalco (as
defined later) and Garbalizer which when converted with
common shares of Garbalizer will represent ninety percent
(90%) of the outstanding voting common shares of post
reorganized Garbalizer.
(h) The board of directors of RecycleNet has duly
authorized and approved the execution of this agreement.
(i) RecycleNet will bear the cost of its own
accountants, attorneys, and other professionals by them
employed.
(j) RecycleNet represents that subsequent to the
herein contemplated transaction, it will have no
encumbrances or liabilities, contingent or otherwise, upon
which a claim upon it could be made or which may
subsequently arise from the activities of RecycleNet prior
to the date of the closing of this transaction and will
fully cooperate with Garbalizer to permit verification on a
basis acceptable to Garbalizer.
(k) RecycleNet hereby represents that neither it nor
its agents or representatives shall, without prior consent
of Garbalizer, sell, agree to sell, enter into negotiations
to sell, or discuss (other than pursuant to unsolicited
inquiries) the sale of the authorized and issued stock of
RecycleNet to or with any party except as disclosed to
Garbalizer in advance and as agreed upon by both parties
except as required by applicable law.
2. REPRESENTATIONS AND WARRANTIES OF GARBALIZER MACHINERY
CORPORATION
Garbalizer warrants and represents that:
(a) Garbalizer is a corporation duly organized and
existing under the laws of the State of Utah, with
authorized capital stock consisting of 15,000,000 share of
common voting stock with a par value of $0.01/share of which
11,816,132 shares are issued and outstanding.
(b) The unaudited financial statements and
accompanying CPA review letter of Garbalizer, including
applicable reporting documents for the accounting period
ending December 31, 1998, (attached hereto and made a part
hereof for all purposes labelled Exhibit "B") have been
prepared in accordance with generally accepted accounting
practices and fairly represent the financial position of
Garbalizer as of the specified dates.
(c) The schedule of patents and other assets to be
transferred to Garb Oil & Power Company by this Agreement
(attached hereto and make a part hereof for all purposes
labelled Exhibit "C") is a true and correct schedule and
brief description of the patents and assets.
(d) Garbalizer is not a party to any pending or
threatened litigation which might adversely affect the
assets of Garbalizer which are being transferred from
Garbalizer to Garb Oil & Power Company.
(e) All taxes which Garbalizer in required by law to
pay in regard to the assets to be transferred to Garb Oil &
Power Company have been duly paid for all prior periods up
to and including the date of the closing of this Agreement.
(f) The assets to be transferred by Garbalizer to
Garb Oil & Power Company have not, since negotiations
commenced between the parties, been materially and adversely
affected as a result of any fire, explosion, earthquake,
flood, drought, wind storm, accident, strike, embargo,
confiscation of vital equipment, materials or inventory,
transactions, or acts of God.
(g) Garbalizer, in acquiring ten percent (10%) of the
post reorganization outstanding and voting shares as herein
contemplated, is acquiring the same in Garbalizer's name,
with no present intention of selling or otherwise
distributing such shares to its individual shareholders.
(h) The board of directors has duly authorized and
approved the negotiation and execution of this agreement.
(i) Garbalizer will bear the cost of any accounting
and legal fees incurred in the negotiation and execution of
this Agreement save and except those fees expressly agreed
upon to be paid by RecycleNet.
(j) Garbalizer represents that subsequent to the
herein contemplated sale of assets and assumption of
indebtedness it will have no encumbrances or liabilities,
contingent or otherwise, upon which a claim upon it could be
made or which may subsequently arise from the activities of
Garbalizer prior to the date of the closing of this
transaction and will fully cooperate with RecycleNet to
permit verification on a basis acceptable to RecycleNet.
(k) Garbalizer hereby represents that neither it nor
its agents or representatives shall, without prior consent
of RecycleNet, sell, agree to sell, enter into negotiations
to sell, or discuss (other than pursuant to unsolicited
inquiries) the sale of the authorized and unissued stock of
Garbalizer to or with any party except as disclosed to
RecycleNet in advance and as agreed upon by both parties
except as required by applicable law.
3. AGREEMENTS OF RECYCLENET CORPORATION
(a) RecycleNet represents that it is a closely held
corporation having less than fifty (50) holders of its
equity securities and is eligible for and will comply with
appropriate exemptions available under the Ontario
Securities Act (or other applicable exemption scheme) for
the exchange of convertible Class "X" shares in Amalco and
Class "N" shares in Garbalizer for common stock of
Garbalizer and Amalco, valued at less than $150,000.00 (U.S.)
(b) RecycleNet shall, immediately upon closing of
this transaction, and at its expense, commence activities to
qualify Garbalizer to become a fully reporting company
pursuant to the provisions of the Securities Exchange Act of
1934 and for NASDAQ listing and trading.
4. AGREEMENTS OF GARBALIZER MACHINERY CORPORATION
(a)
(i) Garbalizer shall, at the expense of RecycleNet,
cause to be incorporated under the Ontario Business
Corporation Act, a subsidiary, hereafter referred to as
"Subco", a company wholly owned by Garbalizer having common
shares entitled to one vote each. Garbalizer shall advise
in due course as to the number of common shares to be
issued. In addition, Garbalizer must authorize an unlimited
quantity of Class "X" shares which are equity participating
and non-voting and shall be convertible to common shares of
Garbalizer as set out hereafter.
(ii) Garbalizer shall amend its constating documents
to create a special class of voting non-equity participating
shares to be called Class "N" shares in Garbalizer.
(iii) Subco and RecycleNet shall thereafter
amalgamate and Garbalizer shall own all the issued and
outstanding common shares of the amalgamated company
(hereafter referred to as "Amalco"). Amalco will assume the
authorized Class "X" special share structure from "Subco".
(iv) The holders of record of common shares in
RecycleNet prior to the amalgamation shall receive one Class
"X" share of Amalco plus one Class "N" share in Garbalizer
for each share in RecycleNet held.
(v) The Class "X" and Class "N" shares shall be
convertible into the common shares of Garbalizer on the
basis of one Class "X" share of Amalco and one Class "N"
share of Garbalizer for each common share of Garbalizer.
(vi) Garbalizer shall enter into an agreement with
Subco in form acceptable to all parties whereby Garbalizer
agreed to the conditions pertaining to the operation and
management of Subco pending issuance, transfer and
conversion of shares prior to amalgamation with RecycleNet.
(b)
(i) Garbalizer will increase authorized common shares
from 15,000,000 (fifteen million) to 100,000,000 (one hundred
million).
(ii) Garbalizer will reverse split it's current issued and
outstanding common shares in a 3 for 2 split, resulting in
the current issued and outstanding shares of 11,816,132 (eleven
million eight hundred and sixteen thousand one hundred and thirty two)
being reduced to 7,877,421(seven million eight hundred and seventy seven
thousand four hundred and twenty one) issued and outstanding common
shares prior to the amalgamation of "Subco" and RecycleNet.
(iii) At the conclusion of the amalgamation of "Subco" and
RecycleNet, the pre-existing common shareholders of Garbalizer will own
10% of the outstanding common shares of the reorganized Garbalizer and
the pre-existing common shareholders of RecycleNet will own 90% of
the outstanding shares of the reorganized Garbalizer.
(iv) It is understood by both parties hereto that this
distribution shall include all options and similar rights to acquire
shares of common stock on a fully diluted basis and that the converted
"X" and "N" convertible shares would represent ninety percent (90%) of
the outstanding common shares of Garbalizer on a fully diluted basis
subsequent to the completion of the transaction.
(c) Garbalizer shall cause the shares and options, if
any, of the pre-merger Garbalizer corporation to be
registered and in reliance upon Regulation D or other
appropriate exemption from the registration requirements of
the Securities Act of 1933.
(d) Garbalizer shall, subsequent to the closing of
this Agreement, cause the name of the surviving corporation
to be changed to a name acceptable to RecycleNet.
(e) Garbalizer shall, upon the execution of this
Agreement, provide to RecycleNet information necessary and
otherwise not readily available to RecycleNet for assistance
in complying with the requirements of becoming a reporting
company, which information shall include recommendations
regarding legal counsel and estimates of time and cost
necessary to obtain such fully reporting status.
5. MUTUAL AGREEMENTS
(a) Garbalizer and RecycleNet shall, subsequent to
the execution of this Agreement cooperate fully in the
completion of this transaction at the earliest possible time
and jointly shall commence preparation and execution of all
documents, agreements, and other relevant matters necessary
to register and trade the securities of the reorganized
corporation pursuant to the requirements of Regulation D and
Form 10 as herein contemplated.
(b) Garbalizer and RecycleNet shall, subsequent to
the creation of said wholly owned Canadian subsidiary
corporation, cooperate in complying with applicable legal,
accounting, and tax requirements of their respective
jurisdictions.
(c) Garbalizer and RecycleNet agree that Garbalizer
shall, subject to verification of value and any required
shareholder approval, and prior to the closing of the herein
contemplated reorganization, sell and convey all existing
assets (including the "Garbalizer" name and logo, patents,
machinery designs, and contract rights) to Garbalizer's
sister corporation Garb Oil & Power in exchange for the
assumption of Garbalizer of all existing indebtedness of
Garbalizer in the approximate amount of $500,000.00 (U.S.).
(d) Garbalizer and RecycleNet agree that immediately
upon closing of this transaction that the currently existing
board of directors shall appoint as their replacements Xx.
Xxxx Xxxxxx ("Xxxxxx") and two additional persons to be
identified by RecycleNet and forthwith resign.
(e) Garbalizer and RecycleNet agree that immediately
upon closing of this transaction Xxxxxx be appointed to
serve as Chief Executive officer of the reorganized
corporation and that, pursuant to written agreement between
Xxxxxx and the reorganized corporation, Xxxxxx negotiate and
execute an employment agreement with the reorganized
corporation for a term of not less than three (3) years.
(f) Garbalizer and RecycleNet shall jointly exercise
their best efforts to retain continued listing of the
reorganized corporation on the NASD OTC electronic bulletin
board; and further, shall jointly exercise their best
efforts to cause the shares of the reorganized corporation's
common stock to qualify for such continued listing.
(g) Garbalizer and RecycleNet shall jointly provide
and be obligated to provide to the other party all requested
relevant information regarding the operations and activities
of such party for inclusion in proxy materials sent or
provided to shareholders for approval of this Agreement, and
shall, through counsel and other representatives, consult
with each other regarding form and content thereof.
(h) Garbalizer and RecycleNet shall jointly have the
right and obligation to complete such due diligence as
either party may deem appropriate with respect to the other
party including, without limitation, the use of professional
auditors. If, for any reason, the representations of a
party are reasonably deemed to vary substantially from the
information obtained by any such audit and cannot be
reasonably reconciled, then the party relying upon such
representations may terminate this Agreement immediately by
giving written notice to such effect, including therein a
clear concise statement of the nature and extent of such
variance.
(i) Garbalizer and RecycleNet jointly agree that they
each will, prior to the closing of this Agreement, obtain
from the now current principal shareholders (whether
individuals or corporations) of said corporations, personal
warranties and/or guarantees (whether made directly or
indirectly) supporting the written representations and
warranties made by such persons to either of the
corporations party to this Agreement and which have been
relied upon by any party hereto.
(j) Each party hereto shall be responsible for its
own legal and other professionals fees incurred in the
negotiation and preparation of the letter of intent herein
referenced and further, that the shareholders of the parties
hereto shall be obligated for such legal and professional
fees as are incurred by the respective parties.
6. APPROVAL OF SHAREHOLDERS
As an express condition precedent, this Agreement is
subject to the approval of the shareholders (where
necessary) and directors of both RecycleNet and Garbalizer.
Both corporations shall call shareholders' meetings or
otherwise obtain such approval on or before the date set for
closing of this Agreement for the purpose of considering and
approving this Agreement and for purposes of taking all
other action required to be taken to effectuate the objects
of this Agreement.
7. TERMINATION/LETTER OF AGREEMENT
(a) In the event either party hereto, prior to the
execution of this Agreement, terminates the letter of intent
for cause, said party shall do so by giving written notice
to the other party, each party to assume its own costs and
expenses upon such termination.
(b) In the event this Agreement is not, as
contemplated and prior oral agreements upon which it is
based, executed by the parties hereto on or before February
25, 1999, either party shall be entitled to unilaterally and
without cause terminate said letter effective upon two (2)
business days written notice to the other party.
(c) Each party hereto agrees to pay all legal,
accounting and other fees and expenses by it incurred in the
preparation of the letter of intent herein referenced as
contemplated in said letter of intent.
8. CONFIDENTIALITY
Each of the parties hereto shall require their
employees and representatives to be obligated to keep
confidential the existence and contents of the letter of
intent preceding this Agreement, this Agreement itself, and
all other non public information received from either party
to this Agreement unless required to do so by operation of
applicable law.
9. CLOSING
The closing of this Agreement shall take place at the
offices of Garbalizer Machinery Corporation, 507 Xxxxxxxx
Building, 00 Xxxxxxxx Xxxxx, Xxxx Xxxx Xxxx, Xxxx, xx March
19, 1999 at 3:00 p.m. Time is of the essence. All
representations and warranties shall survive the closing.
10. CONSTRUCTION
This Agreement shall be construed and interpreted under
the laws of the State of Utah.
11. BENEFITS
This Agreement shall enure to the benefit of and shall
be binding upon the parties and upon their respective
successors.
12. EXHIBITS
The attached exhibits as herein referenced are attached
hereto and made a part hereof for all purposes identified
and labelled as follows:
(a) Exhibit "A" - RecycleNet unaudited
statements and relevant reporting documents;
(b) Exhibit "B" - Garbalizer unaudited
financial statements and relevant reporting
documents.
(c) Exhibit "C" - Listing of patents and
other assets to be conveyed to Garb Oil & Power.
IN WITNESS WHEREOF THE PARTIES HAVE SIGNED THIS
AGREEMENT THE DATE ABOVE SHOWN.
GARBALIZER MACHINERY CORPORATION
BY; /s/ Xxxx X. Xxxxxx
----------------------------
Xxxx X. Xxxxxx
Chief Executive Officer
RECYCLENET CORPORATION
BY: \s\ Xxxx Xxxxxx
-----------------------------
Xxxx Xxxxxx
President
