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EXHIBIT 2.1
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AGREEMENT OF MERGER AND
PLAN OF REORGANIZATION
among
ZEN POTTERY EQUIPMENT, INC.
ZEN ACQUISITION CORP. and
XETHANOL CORPORATION
February 2, 2005
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TABLE OF CONTENTS
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Page
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1. The
Merger...............................................................................................1
1.1
Merger..........................................................................................1
1.2 Effective
Time..................................................................................2
1.3 Certificate of Incorporation, By-laws, Directors and
Officers...................................2
1.4 Assets and
Liabilities..........................................................................2
1.5 Manner and Basis of Converting
Shares...........................................................3
1.6 Surrender and Exchange of
Certificates..........................................................3
1.7
Warrants........................................................................................4
1.8 Parent Common
Stock.............................................................................4
2. Representations and Warranties of the
Company............................................................4
2.1 Organization, Standing, Subsidiaries,
Etc.......................................................4
2.2
Qualification...................................................................................5
2.3 Capitalization of the
Company...................................................................5
2.4 Company
Stockholders............................................................................5
2.5 Corporate Acts and
Proceedings..................................................................5
2.6 Compliance with Laws and
Instruments............................................................6
2.7 Binding
Obligations.............................................................................6
2.8 Broker's and Finder's
Fees......................................................................6
2.9 Financial
Statements............................................................................6
2.10 Absence of Undisclosed
Liabilities..............................................................7
2.11
Changes.........................................................................................7
2.12 Employee Benefit Plans;
ERISA...................................................................7
2.13 Title to Property and
Encumbrances..............................................................7
2.14
Litigation......................................................................................8
2.15 Patents, Trademarks,
Etc........................................................................8
2.16
Disclosure......................................................................................8
3. Representations and Warranties of Parent and Acquisition
Corp............................................8
3.1 Organization and
Standing.......................................................................8
3.2 Corporate
Authority.............................................................................9
3.3 Broker's and Finder's
Fees......................................................................9
3.4 Capitalization of
Parent........................................................................9
3.5 Acquisition
Corp................................................................................9
3.6 Validity of
Shares.............................................................................10
3.7 SEC Reporting and
Compliance...................................................................10
3.8 Financial
Statements...........................................................................10
3.9 Governmental
Consents..........................................................................11
3.10 Compliance with Laws and
Instruments...........................................................11
3.11 No General
Solicitation........................................................................11
3.12 Binding
Obligations............................................................................11
3.13 Absence of Undisclosed
Liabilities.............................................................11
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3.14
Changes........................................................................................12
3.15 Tax Returns and
Audits.........................................................................12
3.16 Employee Benefit Plans;
ERISA..................................................................13
3.17
Litigation.....................................................................................13
3.18 Interested Party
Transactions..................................................................14
3.19 Questionable
Payments..........................................................................14
3.20 Obligations to or by
Stockholders..............................................................14
3.21 Assets and
Contracts...........................................................................14
3.22
Employees......................................................................................15
3.23
Disclosure.....................................................................................15
4. Additional Representations, Warranties and Covenants of the
Stockholders................................15
5. Conduct of Businesses Pending the
Merger................................................................16
5.1 Conduct of Business by the Company Pending the
Merger..........................................16
5.2 Conduct of Business by Parent and Acquisition Corp. Pending
the Merger.........................17
6. Additional
Agreements...................................................................................18
6.1 Access and
Information.........................................................................18
6.2 Additional
Agreements..........................................................................18
6.3
Publicity......................................................................................19
6.4 Appointment of
Directors.......................................................................19
6.5 Parent Name Change and Exchange
Listing........................................................19
6.6 Registration Rights
Agreement..................................................................19
6.7 Stock Incentive
Plan...........................................................................19
6.8 Private
Offering...............................................................................19
7. Conditions of Parties'
Obligations......................................................................19
7.1 Company
Obligations............................................................................20
7.2 Parent and Acquisition Corp.
Obligations.......................................................21
8. Non-Survival of Representations and
Warranties..........................................................24
9. Amendment of
Agreement..................................................................................24
10.
Definitions.............................................................................................24
11.
Closing.................................................................................................28
12. Termination Prior to
Closing............................................................................28
12.1 Termination of
Agreement.......................................................................28
12.2 Termination of
Obligations.....................................................................29
13.
Miscellaneous...........................................................................................29
13.1
Notices........................................................................................29
13.2 Entire
Agreement...............................................................................30
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13.3
Expenses.......................................................................................30
13.4
Time...........................................................................................30
13.5
Severability...................................................................................30
13.6 Successors and
Assigns.........................................................................30
13.7 No Third Parties
Benefited.....................................................................30
13.8
Counterparts...................................................................................30
13.9 Governing
Law..................................................................................30
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LIST OF EXHIBITS AND SCHEDULES
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Exhibits
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A Certificate of Merger
B Certificate of Incorporation of the Company
C By-laws of the Company
D Directors and Officers of the Surviving Corporation
E Letter of Transmittal
F Registration Rights Agreement
G Form of Opinion of Company's Counsel
H Form of Opinion of Parent's Counsel
I Form of Release of Parent Officers and Directors
Company Disclosure Schedules
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1.5 Holders of Parent Common Stock Post-Merger
1.7(a)(i) Treatment of Company Warrants
2.4 Company Stockholders
2.9 Financial Statements
2.10 Undisclosed Liabilities
2.11 Changes/Indebtedness
2.12 Schedule of Employee Benefit Plans
2.13 Title to Properties and Encumbrances
2.14 Litigation
2.15 Patents, Trademarks, Etc.
Parent Disclosure Schedules
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3.1 Subsidiaries
3.21 Schedule of Parent Bank Accounts
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AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
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THIS AGREEMENT OF MERGER AND PLAN OF REORGANIZATION is made and
entered
into as of February 2, 2005, by and among ZEN POTTERY EQUIPMENT,
INC., a
Colorado corporation ("Parent"), ZEN ACQUISITION CORP., a
Delaware corporation
("Acquisition Corp."), which is a wholly-owned subsidiary of
Parent, and
XETHANOL CORPORATION, a Delaware corporation (the
"Company").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Board of Directors of each of Acquisition Corp.,
Parent
and the Company have each determined that it is fair to and in
the best
interests of their respective corporations and shareholders for
Acquisition
Corp. to be merged with and into the Company (the "Merger") upon
the terms and
subject to the conditions set forth herein;
WHEREAS, the Board of Directors of Acquisition Corp. and the
Board of
Directors of the Company have approved the Merger in accordance
with the General
Corporation Law of the State of Delaware (the "DGCL"), and upon
the terms and
subject to the conditions set forth herein and in the
Certificate of Merger (the
"Certificate of Merger") attached as Exhibit A hereto; and the
Board of
Directors of Parent has also approved this Agreement and the
Certificate of
Merger;
WHEREAS, the requisite Stockholders (as such term is defined in
Section
10 hereof) have approved, by written consent pursuant to
Sections 228 and 251 of
the DGCL, this Agreement and the Certificate of Merger and the
transactions
contemplated hereby and thereby, including without limitation,
the Merger, and
Parent, as the sole stockholder of Acquisition Corp., has
approved this
Agreement, the Certificate of Merger and the transactions
contemplated and
described hereby and thereby, including without limitation, the
Merger; and
WHEREAS, immediately following the Closing (as such term is
defined
herein), Parent (as it will exist as of the closing of the
Merger) will sell
shares of its common stock, par value $.001 per share, in a
private offering
(the "Private Offering") to accredited investors, pursuant to
the terms of a
Confidential Private Offering Memorandum, dated November 2004,
as supplemented
by the First Supplement, dated January 10, 2005, and as it may
be further
supplemented (the "Memorandum"), for the purpose of financing
the ongoing
business and operations of the Surviving Corporation (as defined
below)
following the Merger.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants
hereinafter set forth, the parties hereto agree as follows:
1. The Merger.
1.1 Merger. Subject to the terms and conditions of this
Agreement and the Certificate of Merger, Acquisition Corp. shall
be merged with
and into the Company in accordance with Section 251 of the DGCL.
At the
Effective Time (as hereinafter defined), the separate legal
existence of
Acquisition Corp. shall cease, and the Company shall be the
surviving
corporation in the Merger (sometimes hereinafter referred to as
the "Surviving
Corporation") and
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shall continue its corporate existence under the laws of the
State of Delaware
under the name Xethanol Bioenergy, Inc.
1.2 Effective Time. The Merger shall become effective on the
date
and at the time the Certificate of Merger is filed with the
Secretary of State
of the State of Delaware in accordance with Section 251 of the
DGCL. The time at
which the Merger shall become effective as aforesaid is referred
to hereinafter
as the "Effective Time."
1.3 Certificate of Incorporation, By-laws, Directors and
Officers.
(a) The Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time, attached as
Exhibit B hereto,
shall be the Certificate of Incorporation of the Surviving
Corporation from and
after the Effective Time until further amended in accordance
with applicable
law.
(b) The By-laws of the Company, as in effect immediately
prior
to the Effective Time, attached as Exhibit C hereto, shall be
the By-laws of the
Surviving Corporation from and after the Effective Time until
amended in
accordance with applicable law, the Certificate of Incorporation
of the
Surviving Corporation and such By-laws.
(c) The directors and officers listed in Exhibit D hereto
shall be the directors and officers of the Surviving
Corporation, and each shall
hold his respective office or offices from and after the
Effective Time (except,
in the case of directors, as described in Section 6.4) until his
successor shall
have been elected and shall have qualified in accordance with
applicable law, or
as otherwise provided in the Certificate of Incorporation or
By-laws of the
Surviving Corporation.
1.4 Assets and Liabilities. At the Effective Time, the
Surviving
Corporation shall possess all the rights, privileges, powers and
franchises of a
public as well as of a private nature, and be subject to all the
restrictions,
disabilities and duties of each of Acquisition Corp. and the
Company
(collectively, the "Constituent Corporations"); and all the
rights, privileges,
powers and franchises of each of the Constituent Corporations,
and all property,
real, personal and mixed, and all debts due to any of the
constituent
corporations on whatever account, as well for stock
subscriptions as all other
things in action or belonging to each of the Constituent
Corporations, shall be
vested in the Surviving Corporation; and all property, rights,
privileges,
powers and franchises, and all and every other interest shall be
thereafter as
effectively the property of the Surviving Corporation as they
were of the
several and respective constituent corporations, and the title
to any real
estate vested by deed or otherwise in either of the such
Constituent
Corporations shall not revert or be in any way impaired by the
Merger; but all
rights of creditors and all liens upon any property of any of
the Constituent
Corporations shall be preserved unimpaired, and all debts,
liabilities and
duties of the Constituent Corporations shall thenceforth attach
to the Surviving
Corporation, and may be enforced against it to the same extent
as if said debts,
liabilities and duties had been incurred or contracted by
it.
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1.5 Manner and Basis of Converting Shares.
(a) At the Effective Time:
(i) each share of common stock, par value $.01 per share,
of Acquisition Corp. that shall be outstanding immediately prior
to the
Effective Time shall, by virtue of the Merger and without any
action on the part
of the holder thereof, be converted into the right to receive
ten (10) shares of
common stock, par value $.001 per share, of the Surviving
Corporation, so that
at the Effective Time, Parent shall be the holder of all of the
issued and
outstanding shares of the Surviving Corporation;
(ii) the shares of common stock, par value $.001 per
share, of the Company (the "Company Common Stock"), which shares
at the Closing
will constitute all of the issued and outstanding shares of
capital stock of the
Company, beneficially owned by the Stockholders listed in
Schedule 2.4 (other
than shares of Company Common Stock as to which appraisal rights
are perfected
pursuant to the applicable provisions of the DGCL and not
withdrawn or otherwise
forfeited), shall, by virtue of the Merger and without any
action on the part of
the holders thereof, be converted into the right to receive the
number of shares
of Parent Common Stock specified in Schedule 1.5 for each of the
Stockholders,
which shall be equal to approximately .88 of a share of Parent
Common Stock for
each share of Company Common Stock (based on 11,561,705 shares
of Company Common
Stock pre-Merger and 10,206,781 shares of Parent Common Stock
allocated to the
Stockholders post-Merger); and
(iii) each share of Company Common Stock held in the
treasury of the Company immediately prior to the Effective Time
shall be
cancelled in the Merger and cease to exist.
(b) After the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the
Surviving
Corporation of the shares of Company Common Stock that were
outstanding
immediately prior to the Effective Time.
1.6 Surrender and Exchange of Certificates. Promptly after
the
Effective Time and upon (i) surrender of a certificate or
certificates
representing shares of Company Common Stock that were
outstanding immediately
prior to the Effective Time or an affidavit and indemnification
in form
reasonably acceptable to counsel for the Parent stating that
such Stockholder
has lost its certificate or certificates or that such have been
destroyed and
(ii) delivery of a Letter of Transmittal (as described in
Section 4 hereof),
Parent shall issue to each record holder of the Company Common
Stock
surrendering such certificate or certificates and Letter of
Transmittal, a
certificate or certificates registered in the name of such
Stockholder
representing the number of shares of Parent Common Stock that
such Stockholder
shall be entitled to receive as set forth in Section 1.5(a)(ii)
hereof. Until
the certificate, certificates or affidavit is or are surrendered
together with
the Letter of Transmittal as contemplated by this Section 1.6
and Section 4
hereof, each certificate or affidavit that immediately prior to
the Effective
Time represented any outstanding shares of Company Common Stock
shall be deemed
at and after the Effective Time to represent only the right to
receive upon
surrender as aforesaid the Parent Common Stock specified in
Schedule 1.5 hereof
for the holder thereof or to perfect any rights of appraisal
which such holder
may have pursuant to the applicable provisions of the DGCL.
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1.7 Warrants.
(a) (i) At the Effective Time, all outstanding warrants
issued by the Company to purchase shares of Company Common Stock
(the "Company
Warrants") that have not been surrendered by the holder thereof
in exchange for
Company Common Stock, will, at the Effective Time, be deemed be
a warrant (the
"Parent Warrants") to acquire the same number of shares of
Parent Common Stock
as the holder of such Company Warrants would have been entitled
to receive
pursuant to the Merger had such holder exercised such Company
Warrants in full
immediately prior to the Effective Time at a price per share of
Parent Common
Stock equal to the exercise price for the shares of Company
Common Stock
otherwise purchasable pursuant to such Company Warrant. Schedule
1.7(a)(i)
attached hereto sets forth the name of each holder of Company
Warrants, the
aggregate number of shares of Company Common Stock that each
such person may
purchase pursuant to the exercise of his or her Company Warrants
and the
aggregate number of shares of Parent Common Stock that each such
person may
purchase upon exercise of Parent Warrants acquired pursuant to
this Section
1.7(a)(i). By its signature hereunder, Parent expressly assumes
the obligation
to issue Parent Common Stock to the holders of Parent Warrants
upon exercise
thereof, in accordance with the provisions of this Section
1.7(a)(i).
(ii) Without limiting the generality of the foregoing,
the Company and the Parent shall take all corporate actions as
may be necessary
and desirable in order to effectuate the transactions
contemplated by this
Section 1.7(a).
(b) Parent shall take all action necessary and appropriate,
on or prior to the Effective Time, to authorize and reserve a
number of shares
of Parent Common Stock sufficient for issuance upon the exercise
of Parent
Warrants following the Effective Time as contemplated by this
Section 1.7.
(c) Other than the Company Warrants, all options, warrants
and rights to purchase Company Common Stock outstanding as of
the Effective Date
will be exercised or terminated prior to or effective upon the
Effective Time,
and neither Parent nor Acquisition Corp. shall assume or have
any obligation
with respect to such options, warrants or rights.
1.8 Parent Common Stock. Parent agrees that it will cause
the
Parent Common Stock into which the Company Common Stock is
converted at the
Effective Time pursuant to Section 1.5(a)(ii) to be available
for such purpose.
Parent further covenants that immediately prior to the Effective
Time there will
be no more than 1,950,500 shares of Parent Common Stock issued
and outstanding,
and that no other common or preferred stock or equity securities
or any options,
warrants, rights or other agreements or instruments convertible,
exchangeable or
exercisable into common or preferred stock or other equity
securities shall be
issued or outstanding.
2. Representations and Warranties of the Company. The Company
hereby
represents and warrants to Parent and Acquisition Corp. as
follows:
2.1 Organization, Standing, Subsidiaries, Etc.
(a) The Company is a corporation duly organized and existing
in good standing under the laws of the State of Delaware, and
has all requisite
power and authority
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(corporate and other) to carry on its business, to own or lease
its properties
and assets, to enter into this Agreement and the Certificate of
Merger and to
carry out the terms hereof and thereof. Copies of the
Certificate of
Incorporation and By-laws of the Company that have been
delivered to Parent and
Acquisition Corp. prior to the execution of this Agreement are
true and complete
and have not since been amended or repealed.
(b) Other than Permeate Refining, Inc., Xethanol One, LLC,
Advanced Bioethanol Technologies, Inc., Ethanol Extraction
Technologies, Inc.
and Xethanol BioFuels LLC (collectively, the "Subsidiaries"),
the Company has no
subsidiaries or direct or indirect interest (by way of stock
ownership or
otherwise) in any firm, corporation, limited liability company,
partnership,
association or business. The Company owns all of the issued and
outstanding
capital stock or membership interests of the Subsidiaries free
and clear of all
Liens, and the Subsidiaries have no outstanding options,
warrants or rights to
purchase capital stock or other equity securities of such
Subsidiaries, other
than the capital stock or membership interests owned by the
Company. Unless the
context otherwise requires, all references in this Section 2 to
the "Company"
shall be treated as being a reference to the Company and the
Subsidiaries taken
together as one enterprise.
2.2 Qualification. The Company is duly qualified to conduct
business as a foreign corporation and is in good standing the
State of Iowa and
in each other jurisdiction wherein the nature of its activities
or its
properties owned or leased makes such qualification necessary,
except where the
failure to be so qualified would not have a material adverse
effect on the
condition (financial or otherwise), properties, assets,
liabilities, business
operations, results of operations or prospects of the Company
taken as a whole
(the "Condition of the Company"). 2.3 Capitalization of the
Company. The
authorized capital stock of the Company consists of 15,000,000
shares of Company
Common Stock, and the Company has no authority to issue any
other capital stock.
There are 11,546,705 shares of Company Common Stock issued and
outstanding, and
such shares are duly authorized, validly issued, fully paid and
nonassessable.
Except as disclosed in Schedule 1.7(a)(i), the Company has no
outstanding
warrants, stock options, rights or commitments to issue Company
Common Stock or
other Equity Securities of the Company, and there are no
outstanding securities
convertible or exercisable into or exchangeable for Company
Common Stock or
other Equity Securities of the Company.
2.4 Company Stockholders. Schedule 2.4 hereto contains a true
and
complete list of the names and addresses of the record owner of
all of the
outstanding shares of Company Common Stock and other Equity
Securities of the
Company, together with the number and percentage (on a
fully-diluted basis) of
securities held. To the knowledge of the Company, except as
described in
Schedule 2.4, there is no voting trust, agreement or arrangement
among any of
the beneficial holders of Company Common Stock affecting the
exercise of the
voting rights of Company Common Stock.
2.5 Corporate Acts and Proceedings. The execution, delivery
and
performance of this Agreement and the Certificate of Merger
(together, the
"Merger Documents") have been duly authorized by the Board of
Directors of the
Company and have been approved by the requisite vote of the
Stockholders, and
all of the corporate acts and other proceedings required for the
due and valid
authorization, execution, delivery and performance of
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the Merger Documents and the consummation of the Merger have
been validly and
appropriately taken, except for the filing of the Certificate of
Merger referred
to in Section 1.2.
2.6 Compliance with Laws and Instruments. To the knowledge of
the
Company, the business, products and operations of the Company
have been and are
being conducted in compliance in all material respects with all
applicable laws,
rules and regulations, except for such violations thereof for
which the
penalties, in the aggregate, would not have a material adverse
effect on the
Condition of the Company. The execution, delivery and
performance by the Company
of the Merger Documents and the consummation by the Company of
the transactions
contemplated by this Agreement: (a) will not require any
authorization, consent
or approval of, or filing or registration with, any court or
governmental agency
or instrumentality, except such as shall have been obtained
prior to the
Closing, (b) will not cause the Company to violate or contravene
in any material
respect (i) any provision of law, (ii) any rule or regulation of
any agency or
government, (iii) any order, judgment or decree of any court, or
(iv) any
provision of the Certificate of Incorporation or By-laws of the
Company, (c)
will not violate or be in conflict with, result in a breach of
or constitute
(with or without notice or lapse of time, or both) a default
under, any
indenture, loan or credit agreement, deed of trust, mortgage,
security agreement
or other contract, agreement or instrument to which the Company
is a party or by
which the Company or any of its properties is bound or affected,
except as would
not have a material adverse effect on the Condition of the
Company, and (d) will
not result in the creation or imposition of any material Lien
upon any property
or asset of the Company.
2.7 Binding Obligations. The Merger Documents constitute the
legal, valid and binding obligations of the Company and are
enforceable against
the Company in accordance with their respective terms, except as
such
enforcement is limited by bankruptcy, insolvency and other
similar laws
affecting the enforcement of creditors' rights generally and by
general
principles of equity.
2.8 Broker's and Finder's Fees. No Person has, or as a result
of
the transactions contemplated herein will have, any right or
valid claim against
the Company, Parent, Acquisition Corp. or any Stockholder for
any commission,
fee or other compensation as a finder or broker, or in any
similar capacity,
except as set forth in the section of the Memorandum entitled
"Compensation to
Placement Agents and Advisors."
2.9 Financial Statements. Attached hereto as Schedule 2.9 are
the
Company's audited Consolidated Balance Sheet, Consolidated
Statement of
Operations, Consolidated Statement of Changes in Shareholders'
Equity and
Consolidated Statement of Cash Flows as of and for the year
ended December 31,
2003, and the Company's unaudited Consolidated Balance Sheet
(the "Balance
Sheet") as of September 30, 2004 (the "Balance Sheet Date") and
related
Statement of Operations, Consolidated Statement of Changes in
Shareholders'
Equity and Consolidated Statement of Cash Flows as of and for
the nine months
ended September 30, 2004. Such financial statements (i) are in
accordance with
the books and records of the Company, (ii) present fairly in all
material
respects the financial condition of the Company at the dates
therein specified
and the results of its operations and changes in financial
position for the
periods therein specified and (iii) have been prepared in
accordance with
generally accepted accounting principles ("GAAP") applied on a
basis consistent
with prior accounting periods.
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2.10 Absence of Undisclosed Liabilities. The Company has no
material obligation or liability (whether accrued, absolute,
contingent,
liquidated or otherwise, whether due or to become due), arising
out of any
transaction entered into at or prior to the Closing, except (a)
as disclosed in
Schedule 2.10 and/or Schedule 2.11 hereto, (b) to the extent set
forth on or
reserved against in the Balance Sheet, (c) current liabilities
incurred and
obligations under agreements entered into in the usual and
ordinary course of
business since the Balance Sheet Date, none of which
(individually or in the
aggregate) has had or will have a material adverse effect on the
Condition of
the Company and (d) by the specific terms of any written
agreement, document or
arrangement identified in the Schedules.
2.11 Changes. Since the Balance Sheet Date, except as disclosed
in
Schedule 2.11 hereto, the Company has not (a) incurred any
debts, obligations or
liabilities, absolute, accrued, contingent or otherwise, whether
due or to
become due, except for fees, expenses and liabilities incurred
in connection
with the Merger and related transactions and current liabilities
incurred in the
usual and ordinary course of business, (b) discharged or
satisfied any Liens
other than those securing, or paid any obligation or liability
other than,
current liabilities shown on the Balance Sheet and current
liabilities incurred
since the Balance Sheet Date, in each case in the usual and
ordinary course of
business, (c) mortgaged, pledged or subjected to Lien any of its
assets,
tangible or intangible, other than in the usual and ordinary
course of business,
(d) sold, transferred or leased any of its assets, except in the
usual and
ordinary course of business, (e) cancelled or compromised any
debt or claim, or
waived or released any right, of material value, (f) suffered
any physical
damage, destruction or loss (whether or not covered by
insurance) materially and
adversely affecting the Condition of the Company, or (g) entered
into any
transaction other than in the usual and ordinary course of
business.
2.12 Employee Benefit Plans; ERISA. Schedule 2.12 lists all:
(i)
"employee benefit plans" as defined in Section 3(3) of the
Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), maintained or
contributed to
by the Company and covering employees of the Company, including
(i) any such
plans that are "employee welfare benefit plans" as defined in
Section 3(1) of
ERISA and (ii) any such plans that are "employee pension benefit
plans" as
defined in Section 3(2) of ERISA (collectively, the "Company
Benefit Plans");
and (ii) life and health insurance, hospitalization, savings,
bonus, deferred
compensation, incentive compensation, holiday, vacation,
severance pay, sick
pay, sick leave, disability, tuition refund, service award,
company car,
scholarship, relocation, patent award, fringe benefit and other
employee benefit
plans, contracts (other than individual employment, consultancy
or severance
contracts), policies or practices of the Company providing
employee or executive
compensation or benefits to its employees, other than the
Company Benefit Plans
(collectively, the "Benefit Arrangements"). Each Company Benefit
Plan and
Benefit Arrangement has been maintained and administered in all
material
respects in accordance with applicable law.
2.13 Title to Property and Encumbrances. Except as disclosed
in
Schedule 2.13 hereto, the Company has good, valid and
indefeasible marketable
title to all properties and assets used in the conduct of its
business (except
for property held under valid and subsisting leases which are in
full force and
effect and which are not in default) free of all Liens and other
encumbrances,
except Permitted Liens and such ordinary and customary
imperfections of title,
restrictions and encumbrances as do not, individually or in the
aggregate,
materially detract from the value of the property or assets or
materially impair
the use made thereof by the Company in its business. Without
limiting the
generality of the foregoing, the Company has good and
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indefeasible title to all of its properties and assets reflected
in the Balance
Sheet, except for property disposed of in the usual and ordinary
course of
business since the Balance Sheet Date and for property held
under valid and
subsisting leases which are in full force and effect and which
are not in
default.
2.14 Litigation. Except as set forth on Schedule 2.14, there is
no
legal action, suit, arbitration or other legal, administrative
or other
governmental proceeding pending or, to the best knowledge of the
Company,
threatened against or affecting the Company or its properties,
assets or
business, and after reasonable investigation, the Company is not
aware of any
incident, transaction, occurrence or circumstance that might
reasonably be
expected to result in or form the basis for any such action,
suit, arbitration
or other proceeding. The Company is not in default with respect
to any order,
writ, judgment, injunction, decree, determination or award of
any court or any
governmental agency or instrumentality or arbitration
authority.
2.15 Patents, Trademarks, Etc. Schedule 2.15 sets forth a list
of
all United States and foreign patents, trademarks, trade names,
copyrights, and
applications therefor used by the Company exclusively in and
material to the
conduct of its business (the "Patent and Trademark Rights").
Except as disclosed
in Schedule 2.15, (a) the Company owns or possesses adequate
licenses or other
valid rights to use all Patent and Trademark Rights; and (b) to
the Company's
knowledge, the conduct of its business as now being conducted
does not conflict
with any valid patents, trademarks, trade names or copyrights of
others in any
way which has a material adverse effect on the business or
financial condition
of the Company or its business.
2.16 Disclosure. There is no fact relating to the Company that
the
Company has not disclosed to Parent that materially and
adversely affects or,
insofar as the Company can now foresee, will materially and
adversely affect,
the condition (financial or otherwise), properties, assets,
liabilities,
business operations or results of operations of the Company. No
representation
or warranty by the Company herein and no information disclosed
in the schedules
or exhibits hereto by the Company contains any untrue statement
of a material
fact or omits to state a material fact necessary to make the
statements
contained herein or therein not misleading.
3. Representations and Warranties of Parent and Acquisition
Corp.
Parent and Acquisition Corp. jointly and severally represent and
warrant to the
Company, as follows:
3.1 Organization and Standing. Parent is a corporation duly
organized and existing in good standing under the laws of the
State of Colorado.
Acquisition Corp. is a corporation duly organized and existing
in good standing
under the laws of the State of Delaware. Parent and Acquisition
Corp. have
heretofore delivered to the Company complete and correct copies
of their
respective Articles or Certificates of Incorporation and By-laws
as now in
effect. Parent and Acquisition Corp. have full corporate power
and authority to
carry on their respective businesses as they are now being
conducted and as now
proposed to be conducted and to own or lease their respective
properties and
assets. Except as disclosed in Schedule 3.1 hereto, neither
Parent nor
Acquisition Corp. has any subsidiaries (except Parent as the
sole stockholder of
Acquisition Corp.) or direct or indirect interest (by way of
stock ownership or
otherwise) in any firm, corporation, limited liability company,
partnership,
association or business. Parent owns all of the issued and
outstanding capital
stock of Acquisition Corp. free and clear of all Liens, and
Acquisition Corp.
has no outstanding options, warrants or rights to purchase
capital stock or
other equity securities of Acquisition Corp., other than the
capital stock
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owned by Parent. Unless the context otherwise requires, all
references in this
Section 3 to the "Parent" shall be treated as being a reference
to the Parent
and Acquisition Corp. taken together as one enterprise.
3.2 Corporate Authority. Each of Parent and/or Acquisition
Corp.
(as the case may be) has full corporate power and authority to
enter into the
Merger Documents and the other agreements to be made pursuant to
the Merger
Documents, and to carry out the transactions contemplated hereby
and thereby.
All corporate acts and proceedings required for the
authorization, execution,
delivery and performance of the Merger Documents and such other
agreements and
documents by Parent and/or Acquisition Corp. (as the case may
be) have been duly
and validly taken or will have been so taken prior to the
Closing. Each of the
Merger Documents constitutes a legal, valid and binding
obligation of Parent
and/or Acquisition Corp. (as the case may be), each enforceable
against them in
accordance with their respective terms, except as such
enforcement may be
limited by bankruptcy, insolvency, reorganization or other
similar laws
affecting creditors' rights generally and by general principles
of equity.
3.3 Broker's and Finder's Fees. Except for the firms engaged
by
the Company described in Section 2.8, no person, firm,
corporation or other
entity is entitled by reason of any act or omission of Parent or
Acquisition
Corp. to any broker's or finder's fees, commission or other
similar compensation
with respect to the execution and delivery of this Agreement or
the Certificate
of Merger, or with respect to the consummation of the
transactions contemplated
hereby or thereby. Parent and Acquisition Corp. jointly and
severally indemnify
and hold Company harmless from and against any and all loss,
claim or liability
arising out of any such claim from any other Person who claims
he, she or it
introduced Parent or Acquisition Corp. to, or assisted them
with, the
transactions contemplated by or described herein.
3.4 Capitalization of Parent. The authorized capital stock
of
Parent consists of (a) 50,000,000 shares of common stock, par
value $.001 per
share (the "Parent Common Stock"), of which not more than
1,950,500 shares will
be, prior to the Effective Time, issued and outstanding, after
taking into
consideration the cancellation of Parent Common Stock as
indicated in Section
7.2(f)(7)(iii) hereof, and (b) 1,000,000 shares of preferred
stock, par value
$.01 per share, of which no shares are issued or outstanding.
Parent has no
outstanding options, rights or commitments to issue shares of
Parent Common
Stock or any other Equity Security of Parent or Acquisition
Corp., and there are
no outstanding securities convertible or exercisable into or
exchangeable for
shares of Parent Common Stock or any other Equity Security of
Parent or
Acquisition Corp. There is no voting trust, agreement or
arrangement among any
of the beneficial holders of Parent Common Stock affecting the
nomination or
election of directors or the exercise of the voting rights of
Parent Common
Stock. All outstanding shares of the capital stock of Parent are
validly issued
and outstanding, fully paid and nonassessable, and none of such
shares have been
issued in violation of the preemptive rights of any person.
3.5 Acquisition Corp. Acquisition Corp. is a wholly-owned
subsidiary of Parent that was formed specifically for the
purpose of the Merger
and that has not conducted any business or acquired any
property, and will not
conduct any business or acquire any property prior to the
Closing Date, except
in preparation for and otherwise in connection with the
transactions
contemplated by this Agreement, the Certificate of Merger and
the other
agreements to be made pursuant to or in connection with this
Agreement and the
Certificate of Merger.
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<PAGE>
3.6 Validity of Shares. The 9,706,781 shares of Parent
Common
Stock to be issued at the Closing pursuant to Section 1.5(a)(ii)
hereof, when
issued and delivered in accordance with the terms hereof and of
the Certificate
of Merger, shall be duly and validly issued, fully paid and
nonassessable. Based
in part on the representations and warranties of the
Stockholders as
contemplated by Section 4 hereof and assuming the accuracy
thereof, the issuance
of the Parent Common Stock upon the Merger pursuant to Section
1.5(a)(ii) will
be exempt from the registration and prospectus delivery
requirements of the
Securities Act and from the qualification or registration
requirements of any
applicable state blue sky or securities laws.
3.7 SEC Reporting and Compliance. (a) Parent filed a
registration
statement on Form 10-SB under the Exchange Act which became
effective on June
10, 2003. Since that date, Parent has filed with the Commission
all reports
required to be filed by companies registered pursuant to Section
12(g) of the
Exchange Act.
(b) Parent has delivered to the Company true and complete
copies of all annual reports on Form 10-KSB, quarterly reports
on Form 10-QSB,
current reports on Form 8-K and other statements reports and
filings
(collectively, the "Parent SEC Documents") filed by the Parent
with the
Commission. None of the Parent SEC Documents, as of their
respective dates,
contained any untrue statement of a material fact or omitted to
state a material
fact necessary in order to make the statements contained therein
not misleading.
(c) Parent has not filed, and nothing has occurred with
respect to which Parent would be required to file, any report on
Form 8-K since
July 1, 2004. Prior to and until the Closing, Parent will
provide to the Company
copies of any and all amendments or supplements to the Parent
SEC Documents
filed with the Commission since July 1, 2004 and any and all
subsequent
statements, reports and filings filed by the Parent with the
Commission or
delivered to the stockholders of Parent.
(d) Parent is not an investment company within the meaning
of
Section 3 of the Investment Company Act.
(e) The shares of Parent Common Stock are quoted on the
Over-the-Counter (OTC) Bulletin Board under the symbol
"ZPYE.OB," and Parent is
in compliance in all material respects with all rules and
regulations of the OTC
Bulletin Board applicable to it and the Parent Stock. The OTC
Bul
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