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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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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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 Bulletin Board has
cleared the Form 211 filed
