Exhibit 99.01
MERGER AGREEMENT
THIS
MERGER AGREEMENT (the “ Agreement ”) is made and
entered into as of the ___ day of August, 2006, by and between the
following:
Charles
W. Pickering Jr., an individual, (hereinafter, “
Pickering ”);
Pickering
& Associates, Inc., a Washington corporation (hereinafter, the
“ Target ”), and
SoftNet
Technology Corp., a Nevada corporation (hereinafter “
SoftNet ” or the “ Surviving Company
”).
W I T N E S S
E T H
WHEREAS,
subject to the terms and conditions of this Agreement, SoftNet and
Pickering desire for Pickering & Associates, Inc. to merge
into, and with, SoftNet with SoftNet being the sole surviving
entity; and
WHEREAS, the
Board of Directors of SoftNet deems it desirable and in the best
interests of SoftNet and its stockholders that the Target merge
into, and with, SoftNet in consideration of the satisfaction and
payment at Closing of certain obligations of the Target with a face
amount totaling one hundred six thousand thirty six and 62/100
dollars ($106,036.62) as set forth in Appendix A attached hereto
and the payment to Pickering (as sole shareholder of the Target) of
fifty thousand dollars ($50,000) in cash and issuance by SoftNet to
Pickering of five hundred seventy five thousand dollars ($575,000)
worth of unregistered, restricted, SoftNet Common Stock (the
“ SoftNet Shares ”); and
WHEREAS,
the parties to this Agreement agree to conduct the merger pursuant
to IRC 368(A)(1)(a); and
WHEREAS,
SoftNet and Pickering desire to provide for certain undertakings,
conditions, representations, warranties, and covenants in
connection with the transactions contemplated by this Agreement;
and
WHEREAS,
Pickering as sole shareholder of Target, the Board of Directors of
Target and the Board of Directors of SoftNet have approved and
adopted this Agreement, subject to the terms and conditions set
forth herein;
NOW,
THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto do
hereby agree as follows:
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SECTION 1
DEFINITIONS
1.1 “
Agreement ”, “ Pickering ”, “
SoftNet ”, “ SoftNet Shares ”, and
“ Target ”, respectively, shall have the
meanings defined in the foregoing preamble and recitals to this
Agreement.
1.2 “
Merger Date ” shall mean the date on which Articles of
Merger are filed with the Secretary of State of Washington and the
Secretary of State of Nevada.
1.3 “
Closing Date ” shall be the date when the parties
execute the Articles of Merger (as defined below), which the
parties intend to be September 25, 2006, however, the parties can
change the Closing Date to such other time and place as the parties
shall mutually agree, in writing. As of the Closing Date, all
Exhibits to this Agreement shall be complete.
1.4 “ Effective Date
” shall mean July 1, 2006. All adjustments shall be
made as of the Effective Date.
1.5 “ 1933 Act ”
shall mean the Securities Act of 1933, as amended.
1.6 “
1934 Act ” shall mean the Securities Exchange Act of
1934, as amended.
1.7 “ SEC Documents ”
shall have the meaning defined in Section 3.4 hereof.
1.8 “
Confidential information ” shall have the meaning
defined in Section 11.1 hereof.
SECTION 2
AGREEMENT FOR THE MERGER INTO SOFTNET
2.1
The Merger. Upon the terms and
subject to the conditions in this Agreement, and in accordance with
the Nevada law appearing at N.R.S. Chapter 78 (the “Nevada
Act”), and the Washington Business Corporation Act, Chapter
23 (the “Washington Act”), Target shall be merged with
and into SoftNet (the “Merger”) on the Merger Date
unless otherwise agreed by both parties as set forth in the
articles of merger, substantially in the form of Exhibit B
(the “Articles of Merger”), to be filed if, as and when
the Closing occurs with the Secretary of State of the State of
Washington and Secretary of State of the State of Nevada.
SoftNet shall be the surviving corporation in the Merger and shall
succeed to and assume all the rights and obligations of Target in
accordance with the Nevada Act.
2.2
Effects of the Merger.
2.2.1 On the Merger Date, the effect of the
Merger shall be as provided in this Agreement, the Articles of
Merger and the applicable provisions of the Nevada Act.
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2.2.2 On the Merger
Date, the articles of incorporation of SoftNet, as in effect
immediately prior to the Merger Date, shall be the articles of
incorporation of the Surviving Company until thereafter amended as
provided by the Nevada Act and such articles of
incorporation.
2.2.3 On the Merger Date, the bylaws of SoftNet,
as in effect immediately prior to the Merger Date, shall be the
bylaws of the Surviving Company until thereafter amended as
provided by the Nevada Act, the articles of incorporation of the
Surviving Company and such bylaws.
2.2.4 On the Merger Date, the directors and
officers of SoftNet, as constituted immediately prior to the Merger
Date, shall be the directors and officers of the Surviving Company,
for so long as provided under the Nevada Act, the articles of
incorporation of the Surviving Company and the bylaws of the
Surviving Company.
2.3
Effects on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of SoftNet or
Target or the holders of any of the following securities, the
following shall occur:
2.3.1 All
of the issued and outstanding share of Target’s capital stock
shall be converted into the right to receive, on the Merger Date,
the consideration specified and allocated in this Section 2.3.1
(the “ Merger Consideration ”). As
of the Merger Date, the Target’s capital stock shall no
longer be outstanding and shall automatically be canceled and shall
cease to exist, and Pickering as the holder of all of the
certificates formerly representing any such shares of Target
capital stock (the “ Certificates ”)
shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration as allocated in this
Section 2.3.1 upon surrender of such Certificate. On the
Closing Date, Pickering shall receive the sum of $50,000 cash and
in addition, on the Closing Date, SoftNet shall pay by wire
transfer to Williams, Kastner & Gibbs PLLC trust account the
aggregate of the sums listed for payment in Schedule A
. In addition, within five business days of the Closing
Date , SoftNet shall issue or deliver,
in the aggregate, on account of the aggregate Target Common Stock
outstanding immediately prior to the Effective Time (i) that
number of shares of the common stock of SoftNet, no par value per
share (the “ SoftNet Common Stock ”),
equal to $575,000.00, calculated by dividing $575,000.00 by the
average closing price for the five trading days immediately prior
to the Closing Date.
2.4 Adjustment to
Consideration Paid by SoftNet .
On the
one year anniversary of the Merger, SoftNet shall take the five day
average closing price (the “One Year Average Price”)
for their common stock prior to the one year anniversary and
multiply that number by the number of shares issued to Pickering at
the Merger yielding the “Calculated Value.” To the
extent that the Calculated Value is less than $ 575,000, SoftNet
shall issue such additional shares (the “Additional
Shares”) of its unregistered, restricted, common stock to
Pickering so that the shares issued at the Merger coupled with the
Additional
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Shares when multiplied by the One Year Average Price equal
$575,000. To the extent that the Calculated Value is more than
$575,000, Pickering shall return to SoftNet such number of shares
(the “Returned Shares”) of SoftNet’s common stock
received by Pickering at the time of the Merger so that the shares
issued at the time of the Merger less the Returned Shares when
multiplied by the One Year Average Price equal $575,000.
2.5 Legend and Registration
Rights .
2.5.1 The certificates
representing the SoftNet Shares shall bear the following
legend:
“These securities have not been registered under the
Securities Act of 1933, as amended, and may not be transferred
unless covered by an effective registration statement under said
Act or unless in the opinion of counsel for the issuer any such
transfer would be exempt from such registration.”
2.5.2 If SoftNet at any
time proposes to register any of its common stock under the 1933
Act in connection with the public offering of common stock solely
on a form that would also permit registration of the SoftNet
Shares, it will each such time give written notice to Pickering of
its intention so to do and, upon the written request of Pickering
given within 10 business days after receipt of any such notice,
SoftNet will, subject to Section 2.5.3 below, use its best efforts
to cause all SoftNet Shares to be registered under the 1933 Act,
all to the extent necessary to permit the sale or other disposition
(in accordance with the intended methods thereof, as aforesaid) by
Pickering of the Softnet Shares so registered.
2.5.3 Whenever required to use
its best efforts to effect registration of SoftNet Shares, SoftNet
shall: (i) prepare and file with the Securities and Exchange
Commission (“SEC”) a registration statement with
respect to the Shares and cause such registration statement to
become and remain effective, however SoftNet shall in no event be
required to cause such registration to remain effective for more
than 180 days; (ii) file with the SEC such amendments and
supplements to such registration and the related prospectus as is
necessary to comply with the 1933 Act; (iii) use its best efforts
to register and qualify the securities covered by such registration
statement under such Blue Sky laws as is necessary for the
distribution of such securities, provided that SoftNet shall not be
required to qualify to do business in or to file a general consent
to service of process in any such state or jurisdiction. In
connection with an offering involving underwriting of shares,
SoftNet shall not be required to include any SoftNet Shares unless
Pickering accepts the terms of the underwriting as agreed between
the Company and the underwriters selected by it and then only in
such quantity as will not in the written opinion of the
underwriters jeopardize the success of the offering by
SoftNet. You agree that at the request of SoftNet or its
underwriters managing any underwritten offering, not to sell, make
a short sale of, loan, grant any option for, or otherwise
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dispose of any SoftNet Shares (other than those included in the
registration) without the prior written consent of SoftNet or such
underwriters for a period of time from the effective date of such
registration as SoftNet or its underwriters may specify, such
period not however to exceed 180 days.
2.5.4 All expenses incurred by
SoftNet in complying with Secctions 2.5.2 and 2.5.3, including,
without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for SoftNet and the
expense of any special audits incident to or required by any such
registration, shall be borne by SoftNet.
2.5.5 In the event of any
registration of any of its securities under the 1933 Act pursuant
to this Section 2, SoftNet will indemnify and hold harmless
Pickering against any losses, claims, damages or liabilities, joint
or several, to which Pickering may become subject under the 1933
Act or otherwise, in so far as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any
registration statement under which such securities were registered
under the 1933 Act, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading; and will reimburse
Pickering for any legal or any other expenses reasonably incurred
by Pickering in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that
SoftNet will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, said
preliminary prospectus or said prospectus or said amendment or
supplement in reliance upon and in conformity with written
information furnished to SoftNet through an instrument duly
executed by Pickering specifically for use in the preparation
thereof.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF SOFTNET
SoftNet,
in order to induce Pickering to execute this Agreement and to
consummate the transactions contemplated herein, represents and
warrants, to Pickering, to the best of its knowledge, as follows, a
breach of which would be deemed a material breach of this
Agreement:
3.1
Organization and Qualification . SoftNet is a
corporation duly organized, validly existing, and in good standing
under the laws of Nevada, with all requisite power and authority to
own its property and to carry on its business as it is now being
conducted. SoftNet is duly qualified
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as a foreign corporation and in good standing in each jurisdiction
where the ownership, lease, or operation of property or the conduct
of business requires such qualification, except where the failure
to be in good standing or so qualified would not have a material,
adverse effect on the financial condition or business of
SoftNet.
3.2
Authorization and Validity . SoftNet has the requisite
power and is duly authorized to execute and deliver and to carry
out the terms of this Agreement. The board of directors
and/or stockholders of SoftNet have taken all action required by
law, its Articles of Incorporation and Bylaws, both as amended, or
otherwise to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby,
subject to the satisfaction or waiver of the conditions precedent
set forth in Section 8 of this Agreement. Assuming this
Agreement has been approved by all action necessary on the part of
the Target, this Agreement is a valid and binding agreement of
SoftNet.
3.3
No Defaults . SoftNet is not in default under or in
violation of any provision of its Articles of Incorporation or
Bylaws, both as amended. SoftNet is not in default under or
in violation of any material provision of any indenture, mortgage,
deed of trust, lease, loan agreement, or other agreement or
instrument to which it is a party or by which it is bound or to
which any of its is subject, if such default would have a material,
adverse effect on the financial condition or business of SoftNet.
SoftNet is not in violation of any statute, law, ordinance, order,
judgment, rule, regulation, permit, franchise, or other approval or
authorization of any court or governmental agency or body having
jurisdiction over it or any of its properties which, if enforced,
would have a material, adverse effect on the financial condition or
business of SoftNet. Neither the execution and delivery of
this Agreement, nor the consummation of the transactions
contemplated herein, will conflict with or result in a breach of or
constitute a default under any of the foregoing or result in the
creation of any lien, mortgage, pledge, charge, or encumbrance upon
any asset of SoftNet and no consents or waivers thereunder are
required to be obtained in connection therewith in order to
consummate the transactions contemplated by this Agreement.
3.4
SEC Documents; Financial Statements . As of the Merger
Date, SoftNet has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the 1934 Act (all of the
foregoing filed prior to the date hereof, together with any
amendments or restatements thereto, and all exhibits included
therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter
referred to as the “ SEC Documents ”). As
of the Merger Date, the SEC Documents substantially complied in all
material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the Merger
Date, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As
of the Merger Date, the financial statements of SoftNet included in
the SEC Documents substantially complied as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in substantial accordance
with generally accepted accounting principles, consistently
applied, during the periods involved (except ( i ) as may be
otherwise indicated in such financial statements or the notes
thereto, or ( ii ) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be
condensed or
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summary statements) and fairly present in all material respects the
financial position of SoftNet as of the dates thereof and the
results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end
audit adjustments). No other information provided by or on
behalf of SoftNet to Pickering which is not included in the SEC
Documents, including, without limitation, contains any untrue
statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they are or were made, not
misleading. Neither the SoftNet nor any of its officers,
directors, employees or agents has provided Pickering with any
material, non-public information.
3.5
Absence of Certain Changes . Since the most recent
filing by SoftNet with the SEC, there has been no material adverse
change and no material adverse development in the business,
properties, operations, financial condition, results of operations
or prospects of SoftNet. SoftNet has not taken any steps, and does
not currently expect to take any steps, to seek protection pursuant
to any bankruptcy law nor does SoftNet have any knowledge or reason
to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
3.6
Documents . The copies of all agreements and other
instruments that have been delivered by SoftNet to Pickering are
true, correct, and complete copies of such agreements and
instruments and include all amendments thereto.
3.7
Disclosure . The representations and warranties made
by SoftNet herein and in any schedule, statement, certificate, or
document furnished or to be furnished by SoftNet to Pickering
pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, taken as a whole, do not and will
not as of their respective dates contain any untrue statements of a
material fact, or omit to state a material fact necessary to make
the statements made not misleading.
3.8 The
SoftNet Shares to be issued pursuant to the Merger, when issued in
accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and non-assessable.
The SoftNet Shares will not be subject to any shareholders
agreement or other similar contractual restriction.
3.9 SoftNet
has not taken any action that would prevent the Merger from
qualifying as reorganization within the meaning of
§ 368(A)(1)(a).
3.10 Any
corporate action requ
