☐ | Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. |
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Share Name | Share Symbol | Market | Type |
---|---|---|---|
BSQUARE Corporation | NASDAQ:BSQR | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1.89 | 1.89 | 1.90 | 0 | 01:00:00 |
☐ | Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. |
ITEM 1. | SUBJECT COMPANY INFORMATION |
ITEM 2. | IDENTITY AND BACKGROUND OF FILING PERSON |
ITEM 3. | PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS |
Name | | | Position |
Ralph C. Derrickson | | | President and Chief Executive Officer |
Cheryl A. Wynne | | | Chief Financial Officer |
Name of Executive Officer or Director | | | Number of Shares Subject to Vested In the Money Options (#) | | | Cash Consideration for Vested In the Money Options ($) | | | Number of Shares Subject to Unvested In the Money Options (#) | | | Cash Consideration for Unvested In the Money Options ($) |
Officers | | | | | | | | | ||||
Ralph C. Derrickson (and director) | | | 0(1) | | | 0 | | | 0 | | | 0 |
Cheryl A. Wynne | | | 31,875(1) | | | 14,981 | | | 13,125 | | | 6,169 |
Directors | | | | | | | | | ||||
Ryan L. Vardeman | | | 0 | | | 0 | | | 0 | | | 0 |
Robert S. Chamberlain | | | 0 | | | 0 | | | 0 | | | 0 |
Bernee D.L. Strom | | | 12,500 | | | 6,250 | | | 12,500 | | | 6,250 |
Mary Jesse | | | 0 | | | 0 | | | 0 | | | 0 |
Richard Karp | | | 0 | | | 0 | | | 0 | | | 0 |
(1) | Pursuant to their respective employment agreements, all of Mr. Derrickson’s and Ms. Wynne’s outstanding options vest immediately prior to a change of control of BSQR. However, Mr. Derrickson only holds Out of the Money Options. |
Name of Executive Officer or Director | | | Number of Shares Subject to Company RSUs (#) | | | Cash Consideration for Company RSUs ($) | | | Number of Shares Subject to Company PSUs (#) | | | Cash Consideration for Company PSUs ($) | | | Aggregate Cash Consideration ($) |
Officers | | | | | | | | | | | |||||
Ralph C. Derrickson (and director) | | | 0 | | | 0 | | | 250,000(1) | | | 0(1) | | | 0 |
Cheryl A. Wynne | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 |
Directors | | | | | | | | | | | |||||
Ryan L.Vardeman | | | 17,307 | | | 0(2) | | | 0 | | | 0 | | | 0 |
Robert S. Chamberlain | | | 11,538 | | | 0(2) | | | 0 | | | 0 | | | 0 |
Bernee D.L. Strom | | | 11,538 | | | 0(2) | | | 0 | | | 0 | | | 0 |
Mary Jesse | | | 11,538 | | | 0(2) | | | 0 | | | 0 | | | 0 |
Richard Karp | | | 11,538 | | | 0(2) | | | 0 | | | 0 | | | 0 |
(1) | The Company PSUs vest only upon satisfaction of minimum price and service requirements. The minimum price condition is higher than the Offer Price, so the Company PSUs will remain unvested and will not receive any cash consideration as a result of the Merger. |
(2) | The Company RSUs vest in equal tranches on December 15, 2023, March 15, 2024 and June 15, 2024, and unvested Company RSUs are cancelled. |
ITEM 4. | THE SOLICITATION OR RECOMMENDATION |
• | Operate the Company at a positive operating basis for 2023, ideally growing revenue and not using any cash during the year to fund operations. |
• | By June 30, 2023, identify a potential business opportunity or identify potential buyers for all or a portion of the Company. |
• | By September 30, 2023, complete one of the following: (i) the sale of all or a portion of the Company; (ii) an acquisition in pursuit of a new business opportunity; or (iii) an orderly wind-down and liquidation of the Company. |
• | Business, Financial Condition and Prospects. The all-cash consideration of $1.90 per Share, taking into account the Board’s familiarity with the business, operations, prospects, competitive environment, strategic and short- and long-term operating plans, assets, liabilities and financial condition of the Company, is more favorable to the Company’s shareholders than the potential value that could reasonably be expected to be generated from the alternative of the Company continuing to operate independently and pursuing its current business and financial plans on a standalone basis, taking into account the execution risks associated with continued independence; |
• | Implied Premium. The current and recent market prices of the Shares, including the market performance of the Shares relative to those of other participants in the Company’s industry and general market indices, and the fact that the Offer Price of $1.90 per Share represents a compelling premium to historical market prices of the Shares, including a 62% premium to the trailing 52-week volume weighted average of BSQR’s closing stock prices as of October 10, 2023; |
• | Cash Consideration; Certainty of Value. The BSQR Board considered that the Offer Price and the Merger Consideration are all-cash, so that the proposed Transactions would provide certainty, immediate value, and liquidity to the Company’s shareholders for their Shares, especially when viewed against any internal or external risks and uncertainties associated with the Company’s standalone strategy or the financial markets generally; |
• | Tender Offer Structure; Timing of Completion. The anticipated timing of the consummation of the Transactions, and the structure of the Transactions as a cash tender offer for all outstanding Shares followed by a merger to be effected pursuant to Section 23B.11.030(9) of the WBCA and the potential for closing in a relatively short timeframe could reduce the amount of time in which the Company’s business would be subject to the potential uncertainty of closing and related disruption; |
• | Strategic Alternatives. The belief of the Board, after a thorough review of possible strategic alternatives reasonably available to the Company (including continuing to operate on a standalone basis), in each case taking into account the potential benefits, risks and uncertainties associated with those alternatives, that the Offer and the Merger represent the Company’s best reasonably available prospect for maximizing shareholder value; |
• | Certain Management Projections. The Company’s operating and financial performance and its prospects, including the Management Projections (as defined below), which reflect an application of various assumptions of the Company’s senior management and consideration of the inherent uncertainty of achieving the Management Projections and that, as a result, the Company’s actual financial results in future periods could differ materially from the Management Projections; For further discussion, see “— Certain Financial Projections;” and |
• | TeleHill Analysis and Opinion. The written opinion prepared by TeleHill and delivered to the Board, dated October 8, 2023, with respect to the fairness, from a financial point of view, of the Offer Price of $1.90 per Share to be received by the holders of Shares (other than the Excluded Shares) in the Transactions pursuant to the Merger Agreement, as of October 11, 2023, based upon and subject to the procedures followed, assumptions made, matters considered, qualifications and limitations on the review undertaken by TeleHill in preparing its opinion (the “Opinion”), as further described in the section entitled “Opinion of BSQR’s Financial Advisor.” |
• | Opportunity Costs. The fact that the Company will no longer exist as an independent public company and the Company’s shareholders will forego any future increase in its value as an independent public company that might result from its possible growth due to operational improvements, strategic initiatives or otherwise; |
• | Potential Negative Impact on the Company’s Business. The possible negative effect of the Transactions and public announcement of the Transactions on the Company’s financial performance and operating results and the Company’s relationships with suppliers, vendors, other business partners, management and employees; |
• | Interim Restrictions on Business Pending Completion of the Offer. The fact that the Merger Agreement imposes restrictions on the conduct of the Company’s business in the pre-closing period, which may adversely affect the Company’s business, including by delaying or preventing the Company from pursuing non-ordinary course opportunities that may arise or precluding actions that would be advisable if the Company were to remain an independent company; |
• | Termination Fee. The fact that, upon termination of the Merger Agreement under specified circumstances, the Company may be required to pay to Parent a termination fee in the amount of $1,250,000; |
• | Litigation. The risk of litigation in connection with the Offer or the Merger; |
• | Transaction Expenses. The substantial transaction expenses to be incurred and the negative impact of such expenses on the Company’s cash reserves and operating results should the Transactions not be completed; and |
• | Interests of Insiders. The interests that certain directors and executive officers of the Company may have with respect to the Transactions that may be different from, or in addition to, their interests as shareholders of the Company or the interests of the Company’s other shareholders generally; and |
• | Regulatory Approval and Risks of Pending Actions. The risks associated with the receipt of clearance, approval or consent under any applicable antitrust or merger control laws, as well as the fact that the obligation of Merger Sub to accept for payment and pay for Shares tendered pursuant to the Offer is subject to a condition that there be no pending legal proceeding by any governmental body challenging or seeking to prohibit the Offer or the Merger or to impose restrictions or limitations on the parties relating to their conduct of business or ownership of assets. |
| | Historical | | | Company Forecast | | | | | | | | | |||||||||||
| | 2021 | | | 2022 | | | 2023 | | | 2024 | | | 2025 | | | 2026 | | | 2027 | | | 2028 | |
Total Revenue | | | $40,367 | | | $36,487 | | | $31,004 | | | $26,757 | | | $23,224 | | | $20,195 | | | $17,623 | | | $15,438 |
Gross Profit % Margin | | | $5,415 | | | $5,453 | | | $4,980 | | | $4,086 | | | $3,546 | | | $3,061 | | | $2,611 | | | $2,218 |
| 13.4% | | | 14.9% | | | 16.1% | | | 15.3% | | | 15.3% | | | 15.2% | | | 14.8% | | | 14.4% | ||
Operating Loss % Margin | | | ($3,892) | | | ($4,266) | | | ($1,968) | | | ($196) | | | ($847) | | | ($1,223) | | | ($1,682) | | | ($2,012) |
| (9.6%) | | | (11.7%) | | | (6.3%) | | | (0.7%) | | | (3.6%) | | | (6.1%) | | | (9.5%) | | | (13.0%) | ||
Net (Loss) Income | | | ($2,242) | | | ($3,858) | | | ($390) | | | $1,439 | | | $771 | | | $378 | | | ($174) | | | ($631) |
• | Reviewed the draft Merger Agreement dated October 6, 2023, which, for purposes of the Opinion, TeleHill assumed to be identical in all material respects to the document to be executed. |
• | Reviewed certain financial and other information about BSQR that was publicly available. |
• | Reviewed information furnished to TeleHill by BSQR’s management, including certain internal financial analyses, budgets, reports and other information. |
• | Held discussions with various members of BSQR’s senior management concerning historical and current operations, financial conditions and prospects, including recent financial performance. |
• | Reviewed the recent share trading price history of BSQR. |
• | Reviewed the valuation of BSQR implied by the Offer Price. |
• | Reviewed the valuations of publicly traded companies that it deemed comparable in certain respects to BSQR. |
• | Reviewed the financial terms of selected acquisition transactions involving companies in lines of business that it deemed comparable in certain respects to the business of BSQR. |
• | Reviewed the premiums paid in selected acquisition transactions. |
• | Prepared a discounted cash flow analysis of certain businesses of BSQR on a stand-alone basis. |
• | Prepared a liquidation analysis of BSQR that assumed a winding down of all business operations and the distribution of BSQR’s remaining cash assets to shareholders. |
Key Statistics for Full Public Comparable Group | | | Partner Solutions | | | Edge-to-Cloud | | | Forest |
Median Market Capitalization | | | $4.5 billion | | | $122.5 million | | | $23 million |
3-Month Average Daily Trading Volume ($) | | | $73.5 million | | | $129.1 million | | | $34.2 thousand |
Median LTM Revenue | | | $3.8 billion | | | $172 million | | | $31 million |
Key Statistics for Full Public Comparable Group | | | Partner Solutions | | | Edge-to-Cloud | | | Forest |
Median LTM EBITDA Margin | | | 4.8% | | | 5.6% | | | -9.8% |
Median LTM Revenue Growth | | | -0.4% | | | 2.9% | | | -11.1% |
Date | | | Segment | | | Target | | | Buyer | | | Description | | | Implied EV ($M) | | | EV/Revenue |
22-Mar-21 | | | Partner Solutions | | | Tech Data Corporation | | | TD Synnex Corporation | | | Distributor of information technology products intended to serve value-added resellers, direct marketers, retailers and corporate resellers. | | | $7,241 | | | 0.2x |
09-Dec-20 | | | Partner Solutions | | | Ingram Micro Inc. | | | Platinum Equity, LLC | | | Distributes IT hardware and software for businesses globally. Also provides supply chain management, technology repair, reverse logistics and e-commerce fulfillment BPO services. | | | $7,200 | | | 0.1x |
09-Aug-23 | | | Edge to Cloud | | | Computer Task Group, Inc. | | | Cegeka NV | | | Provides IT and digital transformation services for business globally. | | | $169 | | | 0.6x |
03-Jul-23 | | | Edge to Cloud | | | Telit Cinterion | | | Kontron AG | | | Manufacturer of cellular internet of things (IoT) products intended to serve the payment systems, energy, e-health and security segments and end markets. | | | $27 | | | 0.2x |
| | | | | | | | | | Weighted Median | | | 0.17x | |||||
| | | | | | | | | | Weighted Mean | | | 0.17x |
| | 1 Trading Day | | | 5 Trading Days | | | 30 Trading Days | |
Average Premium | | | 59% | | | 61% | | | 62% |
Median Premium | | | 49% | | | 46% | | | 50% |
ITEM 5. | PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED |
ITEM 6. | INTEREST IN SECURITIES OF THE SUBJECT COMPANY |
ITEM 7. | PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS |
• | a tender offer or other acquisition of BSQR’s securities by BSQR, any of its subsidiaries, or any other person; |
• | any extraordinary transaction, such as a merger, reorganization or liquidation, involving BSQR or any of its subsidiaries; |
• | any purchase, sale or transfer of a material amount of assets of BSQR or any of its subsidiaries; or |
• | any material change in the present dividend rate or policy, or indebtedness or capitalization of BSQR. |
ITEM 8. | ADDITIONAL INFORMATION |
Name(1) | | | Cash ($) | | | Equity ($) | | | Perquisites/ Benefits ($)(5) | | | Total ($) |
Ralph C. Derrickson(1) | | | 683,807(1) | | | 76,000(3) | | | 10,800 | | | 770,607 |
Christopher Wheaton(2) | | | 150,000(2) | | | —(4) | | | 4,400 | | | 154,400(6) |
(1) | Mr. Derrickson’s employment agreement provides for severance benefits in the event that, within twelve months following a “change of control,” Mr. Derrickson’s employment is terminated when neither “cause” nor “long term disability” exists or he terminates his employment for “good reason” (each as defined in his agreement). Mr. Derrickson’s severance benefits include: a lump sum payment of 12 months of his then-effective annual base salary (currently $345,000) and a lump sum payment of 100% of his target bonus (assumed to be 50% of his base salary as contemplated in his employment agreement, currently $172,500). As his 2023 annual performance bonus, Mr. Derrickson is also entitled to $166,307 tied to the successful consummation of the Merger, as was approved by the Compensation Committee of the Board. |
(2) | Christopher Wheaton resigned as Chief Financial Officer in February 2023. Accordingly, he will not receive any payment from the Company. Mr. Wheaton’s employment agreement provided for severance benefits in the event that, within twelve months following a “change of control,” Mr. Wheaton’s employment was terminated when neither “cause” nor “long term disability” exists or he terminated his employment for “good reason” (each as defined in his agreement). Mr. Wheaton’s severance benefits included: a lump sum payment of 6 months of his then-effective annual base salary and a lump sum payment of 100% of his target bonus. The amount reflected in this column reflects for illustrative purposes only the amount that Mr. Wheaton would have been entitled to pursuant to his agreement, which consists of a lump sum severance payment of $150,000, reflecting 6 months of his then-effective annual base salary. For the purposes of any potential severance payment, the Compensation Committee did not set a target annual bonus for Mr. Wheaton. |
(3) | Consists of 40,000 Shares held by Mr. Derrickson. The Company PSUs held by Mr. Derrickson vest only upon satisfaction of minimum price and service requirements. The minimum price condition is higher than the Offer Price, so the Company PSUs will remain unvested and will not receive any cash consideration as a result of the Merger. |
(4) | As of the most recent practicable date, we are unable to determine whether Mr. Wheaton owns any Shares. Ms. Wynne currently holds 45,000 In the Money Options with a value of $21,150 based on the Offer Price. |
(5) | Reflects the estimated continued COBRA coverage at BSQR’s expense for a period of twelve months with respect to Mr. Derrickson and six months with respect to Mr. Wheaton and Ms. Wynne, which each is entitled to as part of their severance pursuant to the terms of their respective employment agreement in the event of a “change of control”. |
(6) | The total for Ms. Wynne is $261,150. |
ITEM 9. | EXHIBITS |
Exhibit No. | | | Description |
| | Offer to Purchase, dated October 24, 2023 (incorporated herein by reference to Exhibit (a)(1)(A) to the Schedule TO). | |
| | Letter of Transmittal (incorporated herein by reference to Exhibit (a)(1)(B) to the Schedule TO). | |
| | Notice of Guaranteed Delivery (incorporated herein by reference to Exhibit (a)(1)(C) to the Schedule TO). | |
| | Letter from the Information Agent to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (incorporated herein by reference to Exhibit (a)(1)(D) to the Schedule TO). | |
| | Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (incorporated herein by reference to Exhibit (a)(1)(E) to the Schedule TO). | |
| | Summary Advertisement as published in The New York Times on October 24, 2023 (incorporated herein by reference to Exhibit (a)(1)(F) to the Schedule TO). | |
| | Joint Press release issued by the Company and Kontron on October 11, 2023 (incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K filed by the Company on October 11, 2023). | |
| | Opinion of Telegraph Hill BD LLC, dated October 8, 2023 (included as Annex I to this Schedule 14D-9). | |
| | Email from Ralph Derrickson, the President & Chief Executive Officer of the Company, to all employees (incorporated herein by reference to Exhibit 99.4 to the Schedule 14D-9C filed by BSQR with the SEC on October 11, 2023). | |
| | Internal Communication / Employee FAQs, (incorporated herein by reference to Exhibit 99.3 to the Schedule 14D-9C filed by BSQR with the SEC on October 11, 2023). | |
| | Agreement and Plan of Merger, dated as of October 11, 2023, by and among the Company, Kontron and Merger Sub (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on October 11, 2023). | |
| | Tender and Support Agreement, dated October 11, 2023, by and among Kontron, Merger Sub, and each of the persons set forth on Schedule A thereto (incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on October 11, 2023). | |
| | Confidentiality Agreement, effective June 12, 2023, by and between the Company and Kontron AG (incorporated herein by reference to Exhibit (d)(2) to the Schedule TO). | |
| | Fourth Amended and Restated Stock Plan, as amended (incorporated by reference to Exhibit 4.1 to the Form S-8 filed by the Company with the Securities and Exchange Commission on August 8, 2017). | |
| | Form of Stock Option Agreement (incorporated by reference to Exhibit 10.19(a) to the Quarterly Report on Form 10-Q filed by the Company with the Securities and Exchange Commission on August 9, 2012). | |
| | Form of Restricted Stock Grant Agreement (incorporated by reference to Exhibit 10.19(b) to the Quarterly Report on Form 10-Q filed by the Company with the Securities and Exchange Commission on August 9, 2012). | |
| | Form of Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.19(c) to the Quarterly Report on Form 10-Q filed by the Company with the Securities and Exchange Commission on August 9, 2012). | |
| | 2011 Inducement Award Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by the Company with the Securities and Exchange Commission on November 10, 2011). | |
| | Form of Stock Option Agreement under the 2011 Inducement Award Plan (incorporated by reference to Exhibit 10.1(a) to the Quarterly Report on Form 10-Q filed by the Company with the Securities and Exchange Commission on November 10, 2011). | |
| | Form of Restricted Stock Unit Agreement under the 2011 Inducement Award Plan (incorporated by reference to Exhibit 10.2(b)(1) to the Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission on February 19, 2015). | |
| | Executive Bonus Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on March 20, 2020). | |
| |
Exhibit No. | | | Description |
| | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.3 to the Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission on February 21, 2017). | |
| | ||
| | Employment letter agreement with Ralph Derrickson dated February 4, 2019 (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission on February 25, 2020). | |
| | ||
| | Continuing Offer Letter between the Company and Ms. Cheryl Wynne (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on January 31, 2023). | |
| | ||
| | Board Observer Agreement with Palogic Value Fund, L.P, Palogic Value Management, L.P. and Palogic Capital Management, LLC dated June 25, 2018 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on June 26, 2018). |
* | Filed herewith. |
Dated: October 24, 2023 | | | ||||
| | | | |||
| | BSQUARE CORPORATION | ||||
| | | | |||
| | By: | | | /s/ Cheryl A. Wynne | |
| | Name: | | | Cheryl A. Wynne | |
| | Title: | | | Chief Financial Officer |
• | Reviewed the draft Merger Agreement dated October 6, 2023, which, for purposes of this opinion, we have assumed to be identical in all material respects to the document to be executed. |
• | Reviewed certain financial and other information about the Company that was publicly available. |
• | Reviewed information furnished to us by the Company’s management, including certain internal financial analyses, budgets, reports and other information. |
• | Held discussions with various members of senior management of the Company concerning historical and current operations, financial conditions and prospects, including recent financial performance. |
• | Reviewed the recent share trading price history of the Company. |
• | Reviewed the valuation of the Company implied by the Consideration. |
• | Reviewed the valuations of publicly traded companies that we deemed comparable in certain respects to the Company. |
• | Reviewed the financial terms of selected acquisition transactions involving companies in lines of business that we deemed comparable in certain respects to the business of the Company. |
• | Reviewed the premiums paid in selected acquisition transactions. |
• | Prepared a discounted cash flow analysis of certain businesses of the Company on a stand-alone basis. |
• | Prepared a liquidation analysis of the Company that assumed a winding down of all business operations and the distribution of the Company’s remaining cash assets to shareholders. |
• | In addition, we have conducted such other quantitative reviews, analyses and inquiries relating to the Company as we considered appropriate in rendering this opinion. |
• | During the course of our engagement, we were asked by the Company’s Board of Directors to solicit indications of interest from various third parties regarding a potential transaction with the Company and participated in negotiations with respect to the terms of the Transaction, and we have considered the results of such solicitation and negotiation in rendering our opinion herein. |
Telegraph Hill Advisors BD LLC | | | ||||
| ||||||
By: | | | /s/ Phillip B. Courten | | ||
| | Phillip B. Courten | | | ||
| | Managing Director | | |
23B.13.010 | | | Definitions. |
23B.13.020 | | | Right to dissent. |
23B.13.030 | | | Dissent by nominees and beneficial owners. |
23B.13.200 | | | Notice of dissenters’ rights. |
23B.13.210 | | | Notice of intent to demand payment. |
23B.13.220 | | | Dissenters’ rights—Notice. |
23B.13.230 | | | Duty to demand payment. |
23B.13.240 | | | Share restrictions. |
23B.13.250 | | | Payment. |
23B.13.260 | | | Failure to take corporate action. |
23B.13.270 | | | After-acquired shares. |
23B.13.280 | | | Procedure if shareholder dissatisfied with payment or offer. |
23B.13.300 | | | Court action. |
23B.13.310 | | | Court costs and counsel fees. |
(1) | “Corporation” means the issuer of the shares held by a dissenter before the corporate action, or the surviving or acquiring corporation by merger or share exchange of that issuer. |
(2) | “Dissenter” means a shareholder who is entitled to dissent from corporate action under RCW 23B.13.020 and who exercises that right when and in the manner required by RCW 23B.13.200 through 23B.13.280. |
(3) | “Fair value,” with respect to a dissenter’s shares, means the value of the shares immediately before the effective date of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable. |
(4) | “Interest” means interest from the effective date of the corporate action until the date of payment, at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under all the circumstances. |
(5) | “Record shareholder” means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation. |
(6) | “Beneficial shareholder” means the person who is a beneficial owner of shares held in a voting trust or by a nominee as the record shareholder. |
(7) | “Shareholder” means the record shareholder or the beneficial shareholder. |
(1) | A shareholder is entitled to dissent from, and obtain payment of the fair value of the shareholder’s shares in the event of, any of the following corporate actions: |
(a) | A plan of merger, which has become effective, to which the corporation is a party (i) if shareholder approval was required for the merger by RCW 23B.11.030, 23B.11.080, or the articles of incorporation, or would have been required but for the provisions of RCW 23B.11.030(9), and the shareholder was, or but for the provisions of RCW 23B.11.030(9) would have been, entitled to vote on the merger, or (ii) if the corporation was a subsidiary and the plan of merger provided for the merger of the subsidiary with its parent under RCW 23B.11.040; |
(b) | A plan of share exchange, which has become effective, to which the corporation is a party as the corporation whose shares have been acquired, if the shareholder was entitled to vote on the plan; |
(c) | A sale, lease, exchange, or other disposition, which has become effective, of all, or substantially all, of the property and assets of the corporation other than in the usual and regular course of business, if the shareholder was entitled to vote on the sale, lease, exchange, or other disposition, including a disposition in dissolution, but not including a disposition pursuant to court order or a disposition for cash pursuant to a plan by which all or substantially all of the net proceeds of the disposition will be distributed to the shareholders within one year after the date of the disposition; |
(d) | An amendment of the articles of incorporation, whether or not the shareholder was entitled to vote on the amendment, if the amendment effects a redemption or cancellation of all of the shareholder’s shares in exchange for cash or other consideration other than shares of the corporation; |
(e) | Any action described in RCW 23B.25.120; |
(f) | Any corporate action approved pursuant to a shareholder vote to the extent the articles of incorporation, bylaws, or a resolution of the board of directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares; or |
(g) | A plan of entity conversion in the case of a conversion of a domestic corporation to a foreign corporation, which has become effective, to which the domestic corporation is a party as the converting entity, if: (i) The shareholder was entitled to vote on the plan; and (ii) the shareholder does not receive shares in the surviving entity that have terms as favorable to the shareholder in all material respects and that represent at least the same percentage interest of the total voting rights of the outstanding shares of the surviving entity as the shares held by the shareholder before the conversion. |
(2) | A shareholder entitled to dissent and obtain payment for the shareholder’s shares under this chapter may not challenge the corporate action creating the shareholder’s entitlement unless the action fails to comply with the procedural requirements imposed by this title, RCW 25.10.831 through 25.10.886, the articles of incorporation, or the bylaws, or is fraudulent with respect to the shareholder or the corporation. |
(3) | The right of a dissenting shareholder to obtain payment of the fair value of the shareholder’s shares shall terminate upon the occurrence of any one of the following events: |
(a) | The proposed corporate action is abandoned or rescinded; |
(b) | A court having jurisdiction permanently enjoins or sets aside the corporate action; or |
(c) | The shareholder’s demand for payment is withdrawn with the written consent of the corporation. |
(1) | A record shareholder may assert dissenters’ rights as to fewer than all the shares registered in the shareholder’s name only if the shareholder dissents with respect to all shares beneficially owned by any one person and delivers to the corporation a notice of the name and address of each person on whose behalf the shareholder asserts dissenters’ rights. The rights of a partial dissenter under this subsection are determined as if the shares as to which the dissenter dissents and the dissenter’s other shares were registered in the names of different shareholders. |
(2) | A beneficial shareholder may assert dissenters’ rights as to shares held on the beneficial shareholder’s behalf only if: |
(a) | The beneficial shareholder delivers to the corporation the record shareholder’s executed written consent to the dissent not later than the time the beneficial shareholder asserts dissenters’ rights; and |
(b) | The beneficial shareholder does so with respect to all shares of which such shareholder is the beneficial shareholder or over which such shareholder has power to direct the vote. |
(1) | If proposed corporate action creating dissenters’ rights under RCW 23B.13.020 is submitted for approval by a vote at a shareholders’ meeting, the meeting notice must state that shareholders are or may be entitled to assert dissenters’ rights under this chapter and be accompanied by a copy of this chapter. |
(2) | If proposed corporate action creating dissenters’ rights under RCW 23B.13.020 would be submitted for approval by a vote at a shareholders’ meeting but for the provisions of RCW 23B.11.030(9), the offer made pursuant to RCW 23B.11.030(9) must state that shareholders are or may be entitled to assert dissenters’ rights under this chapter and be accompanied by a copy of this chapter. |
(3) | If corporate action creating dissenters’ rights under RCW 23B.13.020 is submitted for approval without a vote of shareholders in accordance with RCW 23B.07.040, the shareholder consent described in RCW 23B.07.040(1)(b) and the notice described in RCW 23B.07.040(3)(a) must include a statement that shareholders are or may be entitled to assert dissenters’ rights under this chapter and be accompanied by a copy of this chapter. |
(1) | If proposed corporate action creating dissenters’ rights under RCW 23B.13.020 is submitted to a vote at a shareholders’ meeting, a shareholder who wishes to assert dissenters’ rights must (a) deliver to the corporation before the vote is taken written notice of the shareholder’s intent to demand payment for the shareholder’s shares if the proposed corporate action is effected, and (b) not vote such shares in favor of the proposed corporate action. |
(2) | If proposed corporate action creating dissenters’ rights under RCW 23B.13.020 does not require shareholder approval pursuant to RCW 23B.11.030(9), a shareholder who wishes to assert dissenters’ rights with respect to any class or series of shares: |
(a) | Shall deliver to the corporation before the shares are purchased pursuant to the offer under RCW 23B.11.030(9) written notice of the shareholder’s intent to demand payment for the shareholder’s shares if the proposed corporate action is effected; and |
(b) | Shall not tender, or cause to be tendered, any shares of such class or series in response to such offer. |
(3) | If proposed corporate action creating dissenters’ rights under RCW 23B.13.020 is submitted for approval without a vote of shareholders in accordance with RCW 23B.07.040, a shareholder who wishes to assert dissenters’ rights must not execute the consent or otherwise vote such shares in favor of the proposed corporate action. |
(4) | A shareholder who does not satisfy the requirements of subsection (1), (2), or (3) of this section is not entitled to payment for the shareholder’s shares under this chapter. |
(1) | If proposed corporate action creating dissenters’ rights under RCW 23B.13.020 is approved at a shareholders’ meeting, the corporation shall within ten days after the effective date of the corporate action deliver to all shareholders who satisfied the requirements of RCW 23B.13.210(1) a notice in compliance with subsection (6) of this section. |
(2) | If proposed corporate action creating dissenters’ rights under RCW 23B.13.020 is approved without a vote of shareholders in accordance with RCW 23B.11.030(9), the corporation shall within 10 days after the effective date of the corporate action deliver to all shareholders who satisfied the requirements of RCW 23B.13.210(2) a notice in compliance with subsection (6) of this section. |
(3) | If proposed corporate action creating dissenters’ rights under RCW 23B.13.020 is approved without a vote of shareholders in accordance with RCW 23B.07.040, the notice delivered pursuant to RCW 23B.07.040(3)(b) to shareholders who satisfied the requirements of RCW 23B.13.210(3) shall comply with subsection (6) of this section. |
(4) | In the case of proposed corporate action creating dissenters’ rights under RCW 23B.13.020(1)(a)(ii), the corporation shall within ten days after the effective date of the corporate action deliver to all shareholders of the subsidiary other than the parent a notice in compliance with subsection (6) of this section. |
(5) | In the case of proposed corporate action creating dissenters’ rights under RCW 23B.13.020(1)(d) that, pursuant to RCW 23B.10.020(4)(b), is not required to be approved by the shareholders of the corporation, the corporation shall within ten days after the effective date of the corporate action deliver to all shareholders entitled to dissent under RCW 23B.13.020(1)(d) a notice in compliance with subsection (6) of this section. |
(6) | Any notice under subsection (1), (2), (3), (4), or (5) of this section must: |
(a) | State where the payment demand must be sent and where and when certificates for certificated shares must be deposited; |
(b) | Inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received; |
(c) | Supply a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action and requires that the person asserting dissenters’ rights certify whether or not the person acquired beneficial ownership of the shares before that date; |
(d) | Set a date by which the corporation must receive the payment demand, which date may not be fewer than thirty nor more than sixty days after the date the notice in subsection (1), (2), (3), (4), or (5) of this section is delivered; and |
(e) | Be accompanied by a copy of this chapter. |
(1) | A shareholder sent a notice described in RCW 23B.13.220 must demand payment, certify whether the shareholder acquired beneficial ownership of the shares before the date required to be set forth in the notice pursuant to RCW 23B.13.220(6)(c), and deposit the shareholder’s certificates, all in accordance with the terms of the notice. |
(2) | The shareholder who demands payment and deposits the shareholder’s share certificates under subsection (1) of this section retains all other rights of a shareholder until the proposed corporate action is effected. |
(3) | A shareholder who does not demand payment or deposit the shareholder’s share certificates where required, each by the date set in the notice, is not entitled to payment for the shareholder’s shares under this chapter. |
(1) | The corporation may restrict the transfer of uncertificated shares from the date the demand for payment under RCW 23B.13.230 is received until the proposed corporate action is effected or the restriction is released under RCW 23B.13.260. |
(2) | The person for whom dissenters’ rights are asserted as to uncertificated shares retains all other rights of a shareholder until the effective date of the proposed corporate action. |
(1) | Except as provided in RCW 23B.13.270, within thirty days of the later of the effective date of the proposed corporate action, or the date the payment demand is received, the corporation shall pay each dissenter who complied with RCW 23B.13.230 the amount the corporation estimates to be the fair value of the shareholder’s shares, plus accrued interest. |
(2) | The payment must be accompanied by: |
(a) | The corporation’s balance sheet as of the end of a fiscal year ending not more than sixteen months before the date of payment, an income statement for that year, a statement of changes in shareholders’ equity for that year, and the latest available interim financial statements, if any; |
(b) | An explanation of how the corporation estimated the fair value of the shares; |
(c) | An explanation of how the interest was calculated; |
(d) | A statement of the dissenter’s right to demand payment under RCW 23B.13.280; and |
(e) | A copy of this chapter. |
(1) | If the corporation does not effect the proposed corporate action within sixty days after the date set for demanding payment and depositing share certificates, the corporation shall return the deposited certificates and release any transfer restrictions imposed on uncertificated shares. |
(2) | If after returning deposited certificates and releasing transfer restrictions, the corporation wishes to effect the proposed corporate action, it must deliver a new dissenters’ notice under RCW 23B.13.220 and repeat the payment demand procedure. |
(1) | A corporation may elect to withhold payment required by RCW 23B.13.250 from a dissenter unless the dissenter was the beneficial owner of the shares before the date set forth in the dissenters’ notice as the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action. |
(2) | To the extent the corporation elects to withhold payment under subsection (1) of this section, after the effective date of the proposed corporate action, it shall estimate the fair value of the shares, plus accrued interest, and shall pay this amount to each dissenter who agrees to accept it in full satisfaction of the dissenter’s demand. The corporation shall deliver with its offer an explanation of how it estimated the fair value of the shares, an explanation of how the interest was calculated, and a statement of the dissenter’s right to demand payment under RCW 23B.13.280. |
(1) | A dissenter may deliver a notice to the corporation informing the corporation of the dissenter’s own estimate of the fair value of the dissenter’s shares and amount of interest due, and demand payment of the dissenter’s estimate, less any payment under RCW 23B.13.250, or reject the corporation’s offer under RCW 23B.13.270 and demand payment of the dissenter’s estimate of the fair value of the dissenter’s shares and interest due, if: |
(a) | The dissenter believes that the amount paid under RCW 23B.13.250 or offered under RCW 23B.13.270 is less than the fair value of the dissenter’s shares or that the interest due is incorrectly calculated; |
(b) | The corporation fails to make payment under RCW 23B.13.250 within sixty days after the date set for demanding payment; or |
(c) | The corporation does not effect the proposed corporate action and does not return the deposited certificates or release the transfer restrictions imposed on uncertificated shares within sixty days after the date set for demanding payment. |
(2) | A dissenter waives the right to demand payment under this section unless the dissenter notifies the corporation of the dissenter’s demand under subsection (1) of this section within thirty days after the corporation made or offered payment for the dissenter’s shares. |
(1) | If a demand for payment under RCW 23B.13.280 remains unsettled, the corporation shall commence a proceeding within sixty days after receiving the payment demand and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within the sixty-day period, it shall pay each dissenter whose demand remains unsettled the amount demanded. |
(2) | The corporation shall commence the proceeding in the superior court of the county where a corporation’s principal office, or, if none in this state, its registered office, is located. If the corporation is a foreign corporation without a registered office in this state, it shall commence the proceeding in the county in this state where the registered office of the domestic corporation merged with or whose shares were acquired by the foreign corporation was located. |
(3) | The corporation shall make all dissenters, whether or not residents of this state, whose demands remain unsettled, parties to the proceeding as in an action against their shares and all parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law. |
(4) | The corporation may join as a party to the proceeding any shareholder who claims to be a dissenter but who has not, in the opinion of the corporation, complied with the provisions of this chapter. If the court determines that such shareholder has not complied with the provisions of this chapter, the shareholder shall be dismissed as a party. |
(5) | The jurisdiction of the court in which the proceeding is commenced under subsection (2) of this section is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend decision on the question of fair value. The appraisers have the powers described in the order appointing them, or in any amendment to it. The dissenters are entitled to the same discovery rights as parties in other civil proceedings. |
(6) | Each dissenter made a party to the proceeding is entitled to judgment (a) for the amount, if any, by which the court finds the fair value of the dissenter’s shares, plus interest, exceeds the amount paid by the corporation, or (b) for the fair value, plus accrued interest, of the dissenter’s after-acquired shares for which the corporation elected to withhold payment under RCW 23B.13.270. |
(1) | The court in a proceeding commenced under RCW 23B.13.300 shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the costs against the corporation, except that the court may assess the costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment under RCW 23B.13.280. |
(2) | The court may also assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable: |
(a) | Against the corporation and in favor of any or all dissenters if the court finds the corporation did not substantially comply with the requirements of RCW 23B.13.200 through 23B.13.280; or |
(b) | Against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by chapter 23B.13 RCW. |
(3) | If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the corporation, the court may award to these counsel reasonable fees to be paid out of the amounts awarded the dissenters who were benefited. |
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