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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 5, 2000
BSQUARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
WASHINGTON 000-27687 91-165088
(STATE OF INCORPORATION) (COMMISSION (IRS EMPLOYER
FILE NUMBER) IDENTIFICATION NO.)
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3150 139TH AVENUE S.E., SUITE 500
BELLEVUE, WASHINGTON 98005
(425) 519-5900
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 5, 2000, BSQUARE Corporation, a Washington corporation (the
"Company"), BlueWater Systems, Inc., a Washington corporation ("BlueWater"), and
H20 Merger Corporation, a Washington corporation and wholly owned subsidiary of
BSQUARE ("Sub"), entered into an Agreement and Plan of Merger (the "Merger
Agreement"), a copy of which is attached hereto as Exhibit 2.1 and incorporated
by reference herein. Pursuant to the terms of the Merger Agreement, Sub was
merged (the "Merger") with and into BlueWater, with BlueWater surviving the
Merger and becoming a wholly owned subsidiary of BSQUARE. At the effective time
of the Merger (January 6, 2000), each share of BlueWater's Common Stock issued
and outstanding immediately prior to the effective time of the Merger ceased to
be outstanding and was converted into and exchanged for the right to receive
0.14343 shares of BSQUARE Common Stock (the "Exchange Ratio"). In addition, each
option to purchase shares of BlueWater Common Stock outstanding at the effective
time of the Merger was assumed by BSQUARE and will be treated as an option to
purchase that number of shares of BSQUARE Common Stock equal to the product of
the Exchange Ratio and the number of shares of BlueWater Common Stock subject to
such option.
It is the intention of BSQUARE and BlueWater that the Merger for federal
income tax purposes be tax-free to BlueWater's shareholders and for accounting
purposes qualified as a pooling of interests.
On January 6, 2000, BSQUARE issued a press release announcing the Merger,
which press release is attached hereto as Exhibit 99.1(a) and incorporated by
reference herein.
THE FOREGOING SUMMARY OF THE MERGER AGREEMENT IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL AGREEMENT WHICH IS ATTACHED HERETO AS AN EXHIBIT.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
No BlueWater financial statements are required to be filed with respect to
the Merger pursuant to Item 7(a) of Form 8-K.
(b) PRO FORMA FINANCIAL INFORMATION.
No pro forma financial information is required to be filed with respect to
the Merger pursuant to Item 7(b) of Form 8-K.
(c) EXHIBITS.
2.1 Agreement and Plan of Merger among BSQUARE Corporation, a Washington
corporation, BlueWater Systems, Inc., a Washington corporation, and
H20 Merger Corporation, a Washington corporation and wholly owned
subsidiary of BSQUARE, dated as of January 5, 2000.
99.1(a) Press release dated January 6, 2000 announcing the Merger.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BSQUARE CORPORATION
Date: January 18, 2000
By: /S/ BRIAN V. TURNER
--------------------------
Brian V. Turner
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger among BSQUARE Corporation, a Washington
corporation, BlueWater Systems, Inc., a Washington corporation, and H20
Merger Corporation, a Washington corporation and wholly owned
subsidiary of BSQUARE, dated as of January 5, 2000.
99.1(a) Press release dated January 6, 2000 announcing the Merger.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BSQUARE CORPORATION,
H2O MERGER CORPORATION
AND
BLUEWATER SYSTEMS, INC.
DATED AS OF JANUARY 5, 2000
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TABLE OF CONTENTS
Page
----
ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER....................................4
1.1 MERGER......................................................4
1.2 TIME AND PLACE OF CLOSING...................................4
1.3 EFFECTIVE TIME..............................................4
ARTICLE 2 TERMS OF MERGER.....................................................5
2.1 CHARTER.....................................................5
2.2 BYLAWS......................................................5
2.3 DIRECTORS AND OFFICERS......................................5
ARTICLE 3 MANNER OF CONVERTING SHARES.........................................5
3.1 CONVERSION OF SHARES........................................5
3.2 DISSENTING SHAREHOLDERS.....................................6
3.3 FRACTIONAL SHARES...........................................6
3.4 CONVERSION OF STOCK OPTIONS.................................6
ARTICLE 4 EXCHANGE OF SHARES..................................................7
4.1 EXCHANGE PROCEDURES.........................................7
4.2 RIGHTS OF FORMER BLUEWATER SHAREHOLDERS.....................8
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BlueWater.........................8
5.1 ORGANIZATION, STANDING, AND POWER...........................8
5.2 AUTHORITY; NO BREACH BY AGREEMENT...........................9
5.3 CAPITAL STOCK..............................................10
5.4 BLUEWATER SUBSIDIARIES.....................................10
5.5 FINANCIAL STATEMENTS.......................................11
5.6 ABSENCE OF UNDISCLOSED LIABILITIES.........................11
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.......................11
5.8 INSURANCE..................................................12
5.9 TAX MATTERS................................................12
5.10 REAL PROPERTY..............................................14
5.11 ASSETS.....................................................15
5.12 INTELLECTUAL PROPERTY......................................15
5.13 ENVIRONMENTAL MATTERS......................................17
5.14 COMPLIANCE WITH LAWS.......................................17
5.15 LABOR RELATIONS............................................18
5.16 EMPLOYEE BENEFIT PLANS.....................................18
5.17 MATERIAL CONTRACTS.........................................19
5.18 LEGAL PROCEEDINGS..........................................20
5.19 STATEMENTS TRUE AND CORRECT................................20
5.20 ACCOUNTING AND TAX MATTERS.................................20
5.21 STATE TAKEOVER LAWS........................................21
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5.22 TRANSACTIONS AND AFFILIATES................................21
5.23 FEES AND EXPENSES OF BROKERS AND OTHERS....................21
5.24 YEAR 2000 COMPLIANCE.......................................21
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BSQUARE..........................22
6.1 ORGANIZATION, STANDING, AND POWER..........................22
6.2 AUTHORITY; NO BREACH BY AGREEMENT..........................22
6.3 CAPITAL STOCK..............................................23
6.4 BSQUARE SUBSIDIARIES.......................................23
6.5 SEC FILINGS; FINANCIAL STATEMENTS..........................24
6.6 ABSENCE OF UNDISCLOSED LIABILITIES.........................24
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.......................24
6.8 STATEMENTS TRUE AND CORRECT................................25
6.9 AUTHORITY OF MERGER CORPORATION............................25
6.10 ACCOUNTING AND TAX MATTERS.................................25
ARTICLE 7 ADDITIONAL AGREEMENTS..............................................25
7.1 FILINGS WITH STATE OFFICES.................................25
7.2 ACCOUNTING AND TAX TREATMENT...............................25
7.3 STATE TAKEOVER LAWS........................................26
7.4 EMPLOYEE BENEFITS AND CONTRACTS............................26
7.5 INDEMNIFICATION, EXCULPATION AND INSURANCE.................26
7.6 EXCHANGE LISTING...........................................26
7.7 AGREEMENT OF AFFILIATES....................................27
7.8 REGISTRATION RIGHTS........................................27
ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE..................27
8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY....................27
8.2 CONDITIONS TO OBLIGATIONS OF BSQUARE.......................28
ARTICLE 9 MISCELLANEOUS......................................................28
9.1 DEFINITIONS................................................28
9.2 EXPENSES...................................................34
9.3 ENTIRE AGREEMENT...........................................35
9.4 AMENDMENTS.................................................35
9.5 WAIVERS....................................................35
9.6 ASSIGNMENT.................................................36
9.7 NOTICES....................................................36
9.8 GOVERNING LAW..............................................36
9.9 COUNTERPARTS...............................................36
9.10 CAPTIONS; ARTICLES AND SECTIONS............................36
9.11 INTERPRETATIONS............................................37
9.12 ENFORCEMENT OF AGREEMENT...................................37
9.13 SEVERABILITY...............................................37
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LIST OF EXHIBITS
EXHIBIT NUMBER DESCRIPTION
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1 Plan of Merger
2 Affiliate Agreement
3 Registration Rights Agreement
4 Form of Legal Opinion
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of January 5, 2000, by and among BSQUARE CORPORATION, a
Washington corporation ("BSQUARE"); H20 MERGER CORPORATION, a Washington
corporation ("Merger Corporation"); and BLUEWATER SYSTEMS, INC., a Washington
corporation ("BlueWater").
PREAMBLE
The Boards of Directors of BlueWater, Merger Corporation and BSQUARE
each have adopted this Agreement, approved the Merger (as defined herein) and
the other transactions contemplated herein and determined that the Merger and
such other transactions are in the best interests of their respective companies
and shareholders. This Agreement provides for the Merger of Merger Corporation
with and into BlueWater upon the terms and conditions set forth herein and in
the Plan of Merger, which is incorporated herein and made a part of this
Agreement by reference. At the effective time of the Merger, the outstanding
shares of the capital stock of BlueWater shall be converted into the right to
receive shares of the common stock of BSQUARE (except as provided herein). As a
result, shareholders of BlueWater shall become shareholders of BSQUARE and
BlueWater shall continue to conduct its business and operations as a
wholly-owned subsidiary of BSQUARE. It is the intention of the parties to this
Agreement that the Merger for federal income tax purposes shall qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code, and for accounting purposes shall qualify for treatment as a pooling of
interests.
Certain terms used in this Agreement are defined in Section 10.1 of
this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions set forth in this
Agreement, which incorporates by reference the Plan of Merger included as
Exhibit 1 hereto, and the terms and conditions set forth therein, at the
Effective Time (as defined in Section 1.3), Merger Corporation shall be merged
with and into BlueWater in accordance with the provisions of, and with the
effect provided in, Chapter 23B.11 of the WBCA (the "Merger"). BlueWater shall
be the Surviving Corporation resulting from the Merger and shall become a
wholly-owned Subsidiary of BSQUARE and shall continue to be governed by the Laws
of the State of Washington.
1.2 TIME AND PLACE OF CLOSING. The closing of the Merger (the "Closing")
will take place simultaneously with the execution of this Agreement, or at such
other time as the Parties, acting through their authorized officers, may
mutually agree. The Closing shall be held at such location as may be mutually
agreed upon by the Parties.
1.3 EFFECTIVE TIME. Subject to the provisions of this Agreement, as soon as
practicable on the Closing Date, the parties shall file the Articles of Merger
executed in accordance with the
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relevant provisions of the WBCA and shall make all other filings or recordings
required under the WBCA. The Merger shall become effective on the date and at
the time the Articles of Merger shall become effective with the Secretary of
State of the State of Washington, or such other date and time as mutually agreed
upon in writing by the authorized officers of each Party (the "Effective Time").
ARTICLE 2
TERMS OF MERGER
2.1 CHARTER. The Articles of Incorporation of BlueWater in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
of the Surviving Corporation, except that Article 2 of BlueWater's Articles of
Incorporation will be amended by deleting it in its entirety and replacing it
with the following: "Article II--Authorized Capital Stock--the Corporation shall
be authorized to issue 1,000 shares of common stock, without par value."
2.2 BYLAWS. The Bylaws of BlueWater in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until otherwise
amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of Merger Corporation in office
immediately prior to the Effective Time shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation, until such time as new directors are duly
elected by BSQUARE, as the sole shareholder of the Surviving Corporation, after
the Effective Time. The officers of Merger Corporation in office immediately
prior to the Effective Time shall serve as the officers of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation, unless and until the directors of the Surviving
Corporation shall elect in their sole discretion to remove any such officers
from office and/or appoint additional officers.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of BSQUARE, BlueWater, Merger Corporation or the shareholders of any of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of Merger Corporation Common Stock issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into one share of common stock of the
Surviving Corporation.
(b) Each share of BlueWater Common Stock (including shares of Common
Stock issued upon conversion of any outstanding BlueWater Preferred Stock, but
excluding shares held by shareholders who perfect their statutory dissenters'
rights as provided in Section 3.2) issued and outstanding immediately prior to
the Effective Time shall cease to be outstanding and shall be converted into and
exchanged for the right to receive 0.14343 shares of BSQUARE Common Stock (the
"Exchange Ratio").
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3.2 DISSENTING SHAREHOLDERS. Any holder of shares of BlueWater Common Stock
who perfects his dissenters' rights in accordance with and as contemplated by
Chapter 23B.13 of the WBCA shall be entitled to receive the fair value of such
shares (plus accrued interest) in cash as determined pursuant to such provision
of Law; provided, that no such payment shall be made to any dissenting
shareholder unless and until such dissenting shareholder has complied with the
applicable provisions of the WBCA and surrendered to BlueWater the certificate
or certificates representing the shares for which payment is being made. In the
event that after the Effective Time a dissenting shareholder of BlueWater fails
to perfect, or effectively withdraws or loses, his right to receive payment for
his shares pursuant to Chapter 23B.13 of the WBCA, BSQUARE shall issue and
deliver the consideration to which such holder of shares of BlueWater Common
Stock would have received under this Article 3 (without interest) upon surrender
by such holder of the certificate or certificates representing shares of
BlueWater Common Stock held by him.
3.3 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of BlueWater Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of BSQUARE Common Stock (after taking into account all shares of BSQUARE
Common Stock that would otherwise be issuable to such holder upon conversion
pursuant to Section 3.1(b)) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of BSQUARE
Common Stock multiplied by the market value of one share of BSQUARE Common Stock
at the Effective Time. The market value of one share of BSQUARE Common Stock at
the Effective Time shall be the closing price of such common stock on The Nasdaq
Stock Market's National Market (as reported by The Wall Street Journal or, if
not reported thereby, any other authoritative source selected by BSQUARE) on the
last trading day preceding the Effective Time. No such holder will be entitled
to dividends, voting rights, or any other rights as a shareholder in respect of
any fractional shares.
3.4 CONVERSION OF STOCK OPTIONS.
(a) At the Effective Time, each option or other right to purchase
shares of BlueWater Common Stock pursuant to stock options ("BlueWater Options")
granted by BlueWater under the BlueWater Stock Plans, which is outstanding at
the Effective Time, whether or not exercisable, shall be converted into and
become rights with respect to BSQUARE Common Stock, and BSQUARE shall assume
each BlueWater Option, in accordance with the terms of the stock option
agreement by which it is evidenced, except that from and after the Effective
Time, (i) each BlueWater Option shall be considered granted under, and shall be
subject to the terms of, the BSQUARE Stock Option Plan and a corresponding
BSQUARE stock option agreement, (ii) each BlueWater Option assumed by BSQUARE
may be exercised solely for shares of BSQUARE Common Stock (or cash, if so
provided under the terms of such BlueWater Option), (iii) the number of shares
of BSQUARE Common Stock subject to such BlueWater Option shall be equal to the
number of shares of BlueWater Common Stock subject to such BlueWater Option
immediately prior to the Effective Time multiplied by the Exchange Ratio, and
(iv) the per share exercise price under each such BlueWater Option shall be
adjusted by dividing the per share exercise price under each such BlueWater
Option by the Exchange Ratio and rounding up any fraction of a cent to the
nearest cent. Notwithstanding the provisions of clause (iii) of the preceding
sentence, BSQUARE shall not be obligated to issue any fraction of a share of
BSQUARE Common Stock upon exercise of BlueWater Options and any fraction of a
share of BSQUARE Common Stock that otherwise would be subject to a converted
BlueWater Option shall represent the right to receive a cash
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payment upon exercise of such converted BlueWater Option equal to the product of
such fraction and the difference between the market value of one share of
BSQUARE Common Stock at the time of exercise of such Option and the per share
exercise price of such Option. The market value of one share of BSQUARE Common
Stock at the time of exercise of an Option shall be the closing price of such
common stock on The Nasdaq Stock Market's National Market (as reported by The
Wall Street Journal or, if not reported thereby, any other authoritative source
selected by BSQUARE) on the last trading day preceding the date of exercise. In
addition, notwithstanding the provisions of clauses (ii) and (iii) of the first
sentence of this Section 3.4(a), each BlueWater Option which is an "incentive
stock option" shall be adjusted as required by Section 424 of the Internal
Revenue Code, so as not to constitute a modification, extension or renewal of
the option, within the meaning of Section 424(h) of the Internal Revenue Code.
Each of BlueWater and BSQUARE agrees to take all necessary steps to effectuate
the foregoing provisions of this Section 3.4, including using its reasonable
efforts to obtain from each holder of BlueWater Option any Consent or Contract
that may be deemed necessary or advisable in order to effect the transactions
contemplated by this Section 3.4(a).
(b) As soon as practicable after the Effective Time, BSQUARE shall
deliver to the participants in each BlueWater Stock Plan an appropriate notice
setting forth such participant's rights pursuant to the BSQUARE Stock Option
Plan.
(c) All contractual restrictions or limitations on transfer with
respect to BlueWater Common Stock awarded under the BlueWater Stock Plans or any
other plan, program, Contract or arrangement of any BlueWater Company, to the
extent that such restrictions or limitations shall not have already lapsed as of
the Effective Time (whether as a result of the Merger or otherwise), and except
as otherwise expressly provided in such plan, program, Contract or arrangement,
shall remain in full force and effect following the Effective Time with respect
to shares of BSQUARE Common Stock into which such restricted stock is converted
pursuant to Section 3.1; provided that any restrictions or limitations related
to the performance of any BlueWater Company shall be equitably adjusted to
account for the corporate structure of the BlueWater Companies resulting from
the transactions contemplated by this Agreement.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, BSQUARE and
BlueWater shall cause the exchange agent selected by BSQUARE and reasonably
acceptable to BlueWater (the "Exchange Agent") to mail to the former
shareholders of BlueWater appropriate transmittal materials (which shall specify
that delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of BlueWater Common Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent). The Exchange Agent
may establish reasonable and customary rules and procedures in connection with
its duties. After the Effective Time, each holder of shares of BlueWater Common
Stock (other than shares as to which statutory dissenters' rights have been
perfected as provided in Section 3.2) issued and outstanding at the Effective
Time shall surrender the certificate or certificates representing such shares to
the Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the consideration provided in Section 3.1. To the extent required by
Section 3.3, each holder of shares of BlueWater Common Stock issued and
outstanding at the Effective Time also shall receive, upon
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surrender of the certificate or certificates representing such shares, cash in
lieu of any fractional share of BSQUARE Common Stock to which such holder may be
otherwise entitled (without interest). BSQUARE shall not be obligated to deliver
the consideration to which any former holder of BlueWater Common Stock is
entitled as a result of the Merger until such holder surrenders such holder's
certificate or certificates representing the shares of BlueWater Common Stock
for exchange as provided in this Section 4.1. The certificate or certificates of
BlueWater Common Stock so surrendered shall be duly endorsed as the Exchange
Agent may require. Any other provision of this Agreement notwithstanding,
neither BSQUARE, the Surviving Corporation nor the Exchange Agent shall be
liable to a holder of BlueWater Common Stock for any amounts paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property Law. Adoption of this Agreement by the shareholders of
BlueWater shall constitute ratification of the appointment of the Exchange
Agent.
4.2 RIGHTS OF FORMER BLUEWATER SHAREHOLDERS. At the Effective Time, the
stock transfer books of BlueWater shall be closed as to holders of BlueWater
Common Stock immediately prior to the Effective Time and no transfer of
BlueWater Common Stock by any such holder shall thereafter be made or
recognized. Until surrendered for exchange in accordance with the provisions of
Section 4.1, each certificate theretofore representing shares of BlueWater
Common Stock (other than shares as to which statutory dissenters' rights have
been perfected as provided in Section 3.2) shall from and after the Effective
Time represent for all purposes only the right to receive the consideration
provided in Sections 3.1 and 3.3 and this Section 4.2 in exchange therefor. To
the extent permitted by Law, former shareholders of record of BlueWater shall be
entitled to vote after the Effective Time at any meeting of BSQUARE shareholders
the number of whole shares of BSQUARE Common Stock into which their respective
shares of BlueWater Common Stock are converted, regardless of whether such
holders have exchanged their certificates representing BlueWater Common Stock
for certificates representing BSQUARE Common Stock in accordance with the
provisions of this Agreement. Whenever a dividend or other distribution is
declared by BSQUARE on the BSQUARE Common Stock, the record date for which is at
or after the Effective Time, the declaration shall include dividends or other
distributions on all shares of BSQUARE Common Stock issuable pursuant to this
Agreement, but no dividend or other distribution payable to the holders of
record of BSQUARE Common Stock as of any time subsequent to the Effective Time
shall be delivered to the holder of any certificate representing shares of
BlueWater Common Stock issued and outstanding at the Effective Time until such
holder surrenders such certificate for exchange as provided in Section 4.1.
However, upon surrender of such BlueWater Common Stock certificate, both the
BSQUARE Common Stock certificate (together with all such undelivered dividends
or other distributions without interest) and cash payments payable hereunder
(without interest) shall be delivered and paid with respect to each share
represented by such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BLUEWATER
BlueWater hereby represents and warrants to BSQUARE as follows:
5.1 ORGANIZATION, STANDING, AND POWER. BlueWater is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Washington, and has the corporate power and authority to carry on its business
as now conducted and to own, lease and
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operate its Assets. Except as disclosed in Section 5.1 of the BlueWater
Disclosure Memorandum, BlueWater is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign jurisdictions where the character of its Assets or the nature
or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on BlueWater.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) BlueWater has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of BlueWater,
including receipt of approval of this Agreement by two-thirds of all of the
votes entitled to be cast at the Shareholders' Meeting on the approval of this
Agreement by the holders of the outstanding shares of BlueWater Common Stock and
BlueWater Preferred Stock. This Agreement represents a legal, valid, and binding
obligation of BlueWater, enforceable against BlueWater in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by BlueWater,
nor the consummation by BlueWater of the transactions contemplated hereby, nor
compliance by BlueWater with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of BlueWater's Articles of
Incorporation or Bylaws, or (ii) except as disclosed in Section 5.2 of the
BlueWater Disclosure Memorandum, constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of any BlueWater Company under, any Contract or Permit of any BlueWater
Company or, (iii) violate any Law or Order applicable to any BlueWater Company
or any of their respective material Assets other than, in the case of clauses
(ii) and (iii), any such conflicts, breaches, Defaults or other occurrences of
the type referred to above which are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on BlueWater.
(c) No notice to, filing with, or Consent of, any public body or
authority is necessary for the consummation by BlueWater of the Merger and the
other transactions contemplated in this Agreement, other than the filing of the
Articles of Merger with the Washington Secretary of State and appropriate
documents with relevant authorities of other states in which BlueWater is
qualified to do business and such filings with governmental entities to satisfy
the applicable requirements of state securities or "blue sky" laws and such
consents, approvals, orders or authorizations the failure of which to be made or
obtained are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on BlueWater.
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5.3 CAPITAL STOCK.
(a) Prior to the Effective Time, the authorized capital stock of
BlueWater consists of (i) 6,000,000 shares of BlueWater Common Stock, of which
1,500,000 shares are issued and outstanding and (ii) 2,000,000 shares of
preferred stock, without par value, of which 105,652 are issued and outstanding.
At the Effective Time, all issued and outstanding shares of Preferred Stock will
have been converted into an equal number of shares of Common Stock. All of the
issued and outstanding shares of capital stock of BlueWater are duly and validly
issued and outstanding and are fully paid and nonassessable. None of the
outstanding shares of capital stock of BlueWater has been issued in violation of
any preemptive rights of the current or past shareholders of BlueWater.
BlueWater has reserved 600,000 shares of BlueWater Common Stock for issuance
under the BlueWater Stock Plans, pursuant to which options to purchase not more
than 152,000 shares of BlueWater Common Stock are outstanding as of the Closing
Date.
(b) Except as set forth in Section 5.3(a) or disclosed in Section 5.3
of the BlueWater Disclosure Memorandum, there are no shares of capital stock or
other equity securities of BlueWater outstanding and no outstanding Rights
relating to the capital stock of BlueWater.
5.4 BLUEWATER SUBSIDIARIES. BlueWater has disclosed in Section 5.4 of the
BlueWater Disclosure Memorandum all of the BlueWater Subsidiaries that are
corporations (identifying its jurisdiction of incorporation, each jurisdiction
in which the character of its Assets or the nature or conduct of its business
requires it to be qualified and/or licensed to transact business, and the number
of shares owned and percentage ownership interest represented by such share
ownership) and all of the BlueWater Subsidiaries that are general or limited
partnerships or other non-corporate entities (identifying the Law under which
such entity is organized, each jurisdiction in which the character of its Assets
or the nature or conduct of its business requires it to be qualified and/or
licensed to transact business, and the amount and nature of the ownership
interest therein). Except as disclosed in Section 5.4 of the BlueWater
Disclosure Memorandum, BlueWater or one of its wholly-owned Subsidiaries owns
all of the issued and outstanding shares of capital stock (or other equity
interests) of each BlueWater Subsidiary. No capital stock (or other equity
interest) of any BlueWater Subsidiary is or may become required to be issued
(other than to another BlueWater Company) by reason of any Rights, and there are
no Contracts by which any BlueWater Subsidiary is bound to issue (other than to
another BlueWater Company) additional shares of its capital stock (or other
equity interests) or Rights or by which any BlueWater Company is or may be bound
to transfer any shares of the capital stock (or other equity interests) of any
BlueWater Subsidiary (other than to another BlueWater Company). There are no
Contracts relating to the rights of any BlueWater Company to vote or to dispose
of any shares of the capital stock (or other equity interests) of any BlueWater
Subsidiary. All of the shares of capital stock (or other equity interests) of
each BlueWater Subsidiary held by a BlueWater Company are fully paid and
nonassessable under the applicable corporation Law of the jurisdiction in which
such Subsidiary is incorporated or organized and are owned by the BlueWater
Company free and clear of any Lien. Except as disclosed in Section 5.4 of the
BlueWater Disclosure Memorandum, each BlueWater Subsidiary is a corporation, and
each such Subsidiary is duly organized, validly existing, and in good standing
under the Laws of the jurisdiction in which it is incorporated or organized, and
has the corporate power and authority necessary for it to own, lease, and
operate its Assets and to carry on its business as now conducted. Each BlueWater
Subsidiary is duly qualified or licensed to transact business as a foreign
corporation in good standing in the states of the United States and foreign
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jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on BlueWater. The minute book and other organizational documents for each
BlueWater Subsidiary have been made available to BSQUARE for its review, and,
except as disclosed in Section 5.4 of the BlueWater Disclosure Memorandum, are
true and complete as in effect as of the date of this Agreement and accurately
reflect all amendments thereto and all proceedings of the Board of Directors and
shareholders thereof.
5.5 FINANCIAL STATEMENTS. Each of the BlueWater Financial Statements
(including, in each case, any related notes) provided to BSQUARE was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements),
and fairly presented in all material respects the consolidated financial
position of BlueWater and its Subsidiaries as at the respective dates and the
consolidated results of operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount or effect. In addition, attached to Section 5.5 of the
BlueWater Disclosure Memorandum are the complete copies of the BlueWater
Financial Statements and the unaudited balance sheets of BlueWater as of
December 31, 1998 and December 31, 1997, and the related statements of
operations and of changes in the financial position for the fiscal years then
ended.
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No BlueWater Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on BlueWater, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of BlueWater as
of December 31, 1999, included in the BlueWater Financial Statements delivered
prior to the date of this Agreement or reflected in the notes thereto. No
BlueWater Company has incurred or paid any Liability since December 31, 1999,
except for such Liabilities incurred or paid (i) in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
BlueWater or (ii) in connection with the transactions contemplated by this
Agreement. Except as disclosed in Section 5.6 of the BlueWater Disclosure
Memorandum or as would otherwise not violate the first two sentences of this
Section 5.6, no BlueWater Company is directly or indirectly liable, by
guarantee, indemnity, or otherwise, upon or with respect to, or obligated, by
discount or repurchase agreement or in any other way, to provide funds in
respect to, or obligated to guarantee or assume any Liability of, any Person for
any amount in excess of $50,000.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1999, except
as disclosed in the BlueWater Financial Statements delivered prior to the date
of this Agreement or as disclosed in Section 5.7 of the BlueWater Disclosure
Memorandum, there have been no events, changes, or occurrences relating
specifically to BlueWater which have had, or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BlueWater. As of
the date hereof, Section 5.7 of the BlueWater Disclosure Memorandum lists all
wages, salaries and other compensation and/or benefits instituted, approved or
offered across the board to all or substantially all of the BlueWater employees
as of January 4, 2000.
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5.8 INSURANCE. As of the date hereof, Section 5.8 of the BlueWater
Disclosure Memorandum accurately sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, liability and workers' compensation coverage and bond and surety
arrangements) to which any of the BlueWater Companies is a party or under which
any BlueWater Company has any continuing rights or obligations:
(a) the name of the insurer, the name of the policyholder, and the name
of each covered insured; and
(b) the policy number and the period of coverage.
With respect to each such insurance policy, except such as would not
have, individually or in the aggregate, a Material Adverse Effect on BlueWater:
(a) the policy is legal, valid, binding, enforceable and in full force and
effect (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before any proceeding may be brought); (b) the policy will continue to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby (except as
described in clause (a)); (c) neither any of the BlueWater Companies nor, to the
Knowledge of the BlueWater Companies, any other party to the policy is in breach
or default thereunder (including with respect to the payment of premiums or the
giving of notices), and no event has occurred that, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification or acceleration under the policy; and (d) no party to the policy
has repudiated any provision thereof. Each of the BlueWater Companies has been
covered during the past two years by insurance in scope and amount, in its good
faith judgment, customary and reasonable for the businesses in which it has been
engaged during the aforementioned period. As of the date hereof, Section 5.8 of
the BlueWater Disclosure Memorandum also describes any self-insurance
arrangements affecting any of the BlueWater Companies.
5.9 TAX MATTERS.
(a) Except as set forth in Section 5.9 of the BlueWater Disclosure
Memorandum:
(i) BlueWater and each of its Subsidiaries are members of the
affiliated group, within the meaning of Section 1504(a) of the Internal
Revenue Code, of which BlueWater is the common parent, such affiliated
group files a consolidated federal income tax return and neither BlueWater
nor any of its Subsidiaries has ever filed a consolidated federal income
tax return with (or been included in a consolidated return of) a different
affiliated group;
(ii) each of the BlueWater Companies has timely filed or caused to
be filed all Tax Returns required to have been filed by or for it, and all
information set forth in such Tax Returns is accurate and complete in all
material respects;
(iii) each of the BlueWater Companies has paid all Taxes shown as
due on such Tax Returns;
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(iv) each of the BlueWater Companies is in material compliance
with all applicable information reporting and tax withholding requirements
under federal, state, local and foreign Laws;
(v) there are no Liens with respect to Taxes (other than for
current Taxes not yet due and payable) upon any of the Assets of the
BlueWater Companies;
(vi) each of the BlueWater Companies has collected or withheld
all Taxes required to be collected or withheld by it, and all such Taxes
have been paid to the appropriate governmental authority or set aside in
appropriate accounts for future payment when due;
(vii) none of the BlueWater Companies has granted (or is subject
to) any waiver, which is currently in effect, of the period of limitations
for the assessment of any Tax; no unpaid Tax deficiency has been assessed
or asserted against or with respect to, and no audit has been commenced
with respect to, any of the BlueWater Companies for any open tax period; no
power of attorney relating to Taxes that is currently in effect has been
granted by or with respect to any of the BlueWater Companies; there is no
currently pending administrative or judicial proceeding, or any deficiency
or refund litigation, with respect to Taxes of any of the BlueWater
Companies, the adverse outcome of which would have a Material Adverse
Effect on the BlueWater Companies; and any such assertion, assessment,
proceeding or litigation disclosed on Section 5.9 of the BlueWater
Disclosure Memorandum is being contested in good faith through appropriate
measures, and its status is described in Section 5.9 of the BlueWater
Disclosure Memorandum;
(viii) none of the BlueWater Companies has made or entered into,
or holds any asset subject to, a consent filed pursuant to Section 341(f)
of the Internal Revenue Code or a "safe harbor lease" subject to former
Section 168(f)(8) of the Internal Revenue Code;
(ix) none of the BlueWater Companies is required to include in
income any amount from an adjustment pursuant to Section 481 of the
Internal Revenue Code or any similar provision of state or local Law, and
BlueWater has no Knowledge that any governmental authority has proposed any
such adjustment;
(x) none of the BlueWater Companies has made or is obligated to
make any payments, or is a party to any Contract that could obligate it to
make any payments, that would not be deductible by reason of Section 162(m)
or 280G of the Internal Revenue Code; and
(xi) there are no excess loss accounts or deferred intercompany
gains with respect to any member of the affiliated group of which BlueWater
is the common parent which would have a Material Adverse Effect on
BlueWater if taken into account.
(b) Section 5.9 of the BlueWater Disclosure Memorandum lists all
types of material Taxes paid and Tax Returns filed by or on behalf of any of the
BlueWater Companies and expressly indicates each Tax with respect to which any
of the BlueWater Companies is or has been included in a consolidated, unitary or
combined return.
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5.10 REAL PROPERTY. Section 5.10 of the BlueWater Disclosure Memorandum is
a true and correct list of all Real Property of the BlueWater Companies and all
real estate with respect to which any BlueWater Company has entered into a
written agreement for purchase, sale or lease as of the date hereof. With
respect to the Real Property or such real estate subject to a written agreement
for purchase, sale or lease, as of the date hereof:
(a) except as set forth in Section 5.10(a) of the BlueWater Disclosure
Memorandum, there are no leases or subleases, including amendments or
modifications to leases or subleases, in which any BlueWater Company is the
tenant/lessee or subtenant/sublessee of any Real Property;
(b) except as set forth in Section 5.10(b) of the BlueWater Disclosure
Memorandum, there are no leases or subleases, including amendments or
modifications to leases or subleases, in which any BlueWater Company is the
landlord/lessor of any Real Property or any licenses, concessions or other
agreements, written or oral, granted by BlueWater to any party or parties the
right of use or occupancy of any portion of the parcel;
(c) as of the date hereof, Section 5.10(c) of the BlueWater Disclosure
Memorandum contains a true and correct list of all title policies in the
possession or control of any BlueWater Company;
(d) except as set forth in Section 5.10(d) of the BlueWater Disclosure
Memorandum, BlueWater has not received actual notice of any pending or
threatened condemnation proceedings, mechanics' or materialman's Liens or claims
of Lien, lawsuits or administrative actions relating to the Real Property or any
portion thereof or other matters affecting adversely its current use or
occupancy thereof;
(e) with respect to any Real Property that any BlueWater Company owns
or leases, BlueWater has not received actual notice that any of the following
are untrue: (i) the buildings and improvements are located within the boundary
lines of the described parcels of such Real Property, are not in violation of
applicable setback requirements, zoning laws and ordinances (and none of the
properties or buildings or improvements thereon are subject to "permitted
non-conforming use" or "permitted non-conforming structure" classifications),
(ii) no covenant or other restriction or obligation of any kind is binding on
such Real Property owned or leased by any BlueWater Company (provided that such
representation is qualified to the Knowledge of BlueWater insofar as it relates
to covenants, restrictions or obligations which any BlueWater Company is not
responsible for obtaining in its capacity as lessee) and (iii) to the extent
consistent with the current development of such Real Property, all approvals of
governmental authorities (including licenses and permits) required in connection
with the ownership, occupation, operation or construction thereof have been
obtained or will be timely obtained in accordance with Law with respect to such
Real Property owned or leased by any BlueWater Company (provided that such
representation is qualified to the Knowledge of BlueWater insofar as it relates
to approvals that any BlueWater Company is not responsible for obtaining in its
capacity as lessee);
(f) except as disclosed in Section 5.10(f) of the BlueWater Disclosure
Memorandum, BlueWater has not received actual notice that there are outstanding
options, rights of first refusal, or rights of first offer to purchase or lease
any of the Real Property or any portion thereof or interest therein;
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(g) there are no parties (other than any of the BlueWater Companies,
except in any case where an BlueWater Company has entered into a contract to
purchase a parcel but has not yet closed such purchase) in possession of the
parcel, other than tenants under any leases or subleases disclosed in Section
5.10(g) of the BlueWater Disclosure Memorandum who are in possession of space to
which they are entitled;
(h) the Real Property is supplied with utilities and other services
necessary for its operation, including gas, electricity, water, telephone,
sanitary sewer and storm sewer;
(i) as of the date hereof, except as set forth in Section 5.10(k) of
the BlueWater Disclosure Memorandum, BlueWater has not entered into any options
or agreements to purchase or lease real estate (including any amendments or
modifications thereto);
(j) BlueWater has not received a notice of default or similar notice
affecting a parcel and has not delivered a notice of default to any third party
that has not otherwise been cured and, to the Knowledge of BlueWater, BlueWater
is not in default with respect to any obligations affecting a parcel and no
third party is in default with respect to any obligations owing to BlueWater;
and
(k) to the Knowledge of BlueWater, the legal instruments disclosed in
Section 5.10 of the BlueWater Disclosure Memorandum (regardless of what
subsection) are in full force and effect; provided that the foregoing
representation and warranty shall not extend to any matters disclosed in Section
5.10(l) of the BlueWater Disclosure Memorandum.
5.11 ASSETS. Except as disclosed in Section 5.11 of the BlueWater
Disclosure Memorandum, as disclosed or reserved against in the BlueWater
Financial Statements or with respect to Real Property of BlueWater, the
BlueWater Companies have good and marketable title, free and clear of all Liens,
to all of their respective Assets which are material to BlueWater's business on
a consolidated basis. All Assets which are material to BlueWater's business on a
consolidated basis, held under leases or subleases by any of the BlueWater
Companies, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect.
5.12 INTELLECTUAL PROPERTY.
(a) Except as set forth in Section 5.12(a) of the BlueWater Disclosure
Memorandum or as is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on BlueWater: (i) the BlueWater Companies
own or have the right to use pursuant to license, sublicense, agreement or
permission all Intellectual Property reasonably necessary for the operation of
the businesses of the BlueWater Companies as presently conducted; (ii) each item
of Intellectual Property owned or used by any of the BlueWater Companies
immediately prior to the Effective Time will be owned or available for use by
the BlueWater Companies on identical terms and conditions immediately subsequent
to the Effective Time; (iii) each of the BlueWater Companies
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has taken all reasonably necessary and desirable action to maintain and protect
each item of Intellectual Property that it owns or uses; and (iv) each owned
item of Intellectual Property has not been abandoned.
(b) Except as set forth in Section 5.12(b) of the BlueWater Disclosure
Memorandum, to the Knowledge of BlueWater, none of the BlueWater Companies has
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any intellectual property rights of any third party, and to the Knowledge
of BlueWater, none of the BlueWater Companies has ever received any charge,
complaint, claim, demand or notice alleging any such interference, infringement,
misappropriation or violation (including any claim that any of the BlueWater
Companies must license or refrain from using any intellectual property rights of
any third party), except for infringements, conflicts or other occurrences of
the type described above which are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on BlueWater. To the Knowledge of
BlueWater, no third party has interfered with, infringed upon, misappropriated
or otherwise come into conflict with any Intellectual Property rights of any of
the BlueWater Companies, except such as have not had, or are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
BlueWater.
(c) As of the date hereof, Section 5.12(c) of the BlueWater Disclosure
Memorandum identifies each patent, trademark, copyright or other registration
that has been issued to any of the BlueWater Companies with respect to any of
its Intellectual Property, identifies each pending application or application
for registration that any of the BlueWater Companies has made with respect to
any of its Intellectual Property and identifies each license, agreement or other
permission that any of the BlueWater Companies has granted to any third party
with respect to any of its Intellectual Property (together with any exceptions
thereto). Except as set forth in Section 5.12(c) of the BlueWater Disclosure
Memorandum, BlueWater has made available to BSQUARE correct and complete copies
of all such patents, registrations, applications, licenses, agreements,
permissions (as amended to date) and all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. As of the date
hereof, Section 5.12(c) of the BlueWater Disclosure Memorandum also identifies
each trade name or unregistered trademark used by any of the BlueWater Companies
in connection with any of its businesses. Except as set forth in Section 5.12(c)
of the BlueWater Disclosure Memorandum, with respect to each item of
Intellectual Property required to be identified therein:
(i) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(ii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or, to the Knowledge of BlueWater, is
threatened which challenges the legality, validity, enforceability, use or
ownership of the item; and
(iii) none of the BlueWater Companies has licensed or, to the
Knowledge of BlueWater, permitted any third party to use any such item.
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5.13 ENVIRONMENTAL MATTERS.
(a) To the reasonable Knowledge of BlueWater, each BlueWater Company
holds all Permits required under Environmental Laws for it to carry on its
business as now conducted ("Environmental Permits"), and each BlueWater Company,
its Participation Facilities, and its Operating Properties are, and have been,
in compliance with all such Environmental Permits and Environmental Laws, except
for failures to hold Environmental Permits and instances of noncompliance which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on BlueWater.
(b) There is no Litigation pending or, to the reasonable Knowledge of
BlueWater, threatened before any court, governmental agency, or authority or
other forum in which any BlueWater Company or any of its Operating Properties or
Participation Facilities (or BlueWater in respect of such Operating Property or
Participation Facility) has been or, with respect to threatened Litigation, to
the Knowledge of BlueWater, may be named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release, discharge, spillage, or disposal into the environment
of any Hazardous Material, whether or not occurring at, on, under, adjacent to,
or affecting (or potentially affecting) a site owned, leased, or operated by any
BlueWater Company or any of its Operating Properties or Participation
Facilities, except for such Litigation pending or, to the reasonable Knowledge
of BlueWater, threatened that is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on BlueWater, nor, to the Knowledge
of BlueWater, is there any reasonable basis for any Litigation of a type
described in this sentence, except such as is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BlueWater.
(c) During the period of (i) any BlueWater Company's ownership or
operation of any of their respective current properties, (ii) any BlueWater
Company's participation in the management of any Participation Facility, or
(iii) any Blue Water Company's holding of a security interest in an Operating
Property, there have been no releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, adjacent to, or affecting (or potentially
affecting) such properties, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BlueWater. Prior
to the period of (i) any BlueWater Company's ownership or operation of any of
their respective current properties, (ii) any BlueWater Company's participation
in the management of any Participation Facility, or (iii) any BlueWater
Company's holding of a security interest in an Operating Property, to the
reasonable Knowledge of BlueWater, there were no releases, discharges,
spillages, or disposals of Hazardous Material in, on, under, or affecting (or
potentially affecting) any such property, Participation Facility or Operating
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on BlueWater.
5.14 COMPLIANCE WITH LAWS. Each BlueWater Company has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on BlueWater, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BlueWater. Except
as disclosed in Section 5.14 of the BlueWater Disclosure Memorandum, none of the
BlueWater Companies:
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(a) is in Default under any of the provisions of its Articles of
Incorporation or Bylaws (or other governing instruments);
(b) is in Default under any Laws or Orders applicable to its business
or employees conducting its business, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on BlueWater; or
(c) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory Authority or
the staff thereof (i) asserting that any BlueWater Company is not in compliance
with any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BlueWater, (ii)
threatening to revoke any Permits, the revocation of which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
BlueWater, or (iii) requiring any BlueWater Company to enter into or consent to
the issuance of a cease and desist order, formal agreement, directive,
commitment or memorandum of understanding, or to adopt any Board resolution or
similar undertaking, which restricts materially the conduct of its business.
5.15 LABOR RELATIONS. No BlueWater Company is the subject of any Litigation
asserting that it or any other BlueWater Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other BlueWater Company to bargain
with any labor organization as to wages or conditions of employment, nor is any
BlueWater Company party to any collective bargaining agreement, nor is there any
strike or other labor dispute involving any BlueWater Company pending or, to the
Knowledge of BlueWater, threatened nor, to the Knowledge of BlueWater, is there
any activity involving any BlueWater Company's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
5.16 EMPLOYEE BENEFIT PLANS.
(a) BlueWater has disclosed in Section 5.16(a) of the BlueWater
Disclosure Memorandum, and has made available to BSQUARE prior to the execution
of this Agreement copies in each case of, all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other employee
programs, arrangements, or agreements, all medical, vision, dental, or other
health plans, all life insurance plans, and all other material employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any BlueWater Company or any entity
required to be treated as a single employer with BlueWater under Section 414 of
the Internal Revenue Code (an "ERISA Affiliate") thereof for the benefit of
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate (collectively, the "BlueWater Benefit Plans"). Any of the BlueWater
Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "BlueWater ERISA
Plan." No BlueWater ERISA Plan is a "defined benefit plan" (as defined in
Section 414(j) of the Internal Revenue Code). No
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BlueWater ERISA Plan is or has been a multi-employer plan within the meaning of
Section 3(37) of ERISA.
(b) All BlueWater Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws the
breach or violation of which are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on BlueWater or any ERISA Affiliate.
Each BlueWater ERISA Plan which is intended to be qualified under Section 401(a)
of the Internal Revenue Code has received a favorable determination letter from
the Internal Revenue Service, and BlueWater is not aware of any circumstances
likely to result in revocation of any such favorable determination letter.
(c) No BlueWater Company has any unsatisfied Liability under Title IV
of ERISA.
(d) Except as disclosed in Section 5.16(d) of the BlueWater Disclosure
Memorandum, or as required by Law, no BlueWater Company has any Liability for
retiree health and life benefits under any of the BlueWater Benefit Plans.
Except for benefits protected under Section 411(d)(b) of the Internal Revenue
Code, there are no restrictions on the rights of such BlueWater Company to amend
or terminate any BlueWater Benefit Plan without incurring any Liability
thereunder.
(e) Except as disclosed in Section 5.16(e) of the BlueWater Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any BlueWater Company
from any BlueWater Company under any BlueWater Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any BlueWater Benefit Plan, or
(iii) result in any acceleration of the time of payment or vesting of any such
benefit.
5.17 MATERIAL CONTRACTS. Except as disclosed in Section 5.17 of the
BlueWater Disclosure Memorandum or otherwise reflected in the BlueWater
Financial Statements, none of the BlueWater Companies, nor any of their
respective Assets, businesses, or operations, is a party to, or is bound or
affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract providing for aggregate payments
to any Person in any calendar year in excess of $25,000, (ii) any Contract
relating to the borrowing of money by any BlueWater Company or the guarantee by
any BlueWater Company of any such obligation (other than trade payables and
Contracts relating to borrowings or guarantees made in the ordinary course of
business), (iii) any Contract which prohibits or restricts any BlueWater Company
from engaging in any business activities in any geographic area, line of
business or otherwise in competition with any other Person, (iv) any Contract
involving Intellectual Property (other than Contracts entered into in the
ordinary course with customers and "shrink-wrap" software licenses), and (v) any
Contract relating to the purchase or sale of any goods or services (other than
Contracts entered into in the ordinary course of business and involving payments
under any individual Contract not in excess of $25,000) (together with all
Contracts referred to in Sections 5.11 and 5.16(a), the "BlueWater Contracts").
With respect to each BlueWater Contract and except as disclosed in Section 5.17
of the BlueWater Disclosure Memorandum: (i) the Contract is in full force and
effect (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors'
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rights generally and except that the availability of the equitable remedy of
specific performance or injunctive relief is subject to the discretion of the
court before any proceeding may be brought); (ii) no BlueWater Company is in
Default thereunder, except where a Default is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BlueWater; (iii)
no BlueWater Company has repudiated or waived any material provision of any such
Contract; and (iv) no other party to any such Contract is, to the Knowledge of
BlueWater, in Default in any respect or has repudiated or waived any material
provision thereunder, except as is not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on BlueWater. Except as disclosed
in Section 5.17 of the BlueWater Disclosure Memorandum, all of the indebtedness
of any BlueWater Company for money borrowed is prepayable at any time by such
BlueWater Company without penalty or premium.
5.18 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or,
to the Knowledge of BlueWater, threatened against any BlueWater Company, or
against any director, employee or employee benefit plan of any BlueWater
Company, or against any Asset, interest, or right of any of them, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on BlueWater, nor are there any Orders of any Regulatory Authorities,
other governmental authorities, or arbitrators outstanding against any BlueWater
Company, that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on BlueWater; provided that, for purposes of this
Section 5.18, any such Litigation or Order arising after the date hereof shall
not be deemed to have a Material Adverse Effect on BlueWater if and to the
extent such Litigation or Order is based on this Agreement or the transactions
contemplated hereby. Section 5.18 of the BlueWater Disclosure Memorandum
contains a summary of all pending Litigation as of the date of this Agreement to
which any BlueWater Company is a party and which names a BlueWater Company as a
defendant or cross-defendant and for which any BlueWater Company has potential
Liability that is reasonably likely to have a Material Adverse Effect on
BlueWater.
5.19 STATEMENTS TRUE AND CORRECT.
No written statement, certificate, instrument, or other writing furnished
or to be furnished by any BlueWater Company or any Affiliate thereof to BSQUARE
pursuant to this Agreement or any other document, agreement, or instrument
referred to herein contains or will contain any untrue statement of material
fact or will omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
5.20 ACCOUNTING AND TAX MATTERS. Except as disclosed in Section 5.20 of the
BlueWater Disclosure Memorandum, no BlueWater Company or any Affiliate thereof
has taken or agreed to take any action or has any Knowledge of any fact or
circumstance that is reasonably likely to prevent the Merger from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code.
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5.21 STATE TAKEOVER LAWS. No "moratorium," "fair price," "business
combination," "control share," or other anti-takeover Laws (collectively,
"Takeover Laws") of the WBCA, including Chapter 23B.19 of the WBCA, will be
applicable to the execution of this Agreement or the consummation of the Merger,
and to the Knowledge of BlueWater, no other Takeover Laws are applicable to this
Agreement or the Merger.
5.22 TRANSACTIONS AND AFFILIATES. For purposes of this Section, the term
"Affiliate" shall mean (a) any holder of 5% or more of the voting securities of
BlueWater, (b) any director, officer or employee of the BlueWater Companies, (c)
any person, firm or corporation that directly or indirectly controls, is
controlled by or is under common control with any of the BlueWater Companies or
(d) any member of the immediate family of any of such persons. Except as set
forth in Section 5.22 of the BlueWater Disclosure Memorandum, the BlueWater
Companies have not, in the ordinary course of business or otherwise, (A)
purchased, leased or otherwise acquired any material property or assets or
obtained any material services from, (B) sold, leased or otherwise disposed of
any material property or assets or provided any material services to (except
with respect to remuneration for services rendered in the ordinary course of
business as a director, officer or employee of one or more of the BlueWater
Companies), (C) entered into or modified in any manner any Contract with, or (D)
borrowed any money from, or made or forgiven any loan or other advance to, any
Affiliate. Except as set forth in Section 5.22 of the BlueWater Disclosure
Memorandum, or in each case in an amount that is less than $50,000, (i) the
Contracts of the BlueWater Companies do not include any obligation or commitment
between any of the BlueWater Companies and any Affiliate, (ii) the Assets of the
BlueWater Companies do not include any receivable or other obligation or
commitment from an Affiliate to any of the BlueWater Companies and (iii) the
Liabilities of the BlueWater Companies do not include any payable or other
obligation or commitment from any of the BlueWater Companies to any Affiliate.
5.23 FEES AND EXPENSES OF BROKERS AND OTHERS. Other than an investment
banking arrangement with Alexander Hutton, Inc. (the specific terms of which are
set forth in Section 5.23 of the BlueWater Disclosure Memorandum), none of the
BlueWater Companies (a) has had any dealings, negotiations or communications
with any broker or other intermediary in connection with the transactions
contemplated by this Agreement which could reasonably give rise to any liability
for any brokers' or finders' fees or any similar fees in connection with the
transactions contemplated by this Agreement, (b) is committed to any liability
for any brokers' or finders' fees or any similar fees in connection with the
transactions contemplated by this Agreement or (c) has retained any broker or
other intermediary to act on its behalf in connection with the transactions
contemplated by this Agreement.
5.24 YEAR 2000 COMPLIANCE. BlueWater and the BlueWater Subsidiaries have
reviewed the areas within their business and operations which could be adversely
affected by the Year 2000 Problem and have initiated a program to achieve Year
2000 Compliance by December 31, 1999. As of the date hereof, except as is not
reasonably likely to have a Material Adverse Effect on BlueWater: (i) BlueWater
and the BlueWater Subsidiaries have implemented such Year 2000 program in
accordance with the timetable set forth therein; (ii) BlueWater and the
BlueWater Subsidiaries have made appropriate inquiries as to the Year 2000
Compliance of their material suppliers, service providers, franchisors and
vendors, and neither BlueWater nor any BlueWater Subsidiary has received notice
of any inability on the part of such entities to achieve Year 2000 Compliance in
a timely manner; and (iii) based on such review and program, BlueWater and the
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BlueWater Subsidiaries believe that the Year 2000 Problem, including costs of
remediation, will not have a Material Adverse Effect on BlueWater.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BSQUARE
Except as disclosed in BSQUARE SEC Documents filed on or after October 19,
1999 and prior to the date of this Agreement, BSQUARE hereby represents and
warrants to BlueWater as follows:
6.1 ORGANIZATION, STANDING, AND POWER. BSQUARE is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Washington, and has the corporate power and authority to carry on its business
as now conducted and to own, lease and operate its Assets. BSQUARE is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on BSQUARE.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) BSQUARE has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of BSQUARE. This Agreement
represents a legal, valid, and binding obligation of BSQUARE, enforceable
against BSQUARE in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
(b) Neither the execution and delivery of this Agreement by BSQUARE,
nor the consummation by BSQUARE of the transactions contemplated hereby, nor
compliance by BSQUARE with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of BSQUARE Articles of Incorporation or
Bylaws, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any BSQUARE
Company under, any Contract or Permit of any BSQUARE Company or, (iii) violate
any Law or Order applicable to any BSQUARE Company or any of their respective
material Assets other than, in the case of clauses (ii) and (iii), any such
conflicts, breaches, Defaults or other occurrences of the type referred to above
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on BSQUARE.
(c) No notice to, filing with, or Consent of, any public body or
authority is necessary for the consummation by BSQUARE of the Merger and the
other transactions
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contemplated in this Agreement, other than (i) the filing with the SEC of such
reports under Sections 13(a), 13(d), 15(d) or 16(a) of the 1934 Act as may be
required in connection with this Agreement and the transactions contemplated
hereby; (ii) with respect to Merger Corporation, the filing of the Articles of
Merger with the Washington Secretary of State; (iii) such filings with
governmental entities to satisfy the applicable requirements of state securities
or "blue sky" laws; and (iv) such consents, approvals, orders or authorizations
the failure of which to be made or obtained are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BSQUARE.
6.3 CAPITAL STOCK.
(a) The authorized capital stock of BSQUARE consists of (i) 50,000,000
shares of BSQUARE Common Stock, of which 32,294,833 shares are issued and
outstanding as of December 31, 1999, and (ii) 10,000,000 shares of BSQUARE
Preferred Stock, none of which is issued and outstanding. All of the issued and
outstanding shares of BSQUARE Capital Stock are, and all of the shares of
BSQUARE Common Stock to be issued in exchange for shares of BlueWater Common
Stock upon consummation of the Merger, when issued in accordance with the terms
of this Agreement, will be, duly and validly issued and outstanding and fully
paid and nonassessable. None of the outstanding shares of BSQUARE Capital Stock
has been, and none of the shares of BSQUARE Common Stock to be issued in
exchange for shares of BlueWater Common Stock upon consummation of the Merger
will be, issued in violation of any preemptive rights of the current or past
shareholders of BSQUARE. BSQUARE has reserved 7,125,000 shares of BSQUARE Common
Stock for issuance under the BSQUARE Stock Plans, pursuant to which options to
purchase 3,449,565 shares of BSQUARE Common Stock were outstanding as of
December 31, 1999.
(b) Except as set forth in Section 6.3(a) or as disclosed in Section
6.3 of the BSQUARE Disclosure Memorandum, there are no shares of capital stock
or other equity securities of BSQUARE outstanding and no outstanding Rights
relating to the capital stock of BSQUARE.
6.4 BSQUARE SUBSIDIARIES. No capital stock (or other equity interest) of
any BSQUARE Subsidiary is or may become required to be issued (other than to
another BSQUARE Company) by reason of any Rights, and there are no Contracts by
which any BSQUARE Subsidiary is bound to issue (other than to another BSQUARE
Company) additional shares of its capital stock (or other equity interests) or
Rights or by which any BSQUARE Company is or may be bound to transfer any shares
of the capital stock (or other equity interests) of any BSQUARE Subsidiary
(other than to another BSQUARE Company). There are no Contracts relating to the
rights of any BSQUARE Company to vote or to dispose of any shares of the capital
stock (or other equity interests) of any BSQUARE Subsidiary. All of the shares
of capital stock (or other equity interests) of each BSQUARE Subsidiary held by
a BSQUARE Company are fully paid and nonassessable under the applicable
corporation Law of the jurisdiction in which such Subsidiary is incorporated or
organized and are owned by the BSQUARE Company free and clear of any Lien. Each
BSQUARE Subsidiary is a corporation, and is duly organized, validly existing,
and in good standing under the Laws of the jurisdiction in which it is
incorporated or organized, and has the corporate power and authority necessary
for it to own, lease and operate its Assets and to carry on its business as now
conducted. Each BSQUARE Subsidiary is duly qualified or licensed to transact
business as a foreign corporation in good standing in the states of the United
States and foreign
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jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on BSQUARE.
6.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) BSQUARE has timely filed and made available to BlueWater all SEC
Documents required to be filed by BSQUARE on or after October 19, 1999 (the
"BSQUARE SEC Reports"). The BSQUARE SEC Reports (i) at the time filed, complied
in all material respects with the applicable requirements of the Securities Laws
and other applicable Laws and (ii) did not, at the time they were filed (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated in such BSQUARE SEC Reports (as
so amended) or necessary in order to make the statements in such BSQUARE SEC
Reports (as so amended), in light of the circumstances under which they were
made, not misleading. No BSQUARE Subsidiary is required to file any SEC
Documents.
(b) Each of the BSQUARE Financial Statements (including, in each case,
any related notes) contained in the BSQUARE SEC Reports complied as to form in
all material respects with the applicable published rules and regulations of the
SEC with respect thereto, was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited interim
statements, as permitted by Form 10-Q of the SEC), and fairly presented in all
material respects the consolidated financial position of BSQUARE and its
Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in amount
or effect.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. No BSQUARE Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on BSQUARE, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of BSQUARE as of
September 30, 1999 included in the BSQUARE Financial Statements delivered prior
to the date of this Agreement or reflected in the notes thereto. No BSQUARE
Company has incurred or paid any Liability since September 30, 1999, except for
such Liabilities incurred or paid (i) in the ordinary course of business
consistent with past business practice and which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on BSQUARE or
(ii) in connection with the transactions contemplated by this Agreement. Except
as disclosed in Section 6.6 of the BSQUARE Disclosure Memorandum or as would
otherwise not violate the first two sentences of this Section 6.6, no BSQUARE
Company is directly or indirectly liable, by guarantee, indemnity, or otherwise,
upon or with respect to, or obligated, by discount or repurchase agreement or in
any other way, to provide funds in respect to, or obligated to guarantee or
assume any Liability of, any Person for any amount in excess of $500,000.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1999, except
as disclosed in the BSQUARE Financial Statements delivered prior to the date of
this Agreement or as disclosed in Section 6.7 of the BSQUARE Disclosure
Memorandum, (i) there have been no events,
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changes, or occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BSQUARE, and (ii)
the BSQUARE Companies have not taken any action, or failed to take any action,
prior to the date of this Agreement, which action or failure, if taken after the
date of this Agreement, would represent or result in a material breach or
violation of any of the covenants and agreements of BSQUARE provided in Article
7.
6.8 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument or
other writing furnished or to be furnished by any BSQUARE Company or any
Affiliate thereof to BlueWater pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
6.9 AUTHORITY OF MERGER CORPORATION. Merger Corporation is a corporation
duly organized, validly existing and in good standing under the Laws of the
State of Washington as a wholly owned Subsidiary of BSQUARE. The authorized
capital stock of Merger Corporation shall consist of 1,000 shares of Merger
Corporation Common Stock, all of which is validly issued and outstanding, fully
paid and non-assessable and is owned by BSQUARE free and clear of any Lien.
Merger Corporation has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Merger Corporation. This
Agreement represents a legal, valid, and binding obligation of Merger
Corporation, enforceable against Merger Corporation in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
BSQUARE, as the sole shareholder of Merger Corporation, has voted prior to the
Effective Time the shares of Merger Corporation Common Stock in favor of
adoption of this Agreement, as and to the extent required by applicable Law.
6.10 ACCOUNTING AND TAX MATTERS. No BSQUARE Company or any Affiliate
thereof has taken or agreed to take any action or has any Knowledge of any fact
or circumstance that is reasonably likely to prevent the Merger from qualifying
for pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code.
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, BlueWater and Merger Corporation shall execute and
file the Articles of Merger with the Secretary of State of the State of
Washington in connection with the Closing.
7.2 ACCOUNTING AND TAX TREATMENT. Each of the Parties undertakes and agrees
to use its reasonable efforts to cause the Merger, and to take no action that is
reasonably likely to cause the
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Merger not, to qualify for treatment as a pooling of interests for accounting
purposes and a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code for federal income tax purposes.
7.3 STATE TAKEOVER LAWS. Each BlueWater Company shall take all necessary
steps to exempt the transactions contemplated by this Agreement from, or if
necessary to challenge the validity or applicability of, any applicable Takeover
Law, including Chapter 23B.19 of the WBCA.
7.4 EMPLOYEE BENEFITS AND CONTRACTS. BSQUARE will provide BlueWater
employees with benefits under the BSQUARE Benefit Plans or the BlueWater Benefit
Plans or a combination of such plans as determined by BSQUARE in its discretion.
To the extent that BlueWater employees participate in BSQUARE Benefit Plans, the
BSQUARE Benefit Plans shall recognize, for purposes of eligibility and vesting,
each such BlueWater employee's service with the BlueWater Companies to the
extent that such service is recognized under the BlueWater Benefit Plans.
Notwithstanding the foregoing, BlueWater shall not, and BSQUARE shall not be
required to cause BlueWater to, continue the BlueWater Stock Plans or to offer
BlueWater Common Stock as an investment option or an investment under any
BlueWater Benefit Plan.
7.5 INDEMNIFICATION, EXCULPATION AND INSURANCE.
(a) BSQUARE agrees that all rights to indemnification and exculpation
from liabilities for acts or omissions occurring at or prior to the Effective
Time now existing in favor of the current or former directors or officers of the
BlueWater Companies as provided in their respective Articles of Incorporation or
By-laws (or comparable organizational documents), shall be assumed by the
Surviving Corporation in the Merger, without further action, as of the Effective
Time and shall survive the Merger and shall continue in full force and effect in
accordance with their terms. In addition, from and after the Effective Time,
directors and officers of BlueWater who become directors or officers of the
Surviving Corporation will be entitled to the same indemnity rights and
protections as are afforded to other directors and officers of the Surviving
Corporation.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision will be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this Section 7.9.
(c) The provisions of this Section 7.9(c) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
7.6 EXCHANGE LISTING. Following Closing, as necessary, BSQUARE shall use
its best efforts to have the shares of BSQUARE Common Stock issuable pursuant to
the Merger approved for listing on The Nasdaq Stock Market's National Market,
subject to official notice of issuance.
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7.7 AGREEMENT OF AFFILIATES. BlueWater shall deliver to BSQUARE a letter
identifying all Persons whom it reasonably believes are "affiliates" of
BlueWater for purposes of Rule 145 under the 1933 Act or for purposes of
qualifying the Merger for pooling of interests accounting treatment under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations. BlueWater shall cause each such Person to deliver to BSQUARE a
written agreement, substantially in the form of Exhibit 2. BSQUARE shall cause
all Persons whom it reasonably believes are "affiliates" of BSQUARE for purposes
of qualifying the Merger for pooling of interests accounting treatment under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations to comply with Section 2 of Exhibit 2.
7.8 REGISTRATION RIGHTS. Simultaneously with the execution of this
Agreement, BSQUARE and BlueWater shall execute a Registration Rights Agreement
in substantially the form attached hereto as Exhibit 3 (the "Registration Rights
Agreement").
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. Each Party agrees that by
execution of this Agreement such Party represents that the following conditions
have been satisfied, unless waived by both Parties pursuant to Section 10.5:
(a) SHAREHOLDER APPROVAL. The BlueWater Shareholder Approval shall have
been obtained.
(b) LEGAL PROCEEDINGS. No court or governmental or regulatory authority
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law or Order (whether temporary, preliminary or permanent) or taken
any other action which prohibits or makes illegal consummation of the Merger.
(c) POOLING LETTERS. Each of the Parties shall have received a letter,
dated as of the Effective Time, addressed to BSQUARE and BlueWater, in form and
substance reasonably acceptable to BSQUARE and BlueWater, from Arthur Andersen
LLP to the effect that the Merger will qualify for pooling-of-interests
accounting treatment. Each of the Parties shall have received a letter, dated as
of the Effective Time, addressed to BSQUARE and BlueWater, in form and substance
reasonably acceptable to BSQUARE and BlueWater, from Roger Clark & Associates
LLP to the effect that such firm is not aware of any matters relating to
BlueWater and its Subsidiaries which would preclude the Merger from qualifying
for pooling-of-interests accounting treatment.
(d) AGREEMENT OF AFFILIATES. BlueWater shall have delivered to BSQUARE
a letter identifying all Persons whom it reasonably believes are "affiliates" of
BlueWater for purposes of Rule 145 under the 1933 Act or for purposes of
qualifying the Merger for pooling of interests accounting treatment under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations. BlueWater shall have caused each such Person to deliver to BSQUARE
a written agreement, substantially in the form of Exhibit 2. BSQUARE shall have
caused all Persons whom it reasonably believes are "affiliates" of BSQUARE for
purposes of qualifying the Merger
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for pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations to deliver to comply
with Section 2 of Exhibit 2.
(e) CONSENTS AND APPROVALS. All Consents required for consummation of
the Merger or for the preventing of any Default under any Contract or Permit of
such Party have been obtained, except for such Consents the failure to obtain
which is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on either Party.
8.2 CONDITIONS TO OBLIGATIONS OF BSQUARE. BlueWater agrees that by
execution of this Agreement it represents that the following conditions have
been satisfied, unless waived by BSQUARE pursuant to Section 10.5:
(a) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of BlueWater to be performed and complied with pursuant
to this Agreement and the other agreements of BlueWater contemplated hereby
prior to the Effective Time shall have been duly performed and complied with in
all material respects.
(b) TAX OPINION. [Intentionally Deleted.]
(c) CONVERSION OF BLUEWATER PREFERRED STOCK. All shares of BlueWater
Preferred Stock shall have been converted into shares of BlueWater Common Stock
in accordance with the terms and conditions of the BlueWater Preferred Stock,
and such shares of BlueWater Common Stock issued upon conversion of the
BlueWater Preferred shall have been subject to the provisions of Section 3.1(b)
hereof.
(d) LEGAL OPINION. BSQUARE shall have received the legal opinion of
Garvey, Schubert & Barer, dated the Closing Date, in substantially the form
attached hereto as Exhibit 4.
ARTICLE 9
MISCELLANEOUS
9.1 DEFINITIONS.
(a) Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.
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"ARTICLES OF MERGER" shall mean the Articles of Merger to be executed
by BlueWater and filed with the Secretary of State of the State of Washington
relating to the Merger as contemplated by Section 1.1. The Articles of Merger
shall include the Plan of Merger as required under Section 23B.11.050 of the
WBCA.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the books
and records of such Person, and whether or not owned in the name of such Person
or any Affiliate of such Person and wherever located.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CONFIDENTIALITY AGREEMENT" shall mean that certain Mutual
Confidentiality/Nondisclosure Agreement, dated October 17, 1999, between
BlueWater and BSQUARE.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding, or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
"DEFAULT" shall mean (i) any breach or violation of or default under
any Contract, Law, Order, or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Law, Order, or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the giving
of notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase, or impose any Liability or
to accelerate under, any Contract, Law, Order, or Permit, where, in any such
event, such Default is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on a Party.
"BLUEWATER COMMON STOCK" shall mean the common stock, no par value, of
BlueWater.
"BLUEWATER COMPANIES" shall mean, collectively, BlueWater and all
BlueWater Subsidiaries.
"BLUEWATER DISCLOSURE MEMORANDUM" shall mean the written information
entitled "BlueWater Disclosure Memorandum" delivered prior to the date of this
Agreement to BSQUARE describing in reasonable detail the matters contained
therein, and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is being
made. Information disclosed with respect to one Section shall be deemed to be
disclosed for purposes of any other Section with respect thereto.
"BLUEWATER PREFERRED STOCK" shall mean the Series A Convertible
Preferred Stock, no par value, of BlueWater.
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"BLUEWATER FINANCIAL STATEMENTS" shall mean the consolidated balance
sheets (including related notes and schedules, if any) of BlueWater as of
December 31, 1999, and the related statements of income, changes in
shareholders' equity, and cash flows (including related notes and schedules, if
any) for the three fiscal year ended December 31, 1999.
"BLUEWATER STOCK PLANS" shall mean the existing stock option and other
stock-based compensation plans of BlueWater designated as follows: BlueWater
Systems, Inc. Amended Stock Option Plan.
"BLUEWATER SUBSIDIARIES" shall mean the Subsidiaries of BlueWater,
which shall include the BlueWater Subsidiaries described in Section 5.4 and any
corporation or other organization acquired as a Subsidiary of BlueWater in the
future and held as a Subsidiary by BlueWater at the Effective Time.
"BSQUARE CAPITAL STOCK" shall mean, collectively, the BSQUARE Common
Stock, the BSQUARE Preferred Stock and any other class or series of capital
stock of BSQUARE.
"BSQUARE COMMON STOCK" shall mean the without par value common stock of
BSQUARE.
"BSQUARE COMPANIES" shall mean, collectively, BSQUARE and all BSQUARE
Subsidiaries.
"BSQUARE DISCLOSURE MEMORANDUM" shall mean the written information
entitled "BSQUARE Disclosure Memorandum" delivered prior to the date of this
Agreement to BlueWater describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is being
made. Information disclosed with respect to one Section shall be deemed to be
disclosed for purposes of any other Section with respect thereto.
"BSQUARE FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of BSQUARE as of
September 30, 1999, and as of December 31, 1998 and December 31, 1997, and the
related statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the nine months ended
September 30, 1999, and for each of the three fiscal years ended December 31,
1998, December 31, 1997 and December 31, 1996, as filed by BSQUARE in SEC
Documents, and (ii) the consolidated balance sheets of BSQUARE (including
related notes and schedules, if any) and related statements of income, changes
in shareholders' equity, and cash flows (including related notes and schedules,
if any) included in SEC Documents filed with respect to periods ended subsequent
to September 30, 1999.
"BSQUARE PREFERRED STOCK" shall mean the without par value preferred
stock of BSQUARE.
"BSQUARE STOCK OPTION PLAN" shall mean the BSQUARE Amended and Restated
Stock Option Plan.
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<PAGE> 32
"BSQUARE STOCK PLANS" shall mean the existing stock option and other
stock-based compensation plans of BSQUARE designated as follows: BSQUARE Amended
and Restated Stock Option plan and the BSQUARE Employee Stock Purchase Plan.
"BSQUARE SUBSIDIARIES" shall mean the Subsidiaries of BSQUARE, which
shall include the BSQUARE Subsidiaries described in Section 6.4 and any
corporation or other organization acquired as a Subsidiary of BSQUARE in the
future and held as a Subsidiary by BSQUARE at the Effective Time.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface, or subsurface strata) and which are
administered, interpreted, or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the environment,
including the Comprehensive Environmental Response Compensation and Liability
Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases, or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EXHIBITS" 1 and 2, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred to
in this Agreement and any other related instrument or document without being
attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"INTELLECTUAL PROPERTY" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor, trade secrets,
franchises, know-how, inventions, and other intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that are
known or should reasonably have been known after due inquiry by the chairman,
president or other member of management of such Person who, by virtue of such
individual's position with the Person, would be reasonably expected to be
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<PAGE> 33
aware of the matter at hand and the knowledge of any such persons obtained or
which would have been obtained from a reasonable investigation.
"LAW" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable to a
Person or its Assets, Liabilities, or business, including those promulgated,
interpreted or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect liability, indebtedness,
obligation, penalty, cost or expense, claim, deficiency, guaranty or endorsement
of or by any Person (other than endorsements of notes, bills, checks, and drafts
presented for collection or deposit in the ordinary course of business) of any
type, whether accrued, absolute or contingent, liquidated or unliquidated,
matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, or (ii) Liens which do not materially impair the use of or title to
the Assets subject to such Lien.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other examination or
investigation, hearing, administrative or other proceeding relating to or
affecting a Party, its business, its Assets (including Contracts related to it),
or the transactions contemplated by this Agreement.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (a) the financial position,
business, or results of operations of such Party and its Subsidiaries, taken as
a whole, or (b) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger, other than any event, change or
occurrence relating to (i) the United States economy, the western regional
economy or securities markets in general or (ii) this Agreement or the
transactions contemplated hereby or announcement thereof.
"MERGER CORPORATION COMMON STOCK" shall mean the no par value common
stock of Merger Corporation.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OPERATING PROPERTY" shall mean any property owned, leased, or operated
by the Party in question or by any of its Subsidiaries or in which such Party or
Subsidiary holds a security interest or other interest (including an interest in
a fiduciary capacity), and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
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<PAGE> 34
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the management
and, where required by the context, said term means the owner or operator of
such facility or property, but only with respect to such facility or property.
"PARTY" shall mean either BlueWater or BSQUARE, and "PARTIES" shall
mean both BlueWater and BSQUARE.
"PERMIT" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities, Assets, or
business.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"PLAN OF MERGER" shall mean the plan of merger of Merger Corporation
with and into BlueWater in substantially the form attached hereto as Exhibit 1.
"REAL PROPERTY" shall mean all of the real property owned or leased by
the BlueWater Companies, together with the improvements located thereon,
including all appurtenant rights, claims and interests.
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC, The Nasdaq
Stock Market, the NASD, the Federal Trade Commission, the United States
Department of Justice, and all other federal, state, county, local or other
governmental or regulatory agencies, authorities (including self-regulatory
authorities), instrumentalities, commissions, boards or bodies having
jurisdiction over the Parties and their respective Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of its
capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of
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<PAGE> 35
1939, as amended, and the rules and regulations of any Regulatory Authority
promulgated thereunder.
"SUBSIDIARIES" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly or
through an unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its parent
(provided, there shall not be included any such entity the equity securities of
which are owned or controlled in a fiduciary capacity), or (ii) in the case of
partnerships, serves as a general partner.
"SURVIVING CORPORATION" shall mean BlueWater as the surviving
corporation resulting from the Merger.
"TAX" or "TAXES" shall mean any federal, state, county, local, or
foreign taxes, charges, levies, imposts, duties, other assessments, or similar
charge of any kind whatsoever, including any interest, penalties, and additions
imposed thereon or with respect thereto.
"TAX RETURN" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in connection
with Taxes, including any return of an affiliated or combined or unitary group
that includes a Party or any of its Subsidiaries.
"WBCA" shall mean the Washington Business Corporation Act.
"YEAR 2000 COMPLIANT" or "YEAR 2000 COMPLIANCE" shall mean that the
computer systems and other automated equipment used by an entity in connection
with the conduct of its business, including, without limitation, all hardware,
software and operating systems, (i) are able to accurately recognize, represent,
process, manage and manipulate date and date-sensitive data (including, but not
limited to, calculating, comparing, sorting, tagging and sequencing), in both
input and output, whether the date field uses 2 or 4 digits or any other date
coding schema, including "leap year" calculations and will not cause an abnormal
ending scenario within the application domain or generate incorrect values
involving such dates, (ii) with respect to system time for all hardware,
software and operating systems, automatically function into and beyond the year
2000 C.E. without intervention and that all applications and components will
correctly interpret system time into and beyond the year 2000 C.E., and (iii)
are able to accurately recognize, represent, process and manage any date fields
currently assigned special values (i.e., 99/99/99 or 00/00/00), if any.
"YEAR 2000 PROBLEM" shall mean the risk that computer applications may
be unable to recognize and properly perform date-sensitive functions involving
certain dates prior to and any date on or after December 31, 1999.
(b) Any singular term in this Agreement shall be deemed to include
the plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
9.2 EXPENSES. Each of the Parties shall bear and pay all direct costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing,
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<PAGE> 36
registration and application fees, printing fees, and fees and expenses of its
own financial or other consultants, investment bankers, accountants, and
counsel.
9.3 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except, as to Section
7.4(b), for the Confidentiality Agreement). Nothing in this Agreement expressed
or implied, is intended to confer upon any Person, other than the Parties or
their respective successors, any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, other than as provided in Section 7.5.
9.4 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
shareholder approval of this Agreement has been obtained; provided, that after
any such approval by the holders of BlueWater Common Stock, there shall be made
no amendment that pursuant to Chapter 23B.11 of the WBCA requires further
approval by such shareholders without the further approval of such shareholders.
9.5 WAIVERS.
(a) Prior to or at the Effective Time, BSQUARE, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by BlueWater, to waive or extend the time for the compliance or
fulfillment by BlueWater of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of
BSQUARE under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of BSQUARE.
(b) Prior to or at the Effective Time, BlueWater, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by BSQUARE, to waive or extend the time for the compliance or
fulfillment by BSQUARE of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of
BlueWater under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of BlueWater.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
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<PAGE> 37
9.6 ASSIGNMENT. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the Parties and their respective successors and assigns.
9.7 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
BlueWater: BLUEWATER SYSTEMS, INC.
190 West Dayton, Suite 202
Edmonds, Washington 98020
Telecopy Number: (425) 771-2742
Attention: Paul D. Lever, President
Copy to Counsel: Garvey, Schubert & Barer
1191 Second Avenue, Suite 1800
Seattle, WA 98101-2939
Telecopy Number: (206) 464-0125
Attention: Scott Warner
BSQUARE: BSQUARE CORPORATION
3150 - 139th Avenue N.E.
Suite 500
Bellevue, WA 98005
Telecopy Number: (425) 519-5998
Attention: Brian V. Turner
Chief Financial Officer
Copy to Counsel: Summit Law Group, P.L.L.C.
1505 Westlake Avenue N., Suite 300
Seattle, Washington 98109
Telecopy Number: (206) 281-9882
Attention: Michael J. Erickson
9.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Washington, without regard to any
applicable conflicts of Laws.
9.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
9.10 CAPTIONS; ARTICLES AND SECTIONS. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
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<PAGE> 38
9.11 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
9.12 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
9.13 SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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<PAGE> 39
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf as of the day and year first above written.
BLUEWATER SYSTEMS, INC.
By: /S/ PAUL D. LEVER
-------------------------------
Name: Paul D. Lever
Title: President
BSQUARE CORPORATION
By: /S/ BRIAN V. TURNER
-------------------------------
Name: Brian V. Turner
Title: Chief Financial Officer
H20 MERGER CORPORATION
By: /S/ BRIAN V. TURNER
-------------------------------
Name: Brian V. Turner
Title: Chief Financial Officer
38
<PAGE> 1
BSQUARE Acquires BlueWater Systems; BSQUARE Expands Scope of Technology
Offerings to Encompass Multiple Windows Platforms
BELLEVUE, Wash.--(BUSINESS WIRE)--Jan. 6, 2000--BSQUARE Corporation
(Nasdaq:BSQR) announced today that it acquired BlueWater Systems, Inc., a
leading provider of software development toolkits and system integration
services for the creation of Windows(R) powered intelligent computing devices
(ICDs), for approximately 260,000 shares of BSQUARE common stock.
Through the acquisition of BlueWater Systems, BSQUARE will expand from its
traditional expertise in Windows CE and Windows NT Embedded to provide
additional software solutions for computing devices based on other Microsoft(R)
Windows operating systems including Windows 2000, Windows NT, Windows 98 and
Windows for SmartCard. BlueWater Systems will become a wholly owned subsidiary
of BSQUARE Corporation.
The acquisition of BlueWater Systems supports BSQUARE's expansion strategy of
providing software products and services for the development and use of ICDs
based on Microsoft operating systems in addition to Windows CE. This strategy
was announced initially in September of last year with the addition of Windows
NT Embedded software services, and was further supported by BSQUARE's recent
work with the Windows for SmartCard operating system. Acquiring BlueWater
Systems will provide BSQUARE with an additional point of entry into providing
software solutions for ICDs based on the other Windows operating systems.
BlueWater Systems' products and software engineering services are complementary
to BSQUARE's existing capabilities, enabling BSQUARE to offer more complete
software development solutions to Original Equipment Manufacturers (OEMs)
creating ICDs, a market estimated to be over $18 billion in 2003 by
International Data Corporation. BlueWater Systems' software development products
and service capabilities will be seamlessly integrated with BSQUARE's own
product and service offerings. BlueWater Systems' products will continue to be
marketed under the BlueWater Systems brand name.
"BlueWater Systems' capabilities are perfect complements to BSQUARE's
capabilities. With our combined suites of turnkey solutions and top quality
development tools, OEMs can bring any Windows powered ICD to market more
rapidly," said William Baxter, president and CEO of BSQUARE. "BlueWater Systems'
technologies address critical needs in the embedded Windows market and enable us
to deploy our turnkey software technologies across all of Microsoft's Windows
operating systems: Windows 2000, Windows NT, Windows NT Embedded, Windows CE,
Smart Card for Windows and Windows 98. This represents a strategic expansion of
our company to service the increasing needs of the rapidly growing market for
ICDs, yielding BSQUARE a larger overall addressable market."
"The merger with BSQUARE will allow BlueWater Systems to continue delivering our
leading edge technology and solutions to an ever increasing market and customer
base," said Paul Lever, President of BlueWater Systems. "BSQUARE's endorsement
of our technology assures our present and future customers of the longevity of
our solutions and promises more comprehensive support in the future. We will
continue to provide our customers with the high quality products and responsive
technical support they've come to expect from the team at BlueWater Systems."
BlueWater Systems offers the industry's leading device driver development
toolkits and product technical support services for developing mission critical
device drivers for Microsoft's Windows operating systems. Together, the two
companies will provide a complete set of tools for developing system level
software for ICDs based on Windows CE and Windows NT Embedded. Additionally,
BlueWater Systems' toolkits will provide a point of entry for BSQUARE to begin
providing new software products and services to developers of ICDs based on
Windows 2000, Windows NT and Windows 98.
BlueWater Systems' products that BSQUARE will continue to market include:
- -- WinDK 1.1 for Windows CE - The first full-featured device driver
development tool for embedded systems and industrial control developers
using Windows CE.
- -- Time Critical Extension (TCX) - A time critical extension to Windows CE
allowing very low latency interrupts and timers on
<PAGE> 2
Windows CE.
- -- WinDK(TM)- A Windows 2000, Windows NT 4.0, Windows NT Embedded, Windows 98
and WDM Driver Development Library.
- -- USB Extension to WinDK - Provides USB capability on Windows NT 4.0 and
Windows NT Embedded with an affordable toolkit that also is source code
compatible with Windows 2000 and Windows 98.
- -- WinRT(TM) 3.5 - Provides direct binary compatibility between Windows 2000,
Windows NT, Windows NT Embedded, Windows 98 and Windows 95 and enables
hardware control from a Win32 application.
- -- WinRT-VB 3.0 - An integrated ActiveX control tool for developing memory I/O
and port I/O hardware controls for Visual Basic 4.0, 5.0 and 6.0 (32-bit)
Windows applications.
BlueWater Systems will move its 11 employees from Edmonds, Washington to the
BSQUARE headquarters in Bellevue, Washington. Paul Lever, the founder of
BlueWater Systems, will join BSQUARE as the director of platform technologies.
BSQUARE expects to complete the incorporation of BlueWater Systems' employees
and products by the end of the month. BlueWater Systems' revenues were
approximately $1,000,000 in 1999.
About BSQUARE
BSQUARE (Nasdaq:BSQR) is a dynamic software company working with Fortune 500
companies to enable the age of intelligent computing devices. Specializing in
the Microsoft Windows family of operating systems, BSQUARE supplies software
products and services for the development and use of PC Companions, Internet
appliances, industrial automation devices, Windows-based terminals, and other
intelligent computing devices. From development tools to software
infrastructures to end-user applications, BSQUARE's touch is on many embedded
Windows-based devices available in the market today.
For more information, visit BSQUARE at http://www.bsquare.com or call
888/820-4500.
BSQUARE is a registered trademark of BSQUARE Corporation. All names, product
names, and tradenames are trademarks or registered trademarks of their
respective holders.
This release contains forward-looking statements relating to our sales that are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected. The words "believe," "expect," "intend,"
"anticipate," variations of such words, and similar expressions identify
forward-looking statements, but their absence does not mean that the statement
is not forward-looking. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and assumptions that
are difficult to predict. Factors that could affect BSQUARE's actual results
include adverse changes in BSQUARE's relationship with Microsoft, a decline in
the market for Windows CE-based intelligent computing devices or the failure of
such market to develop as anticipated, delays or announcements of delays by
Microsoft of Windows CE product releases, competition and intellectual property
risks. A more detailed description of certain factors that could affect actual
results include, but are not limited to, those discussed in BSQUARE's Quarterly
Report on Form 10-Q, in the section entitled "Risk Factors." Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this release. BSQUARE undertakes no obligation to
update publicly any forward-looking statements to reflect new information,
events or circumstances after the date of this release or to reflect the
occurrence of unanticipated events.
CONTACT: BSQUARE
Michelle Manson, 425/519-5900
[email protected]
