PTNX Printronix (MM)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

Schedule 14A Information

Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934

Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:

o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a 6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a 12

Printronix, Inc.

(Name of Registrant as Specified in Its Charter)

Not Applicable

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

þ No fee required.

o Fee computed on table below per Exchange Act Rules 14a 6(i)(1) and 0 11.

(1)		Title of each class of securities to which transaction applies:
		Common stock, $0.01 par value per share
(2)		Aggregate number of securities to which transaction applies:
		6,892,777 shares of common stock, which consists of: (i) 6,683,507 shares of common stock issued and outstanding as of November 26, 2007, and (ii) 209,270 shares of common stock underlying outstanding options to purchase shares of common stock with an exercise price of less than $16.00.
(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
		In accordance with Exchange Act Rule 0-11(c)(1) the filing fee was determined by multiplying 0.00003070 by the aggregate merger consideration of $109,017,364.90 (which is $16.00 per share multiplied by 6,683,507 shares of Printronix common stock outstanding and the value of 209,270 outstanding and issuable, in-the-money options as of November 26, 2007.
(4)		Proposed maximum aggregate value of transaction:
		$109,017,364.90
(5)		Total fee paid:
		$3,346.83

þ		Fee paid previously with preliminary materials.

o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

(1)		Amount previously paid:
(2)		Form, Schedule or Registration Statement No.:
(3)		Filing Party:
(4)		Date Filed:

 

 

SPECIAL MEETING OF STOCKHOLDERS
MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT
To Be Held on December 27, 2007

 

Dear Stockholder:

 

You are cordially invited to attend a special meeting of stockholders of Printronix, Inc. to be held at the principal executive offices of Printronix, located at 14600 Myford Road, Irvine, California 92606, on Thursday, December 27, 2007, at 9:00 a.m. Pacific Time. At the special meeting, you will be asked to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of October 1, 2007 (the “ Merger Agreement ”), by and among Printronix, Inc. (“ Printronix ”), Pioneer Holding Corp., a Delaware corporation (“ Pioneer ”), and Pioneer Sub Corp., a Delaware corporation and wholly-owned subsidiary of Pioneer (“ Merger Subsidiary ”). Vector Capital IV, L.P., a private equity firm, directly or indirectly owns both Pioneer and Merger Subsidiary.

 

The Merger Agreement contemplates the merger of Merger Subsidiary with and into Printronix, with Printronix continuing as the surviving corporation and becoming a wholly-owned subsidiary of Pioneer (the “ Merger ”). Upon completion of the Merger, each share of our common stock (other than shares held by stockholders who perfect their appraisal rights in accordance with Delaware law, shares held by Printronix, Pioneer, and their respective wholly-owned subsidiaries, and shares held by certain members of Printronix management that are contributing their shares to Pioneer in exchange for equity of Pioneer) will be converted into the right to receive $16.00 in cash, without interest. In addition, each outstanding option to purchase Printronix common stock that has an exercise price less than $16.00 will be converted into the right to receive $16.00 in cash without interest, less the exercise price of such option and applicable withholding taxes.

 

Our Board of Directors appointed a special committee to evaluate the merger. Our Board of Directors has determined, based in part on the unanimous recommendation of the Special Committee, that the merger is fair to and in the best interests of Printronix and its stockholders (other than certain members of management who will hold an equity interest in Pioneer after the closing of the merger). Accordingly, our Board has unanimously approved the Merger Agreement and the Merger, and unanimously recommends that you vote FOR the adoption of the Merger Agreement at the special meeting .

 

The accompanying Notice of Special Meeting of Stockholders and proxy statement explain the proposed Merger and provide specific information concerning the special meeting. We encourage you to read those materials carefully.

 

YOUR VOTE IS VERY IMPORTANT. The Merger cannot be completed unless the Merger Agreement is adopted by the affirmative vote of the holders of a majority of the outstanding shares of our common stock. Whether or not you plan to attend the special meeting in person, please sign and return the enclosed proxy in the envelope provided or vote electronically by the Internet or by telephone. If you attend the special meeting and desire to vote in person, you may do so even though you have previously taken one of the foregoing actions. The failure to vote will have the same effect as voting against the adoption of the Merger Agreement. If you have any questions or need assistance voting your shares, please call the Altman Group, which is assisting us, toll free at (866) 822-1241. Banks and brokers can call (201) 806-7300.

 

Sincerely,

 

Robert A. Kleist
Chief Executive Officer

 

Neither the Securities and Exchange Commission nor any state security regulatory agency has approved or disapproved of the Merger, passed upon the merits or fairness of the Merger, passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

 

The accompanying proxy statement is dated November 26, 2007 and is first being mailed to stockholders on or about November 29, 2007.

Printronix, Inc.

 

14600 Myford Road, Irvine, CA 92606

(714) 368-2300

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held on Thursday, December 27, 2007

 

To our Stockholders:

 

Notice is hereby given that a special meeting of stockholders of Printronix, Inc., a Delaware corporation (“ Printronix ”), will be held at the principal executive offices of Printronix, located at 14600 Myford Road, Irvine, California 92606, on Thursday, December 27, 2007 at 9:00 a.m. Pacific Time.

 

We are holding this special meeting for the following purposes:

 

1.  Adoption of Merger Agreement.   To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of October 1, 2007 (the “ Merger Agreement ”), by and among Printronix, Pioneer Holding Corp. (“ Pioneer ”), and Pioneer Sub Corp. (“ Merger Subsidiary ”), a Delaware corporation and wholly-owned subsidiary of Pioneer.

 

2.  Adjournment or Postponement of the Special Meeting.   If necessary or appropriate, to approve the postponement or adjournment of the special meeting to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to approve the proposal to adopt the Merger Agreement.

 

3.  Other Matters.   To transact such other business as may properly come before the meeting or any properly reconvened meeting following any adjournment or postponement thereof.

 

On October 1, 2007, our Board of Directors, after taking into consideration the unanimous recommendation of the Special Committee, (i) determined that the Merger and the Merger Agreement were fair to, and in the best interests of, our stockholders (other than certain members of management who will hold an equity interest in Pioneer after the closing of the merger) and (ii) approved the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger. Our Board of Directors unanimously recommends that you vote “For” the adoption of the Merger Agreement. In the event that there are not sufficient votes at the time of the special meeting to approve the proposal to adopt the Merger Agreement, then our Board of Directors unanimously recommends that you vote “For” the postponement or adjournment of the special meeting.

 

Our Board of Directors has fixed the close of business on November 26, 2007 as the record date for the purpose of determining stockholders entitled to receive notice of, and to vote at, the special meeting or any adjournment or postponement thereof.

 

Printronix stockholders who do not vote in favor of adoption of the Merger Agreement will have the right to seek appraisal of the fair value of their shares if the Merger is completed, but only if they perfect their appraisal rights by complying with all of the required procedures under Delaware law. See “Appraisal Rights” beginning on page 49 of the accompanying proxy statement and Annex D to the proxy statement.

 

It is important that your shares are represented at the special meeting. Even if you plan to attend the special meeting, we hope that you will promptly vote and submit your proxy by dating, signing, and returning the enclosed proxy card. This will not limit your rights to attend or vote at the special meeting. You may also vote either by telephone or the Internet. We have provided instructions on the proxy card for using these convenient services. If your shares are held of record by a bank, broker or other agent and you wish to vote at the special meeting, you must obtain a proxy card issued in your name from your bank, broker, or other agent.

 

By Order of the Board of Directors

 

George L. Harwood

Senior Vice President, Chief Financial

Officer, Secretary

 

Irvine, California

November 26, 2007

SUMMARY

 

This Summary highlights selected information from this proxy statement regarding the merger and the merger agreement and may not contain all of the information that is important to you as a Printronix stockholder. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to in this proxy statement. See “Where You Can Find More Information.” In this proxy statement, the terms “we,” “us,” “our,” and “Printronix” refer to Printronix, Inc. We refer to Pioneer Holding Corp. as “Pioneer,” Pioneer Sub Corp. as “Merger Subsidiary,” and Vector Capital IV, L.P. as “Vector.” The merger agreement is attached to this proxy statement as Annex A and is incorporated into this proxy statement by reference.

 

Forward-Looking Information

 

This proxy statement contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on our current expectations, assumptions, estimates, and projections about Printronix and our industry. The forward-looking statements are subject to various risks and uncertainties. Generally, these forward-looking statements can be identified by the use of forward-looking terminology, such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “project,” “should,” and similar expressions. Those statements include, among other things, the risk that the merger may not be consummated in a timely manner, if at all, risks regarding employee retention and other risks detailed in our current filings with the Securities and Exchange Commission, including our most recent filings on Form 10-K or Form 10-Q, which discuss these and other important risk factors concerning our operations. We caution you that reliance on any forward-looking statement involves risks and uncertainties, and that, although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate. As a result, the forward-looking statements based on those assumptions could be incorrect. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans and objectives or projected financial results referred to in any of the forward-looking statements. We do not undertake to release the results of any revisions of these forward-looking statements to reflect future events or circumstances.

 

The Proposed Transaction

 

The Proposal (page 33).   You are being asked to vote upon a proposal to adopt the agreement and plan of merger that provides for Printronix to be acquired by a wholly-owned subsidiary of Vector. You may also be asked to vote upon a proposal to adjourn the special meeting, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

 

What You Will Receive (page 33).   Upon completion of the merger, you will receive $16.00 in cash, without interest, and less any applicable withholding taxes, for each of your shares of Printronix common stock, unless you properly exercise your appraisal rights. After the merger is completed, you will have the right to receive the merger consideration, but you will no longer be or have any rights as a Printronix stockholder.

 

On October 1, 2007, the last full trading day prior to the public announcement of the merger agreement, the closing sale price of our common stock as reported on The NASDAQ Global Market was $13.52. On November 23, 2007, the last full trading day prior to the date of this proxy statement, the closing price of our common stock as reported on The NASDAQ Global Market was $15.74.

 

Treatment of Stock Options and Restricted Stock (page 34).   At the effective time of the merger, all of our stock options outstanding and unexercised immediately prior to the effective time of the merger will be cancelled and converted into the right to receive $16.00 in cash, without interest and less the exercise price of such option and any applicable withholding taxes. All of our currently outstanding stock options are fully vested.

 

The merger agreement provides that at or immediately prior to the effective time of the merger, each share of restricted Printronix common stock that is outstanding shall become fully vested and not subject to any rights of repurchase or forfeiture provisions, and the holders of such outstanding restricted Printronix common stock shall be treated as persons holding shares of Printronix common stock under the merger agreement.

Pioneer Holding Corp.   Pioneer, a Delaware corporation, was formed solely for the purpose of effecting the merger and the transactions related to the merger. Pioneer has not engaged in any business except in furtherance of this purpose. Pioneer is currently wholly-owned by Vector.

 

Pioneer Sub Corp.   Merger Subsidiary, a Delaware corporation and wholly-owned subsidiary of Pioneer, was formed solely for the purpose of effecting the merger and the transactions related to the merger. Merger Subsidiary has not engaged in any business except in furtherance of this purpose.

 

Printronix, Inc.   Printronix is the worldwide leader in multi-technology supply-chain printing solutions for the industrial marketplace. We manufacture three types of applications-compatible printers — line matrix, thermal and fanfold laser, as well as printer management software. Our integrated network solutions enable the printing of bar codes, labels, forms, and reports, verify their accuracy and offer unequaled diagnostic technology. The printers and their applications are based on an open systems architecture that facilitates seamless integration into enterprise networks and operation with legacy applications written for other printers.

 

Unanimous Recommendation of the Printronix, Inc. Board (page 19)

 

Our Board of Directors appointed a Special Committee to evaluate the merger. The Special Committee unanimously recommended that our Board of Directors determine that the merger is fair to and in the best interests of Printronix and its stockholders. Our Board of Directors has determined that the merger is fair to and in the best interests of Printronix and its stockholders, and has approved the merger agreement and the merger. Our Board of Directors recommends that stockholders vote FOR adoption of the merger agreement at the special meeting.

 

Opinion of Printronix’s Financial Advisor (page 19 and Annex C)

 

On October 1, 2007, Houlihan Lokey Howard & Zukin Financial Advisors, Inc., which we refer to in this proxy statement as HLHZ, rendered its oral opinion to the Special Committee (which was subsequently confirmed in writing by delivery of HLHZ’s written opinion dated the same date) to the effect that, as of October 1, 2007, the merger consideration to be received by the holders of shares of our common stock (other than members of our senior management who are contributing a portion of their shares to Pioneer in exchange for equity of Pioneer, whom we refer to in this proxy statement as the Continuing Stockholders, and their affiliates) in the merger was fair to such holders from a financial point of view.

 

HLHZ’s opinion was directed to the Special Committee of our Board of Directors and only addressed the fairness from a financial point of view of the merger consideration to be received by the holders of our common stock other than the continuing stockholders and their affiliates in the merger and did not address any other aspect or implication of the merger. The summary of HLHZ’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex C to this proxy statement and sets forth the procedures followed, assumptions made, qualifications, and limitations on the review undertaken and other matters considered by HLHZ in preparing its opinion. However, neither HLHZ’s written opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute advice or a recommendation to any stockholder as to how such stockholder should act or vote with respect to the merger.

 

The Special Meeting

 

Date, Time, and Place (page 4).   We will hold the special meeting at the principal executive offices of Printronix, located at 14600 Myford Road, Irvine, California 92606, on December 27, 2007, beginning at 9:00 a.m., Pacific Time.

 

Required Vote (page 6).   Under Delaware law and our charter documents, the holders of a majority of the outstanding shares of our common stock entitled to vote must be present, either in person or by proxy, to constitute a quorum at the special meeting. The vote required to approve Proposal 1, adoption of the merger agreement, is the affirmative vote of the holders of a majority of the shares of our common stock issued and outstanding on the record date for the special meeting. If it is necessary or appropriate to hold a vote for Proposal 2, then the vote required to

approve Proposal 2, approval of the adjournment or postponement of the special meeting to solicit additional proxies, is the affirmative vote of a majority of the votes cast on Proposal 2.

 

Who May Vote (page 4).   You are entitled to vote at the special meeting if you owned shares of Printronix common stock at the close of business on November 26, 2007, the record date for the special meeting. 6,683,507 shares of Printronix common stock were outstanding and entitled to be voted as of the record date.

 

How You Can Vote (page 5).   If you are a record holder of our common stock, you may vote in the following ways:

 

(1) Voting by Mail. If you choose to vote by mail, simply mark your proxy, date and sign it, and return it in the postage-paid envelope provided.

 

(2) Voting in Person. You can also vote by appearing and voting in person at the special meeting.

 

(3) Voting by Telephone. You can vote your shares by telephone by calling the toll-free telephone number on your proxy card. Telephone voting is available 24 hours a day.

 

(4) Voting by Internet. You can also vote via the Internet. The web site for Internet voting is on your proxy card, and voting is also available 24 hours a day.

 

You can revoke your proxy at any time before it is voted at the special meeting by:

 

 

If your shares are held through a broker, bank, trustee or other holder of record, including the trustee or other fiduciary of an employee benefit plan, you may only vote by completing and returning the voting instruction form provided by the record holder or via the Internet or by telephone, if such a service is provided by the record holder, and you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the special meeting.

 

The Merger

 

The Structure and Effective Time (page 33).   Upon the terms and subject to the conditions of the merger agreement, Merger Subsidiary (a wholly-owned subsidiary of Pioneer), will merge with and into Printronix with Printronix as the surviving corporation and a wholly-owned subsidiary of Pioneer. Except for the Continuing Stockholders, no Printronix stockholders will have any equity interest in Printronix or Pioneer after the merger.

 

Material Federal Income Tax Consequences (page 31).   In general, your receipt of the merger consideration will be a taxable transaction for U.S. federal income tax purposes. For U.S. federal income tax purposes, you will generally recognize capital gain or loss equal to the difference, if any, between the amount of cash received pursuant to the merger and your adjusted basis in the shares surrendered. However, the tax consequences of the merger to you will depend upon your own particular circumstances. You should consult your tax advisor in order to fully understand how the merger will affect you.

 

Governmental and Regulatory Clearances (page 32).   Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules thereunder (which we refer to in this proxy statement as the HSR Act), certain transactions, including the merger, may not be completed until a 30-day waiting period expires or is earlier terminated. Printronix and Vector received notice from the Federal Trade Commission on October 26, 2007 that early termination of the waiting period under the HSR Act was granted.

 

The merger is also subject to review by the German Federal Cartel Office (which we refer to as the “FCO”) under the Act against Restraints of Competition ( Gesetz gegen Wettbewerbsbeschränkungen ). A transaction that is subject to German merger control may not be completed before either the FCO has cleared the transaction or the relevant waiting period has expired without the FCO having prohibited the transaction. The required filing was made with the FCO on November 20, 2007.

Appraisal Rights (page 49 and Annex D).   Under Delaware law, holders of shares of Printronix common stock are entitled to appraisal rights in connection with the merger, if they follow the requirements of Delaware law to perfect their appraisal rights.

 

Merger Financing (page 40).   In order to pay the merger consideration under the merger agreement, Vector intends to borrow up to $35 million pursuant to senior secured credit facilities and has entered into a commitment letter with Silicon Valley Bank making such credit facilities available. Nevertheless, there is no financing contingency to the closing of the merger, and in the event all other closing conditions are satisfied or waived, Pioneer is obligated to close the merger or pay Printronix a termination fee of $5 million upon Printronix’s termination of the merger agreement as a result of Pioneer’s failure to close the merger. Vector also has committed to provide, or cause to be provided, up to $35 million of the capital necessary for Pioneer to fund the transaction. The Continuing Stockholders have agreed to contribute 215,558 shares to Pioneer in exchange for equity of Pioneer. In addition, Printronix will be contributing up to $18 million of Freely Available Cash (as defined in “The Merger Agreement — Conditions to the Merger” on page 45) to the merger consideration. In addition, either the Irvine property will be mortgaged for approximately an additional $25 million of financing, or Vector will contribute additional capital to fund the transaction.

 

The Merger Agreement (page 33 and Annex A)

 

Closing of the Merger (page 44).   Before we can complete the merger, a number of conditions must be satisfied or waived by the applicable party. These include the following:

 

 

No Solicitation of Alternative Transactions by Printronix (page 38). The Merger Agreement contains restrictions on, among other things, our ability to solicit alternative acquisition offers or, subject to certain exceptions, participate in discussions or negotiations with a third party that is seeking to make or that has made an alternate acquisition proposal.

 

Termination of the Merger Agreement (page 47).   The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after Printronix stockholders have approved it:

 

(1) by mutual written consent of Pioneer and Printronix;

 

(2) by either Pioneer or Printronix if:

 

(A) the merger is not consummated by April 1, 2008;

 

(B) Printronix’s stockholders do not approve the merger upon a vote taken at the special meeting; or

 

(C) any applicable law makes consummation of the merger illegal or otherwise prohibited or otherwise enjoins us or Pioneer from consummating the merger and such enjoinment shall have become final and unappealable.

 

(3) by Pioneer if:

 

(A) the Printronix Board or Special Committee fails to make, withdraws or modifies its recommendation in favor of adoption of the merger agreement in a manner adverse to Pioneer;

 

(B) Printronix shall have entered into or publicly announced its intention to enter into a definitive agreement or an agreement in principle with respect to a Superior Proposal (as defined in “The Merger Agreement — No Solicitation of Alternative Transactions by Printronix”);

 

(C) Printronix breaches any representation, warranty, covenant or agreement under the merger agreement such that such breach would cause a failure to satisfy the closing conditions related to our representations, warranties and covenants and such breach cannot be cured or is not cured by a date within 30 days after the receipt of written notice of the breach;

 

(D) After an Acquisition Proposal by a third party (as defined in “The Merger Agreement — No Solicitation of Alternative Transactions by Printronix”) has been publicly announced or received by Printronix, the Printronix Board fails to reaffirm its recommendation of the adoption of the merger agreement to the stockholders within five (5) business days after receipt of Pioneer’s request to do so;

 

(E) Printronix willfully and materially breaches its obligations and covenants with respect to the special meeting, Board recommendation of adoption of the merger agreement, filing and preparing the proxy material, or its non-solicitation obligations under the merger agreement; or

 

(F) the environmental reports prepared pursuant to the merger agreement identify a significant environmental matter that Pioneer determines is unacceptable and Pioneer timely delivers a termination notice.

 

(4) by Printronix if:

 

(A) We enter into a binding agreement with respect to a Superior Proposal (as defined in “The Merger Agreement — No Solicitation of Alternative Transactions by Printronix”) subject to compliance with our no solicitation covenants in the merger agreement, payment to Pioneer of a termination fee of $4.2 million dollars and providing Pioneer five days written notice to make an offer at least as favorable to our stockholders as the Superior Proposal; or

 

(B) Pioneer or Merger Subsidiary breaches any representation, warranty, covenant or agreement under the merger agreement such that such breach would result in a failure to satisfy the closing conditions related to Pioneer’s representations, warranties and covenants, and such breach cannot be cured or is not cured by a date within 30 days after the receipt of written notice of the breach.

 

Termination Fees (page 48).

 

Printronix must pay Pioneer a termination fee of $4.2 Million if:

 

(1) the merger agreement is terminated for the reasons stated in paragraph (4)(A) of “— Termination of Merger Agreement” above;

 

(2) the merger agreement is terminated for the reasons stated in paragraphs (3)(A), (3)(B), (3)(D) or 3(E) of “ — Termination of Merger Agreement” above;

 

(3) the merger agreement is terminated for the reasons stated in paragraphs (2)(A) or (2)(B) of “— Termination of Merger Agreement” above but, only if and when prior to the special meeting in the case of paragraph (2)(B) or April 1, 2008 in the case of paragraph (2)(A), an Acquisition Proposal (as defined in “The Merger Agreement — No Solicitation of Alternative Transactions by Printronix”) shall have been made by a third party, and within 12 months following the date of such termination Printronix enters into an agreement providing for an Acquisition Proposal which is subsequently consummated or an Acquisition Proposal is subsequently consummated (provided that references to “15%” in the definition of Acquisition Proposal shall be deemed references to “50%”).

 

Pioneer must pay Printronix a termination fee of $5 Million (such amounts are guaranteed by Vector) if:

 

(1) the merger agreement is terminated for the reasons stated in paragraph (2)(A) of “— Termination of Merger Agreement”, above, if the conditions to Pioneer’s obligation to close and the mutual conditions to closing have been satisfied by such date by Printronix; or

 

(2) the merger agreement is terminated for the reasons stated in paragraph (4)(B) of “— Termination of Merger Agreement”, above, at a time when Pioneer is not entitled to deliver a termination notice pursuant to paragraph (3)(C) of “— Termination of the Merger Agreement”, above.

 

The Voting Agreements (page 49).

 

As an inducement to Pioneer to enter into the merger agreement, each member of our Board of Directors and several of our officers have entered into voting agreements with Pioneer representing, in the aggregate, 1,529,961 shares of our common stock and 158,213 vested options to acquire shares of our common stock, or approximately 24.67% of the outstanding shares of our common stock (including their vested options as of the record date for the special meeting). Pursuant to the voting agreements, each such person agreed to vote his or her shares in favor of the adoption of the merger agreement and against certain other matters, each as set forth in the voting agreements. Such directors and officers and their affiliates have not received any additional consideration with respect to the voting agreements. The form of voting agreement is attached to this proxy statement as Annex B and is incorporated into this proxy statement by reference.

 

Interests of Certain Persons (page 26).

 

Certain of our officers and directors may have interests in the merger that are different from, or in addition to, yours, including the following:

 

 

 

 

 

Our Board of Directors was aware of these interests and considered them, among other matters, in making its decisions, including forming a Special Committee of independent directors to oversee the merger negotiation process.

 

Additional Information (page 57).

 

You can find more information about Printronix in the periodic reports and other information we file with the Securities and Exchange Commission, which we refer to in this proxy statement as the SEC. The information is available at the SEC’s public reference facilities and at the website maintained by the SEC at http://www.sec.gov. For a more detailed description of the additional information available, please see the section entitled “Where You Can Find More Information”.

TABLE OF CONTENTS

 

 

QUESTIONS AND ANSWERS ABOUT THE MERGER

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTRODUCTION

 

This proxy statement is being furnished to you in connection with the solicitation by our Board of Directors of proxies to be used at the special meeting to be held at the principal executive offices of Printronix, located at 14600 Myford Road, Irvine, California 92606, at 9:00 a.m., Pacific Time, on Thursday, December 27, 2007 and any adjournments or postponements thereof. This proxy statement and the accompanying form of proxy card are being mailed to stockholders on or about November 29, 2007.

 

We are asking our stockholders to vote on the adoption of the merger agreement. If the merger is completed, Printronix will become a direct or indirect wholly owned subsidiary of Pioneer, and our stockholders (other than the Continuing Stockholders) will have the right to receive $16.00 in cash, without interest, for each share of our common stock.

 

THE SPECIAL MEETING

 

The Purpose

 

The purpose of the special meeting is for our stockholders to consider and vote upon a proposal to adopt the merger agreement. A copy of the merger agreement is attached to this proxy statement as Annex A. In the event that there are not sufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement, stockholders may also be asked to vote upon a proposal to postpone or adjourn the special meeting, if necessary, to solicit additional proxies.

 

On October 1, 2007, our Board of Directors (i) determined that the merger and the merger agreement were fair to and in the best interests of our stockholders and (ii) approved the merger agreement and the transactions contemplated thereby, including the merger. Our Board of Directors recommends that you vote “FOR” the adoption of the merger agreement and “FOR” the approval of the proposal to postpone or adjourn the special meeting to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

 

Our Board of Directors knows of no other matter that will be presented for consideration at the special meeting. If any other matter properly comes before the special meeting, or any postponement or adjournment of the special meeting, the persons named in the enclosed form of proxy or their substitutes will vote in accordance with their best judgment on such matters.

 

Appointment of Proxy Holders

 

Our Board of Directors asks you to appoint Robert A. Kleist and George L. Harwood as your proxy holders to vote your shares at the special meeting. You make this appointment by completing the enclosed proxy card using one of the voting methods described below.

 

If appointed by you, the proxy holders will vote your shares as you direct on the matters described in this proxy statement. In the absence of your direction, they will vote your shares as recommended by our Board of Directors.

 

Unless you otherwise indicate on the proxy card, or otherwise, if voting by telephone or via the Internet, you also authorize your proxy holders to vote your shares on any matters not known by our Board of Directors at the time this proxy statement was printed and which, under our bylaws, may be properly presented for action at the special meeting.

 

Who Can Vote

 

Only stockholders who owned shares of record of our common stock as of the close of business on November 26, 2007, the record date for the special meeting, can vote at the special meeting. As of the close of business on the record date, we had 6,683,507 shares of our common stock outstanding. Each holder of common stock is entitled to one vote for each share held as of November 26, 2007.

 

How You Can Vote

 

If you hold your shares in your name as a holder of record, you may submit your proxy by mail, telephone or electronically through the Internet by following the instructions included with your proxy card. If your shares are held by your broker, bank or other nominee, often referred to as held in “street name,” please check your proxy card or contact your broker, bank or nominee to determine whether you will be able to vote by telephone or electronically.

 

Voting by Mail .   You may vote by proxy by dating, signing, and returning your proxy card in the enclosed postage paid envelope. Giving a proxy will not affect your right to vote your shares if you attend the special meeting and want to vote in person.

 

Voting in Person .   You may vote by attending and voting at the special meeting. However, even if you plan to attend the special meeting in person, our Board of Directors recommends that you vote by mail. Voting your proxy card by mail will not limit your right to vote at the special meeting, if you decide to attend in person. If you hold shares through a bank, broker, trustee, or other agent, you must obtain a proxy, executed in your favor, from the bank, broker, trustee, or other agent to be able to vote at the special meeting.

 

Voting by Telephone .   Using a touch-tone telephone, call toll free (866) 540-5760 and follow the instructions. When asked for your voter control number, enter the number printed just above your name on the front of the proxy card accompanying this proxy statement. Your telephone vote is quick, confidential, and immediate. Please note that all votes cast by telephone must be completed and submitted prior to December 26, 2007 at 11:59 p.m., Pacific Time. Your telephone vote authorizes the named proxies to vote your shares to the same extent as if you marked, signed, dated, and returned the proxy card. If you vote by telephone, please do not return your proxy card by mail; or

 

Voting by the Internet .   Visit the Internet voting site at http://www.proxyvoting.com/ptnx and follow the instructions on the screen. When prompted for your voter control number, enter the number printed just above your name on the front of the proxy card accompanying this proxy statement. Your Internet vote is quick, confidential, and immediate. Please note that all votes cast by Internet must be completed and submitted prior to December 26, 2007 at 11:59 p.m. Pacific Time. Your Internet vote authorizes the named proxies to vote your shares to the same extent as if you marked, signed, dated, and returned the proxy card. This is a “secured” web page site. Your software and/or Internet provider must be “enabled” to access this site. Please call your software or Internet provider for further information if needed. If you vote by Internet, please do not return your proxy card by mail.

 

If you vote your shares of our common stock by submitting a proxy, your shares will be voted at the special meeting as you indicated on your proxy card. If no instructions are indicated on your signed proxy card, all of your shares of our common stock will be voted “FOR” the adoption of the merger agreement and “FOR” the approval of the proposal to postpone or adjourn the special meeting to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

 

If your shares are held by a bank, broker, trustee, or other agent, you should have received a voting instruction card and voting instructions with these proxy materials from your bank, broker, trustee, or other agent rather than from Printronix. Simply complete and return the voting instruction card to your bank, broker, trustee, or other agent to ensure that your vote is counted. Alternatively, if offered by your bank, broker, trustee, or other agent, you may vote by telephone or over the Internet as instructed by your bank, broker, trustee, or other agent. To vote in person at the special meeting, you must obtain a valid proxy from your bank, broker, trustee, or other agent. Follow the instructions from your bank, broker, trustee, or other agent included with these proxy materials, or contact your bank, broker, trustee, or other agent to request a proxy form.

 

Revocation of Proxies

 

If you are a record holder of shares of our common stock, you can revoke your proxy at any time before it is voted at the special meeting by:

 

 

If your shares are held through a bank, broker, trustee, or other agent, you must follow instructions received from such bank, broker, trustee, or other agent which were provided with this proxy statement in order to change or revoke your vote or to vote at the special meeting.

 

Quorum; Stock Entitled to Vote; Record Date

 

The holders of a majority of the outstanding shares of our common stock on the record date, represented in person or by proxy, will constitute a quorum for purposes of the special meeting. A quorum is necessary to hold the special meeting. In the event that a quorum is not present at the special meeting, it is expected that the meeting will be adjourned or postponed to solicit additional proxies. Any shares of our common stock held in treasury by Printronix or held by any of our subsidiaries are not considered to be outstanding for purposes of determining a quorum. Abstentions and broker non votes will be counted as shares present and entitled to vote for the purposes of determining a quorum. “Broker non votes” result when banks, brokers, trustees, or other agents are precluded from exercising their voting discretion with respect to the approval of non routine matters such as the adoption of the merger agreement and approval of the merger, and, thus, absent specific instructions from the beneficial owner of those shares, banks, brokers, trustees and other agents are not empowered to vote the shares with respect to the approval of those matters.

 

The adoption of the merger agreement requires the affirmative vote of holders representing at least a majority of the outstanding shares of our common stock on November 26, 2007, the record date for the special meeting. Shares that are present but not voted, either by abstention or non vote, including broker non votes, will be counted for purposes of establishing a quorum. Because adoption of the merger agreement requires the approval of holders representing a majority of the outstanding shares of our common stock, failure to vote your shares, including if you hold your shares through a bank, broker, trustee, or other agent, will have the same effect as a vote “against” the adoption of the merger agreement.

 

The approval of any proposal to postpone or adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the merger agreement requires the affirmative vote of a majority of those shares represented in person or by proxy voting on such proposal. Abstentions or broker non votes will have no impact on the vote to postpone or adjourn the special meeting. The persons named as proxies may propose and vote for one or more postponements or adjournments of the special meeting, including postponements or adjournments to permit further solicitations of proxies. Unless specifically indicated, no proxy voted against adoption of the merger agreement will be voted in favor of any postponement or adjournment of the special meeting.

 

Under Delaware law, holders of shares of our common stock are entitled to appraisal rights in connection with the merger. In order to exercise appraisal rights, you must comply with all applicable requirements of Delaware law. See “Appraisal Rights” beginning on page 49 and Annex D for information on the requirements of Delaware law regarding appraisal rights.

 

Stock Ownership of Directors and Executive Officers

 

As of November 26, 2007, the record date for the special meeting, our directors and officers and their respective affiliates owned, in the aggregate, 1,529,961 shares of our common stock and 158,213 vested options to purchase our common stock, or collectively approximately 24.67% of the outstanding shares of our common stock (including their vested options). Each member of our Board of Directors and certain officers have entered into voting agreements with Pioneer agreeing to vote all of their shares in favor of the adoption of the merger agreement. See “The Voting Agreements” on page 49.

 

Certain of our officers, Robert A. Kleist, George L. Harwood, C. Victor Fitzsimmons, and Juli A. Mathews (whom we sometimes refer to as the “Continuing Stockholders”), have entered into contractual agreements to contribute some of their shares of Printronix which each currently owns to Pioneer in exchange for equity in Pioneer. Mr. Kleist has agreed to contribute 180,558 shares of our common stock in exchange for approximately 8.29% of the equity of Pioneer. Messrs. Harwood and Fitzsimmons have each agreed to contribute 15,000 shares of our common stock to Pioneer in exchange for approximately 0.69% of the equity of Pioneer each. Ms. Mathews has agreed to contribute 5,000 shares of our common stock to Pioneer in exchange for approximately 0.23% of the equity of Pioneer.

 

Solicitation of Proxies

 

Printronix is soliciting your proxy. In addition to the solicitation of proxies by use of the mail, officers and other employees of Printronix may solicit the return of proxies by personal interview, telephone, e-mail, or facsimile. We will not pay additional compensation to our officers and employees for their solicitation efforts. We will request that brokerage houses and other custodians, nominees, and fiduciaries forward solicitation materials to the beneficial owners of stock registered in their names. We will bear all costs of preparing, assembling, printing, and mailing the notice of special meeting of stockholders, this proxy statement, the enclosed proxy, and any additional materials, as well as the cost of forwarding solicitation materials to the beneficial owners of stock and all other costs of solicitation.

 

We have retained the Altman Group to aid in the solicitation of proxies for the special meeting. The Altman Group will receive a base fee of $10,000 plus reimbursement of out-of-pocket fees and expenses.

 

Assistance

 

Stockholders, who have questions regarding the materials, need assistance voting their shares, or require additional copies of the proxy statement or proxy card should contact or call (toll-free) our proxy solicitor:

 

The Altman Group
1200 Wall Street West
Lyndhurst NJ 07071
(866) 822-1241

 

Banks and brokers can call (201) 806-7300.

 

Other Business

 

We are not currently aware of any business to be acted upon at the special meeting other than the matters discussed in this proxy statement. If other matters do properly come before the special meeting, we intend that shares of our common stock represented by properly submitted proxies will be voted by the persons named as proxies on the proxy card in accordance with their judgment.

 

Postponements and Adjournments

 

Although it is not expected, the special meeting may be postponed or adjourned for, among other reasons, the purpose of soliciting additional proxies to any other time and place if approved by our stockholders. You should note that the meeting could be successively postponed or adjourned to any date. If the special meeting is postponed or adjourned for the purpose of soliciting additional proxies, stockholders who have already sent in their proxies will be able to revoke them at any time prior to their use. The persons named as proxies may propose and vote for one or more postponements or adjournments of the special meeting, including postponements or adjournments to permit further solicitations of proxies. Unless indicated on a proxy card, no proxy voted against the proposal to adopt the merger agreement will be voted in favor of any postponements or adjournment of the special meeting. A determination of stockholders of record entitled to notice of or to vote at the special meeting shall apply to any adjournment of the special meeting; provided, however, that our Board of Directors may fix a new record date for the adjourned meeting and provided further that if the adjournment is for more than thirty days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

THE TRANSACTION PARTICIPANTS

 

Printronix, Inc.

 

Printronix is the worldwide leader in multi-technology supply-chain printing solutions for the industrial marketplace. We manufacture three types of applications-compatible printers — line matrix, thermal, and fanfold laser, as well as printer management software. Our integrated network solutions enable the printing of bar codes, labels, forms, and reports, verify their accuracy and offer unequaled diagnostic technology. The printers and their

applications are based on an open systems architecture that facilitates seamless integration into enterprise networks and operation with legacy applications written for other printers. Printronix was incorporated in California in 1974 and was reincorporated in Delaware in December 1986. We maintain our principal executive offices at 14600 Myford Road, Irvine, California 92606. Our telephone number is (714) 368-2300.

 

Pioneer Holding Corp.

 

Pioneer is a newly formed Delaware corporation. Pioneer was formed by Vector Capital IV, L.P. (which we refer to in this proxy statement as “Vector”), solely for the purpose of effecting the merger and the transactions related to the merger. Pioneer is currently wholly owned by Vector and has not engaged in any business except in anticipation of the merger. Vector is a San Francisco-based private equity investment firm that currently manages over $2 billion in equity capital. The principal executive offices of Pioneer are located at 456 Montgomery St., 19th Floor, San Francisco, California 94104, c/o Vector Capital Corporation, and its telephone number is (415) 293-5000.

 

Pioneer Sub Corp.

 

Merger Subsidiary is a newly formed Delaware corporation. Merger Subsidiary was formed solely for the purpose of completing the merger and the transactions related to the merger. Merger Subsidiary is wholly owned by Pioneer and has not engaged in any business except in anticipation of the merger. The principal executive offices of Merger Subsidiary are located at 456 Montgomery St., 19th Floor, San Francisco, California 94104, c/o Vector Capital Corporation, and its telephone number is (415) 293-5000.

 

THE MERGER

 

The discussion under the sections of this proxy statement entitled “The Merger” and “The Merger Agreement” summarizes the material terms of the merger and the Merger Agreement. Although we believe that the description covers the material terms of the merger, this summary may not contain all of the information that is important to you. We urge you to read this proxy statement, the merger agreement and the other documents referred to herein carefully for a complete understanding of the merger.

 

The Merger

 

We are asking our stockholders to consider and vote on the adoption of the merger agreement, pursuant to which Merger Subsidiary will merge with and into Printronix with Printronix continuing as the surviving corporation and a wholly-owned subsidiary of Pioneer.

 

Background of the Merger

 

As a small public company with limited trading volume and analyst research coverage, our Board of Directors regularly discussed whether the benefits of being a public company were outweighed by the associated costs.

 

On February 15, 2005, our Board of Directors held a meeting and discussed retaining an investment bank to assist us in exploring strategic alternatives. On April 27, 2005, we retained the investment banking firm of Houlihan Lokey Howard & Zukin Capital, Inc., an affiliate of HLHZ and which we refer to in this proxy as Houlihan Lokey, to act as our financial advisor.

 

On May 17, 2005, our Board of Directors met with representatives of Houlihan Lokey to discuss a potential process to explore strategic alternatives. Representatives of Stradling Yocca Carlson & Rauth provided a detailed summary of our Board of Directors’ fiduciary duties. At this meeting, Houlihan Lokey, our financial advisor, was given permission to contact 13 strategic bidders and two private equity firms. Several months later, our Board of Directors authorized Houlihan Lokey to contact one other private equity firm. Throughout the process, of the 16 parties contacted in total, 10 executed confidentiality agreements, with nine receiving a confidential information memorandum regarding Printronix.

 

Our Board of Directors decided not to contact certain additional strategic bidders out of its concern that such parties could use the due diligence process to gain a competitive advantage against us or potentially leak information about our exploration of strategic alternatives to the public, causing disruption to our business and our relationships with employees and customers. Our Board of Directors also limited the number of private equity firms contacted out of concern that its exploration of strategic alternatives would become publicly known.

 

In February 2006, we received two written non-binding indications of interest, one from a private equity firm (“Financial Sponsor A”) and one from a strategic bidder (“Strategic Bidder A”). The indication of interest from Financial Sponsor A indicated a proposed purchase price of $17.50 per share. The indication of interest from Strategic Bidder A indicated a proposed purchase price of $15.75 per share, representing a five percent (5%) premium over our closing stock price on February 3, 2006. In subsequent conversations between Strategic Bidder A and Houlihan Lokey, the strategic bidder indicated it was unwilling to pay more than a five percent (5%) premium over the Company’s stock price at the time it enters into the transaction. A second private equity firm (“Financial Sponsor B”) verbally indicated that it was potentially interested in acquiring the Company between $17.00 and $17.50 per share and a second strategic bidder (“Strategic Bidder B”) indicated that it was still considering making a proposal but was not prepared to submit a written indication of interest at this time.

 

On February 14, 2006, our Board of Directors met and discussed the status of our exploration of strategic alternatives. Our Board of Directors decided to reject the indication of interest from Strategic Bidder A due to the low premium over our market price that it was willing to pay, and to continue discussions with the two remaining bidders. Our Board of Directors permitted Houlihan Lokey to meet with Strategic Bidder B to encourage it to submit a written proposal. From February 2006 to March 2006, we engaged in due diligence discussions with Financial Sponsor A and Financial Sponsor B. Also, Houlihan Lokey met with Strategic Bidder B to encourage it to submit a written proposal.

 

On February 23, 2006, management held a meeting with Financial Sponsor B.

 

On February 28, 2006, management held a meeting with Financial Sponsor A. By the end of February 2006, all parties approved by our Board of Directors to contact us had been contacted. Ten parties had declined to proceed; three parties had submitted initial non-binding indications of interest, with one of those three being told by our Board of Directors that their preliminary indication of interest was unacceptable.

 

On March 6, 2006, management held a meeting with Strategic Bidder C, who ultimately declined to pursue the opportunity.

 

On March 16, 2006, Houlihan Lokey met with Financial Sponsor A to discuss their proposal.

 

On March 17, 2006, Houlihan Lokey met with Financial Sponsor B to discuss their proposal.

 

On March 22, 2006, our Board of Directors met to discuss the status of the process and the due diligence efforts being conducted by the various parties.

 

On March 30, 2006, Strategic Bidder B officially declined to pursue the opportunity.

 

On March 31, 2006, Financial Sponsor A submitted a non-binding indication of interest at $17.50 per share and Financial Sponsor B submitted a non-binding indication of interest at $17.00 per share.

 

On April 3, 2006, our Board of Directors met to discuss the indications of interest. At this meeting our Board of Directors considered several alternatives, including (i) requesting Financial Sponsor A and Financial Sponsor B to re-submit bids in an effort to secure a higher valuation and improved contract terms, (ii) moving forward with Financial Sponsor A or Financial Sponsor B, possibly subject to either such party agreeing to improved contract terms, (iii) contacting additional strategic bidders in an effort to secure a higher bid but at the risk of business disruption due to a public leak, or (iv) terminating the process and continuing as an independent public company. Our Board of Directors decided to move forward with Financial Sponsor A, subject to securing a higher purchase price.

 

Following negotiations, on April 10, 2006, Financial Sponsor A submitted a revised non-binding indication of interest, agreeing to a non-binding price of $17.75 per share, representing a 13% premium over our prior day’s closing price and a 24% premium over the Company’s average closing price over the 10 days prior to April 10, 2006.

Based on this price improvement, we entered into exclusive negotiations with Financial Sponsor A. From April 2006 to May 2006, Financial Sponsor A conducted due diligence and we held negotiations with Financial Sponsor A regarding a definitive merger agreement.

 

On May 8, 2006, our Board of Directors met to discuss the status of Financial Sponsor A’s due diligence and merger agreement negotiations. Representatives of Stradling Yocca Carlson & Rauth indicated that the merger agreement negotiations were progressing and that there did not appear to be any major differences between the parties with respect to the terms and conditions of the merger agreement. However, Financial Sponsor A appeared to be backing away from its proposed purchase price as a result of not finding sufficient operational cost saving opportunities in its due diligence review. In mid-May 2006, Financial Sponsor A indicated that it was no longer interested in pursuing a transaction with us.

 

In May 2006, following Financial Sponsor A’s determination not to proceed with a potential transaction, at our request, Houlihan Lokey met with Financial Sponsor B and a strategic bidder (“Strategic Bidder D”) that had been contacted and provided a confidential information memorandum in the initial phase of the process but which had declined to submit an indication of interest. On May 23, 2006, our Board of Directors met and was informed by Houlihan Lokey that Financial Sponsor B requested an updated presentation from the Company’s management. Our Board of Directors also considered approaching additional strategic bidders but decided against expanding the scope of the marketing process out of concern that news of our exploration of strategic alternatives would leak to the public market.

 

In June 2006, representatives of Houlihan Lokey held separate meetings with Financial Sponsor B and Strategic Bidder D to discuss the opportunity and ascertain each party’s level of interest. Strategic Bidder D declined to pursue the opportunity. During June and August 2006, Financial Sponsor B conducted due diligence on the Company and, on August 8, 2006, submitted a non-binding indication of interest to acquire Printronix for $15.50 to $16.50 per share.

 

During the week of August 14th, representatives of Printronix met with Financial Sponsor B to provide a management presentation and further due diligence information. Also present at the meeting were representatives of Houlihan Lokey.

 

We continued preliminary discussions with Financial Sponsor B in August and September, at which time Financial Sponsor B proposed acquiring both Printronix and a separate competitor of Printronix which was majority owned by another private equity firm (“Financial Sponsor C”).

 

On September 25, 2006, our Board of Directors met to discuss the status of the discussions with the various parties. By this time, each of the strategic bidders had declined to pursue a transaction with us. Our Board of Directors discussed Financial Sponsor B’s interest in the Company and its proposed purchase price of between $15.50 and $16.50 per share. Representatives of Houlihan Lokey indicated that, based on their conversations with Financial Sponsor B, it appeared that if Financial Sponsor B ultimately would make a proposal, it would likely be at around $15.50 per share. Our Board of Directors instructed Houlihan Lokey to inform Financial Sponsor B that it would only be interested in a transaction at the higher end of the stated $15.50 to $16.50 per share price range. Our Board of Directors granted Houlihan Lokey permission to contact Financial Sponsor C. Our Board of Directors also considered having Printronix continue as an independent public company. Our Board of Directors also considered a recapitalization of Printronix pursuant to which Printronix would utilize cash on its balance sheet to effect a share repurchase and issue debt securities in exchange for additional shares of its Common Stock. Representatives of Stradling Yocca Carlson & Rauth discussed the potential recapitalization, including our Board of Director’s fiduciary duties relating to the Board’s deliberative process in connection with its consideration of such a transaction. Our Board of Directors decided not to pursue a recapitalization of Printronix.

 

On October 10, 2006, we entered into a confidentiality agreement with Financial Sponsor C, which enabled Financial Sponsor B and Financial Sponsor C to work together with Financial Sponsor C’s portfolio company towards a combination of Printronix and the portfolio company.

 

On October 13, 2006, management held a meeting with Financial Sponsor C.

During October and November 2006, we engaged in due diligence discussions with Financial Sponsor B, Financial Sponsor C and representatives of Financial Sponsor C’s portfolio company.

 

On November 20, 2006, Financial Sponsor C provided a written, non-binding indication of interest indicating a proposed purchase price between $13.50 and $15.00 per share. Our Board of Directors decided to reject the indication of interest from Financial Sponsor C due to the low premium over our market price that it was willing to pay.

 

On November 21, 2006, our Board of Directors met and reviewed the status of discussions with Financial Sponsor B and Financial Sponsor C. Our Board of Directors discussed the lack of progress towards a transaction and determined that we should discontinue discussions with the potential bidders until they had further worked out a transaction between themselves. In this discussion, our Board of Directors noted the added complexity from having multiple parties conduct concurrent negotiations. As part of this deliberation, our Board of Directors indicated to management that it was authorized to engage in discussions with other parties. In the period following this meeting, our management held preliminary discussions with several private equity firms regarding their potential interest in Printronix.

 

In mid-May 2007, our management contacted representatives of Vector. The Vector representatives expressed an interest in pursuing a potential transaction and on May 16, 2007, we entered into a confidentiality agreement with Vector. On May 18, 2007, management held a conference call with representatives of Vector to discuss our operations and public market profile. Vector previously had been identified by Houlihan Lokey as a potential buyer, but had not been contacted because of our desire to limit the number of financial sponsors involved in the process. On May 24, 2007, representatives from Vector met with members of management for an all day meeting to discuss matters related to Printronix, which included Printronix product overview, sales and marketing (organization, expenditures and process), operations (process, expenditures and breakdown between line and thermal printers), opportunities for product cost improvement, research and development, general and administrative expenses, operating plan projections through fiscal year 2008 showing revenues by product and geography, and profit and loss projections by quarter through fiscal year 2008. The parties held several telephonic and in person meetings during May and June 2007. The meetings were for the purpose of providing due diligence information to Vector and the parties did not discuss any arrangements regarding management compensation.

 

On June 6, 2007, Vector submitted a non-binding indication of interest to our Board of Directors. Vector proposed acquiring Printronix for $16.00 per share, representing an approximate 20% premium over the Company’s closing stock price on June 5, 2007, and its average closing price over the 10 days prior to June 6, 2007.

 

On June 7, 2007, our Board of Directors met to consider the Vector proposal. Management discussed its interactions with Vector, and representatives of Stradling Yocca Carlson & Rauth briefed our Board of Directors on its fiduciary duties. Management was recused from the meeting and the independent members of our Board of Directors discussed Vector’s proposal. Our Board of Directors decided to establish a special committee comprised of all of the directors other than Mr. Kleist. The Special Committee was granted the exclusive authority to consider proposals to acquire Printronix and alternatives to a sale of the Company. The Special Committee was also authorized to retain advisors to assist it in its deliberations and any negotiations. The members of the Special Committee determined to discuss whether it was appropriate to retain Houlihan Lokey and Stradling Yocca Carlson & Rauth as their financial and legal advisors at its first meeting.

 

On June 12, 2007, the Special Committee met to discuss Vector’s proposal to acquire Printronix. At the beginning of the meeting, one of the members of the Special Committee, Bruce Coleman, disclosed to the committee that he had recent prior business dealings with Vector and expected to have future business dealings with Vector. While Mr. Coleman believed he would be able to perform his fiduciary duties as a member of the Special Committee, he thought it was appropriate that he resign from the Special Committee in order to avoid even the appearance of a conflict of interest. Accordingly, Mr. Coleman resigned from the Special Committee. Representatives of Stradling Yocca Carlson & Rauth briefed the Special Committee on its fiduciary duties. After inquiring as to any relationships with Vector and our management and considering the costs and risks of engaging new advisors at this stage in the process, the Special Committee determined that both Houlihan Lokey and Stradling Yocca Carlson & Rauth were independent and could represent the Special Committee going forward. Representatives of Houlihan Lokey updated the Special Committee on our ongoing exploration of strategic alternatives and how

various potential bidders had either dropped out of the process or been unwilling to submit a proposal at an acceptable price. Houlihan Lokey also discussed a possible alternative proposal from Financial Sponsor B and Financial Sponsor C whereby Printronix would be combined with Financial Sponsor C’s portfolio company. The Special Committee discussed that, while Financial Sponsor B would likely take the lead in any negotiations, this would be a more complicated transaction due to it having multiple parties and, as such, would have greater risk to consummation. The Special Committee also discussed how such a transaction could achieve the highest possible value since it would combine the value enhancing attributes of a transaction with a financial sponsor (leverage) and a strategic bidder (synergies). The Special Committee also considered whether or not to go back to the parties previously contacted or contact other parties that had been excluded from the process due to competitive and public leak concerns. The Special Committee balanced the potential for obtaining a higher transaction price against the risk of a leak and the disruptive effects such leakage could have on our ability to effectively compete as an independent public company and our relationships with our employees and customers.

 

On June 15, 2007, the Special Committee met for an update on Houlihan Lokey’s conversations with Vector and Financial Sponsor B. Houlihan Lokey advised the Special Committee that Vector had said that it was unwilling to increase its proposed purchase price above $16.00 and did not indicate much flexibility with respect to terms and conditions. Based on the tenor of discussions, the Special Committee determined that it would be unlikely to secure favorable merger agreement terms such as “go-shop” provision or a majority of disinterested shares approval condition. Houlihan Lokey also advised the Special Committee that Financial Sponsor B had said that it was prepared to submit a proposal to acquire the Company for $16.125 per share, in a transaction that would include management participation. The Special Committee decided to inform Vector that its proposed price of $16.00 per share was inadequate in an effort to have Vector increase its proposed price. The Special Committee also decided to request Financial Sponsor B to raise its price to $16.50 per share. The Special Committee discussed how Financial Sponsor B’s proposed transaction was more risky but believed that it was worth pursuing so long as it provided enough of a premium over the price proposed by Vector.

 

On June 19, 2007, our Board of Directors met for an update on Houlihan Lokey’s discussions with Vector and Financial Sponsor B since the previous Committee meeting. Houlihan Lokey advised the Special Committee that Vector had said that it was unwilling to increase its proposed purchase price above $16.00 per share, but did indicate that the merger agreement could include both a “go shop” provision and a majority of disinterested shares approval condition. Representatives of Houlihan Lokey also advised the Special Committee that Financial Sponsor B had increased its proposed purchase price from $16.125 to $16.50 per share, and had submitted a non-binding indication of interest at $16.50 per share shortly before the meeting. Financial Sponsor B’s indication of interest provided for a majority of disinterested shares approval condition, but did not include a “go shop” provision in the merger agreement. The Special Committee discussed the benefits of a “go shop” provision, especially in light of the fact that certain of our competitors had not been contacted during our exploration of strategic alternatives. Representatives of Stradling Yocca Carlson & Rauth noted that, while the merger agreement would have a fiduciary out allowing for a passive post-signing market check (subject to the payment of a break-up fee), a “go shop” would allow us to proactively approach third parties and attempt to secure a transaction with a higher per share purchase price. The Special Committee determined that the absence of a “go shop” provision and the greater complexity of the transaction proposed by Financial Sponsor B were offset by the $0.50 higher per share purchase price. The Special Committee also discussed whether Houlihan Lokey should attempt to have Financial Sponsor B further increase its proposed purchase price but determined that it was highly unlikely that Financial Sponsor B would do so, and requesting a higher price could result in Financial Sponsor B terminating discussions. The Special Committee decided to enter into exclusive negotiations with Financial Sponsor B, pursuant to which we would negotiate exclusively with Financial Sponsor B until July 15, 2007.

 

On July 6, 2007, the Special Committee received updates from representatives of Houlihan Lokey and Stradling Yocca Carlson & Rauth regarding Financial Sponsor B’s due diligence efforts and the negotiation of a merger agreement.

 

On July 15, 2007, the Special Committee met to discuss the status of the negotiations with Financial Sponsor B. Houlihan Lokey advised the Special Committee that Financial Sponsor B had made significant progress conducting its due diligence and merger agreement negotiations, but that Financial Sponsor B also was engaged in due diligence and negotiations with Financial Sponsor C and its portfolio company. As this process was taking

longer than expected, Financial Sponsor B had requested an extension to its exclusivity period, to July 25, 2007. The Special Committee discussed the apparent difficulty Financial Sponsor B was having in finalizing the terms of transaction with both us and Financial Sponsor C. However, the Special Committee continued to believe that Financial Sponsor B could still put a multi-party transaction together and decided to extend Financial Sponsor B’s period of exclusivity until July 25, 2007.

 

On July 25, 2007, the Special Committee met to discuss the negotiations with Financial Sponsor B. The Special Committee discussed how it was taking Financial Sponsor B longer than expected to complete its negotiations with Financial Sponsor C. While the Special Committee still wanted us to work with Financial Sponsor B, it decided to not grant Financial Sponsor B any further extensions to its exclusivity agreement. The Special Committee also instructed Houlihan Lokey to contact Vector following the expiration of Financial Sponsor B’s exclusivity period to determine if Vector was still interested in pursuing a transaction with us. At this meeting, management indicated that it was willing to work with either Financial Sponsor B or Vector and would take direction from the Special Committee as to how to proceed. The Special Committee also discussed whether it was appropriate to have Houlihan Lokey contact various strategic bidders, but decided that the risks of a public leak, including the negative impact a leak would have on our ability to compete as an independent public company, outweighed the potential benefits of contacting strategic bidders.

 

On July 31, 2007, the Special Committee met to discuss the negotiations with Financial Sponsor B and the discussions with Vector. At this meeting, a representative of Financial Sponsor B made a presentation to the Special Committee and discussed how its due diligence and negotiation process with us were complete and its due diligence and negotiation process with Financial Sponsor C were almost complete. The representative also discussed how it was unlikely Financial Sponsor B would be able to finance its acquisition of both Printronix and Financial Sponsor C’s portfolio company on acceptable terms due to the recent turmoil in the debt capital markets. As the representative was unsure when the debt markets would stabilize, he was unwilling to commit to a timetable for the transaction. The representative from Financial Sponsor B then left the meeting. Houlihan Lokey discussed its interactions with Vector and reported to the Special Committee that Vector had reconfirmed in writing its original $16.00 per share offer price. The Special Committee decided to let Vector’s offer expire and instructed Houlihan Lokey to tell Financial Sponsor B to keep it current with respect to its dealings with its proposed lenders. The Special Committee discussed its willingness to enter into exclusive negotiations with Vector but only after giving Financial Sponsor B some additional time to finalize its discussions with Financial Sponsor C and to work out its debt financing issues.

 

On August 2, 2007, the Special Committee met to review the ongoing discussions with Financial Sponsor B and the discussions with Vector. At this meeting, Houlihan Lokey advised the Special Committee that Financial Sponsor B had said that Financial Sponsor B’s lenders needed more time and that a new potential lender was beginning their due diligence review. The Special Committee then discussed Vector’s proposal. Houlihan Lokey informed the Special Committee that it had received another letter of interest from Vector reconfirming its original $16.00 per share offer price. The letter did not include a financing contingency; instead, the letter suggested that Vector would use debt backed by real estate assets to purchase Printronix. Management indicated to the Special Committee a willingness to continue to manage Printronix whether it was owned by either Vector or another party. The Special Committee decided to reenter negotiations and discussions with Vector with respect to a potential transaction after the pending earnings announcement and continue its discussions and due diligence with Financial Sponsor B in parallel. Management was recused and the Special Committee decided to instruct management and Houlihan Lokey to update Vector on Printronix’s latest performance.

 

Prior to the August 10, 2007 Special Committee meeting, members of management (Messrs. Kleist and Harwood) and Houlihan Lokey held a meeting with representatives from Vector. Representatives from Houlihan Lokey were also present. Management updated Vector on Printronix’s financial projections through fiscal year 2010 and discussed Printronix products, worldwide locations, actual profit and loss results, the product market share data, sales growth initiatives, channel to market and recurring revenues.

 

On August 10, 2007, the Special Committee met to review the ongoing discussions with Financial Sponsor B and Vector. Financial Sponsor B had indicated that it was still working with its potential lenders and should have better visibility on its ability to complete a transaction soon. Houlihan Lokey reported that Vector had re-confirmed

its interest in a $16.00 per share transaction after having been provided updated information regarding our financial performance. The Special Committee discussed how a Vector transaction might be more achievable given the current conditions in the debt market due to its need for less debt financing. The Special Committee also discussed the complexity of Financial Sponsor B’s proposed transaction, which involved Financial Sponsor B acquiring Printronix and Financial Sponsor C merging its portfolio company into the Company in exchange for a negotiated portion of the combined company’s equity. The Special Committee also discussed how Vector would likely require an exclusivity agreement before committing significant additional time and resources to a potential transaction.

 

On August 22, 2007, the Special Committee met to continue its discussion regarding a possible transaction. At this meeting, management provided an update on our financial performance. The Special Committee discussed a new non-binding letter of intent from Vector, proposing a $16.00 per share price, subject to us entering into an exclusivity agreement. Representatives of Stradling Yocca Carlson & Rauth discussed how Vector’s proposal did not provide for a “go-shop” provision or a requirement that the transaction be approved by a majority of our disinterested shares. The Committee discussed the absence of these provisions in light of the overall process including the competitive nature of the bidding between Vector and Financial Sponsor B. The Committee also discussed how it would still be able to respond to unsolicited offers under the merger agreement and the fact that we operate in a specific market in which the parties who might have an interest in us had either already been contacted or would be aware of a transaction following its public announcement. The Committee also discussed Financial Sponsor B’s inability to secure financing for its transaction and the risk that Financial Sponsor C could back out of the transaction. Given Financial Sponsor B’s inability to finalize the terms of its proposed transaction, the transaction’s higher risk of non-consummation due to its increased complexity and the Special Committee’s preliminary view that Vector’s proposal represented an attractive transaction for our stockholders, the Special Committee decided to enter into exclusive negotiations with Vector. The Special Committee also authorized management to begin discussions with Vector about their positions with the surviving corporation after closing of the proposed merger and the terms of any equity ownership by management in the acquiring entity or the surviving corporation.

 

On August 23, 2007 through September 13, 2007, representatives of Vector hold informal discussions with members of management (including Messrs. Kleist, Fitzsimmons and Harwood) about their positions and compensation after the closing, as well as their equity participation after closing (but no specific terms were agreed). The members of management indicated a desire to rollover a material portion of their Printronix shares into equity of the acquiring entity.

 

On August 23, 2007, Messrs. Kleist and Harwood held a meeting with representatives from Vector. Representatives from Houlihan Lokey were also present. Management updated Vector on Printronix’s business and operating plan projections, which was similar to that presented on August 10, 2007, but to additional representatives from Vector.

 

On August 24, 2007, Mr. Harwood held a phone call with representatives from Vector. Representatives from Houlihan Lokey were also on the call. Mr. Harwood and Vector discussed Printronix generally and due diligence matters.

 

On August 29, 2007, the initial draft Merger Agreement was sent to Vector’s counsel. Representatives of Printronix (including Mr. Harwood and Ms. Mathews) had a meeting with representatives from Vector. Representatives from Houlihan Lokey were also present. Printronix and Vector discussed Printronix generally and due diligence matters, related to engineering, human resources, marketing and general administrative expenses.

 

On August 30, 2007, representatives of Printronix, including Mr. Harwood, had a diligence meeting with representatives from Vector. Representatives from Houlihan Lokey were also present. Management and Vector discussed Printronix generally and due diligence matters, related to general and administrative expenses, product line profits and losses and Printronix’s financial statements.

 

On August 31, 2007, representatives of Printronix, including Mr. Harwood, had a diligence meeting with representatives from Vector. Representatives from Houlihan Lokey were also present. Management and Vector continued their discussions from August 30, 2007 on general Printronix and due diligence matters.

 

On September 3, 2007, representatives of Printronix, including Mr. Harwood, had a diligence phone call with representatives of Vector. Representatives from Houlihan Lokey were also on the call. Management and Vector discussed Printronix generally and due diligence matters.

 

On September 5, 2007, representatives of Printronix, including Messrs. Kleist, Harwood and Fitzsimmons, had a diligence meeting with representatives from Vector. Representatives from Houlihan Lokey were also present. Management and Vector discussed Printronix generally and due diligence matters with respect to sales, marketing and operations.

 

On September 5, 2007, members of management (including Messrs. Kleist and Harwood) and representatives from Vector met with Silicon Valley Bank. Management gave Silicon Valley Bank an overview of Printronix’s products, worldwide locations, financial statements, sales growth initiatives, channel to market operations and reoccurring revenues. Representatives from Houlihan Lokey were also present.

 

On September 6, 2007, representatives from Vector met with all members of our senior management (including Messrs. Kleist, Harwood and Fitzsimmons and Ms. Mathews) for a diligence meeting to discuss the line matrix, thermal printer, and laser printer markets, to give presentations on sales, marketing, engineering and Printronix operations and inventory, locations, supply chain management, cost reductions, and headcount, present worldwide revenue, operating income and financial projections through fiscal year 2010. Representatives from Houlihan Lokey were also present.

 

On September 10, 2007, Vector’s counsel provided initial comments to the draft merger agreement. Members of sales and marketing management, and Messrs. Kleist and Harwood, held a diligence meeting with representatives of Vector to discuss sales and marketing, provide a due diligence update and held a follow-up question and answer session related to the prior week’s meeting. Representatives from Houlihan Lokey were also present.

 

On September 13, 2007, Mr. Kleist, on behalf of himself, Mr. Harwood, Mr. Fitzsimmons, and Ms. Mathews, reaffirmed to representatives from Vector that they would like to roll over a material portion of their Printronix shares into Pioneer.

 

On September 13, 2007, the Special Committee met to discuss the status of Vector’s due diligence and the negotiation of the definitive merger agreement. At this meeting, management indicated that Mr. Kleist and certain other members of management were in discussions with Vector about how many shares of Printronix stock they would be rolling over into the acquiring entity. The Special Committee also discussed certain terms and conditions of the proposed transaction, including a proposed closing condition related to our working capital and the proposed reverse break-up fee in the event the buyer breached its obligations under the merger agreement. Representatives of Stradling Yocca Carlson & Rauth also discussed the break-up fee that we would have to pay to Vector if the Special Committee or Board of Directors exercised the fiduciary-out mechanism in the merger agreement.

 

On September 14, 2007, representatives from Vector informed members of management they would not be permitted to roll over as much of their Printronix shares into Pioneer as previously desired and proposed that the total amount to be rolled over by all members of management would be 9.9% or less. Members of management (Messrs. Kleist and Harwood) also had a meeting with representatives from Vector. Representatives from Houlihan Lokey were also present. Management and Vector discussed due diligence matters, and held a question and answer session follow-up meeting.

 

On September 17, 2007 and September 18, 2007, representatives from Vector and representatives of Printronix (including Messrs. Kleist and Fitzsimmons) met in Singapore to discuss operations and due diligence matters as they related to the Singapore operations and Asia Pacific region covering its organization, inventory cost reductions, revenue plans, and opportunities for growth. Representatives from Houlihan Lokey were also present for these meetings.

 

On September 21, 2007, the Continuing Stockholders formally retained independent counsel (Rutan & Tucker LLP, which Printronix, as authorized by the Special Committee, will pay the reasonable fees and expenses of approximately $20,000 in connection with its services to the Continuing Stockholders). The Continuing Stockholders confirmed to representatives from Vector that they agreed to the aggregate amount of the rollover proposed by Vector (9.9% or less of the acquiring corporation). Messrs. Harwood and Fitzsimmons and Ms. Mathews individually agreed to rollover a certain

amount of their shares. As part of this agreement, Mr. Kleist proposed that he would rollover approximately 15% of his total amount of Printronix shares to fill the aggregate rollover amount, up to 9.9% of the acquiring corporation.

 

On September 24, 2007, Vector’s counsel sent Mr. Kleist the first draft of the proposed form of Equity Rollover Commitment Letter.

 

Between September 25 and October 1, 2007, the Continuing Stockholders and their counsel and Vector and its counsel negotiated the terms of the equity rollover commitment letters to be entered into by each Continuing Stockholder. The discussions between Mr. Kleist and Vector included whether or not Mr. Kleist would enter into an employment agreement with Printronix to become effective after the closing. Ultimately, Vector agreed to enter into such an employment agreement to bring the terms of Mr. Kleist’s employment back into line with industry norms after a recent pay cut, and the proposed terms of that agreement were memorialized in an attachment to Mr. Kleist’s equity commitment letter.

 

On September 26, 2007, the Special Committee met to discuss the status of Vector’s due diligence and the negotiation of the definitive merger agreement. Representatives of Stradling Yocca Carlson & Rauth briefed the Special Committee on various aspects of the draft merger agreement, including the two primary open issues: the closing conditions relating to environmental matters and working capital. The Special Committee discussed how it was not typical in public company merger agreements to have these types of closing conditions but that Vector was unwilling to enter into a definitive merger agreement without such conditions. The Special Committee instructed Houlihan Lokey and Stradling Yocca Carlson & Rauth to negotiate specific language in order to maximize the likelihood of these conditions being satisfied.

 

From September 26 to October 1, 2007, Houlihan Lokey and Stradling Yocca Carlson & Rauth continued the negotiations with Vector.

 

On October 1, 2007, the Special Committee met to discuss with its financial and legal advisors and consider the proposed transaction and draft merger agreement with Pioneer, which is owned by Vector. As part of this discussion, Stradling Yocca Carlson & Rauth briefed the Special Committee on its fiduciary duties. Thereafter, at the request of the Special Committee, HLHZ rendered its oral opinion to the Special Committee (which was subsequently confirmed in writing by delivery of HLHZ’s written opinion dated the same date) to the effect that, as of October 1, 2007, and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by HLHZ in preparing its opinion, the merger consideration to be received by the holders of shares of our common stock other than the Continuing Stockholders and their affiliates in the merger was fair to such holders from a financial point of view to such holders. After a lengthy discussion, the Special Committee unanimously voted to adopt the merger agreement and authorized Houlihan Lokey and Stradling Yocca Carlson & Rauth, to complete negotiation of the merger agreement and management to execute and deliver the merger agreement. Immediately following the meeting of the Special Committee, our full Board of Directors met to consider these matters and unanimously voted to adopt the merger agreement and otherwise ratified the resolutions of the Special Committee.

 

Following the meeting of our Board of Directors on October 1, 2007, the parties executed the merger agreement and the related agreements (including the voting agreements, the limited guarantee and equity commitment letter delivered by Vector and the rollover equity commitment letters delivered by the Continuing Stockholders). In addition, Silicon Valley Bank executed and delivered the commitment letter with respect to the financing of the merger. Vector and Printronix issued a joint press release announcing the execution of the merger agreement before the opening of the NASDAQ Global Market on October 2, 2007.

 

Reasons for the Merger; Recommendation of the Special Committee and Our Board of Directors

 

The Special Committee

 

The Special Committee, acting with the advice and assistance of its independent legal and financial advisors, evaluated and negotiated, including the terms and conditions of, the merger agreement with Pioneer and Merger Subsidiary. The Special Committee unanimously has determined that each of the merger agreement and the merger is fair to, advisable, and in the best interests of, our unaffiliated stockholders. On October 1, 2007, the Special Committee approved the merger agreement and authorized the transactions contemplated by the merger agreement,

including the merger. The Special Committee unanimously determined to recommend to our Board of Directors that our Board of Directors approve and declare advisable the merger agreement and the merger and that our Board of Directors recommend that our stockholders adopt the merger agreement. In reaching these conclusions, the Special Committee considered the following material substantive factors, among others:

 

 

 

 

 

 

third party, subject to the payment by the Company of a $4.2 million termination fee and certain other conditions, which in the aggregate represents approximately 3.7% of the total merger consideration, after taking into consideration the amount being paid to the Company’s option holders, or (b) which entitle the Company to a reverse termination fees of $5.0 million dollars in the event that (x) the merger agreement is terminated because April 1, 2008 has passed and all of the closing conditions are satisfied and Pioneer cannot close within three business days thereafter or (y) Pioneer or Merger Subsidiary breaches a representation, warranty or covenant under the merger agreement which would cause a failure of the closing condition relating to Pioneer’s and Merger Subsidiary’s representations, warranties and covenants and fails to cure that breach within 30 days of written notice from us and Pioneer does not at the time have the right to terminate the merger agreement due to a breach by us of our representations, warranties or covenants;

 

 

The Special Committee also believed that sufficient procedural safeguards were and are present to ensure the fairness of the merger and to permit the Special Committee to represent effectively the interests of our unaffiliated stockholders without retaining an unaffiliated representative to act solely on behalf of our unaffiliated stockholders. In reaching that determination our Board of Directors took into account, in addition to the factors noted above, the following, each of which it believed supported its decision and provided assurance of the fairness of the merger to our unaffiliated stockholders:

 

 

 

The Special Committee was aware of and also considered the following potentially adverse factors associated with the merger, among others:

 

 

 

 

The preceding discussion of the information and factors considered by the Special Committee is not, and is not intended to be, exhaustive. In view of the large number of factors considered by the Special Committee in connection with the evaluation of the merger agreement and the merger and the complexity of these matters, the Special Committee did not consider it practicable to, nor did it attempt to, quantify, rank or otherwise assign relative weights to the specific factors considered in reaching a decision, nor did the Special Committee evaluate whether these factors were of equal importance. In addition, each director may have given different weight to the various factors. In evaluating the merger agreement and the merger, the Special Committee consulted with our management and our legal and financial advisors with respect to the terms of the merger.

 

The Board of Directors

 

Our board of directors (other than Mr. Kleist), acting upon the unanimous recommendation of the Special Committee, at a meeting described above on October 1, 2007, determined that the merger agreement and the merger are fair to, advisable, and in the best interests of, our unaffiliated stockholders, have approved the merger agreement and have authorized the transactions contemplated by the merger agreement, including the merger, subject to approval by our stockholders. Our Board of Directors unanimously recommends that you vote “FOR” adoption of the merger agreement.

 

As Mr. Kleist is the only director who is an employee of the Company, the approval of the merger agreement and the merger by our board of directors constitutes the approval by a majority of the directors of the Company who are not employees of the Company.

 

Mr. Kleist, who has agreed to contribute a portion of his shares of Printronix common stock to Pioneer in exchange for an approximately 8.29% equity interest in Pioneer, recused himself from the foregoing determination, but participated in the approval by our board of directors because of his position as a member of the board of directors.

 

Opinion of Financial Advisor

 

On October 1, 2007, HLHZ rendered its oral opinion to the Special Committee (which was subsequently confirmed in writing by delivery of HLHZ’s written opinion dated the same date) to the effect that, as of October 1, 2007, the merger consideration to be received by the holders of shares of our common stock other than the Continuing Stockholders and their affiliates in the merger was fair to such holders from a financial point of view.

 

HLHZ’s opinion was directed to the Special Committee and only addressed the fairness from a financial point of view of the merger consideration to be received by the holders of our common stock other than the Continuing Stockholders and their affiliates in the merger and did not address any other aspect or implication of the merger. The summary of HLHZ’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its

written opinion, which is included as Annex C to this proxy statement and sets forth the procedures followed, assumptions made, qualifications, and limitations on the review undertaken and other matters considered by HLHZ in preparing its opinion. Neither HLHZ’s written opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute advice or a recommendation to any stockholder as to how such stockholder should act or vote with respect to the merger.

 

In connection with this opinion, HLHZ made such reviews, analyses and inquiries as HLHZ deemed necessary and appropriate under the circumstances. Among other things, HLHZ:

 

1. reviewed Printronix’s annual reports to stockholders on Form 10-K for the fiscal years ended March 31, 2007, March 31, 2006, and March 31, 2005, and the quarterly report on Form 10-Q for the quarter ended June 29, 2007 which Printronix’s management identified as being the most current financial statements available;

 

2. spoke with certain members of the management of Printronix regarding the operations, financial condition, future prospects, and projected operations and performance of Printronix and regarding the merger;

 

3. reviewed drafts of the following agreements and documents:

 

a. the merger agreement dated as October 1, 2007, including Exhibit A thereto, the form of the voting agreement to be entered into by each of the directors in their capacity as stockholders, and certain officers of Printronix in connection with the merger agreement; and

 

b. the limited guarantee dated as of October 1, 2007 delivered by Vector in favor of Printronix and in connection with the merger agreement.

 

4. reviewed financial forecasts and projections prepared by the management of Printronix with respect to our company for the fiscal years ended March 31, 2008 through 2010;

 

5. reviewed the historical market prices and trading volume for Printronix’s publicly traded securities for the past three years and those of certain publicly traded companies which HLHZ deemed relevant;

 

6. reviewed certain other publicly available financial data for certain companies that HLHZ deemed relevant and publicly available transaction prices and premiums paid in other change of control transactions that HLHZ deemed relevant for companies in related industries to Printronix; and

 

7. conducted such other financial studies, analyses, and inquiries as HLHZ deemed appropriate.

 

HLHZ relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to HLHZ, discussed with or reviewed by HLHZ, or publicly available, and did not assume any responsibility with respect to such data, material and other information. In addition, management of Printronix advised HLHZ, and HLHZ assumed, that the financial forecasts and projections reviewed by HLHZ had been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of Printronix’s management as to the future financial results and condition of Printronix, and HLHZ expressed no opinion with respect to such forecasts and projections or the assumptions on which they were based. HLHZ relied upon and assumed, without independent verification, that there had been no material change in the assets, liabilities, financial condition, results of operations, business or prospects of Printronix since the date of the most recent financial statements provided to HLHZ, and that there was no information or any facts that would make any of the information reviewed by HLHZ incomplete or misleading. HLHZ’s opinion addressed only the fairness, from a financial point of view, of the merger consideration to be received by the holders of shares of our common stock other than the Continuing Stockholders and their affiliates in the merger and does not address any other aspect or implication of the merger or any other agreement, arrangement, or understanding entered into in connection with the merger or otherwise.

 

HLHZ relied upon and assumed, without independent verification, that (a) the representations and warranties of all parties to the agreements identified in item 3 above and all other related documents and instruments that are referred to therein were true and correct, (b) each party to all such agreements would fully and timely perform all of the covenants and agreements required to be performed by such party, (c) all conditions to the consummation of the merger would be satisfied without waiver thereof, and (d) the merger would be consummated in a timely manner in

accordance with the terms described in the agreements and documents provided to us, without any amendments or modifications thereto or any adjustment to the aggregate consideration (through offset, reduction, indemnity claims, post-closing purchase price adjustments or otherwise) or any other financial term of the merger. HLHZ also relied upon and assumed, without independent verification, that (i) the merger would be consummated in a manner that complies in all respects with all applicable federal and state statutes, rules and regulations, and (ii) all governmental, regulatory, and other consents and approvals necessary for the consummation of the merger would be obtained and that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made that would result in the disposition of any material portion of the assets of Printronix or otherwise have an adverse effect on Printronix or any expected benefits of the merger.

 

Furthermore, in connection with this opinion, HLHZ was not requested to make, and did not make, any physical inspection or independent appraisal of any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance-sheet or otherwise) of Printronix or any other party, nor was HLHZ provided with any such appraisal. HLHZ expressed no opinion regarding the liquidation value of any entity. HLHZ undertook no independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which Printronix is or may be a party or is or may be subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which Printronix is or may be a party or is or may be subject and, at our direction and with our consent, HLHZ’s opinion made no assumption concerning, and therefore did not consider, the potential effects of any such litigation, claims or investigations or possible assertion of claims, outcomes or damages arising out of any such matters. HLHZ has not undertaken, and are under no obligation, to update, revise, reaffirm, or withdraw its opinion, or otherwise comment on or consider events occurring after the date thereof.

 

HLHZ’s opinion was furnished for the use and benefit of the Special Committee in connection with its consideration of the merger and was not intended to, and does not, confer any rights or remedies upon any other person, and was not intended to be used, and may not be used, for any other purpose, without HLHZ’s express written consent. The opinion should not be construed as creating any fiduciary duty on HLHZ’s part to any party. The opinion is not intended to be, and does not constitute, a recommendation to the Special Committee, our Board of Directors, any security holder or any other person as to how to act or vote with respect to the merger.

 

HLHZ was not requested to opine as to, and its opinion did not address: (i) the underlying business decision of the Special Committee, Printronix, its respective security holders or any other party to proceed with or effect the merger, (ii) the terms of any arrangements, understandings, agreements or documents related to, or the form or any other portion or aspect of, the merger or otherwise, except as expressly addressed in its opinion, (iii) the fairness of any portion or aspect of the merger to the holders of any class of securities, creditors or other constituencies of Printronix or any other party other than those set forth in its opinion, (iv) the relative merits of the merger as compared to any alternative business strategies that might exist for Printronix or any other party or the effect of any other transaction in which Printronix or any other party might engage, (v) the tax or legal consequences of the merger to either Printronix, its security holders, or any other party, (vi) the fairness of any portion or aspect of the merger to any one class or group of Printronix’s or any other party’s security holders vis-à-vis any other class or group of Printronix’s or such other party’s security holders (including without limitation the allocation of any consideration amongst or within such classes or groups of security holders), (vii) whether or not Printronix, its security holders or any other party is receiving or paying reasonably equivalent value in the merger, or (viii) the solvency, creditworthiness or fair value of Printronix or any other participant in the merger under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters. Furthermore, no opinion, counsel, or interpretation was intended in matters that require legal, regulatory, accounting, insurance, tax or other similar professional advice. It was assumed that such opinions, counsel, or interpretations had been or would be obtained from the appropriate professional sources. Furthermore, HLHZ relied, with our consent, on the assessment by the Special Committee, Printronix and their respective advisers, as to all legal, regulatory, accounting, insurance, and tax matters with respect to Printronix and the merger.

 

In preparing its opinion to the Special Committee, HLHZ performed a variety of analyses, including those described below. The summary of HLHZ’s valuation analyses is not a complete description of the analyses underlying HLHZ’s fairness opinion. The preparation of a fairness opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative, and other

analytic methods employed and the adaptation and application of these methods to the unique facts and circumstances presented. As a consequence, neither a fairness opinion nor its underlying analyses are readily susceptible to partial analysis or summary description. HLHZ arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, analytic method or factor. Accordingly, HLHZ believes that its analyses must be considered as a whole and that selecting portions of its analyses, analytic methods and factors, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

 

In performing its analyses, HLHZ considered business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of the written opinion. No company, transaction, or business used in HLHZ’s analyses for comparative purposes is identical to Printronix or the proposed merger. While the results of each analysis were taken into account in reaching its overall conclusion with respect to fairness, HLHZ did not make separate or quantifiable judgments regarding individual analyses. The implied reference range values indicated by HLHZ’s analyses are illustrative and not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond our control and the control of HLHZ. Much of the information used in, and accordingly the results of, HLHZ’s analyses are inherently subject to substantial uncertainty.

 

HLHZ’s opinion and analyses were provided to the Special Committee in connection with its consideration of the proposed merger and were among many factors considered by the Special Committee in evaluating the proposed merger. Neither HLHZ’s opinion nor its analyses were determinative of the merger consideration or of the views of the Special Committee, our Board of Directors or our management with respect to the merger.

 

The following is a summary of the material valuation analyses performed in connection with the preparation of HLHZ’s opinion rendered to the Special Committee on October 1, 2007. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying and the assumptions, qualifications and limitations affecting each analysis, could create a misleading or incomplete view of HLHZ’s analyses.

 

For purposes of its analyses, HLHZ reviewed a number of financial metrics including:

 

Enterprise Value — generally the value as of a specified date of the relevant company’s outstanding equity securities (taking into account its outstanding options, warrants and other convertible securities) plus the value of its minority interests plus the value of its net debt (the value of its outstanding indebtedness, preferred stock and capital lease obligations less the amount of cash on its balance sheet) as of a specified date.

 

EBITDA — generally the amount of the relevant company’s earnings before interest, taxes, depreciation, and amortization for a specified time period.

 

EBIT — generally the amount of the relevant company’s earnings before interest and taxes for a specified time period.

 

Unless the context indicates otherwise, enterprise and per share equity values used in the selected companies analysis described below were calculated using the closing price of our common stock and the common stock of the selected computer peripheral related companies listed below as of June 30, 2007, and the transaction and per share equity values for the target companies used in the selected transactions analysis described below were calculated as of the announcement date of the relevant transaction based on the purchase prices paid in the selected transactions. Estimates of EBITDA and EBIT for Printronix for the fiscal years ending March 31, 2008, March 31, 2009, and March 31, 2010 were based on estimates provided by Printronix’s management. Estimates of EBITDA and EBIT for the selected companies listed below for the fiscal years ending 2008 and 2009 were based on publicly available research analyst estimates for those companies.

Selected Companies Analysis

 

HLHZ calculated enterprise value multiples of certain financial data for Printronix and selected companies.

 

The calculated multiples included:

 

Enterprise value as a multiple of latest twelve months, or LTM, EBITDA;

Enterprise value as a multiple of estimated 2008 EBITDA; and

Enterprise value as a multiple of estimated 2009 EBITDA.

 

The selected companies were:

 

 

HLHZ applied multiple ranges based on the selected companies’ analysis to corresponding financial data for Printronix provided by our management. The selected companies’ analysis indicated an implied reference range value per share of our common stock of $15.25 to $16.42, as compared to the proposed merger consideration of $16.00 per share of our common stock.

 

Selected Transactions Analysis

 

HLHZ calculated enterprise value multiples of certain financial data based on the purchase prices paid in selected publicly-announced transactions involving target companies it deemed relevant.

 

The calculated multiples included:

 

 

 

¹  Enterprise value multiples of fiscal 2007 LTM EBITDA and estimated fiscal 2008 EBITDA for Intermec, Inc. were not included in calculations of the Low, High, Median and Mean multiples for the selected companies because such multiples were believed to reflect depressed earnings levels significantly below the levels research analysts expect Intermec, Inc. to achieve in the future.

 

The selected transactions were:

 

 

The selected transactions analysis indicated the following:

 

 

HLHZ applied multiple ranges based on the selected transactions analysis to corresponding financial data for Printronix provided by Printronix’s management. The selected transactions analysis indicated an implied reference range value per share of our common stock of $13.78 to $16.57, as compared to the proposed merger consideration of $16.00 per share of our common stock.

 

Discounted Cash Flow Analysis

 

HLHZ also calculated the net present value of Printronix’s unlevered, after-tax cash flows based on the projections provided by our management. In performing this analysis, HLHZ used discount rates ranging from 14% to 22% based on Printronix’s estimated weighted average cost of capital and terminal value multiples ranging from 7.5x to 11.5x based on the multiples indicated by its selected companies analyses. For purposes of the discounted cash flow analysis, HLHZ calculated enterprise values for Printronix after taking into account the estimated present value of certain net operating losses and credit carry forwards. HLHZ utilized a net present value of our company’s net operating loss and tax credit carry forwards equal to $5 million calculated based on a schedule of such amounts expected to be available in the future as provided by our management. The discounted cash flow analyses indicated an implied reference range value per share of our common stock of $15.69 to $18.92, as compared to the proposed merger consideration of $16.00 per share of our common stock.

 

Other Considerations

 

Historical Stock Trading Analysis.   HLHZ noted that, during the prior 52 week period, our common stock had traded at prices ranging from $11.77 to $14.86, as compared to the proposed merger consideration of $16.00 per share of our common stock.

Premiums Analysis.   HLHZ noted that the proposed merger consideration represented a premium to the historical trading price of our common stock as follows:

 

 

 

Conduct of Our Business if the Merger is not Completed

 

In the event that the merger agreement is not adopted by our stockholders or if the merger is not completed for any other reason, our stockholders would not receive any merger consideration for their shares of our common stock. Instead, we would remain an independent public company, our common stock would continue to be listed and traded on NASDAQ Global Market and our stockholders would continue to be subject to the same risks and opportunities as they currently are with respect to their ownership of our common stock. If the merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of our shares, including the risk that the market price of our common stock may decline to the extent that the current market price of our stock reflects a market assumption that the merger will be completed. From time to time, our Board of Directors would evaluate and review our business operations, properties, dividend policy and capitalization, and, among other things, make such changes as are deemed appropriate. In addition, our Board of Directors might seek to identify strategic alternatives to maximize stockholder value. If the merger agreement is not adopted by our stockholders or if the merger is not consummated for any other reason, we cannot guarantee that any other transaction acceptable to us would be offered or that our business, prospects or results of operations would not be adversely impacted.

 

Pursuant to the merger agreement, under certain circumstances, we are permitted to terminate the merger agreement to enter into a Superior Proposal. See “The Merger Agreement Termination of Merger Agreement.”

 

Under certain circumstances, if the merger is not completed, we may be obligated to pay Pioneer a termination fee. Similarly, under other certain circumstances, if the merger is not completed, Pioneer may be obligated to pay Printronix a termination fee. See “The Merger Agreement — Termination Fees.”

 

Interests of Certain Officers and Directors in the Merger

 

In considering the recommendation of our Board of Directors in favor of the merger, our stockholders should be aware that certain of our officers and directors have interests in the merger that are different from or in addition to the interests of our stockholders in general. The members of our Board of Directors were aware of such interests when deciding to approve and recommend the merger agreement and the merger and such interests formed the basis for establishing a special committee of independent directors. See “Background of the Merger” and “Reasons for the Merger; Recommendation of Our Board of Directors.” Our stockholders should take these interests into account in deciding whether to vote “FOR” adoption of the merger agreement.

 

John R. Dougery, a member of our Board of Directors, holds options to purchase common stock of Printronix, the value of which, net of the aggregate exercise price of such options, and assuming a $16.00 per share price of Printronix stock, is approximately $37,743. Mr. Dougery also holds shares of Printronix common stock, the value of which, assuming a $16.00 per share price of Printronix stock, is approximately $1,226,672. Mr. Dougery’s securities and options were issued to him by Printronix in connection with his service on the board of directors, as well as having been acquired by him either through cash purchases and/or the exercise of options.

 

Erwin A. Kelen, a member of our Board of Directors, holds options to purchase common stock of Printronix, the value of which, net of the aggregate exercise price of such options, and assuming a $16.00 per share price of Printronix stock, is approximately $75,503.75. Mr. Kelen also holds shares of Printronix common stock, the value of which, assuming a $16.00 per share price of Printronix stock, is approximately $461,008. Mr. Kelen’s securities and options were issued to him by Printronix in connection with his service on the board of directors, as well as having been acquired by him either through cash purchases and/or the exercise of options.

 

Chris Whitney-Halliwell, a member of our Board of Directors, holds options to purchase common stock of Printronix, the value of which, net of the aggregate exercise price of such options, and assuming a $16.00 per share price of Printronix stock, is approximately $27,853. Ms. Halliwell does not hold shares of Printronix common stock. Ms. Halliwell’s securities were issued to her by Printronix in connection with her service on the board of directors.

 

Charles E. Turnbull, a member of our Board of Directors, holds options to purchase common stock of Printronix, the value of which, net of the aggregate exercise price of such options, and assuming a $16.00 per share price of Printronix stock, is approximately $9,900. Mr. Turnbull does not hold shares of Printronix common stock. Mr. Turnbull’s securities were issued to him by Printronix in connection with his service on the board of directors.

 

Robert A. Kleist, a member of our board of directors and chief executive officer and president of Printronix, has acted as chairman of the board of directors since 1974. Printronix has not referred to Mr. Kleist as chairman of the board in recent SEC filings because it did not believe it was required disclosure as it is not an elected office. Mr. Kleist holds options to purchase common stock of Printronix, the value of which, net of the aggregate exercise price of such options, and assuming a $16.00 per share price of Printronix stock, is approximately $154,284. Mr. Kleist also holds shares of Printronix common stock, the value of which, assuming a $16.00 per share price of Printronix stock, is approximately $18,503,552. Mr. Kleist intends to contribute a portion of his current ownership interests of Printronix common stock to Pioneer in exchange for equity of Pioneer, such that, Mr. Kleist, together with the other Continuing Stockholders, will own an aggregate of 9.9% of the equity of Pioneer. Mr. Kleist is an original founder of Printronix, and has maintained his securities since founding, as well as purchasing additional securities, both through cash purchases as well as the exercise of options. Additional shares have been issued to him in connection with his service on the Printronix board of directors and as our chief executive officer. It is expected that Mr. Kleist will also enter into an agreement with Pioneer pursuant to which he will serve as chief executive officer of Printronix following the consummation of the merger with an initial base salary of $337,000 and the right to participate in any annual bonus plan. Mr. Kleist’s base salary shall be reviewed each year in relation to the average base salary paid to chief executive officers of other companies of similar size and industry as Printronix, provided that Mr. Kleist’s salary shall not decrease so long as he is serving in a full-time capacity as chief executive officer of Printronix. Should Mr. Kleist serve on the new Printronix Board of Directors, he will receive no compensation for his services as such. It is anticipated that no members of the new Printronix Board of Directors will be compensated for their services as such. If Mr. Kleist is terminated without cause and is not offered the role of chairman of the Printronix Board of Directors, he will receive 12 months of base salary as severance. If Mr. Kleist is terminated without cause as chief executive officer, but is offered the role of chairman of our Board of Directors, whether or not he accepts such role, he will receive no severance. If Mr. Kleist is terminated without cause as chief executive officer, but is the working chairman of the board, then he will continue to receive the same salary he would have made as chief executive officer so long as he is serving in a full-time capacity as a working chairman of the board. As a result of his planned contribution of 180,558 shares of Printronix common stock to Pioneer, Mr. Kleist will own 5,804,780 shares of preferred stock of Pioneer and 580,478 shares of common stock of Pioneer. This equates to approximately 8.29% of the preferred stock and approximately 8.29% of the common stock of Pioneer, or approximately 8.29% of the total outstanding equity of Pioneer after the closing.

 

George L. Harwood, our senior vice president, finance & information systems, chief financial officer and secretary, holds options to purchase common stock of Printronix, the value of which, net of the aggregate exercise price of such options, and assuming a $16.00 per share price of Printronix stock, is approximately $332,031.25. Mr. Harwood also holds shares of Printronix common stock, the value of which, assuming a $16.00 per share price of Printronix stock, is approximately $1,100,224. Mr. Harwood intends to contribute approximately 22%, or 15,000 shares, of his current ownership interests of Printronix common stock to Pioneer in exchange for equity of Pioneer. Mr. Harwood’s securities were issued to him by Printronix in connection with his employment, as well as having been acquired by him either through cash purchases and/or the exercise of options. As a result of his planned contribution of 15,000 shares of Printronix common stock to Pioneer, Mr. Harwood will own 482,237 shares of preferred stock of Pioneer and 48,224 shares of common stock of Pioneer. This equates to approximately 0.69% of the preferred stock and approximately 0.69% of the common stock of Pioneer, or approximately 0.69% of the total outstanding equity of Pioneer after the closing.

 

Theodore A. Chapman, our senior vice-president of engineering, holds options to purchase common stock of Printronix, the value of which, net of the aggregate exercise price of such options, and assuming a $16.00 per share price of Printronix stock, is approximately $256,221.88. Mr. Chapman also holds shares of Printronix common stock, the value of which, assuming a $16.00 per share price of Printronix stock, is approximately $640,000. Mr. Chapman’s securities were issued to him by Printronix in connection with his employment.

 

C. Victor Fitzsimmons, our senior vice-president of operations, holds options to purchase common stock of Printronix, the value of which, net of the aggregate exercise price of such options, and assuming a $16.00 per share price of Printronix stock, is approximately $332,031.25. Mr. Fitzsimmons also holds shares of Printronix common stock, the value of which, assuming a $16.00 per share price of Printronix stock, is approximately $1,110,976. Mr. Fitzsimmons intends to contribute approximately 22%, or 15,000 shares, of his current ownership interests of

Printronix common stock to Pioneer in exchange for equity of Pioneer. We believe that the value of Mr. Fitzsimmons’ Printronix securities is material to his net worth. Mr. Fitzsimmons’ securities were issued to him by Printronix in connection with his employment, as well as having been acquired by him either through cash purchases and/or the exercise of options. As a result of his planned contribution of 15,000 shares of Printronix common stock to Pioneer, Mr. Fitzsimmons will own 482,237 shares of preferred stock of Pioneer and 48,224 shares of common stock of Pioneer. This equates to approximately 0.69% of the preferred stock and approximately 0.69% of the common stock of Pioneer, or approximately 0.69% of the total outstanding equity of Pioneer after the closing.

 

James B. McWilson, our senior vice-president of sales, holds options to purchase common stock of Printronix, the value of which, net of the aggregate exercise price of such options, and assuming a $16.00 per share price of Printronix stock, is approximately $12,975. These options to purchase common stock expire on November 4, 2007. The Board of Directors will compensate Mr. McWilson on November 4, 2007, with a cash payment of $12,975 in respect of those options as if they did not expire prior to the effective time. Mr. McWilson also holds shares of Printronix common stock, the value of which, assuming a $16.00 per share price of Printronix stock, is approximately $505,600. Mr. McWilson’s securities were issued to him by Printronix in connection with his employment.

 

David A. Sakai, our senior vice-president of marketing, holds shares of Printronix common stock, the value of which, assuming a $16.00 per share price of Printronix stock, is approximately $400,000. Mr. Sakai’s securities were issued to him by Printronix in connection with his employment.

 

Juli A. Mathews, our vice-president of human resources and facilities and security, holds options to purchase common stock of Printronix, the value of which, net of the aggregate exercise price of such options, and assuming a $16.00 per share price of Printronix stock, is approximately $163,625. Ms. Mathews also holds shares of Printronix common stock, the value of which, assuming a $16.00 per share price of Printronix stock, is approximately $531,344. Ms. Mathews intends to contribute approximately 20%, or 5,000 shares, of her current ownership interests of Printronix common stock to Pioneer in exchange for equity of Pioneer. Ms. Mathews’ securities were issued to her by Printronix in connection with her employment, as well as having been acquired by her either through cash purchases and/or the exercise of options. As a result of her planned contribution of 5,000 shares of Printronix common stock to Pioneer, Ms. Mathews will own 160,746 shares of preferred stock of Pioneer and 16,074 shares of common stock of Pioneer. This equates to approximately 0.23% of the preferred stock and approximately 0.23% of the common stock of Pioneer, or approximately 0.23% of the total outstanding equity of Pioneer after the closing.

 

William D. Mathewes, our vice-president of product development, holds options to purchase common stock of Printronix, the value of which, net of the aggregate exercise price of such options, and assuming a $16.00 per share price of Printronix stock, is approximately $111,112.50. Mr. Mathewes also holds shares of Printronix common stock, the value of which, assuming a $16.00 per share price of Printronix stock, is approximately $245,888. Mr. Mathewes’ securities were issued to him by Printronix in connection with his employment, as well as having been acquired by him either through cash purchases and/or the exercise of options.

 

Stock Options

 

Treatment of Stock Options in Connection with the Merger.   At the effective time of the merger, all of our stock options outstanding and unexercised immediately prior to the effective time of the merger will be converted into the right to receive $16.00 in cash, without interest, less the exercise price of such option and any applicable withholding taxes.

 

Based on the number and exercise prices of options held on November 26, 2007 by our officers and directors, as set forth in the following table, our officers and directors will receive the following amounts, before any

applicable withholding tax, in settlement of their respective options (only considering those options with an exercise price below $16.00 per share) if the merger is completed:

 

 

Agreements to Vote in Favor of the Merger.   Each member of our Board of Directors and the above named officers have entered into a contractual voting agreement with Pioneer, pursuant to which they have each agreed, among other things, to vote in favor of the adoption of the merger agreement. Collectively, these persons held of record 1,529,961 shares of our common stock and 158,213 vested options to acquire shares of our common stock, which is equivalent to approximately 24.67% of the total shares of our common stock outstanding as of November 26, 2007 (including their vested options). See “The Voting Agreements.”

 

Indemnification of Directors and Officers; Insurance.   The merger agreement provides that all rights of indemnification, advancement of expenses and exculpation that exist in favor of individuals who were our directors or officers on or before the effective time of the merger for their acts and omissions as our directors and officers occurring prior to the effective time of the merger, as provided in our certificate of incorporation or bylaws or any of our existing indemnification agreements in effect as of the date of the merger agreement disclosed to Pioneer, will be honored by the surviving corporation subject to applicable law. The merger agreement further provides that for a period of six years following the effective time of the merger, the surviving corporation will maintain directors’ and officers’ liability insurance on terms and with respect to coverage and amount no less favorable than our current policy, subject to limitations set forth in the merger agreement. In lieu of maintaining such current directors’ and officers’ liability insurance, at Pioneer’s discretion, Printronix, prior to the merger, or the surviving corporation after Merger, may purchase a tail policy to our existing policy, subject to limitations set forth in the merger agreement.

 

Restricted Stock — Change-in-Control Arrangements

 

Each of our restricted stock agreements provides that there will be an acceleration of vesting upon a change in control event.

 

In addition, the merger agreement provides that at or immediately prior to the effective time of the merger, each share of restricted Company Stock that is outstanding shall become fully vested and not subject to any rights of repurchase or forfeiture provisions, and the holders of such outstanding restricted stock awards shall be treated as persons holding shares of Printronix common stock under the merger agreement. See “The Merger Agreement — Effect on Printronix Stock Options and Restricted Stock.”

 

In addition, Claus Hinge, our vice president of EMEA sales and marketing, will receive a cash payment equivalent to 20,000 shares of restricted stock ($320,000) upon the effective time of the merger.

 

Arrangements with the Surviving Corporation After Closing

 

Vector indicated in its discussions with management regarding the acquisition that it was important in its willingness to proceed with the acquisition that senior management commit to hold a stake in the surviving corporation. Accordingly, in connection with entering into the merger agreement and in contemplation of the acquisition, each of the Continuing Stockholders agreed with Pioneer to contribute a portion of their equity in Printronix to Pioneer in exchange for equity of Pioneer. It is expected that a stockholders agreement and related agreements will be entered into prior to the consummation of the merger.

 

Equity Rollover Commitments

 

Each Continuing Stockholder committed to invest a certain amount in Pioneer, although each is not permitted to invest more than this amount. This investment is in the form of a rollover of Printronix common stock. Any shares of Printronix common stock rolled over would be exchanged for shares of common and preferred stock of Pioneer. These ownership numbers are based on outstanding shares after closing and will be further diluted by an option pool to be granted to employees after closing, which terms are yet to be determined. The currently committed investments are as follows:

 

 

Our other employees will not be permitted to invest cash, roll over Printronix employee stock options, or rollover shares of Printronix common stock into equity of the surviving corporation.

 

Employment Agreement

 

As described above, prior to consummation of the merger, it is expected that Mr. Kleist will enter into an employment agreement with the surviving corporation on the terms described above.

Material U.S. Federal Income Tax Consequences of the Merger

 

General.   The following is a summary of certain anticipated material U.S. federal income tax consequences of the merger to our stockholders. This summary is based upon provisions of the Internal Revenue Code of 1986, as amended, referred to as the Code, applicable U.S. Treasury Regulations, judicial authority and administrative rulings and practice, all as in effect as of the date hereof, and all of which are subject to change. Any such change, which may or may not be retroactive, could alter the tax consequences to the stockholders as described herein. It is assumed, for purposes of this summary, that the shares of our common stock are held as capital assets within the meaning of Section 1221 of the Code by a “U.S. person.” For U.S. federal income tax purposes, a “U.S. person” is:

 

 

This discussion may not address all aspects of U.S. federal income taxation that may be relevant to a particular stockholder in light of that stockholder’s particular circumstances, or to those stockholders that may be subject to special treatment under the U.S. federal income tax laws (for example, certain insurance companies, tax exempt organizations, financial institutions, U.S. expatriates, persons that are not U.S. persons, dealers or brokers in securities or currencies, pass through entities (e.g., partnerships) and investors in such entities, stockholders who own or at any time held, directly, indirectly or through attribution, 10% or more of our outstanding capital stock, or stockholders who hold shares of our common stock as part of a hedging, “straddle,” conversion, constructive sale or other integrated transaction, who are subject to the alternative minimum tax or who acquired their shares of our common stock through the exercise of director or employee stock options or other compensation arrangements).

 

No ruling has been or will be sought from the Internal Revenue Service, referred to as the IRS, as to the U.S. federal income tax consequences of the merger, and the following summary is not binding on the IRS or the courts. This summary does not address the tax consequences of the merger under state, local, and foreign laws or under United States federal tax law other than income tax law. There can be no assurance that the IRS will not challenge one or more of the tax consequences described herein.

 

Consequences of the Merger to Our Stockholders.   The receipt of cash in exchange for shares of our common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, a stockholder who surrenders shares of our common stock in exchange for cash pursuant to the merger will recognize gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received and such stockholder’s adjusted basis in the shares surrendered. Gain or loss will be calculated separately for each block of shares surrendered in the merger (i.e., shares acquired at the same cost in a single transaction). Such gain or loss will generally be capital gain or loss, and will generally be long term gain or loss provided that a stockholder has held such shares for more than one year as of the closing date of the merger. In the case of stockholders who are individuals, long term capital gain is currently eligible for reduced rates of federal income tax.

 

U.S. federal tax laws significantly limit the deductibility of capital losses for U.S. federal income tax purposes. For instance, corporate taxpayers can deduct capital losses only to the extent of capital gains and for individual taxpayers, capital losses are similarly deductible up to the extent of capital gains, but may be further deductible up to a maximum of $3,000 in any one taxable year. Carryovers of unused capital losses to other taxable years may be permitted in certain circumstances.

 

Dissenters Rights.   A dissenting stockholder who perfects appraisal rights will generally recognize gain or loss with respect to his shares of our common stock equal to the difference between the amount of cash received and his basis in such shares. Gain or loss will be calculated separately for each block of shares (i.e., shares acquired at the same cost in a single transaction), and will be a long term capital gain or loss provided the shares for more than one year prior to the disposition of the shares. Limitations apply to the use of capital losses as described above.

Interest, if any, awarded in an appraisal proceeding by a court would be included in such stockholder’s income as ordinary income for federal income tax purposes.

 

Backup Withholding Tax.   Generally, under the U.S. federal income tax backup withholding rules, a stockholder or other payee that exchanges shares of our common stock for cash may be subject to backup withholding at a rate of 28%, unless the stockholder or other payee (i) provides a taxpayer identification number, or TIN (i.e., a social security number, in the case of individuals, or an employer identification number, in the case of other stockholders), and certifies under penalties of perjury that (A) such TIN is correct, (B) such stockholder is not subject to backup withholding and (C) such stockholder is a U.S. person or (ii) establishes a basis for exemption from backup withholding. Some stockholders (including, among others, all corporations) are not subject to these backup withholding requirements. Each of our stockholders and, if applicable, each other payee should complete and sign the substitute Form W-9 included as part of the letter of transmittal and return it to the paying agent in order to provide information and certification necessary to avoid backup withholding, unless an exemption applies and is otherwise established in a manner satisfactory to the paying agent. Backup withholding is not an additional tax. Any amount withheld under the backup withholding tax rules from a payment to a stockholder will be allowed as a refund or credit against such stockholder’s U.S. federal income tax liability, provided that the required procedures are followed in a timely manner.

 

THE FOREGOING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES IS NOT TAX ADVICE. IN ADDITION, THE DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES WHICH MAY VARY WITH, OR ARE CONTINGENT ON, YOUR INDIVIDUAL CIRCUMSTANCES. MOREOVER, THE DISCUSSION DOES NOT ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE, OR LOCAL TAX CONSEQUENCES OF THE MERGER. ACCORDINGLY, YOU ARE STRONGLY URGED TO CONSULT WITH YOUR TAX ADVISOR TO DETERMINE THE PARTICULAR U.S. FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES TO YOU OF THE MERGER.

 

Governmental and Regulatory Clearances

 

United States

 

Transactions such as the merger are subject to review by the United States Department of Justice and the United States Federal Trade Commission to determine whether they comply with applicable antitrust laws. Under the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the merger may not be completed until the expiration or termination of a 30-day waiting period following the filing of notification reports with the Department of Justice and the Federal Trade Commission by Vector and Printronix. Printronix and Vector (on behalf of Pioneer) filed separate notification report forms with the Department of Justice and the Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 on October 18, 2007 (reporting the acquisition of Printronix through Pioneer). The parties received notice from the Federal Trade Commission that early termination of the waiting period was granted effective October 26, 2007.

 

The Department of Justice and the Federal Trade Commission frequently scrutinize the legality under the antitrust laws of transactions such as the merger. At any time before or after the merger, either the Department of Justice or the Federal Trade Commission could take action under the antitrust laws as it deems necessary or desirable in the public interest, including by seeking to enjoin the merger or by seeking the divestiture of substantial assets of Pioneer and Printronix or their subsidiaries. Private parties and state attorneys general may also bring actions under the antitrust laws under certain circumstances. While the parties believe that the proposed merger does not violate the antitrust laws, there can be no assurance that a challenge to the merger on antitrust grounds will not be made or, if a challenge is made, of the result.

 

Germany

 

The merger is also subject to review by the German Federal Cartel Office (which we refer to as the “FCO”) under the Act against Restraints of Competition ( Gesetz gegen Wettbewerbsbeschränkungen ). A transaction that is subject to German merger control may not be completed before either the FCO has cleared the transaction or the relevant waiting period has expired without the FCO having prohibited the transaction. In practice, the FCO always issues a decision before expiration of the waiting period. After submission of a complete notification, the FCO must

decide within one month whether to clear the transaction or to commence a second-stage investigation. Second-stage decisions must be issued within four months from the filing date. The four-month period may be further extended, provided that the notifying parties consent to such extension. On November 20, 2007, Vector submitted the required notification to the FCO (reporting the acquisition of Printronix by Pioneer).

 

Accounting Treatment

 

The merger will be accounted for as a “purchase transaction” for financial accounting purposes.

 

THE MERGER AGREEMENT

 

This section of the proxy statement summarizes the material terms and conditions of the merger agreement, but is not intended to be an exhaustive discussion of the merger agreement. The rights and obligations of the parties are governed by the express terms and conditions of the merger agreement and not the summary set forth in this section or any other information contained in this proxy statement. We urge you to read the merger agreement carefully and in its entirety. The complete text of the merger agreement is attached as Annex A to this proxy statement and is incorporated herein by reference.

 

The description of the merger agreement in this proxy statement has been included to provide you with information regarding its terms. The merger agreement contains representations and warranties made by and to the parties thereto as of specific dates. The statements embodied in those representations and warranties were made for purposes of that contract between the parties and are subject to qualifications and limitations agreed by the parties in connection with negotiating the terms of that contract. In addition, certain representations and warranties were made as of a specified date, may be subject to a contractual standard of materiality different from those generally applicable to stockholders, or may have been used for the purpose of allocating risk between the parties rather than establishing matters as facts.

 

The Merger

 

The merger agreement provides for the merger of Merger Subsidiary, a wholly-owned subsidiary of Pioneer, with and into Printronix upon the terms and subject to the conditions of the merger agreement. As the surviving corporation, Printronix will survive the merger and continue to exist as a wholly-owned subsidiary of Pioneer. The surviving corporation in the merger is referred to in this proxy statement as the surviving corporation. The merger will become effective at the time of the filing of the certificate of merger with the Secretary of State of the State of Delaware, or at such later time as may be specified in such certificate of merger. We intend to complete the merger as promptly as practicable subject to receipt of approval of the Printronix stockholders of the adoption of the merger agreement and all requisite regulatory clearances and satisfaction of the other closing conditions. See “The Merger — Governmental and Regulatory Clearances” and “Additional Covenants and Agreements” and “Conditions to the Merger.”

 

Merger Consideration

 

At the effective time of the merger, each outstanding share of Printronix common stock, other than shares held by stockholders who exercise their appraisal rights, the Continuing Stockholders, and other than shares held by Printronix, Pioneer, or any of their respective wholly-owned subsidiaries, will be converted into the right to receive $16.00 in cash, without interest and less any applicable tax withholding, and shares held by dissenting stockholders will thereafter represent only the right to payment of the fair market value of such dissenting shares in accordance with Section 262 of the DGCL. See “The Merger — Appraisal Rights.” Upon completion of the merger, no shares of Printronix common stock will remain outstanding and all shares will automatically be canceled and will cease to exist.

 

Payment Procedures

 

The merger agreement provides that prior to the closing date of the merger, Pioneer will select a bank or trust company reasonably satisfactory to Printronix to act as paying agent in connection with the merger and will deposit

with the paying agent cash in an amount equal to the aggregate merger consideration payable to Printronix stockholders and option holders at or immediately following the effective time of the merger.

 

The merger agreement provides that as soon as practicable following the effective time of the merger and, subject to receipt of the necessary stockholder records from our transfer agent, in any event no more than 10 business days thereafter, the paying agent will mail to the record holders of Printronix common stock immediately prior to the effective time of the merger a letter of transmittal and instructions for use in surrendering stock certificates and transferring uncertificated shares in exchange for the merger consideration. No stockholder should surrender any certificates or transfer any uncertificated shares until the stockholder receives the letter of transmittal and other materials for such surrender or transfer. Upon surrender of a stock certificate for exchange to the paying agent together with a duly executed letter of transmittal, or, in the case of a book-entry transfer of uncertificated shares, receipt by the paying agent of such other documents as may be reasonably requested by the paying agent, the holder of such shares of Printronix common stock will be entitled to receive the merger consideration, without any interest thereon and less any applicable tax withholding. Any stock certificate so surrendered or uncertificated share so transferred will be canceled.

 

If any cash is to be paid to a person other than the record holder of shares of Printronix common stock, payment may be made with respect to such shares if (i) the stock certificate representing such shares is properly endorsed or otherwise in proper form for transfer or (ii) in the case of uncertificated shares, such shares are properly transferred, and the transferee either pays to the paying agent any applicable transfer or other taxes relating to such transfer, or establishes to the satisfaction of Pioneer that such tax has been paid or is not required to be paid.

 

If your stock certificate has been lost, stolen, defaced or destroyed, the paying agent will pay to you the applicable merger consideration if:

 

 

Do not send your certificates now. You should send your certificates only pursuant to instructions set forth in the letters of transmittal to be mailed to stockholders after the completion of the Merger. In all cases, the merger consideration will be paid only in accordance with the procedures set forth in the merger agreement and such letters of transmittal.

 

The merger agreement provides that 9 months after the effective time of the merger, upon demand by Pioneer, the paying agent will deliver to the surviving corporation any funds made available to the paying agent that remain unclaimed by the former Printronix stockholders. Any Printronix stockholders who have not exchanged their Printronix shares for the merger consideration in compliance with the above described procedures shall thereafter look only to the surviving corporation for payment of the merger consideration to which they are entitled, without any interest thereon.

 

The cash paid to you upon conversion of your Printronix common stock will be paid in full satisfaction of all rights relating to the shares of Printronix common stock.

 

Effect on Printronix Stock Options and Restricted Stock

 

The merger agreement provides that at or immediately prior to the effective time of the merger, each option to purchase Printronix common stock that is outstanding, whether or not vested or exercisable, shall be cancelled, and Printronix shall pay each holder of any such option at or promptly after the effective time of the merger, subject to applicable withholding requirements, a cash payment determined by multiplying (i) the excess of the merger consideration in cash per share over the exercise price of such option by (ii) the number of shares of Printronix common stock such holder could have purchased (assuming full vesting of all options) had such holder exercised such option in full immediately prior to the effective time of the merger. All outstanding Printronix options are currently vested.

 

The merger agreement provides that at or immediately prior to the effective time of the merger, each share of restricted Printronix common stock that is outstanding shall become fully vested and not subject to any rights of

repurchase or forfeiture provisions, and the holders of such outstanding restricted Printronix common stock shall be treated as persons holding shares of Printronix common stock under the merger agreement.

 

Representations and Warranties

 

The merger agreement contains representations and warranties of each party to the agreement. The representations and warranties in the merger agreement are complicated and not easily summarized. You are urged to read carefully and in their entirety the sections of the merger agreement entitled “Representations and Warranties of the Company (Printronix)” and “Representations and Warranties of Parent (Pioneer) and Merger Subsidiary” in Articles IV and V, respectively, of the merger agreement attached as Annex A to this proxy statement. The assertions embodied in the representations and warranties made by Printronix are qualified by information and statements made in a confidential disclosure schedule that Printronix provided to Pioneer in connection with the signing of the merger agreement. While Printronix does not believe that such disclosure schedule contains information that applicable securities laws require it to publicly disclose (other than information that has already been so disclosed or is disclosed in this proxy statement), the disclosure schedule does contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the merger agreement. Accordingly, you should not rely on the representations and warranties in the merger agreement as characterizations of the actual state of facts, since such representations and warranties were made by the parties to the merger agreement to and solely for the benefit of each other, and they are modified in important part by the underlying disclosure schedule. The disclosure schedule contains information that has been included in Printronix’s general prior public disclosures, as well as additional nonpublic information. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement, which subsequent information may or may not be fully reflected in Printronix’s public disclosures or in this proxy statement. In addition, certain representations and warranties were made as of a specified date, may be subject to a contractual standard of materiality different from those generally applicable to stockholders or may have been used for the purpose of allocating risk between the parties rather than establishing matters as facts.

 

The merger agreement contains representations and warranties of Printronix as to, among other things:

 

 

 

 

 

The merger agreement also contains representations and warranties of Pioneer and Merger Subsidiary as to, among other things:

 

 

Conduct of Printronix’s Business Pending the Merger

 

We have agreed in the merger agreement that, prior to the effective time, we will conduct our business in the ordinary course and consistent with past practice, including, without limitation, preserving intact our present

business organization, maintaining in effect all of our permits, keeping available the services of our directors, officers, and key employees, maintaining satisfactory relationships with our customers, lenders, suppliers, and other persons with which we have material business relationships, and managing cash and working capital in the ordinary course of business consistent with past practices.

 

In addition, we have agreed that, except as otherwise contemplated by the merger agreement (including the confidential disclosure schedule that Printronix provided to Pioneer in connection with the signing of the merger agreement), we will not take any of the following specific actions without the prior written consent of Pioneer:

 

 

 

No Solicitation of Alternative Transactions by Printronix

 

The merger agreement provides that neither Printronix nor any of our subsidiaries will, nor will Printronix or any of our subsidiaries authorize or permit any its directors, officers, employees, and other representatives to, directly or indirectly, do any of the following:

 

 

 

Notwithstanding the foregoing, if the Board of Directors or the Special Committee of Printronix determines in good faith by a majority vote, after considering advice from outside legal counsel, that the failure to take any such action would reasonably be expected to result in a breach of its fiduciary duties under applicable law, then the Board of Directors or the Special Committee of Printronix may directly or indirectly through its representatives:

 

 

Each case applies if, and only if, Printronix has delivered to Pioneer a prior written notice advising Pioneer that we intend to take such action. We shall continue to advise Pioneer after taking any such action. In addition, Printronix shall notify Pioneer promptly (but in no event later than 1 business day) after receipt by Printronix (or any of its advisors) of any Acquisition Proposal, any indication that a third party is considering making an Acquisition Proposal or of any request for information relating to Printronix or any of our subsidiaries or for access to the business, properties, assets, books or records of Printronix or any of our subsidiaries by any third party that may be considering making, or has made, an Acquisition Proposal. Such notice shall be made orally and in writing and shall identify the third party making, and the terms and conditions of, any such Acquisition Proposal, indication or request.

 

Printronix shall keep Pioneer reasonably informed, as promptly as practicable, of the status and details of any such Acquisition Proposal, indication or request. Printronix shall continue to keep Pioneer reasonably informed of the status and material terms of any such Acquisition Proposal, indication or request, including any material amendments or proposed amendments as to price or other material terms.

 

Printronix shall provide Pioneer with at least 48 hours prior notice of any meeting of our Board of Directors (or such lesser notice as is provided to the members of the Board of Directors) at which the Board of Directors is

reasonably expected to consider any Acquisition Proposal. Printronix shall promptly provide Pioneer with any non-public information concerning Printronix provided to any third party that was not previously provided to Pioneer.

 

Printronix shall, and shall cause our subsidiaries and representatives to immediately cease and terminate any and all existing activities, discussions, or negotiations with any third party conducted prior to the date of the merger agreement with respect to any Acquisition Proposal. Printronix shall also promptly request that each third party that has executed a confidentiality agreement within the past 24-months, in connection with its consideration of any Acquisition Proposal, to return or destroy all confidential information previously furnished to such person by or on behalf of Printronix or any of our subsidiaries.

 

Under the merger agreement, an “Acquisition Proposal” means, other than the transactions contemplated by the merger agreement, any offer, proposal, or inquiry from a third party relating to, or that could reasonably be expected to lead to, or any third party indication of interest in any:

 

 

A “Superior Proposal” means any bona fide, unsolicited written Acquisition Proposal for 75% or more of the outstanding shares of Printronix common stock on terms which our Board of Directors or Special Committee determines in good faith by majority vote, after considering the advice of an independent financial advisor of nationally recognized reputation, and taking into account all of the terms and conditions of such proposal, including any break-up fees, expense reimbursement provisions and conditions to consummation, are more favorable and provide greater value to all of Printronix’s stockholders, other than the Continuing Stockholders, than as provided under the merger agreement and for which financing, if a cash transaction (whether in whole or in part), is then fully committed or reasonably determined to be available by our Board of Directors.

 

Financing

 

Printronix shall, and shall cause its subsidiaries to, provide such cooperation as may be reasonably requested by Pioneer in connection with obtaining the debt and equity financing or any alternative financing for the satisfaction of Pioneer’s obligations under the merger agreement, including: (i) participation in meetings, drafting sessions, and due diligence sessions and otherwise assisting Pioneer in the preparation of offering materials and materials for rating agency presentations, (ii) reasonably cooperating with the marketing efforts of Pioneer, its subsidiaries, and their financing sources for any of the financing, including participation in management presentation sessions, “road shows”, and sessions with rating agencies, (iii) furnishing Pioneer, its subsidiaries, and their financing sources with financial and other pertinent information regarding Printronix as may be reasonably requested by Pioneer, including all financial statements, and assisting Pioneer in the preparation of business projections and other financial data of the type required under the Securities Act of 1933, and of the type and form customarily included in offering memoranda, private placement memoranda, prospectuses and similar documents, (iv) providing and executing documents as may be reasonably requested by Pioneer, including a certificate of the chief financial officer of Printronix with respect to solvency matters and consents of accountants for use of their

reports in any materials relating to the financing, (v) reasonably facilitating the pledging of collateral, and (vi) using commercially reasonable efforts to obtain accountants’ comfort letters, legal opinions, surveys and title insurance as reasonably requested by Pioneer.

 

Pioneer and Merger Subsidiary shall use their commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to arrange and obtain the debt and equity financing on the terms and conditions described in the financing commitments, including by using commercially reasonable efforts to (i) maintain in effect the financing commitments, (ii) negotiate and enter into definitive agreements with respect to the financing commitments on the terms and conditions reflected in the financing commitments, (iii) satisfy on a timely basis all conditions applicable to Pioneer and Merger Subsidiary in such definitive agreements that are within their control, and (iv) consummate the debt and equity financing at or prior to the closing of the merger; provided that Pioneer and Merger Subsidiary may in the alternative obtain alternative financing from alternative sources on terms that are not less favorable, in the aggregate, to Pioneer and Merger Subsidiary then the financing contemplated by the financing commitments; provided further that any such new financing commitments shall not (A) expand or adversely change in any material respect the conditions set forth in the financing commitments or (B) reasonably be expected to adversely impact the ability of Pioneer and Merger Subsidiary to perform their respective obligations under the merger agreement. Pioneer shall disclose to Printronix its intention to obtain any such new financing commitments, shall keep Printronix reasonably informed of the material terms thereof and shall deliver to Printronix final drafts of all documents relating to such new financing commitments. In the event any portion of the financing becomes unavailable on the terms and conditions contemplated in the financing commitments for any reason, Pioneer shall give prompt notice and keep Printronix reasonably informed on a reasonable basis and in reasonable detail of the status of its commercially reasonable efforts to arrange, as promptly as practicable following the occurrence of such event, alternative financing.

 

Indemnification

 

Pioneer will cause the surviving corporation, and the surviving corporation agrees, to do the following:

 

 

 

 

In lieu of the forgoing bullet points, prior to the effective time of the merger, at Pioneer’s sole discretion, Printronix shall purchase at or immediately prior to the effective time of the merger a six-year prepaid “tail” policy to Printronix’s current director’s and officer’s liability insurance policy (which tail policy shall contain the same terms and conditions as such existing policy) and the surviving corporation shall continue such tail policy in effect for six years after the effective of the merger, provided that in no event shall Printronix or the surviving corporation be obligated to pay an amount for such “tail policy” that in the aggregate exceeds 250% of the annual premium that Printronix paid in its last full fiscal year. In the event that the costs for either (a) the aggregate premium payable by the surviving corporation, (b) a prepaid “tail” policy purchased by the surviving corporation, or (c) a prepaid “tail” policy purchased by Printronix exceeds the applicable 250% threshold, then the surviving corporation or Printronix, if applicable, shall be obligated to obtain a policy with the greatest coverage available for a cost up to, but not exceeding, such aggregated amount.

 

Employee Benefits

 

From and after the effective time of the merger, Pioneer will, or will cause the surviving corporation to recognize the prior service with Printronix or its Subsidiaries of each employee of Printronix or its Subsidiaries as of the effective time of the merger in connection with all employee benefit plans, programs or policies of Pioneer or its affiliates in which such employees are eligible to participate following the effective time of the merger, for purposes of eligibility, and, for vacation and severance policies, levels of benefits. From and after the effective time of the merger, Pioneer will use commercially reasonable efforts, or will cause the surviving corporation to use commercially reasonable efforts, to cause any pre-existing conditions or limitations and eligibility waiting periods (to the extent that such waiting periods would be inapplicable, taking into account service with the Company) under any group health plans of Pioneer or its affiliates to be waived with respect to such employees and their eligible dependents.

 

Additional Covenants and Agreements

 

Commercially Reasonable Efforts

 

The merger agreement provides that Printronix and Pioneer will use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable law to consummate the transactions contemplated by the merger agreement, including:

 

 

Public Statements

 

The merger agreement provides that Printronix and Pioneer will consult with each other before issuing any press release or other public communications, holding any press conferences, conference calls, or otherwise making any public statements about the merger agreement, the merger, court process or any listing agreement with or rule of

any national securities exchange or association, in which case, Pioneer and Merger Subsidiary, on the one hand, and Printronix, on the other hand, shall consult with each other to the extent reasonably practicable before issuing any such press release, making any such public statements or other public communications, or holding any such press conference or conference call, or any other transactions contemplated by the merger, except as may be required by applicable law.

 

Access and Investigation

 

Printronix has agreed in the merger agreement to (a) provide Pioneer and its representatives with reasonable access to our offices, properties, and books and records, (b) furnish Pioneer and its representatives such financial and operating data and other information as such persons may reasonably request, and (c) instruct its and its subsidiaries representatives to cooperate with Pioneer and Pioneer’s financing sources in their investigation during the period between the date of the merger agreement and the earlier of the termination of the merger agreement or completion of the merger.

 

Delisting and Deregistration

 

Each of Printronix and Pioneer agree to cooperate with the other party in taking, or causing to be taken, all actions necessary (i) to delist Printronix common stock from the NASDAQ Global Market and (ii) to terminate the registration of Printronix common stock under the Exchange Act, such delisting and termination to not be effective until or after the effective time of the merger.

 

Environmental Reports

 

Pioneer and Printronix jointly retained an environmental consultant to conduct Phase I environmental studies at certain current Printronix manufacturing facilities. Pioneer’s potential mortgage lender, also retained an environmental consultant to conduct investigations at Printronix’s Irvine, California manufacturing facility. Pioneer and Printronix shall cause the environmental consultant retained by Pioneer and Printronix (and Parent shall use its commercially reasonable efforts to cause the environmental consultant retained by the mortgage lender) to interact with and provide their analyses and assessments (including all reports) to both Printronix and Pioneer.

 

In the event that the environmental reports project potential costs of remediation (including fees likely to be assessed by governmental authorities), claims, violations, damages, losses or diminution of property value (excluding certain repairs to any structural damage arising out of matters disclosed to Pioneer) in the amount of $2 million or more in the aggregate with respect to the Printronix manufacturing facilities under review, Pioneer will have the option of terminating the merger agreement by delivering notice on the earlier of (i) three calendar days after receiving final copies of the environmental reports produced by the environmental consultants or (ii) October 31, 2007.

 

Working Capital Statements

 

From and after the date of the merger agreement until the effective time of the merger, as soon as reasonably practicable after the close of each fiscal month, Printronix shall deliver to Pioneer an unaudited statement (which we refer to in this proxy statement as a “Working Capital Statement”) setting forth Printronix’s working capital as of the close of business on the last day of such fiscal month. In the month in which the closing of the merger is expected to occur, Printronix shall prepare an adjusted Working Capital Statement as promptly as reasonably practicable after the close of the prior fiscal month, reflecting the working capital as adjusted to (x) subtract from working capital the amount by which the aggregate fees and expenses incurred by Printronix and its Subsidiaries in connection with the transactions contemplated by the merger agreement (which we refer to in this proxy statement as the “Transaction Costs”), whether or not paid, exceed $2,000,000 and (y) add to working capital the amount of Transaction Costs that have been paid by Printronix and that are not included as prepaid expenses in current assets, together with supporting invoices.

 

Conditions to the Merger

 

Conditions to the Obligations of Each Party

 

The merger agreement provides that the obligations of Printronix, Pioneer, and Merger Subsidiary to consummate the merger are subject to the following conditions:

 

 

Conditions to Obligations of Pioneer and Merger Subsidiary to Complete the Merger

 

The merger agreement provides that the obligations of Pioneer and Merger Subsidiary to consummate the merger are subject to the following conditions:

 

 

 

 

Conditions to Obligations of Printronix to Complete the Merger

 

The merger agreement also provides that our obligation to complete the merger is subject to the following conditions:

 

 

The merger agreement provides that a “material adverse effect” with respect to Printronix means any state of facts, change, development, event, effect, condition, occurrence, action, or omission that, individually or in the aggregate, could reasonably be expected to result in a material adverse effect on

(i) the condition (financial or otherwise), business, assets, properties or results of operations of Printronix and its subsidiaries, taken as a whole; or

 

(ii) the ability of Printronix or its subsidiaries to perform its obligations under or to consummate the transactions contemplated by the merger agreement, except, in the case of clause (i), any effect resulting from or arising in connection with

 

(A) this announcement or pendency of the merger agreement or the transactions contemplated by it,

 

(B) changes, circumstances or conditions affecting the industry in which Printronix or its subsidiaries operate, to the extent they do not disproportionately affect Printronix or its subsidiaries, taken as a whole,

 

(C) any change in Printronix’s stock price or trading volume, in and of itself (it being understood that the underlying cause of any such change may be taken into consideration in determining whether a material adverse effect has occurred or could reasonably be expected to occur),

 

(D) any failure by Printronix to meet internal or third party published revenue or earnings projections, in and of itself (it being understood that the underlying cause of any such failure may be taken into consideration in determining whether a material adverse effect has occurred or could reasonably be expected to occur),

 

(E) changes in general U.S. or global economic, regulatory, or political conditions, to the extent they do not disproportionately affect Printronix or its subsidiaries, taken as a whole,

 

(F) any changes or effects arising out of or resulting from any legal claims or other proceedings made by any of Printronix’s stockholders arising out of or related to the merger agreement, the merger or any other transaction contemplated by the merger agreement, or

 

(G) potential costs of remediation, claims, violations, damages, losses, or diminutions of property value identified and quantified in the environmental reports with respect to Printronix’s current manufacturing facilities.

 

The merger agreement provides that a “material adverse effect” with respect to Pioneer means any state of facts, change, development, event, effect, condition, occurrence, action or omission that, individually or in the aggregate, could reasonably be expected to result in a material adverse effect on the ability of Pioneer to perform its obligations under or to consummate the transactions contemplated by the merger agreement.

 

Recommendation to Our Stockholders

 

We have agreed, through our Board of Directors, to recommend to its stockholders that they approve the merger agreement. However, our Board of Directors may withdraw or modify its approval of the merger agreement, the merger, or the other transactions contemplated by the merger agreement and its recommendation that our stockholders adopt the merger agreement and approve the merger if:

 

 

 

The merger agreement does not prohibit our Board of Directors from taking and disclosing to our stockholders a position with respect to a tender or exchange offer by a third party pursuant to the SEC rules 14d-9 and 14e-2(a).

 

Termination of Merger Agreement

 

The merger agreement may be terminated at any time prior to the effective time of the merger:

 

(1) by mutual written consent of Printronix and Pioneer;

 

(2) by either Printronix or Pioneer if:

 

(A) the merger is not consummated by April 1, 2008 (provided that the right to terminate shall not be available to any party whose breach of any provision of the merger agreement results in the failure of the merger to be consummated by such time);

 

(B) Printronix’s stockholders do not approve the merger upon a vote taken at the special meeting; or

 

(C) any applicable law makes consummation of the merger illegal or otherwise prohibited or otherwise enjoins Printronix or Pioneer from consummating the merger and such enjoinment shall have become final and non-appealable.

 

(3) by Pioneer if:

 

(A) an Adverse Recommendation Change shall have occurred (see “— No Solicitation of Alternative Transactions by Printronix”);

 

(B) Printronix shall have entered into or publicly announced its intention to enter into a definitive agreement or an agreement in principle with respect to a Superior Proposal (as defined in “— No Solicitation of Alternative Transactions by Printronix”);

 

(C) Printronix breaches any representation, warranty, covenant or agreement under the merger agreement, , such that such breach would cause a failure to satisfy our closing conditions relating to our representations, warranties, and covenants, and such breach cannot be cured by April 1, 2008 or Printronix does not cure such breach or failure within 30 days after receipt of written notice thereof from Pioneer;

 

(D) After an Acquisition Proposal by a third party (as defined in “— No Solicitation of Alternative Transactions by Printronix”) has been publicly announced or received by Printronix, the Printronix Board fails to reaffirm its recommendation in favor of adoption of the merger agreement to the stockholders within 5 business days after receipt of Pioneer’s request to do so;

 

(E) Printronix willfully and materially breaches its obligations and covenants with respect to the special meeting, Board recommendation of the merger, filing and preparing the proxy material or its non-solicitation obligations under the merger agreement; or

 

(F) the environmental reports prepared pursuant to the merger agreement identify a significant environmental matter that Pioneer determines is unacceptable and timely delivers an environmental termination notice (see “— Additional Covenants and Agreements — Environmental Studies” on page 43 for more information).

 

(4) by Printronix if:

 

(A) Printronix enters into a binding agreement with respect to a Superior Proposal (as defined in “ — No Solicitation of Alternative Transactions by Printronix”) in compliance with the non-solicitation

provision of the merger agreement, and simultaneously with such termination, Printronix pays Pioneer a termination fee of $4,200,000; and (A) notifies Pioneer, in writing and at least 5 business days prior to such termination, of its intention to terminate the merger agreement and to enter into a binding written agreement concerning an Acquisition Proposal that constitutes a Superior Proposal, attaching the most current version of such agreement, and (B) Pioneer does not make, within 5 business days of receipt of such written notification, an offer that is at least as favorable to the stockholders of Printronix as such Superior Proposal, it being understood that Printronix shall not enter into any such binding agreement during such 5 business day period; it being further understood and agreed that any material amendment to any Acquisition Proposal will be deemed to be a new Acquisition Proposal for purposes of re-starting the 5 business day clock; or

 

(B) Pioneer or Merger Subsidiary breaches any representation, warranty, covenant or agreement under the merger agreement, such that such breach would result in a failure to satisfy the closing conditions related to Pioneer’s representations, warranties, and covenants, and such breach cannot be cured by April 1, 2008 or Pioneer does not cure such breach or failure within 30 days after receipt of written notice thereof from Printronix.

 

Termination Fees

 

Printronix must pay Pioneer a termination fee of $4,200,000 if:

 

(1) the merger agreement is terminated for the reasons stated in paragraph (4)(A) of “— Termination of the merger agreement” above;

 

(2) the merger agreement is terminated for the reasons stated in paragraphs (3)(A), (3)(B), (3)(D) or 3(E) of “— Termination of the merger agreement” above; or

 

(3) the merger agreement is terminated for the reasons stated in paragraphs (2)(A) or (2)(B) of “— Termination of the Merger Agreement” above but, only if and when (A) prior to the special meeting (in the case of paragraph (2)(B)) or April 1, 2008 (in the case of paragraph (2)(A), an Acquisition Proposal (as defined in “ — No Solicitation of Alternative Transactions by Printronix”) shall have been made by a third party, and (B) within 12 months following the date of such termination Printronix enters into an agreement providing for an Acquisition Proposal (as defined in “— No Solicitation of Alternative Transactions by Printronix”) which is subsequently consummated or an Acquisition Proposal (as defined in “— No Solicitation of Alternative Transactions by Printronix”) is subsequently consummated. For purposes of this paragraph, all references to “15%” in the definition of “Acquisition Proposal” shall be deemed references to 50%.

 

Pioneer must pay Printronix a termination fee of $5,000,000 if (such amount is guaranteed by Vector) if:

 

(1) the merger agreement is terminated for the reasons stated in paragraph (2)(A) of “— Termination of the Merger Agreement” (the mutual conditions and the conditions to Pioneer’s obligation to close) above if all the conditions to closing set forth in Sections 9.01 and 9.02 of the merger agreement have been satisfied by such date; or

 

(2) the merger agreement is terminated for the reasons stated in paragraph (4)(B) of “— Termination of the Merger Agreement” above at a time when Pioneer is not entitled to deliver a termination notice pursuant to paragraph (3)(C) of “— Termination of the Merger Agreement” above.

 

Amendment and Waiver of the Merger Agreement

 

Amendment

 

Any provision of the merger agreement may be amended if such amendment is executed in writing by each of Printronix, Pioneer, and Merger Subsidiary; provided, however, that after the merger agreement has been adopted by our stockholders, there shall be no amendment that shall reduce the amount or change the kind of consideration to be received in exchange for the shares of Printronix common stock without the further approval of the stockholders.

Waiver

 

Any provisions of the merger agreement may be waived if such waiver is executed in writing by the party against whom the waiver is to be effective.

 

Fees and Expenses

 

Whether or not the merger is completed, in general, all fees and expenses incurred in connection with the merger agreement and the merger will be paid by the party incurring those fees and expenses, provided that the parties will split fees and expenses incurred in connection with any required antitrust filing requirements. Pursuant to the merger agreement, we must pay Pioneer a termination fee if the merger agreement is terminated under specified circumstances and Pioneer must pay us a termination fee if the merger agreement is terminated under other specified conditions. See “ — Termination Fees” above.

 

THE VOTING AGREEMENTS

 

The following description summarizes the material provisions of the voting agreements and is qualified by reference to the complete text of the form of voting agreement which is attached to this proxy statement as Annex B and incorporated by reference into this proxy statement. This summary may not contain all of the information about the voting agreements that is important to you. We encourage you to read the form of voting agreement carefully and in its entirety. As an inducement to Pioneer to enter into the merger agreement, on October 1, 2007, each member of our Board of Directors, and certain of our officers, Robert A. Kleist, George L. Harwood, C. Victor Fitzsimmons, Theodore A. Chapman, Juli A. Mathews, David A. Sakai, and James B. McWilson, who hold and are entitled to vote an aggregate of approximately 24.67% of our outstanding shares of common stock (including their vested options) as of the record date, entered into a voting agreement with Pioneer.

 

Under the voting agreements, until the consummation of the merger or the valid termination of the merger agreement, each such director and officer agreed to cause any of his or her shares of common stock to vote or consent at any meeting of our stockholders or in any written consent of our stockholders, as applicable:

 

 

Pursuant to the voting agreements, each such director and officer stockholder has also agreed, among other things, not to sell, transfer, pledge or otherwise transfer securities of Printronix beneficially owned by such stockholder prior to the consummation of the merger or valid termination of the merger agreement. None of the voting stockholders have received any additional consideration with respect to the voting agreements.

 

To the extent that any stockholder signing a voting agreement is an officer or director of Printronix, nothing in the voting agreement will be construed as preventing or otherwise affecting any actions taken by that stockholder in his or her capacity as an officer or director of Printronix or any of its subsidiaries or from fulfilling the obligations of that office (including the performance of obligations required by the fiduciary duties of that stockholder acting solely in his or her capacity as an officer or director).

 

APPRAISAL RIGHTS

 

Under Section 262 of the DGCL, any holder of Printronix common stock who does not wish to accept the $16.00 per share merger consideration may dissent from the merger and elect to exercise appraisal rights and have the fair value of their shares of Printronix common stock judicially determined and paid in cash, together with a fair

rate of interest, if any. The valuation will exclude any element of value arising from the accomplishment or expectation of the merger. Even if the merger is approved by the holders of the requisite number of shares of our common stock, you are entitled to exercise appraisal rights and obtain payment of the “fair value” for your shares, exclusive of any element of value arising from the expectation or accomplishment of the merger.

 

The following summary of the provisions of Section 262 of the DGCL is not a complete statement of the law pertaining to appraisal rights under the DGCL, and is qualified in its entirety by reference to the full text of Section 262 of the DGCL, a copy of which is attached to this proxy statement as Annex D. If you wish to exercise appraisal rights or wish to preserve your right to do so, you should carefully review Section 262 of the DGCL and are urged to consult legal counsel.

 

All references in Section 262 of the DGCL and in this summary to a “stockholder” are to the record holder of shares of Printronix common stock as to which appraisal rights are asserted. A person having a beneficial interest in shares of Printronix common stock held of record in the name of another person, such as a broker or nominee, must act promptly to cause the record holder to follow properly the steps summarized below and in a timely manner to perfect appraisal rights.

 

Under Section 262 of the DGCL, when a merger is submitted for approval at a meeting of stockholders, as in the case of the merger agreement, not less than 20 days prior to the meeting, Printronix must notify each of its stockholders that appraisal rights are available and include in the notice a copy of Section 262 of the DGCL. This proxy statement constitutes the notice, and we attach the applicable statutory provisions to this proxy statement as Annex D.

 

In order to exercise your appraisal rights effectively, you must satisfy each of the following primary requirements:

 

 

If you fail strictly to comply with any of the above requirements or otherwise fail strictly to comply with the requirements of Section 262 of the DGCL, you will have no appraisal rights with respect to your shares. You will receive no further notices from us regarding your appraisal rights.

 

Neither voting (in person or by proxy) against, abstaining from voting on or failing to vote on the proposal to adopt the merger agreement will constitute a written demand for appraisal within the meaning of Section 262 of the DGCL. The written demand for appraisal must be in addition to and separate from any proxy or vote.

 

The address for purposes of making an appraisal demand is:

 

Secretary

Printronix, Inc.

14600 Myford Road

Irvine, California 92606

 

Only a holder of record of shares of Printronix common stock, or a person duly authorized and explicitly purporting to act on his or her behalf, is entitled to assert an appraisal right for the shares of Printronix common stock registered in his or her name. Beneficial owners who are not record holders and who wish to exercise appraisal rights are advised to consult with the appropriate record holders promptly as to the timely exercise of appraisal rights. A record holder, such as a broker, who holds shares of Printronix common stock as a nominee for others, may

exercise appraisal rights with respect to the shares of Printronix common stock held for one or more beneficial owners, while not exercising such rights for other beneficial owners. In such a case, the written demand should set forth the number of shares as to which the demand is made. Where no shares of Printronix common stock are expressly mentioned, the demand will be presumed to cover all shares of Printronix common stock held in the name of such record holder.

 

A demand for the appraisal of shares of Printronix common stock owned of record by two or more joint holders must identify and be signed by all of the holders. A demand for appraisal signed by trustees, executors, administrators, guardians, attorneys in fact, officers of corporations or others acting in a fiduciary or representative capacity must so identify the persons signing the demand.

 

An appraisal demand may be withdrawn by a former stockholder within 60 days after the effective time of the merger by delivery of a written withdrawal to Pioneer, or thereafter only with written approval of Pioneer. Upon withdrawal of an appraisal demand, the former stockholder must accept the terms of the merger and will be entitled to receive the $16.00 cash payment per share referred to above, without interest and less any applicable withholding taxes. As used in this paragraph and throughout the remainder of this section, references to Pioneer mean the corporation that survives the merger.

 

Within 10 days after the completion of the merger, Pioneer must give written notice of the effective time of the merger to each of Printronix’s former stockholders who did not vote in favor of the merger agreement and who made a written demand for appraisal in accordance with Section 262 of the DGCL. Within 120 days after the effective time of the merger, but not later, either Pioneer or any dissenting stockholder who has complied with the requirements of Section 262 of the DGCL may file a petition in the Delaware Court of Chancery demanding a determination of the value of the shares of Printronix common stock held by all stockholders demanding appraisal of their shares. Pioneer is under no obligation to, and has no present intent to, file a petition for appraisal, and stockholders seeking to exercise appraisal rights should not assume that Pioneer will file a petition or that it will initiate any negotiations with respect to the fair value of the shares. Stockholders who desire to have their shares appraised should initiate any petitions necessary for the perfection of their appraisal rights within the time periods and in the manner prescribed in Section 262 of the DGCL. A stockholder who timely files a petition for appraisal with the Delaware Court of Chancery must serve a copy upon Pioneer, which in turn shall file a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to value have not been reached, with the Delaware Register in Chancery within 20 days of such service. If the Delaware Court of Chancery so orders, the Delaware Register in Chancery will then give notice of the time and place for the hearing of the petition by mail to both Pioneer and stockholders on the list. Such notice will also be given by one or more publications at least one week before the hearing, in a generally-circulated newspaper in City of Wilmington, Delaware, or whichever publication the Delaware Court of Chancery chooses.

 

Within 120 days after the effective time of the merger, any stockholder who has complied with the provisions of Section 262 of the DGCL up to that point may receive from the surviving corporation, upon written request, a statement setting forth the aggregate number of shares not voted in favor of the merger agreement and with respect to which we have received demands for appraisal, and the aggregate number of holders of those shares. The surviving corporation must mail this statement to the stockholder within 10 days of receipt of the request or within 10 days after expiration of the period for delivery of demands for appraisals under Section 262 of the DGCL, whichever is later.

 

If a hearing on the petition is held, the Delaware Court of Chancery is empowered to determine which dissenting stockholders are entitled to an appraisal of their shares. The Delaware Court may require dissenting stockholders who hold stock represented by certificates to submit their certificates representing shares for notation thereon of the pendency of the appraisal proceedings, and the Delaware Court of Chancery is empowered to dismiss the proceedings as to any dissenting stockholder who does not comply with this request. Accordingly, dissenting stockholders are cautioned to retain their share certificates, pending resolution of the appraisal proceedings.

 

After determination of the dissenting stockholders entitled to an appraisal, the Delaware Court of Chancery will appraise the shares held by such dissenting stockholders at their fair value as of the effective time of the merger, exclusive of any value arising from accomplishment or expectation of the merger, along with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value.

In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. In Weinberger v. UOP, Inc. , the Delaware Supreme Court stated that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and construed Section 262 of the DGCL to mean that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

 

Stockholders should be aware that the fair value of their shares as determined under Section 262 of the DGCL could be greater than, the same as, or less than the $16.00 merger consideration. Stockholders should also be aware that investment banking opinions as to the fairness from a financial point of view of the consideration payable in a merger are not opinions as to fair value under Section 262 of the DGCL.

 

The Delaware Court of Chancery may also, on application, (i) assess costs among the parties as the Delaware Court of Chancery deems equitable and (ii) order all or a portion of the expenses incurred by any dissenting stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney’s fees and fees and expenses of experts, to be charged pro rata against the value of all shares entitled to appraisal. Determinations by the Delaware courts are subject to appellate review by the Delaware Supreme Court.

 

The Delaware Court of Chancery will direct payment of the fair value and interest, if any, by Pioneer to the stockholders entitled thereto. Payments will be made to stockholders in the case of holders of uncertificated stock, and in the case of holders of shares represented by certificates upon the surrender of such certificates to us.

 

No appraisal proceedings in the Delaware Court of Chancery shall be dismissed as to any dissenting stockholder without the approval of the Delaware Court of Chancery, and this approval may be conditioned upon terms which the Delaware Court of Chancery deems just.

 

From and after the effective time of the merger, former holders of Printronix common stock, whether or not they have demanded appraisal rights, are not entitled to vote their shares for any purpose and are not entitled to receive payment of dividends or other distributions on the shares (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger).

 

Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of appraisal rights, in which event you will be entitled to receive the consideration with respect to your dissenting shares in accordance with the merger agreement.

 

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

 

Set forth below is certain information as of November 26, 2007 regarding the beneficial ownership of our common stock by:

 

 

Applicable percentage ownership in the following table is based on 6,683,507 shares of our common stock and those vested options by each beneficial owner to acquire shares of our common stock outstanding as of November 26, 2007. Unless otherwise indicated, the persons named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable.

 

 

 

 

 

 

 

 

 

 

On October 1, 2007, the last full trading day prior to the public announcement of the merger agreement, the closing sale price of our common stock as reported on The NASDAQ Global Market was $13.52. On November 23, the last full trading day prior to the date of this proxy statement, the closing price of our common stock as reported on The NASDAQ Global Market was $15.74.

 

Stockholders are encouraged to obtain current market quotations for our common stock.

 

Following the merger, there will be no further market for shares of our common stock and our shares of common stock will be delisted from The NASDAQ Global Market and deregistered under the Securities and Exchange Act of 1934.

 

We have paid a quarterly cash dividend on our common stock since January 31, 2005. The merger agreement provides that we may not pay any cash dividends during the pre closing period without prior written consent of Pioneer. Thus, we currently anticipate that we will retain earnings, if any, to support operations and to finance the growth and development of our business and do not anticipate paying cash dividends in the foreseeable future.

 

However, should the merger not occur, we anticipate returning to our previous dividend payment schedule, as long as our business and the market supports such payments.

 

evaluating these forward-looking statements, you should specifically consider certain risks and uncertainties. Those risks include without limitation:

 

 

 

 

We believe that the assumptions on which our forward-looking statements are based are reasonable. However, we cannot assure you that the actual results or developments we anticipate will be realized or, if realized, that they will have the expected effects on our business or operations. All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this proxy statement and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Forward-looking statements speak only as of the date of this proxy statement or the date of any document incorporated by reference in this document. Except as required by applicable law or regulation, we do not undertake to release the results of any revisions of these forward-looking statements to reflect future events or circumstances.

 

HOUSEHOLDING OF PROXY MATERIAL

 

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies. Each stockholder who participates in householding will continue to receive a separate proxy card.

 

A number of brokers with account holders who are our stockholders will be “householding” our proxy materials. A single proxy statement report will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement, please notify your broker, and direct a written request to Investor Relations, Printronix, Inc., 14600 Myford Road, Irvine, California, 92606, or contact Investor Relations at (800) 665-6210 (US). If any stockholders in your household wish to receive a separate copy of this proxy statement, they may call, write, or send an e-mail to Investor Relations at info@printronix.com, and we will provide such additional copies. Stockholders who currently receive multiple copies of the proxy statement at their address and would like to request “householding” of their communications should contact their broker.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. We file reports, proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other information at the SEC’s Public Reference Section at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330. The SEC also maintains an Internet website, located at www.sec.gov, that contains reports, proxy statements and other information regarding companies and individuals that file electronically with the SEC. Our SEC filings are also available at the office of the NASDAQ Global Market. For further information on obtaining copies of our public filings at the NASDAQ Global Market, you should call (212) 656-5060.

 

The information contained in this proxy statement speaks only as of the date indicated on the cover of this proxy statement unless the information specifically indicates that another date applies.

 

The proxy statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is not lawful to make any offer or solicitation in that jurisdiction. The delivery of this proxy statement should not create an implication that there has been no change in our affairs since the date of this proxy statement or that the information herein is correct as of any later date.

 

Our stockholders should not send in their Printronix stock certificates until they receive the transmittal materials from the payment agent. Our stockholders of record who have further questions about their share certificates or the exchange of our common stock for cash should contact the payment agent.

 

Stockholders should not rely on information other than that contained in this proxy statement. We have not authorized anyone to provide information that is different from that contained in this proxy statement. This proxy statement is dated November 26, 2007. No assumption should be made that the information contained in this proxy statement is accurate as of any date other than that date (or any earlier date if so indicated in this proxy statement), and the mailing of this proxy statement will not create any implication to the contrary.

 

If you have questions about the special meeting or the merger after reading this proxy, or if you would like additional copies of this proxy statement or the proxy card, you should contact Printronix, Inc., 14600 Myford Road, Irvine, California, 92606, Attention: Secretary. You may also call our proxy solicitor, the Altman Group toll free at toll free at (866) 822-1241 (bankers and brokers may call (201) 806-7300.

 

Whether or not you intend to be present at the special meeting, we urge you to submit your signed proxy promptly.

Annex A

 

AGREEMENT AND PLAN OF MERGER

dated as of

October 1, 2007

among

Printronix, Inc.,

Pioneer Holding Corp.

and

Pioneer Sub Corp.

 

TABLE OF CONTENTS

 

 

AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER (this “Agreement” ) dated as of October 1, 2007 among Printronix, Inc., a Delaware corporation (the “Company” ), Pioneer Holding Corp., a Delaware corporation ( “Parent” ), and Pioneer Sub Corp., a Delaware corporation and a wholly-owned subsidiary of Parent ( “Merger Subsidiary” ).

 

WHEREAS, the respective boards of directors of the Company, Parent and Merger Sub have approved and adopted this Agreement and the transactions contemplated hereby and deem them to be advisable and in the best interest of their respective stockholders;

 

WHEREAS, the Special Committee of the Company (as defined herein) has approved this Agreement and the transactions contemplated hereby and deem them to be advisable and in the best interest of the Company’s stockholders;

 

WHEREAS, immediately prior to the Effective Time, certain member of the Company’s management (the “Continuing Stockholders” ) will contribute shares of the Company’s common stock owned by them (the “Contributed Stock” ) to Parent in exchange for shares of capital stock of Parent;

 

WHEREAS, concurrently with the execution and delivery of this Agreement, each of the directors, in their capacity as stockholders, and executive officers of the Company have entered into voting agreements in the form attached as Exhibit A hereto (the “Voting Agreements” ); and

 

WHEREAS, concurrently with the execution of this Agreement, and as a condition to the willingness of the Company to enter into this Agreement, Vector Capital Partners IV, L.P. (the “Guarantor” ) has entered into a limited guarantee (the “Limited Guarantee” ) in the form of Annex A hereto in favor of the Company pursuant to which Guarantor has, among other matters, and subject to the terms thereof, guaranteed certain obligations of Parent and Merger Sub in connection with this Agreement.

 

NOW, THEREFORE, in consideration of the representations, warranties and covenants in this Agreement, and intending to be legally bound hereby, Parent, the Company and Merger Sub hereby agree as follows:

 

The parties hereto agree as follows:

 

Article 1

 

DEFINITIONS

 

Section 1.01    Definitions.   (a) As used herein, the following terms have the following meanings:

 

“Acquisition Proposal” means, other than the transactions contemplated by this Agreement, any offer, proposal or inquiry from a Third Party relating to, or that could reasonably be expected to lead to, or any Third Party indication of interest in, (A) any acquisition or purchase, direct or indirect, in one or a series of transactions, of assets or businesses that constitute 15% or more of the consolidated revenue, net income, EBITDA or assets of the Company and its Subsidiaries or over 15% of any class of equity or voting securities of the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than 15% of the consolidated revenue, net income, EBITDA or assets of the Company and its Subsidiaries, (B) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in a Third Party beneficially owning 15% or more of any class of equity or voting securities of the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than 15% of the consolidated revenue, net income, EBITDA or assets of the Company and its Subsidiaries, or (C) a merger, consolidation, share exchange, business combination, sale of substantially all the assets, reorganization, recapitalization, liquidation, dissolution, joint venture, license agreement or other similar transaction involving the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than 15% of the consolidated revenue, net income, EBITDA or assets of the Company and its Subsidiaries.

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person.

“Applicable Law” means, with respect to any Person, any civil and criminal, foreign, international, European Union, provincial, federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling, writ or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

 

“Business Day” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York or San Francisco, California are authorized or required by Applicable Law to close.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Company Balance Sheet” means the consolidated balance sheet of the Company as of June 29, 2007 and the footnotes thereto set forth in the Company 10-Q.

 

“Company Balance Sheet Date” means June 29, 2007.

 

“Company Disclosure Schedule” means the disclosure schedule dated the date hereof regarding this Agreement that has been provided by the Company to Parent and Merger Subsidiary.

 

“Company IP” means all Intellectual Property Rights used in the conduct of the Company’s or its Subsidiaries’ businesses as currently conducted, or as currently contemplated to be conducted.

 

“Company Owned IP” means all Intellectual Property Rights owned, purported to be owed, developed or acquired by assignment, or exclusively licensed, by the Company and/or its Subsidiaries.

 

“Company Rights” means the Company Stock purchase rights issued pursuant to the Company Rights Agreement.

 

“Company Rights Agreement” means the Company’s Amended and Restated Rights Agreement dated as of April 4, 1999.

 

“Company Stock” means the common stock, $0.01 par value, of the Company.

 

“Company 10-K” means the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2007.

 

“Company 10-Q” means the Company’s quarterly report on Form 10-Q for the quarterly period ended June 29, 2007.

 

“Company Transaction Costs” means all fees and expenses incurred by the Company and its Subsidiaries in connection with the transactions contemplated by this Agreement, including without limitation amounts payable to Houlihan Lokey Howard & Zukin Capital, Inc. and Houlihan Lokey Howard & Zukin Financial Advisors, Inc., amounts payable to the Company’s outside counsel, accountants and other advisors and service providers, and amounts payable to printers in connection with the preparation, printing and mailing of the Company Proxy Statement.

 

“Contract” means any legally binding written or oral contract, agreement, note, bond, indenture, mortgage, guarantee, option, lease, license, sales or purchase order, warranty, commitment or other instrument of any kind.

 

“Current Assets” shall have the same meaning as provided for in the Company 10-K, which includes cash and cash equivalents, short-term investments, accounts receivable net of allowances for doubtful accounts and sales returns, inventory, prepaid expenses and other current assets, and net deferred income tax assets.

 

“Current Liabilities” shall have the same meaning as provided for in the Company 10-K, which includes current portion of long-term debt, accounts payable, accrued liabilities, payroll and employee benefits, warranties, deferred revenue, professional fees, income taxes, and other liabilities. For the purposes of this Agreement, Current Liabilities shall exclude the Company Transaction Costs.

 

“Current Sites” shall mean the Company’s current manufacturing facilities in California, the Netherlands, Mexico and Singapore.

 

“Delaware Law” means the General Corporation Law of the State of Delaware.

“Environmental Consultants” shall mean (a) for all Current Sites other than California, ENVIRON International Corporation and (b) for the current California Company manufacturing facility, the technical consultant retained by the Potential Mortgage Lender.

 

“Environmental Laws” means all civil and criminal, foreign, international, European Union, provincial, federal, state and local laws (statutory, common or otherwise), constitutions, treaties, conventions, ordinances, codes, rules, regulations, orders, injunctions, judgments, decrees, rulings, writs or other similar requirements, in effect where business of the Company or its Subsidiaries currently is conducted any of which govern or relate to pollution, protection or restoration of the environment, natural resources, safety and health, releases or threatened releases of Hazardous Substances, solid or hazardous waste, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, release, transport or handling of Hazardous Substances and all laws and regulations with regard to record keeping, notification, disclosure and reporting requirements respecting Hazardous Substances, together with any Governmental Authority interpretations of each of the foregoing, including, but not limited to (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq., and any amendments thereto; (ii) the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., and any amendments thereto; (iii) the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq.; (iv) any other similar Laws, as now in effect, relating to, or imposing liability or standards of conduct concerning, any Hazardous Materials or dangerous waste, substance or material; and (v) any Laws relating to the protection of human health and occupational safety for employees and others in the workplace.

 

“Environmental Permits” means all Permits relating to or required by Environmental Laws and affecting, or relating to, the business of the Company or any Subsidiary as currently conducted.

 

“ERISA” means the Employee Retirement Income Security Act of 1974.

 

“ERISA Affiliate” of any entity means any other entity that, together with such entity, would be treated as a single employer under Section 414 of the Code.

 

“Freely Available Cash” shall mean unrestricted cash on hand of the Company held in the account set forth on Schedule A less the Company Transaction Costs. “Freely Available Cash” shall exclude any cash that cannot be deposited with the Exchange Agent pursuant to Section 2.03 under Applicable Law (including laws relating to solvency, adequate surplus and similar capital adequacy tests) or under any Contract binding upon the Company or any of its Subsidiaries or any Permits affecting, or relating in any way to, the assets or business of the Company and its Subsidiaries.

 

“GAAP” means generally accepted accounting principles in the United States.

 

“Governmental Authority” means any transnational, domestic or foreign federal, state or local, governmental authority, department, court, agency or official, including any political subdivision thereof.

 

“Hazardous Substance” means any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substance, waste or material, or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics, including any substance, waste or material regulated under any Applicable Law.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

“Intellectual Property Rights” means all worldwide rights in (i) inventions, whether or not patentable, (ii) patents and patent applications, (iii) trademarks, service marks, trade dress, logos, Internet domain names and trade names, whether or not registered, and all goodwill associated therewith, (iv) rights of publicity and other rights to use the names and likeness of individuals, (v) mask works, (vi) computer software, data, databases, files, and documentation and other materials related to the foregoing, (vii) trade secrets and confidential, technical and business information, (viii) any other similar type of proprietary intellectual property right, (ix) all rights to any of the foregoing provided by bilateral or international treaties or conventions, (x) all other intellectual property or proprietary rights and (xi) all rights to sue or recover and retain damages and costs and attorneys’ fees for past, present and future infringement or misappropriation of any of the foregoing.

“Knowledge” of any Person that is not an individual means the actual knowledge of such Person’s executive officers after reasonable inquiry.

 

“Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance or other adverse claim of any kind in respect of such property or asset. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

 

“Material Adverse Effect” means, with respect to any Person (other than Parent and Merger Subsidiary), any state of facts, change, development, event, effect, condition, occurrence, action or omission that, individually or in the aggregate, could reasonably be expected to result in a material adverse effect on (i) the condition (financial or otherwise), business, assets, properties or results of operations of such Person and its Subsidiaries, taken as a whole, or (ii) the ability of such Person to perform its obligations under or to consummate the transactions contemplated by this Agreement, except, in the case of clause (i), any effect resulting from or arising in connection with (A) this announcement or pendency of this Agreement or the transactions contemplated hereby, (B) changes, circumstances or conditions affecting the industry in which the Company and its Subsidiaries operate, to the extent they do not disproportionately affect the Company or its Subsidiaries, taken as a whole, (C) any change in the Company’s stock price or trading volume, in and of itself (it being understood that the underlying cause of any such change may be taken into consideration in determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur), (D) any failure by the Company to meet internal or third party published revenue or earnings projections, in and of itself (it being understood that the underlying cause of any such failure may be taken into consideration in determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur), (E) changes in general U.S. or global economic, regulatory or political conditions, to the extent they do not disproportionately affect the Company or its Subsidiaries, taken as a whole, (F) any changes or effects arising out of or resulting from any legal claims or other proceedings made by any of the Company’s stockholders arising out of or related to this Agreement, the Merger or any other transaction contemplated hereby, or (G) potential costs of remediation, claims, violations, damages, losses or diminutions of property value identified and quantified in the Environmental Reports with respect to the Current Sites.

 

“1933 Act” means the Securities Act of 1933.

 

“1934 Act” means the Securities Exchange Act of 1934.

 

“Parent Material Adverse Effect” means, with respect to the Parent, any state of facts, change, development, event, effect, condition, occurrence, action or omission that, individually or in the aggregate, could reasonably be expected to result in a material adverse effect on the ability of Parent to perform its obligations under or to consummate the transactions contemplated by this Agreement.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Permit” means any permit, license, franchise, certificate, consent, approval and other similar authorization of any Governmental Authority.

 

“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

“Potential Mortgage Lender” shall mean Wells Fargo or any other bank that may provide mortgage financing to Parent.

 

“Public Software” means any software that contains, or is derived in any manner (in whole or in part) from, any software that is distributed as free software or open source software (e.g., Linux), including software licensed or distributed under any of the following licenses or distribution models: (A) GNU’s General Public License (GPL) or Lesser/Library GPL (LGPL), (B) the Artistic License (e.g., PERL), (C) the Mozilla Public License, (D) the Netscape Public License, (E) the Sun Community Source License (SCSL), (F) the Sun Industry Standards License (SISL), (G) the BSD License, and (H) the Apache License.

“Registered IP” means all U.S., international and foreign (i) patents and patent applications (including provisional applications and design patents and applications) and all reissues, divisions, divisionals, renewals, extensions, counterparts, continuations and continuations-in-part thereof, and all patents, applications, documents and filings claiming priority thereto or serving as a basis for priority thereof, (ii) registered trademarks, service marks, applications to register trademarks, applications to register service marks, intent-to-use applications, or other registrations or applications related to trademarks, (iii) registered copyrights and applications for copyright registration, (iv) domain name registrations and Internet number assignments; and (v) other Intellectual Property Rights that are the subject of an application, certificate, filing, registration or other document issued, filed with, or recorded by any Governmental Authority, in the case of each of clauses (i)-(v) above, owned by, under obligation of assignment to, or filed in the name of, the Company or any of its Subsidiaries.

 

“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002.

 

“SEC” means the Securities and Exchange Commission.

 

“Subsidiary” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person.

 

“Third Party” means any Person, including as defined in Section 13(d) of the 1934 Act, other than Parent or any of its Affiliates.

 

“Working Capital” means Current Assets less Current Liabilities.

 

(a) Each of the following terms is defined in the Section set forth opposite such term: