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:
þ
Preliminary Proxy Statement
o
Confidential, for Use of the Commission Only (as permitted by Rule 14a 6(e)(2))
o
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):
o
No fee required.
þ
Fee computed on table below per Exchange Act Rules 14a 6(i)(1) and 0 11.
(1)
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Title of each class of securities to which transaction applies:
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Common stock, $0.01 par value per share
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(2)
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Aggregate number of securities to which transaction applies:
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6,892,777 shares of common stock, which consists of: (i) 6,683,507 shares of common stock
issued and outstanding as of [___], 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.
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(3)
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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):
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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
[___].
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(4)
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Proposed maximum aggregate value of transaction:
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$109,017,364.90
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(5)
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Total fee paid:
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$3,346.83
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Fee paid previously with preliminary materials.
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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.
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(1)
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Amount previously paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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SPECIAL
MEETING OF STOCKHOLDERS
MERGER PROPOSED YOUR VOTE IS VERY IMPORTANT
To Be Held on
[ ],
200[ ]
Dear Stockholder:
You are cordially invited to attend a special meeting of
stockholders of Printronix, Inc. to be held at
[ ],
on
[ ]
200[ ], 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, your 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,
/s/ Robert A. Kleist
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
[ ],
2007 and is first being mailed to stockholders on or about
[ ],
2007.
Printronix,
Inc.
14600 Myford Road, Irvine, CA 92606
(714) 368-2300
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
To Be Held on
[ ],
[ ],
200[ ]
To our Stockholders:
Notice is hereby given that a special meeting of stockholders of
Printronix, Inc., a Delaware corporation
(
Printronix
), will be held at
[ ]
on
[ ],
200[ ] 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., 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
[ ]
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 [ ] 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
/s/ George L. Harwood
George L. Harwood
Senior Vice President, Chief Financial Officer, Secretary
Irvine, California
[ ],
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 [ ]).
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 [ ]).
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
[ ],
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 $[ ].
Treatment of Stock Options and Restricted Stock
(page [ ]).
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.
i
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 [ ])
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 Printronixs Financial Advisor (page [ ]
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 HLHZs 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.
HLHZs 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 HLHZs 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 HLHZs 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 [ ]).
We will hold the
special meeting at
[ ]
on
[ ],
200[ ], beginning at 9:00 a.m., Pacific Time.
Required Vote (page[ ]).
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.
ii
Who May Vote (page [ ]).
You
are entitled to vote at the special meeting if you owned shares
of Printronix common stock at the close of business on
[ ],
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 [ ]).
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:
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giving written notice of revocation to our Secretary;
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submitting another properly executed proxy by telephone,
Internet, or later-dated written proxy; or
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attending the special meeting and voting by paper ballot in
person.
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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 [ ]).
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 equity interest in Printronix or Pioneer after the merger.
Material Federal Income Tax Consequences
(page [ ]).
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 [ ]).
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.
iii
Appraisal Rights (page [ ] 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 [ ]).
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
Printronixs termination of the merger agreement as a
result of Pioneers 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
$18 million of Freely Available Cash (as defined in
The Merger Agreement Conditions to the
Merger on page [ ]) 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 [ ] and
Annex A)
Closing of the Merger
(page [ ]).
Before we can
complete the merger, a number of conditions must be satisfied or
waived by the applicable party. These include the following:
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adoption of the merger agreement by the requisite vote of
Printronix stockholders;
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expiration or early termination of applicable waiting periods
under United States federal and analogous foreign antitrust laws;
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the absence of any injunction or other legal restraint
prohibiting the consummation of the merger;
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the truth in all respects of our representations and warranties
under the merger agreement relating to our authorization to
enter the merger agreement, capitalization and finders
fees and expenses;
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Printronixs compliance with its other representations and
warranties under the merger agreement, except as have not and
would not have individually or in the aggregate, and ignoring
the materiality and material adverse effect qualifiers therein,
a material adverse effect on Printronix;
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Pioneer and Merger Subsidiarys compliance with their
representations and warranties under the merger agreement,
except as have not and would not have a material adverse effect
on Pioneer;
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each partys performance in all material respects of its
obligations under the merger agreement;
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Printronix having at closing no less than $18,000,000 in Freely
Available Cash (as defined in The Merger
Agreement Conditions to the Merger on
page [ ]) and having deposited such amounts into
the account funding the merger consideration;
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Printronix having at close certain amounts of working capital,
depending on the date of closing (as further described in
The Merger Agreement Conditions to the
Merger on page [ ]);
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Pioneer having been satisfied with the results of Environmental
Phase I studies being conducted on our current manufacturing
facilities by October 31, 2007;
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the absence of any pending action, proceeding or investigation
by any governmental entity that seeks to make illegal, to delay
materially, or otherwise directly or indirectly to restrain or
prohibit the consummation of the merger or seeking to obtain
material damages or otherwise directly or indirectly relating to
the transactions contemplated by the merger; and
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the absence of any event, occurrence or development of any state
of circumstances or facts that, individually or in the
aggregate, has had or could have a material adverse effect on
Printronix, since the date of the merger agreement.
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iv
No Solicitation of Alternative Transactions by Printronix
(page [ ]).
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. See The Merger
Agreement No Solicitation of Alternative
Transactions by Printronix.
Termination of the Merger Agreement
(page [ ]).
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) Printronixs 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 Pioneers 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 Pioneers
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.
See The Merger Agreement Termination of Merger
Agreement.
v
Termination
Fees (page [ ]).
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 Pioneers
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. See The Merger Agreement Termination
Fees.
Voting
Agreements (page [ ]).
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 vested options to purchase our
common stock owned by our directors and officers and their
respective affiliates). 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 [ ]).
Certain of our officers and directors may have interests in the
merger that are different from, or in addition to, yours,
including the following:
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our directors and officers hold vested stock options which will
be converted into the right to receive $16.00, net of any
exercise price, for each share of common stock represented by
these grants upon completion of the merger;
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the continuing stockholders (Robert A. Kleist, our president and
chief executive officer, who currently acts as chairman of the
board of directors, George L. Harwood, our chief financial
officer, C. Victor Fitzsimmons, our senior vice president,
worldwide operations and Juli A. Mathews, our vice president,
human resources), have entered into contractual agreements to
contribute some of their shares of Printronix which each
currently owns (180,558 shares by Mr. Kleist,
15,000 shares by each of Messrs. Harwood and
Fitzsimmons, and 5,000 shares by Ms. Mathews) to
Pioneer in exchange for equity of Pioneer, which will equal a
9.9% aggregate ownership interest in Pioneer after the merger in
the aggregate;
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vi
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under the merger agreement, Pioneer has agreed that the
surviving corporation of the merger will honor all obligations
of Printronix and its subsidiaries for indemnification,
advancement of expenses and exculpation from liabilities for
acts or omissions prior to the effective time of the merger by
our and our subsidiaries current and former directors and
officers as provided in our respective organizational documents
and any existing indemnification agreements disclosed to
Pioneer, and the surviving corporation of the merger will
maintain in effect directors and officers liability
insurance on behalf of those directors and officers for a period
of six years after consummation of the merger; and
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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. Kleists
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. Kleists 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.
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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 [ ]).
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 SECs
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 on page [ ].
vii
TABLE OF
CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE MERGER
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1
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Accounting Treatment
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viii
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Page
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A-1
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B-1
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C-1
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D-1
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ix
QUESTIONS
AND ANSWERS ABOUT THE MERGER
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Q:
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May I Attend the Special Meeting?
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A:
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All stockholders as of the close of business on
[ ],
2007, the record date for the special meeting, may attend the
special meeting. No cameras, recording equipment, electronic
devices, large bags, briefcases, or packages will be permitted
in the special meeting.
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Who Can Vote at the Special Meeting?
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A:
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All stockholders of record at the close of business on
[ ],
2007, the record date for the special meeting, will be entitled
to notice of and to vote at the special meeting. If on that
date, your shares were registered directly in your name with our
transfer agent, BNY Mellon Shareowner Services, then you are a
stockholder of record. As a stockholder of record, you may vote
in person at the meeting or vote by proxy.
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If on the record date, your shares were held in an account at a
brokerage firm, bank, dealer, trustee (including the trustee or
other fiduciary of an employed benefit plan) or similar
organization, then you are the beneficial owner of shares held
in street name, and these proxy materials are being
forwarded to you by that organization. The organization holding
your account is considered the stockholder of record for
purposes of voting at the special meeting. As a beneficial
owner, you have the right to direct your broker or other agent
on how to vote the shares in your account. You are also invited
to attend the special meeting. However, since you are not the
stockholder of record, you may not vote your shares in person at
the special meeting unless you request and obtain a valid proxy
from your broker or other agent. See The Special
Meeting beginning on page [ ].
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Q:
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If My Shares Are Held in Street Name, Will My
Broker Vote My Shares for Me?
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A:
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Your broker will vote your shares only if you provide
instructions to the record holder on how to vote. You should
instruct the record holder to vote your shares by following the
directions provided to you by the record holder. See The
Special Meeting beginning on page [ ].
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Q:
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Will My Shares Held in Street Name or Another
Form of Record Ownership Be Combined for Voting Purposes With
Shares I Hold of Record?
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A:
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No. Because any shares you may hold in street
name will be deemed to be held by a different stockholder
than any shares you hold of record, any shares so held will not
be combined for voting purposes with shares you hold of record.
Similarly, if you own shares in various registered forms, such
as jointly with your spouse, as trustee of a trust or as
custodian for a minor, you will receive, and will need to sign
and return, a separate proxy card (or, in the case of telephonic
or Internet voting, provide appropriate instructions concerning
the separate proxy) for those shares because they are held in a
different form of record ownership. Shares held by a corporation
or business entity must be voted by an authorized officer of the
entity. Shares held in an IRA must be voted under the rules
governing the account.
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Q:
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How Are Votes Counted?
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A:
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Votes will be counted by the inspector of election appointed for
the special meeting, who will separately count For
and Against votes, abstentions, and broker non
votes. A broker non vote occurs when a nominee
holding shares for a beneficial owner does not receive
instructions with respect to the proposal to adopt the merger
agreement from the beneficial owner. Because under Delaware law
the adoption of the merger agreement requires the affirmative
vote of holders of a majority of our outstanding shares of
common stock, broker non votes and abstentions will have the
same effect as a vote Against the adoption of the
merger agreement. Broker non votes and abstentions are counted,
however, as present for the purpose of determining whether a
quorum is present.
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Q:
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How Many Votes Are Required to Approve the Proposals?
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A:
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The votes required to approve the proposals are as follows:
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Proposal 1, the adoption of the merger
agreement requires 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; and
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Proposal 2, if necessary or appropriate, the
approval of the adjournment or postponement of the special
meeting to solicit additional proxies requires the affirmative
vote of a majority of the votes cast on the proposal.
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Q:
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How Many Votes Does Printronix Already Know Will Be Voted in
Favor of the Merger Proposal?
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A:
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Each member of our Board of Directors and several of our
officers have entered into a contractual voting agreement with
Pioneer, pursuant to which they have each agreed 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 (including vested options
to purchase our common stock owned by our directors and officers
and their respective affiliates) as of the record date.
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Q:
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How Many Votes Do I Have?
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A:
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You have one vote for each share of our common stock you own as
of
[ ],
2007, the record date for the special meeting.
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Q:
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What Happens If I Do Not Vote?
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A:
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Because the vote required for the proposal to adopt the merger
agreement is based on the total number of shares of our common
stock outstanding on the record date, and not just the shares
that are voted, if you do not vote, it will have the same effect
as a vote Against the adoption of the merger
agreement. If the merger is completed, whether or not you voted
for the adoption of the merger agreement and approval of the
merger, you will be paid the merger consideration for your
shares of our common stock upon completion of the merger, unless
you properly exercise your appraisal rights. See The
Special Meeting beginning on page [ ] and
Appraisal Rights beginning on
page [ ] and Annex D.
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Q:
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When Should I Send in My Stock Certificates?
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A:
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After the special meeting, if you are a stockholder of record,
you will receive a letter of transmittal and other documents to
complete and return to a paying agent designated by Pioneer. In
order to receive the merger consideration as soon as reasonably
practicable following the completion of the merger, you must
send the paying agent your validly completed letter of
transmittal together with your stock certificates as instructed
in the separate mailing. You should NOT send your stock
certificates now.
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Q:
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When Can I Expect to Receive the Merger Consideration For My
Shares?
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A:
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Once the merger is completed, you will be sent in a separate
mailing a letter of transmittal and other documents to be
delivered to the paying agent in order to receive the merger
consideration. Once you have submitted your properly completed
letter of transmittal, stock certificates, and other required
documents to the paying agent, the paying agent will send you
the merger consideration.
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Q:
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I Do Not Know Where My Stock Certificate Is How
Will I Get My Cash?
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A:
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The materials the paying agent will send you after completion of
the merger will include the procedures that you must follow if
you cannot locate your stock certificate. This will include an
affidavit that you will need to sign attesting to the loss of
your certificate. Pioneer may also require that you provide a
bond in order to cover any potential loss.
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Q:
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Who Will Bear the Cost of the Solicitation?
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A:
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The expense of soliciting proxies in the enclosed form will be
borne by Printronix. We have retained the Altman Group a proxy
solicitation firm, to solicit proxies in connection with the
special meeting at a cost of approximately $10,000 plus
reimbursement of out-of-pocket fees and expenses. In addition,
we may reimburse brokers, banks and other custodians, nominees
and fiduciaries representing beneficial owners of shares for
their expenses in forwarding soliciting materials to such
beneficial owners. Proxies may also be solicited by certain of
our directors, officers and employees, personally or by
telephone, facsimile or other means of communication. No
additional compensation will be paid for such services.
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2
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Q:
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What Do I Need to Do Now?
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A:
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We urge you to read this proxy statement, including its annexes,
carefully, and to consider how the merger affects you. If you
are a stockholder of record, then you can ensure that your
shares are voted at the special meeting by taking one of the
following actions:
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indicate your vote on your proxy card and sign and
mail your proxy card in the enclosed return envelope as soon as
possible as instructed in these materials so that your shares
may be represented at the special meeting. The meeting will take
place at
[ ]
on
[ ],
2007, at 9:00 a.m. Pacific Time.
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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
[ ],
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
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visit the Internet voting site at
http://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
[ ],
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.
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Please do NOT send in your stock certificates at this time.
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For further information see The Special Meeting
beginning on page [ ].
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Q:
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What Happens If I Sell My Shares of Common Stock Before the
Special Meeting?
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A:
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The record date for stockholders entitled to vote at the special
meeting is earlier than the date of the special meeting. If you
transfer your shares of our common stock after the record date
but before the special meeting, you will, unless special
arrangements are made, retain your right to vote at the special
meeting but will transfer the right to receive the merger
consideration to the person to whom you transfer your shares.
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Q:
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When Do You Expect the Merger to be Completed?
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A:
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We are working toward completing the merger as quickly as
possible, but we cannot predict the exact timing. We expect to
complete the merger no later than three business days after
obtaining stockholder approval, assuming that all other closing
conditions contained in the merger agreement have been satisfied
or waived at that time. See The Merger Agreement -
Conditions to the Merger on page [ ].
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Q:
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Who Can Help Answer My Other Questions?
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A:
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If you would like additional copies of this proxy statement or a
new proxy card or if you have questions about the merger, you
should contact our Secretary at Printronix, Inc., 14600 Myford
Road, Irvine, California, 92606. You may also call our proxy
solicitor, the Altman Group, at
(866) 822-1241,
toll-free, to request a separate copy of these materials. If
your shares are held by a broker, trustee, or other nominee, you
may also call your broker, trustee, or nominee for additional
information. Banks and brokers can call
(201) 806-7300.
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3
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
[ ]
at 9:00 a.m., Pacific Time, on [
day of the week
],
[ ],
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
[ ],
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 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.
Only stockholders who owned shares of record of our common stock
as of the close of business on
[ ],
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
[ ],
2007.
4
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
[ ],
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
[ ],
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.
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:
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voting in person at the special meeting;
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submitting written notice of revocation to our Secretary prior
to the special meeting; or
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submitting another properly executed proxy by telephone,
Internet, or a later-dated writing proxy.
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5
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
[ ],
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 [ ] and
Annex D for information on the requirements of Delaware law
regarding appraisal rights.
Stock
Ownership of Directors and Executive Officers
As of
[ ],
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 vested options to purchase our common stock
owned by our directors and officers and their respective
affiliates). 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, representing 1,529,961 shares of our
common stock and 158,213 vested options to acquire shares of our
common stock, or collectively approximately 24.67% of our
outstanding common stock (including vested options to purchase
our common stock owned by our directors and officers and their
respective affiliates). See The Voting Agreements on
page [ ].
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
6
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.
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.
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.
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.
7
THE
TRANSACTION PARTICIPANTS
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 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.
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, CA 94104,
c/o Vector
Capital Corporation, and its telephone number is
(415) 293-5000.
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.
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.
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.
8
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 Companys
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
9
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 days closing
price and a 24% premium over the Companys 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 As 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 As 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
Companys 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 partys 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 Bs 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
Directors
10
fiduciary duties relating to the Boards 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 Cs 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 Cs 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 Companys 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
Vectors 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
Vectors 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
11
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 Cs 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 Lokeys 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 Bs 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 Lokeys 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 Bs 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.
12
On July 6, 2007, the Special Committee received updates
from representatives of Houlihan Lokey and Stradling Yocca
Carlson & Rauth regarding Financial Sponsor Bs
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 Bs 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 Bs
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 Cs 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 Vectors 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 Bs lenders needed more time and that a new
potential lender was beginning their due diligence review. The
Special Committee then discussed Vectors 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 Printronixs latest
performance.
13
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 Printronixs 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 Bs 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 companys 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 Vectors 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
Bs inability to secure financing for its transaction and
the risk that Financial Sponsor C could back out of the
transaction. Given Financial Sponsor Bs inability to
finalize the terms of its proposed transaction, the
transactions higher risk of non-consummation due to its
increased complexity and the Special Committees
preliminary view that Vectors 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
Printronixs 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 Vectors 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.
14
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
Printronixs 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 Printronixs 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, Vectors 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 weeks
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 Vectors 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,
15
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, Vectors 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. Kleists
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. Kleists equity commitment
letter.
On September 26, 2007, the Special Committee met to discuss
the status of Vectors 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 HLHZs 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.
16
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:
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the fact that the merger consideration is all cash, which
provides relative certainty of value to Printronix stockholders
(other than the Continuing Stockholders);
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the terms and conditions of the proposed merger agreement,
including (i) the amount and form of consideration being
offered to Printronixs stockholders, (ii) the
representations and warranties of the parties, (iii) the
covenants of the parties, (iv) the conditions to the
closing of the proposed Merger, (v) the right of our Board
of Directors or the Special Committee, in the event it were to
receive any unsolicited bona fide third party acquisition
proposal or proposals that our Board of Directors or the Special
Committee reasonably believes will lead to a Superior Proposal
(as defined in The Merger Agreement No
Solicitation of Alternative Transactions by Printronix)
prior to the stockholder meeting to approve the merger, to
consider and enter into negotiations of any such proposals,
subject to complying with certain requirements including that
our Board of Directors or the Special Committee must determine
in good faith by a majority vote, after considering the advice
of outside legal counsel, that the failure to take such action
would reasonably be expected to result in a breach of its
fiduciary duties under applicable law;
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historical market prices of Printronixs shares;
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market prices and financial data related to companies engaged in
businesses similar to the Companys business and prices and
premiums paid in recent acquisitions of other similar companies;
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Printronixs operating results, its financial condition,
and the Special Committees and managements
evaluation of Printronixs properties, assets and
prospects, including Printronixs prospects if it were to
continue as an independent company;
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Vectors committed financing for the merger and its ability
to complete the merger in a timely manner;
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possible alternatives, which the Special Committee concluded
were not reasonably likely to result in a more favorable
combination of price, form of consideration, and likelihood of
consummation than the merger;
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the fact that the merger agreement provides the opportunity for
Printronix stockholders, who believe that the terms of the
merger are not fair, to pursue dissenter and appraisal rights in
respect of the merger under the Delaware General Company Law
(DGCL);
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the risks and uncertainties associated with our product
offerings, including legacy line printers and the slow adoption
of RFID in the wider marketplace, and the ever present
possibility that if for any reason we are unable to continue to
manufacture or sell our product offerings or if production of
our product offerings were interrupted or could not continue in
a cost-effective or timely manner, whether due to regulatory
sanctions, manufacturing constraints, product defects or
recalls, obsolescence of our technology, increased competition,
intellectual property concerns or otherwise, our business would
be materially harmed;
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the financial analysis reviewed and discussed with the Special
Committee by representatives of HLHZ as well as the oral opinion
of HLHZ, to the Special Committee on October 1, 2007 (which
was subsequently confirmed in writing by delivery of HLHZs
written opinion dated the same date) with respect to 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;
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the historical market prices of our common stock and recent
trading activity, including the fact that the $16.00 per share
merger consideration represented a 18.2% premium over our three
month trading price and a 20.6% premium over our closing stock
price on October 1, 2007 (the last trading day prior to the
announcement of the transaction);
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the termination provisions of the merger agreement,
(a) which entitle our Board of Directors or Special
Committee to terminate the merger agreement in order to enter
into an agreement for a Superior Proposal (as defined in
The Merger Agreement No Solicitation of
Alternative Transactions by Printronix) with a 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 Companys 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
Pioneers and Merger Subsidiarys 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;
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that, although there can be no assurances, our Board concluded,
after consulting with counsel, that antitrust approvals for the
merger are reasonably likely to be obtained; and
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that the transaction will be subject to the approval of our
stockholders.
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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:
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the consideration and negotiation of the transaction was
conducted entirely under the oversight of the members of Special
Committee of our Board of Directors which was composed solely of
independent, disinterested members of our Board of Directors,
and such committee recommended to our Board of Directors that it
approve the merger agreement and the transactions related to the
merger. No member of our Board of Directors has any financial
interest in the merger that is different from our stockholders
generally, other than as described under Interests
of Certain Officers and Directors in the Merger; and
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our extensive, arms length negotiations with Vector,
which, among other things, resulted in the merger consideration
at $16.00.
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The Special Committee was aware of and also considered the
following potentially adverse factors associated with the
merger, among others:
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that our stockholders, other than certain officers, will have no
ongoing equity participation in the surviving corporation
following the merger, meaning that our stockholders will cease
to participate in our future earnings or growth, or to benefit
from any increases in the value of our stock;
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that the proposed merger will be a taxable transaction for our
stockholders;
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that we will be required to pay Pioneer a termination fee if the
merger agreement is terminated under certain circumstances;
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that if the merger is not completed, we may be adversely
affected due to potential disruptions in our operations and
reductions in our perceived acquisition value;
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the potential disruptions to customer, supplier or other
commercial relationships important to us as a result of the
announcement of the merger;
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the possibility that the merger will not be consummated and the
potential negative effect of the public announcement of the
merger on our sales, operating results and stock price and our
ability to retain key management, sales and marketing and
technical personnel;
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the conditions to Pioneers obligation to complete the
merger and the right of Pioneer to terminate the merger
agreement under certain circumstances;
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the restrictions on our ability to solicit or engage in
discussions or negotiations regarding alternative business
combination transactions, subject to specified exceptions, and
the requirement that we pay a termination fee in order to accept
a Superior Proposal (as defined in The Merger
Agreement No Solicitation of Alternative
Transactions by Printronix), which may discourage a
competing proposal to acquire us that may be more advantageous
to our stockholders;
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the restrictions on the conduct of our business prior to the
completion of the merger, requiring us to conduct our business
in the ordinary course, subject to specific limitations, which
may delay or prevent us from undertaking business opportunities
that may arise pending completion of the merger;
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the risk of diverting managements focus and resources from
other strategic opportunities and from operational matters while
working to implement the merger, and the possibility of other
management and employee disruption associated with the merger,
including the possible loss of key management, technical or
other personnel; and
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the interests that certain of our directors and executive
officers may have with respect to the merger, in addition to
their interests as stockholders of Printronix generally, as
described in Interests of Certain Officers and
Directors in the Merger.
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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 HLHZs written opinion dated the same date)
to the effect that, as of October 1,
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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.
HLHZs 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 HLHZs 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 HLHZs
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 Printronixs 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 Printronixs
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 Printronixs 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 Printronixs
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.
HLHZs 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
20
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, HLHZs 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.
21
HLHZs 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
HLHZs express written consent. The opinion should not be
construed as creating any fiduciary duty on HLHZs 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 Printronixs or any other partys security holders
vis-à-vis any other class or group of Printronixs or
such other partys 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 HLHZs valuation analyses is not a
complete description of the analyses underlying HLHZs
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 HLHZs 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
HLHZs 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, HLHZs analyses are inherently
subject to substantial uncertainty.
22
HLHZs 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 HLHZs
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 HLHZs
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 HLHZs 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 companys 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
companys earnings before interest, taxes, depreciation,
and amortization for a specified time period.
EBIT generally the amount of the relevant
companys 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 Printronixs 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:
Zebra Technologies Corp.
Intermec,
Inc.
1
Lexmark International Inc.
Sato Corp.
Toshiba Tec Corp.
Roper Industries Inc.
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.
23
The selected companies analysis indicated the following:
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Multiple Description
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Low
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High
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Median
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Mean
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Enterprise Value as a multiple of:
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LTM EBITDA
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4.5
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x
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14.4
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x
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8.3
|
x
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9.4
|
x
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2008E EBITDA
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4.1
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x
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14.2
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x
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8.2
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x
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9.5
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x
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2009E EBITDA
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4.2
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x
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18.5
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x
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9.6
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x
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10.1
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x
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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:
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Enterprise value as a multiple of the target companys LTM
revenue;
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Enterprise value as a multiple of the target companys LTM
EBITDA; and
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Enterprise value as a multiple of the target companys LTM
EBIT.
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The selected transactions were:
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Acquirer
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Target
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Xerox Corporation
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Global Imaging Systems, Inc.
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Avery Dennison Corporation
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Paxar Corp.
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Ricoh Co. Ltd.
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InfoPrint Solutions Company
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Aberdeen Asset Management plc
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Martel Instruments Ltd.
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Zebra Technologies Corp.
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WhereNet Corporation
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Motorola Inc.
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Symbol Technologies, Inc.
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Elliot Associates, L.P./Francisco
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Metrologic Instruments Inc.
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Partners Management LLC
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The selected transactions analysis indicated the following:
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Multiple Description
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Low
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High
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Median
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Mean
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Enterprise Value as a multiple of:
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LTM Revenue
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0.73
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x
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2.11
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x
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1.53
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x
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1.50
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x
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LTM EBITDA
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9.1
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x
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16.0
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x
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12.7
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x
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12.6
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x
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2009 LTM EBIT
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10.9
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x
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22.8
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x
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17.3
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x
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17.1
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x
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HLHZ applied multiple ranges based on the selected transactions
analysis to corresponding financial data for Printronix provided
by Printronixs 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 Printronixs
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
Printronixs 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
24
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 companys 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:
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Period
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Premium
|
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1 Trading Day
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20.6
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%
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5 Trading Day
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18.5
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%
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20 Trading Day
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18.4
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%
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3 Trading Months
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18.2
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%
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6 Trading Months
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19.1
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%
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1 Calendar Year
|
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22.7
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%
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20 Trading Day High
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16.1
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%
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20 Trading Day Low
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20.6
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%
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1 Calendar Year High
|
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7.7
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%
|
1 Calendar Year Low
|
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35.9
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%
|
Other
Matters
We engaged HLHZ pursuant to a letter agreement dated as of
June 28, 2007, as amended, to render an opinion to the
Special Committee with respect to 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. We engaged HLHZ
based on its experience and reputation. HLHZ is regularly
engaged to render financial opinions in connection with mergers
and acquisitions, financial restructurings, tax matters, ESOP
and ERISA matters, corporate planning, and for other purposes.
HLHZ will receive a fee of $400,000 for rendering its opinion,
no portion of which is contingent upon the consummation of the
merger or the conclusions set forth in its opinion. Houlihan
Lokey, an affiliate of HLHZ, has acted as financial advisor to
the Special Committee in connection with the merger and will
receive a fee currently estimated to be approximately $940,000
for its financial advisory services in connection with the
merger, which is contingent upon the consummation of the merger.
Our company has also agreed to indemnify HLHZ and Houlihan Lokey
and certain related parties for certain liabilities and to
reimburse HLHZ and Houlihan Lokey for certain expenses arising
out of their engagements.
In the ordinary course of business, certain of HLHZs
affiliates, as well as investment funds in which they may have
financial interests, may acquire, hold or sell, long or short
positions, or trade or otherwise effect transactions, in debt,
equity, and other securities and financial instruments
(including loans and other obligations) of, or investments in,
Printronix or any other party that may be involved in the merger
and their respective affiliates or any currency or commodity
that may be involved in the merger. HLHZ and its affiliates have
in the past have provided, and are currently providing, and in
the future may provide investment banking, financial advisory,
and other financial services to Printronix, Pioneer, and their
affiliates for which HLHZ and its affiliates have received, and
would expect to receive, compensation.
25
Delisting
and Deregistration of Our Common Stock
Following the merger, shares of our common stock will no longer
be traded on the NASDAQ Global Market or any other public market
and will be deregistered under the Securities Exchange Act of
1934, as amended, or the Exchange Act, as of the effective time.
Printronix
after the Merger
After the effective time of the merger, Printronix will cease to
be an independent public company and will instead be a
wholly-owned subsidiary of Pioneer. After the effective time of
the merger, pursuant to the merger agreement, the directors of
Merger Subsidiary immediately prior to the effective time of the
merger will become the directors of Printronix, and the officers
of Merger Subsidiary immediately prior to the effective time of
the merger will become the officers of Printronix, in each case
until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed and
qualified, as the case may be. Pursuant to his agreement with
Pioneer, Mr. Kleist will be appointed as the Chief
Executive Officer of Printronix following the merger.
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. Dougerys 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.
26
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. Kelens 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. Halliwells 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. Turnbulls 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. Kleists
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. Kleists 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. immediately after the sentence
Should Mr. Kleist serve on the new Printronix Board
of Directors, he will receive no compensation for his 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. Harwoods
securities were issued to him by Printronix in connection with
his employment, as well as
27
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. Chapmans 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. McWilsons 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. Sakais 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.
28
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
[ ],
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:
Vested
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Net of
|
|
Name
|
|
Shares
|
|
|
per Share Exercise Price
|
|
|
Non-employee directors:
|
|
|
|
|
|
|
|
|
John R. Dougery
|
|
|
4,024
|
|
|
$
|
37,743.00
|
|
Erwin A. Kelen
|
|
|
8,050
|
|
|
$
|
75,503.75
|
|
Chris Whitney-Halliwell
|
|
|
3,024
|
|
|
$
|
27,853.00
|
|
Charles E. Turnbull
|
|
|
6,000
|
|
|
$
|
9,900.00
|
|
Executive and Non-Executive Officers
|
|
|
|
|
|
|
|
|
Robert A. Kleist
|
|
|
15,600
|
|
|
$
|
154,284.00
|
|
George L. Harwood
|
|
|
31,250
|
|
|
$
|
332,031.25
|
|
Theodore A. Chapman
|
|
|
24,115
|
|
|
$
|
256,221.88
|
|
C. Victor Fitzsimmons
|
|
|
31,250
|
|
|
$
|
332,031.25
|
|
James B. McWilson
|
|
|
0
|
|
|
$
|
0.00
|
|
David A. Sakai
|
|
|
0
|
|
|
$
|
0.00
|
|
Juli A. Mathews
|
|
|
15,400
|
|
|
$
|
163,625.00
|
|
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
[ ]
(including vested options to purchase our common stock owned by
our directors and officers and their respective affiliates). 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 Pioneers 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 as
described in the section The Merger Stock
Options; Restricted Stock.
29
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.
Restricted
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Restricted
|
|
|
|
|
|
|
Shares Held by
|
|
|
|
Restricted
|
|
|
Officers and
|
|
Name
|
|
Shares
|
|
|
Directors
|
|
|
Executive and Non-Executive Officers
|
|
|
|
|
|
|
|
|
Robert A. Kleist
|
|
|
50,000
|
|
|
$
|
800,000.00
|
|
George L. Harwood
|
|
|
40,000
|
|
|
$
|
640,000.00
|
|
Theodore A. Chapman
|
|
|
40,000
|
|
|
$
|
640,000.00
|
|
Albert Ching
|
|
|
17,800
|
|
|
$
|
284,800.00
|
|
C. Victor Fitzsimmons
|
|
|
40,000
|
|
|
$
|
640,000.00
|
|
James B. McWilson
|
|
|
31,600
|
|
|
$
|
505,600.00
|
|
David A. Sakai
|
|
|
25,000
|
|
|
$
|
400,000.00
|
|
Juli A. Mathews
|
|
|
25,000
|
|
|
$
|
400,000.00
|
|
William D. Mathewes
|
|
|
15,000
|
|
|
$
|
240,000.00
|
|
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:
|
|
|
|
|
|
|
Equity
|
|
Name
|
|
Commitment
|
|
|
Robert A. Kleist
|
|
$
|
2.89 million
|
|
George L. Harwood
|
|
$
|
240,000.00
|
|
C. Victor Fitzsimmons
|
|
$
|
240,000.00
|
|
Juli A. Mathews
|
|
$
|
80,000.00
|
|
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.
30
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:
|
|
|
|
|
a U.S. citizen or resident alien as determined under the
Code;
|
|
|
|
a corporation (or entity treated as a corporation for
U.S. federal income tax purposes) that is organized under
the laws of the U.S., any state or the District of Columbia;
|
|
|
|
an estate, the income of which is subject to U.S. federal
income taxation regardless of its source; or
|
|
|
|
a trust, if (i) a court within the U.S. is able to
exercise primary supervision over its administration and at
least one United States person is authorized to control all of
its substantial decisions or (ii) it has a valid election
in effect under applicable treasury regulations to be treated as
a U.S. person.
|
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 stockholders 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 stockholders 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
31
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
stockholders 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 stockholders
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.
32
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).
The merger will be accounted for as a purchase
transaction for financial accounting purposes.
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 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.
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
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of Printronix common stock will remain outstanding and all
shares will automatically be canceled and will cease to exist.
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:
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You make an appropriate affidavit certifying such certificate
has been lost, stolen or destroyed; and
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You deliver a bond, in such amount as the surviving corporation
may direct, as indemnity against any claim that may be made with
respect to that certificate against the surviving corporation.
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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
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
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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.
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 Printronixs
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
Printronixs 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:
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the accuracy of its certificate of incorporation and bylaws in
the form provided to Pioneer;
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its and its subsidiaries due organization, valid
existence, good standing, qualification, and power and authority
to operate their respective businesses, including the possession
of all applicable permits, licenses and other governmental
authorizations or approvals applicable to the operation of such
businesses;
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its corporate power and authority to enter into the merger
agreement and to carry out its obligations under the merger
agreement;
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the absence of (i) conflicts with or violations of its
organizational documents, (ii) any violation of applicable
law, (iii) the violation, breach or default of the
instruments or obligations to which it is a party or is bound,
in each case arising from entering into the merger agreement,
completing the merger or complying with the provisions contained
in the merger agreement, or (iv) required consents and
approvals of third parties, including governmental entities,
relating to the merger;
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its and its subsidiaries capitalization and obligations
with respect to capital stock;
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indebtedness;
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its SEC filings and the financial statements contained in such
filings and the accuracy of the information in those documents
and the absence of certain undisclosed liabilities;
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the effectiveness of disclosure controls and procedures as
required by the securities laws reasonably designed and
maintained to ensure that all information (both financial and
non-financial) required to be disclosed in the reports that
Printronix files or submits to the SEC under the Exchange Act
are summarized, reviewed by management and reported within the
time periods required by the SEC;
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its internal controls over financial reporting;
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correctness of information supplied by Printronix for inclusion
in this proxy statement;
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since June 29, 2007, the absence of certain changes or
events;
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the absence of any undisclosed material liabilities;
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compliance with applicable laws;
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the absence of proceedings or court orders against it or any of
its subsidiaries;
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absence of undisclosed brokers and finders fees with
respect to the merger;
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receipt of a fairness opinion from our financial advisor;
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tax matters;
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employee benefit plans and other employment and labor related
matters;
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environmental matters;
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material contracts and the absence of breaches of material
contracts;
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the effectiveness of Printronixs insurance policies;
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intellectual property matters;
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Printronix products compliance with applicable law,
absence of defects, fitness for their ordinary purpose and
conformity in all material respects to any affirmations in
connection with their sale;
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the real and personal property owned or leased by Printronix or
its subsidiaries ;
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the absence of certain unlawful business practices;
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the absence of interested party transactions; and
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applicability of anti-takeover statues and charter provisions.
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The merger agreement also contains representations and
warranties of Pioneer and Merger Subsidiary as to, among other
things:
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organization, good standing and qualification;
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authorization, execution , delivery and enforceability of the
merger agreement;
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the absence of (i) conflicts with or violations of its
organizational documents, (ii) any violation of applicable
law, (iii)the violation, breach or default of the instruments or
obligations to which it is a party or is bound, in each case
arising from entering into the merger agreement, completing the
merger or complying with the provisions contained in the merger
agreement, or (iv) required consents and approvals of third
parties, including governmental entities, relating to the merger;
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absence of legal proceedings and governmental orders relating to
the merger;
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accuracy of the information supplied by Pioneer for inclusion in
the filings made with the SEC in connection with the merger and
the other transactions contemplated by the merger agreement;
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validity of debt and equity financing commitments and
sufficiency of the commitments for the satisfaction of
Pioneers obligations under the Agreement;
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enforceability of the limited guarantee executed by Vector in
favor of Printronix and delivered in connection with the signing
of the merger agreement; and
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that neither Pioneer nor Merger Subsidiary is an
interested stockholder in Printronix, as such term
is defined in Section 203 of the DGCL.
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Conduct
of Printronixs 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:
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amend our Certificate of Incorporation, Bylaws, or other similar
organizational documents (whether by merger, consolidation, or
otherwise) or form any subsidiary;
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split, combine, or reclassify any shares of our capital stock or
that of any of our subsidiaries, or declare, set aside, or pay
any dividend or other distribution (whether in cash, stock, or
property or any combination thereof) in respect of our capital
stock or the capital stock of our subsidiaries, or redeem,
repurchase, or otherwise acquire or offer to redeem, repurchase,
or otherwise acquire any of our securities or our
subsidiaries securities;
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issue, deliver or sell, or authorize the issuance, delivery or
sale of, any shares of our securities or our subsidiaries
securities, other than the issuance of any (i) shares of
our stock upon the exercise of company stock options in the
ordinary course of business consistent with past practice that
are outstanding on the date of the merger agreement in
accordance with the terms of those options on the date of the
merger agreement, (ii) any securities of any of our
subsidiaries to Printronix or any other subsidiary in the
ordinary course of business consistent with past practice or
(iii) amend any term of any of our securities or any of our
subsidiaries securities (in each case, whether by merger,
consolidation or otherwise);
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incur any capital expenditures or any obligations or liabilities
in respect thereof, in the aggregate greater than $500,000;
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acquire (by merger, consolidation, acquisition of stock or
assets or otherwise), directory or indirectly, (i) any
business or person or division thereof, or (ii) any
material amount of assets other than in the ordinary course of
business consistent with past practices;
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sell, lease, license, sell and lease-back, mortgage or otherwise
transfer or grant rights in, or create or incur any lien on any
of our or our subsidiaries assets, Printronix-owned
intellectual property, securities, properties, interests, or
businesses, other than sales of inventory in the ordinary course
of business consistent with past practice;
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make any loans, advances or capital contributions to, or
investments in, any other Person, other than Printronix or any
of our subsidiaries in the ordinary course of business
consistent with past practice;
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create, incur, assume, suffer to exist or otherwise be liable
with respect to any indebtedness, or take any action that would
result in any amendment, modification or change of any term of
indebtedness of Printronix or any of our subsidiaries;
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enter into, amend or modify in any material respect or terminate
any material contract;
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waive, release or assign any of material rights, claims or
benefits of Printronix or any of our subsidiaries;
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waive any material benefits of, or agree to modify in any
adverse respect, or fail to enforce, or consent to any matter
with respect to which its consent is required under, any
confidentiality, standstill or similar contract;
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grant or increase any severance or termination pay to (or amend
any existing arrangement with) any of our or our
subsidiaries directors, officers, or employees, other than
that undertaken in the normal course of business consistent with
past practices;
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increase benefits payable under any existing severance or
termination pay policies or employment agreements;
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enter into any employment, deferred compensation or other
similar agreement (or amend any such existing agreement) with
any director, officer, or employee of Printronix or any of our
subsidiaries, other than that undertaken in the normal course of
business consistent with past practices;
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establish, adopt or amend (except as required by applicable law)
any collective bargaining, bonus, profit-sharing, thrift,
pension, retirement, deferred compensation, compensation, stock
option, restricted stock or other benefit plan, or arrangement
covering any director, officer, or employee of Printronix or any
of our subsidiaries;
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increase compensation, bonuses, or other benefits payable to any
director, officer, or employee of Printronix or any of our
subsidiaries other than employee raises undertaken in the normal
course of business consistent with past practices;
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write down any of our material assets or change our methods of
accounting, except as required by concurrent changes in GAAP (as
interpreted by our independent public accountants) or applicable
law, as required by a governmental authority or
quasi-governmental authority (including the Financial Accounting
Standards Board or any similar organization), or as disclosed in
our SEC documents filed prior to the date of the merger
agreement;
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settle, or offer or propose to settle, any proceeding or other
claim involving or against Printronix or any of our subsidiaries
(other than the settlement of immaterial claims in the ordinary
course of business consistent with past practice which does not
include any obligation to be performed by Printronix or any of
our subsidiaries (other than the payment of money) after the
effective time of the merger or the settlement of claims
reserved against on our last balance sheet), any stockholder
litigation or dispute against Printronix or against any of our
officers or directors, or any proceeding or dispute that relates
to the transactions contemplated by the merger agreement;
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make or change any tax election (other than in the ordinary
course of business), change any annual tax accounting period,
adopt or change any method of tax accounting (other than in the
ordinary course of business), amend any tax returns or file
claims for tax refunds, enter into any closing agreement or
other agreement with a taxing authority, settle any tax claim,
audit or assessment, surrender any right to claim a tax refund,
offset or other reduction in tax liability, or consent to any
extension or waiver of the limitations period applicable to any
tax claim or assessment;
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enter into any contract containing any change of
control or similar provision requiring consent or granting
a termination right or acceleration of any rights in connection
with transactions similar to the merger and the transactions
contemplated by the merger agreement (unless such restriction
expressly excludes the merger and the transactions contemplated
by the merger agreement from such provision);
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take any action that would reasonably be likely to prevent or
materially delay, or omit to take any action necessary to cause,
satisfaction of the merger agreements closing conditions
or the consummation of the merger, or take any action that would
result in a material adverse effect on Printronix;
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change cash or working capital management, including, without
limitation, accelerating the collection of receivables or defer
the payment of current liabilities; or
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agree, resolve or commit to do any of the foregoing.
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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:
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solicit, initiate, or take any action to facilitate or encourage
the submission of any Acquisition Proposal (as defined below);
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enter into or participate in any discussions or negotiations
with, furnish any information relating to Printronix or any of
our subsidiaries or afford access to the business, properties,
assets, books or records of Printronix or any of our
subsidiaries, or to otherwise cooperate in any way with, or
knowingly assist, participate in, facilitate or encourage any
effort by any third party that is seeking to make, or has made,
an Acquisition Proposal;
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fail to make, withdraw, or modify in a manner adverse to Pioneer
the recommendation of our board of directors, or recommend an
Acquisition Proposal or take any action or make any statement
inconsistent with the recommendation of our board of directors
to consummate the merger (any such action, an Adverse
Recommendation Change);
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grant any waiver or release under any standstill or similar
agreement with respect to classes of equity securities of
Printronix or any of our subsidiaries;
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approve any transaction under, or any third party becoming an
interested stockholder under Section 203 of the
DGCL;
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amend or grant any waiver or release or approve any transaction
or redeem any of our rights under the Amended and Restated
Rights Agreement dated as of April 4, 1999, except in
connection with the transactions contemplated by the merger
agreement; or
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enter into any agreement in principle, letter of intent, term
sheet, or other similar instrument relating to an Acquisition
Proposal.
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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:
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engage in negotiations or discussions with any third party that,
subject to compliance with the restrictions set forth above, has
made a bona fide Acquisition Proposal that the Board of
Directors or the Special Committee of Printronix reasonably
believes will lead to a Superior Proposal (as defined below);
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furnish to such third party nonpublic information relating to
Printronix or any of our subsidiaries pursuant to a
confidentiality agreement with terms no less favorable to
Printronix than those contained in the confidentiality agreement
entered into between Printronix and Pioneer;
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following receipt of a Superior Proposal that has not been
withdrawn, subject to compliance with the restrictions set forth
above, make an Adverse Recommendation Change; or
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take any action that any court of competent jurisdiction orders
Printronix to take (which order shall have become final and
non-appealable).
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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.
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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:
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direct or indirect acquisition or purchase, in one or a series
of transactions, of a business that constitutes 15% or more of
the consolidated revenues, net income, EBITDA or assets of
Printronix and its subsidiaries;
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direct or indirect acquisition or purchase, in one or a series
of transactions, of any class of equity securities representing
15% or more of the voting power of Printronix or any of its
subsidiaries, whose assets, individually or in the aggregate,
constitute more than 15% of the consolidated revenues, net
income, EBITDA or assets of Printronix and its subsidiaries;
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tender offer (including a self-tender offer) or exchange offer
that if consummated would result in any person beneficially
owning 15% or more of the voting power of Printronix or any of
its subsidiaries, whose assets, individually or in the
aggregate, constitute more than 15% of the consolidated
revenues, net income, EBITDA or assets of Printronix and its
subsidiaries; or
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merger, consolidation, share exchange, business combination,
sale of substantially all of the assets, reorganization,
recapitalization, liquidation, dissolution, joint venture,
license agreement or other similar transaction involving
Printronix or any of its subsidiaries, whose assets,
individually or in the aggregate, constitute more than 15% of
the consolidated revenues, net income, EBITDA or assets of
Printronix and its subsidiaries.
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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 Printronixs 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.
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 Pioneers
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,
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(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.
Pioneer will cause the surviving corporation, and the surviving
corporation agrees, to do the following:
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after the effective time of the merger, subject to any
limitation imposed under applicable law, honor and fulfill in
all respects all obligations of Printronix and its subsidiaries
in respect of rights to indemnification, advancement of expenses
and exculpation from liabilities for acts or omissions occurring
at or prior to the effective time of the merger now existing in
favor of the current or former directors or officers of
Printronix and each of its subsidiaries as provided in their
respective certificates of incorporation or bylaws (or
comparable organizational documents) and any indemnification or
other agreements of Printronix as in effect on the date of the
merger agreement and disclosed in the confidential disclosure
schedule provided to Pioneer in connection with the signing of
the merger agreement.
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for six years following the effective time of the merger, cause
the certificate of incorporation and bylaws (and other similar
organizational documents) of the surviving corporation and its
subsidiaries to contain provisions with respect to
indemnification, advancement of expenses and exculpation that
are at least as favorable as the indemnification, advancement of
expenses and exculpation provisions contained in the certificate
of incorporation and bylaws (or other comparable organizational
documents) of Printronix and its subsidiaries as of the date of
the merger agreement, and will not repeal, amend or modify in
any manner such provisions except as required by applicable law.
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for six years following the effective time of the merger,
(i) provide officers and directors liability
insurance in respect of acts or omissions occurring prior to the
effective time of the merger covering each such indemnified
person currently covered by Printronixs officers and
directors liability insurance policy on terms with respect
to coverage and amount no less favorable than those of such
policy in effect on the date of the merger agreement or
(ii) acquire a six-year prepaid tail policy to
Printronixs existing directors and officers
liability insurance policy (which tail policy shall
contain the same terms and conditions as such existing policy)
and maintain such tail policy in full force and
effect and continue to honor its obligations thereunder for six
years after the effective time of the merger; provided, that
Pioneer shall not be required to
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pay an annual premium under any policy that exceeds 250% of the
annual premium that Printronix paid in its last full fiscal year.
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In lieu of the forgoing bullet points, prior to the effective
time of the merger, at Pioneers sole discretion,
Printronix shall purchase at or immediately prior to the
effective time of the merger a six-year prepaid tail
policy to Printronixs current directors and
officers 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.
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:
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preparing and filing as promptly as practicable with any
governmental authority or other third party documentation to
effect all necessary filings, notices, petitions, statements,
registrations, submissions of information, applications and
other documents;
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obtaining and maintaining all approvals, consents,
registrations, permits and other authorizations and
confirmations required to be obtained from any governmental
authority or other third party that are necessary, proper or
advisable to consummate the transactions contemplated by the
merger agreement (provided that neither Printronix nor Pioneer
shall be obligated to enter into any settlement, undertaking,
consent decree, stipulation or agreement with any governmental
authority in connection with the transactions contemplated by
the merger agreement); and
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to make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act with respect to the transactions
contemplated by the merger agreement as promptly as practicable
and in any event within 15 business days of the date of the
merger agreement and to supply as promptly as practicable any
additional information and documentary material that may be
requested pursuant to the HSR Act and to take all other actions
necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as
practicable.
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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
Pioneers 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. Pioneers
potential mortgage lender, also retained an environmental
consultant to conduct investigations at Printronixs
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 Printronixs 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
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have been paid by Printronix and that are not included as
prepaid expenses in current assets, together with supporting
invoices.
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:
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the merger agreement and the merger shall have been approved by
a majority of the holders of Printronix common stock;
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no applicable law shall prohibit consummation of the
merger; and
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any applicable waiting period under the HSR Act or under similar
laws in foreign jurisdictions relating to the merger shall have
expired or been terminated.
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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:
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we must have performed in all material respects all of our
obligations under the merger agreement required to be performed
by us at or prior to the closing date;
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each of our representations and warranties contained in
Sections 4.02, 4.05 and 4.14 of the merger agreement
(relating to authorization to enter into the merger agreement
capitalization and finders fees and expenses) shall be
true and correct as of the date of the merger agreement and as
of the closing date as if made on the closing date (except for
those representations and warranties which address matters only
as of an earlier date which shall have been true and correct as
of such earlier date);
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all of our other representations and warranties contained in the
merger agreement (disregarding any exception relating to
materiality or a material adverse effect) shall be true and
correct as of the date of the merger agreement and as of the
closing date as if made on the closing date (except for those
representations and warranties which address matters only as of
an earlier date which shall have been true and correct as of
such earlier date), except for such failures to be true and
correct which have not had and would not have, individually or
in the aggregate, a Printronix material adverse effect;
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our Chief Executive Officer will have delivered a certificate
confirming the accuracy of our representations and warranties
and the performance of our obligations, as set forth above;
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no material adverse effect with respect to Printronix shall have
occurred;
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there has not been instituted or pending any action or
proceeding (or any investigation or other inquiry that could
reasonably be expected to result in such action or proceeding)
by any governmental authority, domestic, foreign or
supranational, (i) challenging or seeking to make illegal,
to delay materially or otherwise directly or indirectly to
restrain or prohibit the consummation of the merger or seeking
to obtain material damages or otherwise directly or indirectly
relating to the transactions contemplated by the merger,
(ii) seeking to restrain or prohibit Pioneers, Merger
Subsidiarys or any of Printronixs other
affiliates (A) ability effectively to exercise full
rights of ownership of the Printronix common stock, including
the right to vote any shares acquired or owned by Pioneer,
Merger Subsidiary or any of Printronixs other affiliates
following the effective time of the merger on all matters
properly presented to Printronixs stockholders, or
(B) ownership or operation (or that of its respective
subsidiaries or affiliates) of all or any material portion of
the business or assets of Printronix and its subsidiaries, taken
as a whole, or of Pioneer and its subsidiaries, taken as a
whole, or (iii) seeking to compel Printronix or any of its
subsidiaries or affiliates to dispose of or hold separate all or
any material portion of the business or assets of Printronix and
its subsidiaries, taken as a whole, or of Pioneer and its
subsidiaries, taken as a whole or (iv) that otherwise would
be reasonably expected to have a material adverse effect on
Printronix or Pioneer;
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there has not been any action taken, or any applicable law
proposed, enacted, enforced, promulgated, issued or deemed
applicable to the merger, by any governmental authority, other
than the application of the waiting period provisions of the HSR
Act to the merger and of laws analogous to the HSR Act existing
in foreign jurisdictions, that, in the reasonable judgment of
Pioneer, is likely, directly or indirectly, to result in any of
the consequences referred in the paragraph above;
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we shall have Freely Available Cash (as defined below) at least
equal to $18,000,000 to contribute to the merger consideration
and shall have deposited such amounts with the paying agent
Freely Available Cash shall mean unrestricted cash
on hand of Printronix held in the account set forth on
Schedule A to the merger agreement less the company
transaction costs and shall exclude any cash that cannot be
deposited with the paying agent under applicable law (including
laws relating to solvency, adequate surplus and similar capital
adequacy tests) or under any contract binding upon Printronix or
any of its subsidiaries or any permits affecting, or relating in
any way to, their assets or business);
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(i) if the closing date occurs (A) during
Printronixs fiscal November 2007 month, then
Printronix, as of the close of its fiscal October
2007 month, will have unaudited adjusted working capital of
not less than $44,650,000, which shall be reflected in the
adjusted Working Capital Statement for the October fiscal month,
(B) during Printronixs fiscal December
2007 month, then Printronix, as of the close of its fiscal
November 2007 month, will have unaudited adjusted working
capital of not less than $45,126,000, which shall be reflected
in the adjusted Working Capital Statement for the November
fiscal month, (C) during Printronixs fiscal January
2008 month, then Printronix, as of the close of its fiscal
December 2007 month, will have unaudited adjusted working
capital amount of not less than $48,300,000, which shall be
reflected in the adjusted Working Capital Statement for the
December fiscal month, (D) during Printronixs fiscal
February 2008 month, then Printronix, as of the close of
its fiscal January 2008 month, will have unaudited adjusted
working capital amount of not less than $48,300,000, which shall
be reflected in the adjusted Working Capital Statement for the
January fiscal month, (E) during Printronixs fiscal
March 2008 month, then Printronix, as of the close of its
fiscal February 2008, will have unaudited adjusted working
capital amount of not less than $48,300,000, which shall be
reflected in the adjusted Working Capital Statement for the
February fiscal month, and (F) after the close of
Printronixs fiscal March 2008 month, then Printronix,
as of the close of its fiscal March 2008, will have unaudited
adjusted working capital of not less than $48,300,000, which
shall be reflected in the adjusted Working Capital Statement for
the March fiscal month, and (ii) Pioneer shall have
received a certificate signed by the Chief Financial Officer of
Printronix to the foregoing effect;
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we shall have delivered to Pioneer a certificate that we are not
and have not been during the last five years a United
States real property holding corporation within the
meaning of Section 897 of the Code; and
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the environmental reports prepared in connection with the merger
agreement on certain Printronix current manufacturing facilities
shall be satisfactory to Pioneer and as a result Pioneer shall
not have timely delivered an environmental termination notice.
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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:
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each of Pioneer and Merger Subsidiary must have performed in all
material respects all of its obligations under the merger
agreement;
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each of Pioneers representations and warranties must be
true as of the effective time as if made at and as of such time,
except for such failures to be true which have not had and would
not have, individually or in the aggregate, a Pioneer material
adverse effect; and
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Pioneers president will have delivered a certificate
confirming the accuracy of Pioneers representations and
warranties and Pioneers performance of its obligations, as
set forth above.
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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 Printronixs 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
Printronixs 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
Printronixs 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:
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we receive a bona fide unsolicited written Acquisition Proposal
that our Board of Directors determines in good faith is a
Superior Proposal (see No Solicitation of
Alternative Transactions by Printronix);
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Printronix, our subsidiaries and our respective representatives
comply with the restrictions described in No
Solicitation of Alternative Transactions by Printronix in
connection with such Acquisition Proposal;
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we provide notice to Pioneer of our Board of Directors
intent to withdraw or modify its recommendation;
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we comply with our obligations to (i) promptly notify
Pioneer within 1 business day, orally and in writing, of receipt
of such Acquisition Proposal, indication that a third party is
considering making an Acquisition Proposal or of any request for
information or for access to the business, properties, assets,
books or records concerning Printronix or any of its
subsidiaries, (ii) keep Pioneer reasonably informed
regarding the status and material terms of such Acquisition
Proposal, including any material or proposed amendments and
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(iii) provide Pioneer with any non-public information
concerning Printronix provided to any other party that was not
previously provided to Pioneer;
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we provide Pioneer with 48 hours prior notice of any
meeting of our Board of Directors in which our Board of
Directors is reasonably expected to consider any such
Acquisition Proposal; and
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our Board of Directors determines in good faith by a majority
vote, after considering advice from outside legal counsel, that
the failure to take such action would reasonably be expected to
result in a breach of its fiduciary duties under applicable law.
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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) Printronixs 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
Pioneers 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 [ ] for more information).
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(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 Pioneers
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.
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; or
(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;
(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 Pioneers 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
48
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.
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 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 vested options to purchase our common
stock owned by our directors and officers and their respective
affiliates) as of the record date, entered into a voting
agreements 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:
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in favor of (i) adoption of the merger agreement,
(ii) each of the actions contemplated by the merger
agreement, and (ii) any proposal or action that could
reasonably be expected to facilitate the merger and the other
transactions contemplated by the merger agreement;
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against any proposal or action that is intended, or could
reasonably be expected to, impede, interfere with, delay,
postpone, discourage or adversely affect the merger or any of
the other transactions contemplated by the merger
agreement; and
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against any Acquisition Proposal (as defined in The Merger
Agreement No Solicitation of Alternative
Transactions by Printronix).
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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).
49
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:
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you must hold your shares of Printronix common stock as of the
date you make your demand for appraisal rights and continue to
hold your shares of Printronix common stock through the
effective time of the merger;
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you must deliver to Printronix a written notice of your demand
for appraisal of your shares of Printronix common stock prior to
the taking of the vote at Printronixs special meeting;
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you must not have voted in favor of adoption of the merger
agreement; if you vote by proxy and wish to exercise appraisal
rights, you must vote against the adoption of the merger
agreement or mark your proxy card to indicate that you abstain
from voting on the adoption of the merger agreement; and
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you must file a petition in the Delaware Court of Chancery
demanding a determination of the fair value of the shares within
120 days after the effective time of the merger.
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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
50
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 Printronixs 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
51
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 attorneys 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.
52
SECURITY
OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is certain information as of November 9,
2007 regarding the beneficial ownership of our common stock by:
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any person (or group of affiliated persons) who was known by us
to own more than 5% of our voting securities;
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each of our directors;
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each of our named executive officers; and
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all current directors and named executive officers as a group.
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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
[ ],
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.
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Number of Shares of
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Percentage of
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Common Stock
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Common Stock
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Name and Address of Beneficial Owner(1)
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Beneficially Owned(2)
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Beneficially Owned
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5% Stockholders:
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Robert A. Kleist(3)(6)
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1,172,072
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17.50
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%
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Rutabaga Capital Management, LLC(4)
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653,411
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9.78
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%
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Royce & Associates, LLC(4)
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490,481
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7.34
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%
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Dimensional Fund Advisors Inc.(4)(5)
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465,548
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6.97
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%
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AWM Investment Company, Inc.(4)
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452,486
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6.77
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%
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Directors and Named Executive Officers:
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John R. Dougery(7)
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84,691
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1.27
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%
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Erwin A. Kelen(8)
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40,863
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*
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Chris Whitney Halliwell(9)
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7,024
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*
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Charles E. Turnbull(10)
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6,000
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*
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George L. Harwood(11)
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100,014
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1.49
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%
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C. Victor Fitzsimmons(12)
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100,686
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1.50
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%
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Theodore A. Chapman(13)
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64,115
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*
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James B. McWilson(14)
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39,100
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*
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Juli A. Mathews(15)
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48,609
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*
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David A. Sakai(16)
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25,000
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*
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All executive officers and directors as a group(17)
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1,688,174
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24.67
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%
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*
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Designates beneficial ownership of less than 1%.
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(1)
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Unless otherwise indicated, the business address of each holder
is:
c/o Printronix,
Inc., 14600 Myford Road, Irvine, California, 92606.
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(2)
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Except as otherwise noted, the beneficial owners enjoy sole
voting and investment powers with respect to the shares
indicated, subject to community property laws where applicable.
Includes shares which the party or group has the right to
acquire by the exercise of stock options which are currently
exercisable. There are no options which will become exercisable
within 60 days after June 25, 2007 because the
exercise dates of all outstanding stock options were accelerated
making such options currently exercisable, as reported in the
Companys
Forms 8-K
filed with the Securities and Exchange Commission on
December 8, 2005 and March 28, 2006.
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(3)
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Mr. Kleist is also a director and an executive officer of
the Company.
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53
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(4)
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Pursuant to Form SC 13G/A Statement of Acquisition of
Beneficial Ownership by Individuals for quarter ended
March 30, 2007, filed with the Securities and Exchange
Commission.
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(5)
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Based on a Schedule 13G/A filed with the SEC on
February 9, 2007, Dimensional Fund Advisors L.P.
(Dimensional), is an investment advisor registered
under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies
registered under the Investment Company Act of 1940, and serves
as investment manager to certain other commingled group trusts
and separate accounts. These investment companies, trusts and
accounts are the Funds. In its role as investment
advisor or manager, Dimensional possesses voting and/or
investment power over the securities of the Issuer described in
this schedule that are owned by the Funds, and may be deemed to
be the beneficial owner of the shares of the Issuer held by the
Funds. However, all securities reported here are owned by the
Funds. Dimensional disclaims beneficial ownership of such
securities. Dimensionals principal business address is
1299 Ocean Way, Santa Monica, CA 90401.
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(6)
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Includes 15,600 shares issuable pursuant to options
exercisable within 60 days of October 1, 2007.
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(7)
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Includes 8,024 shares issuable pursuant to options
exercisable within 60 days of October 1, 2007.
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(8)
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Includes 12,050 shares issuable pursuant to options
exercisable within 60 days of October 1, 2007.
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(9)
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Includes 7,024 shares issuable pursuant to options
exercisable within 60 days of October 1, 2007.
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(10)
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Includes 6,000 shares issuable pursuant to options
exercisable within 60 days of October 1, 2007.
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(11)
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Includes 31,250 shares issuable pursuant to options
exercisable within 60 days of October 1, 2007.
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(12)
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Includes 31,250 shares issuable pursuant to options
exercisable within 60 days of October 1, 2007.
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(13)
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Includes 24,115 shares issuable pursuant to options
exercisable within 60 days of October 1, 2007.
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(14)
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Includes 7,500 shares issuable pursuant to exercisable
options, and does not include an additional 2,500 options which
expired unexercised on November 4, 2007 and for which
Printronix compensated with a cash payment equal to what he
would have received at the effective time had the options not
expired. The remaining 7,500 options exercisable within
60 days of October 1, 2007 will not be exercised at
the effective time because the exercise price of each of those
options is above $16.00.
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(15)
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Includes 15,400 shares issuable pursuant to options
exercisable within 60 days of October 1, 2007.
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(16)
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Does not include 8,500 options that expired unexercised in July
2007.
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(17)
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Includes: John R. Dougery, Erwin A. Kelen, Chris Whitney
Halliwell, Charles E. Turnbull, Robert A Kleist, George L.
Harwood, C. Victor Fitzsimmons, Theodore A. Chapman, and James
B. McWilson, Julie A. Mathews, and Davis Sakai.
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MARKET
PRICES AND DIVIDEND INFORMATION
Our common stock has been quoted on The NASDAQ Global Market or
its predecessor under the symbol PTNX since
March 26, 1990. The following table sets forth the high and
low sales prices for our common stock for the last two years of
public trading, as reported on The NASDAQ Global Market or its
predecessor.
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Quarter Ended
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High
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Low
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September 30, 2005
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$
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18.00
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$
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15.50
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December 30, 2005
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$
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16.35
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$
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14.11
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March 31, 2006
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$
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16.40
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$
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13.35
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June 30, 2006
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$
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16.36
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$
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13.40
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September 29, 2006
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$
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13.66
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$
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12.98
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December 29, 2006
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$
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13.15
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$
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12.02
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March 30, 2007
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$
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14.34
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$
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11.83
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June 29, 2007
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$
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14.91
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$
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11.02
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September 28, 2007
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$
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14.08
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$
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12.51
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December 28, 2007 (through
[ ],
2007)
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$
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15.56
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$
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13.36
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54
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
[ ],
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 $[ ].
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.
PROPOSAL 2
ADJOURNMENT OR POSTPONEMENT OF THE SPECIAL MEETING
If we fail to receive a sufficient number of votes to adopt the
merger agreement, we may propose to adjourn or postpone the
special meeting for the purpose of soliciting additional proxies
to adopt the merger agreement. We currently do not intend to
propose adjournment or postponement of our special meeting if
there are sufficient votes to adopt the merger agreement.
Approval of the proposal to adjourn or postpone our special
meeting for the purpose of soliciting additional proxies
requires the affirmative vote of a majority of the votes cast at
the special meeting by holders of shares of our common stock
present or represented by proxy and voting on the proposal.
Our Board of Directors recommends that you vote
For the proposal to adjourn or postpone the special
meeting to solicit additional proxies if there are insufficient
votes at the time of the meeting to adopt the merger
agreement.
Our Board of Directors currently knows of no other business that
will be presented for consideration at the special meeting.
Nevertheless, should any business other than that set forth in
the notice of special meeting of stockholders properly come
before the meeting, the enclosed proxy confers discretionary
authority to vote with respect to such matters, including
matters that our Board of Directors does not know, a reasonable
time before proxy solicitation, are to be presented at the
meeting. If any of these matters are presented at the meeting,
then the proxy agents named in the enclosed proxy card will vote
in accordance with their judgment.
FORWARD
LOOKING STATEMENTS
Certain statements in this proxy statement, and the documents to
which we refer you in this proxy statement, that are not
historical fact constitute 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 managements beliefs and assumptions and on information
currently available to us. All statements regarding future
events, our future financial performance and results of
operations, our business strategy, our financing plans, our
ability to complete the merger and the anticipated benefits of
the merger are forward-looking statements. Forward-looking
statements can be identified by the use of words such as
believe, expect, anticipate,
intend, plan, estimate,
project, or words of similar meaning or conditional
verbs such as will, should,
could, or may.
These statements are only predictions. Although we believe that
the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Our actual results may
differ materially from those anticipated in these
forward-looking statements. In
55
evaluating these forward-looking statements, you should
specifically consider certain risks and uncertainties. Those
risks include without limitation:
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the satisfaction of the conditions to consummate the merger,
including the adoption of the merger agreement by our
stockholders;
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the occurrence of any event, change or other circumstance that
could give rise to the termination of the merger agreement,
including a termination under circumstances that could require
us to pay a $4.2 million termination fee to Pioneer or
Pioneer to pay a $5 million termination fee to us;
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the effect of the announcement of the merger on our customer and
vendor relationships, including the reseller channel, operating
results and business generally;
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the risk that the merger may not be completed in a timely manner
or at all, which may adversely affect our business and the price
of a share of our common stock;
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the potential adverse effect on our business and operations
because of certain covenants we agreed to in the merger
agreement;
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increases in operating costs resulting from the expenses related
to the proposed merger;
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our inability to retain and, if necessary, attract key
employees, particularly in light of the proposed merger;
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the risk that we may be subject to litigation in connection with
the proposed merger;
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risks related to diverting managements attention from
ongoing business operations; and
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other risks detailed in our current filings with the SEC,
including Item 1A. Risk and Uncertainties in
our Annual Report on
Form 10-K
for our fiscal year ended March 30, 2007. Copies of reports
Printronix filed with the SEC are posted on our website and are
available from Printronix without charge. See Where You
Can Find More Information.
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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.
If the merger is consummated, there will be no public
stockholders of Printronix and no public participation in any
future meetings of stockholders of Printronix. If the merger is
not consummated, however, Printronix will hold its 2008 annual
meeting of stockholders. If such meeting is held, stockholder
proposals that are intended to be included in Printronixs
2008 annual proxy statement for presentation at
Printronixs 2008 annual meeting of stockholders should be
sent to Printronix no later than March 21, 2008 to be
considered for inclusion in the proxy statement and form of
proxy relating to that meeting. Stockholders that intend to
present a proposal that will not be included in the proxy
statement and form of proxy must give notice of the proposal to
Printronix no fewer than 60 days or more than 90 days
prior to the date of the 2008 annual meeting.
Even if Printronix receives a proposal from a qualified
stockholder in a timely manner, it will not guarantee that
proposals inclusion in Printronixs proxy materials
or its presentation at the 2008 annual meeting because there are
other requirements in the proxy rules that a proposal must meet
in order to be included and presented.
Under
Rule 14a-4
promulgated under the Securities and Exchange Act of 1934, as
amended, we will be allowed to use our discretionary voting
authority under proxies solicited by us to vote on any proposal
that is raised at the 2008 annual meeting, without any
discussion of the matter in the proxy statement. Since we did
not receive any stockholder proposals for our 2007 Annual
Meeting before March 21, 2007, we will be able to use our
discretionary voting authority at the 2008 Annual Meeting.
56
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 SECs 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
[ ],
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.
57
AGREEMENT AND PLAN OF MERGER
dated as of
October 1, 2007
among
Printronix, Inc.,
Pioneer Holding Corp.
and
Pioneer Sub Corp.
TABLE OF
CONTENTS
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Page
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ARTICLE 1 DEFINITIONS
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A-1
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Section 1.01.
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Definitions
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A-1
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ARTICLE 2 THE MERGER
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A-7
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Section 2.01.
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The Merger
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A-7
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Section 2.02.
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Conversion of Shares
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A-7
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Section 2.03.
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Surrender and Payment
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A-7
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Section 2.04.
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Dissenting Shares
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A-8
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Section 2.05.
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Stock Options; Restricted Stock
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A-9
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Section 2.06.
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Adjustments
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A-9
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Section 2.07.
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Withholding Rights
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A-9
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Section 2.08.
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Lost Certificates
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A-9
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ARTICLE 3 THE SURVIVING CORPORATION
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A-9
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Section 3.01.
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Certificate of Incorporation
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A-9
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Section 3.02.
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Bylaws
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A-9
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Section 3.03.
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Directors and Officers
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A-9
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
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A-10
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Section 4.01.
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Corporate Existence and Power
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A-10
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Section 4.02.
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Corporate Authorization
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A-10
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Section 4.03.
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Governmental Authorization
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A-10
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Section 4.04.
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Non-contravention
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A-11
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Section 4.05.
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Capitalization
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A-11
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Section 4.06.
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Subsidiaries
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A-12
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Section 4.07.
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SEC Filings and the Sarbanes-Oxley Act
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A-12
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Section 4.08.
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Financial Statements
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A-13
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Section 4.09.
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Disclosure Documents
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A-14
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Section 4.10.
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Absence of Certain Changes
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A-14
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Section 4.11.
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No Undisclosed Material Liabilities
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A-15
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Section 4.12.
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Compliance with Laws; Permits
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A-16
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Section 4.13.
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Litigation
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A-16
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Section 4.14.
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Finders Fees; Expenses
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A-16
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Section 4.15.
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Opinion of Financial Advisor
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A-16
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Section 4.16.
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Taxes
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A-16
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Section 4.17.
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Employee Benefit Plans
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A-18
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Section 4.18.
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Environmental Matters
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A-20
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Section 4.19.
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Material Contracts
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A-20
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Section 4.20.
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Insurance Policies
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A-22
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Section 4.21.
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Intellectual Property
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A-22
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Section 4.22.
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Products
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A-24
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Section 4.23.
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Properties
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A-24
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Section 4.24.
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Certain Business Practices
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A-25
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Section 4.25.
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Interested Party Transactions
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A-25
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Section 4.26.
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Antitakeover Statutes and Rights Agreement
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A-25
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A-i
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Page
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ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUBSIDIARY
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A-26
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Section 5.01.
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Corporate Existence and Power
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A-26
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Section 5.02.
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Corporate Authorization
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A-26
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Section 5.03.
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Governmental Authorization
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A-26
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Section 5.04.
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Non-contravention
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A-26
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Section 5.05.
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Absence Of Litigation
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A-27
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Section 5.06.
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Financing
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A-27
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Section 5.07.
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Limited Guarantee
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A-27
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Section 5.08.
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Disclosure Documents
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A-27
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Section 5.09.
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Antitakeover Statutes
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A-27
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ARTICLE 6 COVENANTS OF THE COMPANY
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A-28
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Section 6.01
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.Conduct of the Company
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A-28
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Section 6.02.
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Stockholder Meeting; Proxy Material
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A-29
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Section 6.03.
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No Solicitation; Other Offers
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A-30
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Section 6.04.
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Financing
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A-31
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Section 6.05.
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Exemption from Liability Under Section 16
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A-32
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ARTICLE 7 COVENANTS OF PARENT
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A-32
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Section 7.01.
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Obligations of Merger Subsidiary
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A-32
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Section 7.02.
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Voting of Shares
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A-32
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Section 7.03.
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Information For Proxy Statement
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A-32
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Section 7.04.
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Director and Officer Liability
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A-32
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Section 7.05.
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Employee Benefits; 401(k) Plan
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A-33
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ARTICLE 8 COVENANTS OF PARENT, MERGER SUBSIDIARY AND
THE COMPANY
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A-34
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Section 8.01.
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Commercially Reasonable Efforts
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A-34
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Section 8.02.
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Certain Filings
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A-35
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Section 8.03.
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Public Announcements
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A-35
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Section 8.04.
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Further Assurances
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A-35
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Section 8.05.
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Access to Information
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A-35
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Section 8.06.
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Notices of Certain Events
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A-35
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Section 8.07.
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Delisting
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A-36
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Section 8.08.
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Litigation
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A-36
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ARTICLE 9 CONDITIONS TO THE MERGER
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A-37
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Section 9.01.
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Conditions to the Obligations of Each Party
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A-37
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Section 9.02.
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Conditions to the Obligations of Parent and Merger Subsidiary
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A-37
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Section 9.03.
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Conditions to the Obligations of the Company
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A-38
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ARTICLE 10 TERMINATION
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A-39
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Section 10.01
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Termination
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A-39
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Section 10.02
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Effect of Termination
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A-40
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A-ii
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Page
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ARTICLE 11 MISCELLANEOUS
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A-40
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Section 11.01.
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Notices
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A-40
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Section 11.02.
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Survival of Representations and Warranties
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A-41
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Section 11.03.
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Amendments and Waivers
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A-41
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Section 11.04.
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Expenses; Termination Fee
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A-41
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Section 11.05.
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Binding Effect; Benefit; Assignment
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A-42
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Section 11.06.
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Governing Law
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A-43
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Section 11.07.
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Jurisdiction
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A-43
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Section 11.08.
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WAIVER OF JURY TRIAL
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A-43
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Section 11.09.
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Counterparts; Effectiveness
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A-43
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Section 11.10.
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Entire Agreement
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A-43
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Section 11.11
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.Severability
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A-43
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Section 11.12.
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Specific Performance
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A-43
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Section 11.13.
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Interpretation
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A-44
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EXHIBIT
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EXHIBIT A Form of Voting Agreement
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EXHIBIT B Certificate of Incorporation of the
Surviving Corporation
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A-iii
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 Companys stockholders;
WHEREAS, immediately prior to the Effective Time, certain member
of the Companys management (the
Continuing
Stockholders
) will contribute shares of the
Companys 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.
A-1
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 Companys 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
Companys 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 Companys annual report on
Form 10-K
for the fiscal year ended March 31, 2007.
Company
10-Q
means the Companys 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 Companys 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 Companys
current manufacturing facilities in California, the Netherlands,
Mexico and Singapore.
Delaware Law
means the General Corporation
Law of the State of Delaware.
A-2
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.
A-3
Knowledge
of any Person that is not an
individual means the actual knowledge of such Persons
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 Companys 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 Companys
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) GNUs 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.
A-4
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:
|
|
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Term
|
|
Section
|
|
1994 Plan
|
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4.05
|
2005 Plan
|
|
4.05
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Additional Report Notice
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8.09
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Adverse Recommendation Change
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6.03
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Agreement
|
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Preamble
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Certificates
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2.03
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Company
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Preamble
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Company Board Recommendation
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4.02
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Company Cash Deposit
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2.03
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Company Payment Event
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11.04
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Company Proxy Materials
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4.09
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Company Proxy Statement
|
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4.09
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Company SEC Documents
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4.07
|
Company Securities
|
|
4.05
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Company Stockholder Approval
|
|
4.02
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Company Stockholder Meeting
|
|
6.02
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Company Stock Option
|
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2.05
|
Company Stock Option Plans
|
|
4.05
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Company Subsidiary Securities
|
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4.06
|
Confidentiality Agreement
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6.03
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Continuing Stockholders
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Preamble
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Contributed Stock
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Preamble
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Current Sites
|
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8.09
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Debt Commitment Letter
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5.06
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Debt Financing
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5.06
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Effective Time
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2.01
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A-5
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Term
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Section
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Employee Plans
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4.17
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End Date
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10.01
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Environmental Reports
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8.09
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Equity Commitment Letter
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5.06
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Exchange Agent
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2.03
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FASB
|
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6.01
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Financing
|
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5.06
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Financing Commitments
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5.06
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Guarantor
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Recitals
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Indebtedness
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4.05
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Indemnified Person
|
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7.04
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internal controls
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4.07
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Leased Real Property
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4.23
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Limited Guarantee
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Recitals
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Major Supplier
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4.19
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Major Supplier
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4.19
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Material Contract
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4.19
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Merger
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2.01
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Merger Consideration
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2.02
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Merger Subsidiary
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Preamble
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Multiemployer Plan
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4.17
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Necessary IP Rights
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4.21
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New Financing Commitments
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7.06
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Notice Date
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8.09
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Owned Real Property
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4.23
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Parent
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Preamble
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Parent Environmental Termination Notice
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8.09
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Parent Parties
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11.04(d)
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Parent Payment Event
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11.04
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Parent Termination Fee
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11.04
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Phase I Environmental Site Assessment
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8.09
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Proceedings
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4.13
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Qualified Plan
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4.17
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Significant Environmental Matter
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8.09
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Special Committee
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4.02
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Solvency Opinion
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7.12
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Superior Proposal
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6.03
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Surviving Corporation
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2.01
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Tax
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4.16
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Taxing Authority
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4.16
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Tax Return
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4.16
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Tax Sharing Agreements
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4.16
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Uncertificated Shares
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2.03
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Voting Agreements
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Recitals
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A-6
Article 2
THE MERGER
Section 2.01
.
The
Merger.
(a) Subject to the terms and
conditions of this Agreement, at the Effective Time, Merger
Subsidiary shall be merged (the Merger) with and
into the Company in accordance with Delaware Law, whereupon the
separate existence of Merger Subsidiary shall cease, and the
Company shall be the surviving corporation (the Surviving
Corporation).
(b) As soon as practicable, but in no event later than
three (3) Business Days following the satisfaction or, to
the extent permitted hereunder, waiver of all conditions to the
Merger set forth in Article 9 (other than delivery of items
to be delivered at the Closing and other than satisfaction of
those conditions that by their nature are to be satisfied at the
Closing, it being understood that the occurrence of the Closing
shall remain subject to the delivery of such items and the
satisfaction or waiver of such conditions at the Closing), the
Company and Merger Subsidiary shall file a certificate of merger
with the Delaware Secretary of State and make all other filings
or recordings required by Delaware Law in connection with the
Merger. The Merger shall become effective at such time (the
Effective Time
) as the certificate of merger
is duly filed with the Delaware Secretary of State (or at such
later time as may be specified in the certificate of merger).
The closing of the Merger shall take place at 11:00 a.m. on
the date of the Effective Time at the offices of
OMelveny & Myers LLP, 275 Battery Street,
Suite 2600, San Francisco, California 94111, unless
another time, date
and/or
place
is agreed to in writing by Merger Subsidiary and the Company.
(c) From and after the Effective Time, the Surviving
Corporation shall possess all the rights, powers, privileges and
franchises and be subject to all of the obligations,
liabilities, restrictions and disabilities of the Company and
Merger Subsidiary, all as provided under Delaware Law.
Section 2.02
.
Conversion
of Shares.
At the Effective Time, by virtue of
the Merger and without any action on the part of any Person,
(a) except as otherwise provided in Section 2.02(b),
Section 2.02(c) or Section 2.04, each share of Company
Stock (including the associated Company Rights) outstanding
immediately prior to the Effective Time shall be shall be
converted into the right to receive an amount in cash per share,
without interest, equal to $16.00 (the
Merger
Consideration
);
(b) each share of Company Stock held by the Company as
treasury stock or owned by Parent (including the Contributed
Stock) or Merger Subsidiary immediately prior to the Effective
Time shall be cancelled, and retired without payment of any
consideration therefor;
(c) each share of Company Stock held by any Subsidiary of
the Company immediately prior to the Effective Time shall be
converted into such number of shares of stock of the Surviving
Corporation such that each such Subsidiary owns the same
percentage of the Surviving Corporation immediately following
the Effective Time as such Subsidiary owned in the Company
immediately prior to the Effective Time; and
(d) each share of common stock of Merger Subsidiary
outstanding immediately prior to the Effective Time shall be
converted into and become one share of common stock of the
Surviving Corporation with the same rights, powers and
privileges as the shares so converted and shall constitute the
only outstanding shares of capital stock of the Surviving
Corporation.
Section 2.03
.
Surrender
and Payment.
(a) Prior to the Effective
Time, Parent shall appoint an agent (the Exchange
Agent) reasonably satisfactory to the Company for the
purpose of exchanging for the Merger Consideration
(i) certificates representing shares of Company Stock (the
Certificates) or (ii) uncertificated shares of
Company Stock (the Uncertificated Shares).
Immediately prior to the Effective Time, the Company shall
deposit $18 million in cash (the Company Cash
Deposit) with the Exchange Agent. The Company Cash Deposit
shall be made solely out of Freely Available Cash and shall be
used solely for purposes of paying a portion of the Merger
Consideration in accordance with this Article 2 and shall
not be used to satisfy any other obligation of the Company or
any of its Subsidiaries. At or immediately following the
Effective Time, Parent shall make available to the Exchange
Agent cash, for the benefit of the holders of Certificates and
Uncertificated Shares, in an amount sufficient to pay all
remaining aggregate Merger Consideration in excess of the
Company Cash Deposit. Promptly
A-7
after the Effective Time (but, subject to receipt by the
Exchange Agent of the necessary stockholder records from the
Companys transfer agent, in no event more than ten
(10) Business Days after the Effective Time), Parent shall
send, or shall cause the Exchange Agent to send, to each holder
of shares of Company Stock at the Effective Time a letter of
transmittal and instructions (which shall specify that the
delivery shall be effected, and risk of loss and title shall
pass, only upon proper delivery of the Certificates or transfer
of the Uncertificated Shares to the Exchange Agent) for use in
such exchange. The parties hereby acknowledge and agree that the
ten (10)-Business Day period set forth in the previous sentence
will be tolled for each Business Day the Exchange Agent has not
received the necessary stockholder records from the
Companys transfer agent.
(a) Each holder of shares of Company Stock that have been
converted into the right to receive the Merger Consideration
shall be entitled to receive, upon (i) surrender to the
Exchange Agent of a Certificate, together with a properly
completed letter of transmittal, or (ii) receipt of an
agents message by the Exchange Agent (or such
other evidence, if any, of transfer as the Exchange Agent may
reasonably request) in the case of a book-entry transfer of
Uncertificated Shares, together with a properly completed letter
of transmittal, the Merger Consideration in respect of the
Company Stock represented by a Certificate or Uncertificated
Share. Until so surrendered or transferred, as the case may be,
each such Certificate or Uncertificated Share shall represent
after the Effective Time for all purposes only the right to
receive such Merger Consideration.
(b) If any portion of the Merger Consideration is to be
paid to a Person other than the Person in whose name the
surrendered Certificate or the transferred Uncertificated Share
is registered, it shall be a condition to such payment that
(i) either such Certificate shall be properly endorsed or
shall otherwise be in proper form for transfer or such
Uncertificated Share shall be properly transferred and
(ii) the Person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes required as a result
of such payment to a Person other than the registered holder of
such Certificate or Uncertificated Share or establish to the
satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(c) After the Effective Time, there shall be no further
registration of transfers of shares of Company Stock. If, after
the Effective Time, Certificates or Uncertificated Shares are
presented to the Surviving Corporation, they shall be canceled
and exchanged for the Merger Consideration provided for, and in
accordance with the procedures set forth, in this Article 2.
(d) Any portion of the Merger Consideration made available
to the Exchange Agent pursuant to Section 2.03(a) that
remains unclaimed by the holders of shares of Company Stock nine
(9) months after the Effective Time shall be returned to
the Surviving Corporation, upon demand, and any such holder who
has not exchanged shares of Company Stock for the Merger
Consideration in accordance with this Section 2.03 prior to
that time shall thereafter look only to the Surviving
Corporation for payment of the Merger Considerations in respect
of such shares without any interest thereon. Notwithstanding the
foregoing, neither Parent, the Surviving Corporation or the
Exchange Agent shall be liable to any holder of shares of
Company Stock for any amounts paid to a public official pursuant
to applicable abandoned property, escheat or similar laws.
(e) Any portion of the Merger Consideration made available
to the Exchange Agent pursuant to Section 2.03(a) to pay
for shares of Company Stock for which appraisal rights have been
perfected shall be returned to the Surviving Corporation upon
demand.
Section 2.04
.
Dissenting
Shares.
Notwithstanding Section 2.03, shares
of Company Stock outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the
Merger or consented thereto in writing and who has demanded
appraisal for such shares of Company Stock in accordance with
Delaware Law shall not be converted into a right to receive the
Merger Consideration, unless such holder fails to perfect,
withdraws or otherwise loses the right to appraisal. If, after
the Effective Time, such holder fails to perfect, withdraws or
loses the right to appraisal, such shares of Company Stock shall
be treated as if they had been converted as of the Effective
Time into a right to receive the Merger Consideration. The
Company shall give Parent prompt notice of any demands received
by the Company for appraisal of shares of Company Stock, and
Parent shall have the right to direct all negotiations and
proceedings with respect to such demands. Except with the prior
written consent of Parent, the Company shall not make any
payment with respect to, or offer to settle or settle, any such
demands.
A-8
Section 2.05
.
Stock
Options; Restricted Stock.
(a) At or
immediately prior to the Effective Time, each option to purchase
shares of Company Stock outstanding under any employee stock
option or compensation plan or arrangement of the Company (a
Company Stock Option), whether or not vested or
exercisable, shall be canceled, and the Company shall pay each
holder of any such option at or promptly after the Effective
Time for each such option, subject to applicable withholding
requirements, an amount in cash determined by multiplying
(i) the excess, if any, of the Merger Consideration in cash
per share over the applicable exercise price of such option by
(ii) the number of shares of Company 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.
(b) Prior to the Effective Time, the Company shall take
such actions as may be necessary to give effect to the
transactions contemplated by this Section 2.05.
(c) Immediately prior to the Effective Time, 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 the Common
Stock of the Company under this Agreement.
Section 2.06
.
Adjustments.
If,
during the period between the date of this Agreement and the
Effective Time, there is any reclassification, recapitalization,
stock split or combination, exchange or readjustment of shares,
or any stock dividend thereon with a record date during such
period relating to the Company Stock, but excluding any change
that results from any exercise of options to purchase shares of
Company Stock granted under the Companys stock option or
compensation plans or arrangements, the Merger Consideration and
any other amounts payable pursuant to this Agreement shall be
appropriately adjusted.
Section 2.07
.
Withholding
Rights.
Each of the Surviving Corporation, Parent
and any other Person required to withhold with respect to any
payment made under this Agreement shall be entitled to deduct
and withhold from the consideration otherwise payable to any
Person pursuant to this Article 2 such amounts as it is
required to deduct and withhold with respect to the making of
such payment under any provision of federal, state, local or
foreign tax law. If the Surviving Corporation or Parent, as the
case may be, so withholds amounts that it is required to
withhold and properly remit such amounts to the appropriate Tax
Authority, such amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares
of Company Stock in respect of which the Surviving Corporation
or Parent, as the case may be, made such deduction and
withholding.
Section 2.08
.
Lost
Certificates.
If any Certificate shall have been
lost, stolen, defaced or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate
to be lost, stolen, defaced or destroyed and the posting by such
Person of a bond in such amount as the Surviving Corporation may
direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will
pay, in exchange for such lost, stolen or destroyed Certificate,
the Merger Consideration to be paid in respect of the shares of
Company Stock represented by such Certificate, as contemplated
by this Article 2.
Article 3
THE
SURVIVING CORPORATION
Section 3.01
.
Certificate
of Incorporation.
The certificate of
incorporation of the Surviving Corporation shall be as set forth
on
Exhibit B
hereto until amended in accordance with
Applicable Law.
Section 3.02
.
Bylaws.
The
bylaws of Merger Subsidiary in effect at the Effective Time
shall be the bylaws of the Surviving Corporation until amended
in accordance with Applicable Law.
Section 3.03
.
Directors
and Officers.
From and after the Effective Time,
until successors are duly elected or appointed and qualified in
accordance with Applicable Law, (i) the directors of Merger
Subsidiary at the Effective Time shall be the directors of the
Surviving Corporation, and (ii) the officers of Merger
Subsidiary at the Effective Time shall be the officers of the
Surviving Corporation.
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Article 4
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Subject to such exceptions disclosed in the Company Disclosure
Schedule (it being expressly understood and agreed that the
disclosure of any fact or item in any Section of the Company
Disclosure Schedule shall only be deemed to be an exception to
(or, as applicable, a disclosure for purposes of) (i) the
representations and warranties of the Company that are contained
in the corresponding Section of this Agreement and (ii) any
other representations and warranties of such Company that is
contained in this Agreement, but only if the relevance of that
reference as an exception to (or a disclosure for purposes of)
such representations and warranties is readily apparent to a
reasonable person who has read that reference and such
representations and warranties, without any independent
knowledge on the part of the reader regarding the matter(s) so
disclosed, the Company represents and warrants to Parent that:
Section 4.01
.
Corporate
Existence and Power.
The Company is a corporation
duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and has all corporate powers
and all material Permits required to carry on its business as
now conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary, except for those
jurisdictions where failure to be so qualified would not have,
individually or in the aggregate, a Material Adverse Effect on
the Company. The Company has heretofore delivered to Parent true
and complete copies of the certificate of incorporation and
bylaws of the Company and each of its Subsidiaries as currently
in effect. The Company has heretofore delivered to Parent true
and complete copies of the minutes (or, in the case of draft
minutes, the most recent versions thereof) of the meetings of
the stockholders, the Board of Directors and any committees of
the Board of Directors of the Company and each of its
Subsidiaries since January 1, 2005.
Section 4.02
.
Corporate
Authorization.
(a) The execution, delivery
and performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated
hereby are within the Companys corporate powers and,
except for the required approval of the Companys
stockholders in connection with the consummation of the Merger,
have been duly authorized by all necessary corporate action on
the part of the Company. The affirmative vote of the holders of
a majority of the outstanding shares of Company Stock is the
only vote of the holders of any of the Companys capital
stock necessary in connection with the consummation of the
Merger (the Company Stockholder Approval). This
Agreement constitutes a valid and binding agreement of the
Company enforceable against the Company in accordance with its
terms, except to the extent that enforceability may be limited
by applicable bankruptcy, insolvency, fraudulent conveyance or
similar laws or by general principles of equity.
At a meeting duly called and held, the Companys Board of
Directors, acting upon the favorable recommendation of a special
committee of the Board of Directors, which is comprised entirely
of disinterested, independent directors (the
Special
Committee
), has unanimously (i) determined that
this Agreement and the transactions contemplated hereby are fair
to and in the best interests of the Companys stockholders
(other than the Continuing Stockholders and their Affiliates),
(ii) declared this Agreement and the transactions
contemplated hereby advisable, (iii) approved and adopted
this Agreement and the transactions contemplated hereby,
(iv) resolved (subject to Section 6.03) to recommend
adoption of this Agreement by its stockholders (such
recommendation, the
Company Board
Recommendation
), and (v) taken all action
necessary to render inapplicable to this Agreement, the Merger,
the Voting Agreements and the other transactions contemplated
hereby and thereby the restrictions on business
combinations (as defined in Section 203 of Delaware
Law) set forth in Section 203 of Delaware Law.
Section 4.03
.
Governmental
Authorization.
The execution, delivery and
performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated
hereby require no action by or in respect of, or filing with,
any Governmental Authority other than (i) the filing of a
certificate of merger with respect to the Merger with the
Delaware Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company is
qualified to do business, (ii) compliance with any
applicable requirements of the HSR Act and of laws analogous to
the HSR Act existing in foreign jurisdictions,
(iii) compliance with any applicable requirements of the
1934 Act, and any other applicable U.S. state or
federal securities laws, and (iv) any actions or filings
the absence of which would not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on
the Company.
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Section 4.04
.
Non-contravention.
Except
as set forth in Section 4.04 of the Company Disclosure
Schedule, the execution, delivery and performance by the Company
of this Agreement and the consummation of the transactions
contemplated hereby do not and will not (i) require any
consent or other action by any Person under, contravene,
conflict with, violate, breach or constitute a default under, or
an event that, with or without notice or lapse of time or both,
would constitute a violation, breach or default under, or cause
or permit the termination, cancellation, acceleration or other
change of any right or obligation or the loss of any benefit to
which the Company or any of its Subsidiaries is entitled under
(A) any provision of the certificate of incorporation or
bylaws of the Company or similar organizational documents of any
of its Subsidiaries, (B) assuming compliance with the
matters referred to in Section 4.03, any provision of any
Applicable Law, (C) any provision of any agreement or other
instrument binding upon the Company or any of its Subsidiaries
or any Permit affecting, or relating in any way to, the assets
or business of the Company and its Subsidiaries or
(ii) result in the creation or imposition of any Lien on
any asset of the Company or any of its Subsidiaries, with such
exceptions, in the case of each of clauses (i)(B), (i)(C) and
(ii), as would not be reasonably expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company.
Section 4.05
.
Capitalization.
(a) The
authorized capital stock of the Company consists of
30,000,000 shares of Company Stock. As of the date of this
Agreement, there were outstanding 6,675,457 shares of
Company Stock (of which 284,400 are shares of Restricted Stock),
Company Stock Options to purchase an aggregate of
314,975 shares of Company Stock under the Companys
1994 Stock Incentive Plan (the 1994 Plan) (of which
options to purchase an aggregate of all such shares of Company
Stock were exercisable), Company Stock Options to purchase an
aggregate of 7,500 shares of Company Stock under the
Companys 2005 Stock Option Plan (the 2005 Plan
and, together with the 1994 Plan, the Company Stock
Plans) (of which options to purchase an aggregate of all
such shares of Company Stock were exercisable) and no options to
purchase Company Stock granted outside the Company Stock Plans.
The Company has no shares of Company Stock reserved for future
issuance under the 1994 Plan and 591,500 shares of Company
Stock reserved for future issuance under the 2005 Plan. All
outstanding shares of capital stock of the Company have been,
and all shares that may be issued pursuant to the Company Stock
Plans will be, when issued in accordance with the respective
terms thereof, duly authorized and validly issued and are fully
paid and nonassessable and free of preemptive rights. Except as
set forth on Section 4.05(a)(i) of the Company Disclosure
Schedule, no Company Subsidiary or Affiliate owns any shares of
capital stock of the Company. Section 4.05(a)(ii) of the
Company Disclosure Schedule contains a complete and correct list
of each outstanding Company Stock Option, including the holder,
date of grant, exercise price, expiration date, number of shares
of Company Stock subject thereto and an indication of whether
the holder is an employee of the Company. The Company has
provided to Parent copies of the forms of all grant agreements
pursuant to which any Company Stock Option was granted.
Section 4.05(a)(iii) of the Company Disclosure Schedule
contains a complete and correct list of each outstanding share
of Restricted Stock, including the holder, date of grant,
vesting schedule and number of shares of Restricted Stock. The
Company has provided to Parent copies of the forms of all grant
agreements pursuant to which any Restricted Stock was issued.
All Company Stock Options and shares of Restricted Stock may, by
their terms, be treated in accordance with 2.05. All Company
Stock Options and any other Company Securities, in each case
whether currently outstanding or previously issued under the
Company Stock Plans or any similar equity plan previously in
existence, were granted with an exercise price or strike price
not less than the fair market value of the Company Stock on the
grant date and were granted in material compliance with the
applicable equity plan and the rule of the Nasdaq Global Market
or other securities exchange on the Company Common Stock was
traded on the grant date.
(b) Except as set forth in this Section 4.05, there
are no outstanding (i) shares of capital stock or voting
securities of the Company, (ii) securities of the Company
convertible into or exchangeable or exercisable for shares of
capital stock or voting securities of the Company,
(iii) options or other rights to acquire from the Company,
or other obligation of the Company to issue, any capital stock,
voting securities or securities convertible into or exchangeable
for capital stock or voting securities of the Company or
(iv) restricted shares, restricted share units, stock
appreciation rights, performance shares, contingent value
rights, phantom stock or similar securities or
rights that are derivative of, or provide economic benefits
based, directly or indirectly, on the value or price of, any
capital stock of, or other voting securities or ownership
interests in, the Company (the items in clauses (i)-(iv) being
referred to collectively as the Company Securities).
There are no outstanding obligations of the Company or any of
its Subsidiaries to issue, deliver, sell, repurchase, redeem or
otherwise acquire any of the Company Securities.
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Neither the Company nor any of its Subsidiaries is a party to
any voting agreements with respect to any Company Securities
and, to the knowledge of the Company, as of the date of this
Agreement (other than pursuant to the Voting Agreements) there
are no irrevocable proxies and no voting agreements with respect
to any Company Securities.
(c) Except as set forth in Section 4.05(c) of the
Company Disclosure Schedule, no Company Securities are owned by
any Subsidiary of the Company.
(d) Except as set forth in Section 4.05(d) of the
Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has any (A) indebtedness for borrowed money,
(B) indebtedness evidenced by any bond, debenture, note,
mortgage, indenture or other debt instrument or debt security,
(C) accounts payable to trade creditors and accrued
expenses not arising in the ordinary course of business,
(D) amounts owing as deferred purchase price for the
purchase of any property, (E) capital leases or
(F) guarantees with respect to any indebtedness or
obligation of a type described in clauses (A) through
(E) above of any other person (collectively,
Indebtedness
). There are no bonds,
debentures, notes or other Indebtedness of the Company or any of
its Subsidiaries or any other securities (other than shares of
Company Stock), instruments or obligations of the Company or any
of its Subsidiaries, in each case, which has or which by its
terms may have at any time (whether actual or contingent) the
right to vote (or which is convertible into, or exchangeable
for, securities having the right to vote) on any matters on
which stockholders of the Company or any of its Subsidiaries may
vote.
Section 4.06
.
Subsidiaries.
(a) Each
Subsidiary of the Company is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers and all
material Permits required to carry on its business as now
conducted. Each such Subsidiary is duly qualified to do business
as a foreign corporation and is in good standing in each
jurisdiction where such qualification is necessary, except for
those jurisdictions where failure to be so qualified would not
have, individually or in the aggregate, a Material Adverse
Effect on the Company. All material Subsidiaries of the Company
and their respective jurisdictions of incorporation are
identified in Section 4.06(a) of the Company Disclosure
Schedule.
(b) Except as set forth in Section 4.06(b) of the
Company Disclosure Schedule, all of the outstanding capital
stock of, or other voting securities or ownership interests in,
each Subsidiary of the Company, is owned by the Company,
directly or indirectly, free and clear of any Lien and free of
any other limitation or restriction (including any restriction
on the right to vote, sell or otherwise dispose of such capital
stock or other voting securities or ownership interests). There
are no outstanding (i) securities of the Company or any of
its Subsidiaries convertible into or exchangeable or exercisable
for shares of capital stock or other voting securities or
ownership interests in any Subsidiary of the Company,
(ii) options or other rights to acquire from the Company or
any of its Subsidiaries, or other obligation of the Company or
any of its Subsidiaries to issue, any capital stock or other
voting securities or ownership interests in, or any securities
convertible into or exchangeable for any capital stock or other
voting securities or ownership interests in, any Subsidiary of
the Company or (iii) restricted shares, restricted share
units, stock appreciation rights, performance shares, contingent
value rights, phantom stock or similar securities or
rights that are derivative of, or provide economic benefits
based, directly or indirectly, on the value or price of, any
capital stock of, or other voting securities or ownership
interests in, any Subsidiary of the Company (the items in
clauses (i)-(iii) being referred to collectively as the
Company Subsidiary Securities
). There are no
outstanding obligations of the Company or any of its
Subsidiaries to issue, deliver, sell, repurchase, redeem or
otherwise acquire any of the Company Subsidiary Securities.
Neither the Company nor any of its Subsidiaries is a party to
any voting agreements with respect to any Company Subsidiary
Securities and, as of the date of this Agreement there are no
irrevocable proxies and no voting agreements with respect to any
Company Subsidiary Securities.
(c) Except as set forth in Section 4.06(c) of the
Company Disclosure Schedule, except for the Company Subsidiary
Securities, the Company does not own, directly or indirectly,
any capital stock of, or other equity, ownership, profit, voting
or other interests in, or any interest convertible, exchangeable
or exercisable for, any equity, profit, voting or similar
interest in, any Person.
Section 4.07
.
SEC
Filings and the Sarbanes-Oxley Act.
(a) The
Company has delivered or made available to Parent, or the
Electronic Data Gathering, Analysis and Retrieval (EDGAR)
database of the SEC contains in a publicly available format,
complete and correct copies of all reports, schedules, forms,
statements and other documents filed by the Company with or
furnished by the Company to the SEC since January 1, 2004
(collectively, the Company SEC Documents). Since
January 1, 2004, the Company has filed with or furnished to
the SEC each
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report, schedule, form, statement or other document or filing
required by Law to be filed or furnished at or prior to the time
so required. No Subsidiary of the Company is required to file or
furnish any report, schedule, form, statement or other document
or filing with the SEC.
(b) As of their respective dates, each of the Company SEC
Documents complied, and each such Company SEC Document filed
subsequent to the date hereof will comply, as to form in all
material respects with the applicable requirements of the
1933 Act and the 1934 Act, as the case may be.
(c) As of its filing date (or, if amended or superseded by
a filing prior to the date hereof, on the date of such filing),
each Company SEC Document filed pursuant to the 1934 Act
did not, and each such Company SEC Document filed subsequent to
the date hereof will not, contain any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The
Company has provided to Parent copies of all comment letters
received from the SEC since January 1, 2004 relating to the
Company SEC Documents, and any written responses of the Company
thereto. There are no outstanding or unresolved comments in any
comment letters received by the Company from the SEC. As of the
date of this Agreement, to the Knowledge of the Company, none of
the Company SEC Documents is the subject of any ongoing review
by the SEC.
(d) Each Company SEC Document that is a registration
statement, as amended or supplemented, if applicable, filed
pursuant to the 1933 Act, as of the date such registration
statement or amendment became effective, did not, and each such
Company SEC Document that becomes effective subsequent to the
date hereof will not, as of such date, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading.
(e) The Company is in compliance in all material respects
with the provisions of the Sarbanes-Oxley Act and the rules and
regulations promulgated thereunder applicable to it. The Company
has promptly disclosed, by filing a
Form 8-K,
any change in or waiver of the Companys code of ethics, as
required by Section 406(b) of the Sarbanes-Oxley Act. To
the Knowledge of the Company, there have been no violations of
provisions of the Companys code of ethics.
(f) The Company has established and maintains disclosure
controls and procedures (as defined in
Rule 13a-15
under the 1934 Act). Such disclosure controls and
procedures are designed to ensure that material information
relating to the Company, including its consolidated
Subsidiaries, is made known to the Companys principal
executive officer and its principal financial officer by others
within those entities, particularly during the periods in which
the periodic reports required under the 1934 Act are being
prepared. Such disclosure controls and procedures are effective
in timely alerting the Companys principal executive
officer and principal financial officer to material information
required to be included in the Companys periodic reports
required under the 1934 Act.
(g) The Company and its Subsidiaries have established and
maintain a system of internal control over financial reporting
(as defined in
Rule 13a-15
under the 1934 Act) (
internal controls
).
Such internal controls are sufficient to provide reasonable
assurance regarding the reliability of the Companys
financial reporting and the preparation of Company financial
statements for external purposes in accordance with GAAP. The
Company has disclosed, based on its most recent evaluation of
internal controls prior to the date hereof, to the
Companys auditors and audit committee (x) any
significant deficiencies and material weaknesses in the design
or operation of internal controls which are reasonably likely to
adversely affect the Companys ability to record, process,
summarize and report financial information and (y) any
fraud, whether or not material, that involves management or
other employees who have a significant role in internal
controls. The Company has made available to Parent a summary of
any such disclosure made by management to the Companys
auditors and audit committee since April 1, 2006.
(h) There are no outstanding loans or other extensions of
credit made by the Company or any of its Subsidiaries to any
executive officer (as defined in
Rule 3b-7
under the 1934 Act) or director of the Company. The Company
has not, since the enactment of the Sarbanes-Oxley Act, taken
any action prohibited by Section 402 of the Sarbanes-Oxley
Act.
Section 4.08
.
Financial
Statements.
The financial statements (including
the notes) of the Company included in the Company SEC Documents
complied, at the time the respective statements were filed, or
with respect to Company SEC Document filed subsequent to the
date hereof will comply, at the time the respective
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statements are filed, as to form in all material respects with
the applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, have been or
will be prepared in accordance with GAAP applied on a consistent
basis (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates
thereof and their consolidated results of operations and cash
flows for the periods then ended.
Section 4.09
.
Disclosure
Documents.
The proxy or information statement of
the Company to be filed with the SEC in connection with the
Merger (the Company Proxy Statement) and any
amendments or supplements thereto will, when filed, comply as to
form in all material respects with the applicable requirements
of the 1934 Act. At the time the Company Proxy Statement or
any amendment or supplement thereto is first mailed to
stockholders of the Company and at the time such stockholders
vote on adoption of this Agreement, the Company Proxy Statement,
as supplemented or amended, if applicable, will not contain any
untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading. Any other documents filed by the Company
with the SEC pursuant to Regulation 14A under the
1934 Act (the Company Proxy Materials) will
not, at the time they are filed with the SEC or otherwise
disseminated to the stockholders of the Company or the public,
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading. The representations and warranties
contained in this Section 4.09 will not apply to statements
or omissions included in the Company Proxy Statement or Company
Proxy Materials based upon information furnished to the Company
in writing by Parent specifically for use therein.
Section 4.10
.
Absence
of Certain Changes.
(a) Except as disclosed
in Section 4.10 of the Company Disclosure Schedule, since
the Company Balance Sheet Date, the Company and its Subsidiaries
have conducted their businesses in the ordinary course of
business and in a manner consistent with past practices, and
there has not been:
(b) any event, occurrence, development or state of
circumstances or facts that has had or could have, individually
or in the aggregate, a Material Adverse Effect on the Company;
(c) any amendment of the articles of incorporation, bylaws
or other similar organizational documents (whether by merger,
consolidation or otherwise) of the Company or its Subsidiaries;
(d) any splitting, combination or reclassification of any
shares of capital stock of the Company or any of its
Subsidiaries or declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital
stock, or redemption, repurchase or other acquisition or offer
to redeem, repurchase, or otherwise acquire any Company
Securities or any Company Subsidiary Securities, except for
regular quarterly cash dividends with customary record and
payment dates on the shares of Company Stock not in excess of
$0.10 per share per quarter;
(e) (i) any issuance, delivery or sale, or
authorization of the issuance, delivery or sale of, any shares
of any Company Securities or Company Subsidiary Securities,
other than the issuance of (A) any shares of the Company
Stock upon the exercise of Company Stock Options that were
outstanding on the Company Balance Sheet Date in accordance with
the terms of those options on the Company Balance Sheet Date and
(B) any Company Subsidiary Securities to the Company or any
other Subsidiary or (ii) amendment of any term of any
Company Security or any Company Subsidiary Security (in each
case, whether by merger, consolidation or otherwise);
(f) authorization of, or commitment to make, capital
expenditures in excess of $500,000 in the aggregate;
(g) any acquisition (by merger, consolidation, acquisition
of stock or assets or otherwise), directly or indirectly, by the
Company or any of its Subsidiaries of any Person or any division
of any Person or any material amount of assets of in any Person;
(h) any sale, lease or other transfer, or creation or
incurrence of any Lien on, any assets, securities, properties,
interests or businesses of the Company or any of its
Subsidiaries, other than sales of inventory in the ordinary
course of business consistent with past practice;
A-14
(i) other than in connection with actions permitted by
Section 4.10(d) or Section 4.10(e), the making by the
Company or any of its Subsidiaries of any loans, advances or
capital contributions to, or investments in, any other Person,
other than in the ordinary course of business consistent with
past practice;
(j) the creation, incurrence, assumption or sufferance to
exist by the Company or any of its Subsidiaries of any
indebtedness for borrowed money or guarantees thereof;
(k) the entering into of any agreement or arrangement that
limits or otherwise restricts in any material respect the
Company, any of its Subsidiaries or any of their respective
Affiliates or any successor thereto or that could, after the
Effective Time, limit or restrict in any material respect the
Company, any of its Subsidiaries, the Surviving Corporation,
Parent or any of their respective Affiliates, from engaging or
competing in any line of business, in any location or with any
Person;
(l) the entering into, amendment or modification in any
material respect or termination of any Material Contract or
waiver, release or assignment of any material rights, claims or
benefits of the Company or any of its Subsidiaries;
(m) (i) any grant or increase of any severance or
termination pay to (or amendment of any existing arrangement
with) any director, officer or employee of the Company or any of
its Subsidiaries, (ii) any increase in benefits payable
under any existing severance or termination pay policies or
employment agreements, (iii) the entry into any employment,
deferred compensation or other similar agreement (or amendment
of any such existing agreement) with any director, officer or
employee of the Company or any of its Subsidiaries,
(iv) any establishment, adoption or amendment (except as
required by Applicable Law) of any collective bargaining, bonus,
profit-sharing, thrift, pension, retirement, deferred
compensation, compensation, stock option, restricted stock or
other benefit plan or arrangement covering any director, officer
or employee of the Company or any of its Subsidiaries or
(v) any material increase in compensation, bonus or other
benefits payable to any director, officer or employee of the
Company or any of its Subsidiaries;
(n) any material labor dispute, other than routine
individual grievances, or any activity or proceeding by a labor
union or representative thereof to organize any employees of the
Company or any of its Subsidiaries, which employees were not
subject to a collective bargaining agreement at the Company
Balance Sheet Date, or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to such
employees;
(o) any change in the Companys methods of accounting,
except as required by Applicable Law or GAAP;
(p) any settlement of, or offer or proposal to settle,
(i) any material litigation, investigation, arbitration,
proceeding or other claim involving or against the Company or
any of its Subsidiaries, (ii) any stockholder litigation or
dispute against the Company or any of its officers or directors
or (iii) any litigation, arbitration, proceeding or dispute
that relates to the transactions contemplated hereby;
(q) any write-down by the Company or any of its
Subsidiaries of any of the material assets of the Company or its
Subsidiaries not in the usual course of business; or
(r) any Tax election made or changed other than in the
ordinary course of business, any annual tax accounting period
made or changed, any method of tax accounting adopted or
changed, any Tax Returns amended materially or claims for
material Tax refunds filed, any material closing agreement
entered into, any material Tax claim, audit or assessment
settled, or any right to claim a material Tax refund, offset or
other reduction in Tax liability surrendered.
Section 4.11
.
No
Undisclosed Material Liabilities.
There are no
liabilities or obligations of the Company or any of its
Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and
there is no existing condition, situation or set of
circumstances that could reasonably be expected to result in
such a liability or obligation, other than:
(a) liabilities or obligations disclosed and provided for
in the Company Balance Sheet or in the notes thereto,
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(b) liabilities or obligations incurred in the ordinary
course of business consistent with past practices since the
Company Balance Sheet Date which are not material in amount to
the Company and its Subsidiaries taken as a whole;
(c) liabilities and obligations under this
Agreement; and
(d) other liabilities or obligations which are not material
in amount to the Company and its Subsidiaries taken as a whole.
Section 4.12
.
Compliance
with Laws; Permits.
Except as listed in
Section 4.18 of the Company Disclosure Schedule, the
Company and each of its Subsidiaries is, and since
January 1, 2004, has been in compliance in all material
respects with Applicable Law, and has not received notice of any
investigation with respect to or been threatened to be charged
with or given notice of any violation of any Applicable Law. The
Company and each of its Subsidiaries is and, since
January 1, 2004 has been in compliance in all material
respects with their respective material Permits, and has not
received notice of any violation related to any such Permit or
any revocation or threatened revocation of any such Permit.
Section 4.13
.
Litigation.
Except
as listed in Section 4.13 of the Company Disclosure
Schedule, there is no claim, action, suit, investigation or
proceeding (Proceedings) pending against, or, to the
Knowledge of the Company, threatened against or affecting, the
Company, any of its Subsidiaries, any present or former officer,
director or employee of the Company or any of its Subsidiaries
or any Person for whom the Company or any Subsidiary may be
liable or any of their respective properties before any court or
arbitrator or before or by any Governmental Authority. Neither
the Company nor any of its Subsidiaries is subject to any order,
writ, judgment, injunction, decree, determination or award of
any Governmental Authority (each, an Order) against
the Company or any of its Subsidiaries or naming the Company or
any of its Subsidiaries as a party or by which any of the
employees or representatives of the Company or any of its
Subsidiaries is prohibited or restricted from engaging in or
otherwise conducting the business of the Company or any of its
Subsidiaries as presently conducted.
Section 4.14
.
Finders
Fees; Expenses.
Except for Houlihan Lokey
Howard & Zukin Capital, Inc. and Houlihan Lokey
Howard & Zukin Financial Advisors, Inc., there is no
investment banker, broker, finder or other intermediary that has
been retained by or is authorized to act on behalf of the
Company or any of its Subsidiaries who might be entitled to any
fee or commission from the Company or any of its Affiliates in
connection with the transactions contemplated by this Agreement.
The Company has delivered to Parent a copy of any agreement
pursuant to which any such fee or commission may be payable and
any indemnification and other agreements related to the
engagement of the persons to whom such fees are payable.
Section 4.14 of the Company Disclosure Schedule sets forth
the Companys good faith estimate of the aggregate fees and
expenses of any accountants, brokers, financial advisors,
consultants, legal counsel or other persons retained by the
Company incurred or to be incurred by the Company and its
Subsidiaries in connection with this Agreement or the
transactions contemplated hereby.
Section 4.15
.
Opinion
of Financial Advisor.
The Company has received
the opinion of Houlihan Lokey Howard & Zukin Financial
Advisors, Inc., dated October 1, 2007, to the effect that,
as of that date, the consideration to be received in the Merger
by the holders of the Company Common Stock (other than the
Continuing Stockholders and their Affiliates) is fair from a
financial point of view to such holders.
Section 4.16
.
Taxes.
(a) All
Tax Returns required by Applicable Law to be filed with any
Taxing Authority by, or on behalf of, the Company or any of its
Subsidiaries have been filed when due (including extensions) in
accordance with all Applicable Laws, and all such Tax Returns
are true and complete in all material respects.
(b) The Company and each of its Subsidiaries has paid (or
has had paid on its behalf) or has withheld and remitted to the
appropriate Taxing Authority all material Taxes shown as due and
payable on the Tax Returns that have been filed and any other
material Taxes that are due and payable, or, where payment is
not yet due (or with respect to Taxes which are being contested
in good faith), has established (or has had established on its
behalf and for its sole benefit and recourse) in accordance with
GAAP an adequate accrual for all material Taxes through the end
of the last period for which the Company and its Subsidiaries
ordinarily record items on their respective books.
A-16
(c) There is no claim, audit, action, suit, proceeding or
investigation now pending or, to the Companys Knowledge,
threatened against or with respect to the Company or its
Subsidiaries in respect of any Tax or Tax asset.
(d) During the five-year period ending on the date hereof,
neither the Company nor any of its Subsidiaries was a
distributing corporation or a controlled corporation in a
transaction intended to be governed by Section 355 of the
Code.
(e) The Company has provided or made available to Parent
true and complete copies of all United States and California
State Tax Returns filed with respect to it or its Subsidiaries,
as the case may be, for taxable periods ending after
December 31, 2004. The Company has provided a FIN 48
summary of all of its Tax Returns for its Subsidiaries since
December 31, 2004.
(f) Neither the Company nor any of its Subsidiaries or any
predecessor has waived any statute of limitations with respect
to Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency, or has made any request in writing
for any such extension or waiver.
(g) Neither the Company nor any of its Subsidiaries has
entered into any reportable transaction as such term
is defined in Treasury
Regulation Section 1.6011-4(b)(1)
or any listed transaction within the meaning of
Treasury
Regulation Section 1.6011-4(b)(2),
or any other transaction requiring disclosure under analogous
provisions of state, local or foreign Tax legal requirement.
(h) The Company and each of the Subsidiaries have withheld
and paid all Taxes required to be withheld and paid in
connection with amounts paid and owing to any employee,
independent contractor, creditor, stockholder or other third
party (whether domestic or foreign).
(i) Neither the Company nor any of its Subsidiaries has
liability for the Taxes of any Person other than the Company and
its Subsidiaries (i) under Treasury Regulations
Section 1.1502-6
(or any similar provision of state, local or foreign legal
requirement), (ii) as a transferee or successor,
(iii) by contract, or (iv) otherwise.
(j) There are no adjustments under Section 481 of the
Code (or any similar adjustments under any provision of the Code
or the corresponding foreign, state or local Tax laws) that are
required to be taken into account by the Company or any of its
Subsidiaries in any period ending after the Closing Date by
reason of a change in method of accounting in any taxable period
ending on or before the Closing Date.
(k) None of the Company or any Subsidiary has been informed
by any jurisdiction that the jurisdiction believes that the
Company or any Subsidiary was required to file any Tax Return or
pay any tax that was not filed or was not paid.
(l)
Tax
means (i) any tax,
governmental fee or other like assessment or charge (including
withholding on amounts paid to or by any Person), together with
any interest, penalty, addition to tax or additional amount
imposed by any Governmental Authority (a
Taxing
Authority
) responsible for the imposition of any such
tax (domestic or foreign), and any liability for any of the
foregoing as transferee, (ii) in the case of the Company or
any of its Subsidiaries, liability for the payment of any amount
of the type described in clause (i) as a result of being or
having been before the Effective Time a member of an affiliated,
consolidated, combined or unitary group, or a party to any
agreement or arrangement, as a result of which liability of the
Company or any of its Subsidiaries to a Taxing Authority is
determined or taken into account with reference to the
activities of any other Person, and (iii) liability of the
Company or any of its Subsidiaries for the payment of any amount
as a result of being party to any Tax Sharing Agreement or with
respect to the payment of any amount imposed on any person of
the type described in (i) or (ii) as a result of any
existing express or implied agreement or arrangement (including
an indemnification agreement or arrangement).
Tax
Return
means any report, return, document, declaration
or other information or filing required to be supplied to any
Taxing Authority with respect to Taxes, including information
returns, any documents with respect to or accompanying payments
of estimated Taxes, or with respect to or accompanying requests
for the extension of time in which to file any such report,
return, document, declaration or other information.
Tax
Sharing Agreements
means all existing agreements or
arrangements (whether or not written) binding the Company or any
of its Subsidiaries that provide for the allocation,
apportionment, sharing or assignment of any Tax liability or
benefit, or the transfer or assignment of income, revenues,
receipts, or gains for the purpose of determining any
A-17
Persons Tax liability excluding any indemnification
agreement or arrangement pertaining to the sale or lease of
assets or subsidiaries).
Section 4.17
.
Employee
Benefit Plans.
(a) Section 4.17 of the
Company Disclosure Schedule contains a complete and correct list
identifying each employee benefit plan, as defined
in Section 3(3) of ERISA (whether or not such plan is
subject to ERISA), each employment, severance or similar
contract, plan, arrangement or policy and each other plan or
arrangement (written or oral, formal or informal) providing for
compensation, bonuses, profit-sharing, stock option or other
stock related rights or other forms of incentive or deferred
compensation, vacation benefits, insurance (including any
self-insured arrangements), health or medical benefits, employee
assistance program, disability or sick leave benefits,
workers compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life
insurance benefits) which is maintained, administered or
contributed to by the Company or any Affiliate or with respect
to which the Company or any of its Subsidiaries has or may in
the future have any liability (collectively, the Employee
Plans). Except as set forth on Section 4.17 of the
Company Disclosure Schedule, copies of such Employee Plans (and,
if applicable, any related administrative agreements, trust or
funding agreements ,insurance policies, summary plan
descriptions, or summaries of material modifications) and all
amendments thereto and written interpretations thereof have been
furnished to Parent together with the two most recent annual
reports and tax returns (including all applicable schedules)
prepared in connection with any such plan or trust, and all
material correspondence in connection with any Employee Benefit
Plan to or from any Governmental Authority within the past two
years.
(b) Neither the Company nor any subsidiary or other ERISA
Affiliate nor any predecessor thereof sponsors, maintains or
contributes to, or has in the past sponsored, maintained or
contributed to, any Employee Plan that is (i) subject to
Title IV of ERISA, (ii) a defined benefit plan,
(iii) a plan described in Section 413 of the Code,
(iv) a plan subject to the minimum funding standards of
Section 412 of the Code or Section 302 of ERISA, or
(v) a plan maintained in connection with any trust
described in Section 501(c)(9) of the Code.
(c) Except as listed in Section 4.17(c) of the Company
Disclosure Schedule, neither the Company nor any ERISA Affiliate
nor any predecessor thereof contributes to, or has in the past
contributed to, any multiemployer plan, as defined in
Section 3(37) of ERISA (a
Multiemployer
Plan
) or any multiple employer plan.
(d) All Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code (each, a
Qualified Plan
) have received determination,
opinion or advisory letters from the Internal Revenue Service to
the effect that such Employee Benefit Plans are qualified and
the plans and trusts related thereto are exempt from federal
income Taxes under Sections 401(a) and 501(a),
respectively, of the Code, or the sponsor thereof has remaining
a period of time under applicable U.S. Department of the
Treasury regulations or Internal Revenue Service pronouncements
in which to apply for such a letter and to make any amendments
necessary to obtain a favorable determination as to the
qualified status of each such Qualified Plan. No such
determination, opinion or advisory letter has been revoked and,
to the Knowledge of the Company, revocation has not been
threatened, nor has any amendment to an Employee Benefit Plan
has been adopted since the date of such letter covering such
Employee Benefit Plan that would adversely affect such favorable
determination. No Qualified Plan has been amended or operated
since the date of its most recent determination letter or
application therefor in any respect, and no act or omission has
occurred, that would reasonably be expected to adversely affect
its qualification or materially increase its cost. The Company
has made available to Parent copies of the most recent Internal
Revenue Service determination, opinion or advisory letters, as
the case may be, with respect to each Qualified Plan.
(e) Each Employee Plan has been maintained in compliance
with its terms and with the requirements prescribed by any and
all Applicable Laws, including ERISA and the Code. Neither the
Company nor, to the Companys Knowledge, any other Person,
has engaged in any transaction or omission with respect to any
Employee Benefit Plan that could subject the Company to any Tax
or penalty (civil or otherwise) imposed by ERISA, the Code or
other applicable legal requirements.
(f) Except as set forth in Section 4.17(f) of the
Company Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement will not (either
alone or together with any other event) entitle any employee or
independent contractor of the Company or any of its Subsidiaries
to severance, bonus or other pay or accelerate the time of
payment or vesting or trigger any payment or funding (through a
grantor trust or otherwise) of
A-18
compensation or benefits or increase the amount payable or
trigger any other material obligation pursuant to any Employee
Plan. Section 4.17(f) of the Company Disclosure Schedule
sets forth a complete and correct list (i) all the
agreements, arrangements and other instruments which give rise
to an obligation to make or set aside amounts payable to or on
behalf of the officers of the Company and its Subsidiaries as a
result of the transactions contemplated by this Agreement
and/or
any
subsequent employment termination (whether by the Company or the
officer), true and complete copies of which have been previously
provided to Parent and (ii) the maximum aggregate amounts
so payable to each such individual as a result of the
transactions contemplated by this Agreement
and/or
any
subsequent employment termination (whether by the Company or the
officer).
(g) Except as set forth in Section 4.17(g) of the
Company Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement
and/or
subsequent employment termination (whether by the Company or the
officer) whether alone or in connection with any other event,
will not (i) result in a material increase in or accelerate
the vesting of any of the benefits available under any Employee
Benefit Plan, or (ii) result in any payment or series of
payments by the Company to any employee or other Person which
could constitute an excess parachute payment within
the meaning of Section 280G of the Code or that would not
be deductible on the Companys corporate tax return under
Section 162(m) of the Code.
(h) Neither the Company nor any of its Subsidiaries has any
liability in respect of post-retirement health, medical or life
insurance benefits for retired, former or current employees of
the Company or its Subsidiaries except as required to avoid
excise tax under Section 4980B of the Code or similar
non-U.S. law.
(i) There has been no amendment to, written interpretation
or announcement (whether or not written) by the Company or any
of its Affiliates relating to, or change in employee
participation or coverage under, an Employee Plan which would
increase materially the expense of maintaining such Employee
Plan above the level of the expense incurred in respect thereof
for the fiscal year ended March 31, 2007.
(j) Except as listed in Section 4.17(j) of the Company
Disclosure Schedule, neither the Company nor any of its
Subsidiaries is or has in the past been a party to or subject
to, or is currently negotiating in connection with entering
into, any collective bargaining agreement or other contract or
understanding with a labor union or organization.
(k) All contributions and payments accrued under each
Employee Plan, determined in accordance with prior funding and
accrual practices, as adjusted to include proportional accruals
for the period ending as of the date hereof, have been
discharged and paid on or prior to the date hereof except to the
extent reflected as a liability on the Company Balance Sheet.
(l) There is no action, suit, investigation, audit or
proceeding pending against, involving or threatened against any
Employee Plan.
(m) There is no outstanding loan by the Company or any
Subsidiary to any employee or independent contactor.
(n) No work stoppage, slowdown, or labor strike against the
Company is pending or reasonably anticipated, or, to the
Companys Knowledge, threatened with respect to the
employee, (ii) the Company has no Knowledge of any
activities or proceedings of any labor union to organize any
employee, or of other organizational campaigns, petitions or
other unionization activities; (iii) there are no actions,
suits, claims, labor disputes or grievances pending, or, to the
Knowledge of the Company, threatened or reasonably anticipated
relating to any labor, safety or discrimination matters
involving any employee, including charges of unfair labor
practices or discrimination complaints; and (vi) Company is
currently in compliance with all Applicable Laws relating to the
employment of labor, including those related to wages, hours,
collective bargaining and the payment and withholding of taxes
and other sums as required by the appropriate Governmental
Authority.
(o) Each Employee Benefit Plan that is a nonqualified
deferred compensation plan (as defined for purposes of
Section 409A(d)(1) of the Code) (1) has been operated
since January 1, 2005 in good faith compliance with
Section 409A of the Code and all applicable IRS guidance
promulgated thereunder to the extent such plan is subject to
Section 409A of the Code, and (2) as to any such plan
in existence prior to January 1, 2005 and not subject to
Section 409A of the Code, has not been materially
modified (within the meaning of IRS Notice
2005-1)
at
any
A-19
time after October 3, 2004. No Company Stock Option
(whether currently outstanding or previously exercised) is, has
been or would be, as applicable, subject to any tax, penalty or
interest under Section 409A of the Code.
(p) Except as set forth on Section 4.17(p) of the
Company Disclosure Schedule, no Employee Benefit Plan is
maintained outside the jurisdiction of the United States, or
covers any employee residing or working outside the United
States (any such Benefit Plan, a
Foreign Benefit
Plan
). With respect to any Foreign Benefit Plans,
(A) all Foreign Benefit Plans have been established,
maintained and administered in compliance in all material
respects with their terms and all Applicable Laws of any
controlling Governmental Authority, (B) all Foreign Benefit
Plans that are required to be funded are fully funded, and with
respect to all other Foreign Benefit Plans, adequate reserves
therefor have been established on the applicable closing
financial statements, and (C) no material liability or
obligation of the Company or its Subsidiaries exists with
respect to such Foreign Benefit Plans that has not been
disclosed on Section 4.17(p) of the Company Disclosure
Schedule.
Section 4.18
.
Environmental
Matters.
(a) Except for matters that are
disclosed in Section 4.18 of the Company Disclosure
Schedule, and have been disclosed in the Companys SEC
Reports:
(i) no notice, notification, demand, request for
information, citation, summons or order has been received, no
complaint has been filed, no penalty has been assessed, and no
investigation, action, claim, suit, proceeding or review (or any
basis therefor) is pending or, to the Knowledge of the Company,
is threatened by any Governmental Authority or other Person
relating to the Company or any Subsidiary and relating to or
arising out of any Environmental Law, other than any of the
foregoing that would not have or be reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect;
(ii) the Company and its Subsidiaries are and have been in
material compliance with all Environmental Laws and all
Environmental Permits, and the Company and its Subsidiaries
possess all material Environmental Permits required under
applicable Environmental Laws for the conduct of their business,
is in compliance in all material respects with the terms and
conditions thereof and has timely applied for any renewal of the
same.
(iii) there are no material liabilities or obligations of
the Company or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable
or otherwise arising under or relating to any Environmental Law
or any Hazardous Substance and any release thereof, and there is
no condition, situation or set of circumstances that could
reasonably be expected to result in or be the basis for any
material liability or obligation.
(b) Except for what is listed in Section 4.18 of the
Company Disclosure Schedule, there has been no environmental
investigation, study, audit, test, review or other analysis
conducted of which the Company has knowledge in relation to the
current or prior business of the Company or any of its
Subsidiaries or any property or facility now or previously owned
or leased by the Company or any of its Subsidiaries that has not
been delivered to Parent at least five Business Days prior to
the date hereof.
(c) Neither the Company nor any of its Subsidiaries owns,
leases or operates or has owned, leased or operated any real
property, or conducts or has conducted any operations, in New
Jersey or Connecticut.
(d) Section 4.18 of the Company Disclosure Letter sets
forth a complete list of Environmental Permits required under
applicable Environmental Laws for the conduct of business by the
Company and its Subsidiaries.
(e) For purposes of this Section 4.18, the terms
Company
and
Subsidiaries
shall include any entity that is, in whole or in part, a
predecessor of the Company or any of its Subsidiaries.
(f) Notwithstanding anything else in this Agreement to the
contrary, this Section 4.18 contains the sole and exclusive
representations and warranties of the Company with respect to
any environmental health and safety matters, including without
limitation any matters arising under any Environmental Laws.
Section 4.19
.
Material
Contracts.
(a) Section 19 of the
Company Disclosure Schedule contains a complete and correct list
as of the date of this Agreement of each of the following
Contracts to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is
legally bound:
(i) each Contract between the Company or any of its
Subsidiaries and any of the 20 largest customers of the Company
and any of its Subsidiaries (determined on the basis of
aggregate revenues received by the
A-20
Company or any of its Subsidiaries over the four consecutive
fiscal quarter period ended June 29, 2007) (each such
customer, a
Major Customer
);
(ii) each Contract between the Company or any of its
Subsidiaries and any of the 30 largest licensors or other
suppliers to the Company and any of its Subsidiaries (determined
on the basis of aggregate amounts paid by the Company or any of
its Subsidiaries over the four consecutive fiscal quarter period
ended June 29, 2007) (each such licensor or other supplier,
a Major Supplier);
(iii) each Contract that contains any provisions
restricting the Company or any of its Affiliates or any
successor thereto (or that could, after the Effective Time,
limit or restrict in any material respect the Company, any of
its Subsidiaries, the Surviving Corporation, Parent or any of
their respective Affiliates) from competing in any line of
business or with any Person or in any area or engaging in any
activity or business (including with respect to the development,
manufacture, marketing or distribution of their respective
products or services), or pursuant to which any benefit or right
is required to be given or lost as a result of so competing or
engaging, or which would have any such effect after the Closing
Date;
(iv) each Contract that (A) grants any exclusive
license or supply or distribution agreement or other exclusive
rights or (B) contains any provision that requires the
purchase of all or a given portion of the requirements of the
Company or any of its Subsidiaries from a given third party, or
any other similar provision;
(v) each Contract pursuant to which the Company or any of
its Subsidiaries grants most favored nation or
similar pricing or terms;
(vi) each Contract pursuant to which the Company or any of
its Subsidiaries has been granted or granted any license to
Intellectual Property Rights, other than nonexclusive licenses
granted by the Company or any of its Subsidiaries to any
customer in the ordinary course of business of the Company and
its Subsidiaries consistent with past practice;
(vii) each lease or sublease of real property and each
lease or sublease of personal property, in each case to which
the Company or any of its Subsidiaries is party as either lessor
or lessee;
(viii) each Contract relating to Indebtedness;
(ix) each Contract to which the Company or any of its
Subsidiaries is party creating or granting a Lien (including
Liens upon properties acquired under conditional sales, capital
leases or other title retention or security devices);
(x) each Contract under which the Company or any of its
Subsidiaries has, directly or indirectly, made any loan, capital
contribution to, or other investment in, any Person (other than
the Company or any of its Subsidiaries and other than extensions
of credit in the ordinary course of business consistent with
past practice);
(xi) each Contract under which the Company or any of its
Subsidiaries has any material obligations that have not been
satisfied or performed relating to the acquisition or
disposition of all or any portion of the business of the Company
(whether by merger, sale of stock, sale of assets or otherwise);
(xii) each Contract under which the Company or any of its
Subsidiaries has acquired or disposed of any portion of any
business (whether by merger, sale of stock, sale or assets or
otherwise) since January 1, 2004;
(xiii) each partnership, joint venture or other similar
Contract or arrangement;
(xiv) each employee collective bargaining agreement or
other Contract with any labor union and each employment Contract
(other than for employment at-will or similar arrangements) that
is not terminable by the Company without notice and without cost
to the Company;
(xv) each Contract relating to the settlement or other
resolution of any suit, claim, action, investigation or other
Proceeding entered into since January 1, 2003;
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(xvi) except for the Contracts disclosed above, each
Contract that has aggregate future sums due to or from the
Company and its Subsidiaries, taken as a whole, for the
12-month
period ending on June 30, 2008, in excess of $500,000;
(xvii) except for the Contracts disclosed above, each
Contract required to be filed by the Company pursuant to
Item 601(b)(10) of
Regulation S-K
under the 1933 Act, or that is otherwise material to
Company and its Subsidiaries, taken as a whole, and not entered
into in the ordinary course of business consistent with past
practice.
(b) Each Contract disclosed in Section 4.19 of the
Company Disclosure Schedule, required to be disclosed pursuant
to this Section 4.19 or which would have been required to
be so disclosed pursuant to this Section 4.19 if it had
existed on the date of this Agreement (each, a
Material
Contract
) is in full force and effect and is a legal,
valid and binding agreement of the Company or a Subsidiary, as
the case may be, and, to the Knowledge of the Company of each
other party thereto, enforceable against the Company or such
Subsidiary, as the case may be, and, to the Knowledge of the
Company against the other party or parties thereto, in each
case, in accordance with its terms except as such enforceability
may be limited by bankruptcy, insolvency, moratorium and other
similar Applicable Law affecting creditors rights
generally and by general principles of equity. No notice to
terminate, in whole or part, any of the same has been served
(nor, to the Knowledge of the Company, has there been any
indication that any such notice of termination will be served),
none of the Company, any of its Subsidiaries or, to the
Knowledge of the Company any other party thereto, is in default
or breach in any material respect under the terms of any
Material Contract, and, to the Knowledge of the Company, no
event or circumstance has occurred that, with notice or lapse of
time or both, would constitute any event of default thereunder.
To the Knowledge of the Company, there are no circumstances that
are reasonably likely to occur that are reasonably likely to
adversely affect the ability of the Company or any of its
Subsidiaries to perform its material obligations under any
Material Contract.
(c) Since June 29, 2007, none of the Major Customers
or Major Suppliers has terminated, failed to renew or requested
any material amendment to any of its Contracts or any of its
existing relationships with the Company or any of its
Subsidiaries.
(d) Except as set forth on Section 4.19 of the Company
Disclosure Schedule, the Company has delivered to Parent
complete and correct copies of each Material Contract in
existence as of the date of this Agreement, as amended and
supplemented.
Section 4.20
.
Insurance
Policies.
The Company and the Subsidiaries have
obtained and maintained in full force and effect insurance in
such amounts, on such terms and covering such risks as are
customary for the business of the Company and its Subsidiaries.
Section 4.20 of the Company Disclosure Schedule contains a
description of the policies of insurance of the Company
presently in force, specifying with respect to each such policy,
the name of the insurer, type of coverage, term of policy,
deductible amount, limits of liability and annual premium (and,
if the owner of such policy is not the Company, the name of the
owner of such policy). All such policies are valid, outstanding
and enforceable, all premiums due and payable thereon have been
paid and neither the Company nor any Subsidiary has agreed to
modify or cancel any of such insurance policies nor has the
Company received any notice of any actual or threatened
modification or cancellation of such insurance other than in the
ordinary course of business and consistent with past practice or
such as is normal and customary in the Companys industry
(and, in the case of cancellation, such policy has been replaced
on substantially similar terms prior to the date of such
cancellation). There is no material claim pending under any such
material policies as to which coverage has been questioned,
denied or disputed.
Section 4.21
.
Intellectual
Property.
(a) The Company and its
Subsidiaries own or otherwise hold the right to use all material
Intellectual Property Rights necessary for the conduct of the
business of the Company and its Subsidiaries as currently
conducted or as currently proposed to be conducted by the
Company or any of its Subsidiaries (the Necessary IP
Rights). The consummation of the transactions contemplated
by this Agreement will not alter, restrict, encumber, impair or
extinguish any Necessary IP Rights.
(b) Except as listed in Section 4.21(b) of the Company
Disclosure Schedule, there are no Proceedings pending or
threatened in writing, or to the Knowledge of the Company,
orally (i) alleging infringement, misappropriation or any
other violation of any Intellectual Property Rights of any
Person by the Company or any of its Subsidiaries or
A-22
any of their respective products or services, or
(ii) challenging the scope, ownership, validity, or
enforceability of the Company-Owned IP or of the Company and its
Subsidiaries rights under the Company IP. None of the
Company or any of its Subsidiaries has infringed,
misappropriated or otherwise violated any Intellectual Property
Rights of any Person.
(c) (i) The Company and its Subsidiaries hold all
right, title and interest in and to the Company-Owned IP, free
and clear of any Liens and (ii) there are no restrictions
on the disclosure, use, license or transfer of the Company-Owned
IP or material Company IP.
(d) Section 4.21(d) of the Company Disclosure Schedule
contains a complete and correct list of all Registered IP. The
Company and its Subsidiaries have taken all actions necessary to
maintain and protect the Registered IP, including payment of
applicable maintenance fees, filing of applicable statements of
use, timely response to office actions and disclosure of any
required information, and all assignments (and licenses where
required) of the Registered IP have been duly recorded with the
appropriate Governmental Authorities. The Company and each of
its Subsidiaries have complied with all applicable notice and
marking requirements for the Registered IP. None of the
Registered IP has been adjudged invalid or unenforceable in
whole or part and, to the Knowledge of the Company, all
Registered IP is valid and enforceable. There are no actions
that are required to be taken by the Company or any of its
Subsidiaries prior to February 1, 2008 with respect to the
Registered IP.
(e) Section 4.21(e) of the Company Disclosure Schedule
contains (A) a complete and correct list of all licenses
and other Contracts pursuant to which the Company or any
Subsidiary is granted rights in any third-party Intellectual
Property (x) embedded or incorporated into or distributed
with any of the Companys products, (y) used by the
Company or any of its Subsidiaries in the development or support
of any of the Companys products or (z) used or held
for use by the Company for any other purpose (excluding, for
purposes of clause (z) only, any non-material generally
available, off-the-shelf software programs licensed by the
Company on standard non-negotiated terms) and (B) a summary
of the Companys and its Subsidiaries remaining
payment and accounting obligations, if any, with respect to each
of the Contracts listed thereon, excluding non-material
agreements for generally available, off-the-shelf software
programs licensed by the Company on standard non-negotiated
terms. The Company has delivered to Parent copies of all
licenses, sublicenses and other agreements identified above. The
Company and its Subsidiaries are not in material breach or
default under any such agreement nor has the Company or any of
its Subsidiaries received in writing any claim or notice of
default under any such agreement. No person other than the
Company or its Subsidiaries possesses any current or contingent
rights (arising from the use of Public Software or otherwise) to
receive, use or otherwise exploit any source code that is part
of the Company Owned IP.
(f) No software covered by or embodying any Company-Owned
IP has been or is being distributed, directly or indirectly, by
or on behalf of the Company or any of its Subsidiaries, in whole
or in part, or was used, or is being used in conjunction with
any Public Software by or on behalf of the Company or any of its
Subsidiaries in a manner which would require that such software
be disclosed or distributed in source code form or made
available at no charge.
(g) The Company and its Subsidiaries have taken all
reasonable steps to protect their rights in the Company-Owned IP
and to protect any confidential information provided to them by
any other Person under obligation of confidentiality. Without
limitation of the foregoing, the Company and its Subsidiaries
have not made any of their material trade secrets or other
confidential or proprietary information available to any other
Person except pursuant to written agreements requiring such
Person to maintain the confidentiality of such information or
materials. The Company and its Subsidiaries have and enforce a
policy requiring each employee and consultant of the Company or
any of its Subsidiaries to execute a proprietary rights and
confidentiality agreement substantially in the form provided to
Parent, and all current and former employees and consultants of
the Company and its Subsidiaries with access to confidential
information of the Company or its Subsidiary have executed such
an agreement.
(h) The Company and its Subsidiaries have obtained from all
parties (including current or former directors, officers or
employees) who have created any portion of, or otherwise who
would have any rights in or to, any Company-Owned IP or who
developed any Intellectual Property Rights for the Company or
its Subsidiaries, valid and enforceable written assignments of
any such rights to the Company and its Subsidiaries and has
thereby obtained ownership of, and is the exclusive owner of all
such independent contractors or third partys rights
in such Company-Owned IP or Intellectual Property Rights. The
Company has provided true and complete copies of such
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assignments to Parent. Neither the Company nor any of its
Subsidiaries is obligated to provide any consideration (whether
financial or otherwise) to any third party with respect to any
exercise of rights by the Company or any of its Subsidiaries, or
any successor to the Company or any of its Subsidiaries, in any
Company IP.
(i) Neither the Company nor any of its Subsidiaries has
transferred ownership of, or granted any exclusive license with
respect to, any Company IP to any other Person. Other than
pursuant to non-exclusive licenses granted in the ordinary
course of business to customers and distributors with respect to
the Companys products as listed in Section 4.21(i) of
the Company Disclosure Schedule, no third party holds any
license or right to use the Company IP. The Company has
delivered to Parent copies of all licenses and agreements
identified above.
(j) No funding, facilities or personnel of any Governmental
Authority were used, directly or indirectly, to develop or
create, in whole or in part, any Company-Owned IP. Neither the
Company nor any Subsidiary is or has ever been a member or
promoter of, or a contributor to, any industry standards body or
similar organization that could compel the Company or such
Subsidiary to grant or offer to any other Person any license or
right to any Company-Owned IP.
(k) Neither the Company nor any of its Subsidiaries has
brought any actions or lawsuits alleging (i) infringement
of any of the Company-Owned IP or (ii) breach of any
license, sublicense or other agreement authorizing another party
to use the Company IP, and, to the Companys Knowledge, as
of the date hereof, there is no infringement of any
Company-Owned IP or material breach of any license, sublicense
or other agreement authorizing another party to use the Company
IP. Neither the Company nor any of its Subsidiaries has entered
into any agreement granting any third party the right to bring
infringement actions with respect to, or otherwise to enforce
rights with respect to, any of the Company-Owned IP.
(l) Immediately following the Effective Time, the Surviving
Corporation will be permitted to exercise all of the rights of
the Company or any of its Subsidiaries under their respective
contracts, licenses and agreements to the same extent as the
Company or any of its Subsidiaries would have been able to had
the transactions contemplated by this Agreement not occurred and
without the payment of any additional amounts or consideration
other than ongoing fees, royalties or payments which the Company
or its Subsidiaries would otherwise be required to pay, except
as a result of any agreements, contracts, licenses and
agreements that Parent or the Merger Sub is subject to prior to
the consummation of the transactions contemplated by this
Agreement. Neither this Agreement nor the transactions
contemplated hereby, will directly result in (i) Parent or
Surviving Corporation granting to any third party any right to,
or with respect to, any material Intellectual Property Right
owned by, or licensed to, either of them, (ii) Parent or
Surviving Corporation being bound by, or subject to, any
non-compete or other material restriction on the operation or
scope of its business, or (iii) Parent or Surviving
Corporation being obligated to pay any royalties or other
material amounts to any third party in excess of those payable
by Company or its Subsidiaries prior to the Effective Time,
except as a result of any contracts, licenses and agreements
that Parent or the Merger Sub is subject to prior to the
consummation of the transactions contemplated by this Agreement.
Section 4.22
.
Products.
The
Company has provided to Parent complete and correct current
lists of each of the products produced or sold by the Company or
any of its Subsidiaries in the form of Distributor Price Lists
for each applicable geographic region. Each of such products is
(i) in compliance in all material respects with Applicable
Law and (ii) fit for the ordinary purposes for which it is
intended to be used and conforms in all material respects to any
promises or affirmations of fact made on the documentation,
container or label for such product or in connection with its
sale. There is no design defect with respect to any of such
products and each of such products contains adequate warnings,
presented in a reasonably prominent manner, in accordance with
Applicable Law and current industry practice with respect to its
contents and use.
Section 4.23
.
Properties.
(a) The
Company and each of its Subsidiaries has good and marketable
title to, or in the case of leased property and leased tangible
assets, valid leasehold interests in, all of its material
properties and material tangible assets. All such assets and
properties, other than assets and properties in which the
Company or any of its Subsidiaries has leasehold interests, are
free and clear of all Liens.
(b) Section 4.23(b) of the Company Disclosure Schedule
sets forth a complete and correct list of all real or immovable
property and interests in real or immovable property owned by
the Company or any of its Subsidiaries (each, an
Owned
Real Property
).
A-24
(c) There are no developments affecting any Owned Real
Property pending or, to the Knowledge of the Company threatened,
which might materially detract from the value, materially
interfere with any present or intended use or materially
adversely affect the marketability of any such property or
assets.
(d) To the Knowledge of the Company, each Owned Real
Property has no material defects, is in good operating condition
and repair and has been reasonably maintained consistent with
standards generally followed in the industry (giving due account
to the age and length of use of same, ordinary wear and tear
excepted), is adequate and suitable for their present uses and,
in the case of plants, buildings and other structures (including
the roofs thereof), are structurally sound.
(e) Each Owned Real Property currently has access to
(i) public roads or valid easements over private streets or
private property for such ingress to and egress from all such
plants, buildings and structures and (ii) water supply,
storm and sanitary sewer facilities, telephone, gas and
electrical connections, fire protection, drainage and other
public utilities, in each case as is necessary for the conduct
of the business of the Company or any Subsidiary as heretofore
conducted. To the Knowledge of the Company, none of the
structures on any Owned Real Property encroaches upon real
property of another Person, and no structure of any other Person
substantially encroaches upon any such Owned Real Property.
(f) Each Owned Real Property, and its continued use,
occupancy and operation as currently used, occupied and
operated, does not constitute a nonconforming use under all
applicable building, zoning, subdivision and other land use and
similar Applicable Law.
(g) Section 4.23(g) of the Company Disclosure Schedule
sets forth a complete and correct list of all real or immovable
property and interests in real or immovable property leased by
the Company or any of its Subsidiaries (each, a
Leased
Real Property
).
(h) With respect to each Leased Real Property, neither the
Company nor any of its Subsidiaries has subleased, licensed or
otherwise granted anyone the right to use or occupy such Leased
Real Property or any portion thereof. The Company and each of
its Subsidiaries enjoy peaceful and undisturbed possession of
the Leased Real Property.
(i) The Owned Real Properties and Leased Real Properties
constitute all of the real property used or held for use in
connection with the businesses of the Company or any Subsidiary
and are adequate to conduct such businesses as currently
conducted.
Section 4.24
.
Certain
Business Practices.
Except as would not,
individually or in the aggregate, reasonably be expected to be
material to the Company and its Subsidiaries, taken as a whole,
neither the Company nor any of its Subsidiaries nor (to the
Knowledge of the Company) any director, officer, agent or
employee of the Company or any of its Subsidiaries (i) used
any funds for unlawful contributions, gifts, entertainment or
other expenses relating to political activity or for the
business of the Company or any of its Subsidiaries or
(ii) made any bribe or kickback, illegal political
contribution, payment from corporate funds which was incorrectly
recorded on the books and records of the Company or any of its
Subsidiaries, unlawful payment from corporate funds to foreign
or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any
provision of the Foreign Corrupt Practices Act of 1977, or
(iii) made any other unlawful payment.
Section 4.25
.
Interested
Party Transactions.
Neither the Company nor any
of its Subsidiaries is a party to any transaction or agreement
with any Affiliate, shareholder that beneficially owns 5% or
more of the Companys outstanding common stock, or director
or executive officer of the Company. No event has occurred since
the date of the Companys last proxy statement for its
annual meeting of stockholders that would be required to be
reported by the Company pursuant to Item 404 of
Regulation S-K
promulgated by the SEC.
Section 4.26
.
Antitakeover
Statutes and Rights Agreement.
(a) The
Company has taken all action necessary to exempt the Merger,
this Agreement, the Voting Agreements and the transactions
contemplated hereby from Section 203 of Delaware Law, and,
accordingly, neither such Section nor any other antitakeover or
similar statute or regulation applies or purports to apply to
any such transactions. No other control share
acquisition, fair price,
moratorium or other antitakeover laws enacted under
U.S. state or federal laws apply to this Agreement, the
Voting Agreements or any of the transactions contemplated hereby.
A-25
(b) The Company has taken all action necessary (i) to
render the Company Rights inapplicable to the Merger, this
Agreement, the Voting Agreement and the transactions
contemplated hereby and thereby, and (ii) ensure that
(A) neither Parent, Merger Subsidiary nor any of their
Affiliates will become an Acquiring Person (as such
term is defined in the Company Rights Agreement), (B) none
of a
Shares Acquisition Date
, a
Distribution Date
, or a
Triggering
Event
(each as defined in the Company Rights
Agreement) shall occur, and (C) the Company Rights will not
separate from the shares of Company Common Stock, in each case,
by reason of the approval or execution of this Agreement, the
announcement or consummation of the Merger, this Agreement, the
Voting Agreement or the transactions contemplated hereby and
thereby.
Article 5
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY
Subject to such exceptions disclosed in the Parent Disclosure
Schedule (it being expressly understood and agreed that the
disclosure of any fact or item in any Section of the Parent
Disclosure Schedule shall only be deemed to be an exception to
(or, as applicable, a disclosure for purposes of) (i) the
representations and warranties of Parent and Merger Subsidiary
that are contained in the corresponding Section of this
Agreement and (ii) any other representations and warranties
of Parent or Merger Subsidiary that is contained in this
Agreement, but only if the relevance of that reference as an
exception to (or a disclosure for purposes of) such
representations and warranties would be readily apparent to a
reasonable person who has read that reference and such
representations and warranties, without any independent
knowledge on the part of the reader regarding the matter(s) so
disclosed, each of Parent and Merger Subsidiary represents and
warrants to the Company that:
Section 5.01
.
Corporate
Existence and Power.
Each of Parent and Merger
Subsidiary is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of
incorporation and has all corporate powers and all Permits
required to carry on its business as now conducted, except for
those Permits the absence of which would not have, individually
or in the aggregate, a Parent Material Adverse Effect. Parent
has heretofore delivered to the Company true and complete copies
of the certificate of incorporation and bylaws of Parent and
Merger Subsidiary as currently in effect. Since the date of its
incorporation, Merger Subsidiary has not engaged in any
activities other than in connection with or as contemplated by
this Agreement.
Section 5.02
.
Corporate
Authorization.
(a) The execution, delivery
and performance by Parent and Merger Subsidiary of this
Agreement and the consummation by Parent and Merger Subsidiary
of the transactions contemplated hereby are within the corporate
powers of Parent and Merger Subsidiary and have been duly
authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of each of Parent and
Merger Subsidiary enforceable against them in accordance with
its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent
conveyance or similar laws or by general principles of equity.
Section 5.03
.
Governmental
Authorization.
The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement
and the consummation by Parent and Merger Subsidiary of the
transactions contemplated hereby require no action by or in
respect of, or filing with, any Governmental Authority, other
than (i) the filing of a certificate of merger with respect
to the Merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other
states in which Parent or Merger Subsidiary is qualified to do
business, (ii) compliance with any applicable requirements
of the HSR Act and of laws analogous to the HSR Act existing in
foreign jurisdictions, (iii) compliance with any applicable
requirements of the 1934 Act and any other U.S. state
or federal securities laws and (iv) any actions or filings
the absence of which would not be reasonably expected to have,
individually or in the aggregate, a Parent Material Adverse
Effect.
Section 5.04
.
Non-contravention.
The
execution, delivery and performance by Parent and Merger
Subsidiary of this Agreement and the consummation by Parent and
Merger Subsidiary of the transactions contemplated hereby do not
and will not require any consent or other action by any Person
under, contravene, conflict with, violate, breach or constitute
a default under, or an event that, with or without notice or
lapse of time or both, could become a violation, breach or
default under, or cause or permit the termination, cancellation,
acceleration or other change of any right or obligation or the
loss of any benefit to which Parent or any of its Subsidiaries
is entitled under
A-26
any provision of (a) the certificate of incorporation or
bylaws of Parent or Merger Subsidiary, (b) assuming
compliance with the matters referred to in Section 5.03,
any provisions of any Applicable Law, or (c) any agreement
or other instrument binding upon Parent or any of its
Subsidiaries or any Permit affecting, or relating in any way to,
the assets or business of the Parent and its Subsidiaries or,
except in the case each of clauses (b) and (c), as would
not be reasonably expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
Section 5.05
.
Absence
Of Litigation.
As of the date of this Agreement,
there is no Action pending or, to the Knowledge of Parent,
threatened, against Parent or any of its Affiliates before any
Governmental Authority that would or seeks to materially delay
or prevent the consummation of the Merger. As of the date of
this Agreement, neither Parent nor any of its Affiliates is
subject to any continuing Order of, consent decree, settlement
agreement or other similar written agreement with, or, to the
Knowledge of Parent, continuing investigation by, any
Governmental Authority, or any Order that would or seeks to
materially delay or prevent the consummation of the Merger.
Section 5.06
.
Financing.
Parent
has provided to the Company true, accurate and complete copies
of (a) fully executed equity commitment letter, dated as of
the date of this Agreement, pursuant to which the Guarantor has
committed to provide or cause to be provided the cash amounts
set forth therein to provide equity financing to Parent
and/or
Merger Subsidiary (the Equity Commitment Letter),
and (b) a fully executed debt commitment letter, dated as
of the date of this Agreement (the Debt Commitment
Letter and together with the Equity Commitment Letter, the
Financing Commitments) pursuant to which, and
subject to the terms and conditions thereof, the lenders party
thereto have committed to provide Merger Subsidiary with loans
in the amounts described therein, the proceeds of which are to
be used to consummate the Merger and the other transactions
contemplated hereby and pay related fees and expenses (the
Debt Financing and together with the equity
financing pursuant to the Equity Commitment Letter, the
Financing). Each of the Financing Commitments, in
the form so delivered, is a legal, valid and binding obligation
of Parent
and/or
Merger Subsidiary, as applicable, and, to Parents
Knowledge, the other parties thereto. As of this date of this
Agreement, the Financing Commitments are in full force and
effect and have not been withdrawn, rescinded or terminated or
otherwise amended or modified in any respect. As of the date
hereof, neither Parent nor Merger Subsidiary is in default or
breach under the terms of the Financing Commitments and, to the
Knowledge of Parent, no event or circumstance has occurred that,
with notice or lapse of time or both, would constitute any
default or breach of the terms of the Financing Commitments.
Parent
and/or
Merger Subsidiary has fully paid any and all commitment fees or
other fees required by the Financing Commitments to be paid on
or before the date of this Agreement. Subject to its terms and
conditions, the Financing, when funded in accordance with the
Financing Commitments and together with the Company Cash
Deposit, will provide Parent and Merger Subsidiary with
acquisition financing at the Effective Time sufficient to
consummate the Merger upon the terms contemplated by this
Agreement. There are no side letters or other agreements or
arrangements relating to the Financing to which Parent, Merger
Subsidiary or any of their Affiliates are a party containing
additional conditions precedent to the Financing.
Section 5.07
.
Limited
Guarantee.
Concurrently with the execution of
this Agreement, Parent has caused the Guarantor to deliver to
the Company the executed Limited Guarantee. The Limited
Guarantee is valid and in full force and effect and constitutes
the valid and binding obligation of the Guarantor, enforceable
in accordance with its terms.
Section 5.08
.
Disclosure
Documents.
None of the information provided by
Parent for inclusion in the Company Proxy Statement or any
amendment or supplement thereto, at the time the Company Proxy
Statement or any amendment or supplement thereto is first mailed
to stockholders of the Company and at the time the stockholders
vote on adoption of this Agreement and at the Effective Time,
will contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under
which they were made, not misleading.
Section 5.09
.
Antitakeover
Statutes.
Neither Parent nor Merger Subsidiary is
an interested stockholder in the Company, as such
term is defined in Section 203 of the DGCL.
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Article 6
COVENANTS OF
THE COMPANY
The Company agrees that:
Section 6.01
.
Conduct
of the Company.
From the date hereof until the
Effective Time, the Company shall, and shall cause each of its
Subsidiaries to, conduct its business in the ordinary course
consistent with past practice and, to the extent consistent
therewith, (i) preserve intact its present business
organization, (ii) maintain in effect all of its foreign,
federal, state and local Permits, (iii) keep available the
services of its directors, officers and key employees,
(iv) maintain satisfactory relationships with its
customers, lenders, suppliers and others having material
business relationships, and (v) manage cash and working
capital in the ordinary course of business consistent with past
practices. Without limiting the generality of the foregoing,
except as expressly contemplated by this Agreement or as set
forth in Section 6.01 of the Company Disclosure Schedule
(with specific reference to the subsection of Section 6.01
to which the disclosure relates), the Company shall not, nor
shall it permit any of its Subsidiaries to do any of the
following without the prior written consent of Parent:
(a) amend its certificate of incorporation, bylaws or other
similar organizational documents (whether by merger,
consolidation or otherwise) or form any Subsidiary;
(b) split, combine or reclassify any shares of capital
stock of the Company or any of its Subsidiaries or declare, set
aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect
of the capital stock of the Company or its Subsidiaries, or
redeem, repurchase or otherwise acquire or offer to redeem,
repurchase, or otherwise acquire any Company Securities or any
Company Subsidiary Securities;
(c) (i) issue, deliver or sell, or authorize the
issuance, delivery or sale of, any shares of any Company
Securities or Company Subsidiary Securities, other than the
issuance of (A) any shares of the Company Stock upon the
exercise of Company Stock Options in the ordinary course of
business consistent with past practice that are outstanding on
the date of this Agreement in accordance with the terms of those
options on the date of this Agreement and (B) any Company
Subsidiary Securities to the Company or any other Subsidiary in
the ordinary course of business consistent with past practice or
(ii) amend any term of any Company Security or any Company
Subsidiary Security (in each case, whether by merger,
consolidation or otherwise);
(d) incur any capital expenditures or any obligations or
liabilities in respect thereof, in the aggregate greater than
$500,000;
(e) acquire (by merger, consolidation, acquisition of stock
or assets or otherwise), directly or indirectly, (i) any
business or Person or division thereof, or (ii) any
material amount of assets other than in the ordinary course of
business consistent with past practice;
(f) sell, lease, license, sell and lease-back, mortgage or
otherwise transfer or grant rights in, or create or incur any
Lien on, any of the Companys or its Subsidiaries
assets, Company-Owned IP, securities, properties, interests or
businesses, other than sales of inventory in the ordinary course
of business consistent with past practice;
(g) other than in connection with actions permitted by
Section 6.01(d) or Section 6.01(e), make any loans,
advances or capital contributions to, or investments in, any
other Person, other than the Company or any of its Subsidiaries
in the ordinary course of business consistent with past practice;
(h) create, incur, assume, suffer to exist or otherwise be
liable with respect to any Indebtedness, or take any action that
would result in any amendment, modification or change of any
term of any Indebtedness of the Company or any of its
Subsidiaries;
(i) (i) enter into, amend or modify in any material
respect or terminate any Material Contract, (ii) waive,
release or assign any material rights, claims or benefits of the
Company or any of its Subsidiaries, or (iii) waive any
material benefits of, or agree to modify in any adverse respect,
or fail to enforce, or consent to any matter with respect to
which its consent is required under, any confidentiality,
standstill or similar Contract;
A-28
(j) (i) grant or increase any severance or termination
pay to (or amend any existing arrangement with) any director,
officer or employee of the Company or any of its Subsidiaries,
other than that undertaken in the normal course of business
consistent with past practices, (ii) increase benefits
payable under any existing severance or termination pay policies
or employment agreements, (iii) enter into any employment,
deferred compensation or other similar agreement (or amend any
such existing agreement) with any current director, officer or
employee of the Company or any of its Subsidiaries, other than
that undertaken in the normal course of business consistent with
past practices, (iv) establish, adopt or amend (except as
required by Applicable Law) any collective bargaining, bonus,
profit-sharing, thrift, pension, retirement, deferred
compensation, compensation, stock option, restricted stock or
other benefit plan or arrangement covering any director, officer
or employee of the Company or any of its Subsidiaries or
(v) increase compensation, bonus or other benefits payable
to any director, officer or employee of the Company or any of
its Subsidiaries other than employee raises undertaken in the
normal course of business consistent with past practices;
(k) write down any of its material assets or change the
Companys methods of accounting, except (i) as
required by concurrent changes in GAAP (as interpreted by the
Companys independent public accountants) or Applicable
Law, (ii) as required by a Governmental Authority or
quasi-Governmental Authority (including the Financial Accounting
Standards Board (
FASB
) or any similar
organization) or (iii) as disclosed in the Company SEC
Documents filed prior to the date hereof;
(l) settle, or offer or propose to settle, (i) any
Proceeding or other claim involving or against the Company or
any of its Subsidiaries (other than the settlement of immaterial
claims in the ordinary course of business consistent with past
practice which does not include any obligation to be performed
by the Company or any of its Subsidiaries (other than the
payment of money) after the Effective Time or the settlement of
claims reserved against on the Company Balance Sheet),
(ii) any stockholder litigation or dispute against the
Company or any of its officers or directors or (iii) any
Proceeding or dispute that relates to the transactions
contemplated hereby;
(m) make or change any Tax election (other than in the
ordinary course of business), change any annual tax accounting
period, adopt or change any method of tax accounting (other than
in the ordinary course of business), amend any Tax Returns or
file claims for Tax refunds, enter into any closing agreement or
other agreement with a Taxing Authority, settle any Tax claim,
audit or assessment, surrender any right to claim a Tax refund,
offset or other reduction in Tax liability, or consent to any
extension or waiver of the limitations period applicable to any
Tax claim or assessment;
(n) enter into any Contract containing any change of
control or similar provision requiring consent or granting
a termination right or acceleration of any rights in connection
with transactions similar to the Merger and the transactions
contemplated by this Agreement (unless such restriction
expressly excludes the Merger and the transactions contemplated
by this Agreement from such provision);
(o) (i) take any action that would reasonably be
likely to prevent or materially delay, or omit to take any
action necessary to cause, satisfaction of the conditions
contained in Sections 9.01 or 9.02 or the consummation of
the Merger, or (ii) take any action that would result in a
Company Material Adverse Effect;
(p) change cash or working capital management, including,
without limitation, accelerate the collection of receivables or
defer the payment of current liabilities; or
(q) agree, resolve or commit to do any of the foregoing.
Section 6.02
.
Stockholder
Meeting; Proxy Material.
(a) The Company shall, as promptly as practicable following
the date hereof, establish a record date for, duly call, give
notice of, convene and hold a meeting of its stockholders (the
Company Stockholder Meeting
) for the purpose
of obtaining the Company Stockholder Approval; provided that the
Company may delay the Company Stockholder Meeting to the extent
(and only to the extent) the Company reasonably determines that
such delay is (i) necessary to secure a quorum, or
(ii) required by Applicable Law to comply with any comments
made by the SEC with respect to the Proxy Statement or
otherwise. The notice of such Company Stockholder Meeting shall
state that a resolution to adopt this Agreement will be
considered at the Company Stockholder Meeting. Subject to
Section 6.03(b), the Board of Directors of the Company
shall recommend to holders of the Company Stock that
A-29
they adopt this Agreement, and shall include such recommendation
in the Company Proxy Statement. The Company shall use its
commercially reasonable efforts to satisfy the closing condition
set forth in Section 9.01(a) and otherwise comply with all
legal requirements applicable to the Company Stockholder Meeting.
(b) The Company shall, as promptly as practicable following
the date of this Agreement, prepare and file with the SEC the
Company Proxy Statement. The Company shall use its commercially
reasonable efforts to cause the definitive Company Proxy
Statement to be cleared by the SEC, mailed to the Companys
stockholders as promptly as practicable after such filing. Each
of the Company and Parent shall furnish all information
concerning such person to the other as may be reasonably
requested in connection with the preparation, filing and
distribution of the Company Proxy Statement. The Company shall
promptly notify Parent upon the receipt of any comments from the
SEC or any request from the SEC for amendments or supplements to
the Company Proxy Statement and shall provide Parent with copies
of all correspondence between it and its representatives, on the
one hand, and the SEC, on the other hand. Each of the Company
and Parent shall use commercially reasonable efforts to respond
as promptly as practicable to any comments of the SEC with
respect to the Company Proxy Statement. Notwithstanding the
foregoing, prior to filing or mailing the Company Proxy
Statement (or any amendment or supplement thereto) or responding
to any comments of the SEC with respect thereto, the Company
(i) shall provide Parent a reasonable opportunity to review
and comment on such document or response (including the proposed
final version of such document or response), (ii) shall
include in such document or response all comments reasonably
proposed by Parent, and (iii) shall provide Parent and its
counsel a reasonable opportunity to participate in any
discussions or meetings with the SEC. If, at any time prior to
the Stockholders Meeting, any information relating to the
Company, Parent or any of their respective affiliates, officers
or directors should be discovered by the Company or Parent which
should be set forth in an amendment or supplement to the Company
Proxy Statement, so that the Company Proxy Statement does not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading, the
party that discovers such information shall promptly notify the
other parties hereto, and an appropriate amendment or supplement
describing such information shall be filed with the SEC and, to
the extent required by Applicable Law, disseminated to the
stockholders of the Company.
Section 6.03
.
No
Solicitation; Other Offers.
(a)
General
Prohibitions
. Subject to Section 6.03(b), neither the
Company nor any of its Subsidiaries shall, nor shall the Company
or any of its Subsidiaries authorize or permit any of its or
their officers, directors, employees, investment bankers,
attorneys, accountants, consultants or other agents or advisors
to, directly or indirectly, (i) solicit, initiate or take
any action to facilitate or encourage the submission of any
Acquisition Proposal, (ii) enter into or participate in any
discussions or negotiations with, furnish any information
relating to the Company or any of its Subsidiaries or afford
access to the business, properties, assets, books or records of
the Company or any of its Subsidiaries to, otherwise cooperate
in any way with, or knowingly assist, participate in, facilitate
or encourage any effort by any Third Party that is seeking to
make, or has made, an Acquisition Proposal, (iii) fail to
make, withdraw or modify in a manner adverse to Parent the
Company Board Recommendation (or recommend an Acquisition
Proposal or take any action or make any statement inconsistent
with the Company Board Recommendation) (any of the foregoing in
this clause (iii), an Adverse Recommendation
Change), (iv) grant any waiver or release under any
standstill or similar agreement with respect to any class of
equity securities of the Company or any of its Subsidiaries,
(iv) approve any transaction under, or any Third Party
becoming an interested stockholder under,
Section 203 of Delaware Law, (v) amend or grant any
waiver or release or approve any transaction or redeem any
Company Rights under the Company Rights Agreement, except in
connection with the transactions contemplated by this Agreement,
or (vi) enter into any agreement in principle, letter of
intent, term sheet or other similar instrument relating to an
Acquisition Proposal.
(b)
Exception to Permit Discussions and Due Diligence
after Receipt of Certain
Proposals
.
Notwithstanding the foregoing, or
anything else in this Agreement, the Board of Directors or the
Special Committee of the Company, directly or indirectly through
advisors, agents or other intermediaries, may (i) engage in
negotiations or discussions with any Third Party that, subject
to the Companys compliance with Section 6.03(a), has
made a bona fide Acquisition Proposal that the Board of
Directors or the Special Committee of the Company reasonably
believes will lead to a Superior Proposal, (ii) thereafter
furnish to such Third Party nonpublic information relating to
the Company or any of its Subsidiaries pursuant to a
confidentiality agreement with terms no less favorable to the
Company than those contained in the Confidentiality Agreement
dated as of May 16, 2007 between the Company
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and Parent (the
Confidentiality Agreement
),
(iii) following receipt of a Superior Proposal that has not
been withdrawn, subject to the Companys compliance with
this Section 6.03, make an Adverse Recommendation Change
and/or
(iv) take any action that any court of competent
jurisdiction orders the Company to take (which order shall have
become final and non-appealable), but in each case referred to
in the foregoing clauses (i) through (iv) only if the
Board of Directors or the Special Committee of the Company
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. Nothing contained
herein shall prevent the Board of Directors or the Special
Committee of the Company from complying with
Rule 14d-9
and
Rule 14e-2(a)
under the 1934 Act with regard to an Acquisition Proposal,
so long as any action taken or statement made to so comply is
consistent with this Section 6.03.
(c)
Required Notices
.
The Board of
Directors or the Special Committee of the Company shall not take
any of the actions referred to in clauses (i) through
(iv) of the preceding subsection unless the Company shall
have delivered to Parent a prior written notice advising Parent
that it intends to take such action, and the Company shall
continue to advise Parent after taking such action. In addition,
the Company shall notify Parent promptly (but in no event later
than one (1) Business Day) after receipt by the Company (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 the Company or any
of its Subsidiaries or for access to the business, properties,
assets, books or records of the Company or any of its
Subsidiaries by any Third Party that may be considering making,
or has made, an Acquisition Proposal. The Company shall provide
such notice orally and in writing and shall identify the Third
Party making, and the terms and conditions of, any such
Acquisition Proposal, indication or request. The Company shall
keep Parent reasonably informed, as promptly as practicable, of
the status and details of any such Acquisition Proposal,
indication or request. The Company shall keep Parent reasonably
informed, on a prompt basis, of the status and material terms of
any such Acquisition Proposal, indication or request, including
any material amendments or proposed amendments as to price and
other material terms thereof. The Company shall provide Parent
with at least forty-eight (48) hours prior notice of any
meeting of the Company Board (or such lesser notice as is
provided to the members of the Company Board) at which the
Company Board is reasonably expected to consider any Acquisition
Proposal. The Company shall promptly provide Parent with any
non-public information concerning the Company provided to any
Third Party that was not previously provided to Parent.
(d)
Definition of Superior
Proposal
.
For purposes of this Agreement,
Superior Proposal
means any bona fide,
unsolicited written Acquisition Proposal for seventy-five
percent (75%) or more of the outstanding shares of Company Stock
on terms that the Board of Directors of the Company or the
Special Committee determines in good faith by a majority vote,
after considering the advice of a financial advisor of
nationally recognized reputation and taking into account all the
terms and conditions of the Acquisition Proposal, including any
break-up
fees, expense reimbursement provisions and conditions to
consummation, are more favorable and provide greater value to
all the Companys stockholders (other than the Continuing
Stockholders) than as provided hereunder 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 the Board of Directors of the Company.
(e)
Obligation to Terminate Existing
Discussions
.
The Company shall, and shall
cause its Subsidiaries and Representatives to, cease immediately
and cause to be terminated any and all existing activities,
discussions or negotiations, if any, with any Third Party
conducted prior to the date hereof with respect to any
Acquisition Proposal. The Company shall promptly request that
each Third Party, if any, that has executed a confidentiality
agreement within the
24-month
period prior to the date hereof in connection with its
consideration of any Acquisition Proposal return or destroy all
confidential information heretofore furnished to such Person by
or on behalf of the Company or any of its Subsidiaries (and all
analyses and other materials prepared by or on behalf of such
Person that contains, reflects or analyzes that information).
Section 6.04
.
Financing.
The
Company shall, and shall cause its Subsidiaries to, provide such
cooperation as may be reasonably requested by Parent in
connection with obtaining the Financing or any alternative
financing (including any alternative financing pursuant to
Section 7.06), including: (i) participation in
meetings, drafting sessions, and due diligence sessions, and
otherwise assisting Parent in the preparation of offering
materials and materials for rating agency presentations;
(ii) reasonably cooperating with the marketing efforts of
Parent, its Subsidiaries, and their financing sources for any of
the financing, including participation in management
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presentation sessions, road shows, and sessions with
rating agencies; (iii) furnishing Parent, its Subsidiaries,
and their financing sources with financial and other pertinent
information regarding the Company as may be reasonably requested
by Parent, including all financial statements, and assisting
Parent in the preparation of business projections and other
financial data of the type required by
Regulation S-X
and
Regulation S-K
under the 1933 Act, 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 Parent,
including a certificate of the chief financial officer of the
Company 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
Parent.
Section 6.05
.
Exemption
from Liability Under Section 16.
Prior to
the Closing, the Company shall take all such steps as may be
required to cause to be exempt under
Rule 16b-3
promulgated under the Exchange Act any dispositions of Company
Stock (including derivative securities with respect to Company
Stock) under such rule and resulting from the transactions
contemplated by this Agreement by each individual who is subject
to the reporting requirements of Section 16(a) of the
Exchange Act with respect to the Company.
Article 7
COVENANTS OF
PARENT
Section 7.01
.
Obligations
of Merger Subsidiary.
Parent shall take all
action necessary to cause Merger Subsidiary to perform its
obligations under this Agreement and to consummate the Merger on
the terms and conditions set forth in this Agreement.
Section 7.02
.
Voting
of Shares.
Parent shall vote all shares of
Company Stock beneficially owned by it or any of its
Subsidiaries in favor of adoption of this Agreement at the
Company Stockholder Meeting.
Section 7.03
.
Information
For Proxy Statement.
Parent will furnish to the
Company such data and information relating to it and Merger
Subsidiary as the Company may reasonably request for the purpose
of including such data and information in the Proxy Statement
and any amendments or supplements thereto.
Section 7.04
.
Director
and Officer Liability.
Parent shall cause the
Surviving Corporation, and the Surviving Corporation hereby
agrees, to do the following
:
(a) After the Effective Time, the Surviving Corporation
shall honor and fulfill in all respects all obligations of the
Company and its Subsidiaries in respect of rights to
indemnification, advancement of expenses and exculpation from
liabilities for acts or omissions occurring at or prior to the
Effective Time now existing in favor of the current or former
directors or officers of the Company and each of its
Subsidiaries (each, an
Indemnified Person
) as
provided in their respective certificates of incorporation or
bylaws (or comparable organizational documents) and any
indemnification or other agreements of the Company as in effect
on the date of this Agreement and disclosed on
Section 7.04(a) of the Company Disclosure Schedule;
provided that such obligations shall be subject to any
limitation imposed from time to time under Applicable Law. In
furtherance and not in limitation of the foregoing, during the
period commencing at the Effective Time and ending on the sixth
anniversary of the Effective Time, the Surviving Corporation
shall cause the certificate of incorporation and bylaws (and
other similar organizational documents) of the Surviving
Corporation and its Subsidiaries to contain provisions with
respect to indemnification, advancement of expenses and
exculpation that are at least as favorable as the
indemnification, advancement of expenses and exculpation
provisions contained in the certificate of incorporation and
bylaws (or other comparable organizational documents) of the
Company and its Subsidiaries as of the date hereof, and during
such six-year period, such provisions shall not be repealed,
amended or otherwise modified in any manner except as required
by Applicable Law.
(b) For six years after the Effective Time, the Surviving
Corporation shall provide officers and directors
liability insurance in respect of acts or omissions occurring
prior to the Effective Time covering each such Indemnified
Person currently covered by the Companys officers
and directors liability insurance policy on terms with
respect to coverage and amount no less favorable than those of
such policy in effect on the date
A-32
hereof; provided that, in satisfying its obligation under this
Section 7.04(b), the Surviving Corporation shall not be
obligated to pay an aggregate premium in excess of 250% of the
amount per annum the Company paid in its last full fiscal year
(the
Annual Premium
), which amount is
disclosed on Section 7.04(b) of the Company Disclosure
Schedule. Notwithstanding the foregoing, the Surviving
Corporation may acquire a six-year prepaid tail
policy to the Companys existing directors and
officers liability insurance policy (which
tail policy shall contain the same terms and
conditions as such existing policy) and in such event, the
Surviving Corporation shall maintain such tail
policy in full force and effect and continue to honor its
obligations thereunder, in lieu of all other obligations of the
Surviving Corporation under the first sentence of this 7.04(b)
for a six years after the Effective Time; provided that in no
event shall the Surviving Corporation be obligated to pay an
amount for such tail policy that in the aggregate
exceeds 250% of the Annual Premium. Prior to the Effective Time,
notwithstanding anything to the contrary set forth in this
Agreement, at Parents direction in its sole discretion,
the Company shall purchase at or immediately prior to the
Effective Time a six-year prepaid tail policy to its
existing directors and officers liability insurance
policy (which tail policy shall contain the same
terms and conditions as such existing policy), and in such
event, the Surviving Corporation shall maintain such
tail policy in full force and effect and continue to
honor its obligations thereunder, in lieu of all other
obligations of the Surviving Corporation under the first
sentence of this 7.04(b) for a six years after the Effective
Time; provided that in no event shall the Company pay an amount
for such tail policy that in the aggregate exceeds
250% of the Annual Premium. In the event that the costs for
either (a) the aggregate premium payable by the Surviving
Corporation pursuant to the first sentence of this
Section 7.04(b), (b) a prepaid tail-policy
purchased by the Surviving Corporation, or (c) a prepaid
tail-policy purchased by the Company exceed the
applicable 250% threshold, then the Surviving Corporation or the
Corporation, 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.
(c) The obligations set forth in this Section 7.04
shall not be terminated, amended or otherwise modified in any
manner that adversely affects any Indemnified Person (or his or
her heirs and his or her representatives) without the prior
written consent of such affected Indemnified Person (or his or
her heirs and his or her representatives). The provisions of
this Section 7.04 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party,
his or her heirs and his or her representatives and
(ii) are in addition to, and not in substitution for, any
other rights to indemnification or contribution that any such
person may have by contract or otherwise.
(d) This Section 7.04 shall be binding on the
Surviving Corporation and its successors and assigns. In the
event the Surviving Corporation or its successor or assign
(i) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation
or entity in such consolidation or merger or (ii) transfers
all or substantially all of its properties and assets to any
person or entity, then, and in each case, proper provision shall
be made so that the successor and assign of the Surviving
Corporation shall honor the obligations set forth with respect
to the Surviving Corporation in this Section 7.04.
Section 7.05
.
Employee Benefits;
401(k) Plan.
From and after the Effective Time,
Parent will, or will cause the Surviving Corporation to
recognize the prior service with the Company or its Subsidiaries
of each employee of the Company or its Subsidiaries as of the
Effective Time (the
Company Employees
) in
connection with all employee benefit plans, programs or policies
of Parent or its affiliates in which Company Employees are
eligible to participate following the Effective Time, for
purposes of eligibility, and, for vacation and severance
policies, levels of benefits. From and after the Effective Time,
Parent 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 Parent or its
affiliates to be waived with respect to Company Employees and
their eligible dependents.
Section 7.06
.
Financing
Commitments.
Parent 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
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
A-33
and conditions reflected in the Financing Commitments,
(iii) satisfy on a timely basis all conditions applicable
to Parent and Sub Merger Subsidiary in such definitive
agreements that are within their control, and
(iv) consummate the Financing at or prior to Closing;
provided
that notwithstanding, and as an alternative to,
the foregoing, Parent and Merger Subsidiary may in any case
obtain alternative financing from alternative sources on terms
that are not less favorable, in the aggregate, to Parent and
Subsidiary then the Financing contemplated by the Financing
Commitments (New Financing Commitments);
provided
further
that any such New Financing Commitments shall not
(A) expand or adversely change in any material respect the
conditions to the Financing set forth in the Financing
Commitments or (B) reasonably be expected to adversely
impact the ability of Parent and Merger Subsidiary to perform
their respective obligations under this Agreement. In any event,
Parent shall disclose to the Company its intention to obtain
such New Financing Commitments, shall keep the Company
reasonably informed of the material terms thereof and shall
deliver to the Company final drafts of all documents relating to
such New Financing Commitments. Upon and from and after such
event, the term Financing as used herein shall be
deemed to mean the Financing contemplated by the Financing
Commitments to the extent in effect at the time in question and
the New Financing Commitments to the extent then in effect. In
the event any portion of the Financing becomes unavailable on
the terms and conditions contemplated in the Financing
Commitments for any reason, Parent shall give the Company prompt
notice and keep the Company reasonably informed on a reasonable
basis and in reasonable detail as set forth herein of the status
of its commercially reasonable efforts to arrange, as promptly
as practicable following the occurrence of such event,
alternative financing from alternative sources on terms that are
not less favorable, in the aggregate, to Parent and Merger
Subsidiary then the Financing contemplated by the Financing
Commitments.
Section 7.07
.
Solvency
of the Surviving Corporation.
If Parent or any of
its Affiliates obtains (on behalf or for the benefit of
themselves or any other Person) an opinion from an independent
expert opining or supporting the conclusion that, after giving
effect to all of the transactions contemplated by this Agreement
and actions taken in connection with the financing (or any
Alternative Financing) thereof, Parent, the Surviving
Corporation
and/or
any
of their Subsidiaries will be Solvent (or shall achieve or
retain any similar or equivalent financial status) (such
opinion, the Solvency Opinion), Parent shall cause
such independent expert to include the Company as an additional
addressee with respect to the Solvency Opinion entitled to rely
thereon and shall provide an executed copy of any such Solvency
Opinion to the Company as promptly as reasonably practicable
after the issuance thereof, but in any event prior to the
Effective Time. For the purpose of clarity, nothing contained
herein shall obligate Parent or any of its Affiliates to obtain
a Solvency Opinion.
Article 8
COVENANTS OF
PARENT, MERGER SUBSIDIARY AND THE COMPANY
The parties hereto agree that:
Section 8.01
.
Commercially
Reasonable Efforts
.
(a) Subject to the terms and conditions of this Agreement,
the Company and Parent 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
under Applicable Law to consummate the transactions contemplated
by this Agreement, including (i) preparing and filing as
promptly as practicable with any Governmental Authority or other
third party all documentation to effect all necessary filings,
notices, petitions, statements, registrations, submissions of
information, applications and other documents and
(ii) obtaining and maintaining all approvals, consents,
registrations, Permits and other authorizations and
confirmations required to be obtained from any Governmental
Authority or other third party that are necessary, proper or
advisable to consummate the transactions contemplated by this
Agreement; provided that the parties hereto understand and agree
that the commercially reasonable efforts of any party hereto
shall not be deemed to include (i) entering into any
settlement, undertaking, consent decree, stipulation or
agreement with any Governmental Authority in connection with the
transactions contemplated hereby or (ii) divesting or
otherwise holding separate (including by establishing a trust or
otherwise), or taking any other action (or otherwise agreeing to
do any of the foregoing) with respect to any of its or the
Surviving Corporations Subsidiaries or any of their
respective Affiliates businesses, assets or properties.
A-34
(b) In furtherance and not in limitation of the foregoing,
each of Parent and the Company shall make an appropriate filing
of a Notification and Report Form pursuant to the HSR Act with
respect to the transactions contemplated hereby as promptly as
practicable and in any event within 15 Business Days of the date
hereof and to supply as promptly as practicable any additional
information and documentary material that may be requested
pursuant to the HSR Act and to take all other actions necessary
to cause the expiration or termination of the applicable waiting
periods under the HSR Act as soon as practicable.
Section 8.02
.
Certain
Filings.
The Company and Parent shall cooperate
with one another (i) in connection with the preparation of
the Company Proxy Statement, (ii) in determining whether
any action by or in respect of, or filing with, any Governmental
Authority is required, or any actions, consents, approvals or
waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (iii) in
taking such actions or making any such filings, furnishing
information required in connection therewith or with the Company
Proxy Statement and seeking timely to obtain any such actions,
consents, approvals or waivers.
Section 8.03
.
Public
Announcements.
The parties agree that the initial
press release to be issued with respect to the transactions
contemplated by this Agreement shall be in a form agreed to by
the parties. Parent and Merger Subsidiary, on the one hand, and
the Company, on the other hand, further agree that they shall
consult with the other before issuing any other press releases,
making any public statements or other public communications, or
holding any press conferences or conference calls, in each case
relating to this Agreement, the Merger and the other
transactions contemplated hereby, except as may be required by
Applicable Law, court process or any listing agreement with or
rule of any national securities exchange or association, in
which case, Parent and Merger Subsidiary, on the one hand, and
the Company, 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.
Section 8.04
.
Further
Assurances.
At and after the Effective Time, the
officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of
the Company or Merger Subsidiary, any deeds, bills of sale,
assignments or assurances and to take and do, in the name and on
behalf of the Company or Merger Subsidiary, any other actions
and things to vest, perfect or confirm of record or otherwise in
the Surviving Corporation any and all right, title and interest
in, to and under any of the rights, properties or assets of the
Company acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger.
Section 8.05
.
Access
to Information.
From the date hereof until the
Effective Time and subject to Applicable Law and the
Confidentiality Agreement, the Company shall (i) give to
Parent, its counsel, financial advisors, auditors, and other
authorized representatives and Parents financing sources
and their counsel and authorized representatives reasonable
access to its offices, properties, books and records,
(ii) furnish to Parent, its counsel, financial advisors,
auditors and other authorized representatives and to
Parents financing sources and their counsel and authorized
representatives such financial and operating data and other
information as such Persons may reasonably request and
(iii) instruct its and its Subsidiaries employees,
counsel, financial advisors, auditors and other authorized
representatives to cooperate with Parent and Parents
financing sources in their investigation. Any investigation
pursuant to this Section shall be conducted in such manner as
not to interfere unreasonably with the conduct of the business
of the Company. No information or knowledge obtained in any
investigation pursuant to this Section shall affect or be deemed
to modify any representation or warranty made by any party
hereunder.
Section 8.06
.
Notices
of Certain Events.
Each of the Company and Parent
shall promptly notify the other of:
(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be required
in connection with the transactions contemplated by this
Agreement;
(b) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by
this Agreement;
(c) any actions, suits, claims, investigations or
proceedings commenced or, to its Knowledge, threatened against,
relating to or involving or otherwise affecting the Company or
any of its Subsidiaries that, if pending on the date of this
Agreement, would have been required to have been disclosed
pursuant to Sections 4.12,
A-35
4.13, 4.16, 4.17, 4.18, 4.21 or 5.05, as the case may be, or
that relate to the consummation of the transactions contemplated
by this Agreement;
(d) it becoming aware of any inaccuracy of any
representation or warranty contained in this Agreement at any
time during the term hereof that could reasonably be expected to
cause the conditions set forth in Section 9.02(a) or 9.03
not to be satisfied; and
(e) any failure of that party to comply with or satisfy any
covenant, condition or agreement to be complied with or
satisfied in all material respects by it hereunder;
provided, however, that the delivery of any notice pursuant to
this Section 8.06 shall not limit or otherwise affect the
remedies available hereunder to the party receiving that notice.
Section 8.07
.
Delisting.
Each
of Parent and the Company agree to cooperate with the other
party in taking, or causing to be taken, all actions necessary
(i) to delist the Company Stock from the NASDAQ Global
Market and (ii) to terminate the registration of the
Company Stock under the Exchange Act; provided that such
delisting and termination shall not be effective until or after
the Effective Time.
Section 8.08
.
Litigation.
Each
of Parent, Merger Subsidiary and the Company agrees to use its
commercially reasonable efforts to defend any lawsuits or other
legal proceedings against, whether judicial or administrative,
challenging, or seeking damages or other relief as a result of,
the Merger, this Agreement or the transactions contemplated
hereby (including any stockholder litigation against the Company
or its directors or officers relating to any of the transactions
contemplated hereby), including seeking to have any order
adversely affecting the ability of the parties to consummate the
transactions contemplated hereby entered by any court or other
Governmental Entity promptly vacated or reversed. The Company
shall not enter into any settlement agreement with respect to
any such lawsuit or legal proceeding without Parents prior
consent.
Section 8.09
.
Environmental
Reports.
(a) Parent and the Company have jointly retained the
Environmental Consultants to conduct Phase I Environmental Site
Assessments with respect to the Current Sites;
provided
,
however
, that the Environmental Consultant for the
Companys current California manufacturing facility shall
be retained by the Potential Mortgage Lender. Parent and the
Company shall cause the Environmental Consultants retained by
Parent and the Company (and Parent shall use its commercially
reasonable efforts to cause any Environmental Consultant
retained by the Potential Mortgage Lender) to interact with and
provide their analyses and assessments (including all reports)
(the
Environmental Reports
) to both the
Company and the Parent.
(b) If the Environmental Reports identify reasonably likely
potential costs of remediation (including fees likely to be
assessed by Governmental Authorities), claims, violations,
damages, losses or diminution of property value (excluding any
costs to repair any structural damage arising out of the matters
set forth on Section 4.13 of the Company Disclosure
Schedule) in the amount of $2,000,000 or more in the aggregate
with respect to the Current Sites (a
Significant
Environmental Matter
), Parent may, in its sole
discretion, by notice in writing delivered to the Company no
later than 5:00 p.m. on the date (the
Notice
Date
) that is the earlier of (i) three calendar
days after the date on which Parent and the Company receive
final copies of the Environmental Reports and
(ii) October 31, 2007, elect to notify the Company
that the Environmental Reports are not acceptable to Parent and
terminate this Agreement pursuant to Section 10.01(c)(vi)
(a
Parent Environmental Termination Notice
).
If Parent does not deliver to the Company the Parent
Environmental Termination Notice by the Notice Date, the
condition contained in Section 9.02(g) of this Agreement
shall be deemed satisfied and Parents right to terminate
pursuant to Section 10.01(c)(vi) shall expire.
(c) If the Environmental Reports reveal no Significant
Environmental Matter, the condition contained in
Section 9.02(g) shall be deemed satisfied and Parents
right to terminate pursuant to Section 10.01(c)(vi) shall
expire.
(d) The Company shall, and shall cause its Subsidiaries and
it and is Subsidiaries respective employees, counsel,
financial advisors, auditors and other authorized
representatives to, cooperate with Parent, Parents lender
and the Environmental Consultants in conducting the Phase I
Environmental Site Assessments.
A-36
(e) For the purpose of this Section 8.09, Phase
I Environmental Site Assessment means an environmental
assessment that is consistent with or generally equivalent to
ASTM (American Society of Testing and Materials) E1527-05
including identification of all
on-site
and
off-site environmental issues that could reasonably be expected
to result in liabilities or compliance costs in excess of
$50,000.
Section 8.10
.
Working
Capital Statements.
From and after the date
hereof until the Effective Time, as soon as reasonably
practicable after the close of each fiscal month, the Company
shall deliver to Parent an unaudited statement (the
Working Capital Statement) setting forth the
Companys Working Capital as of the close of business on
last day of such fiscal month. In the month in which the Closing
is expected to occur, the Company shall prepare an adjusted
Working Capital Statement (an Adjusted Working Capital
Statement) as promptly as reasonably practicable after the
close of the prior fiscal month, which Adjusted Working Capital
Statement shall reflect Working Capital as adjusted to
(x) subtract from Working Capital the amount by which the
aggregate Company Transaction Costs (whether or not paid) exceed
$2,000,000 and (y) add to Working Capital the amount of
Company Transaction Costs that have been paid by the Company and
that are not included as prepaid expenses in Current Assets,
together with supporting invoices (Working Capital as so
adjusted, the Adjusted Working Capital). The Working
Capital Statements and the Final Working Capital Statement shall
be prepared in good faith and be accompanied by a certificate
executed by the Chief Financial Officer of the Company stating
that such statements were prepared in good faith.
Article 9
CONDITIONS
TO THE MERGER
Section 9.01.
Conditions
to the Obligations of Each Party.
The obligations
of the Company, Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following
conditions:
(a) this Agreement and the Merger shall have received the
Company Stockholder Approval;
(b) no Applicable Law shall prohibit the consummation of
the Merger; and
(c) any applicable waiting period under the HSR Act or
under laws analogous to the HSR Act existing in foreign
jurisdictions relating to the Merger shall have expired or been
terminated with respect to the acquisition of the Company.
Section 9.02.
Conditions
to the Obligations of Parent and Merger
Subsidiary.
The obligations of Parent and Merger
Subsidiary to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) (i) the Company shall have performed in all material
respects all of its obligations hereunder required to be
performed by it at or prior to the closing date, (ii)
(A) the representations and warranties of the Company
contained in Sections 4.02, 4.05 and 4.14 shall be true and
correct at and as of the date hereof and at and as of the
Closing Date as if made at and as of the Closing Date (except
for those representations and warranties which address matters
only as of an earlier date which shall have been true and
correct as of such earlier date), (B) the other
representations and warranties set contained in Article 4
(disregarding for these purposes any exception in such
representations and warranties relating to materiality or a
Material Adverse Effect) shall be true and correct at and as of
the date hereof and at and as of the Closing Date as if made at
and as of the Closing Date (except for those representations and
warranties which address matters only as of an earlier date
which shall have been true and correct as of such earlier date),
except in the case of this clause (B) for such failures to
be true and correct which have not had and would not have,
individually or in the aggregate, a Material Adverse Effect; and
(iii) Parent shall have received a certificate signed by
the Chief Executive Officer of the Company to the foregoing
effect;
(b) there shall not have been instituted or pending any
action or proceeding (or any investigation or other inquiry that
could reasonably be expected to result in such action or
proceeding) by any Governmental Authority, domestic, foreign or
supranational, (i) challenging or seeking to make illegal,
to delay materially or otherwise directly or indirectly to
restrain or prohibit the consummation of the Merger or seeking
to obtain material damages or otherwise directly or indirectly
relating to the transactions contemplated by the Merger,
(ii) seeking to restrain or prohibit Parents, Merger
Subsidiarys or any of Parents other Affiliates
(A) ability
A-37
effectively to exercise full rights of ownership of the Company
Stock, including the right to vote any shares of Company Stock
acquired or owned by Parent, Merger Subsidiary or any of
Parents other Affiliates following the Effective Time on
all matters properly presented to the Companys
stockholders, or (B) ownership or operation (or that of its
respective Subsidiaries or Affiliates) of all or any material
portion of the business or assets of the Company and its
Subsidiaries, taken as a whole, or of Parent and its
Subsidiaries, taken as a whole, or (iii) seeking to compel
Parent or any of its Subsidiaries or Affiliates to dispose of or
hold separate all or any material portion of the business or
assets of the Company and its Subsidiaries, taken as a whole, or
of Parent and its Subsidiaries, taken as a whole or
(iv) that otherwise would be reasonably expected to have a
Material Adverse Effect on the Company or Parent;
(c) there shall not have been any action taken, or any
Applicable Law proposed, enacted, enforced, promulgated, issued
or deemed applicable to the Merger, by any Governmental
Authority, other than the application of the waiting period
provisions of the HSR Act to the Merger and of laws analogous to
the HSR Act existing in foreign jurisdictions, that, in the
reasonable judgment of Parent, is likely, directly or
indirectly, to result in any of the consequences referred to in
clauses (i) through (iv) of paragraph (b) above;
(d) since the date of this Agreement, there shall not have
occurred and be continuing as of or otherwise arisen before the
Effective Time any event, occurrence or development of a state
of circumstances or facts which, individually or in the
aggregate, has had or could have a Material Adverse Effect on
the Company;
(e) (i) the Company shall have (i) Freely Available
Cash at least equal to the amount of the Company Cash Deposit;
(ii) have made the Company Cash Deposit using such Freely
Available Cash in accordance with Section 2.03; and
(iii) Parent shall have received a certificate signed by
the Chief Financial Officer of the Company to the foregoing
effect;
(f) (i) if the Closing Date occurs (A) during the
Companys fiscal November 2007 month, then the
Company, as of the close of its fiscal October 2007 month,
will have unaudited Adjusted Working Capital of not less than
$44,650,000, which shall be reflected in the Adjusted Working
Capital Statement for the October fiscal month, (B) during
the Companys fiscal December 2007 month, then the
Company, as of the close of its fiscal November 2007 month,
will have unaudited Adjusted Working Capital of not less than
$45,126,000, which shall be reflected in the Adjusted Working
Capital Statement for the November fiscal month, (C) during
the Companys fiscal January 2008 month, then the
Company, as of the close of its fiscal December 2007 month,
will have unaudited Adjusted Working Capital amount of not less
than $48,300,000, which shall be reflected in the Adjusted
Working Capital Statement for the December fiscal month,
(D) during the Companys fiscal February
2008 month, then the Company, as of the close of its fiscal
January 2008 month, will have unaudited Adjusted Working
Capital amount of not less than $48,300,000, which shall be
reflected in the Adjusted Working Capital Statement for the
January fiscal month, (E) during the Companys fiscal
March 2008 month, then the Company, as of the close of its
fiscal February 2008, will have unaudited Adjusted Working
Capital amount of not less than $48,300,000, which shall be
reflected in the Adjusted Working Capital Statement for the
February fiscal month, and (F) after the close of the
Companys fiscal March 2008 month, then the Company,
as of the close of its fiscal March 2008, will have unaudited
Adjusted Working Capital of not less than $48,300,000, which
shall be reflected in the Adjusted Working Capital Statement for
the March fiscal month, and (ii) Parent shall have received
a certificate signed by the Chief Financial Officer of the
Company to the foregoing effect.
(g) Parent shall have received a certificate in the form
contemplated by Section 897 of the Code and the regulations
thereunder, signed by the Company, to the effect that the
Company is not and has not been within five (5) years of
the date of the certificate a United States real property
holding corporation within the meaning of Section 897
of the Code; and
(h) No Parent Environmental Termination Notice shall have
been timely delivered in accordance with Section 8.09 of
this Agreement.
Section 9.03
.
Conditions
to the Obligations of the Company.
The
obligations of the Company to consummate the Merger are subject
to the satisfaction of the following further conditions:
(a) each of Parent and Merger Subsidiary shall have
performed all of its obligations hereunder required to be
performed by it at or prior to the
A-38
Effective Time; (b) the representations and warranties of
Parent contained in this Agreement and in any certificate or
other writing delivered by Parent pursuant hereto shall be true
at and as of the Effective Time as if made at and as of such
time, except in the case of this clause (b) for such
failures to be true which have not had and would not have,
individually or in the aggregate, a Parent Material Adverse
Effect; and (c) the Company shall have received a
certificate signed by the President of Parent to the foregoing
effect.
Article 10
TERMINATION
Section 10.01
.
Termination.
This
Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Merger has not been consummated on or before
April 1, 2008 (the
End Date
); provided
that the right to terminate this Agreement pursuant to this
Section 10.01(b)(i) shall not be available to any party
whose breach of any provision of this Agreement results in the
failure of the Merger to be consummated by such time;
(ii) there shall be any Applicable Law that (A) makes
consummation of the Merger illegal or otherwise prohibited or
(B) enjoins the Company or Parent from consummating the
Merger and such enjoinment shall have become final and
nonappealable; or
(iii) at the Company Stockholder Meeting (including any
adjournment or postponement thereof), the Company Stockholder
Approval shall not have been obtained; or
(c) by Parent, if:
(i) an Adverse Recommendation Change shall have occurred;
(ii) the Company 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;
(iii) a breach of any representation or warranty or failure
to perform any covenant or agreement on the part of the Company
set forth in this Agreement shall have occurred that would cause
the condition set forth in Section 9.02(a) not to be
satisfied, and such condition is incapable of being satisfied by
the End Date, or if capable of being cured by the Company by the
End Date, the Company does not cure such breach or failure
within 30 days after its receipt of written notice thereof
from Parent; provided, however such
30-day
cure
period shall not apply to the Companys obligation to close
the Merger which shall be governed by Section 2.01(b);
(iv) at any time after receipt or public announcement of an
Acquisition Proposal, the Companys Board of Directors
shall have failed to reaffirm the Company Board Recommendation
as promptly as practicable (but in any event within five
(5) business days) after receipt of any written request to
do so from Parent;
(v) the Company shall have willfully and materially
breached any of its obligations under Section 6.02 or
Section 6.03; or
(vi) the Environmental Reports identify a Significant
Environmental Matter that Parent determines is unacceptable and
timely delivers a Parent Environmental Termination Notice in
accordance with Section 8.09 of this Agreement; or
A-39
(d) by the Company:
(i) subject to complying with the terms of this Agreement,
to promptly enter into a binding written agreement concerning a
Superior Proposal; provided, that the Company shall have paid
any amounts due pursuant to Section 11.04(b) in accordance
with the terms, and at the times, specified therein; and
provided, further, that, in the case of any such termination by
the Company, (A) the Company notifies Parent, in writing
and at least five Business Days prior to such termination, of
its intention to terminate this 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) Parent does not make,
within five Business Days of receipt of such written
notification, an offer that is at least as favorable to the
stockholders of the Company as such Superior Proposal, it being
understood that the Company shall not enter into any such
binding agreement during such five 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 five Business Day clock
described in this Section; or
(ii) if a breach of any representation or warranty or
failure to perform any covenant or agreement on the part of the
Parent or Merger Subsidiary set forth in this Agreement shall
have occurred that would cause the condition set forth in
Section 9.03 not to be satisfied, and such condition is
incapable of being satisfied by the End Date, or if capable of
being cured by Parent by the End Date, Parent does not cure such
breach or failure within 30 days after its receipt of
written notice thereof from the Company;
provided
that
the
30-day
cure period shall not apply to Parent or Merger
Subsidiarys obligation to close the Merger which shall be
governed by Section 2.01(b).
The party desiring to terminate this Agreement pursuant to this
Section 10.01 (other than pursuant to
Section 10.01(a)) shall give prior written notice of such
termination to the other party.
Section 10.02
.
Effect
of Termination.
If this Agreement is terminated
pursuant to Section 10.01, this Agreement shall become void
and of no effect without liability of any party (or any
stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other party hereto;
provided that the Companys right to receive payment of the
Parent Termination Fee from Parent (or from the Guarantor
pursuant to the Limited Guarantee) pursuant to
Section 11.04(c) and to require that Parent, Merger
Subsidiary and the Guarantor perform their respective
obligations under the Limited Guarantee in accordance with the
terms of the Limited Guarantee, the provisions of this
Section 10.02 and Sections 11.04, 11.07 and 11.08
shall survive any termination hereof pursuant to
Section 10.01; provided further that, except as provided in
Section 11.04(d), no such termination shall relieve any
party hereto of any liability or damages resulting from any
willful or intentional breach of this Agreement.
Article 11
MISCELLANEOUS
Section 11.01
.
Notices.
All
notices, requests and other communications to any party
hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to Parent or Merger Subsidiary, to:
Pioneer Holding Corp.
Pioneer Sub Corp.
c/o Vector
Capital Corporation
456 Montgomery Street,
19
th
Floor
San Francisco, CA 94104
Attention: Amish Mehta
Facsimile No.:
415-293-5100
A-40
with a copy to:
OMelveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, California 94111
Attention: Steve L. Camahort,
Facsimile No.:
(415) 984-8701
if to the Company, to:
Printronix, Inc.
14600 Myford Road
Irvine, CA 92606
Attention: Chief Financial Officer
Facsimile No.:
(714) 368-2373
with a copy to:
|
|
|
|
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Attention:
|
K. C. Schaaf,
Michael Mulroy
Facsimile No.:
(949) 725-4100
|
or to such other address or facsimile number address as such
party may hereafter specify for the purpose by notice to the
other parties hereto. All such notices, requests and other
communications shall be deemed received on the date of receipt
by the recipient thereof if received prior to 5:00 p.m. on
a Business Day in the place of receipt. Otherwise, any such
notice, request or communication shall be deemed to have been
received on the next succeeding Business Day in the place of
receipt.
Section 11.02
.
Survival
of Representations and Warranties.
The
representations, warranties and agreements contained herein and
in any certificate or other writing delivered pursuant hereto
shall not survive the Effective Time, except for the agreements
set forth in Section 7.04.
Section 11.03
.
Amendments
and Waivers.
(a) Any provision of this
Agreement may be amended or waived prior to the Effective Time
if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this
Agreement or, in the case of a waiver, by each party against
whom the waiver is to be effective; provided that, after the
Company Stockholder Approval without their further approval, no
such amendment or waiver shall reduce the amount or change the
kind of consideration to be received in exchange for the shares
of Company Stock.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any
rights or remedies provided by Applicable Law.
Section 11.04
.
Expenses;
Termination Fee.
(a) Except as otherwise
provided herein, all costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such
cost or expense; provided that Parent and the Company shall each
pay one half of the filing fee under the HSR Act, any fees of
filings under laws analogous to the HSR Act existing in foreign
jurisdictions and the expenses of the Environmental Consultants.
(b) If a Company Payment Event (as hereinafter defined)
occurs, the Company shall pay Parent (by wire transfer of
immediately available funds), if, pursuant to clause (i) of
the definition of Company Payment Event below, at or
immediately prior to the occurrence of such Company Payment
Event, if pursuant to clause (ii) of the definition of
Company Payment Event below, on the Business Day
immediately following the occurrence of such Company Payment
Event or, if pursuant to clause (iii) of the definition of
Company Payment Event below, within two Business
Days following such Company Payment Event, a fee of four million
two hundred thousand dollars ($4,200,000).
A-41
Company Payment Event
means (i) the
termination of this Agreement pursuant to
Section 10.01(d)(i), (ii) the termination of this
Agreement pursuant to Section 10.01(c)(i), 10.01(c)(ii),
10.01(c)(iv) or 10.01(c)(v), or (iii) the termination of
this Agreement pursuant to Section 10.01(b)(i) or
10.01(b)(iii) but, in the case of this clause (iii), only if and
when (A) prior to the Company Stockholder Meeting (in the
case of a termination pursuant to Section 10.01(b)(iii)) or
the End Date (in the case of a termination pursuant to
Section 10.01(b)(i)), an Acquisition Proposal shall have
been made by a Third Party, and (B) within 12 months
following the date of such termination the Company enters into
an agreement providing for an Acquisition Proposal which
Acquisition Proposal is subsequently consummated or an
Acquisition Proposal is subsequently consummated. For purposes
of this definition of Company Payment Event, all
references to 15% in the definition of
Acquisition Proposal shall be deemed references to
50%.
(c) If a Parent Payment Event (as hereinafter defined)
occurs, Parent shall pay the Company (by wire transfer of
immediately available funds), two Business Days immediately
following the occurrence of such Payment Event, an amount equal
to $5,000,000 (the
Parent Termination Fee
).
(d)
Parent Payment Event
means
(i) the termination of this Agreement pursuant to
Section 10.01(b)(i) if all of the conditions to Closing set
forth in Sections 9.01 and 9.02 were satisfied at the End
Date or (ii) the termination of this Agreement pursuant to
Section 10.01(d)(ii) at a time when Parent is not entitled
to deliver a termination notice pursuant to
Section 10.1(c)(iii).The Company agrees that (i) to
the extent it has incurred losses or damages in connection with
this Agreement (including as a result of a failure by Parent or
Merger Subsidiary to effect the Merger), the Companys sole
and exclusive remedy against Parent, Merger Subsidiary, the
Guarantor and any of their respective former, current and future
direct or indirect equity holders, controlling persons,
stockholders, directors, officers, employee, agents, affiliates,
members, managers, general or limited partners or assignees (the
Parent Parties
) for any breach, loss or
damage shall be to receive payment of the Parent Termination Fee
to the extent provided in Section 11.04(c) or the guarantee
thereof pursuant to the Limited Guarantee and to require the
Guarantor to perform its obligations under the Guarantee in
accordance with its terms, (ii) no person shall have any
other rights or claims or seek damages against any of the Parent
Parties under this Agreement, the Limited Guarantee or the
Financing Commitments, whether at law or equity, in contract, in
tort or otherwise, none of the Parent Parties shall have any
liability or obligations relating to or arising out of this
Agreement or the transactions contemplated by this Agreement,
and (iii) the maximum liability of the Guarantor, directly
or indirectly, shall be limited to the express obligations of
the Guarantor under the Limited Guarantee. Nothing herein shall
relieve Parent or Merger Subsidiary of liability to pay for
Company Stock in the event the Merger is consummated. The
provisions of this Section 11.4(d) are intended to be for
the benefit of, and will be enforceable by, each Parent Party,
his or her heirs and his or her representatives.
(e) The parties acknowledges that the agreements contained
in this Section 11.04 are an integral part of the
transactions contemplated by this Agreement and that, without
these agreements, Parent and Merger Subsidiary, on the one hand,
and the Company on the other hand, would not enter into this
Agreement. Accordingly, if the Company, on the one hand, or
Parent and Merger Subsidiary, on the other hand, fails promptly
to pay any amount due to the other pursuant to this
Section 11.04, the party failing to pay such amount party
shall also pay any costs and expenses incurred by the other
party in connection with a legal action to enforce this
Agreement that results in a judgment against such the party
failing to pay for such amount.
Section 11.05
.
Binding
Effect; Benefit; Assignment.
The provisions of
this Agreement shall be binding upon and, except as provided in
Section 7.04 and Section 11.04(d), shall inure to the
benefit of the parties hereto and their respective successors
and assigns. Except as provided in Section 7.04 and
Section 11.04(d), no provision of this Agreement is
intended to confer any rights, benefits, remedies, obligations
or liabilities hereunder upon any Person other than the parties
hereto and their respective successors and assigns. No party may
assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of each
other party hereto;
provided
that (a) Parent may
assign, by written notice to the Company, its rights and
obligations pursuant to this Agreement to one of its Affiliates
(which Affiliate must (i) be an entity held by the same
stockholders of Parent in the same relative proportions, and
(ii) have not conducted any prior operations itself or
through any of its Subsidiaries), in which event such entity
shall execute this Agreement and upon the effectiveness of such
execution all references in this Agreement to Parent shall be
deemed references to such entity, except that all
representations and warranties with respect to Parent as of the
date of this Agreement shall be deemed representations and
A-42
warranties made with respect to such entity as of the date of
assignment, and (b) Parent may designate, by written notice
to the Company, one of its Affiliates to act in lieu of Merger
Sub (which Affiliate must be (i) a wholly owned Subsidiary
of Parent or must be an entity held by the same stockholders of
Parent in the in the same relative proportions and
(ii) have not conducted any prior operations itself or
through any of its Subsidiaries), in which event such entity
shall execute this Agreement and upon the effectiveness of such
execution all references in this Agreement to Merger Sub shall
be deemed references to such entity, except that all
representations and warranties with respect to Merger Sub as of
the date of this Agreement shall be deemed representations and
warranties made with respect to such entity as of the date of
designation.
Section 11.06
.
Governing
Law.
This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware,
without regard to the conflicts of law rules of such state.
Notwithstanding anything in this Section 11.06 or this
Agreement to the Limited Guarantee and all rights and
obligations thereunder (including the right of the Company to
enforce the Limited Guarantee) shall be governed by New York law
and shall be enforceable only in the New York courts specified
therein in accordance with the terms thereof.
Section 11.07
.
Jurisdiction.
The
parties hereto agree that any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out
of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought in any federal court
located in the State of Delaware or any Delaware state court,
and each of the parties hereby irrevocably consents to the
jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding in any such court
or that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum. Process in any
such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing,
each party agrees that service of process on such party as
provided in Section 11.01 shall be deemed effective service
of process on such party.
Section 11.08
.
WAIVER
OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 11.09
.
Counterparts;
Effectiveness.
This Agreement may be signed in
any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement shall become
effective when each party hereto shall have received a
counterpart hereof signed by all of the other parties hereto.
Until and unless each party has received a counterpart hereof
signed by the other party hereto, this Agreement shall have no
effect and no party shall have any right or obligation hereunder
(whether by virtue of any other oral or written agreement or
other communication).
Section 11.10
.
Entire
Agreement.
This Agreement and the Confidentiality
Agreement constitute the entire agreement between the parties
with respect to the subject matter of this Agreement and
supersedes all prior agreements and understandings, both oral
and written, between the parties with respect to the subject
matter of this Agreement.
Section 11.11
.
Severability.
If
any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction or other
Governmental Authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions
of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated so long as
the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any
party. Upon such a determination, the parties shall negotiate in
good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent
possible.
Section 11.12
.
Specific
Performance.
The parties hereto agree that
irreparable damage would occur to Parent and Merger Subsidiary
if any provision of this Agreement were not performed by the
Company in accordance with the terms hereof and that Parent and
Merger Subsidiary shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement by the Company
or to enforce specifically the performance of the
A-43
terms and provisions hereof in any federal court located in the
State of Delaware or any Delaware state court, in addition to
any other remedy to which Parent and Merger Subsidiary are
entitled at law or in equity. The parties hereto agree that
irreparable damage would occur to the Company if Parent or
Merger Subsidiary fails to perform their obligations pursuant to
Section 11.04 in accordance with the terms thereof and the
Company shall be entitled to an injunction or injunctions to
prevent breaches of Section 11.04 by Parent or Merger
Subsidiary or to enforce specifically the performance of the
terms and provisions of Section 11.04 in any federal court
located in the State of Delaware or any Delaware state court, in
addition to any other remedy to which the Company is entitled at
law or in equity.
Section 11.13
.
Interpretation.
The
headings contained in this Agreement or in any Exhibit or
Schedule hereto and in the table of contents to this Agreement
are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement. Any capitalized terms used
in any Schedule or Exhibit but not otherwise defined therein,
shall have the meaning as defined in this Agreement. When a
reference is made in this Agreement to an Article, Section,
clause, Exhibit or Schedule, such reference shall be to an
Article, Section or clause of, or an Exhibit or Schedule to,
this Agreement unless otherwise indicated. For all purposes
hereof, the terms include, includes and
including shall be deemed followed by the words
without limitation. The words hereof,
hereto, hereby, herein and
hereunder and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not
to any particular provision of this Agreement. The definitions
contained in this Agreement are applicable to the singular as
well as the plural forms of such terms.
[The Remainder of this Page Intentionally Left
Blank.]
A-44
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
PRINTRONIX, INC.
Name: Robert A. Kleist
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Title:
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Chief Executive Officer
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PIONEER HOLDING CORP.
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By:
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/s/ Alexander
R. Slusky
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Name: Alexander R. Slusky
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Title:
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President and Chief-Executive Officer
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PIONEER SUB CORP.
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By:
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/s/ Alexander
R. Slusky
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Name: Alexander R. Slusky
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Title:
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President and Chief-Executive Officer
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A-45
ANNEX B
FORM OF VOTING AGREEMENT
THIS VOTING AGREEMENT (this
Agreement
) is
made and entered into as of October 1, 2007 by and between
Pioneer Holding Corp., a Delaware corporation
(
Parent
), and the undersigned stockholder
(the
Stockholder
) of Printronix, Inc., a
Delaware corporation (the
Company
).
RECITALS:
A. Parent, the Company and Pioneer Sub Corp., a Delaware
corporation and wholly-owned subsidiary of Parent
(
Merger Sub
), are entering into an Agreement
and Plan of Merger of even date herewith (the
Merger
Agreement
), which provides for the merger (the
Merger) of Merger Sub with and into the Company,
pursuant to which all outstanding shares of the Company will be
converted into the right to receive cash, as set forth in the
Merger Agreement.
B. The Stockholder is the beneficial owner (as defined in
Rule 13d 3 under the 1934 Act) of such number of
shares of the outstanding capital stock of the Company, and such
number of shares of capital stock of the Company issuable upon
the exercise of outstanding options to acquire Company capital
stock, as is indicated on the signature page of this Agreement.
C. In consideration of the execution of the Merger
Agreement by Parent, the Stockholder (in his or her capacity as
such) has agreed to vote the Shares so as to facilitate
consummation of the Merger.
NOW, THEREFORE, intending to be legally bound hereby, the
parties hereto hereby agree as follows:
1.
Certain
Definitions
.
Capitalized terms used but not
defined herein shall have the respective meanings ascribed to
them in the Merger Agreement. For all purposes of and under this
Agreement, the following terms shall have the following
respective meanings:
(a)
Expiration Date
shall mean the
earlier to occur of (i) such date and time as the Merger
Agreement shall have been validly terminated pursuant to its
terms, or (ii) such date and time as the Merger shall
become effective in accordance with the terms and conditions set
forth in the Merger Agreement.
(b)
Shares
shall mean: (i) all
securities of the Company (including all shares of capital stock
of the Company and all options to acquire shares of capital
stock of the Company) owned by the Stockholder as of the date of
this Agreement, and (ii) all additional securities of the
Company (including all additional shares of capital stock of the
Company and all additional options to acquire shares of capital
stock of the Company ) of which the Stockholder acquires
beneficial ownership during the period commencing with the
execution and delivery of this Agreement until the Expiration
Date.
(c)
Transfer
. A Person shall be deemed
to have effected a Transfer of a security if such
Person directly or indirectly (i) sells, pledges,
encumbers, grants an option with respect to (including any short
sale), establishes an open put equivalent position
within the meaning of
Rule 16a-h
under the 1934 Act, transfers or otherwise disposes of such
security or any interest therein, (ii) enters into an
agreement or commitment providing for the sale of, pledge of,
encumbrance of, grant of an option with respect to (including
any short sale), establishment of a put equivalent
position with respect to, transfer of or other disposition
of such security or any interest therein, or (iii) enters
into any swap or other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the
economic consequences of ownership of any Shares, whether any
such swap or transaction is to be settled by delivery of Shares
or other securities, in cash or otherwise.
2.
Transfer of Shares
.
(a)
Transfer of Shares
.
The
Stockholder hereby agrees that, at all times during the period
commencing with the execution and delivery of this Agreement
until the Expiration Date, the Stockholder shall not cause or
permit any Transfer of any of the Shares to be effected or make
any offer regarding any
B-1
Transfer of any of the Shares; provided, however, that the
Stockholder may Transfer Shares to a family member or trust for
estate planning purposes, provided that, as a condition to any
such Transfer to a family member or trust, the transferee has
agreed with Parent in writing to be bound by the terms of this
Agreement (including granting a Proxy as contemplated hereby)
and to hold such Shares subject to all the terms and provisions
of this Agreement.
(b)
Transfer of Voting Rights
.
The
Stockholder hereby agrees that, at all times commencing with the
execution and delivery of this Agreement until the Expiration
Date, the Stockholder shall not deposit, or permit the deposit
of, any Shares in a voting trust, grant any proxy in respect of
the Shares, or enter into any voting agreement or similar
arrangement, commitment or understanding in a manner
inconsistent with the terms of Section 3 hereof or
otherwise in contravention of the obligations of the Stockholder
under this Agreement, with respect to any of the Shares.
3.
Agreement to Vote Shares
.
Until
the Expiration Date, at every meeting of stockholders of the
Company called with respect to any of the following, and at
every adjournment or postponement thereof, and on every action
or approval by written consent of stockholders of the Company
with respect to any of the following, the Stockholder shall, or
shall cause the holder of record on any applicable record date
to, to the extent not voted by the person(s) appointed under the
Proxy, vote the Shares:
(a) in favor of (i) adoption of the Merger Agreement,
(ii) each of the actions contemplated by the Merger
Agreement, and (iii) any proposal or action that could
reasonably be expected to facilitate the Merger and the other
transactions contemplated by the Merger Agreement;
(b) against any proposal or action that is intended, or
could reasonably be expected to, impede, interfere with, delay,
postpone, discourage or adversely affect the Merger or any of
the other transactions contemplated by the Merger
Agreement; and
(c) against any Acquisition Proposal.
Until the Expiration Date, in the event that any meeting of the
stockholders of the Company is held with respect to any of the
foregoing (and at every adjournment or postponement thereof),
the Stockholder shall, or shall cause the holder of record of
Shares on any applicable record date to, appear at such meeting
or otherwise cause his, her or its Shares to be counted as
present thereat for purposes of establishing a quorum.
4.
Irrevocable Proxy
.
Concurrently
with the execution of this Agreement, the Stockholder agrees to
deliver to Parent a proxy in the form attached hereto as
Exhibit A
(the
Proxy
), which
shall be irrevocable to the fullest extent permissible by
applicable law, with respect to the Shares.
5.
No Ownership Interest
.
Nothing
contained in this Agreement shall be deemed to vest in Parent
any direct or indirect ownership or incidence of ownership of or
with respect to any Shares. All rights, ownership and economic
benefits of and relating to the Shares shall remain vested in
and belong to the Stockholder, and Parent shall have no
authority to exercise any power or authority to direct the
Stockholder in the voting of any of the Shares, except as
otherwise specifically provided herein, or in the performance of
the Stockholders duties or responsibilities as
stockholders of the Company .
6.
No Solicitation
.
The
Stockholder hereby represents and warrants that he or she has
read Section 6.03 of the Merger Agreement and agrees to be
bound by the provisions of such section.
7.
Representations and Warranties of the
Stockholder
.
The Stockholder hereby
represents and warrants to Parent that, as of the date hereof
and at all times until the Expiration Date:
(a) the Stockholder is (and, except to the extent a
Transfer is made pursuant to the proviso in Section 2(a),
will be) the beneficial owner of the shares of capital stock of
the Company, and the options to purchase shares of capital stock
of the Company, set forth on signature page of this Agreement,
with full power to vote or direct the voting of the Shares for
and on behalf of all beneficial owners of the Shares;
(b) the Shares are (and will be) free and clear of any
liens, pledges, security interests, claims, options, rights of
first refusal, co sale rights, charges or other encumbrances of
any kind or nature (each an
Encumbrance
)
(other than restrictions on transfer imposed by applicable
securities Laws);
B-2
(c) the Stockholder does not as of the date of this
Agreement beneficially own any securities of the Company other
than the shares of capital stock of the Company, and options to
purchase shares of capital stock of the Company, set forth on
the signature page of this Agreement;
(d) the Stockholder has (and will have) full power and
authority to make, enter into and carry out the terms of this
Agreement and the Proxy;
(e) the Stockholder agrees that it will not bring,
commence, institute, maintain, prosecute, participate in or
voluntarily aid any action, claim, suit or cause of action, in
law or in equity, in any court or before any Governmental
Authority, which alleges that the execution and delivery of this
Agreement by the Stockholder, either alone or together with the
other Voting Agreements and proxies to be delivered in
connection with the execution of the Merger Agreement, or the
approval of the Merger Agreement by the board of directors of
the Company, breaches any fiduciary duty of the board of
directors of the Company or any member thereof;
(f) the execution, delivery and performance of this
Agreement by the Stockholder does not, and the consummation by
the Stockholder of the transactions contemplated hereby will
not, result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation, modification or
acceleration) (whether after the giving of notice of or the
passage of time or both) under any Applicable Law or any
Contract to which the Stockholder is a party or which is binding
on it, him or her or its, his or her assets and will not result
in the creation of any Lien on any of the assets or properties
of the Stockholder (other than the Shares), in each case except
for such violations, breaches, defaults, terminations,
cancellations, modifications, accelerations or Liens as would
not reasonably be expected to prevent or materially delay the
performance by the Stockholder of any of its obligations under
this Agreement;
(g) this Agreement has been duly executed by the
Stockholder and constitutes the valid and legally binding
obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar
laws and general principles of equity; and
(h) assuming that all consents contemplated by the Merger
Agreement have been obtained, other than filings under the
1934 Act and other than such as, if not made, obtained or
given, would not reasonably be expected to prevent or materially
delay the performance by Stockholder of any of its obligations
under this Agreement, no notices, reports or other filings are
required to be made by the Stockholder with, nor are any
consents, registrations, approvals, permits or authorizations
required to be obtained by the Stockholder from, any
Governmental Authority or any other Person, in connection with
the execution and delivery of this Agreement by the Stockholder.
8.
Consent
.
The Stockholder (not
in his or her capacity as a director or officer of the Company)
consents and authorizes the Company and Parent their respective
affiliates to publish and disclose in the Company Proxy
Statement and other documents filed with the SEC in connection
with the Merger Agreement its identity and ownership of the
Shares and the nature of its commitments, arrangements and
understandings under this Agreement.
9.
Legending of Shares
.
If so
requested by Parent, the Stockholder hereby agrees that the
Shares shall bear a legend stating that they are subject to this
Agreement and to an irrevocable proxy.
10.
Termination
.
This Agreement
shall terminate and be of no further force or effect as of the
Expiration Date.
11.
Stockholder Capacity
.
To the
extent that the Stockholder is an officer or director of the
Company or any of its Subsidiaries, nothing in this Agreement
shall be construed as preventing or otherwise affecting any
actions taken by the Stockholder in his or her capacity as an
officer or director of the Company or any of its Subsidiaries or
from fulfilling the obligations of such office (including the
performance of obligations required by the fiduciary duties of
the Stockholder acting solely in his or her capacity as an
officer or director).
B-3
12.
Miscellaneous
.
(a)
Waiver
.
No waiver by any party
hereto of any condition or any breach of any term or provision
set forth in this Agreement shall be effective unless in writing
and signed by the party waiving such condition or breach. No
failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right,
power or privilege.
(b)
Severability
.
If any term,
provision, covenant or restriction of this Agreement is held by
a court of competent jurisdiction or other Governmental
Authority to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated so long as the economic
or legal substance of the transactions contemplated hereby is
not affected in any manner materially adverse to any party. Upon
such a determination, the parties shall negotiate in good faith
to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby be consummated
as originally contemplated to the fullest extent possible.
(c)
Binding Effect;
Assignment
.
The Stockholder may not assign
this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of Parent, and any
attempted assignment without such prior written approval shall
be void. Subject to the preceding sentence, this Agreement shall
be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
(d)
Amendments
.
This Agreement may
not be modified, amended, altered or supplemented, except upon
the execution and delivery of a written agreement executed by
each of the parties hereto.
(e)
Specific Performance; Injunctive
Relief
.
The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or
remedies provided by Applicable Law. The exercise by a party of
any one remedy will not preclude the exercise of any other
remedy. The parties hereto agree that irreparable damage would
occur to Parent if any provision of this Agreement were not
performed by the Stockholder in accordance with the terms hereof
and that Parent shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement by the
Stockholder or to enforce specifically the performance of the
terms and provisions hereof in any federal court located in the
State of Delaware or any Delaware state court, in addition to
any other remedy to which Parent is entitled at law or in equity.
(f)
Governing Law
.
This Agreement
shall be governed by and construed in accordance with the laws
of the State of Delaware, without regard to the conflicts of law
rules of such state.
(g)
Waiver of Jury Trial
.
EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
(h)
Entire Agreement
.
This
Agreement and the Proxy constitute the entire agreement between
the parties with respect to the subject matter of this Agreement
and supersede all prior agreements and understandings, both oral
and written, between the parties with respect to the subject
matter of this Agreement. No provision of this Agreement is
intended to confer any rights, benefits, remedies, obligations,
or liabilities hereunder upon any Person other than the parties
hereto and their respective successors and assigns.
B-4
(i)
Notices
.
All notices, requests
and other communications to any party hereunder shall be in
writing (including facsimile transmission) and shall be given,
if to Parent, to:
Pioneer Holding Corp.
c/o Vector
Capital Corporation
456 Montgomery Street, 19th Floor
San Francisco, CA 94104
Attention: Amish Mehta
Facsimile No.:
415-293-5100
Copy to:
OMelveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, California 94111
Attention: Steve L. Camahort,
Facsimile No.:
(415) 984-8701
If to the Stockholder: To the address for notice set
forth on the signature page hereof or to such other address or
facsimile number address as such party may hereafter specify for
the purpose by notice to the other parties hereto. All such
notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if
received prior to 5:00 p.m. on a Business Day in the place
of receipt. Otherwise, any such notice, request, or
communication shall be deemed to have been received on the next
succeeding Business Day in the place of receipt.
(j)
Further Assurances
.
The
Stockholder (in his or her capacity as such) shall execute and
deliver any additional certificate, instruments and other
documents, and take any additional actions, as Parent may deem
necessary or desirable, in the reasonable opinion of Parent, to
carry out and effectuate the purpose and intent of this
Agreement.
(k)
Headings
.
The headings
contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
(l)
Counterparts
.
This Agreement
may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
(m)
Rules of Construction
.
The
Parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the Parties, and no
presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. For all purposes hereof, the terms
include, includes and
including shall be deemed followed by the words
without limitation. The words hereof,
hereto, hereby, herein, and
hereunder and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not
to any particular provision of this Agreement. The definitions
contained in this Agreement are applicable to the singular as
well as the plural forms of such terms.
(n)
Expenses
.
All costs and
expenses incurred in connection with this Agreement shall be
paid by the party incurring such cost or expense.
[Signature page follows]
B-5
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be duly executed as of the date first written above.
PIONEER HOLDING CORP.
STOCKHOLDER:
Signature
Print Address
Telephone
Facsimile No.
Shares beneficially owned:
shares
of Company capital stock
shares
of Company capital stock issuable upon the exercise of
outstanding options
B-6
EXHIBIT A
TO FORM OF VOTING AGREEMENT
FORM OF
PROXY
The undersigned stockholder of Printronix, Inc., a Delaware
corporation (the
Company
), hereby irrevocably
(to the fullest extent permitted by law) appoints Amish Mehta
and Dewey Chambers as the sole and exclusive attorneys-in-fact
and proxies of the undersigned, with full power of substitution
and resubstitution, to vote and exercise all voting and related
rights (to the full extent that the undersigned is entitled to
do so) with respect to all of the shares of capital stock of the
Company that now are or hereafter may be beneficially owned by
the undersigned, and any and all other shares or securities of
the Company issued or issuable in respect thereof on or after
the date hereof (collectively, the
Shares
) in
accordance with the terms of this irrevocable proxy (this
Proxy
). The Shares beneficially owned by the
undersigned stockholder of the Company as of the date of this
Proxy are listed on the final page of this Proxy. Upon the
execution of this Proxy by the undersigned, any and all prior
proxies given by the undersigned with respect to any Shares are
hereby revoked and the undersigned hereby agrees not to grant
any subsequent proxies with respect to the Shares until after
the Expiration Date (as defined below).
This Proxy is irrevocable (to the fullest extent permitted by
law), is coupled with an interest and is granted pursuant to
that certain Voting Agreement of even date herewith by and
between Pioneer Holding Corp., a Delaware corporation
(
Parent
), and the undersigned stockholder
(the
Voting Agreement
), and is granted in
consideration of Parent entering into that certain Agreement and
Plan of Merger (the
Merger Agreement
), by and
among the Company, Parent and Pioneer Sub Corp., a Delaware
corporation and wholly-owned subsidiary of Parent
(
Merger Sub
), which provides for the merger
of Merger Sub with and into the Company in accordance with its
terms (the
Merger
). As used herein, the term
Expiration Date
shall mean the earlier to
occur of (i) six months after such date and time as the
Merger Agreement shall have been validly terminated pursuant to
its terms, or (ii) such date and time as the Merger shall
become effective in accordance with the terms and conditions set
forth in the Merger Agreement.
The attorneys and proxies named above, and each of them, are
hereby authorized and empowered by the undersigned, at any time
prior to the Expiration Date, to act as the undersigneds
attorneys and proxies to vote the Shares, and to exercise all
voting, consent and similar rights of the undersigned with
respect to the Shares (including, without limitation, the power
to execute and deliver written consents) at every annual,
special, adjourned or postponed meeting of stockholders of the
Company and in every written consent in lieu of such meeting:
(i) in favor of (i) adoption of the Merger Agreement,
(ii) each of the actions contemplated by the Merger
Agreement, and (iii) any proposal or action that would
reasonably be expected to facilitate the Merger and the other
transactions contemplated by the Merger Agreement;
(ii) against any proposal or action that is intended, or
could reasonably be expected to, impede, interfere with, delay,
postpone, discourage or adversely affect the Merger or any of
the other transactions contemplated by the Merger
Agreement; and
(iii) against any Acquisition Proposal.
The attorneys-in-fact and proxies named above may not exercise
this Proxy on any other matter except as provided above.
Any obligation of the undersigned hereunder shall be binding
upon the successors and assigns of the undersigned.
B-7
This Proxy is irrevocable (to the fullest extent permitted by
law). This Proxy shall terminate, and be of no further force and
effect, automatically upon the Expiration Date.
Dated: ,
2007
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Signature of Stockholder:
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Print Name of Stockholder:
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Shares beneficially owned:
shares
of Company capital stock
shares
of Company capital stock issuable upon the exercise of
outstanding options
B-8
OPINION OF HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL
ADVISORS, INC.
October 1,
2007
The Special Committee of the Board of Directors
Printronix, Inc.
14600 Myford Road
Irvine, CA 92623
Dear Members of the Special Committee:
We understand that Printronix, Inc., (the Company)
intends to enter into an Agreement and Plan of Merger (the
Merger Agreement) among the Company, Pioneer Holding
Corp. (Parent) and Pioneer Sub Corp., a wholly-owned
subsidiary of Parent (Merger Subsidiary). Pursuant
to the Merger Agreement, Merger Subsidiary will merge with the
Company (the Merger), each outstanding share of
common stock, par value $0.01 per share (Share), of
the Company will be converted into the right to receive $16.00
in cash (the Merger Consideration) and the Company
will become a wholly-owned subsidiary of Parent. You have
advised us that, immediately prior to the Merger, members of the
Companys senior management (the Continuing
Stockholders) will contribute all or a portion of the
Shares they own to Parent in exchange for shares of common stock
of Parent.
You have requested that Houlihan Lokey Howard & Zukin
Financial Advisors, Inc. (Houlihan Lokey) provide an
opinion (the Opinion) to the Special Committee (the
Committee) of the Board of Directors of the Company
as to whether, as of the date hereof, the Merger Consideration
to be received by the holders of Shares other than the
Continuing Stockholders and their affiliates in the Merger is
fair to such holders from a financial point of view.
In connection with this Opinion, we have made such reviews,
analyses and inquiries as we have deemed necessary and
appropriate under the circumstances. Among other things, we have:
1. reviewed the Companys Annual Reports to
Stockholders on
Form 10-K
for the fiscal years ended March 31, 2007, March 31,
2006, and March 31, 2005, and quarterly reports on Form
10-Q
for the
quarter ended June 29, 2007, which the Companys
management has identified as containing the most current
financial statements available;
2. spoken with certain members of the management of the
Company regarding the operations, financial condition, future
prospects and projected operations and performance of the
Company and regarding the Merger;
3. reviewed: (a) the Merger Agreement dated as of
October 1, 2007, including as Exhibit A thereto, the
form of voting agreement to be entered into by each of the
directors, in their capacity as stockholders, and executive
officers of the Company in connection with the Merger Agreement;
and (b) the Limited Guarantee dated as of October 1,
2007 to be entered into by Vector Capital Partners IV, L.P. in
connection with the Merger Agreement;
4. reviewed financial forecasts and projections prepared by
the management of the Company with respect to the Company for
the fiscal years ended March 31, 2008 through 2010;
C-1
5. reviewed the historical market prices and trading volume
for the Companys publicly traded securities for the past
three years and those of certain publicly traded companies which
we deemed relevant;
6. reviewed certain other publicly available financial data
for certain companies that we deemed relevant and publicly
available transaction prices and premiums paid in other
transactions that we deemed relevant; and
7. conducted such other financial studies, analyses and
inquiries as we have deemed appropriate.
We have relied upon and assumed, without independent
verification, the accuracy and completeness of all data,
material and other information furnished, or otherwise made
available, to us, discussed with or reviewed by us, or publicly
available, and do not assume any responsibility with respect to
such data, material and other information. In addition,
management of the Company has advised us, and we have assumed,
that the financial forecasts and projections reviewed by us have
been reasonably prepared in good faith on bases reflecting the
best currently available estimates and judgments of such
management as to the future financial results and condition of
the Company, and we express no opinion with respect to such
forecasts and projections or the assumptions on which they are
based. We have relied upon and assumed, without independent
verification, that there has been no material change in the
assets, liabilities, financial condition, results of operations,
business or prospects of the Company since the date of the most
recent financial statements provided to us, and that there is no
information or any facts that would make any of the information
reviewed by us incomplete or misleading. Our opinion addresses
only the fairness, from a financial point of view, of the Merger
Consideration to be received by the holders of Shares 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.
We have 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 are true and correct, (b) each party to
all such agreements will 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 will
be satisfied without waiver thereof, and (d) the Merger
will 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. We also have relied upon and assumed, without
independent verification, that (i) the Merger will 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 will
be obtained and that no delay, limitations, restrictions or
conditions will be imposed or amendments, modifications or
waivers made that would result in the disposition of any
material portion of the assets of the Company or otherwise have
an adverse effect on the Company or any expected benefits of the
Merger.
Furthermore, in connection with this Opinion, we have not been
requested to make, and have not made, any physical inspection or
independent appraisal of any of the assets, properties or
liabilities (fixed, contingent, derivative, off-balance-sheet or
otherwise) of the Company or any other party, nor were we
provided with any such appraisal. We express no opinion
regarding the liquidation value of any entity. We have
undertaken no independent analysis of any potential or actual
litigation, regulatory action, possible unasserted claims or
other contingent liabilities, to which the Company 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 the Company is or may be a party
or is or may be subject and, at your direction and with your
consent, this Opinion makes no assumption concerning, and
therefore does 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. We
have not undertaken, and are under no obligation, to update,
revise, reaffirm or withdraw this Opinion, or otherwise comment
on or consider events occurring after the date hereof.
This Opinion is furnished for the use and benefit of the
Committee in connection with its consideration of the Merger and
is not intended to, and does not, confer any rights or remedies
upon any other person, and is not intended to be used, and may
not be used, for any other purpose, without our express written
consent. This Opinion should not be construed as creating any
fiduciary duty on Houlihan Lokeys part to any party. This
Opinion is not intended to
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be, and does not constitute, a recommendation to the Committee,
the Board of Directors, any security holder or any other person
as to how to act or vote with respect to the Merger.
In the ordinary course of business, certain of our affiliates,
as well as investment funds in which they may have financial
interests, may acquire, hold or sell, long or short positions,
or trade or otherwise effect transactions, in debt, equity, and
other securities and financial instruments (including loans and
other obligations) of, or investments in, the Company or any
other party that may be involved in the Merger and their
respective affiliates or any currency or commodity that may be
involved in the Merger. The Company has agreed to indemnify us
for certain liabilities arising out of our engagement.
Houlihan Lokey and its affiliates have in the past provided, are
currently providing and in the future may provide, investment
banking, financial advisory and other financial services to the
Company, Parent and their affiliates, for which Houlihan Lokey
and its affiliates have received, and would expect to receive,
compensation. In that regard, Houlihan Lokey Howard &
Zukin Capital, Inc., an affiliate of Houlihan Lokey, has acted
as financial advisor to the Committee in connection with the
Merger and will receive a fee for such services, a substantial
portion of which is contingent upon the consummation of the
Merger. In addition, we will receive a fee for rendering this
Opinion, which is not contingent upon the successful completion
of the Merger.
We have not been requested to opine as to, and this Opinion does
not address: (i) the underlying business decision of the
Committee, the Company, 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
this 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 the Company or any other
party other than those set forth in this Opinion, (iv) the
relative merits of the Merger as compared to any alternative
business strategies that might exist for the Company or any
other party or the effect of any other transaction in which the
Company or any other party might engage, (v) the tax or
legal consequences of the Merger to either the Company, 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
the Companys or any other partys security holders
vis-à-vis any other class or group of the Companys or
such other partys security holders (including without
limitation the allocation of any consideration amongst or within
such classes or groups of security holders), (vii) whether
or not the Company, 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
the Company 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 is intended in matters that require legal,
regulatory, accounting, insurance, tax or other similar
professional advice. It is assumed that such opinions, counsel
or interpretations have been or will be obtained from the
appropriate professional sources. Furthermore, we have relied,
with your consent, on the assessment by the Committee, the
Company and their respective advisers, as to all legal,
regulatory, accounting, insurance and tax matters with respect
to the Company and the Merger.
Based upon and subject to the foregoing, and in reliance
thereon, it is our opinion that, as of the date hereof, the
Merger Consideration to be received by the holders of Shares
other than the Continuing Stockholders and their affiliates in
the Merger is fair to such holders from a financial point of
view.
Very truly yours,
HOULIHAN LOKEY HOWARD & ZUKIN
FINANCIAL ADVISORS, INC.
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SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
§ 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words stock and share
mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock
corporation; and the words depository receipt mean a
receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263, or § 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of
the constituent corporation surviving a merger if the merger did
not require for its approval the vote of the stockholders of the
surviving corporation as provided in subsection (f) of
§ 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or designated as
a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc.
or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of
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incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the
certificate of incorporation contains such a provision, the
procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw
such stockholders demand for appraisal
D-2
and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and
(d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed 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 the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware, or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After determining the stockholders entitled to an
appraisal, the Court shall appraise the shares, determining
their fair value exclusive of any element of value arising from
the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In
determining such fair value, the Court shall take into account
all relevant factors. In determining the fair rate of interest,
the Court may consider all relevant factors, including the rate
of interest which the surviving or resulting corporation would
have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the
appraisal proceeding, the Court may, in its discretion, permit
discovery or other pretrial proceedings and may proceed to trial
upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and
who has submitted such stockholders certificates of stock
to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
D-3
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
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