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OMB APPROVAL
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OMB Number:
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3235-0059
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Expires:
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August 31, 2004
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Estimated average burden
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14.73
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
x
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Filed by a Party other than the Registrant
o
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Check the appropriate box:
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o
Preliminary Proxy Statement
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o
Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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x
Definitive Proxy Statement
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o
Definitive Additional Materials
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o
Soliciting Material Pursuant to §240.14a-12
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Advanced Energy Industries, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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x
No fee required.
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o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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o
Fee paid previously with preliminary materials.
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o
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held May 7, 2003
To Our Stockholders:
The 2003 Annual Meeting of Stockholders of
Advanced Energy Industries, Inc. (Advanced Energy) will be held
on Wednesday, May 7, 2003, at 10:00 a.m., at Advanced
Energys corporate offices, 1625 Sharp Point Drive,
Fort Collins, Colorado 80525. At the meeting, you will be
asked to vote on the following matters:
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1. Election of six directors. The Nominating
Committee of the Board of Directors of Advanced Energy has
proposed that the stockholders re-elect the following directors:
Douglas S. Schatz, Richard P. Beck, Trung T. Doan, Arthur A.
Noeth, Elwood Spedden and Gerald M. Starek.
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2. Approval of the 2003 Stock Option Plan.
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3. Approval of the 2003 Non-Employee
Directors Stock Option Plan.
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4. Approval of an amendment to the Employee
Stock Purchase Plan to increase the total number of shares of
common stock issuable under the plan from 200,000 shares to
400,000 shares.
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5. Ratification of the appointment of KPMG
LLP as independent auditors of Advanced Energy for 2003.
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6. Any other matters of business properly
brought before the meeting.
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Each of these matters is described in detail in
the accompanying proxy statement, dated April 4, 2003.
If you owned common stock of Advanced Energy at
the close of business on March 17, 2003, you are entitled
to receive this notice and to vote at the meeting.
All stockholders are cordially invited to attend
the meeting in person. However, to assure that your voice is
heard, you are urged to return the enclosed proxy card as
promptly as possible in the postage prepaid envelope provided.
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By Order of the Board of Directors
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Jay L. Margulies
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Secretary
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Fort Collins, Colorado
April 4, 2003
YOUR VOTE IS IMPORTANT
Date: April 4, 2003
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To:
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Our Owners
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From:
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Douglas S. Schatz
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Subject:
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Invitation to Our 2003 Annual Meeting of
Stockholders
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Please come to our 2003 Annual Meeting of
Stockholders to learn about Advanced Energy, what we have
accomplished in the last year and what we hope to achieve in
2003. The meeting will be held:
Wednesday, May 7, 2003
10:00 a.m.
Advanced Energys Corporate Offices
1625 Sharp Point Drive
Fort Collins, Colorado 80525
This proxy statement describes the matters that
management of Advanced Energy intends to present to the
stockholders at the annual meeting. Accompanying this proxy
statement is Advanced Energys 2002 Annual Report to
Stockholders and a form of proxy. All voting on matters
presented at the annual meeting will be by paper proxy or by
presence in person, in accordance with the procedures described
in this proxy statement. Instructions for voting are included in
the proxy statement. Your proxy may be revoked at any time prior
to the meeting in the manner described in this proxy statement.
I look forward to seeing you at the meeting.
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Douglas S. Schatz
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Chairman and Chief Executive Officer
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This proxy statement and the accompanying proxy
card are first being sent to stockholders on or about
April 4, 2003.
GENERAL
This proxy statement and the accompanying
materials are being sent to stockholders of Advanced Energy as
part of a solicitation for proxies for use at the 2003 Annual
Meeting of Stockholders. The Board of Directors of Advanced
Energy is making this solicitation for proxies. By delivering
the enclosed proxy card, you will appoint each of
Douglas S. Schatz and Michael El-Hillow as your agent and
proxy to vote your shares of common stock at the meeting. In
this proxy statement, proxy holders refers to
Messrs. Schatz and El-Hillow in their capacities as your
agents and proxies.
Advanced Energys principal executive
offices are located at 1625 Sharp Point Drive,
Fort Collins, Colorado 80525. The telephone number is
(970) 221-4670.
Proposals
We intend to present five proposals to the
stockholders at the meeting:
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1. Election of six directors. The Nominating
Committee of the Board of Directors of Advanced Energy has
proposed that the stockholders re-elect the following directors:
Douglas S. Schatz, Richard P. Beck, Trung T.
Doan, Arthur A. Noeth, Elwood Spedden and Gerald M.
Starek.
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2. Approval of the 2003 Stock Option Plan.
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3. Approval of the 2003 Non-Employee
Directors Stock Option Plan.
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4. Approval of an amendment to the Employee
Stock Purchase Plan to increase the total number of shares of
common stock issuable under the plan from 200,000 shares to
400,000 shares.
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5. Ratification of the appointment of KPMG
LLP as independent auditors of Advanced Energy for 2003.
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We do not know of any other matters to be
submitted to the stockholders at the meeting. If any other
matters properly come before the meeting, the proxy holders
intend to vote the shares they represent as the Board of
Directors may recommend.
Record Date and Share Ownership
If you owned shares of Advanced Energy common
stock in your name as of the close of business on Monday,
March 17, 2003, you are entitled to vote on the proposals
that are presented at the meeting. On that date, which is
referred to as the record date for the meeting,
32,177,067 shares of Advanced Energy common stock were
issued and outstanding and were held by approximately
880 stockholders of record, according to the records of
American Stock Transfer & Trust Company, Advanced
Energys transfer agent.
Voting Procedures
Each share of Advanced Energy common stock that
you hold entitles you to one vote on each of the proposals that
are presented at the annual meeting. The inspector of the
election will determine whether or not a quorum is present at
the annual meeting. A quorum will be present at the meeting if a
majority of the shares of common stock entitled to vote at the
meeting are represented at the meeting, either by proxy or by
the person who owns the shares. Advanced Energys transfer
agent will deliver a report to the inspector of election in
advance of the annual meeting, tabulating the votes cast by
proxies returned to the transfer agent. The inspector of
election will tabulate the final vote count, including the votes
cast in person and by proxy at the meeting.
If a broker holds your shares, this proxy
statement and a proxy card have been sent to the broker. You may
have received this proxy statement directly from your broker,
together with instructions as to how to direct the broker
concerning how to vote your shares. Under the rules for
NASDAQ-listed companies, brokers cannot vote on any of the
proposals without instructions from you. If you do not give your
broker instructions or discretionary authority to vote your
shares on one or more of the proposals being considered at the
meeting and your broker returns the proxy card without voting on
a proposal, your shares will be recorded as broker
1
non-votes with respect to the proposals on
which the broker does not vote. Broker non-votes will be counted
as present for purposes of determining a quorum, but will not be
counted as shares entitled to vote. Under Advanced Energys
Bylaws, most stockholder actions taken at a meeting where a
quorum is present are by a majority of the votes cast, excluding
abstentions. If you abstain from voting on a proposal, your
shares will be counted as present at the meeting, for purposes
of determining a quorum, and entitled to vote, but will have no
effect on the outcome of the voting on the proposals described
in this proxy statement.
The following table reflects the vote required
for each proposal and the effect of broker non-votes and
abstentions on the vote, assuming a quorum is present at the
meeting:
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Effect of Broker
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Non-Votes and
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Proposal
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Vote Required
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Abstentions
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Election of directors
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The six nominees who receive the most votes will
be elected
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No effect
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Approval of the 2003 Stock Option Plan
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Majority of the shares present at the meeting (by
proxy or in person) and voting For or
Against the proposal
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No effect
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Approval of the 2003 Non-Employee Directors
Stock Option Plan
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Majority of the shares present at the meeting (by
proxy or in person) and voting For or
Against the proposal
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No effect
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Approval of an amendment to the Employee Stock
Purchase Plan to increase the total number of shares of common
stock issuable under the plan from 200,000 shares to
400,000 shares
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Majority of the shares present at the meeting (by
proxy or in person) and voting For or
Against the proposal
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No effect
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Ratification of the appointment of KPMG LLP as
independent auditors
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Majority of the shares present at the meeting (by
proxy or in person) and voting For or
Against the proposal
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No effect
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If any other proposals are properly presented to
the stockholders at the meeting, the number of votes required
for approval will depend on the nature of the proposal.
Generally, under Delaware law the number of votes which may be
required to approve a proposal is either a majority of the
shares of common stock represented at the meeting and entitled
to vote, or a majority of the shares of common stock represented
at the meeting and casting votes either for or against the
matter being considered. The enclosed proxy card gives
discretionary authority to the proxy holders to vote on any
matter not included in this proxy statement that is properly
presented to the stockholders at the annual meeting.
Costs of Solicitation
Advanced Energy will bear the costs of soliciting
proxies in connection with the annual meeting. In addition to
soliciting your proxy by this mailing, proxies may be solicited
personally or by telephone or facsimile by some of Advanced
Energys directors, officers and employees, without
additional compensation. We may reimburse our transfer agent,
American Stock Transfer & Trust Company, brokerage
firms and other persons representing beneficial owners of
Advanced Energy common stock for their expenses in sending
proxies to the beneficial owners.
Delivery and Revocability of Proxies
You may vote your shares by marking the enclosed
proxy card and mailing it to American Stock Transfer &
Trust Company in the enclosed postage prepaid envelope. If you
mail your proxy, please allow sufficient time for it to be
received in advance of the annual meeting.
If you deliver your proxy and change your mind
before the meeting, you may revoke your proxy by delivering
notice to Jay Margulies, our Secretary, at Advanced Energy
Industries, Inc., 1625 Sharp Point
2
Drive, Fort Collins, Colorado 80525, stating
that you wish to revoke your proxy or by delivering another
proxy with a later date. You may vote your shares by attending
the meeting in person but, if you have delivered a proxy before
the meeting, you must revoke it before the meeting begins.
Attending the meeting will not automatically revoke your
previously-delivered proxy.
Delivery of Documents to Stockholders Sharing
an Address
If two or more stockholders share an address,
Advanced Energy may send a single copy of this proxy statement
and other soliciting materials, as well as the 2002 Annual
Report to Stockholders, to the shared address, unless Advanced
Energy has received contrary instructions from one or more of
the stockholders sharing the address. If a single copy has been
sent to multiple stockholders at a shared address, Advanced
Energy will deliver a separate proxy card for each stockholder
entitled to vote. Additionally, Advanced Energy will send an
additional copy of this proxy statement, other soliciting
materials and the 2002 Annual Report to Stockholders, promptly
upon oral or written request by any stockholder to Investor
Relations, Advanced Energy Industries, Inc.,
1625 Sharp Point Drive, Fort Collins,
Colorado 80525; telephone number (970) 221-4670. If
any stockholders sharing an address receive multiple copies of
this proxy statement, other soliciting materials and the 2002
Annual Report to Stockholders and would prefer in the future to
receive only one copy, such stockholders may make such request
to Investor Relations at the same address or telephone number.
Common Stock Ownership by Management and Other
Stockholders
The following table sets forth the beneficial
ownership of Advanced Energy common stock as of March 17,
2003 by:
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each person known to us to beneficially own more
than 5% of the outstanding common stock;
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each director and nominee for director;
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each named executive officer identified on
page 12; and
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the current directors and executive officers as a
group.
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Name of Stockholder
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Shares Beneficially Owned
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Percent Owned
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Douglas S. Schatz, Chairman, Chief Executive
Officer and President
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11,037,782
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(1)
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34.3
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%
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Capital Group International, Inc.; Capital
Guardian Trust Company
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4,317,340
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(2)
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13.4
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%
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Franklin Resources, Inc. and Franklin
Advisers, Inc.
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3,730,274
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(3)
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11.6
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%
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Richard P. Beck, Director
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101,074
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(4,5)
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*
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Trung T. Doan, Director
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8,000
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(4)
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*
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Arthur A. Noeth, Director
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12,500
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(4)
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*
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Elwood Spedden, Director
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14,500
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(4)
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*
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Gerald M. Starek, Director
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49,600
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(4,6)
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*
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Arthur W. Zafiropoulo, Director
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42,889
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(4)
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*
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Michael El-Hillow, Executive Vice President of
Finance and Administration and Chief Financial Officer
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27,779
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(4)
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*
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Richard A. Scholl, Senior Vice President and
Chief Technical Officer
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243,114
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(4)
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*
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Brenda M. Scholl, Senior Vice President and
General Manager of Power Strategic Business Unit
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32,653
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(4)
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*
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Charles S. Rhoades, Senior Vice President and
General Manager of Control Systems and Instrumentation
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0
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All current executive officers and directors, as
a group (19 persons)
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11,671,655
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(7)
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36.3
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%
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3
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*
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Less than 1% of the outstanding shares of our
common stock
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(1)
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Includes 10,857,782 shares held by the
family trust of Mr. Schatz and his wife. Mr. Schatz is
a trustee of a charitable foundation that is the record holder
of 180,000 shares of common stock of the issuer. The three
other trustees of the charitable foundation are members of
Mr. Schatz immediate family. Accordingly,
Mr. Schatz may be deemed to share with the other trustees
voting and dispositive power with respect to the charitable
foundations 180,000 shares. Mr. Schatz disclaims
beneficial ownership of the 180,000 shares held by the
charitable foundation, which shares are included in the table.
Mr. Schatz address is c/o Advanced Energy
Industries, Inc., 1625 Sharp Point Drive, Fort Collins,
Colorado 80525.
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(2)
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Information as to the amount and nature of
beneficial ownership was obtained from Amendment No. 6 to
the Schedule 13G filed with the SEC on February 10,
2003 by Capital Group International, Inc. and Capital Guardian
Trust Company. According to the Schedule 13G, Capital Group
International, Inc. is the parent holding company of a group of
investment management companies that hold investment power and,
in some cases, voting power over the securities reported in the
Schedule 13G, and Capital Guardian Trust Company is a bank
that may be deemed to beneficially own common stock as a result
of serving as an investment manager of various institutional
accounts. Capital Group International, Inc. reports sole voting
power over 3,233,510 shares of common stock and sole
dispositive power over 4,317,340 shares of common stock.
Capital Guardian Trust Company reports sole voting power over
2,839,110 shares of common stock and sole dispositive power
over 3,922,940 shares. The address for each of Capital
Guardian and Capital International is 11100 Santa Monica
Boulevard, Los Angeles, CA 90025.
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(3)
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Information as to the amount and nature of
beneficial ownership was obtained from Amendment No. 2 to
the Schedule 13G filed with the SEC on January 29,
2003 by Franklin Resources, Inc. and Franklin Advisers, Inc.
According to the Schedule 13G, Franklin Resources, Inc. is
a parent holding company for direct and indirect investment
advisory subsidiaries, including Franklin Advisers, Inc., and
the shares reported are beneficially owned by one or more open-
or closed-end investment companies or other managed accounts.
Franklin Advisors, Inc. reports sole voting and dispositive
power over 3,201,800 shares, or 100%. The address of each
of Franklin Resources, Inc. and Franklin Advisors, Inc. is One
Franklin Parkway, San Mateo, CA 94403.
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(4)
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Includes beneficial ownership of the following
numbers of shares that may be acquired within 60 days of
March 17, 2003 pursuant to stock options granted or assumed
by Advanced Energy:
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Beck
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2,500
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Doan
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5,000
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Noeth
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12,500
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Spedden
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14,500
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Starek
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23,144
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Zafiropoulo
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10,000
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El-Hillow
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25,779
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Richard A. Scholl
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33,495
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Brenda M. Scholl
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12,361
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(5)
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The shares reported in the table do not include
200 shares held in joint tenancy by Mr. Becks
wife and a person unrelated to Mr. Beck. Mr. Beck
disclaims beneficial ownership of these shares.
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(6)
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The shares reported in the table do not include
2,100 shares held by Mr. Stareks wife.
Mr. Starek disclaims beneficial ownership of these shares.
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(7)
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The shares reported in the table include
235,832 shares that the 19 executive officers and
directors collectively have the right to acquire within
60 days of March 17, 2003 pursuant to stock options
granted or assumed by Advanced Energy.
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4
PROPOSAL NO. 1
ELECTION OF DIRECTORS
A board of six directors is to be elected at the
annual meeting. The Nominating Committee of the Board of
Directors has nominated for election, the persons listed below.
In the event that any nominee is unable to or declines to serve
as a director at the time of the meeting, the proxy holders will
vote in favor of a nominee designated by the Nominating
Committee of the Board of Directors to fill the vacancy. We are
not aware of any nominee who will be unable or who will decline
to serve as a director. The term of office of each person
elected as a director at the meeting will continue from the end
of the meeting until the next Annual Meeting of Stockholders
(expected to be held in the year 2004), or until a successor has
been elected and qualified.
Nominees
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Director
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Principal Occupation and Business
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Name
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Age
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Since
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Experience During Past Five Years
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Douglas S. Schatz(1)
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57
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1981
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Douglas S. Schatz is a co-founder of Advanced
Energy and has been its Chairman and Chief Executive Officer
since its incorporation in 1981. Until July 1999, he also served
as President. In March 2001, Mr. Schatz was reappointed as
President. From September 2002 until February 2003, Mr. Schatz
served as interim Chief Operating Officer. Since December 1995,
Mr. Schatz has also served as a director of Advanced Power
Technology, Inc., a publicly held company that provides high
power, high voltage and high performance semiconductors and
power modules.
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Richard P. Beck(4)
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69
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1995
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Richard P. Beck joined Advanced Energy in March
1992 as Vice President and Chief Financial Officer and became
Senior Vice President in February 1998. In October 2001,
Mr. Beck retired from the position of Chief Financial
Officer, but remained as a Senior Vice President until May 2002.
Mr. Beck is Chairman of the Board of Applied Films
Corporation, a publicly held manufacturer of flat panel display
equipment. He is also a director of Photon Dynamics, Inc., a
publicly held manufacturer of flat panel display test equipment
and is chairman of its audit committee. Mr. Beck is also a
director of TTM Technologies, Inc., a publicly held manufacturer
of printed circuit boards, and serves as chairman of its audit
committee.
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Trung T. Doan(1,3,4)
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44
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2000
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Trung T. Doan has been employed by Micron
Technology, Inc., a provider of semiconductor memory solutions,
since 1988. He has served as Microns Vice President of
Process Development since July 1997. Mr. Doan was a non-employee
director of Engineering Measurements Company, until it was
acquired by Advanced Energy in January 2001. Mr. Doan also
is a director of NuTool, Inc., a privately held semiconductor
equipment manufacturer.
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Arthur A. Noeth(1,2,3)
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67
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1997
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Arthur A. Noeth retired in 1998. From 1993 to
1998, Mr. Noeth was President of the Implant Center, a
provider of ion implant services to the electronics industry.
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5
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Director
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Principal Occupation and Business
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Name
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Age
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Since
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Experience During Past Five Years
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Elwood Spedden(1,2,3)
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65
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1995
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Elwood Spedden has been the Chief Executive
Officer of Photon Dynamics, Inc., a publicly held manufacturer
of flat panel display test equipment, since January 2003. In
January 2002, Mr. Spedden joined the Board of Directors of
Photon. From July 1996 to June 1997, he was a vice president of
KLA- Tencor Semiconductor, a manufacturer of automatic test
equipment used in the fabrication of semiconductors. From 1989
through March 1996, Mr. Spedden was with Credence Systems
Corporation, a manufacturer of automatic test equipment used in
the fabrication of semiconductors, in various senior management
positions including President, Chief Executive Officer and Vice
Chairman of the Board of Directors.
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Gerald M. Starek(1,2,4)
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61
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1998
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Gerald M. Starek joined the Board of Directors of
Advanced Energy following its acquisition of RF Power Products.
Mr. Starek had been a non-employee director of RF Power
Products since February 1994. Mr. Starek founded Silicon
Valley Group, Inc., a supplier of automated wafer processing
equipment for the semiconductor industry. He served as Silicon
Valley Groups Chairman from September 1984 to September
1991 and as Vice Chairman from September 1991 to April 1993.
Mr. Starek is a director and serves on the compensation
committee of AML Communications, Inc., a publicly held
manufacturer of components for wireless communications systems.
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(1)
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Member of the Nominating Committee.
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(2)
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Member of the Audit and Finance Committee.
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(3)
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Member of the Compensation Committee.
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(4)
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Member of the Governance Committee.
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Richard A. Scholl and Brenda M. Scholl are
married. There are no other family relationships between any of
the directors, nominees or executive officers of Advanced Energy.
Required Vote
The six nominees receiving the highest number of
affirmative (
FOR
) votes at the meeting will be elected as
directors. Stockholders do not have the right to cumulate their
votes for the election of directors. Unless otherwise
instructed, the proxy holders will vote the proxies received by
them FOR each of the six nominees. Votes withheld from a nominee
will be counted for purposes of determining whether a quorum is
present, but will not be counted as an affirmative vote for such
nominee.
The Board of Directors recommends a vote
FOR the election of each of the six nominees named
above.
Director Compensation
On February 12, 2003, the Board of Directors
approved a change in the non-employee directors
compensation effective after the annual meeting of the
Companys shareholders in May 2003. This is the first
6
increase in directors compensation since
Advanced Energy went public in 1995 and is based on market data
relative to Board compensation at companies that have profiles
similar to Advanced Energy.
Cash compensation for each non-employee director
will be as follows:
|
|
|
|
|
$15,000 annual retainer paid quarterly in July,
October, February and April,
|
|
|
|
$3,000 per full board meeting; if a board
meeting is more than one day, each board member will receive
$3,000 for each additional day;
|
|
|
|
$1,500 per telephonic meeting which requires
a board vote;
|
|
|
|
$3,000 per Audit and Finance Committee
meeting for the Chairman and $1,500 per meeting for each
committee member; and
|
|
|
|
$1,500 per meeting for all other Committee
Chairmen (Nominating, Governance and Compensation) and
$750 per meeting for each committee member.
|
Previously, non-employee directors received no
retainer, meeting fees of $3,000 for each Board of
Directors meeting attended, other than telephonic
meetings, and $300 for each committee meeting attended.
Advanced Energy is also asking for approval of a
new Non-Employee Directors Stock Option Plan. Under this
plan, options will be awarded and vest as follows:
|
|
|
|
|
15,000 options on initial election or appointment
to the board, which vest 5,000 on election and 5,000 on each of
the next two anniversary dates; and
|
|
|
|
5,000 options annually on the date of re-election
at the annual meeting, to vest on date of grant.
|
Currently, under the 1995 Non-Employee Directors
Stock Option Plan, non-employee directors receive 7,500 options
on initial election, 2,500 of which vest on grant and 2,500 on
each of the second and third anniversary. They also receive
2,500 options annually that vest on the third anniversary of the
grant. The 1995 Plan will be terminated and no additional stock
options will be granted under it, if the new Directors
Stock Option Plan is approved and implemented. See
Proposal No. 3 Approval of the 2003
Non-Employee Directors Stock Option Plan, beginning
on page 19 of this proxy statement.
As of March 17, 2003, options to purchase an
aggregate of 104,500 shares were outstanding under the 1995
Directors Plan.
Board Meetings
The Board of Directors held seven meetings in
2002, including one telephonic meeting. In 2002, the Board of
Directors had an Audit and Finance Committee, a Nominating
Committee and a Compensation Committee. In 2003, the Board of
Directors formed a Governance Committee. In 2002, each incumbent
director attended at least 75% of the meetings of the Board of
Directors and at least 75% of the meetings of the committees on
which he served.
Audit and Finance Committee Meetings
The Audit and Finance Committee consists of
Messrs. Starek (Chairman), Noeth and Spedden, all of whom
are independent directors under
Rule 4200(a)(14) of the National Association of Securities
Dealers listing standards. None of the members of the
Audit and Finance Committee, nor any member of his immediate
family, has been an officer or employee of Advanced Energy or
any of its subsidiaries. The Audit and Finance Committee met
five times in 2002.
7
Report of the Audit and Finance
Committee
The Audit and Finance Committee is governed by a
written charter, included as Appendix A to this proxy
statement, that was originally adopted in 1999, and updated in
2003. The Committee is responsible for, among other things:
|
|
|
|
|
selecting Advanced Energys independent
auditors;
|
|
|
|
approving the scope, fees and results of the
audit engagement;
|
|
|
|
determining the independence and performance of
Advanced Energys independent and internal auditors;
|
|
|
|
approving in advance, any non-audit services and
fees charged by the independent auditors;
|
|
|
|
evaluating the comments made by the independent
auditor with respect to accounting procedures and internal
controls and determining whether to bring such comments to the
attention of Advanced Energys management;
|
|
|
|
reviewing the internal accounting procedures and
controls with Advanced Energys financial and accounting
staff and approving any significant changes; and
|
|
|
|
establishing and maintaining procedures for, and
a policy of, open access to the members of the Audit Committee
by the employees of and consultants to Advanced Energy to enable
the employees and consultants to bring to the attention of the
Audit Committee concerns held by such employees and consultants
regarding the financial reporting of the corporation, and to
report potential misconduct to the Audit Committee.
|
The Committee also conducts financial reviews
with Advanced Energys independent accountants prior to the
release of financial information in the Companys Forms
10-K and 10-Q.
Management has primary responsibility for
Advanced Energys financial statements and the overall
reporting process, including systems of internal controls. The
independent auditors audit the annual financial statements
prepared by management, express an opinion as to whether those
financial statements fairly present the financial position,
results of operations and cash flows of Advanced Energy in
conformity with generally accepted accounting principles and
discuss with the Committee any issues they believe should be
raised.
The Committee has reviewed Advanced Energys
audited financial statements and met separately with both
management and the auditors to discuss and review those
financial statements and reports prior to issuance. In addition,
the Committee has discussed with the independent auditors the
matters outlined in Statement on Accounting Standards
No. 61 (Communication with Audit Committees) to the extent
applicable and received the written disclosures and the letter
from the independent auditors required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit
Committees). The Committee has also discussed with the
independent auditors their independence.
Based on our review and discussion of the
foregoing matters and information, the Committee recommended to
the Board of Directors that the audited financial statements be
included in Advanced Energys 2002 Annual Report on
Form 10-K.
|
|
|
THE AUDIT AND FINANCE COMMITTEE
|
|
|
Gerald M. Starek, Chairman
|
|
Arthur A. Noeth
|
|
Elwood Spedden
|
8
Nominating Committee Meeting
The Nominating Committee consists of
Messrs. Noeth (Chairman), Doan, Schatz, Spedden and Starek.
The Nominating Committee is responsible for:
|
|
|
|
|
establishing and administering the procedures for
nominating persons to serve as directors;
|
|
|
|
identifying and recommending candidates for
nomination to the Board of Directors;
|
|
|
|
considering any nominees recommended by
stockholders; and
|
|
|
|
determining the appropriate number of authorized
directors of Advanced Energy.
|
The Nominating Committee did not meet in 2002,
but acted once by unanimous written consent. If you are a
stockholder and wish to recommend a candidate for nomination to
the Board of Directors, you should submit your recommendation in
writing to the Nominating Committee, in care of the Secretary of
Advanced Energy at 1625 Sharp Point Drive, Fort Collins,
Colorado 80525. Your recommendation should include your name and
address, the number of shares of Advanced Energy common stock
that you own, the name of the person you recommend for
nomination, the reasons for your recommendation, a summary of
the persons business history and other qualifications as a
director of Advanced Energy and whether such person has agreed
to serve, if elected, as a director of Advanced Energy. Please
also see the information under Proposals of
Stockholders on page 25 of this proxy statement.
Compensation Committee Meetings
The Compensation Committee met once in 2002. The
membership of the Compensation Committee currently consists of
Messrs. Noeth (Chairman), Doan and Spedden. The
Compensation Committee is responsible for recommending salaries,
incentives and other compensation for directors and officers of
Advanced Energy, administering Advanced Energys incentive
compensation and benefit plans for officers and recommending to
the Board of Directors policies relating to such compensation
and benefit plans. None of the members of the Compensation
Committee is or has been an officer or employee of Advanced
Energy or any of its subsidiaries.
REPORT ON EXECUTIVE COMPENSATION
Compensation Policies
One of the primary goals in setting compensation
policies is to maintain competitive, progressive programs to
attract, retain and motivate high-caliber executives, foster
teamwork and maximize the long-term success of Advanced Energy
by appropriately rewarding such individuals for their
achievements. Another goal is to provide an incentive to
executives to focus efforts on long-term strategic goals for
Advanced Energy by closely aligning their financial interests
with stockholder interests. To attain these goals Advanced
Energys executive compensation program was designed to
include base salary, annual incentives and long-term incentives.
In formulating and administering the individual
elements of Advanced Energys executive compensation
program, planning, implementing and achieving long-term
objectives are emphasized to establish performance objectives,
evaluate performance and determine actual incentive awards.
Compensation Components
The base salaries of executive officers are
established after review of relevant data of other executives
with similar responsibilities from published industry reports
and surveys of similarly situated companies. The market reviewed
is comprised of similarly sized high technology companies within
and outside Advanced
9
Energys industry as described and reported
in the Radford Executive Compensation Survey
(Radford). There are approximately 90 companies in
the Radford universe used by the Compensation Committee.
The base salaries of the Chief Executive Officer,
Chief Financial Officer and Chief Operating Officer (who was
hired on February 10, 2003), are at approximately 80% of
the market data discussed above. All other executives base
salaries are at levels competitive with the market base salary
of executive officers in similar positions.
In March and June 2001, each of Advanced
Energys executive officers agreed to salary reductions
totaling up to 20% of base salary. Effective January 1,
2002, the executive officers base salaries returned to
March 2001 levels. This accounts for the higher base salary in
2002 when compared with 2001.
The Compensation Committee determines the range
of possible annual bonuses for individual executives by
reviewing a competitive market survey for executives at similar
levels and similarly sized companies as described and reported
by Radford. Actual bonus payments within this range are tied to
meeting specific corporate and executive performance targets.
Advanced Energys revenue increased 23% from 2001 to 2002.
However, adjusting for acquisitions made in 2002, the 2002
revenue amount would have been essentially the same as 2001.
Advanced Energy also reported a net loss of $41.4 million
in 2002.
While certain executives individual
performance targets were met in 2002, the Committee believes
that Advanced Energys financial performance, principally
due to a malaise in the economy in general and the semiconductor
industry in particular, makes the payment of an annual bonus to
its executives unwarranted.
The Committee believes that having a higher
percentage of the Chief Executive Officer, Chief Financial
Officer and Chief Operating Officers cash compensation
derived from their annual incentive payments, when compared to
competitive positions and other executives within Advanced
Energy, is prudent given Advanced Energys recent financial
results and the fact that they are Advanced Energys major
decision makers.
When Advanced Energy does achieve financial
targets that may qualify executives for annual bonuses, the
Committee may award bonuses to the Chief Executive Officer,
Chief Financial Officer and Chief Operating Officer at levels
that may bring their total cash compensation at least to an
amount competitive with market compensation for similar
positions.
The Board of Directors grants stock options under
Advanced Energys stock option plans to give executives a
stake in the long-term performance of Advanced Energy and to
focus their attention on maximizing stockholder value. In
granting options, the Compensation Committee may consider
several factors, including an executives individual
performance, potential contributions to Advanced Energy, the
vesting rates of existing stock options, if any, and options
granted to executives in similar positions using the market data
discussed above. Vesting schedules also may be used to encourage
the long-term retention of executive officers. Options are
granted with exercise prices equal to or greater than the fair
market value of the common stock subject to the option on the
date of grant, as reported on the NASDAQ National Market.
Compensation of the Chief Executive
Officer
The compensation of the Chief Executive Officer,
Douglas S. Schatz, is based on the policies and procedures
applicable generally to executive officers of Advanced Energy.
In determining Mr. Schatz base salary and bonus,
compensation levels for other chief executive officers in high
technology firms within and outside the industry were examined.
The salary paid to Mr. Schatz for 2002 was below the
40th percentile of compensation paid to chief executive
officers of companies of similar size in similar industries,
based on the Radford data, because the Committee believes that
Mr. Schatz should receive a higher percentage of his cash
compensation from his annual incentive payments.
10
Given the extended downturn in the semiconductor
industry and the negative financial impact it has had on the
operating results of Advanced Energy, the Committee determined
that Mr. Schatz base salary would not be changed in
2003 nor would he receive a bonus for 2002. In February 2003,
the Board awarded Mr. Schatz 100,000 stock options
that vest 25,000 per year over the next four years. This is
the first time that Mr. Schatz has received options.
Effect of Section 162(m) of the Internal
Revenue Code
Section 162(m) of the Internal Revenue Code
of 1986 (the Tax Code) generally limits to
$1 million the corporate deduction for compensation paid to
certain executive officers, unless the compensation is
performance-based (as defined in
Section 162(m)). Each of the Board of Directors and the
Compensation Committee has carefully considered the potential
impact of this limitation on executive compensation and has
concluded in general that the best interests of Advanced Energy
and the stockholders will be served if certain of Advanced
Energys stock-based long-term incentives qualify as
performance-based compensation within the meaning of
Section 162(m). It is the intention of the Board of
Directors and Compensation Committee that, so long as it is
consistent with the Compensation Committees overall
compensation objectives, virtually all executive compensation
will be deductible for federal income tax purposes.
|
|
|
THE COMPENSATION COMMITTEE
|
|
|
Arthur A. Noeth, Chairman
|
|
Trung Doan
|
|
Elwood Spedden
|
11
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other
Compensation
The following table sets forth the compensation
earned in 2002 by Advanced Energys Chief Executive Officer
and the four highest-paid executive officers, other than the
Chief Executive Officer, based on salary and bonus in 2002.
These five officers are referred to as the named executive
officers. Each executive officer is appointed annually by
the Board of Directors. The table also sets forth compensation
earned in 2002 by Advanced Energys former Executive Vice
President and Chief Operating Officer.
Summary Compensation Table
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
|
|
|
|
|
|
|
|
|
Compensation Awards
|
|
All Other
|
|
|
|
|
Annual Compensation
|
|
|
|
Annual
|
|
|
|
|
|
|
Securities Underlying
|
|
Compensation
|
Name and Principal Position
|
|
Year
|
|
Salary($)(1)
|
|
Bonus($)
|
|
Options(#)
|
|
($)(2)
|
|
|
|
|
|
|
|
|
|
|
|
Douglas S. Schatz
|
|
|
2002
|
|
|
|
390,675
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,200
|
|
|
Chairman of the Board,
|
|
|
2001
|
|
|
|
340,653
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5,100
|
|
|
Chief Executive Officer
|
|
|
2000
|
|
|
|
373,517
|
|
|
|
187,600
|
|
|
|
0
|
|
|
|
4,800
|
|
|
and President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael El-Hillow
|
|
|
2002
|
|
|
|
240,524
|
|
|
|
0
|
|
|
|
50,000
|
|
|
|
37,700
|
(4)
|
|
Executive Vice President
|
|
|
2001
|
|
|
|
35,350
|
|
|
|
0
|
|
|
|
50,000
|
|
|
|
25,000
|
(4)
|
|
and Chief Financial Officer(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard A. Scholl
|
|
|
2002
|
|
|
|
244,434
|
|
|
|
0
|
|
|
|
40,000
|
|
|
|
1,100
|
|
|
Senior Vice President and
|
|
|
2001
|
|
|
|
230,312
|
|
|
|
0
|
|
|
|
21,000
|
|
|
|
5,100
|
|
|
Chief Technical Officer
|
|
|
2000
|
|
|
|
230,125
|
|
|
|
92,400
|
|
|
|
10,000
|
|
|
|
4,800
|
|
Brenda M. Scholl
|
|
|
2002
|
|
|
|
166,110
|
|
|
|
0
|
|
|
|
35,000
|
|
|
|
1,005
|
|
|
Senior Vice President and
|
|
|
2001
|
|
|
|
130,822
|
|
|
|
30,000
|
|
|
|
6,000
|
|
|
|
4,500
|
|
|
General Manager of
|
|
|
2000
|
|
|
|
144,390
|
|
|
|
13,000
|
|
|
|
2,000
|
|
|
|
4,700
|
|
|
Power Strategic Business Unit(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles S. Rhoades
|
|
|
2002
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
40,000
|
|
|
|
27,446
|
(7)
|
|
Senior Vice President and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manager of Control Systems
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Instrumentation(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James F. Gentilcore
|
|
|
2002
|
|
|
|
271,333
|
|
|
|
0
|
|
|
|
45,000
|
|
|
|
120,000
|
(8)
|
|
Former Executive Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,100
|
|
|
and Chief Operating Officer(8)
|
|
|
2001
|
|
|
|
220,676
|
|
|
|
0
|
|
|
|
47,000
|
|
|
|
5,100
|
|
|
|
|
2000
|
|
|
|
220,242
|
|
|
|
93,500
|
|
|
|
10,000
|
|
|
|
4,800
|
|
|
|
(1)
|
In March and June 2001, each of Advanced
Energys executive officers agreed to salary reductions
totaling up to 20% of base salary. Effective January 1,
2002, the executive officers base salaries returned to
March 2001 levels.
|
|
(2)
|
Reflects amounts contributed by Advanced Energy
to each of the named executive officers under Advanced
Energys 401(k) profit sharing plan.
|
|
(3)
|
Mr. El-Hillow was appointed Chief Financial
Officer on October 10, 2001 and was appointed Executive
Vice President in February 2003.
|
|
(4)
|
Mr. El-Hillow was paid a relocation bonus.
|
|
(5)
|
Mrs. Scholl was appointed Senior Vice
President and General Manager of Power Strategic Business Unit
in October 2002.
|
|
(6)
|
Mr. Rhoades joined Advanced Energy in
September 2002, and was appointed Senior Vice President and
General Manager of Control Systems and Instrumentation in
October 2002.
|
|
(7)
|
Mr. Rhoades was paid a relocation bonus.
|
12
|
|
(8)
|
Mr. Gentilcore left Advanced Energy on
November 29, 2002 and was paid severance benefits upon his
separation.
|
Option Grants in 2002
The following table sets forth information as to
stock options granted in 2002 to those named executive officers
who received options. No stock options were granted to
Mr. Schatz in 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants
|
|
Potential Realizable
|
|
|
|
|
Value at Assumed
|
|
|
|
|
Percent of
|
|
|
|
Annual Rates of Stock
|
|
|
Number of
|
|
Total Options
|
|
|
|
Price Appreciation for
|
|
|
Securities
|
|
Granted to
|
|
|
|
Option Term
|
|
|
Underlying Options
|
|
Employees in
|
|
Exercise
|
|
Expiration
|
|
|
Name
|
|
Granted(#)
|
|
Fiscal Year
|
|
Price($/Sh)
|
|
Date
|
|
5%($)
|
|
10%($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael El-Hillow
|
|
|
12,500
|
|
|
|
0.65
|
%
|
|
|
24.90
|
|
|
|
2/12/2012
|
|
|
|
195,743
|
|
|
|
496,052
|
|
|
|
|
12,500
|
|
|
|
0.65
|
%
|
|
|
38.55
|
|
|
|
4/16/2012
|
|
|
|
303,049
|
|
|
|
767,985
|
|
|
|
|
12,500
|
|
|
|
0.65
|
%
|
|
|
17.85
|
|
|
|
7/18/2012
|
|
|
|
140,322
|
|
|
|
355,604
|
|
|
|
|
12,500
|
|
|
|
0.65
|
%
|
|
|
7.70
|
|
|
|
10/17/2012
|
|
|
|
60,531
|
|
|
|
153,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
total
|
|
|
2.60
|
% total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard A. Scholl
|
|
|
10,000
|
|
|
|
0.52
|
%
|
|
|
24.90
|
|
|
|
2/12/2012
|
|
|
|
156,595
|
|
|
|
396,842
|
|
|
|
|
10,000
|
|
|
|
0.52
|
%
|
|
|
38.55
|
|
|
|
4/16/2012
|
|
|
|
242,439
|
|
|
|
614,388
|
|
|
|
|
10,000
|
|
|
|
0.52
|
%
|
|
|
17.85
|
|
|
|
7/18/2012
|
|
|
|
112,258
|
|
|
|
284,483
|
|
|
|
|
10,000
|
|
|
|
0.52
|
%
|
|
|
7.70
|
|
|
|
10/17/2012
|
|
|
|
48,425
|
|
|
|
122,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
total
|
|
|
2.08
|
% total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brenda M. Scholl
|
|
|
6,250
|
|
|
|
0.33
|
%
|
|
|
24.90
|
|
|
|
2/12/2012
|
|
|
|
97,872
|
|
|
|
248,026
|
|
|
|
|
6,250
|
|
|
|
0.33
|
%
|
|
|
38.55
|
|
|
|
4/16/2012
|
|
|
|
151,524
|
|
|
|
383,992
|
|
|
|
|
6,250
|
|
|
|
0.33
|
%
|
|
|
17.85
|
|
|
|
7/18/2012
|
|
|
|
70,161
|
|
|
|
177,802
|
|
|
|
|
6,250
|
|
|
|
0.33
|
%
|
|
|
7.70
|
|
|
|
10/17/2012
|
|
|
|
30,266
|
|
|
|
76,699
|
|
|
|
|
10,000
|
|
|
|
0.52
|
%
|
|
|
14.50
|
|
|
|
12/11/2012
|
|
|
|
91,190
|
|
|
|
231,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
total
|
|
|
1.84
|
% total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles S. Rhoades
|
|
|
30,000
|
|
|
|
1.56
|
%
|
|
|
7.70
|
|
|
|
10/17/2012
|
|
|
|
145,275
|
|
|
|
368,155
|
|
|
|
|
10,000
|
|
|
|
0.52
|
%
|
|
|
14.50
|
|
|
|
12/11/2012
|
|
|
|
91,190
|
|
|
|
231,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
total
|
|
|
2.08
|
% total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James F. Gentilcore
|
|
|
15,000
|
|
|
|
0.78
|
%
|
|
|
24.90
|
|
|
|
2/12/2012
|
|
|
|
234,892
|
|
|
|
595,263
|
|
|
|
|
15,000
|
|
|
|
0.78
|
%
|
|
|
38.55
|
|
|
|
4/16/2012
|
|
|
|
363,658
|
|
|
|
921,582
|
|
|
|
|
15,000
|
|
|
|
0.78
|
%
|
|
|
17.85
|
|
|
|
7/18/2012
|
|
|
|
168,387
|
|
|
|
426,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
total
|
|
|
2.34
|
% total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All options reflected in the table above were
granted under Advanced Energys 1995 Stock Option Plan.
Each option vests as to one-fourth of the underlying shares on
the first anniversary of its grant date and as to an additional
one-sixteenth of the underlying shares quarterly thereafter
until fully vested. The exercise price of each option is equal
to the fair market value of the common stock on the date of
grant, as reported on the NASDAQ National Market.
13
Aggregated Option Exercises in 2002 and Option
Values at December 31, 2002
The following table sets forth information as to
options granted by Advanced Energy under the 1995 Stock Option
Plan that were exercised by the named executive officers during
2002 and options held by the named executive officers at
December 31, 2002. Mr. Schatz did not exercise or hold
any options during 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Securities Underlying
|
|
Value of Unexercised
|
|
|
|
|
|
|
Unexercised Options
|
|
In-the-Money Options
|
|
|
Shares Acquired
|
|
|
|
at Fiscal Year-End(#)
|
|
at Fiscal Year-End($)
|
Name
|
|
on Exercise(#)
|
|
Value Realized($)
|
|
Exercisable/Unexercisable
|
|
Exercisable/Unexercisable(1)
|
|
|
|
|
|
|
|
|
|
Michael El-Hillow
|
|
|
0
|
|
|
|
0
|
|
|
|
12,500/87,500
|
|
|
$
|
0/$62,750
|
|
Richard A. Scholl
|
|
|
0
|
|
|
|
0
|
|
|
|
24,120/56,880
|
|
|
$
|
29,075/$50,200
|
|
Brenda M. Scholl
|
|
|
0
|
|
|
|
0
|
|
|
|
7,910/38,972
|
|
|
$
|
8,600/$31,375
|
|
Charles S. Rhoades
|
|
|
0
|
|
|
|
0
|
|
|
|
0/40,000
|
|
|
$
|
0/$150,600
|
|
James F. Gentilcore(2)
|
|
|
5,294
|
|
|
$
|
40,440
|
|
|
|
53,340/0
|
|
|
$
|
20,475/$0
|
|
|
|
(1)
|
Reflects the aggregate market value of the common
stock acquired at year-end 2002, minus the exercise price.
|
|
(2)
|
Mr. Gentilcore left Advanced Energy on
November 29, 2002. Upon his separation Mr. Gentilcore
forfeited 81,660 unvested stock options.
|
Compensation Committee Interlocks and Insider
Participation
The current members of the Compensation Committee
are Messrs. Noeth, Spedden and Doan. None of such persons
is or has been an officer or employee of Advanced Energy, nor
has any of such persons had a direct or indirect interest in any
business transaction with Advanced Energy involving an amount in
excess of $60,000.
During 2002, no executive officer of Advanced
Energy served as a member of the Board of Directors or
Compensation Committee of another company that has any executive
officers or directors serving on Advanced Energys Board of
Directors or its Compensation Committee.
Equity Compensation Plan Information
The following table presents information as of
the end of Advanced Energys fiscal year 2002 with respect
to equity compensation plans (exclusive of the proposed approval
of the 2003 Stock Option Plan pursuant to Proposal 2; the
proposed approval of the 2003 Non-Employee Directors Stock
Option Plan pursuant to Proposal 3; and the proposed
increase to the shares reserved for issuance under the Employee
Stock Purchase Plan pursuant to Proposal 4):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
|
|
|
|
Number of Securities to
|
|
Weighted-average
|
|
Number of Securities Remaining
|
|
|
be Issued Upon Exercise
|
|
Exercise Price of
|
|
Available for Future Issuance Under
|
|
|
of Outstanding Options,
|
|
Outstanding Options,
|
|
Equity Compensation Plans (Excluding
|
|
|
Warrants and Rights
|
|
Warrants and Rights
|
|
Securities Reflected in Column (a))
|
|
|
|
|
|
|
|
Equity compensation plans approved by security
holders(1)
|
|
|
2,483,596
|
(2)
|
|
$
|
23.12
|
(2)
|
|
|
2,286,781
|
|
Equity compensation plans not approved by
security holders
|
|
|
1,103,275
|
|
|
$
|
28.49
|
|
|
|
96,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,586,871
|
|
|
|
|
|
|
|
2,383,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Consists of the 1995 Employee Stock Option Plan,
which expires in June 2003, the Non-Employee Directors Stock
Option Plan, which expires in September 2005, and the Employee
Stock Purchase Plan.
|
|
(2)
|
Does not include purchase rights accruing under
the Employee Stock Purchase Plan for offerings beginning after
October 31, 2002, the number and exercise price of which
will not be determinable until the expiration of such offering
periods.
|
14
STOCK PERFORMANCE GRAPH
The following graph reflects the cumulative total
stockholder return on the Advanced Energy common stock since
December 31, 1997, compared with each of the NASDAQ
Composite and the Philadelphia Semiconductor Index (SOXX).
Historical stock price performance is not necessarily indicative
of any future stock price performance.
CERTAIN TRANSACTIONS WITH MANAGEMENT
Advanced Energy leases its executive offices and
certain manufacturing facilities in Fort Collins, Colorado
from Prospect Park East Partnership and from Sharp Point
Properties, LLC, and has secured future leasing rights for a
parcel of land from Sharp Point Properties, LLC. Aggregate
payments under such leases for 2002 totaled approximately
$2.8 million. Douglas S. Schatz, Chief Executive Officer
and Chairman of the Board of Advanced Energy, holds a 26.67%
member interest in each of these leasing entities.
Mr. Schatz did not participate in the negotiations of these
leases. At the time of the negotiations, Advanced Energy
compared the lease rates and other terms of similar properties
in the Fort Collins area. Advanced Energy believes that the
lease rates and other terms of the leases with Prospect Park
East Partnership and Sharp Point Properties, LLC are no less
favorable to Advanced Energy than could have been obtained from
a third-party lessor of similar property.
Advanced Energy leases a condominium in
Breckenridge, Colorado from AEI Properties, a partnership in
which Mr. Schatz holds a 60% interest. Advanced Energy uses
the condominium to provide rewards and incentives to its
customers, suppliers and employees. Aggregate payments to AEI
Properties for 2002 totaled approximately $67,000. The rental
rate was determined based upon a comparison of rental rates and
other lease terms of similar properties in the area. Advanced
Energy believes that the terms of the lease with AEI Properties
is no less favorable than could have been obtained from a third
party lessor for similar property.
Advanced Energy charters an airplane from time to
time from Lochland Aviation, Inc., a company owned by
Mr. Schatz. Aggregate charter payments to Lochland in 2002
were approximately $103,000. Advanced Energy believes that the
terms of the charters are no less favorable than could have been
obtained from third-party charter service companies.
15
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act
of 1934 requires Advanced Energys executive officers and
directors and persons who own more than ten percent of the
outstanding common stock (reporting persons) to file
with the Securities and Exchange Commission an initial report of
ownership on Form 3 and changes in ownership on Forms 4 and
5. The reporting persons are also required to furnish Advanced
Energy with copies of all forms they file. Based solely on its
review of the copies of forms received by it and written
representations from the reporting persons, Advanced Energy
believes that each of the reporting persons timely filed all
reports required to be filed in 2002 or with respect to
transactions in 2002.
PROPOSAL NO. 2
APPROVAL OF THE 2003 STOCK OPTION
PLAN
The Board of Directors of Advanced Energy is
submitting for stockholder approval the 2003 Stock Option Plan
(the 2003 Plan). On February 12, 2003, the Board of
Directors approved and adopted the 2003 Plan, subject to
approval by the stockholders of Advanced Energy. The 2003 Plan
provides for an aggregate of 3,250,000 shares that may be
issued under the plan as stock options, restricted stock awards
and stock appreciation rights. The 3,250,000 shares
represents an incremental increase of approximately
1,250,000 shares to be reserved because the 1995 Plan,
which terminates in June 2003 and will expire upon approval of
this plan, still has approximately 2,000,000 shares
reserved for issuance.
The Board of Directors has determined that it is
advisable to continue to provide stock-based incentive
compensation to Advanced Energys employees, thereby
continuing to align the interests of such individuals with those
of the stockholders, and that awards are an effective means of
providing such compensation. In addition, the 2003 Plan gives
the Compensation Committee the ability to qualify cash and
non-cash compensation paid to executive officers as
performance-based compensation, thereby preserving Advanced
Energys ability to take a tax deduction with respect to
such compensation.
General Nature of the 2003 Plan
The principal purposes of the 2003 Plan are to
provide incentives for employees to further the growth,
development and financial success of Advanced Energy by
personally benefiting through the ownership of Advanced
Energys common stock, and to obtain and retain the
services of such individuals who are considered essential to the
long term success of Advanced Energy through the grant or
issuance of options, restricted stock and stock appreciation
rights (collectively, Awards).
The principal features of the 2003 Plan are
summarized below, but the summary is qualified in its entirety
by reference to the 2003 Plan itself, which is included as
Appendix B to this proxy statement.
Shares Reserved
Under the 2003 Plan, the aggregate number of
shares of common stock that may be issued upon the exercise of
options or any other Award is 3,250,000 shares.
On March 17, 2003, the average of the high
and low price for a share of Advanced Energys common stock
on the NASDAQ Stock Market was $8.60.
The shares of common stock available for issuance
under the 2003 Plan are previously authorized and unissued
shares. The 2003 Plan provides for appropriate adjustments in
the number of shares subject to the 2003 Plan and to outstanding
Awards thereunder in the event of a merger, consolidation,
reorganization, recapitalization, stock dividend, stock split,
reverse stock split, separation, liquidation or other change in
the corporate structure or capitalization affecting Advanced
Energys shares. Available for future issuance under the
2003 Plan are (i) shares subject to expired, surrendered or
unexercisable options; (ii) shares which are forfeited; and
(iii) shares retained by Advanced Energy upon the exercise
of an option to satisfy the related withholding taxes.
16
Administration
The 2003 Plan is administered by the Board of
Directors with recommendations from the Compensation Committee,
consisting of at least two members of the Board of Directors who
are independent directors as defined by Rule 4200(a)(14) of
the National Association of Securities Dealers listing
standards.
The administrator is authorized to determine the
individuals who will receive Awards (the Participants), fix the
number of shares that each Participant may purchase, to
determine the exercise price of the awards, whether options are
to be incentive stock options (ISOs) or non-qualified stock
options (NSOs), and to set the terms and conditions of each
option, including the period over which the Award becomes
exercisable, and all other matters relating to the
administration and operation of the 2003 Plan. The administrator
is also authorized to suspend or discontinue the 2003 Plan or
revise and amend it in any respect whatsoever; provided,
however, that without approval of Advanced Energys
stockholders no revision or amendment shall change the number of
shares issuable, or effectively reduce the exercise price of any
outstanding option under the 2003 Plan.
Eligibility
Awards under the 2003 Plan may be granted to any
employee of Advanced Energy, provided that no individual may
receive aggregate Awards under this plan that exceed 25% of the
number of shares reserved for issuance.
Awards Under the 2003 Plan
The 2003 Plan provides that the administrator may
grant options, both ISOs within the meaning of Section of 422 of
the Internal Revenue Code and options which do not qualify as
ISOs within the meaning of Section 422 of the Internal
Revenue Code or NSOs, restricted stock and stock appreciation
rights. Each award will be set forth in a separate written
agreement.
Fair market value means the closing sale price of
a share on such date as reported on the principal exchange or
market on which shares are then listed or admitted for trading.
The exercise price of a NSO granted under the
2003 Plan may not be less than the fair market value of a share
on the date of the option grant, and usually will become
exercisable (at the discretion of the administrator) in one or
more installments after the grant date. NSOs may not be granted
for any term exceeding 10 years after the grant date.
ISOs will be designed to comply with the
provisions of the Internal Revenue Code and will be subject to
certain restrictions contained in the Internal Revenue Code.
Among such restrictions, ISOs must have an exercise price not
less than the fair market value of a share on the date of the
option grant, may only be granted to employees, must expire
within a specified period of time following the optionees
termination of employment, and must be exercised within
10 years after the date of grant; but may be subsequently
modified to disqualify them from treatment as ISOs. In the case
of an ISO granted to an individual who owns stock possessing at
least 10% of the combined voting power of all classes of
Advanced Energy, the 2003 Plan provides that the exercise price
must be at least 110% of the fair market value of a share on the
date of grant and the ISO must expire no later than the fifth
anniversary of the date of its grant. The aggregate fair market
value determined at the time of grant of shares with respect to
which an ISO is first exercisable by a Participant during any
calendar year cannot exceed $100,000.
Restricted stock may be awarded to a person
meeting the eligibility requirements discussed above. In
general, restricted stock may not be sold, or otherwise
transferred until vested. Holders of restricted stock, unlike
recipients of options, will have voting rights and will receive
dividends if declared by Advanced Energy, prior to vesting. The
terms of all stock appreciation rights are determined by the
2003 Plan administrator.
Stock appreciation rights may be awarded to a
person meeting the eligibility requirements discussed above. In
general, stock appreciation rights award a Participant the right
to receive in cash the amount that the
17
fair market value of a share exceeds a stated
exercise price. The terms of all stock appreciation rights are
determined by the 2003 Plan administrator.
Terms of Awards
The dates on which Awards under the 2003 Plan
first become exercisable and on which they expire will be set
forth in individual Award agreements. These agreements generally
will provide that Awards expire upon termination of the
Participants employment, although the administrator may
provide that such Awards continue to be exercisable following a
termination, or because of the Participants death,
disability or otherwise.
Generally, the exercise price may be paid in
cash, by check, or in cash equivalent. At the discretion of the
administrator, the exercise price may be paid by tender of
shares of Advanced Energy stock having a fair market value not
less than the exercise price.
Certain Federal Income Tax
Consequences
The federal income tax consequences of the 2003
Plan under current federal income tax law are summarized in the
following discussion which deals with the general tax principles
applicable to the 2003 Plan, and is intended for general
information only. In addition, the tax consequences described
below are subject to the limitations of Internal Revenue Code
Section 162(m), as discussed in further detail below.
Alternative minimum tax and other federal taxes and foreign,
state and local income taxes are not discussed, and may vary
depending on individual circumstances and from locality to
locality.
For federal income tax purposes, the recipient of
NSOs granted under the 2003 Plan will not have taxable income
upon the grant of the option, nor will Advanced Energy then be
entitled to any deduction. Generally, upon exercise of NSOs the
optionee will realize ordinary income, and Advanced Energy will
be entitled to a deduction, in an amount equal to the difference
between the option exercise price and the fair market value of
the stock at the date of exercise.
An optionee generally will not recognize taxable
income upon either the grant or exercise of an ISO. However, the
amount by which the fair market value of the shares at the time
of exercise exceeds the exercise price will be an item of
tax preference for the optionee. Generally, upon the sale
or other taxable disposition of the shares of common stock
acquired upon exercise of an ISO, the optionee will recognize
income taxable as capital gains in an amount equal to the
excess, if any, of the amount realized in such disposition over
the option exercise price, provided that no disposition of the
shares has taken place within either (a) two years from the
date of grant of the ISO or (b) one year from the date of
exercise. If the shares of stock are sold or otherwise disposed
of before the end of the one-year and two-year periods specified
above, the difference between the ISO exercise price and the
fair market value of the shares on the date of exercise
generally will be taxable as ordinary income; the balance of the
amount realized from such disposition, if any, generally will be
taxed as capital gain. If the shares of stock are disposed of
before the expiration of the one-year and two-year periods and
the amount realized is less than the fair market value of the
shares at the date of exercise, the optionees ordinary
income generally is limited to the excess, if any, of the amount
realized in such disposition over the option exercise price
paid. Advanced Energy (or other employer corporation) generally
will be entitled to a tax deduction with respect to an ISO only
to the extent the optionee has ordinary income upon sale or
other disposition of the shares of stock.
An option will only qualify as an ISO to the
extent that the aggregate fair market value of the shares with
respect to which the option becomes exercisable for the first
time in any calendar year is equal to or less than $100,000. For
purposes of this rule, the fair market value of shares shall be
determined as of the date the ISO is granted. To the extent an
ISO is exercisable for shares in excess of this $100,000
limitation, the excess shares shall be taxable under the rules
for NSOs described above.
A Participant to whom restricted stock is issued
will not have taxable income upon issuance and Advanced Energy
will not then be entitled to a deduction, unless an election is
made under Section 83(b) of the Internal Revenue Code.
However, when restrictions on shares of restricted stock lapse,
such that the
18
shares are no longer subject to repurchase by us,
the Participant will realize ordinary income and we will be
entitled to a deduction in an amount equal to the fair market
value of the shares at the date such restrictions lapse, less
the purchase price. If an election is made under
Section 83(b) with respect to restricted stock, the
employee will realize ordinary income at the date of issuance
equal to the difference between the fair market value of the
shares at that date less the purchase price therefore and
Advanced Energy will be entitled to a deduction in the same
amount.
No taxable income is generally recognized by the
Participant upon the receipt of a stock appreciation right, but
upon exercise of the stock appreciation right the cash received
generally will be taxable as ordinary income to the Participant
in the year of such exercise. Advanced Energy generally will be
entitled to a compensation deduction for the same amount that
the Participant recognizes as ordinary income.
Under Internal Revenue Code Section 162(m),
in general, income tax deductions of publicly-traded companies
may be limited to the extent total compensation (including base
salary, annual bonus, stock option exercises and nonqualified
benefits paid in 1994 and thereafter) for certain executive
officers exceeds $1 million in any one taxable year.
However, under Internal Revenue Code Section 162(m), the
deduction limit does not apply to certain
performance-based compensation established by an
independent compensation committee which conforms to certain
restrictive conditions stated under the Internal Revenue Code
and related regulations. The 2003 Plan has been structured with
the intent that Awards granted under the 2003 Plan may meet the
requirements for performance-based compensation and
Internal Revenue Code Section 162(m), at the
administrators discretion. Restricted stock granted under
the 2003 Plan may qualify as performance-based under
Internal Revenue Code Section if it vests based solely upon the
performance criteria.
The foregoing summarizes the principal United
States federal income tax consequences to Advanced Energy and to
optionees who are residents in the United States. The
summary is based on the current provisions of the Tax Code and
the regulations thereunder and on Advanced Energys
understanding, in consultation with its legal counsel, of the
current administrative practices of the Internal Revenue
Service. Participants have been advised to obtain independent
advice from their own tax advisors.
Required Vote
Approval of the proposed 2003 Stock Option Plan
requires the affirmative (
FOR
) vote of a majority of the
shares of common stock cast on the matter. For purposes of
determining the number of votes cast on the matter, only those
cast For or Against are included.
Abstentions and broker non-votes are not included.
The Board of Directors recommends a vote
FOR the proposed 2003 Stock Option Plan.
PROPOSAL NO. 3
APPROVAL OF THE 2003 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN
The Board of Directors of Advanced Energy is
submitting for stockholder approval the 2003 Non-Employee
Directors Stock Option Plan (the Directors Plan). On
February 12, 2003, the Board of Directors approved and
adopted the Directors Plan, subject to approval by the
stockholders of Advanced Energy. The Directors Plan
provides for an aggregate of 150,000 shares that may be
issued under the plan as NSOs.
The Directors Plan serves as a successor to
Advanced Energys 1995 Non-Employee Directors Stock
Option Plan, which terminates in September 2005 and will expire
upon stockholder approval of the 2003 Plan. The Board of
Directors has determined that it is advisable to continue to
provide stock-based incentive compensation to Advanced
Energys independent directors to attract and retain as
well as provide an incentive for such directors to increase
their proprietary interests in Advanced Energys long-term
success and progress, thereby continuing to align the interests
of such individuals with those of the stockholders, and that
awards under the Directors Plan are an effective means of
providing such compensation.
19
General Nature of the Directors
Plan
The principal purposes of the Directors
Plan are to provide incentives for independent directors to
further the growth, development and financial success of
Advanced Energy by personally benefiting through the ownership
of Advanced Energys common stock, and to obtain and retain
the services of such individuals who are considered essential to
the long term success of Advanced Energy through the grant or
issuance of NSOs.
The principal features of the Directors
Plan are summarized below, but the summary is qualified in its
entirety by reference to the Directors Plan itself, which
is included as Appendix C to this proxy statement.
Shares Reserved
Under the Directors Plan, the aggregate
number of shares of common stock that may be issued upon the
exercise of NSOs is 150,000 shares.
On March 17, 2003, the average of the high
and low price for a share of Advanced Energys common stock
on the NASDAQ Stock Market was $8.60.
The shares of common stock available for issuance
under the Directors Plan are previously authorized and
unissued shares. The Directors Plan provides for
appropriate adjustments in the number of shares subject to the
Directors Plan and to outstanding NSOs thereunder in the
event of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, reverse stock
split, separation, liquidation or other change in the corporate
structure or capitalization affecting Advanced Energys
shares. Shares subject to expired, surrendered or unexercisable
NSOs are available for future issuance under the Directors
Plan.
Administration
The Directors Plan is generally
administered by a committee selected by the Board of Directors,
consisting of at least two individuals each of whom is either a
member of the board and not a non-employee director, or a senior
officer of Advanced Energy who is not a member of the board.
The administrator is solely responsible for the
interpretation, implementation and application of the
Directors Plan.
Awards Under the Directors
Plan
The Directors Plan provides that a
non-employee director will automatically receive an option to
purchase 15,000 shares on the first date elected or
appointed as a member of the board, and 5,000 shares on any
date re-elected as a member of the board by Advanced
Energys stockholders. All awards granted under the
Directors Plan are not considered ISOs within the meaning
of Section of 422 of the Internal Revenue Code.
Fair market value means the closing sales price
of a share on such date as reported on the principal exchange or
market on which shares are then listed or admitted for trading.
Options granted under the Directors Plan must have an
exercise price of at least 100% of fair market value of a share
on the date of option grant.
A NSO granted upon the date first elected or
appointed as a member of the board is immediately exercisable as
to one-third of the shares subject to the grant, then another
one-third on each of the next two anniversaries of the date
granted. Awards issued upon re-election are immediately vested.
NSOs may not be granted for any term exceeding 10 years
after the grant date.
Terms of Awards
Awards under the Directors Plan generally
expire after the earlier of (i) six months after the date
the non-employee director ceases to be a member of the board,
including by reason of death; (ii) the occurrence of a
change in control; and (iii) the 10th anniversary of the
date of grant. If a director has served continuously as a member
of the board for at least five years, the period under
subsection (i) above is eighteen months.
20
Generally, the exercise price may be paid in
cash. At the discretion of the administrator, the exercise price
may be paid by tender of shares of Advanced Energy stock having
a fair market value not less than the exercise price, provided
that these shares were owned by the non-employee director for a
period of at least six months, or not acquired directly or
indirectly from Advanced Energy.
Certain Federal Income Tax
Consequences
The federal income tax consequences of the
Directors Plan under current federal income tax law are
summarized in the following discussion which deals with the
general tax principles applicable to the Directors Plan,
and is intended for general information only. In addition, the
tax consequences described below are subject to the limitations
of Internal Revenue Code Section 162(m), as discussed in
further detail below. Alternative minimum tax and other federal
taxes and foreign, state and local income taxes are not
discussed, and may vary depending on individual circumstances
and from locality to locality.
For federal income tax purposes, the recipient of
NSOs granted under the Directors Plan will not have
taxable income upon the grant of the option, nor will Advanced
Energy then be entitled to any deduction. Generally, upon
exercise of NSOs the optionee will realize ordinary income, and
Advanced Energy will be entitled to a deduction, in an amount
equal to the difference between the option exercise price and
the fair market value of the stock at the date of exercise.
The foregoing summarizes the principal United
States federal income tax consequences to Advanced Energy and to
non-employee directors who are residents in the United States.
The summary is based on the current provisions of the Tax Code
and the regulations thereunder and on Advanced Energys
understanding, in consultation with its legal counsel, of the
current administrative practices of the Internal Revenue
Service. Non-employee directors have been advised to obtain
independent advice from their own tax advisors.
Required Vote
Approval of the proposed 2003 Non-Employee
Directors Stock Option Plan requires the affirmative
(
FOR
) vote of a majority of the shares of common stock
cast on the matter. For purposes of determining the number of
votes cast on the matter, only those cast For or
Against are included. Abstentions and broker
non-votes are not included.
The Board of Directors recommends a vote
FOR the proposed 2003 Non-Employee Directors
Stock Option Plan.
PROPOSAL NO. 4
APPROVAL OF AN AMENDMENT TO THE EMPLOYEE STOCK
PURCHASE PLAN
The Board of Directors of Advanced Energy is
submitting for stockholder approval an amendment of the Employee
Stock Purchase Plan (the Purchase Plan). On February 12,
2003, the Board of Directors approved, subject to approval by
the stockholders of Advanced Energy, an increase in number of
common shares reserved for issuance under the plan from
200,000 shares to 400,000 shares. At March 17,
2003, Advanced Energy had 28,000 shares unissued from the
initial reservation of 200,000 shares in 1995.
General Nature of the Purchase Plan
The principal purpose of the Purchase Plan is to
provide a means by which employees of Advanced Energy may be
given an opportunity to purchase stock in Advanced Energy. The
Purchase Plan is intended to qualify as an employee stock
purchase plan under section 423 of the Internal
Revenue Code.
The principal features of the Purchase Plan are
summarized below, but the summary is qualified in its entirety
by reference to the Purchase Plan itself, which is included as
Appendix D to this proxy statement.
21
Shares Reserved
Under the Purchase Plan, the aggregate number of
shares of common stock that may be reserved is 200,000. Subject
to stockholder approval, the board has amended the Purchase Plan
to increase the share reserve to 400,000 shares.
On March 17, 2003, the average of the high
and low price for a share of Advanced Energys common stock
on the NASDAQ Stock Market was $8.60.
The shares of common stock available for issuance
under the Purchase Plan are previously authorized and unissued
shares. The Purchase Plan provides for appropriate adjustments
in the number of shares subject to the Purchase Plan in the
event of a merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of
shares or other change in the corporate structure or
capitalization affecting Advanced Energys shares. Shares
reacquired or bought on the market are available for future
issuance under the Purchase Plan.
Administration
The Purchase Plan is generally administered by a
committee composed of not fewer than two members of the Board of
Directors, or the board itself. The administrator is solely
responsible for the interpretation, implementation and
application of the Purchase Plan. The Board of Directors is also
authorized to suspend or terminate the Purchase Plan or revise
and amend it in any respect whatsoever, provided, however that
without approval of Advanced Energys stockholders no
revision or amendment shall change the number of shares issuable
under the Purchase Plan, or modify the Purchase Plan in any way
if such modification requires stockholder approval in order for
the Purchase Plan to obtain employee stock purchase plan
treatment under section 423 of the Internal Revenue Code,
or to comply with the requirements of SEC Rule 16b-3.
Eligibility
Rights under the Purchase Plan may be granted to
any employee of Advanced Energy, provided that such employee
shall not be eligible to be granted rights under the Purchase
Plan, unless, on the offering date, such employee has been in
the employ of Advanced Energy for such continuous period
preceding such grant as the administrator may require. In no
event shall the required period of continuous employment be
greater than two years. In addition, no employee shall be
eligible to be granted rights under the Purchase Plan, unless,
on the offering date, such employees customary employment
with Advanced Energy is for at least twenty hours per week and
at least five months per year. No employee shall be eligible for
the grant of any rights under the Purchase Plan if, immediately
after such rights are granted, such employee owns stock
possessing 5% percent or greater of the combined voting power of
all classes of stock of Advanced Energy.
Awards Under the Purchase Plan
The Purchase Plan provides that the administrator
may grant or provide for the grant of rights to purchase common
stock of Advanced Energy under the Purchase Plan to eligible
employees on a date or dates selected by the administrator. The
administrator is authorized to determine the form, terms and
conditions as the administrator deems appropriate, subject to
the requirement under section 423(b)(5) of the Internal
Revenue Code, stating that all employees granted rights to
purchase stock under the Purchase Plan shall have the same
rights and privileges. The period during which an offering shall
be effective cannot exceed twenty-seven months beginning on the
offering date.
Purchase Price
On each offering date, each eligible employee
shall be granted the right to purchase up to the number of
shares of Advanced Energy common stock purchasable with a
percentage designated by the administrator not exceeding 15% of
such employees earnings. The administrator may also
specify a maximum number of shares which may be purchased by any
employee as well as a maximum aggregate number of shares which
may be purchased by all eligible employees pursuant to such
offering.
22
The purchase price of stock acquired pursuant to
rights granted under the Purchase Plan shall not be less than
the lesser of (i) an amount equal to 85% of the fair market
value of the stock on the offering date; or (ii) an amount
equal to 85% of the fair market value of the stock on the
purchase date.
Certain Federal Income Tax
Consequences
The federal income tax consequences of the
Purchase Plan under current federal income tax law are
summarized in the following discussion which deals with the
general tax principles applicable to the Purchase Plan, and is
intended for general information only. Alternative minimum tax
and other federal taxes and foreign, state and local income
taxes are not discussed, and may vary depending on individual
circumstances and from locality to locality.
For federal income tax purposes, a Participant in
the Purchase Plan will not have taxable income upon the grant of
a right or purchasing shares of stock under the terms of the
Purchase Plan.
If the Participant disposes of shares purchased
under the Purchase Plan within two years from the first day of
the applicable offering period or within one year from the
purchase date, known as a disqualifying disposition, the
Participant will realize ordinary income in the year of such
disposition equal to the amount by which the fair market value
of the shares on the purchase date exceeds the purchase price,
and Advanced Energy will receive a similar deduction. The amount
of ordinary income will be added to the Participants basis
in the shares, and any additional gain or resulting loss
recognized on the disposition of the shares will be a capital
gain or loss if the Participants holding period is greater
than 365 days.
If the Participant disposes of shares purchased
under the Purchase Plan at least two years after the first day
of the applicable offering period and at least one year after
the purchase date, the Participant will realize ordinary income
in the year of disposition equal to the lesser of (i) the
excess of fair market value of the shares on the date of
disposition over the purchase price or (ii) 15% of the fair
market value of the shares on the first day of the applicable
offering period. The amount of any ordinary income will be added
to the Participants basis in the shares, and any
additional gain recognized upon the disposition after such basis
adjustment will be a long-term capital gain. If the fair market
value of the shares on the date of disposition is less than the
purchase price, there will be no ordinary income and any loss
recognized will be a long-term capital loss.
The foregoing summarizes the principal United
States federal income tax consequences to Advanced Energy and to
Participants who are residents of the United States. The summary
is based on the current provisions of the Tax Code and the
regulations thereunder and on Advanced Energys
understanding, in consultation with its legal counsel, of the
current administrative practices of the Internal Revenue
Service. Participants have been advised to obtain independent
advice from their own tax advisors.
Required Vote
Approval of the proposed amendment to the
Employee Stock Purchase Plan requires the affirmative
(FOR)
vote of a majority of the shares of common stock
cast on the matter. For purposes of determining the number of
votes cast on the matter, only those cast For or
Against are included. Abstentions and broker
non-votes are not included.
The Board of Directors recommends a vote
FOR the amendment to the Employee Stock Purchase
Plan
PROPOSAL NO. 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT
AUDITORS
On February 12, 2003, the Audit and Finance
Committee recommended to the Board of Directors, and the Board
of Directors approved, the continued appointment of KPMG LLP for
2003 as independent auditors. If the stockholders fail to ratify
the appointment of KPMG LLP, the Board of Directors and the
Audit and Finance Committee will reconsider their selection.
23
The Audit and Finance Committee intends to meet
with KPMG LLP in 2003 on a quarterly or more frequent basis. At
such times, the Audit and Finance Committee will review the
services performed by KPMG LLP, as well as the fees charged for
such services.
A representative of KPMG LLP is expected to be
present at the meeting and will have an opportunity to make a
statement if he or she so desires. Moreover, the representative
is expected to be available to respond to appropriate questions
from the stockholders.
On July 15, 2002, Advanced Energy appointed
KPMG LLP to replace Arthur Andersen LLP as its independent
accountants. The decision to change public accountants was
recommended by Advanced Energys Audit and Finance
Committee and approved by the Board of Directors.
In connection with the audits of Advanced
Energys consolidated financial statements as of and for
the two years ended December 31, 2001, and with respect to
the subsequent period through March 31, 2002, there were no
disagreements with Arthur Andersen LLP on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements
if not resolved to their satisfaction, would have caused them to
make reference in connection with their opinion on the subject
matter of the disagreement.
Arthur Andersen LLPs reports on the
consolidated financial statements of Advanced Energy as of and
for the two years ended December 31, 2001 did not contain
any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or
accounting principles.
None of the reportable events described under
Item 304(a)(1)(v) of Regulation S-K occurred within
the two years ended December 31, 2001, and the subsequent
interim period ended March 31, 2002.
During the two years ended December 31, 2001
and the subsequent interim period ended March 31, 2002,
Advanced Energy did not consult with KPMG LLP regarding any of
the matters or events set forth in Item 304(a)(2)(i) and
(ii) of Regulation S-K.
Fees Billed by KPMG LLP and Arthur Andersen
LLP
Audit services of KPMG LLP and Arthur Andersen
LLP during 2002 included the examination of the consolidated
financial statements of Advanced Energy and its benefit plans
and services related to filings with the Securities and Exchange
Commission and other regulatory bodies.
Audit Fees
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Arthur
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KPMG LLP
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Andersen LLP
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Audit Fees
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$
|
243,000
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$
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10,000
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Financial Information Systems Design and
Implementation
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All Other Fees:
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Audit Related
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15,750
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47,300
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Consultation Regarding the Application of
Accounting Principles
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4,200
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2,300
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Subscription Services
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1,350
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21,300
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49,600
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TOTAL FEES
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$
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264,300
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$
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59,600
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No other services were provided by KPMG LLP or
Arthur Andersen LLP during 2002.
The Audit and Finance Committee considered the
nature and extent of the services and fees presented under
Audit Fees
and
All Other
Fees
in the table above to be compatible with
maintaining the principal accountants independence.
24
Required Vote
Ratification of the appointment of KPMG LLP as
the independent auditors for Advanced Energy for 2003 requires
the affirmative (
FOR
) vote of a majority of the common
stock cast on the matter. For purposes of determining the number
of votes cast on the matter, only those cast For or
Against are included. Abstentions and broker
non-votes are not included.
The Board of Directors recommends a vote
FOR the proposed ratification of the appointment of
independent auditors.
PROPOSALS OF STOCKHOLDERS
Proposals that a stockholder desires to have
included in Advanced Energys proxy materials for the 2004
Annual Meeting of Stockholders of Advanced Energy in accordance
with SEC Rule 14a-8 must be received by the Secretary of
Advanced Energy at its principal office (1625 Sharp Point Drive,
Fort Collins, Colorado 80525) no later than
December 5, 2003 in order to be considered for inclusion in
such proxy materials. The proxy solicited by management of
Advanced Energy for the 2004 Annual Meeting of Stockholders will
confer discretionary authority to vote on any stockholder
proposal presented at that meeting, unless Advanced Energy is
provided with notice of the proposal no later than
February 18, 2004.
FORM 10-K
A copy of Advanced Energys 2002 Annual
Report on Form 10-K is included in the 2002 Annual Report
to Stockholders accompanying this proxy statement. You can
request an additional copy of the 2002 Annual Report on
Form 10-K by mailing a request to the Secretary of Advanced
Energy at 1625 Sharp Point Drive, Fort Collins, Colorado
80525.
OTHER MATTERS
It is important that your stock be represented at
the meeting, regardless of the number of shares that you hold.
You are therefore urged to execute and return, at your earliest
convenience, the accompanying proxy card in the envelope that
has been enclosed. Instructions as to how to deliver your proxy
are included in this proxy statement under the caption
Delivery and Revocability of Proxies on page 2
and on the proxy card.
Dated: April 4, 2003
Fort Collins, Colorado
25
APPENDIX A
AUDIT AND FINANCE COMMITTEE CHARTER
Organization
There shall be an audit and finance committee of
the board of directors of Advanced Energy Industries, Inc.,
which shall be an audit committee within the meaning
of Section 3(a)(58) of the Securities Exchange Act of 1934
(the Exchange Act). The audit and finance committee
which is appointed by the board, shall be composed of at least 3
directors, none of whom shall be employees of the corporation
and each of whom shall be free from any relationship that would
interfere with the exercise of his or her independent judgment,
as determined by the Board of Directors and in accordance with
the independence requirements of the Nasdaq Stock Market
(Nasdaq), Section 10A(m)(3) of the Securities
Exchange Act of 1934 (the Exchange Act), and the
rules and regulations of the Securities and Exchange Commission
(SEC). At least one member of the audit and finance
committee shall also be an audit and finance committee
financial expert as defined by the SEC. Each member shall
be financially literate as determined by the Board of Directors
in its business judgment.
Statement of Policy
The audit and finance committee shall provide
assistance to the board of directors in fulfilling its
responsibility to the stockholders, potential stockholders, and
investment community relating to corporate accounting, reporting
practices of the corporation, and the quality and integrity of
the financial reports of the corporation. In so doing, it is the
responsibility of the audit and finance committee to maintain
free and open means of communication between the directors, the
independent auditors, the internal auditors, and the financial
management of the corporation. The audit and finance committee
shall also establish procedures, and maintain easy access to the
audit and finance committee, for all employees and consultants
to the corporation to voice concerns and report potential
misconduct to the audit and finance committee. The audit and
finance committee shall have a clear understanding with
management and the independent auditors that the independent
auditors are to report directly to the audit and finance
committee, and that the independent auditors are ultimately
accountable to the Board and the audit and finance committee, as
representatives of the corporations stockholders. The
committee shall have a meeting at least quarterly each fiscal
year and at any additional time as either the board or the
committee deems advisable.
Responsibilities
The audit and finance committees policies
and procedures in carrying out the committees
responsibilities should remain flexible, in order to best react
to changing conditions and to ensure to the directors and
stockholders that the corporate accounting and reporting
practices of the corporation are in accordance with all
requirements and are of the highest quality.
In carrying out its responsibilities, the audit
and finance committee will:
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Have sole authority to hire and terminate the
independent auditors, who are ultimately accountable to the
audit and finance committee.
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Be responsible for reviewing and approving the
scope of the audit and the audit fees to be paid as well as any
significant variations to the original scope and fee.
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Evaluate on a periodic basis the independent
auditors engaged to audit the financial statements of the
corporation and its divisions and subsidiaries.
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Have the sole authority to approve non-audit
services to be performed by the independent auditors, but only
as permitted by the Nasdaq rules and the rules and regulations
of the SEC, which authority the audit and finance committee may
delegate to one or more members of the audit and finance
committee. In the event of such delegation, the member or
members to whom this authority has been
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delegated shall report any decisions made with
respect to non-audit services to the full audit and finance
committee at such committees next scheduled meeting.
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Meet with the independent auditors and financial
management of the corporation to review the scope of the
proposed audit for the current year and the audit procedures to
be utilized, and at the conclusion thereof review such audit,
including any comments or recommendations of the independent
auditors.
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Review with the independent auditors, the
corporations internal auditor, if applicable, and
financial and accounting personnel, the adequacy and
effectiveness of the accounting and financial controls of the
corporation, and elicit any recommendations for the improvement
of such internal control procedures or particular areas where
new or more detailed controls or procedures are desirable.
Particular emphasis should be given to the adequacy of such
internal controls to expose any payments, transactions, or
procedures that might be deemed illegal or otherwise improper.
Further, the committee periodically should review company policy
statements to determine their adherence to the
corporations code of conduct.
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Review the internal audit function of the
corporation including the independence and authority of its
reporting obligations, the proposed audit plans for the coming
year, and the coordination of such plans with the independent
auditors.
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Receive prior to each meeting, a summary of
findings from completed internal audits and a progress report on
the proposed internal audit plan, with explanations for any
deviations from the original plan.
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Review the financial statements contained in the
annual report to stockholders with management and the
independent auditors, as well as all significant correcting
adjustments identified by the independent auditors or
disagreements between management and the independent auditors,
to determine that the independent auditors are satisfied with
the disclosure and content of the financial statements to be
presented to the stockholders. Any changes in accounting
principles should be reviewed as well as any changes in the
selection, application and disclosure of critical accounting
policies.
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Review, at least quarterly, with the independent
auditors the corporations critical accounting policies and
practices and alternative treatments of financial information
within generally accepted accounting principles that have been
discussed with management.
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Provide sufficient opportunity for the internal,
if applicable, and independent auditors to meet with the members
of the audit and finance committee without members of management
present. Among the items to be discussed in these meetings are
the independent auditors evaluation of the
corporations financial, accounting, and auditing
personnel, and the cooperation that the independent auditors
received during the course of the audit, including their access
to all requested records, data and information.
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Receive written statements from the independent
auditors delineating all relationships between the independent
auditors and the corporation consistent with Independence
Standards Board Standard No. 1, and consider and discuss
with the auditors any disclosed relationships or services that
could affect the auditors objectivity and independence,
and if so determined by the audit and finance committee, take
appropriate action to resolve issues regarding the independence
of the auditors.
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Review accounting and financial human resources
and succession planning within the corporation.
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Investigate any matter brought to its attention
within the scope of its duties, with the power to retain and pay
for, out of corporation funds, outside counsel and other
advisors for this purpose if, in its judgment, that is
appropriate.
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Review and discuss with management the financial
statements and Managements Discussion and Analysis section
of the corporations Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q and recommend the filing of
the report.
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Review and approve (to the extent not previously
approved by the corporations Board of Directors) related
party transactions as such term is used by SFAS No. 57 or
as otherwise required to be disclosed
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in the corporations financial statements or
periodic filings with the SEC. It is managements
responsibility to bring such related party transactions to the
attention of the members of the audit and finance committee.
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Review corporation press releases containing
financial information for the purpose of ensuring that such
press releases properly disclose financial information presented
in accordance with generally accepted accounting principles
(GAAP), adequately disclose how any information differs from
financial information presented in accordance with GAAP and does
not give undue prominence to such non-GAAP information or
otherwise provide misleading presentations of the
corporations results of operations or financial condition.
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Review and approve the hiring of any employee who
is employed by the independent auditor, or has been employed by
the independent auditor within the five years prior to the date
of determination whether or not to hire such employee.
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Establish and maintain procedures for, and a
policy of, open access to the members of the audit and finance
committee by the employees and consultants to the corporation to
enable the employees and consultants to bring to the attention
of the audit and finance committee concerns held by such
employees and consultants regarding the financial reporting of
the corporation, and to report potential misconduct to the audit
and finance committee.
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Prepare the report of the audit and finance
committee required by the rules of the Securities and Exchange
Commission to be included in the corporations annual proxy
statement.
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Review and assess the adequacy of this charter as
required and recommend any proposed changes to the board for
approval.
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Submit the minutes of all meetings of the audit
and finance committee and discuss the matters discussed at each
committee meeting with the board of directors.
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Perform such other functions and to have such
power as it may deem necessary or advisable in the efficient and
lawful discharge of the foregoing.
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Establish procedures for dealing with information
about violations of securities laws received from outside
counsel or from employees under the whistleblower
provisions of the Sarbanes-Oxley Act.
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The committee shall periodically receive reports
from and discuss with the Companys general counsel the
adequacy of the policies and practices of the Company related to
compliance with key regulatory requirements, conflicts of
interest and ethical conduct including any potential or actual
conflicts of interest involving directors or officers of the
Company.
While the committee has the responsibility and
power set forth in this charter, it is not the duty of the
committee to plan or conduct audits or to determine that the
Companys financial statements are complete and accurate
and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the
independent auditor. Nor is it the duty of the committee to
conduct investigations or to assure compliance with laws,
regulations and the Companys code of conduct.
A-3
APPENDIX B
ADVANCED ENERGY INDUSTRIES, INC.
2003 STOCK OPTION PLAN
Adopted February 12, 2003
1.
Purpose.
The purpose of the Plan is to provide an incentive to
attract, retain and reward individuals performing services for
the Company, and to motivate such individuals to contribute to
the growth and profitability of the Company.
2.
Definitions.
Whenever the following terms are used in the Plan, they
shall have the meaning indicated below, unless a different
meaning is required by the context.
(a) Administrator means either
the Board or a committee of at least two Board members to which
the Board allocates administration of the Plan.
(b) Board means the board of
directors of the Corporation.
(c) Code means the Internal
Revenue Code of 1986, as amended.
(d) Company means, collectively,
the Corporation and any parent corporation or
subsidiary corporation of the Corporation as defined
in Code § 424(e) and § 424(f), respectively.
(e) Corporation means Advanced
Energy Industries, Inc., a Delaware corporation.
(f) Fair Market Value means,
with respect to a Share as of any date, the closing sale price
of a Share on such date (or previous business day if such date
is not a business day) on the principal exchange or market on
which Shares are then listed or admitted to trading. If, for any
reason, the preceding rule cannot be applied to determine fair
market value, then the Administrator shall make a good faith
determination of fair market value.
(g) ISO means an incentive stock
option within the meaning of Code § 422.
(h) NSO means an option that is
not an ISO.
(i) Participant means a person
who has received a grant or award under the Plan. If a grant or
award is assigned pursuant to Section 6(c), the term
Participant shall mean the assignee when required by
the context.
(j) Plan means this Advanced
Energy Industries, Inc. 2003 Stock Option Plan.
(k) Service means the
Participants employment or service with the Company,
whether in the capacity of an employee, a director, or a
consultant.
(l) Share means one share of
common stock of the Corporation.
3.
Administration.
The Plan shall be
administered by the Administrator. Subject to the provisions of
the Plan, the Administrator shall have the authority to select
the persons to be granted options under this Plan, to fix the
number of shares that each Participant may purchase, to
determine the exercise price of options granted, to set the
terms and conditions of each option (including the period over
which the option becomes exercisable), and to determine all
other matters relating to administration and operation of the
Plan. All questions of interpretation, implementation, and
application of the Plan shall be determined by the Administrator
in its sole discretion. Such determinations shall be final and
binding on all persons. No member of the Board or committee that
acts as Administrator shall be liable for any act or omission on
such members own part, including but not limited to the
exercise of any power or discretion given to such member under
the Plan, except for those acts or omissions resulting from such
members own gross negligence or willful misconduct.
4.
Shares Subject to the Plan.
The
maximum number of Shares that may be issued pursuant to this
Plan is three million two hundred fifty thousand (3,250,000),
subject to adjustment as provided in
B-1
Section 6(e), and subject to limited
re-issuance as indicated below. If an option expires, is
surrendered, or becomes unexercisable without having been
exercised in full, or if any unissued Shares are retained by the
Corporation upon exercise of an option in order to satisfy any
withholding taxes due with respect to such exercise, the
unissued or retained Shares shall become available for future
grant under the Plan (unless the Plan has terminated). If
unvested Shares are forfeited, such Shares shall also become
available for future grant under the Plan, but the total number
of such forfeited Shares that become available may not exceed
twice the maximum number set forth above (subject to adjustment
as provided in Section 6(e)). Other Shares that actually
have been issued under the Plan pursuant to an option shall not
be returned to the Plan and shall not become available for
future grant under the Plan.
5.
Eligibility.
The Administrator may
grant an option or options to any employee or consultant of the
Company, as selected in the sole discretion of the
Administrator. No individual may receive aggregate grants or
awards under this Plan that exceed 25% of the number of Shares
reserved for issuance under Section 4 (subject to
adjustment as provided in Section 6(e)).
6.
General Terms
and Conditions.
(a)
Option Agreements.
Each option
granted under the Plan shall be authorized by action of the
Administrator and shall be evidenced by a written agreement in
such form as the Administrator shall from time to time approve,
which agreement shall comply with and be subject to the terms
and conditions of the Plan.
(b)
ISOs or NSOs.
Options granted
under the Plan shall be designated by the Administrator as
either ISOs or NSOs. The Company does not represent or warrant
that an option intended to be an ISO qualifies as such. To the
extent that the aggregate Fair Market Value (determined as of
the date the option is granted) of the Shares with respect to
which ISOs are exercisable for the first time by any individual
during any calendar year (under all plans of the Company)
exceeds one hundred thousand dollars ($100,000), the option
shall be treated as an NSO. If an ISO is exercised more than
three (3) months after the date on which the Participant
ceases to be an employee (other than by reason of death or
permanent and total disability as defined in Code
§ 22(e)(3)), the option will be treated as an NSO, and
not an ISO, as required by Code § 422.
(c)
Transferability.
Options granted
under the Plan are not transferable by the Participant and shall
be exercisable during the Participants lifetime only by
the Participant; provided, however, that an option may be
transferred upon the approval of the Administrator (in its sole
discretion) by appropriate instrument pursuant to a domestic
relations order described in Rule 16a-12 of the 1934 Act or
to an inter vivos or testamentary trust in which the option is
to be passed to the Participants beneficiaries upon the
Participants death or by gift to the Participants
immediate family (consisting of the Participants child,
stepchild, grandchild, parent, stepparent, grandparent, spouse,
sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, and shall
include adoptive relationships). No option or interest therein
may be otherwise transferred, assigned, pledged, or hypothecated
by the Participant, whether by operation of law or otherwise, or
be made subject to execution, attachment, or similar process.
Any such purported assignment, sale, transfer, delegation, or
other disposition shall be null and void.
(d)
Modification, Extension, and
Renewal.
The Administrator shall have the power to modify,
extend, or renew outstanding options and authorize the grant of
new options in substitution therefor, provided that any such
action may not have the effect of significantly impairing any
rights or obligations of any option previously granted without
the consent of the affected Participant. However, the Company
will not reduce the exercise price of any outstanding option or
cancel outstanding options and grant replacement options with a
lower exercise price without prior approval of the shareholders.
(e)
Changes in Capitalization or
Corporate Transaction.
In the event of any merger,
consolidation, reorganization, recapitalization, stock dividend,
stock split, reverse stock split, separation, liquidation or
other change in the corporate structure or capitalization
affecting the Shares, appropriate adjustment shall be made by
the Administrator in the kind, option price, and number of
shares of stock (including, but not limited to, the maximum
number of Shares reserved under the Plan) that are or may become
subject to options and other awards granted or to be granted
under the Plan. If in connection with the change the Corporation
ceases to
B-2
exist, the surviving or successor entity must
either assume the Corporations rights and obligations with
respect to outstanding options or substitute for outstanding
options substantially equivalent options for equity interests in
the entity. If there is no surviving or successor entity, a
Participants outstanding option must be exercised before
the change, or the option will terminate and cease to be
outstanding.
7.
Exercise.
(a)
Exercise Price.
The exercise
price of an option shall be not less than the Fair Market Value
of a Share on the date of the grant of the option.
(b)
Time of Exercise.
An option shall
become exercisable as specified in the option agreement;
provided, however, that (i) an option shall not be
exercisable after the 10th anniversary of the date of grant and
(ii) unless expressly provided otherwise in the option
agreement, an option shall not be exercisable to the extent its
exercise would result (determined at the time of exercise) in
compensation not deductible by the Corporation under Code
§ 162(m) (unless a failure to exercise will result in
the termination of the option).
(c)
Special Rules for 10% Owners.
The
exercise price of an ISO granted to an individual who owns stock
possessing more than ten percent (10%) of the combined voting
power of all classes of stock of the Corporation shall not be
less than one hundred ten percent (110%) of the Fair Market
Value of a Share on the date of grant. No ISO granted to an
individual who owns stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of
the Corporation shall be exercisable after the expiration of
five (5) years from the date of grant. For purposes of
determining whether an individual owns stock possessing more
than 10 percent (10%) of the total combined voting power of
all classes of stock of the Corporation, the individual shall be
considered as owning the stock owned, directly or indirectly, by
or for his or her brothers and sisters (whether by the whole or
half blood), spouse, ancestors, and lineal descendants. Stock
owned, directly or indirectly, by or for a corporation,
partnership, estate, or trust shall be considered as being owned
proportionately by or for its shareholders, partners, or
beneficiaries. Stock with respect to which the individual holds
an option shall not be counted.
(d)
Notice of Exercise.
Participants
may exercise only by providing written notice to the Corporation
at the address specified in the option agreement, accompanied by
full payment for the Shares to be purchased. After receiving
proper notice of exercise and payment, the Corporation shall
issue a certificate(s) for the Shares purchased, registered in
Participants name (or in Participants name and the
name of Participants spouse as community property or as
joint tenants with a right of survivorship).
(e)
Taxes and Withholding.
The
Company shall have the right to deduct from the Shares issuable
upon the exercise of an option, or to accept from the
Participant the tender of, a number of whole Shares having a
fair market value, as determined by the Administrator, equal to
all or any part of the federal, state, local and foreign taxes,
if any, required by law to be withheld by the Company with
respect to such option or the Shares acquired upon the exercise
thereof. Alternatively or in addition, in its sole discretion,
the Company shall have the right to require Participant, through
payroll withholding, cash payment or otherwise, including by
means of a cashless exercise (as described in
Section 8(b)), to make adequate provision for any such tax
withholding obligations of the Company arising in connection
with the option, or the Shares acquired upon the exercise
thereof.
8.
Payment of
Exercise Price.
Payment of any options exercise price
may be made in cash, by check or cash equivalent. At the sole
discretion of the Administrator, the exercise price may be made
as follows:
(a)
By Tender of Stock.
Payment may
be made by tender (or by attestation) to the Corporation of
Shares owned by Participant having a fair market value (as
determined by the Administrator without regard to any
restrictions on transferability applicable to such Shares by
reason of federal or state securities laws or agreements with
the Corporations underwriter) not less than the exercise
price; provided that, an option may not be exercised by tender
to the Corporation of Shares to the extent such tender would
constitute a violation of the provisions of any law, regulation
or agreement restricting the redemption of the Shares. Unless
otherwise provided by the Administrator, an option may not be
exercised by tender to the Corporation of Shares unless such
Shares either have been owned by the Participant for more than
six (6) months or were not acquired, directly or
indirectly, from the Corporation.
B-3
(b)
By Cashless Exercise.
The
Administrator reserves, at any and all times, the right, in the
Administrators sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for
the exercise of options by payment by the assignment of the
proceeds of a sale or loan with respect to some or all of the
Shares being acquired upon the exercise of the option,
including, without limitation, through an exercise complying
with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve
System.
(c)
By Promissory Note.
Payment may
be made by the Participants promissory note in a form
approved by the Administrator, except that no promissory note
shall be permitted if the exercise of an option using a
promissory note would be a violation of any law. Any permitted
promissory note shall be on such terms as the Administrator
shall determine; provided that (i) the note (including interest)
shall be full recourse, (ii) interest shall be payable in
at least annual installments at a current market interest rate,
(iii) the note shall be secured by the Shares acquired, and
(iv) the remaining balance of the note (including accrued
interest) shall be due and payable within 90 days of
termination of Participants Service for any reason. Unless
otherwise provided by the Administrator, if the Corporation at
any time is subject to the regulations promulgated by the Board
of Governors of the Federal Reserve System or any other
governmental entity affecting the extension of credit in
connection with the Corporations securities, any
promissory note shall comply with such applicable regulations,
and Participant shall pay the unpaid principal and accrued
interest, if any, to the extent necessary to comply with such
applicable regulations.
(d)
By Other Consideration.
Payment
may be made by such other consideration or by any combination of
cash, stock, cashless exercise, promissory note or other
consideration as may be approved by the Administrator from time
to time to the extent permitted by applicable laws.
9.
Termination of
Options.
(a)
Termination of Service.
If a
Participants Service terminates, his or her rights to
exercise an option then held shall be limited.
Participants Service shall not be deemed to have
terminated merely because of a change in the capacity in which
the Participant renders Service or a change in the Company,
provided that there is no interruption or termination of
Participants employment or service. Participants
Service with the Company shall be treated as continuing intact
while the Participant is on military, sick leave, or other bona
fide leave of absence (such as temporary employment by the
government) approved by the Company if the period of such leave
does not exceed 90 days, or, if longer, so long as the
Participants right to reemployment with the Corporation is
guaranteed either by statute or by contract. Where the period of
leave exceeds 90 days and where the Participants
right to reemployment is not guaranteed either by statute or by
contract, Service will be deemed to have terminated on the 91st
day of such leave. Subject to the foregoing, the Administrator,
in its sole discretion, shall determine whether
Participants Service has terminated and the effective date
thereof.
(b)
Involuntary Separation without
Cause.
Except as otherwise provided in paragraphs (c)
through (f), if a Participant leaves the company involuntarily
without cause, Participant shall have the right for a period of
180 calendar days after the date of separation to exercise the
option to the extent Participant was entitled to exercise the
option on that date; provided, however, that the date of
exercise is in no event after the expiration of the term of the
option. To the extent the option is not exercised within this
period, the option will terminate.
(c)
Termination by Disability.
If a
Participant becomes disabled (within the meaning of Code
§ 22(e)(3)) while in Service, Participant or his or
her qualified representative shall have the right for a period
of twenty-four (24) months after the date on which
Participants Service ends to exercise the option to the
extent Participant was entitled to exercise the option on that
date, provided the date of exercise is in no event after the
expiration of the term of the option. To the extent the option
is not exercised within this period, the option will terminate.
(d)
Termination by Retirement.
If a
Participant terminates Service without cause from the Company
after reaching age 60 and with 5 or more years of continuous
service with the Company, Participant shall have 3 years
from date of retirement to exercise the option to the extent
Participant was entitled to exercise the
B-4
option on that date; provided, however, that the
date of exercise is in no event after the expiration of the term
of the option. To the extent the option is not exercised within
this period, the option will terminate. Determination of
retirement shall be at the sole discretion of the Committee.
(e)
Termination after Death.
If a
Participant dies while in Service, the person who acquired the
right to exercise the option by bequest or inheritance or by
reason of the death of the Participant shall have the right for
a period of twelve (12) months after the date of death to
exercise the option to the extent Participant was entitled to
exercise the option on that date, provided the date of exercise
is in no event after the expiration of the term of the option.
To the extent the option is not exercised within this period,
the option will terminate.
(f)
Termination for Cause or Voluntary
Separation.
If a Participants Service is terminated by
the Company for Cause or the Participant voluntarily leaves the
Company, Participant shall have no right to exercise the option,
and the option will terminate. Cause means that
Participant is determined by the Administrator to have committed
an act of embezzlement, fraud, dishonesty, or breach of
fiduciary duty to the Company, or to have deliberately
disregarded the rules of the Company, under circumstances that
could normally be expected to result in loss, damage, or injury
to the Company, or because Participant has made any unauthorized
disclosure of any of the secrets or confidential information of
the Company, has induced any client or customer of the Company
to break any contract with the Company, has induced any
principal for whom the Company acts as agent to terminate the
agency relationship, or has engaged in any conduct that
constitutes unfair competition with the Company.
(g)
Option Agreement.
The option
agreement may provide rules different from those set forth in
subsections. (a) through (e).
10.
Change in
Control.
An options term may be affected by a Change
in Control, as described in this section.
(a)
Optional Assumption or
Substitution.
At the time of a Change in Control, the
surviving, continuing, successor or purchasing corporation or
parent corporation thereof, as the case may be (the
Acquiror), may either assume the Corporations
rights and obligations with respect to outstanding options or
substitute for outstanding options substantially equivalent
options for the Acquirors stock. If the Acquiror is the
same corporate entity as the Corporation, or its successor by
merger, a reaffirmation of the option shall be treated as an
assumption, and a failure to reaffirm shall be treated as a
failure to assume.
(b)
No Assumption or
Substitution Termination.
Options that are
neither assumed nor substituted for by the Acquiror in
connection with a Change in Control, nor exercised as of the
time of the Change in Control, shall terminate and cease to be
outstanding.
(c)
Definition.
For purposes of this
Plan, a Change in Control means a single Ownership Change Event
or combination of proximate (in time, purpose, cause and effect,
and/or the identity of the parties involved) Ownership Change
Events (collectively, a Transaction) wherein the
stockholders of the Corporation immediately before the
Transaction do not retain immediately after the Transaction, in
substantially the same proportions as their ownership of shares
of the Corporations voting stock immediately before the
Transaction, direct or indirect beneficial ownership of more
than 50% of the total combined voting power of the outstanding
voting stock of the Corporation or the corporation or
corporations to which the assets of the Corporation were
transferred (the Transferee Corporation(s)), as the
case may be. For purposes of the preceding sentence, indirect
beneficial ownership shall include, without limitation, an
interest resulting from ownership of the voting stock of one or
more corporations which, as a result of the Transaction, own the
Corporation or the Transferee Corporation(s), as the case may
be, either directly or through one or more subsidiary
corporations. An Ownership Change Event means (i) the
direct or indirect sale, exchange or transfer of the voting
stock of the Corporation, (ii) a merger or consolidation in
which the Corporation is a party, (iii) the sale, exchange
or transfer of all or substantially all of the assets of the
Corporation, or (iv) a liquidation or dissolution of the
Corporation. The Board shall have sole discretion to determine
whether any particular facts and circumstances constitute an
Ownership Change Event or a Transaction, and its determination
shall be final, binding and conclusive.
B-5
11.
Restricted
Stock Awards.
(a)
General Rule.
The Administrator
may award Shares to a person eligible under Section 5,
subject to such terms and conditions consistent with this Plan
that the Administrator shall impose as set forth in a separate
award agreement.
(b)
Vesting.
An award under this
section may condition the vesting of Shares on the performance
of future services by the eligible person, and may alternatively
or additionally condition the vesting of Shares on such other
performance-related conditions that the Administrator shall
impose in its sole discretion.
(c)
Transferability.
An unvested
Share will not be transferable by the Participant until it
becomes vested. The Company shall receive a stock power duly
endorsed in blank with respect to restricted Shares, and the
related stock certificate shall bear the following legend:
The transferability of this certificate and the
shares of stock represented hereby are subject to the
restrictions, terms and conditions (including forfeiture
provisions and restrictions against transfer) contained in the
Advanced Energy Industries, Inc. 2003 Stock Option Plan and an
award agreement entered into between the registered owner of
such shares and Advanced Energy Industries, Inc. A copy of the
plan and agreement is on file in the office of the Secretary of
Advanced Energy Industries, Inc.
Such legend shall be removed from the certificate
only after the Shares vest. Each certificate issued with respect
to Shares subject to this section, together with the stock
powers related to the Shares, shall be deposited by the Company
with a custodian designated by the Company (and which may be the
Company or an affiliate).
(d)
Voting Rights and Dividends.
Unvested Shares may be voted by the holder of such Shares.
Dividends payable with respect to unvested Shares will be paid
to the holder of the Shares without regard to restrictions.
(e)
Change in Control.
An Acquiror
described in Section 10(a) shall have no obligation to
assume or substitute an award of unvested Shares, and any such
Shares not assumed or substituted in connection with a Change in
Control shall be forfeited generally in the manner described in
Section 10(b).
12.
Stock
Appreciation Rights.
The Administrator may award a right to
receive in cash the amount that the Fair Market Value of a Share
exceeds a stated exercise price (a stock appreciation
right or SAR) to a person eligible under
Section 5 on such terms that the Administrator shall
determine, consistent with the terms of this Plan. An SAR shall
be subject to the same general terms that apply to an option
granted hereunder, including (but not limited to) the terms set
forth in Sections 6, 7, 9 and 10 as appropriately modified.
An exercised SAR will reduce the Shares reserved for issuance
under the Plan under Section 4.
13.
Securities
Law Compliance.
(a)
General Rules.
All awards under
this Plan shall be subject to compliance with all applicable
requirements of federal, state or foreign law with respect to
such securities. Options may not be exercised if the issuance of
Shares upon exercise would constitute a violation of any
applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or
market system upon which the Shares may then be listed. In
addition, no option may be exercised unless (i) a
registration statement under the Securities Act shall at the
time of exercise of the option be in effect with respect to the
Shares issuable upon exercise of the option, or (ii) in the
opinion of legal counsel to the Corporation, the Shares issuable
upon exercise of the option may be issued in accordance with the
terms of an applicable exemption from the registration
requirements of the Securities Act. The inability of the
Corporation to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the
Corporations legal counsel to be necessary to the lawful
issuance and sale of any shares hereunder shall relieve the
Corporation of any
B-6
liability in respect of the failure to issue or
sell such shares as to which such requisite authority shall not
have been obtained.
(b)
Conditions of Exercise.
As a
condition to the exercise of any option, the Corporation may
require Participant to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any
applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the
Corporation.
14.
Miscellaneous.
(a)
No Right to an Option.
Nothing in
the Plan shall be construed to give any person any right to
benefit under the Plan.
(b)
No Employment Rights.
Neither the
Plan nor the granting of an option nor any other action taken
pursuant to the Plan shall constitute or be evidence of any
agreement or understanding, express or implied, that the Company
will utilize Participants services for any period of time,
or in any position, or at any particular rate of compensation.
(c)
No Stockholders Rights.
Participant shall have no rights as a shareholder with respect
to the Shares covered by his or her options until the date of
the issuance to him or her of a share certificate for the
Shares, and no adjustment will be made for dividends or other
rights for which the record date is prior to the date the
certificate is issued.
(d)
Claims.
Any person who makes a
claim for benefits under the Plan or under any option agreement
entered into pursuant to the Plan shall file the claim in
writing with the Administrator. Written notice of the
disposition of the claim shall be delivered to the claimant
within 60 days after filing. If the claim is denied, the
Administrators written decision shall set forth (i) the
specific reason or reasons for the denial, (ii) a specific
reference to the pertinent provisions of the Plan or option
agreement on which the denial is based, and (iii) a
description of any additional material or information necessary
for the claimant to perfect his or her claim and an explanation
of why such material or information is necessary. No lawsuit may
be filed by the claimant until a claim is made and denied
pursuant to this subsection.
(e)
Attorneys Fees.
In any
legal action or other proceeding brought by either party to
enforce or interpret the terms of the option agreement, the
prevailing party shall be entitled to recover reasonable
attorneys fees and costs.
(f)
Confidentiality.
The terms and
conditions of the option agreement, including without limitation
the number of Shares for which the option is granted, are
confidential. The Participant shall not disclose the terms of
the option to any third party, except to Participants
financial or legal advisors, tax preparer or family members,
unless disclosure is required by law.
(g)
Corporation Free to Act.
An
option grant shall not affect in any way the right or power of
the Corporation or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations, or other
changes in the Corporations capital structure or its
business, or any merger or consolidation of any member of the
Company or any issue of bonds, debentures, or preferred or
preference stocks affecting the Shares or the rights thereof, or
of any rights, options, or warrants to purchase any capital
stock of the Corporation, or the dissolution or liquidation of
the Corporation, any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceedings of
the Corporation, whether of a similar character or otherwise.
(h)
Severability.
If any provision of
the Plan or option agreement, or its application to any person,
place, or circumstance, is held by an arbitrator or a court of
competent jurisdiction to be invalid, unenforceable, or void,
that provision shall be enforced to the greatest extent
permitted by law, and the remainder of this Plan and option
agreement and of that provision shall remain in full force and
effect as applied to other persons, places, and circumstances.
(i)
Substitution/ Assumption.
The
Company may substitute or assume outstanding options granted by
another company by either (i) granting an option under this
Plan in substitution of such other companys
B-7
option or (ii) assuming such option as if it
had been granted under this Plan if the terms of such assumed
option are consistent this Plan. Such substitution or assumption
will be permissible if the holder of the substituted or assumed
option would have been eligible to be granted an option under
this Plan if the other company had applied the rules of this
Plan to such grant. In the event of an assumption hereunder, the
terms and conditions of the option will remain unchanged, except
that the exercise price and the number and nature of shares
issuable upon exercise of any such option will be adjusted
appropriately in the manner described in Code
§ 424(a). If the Company substitutes a new option for
the old option, such new option may be granted with a similarly
adjusted exercise price.
(j)
Exchange Requirements.
The
requirements of any stock exchange or other established market
(such as the NASDAQ), on which the Corporations common
stock is traded, are hereby incorporated into this Plan by
reference.
(k)
Governing Law.
This Plan and the
option agreement shall be governed by and construed in
accordance with the laws of the State of Colorado applicable to
contracts wholly made and performed in the State of Colorado.
15.
Effective
Date of the Plan.
The Plan will become effective upon
adoption by the Board, subject to approval by the
Corporations stockholders within one year. Options may be
granted under the Plan at any time after the Plans
adoption and before the Plans termination. The Plan shall
terminate on the 10th anniversary of its adoption.
16.
Amendment of
the Plan.
The Board may suspend or discontinue the Plan or
revise or amend it in any respect whatsoever; provided, however,
that without approval of the Corporations stockholders no
revision or amendment shall change the number of Shares issuable
under the Plan (except as provided in Section 6(e)), change
the designation of the class of individuals eligible to benefit
under the Plan, or materially increase the benefits accruing to
Participants.
IN WITNESS WHEREOF, the undersigned Secretary of
the Corporation certifies that this Plan was adopted by the
Board on February 12, 2003, and effective as of the same
date.
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APPENDIX C
ADVANCED ENERGY INDUSTRIES, INC.
2003 NON-EMPLOYEE DIRECTORS STOCK OPTION
PLAN
Adopted February 12, 2003
1.
Purpose.
The purpose of the Plan is to attract and retain the services of
experienced and knowledgeable non-employee directors of Advanced
Energy Industries, Inc., and to provide an incentive for such
directors to increase their proprietary interests in the
Companys long-term success and progress.
2.
Definitions.
Whenever the following terms are used in the Plan, they shall
have the meaning indicated below, unless a different meaning is
required by the context.
(a) Administrator means the
administrative committee described in Section 3.
(b) Board means the board of
directors of the Company.
(c) Company means Advanced
Energy Industries, Inc., a Delaware corporation.
(d) Non-Employee Director means
any member of the Board who is a non-employee
director within the meaning of Rule 16b-3(b)(3)(i)
under Section 16 of the Securities Exchange Act of 1934
(1934 Act).
(e) Plan means this Advanced
Energy Industries, Inc. 2003 Non-Employee Directors Stock
Option Plan.
(f) Share means one share of
common stock of the Company.
3.
Administration.
The Plan shall be administered by a committee selected by the
Board consisting of at least 2 individuals each of whom is
either (i) a member of the Board and not a Non-Employee
Director or (ii) a senior officer of the Company who is not
a member of the Board. Subject to the provisions of the Plan,
the Administrator shall have the authority to determine all
other matters relating to administration and operation of the
Plan. All questions of interpretation, implementation, and
application of the Plan shall be determined by the Administrator
in its sole discretion. Such determinations shall be final and
binding on all persons.
4.
Shares Subject
to the Plan.
The maximum number of Shares that may be issued
pursuant to options granted under the Plan is one hundred fifty
thousand (150,000), subject to adjustment as provided in
Section 6(e) and subject to limited re-issuance as
indicated below. If an option expires, is surrendered, or
becomes unexercisable without having been exercised in full, the
unissued or retained Shares shall become available for future
grant under the Plan. Other Shares that actually have been
issued under the Plan pursuant to an option shall not be
returned to the Plan and shall not become available for future
grant under the Plan.
5.
Eligibility.
A Non-Employee Director will receive option grants under this
Plan on the terms and conditions set forth in Section 6. No
other person may benefit under this Plan.
6.
General Terms
and Conditions.
(a)
Automatic Grants.
On and after
the date of the annual meeting of the Companys
stockholders to be held in 2003, and subject to adjustment under
subsection (e), a Non-Employee Director will automatically
receive an option to purchase (i) fifteen thousand
(15,000) Shares on the date first elected or appointed as a
member of the Board and (ii) five thousand
(5,000) Shares on any date re-elected (or first elected
after an appointment) as a member of the Board by the
Companys stockholders. Any such option will be subject to
the terms and conditions set forth in this Plan, and will be
evidenced by written notice in such form as the Administrator
shall determine.
(b)
Options Are Not Qualified.
Options granted under the Plan are not incentive stock options
described in Internal Revenue Code § 422.
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(c)
Transferability.
Options granted
under the Plan are not transferable by the Non-Employee Director
and shall be exercisable during the Non-Employee Directors
lifetime only by the Non-Employee Director; provided, however,
that an option may be transferred upon the approval of the
Administrator (in its sole discretion) by appropriate instrument
pursuant to a domestic relations order described in
Rule 16a-12 of the 1934 Act or to an inter vivos or
testamentary trust in which the option is to be passed to the
Non-Employee Directors beneficiaries upon the Non-Employee
Directors death or by gift to his or her immediate family
(consisting of the Non-Employee Directors child,
stepchild, grandchild, parent, stepparent, grandparent, spouse,
sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships). Except as provided in
Section 7(d), no option or interest therein may be
otherwise transferred, assigned, pledged, or hypothecated by a
Non-Employee Director, whether by operation of law or otherwise,
or be made subject to execution, attachment, or similar process.
Any such purported assignment, sale, transfer, delegation, or
other disposition shall be null and void.
(d)
Modification, Extension, and
Renewal.
The Administrator shall have the power to modify,
extend, or renew an outstanding option granted under this Plan,
in a manner consistent with the terms of the Plan, provided that
any such action may not significantly impair the
optionholders rights without his or her consent. However,
the Company will not reduce the exercise price of any
outstanding option or cancel outstanding options and grant
replacement options with a lower exercise price without prior
approval of the shareholders.
(e)
Changes in Capitalization or
Corporate Transaction.
In the event of any merger,
consolidation, reorganization, recapitalization, stock dividend,
stock split, reverse stock split, separation, liquidation or
other change in the corporate structure or capitalization
affecting the Shares, appropriate adjustment shall be made by
the Administrator in the kind, option price, and number of
shares of stock (including, but not limited to, the maximum
number of Shares reserved under the Plan) that are or may become
subject to options granted or to be granted under the Plan. If
in connection with the change the Company ceases to exist, the
surviving or successor entity must either assume the
Companys rights and obligations with respect to
outstanding options or substitute for outstanding options
substantially equivalent options for equity interests in the
entity. If there is no surviving or successor entity, a
Non-Employee Directors outstanding option shall become
fully vested and exercisable as of the date seven
(7) calendar days before the change. The exercise of any
option that was permissible solely by reason of the change shall
be conditioned upon consummation of the change. Options that are
neither assumed, substituted nor exercised as of the time of the
change shall terminate and cease to be outstanding.
7.
Exercise.
(a)
Exercise Price.
The exercise
price of an option shall be not less than one hundred percent
(100%) of the fair market value of a Share on the date of grant.
The fair market value of a Share as of any date means the
closing sale price of a Share on such date (or previous business
day if such date is not a business day) on the principal
exchange or market on which Shares are then listed or admitted
to trading. If, for any reason, the preceding rule cannot be
applied to determine fair market value, then the Administrator
shall make a good faith determination of fair market value.
(b)
Vesting.
An option shall be
immediately and fully exercisable (
i.e.,
vested) on the
date granted; provided, however, that the option awarded on the
date first elected or appointed as a member of the Board shall
instead (i) be immediately exercisable to the extent of
one-third of the Shares subject to the option upon grant, then
another one-third of such Shares on each of the next two
anniversaries of the date granted, and (ii) become fully
exercisable upon a Change in Control while the optionee is a
member of the Board, as provided in Section 9.
Notwithstanding clauses (i) and (ii) of the preceding
sentence, no additional vesting will occur after the date the
Non-Employee Director ceases to be a member of the Board.
(c)
Payment of Exercise Price.
An
option may be exercised in whole or in part (to the extent
exercisable) at any time and from time to time. The purchase
price of Shares purchased under an option will be paid in full
to the Company incident to the exercise of the option by
delivery of consideration equal to the product of the option
price and the number of Shares purchased. Such consideration may
be paid (i) in cash, (ii) at the discretion of the
Administrator, in shares of Company common stock either already
owned by the Non-Employee Director for at least six
(6) months or not acquired, directly or indirectly, from
the Company,
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or (iii) any combination thereof. The fair
market value of such common stock as delivered shall be valued
as of the day prior to delivery. The Administrator can determine
that additional forms of payment will be permitted. To the
extent permitted by the Administrator and applicable laws and
regulations (including, but not limited to, federal tax and
securities laws, regulations and state corporate law), an option
may also be exercised in a cashless exercise by
delivery of a properly executed exercise notice together with
irrevocable instructions to a broker designated by the
Administrator to deliver promptly to the Company the amount of
sale or loan proceeds to pay the purchase price. A Non-Employee
Director shall have none of the rights of a stockholder until
the Shares are issued.
(d)
Exercise After Death.
In the
event of the death of a Non-Employee Director who holds an
exercisable option under the Plan, the Non-Employee
Directors option shall (subject to Section 8) be
exercisable by the legal representative or the estate of such
decedent, by any person or persons whom the decedent shall have
designated in writing on forms prescribed by and filed with the
Company or, if no such designation has been made, by the person
or persons to whom the decedents rights have passed by
will or the laws of descent and distribution. To the extent
permitted by applicable law and the rules promulgated under
Section 16(b) of the 1934 Act, the Administrator may permit
a Non-Employee Director to designate in writing during the
Non-Employee Directors lifetime a beneficiary to receive
and exercise stock options in the event of the Non-Employee
Directors death.
8.
Termination of
Options.
An option shall cease to be exercisable after the
earlier of (i) six (6) months after the date the
Non-Employee Director ceases to be a member of the Board
(including by reason of death), (ii) the occurrence of a
Change in Control and (iii) the 10th anniversary of the
date of grant; provided, however, that in the case of a
Non-Employee Director who has served continuously as a member of
the Board for at least five (5) years, the period described
in clause (i) shall be eighteen (18) months.
9.
Change in
Control.
A Non-Employee Directors outstanding option
shall become fully exercisable as of the date
seven (7) calendar days before a Change in Control.
The exercise of any option that was permissible solely by reason
of a Change in Control shall be conditioned upon consummation of
the Change in Control. Options that are not exercised as of the
Change in Control shall terminate and cease to be outstanding. A
Change in Control means a single Ownership Change Event or
combination of proximate (in time, purpose, cause and effect,
and/or the identity of the parties involved) Ownership Change
Events (collectively, a Transaction) wherein the
stockholders of the Company immediately before the Transaction
do not retain immediately after the Transaction, in
substantially the same proportions as their ownership of shares
of the Companys voting stock immediately before the
Transaction, direct or indirect beneficial ownership of more
than 50% of the total combined voting power of the outstanding
voting stock of the Company or the company or companies to which
the assets of the Company were transferred (the Transferee
Company(s)), as the case may be. For purposes of the
preceding sentence, indirect beneficial ownership shall include,
without limitation, an interest resulting from ownership of the
voting stock of one or more companies which, as a result of the
Transaction, own the Company or the Transferee Company(ies), as
the case may be, either directly or through one or more
subsidiary companies. An Ownership Change Event means
(i) the direct or indirect sale, exchange or transfer of
the voting stock of the Company, (ii) a merger or
consolidation in which the Company is a party, (iii) the
sale, exchange or transfer of all or substantially all of the
assets of the Company, or (iv) a liquidation or dissolution
of the Company. The Administrator shall have sole discretion to
determine whether any particular facts and circumstances
constitute an Ownership Change Event or a Transaction, and its
determination shall be final, binding and conclusive.
10.
Securities
Law Compliance.
The grant of options and the issuance of
Shares upon exercise of options shall be subject to compliance
with all applicable requirements of federal, state or foreign
law with respect to such securities. Options may not be
exercised if the issuance of Shares upon exercise would
constitute a violation of any applicable federal, state or
foreign securities laws or other law or regulations or the
requirements of any stock exchange or market system upon which
the Shares may then be listed. In addition, no option may be
exercised unless (i) a registration statement under the
Securities Act of 1933 (1933 Act) shall at the
time of exercise of the option be in effect with respect to the
Shares issuable upon exercise of the option, or (ii) in the
opinion of legal counsel to the Company, the Shares issuable
upon exercise of the option
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may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the
1933 Act. The inability of the Company to obtain from any
regulatory body having jurisdiction the authority, if any,
deemed by the Companys legal counsel to be necessary to
the lawful issuance and sale of any shares hereunder shall
relieve the Company of any liability in respect of the failure
to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the
exercise of any option, the Company may require a Non-Employee
Director to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or
regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
11.
Miscellaneous.
(a)
No Stockholders Rights.
A
Non-Employee Director shall have no rights as a stockholder with
respect to the Shares covered by his or her options until the
date of the issuance to him or her of a stock certificate for
the Shares.
(b)
No Right to Serve.
Neither the
Plan, nor the granting of an option, nor any other action taken
under the Plan, shall be evidence of any agreement or
understanding, express or implied, that a Non-Employee Director
has a right to continue as a member of the Board for any period
of time or rate of compensation.
(c)
Claims.
Any person who makes a
claim for benefits under the Plan or under any option agreement
entered into pursuant to the Plan shall file the claim in
writing with the Administrator. Written notice of the
disposition of the claim shall be delivered to the claimant
within 60 days after filing. If the claim is denied, the
Administrators written decision shall set forth
(i) the specific reason or reasons for the denial,
(ii) a specific reference to the pertinent provisions of
the Plan or option agreement on which the denial is based, and
(iii) a description of any additional material or
information necessary for the claimant to perfect his or her
claim and an explanation of why such material or information is
necessary. No lawsuit may be filed by the claimant until a claim
is made and denied pursuant to this subsection.
(d)
Attorneys Fees.
In any
legal action or other proceeding brought by either party to
enforce or interpret the terms of the option agreement, the
prevailing party shall be entitled to recover reasonable
attorneys fees and costs.
(e)
Company Free to Act.
An option
grant shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations, or other
changes in the Companys capital structure or its business,
or any merger or consolidation of any member of the Company or
any issue of bonds, debentures, or preferred or preference
stocks affecting the Shares or the rights thereof, or of any
rights, options, or warrants to purchase any capital stock of
the Company, or the dissolution or liquidation of the Company,
any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceedings of the
Company, whether of a similar character or otherwise.
(f)
Severability.
If any provision of
the Plan or option agreement, or its application to any person,
place, or circumstance, is held by an arbitrator or a court of
competent jurisdiction to be invalid, unenforceable, or void,
that provision shall be enforced to the greatest extent
permitted by law, and the remainder of this Plan and option
agreement and of that provision shall remain in full force and
effect as applied to other persons, places, and circumstances.
(g)
Governing Law.
This Plan and the
option agreement shall be governed by and construed in
accordance with the laws of the State of Colorado applicable to
contracts wholly made and performed in the State of Colorado.
(h)
Exchange Requirements.
So long as
Shares are listed on any established stock exchange or traded on
the NASDAQ National Market or the NASDAQ SmallCap Market, the
applicable requirements of any such exchange or market shall be
hereby incorporated by reference.
(i)
Compliance with Section 16.
So long as any of the Companys equity securities are
registered pursuant to Section 12(b) or 12(g) of the 1934
Act, with respect to awards granted to or held by Section 16
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insiders, the Plan will comply in all respects
with Rule 16b-3 or any successor rule or rule of similar
application under Section 16 of the 1934 Act or rules
thereunder, and, if any Plan provision is later found not to be
in compliance with such exemption under Section 16, that
provision shall be deemed modified as necessary to meet the
requirements of such applicable exemption.
12.
Effective
Date of the Plan.
The Plan will become effective upon
adoption by the Board, subject to approval by the Companys
stockholders. The Plan shall terminate on the 10th anniversary
of its adoption.
13.
Amendment of
the Plan.
With the approval of the Board, the administrator
may suspend or discontinue the Plan or revise or amend it in any
respect whatsoever; provided, however, that without approval of
the Companys stockholders no revision or amendment shall
change the number of Shares issuable under the Plan (except as
provided in Section 6(e)), change the designation of the
class of individuals eligible to receive options, or materially
increase the benefits accruing to Non-Employee Directors under
the Plan.
IN WITNESS WHEREOF, the undersigned Secretary of
the Company certifies that this Plan was adopted by the Board on
February 12, 2003, effective as of the same date.
C-5
APPENDIX D
ADVANCED ENERGY INDUSTRIES, INC.
EMPLOYEE STOCK PURCHASE PLAN
Adopted September 20, 1995
(a) The purpose of the Employee Stock
Purchase Plan (the Plan) is to provide a means by
which employees of Advanced Energy Industries, Inc. (the
Company), and its Affiliates, as defined in
subparagraph 1(b), which are designated as provided in
subparagraph 2(b), may be given an opportunity to purchase
stock of the Company.
(b) The word Affiliate as used
in the Plan means any parent corporation or subsidiary
corporation of the Company, as those terms are defined in
Sections 424(e) and (f), respectively, of the Internal
Revenue Code of 1986, as amended (the Code).
(c) The Company, by means of the Plan, seeks
to retain the services of its employees, to secure and retain
the services of new employees, and to provide incentives for
such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to
purchase stock of the Company granted under the Plan be
considered options issued under an employee stock purchase
plan as that term is defined in Section 423(b) of the
Code.
(a) The Plan shall be administered by the
Board of Directors (the Board) of the Company unless
and until the Board delegates administration to a Committee, as
provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power
to determine all questions of policy and expediency that may
arise in the administration of the Plan.
(b) The Board shall have the power, subject
to, and within the limitations of, the express provisions of the
Plan:
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(i) To determine when and how rights to
purchase stock of the Company shall be granted and the
provisions of each offering of such rights (which need not be
identical).
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(ii) To designate from time to time which
Affiliates of the Company shall be eligible to participate in
the Plan.
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(iii) To construe and interpret the Plan and
rights granted under it, and to establish, amend and revoke
rules and regulations for its administration. The Board, in the
exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully
effective.
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(iv) To amend the Plan as provided in
paragraph 13.
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(v) Generally, to exercise such powers and
to perform such acts as the Board deems necessary or expedient
to promote the best interests of the Company and its Affiliates
and to carry out the intent that the Plan be treated as an
employee stock purchase plan within the meaning of
Section 423 of the Code.
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(c) The Board may delegate administration of
the Plan to a Committee composed of not fewer than two
(2) members of the Board (the Committee). If
administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board, subject, however, to
such resolutions, not inconsistent with the provisions of the
Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the
Board the administration of the Plan.
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3.
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Share Subject to the Plan.
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(a) Subject to the provisions of paragraph
12 relating to adjustments upon changes in stock, the stock that
may be sold pursuant to rights granted under the Plan shall not
exceed in the aggregate two hundred thousand (200,000) shares of
the Companys common stock (the Common Stock).
If any right granted under the Plan shall for any reason
terminate without having been exercised, the Common Stock not
purchased under such right shall again become available for the
Plan.
(b) The stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or
otherwise.
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4.
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Grant of Rights; Offering.
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(a) The Board or the Committee may from time
to time grant or provide for the grant of rights to purchase
Common Stock of the Company under the Plan to eligible employees
(an Offering) on a date or dates (the Offering
Date(s)) selected by the Board or the Committee. Each
Offering shall be in such form and shall contain such terms and
conditions as the Board or the Committee shall deem appropriate,
which shall comply with the requirements of
Section 423(b)(5) of the Code that all employees granted
rights to purchase stock under the Plan shall have the same
rights and privileges. The terms and conditions of an Offering
shall be incorporated by reference into the Plan and treated as
part of the Plan. The provisions of separate Offerings need not
be identical, but each Offering shall include (through
incorporation of the provisions of this Plan by reference in the
memorandum documenting the Offering or otherwise) the period
during which the Offering shall be effective, which period shall
not exceed twenty-seven (27) months beginning with the
Offering Date, and the substance of the provisions contained in
paragraphs 5 through 8, inclusive.
(b) If an employee has more than one right
outstanding under the Plan, unless he or she otherwise indicates
in agreements or notices delivered hereunder: (1) each
agreement or notice delivered by that employee will be deemed to
apply to all of his or her rights under the Plan, and (2) a
right with a lower exercise price (or an earlier-granted right,
if two rights have identical exercise prices), will be exercised
to the fullest possible extent before a right with a higher
exercise price (or a later-granted right, if two rights have
identical exercise prices) will be exercised.
(a) Rights may be granted only to employees
of the Company or, as the Board or the Committee may designate
as provided in subparagraph 2(b), to employees of any
Affiliate of the Company. Except as provided in
subparagraph 5(b), an employee of the Company or any
Affiliate shall not be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee has been in
the employ of the Company or any Affiliate for such continuous
period preceding such grant as the Board or the Committee may
require, but in no event shall the required period of continuous
employment be greater than two (2) years. In addition,
unless otherwise determined by the Board or the Committee and
set forth in the terms of the applicable Offering, no employee
of the Company or any Affiliate shall be eligible to be granted
rights under the Plan, unless, on the Offering Date, such
employees customary employment with the Company or such
Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide
that, each person who, during the course of an Offering, first
becomes an eligible employee of the Company or designated
Affiliate will, on a date or dates specified in the Offering
which coincides with the day on which such person becomes an
eligible employee or occurs thereafter, receive a right under
that Offering, which right shall thereafter be deemed to be a
part of that Offering. Such right shall have the same
characteristics as any rights originally granted under that
Offering, as described herein, except that:
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(i) the date on which such right is granted
shall be the Offering Date of such right for all
purposes, including determination of the exercise price of such
right;
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(ii) the period of the Offering with respect
to such right shall begin on its Offering Date and end
coincident with the end of such Offering; and
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(iii) the Board or the Committee may provide
that if such person first becomes an eligible employee within a
specified period of time before the end of the Offering, he or
she will not receive any right under that Offering.
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(c) No employee shall be eligible for the
grant of any rights under the Plan if, immediately after any
such rights are granted, such employee owns stock possessing
five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or of any
Affiliate. For purposes of this subparagraph 5(c), the
rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which
such employee may purchase under all outstanding rights and
options shall be treated as stock owned by such employee.
(d) An eligible employee may be granted
rights under the Plan only if such rights, together with any
other rights granted under employee stock purchase
plans of the Company and any Affiliates, as specified by
Section 423(b)(8) of the Code, do not permit such
employees rights to purchase stock of the Company or any
Affiliate to accrue at a rate which exceeds twenty-five thousand
dollars ($25,000) of fair market value of such stock (determined
at the time such rights are granted) for each calendar year in
which such rights are outstanding at any time.
(e) Officers of the Company and any
designated Affiliate shall be eligible to participate in
Offerings under the Plan, provided, however, that the Board may
provide in an Offering that certain employees who are highly
compensated employees within the meaning of
Section 423(b)(4)(D) of the Code shall not be eligible to
participate.
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6.
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Rights; Purchase Price.
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(a) On each Offering Date, each eligible
employee, pursuant to an Offering made under the Plan, shall be
granted the right to purchase up to the number of shares of
Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen
(15%) of such employees Earnings (as defined in
subparagraph 7(a)) during the period which begins on the
Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the
end of the Offering. The Board or the Committee shall establish
one or more dates during an Offering (the Purchase
Date(s)) on which rights granted under the Plan shall be
exercised and purchases of Common Stock carried out in
accordance with such Offering.
(b) In connection with each Offering made
under the Plan, the Board or the Committee may specify a maximum
number of shares which may be purchased by any employee as well
as a maximum aggregate number of shares which may be purchased
by all eligible employees pursuant to such Offering. In
addition, in connection with each Offering which contains more
than one Purchase Date, the Board or the Committee may specify a
maximum aggregate number of shares which may be purchased by all
eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of
rights granted under the Offering would exceed any such maximum
aggregate number, the Board or the Committee shall make a pro
rata allocation of the shares available in as nearly a uniform
manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired
pursuant to rights granted under the Plan shall be not less than
the lesser of:
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(i) an amount equal to eighty-five percent
(85%) of the fair market value of the stock on the Offering
Date; or
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(ii) an amount equal to eighty-five percent
(85%) of the fair market value of the stock on the Purchase Date.
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7.
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Participation; Withdrawal;
Termination.
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(a) An eligible employee may become a
participant in the Plan pursuant to an Offering by delivering a
participation agreement to the Company within the time specified
in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the
maximum percentage specified by the Board or the Committee of
such employees Earnings during the Offering.
Earnings is defined as an employees regular
salary or wages (including amounts thereof elected to be
deferred by the employee, that would otherwise have been paid,
under any arrangement established by the Company intended to
comply with Section 401(k), Section 402(e)(3),
Section 125, Section 402(h), or Section 403(b) of
the Code, and also including any deferrals under a non-qualified
deferred compensation plan or arrangement established by the
Company), which shall include or exclude bonuses, commissions,
overtime pay, incentive pay, profit sharing, other remuneration
paid directly to the employee, the cost of employee benefits
paid for by the Company or an Affiliate, education or tuition
reimbursements, imputed income arising under any group insurance
or benefit program, traveling expenses, business and moving
expense reimbursements, income received in connection with stock
options, contributions made by the Company or an Affiliate under
any employee benefit plan, and similar items of compensation, as
determined by the Board or Committee. The payroll deductions
made for each participant shall be credited to an account for
such participant under the Plan and shall be deposited with the
general funds of the Company. A participant may reduce
(including to zero) or increase such payroll deductions, and an
eligible employee may begin such payroll deductions, after the
beginning of any Offering only as provided for in the Offering.
A participant may make additional payments into his or her
account only if specifically provided for in the Offering and
only if the participant has not had the maximum amount withheld
during the Offering.
(b) At any time during an Offering, a
participant may terminate his or her payroll deductions under
the Plan and withdraw from the Offering by delivering to the
Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to
the end of the Offering except as provided by the Board or the
Committee in the Offering. Upon such withdrawal from the
Offering by a participant, the Company shall distribute to such
participant all of his or her accumulated payroll deductions
(reduced to the extent, if any, such deductions have been used
to acquire stock for the participant) under the Offering,
without interest, and such participants interest in that
Offering shall be automatically terminated. A participants
withdrawal from an Offering will have no effect upon such
participants eligibility to participate in any other
Offerings under the Plan but such participant will be required
to deliver a new participation agreement in order to participate
in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering
under the Plan shall terminate immediately upon cessation of any
participating employees employment with the Company and
any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her
accumulated payroll deductions (reduced to the extent, if any,
such deductions have been used to acquire stock for the
terminated employee), under the Offering, without interest.
(d) Rights granted under the Plan shall not
be transferable by a participant otherwise than by will or the
laws of descent and distribution, or by beneficiary designation
as provided in paragraph 14, and otherwise during his or her
lifetime, shall be exercisable only by the person to whom such
rights are granted.
(a) On each date specified therefor in the
relevant Offering (Purchase Date), each
participants accumulated payroll deductions and other
additional payments specifically provided for in the Offering
(without any increase for interest) will be applied to the
purchase of whole shares of stock of the Company, up to the
maximum number of shares permitted pursuant to the terms of the
Plan and the applicable Offering, at the purchase price
specified in the Offering. No fractional shares shall be issued
upon the exercise of rights granted under the Plan. The amount,
if any, of accumulated payroll deductions remaining in each
participants account after the purchase of shares which is
less than the amount required to purchase one share of stock on
the final Purchase Date of an Offering shall be held in each
such participants account for the purchase of shares under
the next Offering under the Plan, unless such participant
withdraws from such next Offering, as
D-4
provided in subparagraph 7(b), or is no
longer eligible to be granted rights under the Plan, as provided
in paragraph 5, in which case such amount shall be
distributed to the participant after such final Purchase Date,
without interest. The amount, if any, of accumulated payroll
deductions remaining in any participants account after the
purchase of shares which is equal to the amount required to
purchase whole shares of stock on the final Purchase Date of an
Offering shall be distributed in full to the participant after
such Purchase Date, without interest.
(b) No rights granted under the Plan may be
exercised to any extent unless the shares to be issued upon such
exercise under the Plan (including rights granted thereunder)
are covered by an effective registration statement pursuant to
the Securities Act of 1933, as amended (the Securities
Act) and the Plan is in material compliance with all
applicable state, foreign and other securities and other laws
applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance,
no rights granted under the Plan or any Offering shall be
exercised on such Purchase Date, and the Purchase Date shall be
delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the
Purchase Date shall not be delayed more than twelve
(12) months and the Purchase Date shall in no event be more
than twenty-seven (27) months from the Offering Date. If on
the Purchase Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered and in
such compliance, no rights granted under the Plan or any
Offering shall be exercised and all payroll deductions
accumulated during the Offering (reduced to the extent, if any,
such deductions have been used to acquire stock) shall be
distributed to the participants, without interest.
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9.
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Covenants of the Company.
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(a) During the terms of the rights granted
under the Plan, the Company shall keep available at all times
the number of shares of stock required to satisfy such rights.
(b) The Company shall seek to obtain from
each federal, state, foreign or other regulatory commission or
agency having jurisdiction over the Plan such authority as may
be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under
the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights
unless and until such authority is obtained.
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10.
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Use of Proceeds from Stock.
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Proceeds from the sale of stock pursuant to
rights granted under the Plan shall constitute general funds of
the Company.
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11.
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Rights as a Shareholder.
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A participant shall not be deemed to be the
holder of, or to have any of the rights of a holder with respect
to, any shares subject to rights granted under the Plan unless
and until the participants shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of
the Company.
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12.
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Adjustments upon Changes in Stock.
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(a) If any change is made in the stock
subject to the Plan, or subject to any rights granted under the
Plan (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or
other transaction not involving the receipt of consideration by
the Company), the Plan and outstanding rights will be
appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of
shares and price per share of stock subject to outstanding
rights. Such adjustments shall be made by the Board or
Committee, the determination of which shall be final, binding
and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a transaction not
involving the receipt of consideration by the Company.)
D-5
(b) In the event of: (1) a dissolution
or liquidation of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a
reverse merger in which the Company is the surviving corporation
but the shares of the Companys Common Stock outstanding
immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities,
cash or otherwise; or (4) any other capital reorganization in
which more than fifty percent (50%) of the shares of the Company
entitled to vote are exchanged, then, as determined by the Board
in its sole discretion (i) any surviving corporation may
assume outstanding rights or substitute similar rights for those
under the Plan, (ii) such rights may continue in full force and
effect, or (iii) participants accumulated payroll
deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the
participants rights under the ongoing Offering terminated.
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13.
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Amendment of the Plan.
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(a) The Board at any time, and from time to
time, may amend the Plan. However, except as provided in
paragraph 12 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the shareholders
of the Company within twelve (12) months before or after
the adoption of the amendment, where the amendment will:
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(i) Increase the number of shares reserved
for rights under the Plan;
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(ii) Modify the provisions as to eligibility
for participation in the Plan (to the extent such modification
requires shareholder approval in order for the Plan to obtain
employee stock purchase plan treatment under Section 423 of
the Code or to comply with the requirements of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as
amended (Rule 16b-3)); or
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(iii) Modify the Plan in any other way if
such modification requires shareholder approval in order for the
Plan to obtain employee stock purchase plan treatment under
Section 423 of the Code or to comply with the requirements
of Rule 16b-3.
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It is expressly contemplated that the Board may
amend the Plan in any respect the Board deems necessary or
advisable to provide eligible employees with the maximum
benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to
employee stock purchase plans and/or to bring the Plan and/or
rights granted under it into compliance therewith.
(b) Rights and obligations under any rights
granted before amendment of the Plan shall not be impaired by
any amendment of the Plan, except with the consent of the person
to whom such rights were granted, or except as necessary to
comply with any laws or governmental regulation, or except as
necessary to ensure that the Plan and/or rights granted under
the Plan comply with the requirements of Section 423 of the
Code.
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14.
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Designation of Beneficiary.
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(a) A participant may file a written
designation of a beneficiary who is to receive any shares and
cash, if any, from the participants account under the Plan
in the event of such participants death subsequent to the
end of an Offering but prior to delivery to the participant of
such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash
from the participants account under the Plan in the event
of such participants death during an Offering.
(b) Such designation of beneficiary may be
changed by the participant at any time by written notice. In the
event of the death of a participant and in the absence of a
beneficiary validly designated under the Plan who is living at
the time of such participants death, the Company shall
deliver such shares and/or cash to the executor or administrator
of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the
Company), the Company, in its sole discretion, may deliver such
shares and/or cash to the spouse or to any one or more
dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such
other person as the Company may designate.
D-6
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15.
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Termination or Suspension of the
Plan.
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(a) The Board may suspend or terminate the
Plan at any time. Unless sooner terminated, the Plan shall
terminate at the time that all of the shares subject to the
Plans share reserve, as increased and/or adjusted from
time to time, have been issued under the terms of the Plan. No
rights may be granted under the Plan while the Plan is suspended
or after it is terminated.
(b) Rights and obligations under any rights
granted while the Plan is in effect shall not be altered or
impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to
comply with any laws or governmental regulation, or except as
necessary to ensure that the Plan and/or rights granted under
the Plan comply with the requirements of Section 423 of the
Code.
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16.
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Effective Date of Plan.
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The Plan shall become effective upon the adoption
of enabling resolutions by the Companys Board of Directors
(the Effective Date), but no rights granted under
the Plan shall be exercised unless and until the Plan has been
approved by the shareholders of the Company within
12 months before or after the date the Plan is adopted by
the Board or the Committee, which date may be prior to the
Effective Date.
D-7
[FORM OF PROXY]
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
Regardless of whether you plan to attend the 2003 Annual Meeting of
Stockholders, you can be sure your shares are represented at the meeting by
promptly delivering your proxy.
In addition to the election of Directors, there are four proposals being
submitted by the Board of Directors. The Board of Directors recommends a vote
in favor (FOR) of each of the six nominees listed below and in favor (FOR) of
Proposals 2, 3, 4 and 5.
All voting on matters presented at the meeting will be by paper proxy or by
presence in person, in accordance with the procedures described in the proxy
statement.
PLEASE DETACH HERE AND MAIL IN THE ENVELOPE PROVIDED.
ADVANCED ENERGY INDUSTRIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 2003 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 7, 2003
The undersigned hereby constitutes and appoints Douglas S. Schatz and Michael
El-Hillow, and each of them, his, her or its lawful agents and proxies with
full power of substitution in each, to represent the undersigned, and to vote
all of the shares of common stock of Advanced Energy Industries, Inc. which the
undersigned may be entitled to vote at the 2003 Annual Meeting of Stockholders
of Advanced Energy Industries, Inc., 1625 Sharp Point Drive, Fort Collins,
Colorado on Wednesday, May 7, 2003 at 10:00 a.m., local time, and at any
adjournment or postponement thereof, on all matters coming before the meeting.
IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY, WHEN PROPERLY EXECUTED,
WILL BE VOTED IN ACCORDANCE WITH SUCH INSTRUCTIONS. UNLESS A CONTRARY DIRECTION
IS INDICATED, THIS PROXY WILL BE VOTED FOR THE SIX NOMINEES LISTED IN PROPOSAL
1 AND FOR PROPOSALS 2, 3, 4 AND 5.
You may deliver this proxy by signing and returning this proxy card in the
enclosed envelope.
In addition to the election of Directors, there are four proposals being
submitted by the Board of Directors. The Board of Directors recommends a vote
in favor (FOR) of each of the six nominees listed below and in favor (FOR) of
Proposals 2, 3, 4 and 5.
x
Please mark your votes as in this example.
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FOR
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WITHHELD
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Nominees:
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1.
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Election of Six Directors:
For all nominees, except vote withheld from the following nominee(s) (indicate by name(s)):
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o
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o
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(01) Douglas S. Schatz
(02) Richard P. Beck
(03) Trung T. Doan
(04) Arthur A. Noeth
(05) Elwood Spedden
(06) Gerald M. Starek
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FOR
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AGAINST
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ABSTAIN
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2.
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Approval of the 2003 Stock Option
Plan
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o
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o
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o
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3.
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Approval of the 2003 Non-Employee
Directors Stock Option Plan
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o
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o
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o
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4.
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Approval of an amendment to the
Employee Stock Purchase Plan
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o
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o
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o
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5.
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Ratification of the appointment of
KPMG LLP as independent auditors
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o
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o
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o
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6.
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In their discretion, the proxy
holders are authorized to vote
upon any
other matters of business which
may properly come before the meeting, or,
any adjournment(s) thereof.
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Change of Address on
Reverse Side
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o
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I plan to attend the
Meeting
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o
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I do not plan to attend the
meeting
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o
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Please sign exactly as your name appears on this card. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee, or guardian,
please give full title. If more than one trustee, all should sign. If signer
is a corporation, please give full corporate name and have a duly authorized
officer sign, stating title. If signer is a partnership, please sign in
partnership name by authorized person.
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Signature:
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Date:
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Signature:
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Date:
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PLEASE DATE, SIGN AND MAIL YOUR PROXY PROMPTLY.