As filed with the Securities and Exchange Commission on May 19, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ADVANCED ENERGY INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-0846841
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
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1625 SHARP POINT DRIVE
FORT COLLINS, COLORADO 80525
(970) 221-4670
(Address, including postal or zip code, and telephone number, including area code, of registrant's principal executive offices)
RICHARD P. BECK
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
ADVANCED ENERGY INDUSTRIES, INC.
1625 SHARP POINT DRIVE
FORT COLLINS, COLORADO 80525
(970) 221-4670
(Name, address, including zip code, and telephone number, including area code, of agent for service)
with copies to:
MICHELLE L. JOHNSON
J.J. ANDRE
THELEN REID & PRIEST LLP
101 SECOND STREET, SUITE 1800
SAN FRANCISCO, CALIFORNIA 94105-3601
Approximate date of commencement of proposed sale to the public:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT IS DECLARED EFFECTIVE.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following box. []
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than securities offered
solely in connection with dividend or interest reinvestment
plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. []
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. []
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. []
CALCULATION OF REGISTRATION FEE
Title of Each Class Amount to Proposed Proposed Amount of
of Securities be Maximum Maximum Registration
to be Registered Registered Offering Aggregate Fee
Price Offering
Per Unit (1) Price (1)
Common Stock, $0.001 686,503 $51.9375 $35,655,249.56 $9,412.99
par value shares
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(1) Estimated solely for the purpose of determining the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, as amended. The above calculation is based on the average of the reported high and low prices of the Common Stock on the Nasdaq National Market on May 17, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
SUBJECT TO COMPLETION DATED MAY 19, 2000
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the securities and exchange commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PROSPECTUS
686,503 Shares
Advanced Energy Industries, Inc.
Common Stock
This prospectus relates to the public offering, which is not being underwritten, of up to 686,503 shares of our common stock by the selling stockholders identified in this prospectus. The prices at which the stockholders may sell the shares will be determined by the prevailing market for the shares or in negotiated transactions. We will not receive any proceeds from the sale of shares offered under this prospectus.
Our common stock is traded on the Nasdaq National Market under the symbol "AEIS." The last reported sale price on May 17, 2000 was $51.375.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS TO READ ABOUT IMPORTANT FACTORS YOU SHOULD CONSIDER BEFORE PURCHASING SHARES OF THE COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is ________, 2000
ADVANCED ENERGY INDUSTRIES, INC.
OVERVIEW
We design, manufacture and support power conversion and control systems. These systems are important components of industrial manufacturing equipment that modifies surfaces or deposits or etches thin film layers on computer chips, CDs, flat panel displays such as computer screens, DVDs, windows, eyeglasses, solar panels and other products. Our systems refine, modify and control the raw electrical power from a utility and convert it into power that is uniform and predictable. This allows manufacturing equipment to produce and deposit very thin films at an even thickness on a mass scale.
The ongoing demand for improvements in the performance, capacity and speed of computer chips, flat panel displays and other products drives manufacturers to develop more advanced technology to produce thinner, more consistent and more precise layers of film. Thin film production processes enable manufacturers to control and alter the electrical, magnetic, optical and mechanical characteristics of materials. Our systems are used primarily in plasma-based thin film production processes. Plasma is commonly created by applying enough electrical force to a gas at reduced pressure to separate electrons from their parent atoms. Plasma-based process technology was developed to address the limitations of wet chemistry and thermal process technologies and to enable new applications. Plasma-based processes are inherently more controllable and more accurate for many applications than other thin film production processes because of the electrical characteristics of plasma.
We market and sell our systems primarily to large, global original equipment manufacturers of semiconductor, flat panel display, data storage and other industrial thin film manufacturing equipment. We have sold our systems worldwide to more than 100 OEMs and directly to more than 500 end-users. Our principal customers include Applied Materials, Balzers, Eaton, Lam Research, Novellus, Singulus and ULVAC. The semiconductor capital equipment industry accounted for approximately 59% of our total sales in 1997, 49% in 1998, 61% in 1999 and 62% in the first three months of 2000.
We incorporated in Colorado in 1981 and reincorporated in Delaware in 1995. Our main offices are located at 1625 Sharp Point Drive, Fort Collins, Colorado 80525, and our telephone number is (970) 221-4670.
RECENT DEVELOPMENTS
In April 2000, we acquired Noah Holdings, Inc. ("Noah"), a privately-held manufacturer of solid state temperature control systems used to control process temperatures during semiconductor manufacturing. We believe that this acquisition will enable us to increase our product offerings and provide more value to our customers.
STRATEGY
We have achieved a market leadership position in the semiconductor equipment, flat panel display and data storage industries by applying our large base of expertise in the interaction between plasma-based processes and power conversion and control systems to design highly precise, customized power conversion and control systems that provide a wide range of power frequencies for plasma-based thin film processes. Our strategy is to continue to build upon our leadership positions in these industries while exploring other emerging markets. We believe our five key growth opportunities are:
EXPANDING LEADERSHIP IN OUR CORE MARKETS. We believe we are
the market share leader in the semiconductor capital equipment,
data storage and flat panel display markets. We plan to continue
to increase our penetration in these three markets by introducing
new products and solutions for our existing customers and
targeting new customers, but our primary focus will continue to
be on the semiconductor capital equipment market. For example,
in the semiconductor capital equipment market we believe that
significant opportunities exist for us to introduce new products
for processes or applications such as:
* etch applications using radio frequency power;
* gas abatement;
* on-line measurement of power characteristics; and
* copper electroplating.
PROVIDING INTEGRATED SOLUTIONS FOR CUSTOMERS. We believe that customers want solutions that improve process control and yield, and decrease their total cost and time to market. We are developing integrated systems to provide more complete solutions that meet our customers' plasma-based process requirements. We are identifying currently fragmented applications of technology involving significant power, measurement and control content, and developing integrated, high performance, robust and cost- effective solutions for these applications.
TARGETING EMERGING APPLICATIONS. We are targeting emerging applications that have the potential to benefit from more efficient and reliable use of power in manufacturing processes for telecommunications networking equipment, automotive parts, tools, architectural glass and other industrial products.
PURSUING ACQUISITIONS TO FUEL GROWTH. We actively seek complementary technologies and companies as a means to expand our presence in existing and emerging markets and to provide integrated solutions for customers and potential customers. We have acquired and integrated four companies in the last two years. We continually evaluate companies whose products and technologies could enhance our system level capabilities.
CAPITALIZING ON WORLDWIDE INFRASTRUCTURE. Our principal customers are large, global OEMs that require that their suppliers have a well-developed worldwide infrastructure. We plan to continue to take advantage of and expand our established global infrastructure, operating skills and comprehensive product portfolio to better serve these customers and to attract new customers with international support needs.
SALES AND MARKETING
We sell our systems primarily through direct sales personnel to customers in the United States, Europe and Asia, and through distributors in China, France, Israel, Italy, Singapore, and Sweden. Sales outside the United States represented 23% of our total sales during 1997, 28% in 1998, 29% in 1999 and 31% in the first three months of 2000. We maintain sales and service offices across the United States in California, Colorado, Massachusetts, Minnesota, New Jersey and Texas. We maintain sales and service offices outside the United States in Germany, Japan, South Korea, the United Kingdom and Taiwan.
RF POWER PRODUCTS ACQUISITION
In October 1998, we acquired RF Power Products, which designs, manufactures and supports radio frequency (RF) power conversion and control systems consisting of generators and matching networks. Generators provide RF power and matching networks provide control over power flow to the customers' equipment. We believe our ability to offer an expanded line of RF systems to our existing customer base has strengthened those relationships. We sell these products principally to semiconductor capital equipment manufacturers. We also sell similar systems to capital equipment manufacturers in the flat panel display and thin film data storage industries and are exploring applications for these systems in other industries.
RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below and the other information in this prospectus and in the documents incorporated by reference before deciding whether to purchase our common stock.
RISKS RELATED TO OUR BUSINESS
OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS, WHICH COULD NEGATIVELY IMPACT OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS AND STOCK PRICE.
Our quarterly operating results have fluctuated significantly and we expect them to continue to experience significant fluctuations. Downward fluctuations in our quarterly results have historically resulted in decreases in the price of our common stock. Quarterly operating results are affected by a variety of factors, many of which are beyond our control. These factors include:
* changes or slowdowns in economic conditions in the
semiconductor and semiconductor capital equipment industries
and other industries in which our customers operate;
* the timing and nature of orders placed by major customers;
* customer cancellations of previously placed orders and
shipment delays;
* pricing competition from our competitors;
* component shortages resulting in manufacturing delays;
* changes in customers' inventory management practices;
* the introduction of new products by us or our competitors;
and
* costs incurred by responding to specific feature requests by
customers.
In addition, companies in the semiconductor capital equipment industry and other electronics companies experience pressure to reduce costs. Our customers exert pressure on us to reduce our prices, shorten delivery times and extend payment terms. These pressures could lead to significant changes in our operating results from quarter to quarter.
In the past, we have incurred charges and costs related to events such as acquisitions, restructuring and storm damages. The occurrence of similar events in the future could adversely affect our operating results in the applicable quarter.
Our operating results in one or more future quarters may fall below the expectations of analysts and investors. In those circumstances, the trading price of our securities would likely decrease.
THE SEMICONDUCTOR AND SEMICONDUCTOR CAPITAL EQUIPMENT INDUSTRIES ARE HIGHLY VOLATILE AND OUR OPERATING RESULTS ARE AFFECTED TO A LARGE EXTENT BY EVENTS IN THOSE INDUSTRIES.
The semiconductor industry historically has been highly
volatile and has experienced periods of oversupply resulting in
significantly reduced demand for semiconductor fabrication
equipment, which includes our systems. During downturns, some of
our customers have drastically reduced their orders to us and
have implemented substantial cost reduction programs. Sales to
customers in the semiconductor capital equipment industry
accounted for 59% of our total sales in 1997, 49% in 1998, 61% in
1999 and 62% in the first three months of 2000. We expect that
we will continue to depend significantly on the semiconductor and
semiconductor capital equipment industries for the foreseeable
future.
A rapid decrease in demand for our products can occur with limited advance notice because we supply subsystems to equipment manufacturers and make a substantial and increasing proportion of our shipments on a just-in-time basis. This decrease in demand can adversely impact our business and financial results disproportionately because of its unanticipated nature.
A SIGNIFICANT PORTION OF OUR SALES ARE CONCENTRATED AMONG A FEW CUSTOMERS.
Our four largest customers accounted for 51% of our total sales in 1997, 47% in 1998, 53% in 1999 and 54% in the first quarter of 2000. Our largest customer accounted for 31% of our total sales in 1997, 23% in 1998, 32% in 1999 and 36% in the first quarter of 2000. The loss of any of these customers or a material reduction in any of their purchase orders would have a material adverse effect on our business, financial condition and results of operations.
THE MARKETS IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE.
We face substantial competition, primarily from established companies, some of which have greater financial, marketing and technical resources than we do. Our primary competitors are ENI, a subsidiary of Astec (BSR) plc, Applied Science and Technology (ASTeX), Huettinger, Shindingen, Kyosan, Comdel and Daihen. We expect that our competitors will continue to develop new products in direct competition with ours, improve the design and performance of their systems and introduce new systems with enhanced performance characteristics.
To remain competitive, we need to continue to improve and expand our systems and system offerings. In addition, we need to maintain a high level of investment in research and development and expand our sales and marketing efforts, particularly outside of the United States. We may not be able to make the technological advances and investments necessary to remain competitive.
New products developed by competitors or more efficient production of their products could increase pressure on the pricing of our systems. In addition, electronics companies, including companies in the semiconductor capital equipment industry, have been facing pressure to reduce costs. Either of these factors may require us to make significant price reductions to avoid losing orders. Further, our current and prospective customers consistently exert pressure on us to lower prices, shorten delivery times and improve the capability of our systems. Failure to respond adequately to such pressures could result in a loss of customers or orders.
WE MAY NOT BE ABLE TO INTEGRATE OUR ACQUISITIONS.
We have experienced significant growth through acquisitions and continue to actively pursue acquisition opportunities. Our acquisitions to date generally have been in markets in which we have limited experience. We may not be able to compete successfully in these markets or might not be able to operate the acquired businesses efficiently. Our business and results of operations could be adversely affected if integrating these acquisitions results in substantial costs, delays or other operational or financial problems.
Future acquisitions could place additional strain on our operations and management. Our ability to manage future acquisitions will depend on our success in:
* evaluating new markets and investments;
* monitoring operations;
* controlling costs;
* integrating acquired operations and personnel;
* maintaining effective quality controls; and
* expanding our internal management, technical and accounting
systems.
Also, in connection with future acquisitions we may issue equity securities which could be dilutive, incur debt, recognize substantial one-time expenses or create goodwill or other intangible assets that could result in significant amortization expense.
WE ARE GROWING AND MAY BE UNABLE TO MANAGE OUR GROWTH EFFECTIVELY.
We have been experiencing a period of growth and expansion. This growth and expansion is placing significant demands on our management and our operating systems. We need to continue to improve and expand our management, operational and financial systems, procedures and controls, including accounting and other internal management systems, quality control, delivery and service capabilities.
In order to manage our growth, we may also need to spend significant amounts of cash to:
* fund increases in expenses;
* acquire additional facilities and equipment;
* take advantage of unanticipated opportunities, such as major
strategic alliances or other special marketing opportunities,
acquisitions of complementary businesses or assets, or the
development of new products; or
* otherwise respond to unanticipated developments or
competitive pressures.
If we do not have enough cash on hand, cash generated from our operations or cash available under our credit facility to meet these cash requirements, we will need to seek alternative sources of financing to carry out our growth and operating strategies. We may not be able to raise needed cash on terms acceptable to us, or at all. Financings may be on terms that are dilutive or potentially dilutive. If alternative sources of financing are required but are insufficient or unavailable, we will be required to modify our growth and operating plans to the extent of available funding.
SHORTAGES OF COMPONENTS NECESSARY FOR OUR PRODUCT ASSEMBLY CAN DELAY OUR SHIPMENTS.
Manufacturing our power conversion and control systems requires numerous electronic components. Dramatic growth in the electronics industry has significantly increased demand for these components, particularly in the first quarter of 2000. This demand has resulted in periodic shortages and allocations of needed components, and we expect to experience additional shortages and allocations from time to time. Shortages and allocations could cause shipping delays for our systems, adversely affecting our results of operations. Shipping delays also could damage our relationships with current and prospective customers.
OUR DEPENDENCE ON SOLE AND LIMITED SOURCE SUPPLIERS COULD AFFECT OUR ABILITY TO MANUFACTURE PRODUCTS AND SYSTEMS.
We rely on sole and limited source suppliers for some of our
components and subassemblies that are critical to the
manufacturing of our systems. This reliance involves several
risks, including the following:
* the potential inability to obtain an adequate supply of
required components;
* reduced control over pricing and timing of delivery of
components; and
* the potential inability of our suppliers to develop
technologically advanced products to support our growth and
development of new systems.
We believe that in time we could obtain and qualify alternative sources for most sole and limited source parts or could manufacture the parts ourselves. Seeking alternative sources or commencing internal manufacture of the parts could require us to redesign our systems, resulting in increased costs and likely shipping delays. We may be unable to manufacture the parts internally or redesign our systems, which could result in further costs and shipping delays. These increased costs would decrease our profit margins if we could not pass the costs to our customers. Further, shipping delays could damage our relationships with current and potential customers and have a material adverse effect on our business and results of operations.
WE ARE HIGHLY DEPENDENT ON OUR INTELLECTUAL PROPERTY BUT MAY NOT BE ABLE TO PROTECT IT ADEQUATELY.
Our success depends in part on our proprietary technology. We attempt to protect our intellectual property rights through patents and non-disclosure agreements. However, we might not be able to protect our technology, and competitors might be able to develop similar technology independently. In addition, the laws of certain foreign countries might not afford our intellectual property the same protection as do the laws of the United States. For example, our intellectual property is not protected by patents in several countries in which we do business, and we have limited patent protection in certain other countries. The costs of applying for patents in foreign countries and translating the applications into foreign languages require us to select carefully the inventions for which we apply for patent protection and the countries in which we seek such protection. Generally, we have concentrated our efforts to obtain international patents in the United Kingdom, Germany, France, Italy and Japan because there are other manufacturers and developers of power conversion and control systems in those countries, as well as customers for those systems. Our inability or failure to obtain adequate patent protection in a particular country could have a material adverse effect on our ability to compete effectively in that country.
Our patents also might not be sufficiently broad to protect our technology, and any existing or future patents might be challenged, invalidated or circumvented. Additionally, our rights under our patents may not provide meaningful competitive advantages.
We do not believe that any of our products are infringing any patents or proprietary rights of others, although infringements may exist or might occur in the future. Litigation may be necessary to enforce patents issued to us, to protect our trade secrets or know-how, to defend ourselves against claimed infringement of the rights of others or to determine the scope and validity of the proprietary rights of others. Litigation could result in substantial cost and diversion of our efforts. Moreover, an adverse determination in any litigation could cause us to lose proprietary rights, subject us to significant liabilities to third parties, require us to seek licenses or alternative technologies from third parties or prevent us from manufacturing or selling our products. Any of these events could have a material adverse effect on our business, financial condition and results of operations.
WE MUST CONSTANTLY DEVELOP AND SELL NEW SYSTEMS IN ORDER TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGES.
The markets for our systems and the markets in which our
customers compete are characterized by ongoing technological
developments and changing customer requirements. We must
continue to improve existing systems and to develop new systems
that keep pace with technological advances and meet the needs of
our customers in order to succeed. We might not be able to
continue to improve our
systems or develop new systems. The systems we do develop might not be cost-effective or introduced in a timely manner. Developing and introducing new systems may involve significant and uncertain costs. Our business, financial condition and results of operations, as well as our customer relationships, could be adversely affected if we fail to develop or introduce improved systems and new systems in a timely manner.
WE MUST ACHIEVE DESIGN WINS TO RETAIN OUR EXISTING CUSTOMERS AND TO OBTAIN NEW CUSTOMERS.
The constantly changing nature of semiconductor fabrication technology causes equipment manufacturers to continually design new systems. We often must work with these manufacturers early in their design cycles to modify our equipment to meet the requirements of the new systems. Manufacturers typically choose one or two vendors to provide the power conversion equipment for use with the early system shipments. Selection as one of these vendors is called a design win. It is critical that we achieve these design wins in order to retain existing customers and to obtain new customers.
We typically must customize our systems for particular customers to use in their equipment to achieve design wins. This customization increases our research and development expenses and can strain our engineering and management resources. These investments do not always result in design wins.
Once a manufacturer chooses a power conversion and control system for use in a particular product, it is likely to retain that system for the life of that product. Our sales and growth could experience material and prolonged adverse effects if we fail to achieve design wins. In addition, design wins do not always result in substantial sales or profits.
We believe that equipment manufacturers often select their suppliers based on factors such as long-term relationships. Accordingly, we may have difficulty achieving design wins from equipment manufacturers who are not currently customers. In addition, we must compete for design wins for new systems and products of our existing customers, including those with whom we have had long-term relationships.
OUR EFFORTS TO BE RESPONSIVE TO CUSTOMERS MAY LEAD TO THE INCURRENCE OF COSTS THAT ARE NOT READILY RECOVERABLE.
We may incur manufacturing overhead and other costs, many of which are fixed, to meet anticipated customer demand. Accordingly, operating results could be adversely affected if orders or revenues in a particular period or for a particular system do not meet expectations.
We often require long lead times for development of our systems during which times we must expend substantial funds and management effort. We may incur significant development and other expenses as we develop our systems without realizing corresponding revenue in the same period, or at all.
OUR SUCCESS DEPENDS UPON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL.
Our success depends upon the continued efforts of our senior
management team and our technical, marketing and sales personnel.
These employees may voluntarily terminate their employment with
us at any time. Our success also depends on our ability to
attract and retain additional highly qualified management,
technical, marketing and sales personnel. The process of hiring
employees with the combination of skills and attributes required
to carry out our strategy can be extremely competitive and time-
consuming. We may not be able to successfully retain existing
personnel or identify, hire and integrate new personnel. If we
lose the services of key personnel for any reason, including
retirement, or
are unable to attract additional qualified personnel, our business, financial condition and results of operations could be materially and adversely affected.
WE CONDUCT MANUFACTURING AT ONLY A FEW SITES.
We conduct the majority of our manufacturing at our facilities in Fort Collins, Colorado and in Voorhees, New Jersey. We also conduct manufacturing for one customer in Austin, Texas. Tower Electronics, a subsidiary, conducts manufacturing only at its facility in Fridley, Minnesota. Noah, a subsidiary, conducts manufacturing only at its facility in San Jose, California. Each facility generally manufactures different systems. In July 1997, a severe rainstorm in Fort Collins caused substantial damage to our Fort Collins facilities and to some equipment and inventory. The damage caused us to stop manufacturing at that facility temporarily and prevented us from resuming full production there until mid-September 1997. Our insurance policies did not cover all of the costs that we incurred in connection with the rainstorm. Future natural or other uncontrollable occurrences at any of our primary manufacturing facilities that negatively impact our manufacturing processes may not be fully covered by insurance and could have a material adverse effect on our operations and results of operations.
WE HAVE LIMITED EXPERIENCE IN MAINTAINING MULTIPLE MANUFACTURING FACILITIES.
The acquisitions of Tower Electronics in 1997, RF Power Products in 1998, and Noah in 2000 provided us with manufacturing facilities located outside of our facilities in Fort Collins, Colorado. Accordingly, we have limited experience in maintaining multiple manufacturing locations. Substantial costs and delays could result if we fail to effectively manage and integrate our geographically separate facilities.
WE MIGHT NOT BE ABLE TO COMPETE SUCCESSFULLY IN INTERNATIONAL MARKETS OR TO MEET THE SERVICE AND SUPPORT NEEDS OF OUR INTERNATIONAL CUSTOMERS.
Our customers increasingly require service and support on a worldwide basis as the markets in which we compete become increasingly globalized. We maintain sales and service offices in Germany, Japan, South Korea, the United Kingdom, and Taiwan.
Sales to customers outside the United States accounted for 23% of our total sales in 1997, 28% in 1998, 29% in 1999 and 31% in the first three months of 2000, and we expect international sales to continue to represent a significant portion of our future sales. International sales are subject to various risks, including:
* currency fluctuations;
* governmental controls;
* political and economic instability;
* barriers to entry;
* trade restrictions;
* changes in tariffs and taxes; and
* longer payment cycles.
In particular, the Japanese market has historically been difficult for non-Japanese companies, including us, to penetrate.
Providing support services for our systems on a worldwide basis also is subject to various risks, including:
* our ability to hire qualified support personnel;
* maintenance of our standard level of support; and
* differences in local customers and practices.
Our international activities are also subject to the difficulties of managing overseas distributors and representatives and managing foreign subsidiary operations.
We cannot assure you that we will be successful in addressing any of these risks.
FLUCTUATIONS IN THE CURRENCY EXCHANGE RATE BETWEEN THE U.S. DOLLAR AND FOREIGN CURRENCIES COULD ADVERSELY AFFECT OUR OPERATING RESULTS.
A portion of our sales is subject to currency exchange risks as a result of our international operations. We have experienced fluctuations in foreign currency exchange rates, particularly against the Japanese yen. Beginning in 1997, we entered into various forward foreign exchange contracts as a hedge against currency fluctuations in the yen. We have not employed hedging techniques with respect to any other currencies. Our current or any future hedging techniques might not protect us adequately against sudden or substantial currency fluctuations.
WE MUST MAINTAIN MINIMUM LEVELS OF CUSTOMIZED INVENTORY TO SUPPORT CERTAIN CUSTOMER DELIVERY REQUIREMENTS.
We must keep a relatively large number and variety of customized systems in our inventory to meet client delivery requirements because a substantial proportion of our business involves the just-in-time shipment of systems. Our inventory may become obsolete as we develop new systems and as our customers develop new systems. Inventory obsolescence could have a material adverse effect on our financial condition and results of operations.
WE ARE SUBJECT TO NUMEROUS GOVERNMENTAL REGULATIONS.
We are subject to federal, state, local and foreign regulations, including environmental regulations and regulations relating to the design and operation of our power conversion and control systems. We must ensure that our systems meet certain safety and emissions standards, many of which vary across the states and countries in which our systems are used. For example, the European Union has published directives specifically relating to power supplies. We must comply with these directives in order to ship our systems into countries that are members of the European Union. In the past, we have invested significant resources to redesign our systems to comply with these directives. We believe we are in compliance with current applicable regulations, directives and standards and have obtained all necessary permits, approvals and authorizations to conduct our business. However, compliance with future regulations, directives and standards could require us to modify or redesign certain systems, make capital expenditures or incur substantial costs. If we do not comply with current or future regulations, directives and standards:
* we could be subject to fines;
* our production could be suspended; or
* we could be prohibited from offering particular systems in
specified markets.
WE MAY INVEST IN START-UP COMPANIES AND COULD LOSE OUR ENTIRE INVESTMENT.
We have a majority interest in a start-up company and may invest in other start-up companies that develop products and technologies which we believe may provide us with future benefits. These investments may not provide us with any benefit, and we may not achieve any economic return on any of these investments. Our investments in these start-up companies are subject to all of the risks inherent in investing in companies that are not established. We could lose all or any part of our investments in these companies.
WE LEASE OUR FORT COLLINS, COLORADO FACILITIES AND A CONDOMINIUM FROM ENTITIES IN WHICH TWO INDIVIDUALS WHO ARE INSIDERS AND MAJOR STOCKHOLDERS HAVE FINANCIAL INTERESTS.
We lease our executive offices and manufacturing facilities in Fort Collins, Colorado from Prospect Park East Partnership and from Sharp Point Properties, LLC. Douglas S. Schatz, our Chairman and Chief Executive Officer, holds a 26.7% interest in each of the leasing entities. G. Brent Backman, a member of our board of directors, holds a 6.6% interest in each of the leasing entities. Aggregate rental payments under such leases for 1999 totaled approximately $1.7 million. We also lease a condominium in Breckenridge, Colorado to provide rewards and incentives to our customers, suppliers and employees. We lease the condominium from AEI Properties, a partnership in which Mr. Schatz holds a 60% interest and Mr. Backman holds a 40% interest. Aggregate rental payments under the condominium lease for 1999 totaled approximately $36,000. As of May 9, 2000, Mr. Schatz owns approximately 40% of our common stock, and Mr. Backman owns approximately 4% of our common stock.
RISKS RELATED TO OUR COMMON STOCK
THE MARKET PRICE OF OUR STOCK HAS BEEN AND WILL LIKELY CONTINUE TO BE HIGHLY VOLATILE.
The stock market generally and the market for technology stocks in particular have experienced significant price and volume fluctuations, which often have been unrelated or disproportionate to the operating performance of such companies. From our IPO in November 1995 through May 9, 2000, the closing prices of our common stock on the Nasdaq National Market have ranged from $3.50 to $73.25. The market for our common stock likely will continue to be subject to similar fluctuations. Many factors could cause the trading price of our common stock to fluctuate substantially, including the following:
* future announcements concerning our business, our customers
or our competitors;
* variations in our operating results;
* announcements of technological innovations;
* introduction of new products or changes in product pricing
policies by us, our competitors or our customers;
* changes in earnings estimates by securities analysts or
announcements of operating results that are not aligned with
the expectations of analysts and investors;
* economic and competitive conditions in the industries in
which our customers operate; and
* general stock market trends.
OUR EXECUTIVE OFFICERS AND DIRECTORS OWN A SIGNIFICANT PERCENTAGE
OF OUR OUTSTANDING COMMON STOCK, WHICH COULD ENABLE THEM TO
CONTROL OUR BUSINESS AND AFFAIRS.
Our executive officers and directors owned approximately 46% of our outstanding common stock outstanding as of May 9, 2000. Douglas S. Schatz, our Chairman and Chief Executive Officer, owned approximately 40% of our common stock outstanding as of May 9, 2000. These stockholdings give our executive officers and directors collectively, and Mr. Schatz individually, significant voting power. Depending on the number of shares that abstain or otherwise are not voted, our executive officers and directors collectively, and Mr. Schatz individually, may be able to elect all of the members of our board of directors and to control our business and affairs for the foreseeable future.
ANTITAKEOVER PROVISIONS LIMIT THE ABILITY OF A PERSON OR ENTITY TO ACQUIRE CONTROL OF US.
Our certificate of incorporation and bylaws include provisions which:
* allow the board of directors to issue preferred stock with
rights senior to those of the common stock without any vote
or other action by the holders of the common stock;
* limit the right of our stockholders to call a special
meeting of stockholders; and
* impose procedural and other requirements that could make it
difficult for stockholders to effect certain corporate
actions.
In addition, we are subject to the anti-takeover provisions of the Delaware General Corporation Law. Any of these provisions could delay or prevent a person or entity from acquiring control of us. The effect of these provisions may be to limit the price that investors are willing to pay in the future for our securities. These provisions might also discourage potential acquisition proposals or could diminish the opportunities for our stockholders to participate in a tender offer, even if the acquisition proposal or tender offer is at a price above the then current market price for our common stock.
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
Some of the statements contained in or incorporated by reference in this prospectus discuss our plans and strategies for our business or make other forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act. The words "anticipates", "believes", "estimates", "expects", "plans", "intends" and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. These forward-looking statements reflect the current views of our management. However, various risks, uncertainties and contingencies could cause our actual results, performance or achievements to differ materially from those expressed in, or implied by, these statements, including the following:
* the success or failure of our efforts to implement our
business strategy; and
* the other risks and uncertainties discussed under the
heading "Risk Factors" and elsewhere in this prospectus and
in the documents incorporated by reference.
We do not have any obligation to update publicly any forward- looking statements, whether as a result of new information, future events or otherwise. You should carefully consider the information set forth under the heading "Risk Factors" and elsewhere in this prospectus and in the documents incorporated by reference. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in, implied by or incorporated by reference in this prospectus might not occur.
USE OF PROCEEDS
All of the shares of our common stock are being sold by the
selling stockholders. We will not receive any proceeds from the
sale of these shares.
SELLING STOCKHOLDERS
The following table sets forth the names of the selling stockholders and the number of shares being registered for sale as of the date of the prospectus and sets forth the number of shares of common stock known by us to be beneficially owned by each of the selling stockholders as of May 9, 2000. None of the selling stockholders has had a material relationship with the Company within the past three years other than as a result of the ownership of the shares or other securities of Advanced Energy. The shares offered by this prospectus may be offered from time to time by the selling stockholders.
Pursuant to an acquisition of Noah on April 5, 2000, we issued 686,503 shares of common stock to the selling stockholders. As part of the acquisition, we undertook a contractual obligation, by the terms of the Agreement and Plan of Reorganization, to file a registration statement covering the resale of the shares issued in such acquisition through the filing of this Form S-3.
The selling stockholders, with the exception of Hultquist Capital LLC, have entered into an Escrow and Indemnity Agreement with Advanced Energy, dated April 5, 2000, under which the shares being registered may only be offered, pledged, transferred, sold or otherwise disposed of according to the following schedule: 90% as of the date that financial results covering at least 30 days of combined operations of Noah and Advanced Energy have been publicly disclosed pursuant to a report filed by Advanced Energy with the SEC, and 10% as of April 5, 2001 reduced by the amount of any outstanding claims under the indemnity provisions of the Escrow and Indemnity Agreement.
All information contained in the table below is based upon information provided to us by the selling stockholders, and we have not independently verified this information. We are not able to estimate the amount of shares that will be held by the selling stockholders after the completion of this offering because the selling stockholders may offer all or some of their shares and because there currently are no agreements, arrangements or understandings with respect to the sale of any of their shares. The following table assumes that all of the shares being registered will be sold. The selling stockholders are not making any representation that any shares covered by the prospectus will be offered for sale. The selling stockholders reserve the right to accept or reject, in whole or in part, any proposed sale of shares.
Number of Shares Number of Shares
Name Beneficially Owned Registered
Robert W. Higgins 334,969 334,969
Galex Research (1) 121,907 121,907
Valentin Balter 81,271 81,271
Duane Allan Kogler 10,983 10,983
PacTech/Noah
Investments LLC 54,913 54,913
PacTech Partners LLC 28,902 28,902
Jerauld J. Cutini 8,237 8,237
Peter Adams 5,491 5,491
Oliver Janssen 3,980 3,980
Gary Hultquist 2,607 2,607
Hultquist Capital
LLC(2) 33,243 33,243
(1) Boris Atlas, who is an employee of a Noah, a subsidiary of
Advanced Energy, is a partner in Galex Research, a
California general partnership.
(2) Both Oliver Janssen and Gary Hultquist are members of
Hultquist Capital LLC.
13
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Robert W. Higgins, Duane Allan Kogler, and Peter Adams are employed by Noah, a subsidiary of Advanced Energy.
This prospectus also covers any additional shares of common stock that become issuable in connection with the shares being registered by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration which results in an increase in the number of our outstanding shares of common stock.
PLAN OF DISTRIBUTION
We are registering all 686,503 shares on behalf of the selling stockholders named in the table above. All of the shares originally were issued by us in connection with our acquisition of Noah. We will not receive proceeds from this offering. The selling stockholders may sell the shares from time to time, subject to certain restrictions. The selling stockholders will act independently of us in making decisions with respect to the timing, manner and size of each sale.
The sales may be made on the Nasdaq National Market or otherwise, at prices and at terms then prevailing or at prices related to the then current market price, or in negotiated transactions. The selling stockholders may effect such transactions by selling the shares to or through broker-dealers. The shares may be sold by one or more of, or a combination of, the following:
* a block trade in which the broker-dealer so engaged will
attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate
the transaction,
* purchases by a broker-dealer as principal and resale by such
broker-dealer for its account pursuant to this prospectus,
* an exchange distribution in accordance with the rules of
such exchange,
* ordinary brokerage transactions and transactions in which
the broker solicits purchasers, and
* in privately negotiated transactions.
To the extent required, this prospectus may be amended or supplemented from time to time to describe a specific plan of distribution. In effecting sales, broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to participate in the resales.
The selling stockholders may enter into hedging transactions with broker-dealers in connection with distributions of the shares or otherwise. In such transactions, broker-dealers may engage in short sales of the shares in the course of hedging the positions they assume with the selling stockholders.
The selling stockholders also may sell shares short and redeliver the shares to close out such short positions. The selling stockholders may enter into option or other transactions with broker-dealers which require the delivery to the broker- dealer of the shares. The broker-dealer may then resell or otherwise transfer such shares pursuant to this prospectus. The selling stockholders also may loan or pledge the shares to a broker-dealer. The broker-dealer may sell the shares so loaned, or upon a default the broker-dealer may sell the pledged shares pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of commissions, discounts or concessions from the selling stockholders. Broker-dealers or agents may also receive compensation from the purchasers of the shares for whom they act as agents or to whom they sell as principals, or both. Compensation as to a particular broker-dealer might be in excess of customary commissions and will be in amounts to be negotiated in connection with the sale. Broker-dealers or agents and any other
participating broker-dealers or the selling stockholders may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act of 1933 in connection with sales of the shares. Accordingly, any such commission, discount or concession received by them and any profit on the resale of the shares purchased by them may be deemed to be underwriting discounts or commissions under the Securities Act. Because a selling stockholder may be deemed to be an "underwriter" within the meaning of Section 2(11) of the Securities Act, each selling stockholders will be subject to the prospectus delivery requirements of the Securities Act. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 promulgated under the Securities Act may be sold under Rule 144 rather than pursuant to this prospectus. The selling stockholders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their securities. There is no underwriter or coordinating broker acting in connection with the proposed sale of shares by the selling stockholders.
The shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states the shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
The selling stockholders will be subject to applicable provisions of the Securities Exchange Act of 1934 and the rules and regulations thereunder, which provisions may limit the timing of purchases and sales of any of the common stock by the selling stockholders. The foregoing may affect the marketability of such securities.
We will make copies of this prospectus available to the selling stockholders and have informed them of the need for delivery of copies of this prospectus to purchasers at or prior to the time of any sale of the shares.
We will file a supplement to this prospectus, if required, pursuant to Rule 424(b) under the Securities Act upon being notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer. Such supplement will disclose:
* the name of the selling stockholders and of the
participating broker-dealer(s),
* the number of shares involved,
* the price at which such shares were sold,
* the commissions paid or discounts or concessions allowed to
such broker-dealer(s), where applicable,
* that such broker-dealer(s) did not conduct any investigation
to verify the information set out or incorporated by
reference in this prospectus, and
* other facts material to the transaction.
We will bear all costs, expenses and fees in connection with the registration of the shares. The selling stockholders will bear all commissions and discounts, if any, attributable to the sales of the shares.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a Registration Statement on Form S-3 under the Securities Act, relating to the common stock being offered. This prospectus is filed as part of the registration statement. Other parts of the registration statement are omitted from this prospectus.
Statements made in this prospectus concerning the contents of any contract or other document are not necessarily complete. For a more complete description of the matter involved, you should read the entire contract or other document, which has been filed as an exhibit to the registration statement.
We are required by the Exchange Act to file reports, proxy statements and other information with the SEC. You may read and copy such reports, proxy statements and other information at the SEC's public reference facilities:
Washington D.C. New York Chicago Judiciary Plaza Seven World Trade Center Citicorp Center 450 Fifth Street, NW Suite 1300 500 West Madison Street Room 1024 New York, NY 10048 Suite 1400 Washington, D.C. Chicago, IL 60661-2511 20549 |
You may call 1-800-SEC-0330 for further information about the public reference facilities. For a fee, the SEC will send copies of any of our filings to you. In addition, our filed reports, proxy statements and other information are contained in the Internet web site maintained by the SEC. The address is http://www.sec.gov.
Our common stock is quoted on the Nasdaq National Market under the symbol "AEIS", and our SEC filings can also be read at the following Nasdaq address:
Nasdaq Operations 1735 K Street, N.W.
Washington, D.C. 20006
INCORPORATION BY REFERENCE
The SEC allows us to incorporate by reference the information we file with it, which means we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this prospectus, and later information that we file with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until all of the securities registered in this offering are sold:
1. Our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000, filed April 18, 2000 (File #000-26966).
2. Our Annual Report on Form 10-K for the year ended December
31, 1999, filed March 20, 2000 (File #000-26966).
3. Our Definitive Proxy Statement filed March 21, 2000 (File
#000-26966).
4. The description of our common stock which is contained in a
Registration Statement on Form S-3 filed under the Exchange
Act on September 21, 1999 (File #333-87459), including any
amendment or reports filed for the purpose of updating such
description.
You may request a copy of these filings, at no cost, by writing us at the following address:
Advanced Energy Industries, Inc. 1625 Sharp Point Drive Fort Collins, Colorado 80525 Attention: Richard P. Beck
or by calling Investor Relations at (970) 221-4670.
LEGAL MATTERS
The validity of the common stock will be passed upon for us by Thelen Reid & Priest LLP, San Francisco, California.
EXPERTS
The financial statements and schedules incorporated by reference in this prospectus have been audited by Arthur Andersen LLP, independent public accountants, as set forth in their reports as of and for the years ended December 31, 1999 and 1998. In the report for the year ended December 31, 1997, that firm states that with respect to certain subsidiaries its opinion is based on the reports of other independent public accountants. The financial statements and supporting schedules referred to above have been incorporated by reference herein in reliance upon the authority of those firms as experts in giving said reports.
[outside back cover]
TABLE OF CONTENTS
Page
Advanced Energy Industries, Inc. ................. 2
Risk Factors ..................................... 4
Cautionary Note on Forward-Looking Statements .... 12
Use of Proceeds ................................. 12
Selling Stockholders .............................. 13
Plan of Distribution .............................. 14
Where You Can Find More Information ............. 15
Incorporation by Reference ...................... 16
Legal Matters ................................... 17
Experts ......................................... 17
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We have not authorized any person to make a statement that differs from what is in this prospectus. If any person does make a statement that differs from what is in this prospectus, you should not rely on it. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state in which the offer or sale is not permitted. The information in this prospectus is complete and accurate as of its date, but the information may change after that date.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an estimate of the expenses to be incurred by the Registrant in connection with the issuance and distribution of the securities being registered:
Amount to
Be Paid
Registration Fee - SEC ........................ $ 9,412.99
Legal Fees and Expenses ........................ $20,000.00
Accounting Fees and Expenses ................... $10,000.00
Miscellaneous ................................. $ 3,000.00
----------
Total ......................................... $42,412.99
----------
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ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Delaware General Corporation Law ("DGCL"), Advanced Energy's Restated Certificate of Incorporation, as amended (the "AE Certificate"), provides that no director shall be personally liable to Advanced Energy or any stockholder for monetary damages for breach of fiduciary duty as a director, except for liability: (i) for any breach of the duty of loyalty to Advanced Energy or its stockholders; (ii) for acts or omissions not in good faith or involving intentional misconduct or a knowing violation of the law; (iii) under Section 174 of the DGCL; or (iv) for any transaction from which the director derived an improper personal benefit. While the AE Certificate provides protection from awards for monetary damages for breaches of fiduciary duty, it does not eliminate the director's duty of care. Accordingly, the AE Certificate will not affect the availability of equitable remedies, such as an injunction, based on a director's breach of the duty of care. The provisions of the AE Certificate described above apply to officers of Advanced Energy only if they are directors of Advanced Energy and are acting in their capacity as directors, and does not apply to officers of Advanced Energy who are not directors.
In addition, Advanced Energy's Bylaws provide that Advanced
Energy shall indemnify its Executive Officers (as defined in Rule
3b-7 promulgated under the Exchange Act) and directors, and any
employee who serves as an Executive Officer or director of any
corporation at Advanced Energy's request, to the fullest extent
permitted under and in accordance with the DGCL; provided,
however, that Advanced Energy may modify the extent of such
indemnification by individual contracts with its Executive
Officers and directors; and, provided further, that Advanced
Energy shall not be required to indemnify any Executive Officer
or director in connection with any proceeding (or part thereof)
initiated by such person unless: (i) such indemnification is
expressly required to be made by law; (ii) the proceeding was
authorized by the directors of Advanced Energy; (iii) such
indemnification is provided by Advanced Energy, in its sole
discretion, pursuant to the powers vested in Advanced Energy
under the DGCL; or (iv) such indemnification is required to be
made under Article XI, Section 43, Subsection (d) of Advanced
Energy's Bylaws. Under the DGCL, directors and officers as well
as employees and individuals may be indemnified against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits or
proceedings, whether civil,
II-1
criminal, administrative or investigative (other than an action by or in the right of the corporation as a derivative action) if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. Advanced Energy maintains a policy of directors' and officers' liability insurance that insures Advanced Energy's directors and officers against the costs of defense, settlement or payment of a judgment under certain circumstances.
ITEM 16. EXHIBITS
The following is a list of Exhibits filed as part of the Registration Statement:
2.1 Agreement and Plan of Reorganization between the Registrant, Noah Holdings, Inc., and AE Cal Merger Sub, Inc., dated April 5, 2000.
2.2 Escrow and Indemnity Agreement between the Registrant, the former stockholders of Noah Holdings, Inc. and Commercial Escrow Services, Inc., dated April 5, 2000.
4.1 Restated Certificate of Incorporation, as amended (1)
4.2 Bylaws (2)
4.3 Specimen Certificate for the Common Stock (2)
4.4 Form of Indenture between State Street Bank and Trust Company of California, N.A., as trustee, and Advanced Energy Industries, Inc. (including form of 5.25% Convertible Subordinated Note due 2006) (3)
4.5 Undertaking re: Other Long-Term Debt
5.1 Opinion of Thelen Reid & Priest LLP re legality of common stock
23.1 Consent of Arthur Andersen LLP
23.2 Consent of KPMG LLP
23.3 Consent of Thelen Reid & Priest LLP (4)
(2) Incorporated by reference from Advanced Energy's Registration Statement on Form S-1, filed September 20, 1995, as amended (File No. 33-97188).
(3) Incorporated by reference from Advanced Energy's Registration Statement on Form S-3, filed September 21, 1999 (File No. 333-87455).
(4) Included in Exhibit 5.1.
(5) Included on the signature pages to this Registration
Statement.
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UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) of this section do not apply if the registration statement is on Form S-3 and the information required to be included in a post- effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post- effective amendment any of the securities being registered which remain unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for the purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fort Collins, State of Colorado, on May 18, 2000.
ADVANCED ENERGY INDUSTRIES, INC.
By: /s/ DOUGLAS S. SCHATZ
Name: Douglas S. Schatz
Title: Chief Executive Officer
and Chairman of the Board
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Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Douglas S. Schatz, Hollis L. Caswell and Richard P. Beck, and each of them severally, acting alone and without the other, his true and lawful attorney-in-fact with authority to execute in the name of each such person, and to file with the Securities and Exchange Commission, together with any exhibits thereto and other documents therewith, any and all amendments (including without limitation post-effective amendments) to this registration statement, necessary or advisable to enable the Registrant to comply with the Securities Act and any rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, which amendments may make such changes in this registration statement as the aforesaid attorney-in-fact deems appropriate.
Date: May 18, 2000 /s/ DOUGLAS S. SCHATZ
Douglas S. Schatz
Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
Date: May , 2000
Hollis L. Caswell
President, Chief Operating
Officer and Director
Date: May 18, 2000 /s/ RICHARD P. BECK
Richard P. Beck
Senior Vice President, Chief
Financial Officer and Director
(Principal Financial and
Accounting Officer)
II-4
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Date: May , 2000
G. Brent Backman
Director
Date: May 18, 2000 /s/ ARTHUR A. NOETH
Arthur A. Noeth
Director
Date: May 18, 2000 /s/ ELWOOD SPEDDEN
Elwood Spedden
Director
Date: May 18, 2000 /s/ GERALD STAREK
Gerald Starek
Director
Date: May 18, 2000 /s/ ARTHUR ZAFIROPOULO
Arthur Zafiropoulo
Director
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II-5
Exhibit 4.5
We hereby agree to furnish to the SEC, upon request, a copy of the instruments which define the rights of holders of our long- term debt. None of such instruments not included as exhibits in this Form S-3 represents long-term debt in excess of 10% of our consolidated total assets.
Exhibits 5.1 and 23.3
[Letterhead of Thelen Reid & Priest LLP]
May 18, 2000
Advanced Energy Industries, Inc.
1625 Sharp Point Drive
Fort Collins, CO 80525
Ladies and Gentlemen:
We have acted as counsel for Advanced Energy Industries, Inc., a Delaware corporation (the "Company"), in connection with the preparation of the Registration Statement on Form S-3, File No. 333- (the "Form S-3") relating to the issuance and sale by eleven of the Company's stockholders of up to 686,503 shares of Common Stock (together, the "Offering").
In so acting, we have examined the Form S-3, the Company's
Certificate of Incorporation and Bylaws, as in effect as of the
date hereof, and such other documents, records, certificates of
officers of the Company, certificates of public officials and
other instruments as we have deemed necessary or appropriate
under the circumstances for purpose of giving the opinion
expressed herein. In making such examinations, we have assumed
(a) the genuineness of all signatures; (b) the authenticity of
all documents submitted to us as originals; (c) the conformity to
original documents of all documents submitted to us as certified
copies or photocopies; and (d) the identity and capacity of all
individuals acting or purporting to act as public officials.
Based upon, subject to and limited by the foregoing, we are of the opinion that the shares of Common Stock to be offered and sold hereby are legally issued, fully paid and non-assessable. We are members of the bar of the State of California and we express no opinion as to the laws of any state or jurisdiction other than federal laws of the United States, the laws of the State of California and the corporate laws of the State of Delaware. We hereby consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Form S-3. We further consent to the use of our name under the heading "Legal Matters" in the prospectus included in the Form S-3.
Very truly yours,
/s/ Thelen Reid & Priest LLP
THELEN REID & PRIEST LLP
JLM/MLJ
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[LOGO OF ARTHUR ANDERSEN]
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report incorporated by reference in this registration statement of our report dated February 8, 2000 included in Advanced Energy Industries, Inc.'s Form 10-K for the year ended December 31, 1999 and to all references to our Firm included in this Registration Statement (File No. 333- ).
/s/ ARTHUR ANDERSEN LLP
Denver, Colorado
May 18, 2000.
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Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Advanced Energy Industries, Inc.:
We consent to the incorporation by reference in the Registration Statement on Form S-3 of Advanced Energy Industries, Inc. of our report dated January 16, 1998 with respect to the consolidated statement of income, shareholders' equity, and cash flows of RF Power Products, Inc. for the year ended November 30, 1997 and the related schedule (not presented herein), which report appears in the annual report on the Form 10-K of Advanced Energy Industries, Inc. for the year ended December 31, 1999.
/s/ KPMG LLP Philadelphia, Pennsylvania May 18, 2000 |
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
ADVANCED ENERGY INDUSTRIES, INC.
AE CAL MERGER SUB, INC.
AND
NOAH HOLDINGS, INC.
DATED AS OF APRIL 5, 2000
TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS 4
ARTICLE 2. THE MERGER 6
2.1 The Basic Transaction 6
2.2 The Closing 6
2.3 Effective Time 6
2.4 Articles of Incorporation and Bylaws 6
2.5 Directors and Officers of the Surviving Corporation 6
ARTICLE 3. CONVERSION AND EXCHANGE OF SECURITIES 6
3.1 Merger Sub Stock 6
3.2 Company Stock; Options. 6
3.3 Exchange of Certificates Representing Company Shares.8
3.4 Escrow Agreement. 10
3.5 Lost Certificates 10
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 11
4.1 Organization and Standing. 11
4.2 Capitalization. 11
4.3 Authorization; Enforceability; No Violation. 12
4.4 No Consents 13
4.5 Compliance With Laws 13
4.6 Financial Statements. 13
4.7 Absence of Litigation, Orders, Judgments. 14
4.8 Absence of Certain Changes 14
4.9 Taxes 15
4.10 Contracts 15
4.11 Intellectual Property. 15
4.12 Employee Benefit Plans. 16
4.13 No Brokers 17
4.14 Opinion of Financial Advisor 17
4.15 Parent Stock Ownership 17
4.16 Environmental Matters. 17
4.17 Insurance 18
4.18 Proprietary Information and Inventions and
Confidentiality Agreement 18
4.19 Accuracy of Documents and Information 18
4.20 Offices; Capital Equipment 19
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB 19
5.1 Organization and Standing. 19
i
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5.2 Capitalization. 20
5.3 Authorization; Enforceability; No Violation. 20
5.4 No Consents 21
5.5 Parent Reports. 21
5.6 No Brokers 22
5.7 No Reacquisition of Company Shares 22
5.8 Investment Company 22
5.9 Certain Tax Matters 22
ARTICLE 6. COVENANTS 23
6.1 Publicity 23
6.2 Registration Statement. 23
6.3 Listing Application 24
6.4 Expenses 24
6.5 Takeover Statute 24
ARTICLE 7. CONDITIONS TO CLOSING 25
7.1 Conditions to Each Party's Obligation to Effect the
Merger 25
7.2 Conditions to Obligation of the Company to Effect the
Merger 25
7.3 Conditions to Obligation of Parent and Merger Sub to
Effect the Merger 26
ARTICLE 8. TERMINATION 27
8.1 Termination by Either Parent or the Company 27
8.2 Extension; Waiver 27
ARTICLE 9. GENERAL PROVISIONS 27
9.1 Survival of Representations, Warranties and Covenants27
9.2 Notices 27
9.3 Assignment, Binding Effect 28
9.4 Entire Agreement 29
9.5 Amendment 29
9.6 Governing Law 29
9.7 Counterparts 29
9.8 Headings 29
9.9 Interpretation 29
9.10 Waivers 29
9.11 Incorporation of Exhibits 29
9.12 Severability 29
9.13 Enforcement of Agreement 30
9.14 Indemnity 30
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT"), dated as of April 5, 2000, is made by and among Advanced Energy Industries, Inc., a Delaware corporation ("PARENT"), AE Cal Merger Sub, Inc., a California corporation and a wholly-owned subsidiary of Parent ("MERGER SUB"), and Noah Holdings, Inc., a California corporation (the "COMPANY").
RECITALS
A. The Boards of Directors of Parent and the Company each have determined that a business combination between Parent and the Company would enable the companies to achieve long-term strategic and financial benefits and, accordingly, is in the best interests of their respective stockholders. Each of such Boards of Directors desires to effect the Merger (as defined herein), on the terms and subject to the conditions set forth herein.
B. It is intended that the Merger qualify as a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"), for federal income tax purposes.
C. It is intended that the Merger be accounted for as a pooling of interests for financial accounting purposes.
D. Parent has incorporated and organized Merger Sub solely to facilitate the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and subject to the terms and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
"AGREEMENT" has the meaning set forth in the preface above.
"APB NO. 16" means the Accounting Principles Board Opinion Number 16.
"CALIFORNIA FILING MATERIALS" has the meaning set forth in 2.3 below.
"CALIFORNIA LAW" means the Corporation Code of the State of California, as amended.
"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.
"CERTIFICATE" has the meaning set forth in 3.2(b) below.
"CLOSING" has the meaning set forth in 2.2(a) below.
"CLOSING DATE" has the meaning set forth in 2.2 below.
"CLOSING PRICE" means $59.41.
"CODE" has the meaning set forth in the recitals above.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" has the meaning set forth in the preface above.
"COMPANY BENEFIT PLANS" means all employee benefit plans as defined in Section 3.3 of ERISA and any other plan, contract, program, policy or benefit arrangements covering employees or former employees of the Company and all employee agreements providing compensation, severance or other benefits to any employee or former employee of the Company.
"COMPANY BOARD" means the Board of Directors of the Company.
"COMPANY CONTRACT" means any material agreement, contract and commitment, whether written or oral, to which the Company is a party or by which it is bound.
"COMPANY DISCLOSURE SCHEDULE" means the disclosure schedule delivered by Company at or prior to the execution hereof to Parent.
"COMPANY MATERIAL ADVERSE EFFECT" means a material adverse effect on or change in the business, results of operations or financial condition of the Company and Company Subsidiary, taken as a whole.
"COMPANY OPTIONS" has the meaning set forth in 3.2(d)(i) below.
"COMPANY PREFERRED SHARES" means any issued or outstanding share of preferred stock of the Company.
"COMPANY REAL PROPERTIES" means all real property ever owned, leased or occupied by the Company, any Company Subsidiary or any Predecessor.
"COMPANY SHARE" means any share of the common stock of Noah Holdings, Inc.
"COMPANY SHAREHOLDERS" means the holders of Company Shares as of the Closing Date.
"COMPANY SUBSIDIARY" has the meaning set forth in 4.1(b) below.
"COPYRIGHTS" means all of Company's copyrights, copyrightable works, semiconductor topography and mask work interests, including, without limitation, all rights of authorship, use, publication, reproduction, distribution, performance, transformation, moral rights and ownership of copyrightable works, semiconductor topography works and mask works, and all rights to register and obtain renewals and extensions of registrations, together with all other interests accruing by reason of international copyright, semiconductor topography and mask work conventions.
"EFFECTIVE DATE" means the date upon which this Agreement has been executed by each of the parties.
"EFFECTIVE TIME" has the meaning set forth in 2.3 below.
"ENFORCEABILITY EXCEPTIONS" has the meaning set forth in 4.3(d) below.
"ENVIRONMENTAL REQUIREMENTS" means any applicable laws, regulations, ordinances or other provisions having the force or effect of law, or any judicial, governmental, or administrative orders, requests, or determinations, or any common law requirements relating to the protection of human health or the environment (both natural and workplace), including without limitation any Environmental Requirements concerning (A) the use, generation, treatment, storage, transportation, handling or disposal of Hazardous Materials, (B) the control of soil, surface or groundwater pollution products, (C) air quality and emission standards, or (D) health, safety and hazard communication matters. Environmental Requirements include, without limitation, CERCLA, the Resource Conservation and Recovery Act, the Hazardous Materials Transportation Act, the Clean Water Act, the Toxic Substances Control Act, the Clean Air Act, SWDA, the Atomic Energy Act, the Federal Food Drug and Cosmetic Act, and equivalent state and local ordinances and statutes and ordinances in countries other than the United States of America.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"ERISA AFFILIATE" means any business or entity which is a member of the same "controlled group of corporations," under "common control" or an "affiliated service group" with an entity within the meanings of Sections 414(b), (c) or (m) of the Code, or required to be aggregated with the entity under Section 414(o) of the Code, or is under "common control" with the entity, within the meaning of Section 4001(a)(14) of ERISA, or any regulations promulgated or proposed under any of the foregoing Sections.
"ESCROW AGENT" means Commercial Escrow Services, Inc. or any successor thereto appointed in accordance with the Escrow Agreement.
"ESCROW AGREEMENT" has the meaning set forth in 3.4(a) below.
"ESCROW AMOUNT" has the meaning set forth in 3.4(a) below.
"ESCROW FUNDS" has the meaning set forth in 3.4(a) below.
"ESCROW SHARES" has the meaning set forth in 3.4(a) below.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGENT" has the meaning set forth in 3.3(a) below.
"EXCHANGE FUND" has the meaning set forth in 3.3(a) below.
"EXCHANGE RATIO" has the meaning set forth in 3.2(a) below.
"FINANCIAL STATEMENTS" has the meaning set forth in 4.6 below.
"GAAP" means United States generally accepted accounting principles, consistently applied.
"HAZARDOUS MATERIALS" means any toxic, injurious or hazardous materials, substances or wastes, toxic pollutants or contaminants, including petroleum products, crude oil or any by-products or derivatives thereof as any of the foregoing terms are defined in federal, state and local laws applicable to the Company or Parent, as the case may be, but does not include commercially available office cleaning or janitorial supplies.
"INTERIM FINANCIAL STATEMENTS" has the meaning set forth in 4.6 below.
"IRS" means the federal Internal Revenue Service.
"ISOS" has the meaning set forth in 3.2(d)(iii) below.
"ISSUED PATENTS" means any and all of Company's issued patents, reissue or reexamination patents, revivals of patents, utility models, certificates of invention, registrations of patents, or extensions thereof, regardless of country or formal name.
"LETTER OF TRANSMITTAL" has the meaning set forth in 3.3c
below.
"MERGER CERTIFICATES" has the meaning set forth in 3.3(a)
below.
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"MERGER SUB" has the meaning set forth in the preface above.
"MERGER" has the meaning set forth in 2.1 below.
"NON-DISCLOSURE AGREEMENT" means the Non-Disclosure Agreement, dated March 12, 1999 between the Company and Parent.
"PARENT" has the meaning set forth in the preface above.
"PARENT BOARD" means the Board of Directors of Advanced Energy Industries, Inc.
"PARENT DISCLOSURE SCHEDULE" means the disclosure schedule delivered by Parent at or prior to the execution hereof to the Company.
"PARENT MATERIAL ADVERSE EFFECT" means a material adverse effect on or change in the business, results of operations or financial condition of Parent and its Subsidiaries, taken as a whole.
"PARENT OPTIONS" means all options to acquire Parent Common Stock granted by Parent.
"PARENT PREFERRED STOCK" means the 1,000,000 authorized shares of Parent preferred stock, par value $0.001 per share.
"PARENT REPORTS" means the reports, forms, registrations, schedules, statements and other documents required to be filed by Parent with the Commission.
"PARENT SHARE" means any share of the voting common stock of Advanced Energy Industries, Inc.
"PATENT APPLICATIONS" means any of Company's patent rights, including, without limitation, all United States and foreign utility and design patents, and all published or unpublished non-provisional and provisional patent applications, including, without limitation, any and all applications of additions, divisionals, continuations, continuations-in-part, reexaminations, substitutions, extensions, renewals, utility models, certificates of invention or reissues thereof or therefor, invention disclosures and records of invention abandoned patent applications.
"PATENTS" means Patent Applications and Issued Patents collectively.
"PERMITS" means all valid and current permits, licenses, orders, authorizations, registrations, approvals and other analogous instruments.
"PERSON" includes both natural persons and entities.
"POST CLOSING DIVIDENDS" has the meaning set forth in 3.3(f) below.
"PREDECESSOR" means any Person that owns or has ever owned, leased or occupied the Company Real Properties.
"QUALIFIED PLAN" means each Company Benefit Plan that is
intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code, and either (i) the IRS has issued a
favorable determination letter that has not been revoked, or
(ii) an application for a favorable determination letter was
timely submitted to the IRS for which no final action has been
taken by the IRS as of the Closing Date.
"REGISTRATION STATEMENT" means a Registration Statement on Form S-3 under the Securities Act with respect to the Parent Shares transferred to the Company Shareholders in connection with the Merger.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHAREHOLDERS' REPRESENTATIVES" has the meaning set forth in 3.4(b) below.
"SPECIFIED POST-CLOSING DIVIDENDS" has the meaning set forth in 3.3(f) below.
"SUBSIDIARY" of a party means any corporation or other organization, whether incorporated or unincorporated, of which such party directly or indirectly owns or controls at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization, or any organization of which such party is a general partner.
"SUBSTITUTED OPTIONS" has the meaning set forth in 3.2(d)(i) below.
"SURVIVING CORPORATION" has the meaning set forth in 2.1 below.
"SWDA" means the Solid Waste Disposal Act, as amended.
"TRADEMARKS" means all of Company's trademarks, registered trademarks, applications for registration of trademark, service marks, registered service marks, applications for registration of service marks, trade names, registered trade names, and applications for registrations of trade names.
ARTICLE 2.
THE MERGER
2.1 THE BASIC TRANSACTION |HiddenPara|
. On the terms and subject to the conditions of this Agreement, at the Effective Time Merger Sub shall be merged with and into the Company in accordance with this Agreement, and the separate corporate existence of Merger Sub shall thereupon cease (the "Merger"). The Company shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the "Surviving Corporation"), and shall become a wholly-owned subsidiary of Parent. The Merger shall have the effects specified in the California Law.
2.2. THE CLOSING |HiddenPara|
. Subject to the terms and conditions of this Agreement, the closing of the Merger (the "Closing") shall take place at the offices of Thelen, Reid & Priest LLP, San Francisco, California at 10:00 a.m., local time, on the date hereof (the "Closing Date").
2.3 EFFECTIVE TIME |HiddenPara|
. On the Closing Date, the parties hereto shall cause the Merger to be consummated by filing (i) an Agreement of Merger substantially in the form of Exhibit A and all related officer's certificates meeting the requirements of California Law (the "California Filing Materials") in the office of the Secretary of State of California, in accordance with the California Law. The Merger shall become effective at the time of filing of the California Filing Materials with the Secretary of State of California (the "Effective Time").
2.4 ARTICLES OF INCORPORATION AND BYLAWS |HiddenPara|
. The Articles of Incorporation and Bylaws of Merger Sub in effect immediately prior to the Effective Time shall be the Articles of Incorporation and Bylaws of the Surviving Corporation, until duly amended in accordance with applicable law.
2.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
|HiddenPara|
. The directors and officers of Merger Sub immediately prior to the Effective Time shall be the directors and officers of the Surviving Corporation until their successors are duly appointed or elected in accordance with applicable law.
ARTICLE 3.
CONVERSION AND EXCHANGE OF SECURITIES
3.1 MERGER SUB STOCK |HiddenPara|
. At the Effective Time, each share of common stock of Merger Sub outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and non-assessable share of common stock of the Surviving Corporation.
3.2 COMPANY STOCK; OPTIONS.
(a) CONVERSION OF SHARES. Each Company Share that is issued and outstanding immediately prior to the Effective Time shall be automatically converted into the right to receive 0.0577 Parent Shares (the "EXCHANGE RATIO").
(b) CANCELLATION OF COMPANY SHARES. At the Effective
Time, as a result of the Merger and without any action on the
part of the Company Shareholders, all Company Shares and any
other issued and outstanding capital stock of the Company,
including any Company Preferred Shares shall cease to be
outstanding, shall be canceled, retired, and shall cease to
exist, and each Company Shareholder shall thereafter cease to
have any rights with respect to such Company Shares, except the
right to receive upon the surrender of a certificate (a
"CERTIFICATE") representing such Company Shares (i) the number of
Parent Shares determined in accordance with this Section 3.2, and
(ii) cash, without interest, payable (A) in lieu of any
fractional Parent Shares, in accordance with Section 3.3(b), and
(B) Specified Post-Closing Dividends, in accordance with
Section 3.3(f).
(c) TREASURY SHARES AND SHARES HELD BY SUBSIDIARIES.
At the Effective Time, there are no Company Shares held in the
Company's treasury or held by a Company Subsidiary.
(d) OPTIONS.
(i) At the Effective Time, as a result of the Merger and without any action on the part of holder thereof, the options to purchase (i) 500,000 Company Shares granted by the Company to Peter Adams and (ii) 200,000 Company Shares granted by the Company to Duane Kogler, in each case prior to the Effective Time (collectively, "COMPANY OPTIONS") shall be assumed by Parent and shall be converted into options to purchase Parent Common Stock (collectively, "Substituted Options"). Any and all other outstanding options and warrants to purchase Company Shares and similar rights, and any and all Company stock option plans, shall be terminated immediately prior to the Effective Time and none of Parent, the Company and the Surviving Corporation shall have any further obligation with respect thereto.
(ii) Subject to subsection 3.2(d)(iii) below, (A) the number of Parent Shares underlying a Substituted Option shall be equal to the number of Company Shares underlying the subject Company Option multiplied by the Exchange Ratio and rounded to the nearest whole number, (B) the exercise price per share of a Substituted Option shall be adjusted proportionately such that the aggregate exercise price under the Substituted Options granted to each of the Persons set forth in clause (i) above shall remain substantially unchanged, and (C) each Substituted Option shall be exercisable on the same terms and subject to the same conditions as had been applicable to the related Company Option, except to the extent the number of shares and exercise price per share have been adjusted pursuant to (A) and (B), respectively, of this subsection 3.2(d)(ii).
(iii) It is the intention of the parties that
Company Options that qualified as incentive stock options, within
the meaning of Section 422 of the Code ("ISOS"), immediately
prior to the Effective Time, be converted, when assumed by
Parent, into Substituted Options that qualify as ISOs immediately
following the Effective Time, to the extent permitted by
Section 422 of the Code and applicable terms of the Company
Option Plans. In furtherance of such intention, the formulae,
terms and conditions set forth in subsection 3.2(d)(ii) above may
be applied to, or modified for, such Substituted Options as deemed reasonably necessary by Parent, so long as any such application or modification does not reduce the benefit of the Substituted Option to the holder thereof.
(iv) Within 45 days after the Effective Time, Parent shall use reasonable efforts to file with the Commission a Registration Statement on Form S-3 or Form S-8, as determined by Parent in its sole discretion, relating to the issuance of the Parent Shares underlying the Substituted Options or shall cause such Parent Common Stock to be included in an effective Registration Statement on Form S-8 relating to one or more of Parent's stock option plans (collectively, "Parent Option Plans"). So long as any Substituted Options remain outstanding, Parent shall use its best efforts to maintain the effectiveness of any Registration Statement or Statements relating to the Substituted Options (and to maintain the current status of the prospectus or prospectuses related thereto). At or prior to the Effective Time, Parent shall take all corporate action necessary to reserve for issuance a sufficient number of Parent Shares for delivery upon exercise of the Substituted Options.
3.3 EXCHANGE OF CERTIFICATES REPRESENTING COMPANY SHARES.
(a) As of the Effective Time, Parent shall deposit, or shall cause to be deposited, with an exchange agent reasonably acceptable to the Company (the "EXCHANGE AGENT"), for the benefit of the Company Shareholders, for exchange (or to be placed in escrow) in accordance with this Article 3, (i) certificates representing the Parent Shares to be issued in connection with the Merger ("MERGER CERTIFICATES"), and (ii) Parent's good faith estimate of the cash in lieu of fractional shares expected to be payable in connection with the Merger. Such cash and Merger Certificates are referred to herein as the "Exchange Fund."
(b) No fractional Parent Shares shall be issued pursuant hereto. In lieu of the issuance of any fractional share of Parent Common Stock, cash will be paid in respect of any fractional share of Parent Common Stock that would otherwise be issuable and the amount of such cash shall be equal to such fractional proportion of the Closing Price. No interest will be paid or accrued on the cash payable to Company Shareholders.
(c) Promptly after the Effective Time, Parent shall cause the Exchange Agent to mail to each Company Shareholder of record (i) a letter of transmittal, in a form and having such provisions as Parent may reasonably specify ("LETTER OF TRANSMITTAL"), which shall advise each such Company Shareholder that delivery of Merger Certificates shall be effected, and risk of loss and title to such Company Shareholder's Company Shares shall pass, only upon delivery of the Certificates representing such shares to the Exchange Agent, (ii) instructions for use in effecting the surrender of such Certificates in exchange for Merger Certificates and cash in lieu of fractional shares from the Exchange Fund and (iii) notice of the number of Parent Shares to be placed in escrow pursuant to Section 3.4.
(d) Upon surrender of a Certificate to the Exchange Agent for cancellation, together with a duly executed and properly completed Letter of Transmittal, (i) the holder of the Company Shares represented by such Certificate shall be entitled to receive in exchange therefor from the Exchange Fund (A) a Merger Certificate representing that number of whole Parent Shares determined by multiplying the number of Company Shares represented by the Certificate
by the Exchange Ratio (and subtracting the number of Parent Shares of such Company Shareholder to be placed in escrow pursuant to Section 3.4), and (B) a check representing (1) the amount of cash in lieu of fractional Parent Shares, if any, determined pursuant to paragraph (b) of this Section 3.3, and (2) any Specified Post-Closing Dividends, in each case less any applicable tax withholding, and (ii) the Company Shares represented by the surrendered Certificate shall thereupon be canceled. At the Effective Time, the Company shall cause each of the Company Shareholders to deliver to Hultquist Capital LLC, on a pro-rata basis, a number of Parent Shares such that, in the aggregate, Hultquist Capital LLC receives 33,244 Parent Shares as consideration for the services described in Section 4.13.
(e) In the event of a transfer of ownership of Company Shares which is not registered in the transfer records of the Company, a Merger Certificate representing the proper number of Parent Shares, together with a check for the cash to be paid in lieu of fractional shares, if any, may be issued to such transferee of such Company Shares (subject to Section 3.4), if the Certificate representing such Company Shares is presented to the Exchange Agent, accompanied by all documents, in form and substance reasonably satisfactory to Parent and the Exchange Agent, required to evidence and effect such transfer of Company Shares and to evidence that any applicable stock transfer taxes have been paid. There shall be no transfers on the transfer records of the Company, at or after the Effective Time, of Company Shares which were outstanding immediately prior to the Effective Time.
(f) Notwithstanding any other provisions of this Agreement, no dividends or other distributions declared after the Effective Time on Parent Common Stock ("Post-Closing Dividends") shall be paid with respect to any Company Shares represented by a Certificate until such Certificate is surrendered for exchange as provided herein. Subject to the effect of applicable laws, following surrender of any such Certificate, there shall be paid to the holder of the certificates representing whole Parent Shares issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of Post-Closing Dividends with a record date after the Effective Time theretofore payable with respect to such whole Parent Shares and not paid, less the amount of any withholding taxes which may be required thereon ("Specified Post-Closing Dividends"), and (ii) at the appropriate payment date, the amount of Post-Closing Dividends with a record date after the Effective Time but prior to surrender and a payment date subsequent to surrender payable with respect to such whole Parent Shares, less the amount of any withholding taxes which may be required thereon.
(g) One year after the Effective Time, the Exchange Agent shall deliver to the Surviving Corporation any portion of the Exchange Fund (including the proceeds of any investments thereof and any Parent Shares) that remains unclaimed by the former Company Shareholders. Thereafter, former Company Shareholders that have not surrendered their Certificates for exchange shall look to the Surviving Corporation for delivery of Merger Certificates, cash in lieu of fractional shares and unpaid Post-Closing Dividends which such former Company Shareholder is entitled to receive in respect of the Company Shares represented by the theretofore unsurrendered Certificates, in each case, without any interest thereon.
(h) None of Parent, the Company, the Surviving Corporation, the Exchange Agent or any other Person shall be liable to any former Company Shareholder for any amount
properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.
3.4 ESCROW AGREEMENT.
(a) ESCROW SHARES. At the Effective Time, the number
of Parent Shares equal to ten percent (10%) of: (i) the
aggregate Parent Shares issuable in accordance with this
Agreement pursuant to Section 3.2(a), minus the Parent Shares to
be delivered to Hultquist Capital LLC pursuant to Section 3.3(d)
(the "ESCROW SHARES") and (ii) any cash in lieu of fractional
shares to be issued to the Company Shareholders pursuant to
Section 3.3(b) (the "Escrow Funds" and, with Escrow Shares, the
"ESCROW AMOUNT") shall be reserved from that portion of the
Parent Common Stock otherwise issuable to the Company
Shareholders. The Escrow Amount shall be withheld pro rata from
the Parent Shares and cash in lieu of fractional shares to be
received by the Company Shareholders upon conversion of their
Shares. Prior to or at the Closing, the parties shall enter into
an agreement, substantially in the form attached hereto as
Exhibit B (the "ESCROW AGREEMENT"), regarding the terms under
which the Escrow Amount shall be held and released.
(b) APPOINTMENT OF SHAREHOLDERS' REPRESENTATIVES. Pursuant to the Escrow Agreement, the Company Shareholders have appointed or shall appoint Robert Higgins and Peter Adams as the representatives of all of Company Shareholders (the "Shareholders' Representatives"), who shall make decisions required to be made under the Escrow Agreement on behalf of all of the Company Shareholders and enforce all of the Company Shareholders' rights thereunder. Each of the Shareholders' Representatives shall have full power and authority to act for and on behalf of all of the Company Shareholders with respect to all matters set forth in the Escrow Agreement, including without limitation resolution of contested claims and disposition of the Escrow Amount. Any third party, including each of Parent and the Escrow Agent, shall be entitled to rely on any action under the Escrow Agreement by the Shareholders' Representatives as having been made for and on behalf of the Company Shareholders, and any such action shall be binding upon all of the Company Shareholders. The Shareholders' Representatives shall not be liable to the Company Shareholders by reason of any error or judgment or of any act done or step taken or omitted by him in good faith or for any mistake of fact or law, as may be further provided in the Escrow Agreement.
3.5 LOST CERTIFICATES |HiddenPara|
. In the event any Certificate shall have been lost, stolen or destroyed, upon the making and delivery of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Parent Shares and cash deliverable in respect thereof pursuant to this Agreement.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule, the Company makes the following representations and warranties to Parent and Merger Sub, as of the date of this Agreement and as of the Effective Time.
4.1 ORGANIZATION AND STANDING.
(a) The Company (i) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, (ii) has all requisite corporate power and authority to own, operate and lease its properties and carry on its business as now conducted, and (iii) is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the failure to so qualify, or be in good standing, would have a material adverse effect.
(b) The Company does not have any Subsidiaries other than Noah Precision, Inc., a California corporation, and POU, Inc. a California corporation (each a "COMPANY SUBSIDIARY"). Each Company Subsidiary (i) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, (ii) has all requisite corporate power and authority to carry on its business as now conducted, and (iii) is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the failure to so qualify, or be in good standing, would have a material adverse effect.
(c) Neither the Company nor Company Subsidiary has
(i) filed or had filed against it a petition in bankruptcy or a
petition to take advantage of any other insolvency act,
(ii) admitted in writing its inability to pay its debts
generally, (iii) made an assignment for the benefit of creditors,
(iv) consented to the appointment of a receiver for itself or any
substantial part of its property, or (v) generally committed any
act of insolvency (including the failure to pay obligations as
they become due) or bankruptcy.
(d) Neither the Company nor Company Subsidiary is in
violation of any provision of its respective articles of
incorporation, bylaws or other charter documents. The Company
Disclosure Statement sets forth (i) the full name of each Company
Subsidiary, its capitalization, and the ownership interest of
Company and each other Person (if any) therein, (ii) the
jurisdiction in which each Company Subsidiary is organized,
(iii) each jurisdiction in which the Company and each Company
Subsidiary is qualified to do business as a foreign Person,
(iv) a brief summary of the business and material operations of
each Company Subsidiary, and (v) the names of the current
directors and officers of the Company and each Company
Subsidiary. Company has made available to Parent accurate and
complete copies of the articles of incorporation, bylaws, and any
other charter documents, as currently in effect, of the Company
and each Company Subsidiary.
4.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of two classes of shares, Company common stock and Company Preferred Stock. As of the Effective Date, (i) there are 30,000,000 Company Shares authorized, of which 11,891,641 Company Shares are
issued and outstanding; (ii) there are 1,500,000 Company Preferred Shares authorized, of which 1,275,000 Company Preferred Shares are issued and outstanding, and (iii) Company Options to acquire 700,000 Company Shares are outstanding. As of the Effective Time, all Company Preferred Shares shall be converted into Company Shares in accordance with the Company's Articles of Incorporation.
(b) All of the issued and outstanding Company Shares have been duly authorized, validly issued, are fully paid, nonassessable and free of preemptive or similar rights. Other than Company Options, there are no existing and outstanding warrants, rights, options, subscriptions, convertible securities or other agreements or commitments which obligate the Company to issue, transfer or sell any shares of capital stock of the Company or any Company Subsidiary other than the options granted to the Persons described in Section 3.2(d)(i).
(c) Neither the Company nor any Company Subsidiary has any outstanding bonds, debentures, notes or other obligations pursuant to which the holders thereof have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the Company Shareholders on any matter.
4.3 AUTHORIZATION; ENFORCEABILITY; NO VIOLATION.
(a) The Company has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder.
(b) Subject only to the approval of this Agreement and the transactions contemplated hereby by a majority of the Company Shares in accordance with the California Law, all corporate action necessary on the part of the Company for the execution, delivery and performance of this Agreement has been duly taken.
(c) This Agreement constitutes (assuming this Agreement is a valid and legally binding obligation of Parent and Merger Sub) a valid and legally binding obligation of the Company, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity and public policy considerations (the "Enforceability Exceptions").
(d) The execution, delivery and performance of this Agreement will not result in any conflict with, breach or violation of or default (or an event which, with notice or lapse of time or both, would constitute a default), termination or forfeiture under (i) any terms or provisions of the Articles of Incorporation or the Bylaws of the Company, (ii) to the Company's knowledge, any statute, rule, regulation, judicial, governmental, regulatory or administrative decree, order or judgment applicable to the Company or any Company Subsidiary, or (iii) any agreement, lease, license, permit or other instrument to which the Company is a party or to which any of its assets are subject.
(e) There is no action, suit, proceeding or investigation pending or, to the knowledge of the Company, threatened against the Company that questions the validity of this Agreement or the right of the Company to enter into this Agreement or to consummate the transactions contemplated hereby.
4.4 NO CONSENTS |HiddenPara|
. No consent, approval, authorization, order, registration, qualification or filing of or with any court or any regulatory authority or any other governmental or administrative body is required on the Company's part for the consummation by it of the transactions contemplated by this Agreement, except (i) to the extent set forth herein, notices and filings required in order to comply with the Securities Act, the Exchange Act, and state securities or "blue sky" laws, (ii) the filing of the Tax Certificate, and (iii) the filing of the California Filing Materials with the Secretary of State of California.
4.5 COMPLIANCE WITH LAWS |HiddenPara|
. The Company and each Company Subsidiary (i) have all Permits, and each Permit is in full force and effect, and (ii) have made all filings and registrations and the like, necessary or required by law to conduct their respective businesses as currently conducted. Neither the Company nor any Company Subsidiary has received any governmental notice of any violation by such company of any laws, rules, regulation or orders applicable to their respective businesses. Neither the Company nor any Company Subsidiary is in default or is not in compliance under any Permits, and (b) to the knowledge of the Company, the business and operations of the Company and each Company Subsidiary are in compliance with all applicable foreign, federal, state, local and county laws, ordinances, regulations, judgments, orders, decrees or rules of any court, arbitrator or governmental, regulatory or administrative agency or entity.
4.6 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent: (i) an audited consolidated balance sheet of the Company and each Company Subsidiary as at December 31, 1999 (including the notes thereto), and the related consolidated statements of income, retained earnings and cash flow for the fiscal year ended December 31, 1999 (collectively, the "Financial Statements"), together with the report thereon of Branch, Neal, Daney & Spence LLP, its independent certified accountants, and (ii) an unaudited consolidated balance sheet of the Company and Company Subsidiary as at February 29, 2000, and the related consolidated statements of income, retained earnings and cash flow for the two months then ended (collectively, the "Interim Financial Statements"). Each of the Financial Statements and Interim Financial Statements fairly presents in all material respects the consolidated financial position and the results of operations and cash flows of the Company and each Company Subsidiary for the periods set forth therein (subject, in the case of unaudited statements, to normal year-end audit adjustments which would not be material in amount or effect) in each case in accordance with GAAP as consistently applied during the periods involved, except as may be noted therein and subject to the fact that unaudited financial statements do not contain full notes thereto. Neither the Company nor any Company Subsidiary has any liabilities or obligations required to be disclosed in a consolidated balance sheet or the notes thereto prepared in accordance with GAAP, except (i) liabilities or obligations reflected on, or reserved against in, the Financial Statements or the Interim Financial Statements or in the notes thereto or (ii) liabilities or obligations incurred since February 29, 2000, in the ordinary course of business, consistent with past practices. The Company's financial reserves are adequate to cover claims already incurred. The provision for taxes for the Company as set forth in the Financial Statements and Interim Financial Statements is adequate and accurate for taxes due and accrued to such date.
(b) Subject to any reserves set forth in the Financial
Statements and Interim Financial Statements, all of the accounts
receivable and notes receivable owing to the Company as of the
date hereof constitute, and as of the Effective Time will
constitute, valid and enforceable claims arising from bona fide
transactions in the ordinary course of business, and there are no
known or asserted claims, refusals to pay, or other rights of
set-off against any thereof. There is (i) no account debtor or
note debtor delinquent in its payment by more than 60 days,
(ii) no account debtor or note debtor that has refused (or, to
the best knowledge of the Company, threatened to refuse) to pay
its obligations for any reason, (iii) to the best knowledge of
the Company, no account debtor or note debtor that is insolvent
or bankrupt, and (iv) no account receivable or note receivable
which is pledged to any third party by the Company.
(c) The accounts receivable shown on the Financial Statements and the Interim Financial Statements consisted only of items that are fully collectible, good and payable within six months after the Closing. The Company Disclosure Schedule lists all accounts receivable, unbilled invoices and other debts due or recorded in the records of the Company. The amount of all accounts receivable, unbilled invoices and other debts due or recorded in the records and books of account of the Company will be good, payable and collectible in full in the ordinary course of business within six months after the Closing; no contest with respect to the amount or validity of any amount is pending; and none of such accounts receivable or other debts is or will at the Closing be subject to any counterclaim or set-off. The values at which accounts receivable are carried reflect the historical accounts receivable valuation policy of the Company which is consistent with GAAP applied on a consistent basis.
(d) All accounts payable and notes payable by the Company to third parties as of the date hereof arose, and as of the Closing will have arisen, in the ordinary course of business, and there is no such account payable or note payable delinquent in its payment.
4.7 ABSENCE OF LITIGATION, ORDERS, JUDGMENTS.
(a) There are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened which involve transactions of or otherwise relate to the Company, any Company Subsidiary or any of their businesses or properties, at law or in equity, or before any arbitrator of any kind, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or other instrumentality, domestic or foreign.
(b) There are no outstanding orders, writs, injunctions, decrees, judgments, awards, determinations or directions, which involve transactions of or otherwise relate to the Company, any Company Subsidiary or either of their businesses or properties, of any court or arbitrator or under any outstanding order, regulation or demand of any federal, state, municipal or other governmental instrumentality, domestic or foreign.
4.8 ABSENCE OF CERTAIN CHANGES |HiddenPara|
. Since February 29, 2000, the Company has conducted its business only in the ordinary course of such business, and there has not been (i) any Company Material Adverse Effect or any event which is reasonably likely to result in a Company Material Adverse Effect; (ii) any declaration, setting aside or payment of any dividend or other distribution with respect to its capital stock; or (iii) any material change in its accounting principles, practices or methods.
4.9 TAXES |HiddenPara|
. The Company (i) has timely filed all material federal, state,
local, foreign, and other tax returns required to be filed by it
for tax years ended prior to the date of this Agreement or
requests for extensions have been timely filed and any such
request shall have been granted and not expired, and all such
returns are complete in all material respects, (ii) has paid or
accrued all taxes shown to be due and payable on such returns and
(iii) has properly accrued all such taxes for such periods
subsequent to the periods covered by such returns.
4.10 CONTRACTS |HiddenPara|
. Each Company Contract is a valid and legally binding obligation of the Company and, to the knowledge of the Company, the other parties thereto, enforceable against the Company and, to the knowledge of the Company, the other parties thereto, in accordance with its terms, subject to the Enforceability Exceptions. The Company is not, and to the knowledge of the Company no other party to any Company Contract is, in material default thereof, except to the extent that any material default would not result in a Company Material Adverse Effect. The Company has not, and to the knowledge of the Company no other party to any Company Contract has, performed any act or omitted to perform any act which act or omission, with the giving of notice or passage of time or otherwise, will become a material default thereunder, except to the extent that any material default would not result in a Company Material Adverse Effect.
4.11 INTELLECTUAL PROPERTY.
(a) "Intellectual Property" means:
(i) Issued Patents;
(ii) Patent Applications;
(iii) Copyrights;
(iv) Trademarks;
(v) any and all technology, ideas, inventions, designs, proprietary information, unpublished research and development information, manufacturing and operating information, know-how, formulae, trade secrets and technical data, computer programs, and all hardware, software and processes; and
(vi) all other intangible assets, properties and rights (whether or not appropriate steps have been taken to protect, under applicable law, such other intangible assets, properties or rights).
(b) The Company owns or has the right to use all
Intellectual Property used in the operation of its business as
presently conducted, without any interference or conflict with or
misappropriation or infringement of the Intellectual Property
rights of others, other than any interference, conflict,
misappropriation or infringement which has not and will not
result in (i) a material adverse effect on the Company's ability
to manufacture or sell any of its material products or any
material line of products or otherwise to operate its business,
(ii) a material liability of the Company, or (iii) material
redesign or other corrective costs to the Company. The Company
has taken all action necessary to maintain and protect its rights
in the material
Intellectual Property that it owns or uses. Each item of Intellectual Property owned or used by the Company hereunder will be owned or available for use by the Surviving Corporation on substantially identical terms and conditions immediately subsequent to the Effective Time.
(c) The Company Disclosure Schedule sets forth all Patents, registered Copyrights, registered Trademarks, joint development agreements, licenses and agreements relating to Intellectual Property owned or used by the Company. No consents or waivers are required with respect to any Patent, registered Copyright, registered Trademark, joint development agreements, licenses or agreements relating to Intellectual Property owned or used by the Company to consummate the transactions contemplated by this Agreement.
(d) The Company has not, within the past four years,
interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of
others other than any interference, infringement,
misappropriation or conflict which has not and will not result in
(i) a material adverse effect on the Company's ability to
manufacture or sell any of its material products or any material
line of products or otherwise to operate its business, (ii) a
material liability of the Company, or (iii) material redesign or
other corrective costs to the Company. The Company has not
received, and has no knowledge of, any charge, complaint, claim,
demand or notice alleging any such interference, infringement,
misappropriation, or conflict (including, without limitation, any
claim that the Company must license or refrain from using any
Intellectual Property rights of any other Person), or that the
Company's use of the Intellectual Property constitutes unfair
competition.
(e) To the knowledge of the Company, no fraud or misrepresentation has been made by the Company or any of its officers, directors or employees or the relevant inventors during the prosecution of any of the Patents of the Company, nor has any fraud or misrepresentation been included in any documentation for or other disclosure of the Intellectual Property of the Company.
4.12 EMPLOYEE BENEFIT PLANS.
(a) The Company has delivered to Parent complete and correct copies of the plan documents (including trust, investment management or custodial arrangements) relating to each Company Benefit Plan, all other programs and arrangements providing for deferred compensation or health, life or other welfare benefits, the most recent Form 5500s, and the most recent IRS determination letter relating to each "employee benefit plan" as defined under Section3(3) of ERISA.
(b) No Company Benefit Plan, any fiduciary thereof, nor the Company has engaged in a prohibited transaction within the meaning of Section 4975 of the Code, or Section 406 of ERISA, or has incurred any liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA except for such liability or penalty that would not result in a Company Material Adverse Effect. Each Company Benefit Plan has been maintained and administered in all material respects in compliance with its terms and with ERISA and the Code, to the extent applicable thereto.
(c) Neither the Company nor any ERISA Affiliate (during the period of its affiliated status) has any existing liability currently due and payable that has not been satisfied in full under Title IV of ERISA or Section 412 of the Code except for any liability that, if unsatisfied, would not result in a Company Material Adverse Effect. There are no current plans to terminate, whether voluntarily or involuntarily, any materially underfunded pension plan of the Company or any ERISA Affiliate that is subject to Title IV of ERISA.
(d) To the knowledge of the Company, there are no pending or anticipated claims against or otherwise involving any of the Company Benefit Plans and no suit, action or other litigation (excluding claims for benefits incurred in the ordinary course of the Company Benefit Plan activities) has been brought against or with respect to any such Company Benefit Plan.
(e) All contributions required to be made as of the date hereof to the Company Benefit Plans have been made or provided for.
(f) The execution of, and performance of the transactions contemplated by, this Agreement will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any benefit plan, policy, arrangement or agreement or any trust or loan that will or is reasonably likely to result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee of the Company.
(g) The Company has not entered into any severance agreements or adopted any severance policies applicable to the Company or its employees.
4.13 NO BROKERS |HiddenPara|
. The Company has not entered into any contract, arrangement or understanding with any Person or firm which will or is reasonably likely to result in the obligation of the Company, Parent or Merger Sub to pay any finder's fees, brokerage or agent's commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby, except that the Company has retained Hultquist Capital LLC as its financial advisor. Other than the foregoing arrangements, the Company is not aware of any claim for payment of any finder's fees, brokerage or agent's commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby. The services of Hultquist Capital LLC are to be paid for by the Company Shareholders as described in Section 3.3(d); neither the Company nor the Surviving Corporation shall have any liability therefor.
4.14 OPINION OF FINANCIAL ADVISOR |HiddenPara|
. The Company has received the opinion of Hultquist Capital LLC substantially to the effect that, as of the date hereof, the Exchange Ratio and the transactions contemplated by this Agreements are fair to the Company Shareholders from a financial point of view.
4.15 PARENT STOCK OWNERSHIP |HiddenPara|
. Neither the Company nor any of its Subsidiaries owns any Parent Shares or other securities convertible into Parent Shares.
4.16 ENVIRONMENTAL MATTERS.
(a) To the knowledge of the Company after due inquiry and investigation, there has not been any violation of any Environmental Requirements by the Company, any Company Subsidiary or any Predecessor, nor has there been any third party claim or demand based upon any Environmental Requirements against the Company or any Predecessor.
(b) To the knowledge of the Company after due inquiry and investigation, neither the Company nor any Company Subsidiary has disposed of, stored or used any Hazardous Materials on, nor has it transported any Hazardous Materials from, any of the Company Real Properties owned, leased or occupied by the Company, in violation of applicable Environmental Requirements other than a disposal, storage, use or transport. To the knowledge of the Company after due inquiry and investigation, no Predecessor has disposed of, stored or used any Hazardous Materials on, nor has any such Predecessor transported any Hazardous Materials from, any of the Company Real Properties owned, leased or occupied by such Predecessor, in violation of applicable Environmental Requirements.
(c) To the knowledge of the Company after due inquiry
and investigation, none of the following exists at any of the
real property currently owned, leased or occupied by the Company
or any Company Subsidiary or existed at any of the Company Real
Properties at the time the Company or any Predecessor operated
there: (i) underground storage tanks, (ii) asbestos-containing
material in any friable or damaged form or condition,
(iii) materials or equipment containing polychlorinated biphenyls
(PCBs), or (iv) landfills or surface impoundments.
(d) To the knowledge of the Company after due inquiry and investigation, none of the Company Real Properties is or has been contaminated by any Hazardous Materials, in a manner that has given or is reasonably likely to give rise to any material liability on the part of the Company to any Person, including without limitation any governmental authority, for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees, pursuant to Environmental Requirements.
4.17 INSURANCE |HiddenPara|
. The Company maintains insurance with financially sound and reputable insurers, in such amounts, and with such deductibles and covering such risks as is customarily carried by companies engaged in similar businesses and owning similar properties in the localities where the Company is located.
4.18 PROPRIETARY INFORMATION AND INVENTIONS AND CONFIDENTIALITY AGREEMENT |HiddenPara|
. Each employee, consultant, service provider, officer and director of the Company and each Company Subsidiary has executed a proprietary information and inventions and confidentiality agreement, copies of which have been provided to Parent. The Company is not aware that any of such Persons is in violation thereof, and the Company will use its best efforts to prevent any such violation.
4.19 ACCURACY OF DOCUMENTS AND INFORMATION |HiddenPara|
. The copies of all instruments, agreements, other documents and written information delivered by the Company to Parent or its counsel are and will be complete and correct in all material respects as of the date of delivery thereof. No representations or warranties made by the Company in this Agreement, nor any document, written information, statement, financial statement, letter, certificate or exhibit
prepared and furnished or to be prepared and furnished by the Company or its representatives to Parent pursuant hereto or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained herein or therein not misleading, except that the Company makes no representations or warranties concerning any forward-looking statements (except that such statements were made in good faith based on the reasonable belief of the Person making such statement) or any statements made by third parties other than affiliates, employees, officers, directors, agents and advisors of the Company. There is no presently existing event, fact or condition that would have a Company Material Adverse Effect or that could reasonably be expected to do so, which has not been set forth in this Agreement or the exhibits hereto, in the Company Disclosure Schedule or otherwise disclosed by the Company to Parent in writing.
4.20 OFFICES; CAPITAL EQUIPMENT |HiddenPara|
. The offices and capital equipment of the Company and each Company Subsidiary are in good operating condition and repair and are adequate for the uses to which they are being put; and none of such offices or capital equipment is in need of maintenance and repairs except for ordinary and routine maintenance and repairs that are not material in nature or cost.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the Parent Disclosure Schedule or in the Parent Reports filed with the Commission prior to the date hereof, Parent and Merger Sub make the following representations and warranties to the Company as of the date of this Agreement and as of the Effective Date.
5.1 ORGANIZATION AND STANDING.
(a) Parent and each of its Subsidiaries (i) is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, (ii) has all
requisite corporate power and authority to own, operate and lease
its properties and carry on its business as now conducted, and
(iii) is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which the failure
to so qualify, or be in good standing, would have a Parent
Material Adverse Effect.
(b) Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. Merger Sub was organized for purposes of consummating the transactions contemplated by this Agreement. Merger Sub has not engaged in any activity other than as provided in, or contemplated by, this Agreement and, as of the date hereof, has no liabilities of any nature, contingent or otherwise, other than liabilities or obligations that may arise from this Agreement or the transactions contemplated hereby. The authorized capital stock of Merger Sub consists of 100 shares of Merger Sub Common Stock, all of which are validly issued, fully paid and nonassessable and are owned by Parent. Merger Sub is a newly formed subsidiary of Parent with no significant business or assets other than the Parent Shares. Prior to the Merger, Parent will be in control of Merger Sub (within the meaning of Section 368(c)(1) of the Code).
(c) Neither Parent nor any of its Subsidiaries (including without limitation Merger Sub) has (i) filed or had filed against it a petition in bankruptcy or a petition to take advantage of any other insolvency act, (ii) admitted in writing its inability to pay its debts generally, (iii) made an assignment for the benefit of creditors, (iv) consented to the appointment of a receiver for itself or any substantial part of its property or (v) generally committed any act of insolvency (including the failure to pay obligations as they become due) or bankruptcy.
5.2 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of 40,000,000 Parent Shares and Parent Preferred Stock. As of February 25, 2000, there were 28,440,881 Parent Shares, and no shares of Parent Preferred Stock, issued and outstanding. From such date to the date of this Agreement, no additional shares of capital stock of Parent have been issued, except pursuant to the exercise of Parent Options. As of February 25, 2000, there were 2,981,639 Parent Options to acquire Parent Shares that were outstanding. From such date to the date of this Agreement, no additional Parent Options have been granted.
(b) All of the issued and outstanding Parent Shares have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. Other than Parent Options, there are no existing and outstanding warrants, rights, options, subscriptions, convertible securities or other agreements or commitments which obligate Parent to issue, transfer or sell any shares of capital stock of Parent or Merger Sub.
(c) All of the Parent Shares issuable as consideration in the Merger at the Effective Time, when issued in accordance with the terms and conditions of this Agreement, will be duly authorized, validly issued, fully paid and nonassessable and free of preemptive rights.
(d) Neither Parent nor any of its Subsidiaries (including without limitation Merger Sub) has any outstanding bonds, debentures, notes or other obligations pursuant to which the holders thereof have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the stockholders of Parent on any matter.
5.3 AUTHORIZATION; ENFORCEABILITY; NO VIOLATION.
(a) Each of Parent and Merger Sub has full corporate power and authority to execute and deliver this Agreement. and to perform its respective obligations hereunder.
(b) All corporate action necessary on the part of Parent and Merger Sub for the execution, delivery and performance of this Agreement has been duly taken. No approval of the stockholders of Parent is required by applicable law or the rules of the Nasdaq National Market in connection with the consummation by Parent or Merger Sub of the transactions contemplated hereby.
(c) This Agreement constitutes (assuming this Agreement is a valid and binding obligation of the Company), a valid and legally binding obligation of each of Parent and Merger Sub, enforceable against Parent and Merger Sub, as applicable, in accordance with its terms, subject to the Enforceability Exceptions.
(d) The execution, delivery and performance of this Agreement will not result in any conflict with, breach or violation of or default (or an event which, with notice or lapse of time or both, would constitute a default), termination or forfeiture under (i) any terms or provisions of the Certificate of Incorporation or the Bylaws of Parent or any of its Subsidiaries (including without limitation Merger Sub), (ii) any statute, rule, regulation, judicial, governmental, regulatory or administrative decree, order or judgment applicable to Parent or any of its Subsidiaries (including without limitation Merger Sub), or (iii) any agreement, lease, license, permit or other instrument to which Parent or any of its Subsidiaries (including without limitation Merger Sub) is a party or to which any of its assets are subject, except where any such breach, violation, default, termination or forfeiture would not have or result in a Parent Material Adverse Effect.
(e) There is no action, suit, proceeding or investigation pending or threatened against Parent or any of its Subsidiaries that questions the validity of this Agreement or the right of Parent or Merger Sub to enter into this Agreement or to consummate the transactions contemplated hereby.
5.4 NO CONSENTS |HiddenPara|
. No consent, approval, authorization, order, registration,
qualification or filing of or with any court or any regulatory
authority or any other governmental or administrative body is
required on the part of Parent or any of its Subsidiaries for the
consummation by Parent and Merger Sub of the transactions
contemplated by this Agreement, except (i) to the extent set
forth herein, notices and filings required in order to comply
with the Securities Act, the Exchange Act and state securities or
"blue sky" laws, (ii) the filing of the Tax Certificate, and
(iii) the filing of the California Filing Materials with the
Secretary of State of California.
5.5 PARENT REPORTS.
(a) Parent has filed all Parent Reports since November 17, 1995. As of their respective dates, the Parent Reports complied as to form in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the applicable rules and regulations promulgated thereunder. Except to the extent that information contained in any Parent Report has been amended, revised or superseded by a Parent Report subsequently filed and publicly available prior to the date of this Agreement, none of the Parent Reports, when filed, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated balance sheets of Parent included in or incorporated by reference into the Parent Reports (including the related notes and schedules) fairly presents in all material respects the consolidated financial position of Parent and its Subsidiaries as of its date, and each of the consolidated statements of income, stockholders' equity and cash flows of Parent included in or incorporated by reference into the Parent Reports (including any related notes and schedules) fairly presents in all material respects the income, stockholders' equity and cash flows, as the case may be, of Parent and its Subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to normal year-end audit adjustments which would not be material in amount or effect), in each case in accordance with
GAAP, except as may be noted therein and subject to the fact that
unaudited financial statements do not contain full notes thereto.
Parent and its Subsidiaries do not have any liabilities or
obligations required to be disclosed in a consolidated balance
sheet or the notes thereto prepared in accordance with GAAP,
except (i) liabilities or obligations reflected on, or reserved
against in, a consolidated balance sheet of Parent or in the
notes thereto, and included in the Parent Reports,
(ii) liabilities or obligations incurred since September 30, 1999
in the ordinary course of business, consistent with past
practices, or (iii) liabilities disclosed in a Parent Report.
5.6 NO BROKERS |HiddenPara| Neither Parent nor any of its Subsidiaries has entered into any contract, arrangement or understanding with any Person or firm which will or is reasonably likely to result in the obligation of the Company, Parent or Merger Sub to pay any finder's fees, brokerage or agent's commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby. Other than the foregoing arrangements, Parent is not aware of any claim for payment of any finder's fees, brokerage or agent's commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby.
5.7 NO REACQUISITION OF COMPANY SHARES |HiddenPara| Parent has no plan or intention following the Merger to reacquire any shares of its capital stock issued in connection with this Agreement. Parent has no plan or intention to cause Company to issue, after the Merger, additional shares of stock (or rights to acquire shares of Company stock) that would result in Parent losing the ability to vote at least 80% of the total number of shares of all classes of stock of the Company.
5.8 INVESTMENT COMPANY |HiddenPara| Neither Parent nor Merger Sub is an investment company within the meaning of Section 368(a)(2)(F)(iii) of the Code.
5.9 CERTAIN TAX MATTERS |HiddenPara|
(a) Following the Merger, Parent will hold at least 90% of the fair market value of its net assets, at least 70% of the fair market value of its gross assets, at least 90% of the fair market value of Merger Sub's net assets, and at least 70% of the fair market value of Merger Sub's gross assets held immediately prior to the Merger. For this purpose, Merger Sub's assets immediately prior to the Merger shall be determined without regard to any Parent Shares distributed in connection with the Merger.
(b) No shares of Merger Sub have been or will be used as consideration or issued to Company Shareholders in the Merger.
(c) The total fair market value of all consideration other than Parent Shares received by Company Shareholders in exchange for their Company Shares in the Merger (including, without limitation, cash paid to Company Shareholders, if any, or in lieu of fractional shares of Parent Shares) will be less than 20% of the aggregate fair market value of the Company Shares outstanding immediately prior to the Merger.
(d) There is no intercorporate indebtedness existing between Parent and Company or between Merger Sub and Company that was issued, acquired or will be settled at a
discount, and except as provided in this Agreement, Parent will assume no liabilities of Company or Company Shareholders in connection with the Merger. Merger.
(e) Parent has no present plan or intention following
the Closing to liquidate the Company, merge the Company with or
into another corporation, sell or otherwise dispose of the
capital stock of the Company (except for transfers of such stock
to corporations controlled by Parent within the meaning of Code
Section 368(a)(2)(C)), or cause the Company to sell or otherwise
dispose of any of its assets, except for dispositions made in the
ordinary course of business or transfers of assets to
corporations controlled by the Company (within the meaning of
Code Section 368(a)(2)(C)). Merger.
(f) Parent intends that, following the Merger, the Company will continue its historic business or use a significant portion of its historic business in a business.
ARTICLE 6.
COVENANTS
6.1 PUBLICITY |HiddenPara|
. The initial press release relating to this Agreement shall be a joint press release and thereafter the Company and Parent shall, subject to their respective legal obligations (including requirements of stock exchanges and similar self regulatory bodies), consult with each other, and use reasonable efforts to agree upon the text of any press release, before issuing any such press release or otherwise making public statements with respect to the transactions contemplated hereby and in making any filings with any federal or state governmental or regulatory agency or with any national securities exchange with respect thereto.
6.2 REGISTRATION STATEMENT.
(a) Parent and the Company shall cooperate and promptly prepare and Parent shall file with the Commission within 45 days after the Closing Date the Registration Statement.
(b) Parent shall use reasonable efforts to cause the Registration Statement to comply as to form in all material respects with the applicable provisions of the Securities Act, the Exchange Act and the rules and regulations thereunder. Parent shall use all reasonable efforts, and the Company shall cooperate with Parent, (i) to have the Registration Statement declared effective by the Commission as promptly as practicable, and (ii) to obtain timely any and all necessary state securities or "blue sky" permits or approvals required to carry out the transactions contemplated by this Agreement.
(c) The information supplied by the Company for inclusion or incorporation by reference in the Registration Statement shall not, at the time the Registration Statement is declared effective, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they are, made, not misleading.
(d) The information supplied by Parent for inclusion or incorporation by reference in the Registration Statement shall not, at the time the Registration Statement is declared effective, contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading.
(e) Parent will advise the Company, promptly after it receives notice thereof, of the time when the Registration Statement has become effective or any supplement or amendment has been filed, the issuance of any stop order, the suspension of the qualification of the Parent Common Stock issuable in connection with the Merger for offering or sale in any jurisdiction, or any request by the Commission for amendment of the Registration Statement or comments thereon and responses thereto or requests by the Commission for additional information.
(f) Parent shall maintain the effectiveness of the
Registration Statement until all Parent Shares issued in
connection with the Merger are sold or may be sold pursuant to
Rule 144 promulgated under the Securities Act, so long as Rule
415, or any successor rule under the Securities Act, permits an
offering on a continuous or delayed basis, and provided further
that applicable rules under the Securities Act governing the
obligation to file a post-effective amendment permit (in lieu of
filing a post-effective amendment that (i) includes any
prospectus required by Section 10(a)(3) of the Securities Act, or
(ii) reflects facts or events representing a material or
fundamental change in the information set forth in the
Registration Statement) the incorporation by reference of
information required to be included in clauses (i) and (ii) above
to be contained in periodic reports filed pursuant to Section 13
or 15(d) of the Exchange Act in the Registration Statement.
6.3 LISTING APPLICATION |HiddenPara|
. Parent shall promptly prepare and submit to the Nasdaq National Market a listing application covering the Parent Shares issuable in the Merger, and shall use its best efforts to obtain, prior to the effectiveness of the Registration Statement, approval for the listing of such Parent Common Stock, subject to official notice of issuance.
6.4 EXPENSES |HiddenPara|
. Whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses except as expressly provided herein and except that all costs and fees associated with the filing of the Registration Statement with the Commission shall be paid by Parent. The Company shall cause the Company Shareholders to pay any and all fees and expenses of Hultquist Capital LLC in relation to the Merger.
6.5 TAKEOVER STATUTE |HiddenPara|
. If any "fair price," "moratorium," "control share acquisition" or other form of anti-takeover statute or regulation shall become applicable to the transactions contemplated hereby, the Company and the Company Board shall grant such approvals and take such actions as are reasonably necessary so that the transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to eliminate or minimize the effects of such statute or regulation on the transactions contemplated hereby.
ARTICLE 7.
CONDITIONS TO CLOSING
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER |HiddenPara|
. The respective obligation of each party to effect the Merger shall be subject to the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have been approved by the requisite vote of the Company Shareholders, the Company Board and the Parent Board.
(b) None of the parties hereto shall be subject to any order or injunction of a court of competent jurisdiction in the United States which prohibits the consummation of the transactions contemplated by this Agreement. In the event any such order or injunction shall have been issued, each party agrees to use its best efforts to have any such injunction lifted.
(c) All consents, authorizations, orders and approvals of (or filings or registrations with) any governmental commission, board or other regulatory body required in connection with the execution, delivery and performance of this Agreement shall have been obtained or made, except for filings in connection with the Merger and any other documents required to be filed after the Effective Time and except where the failure to have obtained or made any such consent, authorization, order, approval, filing or registration would not have a material adverse effect on the business of Parent (and its Subsidiaries) and the Company, taken as a whole, following the Effective Time.
(d) The Surviving Corporation shall have entered into an employment agreement with Peter Adams in form and substance satisfactory to Peter Adams and Parent. Such employment agreement shall provide that Parent shall employ Peter Adams if the Surviving Corporation dissolves or becomes insolvent.
(e) The Surviving Corporation shall have agreed to pay to each non-salaried employee of the Company a bonus to be employed by the Surviving Corporation after the Closing Date. Each such bonus shall be in an amount equal to the amount paid to such employee for the three (3) month period immediately prior to the Closing Date. Such bonus shall be paid to each employee on the three (3) month anniversary of the Closing Date so long as such employee has not voluntarily terminated his or her employment with the Surviving Corporation prior to such date. The Surviving Corporation's obligation under this clause (e) shall be guaranteed by Parent.
(f) This Agreement shall have been executed and delivered by Parent and the Company.
7.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER |HiddenPara|
. The obligation of the Company to effect the Merger shall be subject to the fulfillment at or prior to the Closing Date of the following conditions:
(a) Parent shall have performed in all material respects its agreements contained in this Agreement required to be performed on or prior to the Closing Date, the
representations and warranties of Parent and Merger Sub contained in this Agreement and in any document delivered in connection herewith shall be true and correct in all material respects as of the Closing Date, except that those representations and warranties which address matters only as of a particular date shall have been true and correct as of such date, and the Company shall have received a certificate of the respective officers of Parent and Merger Sub, dated the Closing Date, certifying to such effect.
(b) The Company shall have received a legal opinion of legal counsel to Parent, dated the Closing Date or a date not more than five business days prior to the Closing Date, in form and substance satisfactory to the Company.
7.3 CONDITIONS TO OBLIGATION OF PARENT AND MERGER SUB TO
EFFECT THE MERGER |HiddenPara|
. The obligations of Parent and Merger Sub to effect the Merger shall be subject to the fulfillment at or prior to the Closing Date of the following conditions:
(a) The Company shall have performed in all material respects its agreements contained in this Agreement required to be performed on or prior to the Closing Date, the representations and warranties of the Company contained in this Agreement and in any document delivered in connection herewith shall be true and correct in all material respects as of the Closing Date, except that those representations and warranties which address matters only as of a particular date shall have been true and correct as of such date, and Parent shall have received an officer's certificate of the Company, dated the Closing Date, certifying to such effect.
(b) Parent shall have received a letter of Arthur Andersen LLP, its independent public accountants, dated as of the Closing Date, in form and substance reasonably satisfactory to Parent, stating that such accountants concur with management's conclusion that the Merger will qualify as a transaction to be accounted for in accordance with the pooling of interests method of accounting under the requirements of APB No. 16.
(c) Parent shall have received an undertaking, in form and substance satisfactory to Parent, from each Company Shareholder and from Hultquist Capital LLC, that such Person will continue as the beneficial owner of such Parent Company Stock and will not transfer or otherwise dispose of any Parent Common Stock until such time as the period required to account for the Merger as a pooling of interests in accordance with APB No. 16 has ended.
(d) The Escrow Agreement shall have been executed by or on behalf of each of the Company Shareholders and delivered to Parent.
(e) Parent shall have received the Financial Statements and Interim Financial Statements together with the Company's auditors opinion and management letters related thereto.
(f) Parent shall have received written notice from Hultquist Capital LLC that all of the fees and expenses owing by the Company to Hultquist Capital LLC shall be satisfied in full upon receipt by Hultquist Capital LLC of the Parent Shares as described in Section 3.3(d). Such notice shall confirm that the representations and warranties made by the Company Shareholders in clauses (ii) through (viii) of the Escrow Agreement are also applicable to, and
true with respect to, Hultquist Capital LLC, as if Hultquist Capital LLC had itself made such representations and warranties.
(g) Parent shall have received a legal opinion of legal counsel to the Company, dated the Closing Date or a date not more than five business days prior to the Closing Date, in form and substance satisfactory to Parent.
ARTICLE 8.
TERMINATION
8.1 TERMINATION BY EITHER PARENT OR THE COMPANY
|HiddenPara|
|
. This Agreement may be terminated and the Merger may be abandoned by action of the Company Board or Parent Board if a United States federal or state court of competent jurisdiction or United States federal or state governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable; provided, that the party seeking to terminate this Agreement pursuant to this Section 8.1 shall have used all reasonable efforts to remove such injunction, order or decree.
8.2 EXTENSION; WAIVER |HiddenPara|
. At any time prior to the Effective Time, any party hereto, by
action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any
of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE 9.
GENERAL PROVISIONS
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
|HiddenPara|
. The representations, warranties and covenants in this
Agreement or in any instrument delivered pursuant to this
Agreement shall not survive the Merger; provided, however, that
(a) the representatives and warranties contained in Article 4 and
Article 5 shall survive the Merger for a period of one (1) year
from the Closing Date, and (b) the covenants contained in
Article 3, Section 6.9, and this Article 9 shall survive the
Merger, but not beyond the extent, if any, specified therein.
9.2 NOTICES |HiddenPara|
. Any notice required to be given hereunder shall be sufficient if in writing, and sent by facsimile transmission and by courier service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows:
If to Parent or Merger Sub:
Advanced Energy Industries, Inc.
1625 Sharp Point Drive
Fort Collins, CO 80525
Attn.: Richard P. Beck
Facsimile: 970-407-5204
with copies to:
Thelen Reid & Priest LLP
333 West San Carlos Street, 17th Floor
San Jose, CA 95110-2701
Attn.: Jay L. Margulies, Esq.
Facsimile: 408 287-8040
If to the Company:
Noah Holdings, Inc.
6389 San Ignacio Avenue
San Jose, California 95119
Attn.: Robert W. Higgins, Chief Executive Officer Facsimile: (408) 281-7797
with copies to:
Hopkins & Carley
The Letitia Building
70 South First Street
San Jose, California 95113
Attn.: Robert V. Hawn, Esq.
Facsimile: (408) 998-4790
or to such other address as any party shall specify by written notice so given, and such notice shall be deemed to have been delivered as of the date so telecommunicated, personally delivered or mailed.
9.3 ASSIGNMENT, BINDING EFFECT |HiddenPara|
. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto or their respective heirs, successors, executors, administrators and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement.
9.4 ENTIRE AGREEMENT |HiddenPara|
. This Agreement, the Exhibits, the Company Disclosure Schedule, the Parent Disclosure Schedule, the Non-Disclosure Agreement and any documents delivered by the parties in connection herewith constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings among the parties with respect thereto. No addition to or modification of any provision of this Agreement shall be binding upon any party hereto unless made in writing and signed by all parties hereto.
9.5 AMENDMENT |HiddenPara|
. This Agreement may be amended by the parties hereto at any time before or after approval of the Merger by the Company Shareholders, but after any such shareholder approval, no amendment shall be made which by law requires the further approval of stockholders without obtaining such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.
9.6 GOVERNING LAW |HiddenPara|
. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to its rules of conflict of laws.
9.7 COUNTERPARTS |HiddenPara|
. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all of the parties hereto.
9.8 HEADINGS |HiddenPara|
. Headings of the Articles and Sections of this Agreement are for the convenience of the parties only, and shall be given no substantive or interpretive effect whatsoever.
9.9 INTERPRETATION |HiddenPara|
. In this Agreement, unless the context otherwise requires, words describing the singular shall include the plural and vice versa, and words denoting any gender shall include all genders and words denoting natural persons shall include corporations, partnerships and other business entities and vice versa.
9.10 WAIVERS |HiddenPara|
. Except as provided in this Agreement, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained in this Agreement. The waiver by any party hereto of a breach of any provision hereunder shall not operate or be construed as a waiver of any prior or subsequent breach of the same or any other provision hereunder.
9.11 INCORPORATION OF EXHIBITS |HiddenPara|
. The Company Disclosure Schedule, the Parent Disclosure Schedule and all Exhibits attached hereto and referred to herein are hereby incorporated herein and made a part hereof for all purposes as if fully set forth herein.
9.12 SEVERABILITY |HiddenPara|
. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.
9.13 ENFORCEMENT OF AGREEMENT |HiddenPara|
. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement was not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any California Court, this being in addition to any other remedy to which they are entitled at law or in equity.
9.14 INDEMNITY |HiddenPara|
. At any time after the Effective Time, the exclusive remedy of the Parent Member Group (as defined in the Escrow Agreement) for any breaches or misrepresentations shall be to resort to the Indemnity Fund (as defined in the Escrow Agreement), other than for any damages sustained by the Parent Member Group in the event of fraud.
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan of Reorganization and caused the same to be duly delivered on their behalf on the day and year set forth in the Preamble hereto.
COMPANY: NOAH HOLDINGS, INC.
By: /s/ ROBERT HIGGINS Name: Robert Higgins Title: Chief Executive Officer |
MERGER SUB: AE CAL MERGER SUB, INC.
By: /s/ JOSEPH MONKOWSKI Name: Joseph Monkowski Title: Vice President |
PARENT: ADVANCED ENERGY INDUSTRIES, INC.
By: /s/ JOSEPH MONKOWSKI Name: Joseph Monkowski Title: Senior Vice President |
ESCROW AND INDEMNITY AGREEMENT
This ESCROW AND INDEMNITY AGREEMENT (the "ESCROW AGREEMENT"), dated as of April 5, 2000, is made by and among Advanced Energy Industries, Inc., a Delaware corporation ("PARENT"), the holders of common stock of Noah Holdings, Inc. listed on Exhibit A (the "COMPANY SHAREHOLDERS") and Commercial Escrow Services, Inc. as indemnity and escrow agent (the "ESCROW AGENT").
RECITALS
WHEREAS, Noah Holdings, Inc., a California corporation (the "COMPANY"), AE Cal Merger Sub, Inc., a California corporation ("MERGER SUB"), and Parent are parties to that certain Agreement and Plan of Reorganization, dated as of the date hereof (the "MERGER AGREEMENT"), pursuant to which Merger Sub shall be merged with and into the Company (the "MERGER"), with the Company surviving as a wholly-owned subsidiary of Parent;
WHEREAS, it is a condition precedent to the Merger Agreement that each Company Shareholder enter into this Agreement;
WHEREAS, the Merger Agreement contains, among other things, representations, warranties and covenants of the Company, indemnities with respect to the breach of which are being provided by the Company Shareholders in this Escrow Agreement;
WHEREAS, pursuant to the Merger Agreement, promptly after the Effective Time each Company Shareholder has agreed to cause a portion of the Parent Shares into which the Company Shares are to be converted (such shares, "INDEMNITY SHARES" and, together with any cash in lieu of fractional shares, the "INDEMNITY AMOUNT") to be deposited with the Escrow Agent in an escrow account established pursuant to this Escrow Agreement and held and subsequently disbursed in accordance with the terms of this Escrow Agreement (such Indemnity Amount, together with any dividends or other distributions received thereon, the "INDEMNITY FUND");
WHEREAS, the Merger Agreement provides for the Shareholder Representatives (as defined below) to act on behalf of all Company Shareholders in connection with this Escrow Agreement and the indemnification obligations contained in the Merger Agreement; and
WHEREAS, the Escrow Agent has agreed to hold and to release the Indemnity Fund pursuant to the terms of this Escrow Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used but not defined herein shall have the meanings set forth in the Merger Agreement. As used in this Escrow Agreement, (i) "EXPENSE" means any and all expenses incurred in connection with investigating, defending or asserting any claim, action, suit or proceeding incident to any matter indemnified against hereunder (including, without limitation, court filing fees, court costs, arbitration fees or costs, witness fees and reasonable fees and disbursements of legal counsel, investigators, expert witnesses, consultants,
accountants and other professionals), (ii) "LOSS" means any and all losses, costs, obligations, liabilities, settlement payments, awards, judgments, fines, penalties, damages, expenses, deficiencies or other charges, and (iii) "PARENT GROUP MEMBERS" means Parent and its affiliates and their respective successors and assigns, including, after the Effective Time, the Surviving Corporation.
2. INDEMNITY FUND.
a. Promptly after the Effective Time, Parent shall deposit, or cause to be deposited, the Indemnity Shares in escrow with the Escrow Agent. Such deposit shall constitute the initial Indemnity Fund and shall be governed by the terms and conditions of this Escrow Agreement. The Escrow Agent shall establish a separate subaccount for each Company Shareholder ("SUBACCOUNT") and credit to such Subaccount the number of Indemnity Shares and cash in lieu of fractional shares set forth opposite the name of such Company Shareholder on ANNEX A hereto.
b. Immediately after receipt from Parent of the Indemnity Amount, the Escrow Agent shall confirm such receipt in writing to Parent and the Shareholder Representatives.
c. All dividends and distributions in respect of the Indemnity Shares, whether in cash, additional Parent Common Stock or other property received by the Escrow Agent shall be distributed currently to the Company Shareholders; provided that stock dividends made to effect stock splits or similar events shall be retained by the Escrow Agent as part of the Indemnity Fund and credited proportionately to the Subaccounts to which the Indemnity Shares are credited. In the event the Indemnity Shares are reclassified or otherwise changed into or exchanged for other securities, property or cash pursuant to any merger, consolidation, sale of assets and liquidation or other transaction, the securities, cash or other property received by the Escrow Agent in respect of the Indemnity Shares shall be retained by it as part of the Indemnity Fund and credited proportionately to the Subaccounts to which the Indemnity Shares are credited. All cash, property, Parent Common Stock and other securities received and retained by the Escrow Agent as described in this Subsection 2(d) are referred to herein as "DISTRIBUTIONS". The provisions of this Section 2 shall apply to successive Distributions.
d. Each Company Shareholder shall have the right to
vote all Indemnity Shares credited to such Company Shareholder's
Subaccount. The Escrow Agent will forward to each Company
Shareholder to whose Subaccount any Indemnity Shares are credited
all notices of shareholders' meetings, proxy statements and
reports to shareholders received by the Escrow Agent in respect
thereof and will either (i) vote the Indemnity Shares credited to
such Company Shareholder's Subaccount only in accordance with
written instructions received from such Company Shareholder, or
(ii) forward to such Company Shareholder a signed proxy enabling
the Company Shareholder to vote such Indemnity Shares. The
Escrow Agent shall be reimbursed for the cost of such forwarding
in accordance with Section 10(d).
3. INDEMNIFICATION.
a. From and after the Effective Time, each Parent Group Member shall be indemnified, held harmless and reimbursed from the Indemnity Fund from and against any and all Loss and Expense incurred by such Parent Group Member in connection with or arising from:
i. any breach or failure to perform by the Company of any of its agreements, covenants or obligations in this Agreement; or
ii. any breach of any warranty or the inaccuracy of any representation of the Company contained in Article 4 of the Merger Agreement or any certificate delivered by or on behalf of the Company pursuant to Article 7 of the Merger Agreement;
Any payment pursuant to this Section 3 shall be made in the form of a transfer from the Indemnity Fund to the applicable Parent Group Member(s). No Parent Group Member shall have any right to any of the Indemnity Fund until the aggregate of all Loss and Expense incurred as a result of the matters described in subsections 3.a.i. or ii. exceed $25,000.
b. In the event of any inaccuracy in the computation of the Exchange Ratio, Parent will recalculate the Exchange Ratio and receive a sufficient number of Parent Shares from the Indemnity Fund in order that the total number of shares of Parent Shares issued and outstanding by virtue of the Merger Agreement would be as would have resulted if such computation of the Exchange Ratio had been true and correct in all respects at the Effective Time.
4. NOTICE AND DETERMINATION OF CLAIMS.
a. If any Parent Group Member wishes to make a claim for indemnification to be satisfied from the Indemnity Fund, such Parent Group Member (individually or collectively, the "CLAIMING PARTY") shall notify the Escrow Agent in writing (the "CLAIM NOTICE") of the facts giving rise to such claim for indemnification hereunder. The Claim Notice shall be accompanied by a certificate of the Claiming Party attesting to the Claiming Party's contemporaneous delivery of a duplicate copy of the Claim Notice to the Shareholder Representatives. Such Claim Notice shall describe in reasonable detail (to the extent then known) the Loss or Expense, the method of computation of such Loss or Expense and contain a reference to the provisions of this Agreement in respect of which such Loss or Expense shall have occurred. If the Claiming Party is not Parent, the Claim Notice must be accompanied by a certificate from Parent confirming that the Claiming Party is a Parent Group Member. At the time of delivery of any Claim Notice to the Escrow Agent, a duplicate copy of such Claim Notice shall be delivered by the Claiming Party to the Shareholder Representatives.
b. Unless the Shareholder Representatives shall have delivered an Objection in accordance with Section 4(c), the Escrow Agent shall, on the twentieth day (or such earlier day as the Shareholder Representatives shall authorize in writing to the Escrow Agent) after receipt of a Claim Notice with respect to indemnification for a specified amount, deliver to Parent, for its account or for the account of each Parent Group Member named in the Claim Notice, such portion of the Indemnity Fund, valued in accordance with this Escrow Agreement, with a value equal to the specified amount.
c. Until the twentieth day following delivery of a Claim Notice, either of the Shareholder Representatives may deliver to the Escrow Agent a written objection (an "OBJECTION") to the claim made in such Claim Notice. At the time of delivery of any Objection to the Escrow Agent, a duplicate copy of such Objection shall be delivered to the Claiming Party.
d. Upon receipt of an Objection properly made, the Escrow Agent shall (i) deliver to Parent, for its account or for the account of each Parent Group Member named in the Claim Notice, such portion of the Indemnity Fund, valued in accordance with this Escrow Agreement, with a value equal to that portion of the amount subject to the Claim Notice which is not disputed by the Shareholder Representatives (if any) and (ii) designate and segregate out of the Indemnity Fund a portion thereof, valued in accordance with the Escrow Agreement, with a value equal to the amount subject to the Claim Notice which is disputed by the Shareholder Representatives. Thereafter, the Escrow Agent shall not dispose of such segregated portion of the Indemnity Fund until the Escrow Agent shall have received a certified copy of the final decision of the arbitrators as contemplated by Section 5, or the Escrow Agent shall have received a copy of the written agreement between the Claiming Party and the Shareholder Representatives resolving such dispute and setting forth the amount, if any, which such Claiming Party is entitled to receive. The Escrow Agent will deliver to Parent, for its account or for the account of each Parent Group Member entitled to payment, such portion of the Indemnity Fund, valued in accordance with the Escrow Agreement, with a value equal to the amount that the Claiming Party is entitled to receive as set forth in the arbitration decision after the expiration of ten (10) business days from the receipt of such decision or, in the event that the amount to which the Claiming Party is entitled is established pursuant to an agreement between the Claiming Party and the Shareholder Representatives, promptly after the Escrow Agent's receipt of such agreement.
5. PAYMENT AND VALUATION.
a. Payments, deliveries or designations from the Indemnity Fund made pursuant to any Claim Notice shall be made, on a Subaccount by Subaccount basis, first from any cash and second from any Indemnity Shares. For purposes of such payment, delivery or designation, Indemnity Shares shall be valued at the Market Value of such Indemnity Shares as determined in accordance with Section 5(b) hereof. To the extent that any payment, delivery or designation is made pursuant to this Escrow Agreement in the form of securities, such payment, delivery or designation shall be rounded to the nearest whole number of such securities, and no fractional securities shall be paid, delivered or designated.
b. The "MARKET VALUE" of each Parent Share in the Indemnity Fund as of any date shall be the Closing Price. In the event of any reclassification, stock split or stock dividend with respect to Parent Common Stock or any change or conversion of Parent Common Stock into other securities, appropriate and proportionate adjustments, if any, shall be made to the Market Value.
c. Payments and deliveries pursuant to a Claim Notice shall be charged to and withdrawn from each Subaccount in proportion to the respective balances in each, unless the Escrow Agent is restrained, enjoined or stayed by law or court order from withdrawing assets from a Subaccount, in which case the amount which would have been drawn from such
Subaccount shall be allocated pro rata among and withdrawn from the remaining Subaccounts as to which the Escrow Agent is not so restrained, enjoined or stayed. If the Escrow Agent ceases to be so restrained, enjoined or stayed, then, to the extent practicable, such remaining Subaccounts from which such amount was withdrawn shall be credited, pro rata, with the amount of such withdrawal through a deduction from the Subaccount that was the subject of such restraint, injunction or stay.
6. RESOLUTION OF CONFLICTS; ARBITRATION.
a. The Claiming Party shall deliver a written response to the Shareholder Representatives in respect of any Objection properly delivered by the Shareholder Representatives. If after twenty (20) days following delivery of such response there remains a dispute as to any claims, the Shareholder Representatives and the Claiming Party shall attempt in good faith for sixty (60) days to agree upon the rights of the respective parties with respect to each of such claims. If the Shareholder Representatives and the Claiming Party should so agree, a memorandum setting forth such agreement shall be prepared and signed by both and shall be furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum and shall distribute the Parent Common Stock or other property, if any, from the Indemnity Fund in accordance with the terms thereof.
b. If no such agreement can be reached after good faith negotiation, either the Claiming Party or the Shareholder Representatives may, by written notice to the other, demand arbitration of the matter unless the amount of the Loss or Expense is at issue in pending litigation with a third party, in which event arbitration shall not be commenced until such amount is ascertained or both parties agree to arbitration; and in either such event the matter shall be settled by arbitration conducted by three arbitrators. Within fifteen (15) days after such written notice is sent, Parent and the Shareholder Representatives shall each select one arbitrator, and the two arbitrators so selected shall select a third arbitrator. The decision of the arbitrators as to the validity and amount of any claim in the related Claim Notice shall be binding, and conclusive, and notwithstanding anything in this Section 6, the Escrow Agent shall be entitled to act in accordance with such decision and make or withhold payments out of the Indemnity Fund in accordance therewith.
c. Judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction. Any such arbitration shall be held in San Francisco, California under the commercial rules then in effect of the American Arbitration Association. The non-prevailing party to an arbitration shall pay its own expenses, the fees of each arbitrator, the administrative fee of the American Arbitration Association, and the expenses, including without limitation, attorneys' fees and costs, reasonably incurred by the other party to the arbitration.
7. SHAREHOLDER REPRESENTATIVES.
a. Each Company Shareholder hereby knowingly and voluntarily appoints and selects Robert Higgins and Peter Adams as the "SHAREHOLDER REPRESENTATIVES" hereunder. Each Company Shareholder acknowledges that each of the Shareholder Representatives shall have the power to bind such Company Shareholder in accordance herewith, and fully consents to such power. Each of the Shareholder Representatives shall be constituted and appointed as agent
for and on behalf of the Company Shareholders to give and receive notices and communications, to authorize delivery to Parent Group Members of the Parent Common Stock or other property from the Indemnity Fund in satisfaction of claims by Parent Group Members, to object to such deliveries, to agree to, negotiate, enter into settlements and compromises of, and demand arbitration and comply with orders of courts and awards of arbitrators with respect to such claims, and to take all actions necessary or appropriate in the judgment of the Shareholder Representatives for the accomplishment of the foregoing. The persons designated to serve as the Shareholder Representatives may be changed by the holders of a majority in interest of the Indemnity Fund from time to time upon not less than 10 days prior written notice to Parent and the Escrow Agent. No bond shall be required of the Shareholder Representatives, and the Shareholder Representatives shall receive no compensation for their services. Any expenses incurred by the Shareholder Representatives in connection with their services hereunder shall be reimbursed from the Indemnity Fund upon presentation of appropriate expense documentation as and to the extent provided in Section 7(b).
b. At least five (5) days prior to the Distribution Date or any earlier date on which any Shareholder Representative ceases to be a Shareholder Representative hereunder, the Shareholder Representatives shall deliver written notice to the Escrow Agent and Parent setting forth the amount of the reasonable expenses incurred by the Shareholder Representatives in connection with their duties under the Merger Agreement and hereunder (the "SHAREHOLDER REPRESENTATIVES' EXPENSES"), which expenses shall be reimbursed from the Indemnity Fund in accordance with the provision of Section 9(d) hereof.
c. Neither Parent, any Parent Group Member nor the Escrow Agent shall be responsible or liable for any acts or omissions of any Shareholder Representative in such Shareholder Representative's capacity as such, and each of them may rely on any action or writing of all the then Shareholder Representatives as being binding on all Shareholder Representatives for all purposes.
d. A decision, act, consent or instruction of the Shareholder Representatives shall constitute a decision of all Company Shareholders for whom shares of Parent Common Stock otherwise issuable to them are deposited in the Indemnity Fund and shall be final, binding and conclusive upon each such Company Shareholder, and the Escrow Agent and Parent may rely upon any decision, act, consent or instruction of the Shareholder Representatives as being the decision, act, consent or instruction of each and every such Company Shareholder. The Escrow Agent and each Parent Group Member are hereby relieved from any liability to any person for any acts done by them in accordance with such decision, act, consent or instruction of the Shareholder Representatives. For purposes of this Escrow Agreement and the Merger Agreement, any action by any of the then Shareholder Representatives shall be deemed to be the action of and binding upon all of the Shareholder Representatives.
e. The Shareholder Representatives shall not be liable to the Company Shareholders for any act done or omitted hereunder while acting in good faith as Shareholder Representatives and in the exercise of reasonable judgment, and any act done or omitted pursuant to the written advice of counsel shall be conclusive evidence of such good faith. The Company Shareholders shall severally indemnify the Shareholder Representatives and hold them harmless from and against any loss, liability or expense incurred without gross negligence or bad
faith on the part of the Shareholder Representatives and arising out of or in connection with the acceptance and administration of their duties hereunder.
f. The Shareholder Representatives shall treat confidentially and not disclose any nonpublic information from or about the Company to any third party (except on a need-to-know basis to individuals who agree to treat such information confidentially).
8. THIRD-PARTY CLAIMS. In the event Parent becomes aware of a third-party claim which Parent believes may result in a demand against the Indemnity Fund, Parent shall notify the Shareholder Representatives of such claim, and the Shareholder Representatives shall be entitled, at their expense, to participate in any defense of such claim. Parent shall have the right in its sole discretion to settle any such claim; provided, however, that if Parent effects the settlement of any such claims without the consent of the Shareholder Representatives, the Shareholder Representatives shall have the power or authority to object under Section 4 or any other provision to the amount paid in such settlement. In the event that the Shareholder Representatives have consented to any such settlement, the Shareholder Representatives shall have no power or authority to object under Section 4 or any other provision to the amount paid in such settlement.
9. TERM, TERMINATION AND DELIVERY OF INDEMNITY AMOUNT.
a. This Escrow Agreement shall be effective as of, but not before, the Effective Time.
b. The indemnification provisions of Section 3 shall terminate one year after the Effective Time or earlier, in whole or in part, if Parent determines that such earlier termination is required to comply with the requirements for accounting for the Merger as a pooling of interests and gives the Escrow Agent and the Shareholder Representatives notice to such effect (and no claims shall be made by any Parent Group Member under Section 2 thereafter), except that such indemnification shall continue as to any Loss or Expense in connection with which a Claim Notice is given in accordance with the requirements of Section 4 on or prior to the date such indemnification obligation would otherwise terminate in accordance with Section 2, as to which the indemnification obligation hereunder shall continue until the liability to be satisfied from the Indemnity Fund, and all Parent Group Members shall have been reimbursed out of the Indemnity Fund for such Loss or Expense.
c. Upon termination of the indemnification obligations under this Escrow Agreement and reimbursement of the Parent Group Members of Losses and Expenses payable in respect thereof hereunder, the Indemnity Fund shall terminate and shall be distributed in accordance with this Section 9.
d. On the first anniversary of the Effective Time, or earlier, if Parent so elects, in whole or in part, in a written notice delivered to the Escrow Agent and the Shareholder Representatives (the "DISTRIBUTION DATE"), the Escrow Agent shall deliver to the Exchange Agent (or, if the agreement appointing the Exchange Agent shall then have terminated, to Parent) an amount (the "DISTRIBUTION AMOUNT") equal to (A) the amount remaining in the Indemnity Fund, less (B) any amount designated as subject to a claim pursuant to such Claim Notice to the
extent such claim has not been resolved prior to such date, and less (C) any amount previously designated in writing by the Shareholder Representatives to the Escrow Agent (with a copy delivered to Parent) as amounts that should be withheld to cover their expenses incurred in connection with their activities hereunder (to the extent the Escrow Agent shall then have received written notice from the Shareholder Representatives to such effect in accordance with Section 7(b)). Upon its receipt of such Distribution Amount, the Exchange Agent or Parent, as the case may be, shall disburse the Distribution Amount from each Subaccount to the Company Shareholder for which such Subaccount was established. No certificates or scrip representing fractional shares of Parent Common Stock or any other security shall be issued upon the fractional share; each Company Shareholder who would otherwise have been entitled to a fractional share of Parent Common Stock upon disbursement of the Distribution Amount will be paid an amount in cash (without interest), rounded to the nearest cent, determined by multiplying (i) the Market Value of such Parent Common Stock or such other securities (in the case of such other securities, as of the Distribution Date) by (ii) the fractional interest to which such holder would otherwise be entitled.
e. Any amounts retained in escrow after the Distribution Date shall be held by the Escrow Agent and shall first be used to indemnify the Parent Group Members, subject to the terms and conditions of this Escrow Agreement, and upon resolution and payment out of the Indemnity Fund of all pending claims, any remaining amounts in escrow shall be transferred to the Shareholder Representatives with respect to out of pocket expenses incurred by them in connection with their activities hereunder (to the extent the Escrow Agent shall then have received written notice from the Shareholder Representatives to such effect in accordance with Section 7(b)), and any remaining shares shall be distributed to the Exchange Agent (or, if the agreement appointing the Exchange Agent shall then have terminated, to Parent), who shall disburse such portion in the manner set forth in Section 4(a).
f. Upon distribution of the entire amount of the Indemnity Fund, the Escrow Agent shall give the Exchange Agent or Parent (in accordance with Section 14), as the case may be, notice to such effect.
g. At any time prior to the termination of this Escrow Agreement, the Escrow Agent shall, if so instructed in a writing signed by Parent and the Shareholder Representatives, release from the Indemnity Fund to Parent or the Exchange Agent, as directed, the portion of the Indemnity Fund specified in such writing.
10. LIABILITY AND COMPENSATION OF ESCROW AGENT.
a. The duties and obligations of the Escrow Agent hereunder shall be determined solely by the express provisions of this Escrow Agreement, and no implied duties or obligations shall be read into this Escrow Agreement against the Escrow Agent. The Escrow Agent shall, in determining its duties hereunder, be under no obligation to refer to any other documents between or among the parties related in any way to this Escrow Agreement (except to the extent that this Escrow Agreement specifically refers to or incorporates by reference provisions of any other document), it being specifically understood that the following provisions are accepted by all of the parties hereto. Parent shall indemnify and hold the Escrow Agent harmless from and against any and all liability and expense which may arise out of any action
taken or omitted by the Escrow Agent, except such liability and expense as may result from the gross negligence or willful misconduct of the Escrow Agent. The reasonable costs and expenses of the Escrow Agent to enforce its indemnification rights under this Section 10(a) shall also be paid by Parent. This right to indemnification shall survive the termination of this Escrow Agreement and removal or resignation of the Escrow Agent. With respect to any claims or actions against the Escrow Agent which are indemnified by Parent under this Section 10, Parent shall have the right to retain sole control over the defense, settlement, investigation and preparation related to such claims or actions; provided that (i) the Escrow Agent may employ its own counsel to defend such a claim or action if it reasonably concludes, based on the advice of counsel, that there are defenses available to it which are different from or additional to those available to Parent and (ii) neither Parent nor the Escrow Agent shall settle or compromise any such claim or action without the consent of the other, which consent shall not be unreasonably withheld or delayed.
b. The Escrow Agent shall not be liable to any person by reason of any error of judgment or for any act done or step taken or omitted by it, or for any mistake of fact or law or anything which it may do or refrain from doing in connection herewith unless caused by or arising out of its own gross negligence or willful misconduct.
c. The Escrow Agent shall be entitled to rely on, and shall be protected in acting in reliance upon, any instructions or directions furnished to it in writing signed by both Parent and the Shareholder Representatives and shall be entitled to treat as genuine, and as the document it purports to be, any letter, paper or other document furnished to it by any Parent Group Member or the Shareholder Representatives, and believed by the Escrow Agent to be genuine and to have been signed and presented by the proper party or parties. In performing its obligations hereunder, the Escrow Agent may consult with counsel to the Escrow Agent and shall be entitled to rely on, and shall be protected in acting in reliance upon, the advice or opinion of such counsel.
d. The Escrow Agent shall be entitled to its
customary fee for the performance of services by the Escrow Agent
hereunder for each year or portion thereof that any portion of
the Indemnity Fund remains in escrow and shall be reimbursed for
reasonable costs and expenses incurred by it in connection with
the performance of such services (such fees, costs and expenses
are hereinafter referred to as the "ESCROW AGENT'S
COMPENSATION"). The Escrow Agent shall render statements to
Parent setting forth in detail the Escrow Agent's Compensation
and the basis upon which the Escrow Agent's Compensation was
computed. The Escrow Agent's Compensation shall be paid by
Parent. Parent shall be entitled, upon submitting a written
request to the Escrow Agent, to be reimbursed out of the
Indemnity Fund for one hundred percent (100%) of any amount that
Parent is required to pay to the Escrow Agent pursuant to such
reimbursement obligation, payable in the same manner set forth in
Section 5 hereof for payment of claims.
e. The Escrow Agent may resign at any time by giving
sixty (60) days written notice to Parent and the Shareholder
Representatives; provided that such resignation shall not be
effective unless and until a successor Escrow Agent has been
appointed and accepts such position pursuant to the terms of this
Section 10. In such event, Parent and the Shareholder
Representatives shall appoint a successor Escrow Agent or, if
Parent and the Shareholder
Representatives are unable to agree upon a successor Escrow Agent within sixty (60) days after such notice, the Escrow Agent shall be entitled to (i) appoint its own successor, provided that such successor is reasonably acceptable to Parent and the Shareholder Representatives or (ii) at the equal expense of Parent and the Shareholder Representatives, petition any court of competent jurisdiction for the appointment of a successor Escrow Agent. Such appointment, whether by Parent and the Shareholder Representatives, on the one hand, or the Escrow Agent, on the other hand, shall be effective on the effective date of the aforesaid resignation (the "INDEMNITY TRANSFER DATE"). On the Indemnity Transfer Date, all right title and interest to the Indemnity Fund, including interest thereon, shall be transferred to the successor Escrow Agent and this Escrow Agreement shall be assigned by the Escrow Agent to such successor Escrow Agent, and thereafter, the resigning Escrow Agent shall be released from any further obligations hereunder. The Escrow Agent shall continue to serve until its successor is appointed, accepts the Escrow Agreement and receives the transferred Indemnity Fund.
f. The Escrow Agent shall not have any right, claim or interest in any portion of the Indemnity Fund except in its capacity as Escrow Agent hereunder.
g. It is understood and agreed that in the event any disagreement among Parent and the Shareholder Representatives results in adverse claims or demands being made in connection with the Indemnity Fund, or in the event the Escrow Agent in good faith is in doubt as to what action it should take hereunder, the Escrow Agent shall retain the Indemnity Fund until the Escrow Agent shall have received (i) an enforceable final order of a court of competent jurisdiction which is not subject to further appeal directing delivery of the Indemnity Fund or (ii) a written agreement executed by Parent and the Shareholder Representatives directing delivery of the Indemnity Fund, in which event Escrow Agent shall disburse the Indemnity Fund in accordance with such order or agreement. Any court order referred to in clause (i) immediately above shall be accompanied by a legal opinion of counsel for the presenting party satisfactory to the Escrow Agent to the effect that said court order or judgment is final and enforceable and is not subject to further appeal. The Escrow Agent shall act on such court order and legal opinion without further question.
11. TAXES. All dividends, distributions, interest and gains earned or realized on the Indemnity Fund ("EARNINGS") and credited to a Subaccount shall be accounted for by the Escrow Agent separately from the Indemnity Fund and, notwithstanding any provisions of this Agreement, shall be treated as having been received by the Company Shareholders to whose Subaccount the Earning are credited for tax purposes. EXHIBIT A hereto sets forth a list of each Company Shareholder's address and Taxpayer Identification Number. The Escrow Agent annually shall file information returns with the United States Internal Revenue Service and payee statements with the Company Shareholders, documenting such Earnings. The Company Shareholders shall provide to the Escrow Agent all forms and information necessary to complete such information returns and payee statements. In the event the Escrow Agent becomes liable for the payment of taxes, including withholding taxes, relating to Earnings or any payment made hereunder, the Escrow Agent may deduct such taxes from each applicable Subaccount.
12. REPRESENTATIONS AND WARRANTIES.
a. PARENT AND ESCROW AGENT. Each of Parent and the Escrow Agent represents and warrants to each of the other parties hereto that it is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation; that it has the power and authority to execute and deliver this Escrow Agreement and to perform its obligations hereunder; that the execution, delivery and performance of this Escrow Agreement has been duly authorized and approved by all necessary action; that this Escrow Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms; and that the execution, delivery and performance of this Escrow Agreement will not result in a breach of or loss of rights under or constitute a default under or a violation of any trust (constructive or other), agreement, judgment, decree, order or other instrument to which it is a party or it or its properties or assets may be bound.
b. COMPANY SHAREHOLDER.
i. AUTHORIZATION. Each Company Shareholder represents to each of the other parties hereto that such Company Shareholder has the power and authority to execute and deliver this Escrow Agreement and to perform its obligations hereunder; that this Escrow Agreement constitutes such Company Shareholder's legal, valid and binding obligation, enforceable against it in accordance with its terms subject to the Enforceability Exceptions; and that the execution, delivery and performance of this Escrow Agreement by such Company Shareholder will not result in a breach of or loss of rights under or constitute a default under or a violation of any trust (constructive or other), agreement, judgment, decree, order or other instrument to which such Company Shareholder is a party or by which such Company Shareholder's properties or assets may be bound.
ii. PURCHASE ENTIRELY FOR OWN ACCOUNT. Each Company Shareholder represents that the Parent Shares will be acquired for investment for such Company Shareholder's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof and that such Company Shareholder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Escrow Agreement, each Company Shareholder further represents that such Company Shareholder does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to any of the Parent Shares.
iii. RELIANCE UPON COMPANY SHAREHOLDERS'
REPRESENTATIONS. Each Company Shareholder understands that the
Parent Shares are not registered under the Securities Act on the
ground that the issuance of shares under the Merger Agreement is
exempt from registration under the Securities Act pursuant to
Section 4(2) and/or Regulation D thereof, and that Parent's
reliance on such exemption is predicated on the Company
Shareholders' representations set forth herein. Each Company
Shareholder realizes that the basis for the exemption may not be
present if, not withstanding such representations, the Company
Shareholders have in mind merely acquiring the Parent Shares for
a fixed or determinable period in the future, or for a market
rise, or for sale if the market does not rise. No Company
Shareholder has any such intention.
iv. RECEIPT OF INFORMATION. Each Company Shareholder believes that such Company Shareholder has received all the information necessary or appropriate for deciding whether to purchase the Parent Shares. Each Company Shareholder further represents that such Company Shareholder has had an opportunity to ask questions and receive answers from Parent regarding the terms and conditions of this Escrow Agreement and the Merger Agreement and the issuance of the Parent Shares pursuant to the Merger Agreement. Any and all of such questions have been answered to the satisfaction of each Company Shareholder. The foregoing, however, does not limit or modify the representations and warranties of any Company Shareholder or the Company in either this Escrow Agreement or the Merger Agreement.
v. INVESTMENT EXPERIENCE. Each Company Shareholder represents that such Company Shareholder is experienced in evaluating and investing in securities of companies in a similar stage of development as Parent and acknowledges that such Company Shareholder is able to fend for himself, herself, or itself, can bear the economic risk of the investment, and has such knowledge and experience in financial and business matters that such Company Shareholder is capable of evaluating the merits and risks of the investment. Each Company Shareholder has been advised of and has had the opportunity to employ the services of legal, accounting, financial and/or investment advisors who are qualified by training and experience in business and financial matters to assist such Company Shareholder in evaluating the merits and risks of acquiring the Parent Shares.
vi. ACCREDITED INVESTOR. Each Company Shareholder has delivered to Parent prior to the Closing a letter, in form and substance satisfactory to Parent, confirming that such Company Shareholder is (a) an "Accredited Investor" as defined in Rule 501 of the Securities Act, or (b) has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment.
vii. RESTRICTED SECURITIES. Each Company Shareholder understands that the Parent Shares are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering, and such securities may be resold without registration under the Securities Act only in certain limited circumstances. Each Company Shareholder understands that resale or other transfer of the Parent Shares will be subject to significant restrictions imposed by federal and state securities laws, and by foreign securities laws, and, as a result, such Company Shareholder may be required to hold the Parent Shares indefinitely.
viii. LEGENDS. To the extent applicable, each certificate or other document evidencing any of Parent Shares issued to any Company Shareholder shall be endorsed with the legends set forth below:
(1) The following legend under the Securities Act:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE APPLICABLE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS."
(2) Any legend imposed or required by Parent's Bylaws or applicable state securities laws.
13. BENEFIT; SUCCESSOR AND ASSIGNS. This Escrow Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns but shall not be assignable by any party hereto without the written consent of all of the other parties hereto; provided, however, that Parent may assign its rights and delegate its obligations hereunder to any successor corporation in the event of a merger, consolidation or transfer or sale of all or substantially all of Parent's stock or assets and that the Escrow Agent may assign its rights hereunder to a successor Escrow Agent appointed hereunder. Except for the persons specified in the preceding sentence, this Escrow Agreement is not intended to confer on any person not a party hereto any rights or remedies hereunder.
14. NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed given when actually received and shall be given by a nationally recognized overnight courier delivery service, certified first class mail or by facsimile (with a confirmatory copy sent by overnight courier) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
If to the Escrow Agent:
Commercial Escrow Services, Inc.
3478 Buskirk Avenue, Suite 1032
Pleasant Hill, CA 94523
Attention: Toni Hardstone
Facsimile No.: (925) 941-6465
Telephone No.: (925) 937-9730
If to Parent or any Parent Group Member, to it at:
Advanced Energy Industries, Inc.
1625 Sharp Point Drive
Fort Collins, CO 80525
Attention: Richard P. Beck
Facsimile No.: (970) 407-5204
Telephone No.: (970) 221-4670
With copy to:
Thelen Reid & Priest LLP
333 West San Carlos Street, 17th Floor
San Jose, CA 95110
Attn: Jay L. Margulies, Esq.
Facsimile No.: (408) 287-8040
Telephone No.: (408) 292-1815
If to any Company Shareholder, at the address set forth
on EXHIBIT A.
Any party may designate such other address in writing to all the other parties hereto; provided that the Company Shareholders may not specify more than one address at any time.
15. GOVERNING LAW. This Escrow Agreement shall be governed by and construed in accordance with the laws of the State of California without reference to conflict of laws principles.
16. COUNTERPARTS. This Escrow Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
17. HEADINGS. The section headings contained in this Escrow Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Escrow Agreement.
18. PARTIAL INVALIDITY. Wherever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision shall be ineffective in the jurisdiction involved to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such invalid, illegal or unenforceable provision or provisions or any other provisions hereof, unless such a construction would be unreasonable.
19. ENTIRE AGREEMENT; MODIFICATION AND WAIVER. This Escrow Agreement and the Merger Agreement embody the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede any and all prior agreements and understandings relating to the subject matter hereof. Notwithstanding the preceding sentence, the parties hereto acknowledge that the Escrow Agent is not a party to nor is it bound by the Merger Agreement. No amendment, modification or waiver of this Escrow Agreement shall be binding or effective for any purpose unless it is made in a writing signed by the party against whom enforcement of such amendment, modification or waiver is sought. No course of dealing between the parties to this Escrow Agreement shall be deemed to affect or to modify, amend or discharge any provision or term of this Escrow Agreement. No delay by any party to or any beneficiary of this Escrow Agreement in the exercise of any of its rights or remedies shall operate as a waiver thereof, and no single or partial exercise by any party to or any beneficiary of this Escrow Agreement of any such right or remedy shall preclude any other or further exercise thereof. A waiver of any right or remedy on any one occasion shall not be construed as a bar to or waiver of any such right or remedy on any other occasion.
20. INDEMNIFICATION. Without affecting, and separate and apart from, each indemnity obligation contained in this Escrow Agreement, Parent and each Company Shareholder hereby agree to the following provisions in connection with the registration of Parent Common Stock with the Commission as provided for in the Merger Agreement:
a. Parent will indemnify each Company Shareholder in respect of its Parent Shares to be subject to the Registration Statement against all claims, losses, expenses, damages and liabilities (or actions in respect thereto) arising out of or based on any untrue statement by Parent (or alleged untrue statement) of a material fact contained in the Registration Statement or other document incident to the registration of such shares, or based on any omission by Parent (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Parent of any rule or regulation promulgated under the Securities Act or any state securities law applicable to Parent and relating to action or inaction required of Parent in connection with any such registration, and will reimburse each such Company Shareholder for any reasonable legal and any other expenses incurred in connection with investigating, defending or settling any such claim, loss, damage, liability or action, provided that the indemnity agreement contained in the provisions of Section 20(a) shall not apply to amounts paid in settlement of any such claim, loss, damage or liability if such settlement is effected without the consent of Parent (which consent shall not be unreasonably withheld) nor shall Parent be liable in any such case to the extent that any such claim, loss, damage or liability arises out of or is based on any untrue statement or omission based upon written information furnished to Parent expressly for use in connection with such registration by such Company Shareholder.
b. Each Company Shareholder will, if Parent Shares
issuable to such Company Shareholder are included in the
securities as to which the registration is being effected,
indemnify Parent, each of its directors and officers, securities
covered by such registration statement, each person who controls
Parent and each underwriter within the meaning of the Securities
Act, and each other Company Shareholder against all claims,
losses, expenses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement by the
Company (or alleged untrue statement) of a material fact
contained in the Registration Statement or other related
document, or any omission by the Company (or alleged omission) to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will
reimburse Parent, such Company Shareholders, such directors,
officers, partners or persons for any reasonable legal or any
other expenses incurred in connection with investigating,
defending or settling any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon
and in conformity with written information furnished to Parent
expressly for use in connection with such registration by such
Company Shareholder specifically for use therein, provided,
however, that indemnity agreement contained in the provisions of
Section 20(b) shall not apply to amounts paid in settlement of
any such claim, loss, damage or liability if such settlement is
effected without the consent of such Company Shareholder (which
consent shall not be unreasonably withheld).
c. Each party entitled to indemnification under this
Section 20 (the "INDEMNIFIED PARTY") shall give notice to the
party required to provide indemnification (the
"INDEMNIFYING PARTY") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party's expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations hereunder, unless such failure resulted in actual detriment to the Indemnifying Party. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or a release from all liability in respect of such claim or litigation.
21. INFORMATION BY HOLDER. Each Company Shareholder shall promptly furnish to Parent such information regarding such Company Shareholder as the Company may request in writing and as shall be required in connection with any registration referred to in the Merger Agreement.
22. COMPANY SHAREHOLDERS' UNDERTAKING. Each Company Shareholder hereby agrees that it shall not trade or otherwise reduce the economic risk relating to each Parent Share it receives in connection with the Merger through short sales, options or other similar transactions until financial results covering at least thirty (30) days of combined operations of Parent and the Surviving Corporations have been publicly disclosed by Parent pursuant to a Parent Report. Parent is obligated under the Exchange Act to publish such results in its quarterly report on Form 10-Q for the second quarter of 2000 by August 15, 2000.
(THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.)
IN WITNESS WHEREOF, the parties hereto have duly executed this Escrow Agreement as of the date first above written.
COMMERCIAL ESCROW SERVICES, INC.
BY: /s/ A. HARDSTONE NAME: A. Hardstone TITLE: President and Manager |
ADVANCED ENERGY INDUSTRIES, INC.
BY: /s/ JOSEPH MONKOWSKI NAME: Joseph Monkowski TITLE: Senior Vice President |
COMPANY SHAREHOLDERS:
/s/ ROBERT W. HIGGINS NAME |
GALEX RESEARCH
BY: /s/ B. ATLAS NAME: B. Atlas TITLE: General Partner /s/ VALENTIN BALTER NAME /s/ DUANE ALLAN KOGLER NAME |
PACTECH/NOAH INVESTMENTS LLC
BY: /s/ THOMAS W. HALLORAN NAME: Thomas W. Halloran TITLE: Managing Member |
PACTECH PARTNERS LLC
BY: /s/ THOMAS W. HALLORAN NAME: Thomas W. Halloran TITLE: President /s/ JERAULD J. CUTINI NAME /s/ PETER ADAMS NAME |
A. G. EDWARDS & SONS, INC., AS
CUSTODIAN
BY: /s/ D. MICHAEL GUTHRIE NAME: D. Michael Guthrie TITLE: Staff Assistant /s/ OLIVER JANSSEN NAME /s/ GARY HULTQUIST NAME |
ANNEX A
COMPANY SHAREHOLDER NUMBER OF AE SHARES
1. Robert W. Higgins 35,201
6389 San Ignacio Avenue
San Jose, CA 95119
Facsimile #(408) 532-7691
Tax #000-00-0000
2. Galex Research 12,811
6247 Royal Oak Court
San Jose, CA 95123
Facsimile #(408)281-7797
Tax #77-048-0018
3. Valentin Balter 8,541
10577 La Roda Drive
Cupertino, CA 95014
Facsimile #(408)255-3565
Tax #000-00-0000
4. Duane Allan Kogler 1,154
408 Gwinn Ct.
San Jose, CA 95111
Facsimile #(408)574-2517
Tax #000-00-0000
5. PacTech/Noah Investments LLC 5,771
One Embarcadero Center, Suite 1200
San Francisco, CA
Facsimile #(925)820-2865
Tax #94-334-2157
6. PacTech Partners LLC 3,037
One Embarcadero Center, Suite 1200
San Francisco, CA
Facsimile #(925)820-2865
Tax #94-334-2402
7. Jerauld J. Cutini 866
Gasonics, Inc.
2730 Junction Avenue
San Jose, CA 95134
Facsimile #
Tax #000-00-0000
8. Peter Adams 577
5562 Morningside Drive
San Jose, CA 95138
Facsimile # (408) 281-7797
Tax #000-00-0000
9. A.G. Edwards & Sons (for Oliver Janssen) 144
One North Jefferson
St. Louis, MO 63103
Facsimile #(314) 955-5402
Tax #43-0895447
10. Oliver Janssen 274
One Embarcadero Center, Suite 1200
San Francisco, CA 94111
Facsimile #(415) 477-0165
Tax #000-00-0000
11. Gary Hultquist 274
One Embarcadero Center, Suite 1200
San Francisco, CA 94111
Facsimile #(415) 477-0165
Tax #000-00-0000
Total 68,650
|