AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 2002
REGISTRATION NO. 333-72748
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 8
TO
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 Number)
1625 SHARP POINT DRIVE
FORT COLLINS, COLORADO 80525
(970) 221-4670
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
MICHAEL EL-HILLOW
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)
COPY TO:
JOHN L. SAVVA, ESQ.
SULLIVAN & CROMWELL
1870 EMBARCADERO ROAD
PALO ALTO, CALIFORNIA 94303-3308
(650) 461-5600
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: From time to time after
the effective date of this registration statement.
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 only 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. [ ]
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SECURITY HOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 3, 2002
PROSPECTUS
[ADVANCED ENERGY INDUSTRIES, INC LOGO]
ADVANCED ENERGY INDUSTRIES, INC.
$125,000,000
5.00% Convertible Subordinated Notes due September 1, 2006 and
Shares of Common Stock Issuable Upon Conversion of the Notes
This prospectus covers resales by selling securityholders of our 5.00%
Convertible Subordinated Notes due September 1, 2006 and shares of our common
stock issuable upon conversion of the notes. See "Plan of Distribution."
MATURITY
The notes are due on September 1, 2006, unless earlier converted, redeemed by us
at our option or repurchased by us at your option.
INTEREST
We will pay interest on the notes on March 1 and September 1 of each year at the
rate of 5.00% per year, commencing on March 1, 2002.
REDEMPTION
We may redeem the notes, in whole or in part, at any time before September 4,
2004 at a redemption price equal to $1,000 per $1,000 principal amount of notes
to be redeemed plus accrued and unpaid interest, if any, to the date of
redemption if the closing price of our common stock has exceeded 150% of the
conversion price then in effect for at least 20 trading days within a period of
30 consecutive trading days ending on the trading day before the date of mailing
of the provisional redemption notice. If we redeem the notes under these
circumstances, we will make an additional "make whole" payment of $150.56 per
$1000 notes, minus any interest paid or accrued and unpaid to the redemption
date. We may redeem some or all of the notes at any time after September 4,
2004.
SUBORDINATION
The notes are subordinated to all of our existing and future senior debt.
CONVERSION
You may convert your notes at any time prior to maturity or redemption into
shares of our common stock at a conversion rate of 33.5289 shares of common
stock per $1,000 principal amount of notes, equal to a conversion price of
approximately $29.83 per share, subject to adjustment.
REPURCHASE RIGHT
You have the right to require us to purchase all or a portion of your notes upon
a change in control.
THE NASDAQ NATIONAL MARKET
Our common stock is quoted on the Nasdaq National Market under the symbol
"AEIS." On May 2, 2002, the last reported sale price of our common stock on the
Nasdaq National Market was $32.85 per share.
We do not intend to apply for listing of the notes on any securities
exchange or for inclusion of the notes in any automated quotation system.
INVESTING IN THE NOTES OR THE COMMON STOCK INTO WHICH THE NOTES ARE
CONVERTIBLE INVOLVES RISKS. PLEASE CAREFULLY CONSIDER THE "RISK FACTORS"
BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 2002.
TABLE OF CONTENTS
SUMMARY..................................................... 1
RISK FACTORS................................................ 6
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS............. 17
USE OF PROCEEDS............................................. 18
RATIO OF EARNINGS TO FIXED CHARGES.......................... 18
DESCRIPTION OF NOTES........................................ 19
DESCRIPTION OF COMMON STOCK................................. 34
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES....... 35
SELLING SECURITYHOLDERS..................................... 39
PLAN OF DISTRIBUTION........................................ 41
VALIDITY OF THE SECURITIES.................................. 42
EXPERTS..................................................... 42
ADDITIONAL INFORMATION...................................... 42
ii
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and historical consolidated financial statements, including the
notes to those financial statements, appearing elsewhere in this prospectus or
incorporated by reference herein. Investors should carefully consider the
information set forth under "Risk Factors". Unless the context otherwise
requires, the term "Advanced Energy" refers to Advanced Energy Industries, Inc.,
and the terms "company", "we", "us" and "our" refer to Advanced Energy
Industries, Inc., and its subsidiaries.
ADVANCED ENERGY INDUSTRIES, INC.
We design, manufacture and support a group of key subsystems for vacuum
process systems. Our customers use our products in plasma-based thin-film
processing equipment that is essential to the manufacture of semiconductors;
compact disks, DVDs and other digital storage media; flat-panel computer and
television screens; coatings for architectural glass and optics. We also
manufacture power supplies for advanced technology computer workstations.
Our direct current, or DC, and radio frequency, or RF, power 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. Moreover, through our acquisitions of Engineering Measurements Company in
January 2001 and Aera Japan Ltd. in January 2002, which provide gas flow
products, and Noah Holdings, Inc. in April 2000 and Sekidenko, Inc. in August
2000, which provide thermal control and measurement products, we are a company
that can provide high quality components and systems that bring together
technologies that provide our customers increased precision and productivity.
We market and sell our systems primarily to large, original equipment
manufacturers, or OEMs, 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, Inc., Axcelis Technologies, Inc.,
Lam Research Corporation, Novellus Systems, Inc., ULVAC Technologies, Inc. and
The Unaxis Corporation. Sales to customers in the semiconductor capital
equipment industry comprised 59% of our sales in 2001, 70% in 2000 and 65% in
1999. We sell our systems primarily through direct sales personnel to customers
in the United States, Europe and Asia, and through distributors in various
regions outside the United States. International sales represented 36% of our
sales in 2001, 28% in 2000 and 27% in 1999.
DEVELOPMENT OF COMPANY BUSINESS
We incorporated in Colorado in 1981 and reincorporated in Delaware in 1995.
In 1995, we effected the initial public offering of our Common Stock. Our
executive offices are located at 1625 Sharp Point Drive, Fort Collins, Colorado
80525, and our telephone number is 970-221-4670.
1
THE NOTES
Maturity date....................... September 1, 2006.
Subordination....................... The notes are subordinated to our
present and future senior debt, as that
term is defined in "Description of the
Notes -- Subordination." The notes are
also effectively subordinated in right
of payment to all indebtedness and
other liabilities of our subsidiaries.
As of December 31, 2001, we had no
outstanding "senior debt", and the
aggregate amount of indebtedness and
other liabilities of our subsidiaries
was approximately $10.6 million
(excluding intercompany liabilities).
As part of the acquisition of Aera
Japan Ltd., Advanced Energy assumed
approximately $34 million of senior
debt. The indenture under which the
notes are issued does not restrict the
incurrence of "senior debt" by us or
the incurrence of other indebtedness or
liabilities by us or any of our
subsidiaries. See "Description of
Notes -- Subordination."
Interest payment dates.............. March 1 and September 1 of each year,
beginning March 1, 2002.
Interest rate....................... 5.00% per annum.
Conversion rights................... Any portion of the notes that is an
integral multiple of $1,000 is
convertible at the option of the holder
into shares of our common stock at a
conversion rate of 33.5289 shares of
common stock per $1,000 principal
amount of notes. This is equivalent to
a conversion price of approximately
$29.83 per share. The conversion rate
is subject to adjustment in some
events. The notes are convertible at
any time before the close of business
on the maturity date, unless we have
previously redeemed or repurchased the
notes. Holders of notes called for
redemption or submitted for repurchase
will be entitled to convert the notes
up to the close of business on the
business day immediately preceding the
date fixed for redemption or
repurchase, as the case may be. See
"Description of Notes -- Conversion
Rights."
Sinking fund........................ None
Provisional redemption.............. We may redeem the notes, in whole or in
part, at any time before September 4,
2004, at a redemption price equal to
$1,000 per $1,000 principal amount of
notes to be redeemed plus accrued and
unpaid interest, if any, to the date of
redemption if the closing price of our
common stock has exceeded 150% of the
conversion
2
price then in effect for at least 20
trading days within a period of 30
consecutive trading days ending on the
trading day before the date of mailing
of the provisional redemption notice.
Upon any provisional redemption, we
will make an additional payment in cash
with respect to the notes called for
redemption in an amount equal to
$150.56 per $1,000 principal amount of
notes, less the amount of any interest
actually paid or accrued and unpaid on
the note prior to the redemption date.
We may make this additional payment in
shares of our common stock, and any
payment in common stock will be valued
at 95% of the average of the closing
sales prices of our common stock for
the five consecutive days ending on the
day prior to the redemption date. We
will be obligated to make this
additional payment on all notes called
for provisional redemption, including
any notes converted after the notice
date and before the provisional
redemption date. See "Description of
Notes -- Optional Redemption by
Advanced Energy -- Provisional
Redemption."
Non-Provisional redemption by
Advanced Energy..................... We may redeem the notes, at our option,
in whole or in part, on or after
September 4, 2004, at the redemption
prices set forth in this prospectus
plus accrued and unpaid interest to the
redemption date. See "Description of
Notes -- Optional Redemption by
Advanced Energy -- Non-Provisional
Redemption."
Repurchase at option of holders upon
a change in control................. Upon a "change in control," as that
term is described in "Description of
the Notes -- Repurchase at Option of
Holders Upon a Change in Control," you
will have the right, subject to
specific conditions and restrictions,
to require us to repurchase your notes,
in whole or in part, at 100% of their
principal amount, together with
interest accrued but unpaid to, but
excluding, the repurchase date. The
repurchase price is payable in cash or,
at our option, and subject to specific
conditions, in shares of common stock.
If we pay the repurchase price in
common stock, the common stock will be
valued at 95% of the average closing
sales prices of the common stock for
the five trading days preceding and
including the third trading day prior
to the repurchase date. See
"Description of Notes -- Repurchase at
Option of Holders Upon a Change in
Control."
3
Events of default................... The following are events of default
under the indenture for the notes:
- we fail to pay principal of or any
premium on any note when due, whether
or not the payment is prohibited by
the subordinated provisions of the
indenture;
- we fail to pay any interest on any
note when due and that default
continues for 30 days, whether or not
the payment is prohibited by the
subordination provisions of the
indenture;
- we fail to provide the notice that we
are required to give in the event of
a "change in control," whether or not
the notice is prohibited by the
subordination provisions of the
indenture;
- we fail to perform any agreement or
other covenant in the notes or the
indenture and that failure continues
for 60 days after written notice to
us by the trustee or by the holders
of at least 25% in aggregate
principal amount of outstanding
notes;
- we or any of our significant
subsidiaries fail to pay when due,
either at its maturity or upon
acceleration thereof, any
indebtedness under any bonds,
debentures, notes or other evidences
of indebtedness for money borrowed
(or any guarantee thereof) in excess
of $15 million if the indebtedness is
not discharged, or the acceleration
is not annulled, within 30 days after
written notice to us by the trustee
or the holders of at least 25% in
aggregate principal amount of the
outstanding notes; and
- events of bankruptcy, insolvency or
reorganization with respect to us or
any of our significant subsidiaries
specified in the indenture. See
"Description of Notes -- Events of
Default."
Symbol for our common stock......... Our common stock is quoted on the
Nasdaq National Market under the symbol
"AEIS".
4
RECENT DEVELOPMENTS
On January 18, 2002, we completed our acquisition of Aera Japan Limited, a
Japanese corporation. The acquisition was effected through our subsidiary
AE-Japan, which purchased all of the outstanding stock of Aera. The aggregate
purchase price paid by AE-Japan was 5.73 billion Japanese yen (approximately $44
million, based upon an exchange rate of 130:1), which was funded from our
available cash. In connection with the acquisition, AE-Japan assumed
approximately $34 million of Aera's debt. Aera, which is headquartered in
Hachioji, Japan, has manufacturing facilities there and manufacturing, sales and
service offices in Austin, Texas; Dresden, Germany; Edinburgh, Scotland; and
Bundang, South Korea; and sales and service offices in Kirchheim, Germany; and
Hshinchu, Taiwan. Aera supplies the semiconductor capital equipment industry
with product lines that include digital mass flow controllers, pressure-based
mass flow controllers, liquid mass flow controllers, ultrasonic liquid flow
meters and liquid vapor delivery systems.
On March 28, 2002, we acquired Dressler HF Technik GmbH, a privately owned
Germany-based provider of power supplies and matching networks, for a purchase
price of $16.75 million. We may pay an additional $3.25 million if Dressler is
able to achieve certain key business objectives by March 30, 2003.
On April 2, 2002, we acquired the additional 40.5% of LITMAS we did not
already own. LITMAS, a privately held, North Carolina-based early-stage company,
designs and manufactures plasma gas abatement systems and high-density plasma
sources. We acquired the 40.5% of LITMAS for approximately 130,000 shares of our
common stock. Based on the Nasdaq closing price of our common stock on April 2,
2002 of $35.16 per share, the purchase price was valued at approximately $4.6
million.
On April 17, 2002, we reported our unaudited financial results for the
first quarter ended March 31, 2002. Revenues for the first quarter 2002 were
$42.9 million, including $6.7 million from Aera Japan Ltd., which we acquired in
January 2002. This represents a decrease of 43 percent from $74.7 million for
the first quarter of 2001, and an increase of 26 percent from $34.0 million for
the fourth quarter of 2001. Net loss for the first quarter of 2002 was $8.7
million, or $0.27 per share compared to first quarter 2001 net income of $5.1
million, or $0.16 per diluted share. This compares to the fourth quarter 2001
net loss of $14.4 million, or $0.45 per share.
RISK FACTORS
You should read the "Risk Factors" section, beginning on page 6 of this
prospectus, to understand the risks associated with an investment in the notes
and our common stock.
5
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this prospectus, you should carefully consider the following risk factors in
evaluating an investment in the notes. This prospectus includes "forward-looking
statements" within the meanings of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements contained or
incorporated by reference in this prospectus, other than statements of
historical fact, are "forward-looking statements". For example, statements
relating to our beliefs, expectations, plans and projections are forward-looking
statements, as are statements that specified actions or circumstances will
continue or change. In some cases, forward-looking statements can be identified
by the inclusion of words such as "believe," "expect," "plan," "anticipate,"
"estimate" and similar words. Our actual results could differ materially from
those projected or assumed in our forward-looking statements, because
forward-looking statements by their nature are subject to risks and
uncertainties. Factors that could contribute to these differences or prove our
forward-looking statements, by hindsight, to be overly optimistic as
unachievable, include the factors described in this section. Other factors,
including factors which we do not now consider material, also might contribute
to the differences between our forward-looking statements and our actual
results. We assume no obligation to update any forward-looking statement or the
reasons why our actual results might differ.
RISKS FACTORS RELATING TO OUR BUSINESS
OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS, WHICH
COULD NEGATIVELY IMPACT OUR STOCK PRICE AND CONSEQUENTLY THE PRICE OF THE NOTES.
Our quarterly operating results have fluctuated significantly and we expect
them to continue to experience significant fluctuations. Downward fluctuations
in our quarterly results historically have 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;
- changes in customers' inventory management practices;
- customer cancellations of previously placed orders and shipment delays;
- pricing competition from our competitors;
- component shortages resulting in manufacturing delays;
- the introduction of new products by us or our competitors;
- costs incurred by responding to specific feature requests by customers;
and
- declines in macroeconomic conditions.
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 prices, shorten delivery times and extend payment
terms. These pressures could lead to significant changes in our operating
results from quarter to quarter. These changes often occur quickly and make it
difficult for us to predict our revenues or operating results. For example, our
ability to predict future operating results is quite low given the current
uncertainty in virtually all forms of technology spending.
In the past, we have incurred charges and costs related to events such as
acquisitions, restructuring and storm damages. In addition, we have from time to
time incurred charges and
6
costs related to new technologies that are being developed by others. 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 common stock would likely decrease and, as a result, any trading
price of the convertible notes may 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 capital equipment. These reductions, in turn, have significantly
reduced demand for our systems. A rapid decrease in demand for our products can
occur with limited advance notice because we supply subsystems to equipment
manufacturers and make a portion 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.
During downturns, some of our customers have drastically reduced their
orders to us and have implemented substantial cost reduction programs. The
semiconductor industry is currently involved in one of the most significant
downturns in its history and there is no reason to believe that this situation
will significantly improve in the near term. Sales to customers in the
semiconductor capital equipment industry accounted for 59% of our total sales in
2001, 70% in 2000 and 65% in 1999. We expect that our business will continue to
depend significantly on the semiconductor and semiconductor capital equipment
industries for the foreseeable future.
THE MARKET PRICE OF OUR COMMON STOCK IS HIGHLY VOLATILE, WHICH COULD LEAD TO
FLUCTUATING PRICES OF THE NOTES, LOSSES FOR INDIVIDUAL INVESTORS AND COSTLY
SECURITIES CLASS ACTION LITIGATION.
The market for technology stocks, including our common stock, has
experienced significant price and volume fluctuations. These fluctuations often
have been unrelated or disproportionate to the operating performance of the
companies. From our IPO in November 1995 through May 2, 2002, 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, and any market for the notes, likely
will continue to be subject to fluctuations. Many factors could cause the
trading price of our common stock and the notes to fluctuate substantially,
including the following:
- future announcements concerning our business, technology, customers or
competitors;
- variations in our operating results;
- 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;
- reduced spending for consumer electronic items;
- the economic and competitive conditions in the industries in which our
customers operate; and
- general stock market trends.
In the past, following periods of volatility in the market price of a
particular company's securities, securities class action litigation often has
been brought against that company. Many technology companies have been subject
to this type of litigation. We may also become involved in this type of
litigation. Litigation is often expensive and diverts management's attention and
7
resources, which could significantly harm our business, financial condition and
results of operations.
A SIGNIFICANT PORTION OF OUR SALES IS CONCENTRATED AMONG A FEW CUSTOMERS.
Our ten largest customers accounted for 53% of our total sales in 2001, 72%
in 2000 and 67% in 1999. Our largest customer, Applied Materials, accounted for
24% of our total sales in 2001, 39% in 2000 and 34% in 1999. The loss of any of
these customers or a material reduction in any of their purchase orders would
significantly harm 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 MKS Instruments, Inc.; Applied
Science and Technology (ASTeX), another subsidiary of MKS Instruments;
Huettinger Elektronik; Shindingen; Kyosan Electric; Comdel; STEC; Kinetics;
Mykrolis; 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 these pressures
could result in a loss of customers or orders.
WE RECENTLY ACQUIRED A NUMBER OF COMPANIES AND TECHNOLOGIES, AND PLAN TO
CONTINUE SEEKING ACQUISITIONS, BUT MIGHT NOT BE ABLE TO INTEGRATE OUR
ACQUISITIONS SUCCESSFULLY OR EFFICIENTLY.
We have significantly expanded our product offerings through acquisitions
and continue to seek acquisition opportunities actively. Prior to 1997, we did
not make any significant acquisitions. In the three years from 1997 through
1999, we acquired five companies. In 2000 and 2001, we acquired three companies
and entered into a strategic partnership arrangement with one other company. In
January 2002, we acquired Aera Japan Limited, a Japanese corporation with
approximately $110 million in revenues in its fiscal year ended June 2001 and
approximately 220 employees in six locations worldwide.
Integrating the companies and technologies that we have acquired has placed
substantial demands on our management team. Further, the increased pace of our
acquisitions has required us to try to integrate multiple acquisitions
simultaneously. This has decreased the time and effort that management can give
to integrating each acquisition, while continuing to manage our existing
business.
Some of our acquisitions have been in technology and geographic markets in
which we have limited experience. We might not be able to compete successfully
in these markets or operate the acquired businesses efficiently. While we may be
able to reduce some costs through consolidation, such as the elimination of
redundant locations and personnel, other unanticipated
8
costs of operating acquired companies or integrating them into our operations
may emerge after acquisition. Our business and results of operations could be
adversely affected if integrating our 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 of acquired companies;
- controlling costs and unanticipated expenses of acquired companies;
- integrating acquired operations and personnel;
- retaining existing customers and strategic partners of acquired
companies;
- maintaining effective quality controls of acquired companies; and
- expanding our internal management, technical and accounting systems.
FUTURE ACQUISITIONS MAY RESULT IN DILUTION TO OUR EXISTING STOCKHOLDERS,
ADVERSELY AFFECT OUR FINANCIAL RESULTS OR THE MARKET PRICE OF OUR SECURITIES OR
LIMIT OUR FINANCIAL FLEXIBILITY.
In connection with future acquisitions we may issue equity securities,
incur or assume debt, recognize substantial one-time expenses or create goodwill
or other intangible assets that could result in significant amortization expense
or future charges for impairment. Parties to whom we issue equity securities in
acquisitions may seek to liquidate their ownership following an acquisition,
which may lead to increased pressure on the market price of our stock and the
notes. We plan to increase the number of shares of our common stock authorized
for issuance to 70 million shares. The issuance of these shares, in an
acquisition or otherwise, would have a dilutive effect on the voting power of
our current stockholders. The market price of our securities may also decline
upon announcement of an acquisition if investors do not view it favorably. Also,
many acquisition opportunities are for foreign companies or for divisions of
larger companies, for whom cash is generally a more attractive consideration
than securities. The use of cash for these acquisitions may reduce our future
financial flexibility.
WE MIGHT NOT BE SUCCESSFUL IN ACQUIRING THE COMPANIES OR DEVELOPING THE
TECHNOLOGIES NECESSARY TO IMPLEMENT OUR BUSINESS STRATEGY.
We continue to look for ways to expand our product offerings to existing
customers, to new customers and into new markets through acquisitions, internal
development and refinement of technologies, and sales and marketing efforts.
However, whether or not we are successful in implementing our goal of becoming a
single-source provider of integrated solutions will depend on many factors,
several of which are out of our control. For example, we may not be able to
identify or acquire companies or develop internally products which complement
our present product offerings. If we identify appropriate target companies or
technologies, we may not be able to afford to acquire them or may be otherwise
unsuccessful in doing so due to market conditions, competition, failure to agree
on terms and other circumstances. Implementation of our growth, acquisition and
product integration strategy may be delayed or altered as these factors affect
management's acquisition and development decision.
OUR NEWLY ACQUIRED FOREIGN OPERATIONS, AS WELL AS OUR FOREIGN SALES AND SERVICE
OFFICES, PRESENT DIFFICULTIES THAT WE HAVE LIMITED EXPERIENCE ADDRESSING.
Our acquisition of Aera Japan Limited significantly increased our
operations outside of the United States. In addition to our operations in Japan,
we maintain sales and service offices in Germany, South Korea, the United
Kingdom, Taiwan and China. In implementing our business
9
strategy, we may acquire other companies or relocate some of our current
domestic operations outside of the United States.
Our foreign operations subject us to risks and uncertainties that we have
limited experience addressing. For example, we face greater difficulty outside
the United States:
- managing and staffing our offices;
- safeguarding our intellectual property;
- understanding and complying with local business customs and laws; and
- competing for customers and supplies with companies based in the foreign
country.
In addition, our foreign operations are subject to risks in each country,
including:
- currency controls and exchange rate fluctuations;
- government regulations and controls; and
- political and economic instability.
Our ability to integrate the operations of Aera Japan Limited and our
overall financial results might be adversely affected if we are unable to
address these difficulties and risks successfully.
WE MIGHT NOT BE ABLE TO COMPETE SUCCESSFULLY IN INTERNATIONAL MARKETS OR 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. Our success
in competing in international markets is subject to our ability to manage
various risks and difficulties, including:
- compliance with product safety requirements and standards that are
different from those of the United States;
- barriers to entry;
- import and export requirements and controls;
- trade restrictions;
- collecting past due accounts receivable from foreign customers; and
- changes in tariffs and taxes.
Sales to customers outside the United States accounted for 36% of our total
sales in 2001, 28% in 2000 and 27% in 1999. As a result of our acquisition of
Aera Japan Limited, we expect international sales to represent a larger portion
of our future sales. 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;
- difficulties managing overseas distributors and representatives; and
- differences in local customs and practices.
Our ability to implement our business strategies and maintain market share
will be jeopardized if we are unable to manage these risks successfully.
10
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 risk as a result of
our international operations. Approximately 25% of our revenues in 2001 were
subject to this risk. As a result of our expanded international operations and
sales, including through the acquisition of Aera Japan Limited, we expect a
greater portion of our future revenues to be subject to this risk.
We have experienced fluctuations in foreign currency exchange rates,
particularly against the Japanese yen, which have negatively affected our
operating results from time to time. We have in the past entered into various
forward foreign exchange contracts to mitigate currency fluctuations in the yen
and intend to continue to do so. We have not employed derivative techniques with
respect to any other currencies. Our current or any future derivative techniques
might not protect us adequately against substantial currency fluctuations.
SHORTAGES OF COMPONENTS NECESSARY FOR OUR PRODUCT ASSEMBLY CAN DELAY OUR
SHIPMENTS.
Manufacturing our products and control systems for the semiconductor
capital equipment industry requires numerous electronic components. Dramatic
growth in the electronics industry has significantly increased demand for these
components. 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 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.
OUR CURRENT AND FUTURE INVESTMENTS IN EARLY-STAGE COMPANIES MIGHT NOT BE
ECONOMICALLY OR OTHERWISE REWARDING AND MIGHT CAUSE US TO REALIZE LOSSES.
We have invested in early-stage companies that develop products and
technologies that 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
early-stage 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. Over the last twelve months the implied value of
a number of early-stage companies
11
has decreased dramatically and a number of technology companies have been forced
to write off all or a portion of their investments in these companies. In 2001,
we recorded a writedown related to an investment in an early-stage company
totalling $6.8 million.
As we make additional investments, we may be required to reflect all or a
portion of such investments as a charge against earnings or record our share of
the early stage company's income or losses. As of December 31, 2001, the
aggregate book value of our investments in early stage companies was $1.1
million.
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 some foreign countries might not afford our intellectual
property the same protections as do the laws of the United States. Our
intellectual property is not protected by patents in several countries in which
we do business, and we have limited patent protection in some 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 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 similar products 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 threaten 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.
INTELLECTUAL PROPERTY LITIGATION IS COSTLY.
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 and are currently alleged in a litigation in which we are a
defendant. 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. This type of litigation often requires
substantial management time and attention, as well as financial and other
resources. We currently are in litigation with a subsidiary of MKS Instruments.
The litigation involves our inductively coupled plasma source product line,
which has represented less than 5% of our total revenues since January 1, 2000.
This and other litigation in the future may result in substantial costs and
division of our efforts.
An adverse determination in any current or future 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 others or
prevent us from manufacturing or selling our products and impact future revenue.
Any of these events could threaten our business, financial condition and results
of operations.
WE MUST CONSTANTLY DEVELOP AND SELL NEW SYSTEMS IN ORDER TO KEEP UP WITH RAPID
TECHNOLOGICAL CHANGE.
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
12
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 INCURRING 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
13
personnel, our business, financial condition and results of operations could be
materially and adversely affected.
WE CONDUCT MANUFACTURING AT ONLY A FEW SITES AND OUR SITES ARE NOT GENERALLY
INTERCHANGEABLE.
We conduct the majority of our manufacturing at our facilities in Fort
Collins and Longmont, Colorado; Voorhees, New Jersey; and Vancouver, Washington.
In connection with the acquisition of Aera, we now have major manufacturing
facilities in Hachioji, Japan and Austin, Texas; and smaller sites in Bundang,
South Korea; Dresden, Germany; and Edinburgh, Scotland. Each facility generally
manufactures different systems and, therefore, is not readily interchangeable.
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 cause significant harm
to our operations and results of operations.
WE MUST MAINTAIN MINIMUM LEVELS OF CUSTOMIZED INVENTORY TO SUPPORT SOME CUSTOMER
DELIVERY REQUIREMENTS.
We must keep a relatively large number and variety of customized systems in
our inventory to meet client delivery requirements. 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. For example, charges for obsolete and
excess inventory were $6.4 million in 2001, $654,000 in 2000 and $1.5 million in
1999, which affected gross margins by 3.3%, 0.2% and 0.8% in these years.
WARRANTY COSTS ON CERTAIN PRODUCTS MAY BE EXCESSIVE.
Recently we have experienced higher than expected levels of warranty costs
on certain products that had been extensively redesigned. These products had
technical problems that we were able to correct, and we took action to repair,
rework, and in some cases, replace the products. Warranty costs in 2001, which
are included in our cost of sales, were higher than historical levels. If
similar problems persist for any of our products in the future, our results of
operations may be materially adversely affected.
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 products and control systems. We must ensure that our systems meet 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
14
to modify or redesign some 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 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, President 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 these leases for 2001
totaled approximately $2.23 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 payments under the condominium lease for 2001 totaled
approximately $47,000. As of December 31, 2001, Mr. Schatz owned approximately
34.7% of our common stock, and Mr. Backman owned approximately 3.8% of our
common stock. It is possible that the interests of these individuals may not
coincide with our interests with respect to these properties.
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 39.8% of our
common stock outstanding as of December 31, 2001. Douglas S. Schatz, our
Chairman, President and Chief Executive Officer, owned approximately 34.7% of
our common stock outstanding as of December 31, 2001. 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 on a particular matter, our executive officers
collectively may be able to elect all of the members of our board of directors
and to control our business affairs for the foreseeable future.
RISK FACTORS RELATING TO THE NOTES
WE HAVE INCREASED OUR LEVERAGE AS A RESULT OF THE SALE OF THE NOTES.
In connection with the sale of the notes, we incurred $125 million of
indebtedness. As a result of this indebtedness, our principal and interest
payment obligations increased and such debt increased from $81.6 million to
$206.6 million at that time. The degree to which we are leveraged could
adversely affect our ability to obtain financing for working capital,
acquisitions or other purposes and could make us more vulnerable to industry
downturns and competitive pressures. Our ability to meet our debt service
obligations will be dependent upon our future performance, which will be subject
to the financial, business and other factors affecting our operations, many of
which are beyond our control.
THE NOTES RANK BELOW OUR SENIOR DEBT AND LIABILITIES OF OUR SUBSIDIARIES, AND WE
MAY BE UNABLE TO REPAY OUR OBLIGATIONS UNDER THE NOTES.
The notes are unsecured and subordinated in right of payment to all of our
senior debt, as described in this prospectus, including senior debt we may incur
in the future. Because the notes are subordinate to senior debt, in the event of
(1) our bankruptcy, liquidation or reorganization,
15
(2) acceleration of the notes due to an event of default under the indenture or
(3) some other events, we will make payments on the notes only after we have
satisfied all of our senior debt obligations. We may not have sufficient assets
remaining to pay amounts on any or all of the notes.
In addition, our right to receive assets of any subsidiaries upon their
liquidation or reorganization, and the rights of the holders of the notes to
share in those assets, would be subject to the satisfaction of claims of the
subsidiaries' creditors. Consequently, the notes are subordinate to all
liabilities, including trade payables, of any of our subsidiaries and any
subsidiaries that we may in the future acquire or establish.
The notes will be our obligations exclusively. The indenture for the notes
does not limit our ability to incur senior debt, or our ability or that of any
of our presently existing or future subsidiaries, to incur other indebtedness
and other liabilities. We may have difficulty paying our obligations under the
notes if we, or any of our subsidiaries, incur additional indebtedness or
liabilities. As of December 31, 2001, we had no senior debt outstanding and the
aggregate amount of indebtedness and other liabilities of our subsidiaries was
approximately $10.6 million (excluding intercompany liabilities). As part of the
acquisition of Aera Japan Ltd., Advanced Energy assumed approximately $34
million of senior debt. We and our subsidiaries may incur additional
indebtedness, including senior debt, which could adversely affect our ability to
pay our obligations under the notes.
WE MAY BE UNABLE TO REPAY OR REPURCHASE THE NOTES.
At maturity, the entire outstanding principal amount of the notes will
become due and payable by us. In addition, if a "change in control," as defined
in the indenture, occurs, each holder of the notes may require that we
repurchase all or a portion of that holder's notes. We cannot assure you that we
will have sufficient funds or will be able to arrange for additional financing
to pay the principal amount or repurchase price due. Under the terms of the
indenture for the notes, we may elect, if we meet particular conditions, to pay
the repurchase price with shares of common stock. Any future borrowing
arrangements or agreements relating to senior debt to which we become a party
may contain restrictions on, or prohibitions against, our repayment or
repurchase of the notes. In the event that the maturity date or "change in
control" occurs at a time when we are prohibited from repaying or repurchasing
the notes, we could attempt to obtain the consent of the lenders under those
arrangements to purchase the notes or we could attempt to refinance the
borrowings that contain the restrictions. If we do not obtain the necessary
consents or refinance these borrowings, we will be unable to repay or repurchase
the notes. In that case, our failure to repay the notes at maturity or to
repurchase any tendered notes would constitute an event of default under the
indenture. Any default, in turn, may cause a default under the terms of our
senior debt. As a result, in these circumstances, the subordination provisions
of the indenture would, absent a waiver, prohibit the repayment or repurchase of
the notes until we pay the senior debt in full.
THERE MAY BE NO PUBLIC MARKET FOR THE NOTES.
Although the initial purchaser of the notes advised us at the time of the
issuance of the notes that it then intended to make a market in the notes, it is
not obligated to do so and may discontinue market making activities at any time
without notice. The notes will not trade publicly until they are sold pursuant
to this registration statement or another exemption from registration is
available, and the liquidity of any public market will depend on the volume and
timing of such sales. Consequently, we cannot ensure that any public market for
the notes will develop or, if one does develop, that it will be liquid or
maintained. If an active public market for the notes fails to develop or be
sustained, the trading price of the notes, as well as your ability to sell your
notes, could be materially and adversely affected. We do not intend to apply for
listing of the notes on any securities exchange or any automated quotation
system.
16
IF LESS THAN ALL THE NOTES ARE TO BE REDEEMED BY ADVANCED ENERGY PURSUANT TO THE
PROVISIONAL REDEMPTION OR NON-PROVISIONAL REDEMPTION PROVISIONS OF THE
INDENTURE, YOUR NOTES MAY OR MAY NOT BE SELECTED TO BE REDEEMED.
The indenture relating to the notes provides that if less than all the
notes are to be redeemed pursuant to the provisional redemption or
non-provisional redemption provisions of the indenture, the particular notes to
be redeemed will be selected by the trustee by lot or by any other method the
trustee may deem fair and appropriate. As a consequence, in some cases it is
possible that some or all of your notes may not be redeemed while notes
belonging to other holders are redeemed. For any notes that are not redeemed,
you would not be eligible to receive the "make whole" payment required in the
case of provisional redemptions or the premium over the principal amount
received in connection with non-provisional redemptions. In addition, you would
continue to hold notes for which, as discussed in the risk factor above, there
may be no public market.
ANTI-TAKEOVER PROVISIONS LIMIT THE ABILITY OF A PERSON OR ENTITY TO ACQUIRE
CONTROL OF US AND MAY ADVERSELY AFFECT THE VALUE OF OUR COMMON STOCK AND
CONSEQUENTLY THE NOTES.
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 particular 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.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
In addition to the other information contained or incorporated by reference
in this prospectus, you should carefully consider the risk factors disclosed in
this prospectus, including those beginning on page 6, in evaluating an
investment in the notes or the common stock issuable upon conversion of the
notes. This prospectus includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, or the Securities Act,
and Section 21E of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. All statements contained or incorporated by reference in this
prospectus, other than statements of historical fact, are "forward-looking
statements" For example, statements relating to our beliefs, expectations, plans
and projections are forward-looking statements, as are statements that specified
actions or circumstances will continue or change. In some cases, forward-looking
statements can be identified by the inclusion of words such as "believe,"
"expect," "plans," "anticipate," "estimate" and similar words. Some of the
forward-looking statements in this prospectus are expectations or projections
relating to:
- customer inventory levels, needs and order levels;
- our future revenues;
- our future gross profit;
17
- research and development expenses;
- selling, marketing, general and administrative expenditures;
- capital resources sufficiency;
- potential acquisitions;
- capital expenditures; and
- restructuring activities and expenses.
Our actual results could differ materially from these projected or assumed
in our forward-looking statements, because forward-looking statements by their
nature are subject to risks and uncertainties. Factors that could contribute to
these differences or prove our forward-looking statements, by hindsight, to be
overly optimistic or unachievable, include the factors described in this
section. Other factors also might contribute to the differences between our
forward-looking statements and our actual results. We assume no obligation to
update any forward-looking statement or the reasons why our actual results might
differ.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the notes or the shares
of common stock offered by this prospectus. See "Selling Security Holders".
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
the periods indicated.
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------
2001 2000 1999 1998 1997 1996
---- ----- ----- ---- ----- -----
Ratio of earnings to fixed charges(1).... N/A 11.86x 18.77x N/A 28.82x 19.82x
---------------
(1) The ratio of earnings to fixed charges is calculated by dividing our
"earnings," as described below, by our "fixed charges," as described below.
For the purposes of this ratio, we calculate "earnings" as our pretax income
from continuing operations before fixed charges; less minority interests in
income of subsidiaries (unless the subsidiary has fixed charges), minority
interests in losses of subsidiaries and income or loss from equity
investees. We calculate "fixed charges" by adding (1) our interest expense,
(2) the amount of amortization of deferred debt issuance cost and (3) the
portion of rental expense under our operating leases that we have deemed to
be representative of the interest factor for these leases. Our earnings, as
defined, were insufficient to cover our fixed charges by $14,547,000 and
$48,820,000 for the year ended December 31, 1998 and the year ended December
31, 2001, respectively.
18
DESCRIPTION OF NOTES
The notes were issued under an indenture between us and State Street Bank
and Trust Company of California, N.A., as trustee. Because this section is a
summary, it does not describe every aspect of the notes and the indenture. The
following summaries of provisions of the indenture do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, the
detailed provision of the notes and the indenture, including the definitions
therein of terms.
GENERAL
The notes are general, unsecured obligations of Advanced Energy Industries,
Inc. The notes are subordinated, which means that they rank behind some of our
indebtedness as described below. The notes are limited to $125,000,000 aggregate
principal amount. We are required to repay the principal amount of the notes in
full on September 1, 2006.
The notes bear interest at 5.00% per annum from the date of original
issuance, August 27, 2001. We will pay interest on the notes on March 1 and
September 1 of each year, commencing on March 1, 2002. Interest payable per
$1,000 principal amount of notes for the period from August 27, 2001 to March 1,
2002 will be $25.5556.
You may convert the notes into shares of our common stock initially at the
conversion rate of 33.5289 shares per each $1,000 principal amount of notes at
any time before the close of business on the maturity date, unless the notes
have been previously redeemed or repurchased. Holders of notes called for
redemption or submitted for repurchase will be entitled to convert the notes up
to and including the business day immediately preceding the date fixed for
redemption or repurchase, as the case may be. The conversion rate may be
adjusted as described below.
We may redeem the notes at our option at any time on or after September 4,
2004, in whole or in part, at the redemption prices set forth below under
"-- Optional Redemption by Advanced Energy," plus accrued and unpaid interest to
the redemption date. If there is a change in control of us, you will have the
right to require us to repurchase your notes as described below under
"-- Repurchase at Option of Holders Upon a Change in Control." We may redeem
some or all of the notes at any time before September 4, 2004 at a redemption
price of $1,000 per $1,000 principal amount of notes, plus accrued and unpaid
interest, if any, to the redemption date, if the closing price of our common
stock has exceeded 150% of the conversion price then in effect for at least 20
trading days within a period of 30 consecutive trading days ending on the
trading day before the date of mailing of the provisional redemption notice. We
will make an additional payment in cash or common stock with respect to the
notes called for provisional redemption in an amount equal to $150.56 per $1,000
principal amount of notes, less the amount of any interest paid on the notes.
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
The notes have been issued:
- only in fully registered form;
- without interest coupons; and
- in denominations of $1,000 and greater multiples.
The notes are evidenced by one or more global notes, which are deposited
with the trustee as custodian for The Depository Trust Company, or DTC, and
registered in the name of Cede & Co., as nominee of DTC. The global note and any
notes issued in exchange for the global note are subject to restrictions on
transfer and bear the legend regarding those restrictions set forth under
"Notice to Investors." Except as set forth below, record ownership of the global
note may
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be transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
The global note may not be registered in the name of any person, nor may it
be exchanged for notes that are registered in the name of any person, other than
DTC or its nominee unless either of the following occurs:
- DTC notifies us that it is unwilling, unable or no longer qualified to
continue acting as the depositary for the global note; or
- an event of default with respect to the notes represented by the global
note has occurred and is continuing.
In those circumstances, DTC will determine in whose names any securities issued
in exchange for the global note will be registered.
DTC or its nominee is considered the sole owner and holder of the global
note for all purposes, and as a result:
- you cannot have notes registered in your name if they are represented by
the global note;
- you cannot receive physical certificated notes in exchange for your
beneficial interest in the global note;
- you will not be considered to be the owner or holder of the global note
or any note it represents for any purpose; and
- all payments on the global note will be made to DTC or its nominee.
The laws of some jurisdictions require that particular kinds of purchasers,
such as insurance companies, can only own securities in definitive certificated
form. These laws may limit your ability to transfer your beneficial interests in
the global note to these types of purchasers.
Only institutions, such as a securities broker or dealer, that have
accounts with DTC or its nominee (called participants) and persons that may hold
beneficial interests through participants can own a beneficial interest in the
global note. The only place where the ownership of beneficial interests in the
global note will appear and the only way the transfer of those interests can be
made will be on the records kept by DTC (for their participants' interests) and
the records kept by those participants (for interests of persons held by
participants on their behalf).
Secondary trading in bonds and notes of corporate issuers is generally
settled in clearinghouse (that is, next-day) funds. In contrast, beneficial
interests in a global note usually trade in DTC's same-day funds settlement
system, and settle in immediately available funds. We make no representations as
to the effect that settlement in immediately available funds will have on
trading activity in those beneficial interests.
We will make cash payments of interest on and principal of and the
redemption or repurchase price of the global note to Cede, the nominee for DTC,
as the registered owner of the global note. We will make these payments by wire
transfer of immediately available funds on each payment date.
We have been informed that DTC's practice is to credit participants'
accounts on the payment date with payments in amounts proportionate to their
respective beneficial interests in the notes represented by the global note as
shown on DTC's records, unless DTC has reason to believe that it will not
receive payment on that payment date. Payments by participants to owners of
beneficial interests in notes represented by the global note held through
participants will be the responsibility of those participants, as is now the
case with securities held for the accounts of customers registered in street
name.
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We will send any redemption notices to Cede. We understand that if less
than all of the notes are being redeemed, DTC's practice is to determine by lot
the amount of the holdings of each participant to be redeemed.
We also understand that neither DTC nor Cede will consent or vote with
respect to the notes. We have been advised that under its usual procedures, DTC
will mail an omnibus proxy to us as soon as possible after the record date. The
omnibus proxy assigns Cede's consenting or voting rights to those participants
to whose accounts the notes are credited on the record date identified in a
listing attached to the omnibus proxy.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, the ability of a person having a beneficial
interest in the principal amount represented by the global note to pledge the
interest to persons or entities that do not participate in the DTC book-entry
system, or otherwise take actions in respect of that interest, may be affected
by the lack of a physical certificate evidencing its interest.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes (including the presentation of notes for exchange) only at the
direction of one or more participants to whose account with DTC interests in the
global note are credited and only in respect of the portion of the principal
amount of the notes represented by the global note as to which the participant
or participants has or have given direction.
DTC has also advised us as follows:
- DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a clearing
corporation within the meaning of the New York Uniform Commercial Code,
as amended, and a clearing agency registered pursuant to the provisions
of Section 17A of the Exchange Act;
- DTC was created to hold securities for its participants and facilitate
the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants;
- Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include some other
organizations;
- Some participants, or their representatives, together with other
entities, own DTC; and
- Indirect access to the DTC System is available to other entities such as
banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
The policies and procedures of DTC, which may change periodically, will
apply to payments, transfers, exchanges and other matters relating to beneficial
interests in the global note. We and the trustee have no responsibility or
liability for any aspect of DTC's or any participants' records relating to
beneficial interests in the global note, including for payments made on the
global note. Further, we and the trustee are not responsible for maintaining,
supervising or reviewing any of those records.
CONVERSION RIGHTS
You have the option to convert any portion of the principal amount of any
note that is an integral multiple of $1,000 into shares of our common stock at
any time on or prior to the close of business on the maturity date, unless the
notes have been previously redeemed or repurchased. The conversion rate will be
equal to 33.5289 shares per $1,000 principal amount of notes. The conversion
rate is equivalent to a conversion price of approximately $29.83 per share. Your
right to convert a note called for redemption or delivered for repurchase will
terminate at the close of business on the business day immediately preceding the
redemption date or
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repurchase date for that note, unless we default in making the payment due upon
redemption or repurchase.
You may convert all or part of any note by delivering the note at the
Corporate Trust Office of the trustee in the Borough of Manhattan, The City of
New York, accompanied by a duly signed and completed conversion notice, a copy
of which may be obtained by the trustee. The conversion date will be the date on
which the note and the duly signed and completed conversion notice are so
delivered.
As promptly as practicable on or after the conversion date, we will issue
and deliver to the trustee a certificate or certificates for the number of full
shares of our common stock issuable upon conversion, together with payment in
lieu of any fraction of a share. The certificate will then be sent by the
trustee to the conversion agent for delivery to the holder. The shares of our
common stock issuable upon conversion of the notes will be fully paid and
nonassessable and will rank equally with the other shares of our common stock.
If you surrender a note eligible for conversion on a date that is not an
interest payment date, you will not be entitled to receive any interest for the
period from the interest payment date preceding the conversion date to the
conversion date, except as described below in this paragraph. In the case of any
eligible note that has been converted after any regular record date but before
the following interest payment date, interest payable on the interest payment
date shall be payable on the interest payment date notwithstanding such
conversion, and interest shall be paid to the holder of the note on the regular
record date. However, any eligible note surrendered for conversion during that
period between the regular record date and the following interest payment date
must be accompanied by payment of an amount equal to the interest on the
interest payment date on the principal amount of the notes being surrendered for
conversion. This payment is not required in the case of notes that are called
for non-provisional redemption or that are to be repurchased and for which your
right to convert will terminate during that period between the regular record
date and the following interest payment date.
No other payment or adjustment for interest, or for any dividends in
respect of our common stock, will be made upon conversion. Holders of our common
stock issued upon conversion will not be entitled to receive any dividends
payable to holders of our common stock as of any record time or date before the
close of business on the conversion date. We will not issue fractional shares
upon conversion. Instead, we will pay cash based on the market price of our
common stock at the close of business on the conversion date.
You will not be required to pay any taxes or duties relating to the issue
or delivery of our common stock on conversion but you will be required to pay
any tax or duty relating to any transfer involved in the issue or delivery of
our common stock in a name other than yours. Certificates representing shares of
our common stock will not be issued or delivered unless all taxes and duties, if
any, payable by you have been paid.
The conversion rate will be subject to adjustment for, among other things:
- dividends and other distributions payable in our common stock on shares
of our capital stock;
- the issuance to all holders of our common stock of rights, options or
warrants entitling them to subscribe for or purchase our common stock at
less than the then current market price of the common stock as of the
record date for stockholders entitled to receive rights, options or
warrants;
- subdivisions, combinations and reclassifications of our common stock;
22
- distributions to all holders of our common stock of evidences of our
indebtedness, shares of capital stock, cash or assets, including
securities, but excluding:
- those dividends, rights, options, warrants and distributions referred to
above;
- dividends and distributions paid exclusively in cash; and
- distributions upon mergers or consolidations discussed below;
- distributions consisting exclusively of cash, excluding any cash portion
of distributions referred to immediately above, or cash distributed upon
a merger or consolidation to which the next succeeding bullet point
applies, to all holders of our common stock in an aggregate amount that,
combined together with:
- other all-cash distributions made within the preceding 365-day period in
respect of which no adjustment has been made; and
- any cash and the fair market value of other consideration payable in
connection with any tender offer by us or any of our subsidiaries for
our common stock concluded within the preceding 365-day period in
respect of which no adjustment has been made,
exceeds 10% of our market capitalization, being the product of the current
market price per share of the common stock on the record date for the
distribution and the number of shares of common stock then outstanding;
and
- the successful completion of a tender offer made by us or any of our
subsidiaries for our common stock which involves an aggregate
consideration that, together with:
- any cash and other consideration payable in a tender offer by us or any
of our subsidiaries for our common stock expiring within the 365-day
period preceding the expiration of that tender offer in respect of which
no adjustment has been made; and
- the aggregate amount of all cash distributions referred to above to all
holders of our common stock within the 365-day period preceding the
expiration of that tender offer in respect of which no adjustments have
been made,
exceeds 10% of our market capitalization on the expiration of the tender offer.
We reserve the right to effect the increases in the conversion rate in
addition to those required by the foregoing provisions as we consider to be
advisable in order that any event treated for United States federal income tax
purposes as a dividend of stock or stock rights will not be taxable to the
recipients. We will not be required to make any adjustment to the conversion
rate until the cumulative adjustments amount to 1.0% or more of the conversion
rate. We will compute all adjustments to the conversion rate and will give
notice by mail to holders of the registered notes of any adjustments.
In the event that we consolidate or merge with or into another entity or
another entity is merged into us, or in case of any sale or transfer of all or
substantially all of our assets, each note then outstanding will become
convertible only into the kind and amount of securities, cash and other property
receivable upon the consolidation, merger, sale or transfer by a holder of the
number of shares of common stock into which the notes were convertible
immediately prior to the consolidation or merger or sale or transfer. The
preceding sentence will not apply to a merger or sale of all or substantially
all of our assets that does not result in any reclassification, conversion,
exchange or cancellation of the common stock.
We may increase the conversion rate, meaning that we increase the number of
shares of common stock into which the notes are convertible, for any period of
at least 20 days if our board of directors determines that the increase would be
in our best interest. The board of directors' determination in this regard will
be conclusive and may be done at any time without limit as to frequency,
including in connection with a call for redemption, subject to applicable
23
securities laws. We will give holders of notes at least 15 days' notice of an
increase in the conversion rate. Any increase, however, will not be taken into
account for purposes of determining whether the closing price of our common
stock exceeds the conversion price by 105% in connection with an event that
otherwise would be a change in control as defined below.
If at any time we make a distribution of property to our stockholders that
would be taxable to the stockholders as a dividend for United States federal
income tax purposes, such as distributions of evidences of indebtedness or
assets by us, but generally not stock dividends on common stock or rights to
subscribe for common stock, and, pursuant to the anti-dilution provisions of the
indenture, the number of shares into which notes are convertible is increased,
that increase may be deemed for United States federal income tax purposes to be
the payment of a taxable dividend to holders of notes. See "United States
Federal Income Tax Consequences -- U.S. Holders."
SUBORDINATION
The notes are subordinated and, as a result, the payment of the principal,
any premium and interest on the notes, including amounts payable on any
redemption or repurchase, are subordinate to the prior payment in full, in cash
or other payment satisfactory to holders of senior debt, of all of our senior
debt to the extent provided in the indenture. The notes are also effectively
subordinated to any debt or other liabilities of our subsidiaries, which means
that our right to receive assets of any of these subsidiaries in a liquidation
is only to the extent that the claims of these subsidiaries' creditors have been
satisfied. This subsidiary debt may also contain covenants that limit the
ability of the applicable subsidiary to pay dividends to us. As of December 31,
2001, we had no senior debt, $81.6 million of other subordinated debt and the
aggregate amount of indebtedness and other liabilities of our subsidiaries was
approximately $10.6 million (excluding intercompany liabilities). As part of the
acquisition of Aera Japan Ltd., Advanced Energy assumed approximately $34
million of senior debt. The subordination provisions in the notes are similar to
but operate independently of the subordination and default provisions in our
other subordinated debt. The holders of these notes share equal priority in
right of payment with the holders of our other subordinated debt, meaning that
neither of the debt is subordinated to the other debt in the case of a default.
The maturity of these notes is before the maturity of our other subordinated
debt.
"Senior debt" is defined in the indenture to mean: the principal of, and
premium, if any, and interest, including all interest accruing subsequent to the
commencement of any bankruptcy or similar proceeding, whether or not a claim for
post-petition interest is allowable as a claim in any proceeding, on, and all
fees and other amounts payable or rent or other obligations, whether absolute or
contingent, secured or unsecured, due or to become due, outstanding on the date
of the indenture or thereafter created, incurred or assumed in connection with
any of the following:
- any credit or loan agreement, note, bond, debenture or other written
obligation;
- our incurring obligations for money borrowed;
- any note or similar instrument issued by us in connection with the
acquisition of any businesses, properties or assets of any kind;
- our leasing real or personal property:
- under leases if all or a portion of the lessee's rental obligations are
required to be capitalized on the balance sheet of the lessee under
generally accepted accounting principles; or
- under leases, participation agreements, guarantees or similar documents
entered into by us in connection with the leasing of real or personal
property by us or any of our subsidiaries which provides that we are
contractually obligated to purchase or cause a third party to purchase
the leased property for a fixed price or otherwise guarantee a
24
residual value of leased property to the lessor or a third party,
whether or not the lease is properly classified as an operating or
capital lease in accordance with generally accepted accounting
principles;
- any interest rate and currency swaps, caps, floors, collars, hedge
agreements, forward contracts or similar agreements or arrangements;
- any letters of credit, bankers' acceptances and similar facilities,
including reimbursement obligations with respect to the foregoing;
- any deferred purchase price of property or services;
- all obligations of the type referred to in the above clauses of another
person and any dividends of another person, the payment of which, in
either case, we have assumed or guaranteed, or for which we are
responsible or liable, directly or indirectly, jointly or severally, as
obligor, guarantor or otherwise, or which are secured by a lien on our
property; and
- renewals, extensions, modifications, replacements, restatements and
refundings of, or any indebtedness or obligation issued in exchange for,
any indebtedness or obligation described in the above clauses of this
definition.
Senior debt does not include:
- the notes;
- any other indebtedness or obligation if its terms or the terms of the
instrument under which or pursuant to which it is issued expressly
provide that it is not superior in right of payment to the notes; or
- any trade accounts payable or accrued liabilities arising in the ordinary
course of business.
"Designated senior debt" means our obligations under any particular senior
debt in which the instrument creating or evidencing the same or the assumption
or guarantee thereof, or related agreements or documents to which we are a
party, expressly provides that the indebtedness will be designated senior debt
for purposes of the indenture. The instrument, agreement or other document
evidencing any designated senior debt may place limitations and conditions on
the right of the senior debt to exercise the rights of designated senior debt.
We may not make any payment on account of principal, premium or interest,
if any, on the notes, or redemption or repurchase of the notes, if:
- we default in our obligations to pay principal, premium, interest or
other amounts on our senior debt, including a default under any
redemption or repurchase obligation, and the default continues beyond any
applicable grace period that we may have to make these payments; or
- any other default occurs and is continuing on any designated senior debt;
and
- the default permits the holders of the designated senior debt to
accelerate its maturity; and
- the trustee has received a payment blockage notice from us, the holder
of debt or another person permitted to give notice under the indenture.
If payments of the notes have been blocked by a payment default on senior
debt, payments on the notes may resume when the payment default has been cured
or waived or ceases to exist.
25
If payments on the notes have been blocked by a nonpayment default on
designated senior debt, payments on the notes may resume on the earlier of:
- the date the nonpayment default is cured or waived or ceases to exist; or
- 179 days after the payment blockage notice is received.
No nonpayment default that existed on the day a payment blockage notice was
delivered to the trustee can be used as the basis for any subsequent payment
blockage notice. In addition, once a holder of designated senior debt has
blocked payment on the notes by giving a payment blockage notice, no new period
of payment blockage can be commenced pursuant to a subsequent payment blockage
notice unless and until both of the following are satisfied:
- 365 days have elapsed since the initial effectiveness of the immediately
prior payment blockage notice; and
- all scheduled payments of principal, any premium and interest with
respect to the notes that have come due have been paid in full in cash.
In addition, all principal, premium, if any, interest and other amounts due
on all senior debt must be paid in full in cash before you are entitled to
receive any payment otherwise due upon:
- any acceleration of the principal on the notes as a result of an event of
default of the notes; or
- any payment or distribution of our assets to creditors upon any
dissolution, winding up, liquidation or reorganization, whether voluntary
or involuntary, marshaling of assets, assignment for the benefit of
creditors, or in bankruptcy, insolvency, receivership or other similar
proceedings.
In the event of insolvency, creditors who are holders of senior debt are
likely to recover more, ratably, than you because of this subordination. The
subordination may result in a reduction or elimination of payments on the notes
to you.
In addition, the notes are "structurally subordinated" to all indebtedness
and other liabilities of our subsidiaries, including trade payables and lease
obligations. This occurs because our right to receive any assets of our
subsidiaries upon their liquidation or reorganization, and your right to
participate in those assets, are effectively subordinated to the claims of that
subsidiary's creditors, including trade creditors, except to the extent that we
are recognized as a creditor of the subsidiary. If we are recognized as a
creditor of that subsidiary, our claims are subordinate to any security interest
in the assets of the subsidiary and any indebtedness of the subsidiary senior to
us.
The indenture does not limit our ability to incur senior debt or our
ability or the ability of our subsidiaries to incur any other indebtedness.
OPTIONAL REDEMPTION BY ADVANCED ENERGY
PROVISIONAL REDEMPTION
We may redeem any portion of the notes at any time prior to September 4,
2004 upon at least 30 and not more than 60 days' notice by mail to the holders
of the notes, at a redemption price equal to 100% of the principal amount of the
notes to be redeemed per note plus accrued and unpaid interest to the redemption
date if the closing price of our common stock has exceeded 150% of the
conversion price for at least 20 trading days in any consecutive 30-day trading
period ending on the trading day prior to the mailing of the notice of
redemption.
If we redeem the notes under these circumstances, we will make an
additional "make whole" payment on the redeemed notes equal to $150.56 per
$1,000 notes, minus the amount of any interest actually paid or accrued and
unpaid on the note prior to the redemption date. We
26
must make these "make whole" payments on all notes called for redemption,
including notes converted after the date we mailed the notice. The "make whole"
payment on notes that have been converted shall not be reduced by accrued and
unpaid interest. We may make these "make whole" payments, at our option, either
in cash or in our common stock or a combination of cash and stock. We will
specify the type of consideration for the "make whole" payment in the redemption
notice.
Payments made in our common stock will be valued at 95% of the average of
the closing sales prices of our common stock for the five consecutive trading
days ending on the day prior to the redemption date. If less than all the notes
are to be redeemed, the particular notes to be redeemed will be selected by the
trustee by lot or by any other method the trustee may deem fair and appropriate.
NON-PROVISIONAL REDEMPTION
On or after September 4, 2004, we may redeem the notes in whole or in part,
at the prices set forth below. If we elect to redeem all or part of the notes,
we will give at least 30, but no more than 60, days' notice to you.
The redemption price, expressed as a percentage of principal amount, is as
follows for the following periods:
REDEMPTION
PERIOD PRICE
------ ----------
Beginning on September 4, 2004 and ending on August 31,
2005...................................................... 102%
Beginning on September 1, 2005 and ending on August 31,
2006...................................................... 101%
and thereafter is equal to 100% of the principal amount. In each case, we will
pay interest to, but excluding the redemption date. If less than all the notes
are to be redeemed, the particular notes to be redeemed will be selected by the
trustee by lot or by any other method the trustee may deem fair and appropriate.
No sinking fund is provided for the notes, which means that the indenture
does not require us to redeem or retire the notes periodically.
PAYMENT AND CONVERSION
We will make all payments of principal and interest on the notes by dollar
check drawn on an account maintained at a bank in The City of New York. If you
are the registered holder of notes with a face value greater than $2,000,000, at
your request we will make payments of principal or interest to you by wire
transfer to an account maintained by you at a bank in The City of New York and
identified by you to the trustee at least 15 days prior to the relevant payment
date. Payment of any interest on the notes will be made to the person in whose
name the note, or any predecessor note, is registered at the close of business
on February 15 or August 15, whether or not a business day, immediately
preceding the relevant interest payment date (a "regular record date").
Payments on any global note registered in the name of DTC or its nominee
will be payable by the trustee to DTC or its nominee in its capacity as the
registered holder under the indenture. Under the terms of the indenture, we and
the trustee will treat the persons in whose names the notes, including any
global note, are registered as the owners for the purpose of receiving
maintaining, supervising or reviewing any of DTC's records or any participant's
or indirect participant's records relating to the beneficial ownership interests
in the global note; or
- any other matter relating to the actions and practices of DTC or any of
its participants or indirect participants.
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We will not be required to make any payment on the notes due on any day
which is not a business day until the next succeeding business day. The payment
made on the next succeeding business day will be treated as though it were paid
on the original due date and no interest will accrue on the payment for the
additional period of time.
Notes may be surrendered for conversion at the Corporate Trust Office of
the trustee in the Borough of Manhattan, New York. Notes surrendered for
conversion must be accompanied by appropriate notices and any payments in
respect of interest or taxes, as applicable, as described above under
"-- Conversion Rights."
We have initially appointed the trustee as paying agent and conversion
agent. We may terminate the appointment of any paying agent or conversion agent
and appoint additional or other paying agents and conversion agents. However,
until the notes have been delivered to the trustee for cancellation, or moneys
sufficient to pay the principal of, premium, if any, and interest on the notes
have been made available for payment and either paid or returned to us as
provided in the indenture, the trustee will maintain an office or agency in the
Borough of Manhattan, New York for surrender of notes for conversion. Notice of
any termination or appointment and of any change in the office through which any
paying agent or conversion agent will act will be given in accordance with
"-- Notices" below.
All moneys deposited with the trustee or any paying agent, or then held by
us, in trust for the payment of principal of, premium, if any, or interest on
any notes which remain unclaimed at the end of two years after the payment has
become due and payable will be repaid to us, and you will then look only to us
for payment.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a "change in control" as defined below occurs, you will have the right,
at your option, to require us to repurchase all of your notes not previously
called for redemption, or any portion of the principal amount thereof, that is
equal to $1,000 or an integral multiple of $1,000. The price we are required to
pay is 100% of the principal amount of the notes to be repurchased, together
with interest accrued but unpaid to, but excluding, the repurchase date.
At our option, instead of paying the repurchase price in cash, we may pay
the repurchase price in our common stock valued at 95% of the average of the
closing prices of our common stock for the five trading days immediately
preceding and including the third trading day prior to the repurchase date. We
may only pay the repurchase price in our common stock if we satisfy conditions
provided in the indenture.
Within 30 days after the occurrence of a change in control, we are
obligated to give to you notice of the change in control and of the repurchase
right arising as a result of the change of control. We must also deliver a copy
of this notice to the trustee. To exercise the repurchase right, you must
deliver on or before the 30th day after the date of our notice irrevocable
written notice to the trustee of your exercise of your repurchase right,
together with the notes with respect to which the right is being exercised. We
are required to repurchase the notes on the date that is 45 days after the date
of our notice.
A change in control will be deemed to have occurred at the time after the
notes are originally issued that any of the following occurs:
- any person acquires beneficial ownership, directly or indirectly, through
a purchase, merger or other acquisition transaction or series of
transactions, of shares of our capital stock entitling the person to
exercise 50% or more of the total voting power of all shares of our
capital stock that is entitled to vote generally in elections of
directors, other than an acquisition by us, any of our subsidiaries or
any of our employee benefit plans; or
28
- we merge or consolidate with or into any other person, any merger of
another person into us or we convey, sell, transfer or lease all or
substantially all of our assets to another person, other than any
transaction:
- that does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of our capital stock; and
- pursuant to which the holders of 50% or more of the total voting power
of all shares of our capital stock entitled to vote generally in
elections of directors immediately prior to the transaction have the
entitlement to exercise, directly or indirectly, 50% or more of the
total voting power of all shares of capital stock entitled to vote
generally in the election of directors of the continuing or surviving
corporation immediately after the transaction; or
- any transaction which is effected solely to change our jurisdiction of
incorporation and results in a reclassification, conversion or exchange
of outstanding shares of our common stock into solely shares of common
stock.
However, a change in control will not be deemed to have occurred if:
- the closing price per share of our common stock for any five trading days
within the period of 10 consecutive trading days ending immediately after
the later of the change in control or the public announcement of the
change in control, in the case of a change in control relating to an
acquisition of capital stock, or the period of 10 consecutive trading
days ending immediately before the change in control, in the case of
change in control relating to a merger, consolidation or asset sale,
equals or exceeds 105% of the conversion price of the notes in effect on
each of those trading days; or
- all of the consideration, excluding cash payments for fractional shares
and cash payments made pursuant to dissenters' appraisal rights, in a
merger or consolidation otherwise constituting a change of control under
the first and second bullet points in the preceding paragraph above
consists of shares of common stock, depository receipts or other
certificates representing common equity interests traded on a national
securities exchange or quoted on the Nasdaq National Market, or will be
so traded or quoted immediately following the merger or consolidation,
and as a result of the merger or consolidation the notes become
convertible solely into common stock, depository receipts or other
certificates representing common equity interests.
For purposes of these provisions:
- the conversion price is equal to $1,000 divided by the conversion rate;
- whether a person is a "beneficial owner" will be determined in accordance
with Rule 13d-3 under the Exchange Act; and
- "person" includes any syndicate or group that would be deemed to be a
person under Section 13 (d) (3) of the Exchange Act.
The rules and regulations promulgated under the Exchange Act require the
dissemination of prescribed information to security holders in the event of an
issuer tender offer and may apply in the event that the repurchase option
becomes available to you. We will comply with this rule to the extent it applies
at that time.
We may, to the extent permitted by applicable law, at any time purchase
notes in the open market, by tender at any price or by private agreement. Any
note that we purchase may, to the extent permitted by applicable law and subject
to restrictions contained in the purchase agreement with the initial purchaser,
be re-issued or resold or may, at our option, be surrendered to the trustee for
cancellation. Any notes surrendered for cancellation may not be re-issued or
resold and will be canceled promptly.
29
The definition of change in control includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of all or substantially all of
our assets. There is no precise, established definition of the phrase
"substantially all" under applicable law. Accordingly, your ability to require
us to repurchase your notes as a result of conveyance, transfer, sale, lease or
other disposition of less than all of our assets may be uncertain.
The foregoing provisions would not necessarily provide you with protection
if we are involved in a highly leveraged or other transaction that may adversely
affect you.
Our ability to repurchase notes upon the occurrence of a change in control
is subject to important limitations. Some of the events constituting a change in
control could result in an event of default under our senior debt. Moreover, a
change in control could cause an event of default under, or be prohibited or
limited by, the terms of our senior debt. As a result, unless we were to obtain
a waiver, a repurchase of the notes in cash could be prohibited under the
subordination provisions of the indenture until the senior debt is paid in full.
Although we have the right to repurchase the notes with our common stock,
subject to particular conditions, we cannot assure you that we would have the
financial resources, or would be able to arrange financing, to pay the
repurchase price in cash for all the notes that might be delivered by holders of
notes seeking to exercise the repurchase right. If we were to fail to repurchase
the notes when required following a change in control, an event of default under
the indenture would occur, whether or not the repurchase is permitted by the
subordination provisions of the indenture. Any default may, in turn, cause a
default under our senior debt. See "-- Subordination."
MERGERS AND SALES OF ASSETS BY ADVANCED ENERGY
We may not consolidate with or merge into any other entity or convey,
transfer, sell or lease our properties and assets substantially as an entirety
to any entity other than to one or more of our subsidiaries, and we may not
permit any entity to consolidate with or merge into us or convey, transfer, sell
or lease the entity's properties and assets substantially as an entirety to us
unless:
- the entity formed by the consolidation or into or with which we are
merged or the entity to which our properties and assets are so conveyed,
transferred, sold or leased, shall be a corporation, limited liability
company, partnership or trust organized and existing under the laws of
the United States, any State within the United States or the District of
Columbia and, if we are not the surviving entity, the surviving entity
assumes the payment of the principal of, premium, if any, and interest on
the notes and the performance of our other covenants under the indenture;
and
- immediately after giving effect to the transaction, no event of default,
and no event that, after notice or lapse of time or both, would become an
event of default, will have occurred and be continuing.
EVENTS OF DEFAULT
The following are events of default under the indenture:
- we fail to pay principal of or premium, if any, on any note when due,
whether or not prohibited by the subordination provisions of the
indenture;
- we fail to pay any interest on any note when due, which failure continues
for 30 days, whether or not prohibited by the subordination provisions of
the indenture;
- we fail to provide notice of a change in control, whether or not the
notice is prohibited by the subordination provisions of the indenture;
- we fail to perform any agreement or other covenant in the notes or the
indenture, which failure continues for 60 days following notice as
provided in the indenture;
30
- any indebtedness under any bonds, debentures, notes or other evidences of
indebtedness for money borrowed, or any guarantee thereof, by us or any
of our significant subsidiaries, in an aggregate principal amount in
excess of $15 million is not paid when due either at its stated maturity
or upon acceleration thereof, and the indebtedness is not discharged, or
the acceleration is not rescinded or annulled, within a period of 30 days
after notice as provided in the indenture; and
- particular events of bankruptcy, insolvency or reorganization involving
us or any of our significant subsidiaries.
Subject to the provisions of the indenture relating to the duties of the
trustee in case an event of default shall occur and be continuing, the trustee
will be under no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any holder unless the holder shall have
offered reasonable indemnity to the trustee. Subject to providing
indemnification of the trustee, the holders of a majority in aggregate principal
amount of the outstanding notes will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the trustee
or exercising any trust or power conferred on the trustee.
If an event of default other than an event of default arising from events
of insolvency, bankruptcy or reorganization occurs and is continuing, either the
trustee or the holders of at least 25% in principal amount of the outstanding
notes may, subject to the subordination provisions of the indenture, accelerate
the maturity of all notes. However, after acceleration, but before a judgment or
decree based on acceleration, the holders of a majority in aggregate principal
amount of outstanding notes may, under specific circumstances, rescind and annul
the acceleration if all events of default, other than the non-payment of
principal of the notes that have become due solely by declaration of
acceleration, have been cured or waived as provided in the indenture. If an
event of default arising from events of insolvency, bankruptcy or reorganization
occurs, then the principal of, and accrued interest on, all the notes will
automatically become immediately due and payable without any declaration or
other act on the part of the holders of the notes or the trustee. For
information as to waiver of defaults, see "Meetings, Modification and Waiver"
below.
You will not have any right to institute any proceeding with respect to the
indenture, or for any remedy under the indenture, unless:
- you give the trustee written notice of a continuing event of default;
- the holders of at least 25% in aggregate principal amount of the
outstanding notes have made written request and offered reasonable
indemnity to the trustee to institute proceedings;
- the trustee has not received from the holders of a majority in aggregate
principal amount of the outstanding notes a direction inconsistent with
the written request; and
- the trustee shall have failed to institute the proceeding within 60 days
of the written request.
However, these limitations do not apply to a suit instituted by you for the
enforcement of payment of the principal of, premium, if any, or interest on your
note on or after the respective due dates expressed in your note or your right
to convert your note in accordance with the indenture.
We will be required to furnish to the trustee annually a statement as to
our performance of some of our obligations under the indenture and as to any
default in performance.
31
MEETINGS, MODIFICATION AND WAIVER
The indenture contains provisions for convening meetings of the holders of
notes to consider matters affecting their interests.
Particular limited modifications of the indenture may be made without the
necessity of obtaining the consent of the holders of the notes.
Other modifications and amendments of the indenture may be made, compliance
by us with some restrictive provisions of the indenture may be waived and any
past defaults by us under the indenture (except a default in the payment of
principal, premium, if any, or interest) may be waived, either:
- with the written consent of the holders of not less than a majority in
aggregate principal amount of the notes at the time outstanding; or
- by the adoption of a resolution, at a meeting of holders of the notes at
which a quorum is present, by the holders of at least 66 2/3% in
aggregate principal amount of the notes represented at the meeting.
The quorum at any meeting called to adopt a resolution will be persons
holding or representing a majority in aggregate principal amount of the notes at
the time outstanding and, at any reconvened meeting adjourned for lack of a
quorum, 25% of the aggregate principal amount.
However, a modification or amendment requires the consent of the holder of
each outstanding note affected if it would:
- change the stated maturity of the principal or interest of a note;
- reduce the principal amount of, or any premium or interest on, any note;
- reduce the amount payable upon a redemption or mandatory repurchase;
- modify the provisions with respect to the repurchase rights of holders of
notes in a manner adverse to the holders;
- modify our right to redeem the notes in a manner adverse to the holders;
- change the place or currency of payment on a note;
- impair the right to institute suit for the enforcement of any payment on
any note;
- modify our obligation to maintain an office or agency in New York City;
- modify the subordination provisions in a manner that is adverse to the
holders of the notes;
- adversely affect the right to convert the notes other than a modification
or amendment required by the terms of the indenture;
- modify our obligation to deliver information required under Rule 144A to
permit resales of the notes and common stock issued upon conversion of
the notes if we cease to be subject to the reporting requirements under
the Exchange Act;
- reduce the above-stated percentage of the principal amount of the holders
whose consent is needed to modify or amend the indenture;
- reduce the percentage of the principal amount of the holders whose
consent is needed to waive compliance with some provisions of the
indenture or to waive some defaults; or
- reduce the percentage required for the adoption of a resolution or the
quorum required at any meeting of holders of notes at which a resolution
is adopted.
32
NOTICES
Notice to holders of the registered notes will be given by mail to the
addresses as they appear in the security register. Notices will be deemed to
have been given on the date of mailing.
Notice of a redemption of notes will be given to the holders of notes to be
redeemed not less than 30 nor more than 60 days prior to the redemption date and
will specify the redemption date. A notice of redemption of the notes will be
irrevocable. In addition, concurrently with the giving of notice to holders, we
will issue a press release containing the same information included in the
notices of redemption.
REPLACEMENT OF NOTES
We will replace any note that becomes mutilated, destroyed, stolen or lost
at the expense of the holder upon delivery to the trustee of the mutilated notes
or evidence of the loss, theft or destruction satisfactory to us and the
trustee. In the case of a lost, stolen or destroyed note, indemnity satisfactory
to the trustee and us may be required at the expense of the holder of the note
before a replacement note will be issued.
PAYMENT OF STAMP AND OTHER TAXES
We will pay all stamp and other duties, if any, that may be imposed by the
United States or any political subdivision thereof or taxing authority thereof
or therein with respect to the issuance of the notes or of shares of stock upon
conversion of the notes. We will not be required to make any payment with
respect to any other tax, assessment or governmental charge imposed by any
government or any political subdivision thereof or taxing authority thereof or
therein.
GOVERNING LAW
The indenture and the notes are governed by and construed in accordance
with the laws of the State of New York, United States of America.
THE TRUSTEE
If an event of default occurs and is continuing, the trustee will be
required to use the degree of care of a prudent person in the conduct of his own
affairs in the exercise of its powers. Subject to these provisions, the trustee
will be under no obligation to exercise any of its rights or powers under the
indenture at the request of any of the holders of notes, unless they have
furnished to the trustee reasonable security or indemnity.
33
DESCRIPTION OF COMMON STOCK
Our authorized capital stock consists of 55,000,000 shares of common stock,
$0.001 par value, and 1,000,000 shares of preferred stock, $0.001 par value. As
of December 31, 2001, 31,847,735 shares of common stock were outstanding, held
by 1,055 holders of record, and no shares of preferred stock were outstanding.
In addition, as of December 31, 2001, 2,624,133 shares were available for grant
under our 1995 Stock Option Plan, 100,000 shares were available for grant under
our 1995 Non-Employee Director Stock Option Plan, 82,320 shares were available
for purchase under our Employee Stock Purchase Plan and 539,150 shares were
available for grant under our 2001 Stock Option Plan. As of December 31, 2001,
options to purchase an aggregate of 2,197,669 shares of common stock were
outstanding under these plans.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding shares of preferred stock
that may be issued, the holders of common stock are entitled to receive ratably
any dividends that may be declared from time to time by the board of directors
out of funds legally available for the payment of dividends. See "Dividend
Policy." The holders of our common stock are entitled to share ratably in all
assets remaining after payment of liabilities and liquidation preferences of any
outstanding shares of preferred stock in the event of our liquidation,
dissolution or winding up. Holders of common stock have no preemptive rights or
rights to convert their common stock into any other securities. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and non-assessable.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
We are subject to Section 203 or the Delaware General Corporation Law
("Section 203"), which, subject to specific exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the time that the stockholder
became an interested stockholder, unless: (i) prior to that time, the board of
directors of the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested holder; (ii)
upon consummation of the transaction that resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (a) by persons who are directors and also
officers and (b) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) at or subsequent
to that time, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 2/3 of the outstanding voting stock
which is not owned by the interested stockholder.
Section 203 generally defines a business combination to include: (i) any
merger or consolidation involving the corporation and the interested
stockholder, (ii) any sale, transfer, pledge or other disposition of 10% or more
of the assets of the corporation involving the interested stockholder, (iii)
subject to specific exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the interested
stockholder, (iv) any transaction involving the corporation that has the effect
of increasing the proportionate share of the stock of any class or series of the
corporation beneficially owned by the interested stockholder or (v) the receipt
by the interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation.
Section 203 generally defines interested stockholder as an entity or person
34
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
TRANSFER AGENT
The transfer agent and registrar for our common stock is American Stock
Transfer.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
This section describes the material United States federal income tax
consequences of purchasing, owning and disposing of the notes we are offering
and the common stock into which the notes may be converted and is the opinion of
Sullivan & Cromwell, special tax counsel to Advanced Energy. It applies to you
only if you are a United States holder that holds your notes or common stock as
capital assets for tax purposes. You are a United States holder if you are a
beneficial owner of a note and you are:
- a citizen or resident of the United States,
- a domestic corporation,
- an estate whose income is subject to United States federal income tax
regardless of its source, or
- a trust if a United States court can exercise primary supervision over
the trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.
This section does not apply to you if you are a member of a class of
holders subject to special rules, such as:
- a dealer in securities or currencies,
- a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings,
- a bank,
- a life insurance company,
- a tax-exempt organization,
- a person that owns notes that are a hedge or that are hedged against
interest rate risks,
- a person that owns notes as part of a straddle or conversion transaction
for tax purposes, or
- a person whose functional currency for tax purposes is not the U.S.
dollar.
This section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations under the Internal
Revenue Code, published rulings and court decisions, all as currently in effect.
These laws are subject to change, possibly on a retroactive basis.
PLEASE CONSULT YOUR OWN TAX ADVISOR CONCERNING THE CONSEQUENCES OF OWNING
THESE NOTES IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE CODE AND THE LAWS OF ANY
OTHER TAXING JURISDICTION.
PAYMENT OF INTEREST
You will be taxed on any interest on your note as ordinary income at the
time you receive the interest or when it accrues, depending on your method of
accounting for tax purposes.
35
NOTES PURCHASED AT A PREMIUM
If you purchase your note for an amount in excess of its principal amount,
you may elect to treat the excess as amortizable bond premium. If you make this
election, you will reduce the amount required to be included in your income each
year with respect to interest on your note by the amount of amortizable bond
premium allocable to that year, based on your note's yield to maturity. If you
make an election to amortize bond premium, it will apply to all debt
instruments, other than debt instruments the interest on which is excludible
from gross income, that you hold at the beginning of the first taxable year to
which the election applies or that you thereafter acquire, and you may not
revoke it without the consent of the Internal Revenue Service.
MARKET DISCOUNT
You will be treated as if you purchased your note at a market discount, and
your note will be a market discount note if:
- you purchase your note for less than its stated redemption price at
maturity and
- the difference between the note's stated redemption price at maturity and
the price you paid for your note is equal to or greater than 1/4 of 1
percent of your note's stated redemption price at maturity multiplied by
the number of complete years to the note's maturity.
If your note's stated redemption price at maturity exceeds the price you
paid for the note by less than 1/4 of 1 percent multiplied by the number of
complete years to the note's maturity, the excess constitutes de minimis market
discount, and the rules discussed below are not applicable to you.
You must treat any gain you recognize on the maturity or disposition of
your market discount note as ordinary income to the extent of the accrued market
discount on your note. Alternatively, you may elect to include market discount
in income currently over the life of your note. If you make this election, it
will apply to all debt instruments with market discount that you acquire on or
after the first day of the first taxable year to which the election applies. You
may not revoke this election without the consent of the Internal Revenue
Service. If you own a market discount note and do not make this election, you
will generally be required to defer deductions for interest on borrowings
allocable to your note in an amount not exceeding the accrued market discount on
your note until the maturity or disposition of your note.
You will accrue market discount on your market discount note on a
straight-line basis unless you elect to accrue market discount using a
constant-yield method. If you make this election, it will apply only to the note
with respect to which it is made and you may not revoke it.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
You will generally recognize gain or loss on the sale, redemption or
exchange of your note (other than a conversion of your note into common stock)
equal to the difference between the amount you realize on the sale or redemption
(including the fair market value of any stock "make whole" payment received in
connection with the redemption) and your tax basis in your note. Your tax basis
in your note will generally be the amount paid for your note, increased by any
market discount and de minimis market discount previously included in income
with respect to your note, and decreased by any amortizable bond premium applied
to reduce interest on your note. This gain or loss will be capital gain or loss
when you sell or exchange or we redeem your note, except to the extent
attributable to accrued but unpaid interest or market discount. Gain
attributable to accrued but unpaid interest or market discount will be taxable
as ordinary income. Capital gain of a noncorporate United States holder is
generally taxed at a maximum rate of 20% where the property is held more than
one year. Your ability to deduct capital losses may be limited.
36
CONVERSION OF THE NOTES
You generally will not recognize any income, gain or loss upon conversion
of a note into shares of our common stock or on receipt of a stock "make whole"
payment in connection with a conversion except (i) to the extent such shares are
considered attributable to accrued interest or market discount not previously
included in income and, thus, are taxable as ordinary income or (ii) with
respect to cash received in lieu of a fractional share. Your tax basis in the
shares received on conversion of a note will be the same as your adjusted tax
basis in the note at the time of the conversion, reduced by any basis allocable
to a fractional share interest for which you received cash. The holding period
for the shares received on conversion will generally include the holding period
of the note converted. However, your tax basis in shares considered attributable
to accrued interest or market discount generally will equal the amount of such
accrued interest or market discount included in income, and the holding period
for such shares will begin on the day after the conversion. Moreover, the tax
consequences of receiving a cash "make whole" payment in connection with a
provisional redemption are unclear.
Neither the applicable Treasury Regulations nor any case law specifically
address the U.S. Federal income tax treatment of a cash "make whole" payment.
However, the receipt of this payment should be treated as capital gain because
the payment is made on redemption and should not represent a payment made to
compensate you for interest accruing up to the sale date. Nevertheless, the
Internal Revenue Service could contend that the payment should be treated as
additional interest income, the other possible characterization, which will
cause it to be taxed to most non-corporate holders at a higher rate if you hold
your note for more than one year. Your basis in any shares received in a
conversion will not be affected by receipt of a cash "make whole" payment. Your
basis in any shares received in connection with any stock "make whole" payment
will equal their fair market value on the redemption date.
Cash received in lieu of a fractional share upon conversion will be treated
as a payment in exchange for the fractional share. Accordingly, the receipt of
cash in lieu of fractional shares generally will result in capital gain or loss
(measured by the difference between the cash received for the fractional share
and your adjusted tax basis in the fractional share).
DIVIDENDS AND CONSTRUCTIVE DIVIDENDS
If you convert your notes into our common stock, you must include in your
gross income the gross amount of any dividend paid by us out of our current or
accumulated earnings and profits, as determined for United States federal income
tax purposes. Distributions in excess of our current and accumulated earnings
and profits will be treated as a return of capital to the extent of your basis
in the common stock, and thereafter as capital gain. If you are a corporate U.S.
shareholder, you would be able to claim a deduction equal to a portion of any
dividends received, subject to generally applicable limitations on that
deduction.
You may, in certain circumstances, be deemed to have received a
constructive distribution if the conversion price of your notes is adjusted.
Adjustments to the conversion price pursuant to a bona fide reasonable
adjustment formula which has the effect of preventing the dilution of the
interest of the holders of the notes, however, will generally not be considered
to result in a constructive distribution of stock. Certain of the possible
adjustments provided in your notes, including, without limitation, adjustments
made to reflect taxable dividends to our stockholders, will not qualify as being
pursuant to a bona fide reasonable adjustment formula. If these adjustments are
made, you will be deemed to have received constructive distributions taxable as
dividends to the extent of our current and accumulated earnings and profits,
even though you have not received any cash or property as a result of these
adjustments. In certain circumstances, the failure of the notes to provide for
such an adjustment may also result in taxable dividend income to you.
37
If you convert your notes into our common stock, any distributions of
additional shares to you with respect to common stock that are made as part of a
pro rata distribution to all of our shareholders generally will not be subject
to United States federal income tax.
SALE OF COMMON STOCK
If you sell or otherwise dispose of your common stock, you will recognize
capital gain or loss for United States federal income tax purposes equal to the
difference between the proceeds you receive and your tax basis in your common
stock. Capital gain of a noncorporate United States holder is generally taxed at
a maximum rate of 20% where the property is held more than one year, and 18%
where the property is held for more than five years. Your ability to deduct
capital losses may be limited.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, if you are a noncorporate United States holder, we and other
payors are required to report to the Internal Revenue Service all payments of
principal, any interest or constructive dividends on your note, and any
dividends on your common stock. In addition, we and other payors are required to
report to the Internal Revenue Service any payment of proceeds of the sale of
your note or common stock before maturity within the United States.
Additionally, backup withholding will apply to any interest or dividend payments
if you fail to provide an accurate taxpayer identification number, or you are
notified by the Internal Revenue Service that you have failed to report all
interest and dividends required to be shown on your federal income tax returns.
38
SELLING SECURITYHOLDERS
The notes were originally issued by us to the initial purchaser in a
transaction exempt from the registration requirements of the Securities Act of
1933, and were immediately resold by the initial purchaser to persons reasonably
believed by them to be "qualified institutional buyers" as defined by Rule 144A
under the Securities Act. The selling securityholders, including their
transferees, pledgees or donees or their successors, may from time to time offer
and sell pursuant to this prospectus or a supplement hereto any or all of the
notes and common stock into which the notes are convertible.
The table below sets forth the name of each selling securityholder, the
aggregate principal amount of notes beneficially owned by each selling
securityholder that may be offered under this prospectus and the number of
shares of common stock into which the notes are convertible. We have prepared
the table based on information given to us by or on behalf of the selling
securityholders on or prior to May 1, 2002. Unless set forth below, to our
knowledge, none of the selling securityholders has, or within the past three
years has had, any material relationship with us or any of our predecessors or
affiliates or beneficially owns in excess of 1% of our outstanding common stock
(the percentage of beneficial ownership is based on Rule 13d-3(d)(i) of the
Exchange Act, using 31,847,735 shares of stock outstanding as of December 31,
2001 and, for each holder, treating as outstanding the number of shares of
common stock issuable upon conversion of all that holder's notes, but assuming
no conversion of any other holder's notes and not including shares of common
stock that may be issued by us upon purchase of notes by us at the option of the
holder. The selling securityholders may offer all, some or none of the notes or
common stock into which the notes are convertible. Because the selling
securityholders may offer all or some portion of the notes or the common stock,
no estimate can be given as to the amount of the notes or the common stock that
will be held by the selling securityholders upon termination of any sales. In
addition, the selling securityholders identified below may have sold,
transferred or otherwise disposed of all or a portion of their notes since the
date on which they provided the information regarding their notes in
transactions exempt from the registration requirements of the Securities Act.
Information concerning the selling securityholders may change from time to
time and any changed information will be set forth in supplements to this
prospectus if and when necessary.
AGGREGATE PRINCIPAL
AMOUNT OF NOTES PERCENTAGE OF NUMBER OF SHARES OF
BENEFICIALLY OWNED NOTES COMMON STOCK
NAME AND OFFERED OUTSTANDING OFFERED(1)
---- ------------------- ------------- -------------------
Bank Austria Cayman Islands, Ltd.......... 4,025,000 3.2 134,953
Bankers Trust Company Trustee for Daimler
Chrysler Corp. Emp. #1 Pension Plan
Dated April 1, 1989(3).................. 3,780,000 3.0 126,739
BTPO Growth vs Value...................... 2,000,000 1.6 67,057
Clinton Multistrategy Master Fund,
Ltd. ................................... 1,600,000 1.3 53,646
Clinton Riverside Convertible Portfolio
Limited................................. 2,400,000 1.9 80,469
Deutsche Banc Alex Brown Inc.(2).......... 13,237,000 10.6 443,822
Fidelity Financial Trust: Fidelity
Convertible Securities Fund............. 3,000,000 2.4 100,586
First Union Securities Inc.(2) ........... 7,000,000 5.6 234,702
Franklin Investors Series Trust --
Convertible Securities Fund............. 2,000,000 1.6 67,057
General Motors Employees Global Group
Pension Trust(4)........................ 1,600,000 1.3 53,646
Goldman, Sachs & Co.(2) .................. 4,708,000 3.8 157,854
Highbridge International LLC(3)........... 6,500,000 5.2 217,937
39
AGGREGATE PRINCIPAL
AMOUNT OF NOTES PERCENTAGE OF NUMBER OF SHARES OF
BENEFICIALLY OWNED NOTES COMMON STOCK
NAME AND OFFERED OUTSTANDING OFFERED(1)
---- ------------------- ------------- -------------------
JP Morgan Securities Inc.(2) ............. 1,000,000 * 33,528
KBC Financial Products (Cayman
Islands)(3)............................. 2,000,000 1.6 67,057
Man Convertible Bond Master Fund Ltd. .... 8,283,000 6.6 277,719
Morgan Stanley & Co. ..................... 5,000,000 4 167,644
Onex Industrial Partners Limited.......... 1,645,000 1.3 55,155
RAM Trading Ltd........................... 6,400,000 5.1 214,584
RCG Latitude Master Fund.................. 1,795,000 1.4 60,184
RCG Multi Strategy, LP.................... 2,030,000 1.6 68,063
Sage Capital.............................. 4,000,000 3.2 134,115
San Diego County Employees Retirement
Association............................. 2,000,000 1.6 67,057
SG Cowen Securities Corp.(2).............. 4,000,000 3.2 134,115
Silvercreek II Limited.................... 980,000 * 32,858
State Street Bank Custodian for GE Pension
Trust(3)................................ 1,725,000 1.4 57,837
St. Thomas Trading Ltd. .................. 14,224,000 11.4 476,915
Wachovia Securities International
Ltd.(2)................................. 12,500,000 10 419,111
Zazove Hedged Convertible Fund L.P........ 2,000,000 1.6 67,057
Zazove Income Fund L.P.................... 1,800,000 1.4 60,352
Zurich Institutional Benchmarks Master
Fund Ltd................................ 1,000,000 * 33,528
Other selling securityholders............. 768,000 * 25,750
---------------
* Less than one percent.
(1) Assumes conversion of all of the holder's notes at a conversion rate of
33.5289 shares of common stock per $1,000 principal amount of the notes.
This conversion rate is subject to adjustment, however, as described under
"Description of Notes -- Conversion Rights". As a result, the number of
shares of common stock issuable upon conversion of the notes may increase or
decrease in the future. Does not include shares of common stock that may be
issued by us upon purchase of notes by us at the option of the holder. In
addition, the number of shares of common stock listed for each holder does
not include fractional shares. Holders will receive a cash adjustment for
any fractional share amount resulting from conversion of the notes, as
described under "Description of Notes -- Conversion Rights."
(2) Selling securityholder is a broker-dealer and an underwriter in this
offering.
(3) Selling securityholder is an affiliate of a broker-dealer, purchased its
securities in the ordinary course of business and, at the time of purchase,
had no agreements or understandings, directly or indirectly, with any person
regarding the distribution of the securities.
(4)Capital Group International, Inc. may also be deemed a beneficial owner of
these securities by virtue of Rule 13d-3 under the Securities Exchange Act of
1934.
40
PLAN OF DISTRIBUTION
The notes and the common stock into which the notes are convertible are
being registered to permit public secondary trading of these securities by the
holders thereof from time to time after the date of this prospectus. We will not
receive any of the proceeds from the offering of the notes or the common stock
by selling securityholders.
The selling securityholders, including their pledgees or donees, may sell
the notes and the common stock into which the notes are convertible directly to
purchasers or through underwriters, broker-dealers or agents. If the notes or
the common stock into which the notes are convertible are sold through
underwriters or broker-dealers, the selling securityholder will be responsible
for underwriting discounts or commissions or agent's commissions. These
discounts, concessions or commissions as to any particular underwriter,
broker-dealer or agent may be in excess of those customary in the types of
transactions involved.
The notes and the common stock into which the notes are convertible may be
sold in one or more transactions at fixed prices, at prevailing market prices at
the time of sale, at varying prices determined at the time of sale, or at
negotiated prices. Sales may be effected in transactions, which may involve
block transactions:
- on any national securities exchange or quotation service on which the
notes or the common stock may be listed or quoted at the time of sale;
- in the over-the-counter market;
- in transactions otherwise than on exchanges or services or in the
over-the-counter market; or
- through the writing of options.
In connection with sales of the notes and the common stock into which the
notes are convertible or otherwise, the selling securityholders may enter into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the notes and the common stock into which the notes are convertible in
the course of hedging the positions they assume. The selling securityholders may
also sell short the notes and the common stock into which the notes are
convertible and deliver the notes or the common stock into which the notes are
convertible to close out short positions, or loan or pledge the notes or the
common stock into which the notes are convertible to broker-dealers that in turn
may sell the securities.
The aggregate proceeds to the selling securityholders from the sale of the
notes or common stock into which the notes are convertible offered by them
hereby will be the purchase price of the notes or common stock less discounts
and commissions, if any. Each of the selling securityholders reserves the right
to accept and, together with their agents from time to time, to reject, in whole
or in part, any proposed purchase of notes or common stock to be made directly
or through agents. We will not receive any of the proceeds from this offering.
In order to comply with the securities laws of some states, if applicable,
the notes and common stock into which the notes are convertible may be sold in
these jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the notes and common stock may not be sold unless they
have been registered or qualified for sale or an exemption from registration or
qualification requirements is available and is complied with.
The selling securityholders and any underwriters, broker-dealers or agents
that participate in the sale of the notes and common stock may be "underwriters"
within the meaning of Section 2(11) of the Securities Act. Any discounts,
commissions, concessions or profit they earn on any resale of the shares may be
underwriting discounts and commissions under the Securities Act. Selling
securityholders who are "underwriters" within the meaning of Section 2(11) of
the Securities Act will be subject to the prospectus delivery requirements of
the Securities Act. The
41
selling securityholders have acknowledged that they understand their obligations
to comply with the provisions of the Exchange Act and the rules thereunder
relating to stock manipulation, particularly Regulation M.
In addition, any securities covered by this prospectus that qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus.
To the extent required, the specific notes or common stock to be sold, the
names of the selling securityholders, the respective purchase prices and public
offering prices, the names of any agent, dealer or underwriter and any
applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement of which this prospectus
is a part.
We entered into a registration rights agreement for the benefit of the
holders of the notes to register their notes and common stock under applicable
federal and state securities laws under specific circumstances and at specific
times. The registration rights agreement provides for cross-indemnification of
the selling securityholders and us and their and our respective directors,
officers and controlling persons against specific liabilities in connection with
the offer and sale of the notes and the common stock, including liabilities
under the Securities Act. We have agreed, among other things, to bear all
expenses (other than underwriting discounts and selling commissions) in
connection with the registration and sale of the notes and the common stock
covered by this prospectus.
VALIDITY OF THE SECURITIES
The validity of the notes and of the common stock offered by this
prospectus will be passed upon for Advanced Energy by Sullivan & Cromwell, Palo
Alto, California.
EXPERTS
The consolidated financial statements and schedule of Advanced Energy
Industries, Inc. as of December 31, 2001 and 2000 and for each of the three
years in the period ended December 31, 2001 incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
The financial statements of Aera Japan Limited as of and for the year ended
June 30, 2001 incorporated in this prospectus by reference from Advanced Energy
Industries, Inc.'s Current Report on Form 8-K/A dated April 2, 2002 have been
audited by Deloitte Touche Tohmatsu, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission, or SEC. You may read
and copy any document we file at the SEC's public reference rooms in Washington,
D.C. and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. The SEC's website is located at
www.sec.gov and contains reports, proxy and information statements and other
information regarding issuers who file electronically. Our website is located at
www.aei.com.
42
In this document, we "incorporate by reference" the information we file
with the SEC, which means that we can disclose important information to you by
referring to that information. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Section
13(a), 13(c), 14 or 15(d) of the Exchange Act until this offering is completed:
1. Our annual report on Form 10-K for the year ended December 31,
2001;
2. Our current reports on Form 8-K filed on February 1, 2002 and May
2, 2002 and on Form 8-K/A filed on April 2, 2002 and May 3, 2002; and
3. Our Form 8-A for registration of our common stock filed on October
12, 1995, as amended.
You may obtain copies of these filings, at no cost, by writing or
telephoning us at the following address:
Advanced Energy Industries, Inc.
1625 Sharp Point Drive
Fort Collins, Colorado 80525
Attention: Investor Relations
Telephone: (970) 221-4670
You should rely only on the information provided in this document or
incorporated in this document by reference. We have not authorized anyone to
provide you with different information. You should not assume that the
information in this document, including any information incorporated herein by
reference, is accurate as of any date other than that on the front of the
document.
43
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the securities being registered. All the amounts shown are estimates except
for the registration fee and the filing fee.
Registration fee............................................ $ 31,250
Legal fees and expenses..................................... $210,000
Accounting fees and expenses................................ $ 50,000
Trustee's fees.............................................. $ 16,000
Printer's fees.............................................. $ 50,000
Other Expenses.............................................. $190,000
--------
TOTAL............................................. $547,250
========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
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, 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
II-1
directors and officers against the costs of defense, settlement or payment of a
judgment under certain circumstances.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF THE DOCUMENT
------- ---------------------------
(*)2.1 -- Stock Purchase Agreement, dated November 16, 2001, by and
among Advanced Energy Industries, Inc., Advanced Energy
Japan K.K., Aera Japan Limited and Certain Stockholders of
Aera Japan Limited. The registrant agrees to furnish
supplementally a copy of Exhibits A through F-2 and Schedule
I through 11.4 to the SEC upon request.
(1)3.1 -- Restated Certificate of Incorporation of Advanced Energy
Industries, Inc.
(2)3.2 -- Bylaws of Advanced Energy Industries, Inc.
(3)4.1 -- Registration Rights Agreement, dated as of August 22, 2001,
between Advanced Energy Industries, Inc. and Goldman, Sachs
& Co.
(4)4.2 -- Indenture, dated as of August 22, 2001, between Advanced
Energy Industries, Inc. and State Street Bank and Trust
Company of California, N.A., as Trustee
(*)5.1 -- Opinion of Sullivan & Cromwell
(*)8.1 -- Tax Opinion of Sullivan & Cromwell
(*)12.1 -- Computation of Ratio of Earnings to Fixed Charges
23.1 -- Consent of Arthur Andersen LLP, independent public
accountants
23.2 -- Consent of Deloitte Touche Tohmatsu
(*)23.3 -- Consent of Sullivan & Cromwell (included in Exhibit 5.1)
(*)23.4 -- Consent of Sullivan & Cromwell (included in Exhibit 8.1)
(*)24.1 -- Power of Attorney
(*)25.1 -- Form T-1 Statement of Eligibility and Qualification of
Trustee
---------------
(1) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2001 (File No. 000-26966), filed August 13, 2001.
(2) Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 33-97188), filed September 20, 1995, as amended.
(3) Incorporated by reference to Exhibit 4.2 of the Registrant's current report
on Form 8-K filed September 10, 2001.
(4) Incorporated by reference to Exhibit 4.1 of the Registrant's current report
on Form 8-K filed September 10, 2001.
(*) Previously filed.
ITEM 17. 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
II-2
increase or decrease in the 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 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(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) do not apply
if 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
15(d) of the Securities Exchange Act of 1934, or the Exchange Act, that
are incorporated by reference in this 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 that remain unsold at the
termination of the offering.
(4) That, for 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 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated
by reference in this registration statement 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.
(5) Insofar as indemnification for liabilities under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to provisions described in Item 15 above, 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 Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in a 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 Securities 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 Fort Collins, Colorado on May 3, 2002.
ADVANCED ENERGY INDUSTRIES, INC.
BY: /s/ MICHAEL EL-HILLOW
----------------------------------
MICHAEL EL-HILLOW
(Senior Vice President and
Chief Financial Officer)
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 dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
* Chief Executive Officer President & May 3, 2002
------------------------------------------------ Chairman of the Board (Principal
Douglas S. Schatz Executive Officer)
/s/ MICHAEL EL-HILLOW Senior Vice President and Chief May 3, 2002
------------------------------------------------ Financial Officer (Principal
Michael El-Hillow Financial Officer & Principal
Accounting Officer)
* Director May 3, 2002
------------------------------------------------
G. Brent Backman
/s/ RICHARD P. BECK Director May 3, 2002
------------------------------------------------
Richard P. Beck
* Director May 3, 2002
------------------------------------------------
Trung Doan
* Director May 3, 2002
------------------------------------------------
Arthur A. Noeth
* Director May 3, 2002
------------------------------------------------
Elwood Spedden
* Director May 3, 2002
------------------------------------------------
Gerald Starek
* Director May 3, 2002
------------------------------------------------
Arthur W. Zafiropoulo
*By: /s/ RICHARD P. BECK
------------------------------------------------
As Attorney-in-Fact
II-4
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF THE DOCUMENT
------- ---------------------------
(*)2.1 -- Stock Purchase Agreement, dated November 16, 2001, by and
among Advanced Energy Industries, Inc., Advanced Energy
Japan K.K., Aera Japan Limited and Certain Stockholders of
Aera Japan Limited. The registrant agrees to furnish
supplementally a copy of Exhibits A through F-2 and Schedule
I through 11.4 to the SEC upon request.
(1)3.1 -- Restated Certificate of Incorporation of Advanced Energy
Industries, Inc.
(2)3.2 -- Bylaws of Advanced Energy Industries, Inc.
(3)4.1 -- Registration Rights Agreement, dated as of August 22, 2001,
between Advanced Energy Industries, Inc. and Goldman, Sachs
& Co.
(4)4.2 -- Indenture, dated as of August 22, 2001, between Advanced
Energy Industries, Inc. and State Street Bank and Trust
Company of California, N.A., as Trustee
(*)5.1 -- Opinion of Sullivan & Cromwell
(*)8.1 -- Tax Opinion of Sullivan & Cromwell
(*)12.1 -- Computation of Ratio of Earnings to Fixed Charges
23.1 -- Consent of Arthur Andersen LLP, independent public
accountants
23.2 -- Consent of Deloitte Touche Tohmatsu
(*)23.3 -- Consent of Sullivan & Cromwell (included in Exhibit 5.1)
(*)23.4 -- Consent of Sullivan & Cromwell (included in Exhibit 8.1)
(*)24.1 -- Power of Attorney
(*)25.1 -- Form T-1 Statement of Eligibility and Qualification of
Trustee
---------------
(1) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2001 (File No. 000-26966), filed August 13, 2001.
(2) Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 33-97188), filed September 20, 1995, as amended.
(3) Incorporated by reference to Exhibit 4.2 of the Registrant's current report
on Form 8-K filed September 10, 2001.
(4) Incorporated by reference to Exhibit 4.1 of the Registrant's current report
on Form 8-K filed September 10, 2001.
(*) Previously filed.