SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO )
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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
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Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
ADVANCED ENERGY INDUSTRIES, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 2002
To our Stockholders:
The 2002 Annual Meeting of Stockholders of Advanced Energy Industries, Inc.
(Advanced Energy) will be held on Wednesday, May 8, 2002, at 10:00 a.m., in the
Monarch Room at Advanced Energy's corporate offices, 1625 Sharp Point Drive,
Fort Collins, Colorado 80525. At the meeting, you will be asked to vote on the
following matters:
1. Election of eight directors. The Nominating Committee of the Board
of Directors of Advanced Energy has proposed that the stockholders re-elect
the current directors: Douglas S. Schatz, G. Brent Backman, Richard P.
Beck, Trung T. Doan, Arthur A. Noeth, Elwood Spedden, Gerald M. Starek and
Arthur W. Zafiropoulo.
2. Approval of an increase in the number of authorized shares of
Advanced Energy common stock from 55 million shares to 70 million shares.
3. Any other matters of business properly brought before the meeting.
Each of these matters is described in detail in the accompanying Proxy
Statement, dated April 5, 2002.
If you owned common stock of Advanced Energy at the close of business on
March 18, 2002, you are entitled to receive this notice and to vote at the
meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure that your voice is heard, you are urged to return the
enclosed proxy card as promptly as possible in the postage prepaid envelope
provided.
By Order of the Board of Directors
Jay L. Margulies
Secretary
Fort Collins, Colorado
April 5, 2002
YOUR VOTE IS IMPORTANT
[ADVANCED ENERGY LOGO]
Date: April 5, 2002
To: Our Owners
From: Douglas S. Schatz
Subject: Invitation to our 2002 Annual Meeting of Stockholders
Please come to our 2002 Annual Meeting of Stockholders to learn about
Advanced Energy, what we have accomplished in the last year and what we hope to
achieve in 2002. The meeting will be held:
Wednesday, May 8, 2002
10:00 a.m.
Monarch Room
Advanced Energy's Corporate Offices
1625 Sharp Point Drive
Fort Collins, Colorado 80525
This proxy statement describes the matters that management of Advanced
Energy intends to present to the stockholders at the annual meeting.
Accompanying this proxy statement is Advanced Energy's 2001 Annual Report to
Stockholders and a form of proxy. All voting on matters presented at the annual
meeting will be by paper proxy or by presence in person, in accordance with the
procedures described in this proxy statement. Instructions for voting are
included in the proxy statement. Your proxy may be revoked at any time prior to
the meeting in the manner described in this proxy statement.
I look forward to seeing you at the meeting.
Douglas S. Schatz
Chairman and Chief Executive Officer
This proxy statement and the accompanying proxy card are first being sent to
stockholders on or about April 5, 2002.
GENERAL
This proxy statement and the accompanying materials are being sent to
stockholders of Advanced Energy as part of a solicitation for proxies for use at
the 2002 Annual Meeting of Stockholders. The Board of Directors of Advanced
Energy is making this solicitation for proxies. By delivering the enclosed proxy
card, you will appoint each of Douglas S. Schatz and Michael El-Hillow as your
agent and proxy to vote your shares of common stock at the meeting. In this
proxy statement, "proxy holders" refers to Messrs. Schatz and El-Hillow in their
capacities as your agents and proxies.
Advanced Energy's principal executive offices are located at 1625 Sharp
Point Drive, Fort Collins, Colorado 80525. The telephone number is (970)
221-4670.
PROPOSALS
We intend to present two proposals to the stockholders at the meeting:
1. Election of eight directors. The Nominating Committee of the Board
of Directors of Advanced Energy has proposed that the stockholders re-elect
the current directors: Douglas S. Schatz, G. Brent Backman, Richard P.
Beck, Trung T. Doan, Arthur A. Noeth, Elwood Spedden, Gerald M. Starek and
Arthur W. Zafiropoulo.
2. Approval of an increase in the number of authorized shares of
Advanced Energy common stock from 55 million shares to 70 million shares.
We do not know of any other matters to be submitted to the stockholders at
the meeting. If any other matters properly come before the meeting, the proxy
holders intend to vote the shares they represent as the Board of Directors may
recommend.
RECORD DATE AND SHARE OWNERSHIP
If you owned shares of Advanced Energy common stock in your name as of the
close of business on Monday, March 18, 2002, you are entitled to vote on the
proposals that are presented at the meeting. On that date, which is referred to
as the "record date" for the meeting, 31,892,670 shares of Advanced Energy
common stock were issued and outstanding and were held of record by 783 persons,
according to the records of American Stock Transfer & Trust Company, Advanced
Energy's transfer agent.
VOTING
Each share of Advanced Energy common stock that you hold entitles you to
one vote on each of the proposals that are presented at the annual meeting. The
inspector of the election will determine whether or not a quorum is present at
the annual meeting. A quorum will be present at the meeting if a majority of the
shares of common stock entitled to vote at the meeting are represented at the
meeting, either by proxy or by the person who owns the shares. Advanced Energy's
transfer agent will deliver a report to the inspector of election in advance of
the annual meeting, tabulating the votes cast by proxies returned to the
transfer agent. The inspector of election will tabulate the final vote count,
including the votes cast in person and by proxy at the meeting.
If a broker holds your shares, this proxy statement and a proxy card have
been sent to the broker. You may have received this proxy statement directly
from your broker, together with instructions as to how to direct the broker how
to vote your shares. If you do not give your broker instructions or
discretionary authority to vote your shares on one or more of the proposals and
your broker returns the proxy card indicating such lack of authority, your
shares will be "broker non-votes" with respect to the proposals for which the
broker does not have authority to vote. Broker non-votes will be counted as
present for purposes of determining a quorum, but will not be counted as shares
entitled to vote.
1
The following table reflects the vote required for each proposal and the
effect of broker non-votes on the vote, assuming a quorum is present at the
meeting:
PROPOSAL VOTE REQUIRED EFFECT OF BROKER NON-VOTES
-------- ------------- --------------------------
Election of directors the eight nominees who receive no effect
the most votes will be elected
Increase in the number of majority of the shares issued same as a vote against
authorized shares of common and outstanding as of the the proposal
stock record date
If you abstain from voting on a proposal, your shares will be counted as
present at the meeting, for purposes of determining a quorum, and entitled to
vote. As a result, abstentions will have no effect on the election of directors
but will have the same effect as a vote against the proposal to increase the
number of authorized shares of common stock.
If any other proposals are properly presented to the stockholders at the
meeting, the number of votes required for approval will depend on the nature of
the proposal. Generally, under Delaware law the number of votes required to
approve a proposal is a majority of the shares of common stock represented at
the meeting. The enclosed proxy card gives discretionary authority to the proxy
holders to vote on any matter not included in this proxy statement that is
properly presented to the stockholders at the meeting.
COSTS OF SOLICITATION
Advanced Energy will bear the costs of soliciting proxies in connection
with the annual meeting. In addition to soliciting your proxy by this mailing,
proxies may be solicited personally or by telephone or facsimile by some of
Advanced Energy's directors, officers and employees, without additional
compensation. We may reimburse our transfer agent, American Stock Transfer &
Trust Company, brokerage firms and other persons representing beneficial owners
of Advanced Energy common stock for their expenses in sending proxies to the
beneficial owners.
DELIVERY AND REVOCABILITY OF PROXIES
You may vote your shares by marking the enclosed proxy card and mailing it
to American Stock Transfer & Trust Company in the enclosed postage-prepaid
envelope. If you mail your proxy, please allow sufficient time for it to be
received in advance of the annual meeting.
If you deliver your proxy and change your mind before the meeting, you may
revoke your proxy by delivering notice to Jay Margulies, our Secretary, at
Advanced Energy Industries, Inc., 1625 Sharp Point Drive, Fort Collins, Colorado
80525, stating that you wish to revoke your proxy or by delivering another proxy
with a later date. You may vote your shares by attending the meeting in person
but, if you have delivered a proxy before the meeting, you must revoke it before
the meeting begins. Attending the meeting will not automatically revoke your
previously-delivered proxy.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS
If two or more stockholders share an address, Advanced Energy may send a
single copy of this proxy statement and other soliciting materials, as well as
the 2001 Annual Report to Stockholders, to the shared address, unless Advanced
Energy has received contrary instructions from one or more of the stockholders
sharing the address. If a single copy has been sent to multiple stockholders at
a shared address, Advanced Energy will deliver a separate proxy card for each
stockholder entitled to vote. Additionally, Advanced Energy will send an
additional copy of this proxy statement, other soliciting materials and the 2001
Annual Report to Stockholders, promptly upon oral or written request by any
stockholder to Investor Relations, Advanced Energy Industries, Inc., 1625 Sharp
Point Drive, Fort Collins, Colorado 80525; telephone number (970) 221-4670. If
any stockholders sharing an address receive multiple copies of this proxy
statement, other soliciting materials and the 2001 Annual Report to Stockholders
and would prefer in the future to receive only
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one copy, such stockholders may make such request to Investor Relations at the
same address or telephone number.
COMMON STOCK OWNERSHIP BY MANAGEMENT AND OTHER STOCKHOLDERS
The following table sets forth the beneficial ownership of Advanced Energy
common stock as of March 18, 2002 by:
- each person known to us to beneficially own more than 5% of the
outstanding common stock;
- each director and nominee for director;
- each named executive officer identified on page 12; and
- the current directors and executive officers as a group.
SHARES
NAME OF STOCKHOLDER BENEFICIALLY OWNED PERCENT OWNED
------------------- ------------------ -------------
Douglas S. Schatz, Chairman and Chief Executive
Officer.............................................. 11,037,782(1) 34.6%
Capital Group International, Inc.; Capital Guardian
Trust Company........................................ 3,180,810(2) 10.0%
Franklin Resources, Inc. and Franklin Advisers, Inc.... 2,719,052(3) 8.5%
FMR Corp.; Fidelity Management & Research Company...... 2,022,752(4) 6.4%
Capital Research and Management Company; SMALLCAP World
Fund, Inc............................................ 1,772,000(5) 5.6%
G. Brent Backman, Director............................. 1,219,782(6) 3.8%
Richard P. Beck, Director, Senior Vice President....... 149,010(7,8) *
Trung T. Doan, Director................................ 7,075(7) *
Arthur A. Noeth, Director.............................. 10,000(7) *
Elwood Spedden, Director............................... 12,000(7) *
Gerald M. Starek, Director............................. 47,100(7,9) *
Arthur W. Zafiropoulo, Director........................ 40,389(7) *
Michael El-Hillow, Senior Vice President of Finance and
Administration and Chief Financial Officer........... 0 *
James Gentilcore, Executive Vice President and Chief
Operating Officer.................................... 65,353(7) *
Joseph R. Monkowski, Senior Vice President of Business
Development.......................................... 78,184(7) *
Richard A. Scholl, Senior Vice President and Chief
Technical Officer.................................... 251,988(7,10) *
All current executive officers and directors, as a
group (15 persons)................................... 12,964,912(11) 39.8%
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* Less than 1%
(1) Mr. Schatz' address is c/o Advanced Energy Industries, Inc., 1625 Sharp
Point Drive, Fort Collins, Colorado 80525. Mr. Schatz is a trustee of a
charitable foundation that is the record holder of 180,000 shares of common
stock of the issuer. The three other trustees of the charitable foundation
are members of Mr. Schatz' immediate family. Accordingly, Mr. Schatz may be
deemed to share with the other trustees voting and dispositive power with
respect to the charitable foundation's 180,000 shares. Mr. Schatz disclaims
beneficial ownership of the 180,000 shares held by the charitable
foundation, which shares are included in the table.
(2) Information as to the amount and nature of beneficial ownership was
obtained from Amendment No. 5 to the Schedule 13G filed with the SEC on
February 11, 2002 by Capital Group International, Inc. and Capital Guardian
Trust Company. According to the Schedule 13G, Capital Group International,
Inc. is the parent holding company of a group of investment management
companies that hold investment
3
power and, in some cases, voting power over the securities reported in the
Schedule 13G, and Capital Guardian Trust Company is a bank that may be
deemed to beneficially own common stock as a result of serving as an
investment manager of various institutional accounts. Capital Group
International, Inc. reports sole voting power over 2,505,400 shares of
common stock and sole dispositive power over 3,180,810 shares of common
stock. Capital Guardian Trust Company reports sole voting power over
2,272,700 shares of common stock and sole dispositive power over 2,948,110
shares. The address for each of Capital Guardian and Capital International
is 11100 Santa Monica Boulevard, Los Angeles, CA 90025.
(3) Information as to the amount and nature of beneficial ownership was
obtained from the Schedule 13G filed with the SEC on February 14, 2002 by
Franklin Resources, Inc. and Franklin Advisers, Inc. According to the
Schedule 13G, Franklin Resources, Inc. is a parent holding company for
direct and indirect investment advisory subsidiaries, including Franklin
Advisers, Inc., and the shares reported are beneficially owned by one or
more open or closed-end investment companies or other managed accounts.
Franklin Advisors, Inc. reports sole voting and dispositive power over
2,283,640 shares, or 7.2%. The address of each of Franklin Resources, Inc.
and Franklin Advisors, Inc. is One Franklin Parkway, San Mateo, CA 94403.
(4) Information as to the amount and nature of beneficial ownership was
obtained from the Schedule 13G filed with the SEC on February 13, 2002 by
FMR Corp. by and on behalf of itself and its direct and indirect
subsidiaries. According to the Schedule 13G, FMR Corp. is a parent holding
company of Fidelity Management & Research Company, which is the beneficial
owner of the reported shares as a result of acting as investment advisor to
various investment companies, including Fidelity OTC Portfolio, which has
beneficial ownership of 1,879,600 shares. The address of FMR Corp. is 82
Devonshire Street, Boston, MA 02109.
(5) Information as to the amount and nature of beneficial ownership was
obtained from the Schedule 13G filed with the SEC on February 11, 2002 by
Capital Research and Management Company ("Capital Research") and SMALLCAP
World Fund, Inc. ("SWFI"). According to the Schedule 13G, Capital Research
is an investment advisor deemed to be the beneficial owner of the shares as
a result of acting as an investment advisor to various investment
companies, including SWFI, which has beneficial ownership of 1,772,000
shares. The address for each of Capital Research and SWFI is 333 South Hope
Street, Los Angeles, CA 90071.
(6) The shares reported in the table include 121,000 shares held by Mr.
Backman's spouse and 700,000 shares owned by GDBA Investments LLP which is
owned 100% by Mr. and Mrs. Backman.
(7) Includes beneficial ownership of the following numbers of shares that may
be acquired within 60 days of March 18, 2002 pursuant to stock options
granted or assumed by Advanced Energy:
- Backman................. 7,500
- Beck.................... 45,436
- Doan.................... 4,075
- Noeth................... 10,000
- Spedden................. 12,000
- Starek.................. 20,644
- Zafiropoulo............. 7,500
- Gentilcore.............. 45,353
- Monkowski............... 65,184
- Scholl.................. 16,556
(8) The shares reported in the table do not include 200 shares held in joint
tenancy by Mr. Beck's wife and a person unrelated to Mr. Beck as to which
Mr. Beck disclaims beneficial ownership.
(9) The shares reported in the table do not include 2,100 shares held by Mr.
Starek's wife as to which Mr. Starek disclaims beneficial ownership.
(10) The shares reported in the table include 5,521 shares that Brenda Scholl,
Mr. Scholl's wife, has the right to acquire within 60 days of March 18,
2002 pursuant to stock options granted to her by Advanced Energy. Brenda
Scholl is a Vice President of Advanced Energy.
(11) The shares reported in the table include 285,756 shares that the 15
executive officers and directors collectively have the right to acquire
within 60 days of March 18, 2002 pursuant to stock options granted or
assumed by Advanced Energy.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
A board of eight directors is to be elected at the meeting. The Nominating
Committee of the Board of Directors has nominated each of the current directors.
In the event that any nominee is unable to or declines to serve as a director at
the time of the meeting, the proxy holders will vote in favor of a nominee
designated by the Nominating Committee of the Board of Directors to fill the
vacancy. We are not aware of any nominee who will be unable or who will decline
to serve as a director. The term of office of each person elected as a director
at the meeting will continue from the end of the meeting until the next Annual
Meeting of Stockholders (expected to be held in the year 2003), or until a
successor has been elected and qualified.
NOMINEES
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS
NAME AGE SINCE EXPERIENCE DURING PAST FIVE YEARS
---- --- -------- ---------------------------------
Douglas S. Schatz............. 56 1981 Douglas S. Schatz is a co-founder of Advanced
Energy and has been its Chairman, Chief
Executive Officer and a director since its
incorporation in 1981. Until July 1999, he
also served as President. In March 2001, Mr.
Schatz was reappointed as President. Since
December, 1995, Mr. Schatz has also served as
a director of Advanced Power Technology, Inc.,
a company which provides high power, high
voltage and high performance semiconductors
and power modules.
G. Brent Backman(1)........... 61 1981 G. Brent Backman is a co-founder and has been
a director of Advanced Energy since its
incorporation in 1981. Mr. Backman was a vice
president of Advanced Energy from its
incorporation until April 1998, when he became
Senior Vice President, Special Projects. Mr.
Backman served in that position until December
1998, when he retired from Advanced Energy.
Richard P. Beck............... 68 1995 Richard P. Beck joined Advanced Energy in
March 1992 as Vice President and Chief
Financial Officer and became Senior Vice
President in February 1998. He became a
director of Advanced Energy in September 1995.
In October 2001, Mr. Beck retired from the
position of Chief Financial Officer, but
remains as a Senior Vice President. Mr. Beck
is Chairman of the Board of Applied Films
Corporation, a publicly held manufacturer of
flat panel display equipment. He is also a
director of Photon Dynamics, Inc., a publicly
held manufacturer of flat panel display test
equipment and serves on its audit committee.
Mr. Beck is also a director of TTM
Technologies, Inc., a publicly held
manufacturer of printed circuit boards, and
serves as chairman of its audit committee.
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DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS
NAME AGE SINCE EXPERIENCE DURING PAST FIVE YEARS
---- --- -------- ---------------------------------
Trung T. Doan(1).............. 43 2000 Trung T. Doan has been employed by Micron
Technology, Inc., a provider of semiconductor
memory solutions, since 1988. He has served as
Micron's Vice President of Process Development
since July 1997. Mr. Doan was a director of
Engineering Measurements Company, until it was
acquired by Advanced Energy in January 2001.
Mr. Doan also is a director of NuTool, Inc., a
privately held semiconductor equipment
manufacturer.
Arthur A. Noeth(1,2,3)........ 66 1997 Arthur A. Noeth retired in 1998. From 1993 to
1998, Mr. Noeth was president of the Implant
Center, a provider of ion implant services to
the electronics industry.
Elwood Spedden(1,2,3)......... 64 1995 Elwood Spedden was a vice president of
KLA-Tencor Semiconductor, a manufacturer of
automatic test equipment used in the
fabrication of semiconductors, from July 1996
to June 1997. From 1990 through March 1996,
Mr. Spedden was with Credence Systems
Corporation, a manufacturer of automatic test
equipment used in the fabrication of
semiconductors, in various senior management
positions including President, Chief Executive
Officer and Vice-Chairman of the Board of
Directors. In January 2002, Mr. Spedden joined
the Board of Directors of Photon Dynamics,
Inc., a publicly held manufacturer of flat
panel display test equipment. From 1996 to
2000, Mr. Spedden was a director of Insight
Objects, a privately held software company.
Gerald M. Starek(1,2)......... 60 1998 Gerald M. Starek joined the Board of Directors
of Advanced Energy following its acquisition
of RF Power Products (now named Advanced
Energy Voorhees). Mr. Starek had been a
non-employee director of RF Power Products
since February 1994. Mr. Starek founded
Silicon Valley Group, Inc., a supplier of
automated wafer processing equipment for the
semiconductor industry. He served as Silicon
Valley Group's Chairman from September 1984 to
September 1991 and as Vice Chairman from
September 1991 to April 1993. Mr. Starek is a
director and serves on the compensation
committee of AML Communications, Inc., a
publicly held manufacturer of components for
wireless communications systems.
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DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS
NAME AGE SINCE EXPERIENCE DURING PAST FIVE YEARS
---- --- -------- ---------------------------------
Arthur W. Zafiropoulo(1,3).... 63 1998 Arthur W. Zafiropoulo joined the Board of
Directors of Advanced Energy following its
acquisition of RF Power Products (now named
Advanced Energy Voorhees). Mr. Zafiropoulo had
been a non-employee director of RF Power
Products since July 1992. Mr. Zafiropoulo is
the founder of Ultratech Stepper, Inc., a
publicly held company that develops,
manufactures and markets photolithography
equipment for the semiconductor industry. Mr.
Zafiropoulo has been Chief Executive Officer
and Chairman of the Board of Directors of
Ultratech Stepper since March 1993. Mr.
Zafiropoulo also served as President of
Ultratech Stepper from March 1997 to April
1999, as he did from March 1993 to March 1996.
Mr. Zafiropoulo is the Vice Chairman of SEMI
(Semiconductor and Equipment Materials
International), an international trade
association.
---------------
(1) Member of the Nominating Committee.
(2) Member of the Audit and Finance Committee.
(3) Member of the Compensation Committee.
There is no family relationship between any of the directors, nominees or
executive officers of Advanced Energy, except that Richard A. Scholl is married
to Brenda M. Scholl, a Vice President of Advanced Energy.
REQUIRED VOTE
The eight nominees receiving the highest number of affirmative (FOR) votes
at the meeting will be elected as directors. Stockholders do not have the right
to cumulate their votes for the election of directors. Unless otherwise
instructed, the proxy holders will vote the proxies received by them FOR each of
the eight nominees. Votes withheld from a nominee will be counted for purposes
of determining whether a quorum is present, but will not be counted as an
affirmative vote for such nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
EIGHT NOMINEES NAMED ABOVE.
DIRECTOR COMPENSATION
Non-employee directors receive meeting fees of $3,000 for each Board of
Directors meeting attended, other than telephonic meetings, and $300 for each
committee meeting attended. They also are reimbursed for reasonable
out-of-pocket travel expenses incurred to attend board and committee meetings.
Non-employee directors participate in Advanced Energy's 1995 Non-Employee
Directors' Stock Option Plan (the "Director Plan"). Under the Director Plan,
upon first becoming a non-employee director, each participant is granted an
option to purchase 7,500 shares of common stock, at the fair market value of the
common stock on the date of grant. These options are exercisable as to 2,500
shares upon grant and vest as to an additional 2,500 shares on each of the
second and third anniversary of the grant date. Also under the Director Plan, on
each anniversary of the participant becoming a non-employee director, the
participant is automatically granted an option to purchase 2,500 shares of
common stock at the fair market value of the common stock on the date of grant.
These options vest in full on the third anniversary of the grant date. All
options granted under the Director Plan have terms of 10 years from the date of
grant. 200,000 shares of common stock have been reserved for issuance under the
Director Plan. As of March 18, 2002, options to purchase an aggregate of 89,500
shares were outstanding under the Director Plan.
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BOARD MEETINGS
The Board of Directors held eight meetings in 2001, including telephonic
meetings. The Board of Directors has an Audit and Finance Committee, a
Nominating Committee and a Compensation Committee. In 2001, each incumbent
director attended at least 75% of the meetings of the Board of Directors and at
least 75% of the meetings of the committees on which he served.
AUDIT AND FINANCE COMMITTEE MEETINGS
The Audit and Finance Committee consists of Messrs. Starek (chairman),
Noeth and Spedden, all of whom are "independent directors" under Rule
4200(a)(14) of the National Association of Securities Dealers' listing
standards. None of the members of the Audit and Finance Committee, nor any
member of his immediate family, has been an officer or employee of Advanced
Energy or any of its subsidiaries. The Audit and Finance Committee met four
times in 2001.
REPORT OF THE AUDIT AND FINANCE COMMITTEE
We are governed by a written charter that was adopted in 1999 and are
responsible for:
- recommending engagement of Advanced Energy's independent auditors;
- reviewing the scope of the audit;
- reviewing the independence and performance of Advanced Energy's
independent auditors;
- evaluating the comments made by the independent auditor with respect to
accounting procedures and internal controls and determining whether to
bring such comments to the attention of Advanced Energy's management; and
- reviewing the internal accounting procedures and controls with Advanced
Energy's financial and accounting staff.
We also conduct quarterly financial reviews with Advanced Energy's
independent accountants prior to the release of financial statements and
quarterly reports on Form 10-Q.
Management has primary responsibility for Advanced Energy's financial
statements and the overall reporting process, including systems of internal
controls. The independent auditors audit the annual financial statements
prepared by management, express an opinion as to whether those financial
statements fairly present the financial position, results of operations and cash
flows of Advanced Energy in conformity with generally accepted accounting
principles and discuss with us any issues they believe should be raised.
We have reviewed Advanced Energy's audited financial statements and met
separately with both management and the auditors to discuss and review those
financial statements and reports prior to issuance. In addition, we have
discussed with the independent auditors the matters outlined in Statement on
Accounting Standards No. 61 (Communication with Audit Committees) to the extent
applicable. We have received the written disclosures and the letter from the
independent accountants required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees). We have also discussed with
the independent auditors their independence.
Based on our review and discussion of the foregoing matters and
information, we recommended to the Board of Directors that the audited financial
statements be included in Advanced Energy's 2001 Annual Report on Form 10-K.
THE AUDIT AND FINANCE COMMITTEE
Gerald M. Starek, Chairman
Arthur A. Noeth
Elwood Spedden
8
FEES BILLED BY ARTHUR ANDERSEN LLP
Audit services of Arthur Andersen LLP during 2001 included the examination
of the consolidated financial statements of Advanced Energy and services related
to filings with the Securities and Exchange Commission and other regulatory
bodies.
Audit Fees
The aggregate of the fees billed to Advanced Energy by Arthur Andersen LLP
for professional services rendered for the audit of the 2001 annual financial
statements and reviews of the quarterly financial statements during 2001 was
$151,500.
All Other Fees
In addition to the audit fees above, Arthur Andersen LLP billed Advanced
Energy for the following services:
- $50,800 for review of financial statements and disclosures in connection
with the registration of securities; and
- $218,050 for acquisition-related services, including review of financial
statements and prior auditor workpapers for certain acquired companies
and acquisition targets, as well as consultation regarding the
application of accounting principles and other related services.
No other services were provided by Arthur Andersen LLP.
The Audit and Finance Committee considered the nature and extent of the
services and fees presented under "Audit Fees" and "All Other Fees" above to be
compatible with maintaining Arthur Andersen LLP's independence.
Financial Information Systems Design and Implementation Services
During 2001, Arthur Andersen LLP did not provide any of the following
services to Advanced Energy: operating or supervising the operation of Advanced
Energy's information system; managing Advanced Energy's local area network; or
designing or implementing a hardware or software system that aggregates source
data underlying the financial statements or generates information that is
significant to Advanced Energy's financial statements taken as a whole.
NOMINATING COMMITTEE MEETING
The Nominating Committee consists of Messrs. Backman, Doan, Noeth, Spedden,
Starek and Zafiropoulo. The Nominating Committee is responsible for:
- establishing and administering the procedures for nominating persons to
serve as directors;
- identifying and recommending candidates for nomination to the Board of
Directors;
- considering any nominees recommended by stockholders; and
- determining the appropriate number of authorized directors of Advanced
Energy.
The Nominating Committee did not meet in 2001, but acted once by unanimous
written consent. If you are a stockholder and wish to recommend a candidate for
nomination to the Board of Directors, you should submit your recommendation in
writing to the Nominating Committee, in care of the Secretary of Advanced Energy
at 1625 Sharp Point Drive, Fort Collins, Colorado 80525. Your recommendation
should include your name and address, the number of shares of Advanced Energy
common stock that you own, the name of the person you recommend for nomination,
the reasons for your recommendation, a summary of the person's business history
and other qualifications as a director of Advanced Energy and whether such
person has agreed to serve, if elected, as a director of Advanced Energy. Please
also see the information under "Proposals of Stockholders" on page 17 of this
proxy statement.
9
COMPENSATION COMMITTEE MEETINGS
The Compensation Committee met once in 2001. During 2001 and presently, the
membership of the Compensation Committee consists of Messrs. Noeth (chairman),
Spedden and Zafiropoulo. The Compensation Committee is responsible for
recommending salaries, incentives and other compensation for directors and
officers of Advanced Energy, administering Advanced Energy's incentive
compensation and benefit plans for officers and recommending to the Board of
Directors policies relating to such compensation and benefit plans. None of the
members of the Compensation Committee is or has been an officer or employee of
Advanced Energy or any of its subsidiaries.
REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES
One of the primary goals in setting compensation policies is to maintain
competitive, progressive programs to attract, retain and motivate high-caliber
executives, foster teamwork and maximize the long-term success of Advanced
Energy by appropriately rewarding such individuals for their achievements.
Another goal is to provide an incentive to executives to focus efforts on
long-term strategic goals for Advanced Energy by closely aligning their
financial interests with stockholder interests. To attain these goals Advanced
Energy's executive compensation program was designed to include base salary,
annual incentives and long-term incentives.
In formulating and administering the individual elements of Advanced
Energy's executive compensation program, planning, implementing and achieving
long-term objectives are emphasized to establish performance objectives,
evaluate performance and determine actual incentive awards.
COMPENSATION COMPONENTS
Base Salary
The base salaries of executive officers are established after review of
relevant data of other executives with similar responsibilities from published
industry reports and surveys of similarly situated companies. The objective is
to maintain Advanced Energy's annual executive salaries at levels competitive
with the market base salary of executive officers in similar positions. The
market reviewed is comprised of similarly sized high technology companies within
and outside Advanced Energy's industry as described and reported in the Radford
Executive Compensation Survey ("Radford") and in a study conducted for Advanced
Energy by SCA Consulting. There are approximately 90 companies in the Radford
universe used by the Compensation Committee. In March and June 2001, each of
Advanced Energy's executive officers agreed to salary reductions totaling up to
20% of base salary. Effective January 1, 2002, the executive officers' base
salaries returned to March 2001 levels. We expect base salaries to remain at
current levels until June 2002 at the earliest, except with respect to James
Gentilcore, whose responsibilities as Chief Operating Officer have increased
substantially.
Annual Incentives
The Compensation Committee determines the range of possible annual bonuses
for individual executives by reviewing a competitive market survey for
executives at similar levels and similarly sized companies as described and
reported in the Radford Executive Compensation Survey. Actual bonus payments
within this range are tied to meeting specific corporate and executive
performance targets. Advanced Energy's revenue decreased 46% from 2000 to 2001,
and Advanced Energy reported a net loss of $31.4 million in 2001 compared to a
net profit of $68.0 million in 2000. These results did not meet the targets for
corporate performance in 2001 set by the Compensation Committee and,
accordingly, no bonuses were paid for 2001.
10
Stock Options
The Board of Directors grants stock options under Advanced Energy's stock
option plans to give executives a stake in the long-term performance of Advanced
Energy and to focus their attention on maximizing stockholder value. In granting
options, the Compensation Committee may consider several factors, including an
executive's individual performance, potential contributions to Advanced Energy,
current equity ownership in Advanced Energy and the vesting rates of existing
stock options, if any. Vesting schedules also may be used to encourage the
long-term retention of executive officers. Options are granted with exercise
prices equal to the fair market value of the common stock subject to the option
on the date of grant, as reported on the Nasdaq National Market Because the
value of an option will increase when Advanced Energy's stock performs well, the
Compensation Committee believes stock options serve to align the interests of
executive officers closely with those of other stockholders.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The compensation of the Chief Executive Officer, Douglas S. Schatz, is
based on the policies and procedures applicable generally to executive officers
of Advanced Energy. In determining Mr. Schatz' base salary and bonus,
compensation levels for other chief executive officers in high technology firms
within and outside the industry were examined. This information was compared to
the performance of such firms relative to Advanced Energy's performance. The
salary paid to Mr. Schatz for 2001 was below the 50th percentile of compensation
paid to chief executive officers of companies of similar size in similar
industries, based on data from the 2001 Radford Executive Compensation Report
and 2001 AEA High-Tech Industry Executive Compensation Survey. Mr. Schatz did
not receive a bonus for 2001.
EFFECT OF SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code of 1986 (the "Tax Code")
generally limits to $1 million the corporate deduction for compensation paid to
certain executive officers, unless the compensation is "performance-based" (as
defined in Section 162(m)). Each of the Board of Directors and the Compensation
Committee has carefully considered the potential impact of this limitation on
executive compensation and has concluded in general that the best interests of
Advanced Energy and the stockholders will be served if certain of Advanced
Energy's stock-based long-term incentives qualify as performance-based
compensation within the meaning of Section 162(m). It is the intention of the
Board of Directors and Compensation Committee that, so long as it is consistent
with the Compensation Committee's overall compensation objectives, virtually all
executive compensation will be deductible for federal income tax purposes.
THE COMPENSATION COMMITTEE
Arthur A. Noeth, Chairman
Elwood Spedden
Arthur W. Zafiropoulo
11
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation earned in 2001 by Advanced
Energy's chief executive officer and the four highest-paid executive officers,
other than the chief executive officer, based on salary and bonus in 2001. The
table also sets forth compensation earned in 2001 by Advanced Energy's current
Chief Financial Officer. These six officers are referred to as the "named
executive officers." Each executive officer is appointed annually by the Board
of Directors.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION --------------------- ALL OTHER
----------------------- SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTIONS(#) ($)(2)
--------------------------- ---- ------------ -------- --------------------- ------------
Douglas S. Schatz................ 2001 340,653 0 0 5,100
Chairman of the Board, 2000 373,517 187,600 0 4,800
Chief Executive Officer 1999 316,302 235,000 0 4,800
and President
James Gentilcore................. 2001 200,676 0 47,000 5,100
Executive Vice President 2000 220,242 93,500 10,000 4,800
and Chief Operating Officer 1999 186,938 70,000 10,000 4,800
Richard P. Beck.................. 2001 230,699 0 22,000 5,100
Senior Vice President(3) 2000 247,915 100,000 15,000 4,800
1999 199,342 70,000 15,000 4,800
Richard A. Scholl................ 2001 220,312 0 21,000 5,100
Senior Vice President 2000 230,125 92,400 10,000 4,800
and Chief Technical Officer 1999 208,525 74,000 10,000 4,800
Joseph R. Monkowski.............. 2001 210,797 0 20,000 5,100
Senior Vice President 2000 228,750 92,000 60,000 4,800
Business Development 1999 193,249 70,000 5,000 0
Michael El-Hillow................ 2001 35,350 0 50,000 25,000(5)
Senior Vice President
and Chief Financial Officer(4)
---------------
(1) In March and June 2001, each of Advanced Energy's executive officers agreed
to salary reductions totaling up to 20% of base salary. Effective January 1,
2002, the executive officers' base salaries returned to March 2001 levels.
Base salaries are expected to remain at current levels until June 2002 at
the earliest, except with respect to Mr. Gentilcore, whose responsibilities
as Chief Operating Officer have increased substantially.
(2) Reflects amounts contributed by Advanced Energy to each of the named
executive officers under Advanced Energy's 401(k) profit sharing plan.
(3) Mr. Beck resigned as Chief Financial Officer on October 10, 2001.
(4) Mr. El-Hillow was appointed Chief Financial Officer on October 10, 2001.
(5) Mr. El-Hillow was paid a relocation bonus.
12
OPTION GRANTS IN 2001
The following table sets forth information as to stock options granted in
2001 to the named executive officers who received options. No options were
granted to Mr. Schatz in 2001.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
NUMBER OF TOTAL OPTIONS PRICE APPRECIATION FOR
SECURITIES GRANTED TO OPTION TERM
UNDERLYING OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) DATE 5%($) 10%($)
---- ------------------ ------------- ------------ ---------- --------- -----------
James Gentilcore..... 7,750 0.9% 26.125 2/7/11 143,822 375,198
4,750 0.6% 28.55 4/11/11 96,331 251,306
4,750 0.6% 32.19 7/11/11 108,613 283,346
29,750 3.5% 18.00 10/10/11 380,387 992,344
------------ ----------
47,000total 5.6%total
------------ ----------
Richard P. Beck...... 5,500 0.6% 26.125 2/7/11 102,067 266,270
5,500 0.6% 28.55 4/11/11 111,541 290,986
5,500 0.6% 32.19 7/11/11 125,762 328,085
5,500 0.6% 18.00 10/10/11 70,324 183,459
------------ ----------
22,000total 2.6%total
------------ ----------
Richard A. Scholl.... 5,000 0.6% 26.125 2/7/11 92,788 242,063
5,000 0.6% 28.55 4/11/11 101,401 264,532
1,000 0.1% 36.49 5/24/11 25,920 67,620
5,000 0.6% 32.19 7/11/11 114,329 298,259
5,000 0.6% 18.00 10/10/11 63,931 166,781
------------ ----------
21,000total 2.5%total
------------ ----------
Joseph R. Monkowski.. 4,750 0.6% 26.125 2/7/11 88,149 229,960
4,750 0.6% 28.55 4/11/11 96,331 251,306
1,000 0.1% 36.49 5/24/11 25,920 67,620
4,750 0.6% 32.19 7/11/11 108,613 283,346
4,750 0.6% 18.00 10/10/11 60,734 158,441
------------ ----------
20,000total 2.4%total
------------ ----------
Michael El-Hillow.... 50,000 5.9% 18.00 10/10/11 639,305 1,667,805
All options were granted under Advanced Energy's 1995 Stock Option Plan.
Each option vests as to one-fourth of the underlying shares on the first
anniversary of its grant date and as to an additional one-sixteenth of the
underlying shares quarterly thereafter until fully vested, except for Mr. Beck's
options which vest as to one-sixteenth of the underlying shares quarterly from
the date of grant and except that the options granted on May 24, 2001 to Mr.
Scholl and Mr. Monkowski become fully exercisable on May 24, 2002. The exercise
price of each option is equal to the fair market value of the common stock on
the date of grant, as reported on the Nasdaq National Market.
AGGREGATED OPTION EXERCISES IN 2001 AND OPTION VALUES AT DECEMBER 31, 2001
The following table sets forth information as to options granted by
Advanced Energy under the 1995 Stock Option Plan that were exercised by the
named executive officers during 2001 and options held by the
13
named executive officers at December 31, 2001. Mr. Schatz and did not exercise
or hold any options during 2001.
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES ACQUIRED AT FISCAL YEAR-END(#) AT FISCAL YEAR END($)
NAME ON EXERCISE(#) VALUE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- --------------- ----------------- ------------------------- ----------------------------
James Gentilcore..... 0 0 35,417/59,877 $324,475/$327,879
Richard P. Beck...... 0 0 37,689/39,311 $213,531/$154,097
Richard A.
Scholl(2).......... 0 0 11,246/29,754 $ 0/$45,775
Joseph R. Monkowski... 10,000 $257,750 49,685/65,315 $380,300/$233,636
Michael El-Hillow.... 0 0 0/50,000 $ 0/$432,000
---------------
(1) Reflects the aggregate market value of the common stock acquired on the date
of exercise minus the exercise price.
(2) Includes 3,687 shares that his wife, Brenda Scholl, has the right to acquire
pursuant to options granted by Advanced Energy. Brenda Scholl is a Vice
President of Advanced Energy.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Arthur Noeth, Elwood
Spedden and Arthur Zafiropoulo. None of such persons is or has been an officer
or employee of Advanced Energy, nor has any of such persons had a direct or
indirect interest in any business transaction with Advanced Energy involving an
amount in excess of $60,000.
During 2001, no executive officer of Advanced Energy served as a member of
the board of directors or compensation committee of another company that has any
executive officers or directors serving on Advanced Energy's Board of Directors
or Compensation Committee.
14
STOCK PERFORMANCE GRAPH
The following graph reflects the cumulative total stockholder return on the
Advanced Energy common stock since December 31, 1996, compared with each of The
Nasdaq Stock Market U.S. and the J.P. Morgan Hambrecht & Quist Semiconductor
Index. Historical stock price performance is not necessarily indicative of any
future stock price performance.
[PERFORMANCE GRAPH]
ADVANCED ENERGY INDUSTRIES, NASDAQ STOCK MARKET - JPMORGAN H&Q
INC. U.S. SEMICONDUCTOR SECTOR
--------------------------- --------------------- --------------------
Dec-96 100.00 100.00 100.00
139.53 107.09 120.56
120.93 101.17 114.78
Mar-97 139.53 94.57 112.39
165.12 97.52 122.03
227.91 108.56 131.77
Jun-97 286.05 111.90 126.75
465.12 123.69 155.03
586.05 123.50 157.96
Sep-97 526.74 130.82 158.44
386.05 124.01 124.03
367.44 124.66 119.66
Dec-97 277.91 122.48 105.46
232.56 126.36 117.80
313.95 138.23 129.41
Mar-98 270.93 143.34 120.92
276.74 145.77 131.53
265.12 137.67 108.09
Jun-98 216.28 147.28 103.89
196.51 145.56 107.12
116.28 116.70 81.88
Sep-98 136.05 132.89 90.57
244.19 138.73 113.40
337.21 152.83 128.94
Dec-98 465.12 172.68 148.04
541.86 197.74 184.80
358.14 180.04 156.33
Mar-99 438.37 193.65 167.92
515.12 199.89 170.98
462.79 194.35 176.60
Jun-99 754.65 211.83 220.22
703.49 208.01 229.13
639.53 216.81 247.09
Sep-99 574.42 217.11 247.11
765.12 234.51 279.00
625.58 263.04 310.56
Dec-99 916.28 320.89 369.44
946.51 309.05 401.57
1353.49 367.84 575.53
Mar-00 948.84 360.25 579.19
1283.72 303.01 576.57
688.37 266.45 514.51
Jun-00 1096.51 313.24 566.95
837.21 296.26 499.10
1062.79 331.28 591.22
Sep-00 613.95 288.25 459.05
320.93 264.57 406.02
366.28 203.84 292.28
Dec-00 418.60 193.01 308.19
570.93 216.42 386.33
422.09 167.56 279.89
Mar-01 480.23 144.08 281.02
645.77 165.57 343.93
608.37 165.37 311.94
Jun-01 767.81 169.81 312.75
609.30 159.01 311.59
430.70 141.68 291.09
Sep-01 309.40 117.81 196.48
373.77 132.93 245.18
440.19 151.85 289.54
Dec-01 495.63 153.15 298.73
CERTAIN TRANSACTIONS WITH MANAGEMENT
Advanced Energy leases its executive offices and manufacturing facilities
in Fort Collins, Colorado from Prospect Park East Partnership and from Sharp
Point Properties, LLC. Douglas S. Schatz, Chief Executive Officer and Chairman
of the Board of Advanced Energy, holds a 26.67% member interest in each of these
leasing entities, and G. Brent Backman, a director of Advanced Energy, holds a
6.6% member interest in each of these leasing entities. Aggregate payments under
such leases for 2001 totaled approximately $2.23 million. Neither Mr. Schatz nor
Mr. Backman participated in the negotiations of these leases. At the time of the
negotiations, Advanced Energy compared the lease rates and other terms of
similar properties in Fort Collins. Advanced Energy believes that the lease
rates and other terms of the leases with Prospect Park East Partnership and
Sharp Point Properties, LLC are no less favorable to Advanced Energy than could
have been obtained from a third party lessor of similar property.
Advanced Energy also leases a condominium in Breckenridge, Colorado from
AEI Properties, a partnership in which Mr. Schatz holds a 60% interest and Mr.
Backman holds a 40% interest. Advanced Energy uses the condominium to provide
rewards and incentives to its customers, suppliers and employees. Aggregate
payments to AEI Properties for 2001 totaled approximately $47,000. The rental
rate was determined based upon a comparison of rental rates and other lease
terms of similar properties in the area. Advanced Energy believes that the terms
of the lease with AEI Properties is no less favorable than could have been
obtained from a third party lessor for similar property.
Richard and Brenda Scholl are both executive officers of Advanced Energy.
Richard Scholl's compensation is set forth above under the caption "Executive
Compensation." During 2001, Advanced Energy paid to Brenda Scholl a base salary
of $153,382 and granted options to her to purchase 6,000 shares of Advanced
15
Energy common stock under the 1995 Stock Option Plan, with an average exercise
price of $27.9285 per share.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Advanced
Energy's executive officers and directors and persons who own more than ten
percent of the outstanding common stock ("reporting persons") to file with the
Securities and Exchange Commission an initial report of ownership on Form 3 and
changes in ownership on Form 4 and 5. The reporting persons are also required to
furnish Advanced Energy with copies of all forms they file. Based solely on its
review of the copies of forms received by it and written representations from
the reporting persons, Advanced Energy believes that each of the reporting
persons timely filed all reports required to be filed in 2001 or with respect to
transactions in 2001.
PROPOSAL NO. 2
INCREASE IN NUMBER OF AUTHORIZED SHARES
Advanced Energy's Certificate of Incorporation currently authorizes the
issuance of 55 million shares of common stock and 1 million shares of preferred
stock. As of March 18, 2002, a total of 40,694,790 shares of common stock were
outstanding or reserved for issuance as follows:
31,892,670 shares issued and outstanding;
5,948,337 shares reserved for issuance under Advanced Energy's stock
option and purchase plans; and
5,839,838 shares reserved for issuance upon conversion of outstanding
convertible notes issued by Advanced Energy in November 1999 and September
2001.
Advanced Energy proposes to increase the number of shares of common stock
that it is authorized to issue to 70 million shares. The number of authorized
shares of preferred stock would remain the same. The Board of Directors approved
the proposed increase in authorized capitalization at a meeting held on February
12, 2002, subject to stockholder approval. If the stockholders approve the
proposal, Paragraph A of Article IV of the Certificate of Incorporation will be
amended to read as follows:
This corporation is authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the corporation is
authorized to issue is seventy-one million (71,000,000) shares.
Seventy million (70,000,000) shares shall be Common Stock, par
value $0.001 per share, and one million (1,000,000) shares shall
be Preferred Stock, par value $0.001 per share.
POTENTIAL USES OF COMMON STOCK
Advanced Energy historically has used its common stock principally for the
following purposes:
- raise capital through equity or convertible debt offerings;
- acquire other companies and technologies using common stock; and
- adopt benefit plans involving the issuance of common stock to employees,
directors and consultants.
Advanced Energy has no immediate plans or commitments to issue additional
shares of common stock, other than shares that are reserved for issuance as
described above. Successfully implementing Advanced Energy's business plans,
however, likely will require the availability of authorized but unissued shares.
Advanced Energy seeks to increase its product offerings, customer base and total
available market, which it historically has done through both internal
development and acquisitions. Achieving further increases in these areas through
internal development will require Advanced Energy to be able to offer
competitive incentives to its employees and prospective employees, including
stock options and other stock-based compensation. Acquiring additional companies
and technologies also may require the availability of authorized shares of
16
common stock, whether as a currency for the purchase price or to provide
incentives to the employees of acquired companies. Both internal development of
new products and technologies and acquisitions also may require Advanced Energy
to raise working capital in the public and private markets. If required to call
a special meeting of stockholders to approve an increase in the authorized
capitalization when these or other purposes are identified, Advanced Energy may
be prevented from taking advantage of the opportunities because of the time or
uncertainty involved in obtaining the requisite approval.
DILUTIVE EFFECTS ON CURRENT STOCKHOLDERS
If the stockholders approve the proposed increase in the authorized number
of shares of common stock, no additional action or authorization by Advanced
Energy's stockholders would be necessary prior to the issuance of the shares,
unless required by applicable law or the rules of the Nasdaq National Market.
When Advanced Energy issues additional shares of common stock, the issuance
could have a dilutive effect on earnings per share, as well as the voting power
of the current stockholders. Under the Certificate of Incorporation, Advanced
Energy's stockholders do not have preemptive rights with respect to the common
stock. This means that, when Advanced Energy issues additional shares of common
stock, the current stockholders do not have any preferential rights to purchase
the shares being issued.
POTENTIAL ANTI-TAKEOVER EFFECTS; MANAGEMENT CONTROL
The proposed increase in the authorized number of shares of common stock
could have an anti-takeover effect under certain circumstances, even though this
is not the intention of this proposal. For example, in the event of a hostile
attempt to take over control of Advanced Energy, it may be possible for Advanced
Energy to issue shares of common stock to dilute the voting power of the other
outstanding shares and increase the potential cost to acquire control of
Advanced Energy. By potentially discouraging initiation of an unsolicited
takeover attempt, the proposed increase in the authorized shares may limit the
opportunity for stockholders to dispose of their shares at the higher price
generally available in takeover attempts or that may be available under a merger
proposal.
The issuance of additional shares to parties friendly to Advanced Energy
also may have the effect of permitting Advanced Energy's current management,
including the current Board of Directors, to retain their positions, and place
them in a better position to resist changes that stockholders may wish to make
if dissatisfied with the conduct of Advanced Energy's business.
REQUIRED VOTE
Approval of the proposed amendment to the Certificate of Incorporation to
increase the authorized capitalization of Advanced Energy requires the
affirmative (FOR) vote of a majority of the shares of common stock issued and
outstanding on the record date, which is March 18, 2002. On the record date,
there were 31,892,670 shares of common stock issued and outstanding. Unless
otherwise instructed on the proxy card, the proxy holders will vote the proxies
received by them FOR this proposal. Abstentions and broker non-votes will have
the same effect as votes against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED INCREASE IN THE
NUMBER OF AUTHORIZED SHARES OF ADVANCED ENERGY'S COMMON STOCK FROM 55 MILLION TO
70 MILLION SHARES.
PROPOSALS OF STOCKHOLDERS
Proposals that a stockholder desires to have included in Advanced Energy's
proxy materials for the 2003 Annual Meeting of Stockholders of Advanced Energy
in accordance with SEC Rule 14a-8 must be received by the Secretary of Advanced
Energy at its principal office (1625 Sharp Point Drive, Fort Collins, Colorado
80525) no later than December 6, 2002 in order to be considered for inclusion in
such proxy materials. The proxy solicited by management of Advanced Energy for
the 2003 Annual Meeting of Stockholders will confer discretionary authority to
vote on any stockholder proposal presented at that meeting, unless Advanced
Energy is provided with notice of the proposal no later than February 19, 2003.
17
FORM 10-K
A copy of Advanced Energy's 2001 Annual Report on Form 10-K is included in
the 2001 Annual Report to Stockholders accompanying this proxy statement. You
can request an additional copy of the 2001 Annual Report on Form 10-K by mailing
a request to the Secretary of Advanced Energy at 1625 Sharp Point Drive, Fort
Collins, Colorado 80525.
OTHER MATTERS
It is important that your stock be represented at the meeting, regardless
of the number of shares that you hold. You are therefore urged to execute and
return, at your earliest convenience, the accompanying proxy card in the
envelope that has been enclosed. Instructions as to how to deliver your proxy
are included in this proxy statement under the caption "Delivery and
Revocability of Proxies" on page 2 and on the proxy card.
THE BOARD OF DIRECTORS
Dated: April 5, 2002
Fort Collins, Colorado
18
[FORM OF PROXY]
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
Regardless of whether you plan to attend the Annual Meeting of Stockholders, you
can be sure your shares are represented at the meeting by promptly delivering
your proxy.
In addition to the election of Directors, there is one proposal being submitted
by the Board of Directors. The Board of Directors recommends a vote in favor
(FOR) of each of the nominees listed below and in favor (FOR) of proposal 2.
All voting on matters presented at the meeting will be by paper proxy or by
presence in person, in accordance with the procedures described in the proxy
statement.
--------------------------------------------------------------------------------
PLEASE DETACH HERE AND MAIL IN THE ENVELOPE PROVIDED.
ADVANCED ENERGY INDUSTRIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 2002
The undersigned hereby constitutes and appoints Douglas S. Schatz and Michael
El-Hillow, and each of them, his, her or its lawful agents and proxies with full
power of substitution in each, to represent the undersigned, and to vote all of
the shares of common stock of Advanced Energy Industries, Inc. which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
Advanced Energy Industries, Inc., 1625 Sharp Point Drive, Fort Collins, Colorado
on Wednesday, May 8, 2002 at 10:00 a.m., local time, and at any adjournment or
postponement thereof, on all matters coming before the meeting.
IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY, WHEN PROPERLY EXECUTED, WILL
BE VOTED IN ACCORDANCE WITH SUCH INSTRUCTIONS. UNLESS A CONTRARY DIRECTION IS
INDICATED, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED IN PROPOSAL 1 AND
FOR PROPOSAL 2.
You may deliver this proxy by signing and returning this proxy card in the
enclosed envelope.
In addition to the election of Directors, there is one proposal being submitted
by the Board of Directors. The Board of Directors recommends a vote in favor
(FOR) of each of the nominees listed below and in favor (FOR) of proposal 2.
[X] Please mark your votes as in this example.
FOR WITHHELD Nominees:
1. Election of Directors: (01) Douglas S. Schatz
[ ] [ ] (02) G. Brent Backman
For all nominees, except vote (03) Richard P. Beck
withheld from the following (04) Trung T. Doan
nominee(s) (indicate by name(s)): (05) Arthur A. Noeth
(06) Elwood Spedden
--------------------------------- (07) Gerald M. Starek
(08) Arthur W. Zafiropoulo
FOR AGAINST ABSTAIN
2. Approval of an increase in [ ] [ ] [ ]
the number of authorized
shares of Advanced Energy
Industries, Inc.'s common
stock from 55,000,000 shares
to 70,000,000 shares.
3. In their discretion, the proxy holders are authorized to vote upon any
other matters of business which may properly come before the meeting, or,
any adjournment(s) thereof.
Change of Address on [ ] I plan to attend the [ ] I do not plan to attend the [ ]
Reverse Side meeting meeting
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Signature: Date:
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