<PAGE> 1
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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
ENGINEERING MEASUREMENTS COMPANY
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies. Common
stock par value: $.01
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(2) Aggregate number of securities to which transaction applies: 4,463,505
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined): $6.96 per share of common stock
par value $.01 (assuming all outstanding stock options are exercised in full
prior to completion of the merger)
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: $31,071,717
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(5) Total fee paid: $6,215
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[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $9,325.80
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(2) Form, Schedule or Registration Statement No.: Form S-4, File #333-43744
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(3) Filing Party: Advanced Energy Industries, Inc.
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(4) Date Filed: August 14, 2000
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<PAGE> 2
[EMCO LOGO]
NOTICE OF RECONVENED SPECIAL MEETING OF SHAREHOLDERS
Engineering Measurements Company will hold a reconvened special meeting of
shareholders on January 2, 2001 at 9:00 a.m. local time, at EMCO's offices at
600 Diagonal Highway, Longmont, Colorado 80501, for the following purposes:
1. To consider and vote upon a proposal to adopt an amended and restated
merger agreement effective as of July 6, 2000, as amended as of October
20, 2000, between EMCO, Advanced Energy Industries, Inc., a Delaware
corporation, and Flow Acquisition Corporation, a Colorado corporation
and a wholly owned subsidiary of Advanced Energy, that provides among
other things, for a merger of Flow Acquisition into EMCO so that EMCO
will become a wholly owned subsidiary of Advanced Energy.
2. To transact any other business that properly comes before the meeting or
any adjournment or postponement of the meeting.
The accompanying Proxy Statement, dated December 1, 2000, describes the
proposed merger in detail and includes a copy of the amended and restated merger
agreement.
Only shareholders of record at the open of business on September 21, 2000
are entitled to notice of and to vote at the meeting. A list of shareholders
entitled to vote at the meeting is available for review at our corporate
offices.
If the amended and restated merger agreement is approved by our
shareholders, and the merger is completed, you will receive cash in exchange for
each share of EMCO stock that you hold. Under Colorado law, shareholders of EMCO
who do not vote in favor of the adoption of the amended and restated merger
agreement and who otherwise comply with the provisions of Article 113 of the
Colorado Business Corporation Act will have the right, if the merger is
completed, to dissent from the merger and to seek appraisal of the fair market
value of their shares of EMCO common stock. See "Dissenters' Rights" in the
accompanying Proxy Statement and Appendix C for a copy of Article 113 which
includes a description of the procedures required to be followed in order to
properly exercise dissenters' rights.
YOU ARE URGED TO VOTE PROMPTLY BY DATING, SIGNING AND RETURNING THE
ENCLOSED PROXY. YOU MAY REVOKE YOUR PROXY IN THE MANNER PROVIDED IN THE
ACCOMPANYING PROXY STATEMENT.
By order of the Board of Directors,
/s/ Charles Miller
Charles Miller
Chairman
December 1, 2000
Longmont, Colorado
<PAGE> 3
[EMCO Letterhead]
December 1, 2000
Dear EMCO Shareholder:
On September 22, 2000, we mailed to you a proxy statement/prospectus
relating to a special meeting of shareholders of EMCO that was scheduled for
October 23, 2000. The purpose of the special meeting was to consider and vote
upon the proposed merger between EMCO and Advanced Energy in which EMCO would
become a wholly owned subsidiary of Advanced Energy, each outstanding share of
EMCO common stock would be converted into at least 0.2018 shares of Advanced
Energy common stock, and you would become a stockholder of Advanced Energy. That
meeting was adjourned to permit consideration of the revised transaction. Due to
the recent market volatility of Advanced Energy's common stock price, we have
entered into an amended and restated merger agreement with Advanced Energy. The
amended and restated merger agreement provides that you will receive cash in the
merger, instead of Advanced Energy common stock, for your EMCO common stock.
Advanced Energy will pay the EMCO shareholders an aggregate of $30 million plus
an amount equal to the exercise prices paid in cash by EMCO option holders on
exercises of any EMCO options between October 20, 2000 and the completion of the
merger. It is anticipated that the EMCO shareholders will receive between $7.00
and $7.09 per share, without interest, although the per share consideration
could be lower depending on the EMCO options that are exercised before
completion of the merger.
We are enclosing a new proxy statement with a summary of the amended and
restated merger agreement. The full text of the amended and restated merger
agreement is attached to the Proxy Statement as Appendix A. WE CANNOT COMPLETE
THE MERGER WITHOUT THE APPROVAL OF OUR SHAREHOLDERS. EVEN IF YOU SUBMITTED A
PROXY CARD IN CONNECTION WITH OUR PREVIOUS PROXY STATEMENT DATED SEPTEMBER 22,
2000, YOU WILL NEED TO COMPLETE THE ENCLOSED BLUE PROXY CARD IN ORDER TO VOTE ON
THE AMENDED AND RESTATED MERGER AGREEMENT. PROXIES SUBMITTED IN CONNECTION WITH
OUR PREVIOUS PROXY STATEMENT DATED SEPTEMBER 22, 2000, WILL NOT BE COUNTED
TOWARD APPROVAL OF THE AMENDED AND RESTATED MERGER AGREEMENT.
After careful consideration of the terms of the amended and restated merger
agreement and other factors, our board of directors recommends that you vote in
favor of the adoption of the amended and restated merger agreement.
If you were a shareholder of record on September 21, 2000, you may vote at
the reconvened special shareholder meeting which will be held on:
January 2, 2001
9:00 a.m. local time
Engineering Measurements Company
600 Diagonal Highway
Longmont, Colorado 80501
YOUR VOTE IS IMPORTANT AS THE AFFIRMATIVE VOTE OF TWO-THIRDS OF OUR COMMON
STOCK IS REQUIRED TO APPROVE THE MERGER AGREEMENT. A FAILURE TO VOTE HAS THE
SAME EFFECT AS A "NO" VOTE.
Certain shareholders of EMCO who hold approximately 60.0% of the EMCO
common stock have granted Advanced Energy an irrevocable proxy to vote for the
amended and restated merger agreement.
Thank you for your cooperation.
Very truly yours,
/s/ Charles Miller
Charles Miller
Chairman
This proxy statement is dated December 1, 2000, and was first mailed to
EMCO shareholders on or about December 4, 2000.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary Term Sheet.......................................... 1
Summary of the Proxy Statement.............................. 3
The Companies............................................. 3
The Merger................................................ 4
EMCO Special Meeting...................................... 4
EMCO Voting Agreements.................................... 4
EMCO's Reasons for the Merger............................. 4
Opinion of EMCO's Financial Advisor....................... 4
Merger Consideration...................................... 4
Interests of Certain EMCO Directors and Officers in the
Merger That are in Addition to Your Interests.......... 5
Dissenters' Rights........................................ 5
Certain Federal Income Tax Consequences of the Merger..... 5
Conditions to Completion.................................. 5
No Solicitation; Board Recommendation..................... 6
Termination of the Amended and Restated Merger
Agreement.............................................. 6
Payment of Termination Fees............................... 6
Vote Required to Approve the Amended and Restated Merger
Agreement.............................................. 6
Forward Looking Statements in This Proxy Statement.......... 7
EMCO Selected Financial Data................................ 8
Market Price and Dividend Information....................... 9
Market Price Information.................................. 9
Dividend Information...................................... 9
Number of EMCO Shareholders............................... 9
EMCO Special Meeting........................................ 9
Date, Time and Place; Matters to be Considered............ 9
Record Date; Quorum; Voting at the Special Meeting........ 10
Security Ownership of Management; EMCO Voting
Agreements............................................. 10
Solicitation of Proxies; Revocation....................... 10
Expenses.................................................. 11
The Merger.................................................. 11
Background of the Merger.................................. 11
Recommendation of the EMCO Board of Directors and EMCO's
Reasons for the Merger................................. 14
Opinion of Quist Financial, Inc........................... 16
Summary of Advanced Energy Proposal....................... 18
Methodology............................................... 18
Market Approaches......................................... 18
Dilution Analysis......................................... 20
Historical Multiples...................................... 20
Implied Historical Exchange Ratio......................... 20
Advanced Energy's Reasons for the Merger.................. 21
Merger Consideration...................................... 22
Payment for Shares........................................
Interests of EMCO's Management in the Merger and Potential
Conflicts of Interests................................. 22
Indemnification; Directors' and Officers' Insurance....... 23
Regulatory Matters........................................ 23
Dissenters' Rights........................................ 23
Material United States Federal Income Tax Consequences.... 24
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
U.S. Federal Income Tax Consequences to EMCO
Shareholders........................................... 24
U.S. Federal Income Tax Consequences to EMCO and Advanced
Energy................................................. 25
Accounting Treatment...................................... 25
The Amended and Restated Merger Agreement................... 25
The Merger................................................ 25
Representations and Warranties............................ 26
Conduct of Business Prior to the Merger................... 26
Covenants................................................. 27
Conditions to the Merger.................................. 28
No Solicitation; Board Recommendation..................... 29
Conduct of Business Following the Merger.................. 29
Termination of the Amended And Restated Merger
Agreement.............................................. 30
Fees, Expenses and Termination Fees....................... 31
Amendment................................................. 31
Employee Benefits......................................... 31
Engineering Measurements Company............................ 32
Overview.................................................. 32
Products.................................................. 33
Sales and Marketing....................................... 34
Description of Capital Stock................................ 34
EMCO Common Stock........................................... 34
Security Ownership of Certain Beneficial Owners and
Management of EMCO........................................ 35
Where You Can Find More Information......................... 36
</TABLE>
APPENDICES
<TABLE>
<S> <C>
Appendix A Amended and Restated Agreement and Plan of Reorganization
Appendix B Fairness Opinion of Quist Financial, Inc. dated October 25,
2000
Appendix C Article 113 of the Colorado Business Corporation Act
</TABLE>
ii
<PAGE> 6
Important business and financial information about EMCO that you might want
to consider in deciding whether to vote in favor of the merger is not included
in this proxy statement, but rather is incorporated by reference to other
documents that have been filed with the Securities and Exchange Commission. For
a complete list of the documents incorporated by reference in this proxy
statement, see "Where You Can Find More Information" on page .
To obtain a free copy of any or all of the documents relating to EMCO that
are incorporated by reference in this proxy statement, you may contact EMCO's
Investor Relations at 600 Diagonal Highway, Longmont, Colorado 80501 or by
calling (303) 651-0550 or by calling its investor relations firm at (310)
208-2550. TO ENSURE TIMELY DELIVERY OF REQUESTED DOCUMENTS, YOU SHOULD MAKE YOUR
REQUESTS BY DECEMBER 26, 2000. You also may obtain free copies of these
documents on the Securities and Exchange Commission's website at www.sec.gov.
Information in this proxy statement about Advanced Energy has been provided
by Advanced Energy. Information in this proxy statement about EMCO has been
provided by EMCO. Neither company has independently investigated the truth or
accuracy of the information provided by the other.
---------------------
TRADEMARKS
Advanced Energy, Microsweep, Sparc, Sparc-LE and the Advanced Energy logo
are registered trademarks of Advanced Energy. Mach-One, Digital Valve and the
EMCO logo are trademarks of EMCO.
iii
<PAGE> 7
SUMMARY TERM SHEET
The following is a summary of some of the terms of the merger of Flow
Acquisition Corporation with and into EMCO, with EMCO surviving as a subsidiary
of Advanced Energy. This summary is an overview and may not contain all the
information that might be important to you. We have included page references to
direct you to more complete information in the proxy statement.
You should carefully read the entire proxy statement, including the
appendices, and the other documents to which this proxy statement refers to
fully understand the merger and its consequences.
The Merger (see
pages 11-25) Advanced Energy will acquire EMCO through a merger
of Advanced Energy's newly formed subsidiary, Flow
Acquisition Corporation, into EMCO. As a result,
EMCO will become a subsidiary of Advanced Energy.
What You Will Receive in
the Merger (see pages 22) You will receive up to $7.09 in cash, without
interest, for each share of EMCO common stock that
you hold at the time the merger is completed,
depending on the EMCO options that are exercised
before completion of the merger.
The Opinion of the
Financial Advisor
(see pages 16-21) Quist Financial, Inc., EMCO's financial advisor,
reviewed the amended and restated merger agreement,
among other things, and has provided its opinion
that the amount to be received by the EMCO
shareholders in the merger is fair from a financial
point of view.
The Board of Directors
Recommends That You Vote
for the Amended and Restated
Merger Agreement
(see page 14) The Board of Directors of EMCO has determined that
the merger is in the best interests of EMCO and its
shareholders. Accordingly, the Board of Directors
recommends that you vote "for" the approval of the
amended and restated merger agreement.
Tax Consequences to EMCO
Shareholders (see page 24) Generally, the merger will be a taxable transaction
for EMCO shareholders for U.S. federal income tax
purposes and may also be a taxable transaction for
state, local, foreign and other tax purposes.
Because individual circumstances may differ, you
should consult your tax advisors for a full
understanding of the tax consequences of the merger
to you.
Conditions to the Merger
(see page 28) Several conditions must be satisfied or waived
before any of the parties is obligated to complete
the merger. These conditions include:
- shareholders holding at least two-thirds of the
outstanding stock of EMCO must vote to approve
the merger;
- no party to the agreement has failed to comply
with the agreement in such a way that it would
have breached the agreement;
- no more than 5% of the shareholders of EMCO
common stock shall have exercised their
dissenters' rights under Colorado law; and
- no event shall have occurred which has a material
adverse effect on any of the parties to the
amended and restated merger agreement.
No Financing Contingency Advanced Energy will pay the merger consideration
to the EMCO shareholders from its existing cash.
Completion of the merger is not subject to Advanced
Energy obtaining any credit or financing.
1
<PAGE> 8
Termination of the Amended
and Restated Merger
Agreement (see page 30) The amended and restated merger agreement may be
terminated before completion of the merger if
certain events occur. These events include:
- if either party materially breaches the amended
and restated merger agreement;
- the merger is not completed by January 31, 2001;
- the EMCO shareholders do not approve the amended
and restated merger agreement at the special
meeting;
- by EMCO, if its Board of Directors determines
that abandoning the merger is required by its
fiduciary duties; and
- by Advanced Energy, if the EMCO Board of
Directors withdraws its recommendation of the
merger or recommends an alternative transaction
with a third party.
Termination Fee (see
page 31) If the amended and restated merger agreement is
terminated under certain circumstances, and if EMCO
enters into a transaction in which a third party
acquires control of EMCO or more than 50% of its
assets, EMCO might be required to pay Advanced
Energy a termination fee of $5 million.
Alternative Proposals and
Alternative Transactions
(see page 29) In general, EMCO has agreed that it will not seek
or encourage a competing transaction in which an
unsolicited offer is made to acquire EMCO, except
in very limited situations.
Rights You Have if You
Oppose the Merger (see
page 23 and Appendix C) You have the right to dissent from the merger and
be paid the amount that a Colorado court determines
to be the fair value of your EMCO shares, instead
of the amount Advanced Energy is offering. These
rights are called "dissenters' rights." Dissenters'
rights will only be available to shareholders who
(1) object to the proposed merger in writing prior
to or at the special meeting before the vote on the
matter is taken (a negative vote will not
constitute a written objection); and (2) do not
vote any of their shares in favor of the proposed
merger at the special meeting. However, a record
shareholder may dissent as to less than all the
shareholder's stock if the shareholder dissents
with respect to all shares beneficially owned by
any one person and provides EMCO with certain
information. Anyone wanting to exercise his, her or
its dissenters' rights must comply strictly with
the procedures outlined in Colorado law. A copy of
the applicable law is attached to this proxy
statement and should be reviewed carefully by
anyone wanting to assert dissenters' rights.
Who may Vote on the Merger
(see page 10) Shareholders of record as of the open of business
on September 21, 2000 will be entitled to notice
of, and to vote at, the special meeting.
Shareholder Vote Required
to Approve Amended and
Restated Merger Agreement
(see page 10) The amended and restated merger agreement must be
approved by holders of more than two-thirds of the
outstanding shares of EMCO stock entitled to vote.
Certain EMCO shareholders, who collectively own
approximately 60% of the outstanding EMCO common
stock, have agreed to vote their shares in favor of
the adoption of the amended and restated merger
agreement. If you do not vote your shares, the
effect will be a vote against the adoption of the
amended and restated merger agreement.
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<PAGE> 9
SUMMARY OF THE PROXY STATEMENT
This summary highlights selected information from this proxy statement. It
does not contain all of the information that might be important to you. You
should read the entire proxy statement and the documents referenced in it before
making a decision whether to vote in favor of the merger. In particular, you
should read the documents attached to this proxy statement, including the
amended and restated merger agreement, Appendix A; the opinion of Quist
Financial, Inc., Appendix B; and Article 113 of the Colorado Business
Corporation Act, Appendix C.
THE COMPANIES
[EMCO LOGO]
ENGINEERING MEASUREMENTS COMPANY
600 Diagonal Highway
Longmont, Colorado 80501
(303) 651-0550
EMCO designs, manufactures, and markets electronic and electro-mechanical
instruments (flowmeters) for measuring the flow of liquids, steam and gases.
EMCO generates its revenues from the sales of flowmeter hardware in both foreign
and domestic markets. Revenue is also generated through contract electronic
printed circuit board assembly. While EMCO has historically been strongest in
energy utility flow measurement, particularly steam metering, it also has
developed products capable of measuring most types of process fluids, as well as
fuel oils and natural gas. EMCO markets flowmeters worldwide, primarily
utilizing a network of distributors and commissioned sales representatives as
well as a direct sales force. EMCO's Mach One digital flow controller is the
subject of a joint development arrangement with Micron Technology. The Mach One,
designed for use in the semiconductor manufacturing industry, is in the
development stage and has attracted the attention of semiconductor equipment
manufacturers. EMCO was incorporated in Colorado in 1967.
[ADVANCED ENERGY LOGO]
ADVANCED ENERGY INDUSTRIES, INC.
1625 Sharp Point Drive
Fort Collins, Colorado 80525
(970) 221-4670
Advanced Energy designs, manufactures and supports technology solutions
that are used in the manufacturing of computer chips, CDs, flat panel displays
such as computer screens, DVDs, windows, eyeglasses, solar panels and other
products. Advanced Energy's power conversion and control 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. Advanced
Energy's systems also include process monitoring and machine control tools, ion
beam sources, dynamics temperature control products and plasma abatement
technologies. Advanced Energy was incorporated in Colorado in 1981 and
reincorporated in Delaware in 1995.
3
<PAGE> 10
THE MERGER
EMCO SPECIAL MEETING (PAGE 9)
The EMCO shareholders' special meeting to approve the amended and restated
merger agreement will be held on January 2, 2001 9:00 a.m., local time, at
EMCO's offices at 600 Diagonal Highway, Longmont, Colorado 80501. You can vote
at the special meeting if you owned shares of EMCO common stock at the opening
of business on September 21, 2000. You can cast one vote for each share of EMCO
common stock that you owned on that date.
EMCO VOTING AGREEMENTS (PAGE 10)
Seven EMCO shareholders, who collectively hold approximately 60.0% of the
EMCO common stock outstanding, have granted Advanced Energy an irrevocable proxy
to vote their shares of EMCO common stock in favor of the amended and restated
merger agreement and against any matter that could prevent the merger from being
completed.
EMCO'S REASONS FOR THE MERGER (PAGE 14)
EMCO's Board of Directors believes that the merger is fair and recommends
that you vote FOR adoption of the amended and restated merger agreement. The
EMCO board of directors has determined that the merger is in the best interests
of EMCO and its shareholders for numerous reasons. Those reasons include:
- the cash consideration to be received by the EMCO shareholders;
- the current business prospects of EMCO;
- the financial and other resources that will be needed to develop EMCO's
business prospects, including the Mach One digital flow controller;
- potential dilution of the share holdings of existing EMCO shareholders if
EMCO sought to finance its expansion through a further sale of equity
securities;
- the structure of the merger as a cash-for-stock transaction, which will
enable EMCO's shareholders to receive up to $7.09 in cash for each share
of EMCO stock they hold, thereby not subjecting the shareholders to the
risks of receiving or holding Advanced Energy's currently volatile stock;
- the premium included in the purchase price over the then current EMCO
stock price and over the lower range of values determined by the
valuation analysis performed by Quist Financial;
- the terms under which EMCO can consider alternative acquisition proposals
by third parties; and
- the opinion of Quist Financial that the consideration to be paid in the
merger is fair, from a financial point of view, to EMCO's shareholders.
OPINION OF EMCO'S FINANCIAL ADVISOR (PAGE 16)
In deciding to approve the merger, EMCO's board of directors considered an
opinion from Quist Financial, Inc. as to the fairness of the cash payment to be
received from a financial point of view to the EMCO shareholders. The full text
of the written opinion of the financial advisor is attached to this proxy
statement as Appendix B. You should read the entire opinion carefully for an
understanding of the assumptions made, matters considered and limitations on the
review undertaken.
MERGER CONSIDERATION (PAGES 22 AND 31)
At the effective time of the merger, Advanced Energy's subsidiary will be
merged into EMCO, with EMCO surviving as a subsidiary of Advanced Energy. If the
merger is completed, each outstanding share of EMCO common stock (other than
shares as to which dissenters' rights of appraisal have been duly and
4
<PAGE> 11
validly asserted) will be converted at the effective time into the right to
receive cash. The EMCO shareholders will receive an aggregate of $30 million
plus the exercise prices paid in cash by EMCO option holders on exercises of any
EMCO options between October 20, 2000 and the completion of the merger. It is
anticipated that the EMCO shareholders will receive between $7.00 and $7.09 per
share, without interest, although the per share consideration could be lower
depending on the EMCO options that are exercised before completion of the
merger. The merger consideration will be approximately $6.96 per share if all
options are exercised. In addition, Advanced Energy will assume any EMCO options
that are not exercised before the completion of the merger and will convert
those options into the right to purchase shares of Advanced Energy common stock.
Non-employee directors must exercise their EMCO options before the merger if the
price of Advanced Energy stock is $15.75 or lower at the time of Closing.
Advanced Energy has the right to require EMCO to cancel all options (other than
under the EMCO employee stock purchase plan) and pay the option holders for such
options if the fraction obtained by dividing the cash price per EMCO share paid
by Advanced Energy in the merger divided by the price of Advanced Energy stock
on the day before the merger is greater than 0.553.
INTERESTS OF CERTAIN EMCO DIRECTORS AND OFFICERS IN THE MERGER THAT ARE IN
ADDITION TO YOUR INTERESTS (PAGE 22)
When considering the recommendations of EMCO's board of directors, you
should be aware that certain EMCO directors and officers have interests in the
merger that are different from, or are in addition to, yours. These interests
could cause the directors and officers of EMCO to be more likely to favor the
merger than if they did not have these interests.
DISSENTERS' RIGHTS (PAGE 23)
Under Colorado law, you have the right to dissent from the merger, obtain
an appraisal of the fair market value of your EMCO shares and receive the
appraisal price in cash instead of the cash consideration payable in the merger.
To assert your dissenters' rights, you must strictly follow the procedures set
forth in Colorado law. A summary of these procedures and a copy of the
applicable Colorado law are included in this proxy statement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (PAGE 24)
The receipt of cash by an EMCO shareholder in the merger will be a taxable
transaction for federal income tax purposes and may also be taxable for state,
local, foreign and other tax purposes. In general, for federal income tax
purposes, under current law, an EMCO shareholder in whose hands the shares of
EMCO common stock are capital assets will recognize gain or loss equal to the
difference between the shareholder's adjusted tax basis in each block of the
shares converted to cash in the merger and the amount of cash received for those
shares.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, YOU SHOULD CONSULT YOUR TAX
ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER TO YOU.
CONDITIONS TO COMPLETION (PAGE 28)
Completion of the merger is subject to the satisfaction or waiver of
various closing conditions, including:
- approval of EMCO shareholders;
- the absence of breaches by the other party;
- holders of not more than 5% of the EMCO common stock exercising their
dissenters' rights; and
- no material adverse change to the other party.
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<PAGE> 12
If EMCO waives any conditions, it will consider the facts and circumstances
at that time and decide whether it should resolicit your proxy.
NO SOLICITATION; BOARD RECOMMENDATION (PAGE 29)
EMCO has agreed not to:
- solicit or participate in any discussions with any person or entity
concerning an alternative acquisition proposal;
- provide any information to any person concerning an alternative
acquisition proposal; or
- authorize or propose an alternative acquisition proposal.
TERMINATION OF THE AMENDED AND RESTATED MERGER AGREEMENT (PAGE 30)
The amended and restated merger agreement may be terminated before
completion of the merger upon the occurrence of certain events including:
- a material breach of the amended and restated merger agreement by
Advanced Energy or EMCO;
- the merger is not completed by January 31, 2001;
- the EMCO shareholders do not approve the amended and restated merger
agreement at the special meeting;
- by EMCO, if the EMCO board of directors determines that abandoning the
merger is required by its fiduciary duties; or
- by Advanced Energy, if the EMCO board of directors withdraws its
recommendation of the merger or recommends an alternative transaction
with a third party.
PAYMENT OF TERMINATION FEES (PAGE 31)
If the amended and restated merger agreement is terminated after an
alternative corporate transaction has been proposed to EMCO by a third party
because:
- the EMCO shareholders do not approve the amended and restated merger
agreement at the special meeting;
- the EMCO board of directors determines that abandoning the merger is
required by its fiduciary duties; or
- the EMCO board of directors withdraws its recommendation of the merger or
recommends an alternative transaction with a third party;
and if EMCO enters into a business combination or similar transaction in which a
third party acquires control of EMCO or more than 50% of its assets within 2
years after termination, then EMCO will pay Advanced Energy a termination fee of
$5 million.
VOTE REQUIRED TO APPROVE THE AMENDED AND RESTATED MERGER AGREEMENT (PAGE 10)
The affirmative vote of the holders of 66 2/3% of the shares of EMCO common
stock that were outstanding on the record date and entitled to vote is required
for adoption of the amended and restated merger agreement. Therefore abstentions
and broker non-votes will have the same effect as votes against the amended and
restated merger agreement. The Advanced Energy stockholders are not required to
vote on the amended and restated merger agreement.
6
<PAGE> 13
FORWARD-LOOKING STATEMENTS IN THIS PROXY STATEMENT
This proxy statement contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act. Forward-looking statements
include statements with respect to Advanced Energy's and EMCO's financial
condition, results of operations and business. Words such as anticipates,
expects, intends, plans, believes, seeks, estimates and similar expressions
identify forward-looking statements.
These forward-looking statements are not guarantees of future performance
and are subject to certain risks and uncertainties that could cause actual
results to differ materially from the results contemplated by the
forward-looking statements.
7
<PAGE> 14
EMCO SELECTED FINANCIAL DATA
The selected statement of operations data for 1996 through 2000 and the
related balance sheets as of April 30, 1996, 1997, 1998, 1999 and 2000 are
derived from financial statements audited by Grant Thornton LLP, independent
accountants. Data for 1999 and 2000 are included in EMCO's annual report on Form
10-KSB for the year ended April 30, 2000.
The selected statement of operations data for the three months ended July
31, 1999 and 2000 and the related balance sheet as of July 31, 2000 are derived
from unaudited financial statements and are included in EMCO's quarterly report
on Form 10-QSB for the three months ended July 31, 2000.
This financial data highlights selected financial information of EMCO but
does not necessarily include all of the financial information that is important
to you. You should also read "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and EMCO's financial statements and the
notes to those statements, included in EMCO's most recent Form 10-KSB and
10-QSB.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEARS ENDED APRIL 30, JULY 31,
-------------------------------------------------------------- -----------------------
1996(1) 1997 1998 1999 2000 1999 2000
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................... $8,665,808 $9,910,047 $9,862,297 $9,694,913 $9,234,052 $2,227,590 $2,462,131
Cost of sales................... 4,852,125 5,626,944 5,921,450 5,711,006 5,693,569 1,356,913 1,474,266
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit.................. 3,813,683 4,283,103 3,940,847 3,983,907 3,540,483 870,677 987,865
Operating expenses:
Research & development........ 427,032 620,931 604,167 790,252 880,932 237,627 267,302
Sales & marketing............. 2,040,468 2,404,919 2,366,339 2,142,086 1,917,928 453,997 576,983
General & administrative...... 860,540 852,130 966,245 937,873 872,223 231,354 379,855
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses........ 3,328,040 3,877,980 3,936,751 3,870,211 3,671,083 922,978 1,224,140
Income (loss) from continuing
operations.................... 485,643 405,123 4,096 113,696 (130,600) (52,301) (236,275)
Other income (expense).......... 120,110 50,863 73,961 118,214 (60,265) 28,305 19,489
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income before taxes......... 605,753 455,986 78,057 231,910 (190,865) (23,996) (216,786)
Provision (benefit) for income
tax........................... 205,704 184,194 (8,988) 34,972 (52,005) (29,457) (93,099)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)............. $ 400,049 $ 271,792 $ 87,045 $ 196,938 $ (138,860) $ 5,461 $ (123,687)
========== ========== ========== ========== ========== ========== ==========
Basic earnings (loss) per
share......................... $ 0.12 $ 0.08 $ 0.02 $ 0.05 $ (0.03) $ 0.00 $ (0.03)
========== ========== ========== ========== ========== ========== ==========
Diluted earnings (loss) per
share......................... $ 0.11 $ 0.08 $ 0.02 $ 0.05 $ (0.03) $ 0.00 $ (0.03)
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AS OF APRIL 30,
-------------------------------------------------------------- JULY 31,
1996(1) 1997 1998 1999 2000 2000
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash & cash equivalents......... $ 532,721 $ 547,837 $ 940,687 $ 697,697 $ 609,050 $ 583,610
Working capital................. 3,441,931 3,191,593 3,413,972 3,339,423 3,431,886 3,834,697
Total assets.................... 6,835,857 7,133,628 7,165,721 7,473,106 7,767,247 8,212,156
Long-term obligations........... 601,482 188,100 189,700 220,500 244,400 235,500
Shareholders' equity............ 5,040,961 5,398,760 5,933,234 6,281,297 6,447,284 6,862,177
Shares outstanding(2)........... 3,441,315 3,497,565 3,982,199 4,042,374 4,125,259 4,223,842
Book value per share............ $ 1.46 $ 1.54 $ 1.49 $ 1.55 $ 1.56 $ 1.62
</TABLE>
---------------
(1) The financial statements for fiscal year 1996 were consolidated with General
Metrology Corporation, a wholly owned subsidiary of EMCO, which was
liquidated in fiscal year 1997.
(2) Number of shares adjusted to reflect 25% stock dividend in October 1998.
8
<PAGE> 15
MARKET PRICE AND DIVIDEND INFORMATION FOR EMCO'S COMMON STOCK
MARKET PRICE INFORMATION
EMCO's common stock is quoted on the Nasdaq National Market under the
symbol "EMCO." The following tables show the range of high and low bid prices
for EMCO's common stock on the Nasdaq National Market for the periods indicated.
These prices reflect inter-dealer prices, without retail mark-up, mark-down or
commissions and may not necessarily represent actual transactions. The EMCO
prices also reflect a 25% stock dividend paid in October 1998.
<TABLE>
<CAPTION>
HIGH BID LOW BID
-------- -------
<S> <C> <C>
FY 1999
First quarter............................................. $ 6.25 $4.00
Second quarter............................................ 4.63 3.20
Third quarter............................................. 5.03 4.00
Fourth quarter............................................ 5.00 4.00
FY 2000
First quarter............................................. 6.25 4.25
Second quarter............................................ 7.94 4.50
Third quarter............................................. 9.50 4.75
Fourth quarter............................................ 8.13 5.81
FY 2001
First quarter............................................. 10.75 5.56
Second quarter............................................ 10.13 6.31
Third quarter (through November 28, 2000)................. 7.00 6.75
</TABLE>
DIVIDEND INFORMATION
EMCO has never paid cash dividends on its common stock and currently has no
plans to do so in the foreseeable future. EMCO paid a 25% stock dividend in
October 1998. As a result, EMCO issued 804,189 shares of its common stock. EMCO
has no restrictions on its ability to pay dividends.
NUMBER OF EMCO SHAREHOLDERS
As of September 21, 2000, there were 449 record holders of EMCO common
stock, as shown on the records of the transfer agent for EMCO's common stock.
EMCO SPECIAL MEETING
DATE, TIME AND PLACE; MATTERS TO BE CONSIDERED
We are sending you this proxy statement as part of the solicitation of
proxies by EMCO for use at the special meeting of EMCO shareholders scheduled to
be held at 9:00 a.m. local time on January 2, 2001, at EMCO's offices at 600
Diagonal Highway, Longmont, Colorado. We are first mailing this proxy statement,
including a notice of the special meeting of EMCO shareholders and a form of
proxy, on or about December 4, 2000.
At the special meeting, EMCO shareholders of record will be asked to
consider and vote upon the amended and restated merger agreement and transact
such other business as may properly come before the special meeting.
THE BOARD OF DIRECTORS OF EMCO HAS APPROVED THE AMENDED AND RESTATED MERGER
AGREEMENT AND HAS DETERMINED THAT THE MERGER IS ADVISABLE, FAIR TO YOU AND IN
YOUR BEST INTERESTS. THE BOARD OF DIRECTORS OF EMCO RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE AMENDED AND RESTATED MERGER AGREEMENT.
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<PAGE> 16
RECORD DATE; QUORUM; VOTING AT THE SPECIAL MEETING
EMCO's board of directors has fixed the open of business on September 21,
2000 as the record date for the determination of shareholders entitled to notice
of, and to vote at, the special meeting. Only holders of record of EMCO common
stock at the open of business on the record date are entitled to notice of and
to vote at the special meeting. As of the record date, there were 4,225,342
outstanding shares of EMCO common stock held of record by 449 persons.
The presence, in person or by proxy, of the holders of at least a majority
of the shares entitled to vote at the special meeting is necessary to constitute
a quorum. Pursuant to the Colorado Business Corporation Act and EMCO's articles
of incorporation and bylaws, approval of the amended and restated merger
agreement requires the affirmative vote of at least 66 2/3% of the outstanding
shares of EMCO common stock entitled to vote at the special meeting. Charles
Miller, William A. Ringer, Saied Hosseini, Walter Kluck, Thomas G. Miller, David
S. Miller and Trung Doan, who together hold approximately 60.0% of the EMCO
shares entitled to vote on the amended and restated merger agreement, have
signed voting agreements appointing Advanced Energy their proxy to vote in favor
of the merger.
Only shares affirmatively voted for approval of the amended and restated
merger agreement, including shares represented by properly executed proxies that
do not contain voting instructions, will be counted as votes "FOR" the amended
and restated merger agreement.
Brokers who hold shares of EMCO common stock in street name for a customer
who is the beneficial owner of those shares may not deliver a proxy to vote the
customer's shares without specific instructions from the customer. These
non-voted shares are referred to as broker non-votes. EMCO common stock held in
street name will only be voted if the broker receives a completed voter
instruction form from the beneficial owner of those shares.
Abstentions and broker non-votes will be included in determining the
presence of a quorum, but will have the same effect as voting against the
amended and restated merger agreement.
A list of shareholders of EMCO is available at the offices of EMCO and will
be available at the special meeting.
SECURITY OWNERSHIP OF MANAGEMENT; EMCO VOTING AGREEMENTS
As of the record date, EMCO's directors, executive officers, their
affiliates and a principal shareholder owned 2,534,583 shares of EMCO common
stock. Charles Miller, William A. Ringer, Saied Hosseini, Walter Kluck, Thomas
G. Miller, David S. Miller and Trung Doan, who together hold approximately 60.0%
of the EMCO shares entitled to vote on the amended and restated merger
agreement, have signed voting agreements appointing Advanced Energy their proxy
to vote in favor of the merger.
SOLICITATION OF PROXIES; REVOCATION
We cannot complete the merger without the approval of our shareholders.
Even if you submitted a proxy in connection with our previous proxy statement
dated September 22, 2000, you will need to complete the enclosed BLUE proxy in
order to vote on the merger. Proxies submitted in connection with our previous
proxy statement dated September 22, 2000, will not be counted toward approval of
the merger.
Shares of EMCO common stock represented by properly executed proxies
received in time for the special meeting will be voted in the manner specified
in the proxy. Proxies that are properly executed but do not contain instructions
will be voted "FOR" approval and adoption of the merger proposal. It is not
expected that any matter other than approval and adoption of the merger proposal
will be brought before the special meeting, but, if other matters are properly
presented, the persons named in such proxy will have authority, unless authority
to do so is withheld in the proxy, to vote in accordance with their judgment on
any other matter, including without limitation, any proposal to adjourn or
postpone the special meeting or otherwise concerning the conduct of the special
meeting.
10
<PAGE> 17
A shareholder may revoke a proxy at any time prior to its exercise by (i)
delivering, prior to the special meeting, to EMCO's Corporate Secretary, a
written notice of revocation bearing a later date or time than the proxy; (ii)
delivering to EMCO's Corporate Secretary, a duly executed proxy bearing a later
date or time than the revoked proxy; or (iii) attending the special meeting and
voting in person. Attendance at the special meeting will not by itself
constitute a revocation of a proxy.
EXPENSES
EMCO will bear the cost of the solicitation of proxies from its
shareholders, and EMCO and Advanced Energy are each bearing one-half the cost of
printing and mailing this proxy statement. In addition to the solicitation by
mail, EMCO's directors, officers and employees may solicit proxies from its
shareholders in person or by telephone, telegram or electronically. Those
directors, officers and employees will not be additionally compensated for that
solicitation, but may be reimbursed for out-of-pocket expenses in connection
therewith. EMCO has also retained a proxy solicitation firm, ADP Investor
Communication Services, to aid it in the solicitation process. EMCO will pay
that firm a fee of $2,950, plus reasonable expenses. Arrangements will also be
made with brokerage houses and other custodians, nominees and fiduciaries for
the forwarding of solicitation materials to the beneficial owners of shares held
of record by such persons. EMCO will reimburse those custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection therewith.
THE MERGER
BACKGROUND OF THE MERGER
Beginning in June 1999, the EMCO board of directors began to explore
various strategic alliances and arrangements for its semiconductor business.
EMCO received one proposal in June 1999 which involved a distribution agreement
for EMCO's products and a second proposal in the fall of 1999 to distribute the
Mach One product. Another proposal was evaluated beginning in September 1999
which included a buyout of the semiconductor portion of EMCO's business for cash
plus a royalty. Discussions were held with a company in late March 2000 through
mid-April 2000, regarding a strategic partnership related to the Mach One
product and an equity investment in EMCO by the company. A fifth company also
held discussions in April 2000 with EMCO regarding purchasing the Mach One
technology for cash. These proposals, each of which were from companies other
than Advanced Energy, were rejected by the EMCO board of directors as not giving
sufficient value to either the semiconductor business or the core flowmeter
business and because of unfavorable tax consequences to EMCO and its
shareholders.
At an EMCO board of directors meeting on February 3, 2000, directors Trung
Doan and William Ringer were asked to search for an executive to lead EMCO's
emerging semiconductor industry products division. Mr. Ringer contacted James
Gentilcore, President of Advanced Energy Voorhees, Inc., a subsidiary of
Advanced Energy, whom he had known for several years.
Charles E. Miller, President of EMCO, met with Mr. Gentilcore on February
14, 2000, to discuss EMCO's emerging semiconductor products division. They also
discussed an Advisory Council for EMCO, which Mr. Miller was working actively to
form, and whether Mr. Gentilcore would be interested in serving on EMCO's
Advisory Council concerning the semiconductor industry products.
On February 24, 2000, the Board of Directors of EMCO formed the Advisory
Council, consisting of Messrs. Miller, Doan, Ringer and Gentilcore and Jerry
Howard, to develop a business plan for the semiconductor products division. The
Advisory Council met on March 9 and April 7, 2000. The Advisory Council
recognized that it would be difficult for EMCO to enter the semiconductor market
alone and discussed the advisability of having EMCO seek a partnership or
partnerships with market leaders in complementary product areas to supplement
EMCO's existing joint development agreement with Micron Technology Inc. Mr.
Howard has subsequently become EMCO's Vice President of Operations.
11
<PAGE> 18
On April 18, 2000, Advanced Energy and EMCO entered into a non-disclosure
agreement relating to the exchange of non-public information in connection with
the consideration of a possible business combination or similar transaction.
On April 28, 2000, Mr. Miller sent Douglas S. Schatz, Chairman and Chief
Executive Officer of Advanced Energy, a copy of the EMCO Advisory Council's
business plan and requested a meeting to discuss a possible business
relationship.
At a meeting on May 4, 2000, Messrs. Miller, Schatz and Gentilcore
discussed the possibility of Advanced Energy acquiring EMCO for 800,000 to
1,000,000 shares of Advanced Energy common stock. On May 4, 2000, the closing
price of Advanced Energy's common stock was $60.625 per share. Mr. Miller agreed
to submit the concept proposal to EMCO's board of directors for consideration.
At an EMCO board of directors meeting on May 12, 2000, Mr. Miller
summarized the various discussions that he had held with representatives of
Advanced Energy and the possibility of completing some form of business
arrangement for EMCO's semiconductor business. At that same meeting, the EMCO
board of directors heard from G. James Williams, Jr. and David J. Cook of EMCO's
legal counsel, Chrisman, Bynum & Johnson P.C., regarding the directors'
fiduciary duties in this setting, met with representatives of an investment
advisor firm concerning work required to render a fairness opinion and the
Advisory Council presented its business plan. The general terms of the proposed
merger, additional possible terms and the merger process were described to the
EMCO board of directors by Mr. Miller and Mr. Williams. Mr. Wayne Ehlert of
Grant Thornton LLP, EMCO's accounting firm, responded to questions from EMCO's
board of directors.
On May 18, 2000, Mr. Schatz spoke with Mr. Miller and proposed to issue
800,000 shares of Advanced Energy common stock in exchange for all of the EMCO
common stock. On May 19, 2000, certain EMCO directors and officers discussed
possible business transactions with Advanced Energy, as well as an alternative
proposal from a company other than Advanced Energy. In light of Advanced
Energy's then reduced stock price, the participating EMCO directors approved
submitting a proposal to Advanced Energy recommending a joint venture instead of
a full business combination. On May 19, 2000, the closing price of Advanced
Energy's common stock was $46.50 per share. Mr. Miller sent this proposal to Mr.
Schatz by e-mail on May 22, 2000.
On May 27, 2000, Mr. Ringer and Mr. Doan met with Mr. Schatz to discuss the
possibility of Advanced Energy acquiring only EMCO's semiconductor business.
This possibility was evaluated, but was rejected for tax and accounting reasons.
On June 14, 2000, Mr. Ringer and Mr. Miller met with Messrs. Schatz and
Gentilcore and Joseph Monkowski, Senior Vice President of Advanced Energy, and
representatives of Thelen Reid & Priest LLP, Advanced Energy's legal counsel, to
discuss the various alternative transactions. Advanced Energy proposed acquiring
EMCO for 900,000 shares of Advanced Energy common stock. On June 14, 2000, the
closing price of Advanced Energy's common stock was $53.375. Messrs. Ringer and
Miller indicated to Advanced Energy that they would present the proposal to
EMCO's board of directors.
During the week of June 15, 2000, Mr. Ringer began the search for a
financial advisor. After receiving a recommendation from a former business
associate and reviewing credentials, Mr. Ringer recommended engaging Quist
Financial, Inc. to serve as financial advisor to EMCO.
On June 15, 2000, the EMCO board of directors held a telephone board
meeting, which Mr. Williams of Chrisman, Bynum & Johnson, P.C. also attended.
Charles Miller described the terms of Advanced Energy's June 14, 2000 proposal.
The consequences, risks, and benefits of the merger were discussed. Messrs.
Miller and Ringer were authorized to continue negotiations with Advanced Energy.
Mr. Miller was authorized to negotiate to retain Quist Financial to render a
fairness opinion. On June 19, 2000, EMCO retained Quist Financial Inc.
From June 15, 2000 to June 30, 2000, Advanced Energy and EMCO conducted due
diligence reviews of each other and held numerous conference calls and meetings
to discuss the terms of the potential
12
<PAGE> 19
acquisition. Mr. Miller kept the EMCO board of directors fully informed as to
the status of all discussions with Advanced Energy.
On June 29, 2000, the EMCO board of directors met to discuss a proposed
merger agreement submitted by Advanced Energy and the fairness opinion prepared
by Quist Financial. Mr. Brett Suchor of Quist Financial discussed the memorandum
supporting the fairness opinion in detail and responded to questions from the
EMCO board of directors. The EMCO board of directors also discussed several
issues relating to pooling of interests accounting treatment with
representatives of Grant Thornton LLP, EMCO's accounting firm.
From June 29, 2000 to July 6, 2000, Advanced Energy and EMCO continued to
negotiate the merger agreement.
On July 6, 2000, the EMCO board of directors met with representatives of
EMCO's financial, legal and accounting advisors to discuss the terms of the
merger agreement. Mr. Suchor of Quist Financial presented a financial analysis
of the transaction and responded to questions from the EMCO board of directors.
Legal counsel and EMCO's accountants also responded to questions from board
members regarding the terms of the agreement and pooling of interests accounting
treatment. EMCO's accountants delivered their pooling of interests report to the
EMCO board of directors. Following these discussions, the EMCO board of
directors determined that the merger agreement and the merger were in the best
interests of EMCO and its shareholders and authorized EMCO to enter into the
merger agreement.
Also on July 6, 2000, the Advanced Energy board of directors met via
teleconference to discuss the proposed transaction. After hearing presentations
from Messrs. Schatz and Monkowski on the due diligence investigations, the
proposed merger agreement and the strategic benefits of the proposed
acquisition, a lengthy and detailed question and answer session followed until
all the director's questions had been addressed. The Advanced Energy board of
directors approved the merger agreement and authorized Advanced Energy to enter
into the merger agreement.
Following the Advanced Energy and EMCO board of directors meetings,
Advanced Energy and EMCO entered into the merger agreement and Advanced Energy
issued a press release announcing the execution of the agreement.
At a special meeting of the EMCO board of directors held on October 16,
2000, EMCO's directors reviewed with EMCO's legal and financial advisors the
terms of the merger agreement in light of the recent drop in the price of
Advanced Energy's common stock. On October 13, 2000, the closing price of
Advanced Energy common stock was $16.50. The Board authorized Messrs. Miller and
Ringer to renegotiate the merger
On October 17, 2000, Messr. Schatz, Miller and Ringer discussed changing
the consideration for the merger from 900,000 shares of Advanced Energy common
stock to $30,000,000 in cash. The parties further discussed adding to the
purchase price the amounts paid in cash by EMCO option holders on exercise of
their options. On that date the EMCO board of directors met to discuss the
proposed terms and received the initial views of Quist Financial on the
proposal. The Board approved additional negotiation of a $30 million cash
transaction.
From October 17, 2000 to October 20, 2000, Advanced Energy and EMCO and
their legal advisors negotiated the amended and restated merger agreement. The
agreement was approved by the EMCO board of directors on October 22, 2000, with
Mr. Trung Doan abstaining, because of his conflict of interest. The directors
specifically noted that the amended and restated merger agreement provided that
EMCO would not be required to complete the merger, unless it received, a
fairness opinion from EMCO's financial advisors with respect to the proposed
cash consideration.
On October 23, 2000, the special meeting of shareholders was held and
adjourned to consider the proposed revised arrangement.
On October 26, 2000, the Board held a special meeting to review the draft
fairness opinion of Quist Financial with Quist Financial.
13
<PAGE> 20
On October 27, 2000, the Board held a special meeting concerning certain
option matters. No action was taken regarding the stock options.
Quist Financial, Inc. delivered a fairness opinion to the EMCO board of
directors in connection with the amended and restated merger agreement on
November 6, 2000. A copy of the fairness opinion is attached to this proxy
statement as Appendix B.
RECOMMENDATION OF THE EMCO BOARD OF DIRECTORS AND EMCO'S REASONS FOR THE MERGER
The board of directors of EMCO believes that the amended and restated
merger agreement is advisable and in the best interests of EMCO and its
shareholders. Accordingly, the EMCO board of directors has approved the amended
and restated merger agreement and recommends that EMCO shareholders vote for the
adoption of the amended and restated merger agreement.
In approving the amended and restated merger agreement, EMCO's board of
directors considered the following benefits, which, in the view of the board of
directors, supported its determination:
- The combined company, as compared to EMCO on its own, will have greater
financial resources and provide increased opportunities to expand EMCO's
product offerings and markets;
- The difficulties of EMCO entering the semiconductor equipment industry,
which was a business in which it had not previously engaged, and in
financing that project and building a world wide sales and support
organization for that market;
- The merger may provide a more stable platform for EMCO's employees and
customers;
- The merger will yield for EMCO shareholders an attractive cash payment
for their shares of EMCO common stock;
- Potential dilution of the share holdings of existing EMCO shareholders if
EMCO sought to finance its expansion through a further sale of equity
securities;
- The US and Israeli armies are jointly developing a Tactical High Energy
Laser (THEL), of which EMCO's digital valve products are key components,
as a defense against short range missiles. TRW is serving as the general
contractor on this project. Should this program be deployed, there could
be significant expenditures required for facilities and equipment in
order to meet the demand for this product.
- The structure of the merger as a cash-for-stock transaction, which will
enable EMCO's shareholders to receive up to $7.10 in cash for each share
of EMCO stock they hold, thereby not subjecting the shareholders to the
risks of receiving or holding Advanced Energy's currently volatile stock;
- The premium included in the purchase price over the then current EMCO
stock price and over the lover range of values determined by the
valuation analysis performed by Quist Financial;
- The terms under which EMCO can consider alternative acquisition proposals
by third parties; and
- The opinion of Quist Financial that the consideration to be paid in the
merger is fair, from a financial point of view, to EMCO's shareholders.
In reaching its decision to approve the amended and restated merger
agreement, the board of directors of EMCO consulted with EMCO's management, as
well as with its financial, accounting and legal advisors. The discussion of
factors considered by EMCO's board of directors is not intended to be exclusive,
but summarizes the material factors considered.
EMCO's board of directors reviewed various historical information
concerning EMCO's and Advanced Energy's respective businesses, financial
performances and conditions, stock prices and trading activity, operations,
management teams and competitive positions. EMCO's board of directors considered
available information about Advanced Energy, including its public reports for
its most recently completed
14
<PAGE> 21
fiscal year and subsequent fiscal quarters as filed with the Securities and
Exchange Commission. In addition, the board of directors instructed management
to conduct additional due diligence on Advanced Energy's financial condition and
prospects, and the results of that due diligence were reported to EMCO's board
of directors. The board of directors concentrated in particular on each
company's financial condition, results of operations, businesses and prospects
before and after giving effect to the merger. Based in part upon these factors,
EMCO's board of directors believes that a merger with Advanced Energy would be
in the best interests of EMCO and its shareholders.
EMCO's board of directors compared the consideration to be received by EMCO
shareholders in the merger with the consideration received in various comparable
merger transactions. The details of this comparison are set forth below under
"-- Opinion of Quist Financial Inc." on page 16. Based on this comparison, the
board of directors of EMCO believes that the merger consideration falls within
the range of what is reasonable and fair for EMCO shareholders.
EMCO's board of directors viewed the terms of the amended and restated
merger agreement, including but not limited to, the cash consideration to be
paid to the EMCO shareholders, the parties' representations, warranties and
covenants, the conditions to their respective obligations and the termination
provisions, as reasonable in light of the entire transaction. EMCO's board of
directors also considered the terms of the proposed amended and restated merger
agreement regarding EMCO's rights to consider and negotiate other acquisition
proposals in certain circumstances, as well as the possible effects of
provisions regarding liquidated damages. The board of directors considered that
the provisions in the amended and restated merger agreement for the benefit of
EMCO reasonably protected the interests of EMCO shareholders, and those for the
benefit of Advanced Energy did not present any significant reasons not to
proceed with the transaction considering all of the circumstances.
EMCO's board of directors considered the anticipated impact of the proposed
transactions on the combined company's future performance, financial and
otherwise, the relative size of EMCO and Advanced Energy, and the improved
prospects of the success of the Mach One semiconductor industry product if the
merger occurred.
EMCO's board of directors considered the merger's impact on EMCO's
customers and employees. Generally, the board viewed the impact on employees as
positive, in that they would become part of a diversified leader in
semiconductor capital equipment manufacturing markets and participate in a
successful company that has substantially greater resources than EMCO. EMCO's
board of directors also generally viewed the impact on EMCO's customers as
positive, in that they also would benefit from having a much larger company
standing behind EMCO's products and the knowledge that EMCO likely will have the
resources to continue to provide precision flowmeters for the semiconductor
industry and flowmeters and controllers for liquid, gas and steam applications
for other industries. Those same benefits would apply to EMCO's contract
electronics manufacturing and digital valve businesses.
EMCO's board of directors received reports from EMCO's management and its
financial advisor as to the results of their due diligence investigation of
Advanced Energy, which consisted in part of reviewing publicly available
information and research analyst reports. The reviewed reports indicated no
significant issues that would preclude approval of the merger by EMCO's board of
directors.
The board of directors of EMCO also identified and considered a variety of
potentially negative factors in its deliberations concerning the merger,
including, but not limited to:
- The challenges of integrating a business such as EMCO with a much larger
company such as Advanced Energy, and the associated risk that the
potential benefits sought in the merger might not be fully realized;
- The change from a tax-free transaction to a taxable transaction;
15
<PAGE> 22
- The possibility that the merger might not be consummated, and the effect
of public announcement of the merger on:
- EMCO's sales, operating results and stock price;
- EMCO's distributor network;
- EMCO's ability to attract and retain personnel;
- the progress of potential and actual development projects with third
parties who may view working with Advanced Energy differently than
working with EMCO; and
- EMCO's ability to secure financing for its future expansion.
- The possibility of substantial charges to be incurred in connection with
the merger, including costs of integrating the businesses and transaction
expenses arising from the merger;
- The risk that despite the efforts of the combined company, key technical
and management personnel might not remain employed with the combined
company;
- The interests of certain officers and directors of EMCO in the merger,
including the matters described under "The Merger -- Interests of EMCO's
Management in the Merger and Potential Conflicts of Interests" on page
22; and
- The effect on EMCO's ability to consider competing offers prior to
completion of the merger, including the effect of the covenant to not
solicit other bidders and the liquidated damages provisions in the merger
agreement.
In the judgment of EMCO's board of directors, the potential benefits of the
amended and restated merger agreement outweighed these considerations.
The board of directors of EMCO also considered what alternatives existed to
the merger, including reviewing the prospects for EMCO continuing as an
independent company and alternative transactions previously considered by EMCO.
In light of the factors described above, the board of directors determined that
the value and benefits available to EMCO shareholders from the amended and
restated merger agreement exceeded the potential they might realize from EMCO
continuing as an independent company.
EMCO's board of directors also considered the potential that a third party
might be willing to enter into a strategic relationship with EMCO or propose to
acquire EMCO. The board of directors did not, however, view this possibility as
likely to provide an alternative superior to the merger with Advanced Energy. In
this light, the board of directors of EMCO also evaluated Advanced Energy's
requirement that EMCO agree to the provisions of the amended and restated merger
agreement limiting EMCO's rights to consider and negotiate acquisition proposals
with others. It appeared unlikely to the board of directors that EMCO would be
able to enter into a transaction with Advanced Energy without these provisions.
OPINION OF QUIST FINANCIAL, INC.
Pursuant to an engagement letter dated October 18, 2000 (the "Engagement
Letter"), the EMCO board of directors retained Quist Financial, Inc. to act as
its exclusive financial advisor in connection with the merger, as described in
the Engagement Letter. Quist Financial's business is the valuation of businesses
and business interests, including both privately held and publicly traded
companies, for all purposes, including mergers and acquisitions. Since 1984,
Quist Financial, Inc. has successfully completed more than 1,500 valuation
projects, principally in the Rocky Mountain region. Quist's professional staff
is experienced in valuing companies in a wide range of industries (from emerging
high tech and Internet companies to those in traditional manufacturing,
distribution and service businesses). EMCO selected Quist Financial as its
financial advisor on the basis of Quist Financial's experience and expertise in
transactions similar to the merger and its reputation in the business community.
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On October 26, 2000, Quist Financial delivered to the EMCO board of
directors its opinion that the purchase price is fair, from a financial point of
view, to EMCO's shareholders as of that date. No limitations were imposed by the
EMCO board of directors on Quist Financial with respect to the investigations
made or procedures followed in rendering its opinion.
THE FULL TEXT OF THE QUIST FINANCIAL WRITTEN OPINION TO THE EMCO BOARD OF
DIRECTORS IS ATTACHED AS APPENDIX B AND IS INCORPORATED HEREIN BY REFERENCE AND
SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY IN CONNECTION WITH THIS PROXY
STATEMENT. THE FOLLOWING SUMMARY OF QUIST FINANCIAL'S OPINION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
Quist Financial's opinion is directed to the EMCO board of directors and
does not constitute a recommendation to any shareholder as to how such
shareholder should vote with respect to the amended and restated merger
agreement. Quist Financial's opinion addresses only the financial fairness of
the purchase price to be received by the EMCO shareholders pursuant to the
amended and restated merger agreement and does not address the relative merits
of the merger or alternatives to the merger, the underlying decision of the EMCO
board of directors to proceed with or effect the merger or any other aspect of
the merger. In furnishing this opinion, Quist Financial did not admit that it is
an expert within the meaning of the term "expert" as used in the Securities Act,
nor did it admit that its opinion constitutes a report or valuation within the
meaning of the Securities Act.
In connection with its opinion, Quist Financial, among other things:
- reviewed a draft of the amended and restated merger agreement;
- held discussions with senior management, directors, representatives and
other advisors of EMCO concerning the business, operations and prospects
of EMCO and Advanced Energy;
- examined publicly available business and financial information relating
to EMCO and Advanced Energy;
- examined financial forecasts of EMCO and other information and data for
EMCO and Advanced Energy, including strategic implications and
operational benefits anticipated to result from the merger;
- reviewed the financial terms of the merger in relation to, among other
things, current and historical market prices and trading volumes of EMCO
capital stock;
- reviewed the historical and projected earnings of and other operating
data of EMCO;
- reviewed the historical and projected capitalization and financial
condition of EMCO;
- considered the financial terms of certain other similar transactions
recently effected that it considered relevant in evaluating the purchase
price and analyzed certain financial, stock market and other publicly
available information relating to the businesses of other companies whose
operations they considered relevant in evaluating those of EMCO and
Advanced Energy;
- considered and reviewed earnings projections for comparable publicly
traded companies as published by I/B/E/S International Inc.; and
- conducted such other analyses and examinations and considered such other
information and financial, economic and market criteria as it deemed
appropriate.
The financial terms and conditions of the draft amended and restated merger
agreement reviewed by Quist Financial are identical to those contained in the
executed amended and restated merger agreement.
In connection with its review, Quist Financial relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available, furnished to them or discussed with
them. Quist Financial relied upon the assurances of the management of EMCO
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<PAGE> 24
that they were not aware of any facts that would make any of the information
provided to Quist Financial inaccurate or misleading. Quist Financial further
relied for purposes of its opinion upon the assurances of the management of EMCO
that the information provided to Quist Financial had been prepared on a
reasonable basis in accordance with industry practice and, with respect to
financial forecasts of EMCO, reflects the best currently available estimates and
judgment of EMCO's management. EMCO and Advanced Energy do not publicly disclose
internal management forecasts, and EMCO's forecasts provided to Quist Financial
were not prepared with a view toward public disclosure. Any forecasts used by
Quist Financial were based upon numerous variables and assumptions that are
inherently uncertain, including, without limitation, factors related to general
economic and competitive conditions. Accordingly, actual results could vary
significantly from those set forth in such forecasts.
Quist Financial did not make and was not provided with an independent
evaluation or appraisal of the assets of EMCO or Advanced Energy and did not
undertake any independent analysis of any pending or threatened litigation,
possible unasserted claims or other contingent liabilities. Quist Financial has
assumed that all necessary regulatory approvals and consents required for the
transaction will be obtained in a manner that will not have adverse effects on
EMCO or Advanced Energy or change the purchase price. Quist Financial has
assumed that neither EMCO nor Advanced Energy are party to any material pending
transactions, including external financing, recapitalizations, acquisitions or
merger discussions, other than the merger or in the ordinary course of business.
Finally, Quist Financial's opinion is based on economic, monetary and market and
other conditions disclosed to Quist Financial as of, and the information made
available to Quist Financial as of, the date of its opinion. Accordingly,
although subsequent developments may affect its opinion, Quist Financial has not
assumed any obligation to update, revise or reaffirm its opinion. Quist
Financial has also assumed that the merger will be consummated in accordance
with the amended and restated merger agreement without waiver of any of the
conditions precedent to the merger contained in the amended and restated merger
agreement. Set forth below is a brief summary of the report presented by Quist
Financial to the EMCO Board on October 26, 2000 in connection with its opinion.
Summary Of Advanced Energy Proposal
Quist Financial calculated that as of October 25, 2000, the Advanced Energy
proposal reflected that for each EMCO share held, a shareholder would receive
$7.10 assuming no EMCO option holders elect to exercise any such options or
$6.96 assuming all options are exercised by option holders. The estimated gross
aggregate consideration or purchase price at that time was valued at between
$31,068,717 and $31,356,986, depending on the number of EMCO options exercised
from October 20, 2000 to closing. Quist Financial prepared a table showing a
range of potential values of the proposed transaction based upon the number of
EMCO options exercised between October 20, 2000 and closing.
Methodology
Quist Financial evaluated the merger proposal using two market approaches:
(i) public guideline company multiples with a control premium and comparable
change of control valuations, and (ii) an income approach using a discounted
cash flow analysis. To reflect the differences in the market risk factors for
the industrial and semiconductor markets, Quist Financial divided EMCO's
historical and projected results in two divisions -- the Industrial Segment and
the Semiconductor Segment. The Industrial Segment primarily includes the
Flowmeter products that are not produced for the semiconductor market, including
the THEL digital valve product. The Semiconductor Segment includes the MFC, LFC,
Pressure, and Flow product lines that to date have not generated revenues and
are dependent (at least in part) on adoption by the semiconductor market.
Market Approaches
1. PRICE TO PROJECTED EARNINGS
Quist Financial used an analysis of similar public companies as an
indication of the value of EMCO. Quist Financial examined 321 publicly traded
companies in businesses similar to EMCO's and selected
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nine of these companies as the best guideline companies for EMCO's business.
This group consisted of the following companies:
<TABLE>
<S> <C>
1. Badger Meter Corporation 6. American Technical Ceramics
2. Dionex Corporation 7. Dense Pac Microsystems, Inc.
3. The Donaldson Company 8. Jmar Technologies
4. Millipore Corporation 9. Zevex International
5. Pall Corporation
</TABLE>
From these companies, Quist Financial calculated a range of valuation
multiples that reflect prices paid for common stock in companies similar to
EMCO. This analysis imputed a range of multiples of between 8.8 to 25.8 times
projected earnings in 2000 and between 7.1 and 37.1 times projected earnings in
2001. Because 2001 projected earnings are substantially above EMCO'S historical
results, Quist Financial determined that investors would place principal
emphasis on the valuation indications resulting from the 2000 projections. Based
on this evidence, Quist Financial derived a range of values of between $20.0
million and $40.0 million for EMCO.
1.1 CONTROL PREMIUM
These indicated values are based on the trading price of minority shares in
publicly traded companies. Therefore, Quist Financial applied a control premium
in order to compare the value to the proposed merger. Quist Financial analyzed
the average control premium in 1999 and the first quarter of 2000 for companies
with SIC Codes relevant to EMCO. Quist Financial then selected a control premium
range of 40%-50% for EMCO's business.
Applying these premiums to the range values above results in a range of
control values for EMCO between $28.0 million and $60.0 million.
2. MERGER AND ACQUISITION APPROACH
Quist Financial examined twenty-six merger and acquisition transactions
announced between January 21, 1998 and October 20, 2000 within the SIC Codes
relevant to EMCO. Based on this analysis, the valuation multiples (market value
of invested capital ("MVIC") to EBITDA, MVIC to Book Value of Invested Capital,
MVIC to Revenues and MVIC to Price-to-Projected Earnings for the current fiscal
year end) implied by the proposed merger with Advanced Energy exceeded the
median of the twenty-six comparable transactions Quist Financial reviewed.
Income Approach
Quist Financial's income approach focused on future cash flows available to
shareholders. Cash flows were then discounted back to the present using
appropriate discount rates. EMCO's business was again broken into the same two
divisions for the discounted future cash flow analysis.
The results for the Industrial Segment are based on management's
projections for all products not built for the semiconductor market. According
to these projections, the Hydroflow, SonicJet and THEL products will be the
primary providers of growth in the Industrial Segment. From Ibbotson's Cost of
Capital, Quist Financial determined that the weighted average cost of capital
("WACC") for the industry is 14%. Quist Financial determined that an appropriate
WACC to apply to the THEL was a range of WACC's between 40%-60% and an
appropriate WACC for the Hydroflow and SonicJet was a range of between 30%-50%.
By weighting the WACC associated with each of the forecasted revenue streams,
Quist Financial determined that the overall WACC for the industrial segment was
20%-40%. Applying this discount, Quist Financial discounted the interim free
cash flows from the Industrial Segment and derived a terminal value to capture
the returns beyond the forecast period. This methodology resulted in a range of
values between $9.7 million and $33.6 million for the Industrial Segment. Based
on the risk profile, Quist Financial determined a range of between $13.0 million
and $25.3 million as suitable for the Industrial Segment.
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<PAGE> 26
A similar methodology was then applied to the Semiconductor Segment.
However, additional financing in the minimum amount of $2-5 million would be
required for the Semiconductor Segment to achieve management's projections.
Based upon the projected exit value for the semiconductor business, Quist
Financial determined that the financing would result in a 10% dilution of the
equity. Based on the risk profile, Quist Financial determined a range of values
between $12.3 million and $26.7 million as suitable for the Semiconductor
Segment. After applying the dilution impact, Quist Financial determined a range
of values for the semiconductor segments between $11.1 million and $24.1
million.
Summing the Industrial Segment and the Semiconductor Segment resulted in a
total value of EMCO between $24.1 million and $49.4 million.
Quist Financial also performed a discounted cash flow analysis based on
consolidated projections. In these projections, approximately half of the
revenue would result from the Semiconductor Segment, 20% from new Industrial
Segment products and 30% from existing markets. For this analysis, Quist
Financial selected a range of WACC from 28% to 48%, took into account the growth
rate of the total company with both divisions, EBITDA multiples and the dilution
from a partial funding of the growth of the Semiconductor Segment using funds
derived from the Industrial Segment rather than venture capital financing. Based
on these assumptions, Quist Financial determined a range of $28.5 million to
$52.8 million for the value of EMCO. After accounting for the dilution impact,
the total value of the equity of EMCO was between $27.0 million and $50.2
million. This amount was within the ranges indicated by valuing EMCO's product
lines separately and by valuing the consolidated EMCO.
Dilution Analysis
Because the primary consideration for EMCO shareholders is cash, Quist
Financial determined that the risk of dilution to shareholders is limited to the
impact of option exercises by EMCO option holders. Because the aggregate value
of the exchanged Advanced Energy options exceeds the aggregate value of the EMCO
options, Quist Financial determined that option holders will likely choose to
convert their EMCO options to Advanced Energy options rather than exercise their
EMCO options and that current EMCO shareholders will be subject to a minimal
amount of dilution between October 20, 2000 and the closing of the merger.
Historical Multiples
Quist Financial reviewed MVIC to EBITDA, MVIC to Book Value of Invested
Capital and Price to Earnings multiples for the annual periods ending June 30,
1998, 1999 and 2000. These historical periods were selected as reflective of the
multiples paid for EMCO historically because they do not reflect the impact of
merger negotiations with Advanced Energy. After reviewing these multiples, Quist
Financial determined that the proposed transaction was above the range indicated
by the historical multiples paid for EMCO's common stock.
Implied Historical Exchange Ratio
Quist Financial derived implied historical exchange ratios by dividing the
closing price per share of EMCO common stock by the closing price per share of
common stock of Advanced Energy for each trading day in the 36-month period from
June 19, 1997 to June 19, 2000, the 24-month period ending June 19, 2000 and the
12-month period ending June 19, 2000. Quist Financial calculated that the
implied exchange ratio as of October 25, 2000 was 0.4438, that the highest
implied exchange ratio during the 36-month period and the 12-month period were
0.7130 and 0.2254, respectively, and that the lowest implied exchange ratio
during the 36-month period was 0.0838. This comparison helped identify the
premium being offered. Over the 18 months ending June 19, 2000, the exchange
ratio offered by Advanced Energy is well above the implied exchange ratios.
While the foregoing summary describes all analyses and examinations that
Quist Financial deems material to its opinion, it is not a comprehensive
description of all analyses and examinations actually conducted by Quist
Financial. The preparation of a fairness opinion necessarily is not susceptible
to partial
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analysis or summary description. Quist Financial believes that its analyses and
the summary set forth above must be considered as a whole and that selecting
portions of its analyses and of the factors considered, without considering all
analyses and factors, would create an incomplete view of the process underlying
the analyses set forth in the presentation to the EMCO board. In addition, Quist
Financial may have given various analyses more or less weight than other
analyses, and may have deemed various assumptions more or less probable than
other assumptions. The fact that any specific analyses has been referred to in
the summary above is not meant to indicate that such analyses was given greater
weight than any other analysis. Accordingly, the ranges of valuations resulting
from any particular analysis described above should not be taken to be Quist
Financial's view of the actual value of EMCO.
As described above in "Reasons for the Merger -- EMCO," Quist Financial's
opinion and presentation to the EMCO board were among the many factors taken
into consideration by the EMCO board in making its determination to approve, and
to recommend that the EMCO shareholders approve, the merger.
The purchase price was determined pursuant to negotiations between Advanced
Energy and EMCO and not pursuant to recommendations from Quist Financial. Quist
Financial was not requested to, nor did it, assist EMCO in soliciting
indications of interest from third parties for all or any part of EMCO.
Consequently, Quist Financial's opinion and presentation to the EMCO Board
should not be viewed as determinative of the EMCO Board's decision to approve
the merger.
EMCO agreed to pay Quist Financial, a fee of $35,000. $12,500 of the fee
was paid on signing of the engagement letter and $22,500 of that fee was payable
upon delivery of the opinion. EMCO also agreed to reimburse Quist Financial for
its reasonable out-of-pocket expenses. Quist is only responsible for its own
gross negligence or willful misconduct. Any liability of Quist Financial to
parties in connection with the merger cannot exceed the aggregate fees actually
received by Quist Financial under the engagement letter. EMCO has agreed to
indemnify Quist Financial, its affiliates, and their respective partners,
directors, officers, agents, consultants, employees and controlling persons
against certain liabilities including liabilities under the federal securities
laws.
ADVANCED ENERGY'S REASONS FOR THE MERGER
The Advanced Energy board of directors has determined that the amended and
restated merger agreement is in the best interests of Advanced Energy and its
stockholders. In deciding to approve the amended and restated merger agreement,
the Advanced Energy board of directors consulted with its legal and financial
advisors, as well as senior management of Advanced Energy and considered the
potential benefits from combining EMCO with Advanced Energy to include the
following:
- The addition of EMCO's digitized flow control technology will advance the
Company in its strategy to provide systems to its semiconductor OEM
customers that are more complete, integrated solutions to meet their
process requirements;
- Flow measurement and control is one of the primary elements that affect
wafer quality, yield and system reliability, and EMCO's technology
appears to significantly outperform competitive solutions; and
- EMCO's approach to flow control uniquely addresses the next wave of
process challenges.
The board of directors also considered the following potentially countervailing
factors:
- Advanced Energy is inexperienced with flow control technology and,
accordingly, may not be able to integrate the technology with Advanced
Energy's existing products to provide the integrated solutions it
anticipates;
- The payment of $30 million to EMCO's shareholders plus the exercise
prices paid in cash by EMCO option holders on exercise of any EMCO
options between October 20, 2000 and the completion of the merger;
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- The costs to integrate EMCO's business with Advanced Energy's existing
business may be significant and involved unexpected expenses; and
- Integration of EMCO's business with Advanced Energy's existing business
may require significant diversion of management's attention and other
Advanced Energy resources.
On balance, the board of directors determined the acquisition of EMCO to be in
the interests of Advanced Energy and its stockholders and accordingly, approved
the amended and restated merger agreement.
MERGER CONSIDERATION
Your shares of EMCO common stock will be converted into the right to
receive up to $7.09 per share in cash, without interest, although the per share
consideration could be lower depending on the EMCO options that are exercised
before completion of the merger. If all options are exercised you will receive
$6.96 per share.
PAYMENT FOR SHARES
Once the merger has been completed, the paying agent will send you a letter
of transmittal with instructions for tendering your EMCO common stock
certificates in exchange for the cash payment from Advanced Energy.
Any cash made available to the paying agent that remains unclaimed by EMCO
shareholders for one year after the time the merger becomes effective will be
returned to Advanced Energy, and any EMCO shareholders who have not tendered
their EMCO certificates by that time must then look to Advanced Energy for
payment of their claim for merger consideration subject to state unclaimed
property laws.
If you have lost your EMCO stock certificate, or if your certificate has
been stolen or destroyed, you should notify the paying agent. Once you have made
an affidavit of the fact that the certificate has been lost, stolen or
destroyed, in a form reasonably satisfactory to Advanced Energy, you will be
entitled to receive the merger consideration for your shares. However, Advanced
Energy or the paying agent may require you to deliver a suitable bond or
indemnity along with your affidavit.
INTERESTS OF EMCO'S MANAGEMENT IN THE MERGER AND POTENTIAL CONFLICTS OF
INTERESTS
The directors and officers of EMCO participate in arrangements with
Advanced Energy that provide them with interests in the merger that are
different from, or in addition to, yours including the following:
- Charles E. Miller, EMCO's current Chairman and Chief Executive Officer
will be the Chief Technical Officer and a director of EMCO following the
merger.
- EMCO's directors will receive continued indemnification from certain
liabilities and directors' and officers liability insurance following the
merger. See "-- Indemnification; Directors' and Officers' Insurance."
These interests could cause the directors and officers of EMCO to be more
likely to favor the merger than if they did not hold these interests.
Trung Doan, a director of EMCO, was appointed to the board of directors of
Advanced Energy one week after the original merger agreement was signed. Mr.
Doan's affiliation with both EMCO and Advanced Energy could influence his view
of the merger. For example, if another company were to make an alternative
proposal to acquire EMCO, Mr. Doan's affiliation with Advanced Energy could
prevent him from being impartial in evaluating whether the alternative proposal
would be more favorable to the EMCO shareholders. In this circumstance, Mr. Doan
could be prohibited from participating in both EMCO and Advanced Energy
directors' meetings on this subject, which would deprive both companies' boards
of directors of a valuable advisor.
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INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
The amended and restated merger agreement provides that all rights to
indemnification for acts or omissions occurring at or prior to the merger
existing in favor of the current or former EMCO directors, officers, employees
or agents, as provided in the EMCO articles of incorporation, bylaws or
applicable law, will survive the merger and continue for a period of six years
after the merger. All indemnification rights in respect of any claim existing as
of the end of this six-year period will continue until final disposition.
Advanced Energy will not be obligated to provide indemnification in excess of
the indemnification EMCO is required to provide under its articles of
incorporation or bylaws.
The amended and restated merger agreement also provides that Advanced
Energy will maintain, for a period of six years from the effective time of the
merger, a directors' and officers' insurance and indemnification policy with an
insurance company rated at least "A" by A.M. Best Company, covering those
persons who currently are covered by that policy. The policy will continue to
the extent that it provides coverage for events occurring prior to or at the
effective time of the merger. Instead of maintaining EMCO's existing policy,
Advanced Energy may provide coverage under any policy maintained for the benefit
of Advanced Energy or any of its subsidiaries, as long as the terms of that
policy are substantially similar to EMCO's existing insurance and
indemnification policy.
REGULATORY MATTERS
Advanced Energy and EMCO are not aware of any material governmental or
regulatory approvals required to be obtained in order to consummate the merger,
other than compliance with applicable federal and state securities and corporate
laws.
DISSENTERS' RIGHTS
Shareholders have dissenters' rights in Colorado as a result of the
proposed merger. Shareholders who oppose the merger will have the right to
receive payment for the value of their shares pursuant to Article 113 of the
Colorado Revised Statutes Annotated. A copy of Article 113 is attached hereto as
Appendix "C" to this proxy statement. The material requirements for a
shareholder to properly exercise his or her rights are summarized below.
HOWEVER, THESE PROVISIONS ARE VERY TECHNICAL IN NATURE AND THE FOLLOWING SUMMARY
IS QUALIFIED IN ITS ENTIRETY BY THE ACTUAL STATUTORY PROVISIONS THAT SHOULD BE
CAREFULLY REVIEWED BY ANY SHAREHOLDER WISHING TO ASSERT SUCH RIGHTS.
Under the Colorado Law, such dissenters' rights will be available only to
those common shareholders of EMCO who (i) object to the proposed merger in
writing prior to or at the special meeting before the vote on the matter is
taken (a negative vote will not itself constitute such a written objection); and
(ii) do not vote any of their shares in favor of the proposed merger at the
special meeting. However, a record shareholder may dissent as to less than all
the shareholder's stock if the shareholder dissents with respect to all shares
beneficially owned by any one person and provides EMCO with certain information.
Within ten days after the effective date of the merger, EMCO will send to
each shareholder who has satisfied both of the foregoing conditions a written
notice in which EMCO will notify such shareholders of their right to demand
payment for their shares and will supply a form for dissenting shareholders to
demand payment. Shareholders will have 30 days to make their payment demands or
lose such rights. If required in the notice sent by EMCO, each dissenting
shareholder must also certify whether or not he or she acquired beneficial
ownership of such shares before or after the date of the first announcement to
the news media of the proposed merger.
Upon receipt of each demand for payment, EMCO will pay each dissenting
shareholder the amount that EMCO estimates to be the fair value of such
shareholder's shares, plus interest from the date of the closing of the merger
to the date of payment. With respect to any dissenting shareholder who does not
certify that he or she acquired beneficial ownership of the shares prior to the
first public announcement of the transaction, EMCO may, instead of making
payment, offer such payment if the dissenter agrees to accept it in full
satisfaction of his or her demand. "Fair value" with respect to a dissenter's
shares, means
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the value of the shares immediately before the closing of the merger, excluding
any appreciation or depreciation in anticipation of such events. Any dissenter
who does not wish to accept the payment or offer made by EMCO must notify EMCO
in writing of his or her own estimate of the fair value of the shares within 30
days after the date EMCO makes or offers payment. If the dissenting shareholder
and EMCO are unable to agree on the fair value of the shares, then EMCO will
commence a proceeding with the Colorado courts within 60 days after receiving
the dissenter's notice of his or her own estimate of fair value. If EMCO does
not commence such a proceeding within the 60-day period, it must pay each
dissenter whose demand remains unresolved the amount demanded by such dissenter.
If a proceeding is commenced, the court will determine the fair value of the
shares and may appoint one or more appraisers to help determine such value.
All dissenting shareholders must be a party to the proceeding, and all such
shareholders will be entitled to judgment against EMCO for the amount of the
fair value of their shares, to be paid on surrender of the certificates
representing such shares. The judgment will include an allowance for interest
(at a rate determined by the court) to the date of payment. The costs of the
court proceeding, including the fees and expenses of any appraiser, will be
assessed against EMCO unless the court finds that the dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment at a higher
amount than that offered by EMCO. Both EMCO and the dissenters must bear their
own respective legal fees and expenses, unless the court requires one party to
pay such legal fees and expenses because of the conduct of such party.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
General. The following discussion summarizes the material U.S. federal
income tax consequences of the merger. This discussion is based upon the
Internal Revenue Code, the regulations promulgated under the Code, Internal
Revenue Service rulings, and judicial and administrative rulings presently in
effect, all of which are subject to change, possibly retroactively. This
discussion does not address all aspects of U.S. federal income taxation that may
be relevant to you in light of your particular circumstances or to those EMCO
shareholders subject to special rules, such as if you are not a citizen or
resident of the United States, or if you are a financial institution, tax-exempt
organization, insurance company, dealer in securities, or if you acquired your
EMCO stock pursuant to the exercise of options or as compensation, or if you
hold your EMCO stock as part of a straddle or similar transaction. YOU ARE URGED
TO CONSULT WITH YOUR TAX ADVISOR TO DETERMINE THE PARTICULAR UNITED STATES
FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES OF THE MERGER
TO YOU.
U.S. Federal Income Tax Consequences to EMCO Shareholders
For U.S. federal income tax purposes, the merger will be a taxable
transaction for EMCO shareholders and may be a taxable transaction for state,
local, foreign and other tax purposes. You will be treated as having sold your
EMCO common stock to Advanced Energy for cash. Accordingly:
- You will recognize taxable gain or loss measured by the difference
between your tax basis in your EMCO common stock and the amount of cash
that you receive in the merger or upon the exercise of your appraisal
rights.
- If you have acquired separate blocks of EMCO common stock at different
times or prices, you must calculate your gain or loss separately for each
separate block.
- If you hold your EMCO common stock as a capital asset, your gain or loss
will be capital gain or loss, and will be long term capital gain or loss
if you have held your EMCO common stock for more than one year as of the
closing date of the merger.
- Generally, you must net your capital gains and capital losses against
each other in determining their tax consequences.
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- Generally, if you are an individual, your tax rate on long-term capital
gains is substantially lower than your tax rate on ordinary income. Your
tax rate on short term capital gains will be the same as your tax rate on
ordinary income.
- If you are an individual, you may deduct capital losses in a taxable year
first against your capital gains and then against up to $3,000 of
ordinary income.
- Individuals may carry their net capital losses that are not currently
deductible forward indefinitely for deduction in future years, subject to
the limitations applicable in the future years.
- Corporations generally may deduct capital losses only against capital
gains. Subject to certain limitations, corporations may carry their
capital losses in excess of capital gains back to the three preceding
taxable years and forward to the five succeeding taxable years for
deduction against capital gains realized in those year.
U.S. Federal Income Tax Consequences to EMCO and Advanced Energy
The merger will be tax-free to EMCO and Advanced Energy.
ACCOUNTING TREATMENT
Advanced Energy and EMCO intend to account for the merger as a purchase for
accounting and financial reporting purposes.
THE AMENDED AND RESTATED MERGER AGREEMENT
The following is a brief summary of the material provisions of the amended
and restated merger agreement. Because it is a summary, it does not include all
the information that may be important to you. We encourage you to read carefully
the entire amended and restated merger agreement, which is attached as Appendix
A to this document, before you decide how to vote.
THE MERGER
The merger will become effective upon the filing of articles of merger with
the Secretary of State of the State of Colorado or at a later time as may be
agreed to in writing by EMCO and Advanced Energy, as specified in the articles
of merger. The merger is expected to be completed on or about January 2, 2001.
At the effective time:
- Flow Acquisition Corporation will be merged into EMCO;
- the separate corporate existence of Flow Acquisition Corporation will
cease;
- each share of EMCO common stock outstanding will be converted into the
right to receive up to $7.09 in cash per share, without interest; and
- EMCO will become a wholly owned subsidiary of Advanced Energy.
References to the surviving corporation in this proxy statement are to EMCO
following the effective time of the merger.
REPRESENTATIONS AND WARRANTIES
EMCO, Advanced Energy and Flow Acquisition Corporation have made
representations in the merger agreement, relating to, among other things:
- their respective organization and similar corporate matters;
- authorization, execution, delivery and enforceability of the merger
agreement;
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<PAGE> 32
- absence of conflicts under their charters and bylaws;
- required consents or approvals;
- documents filed with the SEC;
- completion of the merger not violating any agreements or law; and
- information included in this proxy statement.
EMCO has made additional representations, relating to among other things:
- capital structure;
- litigation;
- insurance;
- contracts and commitments;
- financial statements;
- absence of undisclosed liabilities;
- absence of material adverse events or changes;
- compliance with laws;
- intellectual property matters;
- tax laws and tax returns;
- employee benefit plans and compliance with applicable laws;
- environmental matters;
- finders' or brokers' fees; and
- title to real and personal property.
The representations and warranties in the amended and restated merger
agreement are not easily summarized. In addition, many of the representations
and warranties are subject to various qualifications and limitations, including
qualifications as to materiality. You are urged to read the amended and restated
merger agreement sections titled "Representations and Warranties of the Company"
and "Representations and Warranties of Parent and Merger Sub" in Appendix A.
None of the representations and warranties of EMCO, Flow Acquisition Corporation
or Advanced Energy will survive the merger, but they must be accurate at the
closing of the merger agreement or else the merger might not be completed.
CONDUCT OF BUSINESS PRIOR TO THE MERGER
The amended and restated merger agreement contains certain covenants by
EMCO and Advanced Energy pending the effective time of the merger. These
covenants are designed to provide notice to the other party of certain events
and to ensure that the intended tax and accounting treatment of the merger are
maintained. Until the earlier of the termination of the amended and restated
merger agreement or the effective time of the merger, EMCO and Advanced Energy
have agreed, unless the other party otherwise consents in writing, to:
- promptly deliver to the other party copies of any SEC filings; and
- notify the other party of any material adverse change, any material
litigation or governmental investigation, or the breach by it of any
representation and warranty contained in the amended and restated merger
agreement.
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<PAGE> 33
In addition, the amended and restated merger agreement contains
restrictions on EMCO's conduct of business pending the effective time of the
merger. These restrictions are designed to prevent major changes in EMCO until
the merger takes place, except to the extent Advanced Energy consents to the
changes. EMCO has agreed, unless Advanced Energy otherwise consents in writing,
to:
- conduct its operations according to its ordinary and usual course of
business, in substantially the same manner as previously conducted;
- not enter into or amend any employment or severance agreement with any
director or executive officer except in the ordinary course of business;
- not authorize or enter into any arrangement for the acquisition or sale
of assets or securities outside the ordinary course of business involving
aggregate consideration greater than $100,000;
- not amend in any material respect any employee benefit plan or adopt any
new employee benefit plan;
- not become liable for borrowed money or assume or guarantee the debt of
another person, except in the ordinary course of business;
- not make any loans or advances except in the ordinary course of business;
- use reasonable efforts to:
- preserve intact its business organization and goodwill;
- keep available the services of its officers and employees in each
business function; and
- maintain satisfactory relationships with persons with whom it has
business relationships;
- not take any action which would adversely affect its ability to
consummate the merger or the other transactions contemplated by the
amended and restated merger agreement;
- not amend its Articles of Incorporation or Bylaws;
- not declare or pay any dividend with respect to its capital stock;
- not issue any capital stock or other options, warrants or rights to
purchase or acquire capital stock or change the terms of any outstanding
securities, except that EMCO may issue capital stock upon the exercise of
options, warrants or rights outstanding as of July 6, 2000 and pursuant
to its stock purchase plan;
- not redeem or purchase shares of its capital stock except for cashless
exercises of stock options;
- not make any change or material election with respect to taxes; or
- not take or agree to take, any of the specific actions described in the
amended and restated merger agreement, or any action which would make any
of its representations or warranties contained in the amended and
restated merger agreement untrue or incorrect.
COVENANTS
Each of Advanced Energy, Flow Acquisition Corporation and EMCO has
undertaken additional covenants in the amended and restated merger agreement.
The following summarizes the principal covenants.
Advanced Energy and EMCO have agreed, among other things, to:
- use all reasonable efforts to cooperate to determine which filings,
consents, approvals, permits or authorizations are required to be
obtained from governmental or regulatory authorities, and timely make all
such filings and seek all such consents, approvals, permits or
authorizations;
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<PAGE> 34
- allow representatives of the other party access to offices, files and
other information, and furnish the other party with financial and
operating data;
- consult and cooperate in making any press release or other public
statement regarding the merger; and
- for a period of six years after the effective time of the merger,
Advanced Energy will maintain directors' and officers' liability
insurance substantially similar to that maintained by EMCO prior to the
effective time.
CONDITIONS TO THE MERGER
The respective obligations of EMCO, Advanced Energy, and Flow Acquisition
Corporation to complete the merger are subject to the fulfillment or waiver of
the following conditions on or before the effective time of the merger:
- EMCO shareholders approve the amended and restated merger agreement
(which as a matter of law is required and cannot be waived);
- all governmental approvals, authorizations, consents, filings or
expiration of waiting periods have been obtained or complied with other
than those which would not be reasonably likely to have a material
adverse effect on EMCO and Advanced Energy and its subsidiaries, taken as
a whole; and
- none of EMCO, Advanced Energy and Flow Acquisition Corporation shall be
subject to any order or injunction of a court which prohibits the
completion of the merger.
In addition, the obligations of EMCO to effect the merger are subject to
the fulfillment of the following conditions on or before the effective time of
the merger, any one of which may be waived by EMCO:
- the representations and warranties of Advanced Energy and Flow
Acquisition Corporation in the amended and restated merger agreement are
true and correct in all material respects, at the effective time of the
merger, with the same force and effect as if made at the effective time
of the merger except:
- for changes specifically permitted by the merger agreement; and
- that the accuracy of the representations and warranties that by
their terms speak as of the date of the amended and restated merger
agreement or some other date will be determined as of that date;
- Advanced Energy has performed and complied in all material respects with
all agreements required to be performed by it on or prior to the closing
date of the merger; and
- no material adverse change or effect with respect to Advanced Energy's
business, prospects, results of operations or financial condition will
have occurred.
In addition, the obligations of Advanced Energy and Flow Acquisition
Corporation to effect the merger are subject to the fulfillment of the following
conditions on or before the effective time of the merger, any one of which may
be waived by Advanced Energy:
- the representations and warranties of EMCO contained in the amended and
restated merger agreement are true and correct in all material respects
at the effective time of the merger, with the same force and effect as if
made at the effective time of the merger except:
- for changes specifically permitted by the merger agreement; and
- that the accuracy of the representations and warranties that by their
terms speak as of the date of the amended and restated merger
agreement or some other date will be determined as of that date;
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<PAGE> 35
- EMCO has performed and complied in all material respects with all
agreements required by the amended and restated merger agreement to be
performed by it on or prior to the date of the closing of the merger;
- Holders of not more than 5% of EMCO's common stock have exercised their
right to dissent under Colorado law;
- EMCO's 1998 Stock Purchase Plan has been terminated and all stock and
cash distributed as provided in the amended and restated merger
agreement; and
- no material adverse change or effect with respect to EMCO's business,
prospects, results of operations or financial condition has occurred.
NO SOLICITATION; BOARD RECOMMENDATION
EMCO has agreed that it will not take specified actions with respect to an
"alternative proposal" or an "alternative transaction," except for actions
required to be taken by the fiduciary duty of EMCO's board of directors.
The term "alternative proposal" means any bona fide offer or proposal made
by a third party relating to an alternative transaction. An alternative
transaction means any transaction or series of related transactions involving a
business combination, merger, sale of material assets, sale of shares of capital
stock or similar transaction by EMCO with a person, or company or entity other
than Advanced Energy.
Specifically, EMCO has agreed that it and its officers, directors,
affiliates, representatives, agents, employees, will not, directly or
indirectly:
- solicit, initiate, encourage or participate in any discussions or
negotiations with or provide any information to, any person or entity
concerning any alternative transaction; or
- authorize, propose or announce an intention to authorize or propose any
alternative transaction, unless EMCO receives an alternative proposal in
writing and EMCO's board of directors determines in its good faith
judgment, based as to legal matters on the written advice of counsel,
that failing to take any of the actions described in the preceding
paragraph would constitute a breach of the board of directors' fiduciary
duty.
In addition, EMCO has agreed to immediately provide Advanced Energy a copy
of any alternative proposal if EMCO receives an alternative proposal.
The EMCO board of directors is required to recommend the adoption and
approval of the amended and restated merger agreement and approval of the merger
to the EMCO shareholders unless the EMCO board determines in its good faith
judgment, based as to legal matters on the written advice of counsel, that such
approval would constitute a breach of its fiduciary duty.
The amended and restated merger agreement does not, however, prohibit
EMCO's board of directors from taking and disclosing to EMCO's shareholders a
position contemplated by Rules 14d-9 and 14e-2 under the Securities Exchange Act
with regard to a tender or exchange offer made by someone other than Advanced
Energy.
CONDUCT OF BUSINESS FOLLOWING THE MERGER
Pursuant to the amended and restated merger agreement Flow Acquisition
Corporation will merge into EMCO and EMCO will be the surviving corporation. All
property, rights, privileges, powers and franchises of EMCO and Flow Acquisition
Corporation will vest in the surviving corporation. All debts, liabilities and
duties of EMCO and Flow Acquisition Corporation will become the debts,
liabilities and duties of the surviving corporation. The surviving corporation
will be a wholly owned subsidiary of Advanced Energy.
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<PAGE> 36
Pursuant to the amended and restated merger agreement, the articles of
incorporation of Flow Acquisition Corporation in effect immediately prior to the
effective time of the merger will become the articles of incorporation of the
surviving corporation. The name of the surviving corporation will be
"Engineering Measurements Company" and the bylaws of Flow Acquisition
Corporation will become the bylaws of Engineering Measurements Company following
the effective time of the merger. The directors of Flow Acquisition Corporation
at the effective time of the merger will become the initial directors of the
surviving corporation. The officers of Flow Acquisition Corporation immediately
prior to the effective time of the merger will become the initial officers of
the surviving corporation.
TERMINATION OF THE AMENDED AND RESTATED MERGER AGREEMENT
The amended and restated merger agreement provides that it may be
terminated at any time prior to the effective time of the merger, whether before
or after approval of the merger by the shareholders of EMCO by mutual written
consent of each of Advanced Energy and EMCO; or by either Advanced Energy or
EMCO if:
- the merger has not closed by January 31, 2001 (provided that the right to
terminate will not be available to any party whose action or failure to
act has proximately contributed to the failure to close the merger by
January 31, 2001, and the action or failure to act constitutes a material
breach of the amended and restated merger agreement);
- a court of competent jurisdiction or other governmental entity has issued
a final and non-appealable order, decree or ruling, or taken any other
final and non-appealable action, that permanently restrains, enjoins or
otherwise prohibits the merger (provided that the party exercising the
right to terminate has used all reasonable efforts to remove that order,
decree or ruling); or
- the required approval of the amended and restated merger by the EMCO
shareholders has not been obtained at the EMCO special meeting.
Advanced Energy may terminate the amended and restated merger agreement upon the
occurrence of any of the following events:
- a breach by EMCO of its representations or warranties, which breach has
had or is reasonably likely to have a material adverse effect on EMCO and
which is not curable or, if curable, is not cured within 30 days after
notice of the breach has been received by EMCO from Advanced Energy;
- a material breach by EMCO of any of the covenants or agreements contained
in the merger agreement, which breach is not curable or, if curable, is
not cured within 30 days after notice of the breach has been received by
EMCO from Advanced Energy;
- the EMCO board of directors shall have withdrawn or modified in a manner
materially adverse to Advanced Energy its approval or recommendation of
the merger or the amended and restated merger agreement; or
- the EMCO board of directors shall have recommended an alternative
proposal to the shareholders of EMCO.
EMCO may terminate the amended and restated merger agreement upon the occurrence
of any of the following events:
- a breach by either of Advanced Energy or Flow Acquisition Corporation of
its representations or warranties, which breach has had or is reasonably
likely to have a material adverse effect on Advanced Energy and which is
not curable or, if curable, is not cured within 30 days after notice of
the breach has been received by Advanced Energy from EMCO;
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<PAGE> 37
- a material breach by Advance Energy of any of the covenants or agreements
contained in the amended and restated merger agreement, which breach is
not curable or, if curable, is not cured within 30 days after notice of
the breach has been received by Advanced Energy from EMCO; or
- The EMCO board of directors determines in its good faith judgment, based
as to legal matters on the written advice of legal counsel, that
termination of the merger is required by its fiduciary duties.
FEES, EXPENSES AND TERMINATION FEES
Except as set forth below, all fees and expenses incurred in connection
with the amended and restated merger agreement and the merger will be paid by
the party that incurs them. Advanced Energy and EMCO will share equally all fees
and expenses incurred in relation to the printing and filing fees paid in
connection with the filing of this proxy statement and the costs of printing and
mailing this proxy statement.
EMCO has agreed to pay Advanced Energy a termination fee of $5 million if
prior to the termination, an alternative proposal has been made to the EMCO
board of directors and within two years following the termination, EMCO executes
an agreement with a third party providing for the acquisition of more than 50%
of EMCO's capital stock or assets and Advanced Energy or EMCO terminates the
amended and restated merger agreement because:
- the EMCO shareholders have not approved the amended and restated merger
agreement at the EMCO special meeting;
- the EMCO board of directors determines, in its good faith judgment, based
as to legal matters on the written advice of legal counsel, that
terminating the agreement and abandoning the merger is required by the
EMCO board of directors' fiduciary duties; or
- the EMCO board of directors shall have withdrawn or modified in a manner
materially adverse to Advanced Energy its approval or recommendation of
the merger or the amended and restated merger agreement, or shall have
recommended an alternative proposal to the shareholders of EMCO.
EMCO is required to pay the termination fee within 15 business days of the
execution of an agreement providing for, or completion of, the alternative
transaction.
AMENDMENT
The amended and restated merger agreement may be changed by written
agreement of the parties at any time before or after EMCO shareholders approve
the merger. Any change after the EMCO shareholders approve the merger that by
law requires the approval of EMCO shareholders, however, will require their
approval to be effective.
EMPLOYEE BENEFITS
Stock Options. At the effective time of the merger Advanced Energy will
assume all of the outstanding EMCO stock options, provided that in the event the
Option Exchange Ratio is greater than 0.553, Advanced Energy has the right to
require EMCO to cancel the options granted under the EMCO 1991 and 1997
Incentive Plans and to pay the consideration required by the plans based upon
the Cash Consideration. Pursuant to the EMCO stock option plans, except the 1998
Employee Stock Purchase Plan, the vesting of all options will accelerate, and
all options will be immediately exercisable, as a result of the merger. Each
stock option assumed will continue to have and be subject to substantially the
same terms and conditions as under the EMCO stock plan under which the stock
option was granted except that:
- each option will be fully vested and exercisable;
- each option will be exercisable for the number of shares of Advanced
Energy common stock, rounded to the nearest whole share, equal to the
product obtained from multiplying the number of
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<PAGE> 38
shares of EMCO common stock covered by the option immediately prior to
the effective time by a fraction (the "Option Exchange Ratio") the
numerator of which is the Cash Consideration and the denominator of which
is the price per share of Advanced Energy Common Stock reported on the
Nasdaq National Market on the date preceding the shareholders' meeting;
and
- the option price per share of Advanced Energy common stock will be
adjusted proportionately so that the aggregate exercise price for the
options will remain substantially unchanged for each holder.
Advanced Energy will file a registration statement on Form S-8 or other
appropriate form under the Securities Act covering the shares of Advanced Energy
common stock issuable upon exercise of the options assumed in the merger, or
will cause such shares to be included in an effective registration statement on
Form S-8 relating to one or more of Advanced Energy's stock option plans.
Employee Stock Purchase Plan. EMCO's 1998 Employee Stock Purchase Plan
will be terminated prior to the effective time. All funds contributed to the
1998 Stock Purchase Plan that are not used to purchase shares of EMCO common
stock prior to the effective time will be transferred or otherwise credited to
the Advanced Energy 1995 Employee Stock Purchase Plan. It is anticipated that
all funds contributed to the plan will be used to purchase shares of EMCO common
stock before completion of the merger. Participants in the plan then will
participate in the merger as EMCO shareholders.
Other Benefit Plans. Advanced Energy will provide or cause the surviving
corporation to provide to employees of EMCO who remain employees of the
surviving corporation following the effective time the same compensation and
benefit plans as are provided to other employees of Advanced Energy employed in
similar capacities.
ENGINEERING MEASUREMENTS COMPANY
OVERVIEW
EMCO designs, manufactures, and markets electronic and electro-mechanical
instruments (flowmeters) for measuring the flow of liquids, steam and gases.
EMCO operates within the flow measurement devices and systems industry segment.
EMCO generates its revenues from the sales of flowmeter hardware in both foreign
and domestic markets. Revenue is also generated through contract electronic
printed circuit board assembly. While EMCO has historically been strongest in
energy utility flow measurement (particularly steam metering), it has products
capable of measuring most types of process fluids, as well as fuel oils and
natural gas. Primarily utilizing a network of distributors and commissioned
sales representatives as well as a direct sales force, EMCO markets flowmeters
worldwide.
EMCO has renewed a marketing agreement with Danfoss A/S, a flowmeter
company in Denmark which distributes products in different markets and runs for
a period until April 2001 with a six month renegotiations period. Terms of the
agreement with Danfoss A/S allow EMCO to be the non-exclusive distributor for
Danfoss' MAG and MASS flowmeters in the U.S. industrial market under the EMCO
label. EMCO features six types of flowmeters capable of handling a broad
spectrum of applications (steam, gas and liquid), as well as a large range of
line sizes. These flowmeters position EMCO to compete on a product level with
any flowmeter manufacturer in the world.
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PRODUCTS
EMCO develops and markets a series of products to measure the flow of
steam, chilled and hot water, natural gas, compressed gases and other fluids in
a pipeline. Also included are products, which support the primary flow
measurements, such as pressure, temperature measurements and supporting
electronics.
Sales of flowmeters and related products account for approximately 88% of
the total sales for EMCO for fiscal year 2000. The flowmeter products use two
major technologies in its product lines. The sales contribution by each
technology as a percent of sales for fiscal years 1999 and 2000 are as follows:
<TABLE>
<CAPTION>
TECHNOLOGY FY 1999 FY 2000
---------- ------- -------
<S> <C> <C>
Volumetric.................................................. 74% 68%
Mass........................................................ 26% 20%
</TABLE>
Volumetric technologies include the following products: turbine, vortex
shedding, ultrasonic, and positive displacement meters. Mass technologies
include the following products: electromagnetic, coriolis, flow processors and
digital valves.
EMCO manufactures several series of insertion meters for various
applications of steam, liquids and compressed gas measurement. The insertion
meters offer solutions to customers for metering flows in large size pipes. Each
is available with an assortment of options allowing for extremes in flow range,
pressure and temperature, with adaptation to various output requirements which
provide mass and energy measurement for totalizing or computer input.
EMCO introduced a line of vortex shedding flowmeters in fiscal year 1992.
The Vortex PhD has no moving parts, provides high reliability, has low
maintenance requirements and is capable of operating with dirty fluids.
EMCO introduced a clamp-on transit time ultrasonic flowmeter in January
2000. This product is a non-intrusive meter, which is attached to the outside of
pipes, and is used primarily to measure water, but is capable of measuring other
liquids including oil.
EMCO also develops, manufactures and markets a series of positive
displacement meters which provide accurate measurements of fluid flow rates. The
products' primary applications relate to the measurement of viscous fluids, such
as crude oil, as well as applications requiring a high degree of accuracy.
Digital valves are digitally actuated control valves providing industry
with a unique means of controlling and measuring the flow of fluids. Because of
their accuracy and speed of response, these products are capable of providing a
high degree of control that cannot easily be matched by other valves. In
addition, this product can be configured as a metering valve, thus providing
both measurement and control.
All EMCO flowmeter products utilize a family of digital flow processors to
provide a wide range of measurement processing. The flow processors provide the
desired outputs in engineering units, such as gallons, liters, etc., with
provisions for computing density, mass flow and enthalpy.
The Company introduced a commercial vortex shedding water flowmeter in
March 1997. This product is marketed into the commercial HVAC, ultra-pure and
de-ionized water and landscape/irrigation markets.
The Company provides contract electronic printed circuit board assembly.
These services provided 8% of EMCO's revenues in 1999 and 12% in 2000.
Control of gases is critical to the production of semiconductors. EMCO has
developed the Mach One mass flow controller specifically for the semiconductor
market. This product has been designed to address the gas control needs of the
industry for greater accuracy, control range, response time, and adjustable
capacity. In addition, the Mach One operates at sub-atmospheric pressures, is
less susceptible to clogging
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and has no flow bypass which means improved process repeatability. The Mach One
has not yet been commercialized.
SALES AND MARKETING
EMCO primarily uses a network of distributors and commissioned sales
representatives, as well as a direct sales force, to market EMCO's flowmeters
worldwide. EMCO utilizes a direct sales force to market its contract electronic
printed circuit board assembly services.
In fiscal year 2000, EMCO had foreign sales of approximately $2,242,000, or
24.3% of sales, compared to approximately $2,691,000, or 27.8% of sales in
fiscal year 1999. The decrease of sales for fiscal year 2000 in Europe is due
primarily to lower sales to Danfoss in 2000. EMCO experienced a decrease in
sales to Asia due to a shift in the product mix to lower cost meters. Other
foreign sales are lower due to lower activity overall, rather than sales of a
single large project. All foreign sales are exports from domestic operations.
The breakdown of foreign sales for fiscal years 2000 and 1999, in dollars and
percent of total sales are:
<TABLE>
<CAPTION>
FY 2000 FY 1999
------- -------
<S> <C> <C> <C> <C>
Europe........................................... $1,335,000 14.5% $1,580,000 16.3%
Asia............................................. 658,000 7.1% 755,000 7.8%
Other............................................ 249,000 2.7% 356,000 3.7%
</TABLE>
DESCRIPTION OF CAPITAL STOCK
EMCO COMMON STOCK
EMCO's authorized capital stock consists of 15,000,000 shares of common
stock, par value $0.01. As of September 21, 2000, 4,225,342 shares of common
stock were outstanding, held by 449 holders of record. As of September 21, 2000,
options to purchase an aggregate of 238,163 shares of common stock were
outstanding under EMCO's 1991 Incentive Plan and 1997 Incentive Plan. A total of
750,000 shares were reserved for issuance under its 1991 Incentive Plan, 625,000
shares were reserved for issuance under EMCO's 1997 Incentive Plan and 187,500
shares were reserved for issuance under EMCO's Employee Stock Purchase Plan,
including shares that have already been issued under these plans.
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<PAGE> 41
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF EMCO
The following table sets forth as of September 21, 2000, the number and
percentage of EMCO's shares of common stock owned of record and beneficially by
each person owning more than five percent (5%) of such common stock and by all
individual directors and officers and by all directors and officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME OF OF BENEFICIAL OWNERSHIP
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS(9)
-------------- ---------------- ----------------- ----------
<S> <C> <C> <C>
Common Stock................................. Charles E. Miller 1,482,804(1) 35.0
Common Stock................................. William A. Ringer 123,625(2) 2.9
Common Stock................................. Saied Hosseini 89,250(3) 2.1
Common Stock................................. David S. Miller 426,250(4) 10.1
Common Stock................................. Walter Kluck 29,292(5) 0.7
Common Stock................................. Thomas G. Miller 460,862(6) 10.9
Common Stock................................. Trung T. Doan 10,000(7) 0.2
Common Stock................................. Jerry Howard 0(8) 0.0
All Directors and Officers as a Group (Seven 2,195,833 50.9
Persons)...................................
</TABLE>
---------------
(1) Record and Beneficial; Mr. Miller has sole voting and investment power on
1,256,710 of the owned shares; 213,594 shares have shared voting and
investment power; also includes an option to purchase 12,500 shares of
common stock under the 1991 Incentive Plan. Charles E. Miller's business
address is 600 Diagonal Highway, Longmont, CO 80501.
(2) Record and Beneficial; Mr. Ringer has sole voting and investment power on
123,125 shares of the owned shares; 500 shares have shared voting and
investment power. William A. Ringer's address is P.O. Box 1018, Wilson, WY
83014.
(3) Record and Beneficial; Mr. Hosseini has sole voting and investment power on
64,250 of the owned shares; also includes an option to purchase 12,500
shares of common stock under the 1991 Incentive Plan and an option to
purchase 12,500 shares under the 1997 Incentive Plan. Saied Hosseini's
business address is 600 Diagonal Highway, Longmont, CO 80501.
(4) Record and Beneficial; Mr. Miller has sole voting and investment power on
68,813 of the owned shares; 357,437 shares have shared voting and investment
power. David S. Miller's business address is 420 E. Armour, N. Kansas City,
MO 64166.
(5) Record and Beneficial; Mr. Kluck has sole voting and investment power on
2,187 of the owned shares; 2,105 shares have shared voting and investment
power; also includes an option to purchase 25,000 shares of common stock
under the 1997 Incentive Plan. Walter Kluck's business address is P.O. Box
421, Clifton, NJ 07015.
(6) Record and Beneficial; Mr. Miller has sole voting and investment power on
107,387 shares of the owned shares; 340,975 shares have shared voting and
investment power; also includes an option to purchase 12,500 shares of
common stock under the 1997 Incentive Plan. Thomas G. Miller's business
address is 11725 W. 112th St., Overland Park, KS 66210.
(7) Record and Beneficial; Mr. Doan has sole voting and investment power on
10,000 shares of the owned shares. Trung T. Doan's business address is 8000
S. Federal Way, Boise, Idaho 83707-0006.
(8) Record and Beneficial; Jerry Howard's business address is 600 Diagonal
Highway, Longmont, CO 80501.
(9) All options under the EMCO stock option plans (other than the Employee Stock
Purchase Plan and the option held by Mr. Doan for 5,000 shares of common
stock under the 1997 Incentive Plan) shall vest prior to the closing of the
merger and are included for determining the percentages. Mr. Doan's option
will become exercisable upon closing of the merger, or if the merger were
not to occur, on February 3, 2001.
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Messrs Charles Miller, Al Ringer, Saeid Hosseini, David Miller, Walter
Kluck, Thomas Miller have granted Advanced Energy their proxies to vote in favor
of the merger.
WHERE YOU CAN FIND MORE INFORMATION
EMCO is required by the Securities Exchange Act of 1934 to file reports,
proxy statements and other information with the SEC. You may read and copy these
reports, proxy statements and other information at the SEC's public reference
facilities:
<TABLE>
<CAPTION>
WASHINGTON D.C. NEW YORK
--------------- --------
<S> <C>
Judiciary Plaza Seven World Trade Center
450 Fifth Street, N.W. Suite 1300
Room 1024 New York, NY 10048
Washington, D.C. 20549
</TABLE>
You may call 1-800-SEC-0330 for further information about the public
reference facilities. For a fee, the SEC will send copies of any of EMCO's
filings to you. In addition, EMCO's filed reports, proxy statements and other
information are contained in the Internet web site maintained by the SEC. The
address is http://www.sec.gov.
EMCO's common stock is quoted on the Nasdaq National Market under the symbol
"EMCO" and its SEC filings can also be read at the following address.
Nasdaq Operations
1735 K Street, N.W.
Washington, D.C. 20006
36
<PAGE> 43
APPENDIX A
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
<PAGE> 44
APPENDIX A
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), is made and
entered into as of July 6, 2000, and amended and restated as of October 20,
2000, by and among ADVANCED ENERGY INDUSTRIES, INC., a Delaware corporation
("Parent"), FLOW ACQUISITION CORPORATION, a Colorado corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and ENGINEERING MEASUREMENTS COMPANY,
a Colorado corporation (the "Company").
RECITALS
A. The Boards of Directors of Parent and the Company each have determined
that a business combination between Parent and the Company would enable the
companies to achieve short-term and long-term strategic and financial benefits
to the benefit of their respective stockholders and, accordingly, for that and
other reasons is in the best interests of their respective stockholders. Each of
such Boards of Directors desires to effect the Merger (as defined herein), on
the terms and subject to the conditions set forth herein.
B. Parent has incorporated and organized Merger Sub solely to facilitate
the Merger.
C. For purposes of this Agreement, the date of this Agreement and the date
of the execution and delivery of this Agreement shall be deemed to be July 6,
2000.
NOW, THEREFORE, in consideration of the mutual covenants and subject to the
terms and conditions set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
"Affiliate" means each "affiliate" as defined in Rule 145 of the rules and
regulations promulgated under the Securities Act.
"Agreement" has the meaning set forth in the preface above.
"Alternative Proposal" has the meaning set forth in Section 6.1(b).
"Articles of Merger" has the meaning set forth in Section 2.3.
"Cash Consideration" has the meaning set forth in Section 3.2(a).
"CBCA" has the meaning set forth in Section 2.1.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Certificate" has the meaning set forth in Section 3.2(b).
"Closing" has the meaning set forth in Section 2.2.
"Closing Date" has the meaning set forth in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission of the United
States of America.
"Company" has the meaning set forth in the preface above.
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"Company Benefit Plans" means all employee benefit plans as defined in
Section 3.3 of ERISA and any other plan, contract, program, policy or benefit
arrangements covering employees or former employees of the Company and all
employee agreements providing compensation, severance or other benefits to any
employee or former employee of the Company.
"Company Board" means the Board of Directors of the Company.
"Company Common Stock" means the common stock of the Company.
"Company Contract" has the meaning set forth in Section 4.10.
"Company Disclosure Schedule" means the disclosure schedule delivered by
the Company at or prior to the execution hereof to Parent.
"Company Material Adverse Effect" means a material adverse effect on or
change in the business, prospects, results of operations or financial condition
of the Company and its Subsidiaries, taken as a whole.
"Company Option Plans" has the meaning set forth in Section 3.2(d)(i).
"Company Options" has the meaning set forth in Section 3.2(d)(i).
"Company Personnel" has the meaning set forth in Section 6.10(a).
"Company Real Properties" means all real property ever owned, leased or
occupied by the Company or any Predecessor.
"Company Reports" has the meaning set forth in Section 4.6(a).
"Confidentiality Agreement" has the meaning set forth in Section 8.5(c).
"Copyrights" means any and all of Company's copyrights, copyrightable
works, semiconductor topography and mask work interests, including, without
limitation, all rights of authorship, use, publication, reproduction,
distribution, performance, transformation, moral rights and ownership of
copyrightable works, semiconductor topography works and mask works, and all
rights to register and obtain renewals and extensions of registrations, together
with all other interests accruing by reason of international copyright,
semiconductor topography and mask work conventions.
"Current Policy" has the meaning provided in Section 6.14(b).
"Dissenting Shareholder" means a holder of Dissenting Shares.
"Dissenting Shares" means shares of Company Common Stock held as of the
Effective Time by a shareholder of the Company who has not voted such shares in
favor of the adoption of this Agreement and the Merger and with respect to which
appraisal shall have been duly demanded and perfected in accordance with Article
113 of the CBCA and not effectively withdrawn or forfeited prior to the
Effective Time.
"Effective Time" has the meaning set forth in Section 2.3.
"Enforceability Exceptions" has the meaning set forth in Section 4.3(c).
"Environmental Requirements" means any applicable laws, regulations,
ordinances or other provisions having the force or effect of law, or any
judicial, governmental, or administrative orders, requests, or determinations,
or any common law requirements relating to the protection of human health or the
environment (both natural and workplace), including without limitation any
Environmental Requirements concerning (A) the use, generation, treatment,
storage, transportation, handling or disposal of Hazardous Materials, (B) the
control of soil, surface or groundwater pollution products, (C) air quality and
emission standards, or (D) health, safety and hazard communication matters.
Environmental Requirements include, without limitation, CERCLA, the Resource
Conservation and Recovery Act, the Hazardous Materials Transportation Act, the
Clean Water Act, the Toxic Substances Control Act, the Clean Air Act, SWDA,
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the Atomic Energy Act, the Federal Food Drug and Cosmetic Act, and equivalent
state and local ordinances and statutes and ordinances in countries other than
the United States of America.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any business or entity which is a member of the
same "controlled group of corporations," under "common control" or an
"affiliated service group" with an entity within the meanings of Sections
414(b), (c) or (m) of the Code, or required to be aggregated with the entity
under Section 414(o) of the Code, or is under "common control" with the entity,
within the meaning of Section 4001(a)(14) of ERISA, or any regulations
promulgated or proposed under any of the foregoing Sections.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Future Benefit Plans" has the meaning set forth in Section 6.10(b).
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Hazardous Materials" means any toxic, injurious or hazardous materials,
substances or wastes, toxic pollutants or contaminants, including petroleum
products, crude oil or any by-products or derivatives thereof as any of the
foregoing terms are defined in federal, state and local laws applicable to the
Company or Parent, as the case may be, but does not include commercially
available office cleaning or janitorial supplies.
"Intellectual Property" means any and all of the following of the Company
and the Company Subsidiaries: (i) Patents; (ii) Trademarks; (iii) Copyrights;
and (iv) any and all technology, ideas, inventions, designs, proprietary
information, unpublished research and development information, manufacturing and
operating information, know-how, formulae, trade secrets and technical data,
computer programs, and all hardware, software and processes.
"IRS" means the federal Internal Revenue Service.
"ISOs" has the meaning set forth in Section 3.2(d)(iii).
"Issued Patents" means any and all issued patents, reissue or reexamination
patents, revivals of patents, utility models, certificates of invention,
registrations of patents, or extensions thereof, regardless of country or formal
name.
"Last Report Date" means April 30, 2000.
"Merger" has the meaning set forth in Section 2.1.
"Merger Consideration" means, with respect to any holder of Company Common
Stock, an amount of cash equal to (i) the number of shares of Company Common
Stock represented by such holder's Certificate at the Effective Time, multiplied
by (ii) the Cash Consideration.
"Merger Sub" has the meaning set forth in the preface above.
"Option Exchange Ratio" has the meaning set forth in Section 3.2(d)(ii).
"Parent" has the meaning set forth in the preface above.
"Parent Common Stock" means the common stock of the Parent.
"Parent Material Adverse Effect" means a material adverse effect on or
change in the business, prospects, results of operations or financial condition
of Parent and its Subsidiaries, taken as a whole.
"Parent Option Plans" has the meaning set forth in Section 3.2(d)(v).
"Parent Reports" has the meaning set forth in Section 5.5.
"Patent Applications" means any and all patent rights, including, without
limitation, all United States and foreign utility and design patents, and all
published or unpublished nonprovisional and provisional
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patent applications, including, without limitation, any and all applications of
additions, divisionals, continuations, continuations-in-part, reexaminations,
substitutions, extensions, renewals, utility models, certificates of invention
or reissues thereof or therefor, invention disclosures and records of invention
for abandoned patent applications
"Patents" means the Patent Applications and the Issued Patents.
"Paying Agent" has the meaning set forth in Section 3.3(a).
"Permits" means all valid and current permits, licenses, orders,
authorizations, registrations, approvals and other analogous instruments.
"Person" includes both natural persons and entities.
"Predecessor" means any Person that owns or has ever owned, leased or
occupied the Company Real Properties.
"Proxy Statement" has the meaning provided in Section 6.7(a).
"Qualified Plan" means each Company Benefit Plan that is intended to be a
"qualified plan" within the meaning of Section 401(a) of the Code, and either
(i) the IRS has issued a favorable determination letter that has not been
revoked, or (ii) an application for a favorable determination letter was timely
submitted to the IRS for which no final action has been taken by the IRS as of
the Closing Date.
"Record Date" means the date determined by the Company Board as the date as
of which a person must be a holder of record of Company Common Stock in order to
be entitled to vote at the Stockholders' Meeting.
"Registration Statement" has the meaning set forth in Section 3.2(d)(v).
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiaries" of a party means Subsidiaries of such party
which constitute "significant subsidiaries" under Rule 405 promulgated by the
Commission under the Securities Act.
"Stock Purchase Plan" has the meaning set forth in Section 3.2(d)(iv).
"Stockholders' Meeting" means the meeting of the holders of Company Common
Stock at which such holders consider adoption and approval of this Agreement and
the Merger.
"Subsidiary" of a party means any corporation or other organization,
whether incorporated or unincorporated, of which such party directly or
indirectly owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization, or any organization of which such party is a
general partner.
"Substituted Options" has the meaning set forth in Section 3.2(d)(i).
"Surviving Corporation" has the meaning set forth in Section 2.1.
"SWDA" means the Solid Waste Disposal Act, as amended.
"Termination Fee" has the meaning set forth in Section 8.5(a).
"Trademarks" means any and all of Company's trademarks, registered
trademarks, applications for registration of trademark, service marks,
registered service marks, applications for registration of service marks, trade
names, registered trade names, and applications for registrations of trade
names.
"Transaction" has the meaning provided in Section 6.1(b).
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ARTICLE 2
THE MERGER
2.1 The Basic Transaction. On the terms and subject to the conditions of
this Agreement, at the Effective Time, Merger Sub shall be merged with and into
the Company in accordance with this Agreement, and the separate corporate
existence of Merger Sub shall thereupon cease (the "Merger"). The Company shall
be the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation"), and shall become a wholly owned subsidiary of
Parent. The Merger shall have the effects specified in the Colorado Business
Corporation Act (the "CBCA").
2.2 The Closing [HiddenPara]
Subject to the terms and conditions of this Agreement, the closing of the
Merger (the "Closing") shall take place (a) at the offices of the Company at
10:00 a.m., local time, on the first business day immediately following the day
on which the last to be fulfilled or waived of the conditions set forth in
Article 7 shall be completely fulfilled or waived in accordance herewith, or (b)
at such other time, date or place as Parent and the Company may agree. The date
on which the Closing occurs is hereinafter referred to as the "Closing Date."
2.3 Effective Time. On the Closing Date, Articles of Merger meeting the
requirements of Section 7-111-105 of the CBCA in the form of Exhibit 2.3 (the
"Articles of Merger") shall be executed and filed in the office of the Colorado
Secretary of State, in accordance with the CBCA. The Merger shall become
effective at (a) the time of filing of the Articles of Merger with the Colorado
Secretary of State or (b) such later time as agreed by the parties hereto and
designated in the Articles of Merger as the effective time of the Merger (the
"Effective Time").
2.4 Articles of Incorporation and By-laws. The Articles of Incorporation
and By-laws of Merger Sub in effect immediately prior to the Effective Time
shall be the Articles of Incorporation and By-laws of the Surviving Corporation,
until duly amended in accordance with applicable law.
2.5 Directors and Officers of the Surviving Corporation. The directors
and officers of Merger Sub immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation until their successors are
duly appointed or elected in accordance with applicable law.
ARTICLE 3
CONVERSION OF SECURITIES
3.1 Merger Sub Stock. At the Effective Time, each share of common stock
of Merger Sub outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
non-assessable share of common stock of the Surviving Corporation.
3.2 Company Stock; Options.
(a) Conversion of Stock. At the Effective Time, each share of Company
Common Stock that is issued and outstanding immediately prior to the Effective
Time, exclusive of shares held by Dissenting Shareholders, shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive in cash without interest an amount equal to
(i) U.S. $30,000,000 plus Options Cash divided by (ii) Outstanding Shares (the
"Cash Consideration"). For purposes of this Section 3.2(a), "Options Cash" means
the aggregate of the exercise prices paid in cash by holders of Company Options
on the exercise of any and all Company Options after October 20, 2000 and before
the Closing Date, and "Outstanding Shares" means the number of shares of Company
Common Stock outstanding as of the Effective Time, including shares acquired on
exercise of Company Options after October 20, 2000 and before the Closing Date.
(b) Cancellation of Company Common Stock. At the Effective Time, as a
result of the Merger and without any action on the part of the holders thereof,
all shares of Company Common Stock outstanding
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at the Effective Time shall cease to be outstanding, shall be canceled and
retired and shall cease to exist, and each holder of shares of Company Common
Stock shall thereafter cease to have any rights with respect to such shares of
Company Common Stock, except the right to receive upon the surrender of a
certificate representing such shares of Company Common Stock (a "Certificate")
an amount equal to (i) the number of shares of Company Common Stock set forth on
the Certificate, multiplied by (ii) the Cash Consideration.
(c) Treasury Shares and Shares Held by Subsidiaries. At the Effective
Time, as a result of the Merger and without any action on the part of Parent,
Merger Sub or the Company, any and all shares of Company Common Stock issued and
held in the Company's treasury shall cease to be outstanding, shall be canceled
and retired without payment of any consideration therefor and shall cease to
exist.
(d) Options.
(i) At the Effective Time, as a result of the Merger and without any
action on the part of holder thereof, each option to purchase Company
Common Stock granted by the Company (collectively, "Company Options") under
one of its stock option plans (collectively, "Company Option Plans") that
remains outstanding and unexercised as of the Effective Time, whether or
not vested or exercisable, shall be assumed by Parent and shall be
converted into an option to purchase Parent Common Stock (collectively,
"Substituted Options"); provided, however that, in the event the Option
Exchange Ratio (as calculated in subparagraph (ii) below) is greater than
0.553, Parent shall have the right to require the Company to cause the
Company Options granted under the Engineering Measurements Company 1991
Incentive Plan and the Engineering Measurements Company 1997 Incentive Plan
(the "Incentive Plans") that are outstanding immediately prior to the
Closing to be cancelled pursuant to Section 14(e) of each Incentive Plan
and to pay the consideration required by such Sections 14(e) based upon the
Cash Consideration. If Parent requires the Company to cause the Company
Options granted under the Incentive Plans to be cancelled, then (A) Parent
shall not be required to assume the Company Options cancelled, and (B) if
the Company does not have sufficient cash available to pay the
consideration required by Section 14(e) of each of the Incentive Plans,
Parent shall advance the necessary funds to the Company.
(ii) Subject to subsection 3.2(d)(iii) below, (A) each Substituted
Option shall be exercisable for the number of shares of Parent Common Stock
(rounded down to the nearest whole share) equal to the product obtained by
multiplying the number of shares of Company Common Stock covered by the
related Company Option immediately prior to the Effective Time by a
fraction (the "Option Exchange Ratio"), the numerator of which is the Cash
Consideration and the denominator of which is the closing price per share
of Parent Common Stock reported on the Nasdaq National Market on the
trading day preceding the Stockholders' Meeting; (B) the option price per
share of Parent Common Stock thereafter shall be equal to the quotient
(rounded up to the nearest whole cent) obtained by dividing the exercise
price per share of Company Common Stock subject to the related Company
Option in effect immediately prior to the Effective Time by the Option
Exchange Ratio); and (C) each Substituted Option shall be exercisable on
the same terms and subject to the same conditions as had been applicable to
the related Company Option, except to the extent the number of shares and
exercise price per share have been adjusted pursuant to (A) and (B),
respectively, of this subsection 3.2(d)(ii).
(iii) It is the intention of the parties that Company Options that
qualified as incentive stock options, within the meaning of Section 424 of
the Code ("ISOs"), immediately prior to the Effective Time, be converted,
when assumed by Parent, into Substituted Options that qualify as ISOs
immediately following the Effective Time, to the extent permitted by
Section 424 of the Code and applicable terms of the Company Option Plans.
In furtherance of such intention, the formulae, terms and conditions set
forth in subsection 3.2(d)(ii) above may be applied to, or modified for,
such Substituted Options as deemed reasonably necessary by Parent, so long
as any such application or modification does not materially reduce the
benefit of the Substituted Option to the holder thereof.
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(iv) The Company's Employee Stock Purchase Plan (the "Stock Purchase
Plan") shall be terminated prior to the Closing. All funds invested in the
Stock Purchase Plan but not used by employees to purchase stock thereunder
prior to the Effective Time shall be transferred or otherwise credited to
employees of the Company such that, following the Effective Time, each such
employee shall have purchase rights under Parent's stock purchase plans
substantially similar to those existing under the Stock Purchase Plan
immediately prior to the Effective Time.
(v) On or prior to the Effective Time, Parent shall file with the
Commission a Registration Statement on Form S-3 or Form S-8, as determined
by Parent in its sole discretion, relating to the issuance of the Parent
Common Stock underlying the Substituted Options (a "Registration
Statement") or shall cause such Parent Common Stock to be included in an
effective Registration Statement on Form S-8 relating to one or more of
Parent's stock option plans (collectively, "Parent Option Plans"). So long
as any Substituted Options remain outstanding, Parent shall use its
reasonable best efforts to maintain the effectiveness of any Registration
Statement(s) related to the Substituted Options (and to maintain the
current status of the prospectus or prospectuses related thereto). At or
prior to the Effective Time, Parent shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of the Substituted Options. To the
extent required by the relevant market or exchange, Parent shall list or
qualify all such shares for trading on the principal market or exchange on
which Parent Common Stock is traded from time to time.
3.3 Paying Agent.
(a) At or prior to the Effective Time, Parent shall enter into an agreement
with a bank or trust company selected by Parent to act as the paying agent for
the Merger (the "Paying Agent").
(b) At or prior to the Effective Time, Parent shall supply or cause to be
supplied to or for the account of the Paying Agent in trust for the benefit of
the holders of Company Common Stock the funds necessary to make the payments
contemplated in Section 3.2(a). Such funds shall be invested by the Paying Agent
as directed by Parent in accordance with Parent's investment policy. No interest
will be paid or accrued on the cash payable to holders of Company Common Stock.
(c) Promptly after the Effective Time, Parent shall mail or cause to be
mailed to each holder of Company Common Stock a letter of transmittal, in a
typical form (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for surrender of the
Certificates. Upon surrender to the Paying Agent of a holder's Certificate,
together with such letter of transmittal duly executed, such holder of Common
Stock shall be entitled to receive in exchange therefor a cash payment equal to
such holder's Merger Consideration, and such Certificate so surrendered shall
forthwith be canceled.
(d) In the event of a transfer of ownership of Company Common Stock which
is not registered in the transfer records of the Company, the appropriate Merger
Consideration may be issued to such transferee of such Company Common Stock, if
the Certificate representing such Company Common Stock is presented to the
Paying Agent, accompanied by all documents, in form and substance reasonably
satisfactory to Parent and the Paying Agent, required to evidence and effect
such transfer of Company Common Stock and to evidence that any applicable stock
transfer taxes have been paid. There shall be no transfers on the transfer
records of the Company, at or after the Effective Time, of shares of Company
Common Stock which were outstanding immediately prior to the Effective Time.
Until surrendered in accordance with the provisions of this Section 3.3, from
and after the Effective Time each Certificate shall be deemed to represent the
right to receive a cash payment equal to the holder's Merger Consideration.
(e) Any portion of the funds supplied to the Paying Agent which remains
undistributed to the former stockholders of the Company for twelve months after
the Effective Time shall be delivered to Parent, upon demand of Parent, and any
such former stockholders who have not theretofore complied with this Section 3.3
shall thereafter look only to Parent (subject to abandoned property, escheat and
other similar
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laws) only as general creditors of Parent with respect to any consideration set
forth in Section 3.2(a) that may be payable upon surrender of their
Certificates.
(f) None of Parent, the Company, the Surviving Corporation, the Paying
Agent or any other person shall be liable to any former stockholder of the
Company for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
3.4 Lost Certificates. In the event any Certificate shall have been lost,
stolen or destroyed, upon the making and delivery of an affidavit (in form and
substance satisfactory to the Surviving Corporation) of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Paying Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof pursuant to
this Agreement.
3.5 Dissenting Shares.
(a) Dissenting Shares shall not be converted into or represent the right to
receive the consideration set forth in Section 3.2(a), unless such Dissenting
Shareholder's right to appraisal shall have ceased in accordance with Article
113 of the CBCA. If such Dissenting Shareholder has so forfeited or withdrawn
his, her or its right to appraisal of Dissenting Shares, then (i) as of the
occurrence of such event, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to receive
the Merger Consideration in respect of such shares of Company Common Stock
pursuant to Section 3.2(a), and (ii) promptly following the occurrence of such
event, and in any case within ten (10) days of such event, Parent shall deposit
with the Paying Agent the amount of Merger Consideration to which such holder is
entitled pursuant to Section 3.2(a).
(b) The Company shall give Parent (i) prompt notice of any written demands
for appraisal of any shares of Company Common Stock, withdrawals of such
demands, and any other instruments that relate to such demands received by the
Company, and (ii) after due consultation with the Company, the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal
under the CBCA. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to any demands for appraisal of shares of
Company Common Stock or offer to settle or settle any such demands.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule, the Company makes
the following representations and warranties to Parent and Merger Sub, as of the
date of this Agreement.
4.1 Organization and Standing.
(a) The Company (i) is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation, (ii) has
all requisite corporate power and authority to own, operate and lease its
properties and carry on its business as now conducted, and (iii) is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the failure to so qualify, or be in good standing,
would have a Company Material Adverse Effect.
(b) The Company does not have any Subsidiaries and, except as set forth in
the Company Disclosure Schedule, does not own any equity securities or
securities convertible into or exchangeable or exercisable for equity securities
of any other company.
(c) The Company has not (i) filed or had filed against it a petition in
bankruptcy or a petition to take advantage of any other insolvency act, (ii)
admitted in writing its inability to pay its debts generally, (iii) made an
assignment for the benefit of creditors, (iv) consented to the appointment of a
receiver for
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itself or any substantial part of its property, or (v) generally committed any
act of insolvency (including the failure to pay obligations as they become due)
or bankruptcy.
4.2 Capitalization.
(a) The authorized capital stock of the Company consists of 15,000,000
shares of Company Common Stock. As of April 30, 2000, there were 4,125,259
shares of Company Common Stock issued and outstanding. From such date to the
date of this Agreement, no additional shares of capital stock of the Company
have been issued, except pursuant to the exercise of Company Options. As of
April 30, 2000, Company Options to acquire 338,038 shares of Company Common
Stock were outstanding. From such date to the date of this Agreement, no
additional Company Options have been granted.
(b) All of the issued and outstanding shares of Company Common Stock have
been duly authorized and validly issued and are fully paid, non-assessable and
free of preemptive or similar rights. Other than Company Options, there are no
existing and outstanding warrants, rights, options, subscriptions, convertible
securities or other agreements or commitments which obligate the Company to
issue, transfer or sell any shares of capital stock of the Company.
(c) The Company does not have any outstanding bonds, debentures, notes or
other obligations pursuant to which the holders thereof have the right to vote
(or which are convertible into or exercisable for securities having the right to
vote) with the stockholders of the Company on any matter.
4.3 Authorization; Enforceability; No Violation.
(a) The Company has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder.
(b) Subject only to the approval of this Agreement and the transactions
contemplated hereby by the stockholders of the Company in accordance with the
CBCA, all corporate action necessary on the part of the Company for the
execution, delivery and performance of this Agreement has been duly taken.
(c) This Agreement constitutes (assuming this Agreement is a valid and
legally binding obligation of Parent and Merger Sub) a valid and legally binding
obligation of the Company, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity and public policy
considerations (the "Enforceability Exceptions").
(d) The execution, delivery and performance of this Agreement will not
result in any conflict with, breach or violation of or default (or an event
which, with notice or lapse of time or both, would constitute a default),
termination or forfeiture under (i) any terms or provisions of the Articles of
Incorporation or the Bylaws of the Company, (ii) any statute, rule, regulation,
judicial, governmental, regulatory or administrative decree, order or judgment
applicable to the Company, or (iii) any agreement, lease, license, permit or
other instrument to which the Company is a party or to which any of its assets
are subject, except where any such breach, violation, default, termination or
forfeiture would not have or result in a Company Material Adverse Effect.
(e) There is no action, suit, proceeding or investigation pending or, to
the knowledge of the Company, threatened against the Company that questions the
validity of this Agreement or the right of the Company to enter into this
Agreement or to consummate the transactions contemplated hereby.
4.4 No Consents. Except as set forth in the Company Disclosure Schedule,
no consent, approval, authorization, order, registration, qualification or
filing of or with any court or any regulatory authority or any other
governmental or administrative body is required on the Company's part for the
consummation by it of the transactions contemplated by this Agreement, except
(i) notices and filings required in order to comply with the Securities Act, the
Exchange Act, and state securities or "blue sky" laws, and (ii) the filing of
the Articles of Merger with the Colorado Secretary of State.
4.5 Compliance With Laws. Except where the failure to so comply would not
have a Company Material Adverse Effect, the Company (i) has all valid and
current Permits, and each Permit is in full
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force and effect, and (ii) has made all filings and registrations and the like,
necessary or required by law to conduct its business as currently conducted. The
Company has not received any governmental notice of any violation by it of any
laws, rules, regulation or orders applicable to its business. Except where the
failure to comply would not have a Company Material Adverse Effect, (a) the
Company is not in default under any Permits and is in compliance with the same,
and (b) the business and operations of the Company are in compliance with all
applicable foreign, federal, state, local and county laws, ordinances,
regulations, judgments, orders, decrees or rules of any court, arbitrator or
governmental, regulatory or administrative agency or entity.
4.6 Company Reports.
(a) The Company has filed all reports, forms, registrations, schedules,
statements and other documents required to be filed by it with the Commission
since April 30, 1996 (the "Company Reports"). As of their respective dates, the
Company Reports complied as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the applicable rules and regulations promulgated thereunder. Except to the
extent that information contained in any Company Report has been amended,
revised or superseded by a Company Report subsequently filed and publicly
available prior to the date of this Agreement, none of the Company Reports, when
filed, contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) Each of the balance sheets of the Company included in or incorporated
by reference into the Company Reports (including the related notes and
schedules) fairly presents in all material respects the financial position of
the Company as of its date, and each of the statements of income, retained
earnings and cash flows of the Company included in or incorporated by reference
into the Company Reports (including any related notes and schedules) fairly
presents in all material respects the results of operations and cash flows of
the Company for the periods set forth therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments which would not be material in
amount or effect), in each case in accordance with GAAP, except as may be noted
therein and subject to the fact that unaudited financial statements do not
contain full notes thereto. The Company has no liabilities or obligations
required to be disclosed in a balance sheet or the notes thereto prepared in
accordance with GAAP, except (i) liabilities or obligations reflected on, or
reserved against in, a balance sheet of the Company or in the notes thereto, and
included in the Company Reports, (ii) liabilities or obligations incurred since
the Last Report Date in the ordinary course of business, consistent with past
practices, or (iii) liabilities disclosed in a Company Report.
4.7 Absence of Litigation, Orders, Judgments.
(a) There are no actions, suits or proceedings pending or, to the knowledge
of the Company, threatened which involve transactions of or otherwise relate to
the Company or any of its businesses or properties, at law or in equity, or
before any arbitrator of any kind, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or other
instrumentality, domestic or foreign, that are reasonably likely to have a
Company Material Adverse Effect.
(b) There are no outstanding orders, writs, injunctions, decrees,
judgments, awards, determinations or directions, which involve transactions of
or otherwise relate to the Company or any of its businesses or properties, of
any court or arbitrator or under any outstanding order, regulation or demand of
any federal, state, municipal or other governmental instrumentality, domestic or
foreign, that are reasonably likely to have a Company Material Adverse Effect.
4.8 Absence of Certain Changes. Since the Last Report Date, the Company
has conducted its business only in the ordinary course of such business, and
there has not been (i) any Company Material Adverse Effect or any event which is
reasonably likely to result in a Company Material Adverse Effect; (ii) any
declaration, setting aside or payment of any dividend or other distribution with
respect to its capital stock; or (iii) any material change in its accounting
principles, practices or methods.
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4.9 Taxes. The Company (i) has timely filed all material federal, state
and foreign tax returns required to be filed by it for tax years ended prior to
the date of this Agreement or requests for extensions have been timely filed and
any such request shall have been granted and not expired, and all such returns
are complete in all material respects, (ii) has paid or accrued all taxes shown
to be due and payable on such returns and (iii) has properly accrued all such
taxes for such periods subsequent to the periods covered by such returns.
4.10 Contracts. Each (a) agreement, contract and commitment, whether
written or oral, to which the Company is a party or by which it is bound and
which is filed as an exhibit to or described in a Company Report and (b)
material agreement, contract and commitment entered into by the Company, or by
which it became bound, after the Last Report Date (collectively, "Company
Contracts"), is a valid and legally binding obligation of the Company and, to
the knowledge of the Company, the other parties thereto, enforceable against the
Company and, to the knowledge of the Company, the other parties thereto, in
accordance with its terms, subject to the Enforceability Exceptions. The Company
is not, and to the knowledge of the Company no other party to any Company
Contract is, in material default thereof. The Company has not, and to the
knowledge of the Company no other party to any Company Contract has, performed
any act or omitted to perform any act which act or omission, with the giving of
notice or passage of time or otherwise, will become a material default
thereunder.
4.11 Intellectual Property.
(a) The Company owns or has the right to use all Intellectual Property used
in the operation of its business as presently conducted, without any
interference or conflict with or misappropriation or infringement of the
Intellectual Property rights of others, other than any interference, conflict,
misappropriation or infringement which is not reasonably likely to result in (i)
a material adverse effect on the Company's ability to manufacture or sell any of
its material products or any material line of products or otherwise to operate
its business, (ii) a material liability of the Company, or (iii) material
redesign or other corrective costs to the Company. The Company has taken
commercially reasonable action to maintain and protect its rights in the
material Intellectual Property that it owns or uses. Each material item of
Intellectual Property owned or used by the Company immediately prior to the
Effective Time hereunder will be owned or available for use by the Surviving
Corporation on substantially identical terms and conditions immediately
subsequent to the Effective Time.
(b) Section 4.11 of the Company Disclosure Schedule sets forth all Patents,
registered Copyrights, registered Trademarks, joint development agreements,
licenses and agreements relating to Intellectual Property owned or used by the
Company (other than agreements or licenses for readily available "off-the-
shelf" software) that require a consent or waiver to consummate the transactions
contemplated by this Agreement.
(c) To its knowledge, the Company has not, within the past four years,
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of others other than any
interference, infringement, misappropriation or conflict which did not and is
not reasonably likely to result in (i) a material adverse effect on the
Company's ability to manufacture or sell any of its material products or any
material line of products or otherwise to operate its business, (ii) a material
liability of the Company, or (iii) material redesign or other corrective costs
to the Company. The Company has not received, and has no knowledge of, any
charge, complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation, or conflict (including, without limitation, any
claim that the Company must license or refrain from using any Intellectual
Property rights of any other person), or that the Company's use of the
Intellectual Property constitutes unfair competition.
(d) To the knowledge of the Company, no fraud or misrepresentation has been
made by the Company or any of its officers, directors or employees or the
relevant inventors during the prosecution of any of the Patents of the Company,
nor has any fraud or misrepresentation been included in any documentation for or
other disclosure to any governmental agency of the Intellectual Property of the
Company.
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4.12 Employee Benefit Plans.
(a) The Company does not maintain or contribute to or have any actual or,
to its knowledge, potential liability with respect to any (i) deferred
compensation or bonus or retirement plans or arrangements, (ii) qualified or
nonqualified defined contribution or defined benefit plans or arrangements which
are employee pension benefit plans (as defined in Section 3(2) of ERISA), or
(iii) employee welfare benefit plans, (as defined in Section 3(1) of ERISA),
stock option or stock purchase plans, or material fringe benefit plans or
programs whether in writing or oral and whether or not terminated. The Company
has never contributed to any multiemployer pension plan (as defined in Section
3(37) of ERISA) or has ever maintained or contributed to any defined benefit
plan (as defined in Section 3(35) of ERISA). The Company does not maintain or
contribute to any Company Benefit Plan which provides health, accident or life
insurance benefits to former employees, their spouses or dependents, other than
in accordance with Section 4980B of the Code.
(b) With respect to each Company Benefit Plan that is intended to be a
"qualified plan" within the meaning of Section 401(a) of the Code, either (i)
the IRS has issued a favorable determination letter that has not been revoked,
or (ii) an application for a favorable determination letter was timely submitted
to the IRS for which no final action has been taken by the IRS. To the knowledge
of the Company, there is no reason that is not susceptible to cure why the
qualified status under Section 401(a) of the Code of any Company Benefit Plan
would be denied or revoked, whether retroactively or prospectively.
(c) To the knowledge of the Company, no Company Benefit Plan, any fiduciary
thereof, nor the Company has incurred any liability or penalty under Section
4975 of the Code or Section 502(i) of ERISA. Except as would not have a Company
Material Adverse Effect, each Company Benefit Plan has been maintained and
administered in all material respects in compliance with its terms and with
ERISA and the Code, to the extent applicable thereto.
(d) To the knowledge of the Company, neither the Company nor any ERISA
Affiliate (during the period of its affiliated status) has any existing
liability currently due and payable that has not been satisfied in full under
Title IV of ERISA or Section 412 of the Code. To the knowledge of the Company,
there are no current plans to terminate, whether voluntarily or involuntarily,
any materially underfunded pension plan of the Company or any ERISA Affiliate
that is subject to Title IV of ERISA.
(e) To the knowledge of the Company, there is no pending or anticipated
claim, suit, action or other litigation against or otherwise involving any of
the Company Benefit Plans (excluding claims for benefits incurred in the
ordinary course of the Company Benefit Plan activities) except those which would
either have no Company Material Adverse Effect or those which have been
released, dismissed, settled or otherwise satisfied, each of which is set forth
in Section 4.12(e) of the Company Disclosure Schedule.
(f) All material contributions required to be made as of the date hereof to
the Company Benefit Plans have been made or provided for.
(g) Except as set forth in Schedule 4.12 of the Company Disclosure Schedule
and except with respect to the termination of the Stock Purchase Plan, the
execution of, and performance of the transactions contemplated by, this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any benefit plan, policy,
arrangement or agreement or any trust or loan that will or is reasonably likely
to result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee of the Company.
(h) The Company has not entered into any severance agreements or adopted
any severance policies applicable to the Company or its employees which would
have a Company Material Adverse Effect or which have not either been satisfied
or provided for, and each such severance agreement and policy is set forth on
Section 4.12(h) of the Company Disclosure Schedule.
4.13 No Brokers. The Company has not entered into any contract,
arrangement or understanding with any person or firm which will or is reasonably
likely to result in the obligation of the Company,
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Parent or Merger Sub to pay any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that the Company has retained Quist Financial, Inc. to render a fairness
opinion, the arrangements with which have been disclosed in writing to Parent
prior to the date hereof. Other than the foregoing arrangements, the Company is
not aware of any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
4.14 Parent Stock Ownership. The Company does not own any shares of
Parent Common Stock or other securities convertible into Parent Common Stock.
4.15 Environmental Matters.
(a) There has not been any violation of any Environmental Requirements by
the Company or, to the knowledge of the Company, any Company Predecessor, nor to
the knowledge of the Company has there been any third party claim or demand
based upon any Environmental Requirements against the Company or any Company
Predecessor, other than violations, claims or demands that have not resulted,
and are not reasonably likely to result, in a Company Material Adverse Effect.
(b) The Company has not disposed of, stored or used any Hazardous Materials
on, nor has it transported any Hazardous Materials from, any of the Company Real
Properties in violation of applicable Environmental Requirements other than a
disposal, storage, use or transport which has not resulted in and is not
reasonably likely to result in a Company Material Adverse Effect. To the
knowledge of the Company, no Company Predecessor has disposed of, stored or used
any Hazardous Materials on, nor has any such Company Predecessor transported any
Hazardous Materials from, any of the Company Real Properties in violation of
applicable Environmental Requirements.
(c) To the knowledge of the Company, none of the following exists at any of
the real property currently owned, leased or occupied by the Company or existed
at any of the Company Real Properties at the time the Company or the Company
Predecessor operated there: (i) underground storage tanks, (ii)
asbestos-containing material in any friable or damaged form or condition, (iii)
materials or equipment containing polychlorinated biphenyls (PCBs), or (iv)
landfills or surface impoundments.
(d) To the knowledge of the Company, none of the Company Real Properties is
or has been contaminated by any Hazardous Materials, in a manner that has given
or is reasonably likely to give rise to any material liability on the part of
the Company to any person, including without limitation any governmental
authority, for response costs, corrective action costs, personal injury,
property damage, natural resources damages or attorney fees, pursuant to CERCLA,
or SWDA, or any other Environmental Requirements, whether federal, state or
locally imposed.
4.16 Insurance. The Company maintains insurance with financially sound
and reputable insurers, in such amounts, and with such deductibles and covering
such risks as is customarily carried by companies engaged in similar businesses
and owning similar properties in the localities where the Company is located.
The Company Disclosure Schedule contains a list of each insurance policy
presently maintained by the Company.
4.17 Proprietary Information and Inventions and Confidentiality
Agreement. Each employee, consultant, service provider, officer and director of
the Company has executed a proprietary information and inventions and
confidentiality agreement, copies of which have been provided to Parent. The
Company is not aware that any of such persons is in violation thereof, and the
Company will use its best efforts to prevent any such violation.
4.18 Accuracy of Documents and Information. The copies of all
instruments, agreements, other documents and written information delivered by
the Company to Parent or its counsel are and will be complete and correct in all
material respects as of the date of delivery thereof. No representations or
warranties made by the Company in this Agreement, nor any document, written
information, statement, financial statement, letter, certificate or exhibit
prepared and furnished or to be prepared and furnished by
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the Company or its representatives to Parent pursuant hereto or in connection
with the transactions contemplated hereby, contains or will contain any untrue
statement of material fact, or omits or will omit to state a material fact
necessary to make the statements or facts contained herein or therein not
misleading. There is no presently existing event, fact or condition that would
have a Company Material Adverse Effect or that could reasonably be expected to
do so, which has not been set forth in this Agreement or the exhibits hereto or
otherwise disclosed by the Company to Parent in writing in the Company
Disclosure Schedule.
4.19 Title to Properties; Encumbrances. The Company Disclosure Schedule
contains a complete and accurate list of all real property owned by the Company
and all real property leases to which the Company is a party. Except as listed
in the Company Disclosure Schedule, the Company has good and marketable title to
its properties, interests in properties and assets, real and personal, used in
or necessary for the operation of the business of Company, free and clear of all
liens and encumbrances. The equipment of Company used in the operation of its
business is, taken as a whole, (i) adequate for the business conducted by
Company and (ii) in good operating condition and repair, ordinary wear and tear
excepted. To the knowledge of the Company, all real or personal property leases
to which Company is a party are valid, binding and enforceable against Company
and effective in accordance with their respective terms.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub make the following representations and warranties to
the Company as of the date of this Agreement.
5.1 Organization and Standing.
(a) Parent and each of its Significant Subsidiaries (i) is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (ii) has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business as
now conducted, and (iii) is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure to
so qualify, or be in good standing, would have a Parent Material Adverse Effect.
(b) Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation. Merger Sub
was organized for purposes of consummating the transactions contemplated by this
Agreement. Merger Sub has not engaged in any activity other than as provided in,
or contemplated by, this Agreement and, as of the date hereof, has no
liabilities of any nature, contingent or otherwise, other than liabilities or
obligations that may arise from this Agreement or the transactions contemplated
hereby. The authorized capital stock of Merger Sub consists of 1,000 shares of
Merger Sub Common Stock, all of which are validly issued, fully paid and
nonassessable and are owned by Parent.
(c) Neither Parent nor any of its Subsidiaries (including without
limitation Merger Sub) has (i) filed or had filed against it a petition in
bankruptcy or a petition to take advantage of any other insolvency act, (ii)
admitted in writing its inability to pay its debts generally, (iii) made an
assignment for the benefit of creditors, (iv) consented to the appointment of a
receiver for itself or any substantial part of its property or (v) generally
committed any act of insolvency (including the failure to pay obligations as
they become due) or bankruptcy.
5.2 Authorization; Enforceability; No Violation.
(a) Each of Parent and Merger Sub has full corporate power and authority to
execute and deliver this Agreement, and to perform its respective obligations
hereunder.
(b) All corporate action necessary on the part of Parent and Merger Sub for
the execution, delivery and performance of this Agreement has been duly taken.
No approval of the stockholders of Parent is
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required by applicable law or the rules of the Nasdaq National Market in
connection with the consummation by Parent or Merger Sub of the transactions
contemplated hereby.
(c) This Agreement constitutes (assuming this Agreement is a valid and
binding obligation of the Company), a valid and legally binding obligation of
each of Parent and Merger Sub, enforceable against Parent and Merger Sub, as
applicable, in accordance with its terms, subject to the Enforceability
Exceptions.
(d) The execution, delivery and performance of this Agreement will not
result in any conflict with, breach or violation of or default (or an event
which, with notice or lapse of time or both, would constitute a default),
termination or forfeiture under (i) any terms or provisions of the Certificate
of Incorporation or the By-laws of Parent or any of its Subsidiaries (including
without limitation Merger Sub), (ii) any statute, rule, regulation, judicial,
governmental, regulatory or administrative decree, order or judgment applicable
to Parent or any of its Subsidiaries (including without limitation Merger Sub),
or (iii) any agreement, lease, license, permit or other instrument to which
Parent or any of its Subsidiaries (including without limitation Merger Sub) is a
party or to which any of its assets are subject, except where any such breach,
violation, default, termination or forfeiture would not have or result in a
Parent Material Adverse Effect.
(e) There is no action, suit, proceeding or investigation pending or
threatened against Parent or any of its Subsidiaries that questions the validity
of this Agreement or the right of Parent or Merger Sub to enter into this
Agreement or to consummate the transactions contemplated hereby.
(f) The Cash Consideration will be paid from existing cash of Parent.
Parent will not be required to borrow or otherwise seek additional financing to
pay the Cash Consideration. Neither Parent nor Merger Sub require the consent of
any creditor to pay the Cash Consideration.
5.3 No Consents. No consent, approval, authorization, order,
registration, qualification or filing of or with any court or any regulatory
authority or any other governmental or administrative body is required on the
part of Parent or any of its Subsidiaries for the consummation by Parent and
Merger Sub of the transactions contemplated by this Agreement, except (i)
notices and filings required in order to comply with the Securities Act, the
Exchange Act and state securities or "blue sky" laws, (ii) the filing of the
Articles of Merger with the Colorado Secretary of State and (iii) any notices
and filings necessary to comply with the rules of the Nasdaq National Market
System.
5.4 Parent Reports.
(a) Parent has filed all reports, forms, registrations, schedules,
statements and other documents required to be filed by it with the Commission
since November 17, 1995 (the "Parent Reports"). As of their respective dates,
the Parent Reports complied as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the applicable rules and regulations promulgated thereunder. Except to the
extent that information contained in any Parent Report has been amended, revised
or superseded by a Parent Report subsequently filed and publicly available prior
to the date of this Agreement, none of the Parent Reports, when filed, contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated balance sheets of Parent included in or
incorporated by reference into the Parent Reports (including the related notes
and schedules) fairly presents in all material respects the consolidated
financial position of Parent and its Subsidiaries as of its date, and each of
the consolidated statements of income, stockholders' equity and cash flows of
Parent included in or incorporated by reference into the Parent Reports
(including any related notes and schedules) fairly presents in all material
respects the income, stockholders' equity and cash flows, as the case may be, of
Parent and its Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments which would
not be material in amount or effect), in each case in accordance with GAAP,
except as may be noted therein and subject to the fact that unaudited financial
statements do not contain full notes thereto. Parent and its Subsidiaries do not
have any liabilities or obligations required to be
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disclosed in a consolidated balance sheet or the notes thereto prepared in
accordance with GAAP, except (i) liabilities or obligations reflected on, or
reserved against in, a consolidated balance sheet of Parent or in the notes
thereto, and included in the Parent Reports, (ii) liabilities or obligations
incurred since March 31, 2000 in the ordinary course of business, consistent
with past practices, or (iii) liabilities disclosed in a Parent Report.
5.5 Accuracy of Documents and Information. The copies of all instruments,
agreements, other documents and written information delivered by Parent to the
Company or its counsel are and will be complete and correct in all material
respects as of the date of delivery thereof. No representations or warranties
made by Parent in this Agreement, nor any document, written information,
statement, financial statement, letter, certificate or exhibit prepared and
furnished or to be prepared and furnished by Parent or its representatives to
the Company pursuant hereto or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of material fact, or omits
or will omit to state a material fact necessary to make the statements or facts
contained herein or therein not misleading. There is no presently existing
event, fact or condition that would have a Parent Material Adverse Effect or
that could reasonably be expected to do so, which has not been set forth in this
Agreement or the exhibits hereto.
5.6 Company Options. Parent acknowledges that the vesting of all Company
Options will accelerate at the Effective Time.
ARTICLE 6
COVENANTS
6.1 Alternative Proposals.
(a) Upon execution and delivery of this Agreement, the Company, its
affiliates and their respective officers, directors, employees, representatives
and agents shall immediately cease any existing discussions or negotiations, if
any, conducted with any parties heretofore with respect to any acquisition of
all or any material portion of the assets of, or any equity interest in, the
Company or any business combination with the Company. Notwithstanding the
foregoing, the Company may issue Company Common Stock issuable upon exercise of
the Company Options outstanding on the date hereof and pursuant to the Stock
Purchase Plan, subject to the limitations set forth in Section 3.2(d)(iv).
(b) Prior to the Closing Date, the Company may, solely in response to
unsolicited requests therefor, furnish non-public information regarding itself
to any corporation, partnership, person or other entity or group in respect of,
and may participate in discussions and negotiate with such entity or group
concerning, a business combination, merger, sale of material assets, sale of
shares of capital stock or similar transaction involving the Company (a
"Transaction"), provided that (i) such entity or group has submitted a written
proposal to the Board of Directors of the Company relating to any such
Transaction (an "Alternative Proposal"), (ii) the entity or group enters into
confidentiality agreements with the Company with respect to such non-public
information, and (iii) the Company Board, by a majority vote, determines in its
good faith judgment, based as to legal matters on the written advice of legal
counsel, that failing to take such action would constitute a breach of the
Company Board's fiduciary duty. The Company Board shall provide a copy of any
such written proposal to Parent and Merger Sub immediately after receipt
thereof, unless prohibited by the terms of such proposal.
(c) Neither the Company nor any of its affiliates, nor any of such Persons'
respective officers, directors, employees, representatives or agents, shall,
directly or indirectly (i) encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent and
Merger Sub, any affiliate or associate of Parent and Merger Sub or any designees
of Parent and Merger Sub) concerning any Transaction, or (ii) authorize, propose
or announce an intention to authorize or propose any Transaction (other than the
Merger), unless and until the Company has received an Alternative Proposal in
writing and the Company Board, by majority vote, has determined in its good
faith judgment, based as to legal matters on the written advice of
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legal counsel, that failing to take such action would constitute a breach of the
Company Board's fiduciary duty; provided, however, that nothing herein shall
prevent the Company Board from taking, and disclosing to the Company's
stockholders, a position contemplated by Rules 14d-9 and 14e-2 promulgated under
the Exchange Act with regard to any tender offers; provided, further, that the
Company Board shall not recommend that the stockholders of the Company tender
their shares in connection with any such tender offer unless the Company Board
by a majority vote determines in its good faith judgment, based as to legal
matters on the written advice of legal counsel, that failing to take such action
would constitute a breach of the Company Board's fiduciary duty.
(d) Nothing in this Section 6.1 shall (i) permit the Company to terminate
this Agreement (except as specifically provided in Article 8 hereof), (ii)
permit the Company to enter into any agreement with respect to a Transaction
during the term of this Agreement (it being agreed that during the term of this
Agreement, the Company shall not enter into any agreement with any person that
provides for, or in any way facilitates, a Transaction, other than a
confidentiality agreement in customary form), or (iii) except as specifically
provided in Article 8, affect any other obligation of the Company under this
Agreement.
6.2 Interim Operations of the Company.
(a) Prior to the Effective Time, except as set forth in Section 6.2 of the
Company Disclosure Schedule or as contemplated by any other provision of this
Agreement, unless Parent has consented in writing thereto, the Company:
(i) shall conduct its operations according to their usual, regular and
ordinary course in substantially the same manner as heretofore conducted;
(ii) shall use its reasonable efforts to preserve intact its business
organizations and goodwill, keep available the services of its officers and
employees and maintain satisfactory relationships with those persons having
business relationships with them;
(iii) shall not amend its Articles of Incorporation or Bylaws;
(iv) shall promptly notify Parent of (A) any material adverse change
in its condition (financial or otherwise), business, properties, assets,
liabilities or the normal course of its business or of its properties, (B)
any material litigation or, to the extent known to the Company, any
material governmental complaints, investigations or hearings against or
otherwise involving the Company (or communications indicating that the same
may be contemplated), or (C) the breach of any representation or warranty
of the Company contained herein;
(v) shall promptly deliver to Parent true and correct copies of any
report, statement or schedule filed by the Company with the Commission
subsequent to the date of this Agreement;
(vi) shall not enter into or amend any employment, severance or
similar agreements or arrangements with any of its directors or executive
officers, except (A) in the ordinary course of business consistent with
past practice, or (B) as otherwise provided in this Agreement;
(vii) shall not authorize, propose or announce an intention to
authorize or propose, or enter into negotiations or an agreement with
respect to any acquisition of assets or securities, any disposition of
assets or securities or any release or relinquishment of any contract
rights, which acquisitions, dispositions, releases or relinquishments would
be outside the ordinary course of business and would involve aggregate
consideration in excess of $100,000;
(viii) shall not issue any shares of capital stock or securities,
except as permitted by the last sentence of Section 6.1(a), or effect any
stock split or otherwise change its capitalization;
(ix) shall not grant, confer or award any options, appreciation
rights, warrants, conversion rights, restricted stock, stock units,
performance shares or other rights, not existing on the date hereof, with
respect to any shares of its capital stock or other securities of the
Company;
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(x) except as required by applicable law (in which case prompt notice
shall be given by the Company to Parent), shall not amend in any material
respect the terms of the Company Benefit Plans, including without
limitation any employment, severance or similar agreements or arrangements
in existence on the date hereof, or adopt any new employee benefit plans,
programs or arrangements or any employment, severance or similar agreements
or arrangements;
(xi) shall not incur, create, assume or otherwise become liable for
borrowed money or assume, guarantee, endorse or otherwise become
responsible or liable for the obligations of any other individual,
corporation or other entity, except in the ordinary course of business;
(xii) shall not make any loans or advances to any other Person, except
in the ordinary course of business;
(xiii) shall not make any material tax election other than in the
ordinary course, or without the consent of Parent, which shall not
unreasonably be withheld, settle or compromise any material tax liability;
(xiv) shall not declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock or other ownership interests;
(xv) shall not directly or indirectly redeem, purchase or otherwise
acquire any shares of its capital stock, or make any commitment for any
such action; provided that cashless exercises of stock options shall not be
in violation of this clause (xv); and
(xvi) shall not agree, in writing or otherwise, to take any of the
foregoing actions or take any action which would make any representation or
warranty in Article 4 hereof untrue or incorrect in any material respect as
of the Closing Date.
6.3 Meeting of Stockholders. The Company will take all action necessary
in accordance with applicable law and its Articles of Incorporation and Bylaws
to convene (and adjourn and reconvene, if required to permit a stockholder vote
on this Agreement, as amended) the Stockholders' Meeting as promptly as
practicable to consider and vote upon the approval of this Agreement and the
transactions contemplated hereby. Unless the Company Board by a majority vote
determines in its good faith judgment, based as to legal matters on the written
advice of legal counsel, that taking such action would constitute a breach of
the Company Board's fiduciary duty, the Company Board shall recommend such
approval, and the Company shall take all lawful action to solicit such approval,
including, without limitation, timely mailing the Proxy Statement.
6.4 Filings; Other Actions. Subject to the terms and conditions herein
provided, the Company and Parent shall: (a) use all reasonable efforts to
cooperate with one another in (i) determining which filings are required to be
made prior to the Effective Time with, and which other consents, approvals,
permits or authorizations are required to be obtained prior to the Effective
Time from, governmental or regulatory authorities of the United States, the
several states and foreign jurisdictions in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and (ii) timely making all such filings and timely seeking all such
consents, approvals, permits or authorizations; and (b) use all reasonable
efforts to take, or cause to be taken, all other action and do, or cause to be
done, all other things necessary, proper or appropriate to consummate and make
effective the transactions contemplated by this Agreement.
6.5 Inspection of Records. From the date hereof to the Effective Time,
each of the Company and Parent shall (a) allow all designated officers,
attorneys, accountants and other representatives of the other party reasonable
access at all reasonable times to its respective offices, records and files,
correspondence, audits and properties, as well as to all information relating to
its respective commitments, contracts, titles and financial position, or
otherwise pertaining to its respective business and affairs, (b) furnish to the
other party and the other party's counsel, financial advisors, auditors and
other authorized representatives such financial and operating data and other
information as such persons may reasonably request and (c) instruct
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its respective employees, counsel and financial advisors to cooperate with the
other party in the other party's investigation of its respective business.
6.6 Publicity. The initial press release relating to this Agreement shall
be a joint press release and thereafter, until the Effective Time, the Company
and Parent shall, subject to their respective legal obligations (including
requirements of stock exchanges and similar self regulatory bodies), consult
with each other, and use reasonable efforts to agree upon the text of any press
release, before issuing any such press release or otherwise making public
statements with respect to the transactions contemplated hereby and in making
any filings with any federal or state governmental or regulatory agency or with
any national securities exchange with respect thereto.
6.7 Proxy Statement.
(a) Parent and the Company shall cooperate and promptly prepare the proxy
statement with respect to the Stockholders' Meeting (the "Proxy Statement").
(b) The Company will cause the Proxy Statement to comply as to form in all
material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder.
(c) The Company shall ensure that the information set forth in the Proxy
Statement does not (i) at the time the Proxy Statement (or any amendment thereof
or supplement thereto) is first mailed to holders of Company Common Stock, (ii)
at the time of the Stockholders' Meeting, or (iii) at the Effective Time,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they are made, not misleading, and
shall comply as to form and substance with the requirements of the Exchange Act.
(d) The information supplied by Parent for inclusion or incorporation by
reference in the Proxy Statement shall not (i) at the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to holders of
Company Common Stock, (ii) at the time of the Stockholders' Meeting, or (iii) at
the Effective Time, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, and shall comply as to form and substance with the requirements
of the Exchange Act.
No amendment or supplement to the Proxy Statement will be made by the
Company without the approval of Parent.
6.8 Affiliate Letters. The letters previously delivered by Affiliates of
the Company in respect of certain securities and accounting matters are of no
further force and effect.
6.9 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses except as
expressly provided herein and except that the filing fee in connection with the
filing of the Proxy Statement with the Commission and the expenses incurred in
connection with printing and mailing the Proxy Statement shall be shared equally
by the Company and Parent.
6.10 Employee Benefits.
(a) From and after the Effective Time, Parent shall provide or cause the
Surviving Corporation to provide to persons who are employees of the Company at
the Effective Time and who will continue as employees of the Surviving
Corporation after the Effective Time (the "Company Personnel") the same employee
compensation and benefit plans, programs and arrangements as are provided to
other employees of Parent employed in similar capacities to such Company
Personnel; provided, however, that subject to the foregoing, Parent shall not be
precluded from amending or terminating any particular plan, program or
arrangement, or from substituting any such plans, programs or arrangements with
plans, programs or arrangements applicable and available to other employees of
Parent and its Subsidiaries.
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(b) Following the Effective Time, Parent shall cause the benefit plans
covering the Company Personnel following the Effective Time (the "Future Benefit
Plans") to continue to recognize the service credit of the Company Personnel
accrued as of the Effective Time under the Company Benefit Plans for purposes of
participation, eligibility and vesting of benefits, to the extent permissible by
the terms of such Future Benefit Plans.
6.11 Agreements. Between the date hereof and the Closing Date, the
Company shall not enter into any agreement which the Company knows or has reason
to know is reasonably likely to cause any major customer of the Company to
terminate any material contracts, agreements or other obligations that exist
between that customer on the one hand, and the Company (or the Company following
the Merger), on the other hand and the Company shall take all reasonable action
appropriate to an effort to avoid such termination.
6.12 Takeover Statute. If any "fair price," "moratorium," "control share
acquisition" or other form of anti-takeover statute or regulation shall become
applicable to the transactions contemplated hereby, the Company and the Company
Board shall grant such approvals and take such actions as are reasonably
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of such statute or regulation on the
transactions contemplated hereby; provided, however, that the Company and the
Company Board shall not be required to grant such approvals or take such actions
if the Company Board, by majority vote, determines in its good faith judgment,
based as to legal matters on the written advice of legal counsel, that granting
such approvals or taking such actions would constitute a breach of the Company's
Board's fiduciary duties.
6.13 Interim Operations of Parent.
(a) Prior to the Effective Time, except as contemplated by any other
provision of this Agreement, unless the Company has consented in writing
thereto, Parent:
(i) shall promptly notify the Company of (A) any material adverse
change in its condition (financial or otherwise), business, properties,
assets, liabilities or the normal course of its business or of its
properties, (B) any material litigation or, to the extent known to Parent,
any material governmental complaints, investigations or hearings against or
otherwise involving Parent (or communications indicating that the same may
be contemplated), or (C) the breach of any representation or warranty of
Parent contained herein;
(ii) shall promptly deliver to the Company true and correct copies of
any report, statement or schedule filed by Parent with the Commission
subsequent to the date of this Agreement; and
(b) shall not agree, in writing or otherwise, to take any action which
would make any representation or warranty in Article 5 hereof untrue or
incorrect in any material respect as of the Closing Date.
6.14 Directors' and Officers' Indemnification and Insurance.
(a) The Articles of Incorporation and By-laws of the Surviving Corporation
shall contain the respective provisions that are set forth, as of the date of
this Agreement, in the Articles of Incorporation and the By-laws of the Company
dealing with indemnification of officers, directors and employees of the Company
and other persons specified therein, which provisions shall not be amended,
repealed or otherwise modified for a period of six years from the Effective Time
in any manner that would affect adversely the rights thereunder with respect to
actions or events occurring prior to the Effective Time of individuals who were
entitled to such indemnification prior to the Effective Time.
(b) The Surviving Corporation shall maintain in effect for at least six
years from the Effective Time directors' and officers' liability insurance with
an insurance company rated at least "A" by A.M. Best Company, covering the
persons who, as of the date of this Agreement, are covered by the Company's
directors' and officers' liability insurance policy (the "Current Policy"). The
coverage provided by the
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directors' and officers' liability insurance maintained by the Surviving
Corporation shall be substantially similar to the coverage provided by the
Current Policy.
(c) Parent shall guarantee the obligations of the Surviving Corporation
provided by this Section 6.14.
This Section 6.14 shall survive the consummation of the Merger, is intended
to benefit the Company, the Surviving Corporation and each indemnified party,
and shall be enforceable by the indemnified parties.
6.15 Vote to Adjourn. Parent shall vote all Common Stock as to which it
has voting power in favor of adjourning the meeting of holders of Company Common
Stock scheduled for October 23, 2000.
6.16 Non-Employee Director Option Exercises. The Company shall cause each
of its non-employee directors to provide to Parent, as soon as practicable but
in no event later than October 31, 2000, an agreement that such non-employee
director will exercise his Company Option prior to the Effective Time, if the
closing price of the Parent Common Stock on the trading day preceding the
Stockholders' Meeting is equal to or less than $15.75. Substituted Options will
not be granted to the non-employee directors of the Company as a result of such
exercises, if applicable.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved by the requisite vote of the holders of the issued and
outstanding shares of capital stock of the Company.
(b) None of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction in the United States which
prohibits the consummation of the transactions contemplated by this
Agreement. In the event any such order or injunction shall have been
issued, each party agrees to use its best efforts to have any such
injunction lifted.
(c) All consents, authorizations, orders and approvals of (or filings
or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
the filing of the Articles of Merger and any other documents required to be
filed after the Effective Time and except where the failure to have
obtained or made any such consent, authorization, order, approval, filing
or registration would not have a material adverse effect on the business of
Parent (and its Subsidiaries) and the Company, taken as a whole, following
the Effective Time.
(d) The Company Board shall have received the opinion of Quist
Financial, Inc., substantially to the effect that, as of October 20, 2000,
the Cash Consideration is fair to the holders of Company Common Stock from
a financial point of view, and shall have provided a copy of the written
opinion to Parent.
7.2 Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) Parent shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date, the representations and warranties of Parent and
Merger Sub contained in this Agreement and in any document delivered in
connection herewith shall be true and correct in all material respects as
of the Closing Date, except that those representations and warranties which
address matters only as of a particular date shall have been true and
correct as of such date, and the Company shall have received a certificate
of an executive officer of Parent, dated the Closing Date, certifying to
such effect.
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(b) From the date of this Agreement through the Effective Time, there
shall not have occurred a Parent Material Adverse Effect.
7.3 Conditions to Obligation of Parent and Merger Sub to Effect the
Merger. The obligations of Parent and Merger Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date, the representations and warranties of the Company
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct in all material respects as of the
Closing Date, except that those representations and warranties which
address matters only as of a particular date shall have been true and
correct as of such date, and Parent shall have received a certificate of an
executive officer of the Company, dated the Closing Date, certifying to
such effect.
(b) Holders of not less than fifty-five percent (55%) of the Company
Common Stock outstanding as of the Record Date shall have entered into
voting agreements, in form and substance satisfactory to Parent, pursuant
to which such holders shall have agreed to vote, or cause their shares to
be voted, in favor of the Merger at the Stockholders' Meeting. Each such
holder shall have complied in all material respects with all agreements and
covenants required to be performed under such voting agreement.
(c) Holders of not more than five percent (5%) of the shares of
Company Common Stock outstanding immediately prior to the Effective Time
shall have exercised their rights as Dissenting Shareholders.
(d) The Stock Purchase Plan shall have been terminated and any stock
and/or cash distributed thereunder as set forth in Section 3.2(d)(iv).
(e) From the date of this Agreement through the Effective Time, there
shall not have occurred a Company Material Adverse Effect.
ARTICLE 8
TERMINATION
8.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the stockholders of the Company, by the
mutual consent of Parent and the Company.
8.2 Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either Parent or the Company if (a) the Merger shall not have been
consummated by January 31, 2001, or (b) the approval of the Company's
stockholders required by Section 7.1(a) shall not have been obtained at the
Stockholders' Meeting or any adjournment thereof, or (c) a United States federal
or state court of competent jurisdiction or United States federal or state
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and non-appealable; provided, that the party seeking to terminate this
Agreement pursuant to this paragraph (c) shall have used all reasonable efforts
to remove such injunction, order or decree; and provided, in the case of a
termination pursuant to paragraph (a) of this Section 8.2, that the terminating
party shall not have breached in any material respect its obligations under this
Agreement in any manner that shall have proximately contributed to the failure
to consummate the Merger by January 31, 2001.
8.3 Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the adoption and approval by the
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stockholders of the Company referred to in paragraph (a) of Section 7.1, by
action of the Company Board, if (a) the Company Board, by majority vote,
determines in its good faith judgment, based as to legal matters on the written
advice of legal counsel, that terminating this Agreement and abandoning the
Merger is required by the Company Board's fiduciary duties, or (b) there has
been a breach by Parent or Merger Sub of any representation or warranty
contained in this Agreement that has had or is reasonably likely to have a
Parent Material Adverse Effect, which breach is not curable or, if curable, is
not cured within 30 days after written notice of such breach is given by the
Company to Parent, or (c) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of Parent, which
breach is not curable or, if curable, is not cured within 30 days after written
notice of such breach is given by the Company to Parent.
8.4 Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, by action of
the Board of Directors of Parent, if (a) the Company Board shall have (i)
withdrawn or modified in a manner materially adverse to Parent its approval or
recommendation of this Agreement or the Merger or (ii) recommended an
Alternative Proposal to the Company stockholders, or (b) there has been a breach
by the Company of any representation or warranty contained in this Agreement
that has had or is reasonably likely to have a Company Material Adverse Effect,
which breach is not curable or, if curable, is not cured within 30 days after
written notice of such breach is given by Parent to the Company, or (c) there
has been a material breach of any of the covenants or agreements set forth in
this Agreement on the part of the Company, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by Parent to the Company.
8.5 Effect of Termination and Abandonment.
(a) If this Agreement is terminated by the Company or Parent pursuant to
Section 8.2(b), 8.3(a) or 8.4(a), and (x) prior to such termination, a proposal
with respect to a Transaction shall have been made, and (y) within two (2) years
after such termination, either the Company enters into any agreement with
respect to a Transaction whereby any third party shall acquire beneficial
ownership of more than 50% of the Company's (i) outstanding shares of voting
stock or (ii) assets (measured by fair market value), then the Company shall pay
Parent, by wire transfer of immediately available funds, a fee (the "Termination
Fee") of Five Million Dollars ($5,000,000) within fifteen (15) business days
after the execution of such agreement or the consummation of such acquisition
(whichever shall first occur).
(b) The Company acknowledges that the agreements contained in this Section
8.5 are an integral part of the transactions contemplated in this Agreement and
that the Termination Fee constitutes liquidated damages and is not a penalty. If
the Company fails to promptly pay the Termination Fee when due and, in order to
obtain such payment, Parent or Merger Sub commences a suit which results in a
judgment against the Company, the Company shall reimburse Parent for its costs
and expenses (including attorneys' fees) incurred in connection with such suit,
together with interest on the amount of the Termination Fee at the prime rate,
as then quoted in The Wall Street Journal, from the date the Termination Fee was
required to be paid.
(c) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article 8, all obligations of the parties hereto
shall terminate, except (i) the obligations of the parties set forth in this
Section 8.5 and Section 6.9, (ii) the provisions of Sections 9.3, 9.6, 9.9, 9.12
and 9.13, and (iii) the Confidentiality Agreement previously executed between
the Company and Parent (the "Confidentiality Agreement"). Moreover, in the event
of termination of this Agreement pursuant to Section 8.3 or 8.4, nothing herein
shall prejudice the ability of the nonbreaching party from seeking damages,
after taking into account payment of the Termination Fee, if such fee has been
paid, from any other party for any willful breach of this Agreement, including
without limitation, attorneys' fees and the right to pursue any remedy at law or
in equity.
8.6 Extension; Waiver. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
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representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE 9
GENERAL PROVISIONS
9.1 Nonsurvival of Representations, Warranties and Covenants. The
representations, warranties and covenants in this Agreement or in any instrument
delivered pursuant to this Agreement shall not survive the Merger; provided,
however, that the covenants contained in Article 3, Section 6.9, Section 6.14
and this Article 9 shall survive the Merger, but not beyond the extent, if any,
specified therein.
9.2 Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
If to Parent or Merger Sub:
Advanced Energy Industries, Inc.
1625 Sharp Point Drive
Fort Collins, Colorado 80525
Attn.: Richard P. Beck
Facsimile: (970) 407-5300
with copies to:
Thelen Reid & Priest LLP
333 West San Carlos Street, 17th Floor
San Jose, CA 95110-2701
Attn.: Jay L. Margulies, Esq.
Facsimile: (408) 287-8040
If to the Company:
Engineering Measurements Company
600 Diagonal Highway
Longmont, Colorado 80501
Attn.: Charles E. Miller
Facsimile: (303) 678-7152
with copies to:
Chrisman, Bynum & Johnson, P.C.
1900 Fifteenth Street
Boulder, CO 80302
Attn: G. James Williams, Jr.
Facsimile: (303) 449-5426
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
9.3 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary (except as provided in Section
6.13), nothing in this Agreement, expressed or implied, is intended to confer on
any person other than the parties hereto or their respective heirs, successors,
executors, administrators and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
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9.4 Entire Agreement. This Agreement, the Exhibits, the Company
Disclosure Schedule, the Confidentiality Agreement and any documents delivered
by the parties in connection herewith constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
9.5 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of the Merger by the stockholders of the Company, but after any
such stockholder approval, no amendment shall be made which by law requires the
further approval of stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
9.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without regard to its rules of
conflict of laws.
9.7 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
9.8 Headings. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
9.9 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations, partnerships and other
business entities and vice versa.
9.10 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
9.11 Incorporation of Exhibits. The Company Disclosure Schedule and all
Exhibits attached hereto and referred to herein are hereby incorporated herein
and made a part hereof for all purposes as if fully set forth herein.
9.12 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.13 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any Colorado court, this being in addition to
any other remedy to which they are entitled at law or in equity.
9.14 Knowledge. For purposes of this Agreement, (a) "to the knowledge of
the Company" or words of like import shall mean to the knowledge of Charles
Miller or William Ringer, and (b) "to the knowledge of Parent" or words of like
import shall mean to the knowledge of Douglas Schatz, Richard Beck or Joseph
Monkowski.
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year set forth in the
Preamble hereto.
<TABLE>
<S> <C>
COMPANY: ENGINEERING MEASUREMENTS COMPANY
By: /s/ CHARLES E. MILLER
----------------------------
Name: Charles E. Miller
Title: President
MERGER SUB: FLOW ACQUISITION CORPORATION
By: /s/ JAMES F. GENTILCORE
----------------------------
Name: James F. Gentilcore
Title: President
PARENT: ADVANCED ENERGY INDUSTRIES, INC.
By: /s/ DOUGLAS S. SCHATZ
----------------------------
Name: Douglas S. Schatz
Title: Chief Executive
Officer
</TABLE>
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APPENDIX B
OPINION OF QUIST FINANCIAL, INC.
<PAGE> 71
APPENDIX B
[QUIST FINANCIAL, INC. LETTERHEAD]
October 25, 2000
The Board of Directors
Engineering Measurements Company
600 Diagonal Highway
Longmont, CO 80501
Gentlemen:
Quist Financial, Inc. ("Quist") was retained by the Board of Directors of
Engineering Measurements Company ("EMCO" or "Company"), a Colorado corporation,
to express an opinion as to the fairness from a financial point of view to the
Company's shareholders of a purchase price of $30,000,000 plus aggregate options
exercise prices for the outstanding capital stock in EMCO (the "Purchase
Price"), as set out in the Amended and Restated Agreement and Plan of
Reorganization (the "Agreement") to be entered into between the Company and
Advanced Energy Industries ("AEI"), a Delaware corporation.
As more specifically set forth in the Agreement, and subject to the terms
and conditions thereof, EMCO and AEI propose to enter into a business
combination (the "Business Combination") in which all of the Company's
outstanding shares of common stock as of the closing date shall be exchanged for
$30,000,000 plus the aggregate of the exercise prices paid in cash by holders of
EMCO options exercised after October 20, 2000 and before the closing date.
Quist's principal business is the valuation of businesses and business
interests, including both privately held and publicly traded companies, for all
purposes, including mergers and acquisitions, divestitures, gift and estate
taxes, Employee Stock Ownership Plans, corporate and partnership
recapitalizations, dissolutions, and other purposes. Prior to this engagement,
Quist prepared a fairness opinion letter with respect to the original terms
contemplated by the parties, which have been amended and restated in the
Agreement.
In arriving at our opinion, we reviewed a draft of the Agreement, and held
discussions with senior officers, directors and other representatives and
advisors of the Company concerning the business, operations and prospects of the
Company and AEI. We examined publicly available business and financial
information relating to the Company and AEI as well as financial forecasts and
other information and data for the Company that were provided to or otherwise
discussed with us by the management of the Company, including strategic
implications and operational benefits anticipated to result from the Business
Combination as projected by the managements of the Company and AEI. We reviewed
the financial terms of the Business Combination as set forth in the Agreement in
relation to, among other things: current and historical market prices and
trading volumes of Company capital stock; the historical and projected earnings
and other operating data of the Company; and the historical and projected
capitalization and financial condition of the Company. We considered, to the
extent publicly available, the financial terms of certain other similar
transactions recently effected that we considered relevant in evaluating the
Purchase Price and analyzed certain financial, stock market and other publicly
available information relating to the businesses of other companies whose
operations we considered relevant in evaluating those of the Company and AEI. We
considered and reviewed earnings projections published by I/B/E/S International,
Inc. for comparable publicly traded companies. In addition, we conducted such
other analyses and examinations and considered such other information and
financial, economic and market criteria as we deemed appropriate in arriving at
our opinion.
In rendering our opinion, we relied, without independent verification, upon
the accuracy and completeness of all financial and other information and data
publicly available, furnished to us, or discussed with us. We relied upon the
assurances of the management of EMCO that they are not aware of
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any facts that would make any of the information provided to us inaccurate or
misleading. We further relied upon the assurances of the Company's management
that the information provided has been prepared on a reasonable basis in
accordance with industry practice, and, with respect to financial planning data,
reflects the best currently available estimates and judgment of the Company's
management and that they are not aware of any information or facts that would
make the information provided to us incomplete or misleading.
We have not made or been provided with an independent evaluation or
appraisal of the assets or liabilities of EMCO or AEI. Without limiting the
generality of the foregoing, we have undertaken no independent analysis of any
pending or threatened litigation, possible unasserted claims or other contingent
liabilities, to which EMCO or AEI, or any of their respective affiliates is a
party or may be subject; and our opinion makes no assumption concerning, and
therefore does not consider, the possible assertions of claims, outcomes or
damages arising out of any such matters. We have also assumed that all the
necessary regulatory approvals and consents required for the transaction will be
obtained in a manner that will not have adverse effects on EMCO or AEI or change
the Purchase Price. We have assumed that neither the Company nor AEI are party
to any material pending transactions, including external financing,
recapitalizations, acquisitions or merger discussions, other than the Business
Combination or in the ordinary course of business. You have advised us, and we
have assumed, that the final terms of the Agreement will not vary materially
from those set forth in the draft reviewed by us. We have further assumed that
the Business Combination will be consummated in accordance with the terms of the
Agreement without waiver of any of the conditions precedent to the Business
Combination contained in the Agreement.
We were not requested to consider, and our opinion does not address, the
relative merits of the Business Combination as compared to any alternative
business strategies that might exist for the Company. Our opinion is limited to
the fairness, from a financial point of view, of the Purchase Price in the
Business Combination and does not address the Company's underlying business
decision to affect the Business Combination. Our opinion necessarily is based
upon information available to us and financial, stock market and other
conditions and circumstances existing and disclosed to us as of the date hereof
and we assume no responsibility to update or revise our opinion based upon
circumstances or events occurring after the date hereof. Events occurring after
the date hereof could materially affect assumptions used in preparing this
opinion.
Our opinion expressed herein is provided for the information of the Board
of Directors of the Company in its evaluation of the Business Combination and
our opinion is not intended to be and does not constitute a recommendation of
the Business Combination to the Company or a recommendation to any stockholder
as to how such stockholder should vote on any matters relating to the Business
Combination.
This opinion is delivered subject to the conditions, scope of engagement,
limitations and understandings set forth in the opinion and our engagement
letter and subject to the understanding that the obligations of Quist Financial,
Inc. in regard to the Merger are solely corporate obligations and that no
officer, director, employee, agent, shareholder or controlling person of Quist
shall be subject to any personal liability whatsoever to any person.
Quist's opinion does not consider the tax impact to individual shareholders
based on the terms and structure of the deal. Quist is not and does not claim to
be a qualified tax expert.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Purchase Price is fair, from a financial point of view, to
the Company's shareholders.
QUIST FINANCIAL, INC.
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APPENDIX C
DISSENTERS' RIGHTS
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APPENDIX C
COLORADO REVISED STATUTES
TITLE 7. CORPORATIONS AND ASSOCIATIONS
CORPORATIONS
ARTICLE 113
DISSENTERS' RIGHTS
PART 1
RIGHT OF DISSENT -- PAYMENT FOR SHARES
7-113-101 DEFINITIONS.
For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares held
in a voting trust or by nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring domestic or
foreign corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at
the time and in the manner required by part 2 of this article.
(4) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effective date of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action except to the extent
that exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares that are registered in the name of a nominee to the extent such
owner is recognized by the corporation as the shareholder as provided in
section 7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
7-113-102 RIGHT TO DISSENT.
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
and obtain payment of the fair value of the shareholder's shares in the event of
any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party if:
(I) Approval by the shareholders of that corporation is required
for the merger by section 7-111-103 or 7-111-104 or by the articles or
incorporation; or
(II) The corporation is a subsidiary that is merged with its parent
corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired;
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(c) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102 (1); and
(d) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, or the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote
upon the consent of the corporation to the disposition pursuant to section
7-112-102 (2).
(1.3) A shareholder is not entitled to dissent and obtain payment, under
subsection (1) of this section, of the fair value of the shares of any class or
series of shares which either were listed on a national securities exchange
registered under the federal "Securities Exchange Act of 1934," as amended, or
on the national market system of the National Association of Securities Dealers
Automated Quotation System or were held of record by more than two thousand
shareholders, at the time of:
(a) The record date fixed under section 7-107-107 to determine the
shareholders entitled to receive notice of the shareholders' meeting at
which the corporate action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the corporate action;
or
(c) The effective date of the corporate action if the corporate action
is authorized other than by a vote of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this section shall
not apply if the shareholder will receive for the shareholder's shares, pursuant
to the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of the plan
or merger or share exchange;
(b) Shares of any other corporation which at the effective date of the
plan or merger or share exchange either will be listed on a national
securities exchange registered under the federal "Securities Exchange Act
of 1934," as amended, or on the national market system of the National
Association of Securities Dealers Automated Quotation System, or will be
held of record by more than two thousand shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash in lieu
of fractional shares.
(2) (Deleted by amendment, L. 96, p. 1321, '30, effective June 1, 1996.)
(2.5) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the
event of a reverse split that reduces the number of shares owned by the
shareholder to a fraction of a share or to scrip if the fractional share or
scrip so created is to be acquired for cash or the scrip is to be voided under
section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action to the
extent provided by the bylaws or a resolution of the board of directors.
(I) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate
action creating such entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation
7-113-103 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person and causes the corporation to receive written notice which states such
dissent
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and the name, address, and federal taxpayer identification number, if any, of
each person on whose behalf the record shareholder asserts dissenters' rights.
The rights of a record shareholder under this subsection (1) are determined as
if the shares as to which the record shareholder dissents and the other shares
of the record shareholder were registered in the names of different
shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders, each
such beneficial shareholder must certify to the corporation that the beneficial
shareholder and the record shareholder or record shareholders of all shares
owned beneficially by the beneficial shareholder have asserted, or will timely
assert, dissenters' rights as to all such shares as to which there is no
limitation on the ability to exercise dissenters' rights. Any such requirement
shall be stated in the dissenters' notice given pursuant to section 7-113-203.
PART 2
PROCEDURE FOR EXERCISE OF DISSENTER'S RIGHTS
7-113-201 NOTICE OF DISSENTERS' RIGHTS.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting, the notice
of the meeting shall be given to all shareholders, whether or not entitled to
vote. The notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this article and shall be accompanied by a copy of this
article and the materials, if any, that, under articles 101 to 117 of this
title, are required to be given to shareholders entitled to vote on the proposed
action at the meeting. Failure to give notice as provided by this subsection (1)
shall not affect any action taken at the shareholders' meeting for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202(1).
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection (2)
shall not affect any action taken pursuant to section 7-107-104 for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provision of section 7-113-202(2).
7-113-202 NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting and if
notice of dissenters' rights has been given to such shareholder in
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connection with the action pursuant to section 7-113-201(1), a shareholder who
wished to assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken,
written notice of the shareholder's intention to demand payment for the
shareholder's shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104 and if notice of dissenters' rights has been given to such
shareholder who wishes to assert dissenter's rights shall not execute a writing
consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection (1)
or (2) of this section is not entitled to demand payment for the shareholder's
shares under this article.
7-113-203 DISSENTERS' NOTICE.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized, the corporation shall give a written
dissenters' notice to all shareholders who are entitled to demand payment for
their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section shall
be given no later than ten days after the effective date of the corporate action
creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for certificated
shares must be deposited;
(c) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall not be
less than thirty days after the date the notice required by subsection (1)
of this section is given;
(f) State the requirement contemplated in section 7-113-103 (3) if
such requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204 PROCEDURE TO DEMAND PAYMENT.
(1) A shareholder who is given a dissenters' notice pursuant to section
7-113-203 and who wishes to assert dissenters' rights shall, in accordance with
the terms of the dissenters' notice:
(a) Cause the corporation to receive a payment demand, which may be
the payment demand form contemplated in section 7-113-203 (2) (d), duly
completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1) of
this section retains all rights of a shareholder, excepts the right to transfer
the shares, until the effective date of the proposed
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corporate action giving rise to the shareholder's exercise of dissenters' rights
and has only the right to receive payment for the shares after the effective
date of such corporate action.
(3) Except as provided in section 7-113-207 or 7-113-209 (1) (b), the
demand for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the shareholder's
share certificates as required by the date or dates set in the dissenters'
notice is not entitled to payment for the shares under this article.
7-113-205 UNCERTIFICATED SHARES.
(1) Upon receipt of a demand for payment under section 7-113-204 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
thereof.
(2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
7-113-206 PAYMENT.
(1) Except as provided in section 7-113-208, upon the effective date of the
corporate action creating dissenters' rights under section 7-113-102 or upon
receipt of a payment demand pursuant to section 7-113-204, whichever is later,
the corporation shall pay each dissenter who complied with section 7-113-204, at
the address stated in the payment demand, or if no such address is stated in the
payment demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares, the
amount the corporation estimates to be the fair value of the dissenter's shares,
plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance sheet
as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, and, if the
corporation customarily provides such statements to shareholders, a
statement of changes in shareholders' equity for that year and a statement
of cash flow for that year, which balance sheet and statements shall have
been audited if the corporation customarily provides audited financial
statements to shareholders, as well as the latest available financial
statements, if any, for the interim or full-year period, which financial
statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
section 7-113-209; and
(e) A copy of this article.
7-113-207 FAILURE TO TAKE ACTION.
(1) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 does not occur within sixty days after the date
set by the corporation by which the corporation must receive the payment demand
as provided in section 7-113-203, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(2) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set by
the corporation by which the corporation must receive the payment demand as
provided in section 7-113-203, then the corporation shall send a new dissenters'
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notice, as provided in section 7-113-203, and the provisions of sections
7-113-204 to 7-113-209 shall again be applicable.
7-113-208 SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER ANNOUNCEMENT OF
PROPOSED CORPORATE ACTION.
(1) The corporation may, in or with the dissenters' notice given pursuant
to section 7-113-203, state the date of the first announcement to news media or
to shareholders of the terms of the proposed corporate action creating
dissenters' rights under section 7-113-102 and state that the dissenter shall
certify in writing, in or with the dissenter's payment demand under section
7-113-204, whether or not the dissenter (or the person on whose behalf
dissenters' rights are asserted) acquired beneficial ownership of the shares
before that date. With respect to any dissenter who does not so certify in
writing, in or with the payment demand, that the dissenter or the person on
whose behalf the dissenter asserts dissenters' rights acquired beneficial
ownership of the shares before such date, the corporation may, in lieu of making
the payment provided in section 7-113-206, offer to make such payment if the
dissenter agrees to accept it in full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206(2).
7-113-209 PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any payment
made under section 7-113-206, or reject the corporation's offer under section
7-113-208 and demand payment of the fair value of the shares and interest due,
if:
(a) The dissenter believes that the amount paid under section
7-113-206 or offered under section 7-113-208 is less than the fair value of
the shares or that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206
within sixty days after the date set by the corporation by which the
corporation must receive the payment demand; or
(c) The corporation does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as
required by section 7-113-207(1).
(2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
PART 3
JUDICIAL APPRAISAL OF SHARES
7-113-301 COURT ACTION.
(1) If a demand for payment under section 7-113-209 remains unresolved, the
corporation may, within sixty days after receiving the payment demand, commence
a proceeding and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding with
the sixty-day period, it shall pay to each dissenter whose demand remains
unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in subsection
(1) of this section in the district court of the country in this state where the
corporation's principal office is located or, if the corporation has no
principal office in this state, in the district court of the county in which its
registered office is located. If the corporation is a foreign corporation
without a registered office, it shall commence
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the proceeding in the country where the registered office of the domestic
corporation merged into, or whose shares were acquired by, the foreign
corporation was located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unresolved parties to the proceeding commenced
under subsection (2) of this section as in an action against their shares, and
all parties shall be served with a copy of the petition. Service on each
dissenter shall be by registered or certified mail, to the address stated in
such dissenter's payment demand, or if no such address is stated in the payment
demand, at the address shown on the corporation's current record of shareholders
for the record shareholder holding the dissenter's shares, or as provided by
law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to such order. The parties to
the proceeding are entitled to the same discovery rights as parties in other
civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if any,
by which the court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the corporation, or for the fair value,
plus interest, of the dissenter's shares for which the corporation elected to
withhold payment under section 7-113-208.
7-113-302 COURT COST AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under section 7-113-301
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation; except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the
court finds the corporation did not substantially comply with the
requirements of part 2 of this article; or
(b) Against either the corporation or one or more dissenters, in favor
of any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to said counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefited.
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FOR USE BY THE SHAREHOLDERS OF COMMON STOCK OF ENGINEERING MEASUREMENTS COMPANY.
Engineering Measurements Company
600 Diagonal Highway
Longmont, Colorado 80501
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ENGINEERING
MEASUREMENTS COMPANY.
The undersigned hereby appoints Charles Miller and William Ringer as
Proxies, each with the power to appoint his substitute, and hereby authorizes
each of them to represent and to vote, as designated below, all the shares of
the common stock, par value $.01 per share ("EMCO Shares"), of Engineering
Measurements Company ("EMCO") held of record by the undersigned on September 21,
2000, at the reconvened special meeting of shareholders of EMCO to be held on
January 2, 2001 and any adjournment thereof (the "Special Meeting").
The Board of Directors of EMCO has approved the Amended and Restated Merger
Agreement (each as defined in the accompanying Proxy Statement) and recommends
that holders of EMCO Shares vote FOR approval of the Amended and Restated Merger
Agreement.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1.
Please mark, sign, date and promptly return this proxy card using the
enclosed envelope. If your address is incorrectly shown, please print changes.
ENGINEERING MEASUREMENTS COMPANY
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY.
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
Engineering Measurements Company will hold a special meeting of
shareholders on January 2, 2001 at 9:00 a.m. local at EMCO's offices at 600
Diagonal Highway, Longmont, Colorado 80501, for the following purposes:
(SEE REVERSE)
1. To approve the merger agreement, dated as of July 6, 2000, as amended and
restated as of October 20, 2000, between EMCO, Advanced Energy Industries, Inc.,
a Delaware corporation, and Flow Acquisition Corporation, a Colorado corporation
and a wholly owned subsidiary of Advanced Energy, that provides among other
things, for a merger of Flow Acquisition into EMCO so that EMCO will become a
wholly owned subsidiary of Advanced Energy.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Except as set forth in the accompanying proxy statement, in their discretion,
the Proxies are authorized to vote upon such other business as may properly come
before the Special Meeting.
All other proxies heretofore given by the undersigned to vote EMCO Shares
which the undersigned would be entitled to vote if personally present at the
Special Meeting, are hereby expressly revoked.
ALL PROPOSALS ARE PROPOSED BY THE BOARD OF DIRECTORS OF EMCO. THIS PROXY
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CONFERS DISCRETIONARY AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT
THE TIME OF THE MAILING OF THE NOTICE OF THE SPECIAL MEETING OF SHAREHOLDERS TO
THE UNDERSIGNED.
BY SIGNING THIS PROXY THE SIGNATORY AUTHORIZES ITS TRANSMISSION TO EMCO OF
THIS PROXY BY ELECTRONIC MEANS INCLUDING TELECOPY.
Dated: , 2000
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Signature(s)
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Signature(s)
Please date this proxy and sign it
exactly as your name or name(s)
appear above. When shares are held
jointly, both must sign. When
signing as an attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
shares are held by a corporation,
please sign in full corporate name
by the President or other
authorized officer. If shares are
held by a partnership, please sign
in partnership name by an
authorized person.
