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Agreement And Plan Of Reorganization Dated 7/21/00

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Sectors: Electronics and Miscellaneous Technology
Governing Law: Washington, View Washington State Laws
Effective Date: July 21, 2000
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MERGER AGREEMENT


AMONG


SEKIDENKO, INC.
("SEKIDENKO")


DR. RAY R. DILS
(AS THE "PRINCIPAL SHAREHOLDER")


ADVANCED ENERGY INDUSTRIES, INC.
(AS THE "PARENT CORPORATION")


AND


MERCURY MERGER CORPORATION
(AS THE "MERGER SUB")


DATED JULY 21, 2000


2


TABLE OF CONTENTS


Page


PARTIES ..............................................................................1


RECITALS .............................................................................1


1. THE MERGER......................................................................2
1.1 Articles and Plan of Merger............................................2
1.2 Effective Time.........................................................2
1.3 Effect of the Merger...................................................2
1.4 Anticipated Tax Treatment of the Merger................................3
1.5 Anticipated Accounting Treatment of the Merger.........................3


2. CONVERSION AND EXCHANGE OF SHARES...............................................3
2.1 Conversion of Capital Stock of Sekidenko...............................3
2.2 Procedures for Exchange of Certificates for Merger Shares..............3
2.3 Merger Shares to be Escrowed...........................................4
2.4 Merger Sub's Capital Stock.............................................4


3. CLOSING.........................................................................4
3.1 Date, Time and Place of Closing........................................4
3.2 Documents to be Delivered at Closing by Sekidenko......................4
3.3 Documents to be Delivered at Closing by the Parent Corporation.........5


4. REPRESENTATIONS AND WARRANTIES OF SEKIDENKO AND THE
PRINCIPAL SHAREHOLDER...........................................................5
4.1 Corporate Existence and Powers of Sekidenko............................5
4.2 Authorizations, Enforceability and Effect of Agreement.................6
4.3 Capital Stock of Sekidenko.............................................7
4.4 Subsidiaries...........................................................7
4.5 Permits and Compliance with Applicable Laws............................7
4.6 Litigation, Orders and Judgments.......................................7
4.7 Financial Statements...................................................7
4.8 Tax Matters............................................................8
4.9 Offices and Equipment..................................................8
4.10 Insurance..............................................................8
4.11 Material Contracts.....................................................9
4.12 Intellectual Property..................................................9
4.13 Compliance with Employment Laws and Labor Relations....................9
4.14 Hazardous Substances..................................................10
4.15 Employee Benefit Plans................................................10
4.16 Finders...............................................................11
4.17 Absence of Certain Changes or Events..................................11
4.18 Relations with Major Customer.........................................11
4.19 Books and Records.....................................................12
4.20 Pooling of Interests; Tax Reorganization..............................12


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5. REPRESENTATIONS AND WARRANTIES OF THE PARENT CORPORATION
AND THE MERGER SUB.............................................................12
5.1 Corporate Existence and Powers of the Parent Corporation..............12
5.2 Corporate Existence and Powers of the Merger Sub......................12
5.3 Authorizations, Enforceability and Effect of Agreement................12
5.4 Capital Stock of the Parent Corporation...............................13
5.5 Securities Filings Made by the Parent Corporation.....................14
5.6 Tax Matters...........................................................14


6. COVENANTS......................................................................14
6.1 Investigation.........................................................14
6.2 Confidentiality.......................................................15
6.3 Announcements.........................................................15
6.4 Conduct of Sekidenko's Business Until Closing.........................15
6.5 Conduct of the Parent Corporation's Business Until Closing............16
6.6 Hart Scott Rodino Filing..............................................16
6.7 Form S-3 Registration Statement.......................................17
6.8 Listing Application...................................................18
6.9 Advice of Changes.....................................................18
6.10 Expenses Associated with the Merger...................................18
6.11 Preparation of Audited Financial Statements of Sekidenko..............18
6.12 No Acquisition Discussions............................................18
6.13 Certificates..........................................................18


7. CONDITIONS TO THE OBLIGATIONS OF THE PARENT CORPORATION AND
THE MERGER SUB.................................................................19
7.1 Accuracy of Representations and Warranties............................19
7.2 Performance of Covenants..............................................19
7.3 Consents..............................................................19
7.4 No Change in Major Customer Relationship..............................19
7.5 Certificate...........................................................19
7.6 Escrow Agreement......................................................19
7.7 HSR Act Waiting Period................................................19
7.8 Opinion of Counsel to Sekidenko.......................................19
7.9 Confirmation of Pooling of Interest...................................19
7.10 Employment Agreement..................................................20
7.11 No Dissenters.........................................................20
7.12 Audit of Financial Statements.........................................20
7.13 Exemption from Registration...........................................20
7.13 Assignment of Sublicense Royalties....................................20


8. CONDITIONS TO THE OBLIGATIONS OF SEKIDENKO AND THE PRINCIPAL
SHAREHOLDER....................................................................20
8.1 Accuracy of Representations and Warranties............................20
8.2 Performance of Covenants..............................................20
8.3 Certificate...........................................................20
8.4 Escrow Agreement......................................................20
8.5 HSR Act Waiting Period................................................20
8.6 Opinion of Counsel to the Parent Corporation..........................20


iii 4


9. TERMINATION....................................................................21
9.1 By Mutual Agreement...................................................21
9.2 By the Parent Corporation.............................................21
9.3 By Sekidenko..........................................................21
9.4 Effect of Termination.................................................21


10. GENERAL........................................................................21
10.1 Binding Effect; Benefits..............................................21
10.2 Survival of Representations, Warranties and Covenants.................22
10.3 Assignment............................................................22
10.4 Notices...............................................................22
10.5 Entire Agreement; Amendment...........................................23
10.6 Governing Law and Interpretation......................................23
10.7 Arbitration...........................................................23
10.8 Counterparts..........................................................23
10.9 Waivers...............................................................23
10.10 Severability..........................................................23


iv 5


EXHIBITS


The following Exhibits are attached to and are incorporated by reference into this Agreement as if fully set forth herein.


Exhibit 1.1 Form of Articles of Merger
Exhibit 2.3 Form of Escrow Agreement
Exhibit 3.2.3 Form of Employment Agreement
Exhibit 7.8 Form of Opinion of Legal Counsel to Sekidenko
Exhibit 8.6 Form of Opinion of Legal Counsel to the Parent Corporation


SCHEDULES


The following Schedules have been provided separately, but concurrently with delivery of this Agreement, by Sekidenko to the Parent Corporation and are incorporated by reference into this Agreement as if fully set forth herein.


Schedule 2.1 List of Sekidenko Shareholders
Schedule 4.2.4 Consents
Schedule 4.6 Litigation, Orders and Judgments
Schedule 4.7 Financial Statements
Schedule 4.11 Material Contracts
Schedule 4.12 Intellectual Property
Schedule 4.13 Compliance with Employment Laws and Labor Relations
Schedule 4.14 Hazardous Substances
Schedule 4.15 Benefit Plans
Schedule 4.16 Finders Fees
Schedule 4.17 Changes or Events


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INDEX OF DEFINED TERMS


Term Location of Definition ---- ---------------------- Agreement Preface APB No. 16 Recital E Applied Materials Section 4.18 Articles of Merger Section 1.1 Benefit Plans Section 4.15 Closing Section 3.1 Closing Date Section 3.1 Code Recital D Effective Time Section 1.2 Environmental Requirements Section 4.14 ERISA Section 4.15 Escrow Agent Section 2.3 Escrow Agreement Section 2.3 Exchange Price Section 2.1 Exchange Ratio Section 2.1.1 Form S-3 Registration Section 6.7 Hazardous Substances Section 4.14 HSR Act Section 4.2.4 Material Contract Section 4.11 Merger Section 1.1 Merger Shares Section 2.1.1 Merger Sub Parties Principal Shareholder Parties Parent Corporation Parties Parent Corporation's Securities Filings Section 5.5 Sekidenko Parties Sekidenko Financial Statements Section 4.7 Sekidenko Intellectual Property Section 4.12 Sekidenko Shareholders Section 2.1 Surviving Corporation Section 1.3


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MERGER AGREEMENT


THIS MERGER AGREEMENT (the "AGREEMENT") is dated for reference purposes as of July 21, 2000 and is by and among the following:


PARTIES


Sekidenko, Inc., a corporation duly ("SEKIDENKO") incorporated under the laws of the State of Washington having its principal office located at: 2501 S.E. Columbia Way, Suite 230 Vancouver, Washington 98661


Dr. Ray R. Dils, (the "PRINCIPAL SHAREHOLDER") an individual residing at: 1416 N.E. 145th Avenue Vancouver, Washington 98684


Advanced Energy Industries, Inc., a corporation (the "PARENT CORPORATION") duly incorporated under the laws of the State of Delaware and having its principal office located at: 1625 Sharp Point Drive Fort Collins, CO 80525


Mercury Merger Corporation, a corporation (the "MERGER SUB") duly incorporated under the laws of the State of Washington and having its principal office located at: 1625 Sharp Point Drive Fort Collins, CO 80525


RECITALS


A. The Boards of Directors of Sekidenko and Parent Corporation each have determined that a business combination involving Sekidenko and Parent Corporation would enable each of those companies to better achieve their long-term strategic and financial objectives and, accordingly, would be in the best interest of their respective shareholders and each desires to effect the Merger (as defined herein) on the terms and subject to the conditions set forth herein.


B. The Principal Shareholder is the record and beneficial holder of a majority of the outstanding capital stock of Sekidenko and desires to cause Sekidenko to enter into this Agreement and to consummate the transactions contemplated hereby.


C. The Parent Corporation has caused the formation of Merger Sub for the sole purpose of effecting the Merger.


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D. The parties intend that the Merger qualify for federal income tax purposes as a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the "CODE").


E. The parties intend that the Merger be accounted for as a pooling of interests for financial accounting purposes in accordance with Accounting Principles Board Opinion Number 16, the interpretive releases issued pursuant thereto and the pronouncements of the Securities and Exchange Commission relating thereto (collectively, "APB NO. 16").


AGREEMENT


NOW THEREFORE, for and in consideration of the premises and the mutual covenants and agreements contained herein, and, subject to the terms and conditions set forth herein, intending to be legally bound hereby, the parties hereto agree as follows:


1. THE MERGER.


1.1 Articles and Plan of Merger. On the terms and subject to the conditions of this Agreement, on the Closing Date (as defined in Section 3.1, below), Sekidenko and the Merger Sub will execute Articles of Merger, including a Plan of Merger, in the form attached hereto as Exhibit 1.1 (the "ARTICLES OF MERGER"), and file such Articles of Merger with the Secretary of State of the State of Washington. Pursuant to these Articles of Merger, the Merger Sub will be merged with and into Sekidenko (the "MERGER").


1.2 Effective Time. The Merger will become effective as of the date on which Sekidenko and the Merger Sub file the Articles of Merger with the Secretary of State of the State of Washington (the "EFFECTIVE Time").


1.3 Effect of the Merger. The Merger shall have the effects set forth in Section 23B.11.060 of the Washington Business Corporation Act. Pursuant to the Merger, the separate existence of the Merger Sub will cease and Sekidenko shall, for all purposes, be considered the surviving corporation (the "SURVIVING CORPORATION").


1.3.1 The Articles of Incorporation, as amended, of Sekidenko in
effect at and as of the Effective Time will be the Articles of
Incorporation of the Surviving Corporation.


1.3.2 The Bylaws of the Merger Sub in effect at and as of the
Effective Time shall be the Bylaws of the Surviving Corporation.


1.3.3 The officers and directors of the Merger Sub, as of the
Effective Time, will be the officers and directors of the Surviving
Corporation, and all other persons who hold or who may claim to hold any
position as an officer or director of Sekidenko shall, as of the Effective
Time, be deemed to have been removed from such position.


1.3.4 The Surviving Corporation may, at any time after the Effective
Time, take any action, including executing and delivering any document, in
the name of and on behalf of either Sekidenko or the Merger Sub in order to
carry out and effectuate the transactions contemplated by this Agreement.


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1.4 Anticipated Tax Treatment of the Merger. The parties intend that the Merger qualify for federal income tax purposes as a reorganization within the meaning of Section 368 of the Code. However, no party makes any representation herein to any other party or to the shareholders of any other party as to the actual tax treatment of the Merger, except as specifically set forth in Sections 4.20, 5.6 and 5.7 of this Agreement.


1.5 Anticipated Accounting Treatment of the Merger. The parties intend that the Merger be accounted for as a pooling of interests for financial accounting purposes in accordance with APB No. 16. However, no party makes any representation herein to any other party as to the actual accounting treatment of the Merger, except as specifically set forth in Sections 4.20, 5.6 and 5.7 of this Agreement.


2. CONVERSION AND EXCHANGE OF SHARES.


2.1 Conversion of Capital Stock of Sekidenko. Schedule 2.1 sets forth the record holders of all of the issued and outstanding shares of Sekidenko capital stock as of the date of this Agreement (the "SEKIDENKO SHAREHOLDERS", which term shall hereinafter also include any person who becomes a record holder of Sekidenko capital stock after the date of this Agreement prior to the Closing) and the number of shares of Sekidenko capital stock held by each of them. For purposes of this Agreement, the "EXCHANGE PRICE" shall mean the average over a 10 trading day period which ends with the fifth trading day prior to the Closing Date (as hereinafter defined) of the last sale price for shares of the Parent Corporation's common stock as publicly reported on the Nasdaq National Market.


2.1.1 At the Effective Time, each share of Sekidenko common stock that is then issued and outstanding shall automatically be converted into the right to receive shares of the common stock of the Parent Corporation ("MERGER SHARES"), as determined by this Section 2.1. The number of Merger Shares to be exchanged for each share of Sekidenko common stock (the "EXCHANGE RATIO") shall be determined by dividing (i) $98,050,000 by (ii) the product of the Exchange Price and 500,000, provided, however, that the number of Merger Shares shall not be less than 1,500,000 nor more than 2,000,000. If the number of Merger Shares, calculated as set forth in the second sentence of this Section 2.1.1, is less than 1,500,000, then the Exchange Ratio shall be adjusted upwards so that the number of Merger Shares equals 1,500,000. If the number of Merger Shares, calculated as set forth in the second sentence of this Section 2.1.1, exceeds 2,000,000, then the Exchange Ratio shall be adjusted downwards so that the number of Merger Shares equals 2,000,000. The outstanding shares of Sekidenko common stock shall be exchanged for Merger Shares in accordance with Section 2.2.


2.1.2 No fractional shares shall be issued to any Sekidenko Shareholder. In lieu of the issuance of any fractional shares, a Sekidenko Shareholder shall be entitled to receive a cash payment equal to the fractional share which such holder would otherwise be entitled to receive multiplied by the Exchange Price. No interest will be paid or accrued on the cash payable pursuant to this Section 2.1.2.


2.1.3 At the Effective Time, as a result of the effectiveness of the Merger and without any further action on the part of Sekidenko or the Sekidenko Shareholders, all outstanding shares of Sekidenko common stock shall cease to be outstanding, shall be cancelled and shall cease to exist and each Sekidenko Shareholder shall thereafter cease to have any rights with respect to such shares except for the right to receive Merger Shares and cash in lieu of fractional shares in accordance with this Section 2.1.


2.2 Procedures for Exchange of Certificates for Merger Shares. At Closing, the Parent Corporation shall deliver to the Sekidenko Shareholders: (i) one or more certificates in the name of each of the Sekidenko Shareholders for the number of Merger Shares to be issued to such Sekidenko Shareholder pursuant to Section 2.1.1 of this Agreement, except for those Merger Shares which are to be deposited with


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the Escrow Agent pursuant to Section 2.3 and (ii) cash in lieu of fractional shares to be paid to the Sekidenko Shareholders pursuant to Section 2.1.2 of this Agreement. At Closing, Sekidenko shall cause each of the Sekidenko Shareholders to deliver to the Parent Corporation the stock certificate or certificates representing the shares of Sekidenko common stock held by such Sekidenko Shareholder.


2.3 Merger Shares to be Escrowed. A stock certificate representing 10% of the Merger Shares to which each Sekidenko Shareholder would otherwise be entitled to receive in exchange for his or its Sekidenko common stock shall, in lieu of being delivered to such Sekidenko Shareholder at Closing, be delivered by the Parent Corporation to an escrow agent reasonably acceptable to the Principal Shareholder and the Parent Corporation (the "ESCROW AGENT") to be held by the Escrow Agent (or its successor as escrow agent) and dispersed in accordance with the terms of an escrow agreement among Escrow Agent, the Sekidenko Shareholders and the Parent Corporation in the form of Exhibit 2.3 hereto ("ESCROW AGREEMENT").


2.4 Merger Sub's Capital Stock. At the Effective Time, each share of capital stock of the 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. CLOSING.


3.1 Date, Time and Place of Closing. The closing of the transactions contemplated by Section 1 hereof (the "CLOSING") will take place at the offices of Foster Pepper & Shefelman, LLP, in Portland, Oregon, at 10:00 a.m. local time, on August 18, 2000, or at such other date, time and place as Sekidenko and the Parent Corporation may mutually agree in writing ("CLOSING DATE").


3.2 Documents to be Delivered at Closing by Sekidenko. At Closing, Sekidenko will execute and deliver and/or cause to be executed and delivered to the Parent Corporation the following instruments and other documents:


3.2.1 the Articles of Merger duly executed by Sekidenko;


3.2.2 the Escrow Agreement duly executed by the Escrow Agent and each
Sekidenko Shareholder;


3.2.3 a copy of an Employment Agreement by and between the Principal
Shareholder and Sekidenko in the form attached hereto as Exhibit 3.2.3 duly
executed by the Principal Shareholder and by Sekidenko;


3.2.4 the closing certificate required by Section 7.5 duly executed by
Sekidenko;


3.2.5 the opinion of legal counsel to Sekidenko required by Section
7.8 of this Agreement;


3.2.6 the stock certificates representing all of the outstanding
shares of Sekidenko common stock;


3.2.7 a representation letter signed by each of the Sekidenko
Shareholders, including any person who becomes a Sekidenko Shareholder
after the date of this agreement and prior to the Closing Date, certifying
that such person (a) is an "accredited investor" within the meaning of
Regulation D under the Securities Act of 1933 (the "Securities Act"), (b)
is acquiring the Merger Shares for himself, herself or itself and not for
any other person, (c) understands that the Merger


4 11


Shares are being issued without registration under the Securities Act and,
therefore, cannot be resold or otherwise transferred without registration
of such shares or availability of an exemption from registration, and (d)
acknowledges that one or more legends relating to the resale restrictions
may be placed on the certificates representing the Merger Shares; and


3.2.8 written agreements from each of the Sekidenko Shareholders not
to transfer or dispose of any of the Merger Shares issued to them (a) until
such time as financial results have been published by the Parent
Corporation that include at least 30 days of combined operations following
the Effective Date and (b) in the case of each Sekidenko Shareholder who
may be deemed to be an "affiliate" of Sekidenko within the meaning of Rule
145 under the Securities Act, except in accordance with such Section 145.


3.3 Documents to be Delivered at Closing by the Parent Corporation. At Closing, the Parent Corporation will execute and deliver and/or cause to be executed and delivered to Sekidenko the following instruments and other documents:


3.3.1 the Articles of Merger duly executed by the Merger Sub;


3.3.2 the Escrow Agreement duly executed by the Parent Corporation and
the Escrow Agent;


3.3.3 the closing certificate required by Section 8.3 duly executed by
the Parent Corporation.


3.3.4 the opinion of legal counsel to the Parent Company required by
Section 8.6 of this Agreement;


3.3.5 the stock certificates representing the Merger Shares and the
cash payments in lieu of any fractional shares as provided by Section 2.1.


4. REPRESENTATIONS AND WARRANTIES OF SEKIDENKO AND THE PRINCIPAL SHAREHOLDER.


Sekidenko and the Principal Shareholder do hereby, jointly and severally, make the following representations and warranties to the Parent Co
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