EXHIBIT 10.1

LOAN MODIFICATION AGREEMENT

This Loan Modification Agreement is entered into July 6, 2005, effective as of
July 7, 2005, by and between SILICON VALLEY BANK (“Bank”), whose address is 3003
Tasman Drive, Santa Clara, California 95054 with a loan production office at
4410 Arapahoe Avenue, Suite 200, Boulder, CO 80303 and ADVANCED ENERGY
INDUSTRIES, INC. (“Borrower”), whose address is 1625 Sharp Point Drive, Fort
Collins, CO 80525.

1. DESCRIPTION OF EXISTING AGREEMENT. Among other Obligations, which may be
owing by Borrower to Bank, Borrower is or may become indebted to Bank pursuant
to, among other documents, a Loan and Security Agreement dated May 10, 2002, as
it may be amended from time to time (the “Loan Agreement”). The Loan Agreement
provides for, among other things, a Committed Revolving Line in the original
principal amount of Twenty-Five Million and No/100 Dollars ($25,000,000.00).
Defined terms used but not otherwise defined herein shall have the same meanings
as set forth in the Loan Agreement.

Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the “Obligations.”

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement.

Hereinafter, the above-described security documents, together with all other
documents securing repayment of the Obligations shall be referred to as the
“Security Documents”. Hereinafter, the Security Documents, together with all
other documents evidencing or securing the Obligations shall be referred to as
the “Existing Loan Documents”.

3. DESCRIPTION OF CHANGE IN TERMS. Bank hereby agrees to modify the Loan
Agreement as follows:

  A.   Modifications to Loan Agreement.

  1.   Subsection (b) of Section 2.5 entitled “Fees” is amended to read as
follows:

  (b)   Non-usage Fee. No later than the 15th calendar day following the end of
each calendar quarter, Borrower shall pay to Bank a non-usage fee equal to
Three-Eighths of One Percent (0.375%) per annum of the difference between the
Committed Revolving Line and the average daily outstanding balance during the
prior calendar quarter.

  2.   Subsection (d) of Section 6.2 entitled “Financial Statements, Reports,
Certificates” is hereby amended to read as follows:

  (d)   At any time that the aggregate amount of outstanding Advances, exclusive
of interest thereon, exceeds $10,000,000 and remains outstanding for 30
consecutive days, Borrower will allow Bank to conduct an initial audit and
thereafter annual audits of Borrower’s Collateral at Borrower’s expense. Such
audits will be conducted no more often than once every year after the initial
audit, unless an Event of Default has occurred and is continuing.

  3.   Section 6.7 entitled “Financial Covenants” is amended to read as follows:

    Borrower will maintain on a consolidated basis as of the last day of each
fiscal quarter of Borrower unless otherwise noted:

 

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  (i)   Quick Ratio. A ratio of Quick Assets to Current Liabilities of at least
2.00 to 1.0; and, for purposes hereof, the current portion of convertible
subordinated notes shall be subtracted from Current Liabilities.     (ii)  
Tangible Net Worth. A Tangible Net Worth plus Subordinated Debt plus the
outstanding principal amount of Borrower’s (a) 5.0% Convertible Notes due
September 1, 2006 and (b) 5.25% Convertible Notes due November 15, 2006
(collectively, the “Existing Notes”) or of any convertible subordinated notes
(containing subordination terms satisfactory to Bank in its sole discretion)
issued by Borrower in repayment of such Existing Notes, of at least the sum of
$220,000,000 plus 50% of the net profit for such quarter; and, for purposes
hereof, the figure of $220,000,000 may be reduced on a one-time basis at the
time Borrower issues (A) any new convertible notes (containing subordination
terms satisfactory to Bank in its sole discretion) to repay the Existing Notes,
by the difference between the amount of the Existing Notes and the amount of any
such new convertible notes, and (B) any new equity securities to repay the
Existing Notes, by the difference between the amount of the Existing Notes and
the amount of any such new equity securities; provided, that the amount of such
one time reduction may not exceed the lesser of $70,000,000 or the amount of
balance sheet cash (exclusive of the proceeds of such new convertible notes, new
equity securities or combination of both notes and equity) used to repay the
Existing Notes; and provided, further, that at the time of such one-time
reduction, Borrower shall have raised not less than $100,000,000 in new
convertible notes(containing subordination terms satisfactory to Bank in its
sole discretion), new equity securities or a combination thereof.

  4.   Section 13.1 entitled “Definitions” is hereby amended to change the
definitions of the following terms to read as shown:

    "Collateral” is the property described on Exhibit A, excluding any tangible
property located outside the United States.       "Committed Revolving Line” is
a Credit Extension of up to $40,000,000.       “Credit Extension” is each
Advance, FX Forward Contract, Letter of Credit or any other extension of credit
by Bank for Borrower’s benefit.       Subpart (d) of the definition of “Eligible
Accounts” is amended to read as follows:

  (d)   Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, except for Applied
Materials, for which the percentage may be 35%, for the amounts that exceed that
percentage, unless Bank approves in writing in advance;

    Subpart (g) of the definition of “Permitted Indebtedness” is amended to read
as follows:

  (g)   Indebtedness of AE-Japan up to an aggregate principal amount of
$7,500,000.

    “Revolving Maturity Date” is July 6, 2006.

  5.   Exhibits C and D attached hereto shall be substituted for those attached
to the Loan Agreement.

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  B.   Consent to Change in Management.

     Borrower has notified Bank that it is in the process of changing its chief
executive officer from Mr. Douglas S. Schatz to Dr. Hans-Georg Betz and Borrower
has requested that Bank consent to such change in management for purposes of
Section 7.2 of the Loan Agreement. This Loan Modification will serve as Bank’s
consent to such change in management solely for purposes of Section 7.2 of the
Loan Agreement. Bank’s consent shall not limit or impair Bank’s right to demand
strict performance of (1) this covenant as set forth in the Loan Agreement after
such change in management; and (2) all other covenants and provisions set forth
in the Loan Agreement at all times.

4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

5. PAYMENT OF LOAN FEE AND EXPENSES. Borrower shall pay to Bank a fee in the
amount of Ten Thousand and No/100 Dollars ($10,000.00) (the “Loan Fee”) plus all
of Bank’s reasonable out-of-pocket expenses in connection with this Loan
Modification Agreement.

6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Obligations.

7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below)
understands and agrees that in modifying the existing Obligations, Bank is
relying upon Borrower’s representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank’s agreement to modifications
to the existing Obligations pursuant to this Loan Modification Agreement in no
way shall obligate Bank to make any future modifications to the Obligations.
Nothing in this Loan Modification Agreement shall constitute a satisfaction of
the Obligations. It is the intention of Bank and Borrower to retain as liable
parties all makers and endorsers of Existing Loan Documents, unless the party is
expressly released by Bank in writing. Unless expressly released herein, no
maker, endorser, or guarantor will be released by virtue of this Loan
Modification Agreement. The terms of this paragraph apply not only to this Loan
Modification Agreement, but also to all subsequent loan modification agreements.

8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon receipt by Bank of the Loan Fee and a fully executed
counterpart hereof.

     This Loan Modification Agreement is executed as of the date first written
above.

     
BORROWER:
  BANK:
 
   
ADVANCED ENERGY INDUSTRIES, INC.
  SILICON VALLEY BANK
 
   
By: /s/ Michael El-Hillow
  By: /s/ Frank Amoroso
Name: Michael El-Hillow
  Name: Frank Amoroso
Title: Executive V.P. and CFO
  Title: V.P.

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