Document:

exv10w4

 

EXHIBIT 10.4

AGREEMENT

THIS AGREEMENT (the “Agreement”) made as of the 18th day of August 2003 by and
between VARSITY GROUP INC., a Delaware corporation (the “Company”), and JACK M
BENSON (the “Executive”).

The Executive is presently employed by the Company as its Chief Financial
Officer.

The Board of Directors of the Company desires to set forth the nature and
amount of compensation and other benefits to be provided to the Executive and
any of the rights of the Executive in the event of his termination of
employment with the Company. The Executive is willing to commit himself to
continue to serve the Company, on the terms and conditions herein provided.

In order to effect the foregoing, the Company and the Executive wish to enter
into this Agreement under the terms and conditions set forth below.
Accordingly, in consideration of the promises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:

1. Employment. The Company hereby agrees to continue to employ the Executive,
and the Executive hereby agrees to continue to serve the Company, on the terms
and conditions set forth herein.

2. Term. The term of Executive’s employment under Section 1 will terminate upon
the termination of Executive’s employment with the Company for any reason
whatsoever. No such termination shall affect any of the Company’s other
obligations under this Agreement arising at or after such termination of
employment.

3. Position and Duties. The Executive shall serve as Chief Financial Officer of
the Company and shall have such responsibilities and authority as may normally
be exercised by a person in such positions at a company.

4. Place of Performance. The Executive shall be based at the current or future
headquarters of the Company, provided that any future headquarters is not more
than twenty-five (25) miles from the location of the Company’s headquarters on
the date hereof.

5. Compensation and Related Matters.

(a)  Base Salary. During the Executive’s employment with the Company, the
Company shall pay to the Executive a salary at a rate of not less than One
Hundred Seventy Thousand Dollars ($170,000) per annum in equal installments as
nearly as practicable on the normal payroll periods for employees of the
Company generally (the “Base Salary”). The Base Salary may be increased from
time to time and, if so increased, shall not thereafter be decreased during the
term of this Agreement.

(b)  Bonus. The Executive shall be eligible to receive an annual bonus as
determined by the Chief Executive Officer (the “Annual Bonus”) payable in
accordance with goals to be developed by the Company’s Compensation Committee
in accordance with Executive on an annual basis.

(c)  Expenses. During the term of the Executive’s employment hereunder, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in performing services hereunder, including
all expenses of travel and living expenses while away from home on business or
at the request of and in the service of the Company, provided that such
expenses are incurred and accounted for in accordance with the policies and
procedures established by the Company.

(d)  Benefits. During the term of the Executive’s employment hereunder, the
Company shall maintain in full force and effect, and the Executive shall be
entitled to continue to participate in, all of its employee benefit plans and
arrangements in effect on the date hereof in which the Executive participates
or receives benefits, or plans or arrangements providing the Executive with at
least equivalent benefits thereunder. The Company shall not make any changes in
such plans and arrangements which would adversely affect the Executive’s rights
or benefits thereunder, unless such change occurs pursuant to a program
applicable to all officers of the Company and does not result in a
proportionately greater reduction in the rights of or benefits to the Executive
as compared with any other officers of the Company. The Executive shall be
entitled to participate in or receive benefits under any employee benefit plan
or arrangement made available by the Company in the future to its officers and
key management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements. Nothing
paid to the Executive under any plan or arrangement presently in effect or made
available in the future shall be deemed to be in lieu of any amounts payable to
the Executive pursuant to this Section 5.

6. Termination and Definitions.

(a)  Cause. The Executive’s rights under Section 5 of this Agreement shall
immediately be terminated if the Executive’s employment is terminated for
Cause.

 

 

(b)  Termination by the Executive. The Executive may terminate his employment
hereunder for Good Reason.

(c)  Notice of Termination. Any termination of the Executive’s employment by the
Company or by the Executive shall be communicated by written Notice of
Termination to the other party hereto.

(d)  Definitions.

(i)  For purposes of this Agreement, termination “for Cause” shall arise where
termination results from (A) conviction of, or the pleading of nolo contendere
to, a felony; (B) a material breach of this Agreement which materially and
adversely affects the Company’s business and operations; (C) the failure of
Executive for any reason, within ten (10) days after receipt by Executive of
written notice thereof from the Company, to correct, cease or otherwise alter
any failure to comply with instructions or other action or omission to act
which will materially or adversely affect its business or operations; (D)
misconduct by Executive which is of such a serious and substantial nature that
a reasonable likelihood exists that such misconduct will materially injure the
reputation of the Company if Executive was to remain employed by the Company;
and (E) proven gross negligence.

(ii)  For purposes of this Agreement, “Good Reason” shall mean (A) the
termination of Executive’s employment with the Company other than for Cause,
(B) Executive’s voluntary termination of employment with the Company within
ninety (90) days following any of (i) a decrease in Executive’s base salary
below its level in effect on the date prior to such termination, (ii) a
material reduction in Executive’s job responsibilities without Executive’s
consent, or (iii) a geographical relocation of the Executive more than
twenty-five (25) miles from the current location of the Company without his
consent, or (C) a Change of Control of the Company followed, within two years
after such Change of Control, by (i) the termination of Executive’s employment
with the Company other than for Cause, or (ii) the Executive’s voluntary
termination of employment with the Company within ninety (90) days following
any of (x) a decrease in Executive’s base salary below its level in effect on
the date prior to such termination, (y) a material reduction in Executive’s job
responsibilities without Executive’s consent, or (z) a geographical relocation
of the Executive more than twenty-five (25) miles from the current location of
the Company without his consent.

(iii)  For purposes of this Agreement, a “Change in Control” of the Company
shall be deemed to have occurred if (A) any “person” (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)), is or becomes the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company (not including any securities acquired directly from the Company)
representing more than 50% of the combined voting power of the Company’s then
outstanding securities; (B) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) at least 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, or (ii) a merger or consolidation effected
to implement a recapitalization of the Company in which no person acquires more
than 50% of the combined voting power of the Company and outstanding
securities; or (C) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company’s assets.

(iv)  For purposes of this Agreement, a “Notice of Termination” shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated.

7. Compensation upon Termination.

(a)  Termination for Cause or Resignation Without Good Reason. If (i) the
Executive’s employment shall be terminated for Cause, or (ii) the Executive
voluntarily resigns from the employ of the Company and Good Reason shall not
have occurred, then the Company shall pay the Executive his Base Salary through
the date of delivery to him of a Notice of Termination at the rate then in
effect at the time and date the Notice of Termination is delivered, and the
Company shall have no further obligations to the Executive under this
Agreement.

(b)  Termination Without Cause or Resignation for Good Reason. If the Company
shall terminate the Executive’s employment other than pursuant to Section 6(a)
hereof (it being understood that a purported termination pursuant to Section
6(a) hereof, which is disputed and finally determined not to have been pursuant
to Section 6(a) shall be a termination by the Executive pursuant to Section
6(b)) or if the Executive terminates his employment for Good Reason, then:

(i)  the Company shall pay to the Executive, upon his termination, his Base
Salary through the date of termination at the rate in effect at the time Notice
of Termination is delivered; and

 

 

(ii)  in lieu of any further salary or bonus payments to the Executive for
periods subsequent to the date of termination, the Company shall pay, as
severance pay to the Executive, an amount equal to six (6) months of the
Executive’s Base Salary in effect as of the date of termination, payable
monthly in six (6) equal installments after termination of employment.

(c)  Termination Upon a Change in Control. If there is a Change in Control of
the Company or there has been a public announcement of a Change in Control of
the Company (provided, however, that consummation of the Change in Control of
the Company shall be a condition precedent to the effectiveness of this
provision) and at any time thereafter the employment of the Executive under
this Agreement is terminated other than pursuant to Section 6(a) hereof by the
Company or a successor entity or is terminated with Good Reason by the
Executive, then:

(i)  the Company shall pay to the Executive, upon his termination, his Base
Salary through the date of termination at the rate in effect at the time Notice
of Termination is given together with pro-rata bonus; and

(ii)  in lieu of any further salary or bonus payments to the Executive for
periods subsequent to the date of termination, the Company shall pay on the
date of termination, as severance pay to the Executive, a payment in an amount
equal to one hundred percent (100%) of the Executive’s Base Salary in effect as
of the date of termination payable monthly in twelve (12) equal installments.

(d)  Continuation of Benefit Plans. Upon any termination of the Executive’s
employment, pursuant to Section 6(a) hereof or by the Executive without Good
Reason, the Company shall maintain in full force and effect for the continued
benefit of the Executive for six (6) months, or twelve (12) months if there has
previously occurred a Change in Control of the Company, all employee benefit
plans and programs in which the Executive was entitled to participate.

(e)  Participation in Benefit Plans after Termination of Employment. The
Executive shall be entitled to continue to participate in any benefit plan or
program of the Company for twelve (12) months after the expiration of the
period provided for in Section 7(d), provided, that the Executive pays the
direct cost of any such benefit plan or program.

8. Non Compete; Non Solicitation. During the period the Executive is
receiving compensation pursuant to Section 7, the Executive agrees that,
without the prior written consent of the Company or its successors (i) he will
not, directly or indirectly, either as principal, manager, agent, consultant,
officer, partner, or employee or in any other capacity, carry on, be engaged in
any business which is in competition with the business of the Company and/or
its subsidiaries, affiliates or successors and (ii) he shall not, on his own
behalf or on behalf of any person or company, directly or indirectly,
communicate with any person who is employed by the Company and/or its
subsidiaries, affiliates or successors at any time in order to encourage,
solicit or suggest that such person terminate his or her employment with the
Company, or to solicit or offer employment to such person.

9. Successors; Binding Agreement.

(a)  Successors. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, “Company” shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this Section 8 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.

(b)  Binding Agreement. This Agreement and all rights of the Executive hereunder
shall inure to the benefit of and be enforceable by the Executive’s personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts would still be payable to him hereunder if he had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Executive’s devisee, legatee, or other
designee or, if there be no such designee, to the Executive’s estate.

10. Notice. For the purposes of this Agreement, notices, demands and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States registered mail, return receipt requested, postage
prepaid, addressed, if to the Executive, to his address as it appears in the
records of the Company, or if to the Company, as follows:

Varsity Group Inc.

1850 M Street, NW

Suite 1150

Washington, DC 20036

or to such other address as any party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

 

 

11. Prior Agreement. All prior agreements between the Company and the Executive
with respect to the employment of the Executive are hereby superseded and
terminated effective as of the date hereof and shall be without further force
or effect.

12. Miscellaneous. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the District of Columbia.

13. Validity. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect. IN
WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date and year first above written.

VARSITY GROUP INC.:

	 	 	 
	Signature:	 	 
	 	 	

	Name:	 	 
	 	 	

	Title:	 	 
	 	 	

	Date:	 	 
	 	 	

EXECUTIVE:

	 	 	 
	Signature:	 	 
	 	 	

	Name:	 	 
	 	 	

	Title:	 	 
	 	 	

	Date:<PAGE>
                                                                    EXHIBIT 10.1

                        ADVANCED ENERGY INDUSTRIES, INC.
                             2003 STOCK OPTION PLAN
                            ADOPTED FEBRUARY 12, 2003

         1.       PURPOSE. The purpose of the Plan is to provide an incentive to
attract, retain and reward individuals performing services for the Company, and
to motivate such individuals to contribute to the growth and profitability of
the Company.

         2.       DEFINITIONS. Whenever the following terms are used in the
Plan, they shall have the meaning indicated below, unless a different meaning is
required by the context.

         (a)      "Administrator" means either the Board or a committee of at
least two Board members to which the Board allocates administration of the Plan.

         (b)      "Board" means the board of directors of the Corporation.

         (c)      "Code" means the Internal Revenue Code of 1986, as amended.

         (d)      "Company" means, collectively, the Corporation and any "parent
corporation" or "subsidiary corporation" of the Corporation as defined in Code
Section 424(e) and Section 424(f), respectively.

         (e)      "Corporation" means Advanced Energy Industries, Inc., a
Delaware corporation.

         (f)      "Fair Market Value" means, with respect to a Share as of any
date, the closing sale price of a Share on such date (or previous business day
if such date is not a business day) on the principal exchange or market on which
Shares are then listed or admitted to trading. If, for any reason, the preceding
rule cannot be applied to determine fair market value, then the Administrator
shall make a good faith determination of fair market value.

         (g)      "ISO" means an incentive stock option within the meaning of
Code Section 422.

         (h)      "NSO" means an option that is not an ISO.

         (i)      "Participant" means a person who has received a grant or award
under the Plan. If a grant or award is assigned pursuant to Section 6(c), the
term "Participant" shall mean the assignee when required by the context.

         (j)      "Plan" means this Advanced Energy Industries, Inc. 2003 Stock
Option Plan.

         (k)      "Service" means the Participant's employment or service with
the Company, whether in the capacity of an employee, a director, or a
consultant.

         (l)      "Share" means one share of common stock of the Corporation.

                                      -1-

<PAGE>

         3.       ADMINISTRATION. The Plan shall be administered by the
Administrator. Subject to the provisions of the Plan, the Administrator shall
have the authority to select the persons to be granted options under this Plan,
to fix the number of shares that each Participant may purchase, to determine the
exercise price of options granted, to set the terms and conditions of each
option (including the period over which the option becomes exercisable), and to
determine all other matters relating to administration and operation of the
Plan. All questions of interpretation, implementation, and application of the
Plan shall be determined by the Administrator in its sole discretion. Such
determinations shall be final and binding on all persons. No member of the Board
or committee that acts as Administrator shall be liable for any act or omission
on such member's own part, including but not limited to the exercise of any
power or discretion given to such member under the Plan, except for those acts
or omissions resulting from such member's own gross negligence or willful
misconduct.

         4.       SHARES SUBJECT TO THE PLAN. The maximum number of Shares that
may be issued pursuant to this Plan is three million two hundred and fifty
thousand (3,250,000), subject to adjustment as provided in Section 6(e), and
subject to limited re-issuance as indicated below. If an option expires, is
surrendered, or becomes unexercisable without having been exercised in full, or
if any unissued Shares are retained by the Corporation upon exercise of an
option in order to satisfy any withholding taxes due with respect to such
exercise, the unissued or retained Shares shall become available for future
grant under the Plan (unless the Plan has terminated). If unvested Shares are
forfeited, such Shares shall also become available for future grant under the
Plan, but the total number of such forfeited Shares that become available may
not exceed twice the maximum number set forth above (subject to adjustment as
provided in Section 6(e)). Other Shares that actually have been issued under the
Plan pursuant to an option shall not be returned to the Plan and shall not
become available for future grant under the Plan.

         5.       ELIGIBILITY. The Administrator may grant an option or options
to any employee or consultant of the Company, as selected in the sole discretion
of the Administrator. No individual may receive aggregate grants or awards under
this Plan that exceed 25% of the number of Shares reserved for issuance under
Section 4 (subject to adjustment as provided in Section 6(e)).

         6.       GENERAL TERMS AND CONDITIONS.

         (a)      Option Agreements. Each option granted under the Plan shall be
authorized by action of the Administrator and shall be evidenced by a written
agreement in such form as the Administrator shall from time to time approve,
which agreement shall comply with and be subject to the terms and conditions of
the Plan.

         (b)      ISOs or NSOs. Options granted under the Plan shall be
designated by the Administrator as either ISOs or NSOs. The Company does not
represent or warrant that an option intended to be an ISO qualifies as such. To
the extent that the aggregate Fair Market Value (determined as of the date the
option is granted) of the Shares with respect to which ISOs are exercisable for
the first time by any individual during any calendar year (under all plans of
the Company) exceeds one hundred thousand dollars ($100,000), the option shall
be treated as an NSO. If an ISO is exercised more than three (3) months after
the date on which the Participant ceases to be an employee (other than by reason
of death or permanent and total disability as

                                      -2-

<PAGE>

defined in Code Section 22(e)(3)), the option will be treated as an NSO, and
not an ISO, as required by Code Section 422.

         (c)      Transferability. Options granted under the Plan are not
transferable by the Participant and shall be exercisable during the
Participant's lifetime only by the Participant; provided, however, that an
option may be transferred upon the approval of the Administrator (in its sole
discretion) by appropriate instrument pursuant to a domestic relations order
described in Rule 16a-12 of the 1934 Act or to an inter vivos or testamentary
trust in which the option is to be passed to the Participant's beneficiaries
upon the Participant's death or by gift to the Participant's immediate family
(consisting of the Participant's child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships). No option or interest therein may be otherwise
transferred, assigned, pledged, or hypothecated by the Participant, whether by
operation of law or otherwise, or be made subject to execution, attachment, or
similar process. Any such purported assignment, sale, transfer, delegation, or
other disposition shall be null and void.

         (d)      Modification, Extension, and Renewal. The Administrator shall
have the power to modify, extend, or renew outstanding options and authorize the
grant of new options in substitution therefor, provided that any such action may
not have the effect of significantly impairing any rights or obligations of any
option previously granted without the consent of the affected Participant.
However, the Company will not reduce the exercise price of any outstanding
option or cancel outstanding options and grant replacement options with a lower
exercise price without prior approval of the shareholders.

         (e)      Changes in Capitalization or Corporate Transaction. In the
event of any merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, reverse stock split, separation, liquidation or other
change in the corporate structure or capitalization affecting the Shares,
appropriate adjustment shall be made by the Administrator in the kind, option
price, and number of shares of stock (including, but not limited to, the maximum
number of Shares reserved under the Plan) that are or may become subject to
options and other awards granted or to be granted under the Plan. If in
connection with the change the Corporation ceases to exist, the surviving or
successor entity must either assume the Corporation's rights and obligations
with respect to outstanding options or substitute for outstanding options
substantially equivalent options for equity interests in the entity. If there is
no surviving or successor entity, a Participant's outstanding option must be
exercised before the change, or the option will terminate and cease to be
outstanding.

         7.       EXERCISE.

         (a)      Exercise Price. The exercise price of an option shall be not
less than the Fair Market Value of a Share on the date of the grant of the
option.

         (b)      Time of Exercise. An option shall become exercisable as
specified in the option agreement; provided, however, that (i) an option shall
not be exercisable after the 10th anniversary of the date of grant and (ii)
unless expressly provided otherwise in the option agreement, an option shall not
be exercisable to the extent its exercise would result (determined

                                      -3-

<PAGE>

at the time of exercise) in compensation not deductible by the Corporation
under Code Section 162(m) (unless a failure to exercise will result in the
termination of the option).

         (c)      Special Rules for 10% Owners. The exercise price of an ISO
granted to an individual who owns stock possessing more than ten percent (10%)
of the combined voting power of all classes of stock of the Corporation shall
not be less than one hundred ten percent (110%) of the Fair Market Value of a
Share on the date of grant. No ISO granted to an individual who owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Corporation shall be exercisable after the expiration of
five (5) years from the date of grant. For purposes of determining whether an
individual owns stock possessing more than 10 percent (10%) of the total
combined voting power of all classes of stock of the Corporation, the individual
shall be considered as owning the stock owned, directly or indirectly, by or for
his or her brothers and sisters (whether by the whole or half blood), spouse,
ancestors, and lineal descendants. Stock owned, directly or indirectly, by or
for a corporation, partnership, estate, or trust shall be considered as being
owned proportionately by or for its shareholders, partners, or beneficiaries.
Stock with respect to which the individual holds an option shall not be counted.

         (d)      Notice of Exercise. Participants may exercise only by
providing written notice to the Corporation at the address specified in the
option agreement, accompanied by full payment for the Shares to be purchased.
After receiving proper notice of exercise and payment, the Corporation shall
issue a certificate(s) for the Shares purchased, registered in Participant's
name (or in Participant's name and the name of Participant's spouse as community
property or as joint tenants with a right of survivorship).

         (e)      Taxes and Withholding. The Company shall have the right to
deduct from the Shares issuable upon the exercise of an option, or to accept
from the Participant the tender of, a number of whole Shares having a fair
market value, as determined by the Administrator, equal to all or any part of
the federal, state, local and foreign taxes, if any, required by law to be
withheld by the Company with respect to such option or the Shares acquired upon
the exercise thereof. Alternatively or in addition, in its sole discretion, the
Company shall have the right to require Participant, through payroll
withholding, cash payment or otherwise, including by means of a cashless
exercise (as described in Section 8(b)), to make adequate provision for any such
tax withholding obligations of the Company arising in connection with the
option, or the Shares acquired upon the exercise thereof.

         8.       PAYMENT OF EXERCISE PRICE. Payment of any option's exercise
price may be made in cash, by check or cash equivalent. At the sole discretion
of the Administrator, the exercise price may be made as follows:

         (a)      By Tender of Stock. Payment may be made by tender (or by
attestation) to the Corporation of Shares owned by Participant having a fair
market value (as determined by the Administrator without regard to any
restrictions on transferability applicable to such Shares by reason of federal
or state securities laws or agreements with the Corporation's underwriter) not
less than the exercise price; provided that, an option may not be exercised by
tender to the Corporation of Shares to the extent such tender would constitute a
violation of the provisions of any law, regulation or agreement restricting the
redemption of the Shares. Unless otherwise

                                      -4-

<PAGE>

provided by the Administrator, an option may not be exercised by tender to the
Corporation of Shares unless such Shares either have been owned by the
Participant for more than six (6) months or were not acquired, directly or
indirectly, from the Corporation.

         (b)      By Cashless Exercise. The Administrator reserves, at any and
all times, the right, in the Administrator's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of options by payment by the assignment of the proceeds of a sale or
loan with respect to some or all of the Shares being acquired upon the exercise
of the option, including, without limitation, through an exercise complying with
the provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System.

         (c)      By Promissory Note. Payment may be made by the Participant's
promissory note in a form approved by the Administrator, except that no
promissory note shall be permitted if the exercise of an option using a
promissory note would be a violation of any law. Any permitted promissory note
shall be on such terms as the Administrator shall determine; provided that (i)
the note (including interest) shall be full recourse, (ii) interest shall be
payable in at least annual installments at a current market interest rate, (iii)
the note shall be secured by the Shares acquired, and (iv) the remaining balance
of the note (including accrued interest) shall be due and payable within 90 days
of termination of Participant's Service for any reason. Unless otherwise
provided by the Administrator, if the Corporation at any time is subject to the
regulations promulgated by the Board of Governors of the Federal Reserve System
or any other governmental entity affecting the extension of credit in connection
with the Corporation's securities, any promissory note shall comply with such
applicable regulations, and Participant shall pay the unpaid principal and
accrued interest, if any, to the extent necessary to comply with such applicable
regulations.

         (d)      By Other Consideration. Payment may be made by such other
consideration or by any combination of cash, stock, cashless exercise,
promissory note or other consideration as may be approved by the Administrator
from time to time to the extent permitted by applicable laws.

         9.       TERMINATION OF OPTIONS.

         (a)      Termination of Service. If a Participant's Service terminates,
his or her rights to exercise an option then held shall be limited.
Participant's Service shall not be deemed to have terminated merely because of a
change in the capacity in which the Participant renders Service or a change in
the Company, provided that there is no interruption or termination of
Participant's employment or service. Participant's Service with the Company
shall be treated as continuing intact while the Participant is on military, sick
leave, or other bona fide leave of absence (such as temporary employment by the
government) approved by the Company if the period of such leave does not exceed
90 days, or, if longer, so long as the Participant's right to reemployment with
the Corporation is guaranteed either by statute or by contract. Where the period
of leave exceeds 90 days and where the Participant's right to reemployment is
not guaranteed either by statute or by contract, Service will be deemed to have
terminated on the 91st day of such leave. Subject to the foregoing, the
Administrator, in its sole discretion, shall determine whether Participant's
Service has terminated and the effective date thereof.

                                      -5-

<PAGE>

         (b)      Involuntary Separation without Cause. Except as otherwise
provided in paragraphs (c) through (f), if a Participant leaves the company
involuntarily without cause, Participant shall have the right for a period of
180 calendar days after the date of separation to exercise the option to the
extent Participant was entitled to exercise the option on that date; provided,
however, that the date of exercise is in no event after the expiration of the
term of the option. To the extent the option is not exercised within this
period, the option will terminate.

         (c)      Termination by Disability. If a Participant becomes disabled
(within the meaning of Code Section 22(e)(3)) while in Service, Participant or
his or her qualified representative shall have the right for a period of
twenty-four (24) months after the date on which Participant's Service ends to
exercise the option to the extent Participant was entitled to exercise the
option on that date, provided the date of exercise is in no event after the
expiration of the term of the option. To the extent the option is not exercised
within this period, the option will terminate.

         (d)      Termination by Retirement. If a Participant terminates Service
without cause from the Company after reaching age 60 and with 5 or more years of
continuous service with the Company, Participant shall have 3 years from date of
retirement to exercise the option to the extent Participant was entitled to
exercise the option on that date; provided, however, that the date of exercise
is in no event after the expiration of the term of the option. To the extent the
option is not exercised within this period, the option will terminate.
Determination of retirement shall be at the sole discretion of the Committee.

         (e)      Termination after Death. If a Participant dies while in
Service, the person who acquired the right to exercise the option by bequest or
inheritance or by reason of the death of the Participant shall have the right
for a period of twelve (12) months after the date of death to exercise the
option to the extent Participant was entitled to exercise the option on that
date, provided the date of exercise is in no event after the expiration of the
term of the option. To the extent the option is not exercised within this
period, the option will terminate.

         (f)      Termination for Cause or Voluntary Separation. If a
Participant's Service is terminated by the Company for Cause or the Participant
voluntarily leaves the Company, Participant shall have no right to exercise the
option, and the option will terminate. "Cause" means that Participant is
determined by the Administrator to have committed an act of embezzlement, fraud,
dishonesty, or breach of fiduciary duty to the Company, or to have deliberately
disregarded the rules of the Company, under circumstances that could normally be
expected to result in loss, damage, or injury to the Company, or because
Participant has made any unauthorized disclosure of any of the secrets or
confidential information of the Company, has induced any client or customer of
the Company to break any contract with the Company, has induced any principal
for whom the Company acts as agent to terminate the agency relationship, or has
engaged in any conduct that constitutes unfair competition with the Company.

         (g)      Option Agreement. The option agreement may provide rules
different from those set forth in subsections. (a) through (e).

         10.      CHANGE IN CONTROL. An option's term may be affected by a
Change in Control, as described in this section.

                                      -6-

<PAGE>

         (a)      Optional Assumption or Substitution. At the time of a Change
in Control, the surviving, continuing, successor or purchasing corporation or
parent corporation thereof, as the case may be (the "Acquiror"), may either
assume the Corporation's rights and obligations with respect to outstanding
options or substitute for outstanding options substantially equivalent options
for the Acquiror's stock. If the Acquiror is the same corporate entity as the
Corporation, or its successor by merger, a reaffirmation of the option shall be
treated as an assumption, and a failure to reaffirm shall be treated as a
failure to assume.

         (b)      No Assumption or Substitution - Termination. Options that are
neither assumed nor substituted for by the Acquiror in connection with a Change
in Control, nor exercised as of the time of the Change in Control, shall
terminate and cease to be outstanding.

         (c)      Definition. For purposes of this Plan, a Change in Control
means a single Ownership Change Event or combination of proximate (in time,
purpose, cause and effect, and/or the identity of the parties involved)
Ownership Change Events (collectively, a "Transaction") wherein the stockholders
of the Corporation immediately before the Transaction do not retain immediately
after the Transaction, in substantially the same proportions as their ownership
of shares of the Corporation's voting stock immediately before the Transaction,
direct or indirect beneficial ownership of more than 50% of the total combined
voting power of the outstanding voting stock of the Corporation or the
corporation or corporations to which the assets of the Corporation were
transferred (the "Transferee Corporation(s)"), as the case may be. For purposes
of the preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting stock of one or
more corporations which, as a result of the Transaction, own the Corporation or
the Transferee Corporation(s), as the case may be, either directly or through
one or more subsidiary corporations. An Ownership Change Event means (i) the
direct or indirect sale, exchange or transfer of the voting stock of the
Corporation, (ii) a merger or consolidation in which the Corporation is a party,
(iii) the sale, exchange or transfer of all or substantially all of the assets
of the Corporation, or (iv) a liquidation or dissolution of the Corporation. The
Board shall have sole discretion to determine whether any particular facts and
circumstances constitute an Ownership Change Event or a Transaction, and its
determination shall be final, binding and conclusive.

         11.      RESTRICTED STOCK AWARDS.

         (a)      General Rule. The Administrator may award Shares to a person
eligible under Section 5, subject to such terms and conditions consistent with
this Plan that the Administrator shall impose as set forth in a separate award
agreement.

         (b)      Vesting. An award under this section may condition the vesting
of Shares on the performance of future services by the eligible person, and may
alternatively or additionally condition the vesting of Shares on such other
performance-related conditions that the Administrator shall impose in its sole
discretion.

         (c)      Transferability. An unvested Share will not be transferable by
the Participant until it becomes vested. The Company shall receive a stock power
duly endorsed in blank with respect to restricted Shares, and the related stock
certificate shall bear the following legend:

                                      -7-

<PAGE>

         The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and conditions
(including forfeiture provisions and restrictions against transfer) contained in
the Advanced Energy Industries, Inc. 2003 Stock Option Plan and an award
agreement entered into between the registered owner of such shares and Advanced
Energy Industries, Inc. A copy of the plan and agreement is on file in the
office of the Secretary of Advanced Energy Industries, Inc.

         Such legend shall be removed from the certificate only after the Shares
vest. Each certificate issued with respect to Shares subject to this section,
together with the stock powers related to the Shares, shall be deposited by the
Company with a custodian designated by the Company (and which may be the Company
or an affiliate).

         (d)      Voting Rights and Dividends. Unvested Shares may be voted by
the holder of such Shares. Dividends payable with respect to unvested Shares
will be paid to the holder of the Shares without regard to restrictions.

         (e)      Change in Control. An Acquiror described in Section 10(a)
shall have no obligation to assume or substitute an award of unvested Shares,
and any such Shares not assumed or substituted in connection with a Change in
Control shall be forfeited generally in the manner described in Section 10(b).

         12.      STOCK APPRECIATION RIGHTS. The Administrator may award a right
to receive in cash the amount that the Fair Market Value of a Share exceeds a
stated exercise price (a "stock appreciation right" or "SAR") to a person
eligible under Section 5 on such terms that the Administrator shall determine,
consistent with the terms of this Plan. An SAR shall be subject to the same
general terms that apply to an option granted hereunder, including (but not
limited to) the terms set forth in Sections 6, 7, 9 and 10 as appropriately
modified. An exercised SAR will reduce the Shares reserved for issuance under
the Plan under Section 4.

         13.      SECURITIES LAW COMPLIANCE.

         (a)      General Rules. All awards under this Plan shall be subject to
compliance with all applicable requirements of federal, state or foreign law
with respect to such securities. Options may not be exercised if the issuance of
Shares upon exercise would constitute a violation of any applicable federal,
state or foreign securities laws or other law or regulations or the requirements
of any stock exchange or market system upon which the Shares may then be listed.
In addition, no option may be exercised unless (i) a registration statement
under the Securities Act shall at the time of exercise of the option be in
effect with respect to the Shares issuable upon exercise of the option, or (ii)
in the opinion of legal counsel to the Corporation, the Shares issuable upon
exercise of the option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act.
The inability of the Corporation to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Corporation's legal counsel to
be necessary to the lawful issuance and sale of any shares hereunder shall
relieve the Corporation of any liability in respect of the failure to issue or
sell such shares as to which such requisite authority shall not have been
obtained.

                                      -8-

<PAGE>

         (b) Conditions of Exercise. As a condition to the exercise of any
option, the Corporation may require Participant to satisfy any qualifications
that may be necessary or appropriate, to evidence compliance with any applicable
law or regulation and to make any representation or warranty with respect
thereto as may be requested by the Corporation.

         14.      MISCELLANEOUS.

         (a)      No Right to an Option. Nothing in the Plan shall be construed
to give any person any right to benefit under the Plan.

         (b)      No Employment Rights. Neither the Plan nor the granting of an
option nor any other action taken pursuant to the Plan shall constitute or be
evidence of any agreement or understanding, express or implied, that the Company
will utilize Participant's services for any period of time, or in any position,
or at any particular rate of compensation.

         (c)      No Stockholders' Rights. Participant shall have no rights as a
shareholder with respect to the Shares covered by his or her options until the
date of the issuance to him or her of a share certificate for the Shares, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date the certificate is issued.

         (d)      Claims. Any person who makes a claim for benefits under the
Plan or under any option agreement entered into pursuant to the Plan shall file
the claim in writing with the Administrator. Written notice of the disposition
of the claim shall be delivered to the claimant within 60 days after filing. If
the claim is denied, the Administrator's written decision shall set forth (i)
the specific reason or reasons for the denial, (ii) a specific reference to the
pertinent provisions of the Plan or option agreement on which the denial is
based, and (iii) a description of any additional material or information
necessary for the claimant to perfect his or her claim and an explanation of why
such material or information is necessary. No lawsuit may be filed by the
claimant until a claim is made and denied pursuant to this subsection.

         (e)      Attorneys' Fees. In any legal action or other proceeding
brought by either party to enforce or interpret the terms of the option
agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and costs.

         (f)      Confidentiality. The terms and conditions of the option
agreement, including without limitation the number of Shares for which the
option is granted, are confidential. The Participant shall not disclose the
terms of the option to any third party, except to Participant's financial or
legal advisors, tax preparer or family members, unless disclosure is required by
law.

         (g)      Corporation Free to Act. An option grant shall not affect in
any way the right or power of the Corporation or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations, or other
changes in the Corporation's capital structure or its business, or any merger or
consolidation of any member of the Company or any issue of bonds, debentures, or
preferred or preference stocks affecting the Shares or the rights thereof, or of
any rights, options, or warrants to purchase any capital stock of the
Corporation, or the dissolution or liquidation of the Corporation, any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceedings of the Corporation, whether of a similar character or
otherwise.

                                      -9-

<PAGE>

         (h)      Severability. If any provision of the Plan or option
agreement, or its application to any person, place, or circumstance, is held by
an arbitrator or a court of competent jurisdiction to be invalid, unenforceable,
or void, that provision shall be enforced to the greatest extent permitted by
law, and the remainder of this Plan and option agreement and of that provision
shall remain in full force and effect as applied to other persons, places, and
circumstances.

         (i)      Substitution/Assumption. The Company may substitute or assume
outstanding options granted by another company by either (i) granting an option
under this Plan in substitution of such other company's option or (ii) assuming
such option as if it had been granted under this Plan if the terms of such
assumed option are consistent this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed option would have been
eligible to be granted an option under this Plan if the other company had
applied the rules of this Plan to such grant. In the event of an assumption
hereunder, the terms and conditions of the option will remain unchanged, except
that the exercise price and the number and nature of shares issuable upon
exercise of any such option will be adjusted appropriately in the manner
described in Code Section 424(a). If the Company substitutes a new option for
the old option, such new option may be granted with a similarly adjusted
exercise price.

         (j)      Exchange Requirements. The requirements of any stock exchange
or other established market (such as the NASDAQ), on which the Corporation's
common stock is traded, are hereby incorporated into this Plan by reference.

         (k)      Governing Law. This Plan and the option agreement shall be
governed by and construed in accordance with the laws of the State of Colorado
applicable to contracts wholly made and performed in the State of Colorado.

         15.      EFFECTIVE DATE OF THE PLAN. The Plan will become effective
upon adoption by the Board, subject to approval by the Corporation's
stockholders within one year. Options may be granted under the Plan at any time
after the Plan's adoption and before the Plan's termination. The Plan shall
terminate on the 10th anniversary of its adoption.

         16.      AMENDMENT OF THE PLAN. The Board may suspend or discontinue
the Plan or revise or amend it in any respect whatsoever; provided, however,
that without approval of the Corporation's stockholders no revision or amendment
shall change the number of Shares issuable under the Plan (except as provided in
Section 6(e)), change the designation of the class of individuals eligible to
benefit under the Plan, or materially increase the benefits accruing to
Participants.

         IN WITNESS WHEREOF, the undersigned Secretary of the Corporation
certifies that this Plan was adopted by the Board on February 12, 2003, and
effective as of the same date.

                                      -10-

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