Document:

Executive 162(m) Bonus Plan of the Registrant

     

    THE
      P&F INDUSTRIES, INC.

    EXECUTIVE
      162(m) BONUS PLAN

     

    
      	1.  	
              PURPOSE

            

    

     

    The
      purpose of this Plan is to attract, retain and motivate key executive employees
      by providing cash performance awards to designated key executive employees
      of
      the Company and its Subsidiaries. This Plan shall be effective upon the approval
      of the Plan by the stockholders of the Company in accordance with the laws
      of
      the State of Delaware.

     

    
      	2.  	
              DEFINITIONS

            

    

     

    Unless
      the context otherwise requires, the follow terms shall have the meanings set
      forth below:

     

    
      	(a)  	
              “Award”
                - shall mean the total Performance Award as determined under the
                Plan.

            

    

     

    
      	(b)  	
              “Board”
                - shall mean the Board of Directors of the
                Company.

            

    

     

    
      	(c)  	
              “Change
                in Control of the Company” - shall have the meaning set forth in Exhibit
                A.

            

    

     

    
      	(d)  	
              “Code”
                - shall mean the Internal Revenue Code of 1986, as amended and any
                successor thereto.

            

    

     

    
      	(e)  	
              “Code
                Section 162(m)” - shall mean the exception for performance-based
                compensation under Section 162(m) of the Code or any successor section
                and
                the Treasury regulations promulgated
                thereunder.

            

    

     

    
      	(f)  	
              “Company”
                - shall mean P&F Industries, Inc. and any successor by merger,
                consolidation or otherwise.

            

    

     

    
      	(g)  	
              “Committee”
                - shall mean the Compensation Committee of the Board or such other
                Committee of the Board that is appointed by the Board all of whose
                members
                shall satisfy the requirements to be “outside directors,” as defined under
                Code Section 162(m).

            

    

     

    
      	(h)  	
              “Exchange
                Act” shall mean the Securities
                Exchange Act of 1934, as amended and
                any successor thereto.

            

    

     

    
      	(i)  	
              “Individual
                Target Award” - shall mean the targeted performance award for a
                Performance Period specified by the Committee as provided in
                Section 5 hereof.

            

    

     

    
      	(j)  	
              “Participant”
                - shall mean an employee of the Company or a Subsidiary selected,
                in
                accordance with Section 4 hereof, to be eligible to receive an Award
                in accordance with this Plan.

            

    

     

    
      	(k)  	
              “Performance
                Award” - shall mean the amount paid or payable under Section 6 hereof.
                

            

    

     

    
      	(l)  	
              “Performance
                Goal” - shall mean the objective performance goals, formulae or standards
                that the Committee shall establish in accordance with Section 6.2
                hereof.

            

    

     

    
      	(m)  	
              “Performance
                Period” - shall mean a period of one (1) year, fiscal or calendar, or
                less, as determined by the Board.

            

    

     

    
      	(n)  	
              “Plan”
                - shall mean this P&F Industries, Inc. Executive 162(m) Bonus
                Plan.

            

    

     

    
      	(o)  	
              “Subsidiary”
                - shall mean, other than the Company, (i) any corporation in an unbroken
                chain of corporations beginning with the Company which owns stock
                possessing fifty percent (50%) or more of the total combined voting
                power
                of all classes of stock in one of the other corporations in such
                chain;
                (ii) any corporation or trade or business (including, without limitation,
                a partnership or limited liability company) which is controlled fifty
                percent (50%) or more (whether by ownership of stock, assets or an
                equivalent ownership interest or voting interest) by the Company
                or one of
                its Subsidiaries; or (iii) any other entity in which the Company
                or any of
                its Subsidiaries has a material equity interest and which is designated
                as
                a “Subsidiary” by resolution of the
                Committee.

            

    

     

    
      	3.  	
              ADMINISTRATION
                AND INTERPRETATION OF THE PLAN

            

    

     

    The
      Plan
      shall be administered by the Committee. The Committee shall have the exclusive
      authority and responsibility to: (i) interpret the Plan; (ii) approve
      the designation of eligible Participants; (iii) set the performance
      criteria for Awards within the Plan guidelines; (iv) certify attainment of
      performance goals and other material terms; (v) reduce Awards as provided
      herein; (vi) authorize the payment of all benefits and expenses of the Plan
      as
      they become payable under the Plan; (vii) adopt, amend and rescind rules
      and regulations relating to the Plan; and (viii) make all other
      determinations and take all other actions necessary or desirable for the Plan’s
      administration including, without limitation, correcting any defect, supplying
      any omission or reconciling any inconsistency in this Plan in the manner and
      to
      the extent it shall deem necessary to carry this Plan into effect, but only
      to
      the extent any such action would be permitted under Code Section
      162(m).

     

    Decisions
      of the Committee shall be made by a majority of its members. All decisions
      of
      the Committee on any question concerning the selection of Participants and
      the
      interpretation and administration of the Plan shall be final, conclusive and
      binding upon all parties. The Committee may rely on information, and consider
      recommendations, provided by the Board or the executive officers of the Company.
      The Plan is intended to comply with Code Section 162(m), and all provisions
      contained herein shall be limited, construed and interpreted in a manner to
      comply therewith.

     

    No
      member
      of the Committee shall be liable for any action, omission, or determination
      relating to the Plan, and the Company shall indemnify and hold harmless each
      member of the Committee and each other director or employee of the Company
      or
      its affiliates to whom any duty or power relating to the administration or
      interpretation of the Plan has been delegated against any cost or expense
      (including counsel fees, which fees shall be paid as incurred) or liability
      (including any sum paid in settlement of a claim with the approval of the
      Committee) arising out of or in connection with any action, omission or
      determination relating to the Plan, unless, in each case, such action, omission
      or determination was taken or made by such member, director or employee in
      bad
      faith and without reasonable belief that it was in the best interests of the
      Company. The foregoing provisions are in addition to and shall not be deemed
      to
      limit or modify, any exculpatory rights or rights to indemnification or the
      advancement of expenses that any such persons may now or hereafter have, whether
      under the Company’s Amended By-laws, the General Corporation Law of the State of
      Delaware or otherwise.

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    
      	4.  	
              ELIGIBILITY
                AND PARTICIPATION

            

    

     

    
      	(a)  	
              For
                each Performance Period, the Committee shall select the employees
                of the
                Company and its Subsidiaries who are to participate in the Plan from
                among
                the executive employees of the Company and its
                Subsidiaries.

            

    

     

    
      	(b)  	
              No
                person shall be entitled to any Award under this Plan for any Performance
                Period unless he or she is so designated as a Participant for that
                Performance Period. The Committee may add to or delete individuals
                from
                the list of designated Participants at any time and from time to
                time, in
                its sole discretion, subject to any limitations required to comply
                with
                Code Section 162(m).

            

    

     

    
      	5.  	
              INDIVIDUAL
                TARGET AWARD

            

    

     

    For
      each
      Participant for each Performance Period, the Committee may specify a targeted
      performance award, which shall be referred to herein as an Individual Target
      Award. The Individual Target Award may be expressed, at the Committee’s
      discretion, as a fixed dollar amount, a percentage of base pay or total pay
      (excluding payments made under this Plan), or an amount determined pursuant
      to
      an objective formula or standard. Establishment of an Individual Target Award
      for an employee for a Performance Period shall not imply or require that the
      same level or any Individual Target Award be set for any subsequent Performance
      Period. At the time the Performance Goals are established (as provided in
      Section 6.2 below), the Committee shall prescribe a formula to determine the
      percentages (which, subject to Section 6.5 hereof, may be greater than
      one-hundred percent (100%)) of the Individual Target Award which may be payable
      based upon the degree of attainment of the Performance Goals during the
      Performance Period. Notwithstanding anything else herein, unless otherwise
      specified by the Committee with respect to an Individual Target Award, the
      Committee may, in its sole discretion, elect to pay a Participant an amount
      that
      is less than the Participant’s Individual Target Award (or attained percentage
      thereof) regardless of the degree of attainment of the Performance Goals;
      provided that no such discretion to reduce an Award earned based on achievement
      of the applicable Performance Goals shall be permitted for the Performance
      Period in which a Change in Control of the Company occurs, or during such
      Performance Period with regard to the prior Performance Period if the Awards
      for
      the prior Performance Period have not been made by the time of the Change in
      Control of the Company, with regard to individuals who were Participants at
      the
      time of the Change in Control of the Company.

     

    
      	6.  	
              PERFORMANCE
                AWARD PROGRAM

            

    

     

    6.1  Performance
      Awards.
      Subject
      to Section 7 herein, each Participant is eligible to receive up to the
      achieved percentage of their Individual Target Award for such Performance Period
      (or, subject to the last sentence of Section 5, such lesser amount as determined
      by the Committee in its sole discretion) based upon the attainment of the
      objective Performance Goals established pursuant to Section 6.2 and the
      formula established pursuant to Section 5. Except as specifically provided
      in
      Section 7, no Performance Award shall be made to a Participant for a Performance
      Period unless the minimum Performance Goals for such Performance Period are
      attained.

     

    6.2  Performance
      Goals.
      The
      Committee shall establish the objective performance goals, formulae or standards
      and the Individual Target Award (if any) applicable to each Participant or
      class
      of Participants for a Performance Period in writing prior to the beginning
      of
      such Performance Period or at such later date as permitted under Code Section
      162(m) and while the outcome of the Performance Goals are substantially
      uncertain. Such Performance Goals may incorporate, if and only to the extent
      permitted under Code Section 162(m), provisions for disregarding (or adjusting
      for) changes in accounting methods, corporate transactions (including, without
      limitation, dispositions and acquisitions) and other similar type events or
      circumstances. To the extent any such provision would create impermissible
      discretion under Code Section 162(m) or otherwise violate Code Section 162(m),
      such provision shall be of no force or effect. These Performance Goals shall
      be
      based on one or more of the following criteria with regard to the Company (or
      a
      Subsidiary, division, other operational unit or administrative department of
      the
      Company): (i) the attainment of certain target levels of, or a specified
      increase in, enterprise value or value creation targets; (ii) the
      attainment of certain target levels of, or a percentage increase in after-tax
      or
      pre-tax profits, including without limitation that attributable to continuing
      and/or other operations; (iii) the attainment of certain target levels of,
      or a specified increase in, operational cash flow; (iv) the attainment of a
      certain level of reduction of, or other specified objectives with regard to
      limiting the level of increase in all or a portion of, the Company’s bank debt
      or other long-term or short-term public or private debt or other similar
      financial obligations of the Company, which may be calculated net of cash
      balances and/or other offsets and adjustments as may be established by the
      Committee; (v) the attainment of certain target levels of, or a specified
      percentage increase in, earnings per share or earnings per share from continuing
      operations; (vi) the attainment of certain target levels of, or a specified
      percentage increase in, net sales, revenues, net income or earnings before
      income tax or other exclusions; (vii) the attainment of certain target
      levels of, or a specified increase in, return on capital employed (including,
      without limitation, return on invested capital or return on committed capital);
      (viii) the attainment of certain target levels of, or a percentage increase
      in, after-tax or pre-tax return on stockholder equity; (ix) the attainment
      of certain target levels of, or a percentage increase in, market share;
      (x) the attainment of certain target levels of, or a percentage increase
      in, the fair market value of the shares of the Company’s common stock;
      (xi) the growth in the value of an investment in the Company’s common stock
      assuming the reinvestment of dividends; (xii) 
      the
      attainment of a certain level of, reduction of, or other specified objectives
      with regard to limiting the level of or increase in, all or a portion of
      controllable expenses or costs or other expenses or costs; or (xiii) the
      attainment of certain target levels of, or a specified increase in, economic
      value added targets based on a cash flow return on investment
      formula.

     

    In
      addition, such Performance Goals may be based upon the attainment of specified
      levels of Company (or Subsidiary, division, other operational unit or
      administrative department of the Company) performance under one or more of
      the
      measures described above relative to the performance of other corporations.
      To
      the extent permitted under Code Section 162(m), but only to the extent
      permitted under Code Section 162(m) (including, without limitation,
      compliance with any requirements for stockholder approval), the Committee may:
      (i) designate additional business criteria on which the Performance Goals
      may be based or (ii) adjust, modify or amend the aforementioned business
      criteria.

     

    6.3  Except
      as
      otherwise provided herein, the measures used in Performance Goals set under
      the
      Plan shall be determined in accordance with generally accepted accounting
      principles (“GAAP”) and in a manner consistent with the methods used in the
      Company’s regular reports on Forms 10-K and 10-Q. 

     

    6.4  To
      the
      extent any objective Performance Goals are expressed using any measures that
      require deviations from GAAP, such deviations shall be at the discretion of
      the
      Committee as exercised at the time the Performance Goals are set.

    
       

    

    6.5   Maximum
      Performance Award.
      The
      maximum Performance Award payable to a Participant for any Performance Period
      is
      $2,750,000.

     

    6.6  Payment
      Date; Committee Certification.
      Performance Awards will be paid as soon as administratively feasible in the
      fiscal year after the fiscal year in which the Performance Period in which
      they
      are earned is completed, but not before the Committee certifies in writing
      that
      the Performance Goals specified pursuant to Section 6.2 (except to the
      extent permitted under Code Section 162(m) and provided in Section 7 with regard
      to death, disability or Change in Control of the Company or certain other
      termination situations) were, in fact, satisfied, except as may otherwise be
      agreed by a Participant and the Company in a written agreement executed prior
      to
      the beginning of the Performance Period to which the Performance Award relates
      in accordance with any deferred compensation program, if any, in effect
      applicable to such Participant. The Committee shall use its best efforts to
      make
      a determination with regard to satisfaction of the Performance Goals within
      two
      and one-half (21⁄2) months after the end of each Performance Period. Any
      Performance Award deferred by a Participant shall not increase (between the
      date
      on which the Performance Award is credited to any deferred compensation program
      applicable to such Participant and the payment date) by an amount that would
      result in such deferral being deemed as an “increase in the amount of
      compensation” under Code Section 162(m). The Participant shall have no right to
      receive payment of any deferred amount until he or she has a right to receive
      such amount under the terms of the applicable deferred compensation program.
      To
      the extent applicable, any deferral under this section is intended to comply
      with the applicable requirements of Code Section 409A (and the regulations
      thereunder) and shall be limited, construed and interpreted in a manner so
      as to
      comply therewith.

     

    
      	7.  	
              EMPLOYMENT
                ON AWARD DATE GENERALLY REQUIRED FOR
                AWARD

            

    

     

    No
      Award
      shall be made to any Participant who is not an active employee of the Company
      or
      one of its Subsidiaries or affiliates on the date Awards for the Performance
      Period are generally paid to Participants; provided,
      however,
      that
      the Committee, in its sole and absolute discretion, may make Awards to
      Participants for a Performance Period in circumstances that the Committee deems
      appropriate including, but not limited to, a Participant’s death, disability,
      retirement or other termination of employment during such Performance Period
      and
      the Committee shall be required to make at least a pro-rata Award through the
      date of a Change in Control of the Company to each Participant who is a
      Participant at the time of such Change in Control of the Company. All such
      Awards shall be based on achievement of the Performance Goals for the
      Performance Period, except that, to the extent permitted under Code Section
      162(m), in the case of death, disability or Change in Control of the Company
      during the Performance Period (or such other termination situations as permitted
      under Code Section 162(m)) an amount equal to or less than the Individual Target
      Awards may be made by the Committee either during or after the Performance
      Period without regard to actual achievement of the Performance Goals.
      Furthermore, upon a Change in Control of the Company the Committee may, in
      its
      sole discretion but only to the extent permitted under Code Section 162(m),
      make
      an award (payable immediately) equal to a pro-rata portion (through the date
      of
      the Change in Control of the Company) of the Individual Target Award payable
      upon achieving, but not surpassing, the Performance Goals for the relevant
      Performance Period. Any such immediate pro-rata payment shall reduce any other
      Award made for such Performance Period under this Plan by the amount of the
      pro-rata payment.

    
      
        2

        
          

        

      

       

    

    
      	8.  	
              NON-ASSIGNABILITY

            

    

     

    No
      Award
      under this Plan nor any right or benefit under this Plan shall be subject to
      anticipation, alienation, sale, assignment, pledge, encumbrance, garnishment,
      execution or levy of any kind or charge, and any attempt to anticipate,
      alienate, sell, assign, pledge, encumber and to the extent permitted by
      applicable law, charge, garnish, execute upon or levy upon the same shall be
      void and shall not be recognized or given effect by the Company.

     

    
      	9.  	
              NO
                RIGHT TO EMPLOYMENT

            

    

     

    Nothing
      in the Plan or in any notice of award pursuant to the Plan shall confer upon
      any
      person the right to continue in the employment of the Company or one of its
      Subsidiaries or affiliates nor affect the right of the Company or any of its
      Subsidiaries or affiliates to terminate the employment of any
      Participant.

     

    
      	10.  	
              AMENDMENT
                OR TERMINATION

            

    

     

    The
      Board
      (or a duly authorized committee thereof) may, in its sole and absolute
      discretion, amend, suspend or terminate the Plan or adopt a new plan in place
      of
      this Plan at any time; provided, that no such amendment shall, without the
      prior
      approval of the stockholders of the Company entitled to vote thereon in
      accordance with the laws of the State of Delaware to the extent required under
      Code Section 162(m): (i) materially alter the Performance Goals as set
      forth in Section 6.2; (ii) increase the maximum amount set forth in Section
      6.5; (iii) change the class of eligible employees set forth in Section
      4(a); or (iv) implement any change to a provision of the Plan requiring
      stockholder approval in order for the Plan to continue to comply with the
      requirements of Code Section 162(m). Furthermore, no amendment, suspension
      or
      termination shall, without the consent of the Participant, alter or impair
      a
      Participant’s right to receive payment of an Award for a Performance Period
      otherwise payable hereunder. In addition, no Award shall be granted based on
      the
      Performance Goals established on or after the first stockholder meeting that
      occurs in the fifth year following the year in which the stockholders previously
      approved the Performance Goals, unless the stockholders reapprove the
      Performance Goals on or before such stockholder meeting. Notwithstanding
      anything herein to the contrary, any provision in this Plan that is inconsistent
      with Code Section 409A shall be deemed to be amended to comply with Code Section
      409A and to the extent such provision cannot be amended to comply therewith,
      such provision shall be null and void. The Board (or a duly authorized committee
      thereof) may at any time and from time to time amend, in whole or in part,
      any
      or all of the provisions of this Plan to comply with Code Section 409A and
      the
      regulations thereunder or any other applicable law without Participant
      consent.

     

    
      	11.  	
              SEVERABILITY

            

    

     

    In
      the
      event that any one or more of the provisions contained in the Plan shall, for
      any reason, be held to be invalid, illegal or unenforceable, in any respect,
      such invalidity, illegality or unenforceability shall not affect any other
      provision of the Plan and the Plan shall be construed as if such invalid,
      illegal or unenforceable provisions had never been contained
      therein.

     

    
      	12.  	
              WITHHOLDING

            

    

     

    The
      Company shall have the right to make such provisions as it deems necessary
      or
      appropriate to satisfy any obligations it may have to withhold federal, state
      or
      local income or other taxes incurred by reason of payments pursuant to the
      Plan.

     

    
      	13.  	
              GOVERNING
                LAW

            

    

     

    This
      Plan
      and any amendments thereto shall be construed, administered, and governed in
      all
      respects in accordance with the laws of the State of Delaware (regardless of
      the
      law that might otherwise govern under applicable principles of conflict of
      laws).

    
      
        
        

      

      
        3

        
          

        

      

      Exhibit
        A

    

     

    A
      Change
      in Control of the Company shall, unless the Board otherwise directs by
      resolution adopted prior thereto or, in the case of a particular Award, the
      applicable award agreement states otherwise, be deemed to occur if:

    

    
      	i.  	
              any
                “person” (as that term is used in Sections 13(d) and 14(d)(2) of the
                Exchange
                Act)
                other than a Founder (as defined below) is or becomes the beneficial
                owner
                (as that term is used in Section 13(d) of the Exchange Act), directly
                or
                indirectly, of 50% or more of either the outstanding shares of the
                Company’s Class A common stock or the combined voting power of the
                Company’s then outstanding voting securities entitled to vote
                generally;

            

    

     

    
      	ii.  	
              during
                any period of two (2) consecutive years, individuals who constitute
                the
                Board at the beginning of such period cease for any reason to constitute
                at least a majority thereof, unless the election or the nomination
                for
                election by the Company’s stockholders of each new director was approved
                by a vote of at least three-quarters of the directors then still
                in office
                who were directors at the beginning of the period;
                or
                

            

    

     

    
      	iii.  	
              the
                Company undergoes a liquidation or dissolution or a sale of all or
                substantially all of its assets. No merger, consolidation or corporate
                reorganization in which the owners of the combined voting power of
                the
                Company’s then outstanding voting securities entitled to vote generally
                prior to said combination, own 50% or more of the resulting entity’s
                outstanding voting securities shall, by itself, be considered a Change
                in
                Control of the Company; 

            

    

     

    As
      used
      herein, “Founder” means Richard A. Horowitz and any of his
      affiliates.

     

     

    4exv10w1

 

EXHIBIT 10.1

ADVANCED ENERGY INDUSTRIES, INC.

AMENDED AND RESTATED 2003 NON-EMPLOYEE DIRECTORS’

STOCK OPTION PLAN

Adopted February 12, 2003

AMENDED AND RESTATED FEBRUARY 15, 2006

     1. PURPOSE. The purpose of the Plan is to attract and retain the
services of experienced and knowledgeable non-employee directors of Advanced
Energy Industries, Inc., and to provide an incentive for such directors to
increase their proprietary interests in the Company’s long-term success and
progress.

     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 the administrative committee described
in Section 3.
	 
	 	(b)	 	“Board” means the board of directors of the Company.
	 
	 	(c)	 	“Company” means Advanced Energy Industries, Inc., a Delaware
corporation.
	 
	 	(d)	 	“Non-Employee Director” means any member of the Board who is a
“non-employee director” within the meaning of Rule 16b-3(b)(3)(i) under Section 16 of
the Securities Exchange Act of 1934 (“1934 Act”).
	 
	 	(e)	 	“Plan” means this Advanced Energy Industries, Inc. Amended and Restated 2003
Non-Employee Directors’ Stock Option Plan.
	 
	 	(f)	 	“Share” means one share of common stock of the Company.

     3. ADMINISTRATION. The Plan shall be administered by a committee
selected by the Board consisting of at least 2 individuals each of whom is
either (i) a member of the Board and not a Non-Employee Director or (ii) a
senior officer of the Company who is not a member of the Board. Subject to the
provisions of the Plan, the Administrator shall have the authority 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.

 

 

     4. SHARES SUBJECT TO THE PLAN. The maximum number of Shares that may be issued pursuant
to awards granted under the Plan is two hundred fifty
thousand (250,000), subject to adjustment as provided in Section 6(b) and subject to limited
re-issuance as indicated below. If an award expires, is surrendered, or in the case of options
becomes unexercisable without having been exercised in full, the unissued or retained Shares shall
become available for future grant under the Plan. Other Shares that actually have been issued under
the Plan pursuant to an award shall not be returned to the Plan and shall not become available for
future grant under the Plan.

     5. ELIGIBILITY. A Non-Employee Director may receive awards under this Plan on the terms
and conditions set forth in Sections 6 and 7. No other person may benefit under this Plan.

     6. GENERAL TERMS AND CONDITIONS.

     (a) Automatic Grants. On and after the date of the annual meeting of the
Company’s stockholders to be held in 2006, and subject to adjustment under Section 6(b), a
Non-Employee Director will automatically receive five thousand (5,000) Restricted Stock Units on
the date first elected or appointed as a member of the Board and (ii) two thousand (2,000)
Restricted Stock Units on any date re-elected (or first elected after an appointment) as a member
of the Board by the Company’s stockholders. Any such grant will be subject to the terms and
conditions set forth in this Plan, and will be evidenced by written notice in such form as the
Administrator shall determine. Pursuant to Section 7, the form of award granted may be changed
from time to time by resolution of the Board of Directors

     (b) 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, 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 the Plan. If in connection with the change the Company
ceases to exist, the surviving or successor entity must either assume the Company’s rights and
obligations with respect to outstanding awards or substitute for outstanding awards substantially
equivalent awards for equity interests in the entity. If there is no surviving or successor entity,
a Non-Employee Director’s outstanding option shall become fully vested and exercisable as of the
date seven (7) calendar days before the change. Restricted Stock and Restricted

 

 

Stock Units shall vest upon consummation of the change. The exercise of any option that was
permissible solely by reason of the change shall be conditioned upon consummation of the change.
Options that are neither assumed, substituted nor exercised as of the time of the change shall
terminate and cease to be outstanding.

     (c) Amendment. The Administrator shall have the power to modify, extend, or renew an
outstanding award granted under this Plan, in a manner consistent with the terms of the Plan,
provided that any such action may not significantly impair the awardholder’s rights without his or
her consent. 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 the
prior approval of the shareholders.

     7. AWARDS.

     (a) Awards may take the form of Restricted Stock Units, Restricted Stock and/or Stock Options.
The form of award granted under the Plan may be changed from time to time by resolution of the
Board of Directors. Restricted Stock Units will be granted upon approval of this amended and
restated Plan.

     (b) Restricted Stock Units

	 	i)	 	Vesting. Restricted Stock Units shall vest over a period
of time to be established by the Administrator at the time of grant. Each award
of Restricted Stock Units may be subject to a different vesting schedule. At the
time of the grant, the Administrator may, in its sole discretion, prescribe
restrictions in addition to or other than the expiration of the vesting period,
including the satisfaction of corporate or individual performance objectives,
which may be applicable to all or any portion of the Restricted Stock Units.
	 
	 	ii)	 	Payment for Shares. At the time Shares are issued to the
Non-Employee Director pursuant to Restricted Stock Units, the Non-Employee
Director shall be required, to the extent required by applicable law, to
purchase such Shares from the Company at a purchase price equal to the aggregate
par value of the Shares represented by such Restricted Stock. The purchase
price, if any, shall be payable in cash or, in the discretion of the
Administrator, in consideration for past Services rendered to the Company or for
such other form of consideration determined by the Administrator.

 

 

	 	iii)	 	Withholding Taxes. The Company shall have the right to
deduct from the Shares issuable pursuant to Restricted Stock Units, or to
accept from the Non-Employee Director 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 the Restricted Stock Units or the
Shares acquired pursuant thereto. Alternatively or in addition, in its sole
discretion, the Company shall have the right to require Non-Employee Director,
through payroll withholding, cash payment or otherwise, to make adequate provision
for any such tax withholding obligations of the Company arising in connection with
the Restricted Stock Units or the Shares acquired pursuant thereto.
	 
	 	iv)	 	Termination of Service. Unless otherwise provided in an
Award Agreement or in writing after the Award Agreement is issued, upon the
termination of the Non-Employee Director’s Service, any Restricted Stock Units
held by such Non-Employee Director that have not vested, or with respect to
which all applicable restrictions and conditions have not lapsed, shall
immediately be deemed forfeited. Upon forfeiture of Restricted Stock Units, the
grantee shall have no further rights with respect to such award.
	 
	 	v)	 	Transferability. Restricted Stock Units granted under the
Plan are not transferable by the Non-Employee Director; provided, however, that
a restricted stock unit 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
Non-Employee Director’s beneficiaries upon the Non-Employee Director’s death or
by gift to his or her immediate family (consisting of the Non-Employee
Director’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, including adoptive relationships). Any other
purported transfer shall be null and void.
	 
	 	vi)	 	Rights of a Holder. A Non-Employee Director shall have no
rights as a shareholder with respect to the Shares covered by his or her
Restricted Stock Units 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. A holder of Restricted Stock Units shall have no rights other than those
of a general creditor of the Company. Restricted Stock Units shall represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the
applicable award agreement.

 

 

     (c) Restricted Stock

	 	i)	 	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.
	 
	 	ii)	 	Transferability 

	 	(1)	 	An unvested Share will not be transferable by the
Non-Employee Director 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:

	 	(a)	 	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
Non-Employee Directors’ 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.

	 	(2)	 	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).

	 	iii)	 	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.

 

 

     (d) Options

	 	i)	 	Options Are Not Qualified. Options granted under the Plan
are not incentive stock options described in Internal Revenue Code Section 422.
	 
	 	ii)	 	Transferability. Options granted under the Plan are not
transferable by the Non-Employee Director and shall be exercisable during the
Non-Employee Director’s lifetime only by the Non-Employee Director; 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 Non-Employee
Director’s beneficiaries upon the Non-Employee Director’s death or by gift to his
or her immediate family (consisting of the Non-Employee Director’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, including adoptive relationships). Except as provided in Section
7(d)(vi), no option or interest therein may be otherwise transferred, assigned,
pledged, or hypothecated by a Non-Employee Director, 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.
	 
	 	iii)	 	Exercise Price. The exercise price of an option shall be
not less than one hundred percent (100%) of the fair market value of a Share on
the date of grant. The fair market value of a Share as of any date means 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.
	 
	 	iv)	 	Vesting. An option shall be immediately and fully
exercisable (i.e., vested) on the date granted; provided, however, that the
option awarded on the date first elected or appointed as a member of the Board
shall instead (i) be immediately exercisable to the extent of one-third of the
Shares subject to the option upon grant, then another one-third of such Shares on
each of the next two anniversaries of the date granted, and (ii) become fully
exercisable upon a Change in Control while the optionee is a member of the Board,
as provided in Section 10. Notwithstanding clauses (i) and (ii)
of the preceding sentence, no additional vesting will occur after the date the
Non-Employee Director ceases to be a member of the Board.

 

 

	 	v)	 	Payment of Exercise Price. An option may be exercised in
whole or in part (to the extent exercisable) at any time and from time to time.
The purchase price of Shares purchased under an option will be paid in full to
the Company incident to the exercise of the option by delivery of consideration
equal to the product of the option price and the number of Shares purchased. Such
consideration may be paid (i) in cash, (ii) at the discretion of the
Administrator, in shares of Company common stock either already owned by the
Non-Employee Director, or (iii) any combination thereof. The fair market value of
such common stock as delivered shall be valued as of the day prior to delivery.
The Administrator can determine that additional forms of payment will be
permitted. To the extent permitted by the Administrator and applicable laws and
regulations (including, but not limited to, federal tax and securities laws,
regulations and state corporate law), an option may also be exercised in a
“cashless” exercise by delivery of a properly executed exercise notice together
with irrevocable instructions to a broker designated by the Administrator to
deliver promptly to the Company the amount of sale or loan proceeds to pay the
purchase price. A Non-Employee Director shall have none of the rights of a
stockholder until the Shares are issued.
	 
	 	vi)	 	Exercise After Death. In the event of the death of a
Non-Employee Director who holds an exercisable option under the Plan, the
Non-Employee Director’s option shall (subject to Section 9) be exercisable by the
legal representative or the estate of such decedent, by any person or persons
whom the decedent shall have designated in writing on forms prescribed by and
filed with the Company or, if no such designation has been made, by the person or
persons to whom the decedent’s rights have passed by will or the laws of descent
and distribution. To the extent permitted by applicable law and the rules
promulgated under Section 16(b) of the 1934 Act, the Administrator may permit a
Non-Employee Director to designate in writing during the Non-Employee Director’s
lifetime a beneficiary to receive and exercise stock options in the event of the
Non-Employee Director’s death.

     8. 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. A 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.

     9. TERMINATION OF OPTIONS. An option shall cease to be exercisable after the earlier of (i)
six (6) months after the date the Non-Employee Director ceases to be a member of the Board
(including by reason of death), (ii) the occurrence of a Change in Control and (iii) the
10th anniversary of the date of grant; provided, however, that in the case of a
Non-Employee Director who has served continuously as a member of the Board for at least five (5)
years, the period described in clause (i) shall be eighteen (18) months.

     10. CHANGE IN CONTROL. A Non-Employee Director’s outstanding
option shall become fully exercisable as of the date seven (7) calendar days before a Change in
Control. Restricted Stock and Restricted Stock Units shall vest upon consummation of the Change in
Control. The exercise of any option that was permissible solely by reason of a Change in Control
shall be conditioned upon consummation of the Change in Control. Options that are not exercised as
of the Change in Control shall terminate and cease to be outstanding. 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 Company immediately before the Transaction do not
retain immediately after the Transaction, in substantially the same proportions as their ownership
of shares of the Company’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 Company or the company or companies to which the assets of the Company were
transferred (the “Transferee Company(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 companies which, as a result of the Transaction,
own the Company or the Transferee Company(ies), as the case may be, either directly or through one
or more subsidiary companies. An Ownership Change Event means (i) the direct or indirect sale,
exchange or transfer of the voting stock of the Company, (ii) a merger or consolidation in which
the Company is a party, (iii) the sale, exchange or transfer of all or substantially all of the
assets of the Company, or (iv) a liquidation or dissolution of the Company. The Administrator 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. SECURITIES LAW COMPLIANCE. 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 of 1933 (“1933 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 Company, 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 1933 Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the
lawful issuance and sale of any shares hereunder shall relieve the Company 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. As a condition to the exercise of any option, the Company may require a
Non-Employee Director 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 Company.

     12. MISCELLANEOUS.

     (a) No Stockholders’ Rights. A Non-Employee Director shall have no
rights as a stockholder with respect to the Shares covered by his or her awards
until the date of the issuance to him or her of a stock certificate for the
Shares.

     (b)  No Right to Serve. Neither the Plan, nor the granting of an
award, nor any other action taken under the Plan, shall be evidence of any
agreement or understanding, express or implied, that a Non-Employee Director has
a right to continue as a member of the Board for any period of time or rate of
compensation.

     (c)  Claims. Any person who makes a claim for benefits under the
Plan or under any award 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 award 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.

 

 

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

     (e) Company Free to Act. An award grant shall not affect in any
way the right or power of the Company or its stockholders to make or authorize
any or all adjustments, recapitalizations, reorganizations, or other changes in
the Company’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 Company, or the
dissolution or liquidation of the Company, any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceedings of the
Company, whether of a similar character or otherwise.

     (f) Severability. If any provision of the Plan or award 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 award agreement and of that
provision shall remain in full force and effect as applied to other persons, places, and
circumstances.

     (g) Governing Law. This Plan and the award 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.

     (h)  Exchange Requirements. So long as Shares are listed on any
established stock exchange or traded on the NASDAQ National Market or the NASDAQ SmallCap Market,
the applicable requirements of any such exchange or market shall be hereby incorporated by
reference.

     (i) Compliance with Section 16. So long as any of the Company’s
equity securities are registered pursuant to Section 12(b) or 12(g) of the 1934 Act, with respect to awards granted to or held by Section 16 insiders, the Plan will comply in all
respects with Rule 16b-3 or any successor rule or rule of similar application under Section 16 of
the 1934 Act or rules thereunder, and, if any Plan provision is later found not to be in compliance
with such exemption under Section 16, that provision shall be deemed modified as necessary to meet
the requirements of such applicable exemption.

 

 

     13. EFFECTIVE DATE OF THE PLAN. The Plan will become effective
upon adoption by the Board, subject to approval by the Company’s stockholders.
The Plan shall terminate on the 10th anniversary of its adoption.

     14. AMENDMENT OF THE PLAN. With the approval of the Board, the
Administrator may suspend or discontinue the Plan or revise or amend it in any
respect whatsoever; provided, however, that without approval of the Company’s
stockholders no revision or amendment shall change the number of Shares issuable
under the Plan (except as provided in Section 6(b)), change the designation of
the class of individuals eligible to receive awards, or materially increase the
benefits accruing to Non-Employee Directors under the Plan.

     IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that this Plan was amended and restated by the Board on February 15, 2006, effective as of the same
date.

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