EXHIBIT 10.2

 

ALLIED MOTION TECHNOLOGIES INC.

DEFERRED COMPENSATION PLAN

As Amended and Restated Effective May 31, 2011

 

Allied Motion Technologies Inc., a Colorado corporation (the “Company”)
previously established the Allied Motion Technologies Inc. Deferred Compensation
Plan (the “Plan”), effective as of January 1, 2006.

 

Effective as of January 1, 2007, the Company amended and restated the Plan in
its entirety, with the provisions of the amended and restated Plan to apply to
all Plan Participants on and after January 1, 2007.

 

Effective May 31, 2011, the Company hereby amends and restates the Plan in its
entirety, and this amended and restated Plan will apply to all Plan Participants
on and after May 31, 2011.  This amended and restated Plan document is intended
to simplify and enhance the Plan by eliminating unnecessary sub-Accounts, adding
distribution alternatives for future contributions, and revising the default
distribution provisions for future contributions.  These changes have been made
in compliance with Section 409A of the Code, so that no change to any previously
elected or default form or timing of any payment results from this amended and
restated Plan.

 

The purposes of the Plan are (1) to provide certain key employees with the
opportunity to defer the receipt of certain compensation otherwise payable to
them, and (2) to permit eligible key employees to participate in the success of
the Company by providing them with the opportunity to earn additional,
performance based compensation.

 

1.                                  Definitions.

 

The following definitions shall apply for the purposes of the Plan:

 

1.01                           “Account” means the bookkeeping account
established for each Participant under this Plan for the purpose of recording
amounts credited on behalf of such Participant and any income, gains or losses
thereon, as further described in Section 7.

 

1.02                           “Appropriate Form” means a written or electronic
election or other form prescribed by the Board for use in connection with this
Plan.  The Board may modify, update or replace any Appropriate Form, on a
prospective basis, at any time, and the new or modified form shall take effect
with respect to each Participant as soon as it is furnished to such Participant.

 

1.03                           “Beneficiary” means a person or trust designated
in an Appropriate Form as being entitled to receive payment under this Plan on
account of the death of a Participant.  If no valid designation of a beneficiary
is made, a Participant’s Beneficiary shall be such Participant’s estate.

 

1.04                           “Board” or “Board of Directors” means the Board
of Directors of the Company or, where applicable, any Committee of the Board to
which authority with respect to any matter relating to this Plan is delegated.

 

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1.05                           “Bonus” means any bonus payable to a Participant
by the Employer under the Employee Incentive Bonus Plan, or any other bonus plan
for the benefit of one or more Participants that is approved by the Board.

 

1.06                           A “Change of Control”, for purposes of the Plan,
shall be defined in the manner set forth in Section 409A of the Code and the
Treasury Regulations thereunder.

 

1.07                           “Code” means the Internal Revenue Code of 1986,
as amended.

 

1.08                           “Deferral” means a portion of a Participant’s
Salary or Bonus which is deferred pursuant to Section 3.02 and credited to the
Participant’s Account in accordance with Section 3.03.

 

1.09                           “Deferral Election” means each Participant’s
written election to defer the receipt of Salary or Bonus in accordance with
Section 3.02.

 

1.10                           “Disabled” means suffering from any mental or
physical condition, other than use of alcohol or illegal use of drugs or
narcotics, which renders a Participant unable to perform substantially all of
the duties and services for the Company required of the Participant in a
satisfactory manner for 120 consecutive days, or 180 days during any 12-month
period.

 

1.11                           “Discretionary Contribution” means an unfunded
contribution for the benefit of a Participant, as described in Section 6.

 

1.12                           “Effective Date of the Plan” means the original
effective date of the Plan, which was January 1, 2006.  The Effective Date of
this amended and restated Plan is May 31, 2011.

 

1.13                           “Employer” means the Company or, where
applicable, a subsidiary of the Company which is the employer of a Participant.

 

1.14                           “Investment Funds” means those mutual funds that
are designated by the Board from time to time as the investments available to
measure adjustments to Accounts, as provided in Section 7.03.

 

1.15                           “Net Profit” means the after tax net income of
the Company for a Year, as stated in the Company’s certified financial
statements.

 

1.16                           “Net Profit Target” means a threshold amount of
Net Profit for a Year, designated by the Board as a Performance Criterion
pursuant to Section 4.01.

 

1.17                           “Participant” means an executive employee of the
Company or a subsidiary of the Company who is designated by the Board as a
participant in the Plan.  Effective on and after January 1, 2007, for purposes
of Section 3, Section 4 and Section 5 hereof, a “Participant” means a
Participant who has been designated by the Board as eligible to make the
contributions or receive the benefits described in such Section.

 

1.18                           “Performance Contribution” means an unfunded
contribution for the benefit of a Participant, as described in Section 4.

 

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1.19                           “Performance Criteria” means such Net Profit
Targets or other organizational criteria, the satisfaction of which is a
condition to the Participants’ earning Performance Contributions.

 

1.20                           “Plan” means the Plan set forth herein, as it may
be amended from time to time in accordance with Section 11.01.

 

1.21                           “Retirement” or “Retire” means any termination of
employment with the Company.

 

1.22                           “Salary” means the base salary payable to each
Participant by the Company.

 

1.23                           “Separation from Service” means, with respect to
a Participant, such Participant’s death, retirement or other termination of
employment with the Company.  For purposes of the Plan, such term will be
interpreted and applied in a manner consistent with Section 409A of the Code and
the Treasury regulations thereunder.

 

1.24                           “Term” means the period of time during which the
Plan is in effect, beginning on the Effective Date of the Plan and ending on the
effective date of the Plan’s termination pursuant to Section 11.01 or 11.02.

 

1.25                           “Year” means each calendar year during the Term
of this Plan.

 

2.                                  Participation.

 

2.01                           Commencement.  Participation in the Plan is
limited to those Executive employees of the Company or a subsidiary of the
Company that are (a) members of a select group of management and highly
compensated Employees, as determined by the Board, and (b) designated by the
Board.  An employee of the Company or a subsidiary of the Company will become a
Participant in the Plan upon being so designated by the Board, effective as of
such date as the Board shall designate (which may be prior to the date of such
designation).

 

2.02                           Scope of Participation.  In designating an
employee of the Company or a subsidiary of the Company as a Participant, the
Board shall designate the contributions or benefits under the Plan that the
Participant will be eligible to make or receive.  If the Board makes no special
designation with respect to an employee, such Participant will be eligible only
to make deferrals in accordance with Section 3 and shall not be eligible to
receive Performance Contributions pursuant to Section 4 or benefits upon a
change of control pursuant to Section 5.  As used in Section 3, Section 4 and
Section 5 hereof, a “Participant” means a Participant who has been designated by
the Board as eligible to make the contributions or receive the benefits
described in such Section.

 

2.03                           Termination of Participation.  Once designated as
a Participant, an individual will continue as a Participant until the earliest
of the following:

 

(a)                                  all benefits to which he is entitled under
the Plan have been distributed to him;

 

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(b)                                 the Participant ceases to meet the
eligibility requirements stated in Section 2.01; or

 

(c)                                  the Plan is terminated pursuant to
Section 11.01

 

3.                                  Deferrals.

 

3.01                           Deferral of Salary or Bonus.

 

(a)                                  Each Participant may elect to defer receipt
of up to 100 percent of the Salary and any Bonus otherwise payable to such
Participant for a given Year.

 

(b)                                 A Participant may defer an item of
compensation only to the extent that the Participant is entitled to receive such
item of compensation.  Upon electing such a Deferral, the Participant will have
no further right to such deferred compensation other than as provided under the
Plan.

 

3.02                           Deferral Election.

 

(a)                                  To elect to defer Salary or a Bonus, each
eligible Participant shall file a Deferral Election, on the Appropriate Form,
with the Secretary of the Company in accordance with this Section 3.02.

 

(b)                                 Except as provided in subsection (e), an
election to defer Salary for a Year shall be filed by December 31 of the Year
preceding the Year in which the election is to take effect.  The election shall
be effective with respect to Salary payable for all payroll periods ending in
the Year in which it is effective.  An election must specify a Deferral which is
a stated percentage of the Participant’s Salary for such Year.  Such Deferrals
will be distributed as provided in Section 8.

 

(c)                                  Except as provided in subsection (e), an
election to defer a Bonus shall be filed before the beginning of the Year during
which the performance on which the Bonus will be based is measured; provided,
however, that if such Bonus constitutes “performance based compensation”, within
the meaning of Section 409A(4)(B)(iii) of the Code and the Treasury Regulations
thereunder, and the other applicable requirements of such Regulations are met
with respect to such Bonus, such election to defer may be made up until six
months before the end of the Year during which the applicable Performance
criteria are measured.  Whether a Bonus constitutes “performance based
compensation” (as so defined) will be determined by the Board in its sole
discretion.  An election to defer a Bonus must specify a Deferral which is a
stated percentage of such Bonus.  Such Bonus Deferrals will be distributed as
provided in Section 8.

 

(d)                                 A Deferral Election that is made prior to
the due date for its filing, as herein provided, may be rescinded, and a new
election made, before such due date.  If not rescinded, an election to defer
shall become irrevocable at the expiration of the time for its filing.

 

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(e)                                  For the Year in which an employee first
becomes a Participant, such Participant may file a Deferral Election with
respect to Salary or Bonus paid for services performed after the date such
Deferral Election is filed, at any time thirty (30) days after such employee
first becomes a Participant.

 

3.03                           Credit to Account.  The Company shall credit any
Deferral to each Participant’s Account, as described in Section 7.01, as of the
date it would have otherwise been paid to each Participant.

 

3.04                           Vesting.  A Participant’s interest in his
Deferrals shall be fully vested at all times.

 

3.05                           Unforeseen Emergency.  Upon payment to a
Participant pursuant to Section 8.05 on account of an unforeseeable emergency,
any Deferral Election such Participant has in effect for the Year of the payment
shall automatically terminate.

 

4.                                  Performance Contributions.

 

4.01                           Basis of Performance Contributions; Performance
Criteria.

 

(a)                                  For each Year during the Performance
Contribution Term, the Company will credit Performance Contributions to the
Accounts of all eligible Participants for a Year if the Company achieves the
Performance Criteria for such Year, and the other terms of conditions of this
Plan are satisfied.

 

(b)                                 For the first Year of the Plan, the
Performance Criteria shall be:

 

(i)                                     A Net Profit Target, which shall be a
threshold amount of Net Profit, equal to a stated return on investment (“ROI”),
determined in the manner stated in Schedule 1 hereto; and

 

(ii)                                  A stated percentage of the excess of
(A) the Company’s Net Profit for the Year, over (B) the Net Profit Target for
such Year, determined in the manner stated in Schedule 1.

 

(c)                                  For each succeeding Year during the Term,
the Board shall designate the applicable Performance Criteria for the Year on or
before the ninetieth (90th) day of such Year, or as soon thereafter as is
practicable.

 

(d)                                 The “Performance Contribution Term” with
respect to any Participant means the period beginning on the Effective Date of
the Plan and ending on the earliest of:

 

(i)                                     December 31, 2020; or

 

(ii)                                  December 31st of the third calendar year
which begins after the date of such Participant’s Separation from Service; or

 

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(iii)                               the date on which such Participant is
terminated for “Cause”, within the meaning of such Participant’s Employment
Agreement with the Company or a subsidiary of the Company, or

 

(iv)                              the date on which the Participant directly or
indirectly: (A) (whether as director, officer, consultant, principal, employee,
agent or otherwise) engages in or contributes Participant’s knowledge and
abilities to any business or entity in competition with the Company or a
subsidiary of the Company; or (B) attempts in any manner to solicit from any
customer of the Company or a subsidiary business of the type performed by the
Company or a subsidiary or persuade any customer of the Company or a subsidiary
to cease doing business or reduce the amount of business that such customer has
customarily done with the Company or a subsidiary.

 

4.02                           Credit to Account.  The Company shall credit any
Performance Contributions to each eligible Participant’s Account, as described
in Section 7.01, as of the date on which the amount of such Performance
Contribution is determined by the Board.  Such Performance Contributions will be
distributed as provided in Section 8.

 

4.03                           Vesting.

 

(a)                                  A Participant’s interest in a Performance
Contribution made on his behalf for a Year shall become fully vested if he:

 

(i)                                     is employed by the Company or a
subsidiary of the Company on December 31 of such Year, or

 

(ii)                                  Retires, dies or becomes Disabled during
such Year.

 

(b)                                 If an eligible Participant Retires, dies or
become Disabled during the Year, the Performance Contribution shall nevertheless
be computed with respect to the entire Year, and the Participant shall be
entitled to receive the entire Performance Contribution for such Year.  In the
case of any other termination of employment prior to December 31 of such Year,
the entire Performance Contribution will be forfeited and the Participant shall
not have any right to such Performance Contribution.

 

5.                                  Benefits Upon a Change of Control.

 

5.01                           Calculation of Change of Control Benefit.

 

(a)                                  In the event of a Change of Control with
respect to the Company which occurs during the Performance Contribution Term, a
special benefit will be paid, at the time hereafter provided, to all eligible
Participants.  Such benefit will be equal to the sum of the following:

 

(i)                                     An amount equal to a pro rata portion of
the Performance Contribution that would have been paid to such Participant for
the Year in which

 

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the Change of Control occurs, based on the number of days in such Year which
precede the Change of Control; plus

 

(ii)                                  An amount determined by multiplying

 

(A)                              the average of the Performance Contributions
for the benefit of such Participant for the preceding three (3) years, or the
number of years since the Effective Date of the Plan, if less, by

 

(B)                                the lesser of (I) three (3), or (II) the
number of Years, or fractions thereof, remaining after the date of the Change of
Control until December 31, 2020.

 

(b)                                 For purposes of computing the portion of
special benefit described in clause (i), above:

 

(i)                                     Performance Criteria shall be measured
for the period ending on the last day of the month preceding the month that
includes the effective date of the Change of Control; and

 

(ii)                                  Extraordinary costs arising out of the
transactions that constitute the Change of Control shall be disregarded.

 

5.02                           Payment of Change of Control Benefit.  The Change
of Control benefit shall be determined by the Board prior to the effective date
of the Change of Control, and paid to each Participant in a lump sum during the
30 day period beginning on the date of the Change of Control.

 

6.                                  Discretionary Contributions.

 

6.01                           Designation of Eligible Participants.

 

(a)                                  The Board may, from time to time, allocate
additional Discretionary Contributions to one or more Participants, in such
amount(s) as the Board shall designate.

 

(b)                                 Such Discretionary Contributions will be
distributed as provided in Section 8.

 

6.02                           Credit to Account.  The Company shall credit any
Discretionary Contributions to each Participant’s Account as of the date on
which the Board makes the designations described in Section 6.01.

 

6.03                           Vesting.  A Participant’s interest in any
Discretionary Contributions made on his behalf shall be fully vested at all
times.

 

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7.                                  Participants’ Accounts.

 

7.01                           Establishment of Accounts and Sub-Accounts.

 

(a)                                  The Company shall establish an Account for
each Participant on the Company’s books to which deferrals and contributions
under this Plan shall be credited.

 

(b)                                 Effective May 31, 2011, all existing
Sub-Accounts under the Plan for each Participant shall be combined into one
Account, including the following Sub-Accounts established under the Plan prior
to May 31, 2011:  the Deferral Sub-Account, the Performance Contribution
Sub-Account, and the Discretionary Contribution Sub-Account for each
Participant.

 

7.02                           Performance Contributions Subject to Forfeiture. 
Until and except to the extent that Performance Contributions become vested in
accordance with Section 4.03, the interest of each Participant in his
Performance Contributions is contingent only and is subject to forfeiture as
provided in Section 4.03.

 

7.03                           Imputed Investment Experience.

 

(a)                                  Each Participant may designate one or more
Investment Funds in which stated portions of such Participant’s Account shall
hypothetically be invested, by completing the Appropriate Form and following
such procedures as the Board shall designate.  Each Participant may allocate his
Account among the different Investment Funds.  Furthermore, each Participant may
change his designation of Investment Funds once every month.  The Investment
Funds so designated are referred to herein as the “Designated Investment Funds”.

 

(b)                                 Each month during the period of a
Participant’s participation in the Plan, the Company shall adjust the balance
credited to each Participant’s Account to reflect the investment performance of
the Designated Investment Funds.

 

7.04                           Accounting.

 

(a)                                  The Company shall, on a periodic basis,
deliver to each Participant a written report of the adjusted value of the
Participant’s Account.  The report shall separately show all Deferrals and other
contributions with respect to the Account, all investment returns with respect
to each portion of the Account for which the Participant has made an investment
designation, and any payments to the Participant.

 

(b)                                 If the Company has engaged a trustee,
custodian, or brokerage firm to hold securities and other property acquired with
respect to the Account, an accounting or report by such trustee, custodian, or
brokerage firm shall be deemed to be the Company’s report for purposes of this
Plan, except to the extent the Company may inform the Participants otherwise.

 

8.                                  Distributions.

 

8.01                           Distribution of Contributions Made Prior to
May 31, 2011.  Except as provided in Section 8.04, a Participant’s entire
Account attributable to Deferrals, Performance

 

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Contributions, and Discretionary Contributions made to the Plan for Years ending
prior to May 31, 2011, shall be distributed in a lump sum within thirty (30)
days after the earliest of the following dates:

 

(a)                                  December 31, 2020;

 

(b)                                 The last day of the third calendar year
which begins after the Participant’s Separation from Service; or

 

(c)                                  The effective date of a Change of Control.

 

8.02                           Distributions of Contributions Made on or After
May 31, 2011.  Except as provided in Section 8.04, and unless the Participant
elects otherwise in accordance with Section 8.03, a Participant’s entire Account
attributable to Deferrals made to the Plan for 2012 and future years, to
Performance Contributions made to the Plan for 2011 (to the extent such
Performance Contributions constitute performance based compensation under
Section 409A of the Code) and future years, and to Discretionary Contributions
approved for contribution to the Plan on or after May 31, 2011, shall be
distributed in a lump sum within thirty (30) days after the earliest of the
following dates:

 

(a)                                  December 31, 2020;

 

(b)                                 The first business day of the calendar year
immediately following the calendar year in which occurs the Participant’s
Separation from Service; or

 

(c)                                  The effective date of a Change of Control.

 

8.03                           Election of Time and Form of Payment.

 

(a)                                  Except as may be otherwise provided by the
Board, and subject to Section 8.01 above, each Participant may designate the
time and form of payment of his entire Account, or a portion of his Account
attributable to Deferrals, Performance Contributions, or Discretionary
Contributions as provided below.

 

(b)                                 To be effective with respect to any
Discretionary Contribution, Performance Contribution or Deferrals with respect
to any Year:

 

(i)                                     An election with respect to a Deferral
must be made before the expiration of the time for filing the Participant’s
Deferral Election, as provided in Section 3.02.

 

(ii)                                  An election with respect to a Performance
Contribution must be made before the beginning of the Year for which such
Performance Contribution is earned; provided, however, that if such Performance
Contribution constitutes “performance based compensation”, within the meaning of
Section 409A(4)(B)(iii) of the Code and the Treasury Regulations thereunder, an
election under this Section 8.03 with respect to such Performance Contribution
may be

 

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made after the beginning of the Year for which such Performance Contribution is
earned, as long as it is made at least six months before the end of such Year.

 

(iii)                               With respect to any Discretionary
Contribution, unless the Board determines otherwise in compliance with
Section 409A of the Code, the Participant’s existing elections with respect to
his Deferrals under the Plan for a Year shall also apply to any Discretionary
Contribution made for such Year.

 

(c)                                  The optional methods are as follows:

 

(i)                                     One lump sum payment on such date as is
designated in the Participant’s election;

 

(ii)                                  Monthly installments over a period of up
to ten (10) years, beginning on such date as is designated in the Participant’s
election, subject to the provisions of Section 8.04.

 

8.04                           Changes to Payment Method.  A Participant’s
election to revoke the default payment method of Sections 8.01 and 8.02, and to
elect another payment method under Section 8.03, or to change the payment method
elected under Section 8.03, shall be subject to the following restrictions:

 

(a)                                  The election to revoke or change shall not
take effect until twelve (12) months after the date it is made.

 

(b)                                 Except in the case of an election under
Section 8.06 (unforeseeable emergency), the election to revoke or change may not
provide for payment sooner than five (5) years from the date payment would
otherwise have been made or begun.

 

(c)                                  An election to revoke or change with
respect to payments scheduled to be made or to begin at a time specified by each
Participant may not be made less than 12 months before the time originally
specified for payment to be made or begin.

 

8.05                           Payment on Death.

 

(a)                                  Upon a Participant’s death, the Company
shall pay the balance of the Account to each Participant’s Beneficiary, within
thirty (30) days after the date of his death.

 

(b)                                 Each Participant may designate one or more
primary and contingent Beneficiaries to receive any amounts payable under this
Plan on his death.  The designation of Beneficiary shall be in writing, shall be
made on the Appropriate Form, shall not be effective unless filed with the
Secretary of the Company before the Participant’s death, and may be changed or
revoked at any time without notice to any beneficiary by the Participant’s
filing of a subsequent designation with the Secretary of the Company.  If a
Participant designates more than one Beneficiary, each shall share equally
unless such Participant specifies a different allocation or preference.  If any
Participant fails to designate a Beneficiary, or should no designated
Beneficiary survive

 

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him or be in existence after the Participant’s death, the Beneficiary of the
Participant’s Account shall be such Participant’s estate.

 

(c)                                  If a Beneficiary (who is a natural person)
entitled to payment should die after a Participant’s death but before receiving
payment of the entire amount payable to him, the balance of any amounts payable
shall be paid when due to the surviving Beneficiary or Beneficiaries designated
by such Participant in accordance with such Participant’s designation.  If there
should be no designated Beneficiaries surviving or in existence on the date of
such Beneficiary’s death, the balance of such payments shall be paid when due to
the executor or administrator of the last Beneficiary to die.

 

8.06                           Unforeseeable Emergency.

 

(a)                                  A Participant or his Beneficiary may, in
the case of an unforeseeable emergency (as defined in subsection (b)), elect and
shall be entitled to payment of an amount credited to such Participant’s Account
subject to the following conditions:

 

(i)                                     The amount payable shall not exceed the
amount reasonably necessary to satisfy the emergency need (which may include
amounts necessary to pay any Federal, State, or local income taxes or penalties
reasonably anticipated to result from the payment), taking into account the
termination of any Deferral Elections pursuant to Section 3.05.

 

(ii)                                  The Company shall not pay any amount on
account of an unforeseeable emergency to the extent the emergency is or may be
relieved through reimbursement or compensation from insurance or otherwise; or
by liquidation of each Participant’s or the beneficiary’s assets, to the extent
the liquidation of such assets would not cause severe financial hardship; or by
cessation of Deferrals under this Plan.

 

(b)                                 For purposes of this Plan, “unforeseeable
emergency” means a severe financial hardship of each Participant or his
beneficiary resulting from an illness or accident of each Participant or
beneficiary or each Participant or beneficiary’s spouse or dependent (as defined
in section 152(a) of the Code); loss of each Participant’s or beneficiary’s
property due to casualty; or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of each
Participant or beneficiary.  The Company shall, in its discretion, determine
whether each Participant or beneficiary is faced with an unforeseeable emergency
permitting a distribution under this Section 8.05.  In doing so, the Company
shall refer to the definition of “unforeseeable emergency” set forth in Treasury
Regulations under Section 409A of the Code, and shall base its determination on
such definition and the relevant facts and circumstances of each case.

 

8.07                           Payments to Certain Employees.  In no event shall
any payment under the Plan on account of a Participant’s separation from service
be made to a Participant who is a specified employee (as defined in Section 409A
of the Code) as of the date of separation from service,

 

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before the date that is six months after the date of separation from service or,
if earlier than the end of the six-month period, the date of death of such
Participant.

 

8.08                           Taxes.  Payments under this Plan shall be subject
to any applicable tax withholding as required under Federal, State, and local
law.

 

9.                                  Source of Payments

 

9.01                           Unsecured Creditor.  Nothing contained in this
Plan shall create a trust or create a fiduciary relationship of any kind between
the Company and each Participant.  To the extent that any person acquires a
right to receive payments from the Company under this Plan, such right shall be
no greater than the right of any unsecured general creditor of the Company.

 

9.02                           Unfunded.  The Company and each Participant
acknowledge it is their intent and they agree that for purposes of Title I of
the Employee Retirement Income Security Act of 1974, as amended, and for
purposes of the Code, and for all other purposes, this Plan constitutes an
unfunded arrangement maintained for the purpose of providing deferred
compensation for an individual who is a member of a select group of management
or highly compensated employees.

 

9.03                           Company Obligation to Establish Trust.

 

(a)                                  Notwithstanding the foregoing provisions of
this Section 9, but subject to the provisions of subsection (c), below, upon the
occurrence of any event described in subsection (b), the Company shall, as soon
as practicable, but in any case within sixty (60) days after notice of such
event is delivered to the Company by any Participant as provided herein:

 

(i)                                     establish an irrevocable “rabbi trust”,
within the meaning of IRS Revenue Procedure 92-64, or any comparable provision
of law then in effect, under this Plan, which trust shall include a separate
account for each Participant; and

 

(ii)                                  contribute to such trust such principal
amount, in cash, as shall be to sufficient to fully fund all benefits of all
Participants under the Plan which have theretofore accrued.

 

Thereafter, each Year the Company shall (A) contribute to such trust such
additional amounts as shall be required such that, after such contribution, the
assets in the trust shall be sufficient to fully fund all benefits under the
Plan which have theretofore accrued, and (B) cause the trustee to deliver
periodic reports to all Participants (not less frequently than annually) with
respect to the assets, gains and losses of the Participant’s account under the
trust.

 

(b)                                 The events referred to in subsection (a) are
as follows:

 

(i)                                     A “Change of Control” with respect to
the Company; or

 

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(ii)                                  Any Participant’s delivery of a written
notice to the Company requesting that the Company establish a rabbi trust as
provided herein.

 

(c)                                  Notwithstanding the foregoing provisions of
this Section 9.03, in no event shall the Company be required to establish a
rabbi trust:

 

(i)                                     during any “restricted period” with
respect to any defined benefit pension plan of the Company or an affiliate, to
the extent prohibited by Section 409A(B)(3) of the Code; or

 

(ii)                                  if the establishment of such trust would
violate Section 409A(B)(2) of the Code, relating to a change in the employer’s
financial health.

 

10.                           Prohibition Against Assignment.

 

10.01                     No Assignment.  Except to the extent required by law,
the right of each Participant or any beneficiary to payment of each
Participant’s interest in his Account shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of each Participant or beneficiary.

 

11.                           Amendment and Termination.

 

11.01                     Action by Company.  The Company may amend or terminate
this Plan at any time by resolution of the Board of Directors, but no such
amendment or termination shall adversely affect each Participant’s rights with
respect to the amounts previously credited to his Account.

 

11.02                     Liquidation.  This Plan shall terminate automatically
upon the liquidation or dissolution of the Company.  Subject to Section 10.03,
payment of each Participant’s Account shall be made to him or, if each
Participant is deceased, his beneficiary, in a lump sum as soon as practicable
following such liquidation or dissolution.

 

11.03                     Conformance to Section 409A.  Notwithstanding any
contrary provision of this Section 11 or Section 8:

 

(a)                                  If the termination of a Participant’s
employment with the Company does not qualify as a separation from service, as
that term is used under Section 409A of the Code, and such Participant is not
disabled, as that term is defined under Section 409A of the Code, then payment
under Section 8.01 or 8.02 shall not be made or begin before the relevant time
has elapsed after each Participant’s separation from service with the Company.

 

(b)                                 The time or schedule of any payment under
this Plan may not be accelerated except as otherwise provided in this Plan and
then only to the extent such acceleration would not cause this Plan to fail to
meet the requirements of section 409A of the Internal Revenue Code.

 

11.04                     Intent To Defer Tax  The Company and each Participant
intend that this Plan meet the requirements of Section 409A of the Code for the
deferral (until payment) of the income

 

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taxation of the compensation deferrable under this Plan, and this Plan shall be
construed accordingly.  To the extent this Plan is more restrictive than
necessary to meet the requirements of Section 409A of the Code, the Company
reserves the right to amend this Plan, provided such amendment would not cause
the Plan to fail to meet those requirements.

 

12.                           Miscellaneous.

 

12.01                     No Contract of Employment.  Nothing contained in this
Plan shall be deemed to create a contract of continuing employment between the
Company and each Participant.

 

12.02                     Administration.  The Board shall administer this Plan
in accordance with the Plan’s terms and shall have full power and authority
necessary or appropriate for carrying out its duties.  The Board shall have the
full power to establish any rules and procedures it finds appropriate for the
administration of this Plan.  The Board may correct any defect or reconcile any
inconsistency in the Plan to the extent the Board finds it necessary to carry
out the purposes of the Plan.  The Board shall have full power and authority to
interpret the Plan and to decide all matters arising in connection with the
administration of the Plan.  In exercising its power and authority, the Board
shall have complete discretion and its determinations shall be final.

 

12.03                     Participant Responsible for Investment Designations. 
Neither the Company nor the Board shall have any duty to question any investment
designations of a Participant or to make recommendations to any Participant with
respect to investment designations.  Neither the Company nor the Board shall be
liable for any reduction in the amount credited to a Participant’s Account that
is the result of each Participant’s investment designations or a failure of each
Participant to make or change an investment designation.

 

Notwithstanding any other provision of this Plan, a Participant’s investment
designation shall not be given effect if the Board in its discretion determines
that such an investment would be unlawful or impracticable if actually made by
the Company.

 

12.04                     Investment Designations upon Death, Incapacity, or
Disability.  The provisions of this Section 12.04 shall apply notwithstanding
any contrary provisions of the Plan.

 

(a)                                  Upon a Participant’s death, such
Participant’s Beneficiary or Beneficiaries to the extent of their interests, or,
if each Participant fails to designate a Beneficiary or no Beneficiary survives
him, the executor or administrator of each Participant’s estate, shall succeed
to each Participant’s right to make investment designations with respect to the
Account, and all references to each Participant in Section 7.03 and
Section 12.03 shall be interpreted as references to the Beneficiary,
Beneficiaries, executor, or administrator, as appropriate.

 

(b)                                 If, in the Board’s opinion, each Participant
or a Beneficiary entitled to make investment designations under this Plan is
under a legal disability or incapacitated in any way so as to be unable to
manage his financial affairs, and if the Board determines that a legal
representative of each Participant or his beneficiary is authorized to make such
designations on behalf of each Participant or his Beneficiary, then such legal
representative shall be considered the each Participant or beneficiary for all
purposes of Section 7.03 and Section 12.03.

 

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(c)                                  If, in the situation described in paragraph
(b) (involving each Participant’s legal disability or incapacity), the Board
determines that no legal representative is authorized to make such designations
on behalf of each Participant or his beneficiary, then neither the Board nor the
Company shall be under any obligation to take any action with respect to the
investment designations in effect with respect to the Account.  However, in such
a situation, the Board may, from time to time, in its discretion, make
investment designations on each Participant’s behalf, but only from among
Investment Funds substantially all of the assets of which are certificates of
deposit or interest bearing accounts in banks, savings banks, or savings and
loan associations; obligations of the United States government and obligations
guaranteed as to principal and interest by the United States government;
obligations of a state, a territory, or a possession of the United States, or of
any political subdivision of any of the foregoing, or of the District of
Columbia; and cash deposit accounts.  Neither the Board, the Company, nor any
trustee shall be liable to each Participant, his beneficiary, or his estate for
taking no action with respect to investment designations in effect with respect
to the Account or for taking the action described in the preceding sentence.

 

12.05                     Waivers.  No provision of this Plan (as it may be
amended from time to time pursuant to Section 11/01) may be modified, waived, or
discharged except by an instrument in writing executed by an authorized officer
of the Company.  A waiver by either party of any breach of, or compliance with,
any condition or provision of this Plan shall not be deemed a waiver of similar
or dissimilar provisions or conditions at the same or any prior or subsequent
time.  No agreements or representations, oral or otherwise, with respect to the
subject matter of this Plan have been made by either party that are not
expressly set forth in this Plan.

 

12.06                     Construction.  The validity, interpretation,
construction, and performance of this Plan shall be governed by the internal
laws of the State of Colorado, without regard to the principles of conflicts of
law.

 

12.07                     Enforceability.  The invalidity or unenforceability of
any provision of this Plan shall not affect the validity of any other provision
of this Plan, which shall remain in full force and effect.

 

12.08                     Successors.  This Plan shall be binding on and inure
to the benefit of the Company, its successors and assigns, each Participant, and
each Participant’s heirs, executors, administrators, and legal representatives.

 

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12.09                     Notices.  All notices and other communications
required or permitted to be given under the Plan shall be in writing and shall
be deemed to have been duly given if (1) delivered personally, (2) sent by
next-day or overnight mail or delivery, or (3) sent by fax, as follows:

 

(a)                                  If to the Company to:

 

Allied Motion Technologies Inc.

Suite 150

23 Inverness Way East

Englewood, CO 80112

Fax:  (303) 799-8521

Attention:  Secretary

 

(b)                                 If to any Participant, to the address or fax
number of such Participant most recently provided to the Company by the
Participant.

 

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Schedule 1

Determination of Performance Criteria

 

For 2006, the Performance Contribution will be based on a Net Profit Target
equivalent to an 8% return on investment, with the investment used for such
determination being shareholders’ equity at the beginning of the year adjusted
for the issuance of any Company stock during the year.

 

If the Company’s net profit for 2006 exceeds this Net Profit Target amount, 25%
of the excess shall be allocated evenly to Richard D. Smith and Richard S.
Warzala.

 

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