**Exhibit 10.18**

**DEFERRED COMPENSATION PLAN**

Allied MotionTechnologies Inc., a Colorado corporation (the “Company”) hereby establishesthe Allied Motion Technologies Inc***.***DeferredCompensation Plan******(the “Plan”), effective asof January 1, 2006.

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

**1.             Definitions.**

The following definitionsshall apply for the purposes of the Plan:

1.01         “Account” means the bookkeeping accountestablished for each Participant under this Plan, as further described in Section7.

1.02         “Appropriate Form” means a written orelectronic election or other form prescribed by the Board for use in connectionwith 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 Participantas soon as it is furnished to such Participant.

1.03         “Beneficiary” means a person or trust entitledto receive payment under this Plan on account of the death of a Participant.

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

1.05         “Bonus” means any bonus payable to a Participantby the Company under the Employee Incentive Bonus Plan, or any other bonus planfor the benefit of the Participants that is approved by the Board.

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

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

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

1.09         “Deferral Election” means eachParticipant’s written election to defer the receipt of Salary or Bonus inaccordance with Section 3.02.

 

----

 

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

1.11         “Discretionary Contribution” means anunfunded contribution for the benefit of a Participant, as described in Section6.

1.12         “Effective Date of the Plan” means January1, 2006.

1.13         “Investment Funds” means those mutualfunds, available through Fidelity Investments, that are designated by the Boardfrom time to time as the investments available to measure adjustments toAccounts, as provided in Section 7.03.

1.14         “Net Profit” means the after tax netincome of the Company for a Year, as stated in the Company’s certifiedfinancial statements.

1.15         “Net Profit Target” means a thresholdamount of Net Profit for a Year, designated by the Board as a PerformanceCriterion pursuant to Section 4.01.

1.16         “Participant” means an executiveemployee of the Company who is designated by the Board as a participant in thePlan.

1.17         “Performance Contribution” means anunfunded contribution for the benefit of a Participant, as described inSection 4.

1.18         “Performance Contribution Term” withrespect to any Participant means the period beginning on the Effective Date andending on the earlier of:

(a)           December 31, 2020;or

(b)           December 31st of thethird calendar year which begins after the date of such Participant’s Separationfrom Service; or

(c)           The date on which suchParticipant

(i)            is terminated for “Cause”,within the meaning of such Participant’s Employment Agreement with the Company,or

(ii)           the date on whichthe Participant directly or indirectly: (A) (whether as director, officer,consultant, principal, employee, agent or otherwise) engages in or contributesParticipant’s knowledge and abilities to any business or entity in competitionwith the Company; or (B) attempts in any manner to solicit from anycustomer of the Company business of the type performed by the Company orpersuade any customer of the Company to cease doing business or reduce theamount of business that such customer has customarily done with the Company.

 

2

----

 

1.19         “Performance Criteria” means such NetProfit Targets or other organizational criteria, the satisfaction of which is acondition 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 anytermination of employment with the Company on or after the Effective Date ofthe Plan.

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

1.23         “Separation from Service” means, withrespect to a Participant, such Participant’s death, retirement or othertermination of employment with the Company. For purposes of the Plan, such term will be interpreted and applied in amanner consistent with Section 409A of the Code and the Treasuryregulations thereunder.

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

1.25         “Year” means each calendar year duringthe Term of this Plan

**2.             Participation.**

2.01         Commencement.  An employee of the Company will become aParticipant in the Plan upon being so designated by the Board, effective as ofsuch date as the Board shall designate (which may be prior to the date of suchdesignation).  As of the Effective Dateof the Plan, the only two Participants are Richard D. Smith and Richard S. Warzala.

2.02         Termination of Participation.  Once designated as a Participant, anindividual will continue as a Participant until all benefits to which he isentitled under the Plan have been distributed to him.

**3.             Deferrals.**

3.01         Deferral of Salary or Bonus.

(a)           Each Participant mayelect to defer receipt of up to 100 percent of the Salary and any Bonusotherwise payable to such Participant for a given Year.

(b)           A Participant maydefer an item of compensation only to the extent that the Participant isentitled to receive such item of compensation. Upon electing such a Deferral, the Participant will have no furtherright to such deferred compensation other than as provided under the Plan.

 

3

----

 

3.02         Deferral Election.

(a)           To elect to defer Salary or a Bonus, eachParticipant shall file a Deferral Election, on the Appropriate Form, with the Secretaryof the Company in accordance with this Section 3.02.

(b)           Except as providedin subsection (e), an election to defer Salary for a Year shall be filed byDecember 31 of the Year preceding the Year in which the election is to takeeffect.  The election shall be effectivewith respect to Salary payable for all payroll periods ending in the Year inwhich it is effective.

(c)           Except as providedin subsection (e), an election to defer a Bonus shall be filed before thebeginning of the Year during which the performance, on which the Bonus will bebased, is measured; provided, however, that if the Board determines that suchBonus constitutes “performance based compensation”, within the meaning ofSection 409A(4)(B)(iii) of the Code and the Treasury Regulations thereunder,and that the other applicable requirements of such Regulations are met withrespect to such Bonus, such election to defer may be made up until six monthsbefore the end of the Year during which the applicable Performance criteria aremeasured.

(d)           A Deferral Electionthat is made prior to the due date for its filing, as herein provided, may berescinded, and a new election made, before such due date.  If not rescinded, an election to defer shallbecome irrevocable at the expiration of the time for its filing, except asprovided in Section 3.05 (unforeseen emergency).

(e)           For the Year inwhich an employee first becomes a Participant, such Participant may file aDeferral Election with respect to Salary or Bonus paid for services performedafter 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 a “DeferralSub-Account” of each Participant’s Account, as described in Section 7.01, as of the date it would have otherwisebeen paid to each Participant.

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

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

**4.             PerformanceContributions.**

4.01         Basis of Performance Contributions;Performance Criteria.  

(a)           For eachYear during the Performance Contribution Term, the Company will creditPerformance Contributions to the Accounts of Participants for a Year if the 

 

4

----

 

Company achieves thePerformance Criteria for such Year, and the other terms of conditions of thisPlan are satisfied.

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

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

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

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

4.02         Credit to Account.  The Company shall credit any PerformanceContributions to a “Performance Contribution Sub-Account” of each Participant’sAccount, as described in Section 7.01, as of the date on which the amount of such Performance Contribution isdetermined by the Board.

4.03         Vesting.

(a)           A Participant’sinterest in a Performance Contribution made on his behalf for a Year shallbecome fully vested if he

(i)            is employed by theCompany on December 31 of such Year, or

(ii)           Retires, dies orbecomes Disabled during such Year.

(b)           If a ParticipantRetires, dies or become Disabled during the Year, the Performance Contributionshall nevertheless be computed with respect to the entire Year, and theParticipant shall be entitled to receive the entire Performance Contributionfor such Year.

**5.             BenefitsUpon a Change of Control.**

5.01         Calculation of Change of ControlBenefit.  

(a)           In the event of aChange of Control with respect to the Company which occurs during thePerformance Contribution Term,  a specialbenefit will be paid, at the time hereafter provided, to all Participants.  Such benefit will be equal to the sum of thefollowing:

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

 

5

----

 

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

(ii)           An amountdetermined by multiplying

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

(B)                                thelesser 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 ofcomputing the portion of special benefit described in clause (i), above:

(A)                              PerformanceCriteria shall be measured for the period ending on the last day of the monthpreceding the month that includes the effective date of the Change of Control;and

(B)                                Extraordinarycosts arising out of the transactions that constitute the Change of Controlshall be disregarded.

5.02         Payment of Change of Control Benefit.  The Change of Control Benefit shall be determinedby the Board prior to the effective date of the Change of Control, and paid toeach Participant on the date of the Change of Control, or as soon thereafter asis reasonably practicable, but in any case within the time prescribed inSection 8.

**6.             Discretionary Contributions.**

6.01         Designation of Eligible Participantsand Other Matters.

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

(b)           No later than thedate on which the Board designates the Participant(s) who shall receive such DiscretionaryContributions, and the amount thereof, it shall also designate when and howsuch amounts shall be distributed to the eligible Participants, from among theoptions stated in Section 8.02.

6.02         Credit to Account.  The Company shall credit any Discretionary Contributionsto a “Discretionary Contribution Sub-Account” in each Participant’s Account asof the date on which the Board makes the designations described in Section 6.01.

 

6

----

 

6.03         Vesting.  A Participant’s interest in his DiscretionarySub-Account shall be fully vested at all times.

**7.             Participants’Accounts.**

7.01         Establishment of Accounts andSub-Accounts.  

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

(b)           Deferrals pursuantto Section 3, and any adjustments thereto pursuant to Section 7.03, shallbe credited to a Deferral Sub-Account within the Account of the Participantwho makes such Deferral.  PerformanceContributions on behalf of a Participant pursuant to Section 4, andany adjustments thereto pursuant to Section 7.03, shall be credited to aPerformance Contribution Sub-Account within the Account of suchParticipant.  Discretionary Contributionson behalf of a Participant pursuant to Section 6 and any adjustments theretopursuant to Section 7.03, shall be credited to a Discretionary ContributionSub-Account within the Account of such Participant.

7.02         Performance Contributions Subject toForfeiture.

(a)           Until and except to the extent that PerformanceContributions become vested in accordance with Section 4.03, the interest ofeach Participant in his Performance Contribution Sub-Account is contingent onlyand is subject to forfeiture as provided in Section 4.03.  

7.03         Imputed Investment Experience.  

(a)           Each Participant maydesignate one or more Investment Funds in which stated portions of suchParticipant’s Account shall hypothetically be invested, by completing theAppropriate Form and following such procedures as the Board shall designate.  Each Participant may allocate his Account orany Sub-Account among different Investment Funds in increments of 10%.  Furthermore, each Participant may change hisdesignation of Investment Funds once every month.  The Investment Funds so designated arereferred to herein as the “Designated Investment Funds”.  

(b)           Each month duringthe period of a Participant’s participation in the Plan, *** ***the Company shall adjust thebalance credited to each Participant’s Account to reflect the investmentperformance of the Designated Investment Funds.

7.04         Accounting.  

(a)           The Company shall,on a periodic basis, deliver to each Participant a written report of theadjusted value of the Participant’s Account. The report shall separately show all Deferrals and other contributions withrespect to the Account, all 

 

7

----

 

investment returnswith respect to each portion of the Account for which the Participant has madean investment designation, and any payments to the Participant.

(b)           If the Company hasengaged a trustee, custodian, or brokerage firm to hold securities and otherproperty 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 forpurposes of this Plan, except to the extent the Company may inform theParticipants otherwise.

**8.             Distributions.**

8.01         Default Rule.  ’Except as provided in Section 8.04, aParticipant’s Discretionary Sub-Account and, unless the Participant electsotherwise in accordance with Section 8.02, a Participant’s Deferral Sub-Accountand Performance Contribution Sub-Account shall be distributed in a lump sumwithin thirty (30) days after the earliest of the following dates:

(a)           The end of thePerformance Contribution Term; or 

(b)           The effective dateof a Change of Control.

8.02         Election of Time and Form of Payment.  

(a)           Each Participant mayelect to have payment of his Deferral Sub-Account or Performance ContributionSub-Account made to him in one of the methods described in this Section 8.02instead of in the method described in Section 8.01, subject to the requirementsstated in subsection (b) and in Section 8.03. 

(b)           To be effective withrespect to any contribution or Deferrals with respect to any Year:

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

(ii)           An election withrespect to a Performance Contribution must be made at least six months beforethe end of the Year during which the applicable Performance Criteria aremeasured.

(c)           The optional methodsare as follows:

(i)            Monthly installments over a periodof three (3) years, beginning on such date as is designated in the Participant’selection, subject to the provisions of Section 8.03***.***

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

 

8

----

 

(a)           The election torevoke or change shall not take effect until twelve (12) months after thedate it is made.

(b)           Except in the caseof an election under Section 8.05 (unforeseeable emergency), the election torevoke or change may not provide for payment sooner than five (5) yearsfrom the date payment would otherwise have been made or begun.

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

(d)           For the purposes ofthis Section 8.03, a series of installment payments shall be considered asingle payment.

8.04         Payment on Death.

(a)           Upon a Participant’sdeath before the termination of his employment with the Company, the Companyshall pay the balance of the Account to each Participant’s Beneficiary orestate, within thirty (30) days after the date of his death.

(b)           Upon a Participant’sdeath after the termination of his employment with the Company, the Companyshall pay any balance of the Account to such Participant’s Beneficiary orestate, as provided in subsection (c), in the method in effect under Section 8.01or 8.02, as applicable.

(c)           Each Participant maydesignate one or more primary and contingent Beneficiaries to receive anyamounts payable under this Plan on his death. The designation of Beneficiary shall be in writing, shall be made on theAppropriate Form, shall not be effective unless filed with the Secretary of theCompany before the Participant’s death, and may be changed or revoked at anytime without notice to any beneficiary by the Participant’s filing of asubsequent designation with the Secretary of the Company.  If a Participant designates more than one Beneficiary,each shall share equally unless such Participant specifies a differentallocation or preference.  If any Participantfails to designate a Beneficiary, or should no designated Beneficiary survivehim or be in existence after the Participant’s death, payment shall be made to suchParticipant’s estate.

(d)           If a Beneficiary (whois a natural person) entitled to payment should die after a Participant’s deathbut before receiving payment of the entire amount payable to him, the balanceof any amounts payable shall be paid when due to the surviving Beneficiary or Beneficiariesdesignated by such Participant in accordance with such Participant’s designation.  If there should be no designated Beneficiariessurviving or in existence on the date of such Beneficiary’s death, the balanceof such payments shall be paid when due to the executor or administrator of thelast Beneficiary to die.

 

9

----

 

8.05         Unforeseeable Emergency.

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

(b)           The amount payable shallnot exceed the amount reasonably necessary to satisfy the emergency need (whichmay include amounts necessary to pay any Federal, State, or local income taxesor penalties reasonably anticipated to result from the payment), taking intoaccount the termination of any Deferral Elections pursuant to Section 3.05.

(c)           The Company shallnot pay any amount on account of an unforeseeable emergency to the extent theemergency is or may be relieved through reimbursement or compensation frominsurance or otherwise; or by liquidation of each Participant’s or the beneficiary’sassets, to the extent the liquidation of such assets would not cause severefinancial hardship; or by cessation of Deferrals under this Plan.

(d)           For purposes of thisPlan, “unforeseeable emergency” means a severe financial hardship of eachParticipant or his beneficiary resulting from an illness or accident of eachParticipant or beneficiary or each Participant or beneficiary’s spouse ordependent (as defined in section 152(a) of the Code); loss of each Participant’sor beneficiary’s property due to casualty; or other similar extraordinary andunforeseeable circumstances arising as a result of events beyond the control ofeach Participant or beneficiary.  TheCompany shall, in its discretion, determine whether each Participant orbeneficiary is faced with an unforeseeable emergency permitting a distributionunder this Section 8.05.  In doing so,the Company shall refer to the definition of “unforeseeable emergency” setforth in Treasury Regulations under Section 409A of the Code, and shall baseits determination on such definition and the relevant facts and circumstancesof each case.

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

**9.             Source ofPayments**

9.01         Unsecured Creditor.  Nothing contained in this Plan shall create atrust or create a fiduciary relationship of any kind between the Company and eachParticipant.  To the extent that anyperson 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 creditorof the Company.

9.02         Unfunded.  The Company and each Participant acknowledgeit is their intent and they agree that for purposes of Title I of the EmployeeRetirement Income Security Act of 1974, as amended, and for purposes of theCode, and for all other purposes, this Plan constitutes an unfunded arrangementmaintained for the purpose of providing deferred compensation for an individualwho is a member of a select group of management or highly compensatedemployees.

 

10

----

 

**10.          ProhibitionAgainst Assignment.**

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

**11.          Amendmentand Termination.**

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

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

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

(a)           If the terminationof a Participant’s employment with the Company does not qualify as a separationfrom service, as that term is used under Section 409A of the Code, and such Participantis 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 therelevant time has elapsed after each Participant’s separation from service withthe Company.

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

11.04       Intent To Defer Tax  The Company and each Participant intend thatthis Plan meet the requirements of Section 409A of the Code for the deferral(until payment) of the income taxation of the compensation deferrable under thisPlan, and this Plan shall be construed accordingly.  To the extent this Plan is more restrictivethan necessary to meet the requirements of Section 409A of the Code, theCompany reserves the right to amend this Plan, provided such amendment wouldnot cause the Plan to fail to meet those requirements.

**12.          Miscellaneous.**

12.01       No Contract of Employment.  Nothing contained in this Plan shall bedeemed to create a contract of continuing employment between the Company and eachParticipant.

12.02       Administration.  The Board shall administer this Plan inaccordance with the Plan’s terms and shall have full power and authoritynecessary or appropriate for carrying out 

 

11

----

 

its duties.  The Board shall have the full power toestablish any rules and procedures it finds appropriate for the administrationof this Plan.  The Board may correct anydefect or reconcile any inconsistency in the Plan to the extent the Board findsit necessary to carry out the purposes of the Plan.  The Board shall have full power and authorityto interpret the Plan and to decide all matters arising in connection with theadministration of the Plan.  Inexercising its power and authority, the Board shall have complete discretionand its determinations shall be final.

12.03       Participant Responsible for InvestmentDesignations.  Neither the Companynor the Board shall have any duty to question any investment designations of a Participantor to make recommendations to any  Participant with respect to investmentdesignations.  Neither the Company northe Board shall be liable for any reduction in the amount credited to a Participant’sAccount that is the result of each Participant’s investment designations or afailure of each Participant to make or change an investment designation.

Notwithstandingany other provision of this Plan, a Participant’s investment designation shallnot be given effect if the Board in its discretion determines that such aninvestment would be unlawful or impracticable if actually made by the Company.

12.04       Investment Designations upon Death,Incapacity, or Disability.  Theprovisions of this Section 12.04 shall apply notwithstanding any contraryprovisions of the Plan.

(a)           Upon a Participant’sdeath, such Participant’s Beneficiary or Beneficiaries to the extent of theirinterests, or, if each Participant fails to designate a Beneficiary or no Beneficiarysurvives him, the executor or administrator of each Participant’s estate, shallsucceed to each Participant’s right to make investment designations withrespect to the Account, and all references to each Participant in Section 7.03and Section 12.03 shall be interpreted as references to the Beneficiary, Beneficiaries,executor, or administrator, as appropriate.

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

(c)           If, in the situationdescribed in paragraph (b) (involving each Participant’s legal disability orincapacity), the Board determines that no legal representative is authorized tomake such designations on behalf of each Participant or his beneficiary, thenneither the Board nor the Company shall be under any obligation to take anyaction with respect to the investment designations in effect with respect tothe Account.  However, in such asituation, the Board may, from time to time, in its discretion, make investmentdesignations on each Participant’s behalf, but only from among Investment Fundssubstantially all of the assets of which are certificates of deposit orinterest bearing accounts in banks, savings banks, or savings and loan 

 

12

----

 

associations;obligations of the United States government and obligations guaranteed as toprincipal and interest by the United States government; obligations of a state,a territory, or a possession of the United States, or of any political subdivisionof any of the foregoing, or of the District of Columbia, and cash depositaccounts.  Neither the Board, the Company,nor any trustee shall be liable to each Participant, his beneficiary, or hisestate for taking no action with respect to investment designations in effectwith respect to the Account or for taking the action described in the precedingsentence.

12.05       Waivers.  No provision of this Plan may be modified,waived, or discharged except by an instrument in writing executed by eachParticipant and an authorized officer of the Company.  A waiver by either party of any breach of, orcompliance with, any condition or provision of this Plan shall not be deemed awaiver of similar or dissimilar provisions or conditions at the same or anyprior or subsequent time.  No agreementsor representations, oral or otherwise, with respect to the subject matter ofthis Plan have been made by either party that are not expressly set forth inthis Plan.

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

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

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

 

13

----

 

**Schedule 1**

**Determinationof Performance Criteria**

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

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

 

14

----