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LSI INDUSTRIES INC. RETIREMENT PLAN

Employee Benefits Plan Agreement

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LSI INDUSTRIES INC | Amendment and Restatement LSI Industries, Inc

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Title: LSI INDUSTRIES INC. RETIREMENT PLAN
Date: 8/26/2011
Industry: Furniture and Fixtures     Sector: Consumer Cyclical

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EXHIBIT 10.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LSI INDUSTRIES INC. RETIREMENT PLAN

(Restated as of July 1, 2011)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

TABLE OF CONTENTS

 

ARTICLE 1  INTRODUCTION AND PURPOSE

1-1

1.1

Amendment and Restatement.

1-1

1.2

Purpose of the Plan.

1-1

 

 

 

ARTICLE 2  DEFINITIONS

2-1

2.1

“Account”

2-1

2.2

“Accounting Date”

2-1

2.3

“Actual Deferral Percentage”

2-1

2.4

“Adjusted Compensation”

2-1

2.5

“Administrator”

2-1

2.6

“Adoption Agreement”

2-2

2.7

“Affiliate”

2-2

2.8

“Annual Earnings”

2-2

2.9

“Annual Employer Contribution Account”

2-3

2.10

“Beneficiary”

2-3

2.11

“Board” or “Board of Directors”

2-3

2.12

“Code”

2-3

2.13

“Committee”

2-3

2.14

“Company”

2-3

2.15

“Dependent”

2-3

2.16

“Determination Date”

2-4

2.17

“Determination Period”

2-4

2.18

“Disability”

2-4

2.19

“Effective Date”

2-4

2.20

“Employee”

2-4

2.21

“Employer”.

2-5

2.22

“Employer-Approved Leave of Absence”

2-5

2.23

“Entry Date”.

2-5

2.24

“ERISA”

2-5

2.25

“Excess Earnings”

2-5

2.26

“Five-Percent Owner”

2-5

2.27

“Highly Compensated Employee”

2-5

2.28

“Hour of Service”

2-6

2.29

“Key Employee”

2-7

2.30

“Leased Employee”

2-7

2.31

“Non-Highly Compensated Employee”

2-7

2.32

“Normal Retirement Age”

2-7

2.33

“Participant”

2-7

2.34

“Plan”

2-7

 

 

i


 

2.35

“Plan Assets”

2-7

2.36

“Plan Year”

2-7

2.37

“Present Value”

2-7

2.38

“Prior Plan”.

2-7

2.39

“Profit Sharing Contribution Account”

2-7

2.40

“Rollover Account”

2-7

2.41

“Section 401(k) Contribution Account”

2-7

2.42

“Severance”

2-8

2.43

“Six Consecutive Months”

2-8

2.44

“Surviving Spouse”.

2-8

2.45

“Top-Heavy Plan”

2-8

2.46

“Top-Heavy Ratio”

2-8

2.47

“Trust”.

2-9

2.48

“Trustee”

2-9

2.49

“Valuation Date”

2-9

2.50

“Vesting Years”.

2-9

 

 

 

ARTICLE 3  ELIGIBILITY AND PARTICIPATION

3-1

3.1

Eligibility and Participation.

3-1

3.2

Participants in the Prior Plan.

3-1

3.3

Absences and Severances of Less Than 12 Months.

3-1

3.4

Reemployment of Former Participant.

3-1

 

 

 

ARTICLE 4  CONTRIBUTIONS AND ALLOCATION

4-1

4.1

Section 401(k) Contributions.

4-1

4.2

Profit Sharing Contributions.

4-4

4.3

Annual Employer Contributions.

4-5

4.4

Minimum Contribution for Top-Heavy Years.

4-6

4.5

Return of Contributions by the Employer.

4-6

4.6

Catch-up Contributions.

4-7

4.7

Participant After-Tax Contributions.

4-7

4.8

Rollover Contributions.

4-7

4.9

Reemployment of Veterans.

4-8

 

 

 

ARTICLE 5  LIMITATIONS ON ANNUAL ADDITIONS

5-1

5.1

Definitions.

5-1

5.2

Limitation on Annual Additions.

5-4

5.3

Limitation in Case of Defined Benefit Plan and Defined Contribution Plan for the Same Employee.

5-6

 

 

ii


 

ARTICLE 6  VESTING AND FORFEITURES

6-1

6.1

Vesting Provisions.

6-1

6.2

Allocation of Forfeitures.

6-3

6.3

Vesting Upon Termination or Partial Termination of the Plan or Discontinuance of Contributions.

6-3

6.4

Unclaimed Account Procedure.

6-3

 

 

 

ARTICLE 7  INVESTMENT OF ACCOUNTS

7-1

7.1

Funding Policy and Method.

7-1

7.2

Funding Policy.

7-1

7.3

Investment Elections.

7-1

7.4

Investment Adjustment.

7-1

7.5

Insurance.

7-1

7.6

Loans.

7-1

 

 

 

ARTICLE 8  WITHDRAWALS AND DISTRIBUTIONS

8-1

8.1

Withdrawals from Section 401(k) Contribution Account, Annual Employer Contribution Account and Profit Sharing Contribution Account.

8-1

8.2

Withdrawals from Rollover Account.

8-1

8.3

Events of Distribution to Participants.

8-1

8.4

Amount of Payment.

8-1

8.5

Time of Payment to a Participant.

8-2

8.6

New Minimum Distribution Requirements.

8-3

8.7

Restrictions on Section 401(k) Withdrawals and Distributions.

8-6

 

 

 

ARTICLE 9  FORM OF PAYMENT TO PARTICIPANTS

9-1

9.1

General.

9-1

9.2

Qualified Joint and Survivor Annuity.

9-1

9.3

Incidental Benefits.

9-3

9.4

Distribution Periods.

9-4

9.5

Minimum Distribution.

9-6

9.6

Life Expectancy.

9-7

9.7

Transitional Rule.

9-7

9.8

Direct Rollover.

9-8

 

 

 

ARTICLE 10  DEATH BENEFITS

10-1

10.1

Preretirement Survivor Annuity.

10-1

10.2

Balance of Death Benefit.

10-3

 

 

 

ARTICLE 11  THE COMMITTEE

11-1

11.1

Committee.

11-1

11.2

Membership.

11-1

11.3

Rules and Regulations.

11-1

11.4

Powers.

11-1

11.5

Action of the Committee.

11-2

 

 

iii


 

11.6

Miscellaneous Administration Provisions.

11-2

11.7

Initial Claims Procedure.

11-3

11.8

Claim Review Procedure.

11-4

 

 

 

ARTICLE 12  AMENDMENT AND TERMINATION

12-1

12.1

Amendment and Termination.

12-1

12.2

Distribution of Plan Assets Upon Termination of the Plan.

12-2

 

 

 

ARTICLE 13  EXTENSION OF PLAN

13-1

13.1

Adoption by Affiliate.

13-1

 

 

 

ARTICLE 14  TOP-HEAVY RULES

14-1

14.1

Definitions.

14-1

14.2

Limitation on Earnings.

14-3

14.3

Minimum Contribution.

14-3

14.4

Limitations on Benefits.

14-3

14.5

Modification of Top-Heavy Rules.

14-4

 

 

 

ARTICLE 15  MISCELLANEOUS

15-1

15.1

Construction.

15-1

15.2

Assignment or Alienation of Benefits.

15-1

15.3

Data.

15-1

15.4

Employment Relationship.

15-1

15.5

Merger or Transfer of Plan Assets.

15-2

15.6

Incompetency or Disability.

15-2

15.7

Nontransferability of Annuities.

15-2

15.8

Governing Law.

15-2

15.9

Severability.

15-2

15.10

Death Benefits Under USERRA-Qualified Active Military Service.

15-2

 

 

iv


 

 

ARTICLE 1

 

INTRODUCTION AND PURPOSE

 

1.1            Amendment and Restatement . LSI Industries, Inc. hereby restates the LSI Industries Inc. Retirement Plan in its entirety, effective as of July 1, 2011, in this document as the Plan and in the accompanying LSI Industries Inc. Retirement Trust; provided, however, such other effective dates as are specified in the Plan for particular provisions shall be applicable.  This restatement incorporates all amendments made to the Plan prior to the date of the restatement.

 

1.2            Purpose of the Plan . The purpose of the Plan is to provide retirement and other benefits for Participants and their respective beneficiaries.  Except as otherwise provided by Section 5.2 and by law, the assets of the Plan shall be held for the exclusive purpose of providing benefits to Participants and their beneficiaries and defraying reasonable expenses of administering the Plan, and it shall be impossible for any part of the assets or income of the Plan to be used for, or diverted to, purposes other than such exclusive purposes.  In accordance with section 401(a)(27)   of the Code, the Plan is hereby designated as a profit sharing plan.

 

 

1-1


 

 

ARTICLE 2

 

DEFINITIONS

 

As used in the Plan, the following terms, when capitalized, shall have the following meanings, except when otherwise indicated by the context:

 

2.1           “Account” means a Participant’s allocable share of the Plan Assets.  A Participant’s Account may include one or more of the following subaccounts: Annual Employer Contribution Account; Profit Sharing Contribution Account; Section 401(k) Contribution Account; and Rollover Account.

 

2.2           “Accounting Date” means each day that the New York Stock Exchange is open.

 

2.3            (a)           “Actual Deferral Percentage” for a group of Participants for a Plan Year is the average of the ratios, calculated separately for each such Employee in such group, of:

 

(1)           the amounts contributed on behalf of each such Employee to the Plan for such Plan Year under Section 4.1 to

 

(2)           the Employee’s Adjusted Compensation for such Plan Year.

 

(b)           If the Plan satisfies the requirements of sections 401(k), 401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy such requirements only if aggregated with this Plan, then such other plans shall be aggregated with this Plan for purposes of computing the Actual Deferral Percentages and for determining whether the nondiscrimination rules of Section 4.1(b) currently   are satisfied.  Plans may be aggregated hereunder only if they have the same plan year.  If such aggregation applies, the other plans must use a testing method consistent with this Plan.

 

(c)           For purposes of computing the separate ratio under (a) above for any Highly Compensated Employee, all cash or deferred arrangements under section 401(k) of the Code of the Employer (and other employers taken into account under section 414 of the Code) in which such Highly Compensated Employee is a participant, shall be treated as one cash or deferred arrangement under section 401(k) of the Code.  If such arrangements have different plan years, this provision shall be applied by treating all such arrangements ending with or within the same calendar year as a single arrangement.

 

2.4           “Adjusted Compensation” means Section 415 Compensation (as defined in Section 5.1(g)) plus elective or salary reduction amounts which are excludable from gross income under sections 125, 402(a)(8), 402(h), 403(b) or 132(f) of the Code.

 

2.5           “Administrator” or “Plan Administrator” means the individual, committee or entity appointed as such by the Board, provided that if none is so appointed, then it means the Employer.

 

 

2-1


 

 

2.6           “Adoption Agreement” means the written instrument evidencing the adoption of the Plan by an Affiliate, pursuant to Article 13 of the Plan.  The instrument shall be executed by the adopting Employer and the Company.  The Adoption Agreement may specify provisions applicable to Employees of the adopting Employer which vary from the other provisions of the Plan.  The Adoption Agreement shall be considered part of the Plan document.

 

2.7           “Affiliate” means each of the following for such period of time as is applicable under section 414 of the Code:

 

(a)           a corporation which, together with the Employer, is a member of a controlled group of corporations within the meaning of section 414(b) of the Code (as modified by section 415(h) thereof for the purposes of Article 5) and the applicable regulations thereunder;

 

(b)           a trade or business (whether or not incorporated) with which the Employer is under common control within the meaning of section 414(c) of the Code (as modified by section 415(h) thereof for the purposes of Article 5) and the applicable regulations thereunder;

 

(c)           an organization which, together with the Employer, is a member of an affiliated service group (as defined in section 414(m) of the Code); and

 

(d)           any other entity required to be aggregated with the Employer under section 414(o) of the Code.

 

2.8           “Annual Earnings” mean wages, salaries, other amounts received for personal services actually rendered (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits and bonuses), and earned income (within the meaning of section 401(c)(2) of the Code) from the Employer and all Affiliates.  The term includes income from sources outside the United States (as defined in section 911(b) of the Code) and is determined without regard to the exclusions from gross income in sections 931 and 933 of the Code.  Annual Earnings shall not include reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation, welfare benefits, automobile allowances, stock option gains and severance pay.  Annual Earnings shall be taken into account in the Plan Year in which they are   actually paid.  Annual Earnings shall be taken into account only while an Employee is a Participant.

 

Annual Earnings shall include amounts that are contributed by an Employer pursuant to the provisions of a salary reduction agreement and that are not included in the gross income of the Participant but for section 402(e)(3) of the Code (relating to a salary reduction election under section 401(k) of the Code), section 125 of the Code (relating to the cafeteria or flexible benefit plans), section 402(h) of the Code (relating to SEPs), section 403(b) of the Code (relating to certain tax deferred annuities), section 457(b) of the Code (relating to deferred compensation plans of state and local governments and tax-exempt organizations), section 414(h)(2) of the Code (relating to certain picked-up employee contributions) or Section 132(f) of the Code (relating to qualified transportation fringes).

 

 

2-2


 

 

Solely for purposes of determining the Actual Deferral Percentage, the Administrator, in lieu of the definition of “Annual Earnings” set forth above, may use any definition that satisfies section 414(s) of the Code.

 

For any Plan Year beginning before June 30, 2002, only the first $170,000 (as adjusted by the Secretary of Treasury in accordance with section 401(a)(17) of the Code) of a Participant’s Annual Earnings shall be taken into account.

 

The Annual Earnings of each Participant taken into account in determining allocations for any Plan Year beginning after June 30, 2002 shall not exceed $200,000, as adjusted for cost-of-living increases in accordance with Section 401(a)(17)(B) of the Code.  The cost-of-living adjustment in effect for a calendar year applies to Annual Earnings for the determination period that begins with or within such calendar year.

 

2.9           “Annual Employer Contribution Account” means the separate portion of each Participant’s Account which reflects the Annual Employer Contributions under Section 4.3 and forfeitures allocated thereto as adjusted in accordance with Article 7.

 

2.10           “Beneficiary” means the person or persons who, under the provisions of Article 9 and Article 10, shall be entitled to receive a distribution, if any, payable under the Plan in the event such Participant  or former Participant dies before his interest has been distributed to him in full.

 

2.11           “Board” or “Board of Directors” means the Board of Directors of the Company.

 

2.12           “Code” means the Internal Revenue Code of 1986, as amended at the particular time applicable.  A reference to a section of the Code shall include said section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section.

 

2.13           “Committee” means the committee established in accordance with the provisions of Article 11, at the time designated, qualified, and acting hereunder.

 

2.14           “Company” means LSI Industries Inc., its successors and any entity into which it is merged or consolidated.

 

2.15           “Dependent” means any unmarried:

 

(a)           natural child of the Employee, provided the child is principally dependent upon the Employee for support and/or resides with the Employee; or

 

(b)           stepchild or legally adopted child (or legally placed child pending adoption) of the Employee, provided the child is principally dependent upon the Employee for support and resides with the Employee; or

 

(c)           foster child provided that such child meets the dependency ruling by the IRS and has been a member of the Employee’s household for the entire prior calendar year; or

 

 

2-3


 

 

(d)           child for whom the Employee is the legal guardian, provided the child is principally dependent upon the Employee for support and resides with the Employee.

 

The dependent must also be one of the following:

 

(a)           age 18 or younger;

 

(b)           age 19 to 23, if the child is a full-time student; or

 

(c)           a disabled dependent older than age 19.

 

Notwithstanding the foregoing, an adult who lives with the Employee at least 8 hours a day and who is physically or mentally unable to care for himself is also a dependent.

 

2.16           “Determination Date” with respect to any Plan Year for the Plan, means the last day of the preceding Plan Year.

 

2.17           “Determination Period” means, with respect to any Plan Year, the five Plan Years ending on the Determination Date with respect to such Plan Year.

 

2.18           “Disability” means, with respect to a Participant, a Participant who has been determined by the Plan Administrator to be receiving total and permanent disability benefits under the Social Security Act in effect at the date of disability.

 

2.19           “Effective Date” means, for purposes of any provisions of this Plan that are required to comply with the Uniformed Services Employment and Reemployment Rights Act of 1994, the Effective Date shall mean December 12, 1994.  For purposes of any provisions of this Plan that are required to comply with the Small Business Job Protection Act of 1996 and the Taxpayer Relief Act of 1997, the Effective Date shall mean the dates as specified in the Plan for various provisions.  For purposes of the Internal Revenue Service Restructuring and Reform Act of 1998 and the Community Renewal Relief Act of 2000, the Effective Date shall mean the dates specified in the applicable law.  For purposes of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”), the Effective Date shall mean July 1, 2002, unless otherwise specified.  For purposes of the merger of the Pension Plan of LSI Industries Inc. (originally effective July 1, 1980 and amended and restated July 1, 1984) into the Profit Sharing Plan of LSI Industries Inc. (originally effective July 1, 1977 and amended and restated July 1, 1984), the Effective Date shall mean June 30, 1995.  For all other purposes, the Effective Date of this amendment and restatement shall mean July 1, 2001.

 

2.20           “Employee” means an individual who performs services for the Employer and who is considered by the Employer in its sole and absolute discretion to be an Employee for purposes of the Plan.  The term shall include for all Plan purposes except participating in the Plan and sharing in contributions by the Employer, any “Leased Employee” as defined below.  The term shall not include an individual who performs services for the Employer solely as a director or an independent contractor or any individual covered by a collective bargaining agreement, unless such agreement specifically provides for coverage under the Plan.  A determination that an individual is an employee of the Employer for other purposes such as employment tax purposes, shall have no bearing whatsoever on the determination of whether the individual is an Employee under the Plan if the Employer does not consider the individual to be its Employee for purposes of the Plan.

 

 

2-4


 

 

2.21           “Employer” means the Company and any Affiliate which adopts the Plan, or any successor or assign of any of them.  With respect to particular Employees and Participants, the term “Employer” means the entity by which they are or were employed.

 

2.22           “Employer-Approved Leave of Absence” means a temporary absence from work not exceeding 12 months resulting from illness, layoff or other cause if authorized in advance by an Employer or Affiliate pursuant to its uniform leave policy, if the individual’s employment shall not otherwise be terminated during the period of such absence.

 

2.23           “Entry Date” means each January 1 and July 1.

 

2.24           “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, at the particular time applicable.  A reference to a section of ERISA shall include said section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section.

 

2.25           “Excess Earnings” means a Participant’s Annual Earnings for a particular Plan Year in excess of the “Taxable Wage Base.”  “Taxable Wage Base” means for any Plan Year, the maximum amount of earnings for the calendar year which includes the beginning of such Plan Year which may be considered wages for such calendar year under section 3121(a)(1) of the Code (which pertains to FICA wages).

 

2.26           “Five-Percent Owner” means any person who owns (or is considered as owning within the meaning of sections 318 and 416 of the Code) more than 5 percent of the capital or profits interest in the Employer.

 

2.27           “Highly Compensated Employee” means as determined under section 414(q) of the Code and the Treasury Regulations thereunder, an individual who, at any time during the Plan Year is an Employee, and who:

 

(a)           during the Plan Year or the preceding twelve month period was at any time a Five-Percent Owner; or

 

(b)           received Adjusted Compensation from the Employer in excess of $80,000 (as adjusted pursuant to section 415(d) of the Code) during the 12 month period preceding the Plan Year and, if elected by the Employer, was in the group consisting of the top 20 percent of the Employees when ranked on the basis of Adjusted Compensation paid during such preceding 12 month period.

 

 

2-5


 

 

2.28           (a)           “Hour of Service” means each of the following, determined from records of hours worked and hours for which payment is made or due, provided that the same hour shall not be counted more than once:

 

(1)           each hour for which an individual is paid, or entitled to payment for work for the Employer, which hours shall be credited to such individual for the computation period or periods in which the duties are performed;

 

(2)           each hour for which an individual is paid, or entitled to payment, by the Employer on account of a period of time during which no work is performed (irrespective of whether his employment relationship has terminated) due to vacation, holiday, illness, incapacity (including short-term disability, but excluding long-term disability), layoff, jury duty, military duty or leave of absence, but excluding any payments which solely reimburse him for medical or medically related expenses and excluding any payments made or due under a plan maintained solely for the purposes of complying with applicable workers’ compensation or unemployment compensation or disability insurance laws; provided, however, no more than 501 Hours of Service shall be credited under this paragraph for any single continuous period (whether or not such period occurs in a single computation period); and provided further that Hours of Service under this paragraph shall be calculated and credited pursuant to section 2530.200b-2 of the Department of Labor Regulations which are incorporated herein by this reference;

 

(3)           each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer; provided, however, that the same Hours of Service shall not be credited both under paragraph (1) or paragraph (2), as the case may be, and under this paragraph (3); and provided further, that Hours of Service for back pay awarded or agreed to with respect to periods described in paragraph (2) shall be subject to the limitations set forth therein and shall be calculated pursuant to the regulations referred to therein; and provided further, that these Hours of Service shall be credited to such individual for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made; and

 

(4)           each regularly scheduled hour of work for which an Employee would have been compensated during military service if his employment status immediately prior thereto had continued.

 

(b)           For purposes of determining service under (a)(1), (2), (3), and (4) above, service (including service as a self-employed individual) for the following shall be treated as if it were service for the Employer:

 

(1)           each Affiliate; and

 

(2)           each predecessor employer within the meaning of, and to the extent required under, section 414(a) of the Code.

 

(c)           Anything in the Plan to the contrary notwithstanding, in determining an Employee’s service, he shall be entitled to such credit, if any, as is required by federal law.

 

 

2-6


 

 

2.29           “Key Employee” means any Participant who, at any time during the Plan Year, is described in section 416(i)(1) of the Code.

 

2.30           “Leased Employee” means any person (other than an Employee of the Employer) who pursuant to an agreement between the Employer and any other person (“leasing organization”) has performed services for the Employer (or for the Employer and related persons determined in accordance with section 414(n)(6) of the Code) on a substantially full-time basis for a period of at least one year, and such services are performed under the primary direction or control of the Employer.

 

2.31           “Non-Highly Compensated Employee” means an individual who is not a Highly Compensated Employee and who, at any time during the Plan Year, is an Employee.

 

2.32           “Normal Retirement Age” means age 60.

 

2.33           “Participant” means an Employee who satisfies the eligibility requirements of Article 3 and also means a former   Employee who has an Account under the Plan.

 

2.34           “Plan” means the LSI Industries Inc. Retirement Plan as set forth in this document and, if amended at any time, then as so amended.

 

2.35           “Plan Assets” means the assets of the Plan at the particular time applicable.

 

2.36           “Plan Year” means the 12 month period beginning on July 1 and ending on the following June 30.

 

2.37           “Present Value” means, with respect to a defined benefit plan, the present value based on the interest and mortality rates specified under the applicable defined benefit plan for purposes of computing the Top-Heavy Ratio.  The actuarial assumptions used for all plans within the same aggregation group must be the same.

 

2.38           “Prior Plan” means the LSI Industries Inc. Retirement Plan and Trust as it existed prior to the Effective Date.

 

2.39           “Profit Sharing Contribution Account” means the separate portion of each Participant’s Account which reflects the Employer’s contributions under Section 4.2 and forfeitures allocated thereto as adjusted in accordance with Article 7.

 

2.40           “Rollover Account” means the separate portion of each Participant’s Account which reflects the Participant’s rollover contributions, if any, made pursuant to Section 4.8 as adjusted in accordance with Article 7.

 

2.41           “Section 401(k) Contribution Account” means the separate portion of each Participant’s Account which reflects contributions on behalf of such Participant under Section 4.1, if any, as adjusted in accordance with Article 7.

 

 

2-7


 

 

2.42           “Severance” means an absence from the employment of the Employer and all Affiliates beginning on the earliest of death, termination, discharge, retirement or the first anniversary of any other absence (with or without pay).

 

2.43           “Six Consecutive Months” means a 6 consecutive month period beginning on the Employee’s first day of employment during which the Employee has at least one Hour of Service during each month.

 

2.44           “Surviving Spouse” means a Participant’s surviving spouse (who, in the case of the Qualified Joint and Survivor Annuity, is the spouse to whom the Participant was married on the date on which his benefit payments commenced) except to the extent that a former spouse is treated as such, for purposes of the Plan, under a qualified domestic relations order as described in section 414(p) of the Code.

 

2.45           “Top-Heavy Plan” means the Plan, with respect to any Plan Year, if the Top-Heavy Ratio exceeds 60 percent.

 

2.46           “Top-Heavy Ratio” means, for the Plan or an Aggregation Group of which the Plan is a part, a fraction, the numerator of which is the sum of defined contribution account balances and the Present Values of defined benefit accrued benefits for all Key Employees and the denominator of which is the sum of defined contribution account balances and the Present Values of defined benefit accrued benefits for all participants.  The Top-Heavy Ratio shall be determined in accordance with section 416 of the Code and the applicable regulations thereunder, including, without limitation, the provisions relating to rollovers and the following provisions:

 

(a)           The value of account balances under the Plan will be determined as of the Determination Date with respect to the applicable Plan Year.

 

(b)           The value of account balances and accrued benefits under plans aggregated with the Plan shall be calculated with reference to the determination dates under such plans that fall within the same calendar year as the applicable Determination Date under the Plan.

 

(c)           The value of account balances and the present value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12 month period ending on the applicable determination date, except as provided in section 416 of the Code and the regulations thereunder for the first and second plan years of a defined benefit plan.

 

(d)           A simplified employee pension shall be treated as a defined contribution plan; provided, however, at the election of the Employer, the Top-Heavy Ratio shall be computed by taking into account aggregate employer contributions in lieu of the aggregate of the accounts of employees.

 

(e)           Distributions (including distributions under a terminated plan which had it not been terminated would have been included in the Aggregation Group) within the 5-year period ending on a determination date shall be taken into account.

 

 

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(f)           Defined contribution account balances shall be adjusted to reflect any contribution not actually made as of a determination date but required to be taken into account on that date under section 416 of the Code and the regulations thereunder.

 

(g)           Deductible voluntary contributions shall not be included.

 

(h)           There shall be disregarded the account balances and accrued benefits of a Participant:

 

(1)           who is not a Key Employee but who was a Key Employee in a prior Plan Year, or

 

(2)           with respect to a Plan Year beginning after 1984, who has not performed services for the Employer maintaining the Plan at any time during the 5-year period ending on the determination date.

 

(i)           The accrued benefit of a Participant other than a Key Employee shall be determined (1) under the method, if any, which uniformly applies for accrual purposes under all defined benefit plans of the Employer, or (2) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of section 411(b)(1)(C) of the Code.

 

2.47           “Trust” means the LSI Industries Inc. Retirement Trust as established pursuant to agreement between the Employer and Trustee, under which the Plan Assets are held, and, if amended at any time, then as so amended.

 

2.48           “Trustee” means the trustee under the Trust.

 

2.49           “Valuation Date” with respect to a Determination Date under the Plan, means the Accounting Date coinciding with such Determination Date.

 

2.50           “Vesting Years” mean the sum of the Plan Years (including Plan Years prior to the Effective Date) during which an individual completes 1,000 or more Hours of Service.  If a Participant terminates employment and is reemployed by an Employer as an Employee, he shall receive credit for all years of service prior to his termination of employment, regardless of the years between his termination of employment and reemployment.

 

 

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ARTICLE 3

 

ELIGIBILITY AND PARTICIPATION

 

3.1            Eligibility and Participation . Each Employee who is not already a Participant shall become a Participant as of the Entry Date (either January 1 or July 1) coinciding with or next following the date on which he meets the following requirements:

 

(a)           he is at least 21 years old, and

 

(b)           he has been an Employee for Six Consecutive Months.

 

3.2            Participants in the Prior Plan . Anything in Section 3.1 to the contrary notwithstanding, a person who was a participant in the Prior Plan on the day immediately prior to the Effective Date shall continue to be a Participant in the Plan on the Effective Date.

 

3.3            Absences and Severances of Less Than 12 Months .

 

(a)            Absences .  If, on the Entry Date determined under Section 3.1 (either January 1 or July 1), an Employee is absent from employment for reasons other than termination, discharge, or retirement, and if the individual returns to employment within 12 months, then, upon the termination of such absence, and provided the individual is an Employee, he shall become a Participant retroactive to such Entry Date.

 

(b)            Severances .  If an Employee’s Entry Date determined under Section 3.1, falls within a period of Severance of 12 months or less taken into account as Service under Section 2.28, then, provided the individual is an Employee, the individual shall become a Participant on the date on which such period of Severance ends.

 

3.4            Reemployment of Former Participant . If a former Participant is reemployed as an Employee, then, provided that he meets the requirements of Section 3.1, he shall become a Participant again as of the date of such reemployment.

 

 

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ARTICLE 4

 

CONTRIBUTIONS AND ALLOCATION

 

4.1            Section 401(k) Contributions .

 

(a)            Salary Deferral Contributions .

 

(1)            Salary Reduction .  Each Participant who is an Employee may enter into a salary reduction agreement with the Employer whereby he authorizes the Employer to reduce his Annual Earnings, or any part thereof, by such percentage as he shall specify.  Effective prior to February 1, 2002, the Participant may elect to defer not less than 1% of his Annual Earnings nor more than 15% of his Annual Earnings for any Plan Year.  Such deferral percentage must be in whole percentage increments.  Effective as of February 1, 2002, the Participant may elect to defer not less than 1% of his Annual Earnings nor more than 25% of his Annual Earnings for any Plan Year.

 

(2)            Maximum Deferral Amount .  In no event shall a Participant’s Annual Earnings in any calendar year be reduced by a salary reduction agreement under (1) above (and under all other plans, contracts or arrangements of the Employer which allow elective deferrals within the meaning of section 402(g)(3) of the Code) in an amount greater than the maximum amount that may be contributed as an elective deferral for any calendar year under section 402(g) of the Code.  This amount may be adjusted by the Secretary of Treasury under section 402(g)(5) of the Code for cost of living adjustments.  The maximum amount that may be deferred for the calendar year beginning January 1, 2002 is $11,000.

 

(3)            Contribution to the Plan .  Subject to the limitations under Article 5, paragraph (2) above and paragraph (b) below, the Employer shall so reduce the Participant’s Annual Earnings and shall contribute to the Plan on behalf of each such Participant an amount equal to the reduction in the Participant’s Annual Earnings.  Such contribution shall be credited to the Participant’s Section 401(k) Contribution Account.

 

Such contributions shall be made as soon as the Employer can reasonably segregate such amounts, but not later than the 15th business day of the month following the month in which such amounts would have otherwise been payable to the Participant.  Such contributions for a Plan Year which are made before the end of such Plan Year shall be credited as of the Accounting Date coinciding with or next following the Trustee’s receipt thereof, and such contributions for a Plan Year which are received after the end of such Plan Year shall be credited as of the last Accounting Date of such Plan Year.  Such contributions for a Plan Year which are received after the end of such Plan Year, although credited for such Plan Year, shall be posted to Participants’ Accounts as of the Accounting Date coinciding with or next following the Trustee’s receipt of the contributions.  Accordingly, such contributions will not be invested and begin receiving earnings or losses until the date they are posted to the Accounts.

 

(4)            Procedural Matters .  A Participant may enter or change a salary reduction agreement under (1) above at any time by giving the Committee advance notice in a manner prescribed by the Committee.  In no event may a salary reduction agreement be entered into retroactively.  In addition, the Employer may require or allow a Highly Compensated Employee to reduce the percentage or amount specified in his salary reduction agreement to the extent that the Employer reasonably anticipates that without the reduction, the limits set forth in Sections 4.1(a)(2), 4.1(b), or Article 5 would be exceeded for the Plan Year.

 

 

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A Participant may elect, in a manner specified by the Committee, to terminate a salary reduction agreement at any time once notice has been given.  Any such election shall be effective as soon as administratively feasible.  Such elections shall be effective only with respect to Annual Earnings not yet earned as of the effective date of such election.

 

(b)            Limitation on Section 401(k) Contributions .  The Actual Deferral Percentage for any Plan Year for Participants who are Highly Compensated Employees shall not exceed the greater of:

 

(1)           1.25 times the Actual Deferral Percentage for all the Participants who are Non-Highly Compensated Employees for the Plan Year, or

 

(2)           the lesser of:

 

(A)           Two times the Actual Deferral Percentage for all the Participants who are Non-Highly Compensated Employees for the preceding Plan Year, provided that the Actual Deferral Percentage for the Participants who are Highly Compensated Employees shall not exceed the Actual Deferral Percentage for Participants who are Non-Highly Compensated Employees for the Plan Year by more than 2 percentage points; or

 

(B)           such amount as the Secretary of Treasury may prescribe to prevent multiple use of this alternative limitation with respect to any Highly Compensated Employee.  Effective for Plan Years beginning after June 30, 2002, the multiple use shall not be applied.

 

(c)            Return of Excess Elective Deferrals .

 

(1)            Participant Election .  If amounts are includable in a Participant’s gross income under section 402(g) of the Code for a taxable year of the Participant, the Participant may elect to receive a distribution from his Section 401(k) Contribution Account in an amount up to the sum (or difference) of:

 

(A)           the lesser of:

 

(i)           the amount includable in his gross income under section 402(g) of the Code for the taxable year; or

 

(ii)           the amount of his salary deferrals under Section 4.1(a) for the taxable year; plus (or minus)

 

(B)           the income (or loss) allocable to the amount determined under (A) above determined by the Administrator in accordance with Treasury Regulations.

 

 

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(2)            Procedure .  An election under (1) above shall be made in such manner as the Administrator shall direct and shall be effective only if received by the Administrator no later than the first March 1st following the close of the Participant’s taxable year to which the election relates.  A Participant who has exceeded the limits of Section 4.1(a)(2) shall be deemed to have made an election hereunder to the extent of such excess.

 

(3)            Distribution .  Any other provisions of the Plan to the contrary notwithstanding, the amount determined under (1) if properly elected under (2) shall be paid to the Participant as a lump sum no later than the first April 15th following the close of the Participant’s taxable year to which the election relates.

 

(4)            Effect on Other Provisions .  Except to the extent provided by the Secretary of the Treasury or his delegate, distributions hereunder shall be taken into account under Section 4.1(b).

 

(d)            Excess Section 401(k) Contributions .

 

(1)            Excess Actual Deferral Percentage .  If the Actual Deferral Percentage for a Plan Year for the Participants who are Highly Compensated Employees exceeds the maximum amount allowable under Section 4.1(b), then the Administrator shall determine the amount to be distributed and the Highly Compensated Employees subject to receiving a distribution in accordance with the Code and applicable Treasury Regulations.

 

(2)            Distribution .  Any other provisions of the Plan to the contrary notwithstanding, the Administrator shall distribute the amount determined under (1) above to each Highly Compensated Employee determined under (1) above as a lump sum no later than the last day of the following Plan Year; provided however, the Employer shall be subject to a 10% excise tax under section 4979 of the Code if the distributions are not made before the close of the first 2½ months of such following Plan Year.

 

(3)            Effect on Other Provisions .  If distributions are made in accordance with this Section 4.1(d) with respect to a Plan Year, then the limitations of Section 4.1(b) shall be deemed satisfied for the Plan Year.  Except to the extent provided by the Secretary of Treasury, distributions hereunder shall be taken into account under Article 5.

 

With respect to excess contributions made in taxable year 2007, the Plan Administrator must calculate allocable income for the taxable year and also for the gap period ( i.e ., the period after the close of the taxable year in which the excess contribution occurred and prior to the distribution); provided that the Plan Administrator will calculate and distribute the gap period allocable income only if the Plan Administrator in accordance with the Plan terms otherwise would allocate the gap period allocable income to the Participant’s Account.  With respect to excess contributions made in taxable years after 2007, gap period income may not be distributed.

 

 

4-3


 

 

4.2            Profit Sharing Contributions .

 

(a)            General .  Except as provided in an Adoption Agreement, for each Plan Year, each Employer shall contribute to the Plan such amount (if any) as the Board shall determine in its sole discretion by action specifying the amount of such contribution (such amount being hereinafter referred to as the Employer’s “Profit Sharing Contribution”), subject to Article 5.  The Company may establish separate discretionary “Contribution Pools” for separate business locations.  Profit Sharing Contributions to each of the “Contribution Pools” are discretionary and determined separately each year by the Board.

 

(b)            Participants Entitled to Receive an Allocation of Profit Sharing Contribution .  A Participant shall be entitled to receive an allocation of the Profit Sharing Contribution under (a) above to the Plan for a Plan Year if he is:

 

(1)           a Participant who is credited with 1,000 or more Hours of Service during such Plan Year, provided that he is in the employment of the Employer as an Employee on the last day of such Plan Year;

 

(2)           a Participant who died during such Plan Year and prior to the termination of his employment as an Employee;

 

(3)           a Participant who retired from his employment as an Employee on or after his reaching Normal Retirement Age during such Plan Year;

 

(4)           a Participant who incurred a Disability and retired from his employment as an Employee as a result thereof during such Plan Year; or

 

(5)           a Participant who is on an Employer-Approved Leave of Absence from his employment as an  Employee at the close of such Plan Year, if he received compensation from the Employer during such Plan Year.

 

Notwithstanding the foregoing, Participants excluded from receiving a Profit Sharing Contribution pursuant to an Adoption Agreement shall not be included in an allocation pursuant to this Section 4.2.

 

(c)            Allocation Formula .  Subject to the limitations of Article 5, as of the last Accounting Date for a Plan Year, there shall be allocated to the Profit Sharing Contribution Account of each Participant qualified, under (b) above, to receive such an allocation, that portion of the Profit Sharing Contribution under (a) above for such Plan Year that bears the same ratio to the total amount of such Contribution as the Annual Earnings of such Participant for such Plan Year bears to the total amount of the Annual Earnings of all such Participants eligible to share in such allocation in the Contribution Pool for such Plan Year.  Such contribution shall not be posted to Participants’ Accounts until the Accounting Date coinciding with or next following the date it is actually received by the Trustee.  Accordingly, such contributions will not be invested and begin receiving earnings or losses until the date they are posted to the Accounts.

 

 

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4.3            Annual Employer Contributions .

 

(a)            General .  Except as provided in an Adoption Agreement, each Employer shall contribute for each Plan Year beginning on or after July 1, 1994, an amount equal to the sum of 4% of Annual Earnings plus 4% of Excess Earnings (hereinafter the “Annual Employer Contribution”) for such Plan Year paid by such Employer to each Participant who satisfies the requirements of Section 4.3(b).  Except as provided in an Adoption Agreement, each Employer shall contribute for each Plan Year beginning on or after July 1, 2009, an amount equal to the sum of 2% of Annual Earnings plus 2% of Excess Earnings (hereinafter the “Annual Employer Contribution”) for such Plan Year paid by such Employer to each Participant who satisfies the requirements of Section 4.3(b).

 

(b)            Participants Entitled to Receive an Allocation of Annual Employer Contribution .  A Participant shall be entitled to receive an allocation of the Annual Employer Contribution under (a) above to the Plan for a Plan Year if he is:

 

(1)           a Participant who is credited with 1,000 or more Hours of Service during such Plan Year, provided that he is in the employment of the Employer as an Employee on the last day of such Plan Year;

 

(2)           a Participant who died during such Plan Year and prior to the termination of his employment as an Employee;

 

(3)           a Participant who retired from his employment as an Employee on or after his reaching Normal Retirement Age during such Plan Year;

 

(4)           a Participant who incurred a Disability and retired from his employment as an Employee as a result thereof during such Plan Year; or

 

(5)           a Participant who is on an Employer-Approved Leave of Absence from his employment as an Employee at the close of such Plan Year, if he received compensation from the Employer during such Plan Year.

 

Notwithstanding the foregoing, Participants excluded from receiving an Annual Employer Contribution pursuant to an Adoption Agreement shall not be included in an allocation pursuant to this Section 4.3.

 

(c)            Allocation Formula .  Subject to the limitation of Article 5, as of the last Accounting Date for a Plan Year, there shall be allocated to the Annual Employer Contribution Account of each Participant qualified under (b) above to receive such an allocation, an amount determined as follows:

 

(1)           an amount equal to 4% multiplied by each Participant’s Annual Earnings for that Plan Year shall be allocated to the Annual Employer Contribution Account of each Participant, plus

 

 

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(2)           an amount equal to 4% multiplied by each Participant’s Excess Earnings for that Plan Year shall be allocated to the Annual Employer Contribution Account of each Participant with Excess Earnings.

 

Such contribution shall not be posted to Participants’ Accounts until the Accounting Date coinciding with or next following the date it is actually received by the Trustee.  Accordingly, such contributions will not be invested and begin receiving earnings or losses until the date they are posted to the Accounts.  The allocation formula described above shall be amended by replacing “4%” each place it appears with “2%” effective for Plan Years ending on or after June 30, 2010.

 

4.4            Minimum Contribution for Top-Heavy Years .

 

(a)            General .  Anything in Sections 4.1, 4.2 or 4.3 to the contrary notwithstanding, for any Plan Year for which the Plan is a Top-Heavy Plan, the amount of Employer contributions and forfeitures (excluding contributions under Section 4.1(a)) allocated on behalf of any Participant who is not a Key Employee and who is an Employee on the last day of the Plan Year shall not be less than such Participant’s Section 415 Compensation times the lesser of (1) 3% or (2) the largest percentage of such contributions and forfeitures (including contributions under Section 4.1(a)),expressed as a percentage of Section 415 Compensation, allocated on behalf of any Key Employee for that Plan Year.  For these purposes, “Section 415 Compensation” shall mean the first $170,000 (as adjusted by the Secretary of Treasury at the same time and in the same manner as under section 415(d) of the Code) of a Participant’s Section 415 Compensation (as defined in Section 5.1(g)) for Plan Years beginning before July 1, 2002.  For Plan Years beginning after June 30, 2002, “Section 415 Compensation” shall mean the first $200,000 as adjusted for cost-of-living increases in accordance with section 401(a)(17)(B) of the Code.  The minimum allocation is determined without regard to any Social Security contribution.

 

This minimum allocation shall be made even though, under other Plan provisions, the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation for the year because of the Participant’s failure to complete 1,000 Hours of Service.

 

(b)            Participants Also Covered Under Defined Benefit Plan .  If a Participant who is not a Key Employee and who is an Employee on the last day of the Plan Year also participates in one or more defined benefit plans which are part of the same Aggregation Group as the Plan, and if such defined benefit plan or plans do not satisfy the minimum benefit requirements of section 416 of the Code with respect to such Participant, then, with respect to such Participant, “5%” shall be substituted for “the lesser of (1) 3% or (2) the largest percentage of such contributions and forfeitures (including contributions under Section 4.1(a)), expressed as a percentage of Section 415 Compensation) allocated on behalf of any Key Employee for that Plan Year” in (a) above.

 

4.5            Return of Contributions by the Employer .

 

(a)            Mistake of Fact .  If a contribution by the Employer to the Plan is made by reason of a mistake of fact, then, subject to (d) below, such contribution may be returned to the Employer within 1 year after the payment of such contribution.

 

 

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(b)            Qualification .  Contributions by the Employer to the Plan are conditioned upon the initial qualification of the Plan under section 401 of the Code.  If the Plan receives an adverse determination with respect to its initial qualification under the Code, then the entire assets attributable to the Employer’s contributions may be returned to the Employer within 1 year after such determination.

 

(c)            Deductibility .  Contributions by the Employer to the Plan are conditioned upon the deductibility of such contributions under section 404 of the Code, and, subject to (d) below, such contributions (to the extent disallowed) may be returned to the Employer within 1 year after the disallowance of the deduction.

 

(d)            Limitation on Return .  The amount of the contribution which may be returned to the Employer under paragraph (a) or (c) above shall be limited to the excess of the amount contributed over the amount that would have been contributed had there not occurred a mistake of fact or a mistake in determining the deduction.  Earnings attributable to such excess may not be returned to the Employer, but losses attributable thereto must reduce the amount to be so returned.  Furthermore, the amount of the contribution which may be returned shall be limited so as not to cause the balance to the credit of a Participant’s Account to be reduced to less than the balance which would have been credited to his Account had such contribution not been made.

 

4.6            Catch-up Contributions . Effective as soon as administratively possible after February 1, 2006, all Participants who enter into a salary reduction agreement under this Plan and who will attain age 50 or more before the close of the Plan Year shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of Section 414(v) of the Code, as determined by the Administrator.  Such catch-up contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitation of Sections 402(g) and 415 of the Code.  The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such catch-up contributions.

 

4.7            Participant After-Tax Contributions . After-tax contributions by Participants shall neither be required nor permitted.

 

4.8            Rollover Contributions . A Participant while an Employee may contribute to the Plan money that qualifies for such a rollover under the provisions of sections 402(c)(5) or 403(a)(4) or (5) of the Code or that qualifies as a rollover contribution under section 408(d)(3) of the Code; provided however, no amounts constituting accumulated deductible employee contributions, as defined in section 72(o)(5) of the Code, may be so contributed.  Effective May 1, 2004, the Plan will accept rollovers in any amount.  Any rollover contribution shall be credited to such Participant’s Rollover Account as of the Accounting Date coinciding with or next following the Trustee’s receipt thereof.

 

The Plan will accept Participant rollover contributions and/or direct rollovers of distributions made after June 30, 2002, from (a) a qualified plan described in sections 401(a) or 403(a) of the Code, excluding after-tax employee contributions; (b) an annuity contract described in section 403(b) of the Code, excluding after-tax employee contributions; and (c) an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state. The Plan will not accept a Participant rollover contribution of the portion of a distribution from an individual retirement account or annuity described in sections 408(a) or 408(b) of the Code that is eligible to be rolled over and would otherwise be includible in gross income (including an after-tax contribution).

 

 

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If any amount received as a rollover contribution is determined not to qualify for a rollover, then such amount (adjusted for any gain or loss) shall be returned to the Participant as soon as practical.

 

4.9            Reemployment of Veterans . Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with section 414(u) of the Code.

 

 

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ARTICLE 5

 

LIMITATIONS ON ANNUAL ADDITIONS

 

5.1            Definitions . For purposes of this Article 5, the following terms shall have the following meanings:

 

(a)           “Annual Addition” means, with respect to the Plan, any other Defined Contribution Plan in which a Participant participates or has participated, and any account described in (4) or (5) below, the sum, for the Limitation Year, of:

 

(1)           all employer contributions (other than amounts restored in accordance with section 411(a)(3)(D) or 411(a)(7)(C) of the Code) allocated to his Account (excluding restorative payments resulting from a fiduciary’s actions for which there is a reasonable risk of liability);

 

(2)           all forfeitures allocated to his Account;

 

(3)           (A)           for Limitation Years beginning before January 1, 1987, the lesser of:

 

(i)           one-half of his own contributions (other than rollover contributions, repayments of loans or of amounts described in section 411(a)(7)(B) of the Code in accordance with the provisions of section 411(a)(7)(C) of the Code, repayments of amounts described in section 411(a)(3)(D) of the Code, direct transfers between qualified plans, and, for Limitation Years after December 31, 1981, deductible employee contributions within the meaning of section 72(o)(5) of the Code), or

 

(ii)           the amount of his own such contributions in excess of 6% of his Section 415 Compensation for the Limitation Year; and

 

(B)           for Limitation Years beginning after December 31, 1986, 100% of his own such contributions for the Limitation Year.

 

(4)           amounts allocated, in years beginning after March 31, 1984, to an individual medical benefit account, as defined in section 415(l)(2) of the Code, which is part of a pension or annuity plan maintained by the Employer or an Affiliate; and

 

(5)           amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits allocated to the separate account of a key employee, as defined in section 419A(d)(3) of the Code, under a welfare benefits fund, as defined in section 419(e) of the Code, maintained by the Employer or an Affiliate.

 

 

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A Participant’s Annual Addition shall include such other amounts as the Commissioner of Internal Revenue properly determines.  An Annual Addition shall be deemed credited to a Participant’s Account with respect to an applicable Limitation Year if it is allocated to his Account under the terms of such plan as of any date within such applicable Limitation Year; provided however, such amount must be actually contributed within the time limit prescribed by applicable Treasury Regulations.

 

(b)           “Defined Benefit Plan” means a plan (whether or not terminated) of the Employer or an Affiliate that is not a Defined Contribution Plan and that either qualifies under section 401 of the Code or meets the requirements of section 404(a)(2) of the Code.

 

(c)           “Defined Benefit Plan Fraction,” with respect to a Participant, means, subject to section 2004(d)(2) of ERISA, a fraction:

 

(1)           the numerator of which is the sum, for all Defined Benefit Plans in which he participates or has participated, of the annual benefit (as determined under section 415(b)(2) of the Code as of the close of the Limitation Year), provided by the Employer and all Affiliates, to which the Participant would be entitled if he continued employment until reaching normal retirement age (or current age, if later) and if his compensation for the Limitation Year and all other relevant factors used to determine such benefit remained constant until normal retirement age (or current age, if later), and

 

(2)           the denominator of which is the lesser of:

 

(A)           1.25 times the dollar limitation, under section 415(b)(1)(A) of the Code, in effect for the Limitation Year, or

 

(B)           1.4 times the Participant’s average Section 415 Compensation for his highest 3 consecutive Limitation Years.

 

Notwithstanding the above, if the Participant was a participant as of the first day of the first Limitation Year beginning after December 31, 1986 in 1 or more Defined Benefit Plans which were in existence on May 6, 1986, the denominator of this fraction will not be less than 125 percent of the sum of the annual benefits under such plans which the Participant had accrued as of the end of the last Limitation Year beginning before January 1, 1987, disregarding any changes in the terms and conditions of the plan after May 5, 1986.  The preceding sentence applies only if the Defined Benefit Plans individually and in the aggregate satisfied the requirements of section 415 of the Code for all Limitation Years beginning before January 1, 1987.

 

(d)           (1)           “Defined Contribution Plan” means each of the following (whether or not terminated) maintained by the Employer or an Affiliate:

 

(A)           a plan that is qualified under section 401 of the Code and that provides for an individual account for each participant and for benefits based solely on the amount contributed to the participant’s account, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant’s account;

 

 

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(B)           a Participant’s contributions to a Defined Benefit Plan; and

 

(C)           contributions by the Employer or an Affiliate to a simplified employee pension (as defined in section 408(k) of the Code).

 

(2)           With respect to any Participant who is in control of the Employer within the meaning of section 414(b) or (c) of the Code, as modified by section 415(h) of the Code, the term “Defined Contribution Plan” includes an annuity contract described in section 403(b) of the Code and, with respect to Limitation Years before January 1, 1982, an individual retirement plan (as described in section 7701(a)(37) of the Code).

 

(e)           “Defined Contribution Plan Fraction,” with respect to a Participant, means, subject to the transition rules under section 415(e) of the Code and subject to the special rules provided by Treasury regulations for special situations (including situations in which past records are not available), a fraction:

 

(1)           the numerator of which is the sum of the Annual Additions to the Participant’s account for the current Limitation Year and all prior Limitation Years, and

 

(2)           the denominator of which is the sum of the lesser of the following amounts determined for the current Limitation Year and each prior Limitation Year of the Participant’s service:

 

(A)           1.25 times the dollar limitation in effect under section 415(c)(1)(A) (without regard to paragraph (6) thereof) of the Code for such Limitation Year, or

 

(B)           1.4 times the amount which may be taken into account for such Limitation Year under section 415(c)(1)(B) of the Code.

 

If the Participant was a participant as of the end of the first day of the first Limitation Year beginning after December 31, 1986, in one or more Defined Contribution Plans which were in existence on May 6, 1986, the numerator of this fraction will be adjusted if the sum of this fraction and the Defined Benefit Plan Fraction would otherwise exceed 1.0 under the terms of this Plan.  Under the adjustment, an amount equal to the product of the excess of the sum of the fractions over 1.0 times the denominator of this fraction, will be permanently subtracted from the numerator of this fraction.  The adjustment is calculated using the fractions as they would be computed as of the end of the last Limitation Year beginning before January 1, 1987 and disregarding any changes in the terms and conditions of the plan made after May 5, 1986, but using the section 415 limitation applicable to the first Limitation Year beginning on or after January 1, 1987.  The Annual Addition for any Limitation Year shall not be recomputed to treat all nondeductible employee contributions as Annual Additions.

 

(f)           “Limitation Year” means the calendar year or any other 12-consecutive-month period adopted pursuant to written resolution.

 

 

5-3


 

 

(g)           “Section 415 Compensation” means wages, salaries, other amounts received for personal services actually rendered (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits and reimbursements or other expense allowances under a nonaccountable plan), and earned income (within the meaning of section 401(c)(2) of the Code) from the Employer and all Affiliates and (to the extent provided by applicable Treasury Regulations) from an employer purchasing a section 403(b) annuity.  The term includes income from sources outside the United States (as defined in section 911(b) of the Code); but, to the extent provided by applicable Treasury Regulations, the term excludes amounts which receive special tax benefit.  The term also includes differential wage payments (as defined in section 3401(h)(2) of the Code).  Section 415 Compensation is determined without regard to the exclusions from gross income in sections 931 and 933 of the Code.  Deferred compensation is included only with respect to amounts received pursuant to an unfunded non-qualified plan and only in the Limitation Year such amounts are included in the Employee’s gross income.  Section 415 Compensation actually paid or made available to a Participant within a Limitation Year (including, at the election of the Employer, amounts earned but not paid in a Limitation Year because of the timing of pay periods and pay days if these amounts are paid during the first few weeks of the next Limitation Year, the amounts are included on a uniform and consistent basis with respect to all similarly situated Employees and no amount is included in more than one Limitation Year) shall be used unless, for Limitation Years beginning before December 31, 1991 (or such later date as may be prescribed by Treasury Regulations), the Employer and each Affiliate maintaining a qualified plan elect, by the adoption of a written resolution, to use the Section 415 Compensation accrued for an entire Limitation Year.  The term includes amounts that are includible in gross income of an Employee under the rules of section 409A or 457(f)(1)(A) of the Code or because the amounts are constructively received by the Employee.  Except as follows, in order to be taken into account for a Limitation Year, Section 415 Compensation must be paid or treated as paid to an Employee prior to the Employee’s severance from employment with the Employer.  Section 415 Compensation described below does not fail to constitute Section 415 Compensation merely because it is paid after the Employee’s severance from employment with the Employer provided it is paid by the later of 2½ months after the severance or the end of the Limitation Year that includes the date of the severance.  Section 415 Compensation is subject to this rule if (A) it is regular compensation for services during the Employee’s regular work hours or for services outside the Employee’s regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments, and (B) the payment would have been paid to the Employee prior to a severance from employment if the Employee had continued in employment with the Employer.

 

5.2            Limitation on Annual Additions .

 

(a)            Limitation Before July 1, 2002 .  Effective for Limitation Years beginning before July 1, 2002, subject to Section 5.3, and subject to Treasury Regulations covering the aggregation during a Limitation Year of previously unaggregated plans, the Annual Addition with respect to a Participant for any Limitation Year to which section 415 of the Code applies shall not exceed the lesser of:

 

 

5-4


 

 

(1)           $30,000 (or, if greater, one-fourth of the Defined Benefit Plan dollar limitation set forth in section 415(b)(1)(A) of the Code (as adjusted under section 415(d) of the Code), determined as of the last day of the applicable Limitation Year), or

 

(2)           25% of such Participant’s Section 415 Compensation for such Limitation Year.

 

The limitation in (2) above shall not apply with respect to any contributions for medical benefits (within the meaning of section 401(h) or 419A(f)(2) of the Code) which are otherwise treated as an Annual Addition under section 415(l) or 419A(d)(2) of the Code.

 

(b)            Limitations after June 30, 2002 .

 

(1)            Effective Date . This Section shall be effective for Limitation Years beginning after June 30, 2002.

 

(2)            Maximum Annual Addition . Except to the extent permitted under any provision that permits catch-up contributions under EGTRRA section 631 and section 414(v) of the Code, if applicable, the Annual Addition that may be contributed or allocated to a Participant’s Account under the Plan for any Limitation Year shall not exceed the lesser of:

 

(A)           $40,000, as adjusted for increases in the cost-of-living under section 415(d) of the Code, or

 

(B)           100% of the Participant’s Section 415 Compensation for the Limitation Year. The compensation limit shall not apply to any contribution for medical benefits after severance from employment (within the meaning of section 401(h) or section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition.

 

(c)            Treatment of Excess Annual Additions .

 

(1)            General .  If, as a result of the allocation of forfeitures, a reasonable error in estimating a Participant’s Section 415 Compensation, a reasonable error in determining the amount of elective deferrals (within the meaning of section 402(g)(3) of the Code) that may be made within the limits of section 415 of the Code, or under other facts and circumstances which the Commissioner of Internal Revenue finds justify the availability of the rules set forth herein, the Annual Addition under the Plan for a particular Participant would cause the limitations of (a) or (b) above applicable to that Participant for the Limitation Year to be exceeded, then:

 

(A)           a Participant’s or former Participant’s 401(k) deferrals together with any gains allocated thereto shall be returned to the extent that the return would reduce the excess amount (and in such a case the contributions shall be disregarded under the Plan’s provisions relative to sections 402(g), 401(k)(3) and 401(m)(2) of the Code);

 

 

5-5


 

 

(B)           any excess amount remaining after the application of (A) above shall be deemed a forfeiture for such Plan Year and shall be used to reduce Employer contributions for the next Limitation Year (and succeeding Limitation Years, as necessary) for all of the Participants in the Plan, and shall be allocated and reallocated among Participants’ accounts, pursuant to the Plan’s formula for allocating Employer contributions, in the next Limitation Year (and succeeding Limitation Years, as necessary); and

 

(C)           if there is any excess amount remaining after the application of  (B) above, a Participant or former Participant’s 401(k) deferrals to be made on behalf of a  Participant or former Participant together with any gains allocated thereto shall be returned to the extent the return would reduce the excess amount (and in such a case the contributions shall be disregarded under the Plan’s provisions relative to sections 402(g), 401(k)(3) and 401(m)(2) of the Code);

 

(2)            Allocation of Excess Among Plans .  If amounts are allocated to a Participant’s account under more than one Defined Contribution Plan, then any excess shall be deemed to consist of the amounts last allocated, except that Annual Additions attributable to a welfare benefits fund as defined in section 419(e) of the Code will be deemed to have been allocated first regardless of the actual allocation date.  If amounts are allocated under more than one Defined Contribution Plan as of the same date, then the excess attributed to each such plan shall be the same proportion of the total excess as the ratio of the amount allocated to the Participant as of such date under such plan divided by the total amount allocated as of such date (determined without regard to the limitations under section 415 of the Code); provided however, no excess shall be attributed to an employee stock ownership plan within the meaning of section 4975(e)(7) of the Code, until the Annual Additions under all other Defined Contribution Plans (other than a tax credit employee stock ownership plan, or “TCESOP,” within the meaning of section 409 of the Code) have been reduced to zero, and no excess shall be attributed to a TCESOP until the Annual Additions under all other Defined Contribution Plans have been reduced to zero.

 

(3)            Excess Annual Additions Corrections .  Effective as of the first Limitation Year commencing on or after July 1, 2007, the correction methods for handling excess Annual Additions specified above no longer apply.  However, similar correction methods may be available under the IRS Employee Plans Compliance Resolution System.

 

5.3            Limitation in Case of Defined Benefit Plan and Defined Contribution Plan for the Same Employee .

 

(a)            General .  In any case in which a Participant has at any time participated in one or more Defined Benefit Plans, the sum of the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction, for any Limitation Year to which section 415 of the Code applies, may not exceed 1.0, subject to Treasury Regulations covering the aggregation during a Limitation Year of previously unaggregated plans.  If such sum would exceed 1.0, then the Annual Additions to the Plan shall be reduced only to the extent that such excess is not eliminated by reductions in the accrual of Defined Benefit Plan benefits.  Effective for Plan Years beginning after June 30, 2000, this combined limit shall no longer apply.

 

 

5-6


 

 

(b)            Top-Heavy Rule .  If a Limitation Year contains any portion of a Plan Year for which the Plan is a Top-Heavy Plan, then “1.0” shall be substituted for “1.25” in Sections 5.1(c)(2)(A) and 5.1(e)(2)(A); provided however, any limitation which results from the application of this sentence may be exceeded so long as there are no Defined Benefit Plan accruals for the individual and no employer contributions, forfeitures, or voluntary nondeductible contributions allocated to the individual; and provided further, this sentence shall not apply if the sum, for any Aggregation Group of which the Plan is a part, of the Key Employees’ benefits from all Defined Benefit Plans and Defined Contribution Plans does not exceed 90% of the total of all Participants’ benefits and if the Employer contribution would satisfy the requirements of Section 0 if “4%” were substituted for “3%” and “7½%” were substituted for “5%.”  Effective for Plan Years beginning on or after July 1, 2009, this provision shall be applied on the basis of the Annual Employer Contribution being 2% of Annual Earnings plus 2% of Excess Earnings.

 

 

5-7


 

 

ARTICLE 6

 

VESTING AND FORFEITURES

 

6.1            Vesting Provisions .

 

(a)            Rollover Account .  A Participant’s rights to his Rollover Account shall be nonforfeitable at all times.

 

(b)            Section 401(k) Contribution Account .  A Participant’s rights to his Section 401(k) Contribution Account shall be nonforfeitable at all times.

 

(c)            Annual Employer Contribution Account and Profit Sharing Contribution Account .

 

(1)            At Normal Retirement Age .  Upon and after a Participant’s attainment of Normal Retirement Age, if he is then in the service of the Employer or an Affiliate, he shall have a nonforfeitable right to his Annual Employer Contribution Account and Profit Sharing Contribution Account.

 

(2)            Prior to Normal Retirement Age .

 

(A)            Vesting Schedule .  A Participant shall have a nonforfeitable right to a percentage of his Annual Employer Contribution Account and his Profit Sharing Contribution Account on the basis of the number of Vesting Years with which he is credited, pursuant to the following vesting schedule:

 

Vesting Years

 

Nonforfeitable

Percentage

 

Less than 2

 

0%

2

 

20%

3

 

40%

4

 

60%

5

 

80%

6 or more

 

100%

 

(B)            Death or Disability .  Anything in (A) above to the contrary notwithstanding, but subject to (C) below, if a Participant’s employment by the Employer terminates because of his death or incurrence of a Disability, then his Annual Employer Contribution Account and his Profit Sharing Contribution Account shall be fully vested.

 

 

6-1


 

 

If a Participant is reemployed after incurring a forfeiture, any balance remaining in his Annual Employer Contribution Account or Profit Sharing Contribution Account at the tim


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