<PAGE> 1
FORM 10-Q
---------
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549
----------------------
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999.
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO
________________.
Commission File No. 0-13375
LSI Industries Inc.
State of Incorporation - Ohio IRS Employer I.D. No. 31-0888951
10000 Alliance Road
Cincinnati, Ohio 45242
(513) 793-3200
Indicate by checkmark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
----- -----
Common Shares, no par value. Shares outstanding at November 1, 1999: 10,176,513
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LSI INDUSTRIES INC.
-------------------
FORM 10-Q
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FOR THE QUARTER ENDED SEPTEMBER 30, 1999
----------------------------------------
INDEX
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Begins on
Page
----
PART I. Financial Information
ITEM 1. FINANCIAL STATEMENTS
Consolidated Income Statements........................ 3
Consolidated Balance Sheets........................... 4
Consolidated Statements of Cash Flows................. 5
Notes to Financial Statements......................... 6
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................................... 9
PART II. Other Information
ITEM 6. Exhibits and Reports on Form 8-K...................... 12
Signatures ...................................................... 12
Page 2
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PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
LSI INDUSTRIES INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Three Months Ended
September 30
------------------
(in thousands, except per 1999 1998
share data; unaudited) ---- ----
Net sales $ 64,014 $ 53,414
Cost of products sold 42,919 35,180
-------- --------
Gross profit 21,095 18,234
Selling and administrative expenses 12,605 11,973
-------- --------
Operating income 8,490 6,261
Interest expense 120 54
Interest (income) (283) (128)
Other expense -- 32
-------- --------
Income before income taxes 8,653 6,303
Income tax expense 3,296 2,391
-------- --------
Net income $ 5,357 $ 3,912
======== ========
Earnings per common share
Basic $ .53 $ .41
======== ========
Diluted $ .52 $ .40
======== ========
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
Page 3
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LSI INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts) September 30, June 30,
1999 1999
------------- --------
ASSETS
- ------
Current Assets
Cash and cash equivalents $ 11,806 $ 13,881
Accounts receivable 41,162 39,630
Inventories 26,482 25,261
Other current assets 2,305 2,687
-------- --------
Total current assets 81,755 81,459
Property, plant and equipment, net 34,526 32,985
Goodwill and other assets, net 23,096 23,270
-------- --------
$139,377 $137,714
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
- ----------------------------------
Current Liabilities
Notes payable to bank $ -- $ 379
Current maturities of long-term debt 196 196
Accounts payable 14,541 14,628
Accrued expenses 14,612 16,641
-------- --------
Total current liabilities 29,349 31,844
Long-Term Debt 1,670 1,705
Other Long-Term Liabilities 1,442 1,413
Shareholders' Equity
Preferred shares, without par value;
Authorized 1,000,000 shares; none issued -- --
Common shares, without par value;
Authorized 30,000,000 shares;
Outstanding 10,174,313 and 10,151,690
shares, respectively 45,896 45,588
Retained earnings 61,020 57,164
-------- --------
Total shareholders' equity 106,916 102,752
-------- --------
$139,377 $137,714
======== ========
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
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LSI INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) Three Months Ended
September 30
------------------
1999 1998
---- ----
Cash Flows from Operating Activities
Net income $ 5,357 $ 3,912
Non-cash items included in income
Depreciation and amortization 1,370 1,098
Deferred income taxes 29 30
Deferred compensation plan 162 142
Loss on disposition of fixed assets -- 32
Changes in operating assets and liabilities
Accounts receivable (1,532) 1,346
Inventories (1,221) 183
Accounts payable and other (1,693) (4,064)
Change in liability for discontinued operations (41) (5)
-------- --------
Net cash flows from operating activities 2,431 2,674
-------- --------
Cash Flows from Investing Activities
Purchase of property, plant and equipment (2,737) (411)
-------- --------
Net cash flows from investing activities (2,737) (411)
-------- --------
Cash Flows from Financing Activities
Decrease in notes payable to bank (379) --
Payment of long-term debt (35) (26)
Cash dividends paid (1,501) (1,209)
Purchase of treasury shares (300) (191)
Exercise of stock options 446 273
-------- --------
Net cash flows from financing activities (1,769) (1,153)
-------- --------
Increase (decrease) in cash and cash equivalents (2,075) 1,110
Cash and cash equivalents at beginning of year 13,881 9,338
-------- --------
Cash and cash equivalents at end of period $ 11,806 $ 10,448
======== ========
Supplemental Cash Flow Information
Interest paid $ 56 $ 48
Income taxes paid $ 790 $ 871
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
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LSI INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: INTERIM FINANCIAL STATEMENTS
The interim financial statements are unaudited and are prepared in
accordance with rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. In the opinion of Management, the
interim financial statements include all normal adjustments and
disclosures necessary to present fairly the Company's financial
position as of September 30, 1999, and the results of its operations
and its cash flows for the periods ended September 30, 1999 and 1998.
These statements should be read in conjunction with the financial
statements and footnotes included in the fiscal 1999 annual report.
NOTE 2: RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting
for Derivative Instruments and Hedging Activities," which establishes
standards for reporting and disclosure of derivative and hedging
instruments. SFAS No. 133 is effective for fiscal years beginning after
June 15, 2000. The Company will not be affected by this new standard
because the Company has no derivative or hedging financial instruments.
NOTE 3: BUSINESS SEGMENT INFORMATION
LSI operates in two business segments - the Image Group and the
Commercial / Industrial Lighting Group. The Image Group manufactures
and sells exterior and interior visual image elements (lighting,
graphics, and menu board systems) for the petroleum / convenience store
market and for multi-site retail operations. The Image Group includes
the operations of LSI Petroleum Lighting, LSI Automotive, LSI Images,
LSI Metal Fabrication, SGI Integrated Graphic Systems, Grady McCauley,
and LSI Retail Graphics. The Commercial / Industrial Lighting Group
manufactures and sells primarily outdoor, indoor, and landscape
lighting for the commercial / industrial and multi-site retail markets.
The Commercial / Industrial Lighting Group includes the operations of
LSI Lighting Systems, Courtsider Lighting, Greenlee Lighting, LSI
Marcole, and LSI MidWest Lighting. The Company's most significant
market is the petroleum / convenience store market with approximately
37% and 47% of net sales concentrated in this market in the three
months ended September 30, 1999, and 1998, respectively.
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The following information is provided for the following periods:
Three Months Ended
September 30
-------------------
1999 1998
---- ----
(In thousands)
NET SALES:
Image Group $ 42,396 $ 37,954
Commercial / Industrial Lighting Group 21,618 15,460
-------- --------
$ 64,014 $ 53,414
======== ========
OPERATING INCOME:
Image Group $ 6,157 $ 4,469
Commercial / Industrial Lighting Group 2,333 1,792
-------- --------
$ 8,490 $ 6,261
======== ========
IDENTIFIABLE ASSETS:
Image Group $ 86,741 $ 75,601
Commercial / Industrial Lighting Group 39,136 21,803
-------- --------
125,877 97,404
Corporate 13,500 11,870
-------- --------
$139,377 $109,274
======== ========
CAPITAL EXPENDITURES:
Image Group $ 1,725 $ 177
Commercial / Industrial Lighting Group 1,012 234
-------- --------
$ 2,737 $ 411
======== ========
DEPRECIATION AND AMORTIZATION:
Image Group $ 929 $ 821
Commercial / Industrial Lighting Group 441 277
-------- --------
$ 1,370 $ 1,098
======== ========
Operating income of the business segments includes sales less all
operating expenses including allocations of corporate expense, but
excluding interest expense. Sales between business segments are
immaterial.
Identifiable assets are those assets used by each segment in its
operations, including allocations of shared assets. Corporate assets
consist primarily of cash and cash equivalents, and refundable income
taxes.
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NOTE 4: EARNINGS PER COMMON SHARE
The following table presents the amounts used to compute earnings per
common share and the effect of dilutive potential common shares on net
income and weighted average shares outstanding:
Three Months Ended
(In thousands, except per share) September 30
------------------
1999 1998
---- ----
BASIC EARNINGS PER SHARE
- ------------------------
Net income $ 5,357 $ 3,912
======= =======
Weighted average shares
outstanding during the period,
net of treasury shares 10,169 9,658
======= =======
Basic earnings per share $ .53 $ .41
======= =======
DILUTED EARNINGS PER SHARE
- --------------------------
Net income $ 5,357 $ 3,912
======= =======
Weighted average shares
outstanding during the period,
net of treasury shares 10,169 9,658
Effect of dilutive securities (A):
Impact of common shares to be
issued under stock option plans,
a deferred compensation plan
and contingently issuable shares 192 191
------- -------
Weighted average shares
outstanding (B) 10,361 9,849
======= =======
Diluted earnings per share $ .52 $ .40
======= =======
(A) Calculated using the "Treasury Stock" method as if dilutive
securities were exercised and the funds were used to purchase Common
Shares at the average market price during the period.
(B) The exercise price of all options was less than the average fair
market value of the common shares in the three month periods ended
September 30,1999 and 1998.
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NOTE 5: INVENTORIES
Inventories consist of the following (in thousands):
September 30, 1999 June 30, 1999
------------------ -------------
Raw Materials $12,622 $12,485
Work-in-Process and
Finished Goods 13,860 12,776
------- -------
$26,482 $25,261
======= =======
NOTE 6: CASH DIVIDENDS
The Company paid cash dividends of $1,501,000 and $1,209,000 in the
three month periods ended September 30, 1999 and 1998, respectively. In
October 1999, the Company's Board of Directors declared an $0.08 per
share regular quarterly cash dividend ($814,000) payable on November
16, 1999 to shareholders of record November 9, 1999.
NOTE 7: SHAREHOLDERS' EQUITY
The Company has a non-qualified Deferred Compensation Plan with all
Plan investments in common shares of the Company. A total of 57,557 and
45,030 common shares were held in the Plan as of September 30, 1999 and
June 30, 1999, respectively, and, accordingly, have been recorded as
treasury shares.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
NET SALES BY BUSINESS SEGMENT
(In thousands, unaudited)
Three Months Ended
September 30
------------------
1999 1998
---- ----
Image Group $42,396 $37,954
Commercial / Industrial
Lighting Group 21,618 15,460
------- -------
$64,014 $53,414
======= =======
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RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1998
Net sales of $64,014,000 in the first quarter of fiscal 2000 increased
20% over fiscal 1999 first quarter net sales of $53,414,000. Results of the
Image Group in fiscal 2000 include the operations of LSI Retail Graphics
(acquired April 1999; less than 2% of net sales in the first quarter of fiscal
2000). Results of the Commercial / Industrial Lighting Group include the
operations of LSI MidWest Lighting (acquired January 1999; approximately 8% of
net sales in fiscal 2000). Commercial / Industrial Lighting Group net sales
increased 40% and Image Group net sales increased 12% in the first quarter of
fiscal 2000 as compared to the prior year. The increase in the Commercial /
Industrial Lighting Group net sales resulted primarily from the inclusion of the
results of LSI MidWest Lighting and from increased sales of electrical wire
harnesses. The increase in Image Group net sales is attributed primarily to
growth in the Company's menu board system business and interior graphics, as
well as to the inclusion of the results of LSI Retail Graphics. The Company's
exterior fascia graphics sales volume, a component of the Image Group, was down
approximately 12% as compared to the prior year. Net sales of the Image Group to
the petroleum / convenience store market represented 37% and 47% of net sales in
fiscal 2000 and fiscal 1999, respectively. While sales prices were increased,
inflation did not have a significant impact on sales in 2000 as competitive
pricing pressures held price increases to a minimum.
Gross profit of $21,095,000 increased 16% over last year's gross profit
of $18,234,000, and decreased as a percentage of net sales to 33.0% in fiscal
year 2000 as compared to 34.1% in the prior year. The increase in amount of
gross profit is due primarily to the 20% increase in net sales. The decrease in
gross profit percentage is primarily related to lower margins from the lighting
business that was acquired at the beginning of the second half of fiscal 1999.
Selling and administrative expenses increased to $12,605,000 from $11,973,000
primarily as a result of the addition of the acquired businesses. As a
percentage of net sales, selling and administrative expenses were at 19.7% in
fiscal 2000 as compared to 22.4% in the prior year. The reduction of selling and
administrative expenses as a percentage of net sales is primarily due to a
significant amount of fixed costs with increasing net sales, as well as to
significant sales increases of a product line in the Image Group which has
significantly lower variable selling expenses.
The Company reported net interest income of $163,000 in the first
quarter of fiscal 2000 as compared to net interest income of $74,000 in the
first quarter of fiscal 1999 primarily reflective of an increased amount of
short-term cash investments. The Company's effective tax rate increased to 38.1%
in the first quarter of fiscal 2000 as compared to 37.9% in fiscal 1999
primarily due to increased provision of state and local income tax.
Net income of $5,357,000 increased 37% over $3,912,000 in the first
quarter of fiscal 1998. The increased net income resulted from increased gross
profit on higher net sales, and from the reporting of a larger amount of net
interest income in fiscal 2000 as compared to 1999, partially offset by
increased operating expenses and income taxes. Diluted earnings per share of
$0.52 increased 30% in the first quarter of fiscal 2000 from $0.40 per share in
fiscal 1999. The weighted average common shares outstanding for purposes of
computing diluted earnings per share increased 5% in the first quarter of fiscal
2000 to 10,361,000 shares from 9,849,000 shares in 1999 primarily as a result of
common shares issued to acquire businesses and the exercise of stock options
during the year.
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Certain recently issued accounting pronouncements will affect the
Company's future financial statements and / or disclosures. See Note 1 to the
accompanying consolidated financial statements for additional discussion.
LIQUIDITY AND CAPITAL RESOURCES
The Company considers its level of cash on hand, its current ratio and
working capital levels to be its most important measures of short-term
liquidity. For long-term liquidity indicators, the Company believes its ratio of
long-term debt to equity and its historical levels of net cash flows from
operating activities to be the most important measures.
At September 30, 1999 the Company had working capital of $52.4 million,
compared to $49.6 million at June 30, 1999. The ratio of current assets to
current liabilities increased to 2.79 to 1 from 2.56 to 1. The increased working
capital is primarily attributed to increased receivables and inventory, and
decreased accrued expenses, partially offset by a reduction in cash and cash
equivalents.
The Company generated $2.4 million of cash from operating activities in
the first quarter of fiscal 2000 as compared to $2.7 million in the first
quarter of fiscal 1999. This modest decrease in net cash flows from operating
activities in the first quarter of fiscal 2000 is primarily the net result of
increased net income, increased accounts receivable and inventories, and a
lesser decrease in accounts payable and accrued expenses. As of September 30,
1999, the Company's days sales outstanding were at approximately 58 days,
increased from the June 30, 1999 statistic of 54 days.
In addition to cash generated from operations, the Company's primary
source of liquidity continues to be its lines of credit. The Company has two
unsecured revolving lines of credit totaling $32 million, all of which was
available as of October 29, 1999. A $12 million line of credit expires in the
fourth quarter of fiscal 2000. The primary line of credit in the amount of $20
million is a three year committed credit facility expiring in fiscal 2002 with
an annual renewal in the fourth quarter of fiscal 2000. The Company believes
that the total of available lines of credit plus cash flows from operating
activities is adequate for the Company's fiscal 2000 operational and capital
expenditure needs. The Company is in compliance with all of its loan covenants.
Capital expenditures of $2.7 million in the first quarter of fiscal 2000 compare
to $0.4 million in the prior year's first quarter. Spending in fiscal year 2000
was primarily related to capitalization of Company-wide enterprise resource
planning software and related implementation costs, expansion of the Company's
Cincinnati facilities, equipment, and tooling for new products. Capital
expenditures totaling approximately $8 million are planned for fiscal 2000,
exclusive of business acquisitions.
On October 25, 1999 the Board of Directors declared a cash dividend of
$0.08 per share (approximately $814,000) to be paid November 16, 1999 to
shareholders of record on November 9, 1999. Cash dividends paid in the first
quarter of fiscal 2000 totaled $1.5 million, a 24% increase over the $1.2
million paid in the first quarter of fiscal 1999.
The Company has completed its review of its business systems, office
support systems, and its facilities and equipment with respect to year 2000
programming deficiencies. No systems or equipment critical to operation of the
business have been identified as having a year 2000 deficiency, and therefore
the Company has not yet developed any contingency plans. The review has extended
to major suppliers and customers, and this element of the review is expected to
be completed by November 30, 1999. The Company does not anticipate material
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costs to be incurred to modify or replace any affected systems. The Company
anticipates completion of this process prior to November 30, 1999. The Company
has not to date developed any contingency plans related to its major suppliers.
Such plans will depend upon the responses from major suppliers in the event any
of them should indicate that they will not be year 2000 compliant.
The Company continues to seek opportunities to invest in new products
and markets, and in acquisitions which fit its strategic growth plans in the
lighting and graphics markets. The Company believes that adequate financing for
any such investments or acquisitions will be available through future borrowings
or through the issuance of common or preferred shares in payment for acquired
businesses.
PART II. OTHER INFORMATION
--------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
a) Exhibits
10.1 LSI Industries Inc. Retirement Plan (Amended and Restated
as of October 1, 1999)
27 Financial Data Schedule
b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this Report is filed.
[All other items required in Part II have been omitted because they are
not applicable or are not required.]
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LSI Industries Inc.
-------------------
BY: /s/ Robert J. Ready
--------------------------------
Robert J. Ready
President and Chief Executive Officer
(Principal Executive Officer)
BY: /s/ Ronald S. Stowell
--------------------------------
Ronald S. Stowell
Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
November 2, 1999
Page 12
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- --------------------------------------------------------------------------------
Exhibit 10.1
LSI INDUSTRIES INC. RETIREMENT PLAN
(Amended and Restated as of October 1, 1999)
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
<TABLE>
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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 - 2
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
2.35 "Plan Assets" ..............................................................................2 - 7
2.36 "Plan Year" ................................................................................2 - 7
2.37 "Present Value".............................................................................2 - 7
2.38 "Prior Plan" ...............................................................................2 - 8
</TABLE>
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2.39 "Profit Sharing Contribution Account".......................................................2 - 8
2.40 "Rollover Account" .........................................................................2 - 8
2.41 "Section 401(k) Contribution Account" ......................................................2 - 8
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 - 10
2.49 "Valuation Date"...........................................................................2 - 10
2.50 "Vesting Years"............................................................................2 - 10
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 - 3
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 Participant After-Tax Contributions.........................................................4 - 7
4.7 Rollover Contributions......................................................................4 - 7
4.8 Reemployment of Veterans....................................................................4 - 7
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
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
</TABLE>
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<TABLE>
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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 - 2
8.5 Time of Payment to a Participant............................................................8 - 2
8.6 Restrictions on Section 401(k) Withdrawals and Distributions................................8 - 3
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 - 4
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
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
</TABLE>
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<TABLE>
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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 - 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 - 2
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
</TABLE>
-iv-
<PAGE> 6
ARTICLE 1
INTRODUCTION AND PURPOSE
------------------------
1.1 AMENDMENT AND RESTATEMENT. LSI Industries Inc. hereby amends and
restates the LSI Industries Inc. Retirement Plan and Trust in its entirety,
effective as of October 1, 1999, 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.
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 money purchase pension plan.
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<PAGE> 7
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.
(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) or 403(b) of the Code.
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<PAGE> 8
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.
2.6 "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
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<PAGE> 9
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) or section 414(h)(2) of the Code (relating to certain
picked-up employee contributions).
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, only the first $160,000 (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.
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
Articles 9 and 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
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<PAGE> 10
(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
(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.
(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 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 the
amendment and restatement shall mean October 1, 1999.
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
2-4
<PAGE> 11
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.
2.21 "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
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<PAGE> 12
(b) received Adjusted Compensation from the Employer in excess of
$80,000 (as adjusted pursuant to section 415(d) of the Code) during the twelve
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 twelve month period.
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;
(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; and
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<PAGE> 13
(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.
2.29 "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 twelve-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.
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<PAGE> 14
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.
2.42 "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 six 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.
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<PAGE> 15
(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.
(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.
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<PAGE> 16
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. Notwithstanding the foregoing, years of service before age 21
shall be disregarded for vesting purposes. 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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<PAGE> 17
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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<PAGE> 18
ARTICLE 4
CONTRIBUTIONS AND ALLOCATIONS
-----------------------------
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. 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.
(2) ADJUSTED $10,000 ANNUAL LIMIT. 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 $10,000 (or such
greater amount as may be prescribed by the Secretary of Treasury).
(3) CONTRIBUTION TO THE PLAN. Subject to the limitations
under Article 5, (2) above and (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
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<PAGE> 19
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.
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 (2) 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.
(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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<PAGE> 20
(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 2-1/2 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.
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.
4-3
<PAGE> 21
(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.
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 four percent of Annual Earnings plus four percent
of Excess Earnings (hereinafter the "Annual
4-4
<PAGE> 22
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
(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,
4-5
<PAGE> 23
such contributions will not be invested and begin receiving earnings or losses
until the date they are posted to the Accounts.
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 $160,000.00 (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)). 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.
(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.
4-6
<PAGE> 24
(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 PARTICIPANT AFTER-TAX CONTRIBUTIONS. After-tax contributions by
Participants shall neither be required nor permitted.
4.7 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. Except as provided in an
Adoption Agreement, the Plan will only accept rollovers in an amount of $500 or
more. 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.
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.
4.8 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.
4-7
<PAGE> 25
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;
(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 percent 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.
5-1
<PAGE> 26
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 three 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 one 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
5-2
<PAGE> 27
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;
(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
5-3
<PAGE> 28
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.
(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. 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.
5.2 LIMITATION ON ANNUAL ADDITIONS.
(a) LIMITATION. 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:
(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 percent of such Participant's Section 415
Compensation for such Limitation Year.
5-4
<PAGE> 29
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) 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) 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);
(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
5-5
<PAGE> 30
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.
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.
(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 percent of the total of all
Participants' benefits and if the Employer contribution would satisfy the
requirements of Section 4.4(b) if "4 percent" were substituted for "3 percent"
and "7-1/2 percent" were substituted for "5 percent."
5-6
<PAGE> 31
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:
<TABLE>
<CAPTION>
Nonforfeitable
Vesting Years Percentage
------------- --------------
<S> <C>
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
</TABLE>
(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
<PAGE> 32
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 time of such reemployment shall be separately
accounted for, shall be nonforfeitable, and shall not be subject to the above
vesting schedule.
(C) VESTED PERCENTAGE UNDER THE OLD PLAN.
Anything in (A) above to the contrary notwithstanding, a Participant shall have
a nonforfeitable right to a percentage of his Employer Contribution Account and
his Profit Sharing Contribution Account that is no less than the vested
percentage in his account derived from Employer Contributions and Profit Sharing
Contributions computed under the Old Plan on the date immediately prior to the
later of the effective date of this restatement of the Plan or the date on which
this restatement of the Plan is adopted.
(3) FORFEITURE FOR BREAK IN SERVICE. If a Participant has
not been an Employee for five consecutive Plan Years, then his forfeitable
interest (at such time) in his Annual Employer Contribution Account and his
Profit Sharing Contribution Account shall be forfeited.
(4) EFFECT OF CASH-OUT DISTRIBUTIONS.
(A) FORFEITURE. If a Participant, who is not
fully vested in his Annual Employer Contribution Account or his Profit Sharing
Contribution Account, terminates service and receives a distribution of the
present value of his entire nonforfeitable interest, then his forfeitable
interest therein shall be forfeited immediately. If the present value of the
portion of the Participant's vested Account balance attributable to his Annual
Employer Contribution Account, Profit Sharing Contribution Account, and Section
401(k) Contribution Account exceeds $5,000, then there shall be no forfeiture
hereunder unless the Participant has voluntarily requested to receive a
distribution.
(B) RESTORATION. Any amount that a Participant
forfeited under (A) above shall be restored, unadjusted for any gains or losses,
if such Participant resumes employment with the Employer covered by the Plan and
if he repays to the Plan the full amount of such distribution before the earlier
of:
(i) five consecutive Plan Years from the
date he was last an Employee, or
(ii) the end of the five-year period
beginning with his resumption of employment with the Employer.
(C) SOURCE OF RESTORATION. Any restoration under
(B) above shall be made from available forfeitures before any other allocation
thereof, and, if such forfeitures are insufficient, then the Employer shall
contribute the difference.
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(D) SPECIAL RULE. A Participant, who has no
vested interest in his Annual Employer Contribution Account or his Profit
Sharing Contribution Account and no Section 401(k) Contribution Account or
Rollover Account and who terminates service, shall be treated for purposes of
(A) above as if he had received a distribution of the present value of his
entire nonforfeitable interest as of the date of his termination of service.
Such a Participant who resumes employment with the Employer before the
expiration of five consecutive Plan Years since he was last an Employee, shall
be treated under (B) above as if he had repaid to the Plan the full amount of
that distribution as of the date of his resumption of employment.
(5) FORFEITURE FOR DEATH AFTER SEPARATION FROM SERVICE.
If a Participant dies after his separation from service with the Employer and if
the Administrator has notice thereof, then any forfeitable portion of his
Account shall be forfeited.
6.2 ALLOCATION OF FORFEITURES. Forfeitures occurring during a Plan Year,
first shall be applied, under Section 6.1(c)(4)(B) to the restoration of
forfeitures and, then, shall be used to reduce future Annual Employer
Contributions due under Section 4.3 or Profit Sharing Contributions due under
Section 4.2.
6.3 VESTING UPON TERMINATION OR PARTIAL TERMINATION OF THE PLAN OR
DISCONTINUANCE OF CONTRIBUTIONS. Notwithstanding the provisions of Section 6.1,
upon the termination or partial termination of the Plan or the complete
discontinuance of contributions under the Plan, the amounts then credited to all
affected Participants' Accounts shall become fully vested.
6.4 UNCLAIMED ACCOUNT PROCEDURE. Neither the Trustee nor the Plan
Administrator shall be obliged to search for, or ascertain the whereabouts of,
any Participant or Beneficiary. The Plan Administrator shall notify any
Participant or Beneficiary that he is entitled to a distribution under this Plan
by certified or registered mail addressed to his last known address of record
with the Plan Administrator or the Employer. The notice shall quote the
provisions of this Section. If the Participant fails to claim his benefits or
make his whereabouts known in writing to the Plan Administrator within a
reasonable period of time and the Plan Administrator does not know the
whereabouts of the Participant or his Beneficiary, the Plan Administrator shall
make reasonable efforts to locate the Participant (or Beneficiary). These
efforts may include, but are not limited to, requesting the Social Security
Administration to notify the Participant (or Beneficiary) pursuant to the
procedures it has established for this purpose, requesting the Internal Revenue
Service to forward such notification pursuant to the procedures it has
established for this purpose, or taking any other reasonable means to locate the
Participant (or Beneficiary). If the Participant or Beneficiary fails to claim
his benefits or make his whereabouts known in writing to the Plan Administrator
within two calendar years after the date of notification, the benefits under the
Plan of the Participant or Beneficiary will disposed of as follows:
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(a) If the whereabouts of the Participant are unknown but the
whereabouts of the Participant's Beneficiary then are known to the Plan
Administrator, distribution will be made to the Beneficiary.
(b) If the Trustee is unable to distribute the Participant's
benefits under Subsection (a), the benefits of the Participant or Beneficiary
shall be forfeited in accordance with Section 6.1 of the Plan. In the event a
Participant makes a claim for a benefit forfeited pursuant to this Subsection,
the Plan Administrator shall direct the Trustee to reinstate the forfeited
benefit, without adjustment for interim gains or losses experienced by the
Investment Funds.
While payment is pending, the Plan Administrator shall direct the Trustee to
hold the Participant's benefits as previously directed in accordance with
Article 7. The segregated account shall be entitled to all income it earns and
shall bear all expense or loss it incurs. Any payment made pursuant to the power
herein conferred upon the Plan Administrator shall operate as a complete
discharge of all obligations of the Trustee and the Plan Administrator, to the
extent of the distributions so made.
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ARTICLE 7
INVESTMENT OF ACCOUNTS
----------------------
7.1 FUNDING POLICY AND METHOD. The Plan Assets shall be held under and the
benefits under the Plan shall be funded through such trusts as the Board, in its
sole discretion, may establish or cause to be established for the purposes of
carrying out the Plan. The Board shall determine the form and terms of any such
trust, from time to time, consistent with the objectives of the Plan, ERISA and
any other applicable legal requirements, and may remove any trustee and select a
successor trustee or trustees or may terminate any such trust. Any such trust so
established and maintained is and shall be a part of the Plan.
7.2 FUNDING POLICY. The funding policy for the Plan shall be as set forth
in Section 7.3.
7.3 INVESTMENT ELECTIONS. Each Participant shall elect the manner in which
his Account and any future contributions thereto are to be invested from among
such funds as the Administrator directs the person or entity holding the Plan
Assets to make available and any other legally permissible investment which the
person or entity holding the Plan Assets agrees to hold.
Such an election shall be effective as soon thereafter upon receipt of the
election as is practicable. An investment election must be made in the manner
specified by the Committee. If a Participant fails to make an election, then his
Account shall be invested as provided by the Committee.
7.4 INVESTMENT ADJUSTMENT. Any earnings or losses on Plan Assets shall be
credited solely to the Account to which such Plan Assets are allocated.
7.5 INSURANCE. No Plan Assets may be invested in life insurance contracts.
7.6 LOANS.
(a) ELIGIBILITY. Upon proper application with the Trustee by an
Employee or a Participant who is a party in interest within the meaning of
section 3(14) of ERISA (the "borrower"), the Committee may authorize and direct
the Trustee to grant a loan to such borrower, subject to the conditions set
forth below.
(b) CONDITIONS. The terms, conditions, and procedures governing
or otherwise relating to any loan shall be as set forth herein, as well as those
specified by the Committee in the form of Loan Application and Promissory Note
and Pledge of Security, which are hereby incorporated by reference into the Plan
as the same are from time to time in effect, that are consistent with the
requirements of section 4975(d)(1) of the Code. Loans under (a) above shall meet
all of the following requirements:
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(1) Loans shall be made available to all Employees and
Participants who are a party in interest within the meaning of Section 3(14) of
ERISA on a reasonably equivalent basis.
(2) Loans shall be made available only for the following
reasons:
(A) medical expenses previously incurred by the
borrower, the borrower's spouse, or any Dependents of the borrower or the need
for any such person to obtain such medical care;
(B) costs directly related to the purchase
(excluding mortgage payments) of a principal residence for the borrower;
(C) payment of tuition and related educational
fees for post-secondary education for the borrower, his spouse, children, or
other Dependents;
(D) payments necessary to prevent the eviction
of the borrower from his principal residence or foreclosure on the mortgage on
the borrower's principal residence;
(E) expenses for the rehabilitation or
remodeling of the principal residence of the borrower; or
(F) expenses for the funeral of a member of the
immediate family of the borrower.
(3) In determining whether to grant a loan to a borrower
and the amount of any such loan, the Committee shall give consideration to:
(A) whether the borrower has a sufficient level
of income to amortize the loan according to its terms;
(B) whether the loan meets the requirements of
this Section 7.6; and
(C) the basic purpose of the Plan.
(4) Loans shall bear a reasonable rate of interest as
determined from time to time by the Committee and shall be a reasonable interest
rate commensurate with correct interest rates charged by persons in the business
of lending money.
(5) Loans shall be adequately secured, which security
shall, notwithstanding Section 15.2, consist of an assignment of 50 percent of a
borrower's nonforfeitable benefit under the Plan determined as of the date as of
which the loan is made.
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(6) Loans shall be repaid only by payroll withholding
properly authorized by the borrower; provided that the Committee may allow
prepayment through other means. In the event a borrower is no longer on the
payroll of an Employer or an Affiliate, the loan payments shall be made directly
to the Plan by the borrower without payroll withholding.
(7) If the Qualified Joint and Survivor Annuity would be
the automatic form of benefit to the Participant under Section 9.2 of the Plan
at the time such accrued nonforfeitable benefit is used as security, then, such
loan and the possible reduction in the Participant's benefit must, within the
90-day period prior to making the loan, be consented to by the Participant and
(if he is married) his spouse. A new consent is required if the Participant's
Account balance is used for any increase in the amount of security. The consent
shall comply with the requirements of Section 9.2(c)(4) but shall be deemed to
meet any requirements contained therein even though the Participant is married
to a different spouse at the time of any setoff.
(8) No Participant loan shall exceed the limitations
under (c) and (d) below.
(9) In the event of default, foreclosure on the
Participant's accrued nonforfeitable benefit, to the extent used as security for
the loan, will occur. Events constituting default shall be specified in the
promissory note or security agreement to be executed by the Participant.
(c) LIMITATION ON AMOUNT.
(1) The original principal amount of any loan shall not
be less than $1,000 and the Committee may limit the frequency of loans made to a
borrower in accordance with uniform rules and procedures. No more than 2 loans
to a borrower may be outstanding at any time.
(2) The principal amount of any loan hereunder to a
borrower shall not exceed, when aggregated with the outstanding balance of all
loans to the borrower from other plans maintained by an Employer or a Affiliate,
an amount equal to the lesser of:
(A) $50,000 (reduced by the highest outstanding
balance of any other loan to the borrower from the Plan or another plan of an
Employer or an Affiliate during the preceding 12-month period); or
(B) 50% of the aggregate amount of the
borrower's nonforfeitable interest under the Plan and his nonforfeitable
interest under all other plans maintained by an Employer or an Affiliate.
(d) REPAYMENT PERIOD. Each loan, by its terms, shall be required
to be repaid within 5 years except in the case of a loan used to acquire any
dwelling unit which within a reasonable time is to be used (determined at the
time the loan is made) as the principal residence of the Participant which shall
be required to be repaid within 15 years. Loan repayments may be
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suspended under this Plan during a Participant's Employer-Approved Leave of
Absence for military service as permitted under section 414(u)(4) of the Code.
(e) LEVEL AMORTIZATION. Each loan shall be subject to
substantially level amortization, with payments of principal and interest not
less frequently than in equal monthly installments, over the term of the loan. A
borrower may, however, prepay the entire balance of his loan in one single lump
sum without the imposition of the prepayment penalty.
(f) ACCOUNTING FOR LOANS. Any loan granted to the borrower shall
be deemed an earmarked investment made solely for the borrower's benefit and
shall be evidenced by a separate loan account of the borrower. A borrower's
separate loan amount shall be established as of the date on which the loan is
made and shall be funded with an amount equal to the principal amount of the
loan that is transferred to such account from first the borrower's Section
401(k) Contribution Account; next from the borrower's Rollover Account; next
from the borrower's Annual Employer Contribution Account, and finally from the
borrower's Profit Sharing Contribution Account. Transfers to a loan account
shall be made from such of the investment elections in which such Accounts are
invested as the borrower shall direct and shall be subject to any restrictions
and limitations applicable under the terms of any instrument in which the
borrower's other Plan Accounts are invested. All principal and interest payments
made on a loan granted hereunder shall be allocated upon receipt to the
borrower's other Plan Accounts in the proportion that such Accounts were debited
to fund the borrower's separate loan account, but based upon his election then
in effect pursuant to Section 7.3. The balance of borrower's separate loan
account shall be decreased by the amount of principal payments and the loan
account shall be closed when the loan has been repaid in full. Any expenses of
the Trustee which are directly attributable to its administration of a
borrower's separate loan account, as determined by the Trustee, shall be charged
to and paid from the borrower's Plan Accounts in the proportion that such
Accounts were debited to from the borrower's separate loan account.
(g) EFFECT OF DEFAULT ON BENEFITS. For purposes of determining the
amount of the Qualified Joint and Survivor Annuity or Preretirement Survivor
Annuity otherwise payable under Section 9.2 or 10.1, a Participant's Account
shall be reduced by that part of his Account held as security for the loan and
treated as payment in satisfaction of the loan (including accrued interest).
Upon a Participant's death, if less than 100 percent of his Account is payable
to his Surviving Spouse, then, in determining the amount payable to the
Surviving Spouse, the amount treated as payment in satisfaction of any loan
(including accrued interest) shall first be treated as reducing the Account.
In the event of failure on the part of a borrower to make, or cause to be made,
any payment required under the terms of the loan within 60 days following the
date on which such payment shall become due or in the event the Employee revokes
a payroll withholding for loan repayment, the Committee may declare the loan to
be in default, and the entire unpaid balance of such loan, together with accrued
interest, shall be immediately due and payable. In any such event, if such
balance and interest thereon is not then paid, the Trustee shall charge the
account of the borrower
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<PAGE> 39
with the amount of such balance and the accrued interest as of the earliest date
a distribution may be made from the Plan to the borrower without adversely
affecting the tax qualification of the Plan.
(h) ADMINISTRATION. The Committee is authorized to administer the
loan program. Loans will be approved if the proper forms and documentation are
completed and delivered to the Trustee, the amount of the loan requested does
not exceed the limits specified in this Section, adequate security authorized in
this Section is delivered to the Trustee, and the other provisions of this
Section are satisfied.
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ARTICLE 8
WITHDRAWALS AND DISTRIBUTIONS
-----------------------------
8.1 WITHDRAWALS FROM SECTION 401(k) CONTRIBUTION ACCOUNT, ANNUAL EMPLOYER
CONTRIBUTION ACCOUNT AND PROFIT SHARING CONTRIBUTION ACCOUNT.
(a) ELECTION. After attainment of age 59-1/2, a Participant may
make withdrawals from his Section 401(k) Contribution Account, Rollover Account,
Annual Employer Contribution Account and Profit Sharing Contribution Account,
except to the extent that a loan is secured thereby, during his employment with
the Employer. Any request for a withdrawal shall be made on such forms or in
such manner as the Committee shall direct and shall be subject to such time and
other limitations as the Administrator shall prescribe.
(b) TIME OF PAYMENT. Any withdrawal requested shall be payable as
soon as administratively feasible after the Trustee receives notice of such
withdrawal.
8.2 WITHDRAWALS FROM ROLLOVER ACCOUNT.
(a) ELECTION. A Participant shall have the right to make
withdrawals from his Rollover Account, except to the extent that a loan is
secured thereby. The Participant's exercise of his rights of withdrawal shall be
made on such forms or in such manner as the Committee shall direct and shall be
subject to such time and other limitations as the Administrator shall prescribe.
(b) TIME OF PAYMENT. Any withdrawal pursuant to this Section
shall be payable as soon as administratively feasible after the Trustee receives
notice of such withdrawal.
(c) LIMITATIONS. A withdrawal under this Section may be made only
once per Plan Year. The minimum amount for such withdrawal is $500.
8.3 EVENTS OF DISTRIBUTION TO PARTICIPANTS. A Participant's benefit shall
become distributable to him on account of:
(a) retirement at or after Normal Retirement Age;
(b) retirement for Disability;
(c) other termination of employment; or
(d) subject to Section 9.7, the date required under Section 9.5.
8.4 AMOUNT OF PAYMENT. The amount of any payment under the Plan shall be based
on the nonforfeitable percentage of the Participant's Account, valued as of the
Accounting Date
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<PAGE> 41
coinciding with or last preceding the payment, increased by any nonforfeitable
contributions made by or on behalf of such Participant after such Accounting
Date but not yet credited to his Account and reduced by any payments and/or
withdrawals after such Accounting Date.
8.5 TIME OF PAYMENT TO A PARTICIPANT.
(a) GENERAL. Subject to (b) and (c) below, distribution to a
Participant whose benefit has become distributable shall commence as soon as
administratively feasible after the Participant elects commencement of his
benefit (valued in accordance with Section 8.4), but in no event later than 60
days after the close of the Plan Year in which the Participant ceases to be a
Participant or, if earlier, the Plan Year in which the former Participant
terminated employment after having attained age 60.
(b) PARTICIPANT CONSENT.
(1) GENERAL. If the value of a former Participant's
nonforfeitable benefit under the Plan exceeds $5,000, then no part of such
benefit may be distributed to him prior to Normal Retirement unless he consents
in writing to the distribution.
(2) WRITTEN EXPLANATION. The Administrator shall provide to
each Participant whose consent is required under (1) above, no less than 30 days
and no more than 90 days prior to the commencement of benefit payments, a
written explanation of the material features and relative values of the optional
forms of benefit under the Plan, and his right (if any) to defer receipt of the
distribution. A Participant may elect to commence his distribution in less than
thirty days from the date he is provided with the explanation provided he is
informed of his right to the 30-day period.
(3) TIME OF CONSENT. A Participant's consent to a
distribution must not be made before he receives the written explanation under
(2) above and must not be made more than 90 days before benefit payments
commence.
This Section 8.5(b) shall be deemed to have been satisfied with respect to any
setoff of a Participant loan against the Participant's Account if the
Participant agreed to use his Account as security for the loan.
(c) LATEST DATE OF PAYMENT. Notwithstanding any of the preceding
provisions of this Article, the distribution of a Participant's benefits shall
be made in accordance with the following requirements and shall otherwise comply
with section 401(a)(9) of the Code and the Regulations thereunder (including
section 1.401(a)(9)-2 of the Treasury Regulations), the provisions of which are
incorporated herein by reference.
Benefit distributions to a Participant who is over the age of 70-1/2 and who is
no longer an Employee must commence no later than April 1st of the calendar year
following the end of the calendar year in which the Participant attains age
70-1/2. A Participant who is over the age of 70-1/2 and who is still an Employee
is not required to take distributions until April 1st of the
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calendar year following the calendar year in which his employment has
terminated. Notwithstanding the foregoing, benefit distributions to a
Participant who is a "5% owner" at any time during the Plan Year ending within
the calendar year in which the Participant attained age 70-1/2 must commence no
later than April 1st of the calendar year following the end of the calendar
year in which the Participant attains age 70-1/2.
8.6 RESTRICTIONS ON SECTION 401(k) WITHDRAWALS AND DISTRIBUTIONS.
Notwithstanding any other provisions to the contrary, a Participant's Section
401(k) Contribution Account shall not be withdrawn or distributed earlier than
one of the following:
(a) the Participant's separation from service;
(b) the Participant's death;
(c) the Participant's incurrence of a Disability;
(d) the termination of the Plan without the establishment or
maintenance of another defined contribution plan (other than an employee stock
ownership plan, as defined in section 4975(e) or 409 of the Code, or a
simplified employee pension, as defined in section 408(k) of the Code);
(e) the date of the disposition by a corporation of substantially
all of the assets (within the meaning of section 409(d)(2) of the Code) used by
such corporation in a trade or business of such corporation if the corporation
continues to maintain the Plan, and if the purchaser is unrelated and does not
adopt or maintain the Plan, but only with respect to an Employee who continues
employment with the corporation acquiring such assets;
(f) the date of the disposition by a corporation of such
corporation's interest in a subsidiary (within the meaning of section 409(d)(3)
of the Code) if the corporation continues to maintain the Plan, and if the
purchaser is unrelated and does not adopt or maintain the Plan, but only with
respect to an Employee who continues employment with such subsidiary; or
(g) to the extent provided in Article 8, attainment of age 70-1/2.
An event described in (d), (e) or (f) shall qualify as an event allowing a
withdrawal or distribution only if the payment is in a lump sum.
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ARTICLE 9
FORM OF PAYMENT TO PARTICIPANTS
-------------------------------
9.1 GENERAL.
(a) WITHDRAWALS. Any withdrawal made pursuant to Sections 8.1 or
8.2 shall be paid in a single sum in cash.
(b) DISTRIBUTIONS. The distribution to which a Participant is
entitled shall, subject to (c) below, be paid in such of the following forms as
the Participant elects:
(1) a single sum in cash;
(2) in a series of installments over a period not in
excess of the normal life expectancy of the distributee, such installments to be
equal in amount except as necessary to adjust for any net earnings of and
changes in the market value of the Accounts as the case may be, or by any other
method reasonably calculated to provide a more rapid distribution of his
interest.
(3) an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct rollover; or
(4) a Qualified Joint and Survivor Annuity, as defined in
Section 9.2, for married participants and a single life annuity for unmarried
participants.
(c) CASH-OUT DISTRIBUTIONS. Any other provisions of the Plan to
the contrary notwithstanding, any amount payable to a Participant under the Plan
shall be paid in a lump sum cash distribution, provided that the value of the
Participant's nonforfeitable benefit under the Plan, determined as of the date
of distribution, does not exceed $5,000, effective as of July 1, 1998 ($3,500
prior to July 1, 1998), and such payment is made before payment otherwise
begins. Such lump sum shall be paid as soon as administratively feasible
following the Participant's termination of employment (but not later than the
date required under Section 8.5(c)).
9.2 QUALIFIED JOINT AND SURVIVOR ANNUITY.
(a) AUTOMATIC FORM OF PAYMENT. The form of payment to a
Participant shall be a Qualified Joint and Survivor Annuity (defined in (b)
below) if:
(1) the value of his vested Account balance exceeds
$5,000; and
(2) the Participant has not waived such Annuity pursuant
to (c) below.
(b) DEFINITION OF QUALIFIED JOINT AND SURVIVOR ANNUITY.
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<PAGE> 44
(1) MARRIED PARTICIPANT. For a Participant who is married
(including a Participant who is subject to an applicable qualified domestic
relations order as described in section 414(p) of the Code), "Qualified Joint
and Survivor Annuity" means an immediate annuity for the life of the Participant
with a survivor annuity for the life of the Participant's Surviving Spouse which
is equal to one-half of the annuity payable during the joint lives of the
Participant and such spouse.
(2) SINGLE PARTICIPANT. For a Participant who is not
married, "Qualified Joint and Survivor Annuity" means an annuity for the life of
the Participant.
(3) AMOUNT. The Qualified Joint and Survivor Annuity will
be the amount of benefit which can be purchased with the Participant's
nonforfeitable Account balance.
(c) WAIVER.
(1) ELECTION PERIOD. A Participant may waive the
Qualified Joint and Survivor Annuity form of benefit at any time during a 90-day
election period ending on the date as of which his benefit payments begin. Such
a waiver must be in writing and must specify the optional form of benefit
elected and the specific Beneficiary or Beneficiaries, if any, to whom any death
benefits under the Plan will be payable.
(2) REVOCATION. A Participant may also revoke any waiver
under (1) above during the election period thereunder. There shall be no
limitation on the number of such elections and revocations permitted during such
election period.
(3) WRITTEN EXPLANATION. The Administrator shall provide
to each Participant, no less than 30 days and no more than 90 days, prior to the
commencement of his benefit payments (to the extent permitted by Treasury
Regulations or pronouncement of the Internal Revenue Service, the Company may
permit the Participant to waive the 30-day limit), a written explanation of:
(A) the terms and conditions of the Qualified
Joint and Survivor Annuity,
(B) the Participant's right to make, and the
effect of, an election under (1) above to waive the Qualified Joint and Survivor
Annuity form of benefit,
(C) the rights of the Participant's spouse under
(4) below,
(D) the right to make, and the effect of, a
revocation of an election under (1) above, and
(E) the eligibility requirements, material
features and relative values of any optional forms of benefit under the Plan.
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<PAGE> 45
(4) SPOUSAL CONSENT. A waiver of the Qualified Joint and
Survivor Annuity shall not take effect with respect to a spouse of a Participant
unless:
(A) such spouse consents in writing to such
election, and such spouse's consent:
(i) acknowledges the effect of such
election,
(ii) acknowledges the specific
Beneficiary or Beneficiaries, if any, to whom any death benefits under the Plan
will be payable, which may not be changed without spousal consent (or the
consent of the spouse expressly permits designations by the Participant without
any requirement of further consent by the spouse),
(iii) acknowledges the specific optional
form of benefit elected which may not be changed without spousal consent (except
back to the Qualified Joint and Survivor Annuity) (or the consent of the spouse
expressly permits changes by the Participant without any requirement of further
consent by the spouse), and
(iv) is witnessed by a Plan
representative or a notary public; or
(B) it is established to the satisfaction of a
Plan representative that the consent required under (A) above may not be
obtained because there is no spouse, because the spouse cannot be located, or
because of such other circumstances as may be provided in regulations of the
Internal Revenue Service.
General consents referred to in the parentheticals under (A)(ii) and (iii) above
must acknowledge that the spouse has the right to limit consent to a specific
Beneficiary or Beneficiaries and a specific optional form or forms of benefit
and that the spouse voluntarily elects to relinquish the rights so relinquished.
9.3 INCIDENTAL BENEFITS. In determining the minimum distributions during
the Participant's lifetime for years in which minimum distributions are required
under Section 9.5, if the Participant's benefit is distributed other than as a
single life annuity and if the Participant has a Beneficiary other than his
spouse, in no event shall the divisor specified in Section 9.5(a) exceed the
divisor specified in Treasury Regulations under section 401(a)(9) of the Code
applicable for the incidental benefit requirement.
If the Participant's Account is used to purchase an annuity contract (other than
a single life annuity) from an insurance company in order to provide the
Participant's benefit, the maximum period certain and the maximum survivor
annuity permissible in the case of a non-spouse Beneficiary, shall be determined
in accordance with Treasury Regulations under section 401(a)(9) of the Code.
In the case of a change in Beneficiaries the minimum distributions required
shall be determined in accordance with applicable Treasury Regulations under
section 401(a)(9) of the Code.
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9.4 DISTRIBUTION PERIODS.
(a) GENERAL. Except to the extent that distribution is made in the
form of a lump sum, and subject to the provisions of Section 9.2 (relating to
the Qualified Joint and Survivor Annuity), distribution to a Participant must be
made over any of the following periods (or any combination thereof):
(1) the life of the Participant;
(2) the lives of the Participant and his Beneficiary (if
the Beneficiary is an individual);
(3) a period certain not extending beyond the life
expectancy of the Participant; or
(4) a period certain not extending beyond the joint life
and last survivor expectancy of the Participant and his Beneficiary (if the
Beneficiary is an individual).
(b) DETERMINATION OF DISTRIBUTION PERIODS. For purposes of
determining minimum distributions under Section 9.5, the determination of
distribution periods under (a) above shall be made in accordance with section
401(a)(9) of the Code, the Treasury Regulations thereunder and the following:
(1) the Beneficiary as of the date benefits are required
to commence under Section 8.5, shall be determinative; provided that if annuity
payments commence to a Participant on or before the date benefits are required
to commence, the Beneficiary determined as of any date during the 90 days before
the commencement of annuity payments shall be determinative;
(2) if more than one individual would be a Participant's
Beneficiary as of the date benefits are required to commence under Section 8.5,
the individual Beneficiary with the shortest life expectancy shall be
determinative; provided that if the Participant's spouse is a Beneficiary and
the spouse's life expectancy is recalculated pursuant to Section 9.6, that
recalculated life expectancy shall be compared annually to the remaining life
expectancies of the other Beneficiaries, not recalculated, and the shortest life
expectancy shall be used for determining the minimum distribution for that
calendar year;
(3) if, as of the date benefits are required to commence
under Section 8.5, at least one of the Participant's Beneficiaries would be
other than an individual (other than a trust satisfying the requirements of (5)
below), the distribution periods specified in (a)(2) and (4) above shall not be
available;
(4) any Beneficiary whose entitlement, as of that date,
is contingent on the death of a prior Beneficiary shall be disregarded;
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<PAGE> 47
(5) if a trust is a Participant's Beneficiary, the
beneficiaries of that trust (and not the trust itself) shall be treated as the
Participant's Beneficiaries if all of the following requirements are met:
(A) the trust is valid under state law (or
would be but for the fact that there is no corpus);
(B) the trust is irrevocable;
(C) the trust's beneficiaries are identifiable
from the trust instrument; and
(D) a copy of the trust instrument is provided
to the Plan.
(c) CHANGE IN BENEFICIARIES. If, after the date benefits are
required to commence under Section 8.5, there is a new or additional Beneficiary
or other change in Beneficiaries, the distribution periods under (a) shall be
affected as provided in section 401(a)(9) of the Code, the Treasury Regulations
thereunder and the following:
(1) if the new Beneficiary is an individual with a life
expectancy shorter than the life expectancy of the Beneficiary whose life
expectancy was used for determining the maximum distribution periods under (a)
above, the maximum distribution period shall be recalculated as of the date
benefits were required to commence under Section 8.5, effective for calendar
years subsequent to the year of the Beneficiary change; provided that if one of
the beneficiaries involved is the Participant's spouse and the spouse's life
expectancy is recalculated pursuant to Section 9.6, that recalculated life
expectancy shall be compared annually to the remaining life expectancies of the
other Beneficiaries, not recalculated, and the shortest life expectancy shall be
used for determining the minimum distribution for that year and each succeeding
year.
(2) if the new Beneficiary is an individual with a life
expectancy longer than the life expectancy of the Beneficiary whose life
expectancy was being used, there shall be no effect on the maximum distribution
periods even though the old beneficiary is no longer a Beneficiary; provided
that if one of the beneficiaries involved is the Participant's spouse and the
spouse's life expectancy is recalculated pursuant to Section 9.6, that
recalculated life expectancy shall be compared annually to the remaining life
expectancies of the other Beneficiaries, not recalculated, and the shortest life
expectancy shall be used for determining the minimum distribution for that year
and each succeeding year;
(3) if the change results in the Participant having a
Beneficiary which is not an individual (other than a trust meeting the
requirements of (b)(5) above), or, if a trust satisfying the requirements of
(b)(5) above as of the date benefits were required to commence under Section 8.5
later fails to satisfy those requirements, the distribution periods specified in
(a)(2) and (4) above shall no longer be available and the maximum distribution
periods under (a) shall be recalculated as of the date benefits were required to
commence under Section 8.5, effective for
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<PAGE> 48
the calendar years subsequent to the year of the Beneficiary change, or trust
change, as the case may be;
(4) if the Beneficiary whose life expectancy was used
for determining the maximum distribution periods under (a) dies, such
Beneficiary's remaining life expectancy (deemed to be zero in the case of a
Participant's spouse if life expectancies had been recalculated pursuant to
Section 9.6) shall continue to apply whether or not a Beneficiary with a shorter
life expectancy receives the benefits.
9.5 MINIMUM DISTRIBUTION.
(a) GENERAL. Subject to Section 9.7, if the Participant's entire
interest is to be distributed in a form other than a lump sum or a Qualified
Joint and Survivor Annuity, then the minimum amount to be distributed beginning
with the first calendar year for which distributions are required and for each
succeeding calendar year, will, to the extent of his Account balance, be the
amount equal to the quotient obtained by dividing his Account balance by the
life expectancy of the Participant or the joint life and last survivor
expectancy of the Participant and his Beneficiary. The first calendar year for
which distributions are required is the calendar year in which the Participant
attains age 70-1/2, retires or becomes a Five-Percent Owner (whichever is
determinative of the latest commencement date under Section 8.5).
(b) TIME FOR DISTRIBUTIONS. The distribution for the first
calendar year for which distributions are required shall be made on or before
the applicable April 1 determined under Section 8.5. The minimum distribution
for succeeding calendar years (including the calendar year in which such
applicable April 1 falls) shall be made on or before December 31 of each such
year.
(c) ACCOUNT BALANCE. For purposes of determining required minimum
distributions, the relevant Account balance shall be the Account balance as of
the last Accounting Date in the calendar year immediately preceding the calendar
year for which the required distributions are being determined, increased by the
amount of any contributions and forfeitures made by or on behalf of the
Participant as of dates in such immediately preceding calendar year after such
last Accounting Date, reduced by any payments or withdrawals in such immediately
preceding calendar year after such last Accounting Date, and, in the case of
minimum distributions for the second calendar year for which distributions are
required, reduced by distributions made in such second calendar year on or
before the required benefit commencement date (under Section 8.5) that are not
in excess (when added to amounts distributed in the first calendar year) of the
amount required to meet the minimum distribution for the first calendar year;
provided that, in no event shall an amount greater than the Participant's
nonforfeitable percentage be distributed.
(d) SURVIVOR BENEFITS. Any survivor benefits under this Article 9 shall
be distributed at least as rapidly as under the method of distribution being
used prior to the Participant's death; provided that if the Participant dies
before the latest commencement date for benefits under Section 8.5 and has been
receiving benefits in a form other than an annuity, the remaining survivor
benefits must also be distributed as rapidly as provided in Section 10.2.
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<PAGE> 49
9.6 LIFE EXPECTANCY.
(a) GENERAL. For purposes of Sections 9.4 and 9.5, life expectancy
and joint life and last survivor expectancy will be computed in accordance with
applicable Treasury Regulations under section 401(a)(9) of the Code and by the
use of the return multiples contained in Tables V and VI of Treasury Regulation
1.72-9 and, except as provided in (b) and (c) below, will be determined as of
the Participant's (and Beneficiary's) birthday in the calendar year in which the
Participant attains age 70-1/2, retires or becomes a Five-Percent Owner
(whichever is determinative of the latest commencement date under Section 8.5,
and such multiple shall be reduced by one for each subsequent taxable year.
(b) RECALCULATION. If the Participant so elects, the life
expectancy of a Participant and/or his spouse may be recalculated no more
frequently than annually if such election is irrevocable, is made no later than
the date benefits must commence under Section 8.5, and is applicable to all
subsequent years. If recalculation is applicable, the life expectancy of the
participant or spouse shall be determined using his or her age as of his or her
birthday in each succeeding calendar year.
(c) ANNUITY CONTRACTS. If annuity payments commence to a
Participant before the latest commencement date under Section 8.5, life
expectancies of the Participant and Beneficiary shall be determined as of their
birthdays in the calendar year in which payments commence.
9.7 TRANSITIONAL RULE.
(a) GENERAL. Anything in the Plan (other than the provisions
relating to the Qualified Joint and Survivor Annuity and the Preretirement
Survivor Annuity) to the contrary notwithstanding, distribution on behalf of any
Participant may be made in accordance with the following requirements
(regardless of when such distribution commences):
(1) the distribution is one which would not have
disqualified the Plan under section 401(a)(9) of the Code as in effect prior to
amendment by the Deficit Reduction Act of 1984;
(2) the distribution is in accordance with a method of
distribution designated by the Participant whose interest is being distributed
or, if the Participant is deceased, by a Beneficiary of such Participant;
(3) such designation was in writing, and was signed by
the Participant or Beneficiary;
(4) the Participant had accrued a benefit under the Plan
as of December 31, 1983; and
(5) the method of distribution designated by the
Participant or the Beneficiary specifies the form of the distribution, the time
at which distribution will commence, the period
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over which distributions will be made, and in the case of any distribution upon
the Participant's death, the Beneficiaries of the Participant listed in order of
priority.
(b) DISTRIBUTIONS UPON DEATH. A distribution upon death will not
be covered by this transitional rule unless the information in the designation
contains the required information described above with respect to the
distributions to be made upon the death of the Participant.
(c) DISTRIBUTIONS COMMENCING BEFORE JANUARY 1, 1984. For any
distribution which commences before January 1, 1984, but continues after
December 31, 1983, the Participant, or the Beneficiary, to whom such
distribution is being made, will be presumed to have designated the method under
which the distribution is being made if the method of distribution was specified
in writing and the distribution satisfies the requirements in paragraphs (1) and
(5) of (a) above.
(d) EFFECT OF REVOCATION. If a designation of a method of
distribution is revoked, any subsequent distribution must satisfy the
requirements of section 401(a)(9) of the Code as in effect at the time and the
Treasury Regulations thereunder. If a designation is revoked, the Plan shall
distribute by the end of the calendar year following the calendar year in which
the revocation occurs, the total amount not yet distributed which would have
been required under section 401(a)(9) of the Code (including, for calendar years
after 1988, the minimum distribution incidental benefit requirement), had the
designation not been in effect. Any changes in the designation will be
considered to be a revocation of the designation; provided however, the mere
substitution or addition of another beneficiary (one not named in the
designation) under the designation will not be considered to be a revocation of
the designation so long as such substitution or addition does not alter the
designation, directly or indirectly (for example, by altering the relevant
measuring life).
9.8 DIRECT ROLLOVER.
(a) GENERAL. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this Section,
but subject to such exceptions permitted by the Internal Revenue Service, a
distributee may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in a direct
rollover.
(b) DEFINITIONS.
(1) ELIGIBLE ROLLOVER DISTRIBUTION. An eligible rollover
distribution is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover distribution does
not include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and the portion of
any distribution that is not Includable in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to employer
securities).
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<PAGE> 51
(2) ELIGIBLE RETIREMENT PLAN. An eligible retirement
plan is an individual retirement account described in section 408(a) of the
Code, an individual retirement annuity described in section 408(b) of the Code,
an annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible rollover distribution
to the surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
(3) DISTRIBUTEE. A distributee includes an employee or
former employee. In addition, the employee's or former employee's surviving
spouse and the employee's or former employee's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as defined in
section 414(p) of the Code, are distributees with regard to the interest of the
spouse or former spouse.
(4) DIRECT ROLLOVER. A direct rollover is a payment by
the Plan to the eligible retirement plan specified by the distributee.
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ARTICLE 10
DEATH BENEFITS
--------------
10.1 PRERETIREMENT SURVIVOR ANNUITY.
(a) GENERAL. A Participant's Surviving Spouse, if any, shall be
entitled to a Preretirement Survivor Annuity if:
(1) the Participant dies before the commencement of
benefit payments;
(2) prior to his death, the Participant had not waived
the Preretirement Survivor Annuity pursuant to Section 10.1(c); and
(3) the Participant and such Surviving Spouse were
married throughout the 1- year period ending on the date of the Participant's
death or, if such Surviving Spouse is a former spouse treated as a Surviving
Spouse pursuant to a qualified domestic relations order as described in section
414(p) of the Code, the Participant and such Surviving Spouse were married for
at least 1 year.
(b) DEFINITION OF PRERETIREMENT SURVIVOR ANNUITY. The
"Preretirement Survivor Annuity" is an annuity which is for the life of a
Participant's Surviving Spouse, which is the actuarial equivalent of 50 percent
of the Participant's nonforfeitable Account balance as of the date of his death,
whether vested before or upon death and including the proceeds of any insurance
contracts, and under which annuity payments commence as of a date (not later
than December 31 of the calendar year in which the Participant would have
attained age 70-1/2) elected by such Surviving Spouse.
(c) WAIVER OF PRERETIREMENT SURVIVOR ANNUITY.
(1) GENERAL. A Participant may waive coverage of the
Preretirement Survivor Annuity at any time during his election period under (3)
below. Such a waiver must be in writing and must specify the specific
Beneficiary or Beneficiaries, if any, to whom any death benefits under the Plan
will be payable.
(2) REVOCATION. Any waiver under (1) above may be revoked
at any time during the Participant's election period under (3) below. There
shall be no limitation on the number of such elections and revocations permitted
during such election period.
(3) ELECTION PERIOD. For purposes of (1) and (2) above,
the election period shall be the period:
(A) beginning on the earlier of:
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<PAGE> 53
(i) the first day of the Plan Year in
which the Participant attains age 35, or
(ii) the date of the Participant's
separation from service; provided however, if the Participant returns to
service, then any election made prior to the first day of the Plan Year in which
he attains age 35 shall be voided; and
(B) ending on the Participant's date of death.
(4) WRITTEN EXPLANATION.
(A) The Administrator shall provide to each
Participant, within the Applicable Period (defined below), and consistent with
such regulations as the Secretary of Treasury may prescribe, a written
explanation of:
(i) the terms and conditions of the
Preretirement Survivor Annuity;
(ii) the Participant's right to make,
and the effect of, an election under (1) above to waive the coverage of the
Preretirement Survivor Annuity;
(iii) the rights of the Participant's
spouse under (5) below;
(iv) the right to make, and the effect
of, a revocation of an election under (2) above; and
(v) the eligibility conditions,
material features and relative values of any optional forms of benefit under the
Plan.
(B) "Applicable Period" means, with respect to a
Participant, whichever of the following periods ends last:
(i) the period beginning with the first
day of the Plan Year in which the Participant attains age 32 and ending with the
close of the Plan Year preceding the Plan Year in which the Participant attains
age 35;
(ii) the period beginning one year prior
to, and ending one year after, the date the individual becomes a Participant, or
(iii) the period beginning one year
before, and ending one year after, section 401(a)(11) of the Code first applies
to the Participant.
In the case of a Participant who separates from service before attaining age 35,
the "Applicable Period" means in all events the period beginning one year before
the separation from service and
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<PAGE> 54
ending one year after such separation; provided that if such a Participant
returns to service, the provisions of (i), (ii) and (iii) above shall again
apply.
(5) SPOUSAL CONSENT. A waiver under (1) above shall not
be effective with respect to a spouse of a Participant unless:
(A) such spouse consents in writing to such
election, and such spouse's consent:
(i) acknowledges the effect of such
election,
(ii) acknowledges the specific
Beneficiary or Beneficiaries to whom any death benefits under the Plan will be
payable which may not be changed without spousal consent (or the consent of the
spouse expressly permits designations by the Participant without any requirement
of further consent by the spouse), and
(iii) is witnessed by a Plan
representative or a notary public; or
(B) it is established to the satisfaction of a
Plan representative that the consent required under (A) above may not be
obtained because there is no spouse, because the spouse cannot be located, or
because of such other circumstances as may be provided in regulations of the
Internal Revenue Service.
General consents referred to in the parenthetical of (A)(ii) above must
acknowledge that the spouse has the right to limit consent to a specific
Beneficiary or Beneficiaries and that the spouse voluntarily elects to
relinquish such right.
(d) CASH-OUT DISTRIBUTIONS. Any other provisions of the Plan to
the contrary notwithstanding, any amount otherwise payable under the Plan as a
Preretirement Survivor Annuity to a Surviving Spouse shall be paid in a lump sum
cash distribution provided that:
(1) the value (determined as of the date of distribution)
of such Preretirement Survivor Annuity does not exceed $5,000 and such payment
is made before payment otherwise begins; or
(2) the Surviving Spouse elects in writing to receive the
lump sum cash distribution, such election acknowledges its effect, and the
election is witnessed by a Plan representative or a notary public.
Such lump sum shall be paid as soon as administratively feasible after the
Participant's death.
10.2 BALANCE OF DEATH BENEFIT.
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<PAGE> 55
(a) ENTITLEMENT. Upon the death of a Participant, prior to the
application of his Account for his benefit, his Beneficiary shall be entitled to
a benefit equal to:
(1) the nonforfeitable balance to the credit of such
Participant's Account, valued as of the Accounting Date coinciding with or last
preceding the date on which such benefit payments begin; plus
(2) any nonforfeitable contributions made by or on behalf
of such Participant after such Accounting Date but not yet credited to his
Account; minus
(3) any amount applied for the benefit of the
Participant's Surviving Spouse pursuant to Section 10.1.
(b) PAYMENT OF DEATH BENEFITS.
(1) GENERAL. Death benefits under (a) above shall,
subject to the subsections below, be payable to a Participant's Beneficiary in
such of the following forms as the Participant or Beneficiary elects:
(A) a single sum cash distribution,
(B) a series of installments over a period not
in excess of the normal life expectancy of the distributee, such installments to
be equal in amount except as necessary to adjust for any net earnings of and
changes in the market value of the Accounts as invested, as the case may be, or
by any other method reasonably calculated to provide a more rapid distribution
of his interest, or
(C) in the case of Beneficiary to whom benefits
commence in accordance with (c)(2)(A) below, periodic installments sufficient in
size to satisfy the minimum distribution requirements of (e) below, with a lump
sum distribution of the remaining Account balance (otherwise payable to that
Beneficiary) upon the Beneficiary's death, or
(D) a single life annuity.
Subject to (c) below, distribution of death benefits under (a) above shall
commence at such time as the Participant or Beneficiary elects and, unless
administratively impractical, shall first be available for distribution within
90 days after the Participant's death.
(2) ELECTION. An election by a Participant or Beneficiary
under (1) above must be made no later than the earliest date specified in (c)(1)
and (2) below for the commencement of death benefits. As of such date, the
election must be irrevocable with respect to the Beneficiary (and all subsequent
Beneficiaries) and must apply to all subsequent years. In the absence of a valid
election by the required date, the death benefits under (a) shall be distributed
as soon as administratively feasible after the date by which the election would
have been required in a single sum.
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<PAGE> 56
(c) DISTRIBUTION PERIODS. Subject to Section 9.7, death benefits
under (a) above shall be distributed to a Participant's Beneficiary:
(1) no later than December 31 of the calendar year
containing the fifth anniversary of the Participant's death; or
(2) if the Beneficiary is an individual:
(A) beginning not later than December 31 of the
calendar year immediately following the calendar year of the Participant's death
(or, if later, and if the Beneficiary is the Participant's spouse, not later
than December 31 of the calendar year in which the Participant would have
attained age 70-1/2, and if such spouse dies before payments are required to
commence, then the distribution period hereunder shall be determined as if such
spouse were the Participant); and
(B) (i) over the life of such Beneficiary
(if the Beneficiary is an individual) or
(ii) over a period not extending beyond
the life expectancy of such Beneficiary (if the Beneficiary is an individual).
(d) DETERMINATION OF DISTRIBUTION PERIODS. The determination of
distribution periods under (c)(2) above shall be made in accordance with section
401(a)(9) of the Code, the Treasury Regulations thereunder and the following:
(1) the Beneficiary as of the date of the Participant's
death (or, if applicable, the surviving spouse's death) shall be determinative;
(2) if more than one individual would be a Participant's
(or Surviving Spouse's) Beneficiary as of the date of the Participant's death
(or, if applicable, the surviving spouse's death) the individual Beneficiary
with the shortest life expectancy shall be determinative; provided that if the
Participant's spouse is a Beneficiary and the spouse's life expectancy is
recalculated pursuant to (f) below, that recalculated life expectancy shall be
compared annually to the remaining life expectancies of the other Beneficiaries,
not recalculated, and the shortest life expectancy shall be used for determining
the minimum distribution for that calendar year;
(3) if, as of the date of the Participant's death, at
least one of the Participant's Beneficiaries is other than an individual (other
than a trust satisfying the requirements of (5) below), the distribution periods
specified in (c)(2) above shall not be available;
(4) any Beneficiary whose entitlement, as of the date of
the Participant's death, is contingent on the death of a prior Beneficiary shall
be disregarded;
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<PAGE> 57
(5) if a trust is a Participant's Beneficiary as of the
date of the Participant's death, the beneficiaries of that trust (and not the
trust itself) shall be treated as the Participant's Beneficiaries if all of the
following requirements are met:
(A) the trust is valid under state law (or would
be but for the fact that there is no corpus);
(B) the trust is irrevocable;
(C) the trust's beneficiaries are identifiable
from the trust instrument; and
(D) a copy of the trust instrument is provided
to the Plan.
(e) MINIMUM DISTRIBUTION.
(1) GENERAL. For Plan Years beginning after December 31,
1984, subject to such transitional rules as may be provided in Treasury
Regulations for the purposes of (c)(2)(B) above and subject to Section 9.7, the
minimum amount to be distributed beginning with the first calendar year for
which distributions are required and for each succeeding calendar year, will, to
the extent of the Participant's Account balance, be the amount equal to the
quotient obtained by dividing his Account balance by the life expectancy of the
Beneficiary. The first calendar year for which distributions are required is the
calendar year in which the Participant dies or a spouse dies (whichever is
applicable).
(2) TIME FOR DISTRIBUTIONS. Distributions which are
required shall be made on or before December 31 each year commencing with the
calendar year specified in (c)(2)(A) above.
(3) ACCOUNT BALANCE. For purposes of determining required
minimum distributions, the relevant Account balance shall be the Account balance
as of the last Accounting Date in the calendar year immediately preceding the
calendar year for which the required distributions are being determined,
increased by the amount of any contributions and forfeitures made by or on
behalf of the Participant as of dates in such immediately preceding calendar
year after such last Accounting Date, reduced by any payments or withdrawals in
such immediately preceding calendar year after such last Accounting Date;
provided that, in no event shall an amount greater than the Participant's
nonforfeitable percentage be distributed.
(4) ANNUITY CONTRACTS. If a Participant's Account is used
to purchase an annuity contract from an insurance company in order to provide
the Beneficiary's benefit hereunder, notwithstanding the foregoing, the minimum
distribution requirements will be satisfied if the annuity provides for periodic
payments at intervals not longer than one year, commencing on or before the date
a minimum distribution would otherwise be required over a period not exceeding
the maximum period described in (c)(2)(B) above remaining (without recalculation
of life expectancies after the annuity purchase). Any such annuity contract must
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<PAGE> 58
satisfy the requirements of the applicable Treasury Regulations under section
401(a)(9) of the Code.
(f) LIFE EXPECTANCY.
(1) GENERAL. For purposes of Sections (c), (d) and (e)
above, life expectancy will be computed in accordance with applicable Treasury
Regulations under section 401(a)(9) of the Code and by the use of the return
multiples contained in Tables V and VI of Treasury Regulation 1.72-9 and, except
as provided in (2) and (3) below, will be determined as of the Beneficiary's
birthday in the calendar year in which distributions are required to commence
under (c)(2) above, and such multiple shall be reduced by one for each
subsequent taxable year.
(2) RECALCULATION. If a Beneficiary who was the
Participant's spouse so elects, the life expectancy of such spouse may be
recalculated no more frequently than annually if such election is irrevocable,
is made no later than the date benefits must commence under (c)(2) above, and is
applicable to all subsequent years. If recalculation is applicable, the life
expectancy of the spouse shall be determined using his or her age as of his or
her birthday in each succeeding calendar year.
(3) ANNUITY CONTRACTS. If annuity payments commence
irrevocably to a Beneficiary before the latest commencement date under (c)(2)
above, the Beneficiary's life expectancy shall be determined as of his birthday
in the calendar year in which payments commence.
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ARTICLE 11
THE COMMITTEE
-------------
11.1 COMMITTEE.
(a) NAMED FIDUCIARY. The Committee, each Employer and the Trustee
shall be "Named Fiduciaries" for the Plan.
(b) RESPONSIBILITIES. The Committee shall discharge its
responsibilities with respect to the Plan in accordance with the documents and
instruments governing the Plan insofar as such documents and instruments are
consistent with the provisions of Title I of ERISA.
11.2 MEMBERSHIP.
(a) DELEGATIONS. The Company, by action of its Board, shall
appoint a Committee of at least three individuals to administer the Plan as
hereinafter set forth. Upon his appointment to the Committee by the Company,
each such appointee shall become a member of the Committee by accepting his
appointment in a writing signed by him and delivered to the Company.
(b) REMOVAL, RESIGNATION, AND VACANCIES. A Committee member may be
removed therefrom at any time and without cause by action of the Board and may
resign at any time upon prior written notice to the Board. Vacancies in any such
positions created by removal, resignation, death or other cause may be filled by
the Board or the fiduciary responsibilities for such position may be retained
and/or re-delegated by such person or entity.
11.3 RULES AND REGULATIONS. The Committee may from time to time formulate
such rules and regulations for its organization and the transaction of its
business as it deems suitable and as are consistent with the provisions of the
Plan.
11.4 POWERS. In addition to the powers which are expressly provided in the
Plan, the Committee shall have the power and authority in its sole, absolute and
uncontrolled discretion to control and manage the operation and administration
of the Plan and shall have all powers necessary to accomplish these purposes
including, but not limited to the following:
(a) the power to determine who is a Participant;
(b) the power to determine allocations, balances, and
nonforfeitable percentages with respect to Participants' Accounts;
(c) the power to determine when, to whom, in what amount, and in
what form distributions are to be made; and
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(d) such powers as are necessary, appropriate or desirable to
enable it to perform its responsibilities, including the power to establish
rules, regulations and forms with respect thereto.
11.5 ACTION OF THE COMMITTEE. Any act authorized, permitted or required to
be taken by the Committee under the Plan may be taken by a majority of the
members of the Committee at the time acting hereunder, either by vote at a
meeting, or in writing without a meeting. All notices, advices, directions,
certifications, approvals, and instructions required or authorized to be given
by the Committee under the Plan shall be in writing and signed by a majority of
the members of the Committee, or by such member or members as may be designated
by an instrument in writing, signed by all members thereof and filed with the
Trustee, as having authority to execute such documents on its behalf. Subject to
the provisions of Section 11.7, any action taken by the Committee which is
authorized, permitted or required under the Plan shall be final and binding upon
all persons who have or who claim an interest under the Plan, and all third
parties dealing with a Employer, the Committee, or the Trustee.
11.6 MISCELLANEOUS ADMINISTRATION PROVISIONS.
(a) ADMINISTRATIVE EXPENSES. The Employer may pay the reasonable
expenses of administering the Plan, including any expenses incident to the
functioning of the Committee and the professional fees of any consultants or
advisors with respect to the Plan; provided however, any expenses not so paid by
the Employer shall be paid from the Plan Assets; and provided further, no person
who already receives full-time pay from the Employer shall receive any
compensation from the Plan, except for reimbursement of expenses properly and
actually incurred.
(b) INDEMNIFICATION. The Employer may indemnify, through insurance
or otherwise, some or all of the fiduciaries with respect to the Plan against
claims, losses, damages, expenses and liabilities arising from their performance
of their responsibilities under the Plan.
(c) INTERPRETATIONS. All interpretations of the Plan and questions
concerning its administration and application as determined by the Committee in
its sole, absolute and uncontrolled discretion shall be binding on all persons
having an interest under the Plan.
(d) UNIFORM AND NON-DISCRIMINATORY APPLICATION. All determinations
and actions under the Plan shall be uniformly and consistently applied in a
non-discriminatory manner to all persons under similar circumstances.
(e) QUALIFIED DOMESTIC RELATIONS ORDER PROCEDURES. The Committee
shall establish reasonable procedures to determine the qualified status, under
section 414(p) of the Code, of domestic relations orders and to administer
distributions under such qualified orders. Notwithstanding anything to the
contrary continued in the Plan, the Committee shall direct the Trustee to make
immediate distribution to or for the benefit of an alternate payee under a
domestic relations order that has been determined to be a qualified order of the
alternate payee's benefit under the Plan in any form which such benefit may be
paid under the Plan to the Participant or former
11-2
<PAGE> 61
Participant with respect to whom such qualified order applies, but only if the
qualified order provides for the immediate distribution.
(f) EFFECTIVENESS OF ELECTIONS, ETC. An election, designation,
request or revocation provided for in the Plan shall be made in such manner as
prescribed by the Administrator.
(g) WRITTEN RECORDS. The Committee shall also maintain records of
all meetings, proceedings, and actions held, undertaken, or performed by it, and
shall furnish to the Company such reports as it may from time to time request.
All such books of account and other records and data as are necessary for the
proper performance of its responsibilities under the Plan.
(h) ADMINISTRATION CONSISTENT WITH ERISA AND THE CODE. The Plan is
intended to comply with the provisions of ERISA and of the Code, and the Plan
shall be interpreted and administered consistently with such provisions and with
the applicable regulations and rulings thereunder.
(i) SERVICE IN MORE THAN ONE FIDUCIARY CAPACITY. Any person or
entity may serve in more than one fiduciary capacity for the Plan, including
service both as Administrator and as trustee.
11.7 INITIAL CLAIMS PROCEDURE.
(a) CLAIM.
(1) FILING. In order to present a complaint regarding the
nonpayment of a Plan benefit or a portion thereof (a "Claim"), a Participant or
Beneficiary under the Plan (a "Claimant") or his duly authorized representative
must file such Claim by mailing or delivering a writing stating such Claim to
the corporate office of LSI Industries Inc.
(2) ACKNOWLEDGMENT. Upon such receipt of a Claim, the
Committee shall furnish to the Claimant a written acknowledgment which shall
inform such Claimant of the time limit set forth in (b)(1) below and of the
effect, pursuant to (b)(3) below, of failure to decide the Claim within such
time limit.
(b) INITIAL DECISION.
(1) TIME LIMIT. The Committee shall decide upon a Claim
within a reasonable period of time after receipt of such Claim; provided
however, that such period shall in no event exceed 90 days, unless special
circumstances require an extension of time for processing. If such an extension
of time for processing is required, then the Claimant shall, prior to the
termination of the initial 90-day period, be furnished a written notice
indicating such special circumstances and the date by which the Administrator
expects to render a decision. In no event shall an extension exceed a period of
90 days from the end of the initial period.
11-3
<PAGE> 62
(2) NOTICE OF DENIAL. If the Claim is wholly or
partially denied, then the Administrator shall furnish to the Claimant, within
the time limit applicable under (1) above, a written notice setting forth in a
manner calculated to be understood by the Claimant:
(A) the specific reason or reasons for such
denial;
(B) specific reference to the pertinent Plan
provisions on which such denial is based;
(C) a description of any additional material or
information necessary for such Claimant to perfect his Claim and an explanation
of why such material or information is necessary; and
(D) appropriate information as to the steps to
be taken if such Claimant wishes to submit his Claim for review pursuant to
Section 11.8, including notice of the time limits set forth in Section
11.8(b)(2).
(3) DEEMED DENIAL FOR PURPOSES OF REVIEW. If a Claim is
not granted and if, despite the provisions of (1) and (2) above, notice of the
denial of a Claim is not furnished within the time limit applicable under (1)
above, then the Claimant may deem such Claim denied and may request a review of
such deemed denial pursuant to the provisions of Section 11.7.
11.8 CLAIM REVIEW PROCEDURE.
(a) CLAIMANT'S RIGHTS. If a Claim is wholly or partially denied
under Section 11.7, then the Claimant or his duly authorized representative
shall have the following rights, within 60 days of the date on which he receives
the notice:
(1) to obtain, subject to (b) below, a full and fair
review by the Committee;
(2) to review pertinent documents; and
(3) to submit issues and comments in writing.
(b) REQUEST FOR REVIEW.
(1) FILING. To obtain a review pursuant to (a) above, a
Claimant entitled to such a review or his duly authorized representative shall,
subject to (2) below, mail or deliver a written request for such a review (a
"Request for Review") to the corporate office of LSI Industries Inc.
(2) LIMITS FOR REQUESTING A REVIEW. A Request for Review
must be mailed or delivered within 60 days after receipt by the Claimant of
written notice of the denial of the Claim.
11-4
<PAGE> 63
(3) ACKNOWLEDGMENT. Upon such receipt of a Request for
Review, the Committee shall furnish to the Claimant a written acknowledgment
which shall inform such Claimant of the time limit set forth in (c)(1) below and
of the effect, pursuant to (c)(3) below, of failure to furnish a decision on
review within such time limit.
(c) DECISION ON REVIEW.
(1) TIME LIMIT. If, pursuant to (b) above, a review is
requested, then, except as otherwise provided in (B) below, the Committee or its
delegate (but only if such delegate has been given the authority to make a final
decision on the Claim) shall make a decision promptly and no later than 60 days
after receipt of the Request for Review; except that, if special circumstances
require an extension of time for processing, then the decision shall be made as
soon as possible but not later than 120 days after receipt of the Request for
Review. The Committee must furnish the Claimant written notice of any extension
prior to its commencement.
(2) NOTICE OF DECISION. The Committee or its delegate
shall furnish to the Claimant, within the time limit applicable under (1) above,
a written notice setting forth in a manner calculated to be understood by the
Claimant:
(A) the specific reason or reasons for the
decision on review; and
(B) specific reference to the pertinent Plan
provisions on which the decision on review is based.
(3) DEEMED DENIAL. If, despite the provisions of (1) and
(2) above, the decision on review is not furnished within the time limit
applicable under (1) above, then the Claimant shall be deemed to have exhausted
his remedies under the Plan and he may deem the Claim to have been denied on
review.
11-5
<PAGE> 64
ARTICLE 12
AMENDMENT AND TERMINATION
-------------------------
12.1 AMENDMENT AND TERMINATION.
(a) RIGHT TO AMEND OR TERMINATE. The Company expects the Plan to
be permanent, but since future conditions cannot be anticipated or foreseen, it
must necessarily and hereby does reserve the right to amend or terminate the
Plan at any time by action of the Board, in a writing signed by an officer of
the Company, provided that no amendment of the Plan that affects the rights,
duties or responsibilities of any Trustee shall be adopted without such
Trustee's written consent and acceptance thereof. The Company shall have the
right to amend the Plan on behalf of all Employers.
(b) CORPORATE REORGANIZATION. The merger, consolidation, or
liquidation of the Company, any Employer or any Affiliate with or into the
Company any other Employer, or any Affiliate shall not constitute a termination
of the Plan as to the Company or such Employer.
(c) CONDITIONS ON AMENDMENTS AND TERMINATION.
(1) DURATION OF COLLECTIVE BARGAINING AGREEMENT. No
action under (a) above shall alter the Plan or its operation, except as may be
required by the Internal Revenue Service for the purposes of meeting the
conditions for qualification and tax deduction under sections 401(a) and 404(a)
of the Code, in respect of employees who are represented under a collective
bargaining agreement in contravention of the provisions of any such agreement
pertaining to pension benefits as long as any such agreement is in effect.
(2) ACCRUED BENEFIT.
(A) GENERAL. No amendment to the Plan shall be
effective to the extent that it has the effect of reducing a Participant's
accrued benefit, except as permitted under section 412(c)(8) of the Code.
(B) TREATMENT OF CERTAIN AMENDMENTS. For
purposes of (A) above, an amendment which has the effect, with respect to
benefits attributable to service before the amendment, of
(i) eliminating or reducing an early
retirement benefit or a retirement-type subsidy or
(ii) (except as otherwise provided by
Treasury Regulations) eliminating an optional form of benefit shall be treated
as reducing accrued benefits. In the case of a retirement-type subsidy, the
preceding sentence shall apply only with respect to a Participant
12-1
<PAGE> 65
who satisfies (either before or after the amendment) the preamendment conditions
for the subsidy.
(3) CHANGES IN VESTING SCHEDULE. No amendment shall
reduce the nonforfeitable percentage of a Participant's accrued benefit
(determined as of the later of the date such amendment is adopted or the date
such amendment becomes effective). Further, if the Plan's vesting schedule is
amended, or the Plan is amended in any way that directly or indirectly affects
the computation of the Participant's nonforfeitable percentage, each Participant
with at least 3 Vesting Years may elect, within a reasonable period after the
adoption of the amendment, to have the nonforfeitable percentage computed under
the Plan without regard to such amendment. The period during which the election
may be made shall commence with the date the amendment is adopted and shall end
on the latest of:
(A) 60 days after the amendment is adopted;
(B) 60 days after the amendment becomes
effective; or
(C) 60 days after the Participant is issued
written notice of the amendment by the Employer or Administrator.
12.2 DISTRIBUTION OF PLAN ASSETS UPON TERMINATION OF THE PLAN. If the Plan
is terminated, then distributions and withdrawals shall continue to be made as
provided in the Plan; provided however, subject to Article 8, the Administrator
may cause Participants' Accounts to be paid to them, pursuant to the provisions
of Article 9, on account of such termination of the Plan.
12-2
<PAGE> 66
ARTICLE 13
EXTENSION OF PLAN
-----------------
13.1 ADOPTION BY AFFILIATE. An Affiliate may, by action of its board of
directors or other governing body and with the consent of the Board of the
Company, adopt the Plan as of a specified dated and become an Employer hereunder
by causing an Adoption Agreement to be executed pursuant to the authority of its
board of directors or other governing body and filed with the Company, the
Committee, and the Trustee; and notice of such adoption shall be given by the
adopting Employer to its Employees. With the approval of the Company, the
Adoption Agreement may specify varying provisions, notwithstanding any
provisions in the Plan to the contrary, which shall be applicable to the
adopting Employer's Employees.
13-1
<PAGE> 67
ARTICLE 14
TOP-HEAVY RULES
---------------
14.1 DEFINITIONS. For purposes of this Article 14, the following terms shall
have the following meanings:
(a) "Aggregation Group" means:
(1) each qualified plan or simplified employee pension of
the Employer or an Affiliate in which a Key Employee is a participant,
(2) each other plan of the Employer or an Affiliate which
enables any plan described in (1) above to meet the requirements of section
401(a)(4) or 410 of the Code,
(3) any other plan or plans which the Employer elects to
include provided that the group would continue to meet the requirements of
sections 401(a)(4) and 410 of the Code with such plan or plans being taken into
account, and
(4) any other plan which would have been included in the
foregoing had it not terminated.
(b) "Key Employee," with respect to any Plan Year, means, as
determined under section 416(i) of the Code, any person who, at any time during
the Determination Period with respect to such Plan Year, is:
(1) an officer of the Employer or an Affiliate who:
(A) has Adjusted Compensation greater than 50
percent of the dollar limitation in effect under section 415(b)(1)(A) of the
Code for any such Plan Year, and
(B) is taken into account under section 416(i)
of the Code;
(2) one of the 10 employees who:
(A) owns (or is considered as owning within the
meaning of sections 318 and 416(i) of the Code) both more than a 1/2 percent
ownership interest in value and one of the 10 largest percentage ownership
interests in value of the Employer; and
(B) has (during the Plan Year of ownership)
Adjusted Compensation from the Employer and any Affiliates of more than the
limitation in effect under section 415(c)(1)(A) of the Code for the calendar
year in which such Plan Year ends;
14-1
<PAGE> 68
(3) a 5-percent owner (as defined in section 416(i) of
the Code) of the Employer; or
(4) a 1-percent owner (as defined in section 416(i) of
the Code) of the Employer having Adjusted Compensation (Section 415 Compensation
as defined in Section 5.1(g) for years beginning before January 1, 1990) from
the Employer and any Affiliates of more than $150,000.
(c) "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.
(d) "Top-Heavy Plan" means the Plan, with respect to any Plan Year
after 1983, if the Top-Heavy Ratio exceeds 60 percent.
(e) "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:
(1) The value of account balances under the Plan will be
determined as of the Determination Date with respect to the applicable Plan
Year.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
14-2
<PAGE> 69
(6) 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.
(7) Deductible voluntary contributions shall not be
included.
(8) There shall be disregarded the account balances and
accrued benefits of a Participant
(A) who is not a Key Employee but who was a Key
Employee in a prior Plan Year; or
(B) 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.
(9) Effective for Plan Years beginning after December 31,
1986, the accrued benefit of a Participant other than a Key Employee shall be
determined (A) under the method, if any, which uniformly applies for accrual
purposes under all defined benefit plans of the Employer, or (B) 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.
14.2 LIMITATION ON EARNINGS. In any Plan Year beginning prior to 1989 for
which the Plan is a Top-Heavy Plan, the Annual Earnings taken into account under
the Plan shall not exceed $200,000.
14.3 MINIMUM CONTRIBUTION.
(a) GENERAL. For any Plan Year for which the Plan is a Top-Heavy
Plan, the contribution made by the Employer and forfeitures (excluding, for any
Plan Year beginning after 1988, 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
Compensation times the lesser of (1) 3% or (2) the largest percentage of such
contributions and forfeitures (including, for any Plan Year beginning after
1988, contributions under Section 4.1(a)), expressed as a percentage of
Compensation, allocated on behalf of any Key Employee for that Plan Year. The
minimum allocation is determined without regard to any Social Security
contribution and without regard to profits.
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 (1) the
Participant's failure to complete 1,000 Hours of Service, (2) the Participant's
failure to make contributions to the Plan, or (3) Compensation of less than a
stated amount.
14-3
<PAGE> 70
(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, for any Plan Year
beginning after 1988, 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.
14.4 LIMITATIONS ON BENEFITS. If a Limitation Year contains any portion of a
Plan Year for which the Plan is a Top-Heavy Plan, then, for purposes of the
computation of the Defined Benefit Plan Fraction and the Defined Contribution
Plan Fraction under Article 5, "1.0" shall be substituted for "1.25"; 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 of the Key Employees' benefits from all
Defined Benefit Plans and Defined Contribution Plans does not exceed 90 percent
of the total of all Participants' benefits and if the Plan would satisfy the
requirements of Section 13.3 if "4%" were substituted for "3%" and "7-1/2%" were
substituted for "5%".
14-4
<PAGE> 71
ARTICLE 15
MISCELLANEOUS
-------------
15.1 CONSTRUCTION.
(a) ARTICLE AND SECTION REFERENCES. Except as otherwise indicated
by the context, all references to Articles or Sections in the Plan refer to
Articles or Sections of the Plan. The titles thereto are for convenience of
reference only and the Plan shall not be construed by reference thereto.
(b) GENDER AND NUMBER. As used in the Plan, except when otherwise
indicated by the context, the genders of pronouns and the singular and plural
numbers of terms shall be interchangeable.
15.2 ASSIGNMENT OR ALIENATION OF BENEFITS. Benefits provided under the Plan
may not be anticipated, assigned (either at law or in equity), alienated or
subject to attachment, garnishment, levy, execution or other legal or equitable
process; provided however, benefits shall be paid in accordance with the
applicable requirements of any domestic relations order which is a qualified
domestic relations order (as defined in section 206(d) of ERISA or section
414(p) of the Code); and provided further that benefits shall be paid pursuant
to any domestic relations order entered before January 1, 1985 if either the
Plan is paying benefits pursuant to such order on such date or the Administrator
elects to treat such order as a qualified domestic relations order. Except as
provided in the foregoing, if any attempt shall be made to reach the beneficial
interest of any Participant or beneficiary by legal process not preempted by
ERISA, the Administrator may suspend any rights of distribution which any
Participant or beneficiary may have, and may direct that such person's
beneficial interest hereunder be paid over or applied for the benefit of such
person, or for the benefit of dependents of such person, as the Administrator
shall determine.
15.3 DATA.
(a) OBLIGATION TO FURNISH. Each person who participates or claims
benefits under the Plan shall furnish to the Administrator, any trustee, or any
insurance company involved in the funding of the benefits under the Plan, such
signatures, documents, evidence, or information as the Administrator, such
trustee, or such insurance company shall consider necessary or desirable for the
purpose of administering the Plan.
(b) MISTAKES OR MISSTATEMENTS. In the event of a mistake or a
misstatement as to any item of such information, as is furnished pursuant to (a)
above, which has an effect on the amount of benefits to be paid under the Plan,
or in the event of a mistake or misstatement as to the amount of payments to be
made to a person entitled to receive a benefit under the Plan, the Administrator
shall cause such amounts to be withheld or accelerated, as shall in its judgment
accord to such person the payment to which he is properly entitled under the
Plan.
15-1
<PAGE> 72
15.4 EMPLOYMENT RELATIONSHIP.
(a) NO ENLARGEMENT OF RIGHTS. Except as otherwise provided by law
or legally enforceable contract, the establishment of the Plan or of any fund or
any insurance contract thereunder, any amendment of the Plan, participation in
the Plan, or the payment of any benefits under the Plan, shall not be construed
as giving any person whomsoever any legal or equitable claims or rights against
the Employer, or its officers, directors, or shareholders, as such, or as giving
any person the right to be retained in the employment of the Employer.
(b) EMPLOYER'S RIGHTS. The right of the Employer to discipline or
discharge an employee shall not be affected by reason of any of the provisions
of the Plan.
15.5 MERGER OR TRANSFER OF PLAN ASSETS. In the case of any merger or
consolidation of the Plan with, or transfer of assets or liabilities of the Plan
to, any other plan, each Participant in the Plan shall (if the surviving plan
terminated immediately after the merger, consolidation, or transfer) be entitled
to receive a benefit which is equal to or greater than the benefit he would have
been entitled to receive immediately before the merger, consolidation, or
transfer (if the Plan had then terminated).
15.6 INCOMPETENCY OR DISABILITY. Each person to whom a distribution is
payable under the Plan shall be conclusively presumed to be mentally competent
and not under a disability that renders him unable to care for his affairs,
until the date on which the Administrator receives a written notice, in a form
and manner acceptable to the Administrator, indicating that a guardian,
conservator, or other party legally vested with the care of the person or the
estate of such person has been appointed by a court of competent jurisdiction,
and any payment of a distribution due thereafter shall be made to the same,
provided that proper proof of his appointment and continuing qualification is
furnished in a form and manner acceptable to the Administrator. The
Administrator shall not be required to look to the application of any such
payment so made.
15.7 NONTRANSFERABILITY OF ANNUITIES. Any annuity contract distributed from
the Plan must be nontransferable.
15.8 GOVERNING LAW. The Plan and all rights and duties under the Plan shall
be governed, construed and administered in accordance with the laws of Ohio,
except as governed separately by or preempted by federal law.
15.9 SEVERABILITY. In case any provision of this Plan shall be held illegal
or invalid for any reason, such illegality or invalidity shall not affect the
remaining provisions of this Plan, and this Plan shall be construed and
interpreted as if such illegal or invalid provision had never been a part of it.
15-2
<PAGE> 73
IN WITNESS WHEREOF, LSI INDUSTRIES INC. has caused this Plan to be
executed this 20th day of September, 1999.
LSI INDUSTRIES INC.
By: /s/ Ronald S. Stowell
------------------------
VP, CFO & Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000763532
<NAME> LSI INDUSTRIES INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1,000
<CASH> 11,806
<SECURITIES> 0
<RECEIVABLES> 42,451
<ALLOWANCES> (1,289)
<INVENTORY> 26,482
<CURRENT-ASSETS> 81,755
<PP&E> 55,586
<DEPRECIATION> (21,060)
<TOTAL-ASSETS> 139,377
<CURRENT-LIABILITIES> 29,349
<BONDS> 1,670
0
0
<COMMON> 45,896
<OTHER-SE> 61,020
<TOTAL-LIABILITY-AND-EQUITY> 139,377
<SALES> 64,014
<TOTAL-REVENUES> 64,014
<CGS> 42,919
<TOTAL-COSTS> 12,605
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (163)
<INCOME-PRETAX> 8,653
<INCOME-TAX> 3,296
<INCOME-CONTINUING> 5,357
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,357
<EPS-BASIC> .53
<EPS-DILUTED> .52
</TABLE>
