10-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 2009.

OR

o 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.

(Exact name of Registrant as specified in its charter)

	10000 Alliance Road
Ohio	Cincinnati, Ohio 45242	IRS Employer I.D.
(State or other jurisdiction of	(Address of principal executive offices)	No. 31-0888951
incorporation or organization)

(513) 793-3200
(Telephone number of principal executive offices)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common shares, no par value	The NASDAQ Stock Market LLC
	(NASDAQ Global Select Market)

Securities Registered Pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þ

Indicate by check mark 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer þ Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of December 31, 2008, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $133,300,000 based upon a closing sale price of $6.87 per share as reported on The Nasdaq Global Select Market.

At August 28, 2009 there were 24,038,889 no par value Common Shares issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement filed with the Commission for its 2009 Annual Meeting of Shareholders are incorporated by reference in Part III, as specified.

LSI INDUSTRIES INC.
2009 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS

	Begins on
	Page
PART I
ITEM 1. BUSINESS		1
ITEM 1A. RISK FACTORS		8
ITEM 1B. UNRESOLVED STAFF COMMENTS		11
ITEM 2. PROPERTIES		12
ITEM 3. LEGAL PROCEEDINGS		13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		13
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		13
ITEM 6. SELECTED FINANCIAL DATA		14
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		14
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		16
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		16
ITEM 9A. CONTROLS AND PROCEDURES		16
ITEM 9B. OTHER INFORMATION		17
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		17
ITEM 11. EXECUTIVE COMPENSATION		17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS		17
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		17
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES		17
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES		18
Exhibit 10.9
Exhibit 10.10
Exhibit 21
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

This Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to numerous assumptions, risks or uncertainties. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Forward-looking statements may be identified by words such as “guidance,” “forecasts,” “estimates,” “anticipates,” “projects,” “plans,” “expects,” “intends,” “believes,” “seeks,” “may,” “will,” “should” or the negative versions of those words and similar expressions, and by the context in which they are used. Such statements are based upon current expectations of the Company and speak only as of the date made. Actual results could differ materially from those contained in or implied by such forward-looking statements as a result of a variety of risks and uncertainties. These risks and uncertainties include, but are not limited to, the impact of competitive products and services, product demand and market acceptance risks, potential costs associated with litigation and regulatory compliance, reliance on key customers, financial difficulties experienced by customers, the cyclical and seasonal nature of our business, the adequacy of reserves and allowances for doubtful accounts, fluctuations in operating results or costs, unexpected difficulties in integrating acquired businesses, the ability to retain key employees of acquired businesses and unfavorable economic and market conditions. These risks and uncertainties also include, but are not limited to, those described in Part I, “Item IA. Risk Factors” and elsewhere in this report and those described from time to time in our future reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or circumstances.

PART I

ITEM 1. BUSINESS

Our Company

We are a leading provider of comprehensive corporate visual image solutions through the combination of extensive screen and digital graphics capabilities, a wide variety of high quality indoor and outdoor lighting products, and related professional services. We also provide graphics and lighting products and professional services on a stand-alone basis. Our company is the leading provider of corporate visual image solutions to the petroleum/convenience store industry. We use this leadership position to penetrate national retailers and multi-site retailers, including quick service and casual restaurants, video rental and eyewear chains, retail chain stores and automobile dealerships located primarily in the United States. In addition, we are a leading provider of digital solid-state LED video screens and LED (light emitting diode) specialty lighting to such markets or industries as sports stadiums and arenas, digital billboards, and entertainment. We design and develop all aspects of the solid-state LED video screens and lighting, from the electronic circuit board, to the software to drive and control the LEDs, to the structure of the LED product.

Our focus on product development and innovation creates products that are essential components of our customers’ corporate visual image strategy. We develop and manufacture lighting, graphics and solid-state LED video screen and lighting products and distribute them through an extensive multi-channel distribution network that allows us to effectively service our target markets. Representative customers include British Petroleum/Amoco/Arco, Chevron Texaco, 7-Eleven, ExxonMobil, Shell, Burger King, Dairy Queen, Taco Bell, Wendy’s, Best Buy, CVS Pharmacies, Inc., Target Stores, Wal-Mart Stores, Inc., Chrysler, Ford, General Motors, Nissan, Saturn, and Toyota. We service our customers at the corporate, franchise and local levels.

We believe that national retailers and niche market companies are increasingly seeking single-source suppliers with the project management skills and service expertise necessary to execute a comprehensive visual image program. The integration of our graphics, lighting, technology and professional services capabilities allows our customers to outsource to us the development of an entire visual image program from the planning and design stage through installation. Our approach is to combine standard, high-production lighting products, custom graphics applications and professional services to create complete customer-focused visual image solutions. We also offer products and services on a stand-alone basis to service our existing image solutions customers, to establish a presence in a new market or to create a relationship with a new customer. We believe that our ability to combine graphics and lighting products and professional services into a comprehensive visual image solution differentiates us from our competitors who offer only stand-alone products for lighting or graphics and who lack professional services offerings. During the past several years, we have continued to enhance our ability to provide comprehensive corporate visual image solutions by adding additional graphics capabilities, lighting products, LED video screens, LED lighting products and professional services through acquisitions and internal development.

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Our business is organized as follows: the Lighting Segment, which represented 69% of our fiscal 2009 net sales; the Graphics Segment, which represented 26% of our fiscal 2009 net sales; the Technology Segment, which represented 2% of our fiscal 2009 net sales; and an All Other Category, which represented 3% of our fiscal 2009 net sales. Our most significant market, which includes sales of both the Lighting Segment and the Graphics Segment, is the petroleum / convenience store market with approximately 23%, 28%, and 26% of total net sales concentrated in this market in the fiscal years ended June 30, 2009, 2008, and 2007, respectively. See Note 2 of Notes to Consolidated Financial Statements beginning on page F-30 of this Form 10-K for additional information on business segments. Net sales by segment are as follows (in thousands):

	2009		2008		2007
Lighting Segment	$	160,475	$	183,694	$	191,697
Graphics Segment		60,765		85,244		107,764
Technology Segment		4,576		9,136		17,132
All Other Category		7,983		27,212		20,860
Total Net Sales	$	233,799	$	305,286	$	337,453

Lighting Segment

Our lighting segment manufactures and markets outdoor and indoor lighting for the commercial, industrial and multi-site retail markets, including the petroleum / convenience store market. Our products are designed and manufactured to provide maximum value and meet the high-quality, competitively-priced product requirements of our niche markets. We generally avoid specialty or custom-designed, low-volume products for single order opportunities. We do, however, design proprietary products used by our national account customers in large volume, and occasionally also provide custom products for large, specified projects. Our concentration is on our high-volume, standard product lines that meet our customers’ needs. By focusing our product offerings, we achieve significant manufacturing and cost efficiencies.

Our lighting fixtures, poles and brackets are produced in a variety of designs, styles and finishes. Important functional variations include types of mounting, such as pole, bracket and surface, and the nature of the light requirement, such as down-lighting, wall-wash lighting, canopy lighting, flood-lighting, area lighting and security lighting. Our engineering staff performs photometric analyses, wind load safety studies for all light fixtures and also designs our fixtures and lighting systems. Our lighting products utilize a wide variety of different light sources, including high-intensity discharge metal-halide, fluorescent, and solid-state LED. The major products and services offered within our lighting segment include: exterior area lighting, interior lighting, canopy lighting, landscape lighting, LED lighting, light poles, lighting analysis and photometric layouts. All of our products are designed for performance, reliability, ease of installation and service, as well as attractive appearance. The Company also has a focus on designing lighting system solutions and implementing strategies related to energy savings in substantially all markets served.

We offer our customers expertise in developing and utilizing high-performance LED color and white lightsource solutions for our Lighting, Graphics and Technology applications, which, when combined with the Company’s lighting fixture expertise and technology has the potential to result in a broad spectrum of white light LED fixtures that offer equivalent or improved lighting performance with significant energy and maintenance savings as compared to the present metal halide and fluorescent lighting fixtures.

The $23.2 million or 12.6% decrease in Lighting Segment net sales in fiscal 2009 is primarily the result of a $13.3 million or 17% net decrease in lighting sales to our niche markets (petroleum / convenience stores, automotive dealerships, and quick service restaurants) and national retail accounts, and a $9.9 million or 9.2% decrease in commissioned net sales to the commercial / industrial lighting market.

The $8.0 million or 4.2% decrease in Lighting Segment net sales in fiscal 2008 is primarily the net result of a $10.0 million or 10.3% increase in commissioned net sales to the commercial and industrial lighting market, offset by a $17.9 million or 18.9% decrease in lighting sales to our niche markets of petroleum / convenience stores, automotive dealerships, and retail national accounts (one large national retailer represented approximately $14.9 million of this reduction as their new store construction program slowed and the Company has transitioned from primarily interior lighting to primarily exterior lighting under a new contract).

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Graphics Segment

The Graphics Segment manufactures and sells exterior and interior visual image elements related to graphics. These products are used in graphics displays and visual image programs in several markets, including the petroleum/convenience store market and multi-site retail operations. Our extensive lighting and graphics expertise, product offering, visual image solution implementation capabilities and other professional services represent significant competitive advantages. We work with corporations and design firms to establish and implement cost effective corporate visual image programs. Increasingly, we have become the primary supplier of exterior and interior graphics for our customers. We also offer installation or installation management (utilizing pre-qualified independent subcontractors throughout the United States) services for those customers who desire that we become involved in the installation of interior or exterior graphics products.

Our business can be significantly impacted by participation in a customer’s “image conversion program,” especially if it were to involve a “roll out” of that new image to a significant number of that customer’s and its franchisees’ retail sites. The impact to our business can be very positive with growth in net sales and profitability when we are engaged in an image conversion program. This can be followed in subsequent periods by lesser amounts of business or negative comparisons following completion of an image conversion program, unless we are successful in replacing that completed business with participation in a new image conversion program of similar size with one or more customers. An image conversion program can potentially involve any or all of the following improvements, changes or refurbishments at a customer’s retail site: interior or exterior lighting (see discussion above about our lighting segment), interior or exterior store signage and graphics, and installation of these products in both the prototype and roll out phases of their program. We believe our retail customers are implementing image conversions on a more frequent basis than in the past, approximately every five to seven years versus ten to fifteen years in the past, in order to maintain a safe, fresh look or new image on their site in order to continue to attract customers to their site, and maintain or grow their market share.

The major products and services offered within our Graphics Segment include the following: signage and canopy graphics, pump dispenser graphics, building fascia graphics, decals, interior signage and marketing graphics, aisle markers, wall mural graphics, fleet graphics, prototype program graphics, installation services for graphics products and solid state LED video screens for the sports and advertising markets.

The $24.5 million or 28.7% decrease in Graphics Segment net sales in fiscal 2009 is primarily the result of completion of programs for certain graphics customers, including an image conversion program for a national drug store retailer ($4.3 million decrease), two petroleum / convenience store customers’ programs ($25.7 million decrease), reductions of net sales to ten other petroleum / convenience store customers ($7.0 million decrease) and changes in volume or completion of other graphics programs. These decreases were partially offset by increased net sales to certain other customers, including a reimaging program for a grocery customer ($8.9 million increase), and sales of solid-state LED video screens for sports markets ($5.7 million increase).

The $22.5 million or 20.9% decrease in Graphics Segment net sales in fiscal 2008 is primarily the result of completion of programs for certain graphics customers or reduction of net sales to other graphics customers, including an image conversion program for a national drug store retailer ($16.6 million decrease), two petroleum / convenience store customers ($8.0 million decrease), reduced sales to a telecommunications company ($2.2 million decrease) and changes in volume or completion of other graphics programs. These decreases were partially offset by increased net sales to certain other customers, including sales related to an image conversion program in the petroleum / convenience store market ($6.1 million increase).

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Technology Segment

The Technology Segment was created on June 26, 2006 when the Company acquired substantially all the net assets of SACO Technologies, Inc., which it renamed LSI Saco Technologies, at a total purchase price of $45.1 million. The new subsidiary has continued to operate in Montreal, Canada as a worldwide leader and pioneer in the design, production, and support of high-performance light engines and large format video screens using LED (light emitting diode) technology. LSI Saco Technologies offers its customers expertise in developing and utilizing high-performance LED color and white lightsource solutions for both lighting and graphics applications. The Company acquired SACO Technologies primarily in order to obtain LED technology and also to enter into the large format video screen business for the sports and entertainment markets. This LED technology has significant potential for the Company’s Lighting Segment to be combined with the Company’s existing lighting fixture expertise and technology to develop a broad spectrum of white light LED fixtures that offer equivalent or improved lighting performance with significant energy and maintenance savings as compared to the present metal halide and fluorescent lighting fixtures. Additionally, this LED technology is used in the Company’s Graphics Segment to light, accent and provide color lighting to graphics display and visual image programs of the Company’s retail, quick service restaurant and sports market customers.

Net sales of the Technology Segment were $4,576,000 and $9,136,000 in fiscal years 2009 and 2008, respectively. The decrease in fiscal 2009 relates primarily to decreased sales of solid-state LED video screens for the sports and advertising markets ($3.0 million) and decreased sales of specialty LED lighting ($2.1 million). Fiscal 2008 net sales of $9,136,000 decreased $8.0 million or 48% from the prior fiscal year primarily as a result of reduced sales of video screens for the sports markets ($6.5 million) and billboard market ($2.0 million) and reduced specialty LED lighting sales ($1.7 million), partially offset by increased net sales of LED video screens to the entertainment market ($0.8 million) and advertising market ($1.2 million).

All Other Category

The All Other Category includes the results of all LSI operations that are not able to be aggregated into one of the three reportable business segments. Operating results of LSI Marcole, LSI Adapt, LSI Images as well as Corporate Administrative expenses are included in the All Other Category. The major products and services offered by operations included in the All Other Category include: electrical wire harnesses (for LSI’s light fixtures and for the white goods or appliance industry); exterior and interior menu board systems primarily for the quick service restaurant market; and surveying, permitting and installation management services related to products of the Graphics Segment.

Fiscal 2009 net sales of $7,983,000 decreased $19.2 million or 71% from the prior fiscal year primarily as a net result of one menu board conversion program that was completed in fiscal 2008 ($19.8 million decrease). Fiscal 2008 net sales of the All Other Category of $27,212,000 increased $6.4 million or 30% from the prior year primarily as a net result of one menu board conversion program that was completed in fiscal 2008 ($10.1 million increase), a $2.9 million decrease in sales to a second menu board customer, and decreased net sales to electrical wire harness customers ($1.2 million decrease).

Goodwill Impairment

In fiscal 2009, we recorded a $14,467,000 non-cash goodwill impairment charge. Charges totaling $11,185,000 were recorded in the Lighting Segment, charges totaling $716,000 were recorded in the Graphics Segment, and charges in the amount of $2,566,000 were recorded in the All Other Category. Impairment tests conducted in three of the four fiscal quarters indicated there were full or partial impairments of goodwill in one of our reporting units in our Lighting Segment, one reporting unit in the Graphics Segment and one reporting unit in our All Other Category due to the combination of a decline in the market capitalization of the Company at certain quarter-end balance sheet dates and a decline in the estimated forecasted discounted cash flows which management attributes to a weaker economic cycle impacting certain of our customers, notably national retailers.

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Our Competitive Strengths

Single Source Comprehensive Visual Image Solution Provider. We believe that we are the only company serving our target markets that combines significant graphics capabilities, lighting products and installation implementation capabilities to create comprehensive image solutions. We believe that our position as a single-source provider creates a competitive advantage over competitors who can only address either the lighting or the graphics component of a customer’s corporate visual image program. Using our broad visual image solutions capabilities, our customers can maintain complete control over the creation of their visual image programs while avoiding the added complexity of coordinating separate lighting and graphics suppliers and service providers among multiple suppliers. We can use high technology software to produce computer-generated virtual prototypes of a customer’s new or improved retail site image. We believe that these capabilities are unique to our target markets and they allow our customers to make educated, cost-effective decisions quickly.

Proven Ability to Penetrate Target Markets. We have grown our business by establishing a leadership position in the majority, as defined by our revenues, of our target markets, including petroleum/convenience stores, automobile dealerships and specialty retailers. Although our relationship with our customers may begin with the need for a single product or service, we leverage our broad product and service offering to identify additional products and solutions. We combine existing graphics, lighting and image element offerings, develop products and add services to create comprehensive solutions for our customers.

Product Development Focus. We believe that our ability to successfully identify and develop new products has allowed us to expand our market opportunity and enhance our market position. Our product development initiatives are designed to increase the value of our product offering by addressing the needs of our customers and target markets through innovative retrofit enhancements to existing products or the development of new products. In addition, we believe our product development process creates value for our customers by producing products that offer energy efficiency, low maintenance requirements and long-term operating performance at a competitive price based upon the latest technologies available.

Strong Relationships with our Customers. We have used our innovative products and high-quality services to develop close, long-standing relationships with a large number of our customers. Many of our customers are recognized among the leaders in their respective markets; including customers such as BP, Chrysler, CVS Caremark and Burger King. Their use of our products and services raises the visibility of our capabilities and facilitates the acceptance of our products and services in their markets. Within each of these markets, our ability to be a single source provider of image solutions often creates repeat business opportunities through corporate reimaging programs. We have served some of our customers since our inception in 1976.

Well-capitalized Balance Sheet. As part of our long-term operating strategy, we believe the Company maintains a conservative capital structure. With a strong equity base, we are able to preserve operating flexibility in times of industry expansion and contraction. In the current business environment, a strong balance sheet demonstrates financial viability to our existing and targeted customers. In addition, a strong balance sheet enables us to continue important R&D and capital spending.

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Aggressive Use of Our Image Center Capabilities. Our image center capabilities provide us with a distinct competitive advantage to demonstrate the effectiveness of integrating graphics and lighting into a complete corporate visual image program. Our technologically advanced image centers, which demonstrate the depth and breadth of our product and service offerings, have become an effective component of our sales process.

Maintain our Vertically Integrated Business Model. We consider our company to be a vertically integrated manufacturer rather than a product assembler. We focus on developing unique customer-oriented products, solutions and technology, and outsource certain non-core processes and product components as necessary.

Sales, Marketing and Customers

Our lighting products are sold primarily throughout the United States, but also in Canada, Australia and Latin America (about 3% of total net sales are outside the United States) using a combination of regional sales managers, independent sales representatives and distributors. Although in some cases we sell directly to national firms, more frequently we are designated as a preferred vendor for product sales to customer-owned as well as franchised, licensed and dealer operations. Our graphics products, which are program-driven, technology products, and products and services sold by company operations in the All Other Category are sold primarily through our own sales force. Our marketing approach and means of distribution vary by product line and by type of market.

Sales are developed by contacts with national retail marketers, branded product companies, franchise and dealer operations. In addition, sales are also achieved through recommendations from local architects, engineers, petroleum and electrical distributors and contractors. Our sales are partially seasonal as installation of outdoor lighting and graphic systems in the northern states decreases during the winter months.

Our image center capabilities are an important part of our sales process. The image center, unique within the lighting and graphics industry, is a facility that can produce a computer-generated virtual prototype of a customer’s facility on a large screen through the combination of high technology software and audio/visual presentation. With these capabilities, our customers can instantly explore a wide variety of lighting and graphics alternatives to develop consistent day and nighttime images. Our image centers give our customers more options, greater control, and more effective time utilization in the development of lighting, graphics and visual image solutions, all with much less expense than traditional prototyping. In addition to being cost and time effective for our customers, we believe that our image center capabilities result in the best solution for our customers’ needs.

The image centers also contain comprehensive indoor and outdoor product display areas that allow our customers to see many of our products and services in one setting. This aids our customers in making quick and effective lighting and graphic design decisions through hands-on product demonstrations and side-by-side comparisons. More importantly, our image center capabilities allow us to expand our customer’s interest from just a single product into other products and solutions. We believe that our image center capabilities have further enhanced our position as a highly qualified outsourcing partner capable of guiding a customer through image alternatives utilizing our lighting and graphics products and services. We believe this capability distinguishes us from our competitors and will become increasingly beneficial in attracting additional customers.

Manufacturing and Operations

We design, engineer and manufacture substantially all of our lighting and graphics products through a vertically integrated business model. By emphasizing high-volume production of standard product lines, we achieve significant manufacturing efficiencies. When appropriate, we utilize alliances with vendors to outsource certain products and assemblies. LED products and related software are engineered, designed and final-assembled by the Company, while much of the manufacturing has been performed by select qualified vendors. In fiscal 2007, we made all necessary preparations to begin manufacturing within the Company certain components for certain LED video screens and products. We are not dependent on any one supplier for any of our component parts.

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The principal raw materials and purchased components used in the manufacturing of our products are steel, aluminum, wire, sockets, lamps, certain fixture housings, acrylic and glass lenses, lighting ballasts, inks, various graphics substrates such as decal material and vinyls, LEDs and electrical components. We source these materials and components from a variety of suppliers. Although an interruption of these supplies and components could disrupt our operations, we believe generally that alternative sources of supply exist and could be readily arranged. We strive to reduce price volatility in our purchases of raw materials and components through quarterly or annual contracts with certain of our suppliers. Our lighting operations generally carry relatively small amounts of finished goods inventory, except for certain products that are stocked to meet quick delivery requirements. Most often, lighting products are made to order and shipped shortly after they are manufactured. Our graphics operations manufacture custom graphics products for customers who frequently require us to stock certain amounts of finished goods in exchange for their commitment to that inventory. Our technology operation carries LED and LED component inventory due to longer lead times, and makes products to order and ships shortly after assembly is complete. In some Graphics programs, customers also give us a cash advance for the inventory that we stock for them. Customers purchasing LED video screens routinely give us cash advances for large projects prior to shipment.

We believe we are a low-cost producer for our types of products, and as such, are in a position to promote our product lines with substantial marketing and sales activities.

Our manufacturing operations are subject to various federal, state and local regulatory requirements relating to environmental protection and occupational health and safety. We do not expect to incur material capital expenditures with regard to these matters and believe our facilities are in compliance with such regulations.

Competition

We experience strong competition in all segments of our business, and in all markets served by our product lines. Although we have many competitors, some of which have greater financial and other resources, we do not compete with the same companies across our entire product and service offerings. We believe product quality and performance, price, customer service, prompt delivery, and reputation to be important competitive factors.

We have several product and process patents which have been obtained in the normal course of business. In general, we do not believe that patent protection is critical to our business, however we do believe that patent protection is important for a few select products.

Additional Information

Our sales are partially seasonal as installation of outdoor lighting and graphic systems in the northern states lessens during the harshest winter months. We had a backlog of orders, which we believe to be firm, of $40.5 million and $29.8 million at June 30, 2009 and 2008, respectively. All orders are believed to be shippable within twelve months. The increase as of June 30, 2009 relates primarily to a $22 million project with a petroleum / convenience store customer to install retrofit solid-state LED lighting at over 1,100 of its sites in North America.

We have approximately 1,160 full-time and 80 temporary employees as of June 30, 2009. We offer a comprehensive compensation and benefit program to most employees, including competitive wages, a discretionary bonus plan, a profit-sharing plan and retirement plan, and a 401(k) savings plan (for U.S. employees), a non-qualified deferred compensation plan (for certain employees), an equity compensation plan, and medical and dental insurance.

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We file reports with the Securities and Exchange Commission (“SEC”) on Forms 10-K, 10-Q and 8-K. You may read and copy any materials filed with the SEC at its public reference room at 100 F. Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain that information by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding us. The address of that site is http://www.sec.gov. Our internet address is http://www.lsi-industries.com. We make available free of charge through our internet web site our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as soon as reasonably practical after we electronically file them with the SEC. LSI is not including the other information contained on its website as part of or incorporating it by reference into this Annual Report on Form 10-K.

LSI Industries Inc. is an Ohio corporation, incorporated in 1976.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the following factors which could materially affect our business, financial condition, cash flows or future results. Any one of these factors could cause the Company’s actual results to vary materially from recent results or from anticipated future results. The risks described below are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

The markets in which we operate are subject to competitive pressures that could affect selling prices, and therefore could adversely affect our operating results.

Our businesses operate in markets that are highly competitive, and we compete on the basis of price, quality, service and/or brand name across the industries and markets served. Some of our competitors for certain products, primarily in the Lighting Segment, have greater sales, assets and financial resources than we have. Some of our competitors are based in foreign countries and have cost structures and prices in foreign currencies. Accordingly, currency fluctuations could cause our U.S. dollar-priced products to be less competitive than our competitors’ products which are priced in other currencies. Competitive pressures could affect prices we charge our customers or demand for our products, which could adversely affect our operating results. Additionally, customers for our products are attempting to reduce the number of vendors from which they purchase in order to reduce the size and diversity of their inventories and their transaction costs. To remain competitive, we will need to invest continuously in manufacturing, marketing, customer service and support, and our distribution networks. We may not have sufficient resources to continue to make such investments and we may be unable to maintain our competitive position.

Lower levels of economic activity in our end markets could adversely affect our operating results.

Our businesses operate in several market segments including commercial, industrial, retail, petroleum / convenience store and entertainment. Operating results can be negatively impacted by volatility in these markets. Future downturns in any of the markets we serve could adversely affect our overall sales and profitability.

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Our operating results may be adversely affected by unfavorable economic and market conditions.

Economic conditions worldwide have from time to time contributed to slowdowns in our industry at large, as well as to the specific segments and markets in which we operate. When combined with ongoing customer consolidation activity and periodic manufacturing and inventory initiatives, the current uncertain macro-economic climate, including but not limited to the effects of weakness in credit markets, could lead to reduced demand from our customers and increased price competition for our products, increased risk of excess and obsolete inventories and higher overhead costs as a percentage of revenue. If the markets in which we participate experience further economic downturns, as well as a slow recovery period, this could negatively impact our sales and revenue generation, margins and operating expenses, and consequently have a material adverse effect on our business, financial condition and results of operations.

Price increases or significant shortages of raw materials and components could adversely affect our operating margin.

The Company purchases large quantities of raw materials and components — mainly steel, aluminum, ballasts, sockets, wire, plastic, lenses, glass, vinyls, inks, LEDs, and corrugated cartons. Materials comprise the largest component of costs, representing nearly 62% and 60% of the cost of sales in 2009 and 2008, respectively. While we have multiple sources of supply for each of our major requirements, significant shortages could disrupt the supply of raw materials. Further increases in the price of these raw materials and components could further increase the Company’s operating costs and materially adversely affect margins. Although the Company attempts to pass along increased costs in the form of price increases to customers, the Company may be unsuccessful in doing so for competitive reasons. Even when price increases are successful, the timing of such price increases may lag significantly behind the incurrence of higher costs.

We have a concentration of net sales to the petroleum / convenience store market, and any substantial change could have an adverse affect on our business.

Approximately 23% of our net sales in fiscal year 2009 are concentrated in the petroleum / convenience store market. Sales to this market segment are dependent upon the general conditions prevailing in and the profitability of the petroleum and convenience store industries and general market conditions. Our petroleum market business is subject to reactions by the petroleum industry to world political events, particularly those in the Middle East, and to the price and supply of oil. Major disruptions in the petroleum industry generally result in a curtailment of retail marketing efforts, including expansion and refurbishing of retail outlets, by the petroleum industry and adversely affect our business. Any substantial change in purchasing decisions by one or more of our largest customers, whether due to actions by our competitors, customer financial constraints, industry factors or otherwise, could have an adverse effect on our business.

Difficulties with integrating acquisitions could adversely affect operating costs and expected benefits from those acquisitions.

We have pursued and will continue to seek potential acquisitions to complement and expand our existing businesses, increase our revenues and profitability, and expand our markets through acquisitions. We cannot be certain that we will be able to identify, acquire or profitably manage additional companies or successfully integrate such additional companies without substantial costs, delays or other problems. Also, companies acquired recently and in the future may not achieve revenues, profitability or cash flows that justify our investment in them. We expect to spend significant time and effort in expanding our existing businesses and identifying, completing and integrating acquisitions. We expect to face competition for acquisition candidates which may limit the number of acquisition opportunities available to us, possibly leading to a decrease in the rate of growth of our revenues and profitability, and may result in higher acquisition prices. The success of these acquisitions we do make will depend on our ability to integrate these businesses into our operations. We may encounter difficulties in integrating acquisitions into our operations and in managing strategic investments. Therefore, we may not realize the degree or timing of the benefits anticipated when we first enter into a transaction.

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If acquisitions are made in the future and goodwill and intangible assets are recorded on the balance sheet, circumstances could arise in which the goodwill and intangible assets could become impaired and therefore would be written off.

We have pursued and will continue to seek potential acquisitions to complement and expand our existing businesses, increase our revenues and profitability, and expand our markets through acquisitions. As a result of acquisitions, we have significant goodwill and intangible assets recorded on our balance sheet. We will continue to evaluate the recoverability of the carrying amount of our goodwill and intangible assets on an ongoing basis, and we may incur substantial non-cash impairment charges, which would adversely affect our financial results. There can be no assurance that the outcome of such reviews in the future will not result in substantial impairment charges. Impairment assessment inherently involves judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact our assumptions as to prices, costs, holding periods or other factors that may result in changes in our estimates of future cash flows. Although we believe the assumptions we used in testing for impairment are reasonable, significant changes in any one of our assumptions could produce a significantly different result. If there were to be a decline in our market capitalization and a decline in estimated forecasted discounted cash flows, there could be an impairment of the goodwill and intangible assets. A non-cash impairment charge could be material to the net income of the reporting period in which it is recorded.

If customers do not accept new products, we could experience a loss of competitive position which could adversely affect future revenues.

The Company is committed to product innovation on a timely basis to meet customer demands. Development of new products for targeted markets requires the Company to develop or otherwise leverage leading technologies in a cost-effective and timely manner. Failure to meet these changing demands could result in a loss of competitive position and seriously impact future revenues. Products or technologies developed by others may render the Company’s products or technologies obsolete or noncompetitive. A fundamental shift in technologies in key product markets could have a material adverse effect on the Company’s operating results and competitive position within the industry. More specifically, the development of new or enhanced products is a complex and uncertain process requiring the anticipation of technological and market trends. We may experience design, manufacturing, marketing or other difficulties, such as an inability to attract a sufficient number of experienced engineers, that could delay or prevent our development, introduction or marketing of new products or enhancements and result in unexpected expenses. Such difficulties could cause us to lose business from our customers and could adversely affect our competitive position. In addition, added expenses could decrease the profitability associated with those products that do not gain market acceptance.

Our business is cyclical and seasonal, and in downward economic cycles our operating profits and cash flows could be adversely affected.

Historically, sales of our products have been subject to cyclical variations caused by changes in general economic conditions. Our revenues in our third quarter ending March 31 are also affected by the impact of weather on construction and installation programs and the annual budget cycles of major customers. The demand for our products reflects the capital investment decisions of our customers, which depend upon the general economic conditions of the markets that our customers serve, including, particularly, the petroleum and convenience store industries. During periods of expansion in construction and industrial activity, we generally have benefited from increased demand for our products. Conversely, downward economic cycles in these industries result in reductions in sales and pricing of our products, which may reduce our profits and cash flow. During economic downturns, customers also tend to delay purchases of new products. The cyclical and seasonal nature of our business could at times adversely affect our liquidity and financial results.

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A loss of key personnel or inability to attract qualified personnel could have an adverse affect on our operating results.

The Company’s future success depends on the ability to attract and retain highly skilled technical, managerial, marketing and finance personnel, and, to a significant extent, upon the efforts and abilities of senior management. The Company’s management philosophy of cost-control results in a very lean workforce. Future success of the Company will depend on, among other factors, the ability to attract and retain other qualified personnel, particularly management, research and development engineers and technical sales professionals. The loss of the services of any key employees or the failure to attract or retain other qualified personnel could have a material adverse effect on the Company’s results of operations.

The costs of litigation and compliance with environmental regulations, if significantly increased, could have an adverse affect on our operating profits.

We are, and may in the future be, a party to any number of legal proceedings and claims, including those involving patent litigation, product liability, employment matters, and environmental matters, which could be significant. Given the inherent uncertainty of litigation, we can offer no assurance that existing litigation or a future adverse development will not have a material adverse impact. We are also subject to various laws and regulations relating to environmental protection and the discharge of materials into the environment, and it could potentially be possible we could incur substantial costs as a result of the noncompliance with or liability for clean up or other costs or damages under environmental laws.

Uncertainties inherent in certain tax and accounting matters could adversely affect our operating results.

The discussion of goodwill impairment and tax matters in Notes 6, 8 and 12 to our consolidated financial statements beginning on page F-35 is incorporated by reference.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

The Company has fourteen facilities:

Description		Size	Location	Status
1)	LSI Industries Corporate Headquarters, and lighting fixture and graphics manufacturing	243,000 sq. ft., (includes 66,000 sq. ft. of office space)	Cincinnati, OH	Owned
2)	LSI Industries pole manufacturing and dry powder-coat painting	122,000 sq. ft.	Cincinnati, OH	Owned
3)	LSI Metal Fabrication and LSI Images manufacturing and dry powder-coat painting	98,000 sq. ft. (includes 5,000 sq. ft. of office space)	Independence, KY	Owned
4)	LSI Integrated Graphics office; screen printing manufacturing; and architectural graphics manufacturing	198,000 sq. ft. (includes 34,000 sq. ft. of office space)	Houston, TX	Leased
5)	Greenlee Lighting office and manufacturing	40,000 sq. ft. (includes 4,000 sq. ft. of office space)	Dallas, TX	Leased
6)	Grady McCauley office and manufacturing	210,000 sq. ft. (includes 20,000 sq. ft. of office space)	North Canton, OH	Owned
7)	LSI Marcole office and manufacturing of electrical wire harnesses; contract assembly services	61,000 sq. ft. (includes 5,000 sq. ft. of office space)	Manchester, TN	Owned
8)	LSI MidWest Lighting office and manufacturing	163,000 sq. ft. (includes 6,000 sq. ft. of office space and 27,000 sq. ft. of leased warehouse space)	Kansas City, KS	Owned and Leased
9)	LSI Retail Graphics office and manufacturing	57,000 sq. ft. (includes 11,000 sq. ft. of office space)	Woonsocket, RI	Owned
10)	LSI Lightron office and manufacturing	170,000 sq. ft. (includes 10,000 sq. ft. of office space)	New Windsor, NY	Owned and Leased (a)
11)	LSI West Coast Distribution Center	24,000 sq. ft.	Fontana, CA	Leased
12)	LSI Adapt offices	2,000 sq. ft.	North Canton, OH Charlotte, NC	Owned Leased
13)	LSI Saco Technologies office and manufacturing	32,000 sq. ft. (includes 9,000 sq. ft. of office space)	Montreal, Canada	Leased
14)	LSI ADL Technology office and manufacturing	57,000 sq. ft. (includes 11,000 sq. ft. of office space)	Hilliard, OH	Owned (b)

(a)	The land at this facility is leased and the building is owned.
(b)	This subsidiary and facility were acquired July 22, 2009.

The Company considers these facilities (total of 1,477,000 square feet) adequate for its current level of operations.

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ITEM 3. LEGAL PROCEEDINGS

Nothing to report.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None in the fourth quarter.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a)	Common share information appears in Note 17 — SUMMARY OF QUARTERLY RESULTS (UNAUDITED) under “Range of share prices” beginning on page F-45 of this Form 10-K. Information related to “Earnings (loss) per share” and “Cash dividends paid per share” appears in SELECTED FINANCIAL DATA on page F-47 of this Form 10-K. LSI’s shares of common stock are traded on the NASDAQ Global Select Market under the symbol “LYTS.”
	The Company’s policy with respect to dividends, as revised by the Board of Directors in August 2007, is to pay a quarterly cash dividend representing a payout ratio of between 50% and 70% of the then current fiscal year net income forecast. Accordingly, the Board of Directors established a new indicated annual cash dividend rate of $0.20 per share beginning with the first quarter of fiscal 2009 consistent with the above dividend policy. In addition to the four quarterly dividend payments, the Company may declare a special year-end cash and/or stock dividend. The Company has paid annual cash dividends beginning in fiscal 1987 through fiscal 1994, and quarterly cash dividends since fiscal 1995.
	At August 18, 2009, there were 427 shareholders of record. The Company believes this represents approximately 3,000 beneficial shareholders.

(b) The Company does not purchase into treasury its own common shares for general purposes. However, the Company does purchase its own common shares, through a Rabbi Trust, as investments of employee/participants of the LSI Industries Inc. Non-Qualified Deferred Compensation Plan. Purchases of Company common shares for this Plan in the fourth quarter of fiscal 2009 were as follows:

ISSUER PURCHASES OF EQUITY SECURITIES

							(d) Maximum Number
					(c) Total Number of		(or Approximate Dollar
	(a) Total				Shares Purchased as		Value) of Shares that
	Number of		(b) Average		Part of Publicly		May Yet Be Purchased
	Shares		Price Paid		Announced Plans or		Under the Plans or
Period	Purchased		per Share		Programs		Programs
4/1/09 to 4/30/09		806	$	5.85		806		(1	)
5/1/09 to 5/31/09		1,009	$	4.67		1,009		(1	)
6/1/09 to 6/30/09		902	$	4.61		902		(1	)
Total		2,717	$	5.00		2,717		(1	)

(1) All acquisitions of shares reflected above have been made in connection with the Company’s Non-Qualified Deferred Compensation Plan, which does not contemplate a limit on shares to be acquired.

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The following graph compares the cumulative total shareholder return on the Company’s Common Shares during the five fiscal years ended June 30, 2009 with a cumulative total return on the NASDAQ Stock Market Index (U.S. companies) and the Dow Jones Electrical Equipment Index. The comparison assumes $100 was invested June 30, 2004 in the Company’s Common Shares and in each of the indexes presented; it also assumes reinvestment of dividends.

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

ITEM 6. SELECTED FINANCIAL DATA

“Selected Financial Data” begins on page F-47 of this Form 10-K.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” appears on pages F-1 through F-15 of this Form 10-K.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in variable interest rates, changes in prices of raw materials and component parts, and changes in foreign currency translation rates. Each of these risks is discussed below.

Interest Rate Risk

The Company earns interest income on its cash, cash equivalents, and short-term investments and pays interest expense on its debt. Because of variable interest rates, the Company is exposed to risk of interest rate fluctuations, which impact interest income, interest expense, and cash flows. With the significant increase in the Company’s short-term cash investments and fourth quarter fiscal 2007 pay down of all variable rate debt, the adverse exposure to interest rate fluctuations has decreased considerably.

All of the Company’s $45,000,000 available lines of credit are subject to interest rate fluctuations, should the Company borrow on these lines of credit. Additionally, the Company expects to generate cash from its operations that will subsequently be used to pay down as much of the debt (if any is outstanding) as possible or invest cash in short-term investments (if no debt is outstanding), while still funding the growth of the Company.

Raw Material Price Risk

The Company purchases large quantities of raw materials and components — mainly steel, aluminum, ballasts, sockets, wire, plastic, lenses, glass, vinyls, inks, LEDs and corrugated cartons. The Company’s operating results could be affected by the availability and price fluctuations of these materials. The Company uses multiple suppliers, has alternate suppliers for most materials, and has no significant dependence on any single supplier. No significant supply problems have been encountered in recent years. Price risk for these materials is related to increases in commodity items that affect all users of the materials, including the Company’s competitors. For the year ended June 30, 2009, the raw material component of cost of goods sold subject to price risk was approximately $112 million. The Company does not actively hedge or use derivative instruments to manage its risk in this area. The Company does, however, seek new vendors, negotiate with existing vendors, and at times commit to minimum volume levels to mitigate price increases. The Company negotiates supply agreements with certain vendors to lock in prices over a negotiated period of time. In response to the rising material prices, the Company’s Lighting Segment announced price increases ranging from 3% to 6%, depending on the product, effective with August 2006 orders. Because of continued raw material cost increases, the Company announced additional selected price increases ranging from 5% to 12% effective with August 2008 orders. The Company’s Graphics Segments generally establishes new sales prices, reflective of the then current raw material prices, for each custom graphics program as it begins.

Foreign Currency Translation Risk

As a result of the Company’s June 2006 acquisition of SACO Technologies, Inc. (headquartered in Montreal, Canada), the Company became exposed to fluctuations in foreign currency exchange rates in the operation of its Canadian business. However, a substantial amount of SACO’s business is conducted in U.S. dollars, therefore, any potential risk is deemed immaterial.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	Begins
Index to Financial Statements	on Page
Financial Statements:
Management’s Report on Internal Control Over Financial Reporting		F-16
Report of Independent Registered Public Accounting Firm		F-17
Report of Independent Registered Public Accounting Firm		F-18
Consolidated Statements of Operations for the years ended June 30, 2009, 2008, and 2007		F-19
Consolidated Balance Sheets at June 30, 2009 and 2008		F-20
Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2009, 2008, and 2007		F-22
Consolidated Statements of Cash Flows for the years ended June 30, 2009, 2008, and 2007		F-23
Notes to Consolidated Financial Statements		F-24
Financial Statement Schedules:
II — Valuation and Qualifying Accounts for the years ended June 30, 2009, 2008, and 2007		F-46

Schedules other than those listed above are omitted for the reason(s) that they are either not applicable or not required or because the information required is contained in the financial statements or notes thereto. Selected quarterly financial data is found in NOTE 17 of the accompanying consolidated financial statements.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company periodically reviews the design and effectiveness of its disclosure controls and internal control over financial reporting. The Company makes modifications to improve the design and effectiveness of its disclosure controls and internal control structure, and may take other corrective action, if its reviews identify a need for such modifications or actions. The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.

As of the end of the period covered by this Form 10-K, an evaluation was completed under the supervision and with the participation of our management, including Chief Executive Officer and Chief Financial Officer, regarding the design and effectiveness of our disclosure controls and procedures. Based on this evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures were effective as of June 30, 2009.

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Changes in Internal Control

As described in our Form 10-Q for the period ended March 31, 2009, the Company concluded that it had a material weakness in internal control over financial reporting related to the identification of reporting units under Statement of Financial Accounting Standards No. 142, Goodwill and Intangible Assets (“SFAS No. 142”). The Company has remediated this material weakness by the implementation of new procedures with respect to how the goodwill impairment tests are conducted. Management reanalyzed the technical application of SFAS No. 142 and redefined its reporting units for goodwill impairment testing. The goodwill impairment tests are now performed at the operating segment level, which is the lowest level discrete financial information available and regularly reviewed by management. These additional procedures have been designed to ensure that all technical aspects of SFAS No. 142 are properly considered and applied.

Other than as described above, there were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended June 30, 2009, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. See Management’s Report on Internal Control Over Financial Reporting on page F-16.

ITEM 9B. OTHER INFORMATION

On September 8, 2009, the Audit Committee of the Board of Directors notified Deloitte & Touche LLP that they would be dismissed as the Company’s independent registered public accounting firm upon filing of this Annual Report on Form 10-K. On that same date, the Audit Committee of the Board of Directors notified Grant Thornton LLP that they would be engaged as the Company’s independent registered public accounting firm upon filing of this Annual Report on Form 10-K.

PART III

ITEMS 10, 11, 12, 13 and 14 of Part III are incorporated by reference to the LSI Industries Inc. Proxy Statement for its Annual Meeting of Shareholders to be held November 19, 2009, as filed with the Commission pursuant to Regulation 14A.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED  SHAREHOLDER MATTERS

The description of equity compensation plans required by Regulation S-K, Item 201(d) is incorporated by reference to the LSI Industries Inc. Proxy Statement for its Annual Meeting of Shareholders to be held November 19, 2009, as filed with the Commission pursuant to Regulation 14A.

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The following table presents information about the Company’s equity compensation plans (LSI Industries Inc. 1995 Stock Option Plan, the LSI Industries Inc. 1995 Directors’ Stock Option Plan and the 2003 Equity Compensation Plan) as of June 30, 2009.

					(c)
					Number of securities
					remaining available
	(a)				for future issuance
	Number of securities to		(b)		under equity
	be issued upon		Weighted average		compensation plans
	exercise of outstanding		exercise price of		(excluding securities
	options, warrants and		outstanding options,		reflected in column
Plan category	rights		warrants and rights		(a))
Equity compensation plans approved by security holders		1,537,212	$	13.07		897,683
Equity compensation plans not approved by security holders		—		—		—
Total		1,537,212	$	13.07		897,683

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this report:

(1) Consolidated Financial Statements Appear as part of Item 8 of this Form 10-K.

(2) Consolidated Financial Statement Schedules Appear as part of Item 8 of this Form 10-K.

(3) Exhibits — Exhibits set forth below are either on file with the Securities and Exchange Commission and are incorporated by reference as exhibits hereto, or are filed with this Form 10-K.

Exhibit No.		Exhibit Description
	2.1	Stock Purchase Agreement dated as of June 26, 2006 among LSI Industries Inc. (“LSI” or the “Registrant”), Jalbout Holdings Inc., 3970957 Canada, Inc., Saco Technologies Inc., 4349466 Canada Inc., Fred Jalbout and Bassam Jalbout filed as Exhibit 2.1 to LSI’s Form 8-K filed June 29, 2006.
	2.2	Purchase and Sale Agreement dated as of July 22, 2009 among LSI Industries Inc., LSI Acquisition Inc., ADL Technology Inc., ADL Engineering Inc., and Craig A. Miller, Kevin A. Kelly and David T. Feeney filed as Exhibit 2.1 to LSI’s Form 8-K filed July 24, 2009.
	3.1	Articles of Incorporation of LSI filed as Exhibit 3.1 to LSI’s Form S-3 Registration Statement File No. 33-65043.
	3.2	Amended and Restated Code of Regulations of LSI filed as Exhibit 3 to LSI’s Form 8-K filed January 22, 2009.
	3.3	Amendment to Code of Regulations of LSI filed as Exhibit 3 to LSI’s Form 10-Q for the quarter ended December 31, 2004.

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Exhibit No.			Exhibit Description
	10.1		Credit Agreement by and among LSI as the Borrower, the banks party thereto as the lenders thereunder, PNC Bank National Association as the Administrative Agent and the Syndication Agent, Dated as of March 30, 2001 filed as Exhibit 4 to LSI’s Form 10-K for the fiscal year ended June 30, 2001.
	10.2		Amendment to Credit Agreement (Dated June 26, 2006) filed as Exhibit 10.5 to LSI’s Form 8-K filed June 29, 2006.
	10.3		Amendment No. 6 to Credit Agreement dated January 12, 2007 among the Registrant, PNC Bank, National Association, in its capacity as Lender and The Fifth Third Bank filed as Exhibit 10.1 to LSI’s Form 8-K filed January 17, 2007.
	10.4		Amended and Restated 364 Day Notes executed by Registrant in favor of PNC Bank, National Association and Fifth Third Bank dated March 18, 2009 filed as Exhibit 10.2 to LSI’s Form 8-K filed March 18, 2009.
	10.5		Loan Agreement dated January 12, 2007 among The Fifth Third Bank, LSI Saco Technologies Inc. and LSI, as guarantor, filed as Exhibit 10.2 to LSI’s Form 8-K filed January 17, 2007.
	10.6		Continuing and Unlimited Guaranty Agreement dated January 12, 2007 executed by the Registrant filed as Exhibit 10.3 to LSI’s Form 8-K filed January 17, 2007.
	10.7		Amendment to Credit Agreement (Dated March 18, 2009) filed as Exhibit 10.1 to LSI’s Form 8-K filed March 18, 2009.
	10.8		First Amendment to Loan Agreement and Guaranty dated as of June 8, 2007 among the Registrant, LSI Saco Technologies Inc., and Fifth Third Bank filed as Exhibit 10.1 to LSI’s Form 8-K filed June 11, 2007.
	10.9	*	LSI Industries Inc. Retirement Plan (Amended and Restated as of February 1, 2006).
	10.10	*	Fourth Amendment to the LSI Industries Inc. Retirement Plan (Amended and Restated as of February 1, 2006).
	10.11	*	LSI Industries Inc. 1995 Directors’ Stock Option Plan (Amended as of December 6, 2001) filed as Exhibit 10 to LSI’s Form S-8 Registration Statement File No. 333-100038.
	10.12	*	LSI Industries Inc. 1995 Stock Option Plan (Amended as of December 6, 2001) filed as Exhibit 10 to LSI’s Form S-8 Registration Statement File No. 333-100039.
	10.13	*	LSI Industries Inc. 2003 Equity Compensation Plan (Amended and Restated through January 25, 2006) filed as Exhibit 10.2 to LSI’s Form 8-K filed January 5, 2006.
	10.14	*	Trust Agreement Establishing the Rabbi Trust Agreement by and between LSI Industries Inc. and Prudential Bank & Trust, FSB filed as Exhibit 10.1 to LSI’s Form 8-K filed January 5, 2006.

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Exhibit No.			Exhibit Description
	10.15	*	LSI Industries Inc. Nonqualified Deferred Compensation Plan (Amended and Restated as of December 31, 2008) filed as Exhibit 10 to LSI’s Form 8-K filed October 23, 2008.
	10.16	*	Amended Agreement dated January 25, 2005 with Robert J. Ready filed as Exhibit 10.1 to LSI’s Form 8-K filed January 27, 2005.
	10.17	*	Amended Agreement dated January 25, 2005 with James P. Sferra filed as Exhibit 10.2 to LSI’s Form 8-K filed January 27, 2005.
	10.18	*	LSI Industries Inc. 2006 Corporate Officer Incentive Compensation Plan filed as Exhibit 10.1 to LSI’s Form 8-K filed January 26, 2006.
	10.19		Registration Rights Agreement dated as of June 26, 2006 by and between LSI Industries Inc. and Saco Technologies Inc. filed as Exhibit 10.2 to LSI’s Form 8-K filed June 29, 2006.
	10.20	*	Employment Agreement dated as of June 26, 2006 by and between 4349466 Canada Inc. and Fred Jalbout filed as Exhibit 10.3 to LSI’s Form 8-K filed June 29, 2006.
	10.21		Lease Agreement between 3970957 Canada, Inc. and 4349466 Canada Inc. filed as Exhibit 10.4 to LSI’s Form 8-K filed June 29, 2006.
	10.22		Escrow Agreement dated as of July 22, 2009 among LSI Acquisition Inc., Craig A. Miller, Kevin A. Kelly, David T. Feeney and U.S. Bank, National Association filed as Exhibit 10.1 to LSI’s Form 8-K filed July 24, 2009.
	10.23		Registration Rights Agreement dated as of July 22, 2009 by and between LSI Industries Inc. and Craig A. Miller, Kevin A. Kelly and David T. Feeney filed as Exhibit 10.2 to LSI’s Form 8-K filed July 24, 2009.
	10.24		Real Estate Purchase Agreement between Kelmilfeen Ltd. and LSI Acquisition Inc. dated July 22, 2009 filed as Exhibit 10.3 to LSI’s Form 8-K filed July 24, 2009.
	14		Code of Ethics filed as Exhibit 14 to LSI’s Form 10-K for the fiscal year ended June 30, 2004.
	21		Subsidiaries of the Registrant
	23.1		Consent of Independent Registered Public Accounting Firm
	31.1		Certification of Principal Executive Officer required by Rule 13a-14(a)
	31.2		Certification of Principal Financial Officer required by Rule 13a-14(a)
	32.1		18 U.S.C. Section 1350 Certification of Principal Executive Officer
	32.2		18 U.S.C. Section 1350 Certification of Principal Financial Officer

* Management Compensatory Agreements.

LSI will provide shareholders with any exhibit upon the payment of a specified reasonable fee, which fee shall be limited to LSI’s reasonable expenses in furnishing such exhibit.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.
Date: September 11, 2009	BY:	/s/ Robert J. Ready Robert J. Ready
		Chairman of the Board and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title
/s/ Robert J. Ready Robert J. Ready	Chairman of the Board, Chief Executive Officer, and President
Date: September 11, 2009	(Principal Executive Officer)
/s/ Ronald S. Stowell Ronald S. Stowell	Vice President, Chief Financial Officer, and Treasurer  (Principal Financial and Accounting Officer)
Date: September 11, 2009
/s/ Gary P. Kreider Gary P. Kreider	Director
Date: September 11, 2009
/s/ Dennis B. Meyer Dennis B. Meyer	Director
Date: September 11, 2009
/s/ Wilfred T. O’Gara Wilfred T. O’Gara	Director
Date: September 11, 2009
/s/ Mark A. Serrianne Mark A. Serrianne	Director
Date: September 11, 2009
/s/ James P. Sferra James P. Sferra	Secretary; Executive Vice President  — Manufacturing; and Director
Date: September 11, 2009

- 21 -

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company’s “forward looking statements” and disclosures as presented earlier in this Form 10-K in the “Safe Harbor” Statement should be referred to when reading Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Net Sales by Business Segment

(In thousands)	2009		2008		2007
Lighting Segment	$	160,475	$	183,694	$	191,697
Graphics Segment		60,765		85,244		107,764
Technology Segment		4,576		9,136		17,132
All Other Category		7,983		27,212		20,860
	$	233,799	$	305,286	$	337,453

Operating Income (Loss) by Business Segment

(In thousands)	2009			2008			2007
Lighting Segment	$	(3,911	)	$	15,310		$	17,219
Graphics Segment		2,646			(14,027	)		19,012
Technology Segment		(486	)		(4,876	)		480
All Other Category		(12,660	)		(7,377	)		(4,161	)
	$	(14,411	)	$	(10,970	)	$	32,550

As fiscal 2009 progressed, the Company encountered a global economic recession with unprecedented negative economic forces, including declining industrial production, rapidly increasing unemployment, roller coaster commodity pricing, and record low confidence levels, as well as issues such as malfunctioning credit markets which could affect many customers and a decimated housing market that indirectly could affect the Company’s business. Taken as a whole, these factors have caused a substantial reduction in demand for our lighting and graphics products. Virtually all of our markets have been adversely impacted and our business has suffered as a result. During these difficult and uncertain economic conditions, we have taken a number of proactive steps to “right size” LSI Industries to meet today’s challenges. Such actions include strict control of expenses, capital expenditure reductions, close management of accounts receivable and inventories, headcount reductions, and maintaining a conservative financial position coupled with positive free cash flow. We believe the economy will eventually improve. As we continue to adjust our expense levels to lower production rates and manage working capital efficiently, we are also strategically positioning the business for future growth and are very positive about the longer term outlook and opportunities for the Company, notwithstanding the current economic recession that will likely continue to impact results during the next several quarters. LSI is facing a period of challenging business conditions in the near term due to the general economic recession but expects to emerge a stronger and more efficient company as business conditions improve.

The Company’s total net sales of products and services related to solid-state LED technology in light fixtures and video screens for sports, advertising and entertainment markets totaled $18.9 million in fiscal 2009, representing approximately a 150% increase from last year’s net sales of $7.5 million. In addition, the Company sells certain elements of graphic identification programs that contain solid-state LED light sources.

F-1

Results of Operations

2009 Compared to 2008

Lighting Segment

(In thousands)	2009			2008
Net Sales	$	160,475		$	183,694
Operating Income (Loss)	$	(3,911	)	$	15,310

Lighting Segment net sales of $160,475,000 in fiscal 2009 decreased 12.6% from fiscal 2008 net sales of $183,694,000. The $23.2 million decrease in Lighting Segment net sales is primarily the result of a $13.3 million or 17% net decrease in lighting sales to our niche markets (petroleum / convenience stores, automotive dealerships, and quick service restaurants) and national retail accounts, and a $9.9 million or 9.2% decrease in commissioned net sales to the commercial / industrial lighting market. Sales of lighting to the petroleum / convenience store market represented 19% and 16% of Lighting Segment net sales in fiscal years 2009 and 2008, respectively. Net sales of lighting to this, the Company’s largest niche market, were up 2.2% from last year to $30,279,000. The petroleum / convenience store market has been, and will continue to be, a very important niche market for the Company.

Gross profit of $36,403,000 in fiscal 2009 decreased $12.4 million or 25% from the same period last year, and decreased from 25.9% to 21.9% as a percentage of Lighting Segment net sales (customer plus intra-segment net sales). The decrease in amount of gross profit is due to decreased Lighting net sales and margins, caused in part by higher manufacturing overhead costs as a percentage of net sales due to the lower sales volume. The following items also influenced the Lighting Segment’s gross profit margin: competitive pricing pressures; decreased direct labor as a percentage of net sales; decreased indirect wage, compensation and benefits costs ($0.9 million decrease); $0.5 million decreased supplies; $0.4 million decreased depreciation expense; $0.3 million decreased repairs and maintenance; $0.2 million decreased utilities; and $0.2 million decreased property and real estate taxes.

Selling and administrative expenses of $29,129,000 in fiscal year 2009 decreased $3.2 million, and increased to 18.2% as a percentage of Lighting Segment net sales from 17.6% in the same period last year. Employee compensation and benefits expense increased $0.2 million in fiscal 2009 as compared to last year, and other changes of expense between years include decreased sales commission expense ($2.9 million), decreased advertising and literature expense ($0.2 million), increased bad debt expense ($0.2 million), increased research and development expense ($0.7 million), decreased customer relations expense ($0.3 million) and increased outside services expense ($0.1 million).

The Company recorded a full impairment of goodwill in one reporting unit in the Lighting Segment in fiscal 2009, and accordingly recorded a non-cash expense in the amount of $11,185,000 as compared to impairments totaling $1,097,000 of certain intangible assets last year. The impairments in both years were related to a decline in the market value of the Company’s stock as well as a decline in the estimated forecasted discounted cash flows expected by the respective reporting units.

The Lighting Segment fiscal 2009 operating loss of $(3,911,000) compares to operating income of $15,310,000 last year. This decrease of $19.2 million was the result of decreased net sales and decreased gross profit, and increased impairment charges, partially offset by decreased selling and administrative expenses.

F-2

Graphics Segment

(In thousands)	2009		2008
Net Sales	$	60,765	$	85,244
Operating Income (Loss)	$	2,646	$	(14,027	)

Graphics Segment net sales of $60,765,000 in fiscal 2009 decreased 28.7% from fiscal 2008 net sales of $85,244,000. The $24.5 million decrease in Graphics Segment net sales is primarily the result of completion of programs for certain graphics customers, including an image conversion program for a national drug store retailer ($4.3 million decrease), two petroleum / convenience store customers’ programs ($25.7 million decrease), reductions of net sales to ten other petroleum / convenience store customers ($7.0 million decrease) and changes in volume or completion of other graphics programs. These decreases were partially offset by increased net sales to certain other customers, including a reimaging program for a grocery customer ($8.9 million increase), and sales of solid-state LED video screens for sports markets ($5.7 million increase). Sales responsibility related to solid-state LED video screens for sports markets was transferred in fiscal 2009 from the Technology Segment to the Graphics Segment. Sales of graphics products and services to the petroleum / convenience store market represented 40% and 65% of Graphics Segment net sales in fiscal years 2009 and 2008, respectively. Net sales of graphics to this, the Company’s largest niche market, were down 56% from last year to $24,295,000. The petroleum / convenience store market has been, and will continue to be, a very important niche market for the Company. Net sales of products and services related to solid-state LED video screens totaled $5.7 million in fiscal 2009, with no such sales in the Graphics Segment last year.

Image and brand programs, whether full conversions or enhancements, are important to the Company’s strategic direction. Image programs include situations where our customers refurbish their retail sites around the country by replacing some or all of the lighting, graphic elements, menu board systems and possibly other items they may source from other suppliers. These image programs often take several quarters to complete and involve both our customers’ corporate-owned sites as well as their franchisee-owned sites, the latter of which involve separate sales efforts by the Company with each franchisee. The Company may not always be able to replace net sales immediately when a large image conversion program has concluded. Brand programs typically occur as new products are offered or new departments are created within an existing retail store. Relative to net sales to a customer before and after an image or brand program, net sales during the program are typically significantly higher, depending upon how much business is awarded to the Company. Sales related to a customer’s image or brand program are reported in either the Lighting Segment, Graphics Segment, or the All Other Category depending upon the product and/or service provided.

Gross profit of $13,382,000 in fiscal 2009 decreased $8.1 million or 38% from last year, and decreased from 24.7% to 21.5% as a percentage of Graphics Segment net sales (customer plus intra-segment net sales). The decrease in amount of gross profit is due both to decreased Graphics net sales and margins (both product and installation), increased material costs as a percentage of Graphics Segment net sales, and under utilized manufacturing capacity. The following items also influenced the Graphics Segment’s gross profit margin: competitive pricing pressures, decreased direct labor reflective of less sales volume, and other manufacturing expenses in support of production requirements ($1.3 million of decreased indirect wage, compensation and benefits costs; $0.4 million decreased supplies and repairs and maintenance; $0.2 million decreased outside services; and $0.2 million decreased depreciation and utilities).

F-3

Selling and administrative expenses of $10,020,000 in fiscal year 2009 decreased $1.8 million, and increased to 16.5% as a percentage of Graphics Segment net sales from 13.8% in the same period last year. Employee compensation and benefits expense decreased $0.8 million in fiscal 2009 as compared to last year, and other changes of expense between years include decreased bad debt expense ($0.2 million), decreased customer relations expense ($0.3 million), decreased outside services expense ($0.2 million), decreased travel and entertainment ($0.1 million), decreased research and development ($0.2 million) and decreased supplies expense ($0.1 million).

The Company recorded a full impairment of goodwill in one reporting unit in the Graphics Segment in fiscal 2009, and accordingly recorded a non-cash expense in the amount of $716,000 as compared to full or partial goodwill and intangible asset impairments of $23,739,000 last year. The impairments in both years were related to a decline in the market value of the Company’s stock as well as a decline in the estimated forecasted discounted cash flows expected by the respective reporting units.

The Graphics Segment fiscal 2009 operating income of $2,646,000 compares to an operating loss of $(14,027,000) last year. This increased operating income of $16.7 million was the result of decreased net sales and decreased gross profit, offset by significantly decreased impairment charges and by decreased selling and administrative expenses.

Technology Segment

(In thousands)	2009			2008
Net Sales	$	4,576		$	9,136
Operating Income (Loss)	$	(486	)	$	(4,876	)

Technology Segment net sales of $4,576,000 in fiscal 2009 decreased 49.9% from fiscal 2008 net sales of $9,136,000. The $4.6 million decrease in Technology Segment net sales is primarily the net result of decreased sales of solid-state LED video screens for sports and advertising markets ($3.0 million) and decreased sales of specialty LED lighting ($2.1 million), partially offset by increased sales of solid-state LED video screens to the entertainment market ($0.8 million). Sales responsibility related to solid-state LED video screens for sports markets was transferred in fiscal 2009 from the Technology Segment to the Graphics Segment.

Gross profit of $1,028,000 in fiscal 2009 decreased $0.2 million or 16% from the same period last year, and decreased from 12.4% to 11.5% as a percentage of Technology Segment net sales (customer plus intra-segment net sales). The decrease in amount of gross profit is due to decreased Technology net sales and margins, partially offset by decreased indirect wages ($0.1 million).

Selling and administrative expenses of $1,514,000 in fiscal year 2009 decreased $1.5 million, and increased to 33.1% as a percentage of Technology Segment net sales from 32.7% last year. Employee compensation and benefits expense decreased $0.2 million in fiscal 2009 as compared to last year, and other changes of expense between years include decreased warranty expense ($0.6 million), increased outside services ($0.2 million), decreased sales commissions expense ($0.2 million) and decreased expense related to amortization of intangibles ($0.2 million).

The Company recorded a full impairment of goodwill in the reporting unit in the Technology Segment in fiscal 2008, and accordingly recorded a non-cash expense in the amount of $3,119,000. There was no impairment charge in fiscal 2009. The impairment was related to a decline in the market value of the Company’s stock as well as a decline in the estimated forecasted discounted cash flows expected by the reporting unit.

F-4

The Technology Segment fiscal 2009 operating loss of $(486,000) compares to an operating loss of $(4,876,000) last year. This increase in operating income of $4.4 million was the net result of decreased net sales and gross profit, offset by decreased selling and administrative expenses and no impairment charge in fiscal 2009 as compared to a $3.1 million impairment in fiscal 2008.

All Other Category

(In thousands)	2009			2008
Net Sales	$	7,983		$	27,212
Operating Income (Loss)	$	(12,660	)	$	(7,377	)

All Other Category net sales of $7,983,000 in fiscal 2009 decreased 70.7% from fiscal 2008 net sales of $27,212,000. The $19.2 million decrease in All Other Category net sales is primarily the result of the fiscal 2008 completion of a menu board replacement program ($19.8 million decrease) and changes in volume or completion of other customer programs.

Image and brand programs, whether full conversions or enhancements, are important to the Company’s strategic direction. Image programs include situations where our customers refurbish their retail sites around the country by replacing some or all of the lighting, graphic elements, menu board systems and possibly other items they may source from other suppliers. These image programs often take several quarters to complete and involve both our customers’ corporate-owned sites as well as their franchisee-owned sites, the latter of which involve separate sales efforts by the Company with each franchisee. The Company may not always be able to replace net sales immediately when a large image conversion program has concluded. Brand programs typically occur as new products are offered or new departments are created within an existing retail store. Relative to net sales to a customer before and after an image or brand program, net sales during the program are typically significantly higher, depending upon how much business is awarded to the Company. Sales related to a customer’s image or brand program are reported in either the Lighting Segment, Graphics Segment, or the All Other Category depending upon the product and/or service provided.

Gross profit of $1,014,000 in fiscal 2009 decreased $7.9 million or 89% from last year, and decreased from 22.5% to 8.4% as a percentage of the All Other Category net sales (customer plus intra-segment net sales). The decrease in amount of gross profit is primarily due to decreased net sales and margins, competitive pricing pressures, partially offset by decreased direct labor reflective of less sales volume, as well as decreased indirect wage, compensation and benefits costs ($0.1 million reduction).

Selling and administrative expenses of $11,108,000, which includes Corporate administration expenses, in fiscal year 2009 decreased $5.2 million. Changes of expense between years include decreased employee compensation and benefits expense ($0.2 million), decreased menu board patent infringement settlement costs ($2.6 million), decreased legal fees primarily as a result of settlement of menu board patent litigation ($0.5 million), decreased research and development expense ($0.6 million), decreased depreciation expense ($0.4 million), increased audit/accounting and outside services fees ($0.2 million), decreased customer relations expense ($0.1 million) and decreased warranty expense ($0.1 million).

The Company recorded a partial impairment of goodwill in one reporting unit in the All Other Category in fiscal 2009, and accordingly recorded a non-cash expense in the amount of $2,566,000 with no similar impairment expense in the prior year. The impairment was related to a decline in the market value of the Company’s stock as well as a decline in the estimated forecasted discounted cash flows expected by that reporting unit.

The All Other Category fiscal 2009 operating loss of $(12,660,000) compares to an operating loss of $(7,377,000) in the same period last year. This increased loss of $5.3 million was the result of decreased net sales and decreased gross profit, and a goodwill impairment expense in fiscal 2009, partially offset by decreased selling and administrative expenses.

F-5

Consolidated Results

The Company reported net interest income of $8,000 in fiscal 2009 as compared to net interest income of $279,000 last year. The Company was in a positive cash position and was debt free for substantially all of fiscal 2008 and generated interest income on invested cash. The Company was occasionally in a borrowing position in fiscal 2009 and, when in a cash investment position, earned interest at lower rates than the prior year.

The $989,000 income tax benefit in fiscal 2009 reflects a tax benefit of $105,000 related to the operations of the Company (which includes a $333,000 release of a FIN 48 income tax liability associated with a voluntary disclosure program) and a tax benefit of $884,000 associated with the $14,467,000 impairment of goodwill (the majority of which was non-deductible for tax purposes). Income tax expense in fiscal 2008 was $2,357,000, which is reflective of income tax expense on the reduced normal operating results, $1.8 million of valuation reserves on the Company’s Canadian net operating loss tax benefit and on Canadian tax credits, and the tax benefit recorded on the impairment charges (goodwill and intangible assets), some of which is not deductible for tax purposes.

The Company reported a net loss of $(13,414,000) in fiscal 2009 as compared to a net loss of $(13,048,000) last year. The increased net loss is primarily the result of decreased operating income in the all Segments (which includes pre-tax goodwill and intangible asset impairments of $14,467,000 and $27,955,000 in fiscal years 2009 and 2008, respectively) and less net interest income, partially offset by decreased income tax expense. The diluted loss per share was $(0.62) in fiscal 2009, as compared to a diluted loss per share of $(0.60) last year. The weighted average common shares outstanding for purposes of computing diluted (loss) per share in fiscal 2009 were 21,800,000 shares as compared to 21,764,000 shares last year.

2008 Compared to 2007

Net sales of $305,286,000 in fiscal 2008 decreased 9.5% from fiscal 2007 net sales of $337,453,000. Lighting Segment net sales decreased 4.2% to $183,694,000, Graphics Segment net sales decreased 20.9% to $85,244,000, Technology Segment net sales decreased 46.7% to $9,136,000 and net sales in the All Other Category increased 30.5% to $27,212,000 as compared to the prior year. Sales to the petroleum / convenience store market represented 28% and 26% of net sales in fiscal years 2008 and 2007, respectively. Net sales to this, the Company’s largest niche market, are reported in both the Lighting and Graphics Segments, depending upon the product or service sold, and were down 2% from last year to $84,897,000 as Graphics sales to this market increased 4% and Lighting sales decreased 9%. The petroleum / convenience store market has been, and will continue to be, a very important niche market for the Company; however, if sales to other markets and customers increase more than net sales to this market, then the percentage of net sales to the petroleum / convenience store market would be expected to decline. See Note 3 to these financial statements on Major Customer Concentrations.

The $8.0 million or 4.2% decrease in Lighting Segment net sales is primarily the net result of a $10.0 million or 10.3% increase in commissioned net sales to the commercial and industrial lighting market, offset by a $17.9 million or 18.9% decrease in lighting sales to our niche markets of petroleum / convenience stores, automotive dealerships, and retail national accounts (one large national retailer represented approximately $14.9 million of this reduction as their new store construction program slowed and the Company has transitioned from primarily interior lighting to primarily the exterior lighting under a new contract).

F-6

The $22.5 million or 20.9% decrease in Graphics Segment net sales is primarily the result of completion of programs for certain graphics customers or reduction of net sales to other graphics customers, including an image conversion program for a national drug store retailer ($16.6 million decrease), two petroleum / convenience store customers ($8.0 million decrease), reduced sales to a telecommunications company ($2.2 million decrease) and changes in volume or completion of other graphics programs. These decreases were partially offset by increased net sales to certain other customers, including sales related to an image conversion program in the petroleum / convenience store market ($6.1 million increase).

Image and brand programs, whether full conversions or enhancements, are important to the Company’s strategic direction. Image programs include situations where our customers refurbish their retail sites around the country by replacing some or all of the lighting, graphic elements, menu board systems and possibly other items they may source from other suppliers. These image programs often take several quarters to complete and involve both our customers’ corporate-owned sites as well as their franchisee-owned sites, the latter of which involve separate sales efforts by the Company with each franchisee. The Company may not always be able to replace net sales immediately when a large image conversion program has concluded. Brand programs typically occur as new products are offered or new departments are created within an existing retail store. Relative to net sales to a customer before and after an image or brand program, net sales during the program are typically significantly higher, depending upon how much of the lighting or graphics business is awarded to the Company. Sales related to a customer’s image or brand program are reported in either the Lighting or Graphics Segment or the All Other Category, depending upon the product and/or service provided.

The $8.0 million or 46.7% decrease in Technology Segment net sales is primarily the result of reduced sales to an LED billboard customer ($2.0 million decrease), reduced sales to customers involved in sports scoreboards and video screens ($6.5 million decrease), and decreased sales of specialty LED lighting to two customers ($1.7 million decrease). These decreases were partially offset by increased sales of LED video screens to the entertainment market ($0.8 million) and advertising market ($1.2 million increase).

The $6.4 million or 30.5% increase in net sales of the All Other Category is primarily the result of a menu board conversion for a quick service restaurant retailer which was completed in fiscal 2008 ($10.1 million increase in product and installation net sales), a decrease in net sales to a second menu board customer ($2.9 million decrease), and decreased net sales to electrical wire harness customers ($1.2 million decrease).

Gross profit of $80,427,000 in fiscal 2008 decreased 10% from last year, and decreased from 26.4% to 26.3% as a percentage of net sales. The decrease in amount of gross profit is primarily due to decreased Graphics net sales and margins, both product and installation, partially offset by increased gross profit from reduced lighting net sales. The following items also influenced the Company’s gross profit margin on a consolidated basis: competitive pricing pressures; increased cost of materials; decreased direct labor reflective of less sales volume; an unfavorable $1.0 million net realizable value reserve and refurbishment reserve recorded on some Technology Segment inventory; net decreased wage, compensation and benefits costs ($0.6 million increase in Lighting, $1.0 million decrease in Graphics and $0.4 million decrease in the All Other Category); $0.5 million of decreased outside services (primarily in Graphics); $0.3 million decreased lease and rental expense (Graphics and the All Other Category); $0.3 million decreased repairs and maintenance (primarily Lighting and Graphics); $0.2 million decreased supplies; and $0.1 million decreased utilities and property taxes).

F-7

Selling and administrative expenses of $60,642,000 in fiscal year 2008 increased $3.4 million, and increased to 19.9% as a percentage of net sales from 17.0% last year. Employee compensation and benefits expense increased $0.4 million in fiscal 2008 as compared to last year (decreases of $0.5 million and $0.2 million in the Lighting and Graphics Segments, respectively, and increases of $0.5 and $0.6 million in the Technology Segment and All Other Category, respectively). Other changes of expense between years include increased sales commission expense ($2.0 million in Lighting), increased research & development expense ($1.5 million, primarily associated with research and development spending related to solid-state LED technology), increased outside services ($1.0 million primarily in the All Other Category), decreased legal expenses ($0.8 million in the All Other Category), reduced customer rebates and accommodations ($0.4 million primarily in Graphics), increased warranty expense ($0.7 million increase in the Technology Segment, partially offset by decreases of $0.1 million and $0.3 million in Lighting and Graphics, respectively), decreased bad debt expense ($0.3 million primarily in Graphics), decreased depreciation expense ($0.3 million in the All Other Category), and increased repairs and maintenance ($0.1 million in the All Other Category).

The Company recorded a $2.8 million expense in fiscal 2008 in the All Other Category related to the Company’s offer to settle in a menu board patent litigation. Even though the offer to settle this matter was made in the first quarter of fiscal 2009, as a type one subsequent event, the $2.8 million charge is required to be recorded in fiscal 2008. While the Company believes its menu board designs did not infringe upon the plaintiffs’ patents, management believes it is in the best interests of the Company to achieve certainty in this matter, and therefore has extended a settlement offer. See Note 14 for further discussion. The Company had recorded a favorable reversal of a $0.6 million loss contingency reserve in fiscal 2007 related to this same menu board patent litigation following a favorable summary judgment decision in the lower court.

In fiscal 2008, the Company recorded a $27,955,000 non-cash impairment charge in the fourth quarter as follows: goodwill ($26,175,000) and certain intangible assets ($1,780,000). Impairment charges totaling $23,739,000 were recorded in the Graphics Segment, $3,119,000 in the Technology Segment and charges in the amount of $1,097,000 were recorded in the Lighting Segment. There was no similar impairment expense in fiscal 2007. Step one of the annual impairment test indicated there was a material impairment of goodwill and certain intangible assets in two of the Company’s reporting units within its Graphics Segment, two reporting units in its Lighting Segment and one reporting unit in its Technology Segment due to the combination of a decline in the market capitalization of the Company at June 30, 2008 and a decline in the estimated forecasted discounted cash flows expected by the Company which management attributes to a weaker economic cycle impacting certain of the Company’s customers, notably national retailers. Additionally and included in the amounts above, the Company determined that a certain trade name in its Lighting Segment was no longer going to be used in marketing efforts, and therefore a related intangible asset had no value as the Company more than ever before emphasizes and relies upon its “LSI” brand name recognition in the lighting markets it serves.

The Company reported net interest income of $279,000 in fiscal 2008 as compared to net interest expense of $823,000 last year. The Company was in a positive cash position and was debt free for substantially all of fiscal 2008 and generated interest income on invested cash. The Company was in a borrowing position the first nine and one-half months of fiscal 2007.

The effective tax rate in fiscal 2007 was 34.5%, resulting in an income tax expense of $10,938,000. Income tax expense in fiscal 2008 was $2,357,000, which is reflective of income tax expense on the reduced normal operating results, $1.8 million of valuation reserves on the Company’s Canadian net operating loss tax benefit and on Canadian tax credits, and the tax credit provision recorded on the impairment charges (goodwill and intangible assets), some of which is not deductible for tax purposes. The Company expects an effective income tax rate in fiscal 2009 of approximately 37.5%.

The Company reported a net loss of $13,048,000 in fiscal 2008 as compared to net income of $20,789,000 last year. The decrease is primarily the result of decreased gross profit on decreased net sales, a non-cash goodwill and intangible asset impairment charge in fiscal 2008, increased operating expenses, all partially offset by decreased income tax expense and net interest income as compared to net interest expense last year. Diluted loss per share was $0.60 in fiscal 2008, as compared to diluted earnings per share of $0.95 last year. The weighted average common shares outstanding for purposes of computing diluted earnings per share in fiscal 2008 were 21,764,000 shares as compared to 21,924,000 shares last year.

F-8

Liquidity and Capital Resources

The Company considers its level of cash on hand, borrowing capacity, 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 June 30, 2009, the Company had working capital of $72.5 million, compared to $72.9 million at June 30, 2008. The ratio of current assets to current liabilities was 4.70 to 1 as compared to a ratio of 3.32 to 1 at June 30, 2008. The $0.4 million decrease in working capital from June 30, 2008 to June 30, 2009 was primarily related to decreased inventory ($10.3 million) and decreased net accounts receivable ($9.2 million), partially offset by decreased accounts payable ($6.2 million), decreased accrued expenses ($5.6 million), increased cash and cash equivalents ($7.0 million), and increased other current assets ($0.3 million). The Company has a strategy of aggressively managing working capital, including reduction of the accounts receivable days sales outstanding (DSO) and reduction of inventory levels, without reducing service to our customers.

The Company generated $16.5 million of cash from operating activities in fiscal 2009 as compared to a generation of $12.7 million last year. This $3.8 million increase in net cash flows from operating activities is primarily the net result of less net income ($0.4 million unfavorable), reduced non-cash goodwill and intangible asset impairment charge in fiscal 2009 ($13.5 million unfavorable), less of a reduction in accounts receivable (unfavorable change of $7.9 million), a decrease rather than an increase in inventories (favorable change of $11.3 million), less of a reduction in customer prepayments (favorable change of $16.7 million), a larger decrease in accounts payable (unfavorable change of $1.8 million), a larger decrease in accrued expenses and other assets (unfavorable change of $5.8 million), decreased depreciation and amortization (unfavorable $1.0 million), a smaller increase in the reserves for bad debts (favorable $0.2 million), a larger decrease in obsolete inventory reserves ($0.2 million unfavorable) and decrease in deferred income tax assets rather than an increase (favorable $6.9 million). The fiscal 2008 significant reduction in customer prepayments is related to the completion of a menu board replacement program in the Graphics Segment.

Net accounts receivable were $29.7 million and $38.9 million at June 30, 2009 and June 30, 2008, respectively. The decrease of $9.2 million in net receivables is primarily due to a higher amount of net sales in the fourth quarter of fiscal 2008 as compared to the fourth quarter of fiscal 2009, plus the affect of decreased DSO (Days’ Sales Outstanding). The DSO decreased to 51 days at June 30, 2009 from 54 days at June 30, 2008. The Company believes that its receivables are ultimately collectible or recoverable, net of certain reserves, and that aggregate allowances for doubtful accounts are adequate.

Net inventories at June 30, 2009 decreased $10.3 million from June 30, 2008 levels. Based on a strategy of reducing inventory and in response to customer programs and the timing of shipments, inventory decreases occurred in the Lighting Segment of approximately $4.1 million (some of this inventory supports certain graphics programs), in the Graphics Segment of approximately $3.5 million, in the Technology Segment of approximately $1.6 million and in the All Other Category of approximately $1.1 million since June 30, 2008.

F-9

Cash generated from operations and borrowing capacity under two line of credit facilities are the Company’s primary source of liquidity. The Company has an unsecured $40 million revolving line of credit with its bank group, with all $40 million of the credit line available as of August 14, 2009. This line of credit consists of a $30 million two year committed credit facility expiring in the third quarter of fiscal 2011 and a $10 million committed credit facility expiring in the third quarter of fiscal 2010. Additionally, the Company has a separate $5 million line of credit, renewable annually in the third fiscal quarter, for the working capital needs of its Canadian subsidiary, LSI Saco Technologies. Renewal actions on the $30 million line of credit in the third quarter of fiscal 2009 were such that the interest rate and unused credit line cost remained the same, but the bank group did not add back a third year of commitment to the line. With respect to the $10 million line of credit (formerly this was a $20 million line), the bank group made this a committed line, increased the interest rate by 200 basis points and added an unused credit fee of 30 basis points, and as a result, the Company reduced the amount available on this portion of the overall line of credit from $20 million down to $10 million. Renewal action on the $5 million Canadian line of credit was postponed by the bank to the fourth quarter of fiscal 2009. In the renewal, the bank increased the interest rate to be consistent with the U.S. $10 million line of credit. As of August 14, 2009, all $5 million of this line of credit is available. The Company believes that the $45 million total of available lines of credit plus cash flows from operating activities is adequate for the Company’s fiscal 2010 operational and capital expenditure needs. The Company is in compliance with all of its loan covenants.

The Company used $3.0 million of cash related to investing activities in fiscal 2009 as compared to a generation of $4.3 million last year. The primary change between years relates to the fiscal 2008 divestiture of short-term investments ($8.0 million unfavorable) and decreased purchase of fixed assets ($0.7 million favorable). Capital expenditures of $3.0 million in fiscal 2009 compared to $3.7 million last year. Spending in both periods is primarily for tooling and equipment, with $1.8 million also being spent in fiscal 2009 for a facility for the Graphics Segment. The Company expects fiscal 2010 capital expenditures to be approximately $3.0 million, exclusive of business acquisitions.

The Company used $6.5 million of cash related to financing activities in fiscal 2009 as compared to a use of $12.7 million in the same period last year. The $6.2 million favorable change between periods is primarily the result of lower cash dividend payments ($6,471,000 in fiscal 2009 as compared to $13,580,000 in the same period last year). The $7.1 million reduction in dividend payments between years is primarily the net result of a special year-end dividend of approximately $1.1 million paid in the first quarter of fiscal 2008 with none in fiscal 2009, and a lower per share dividend rate beginning in the second quarter of fiscal 2009. Additionally, the Company had cash flow from the exercise of stock options in fiscal 2008, while there were no exercises in fiscal 2009 ($1.1 million unfavorable).

	Payments Due by Period
Contractual Obligations as			Less than		1-3		3-5		More than
of June 30, 2009 (a)	Total		1 year		years		years		5 years
Long-Term Debt Obligations	$	—	$	—	$	—	$	—	$	—
Capital Lease Obligations		—		—		—		—		—
Operating Lease Obligations		5,623		1,589		3,863		169		2
Purchase Obligations		16,781		16,625		156		—		—
Other Long-Term Liabilities		—		—		—		—		—
Total	$	22,404	$	18,214	$	4,019	$	169	$	2

(a) The liability for uncertain tax positions of $2.7 million is not included due to the uncertainty of timing of payments.

The Company has financial instruments consisting primarily of cash and cash equivalents and short-term investments, revolving lines of credit, and long-term debt. The fair value of these financial instruments approximates carrying value because of their short-term maturity and/or variable, market-driven interest rates. The Company has no financial instruments with off-balance sheet risk and has no off balance sheet arrangements.

F-10

On August 19, 2009 the Board of Directors declared a regular quarterly cash dividend of $0.05 per share (approximately $1,202,000) payable September 8, 2009 to shareholders of record on September 1, 2009. The Company’s cash dividend policy is that the indicated annual dividend rate will be set between 50% and 70% of the expected net income for the current fiscal year. Consideration will also be given by the Board to special year-end cash or stock dividends. The declaration and amount of any cash and stock dividends will be determined by the Company’s Board of Directors, in its discretion, based upon its evaluation of earnings, cash flow, capital requirements and future business developments and opportunities, including acquisitions. Accordingly, the Board established a new indicated annual cash dividend rate of $0.20 per share beginning with the first quarter of fiscal 2010 consistent with the above dividend policy.

Carefully selected acquisitions have long been an important part of the Company’s strategic growth plans. The Company continues to seek out, screen and evaluate potential acquisitions that could add to our product lines or enhance the Company’s position in selected markets. The Company believes 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. In July 2009, the Company made an acquisition that will vertically integrate the supply chain for certain components of the Company’s various solid-state LED products. The new company will operate under the name LSI ADL Technology Inc., and will design, engineer, and manufacture custom designed circuit boards, assemblies, and sub-assemblies used in various applications including the control of solid-state LED lighting. With the acquisition of AdL Technology, we made a decision to further establish and advance our leadership position in LED lighting by vertically integrating our capabilities in connection with designing, engineering, and producing the solid-state electronics that control and power LEDs. LSI ADL will allow us to stay on the leading edge of product development, while at the same time providing opportunities to drive down manufacturing costs and control delivery of key components. ADL’s capabilities will also have applications in our other LED product lines such as digital scoreboards, advertising ribbon boards and billboards.

Critical Accounting Policies and Estimates

The Company is required to make estimates and judgments in the preparation of its financial statements that affect the reported amounts of assets, liabilities, revenues and expenses, and related footnote disclosures. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The Company continually reviews these estimates and their underlying assumptions to ensure they remain appropriate. The Company believes the items discussed below are among its most significant accounting policies because they utilize estimates about the effect of matters that are inherently uncertain and therefore are based on management’s judgment. Significant changes in the estimates or assumptions related to any of the following critical accounting policies could possibly have a material impact on the financial statements.

Revenue Recognition

The Company recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition.” Revenue is recognized when title to goods and risk of loss have passed to the customer, there is persuasive evidence of a purchase arrangement, delivery has occurred or services have been rendered, and collectibility is reasonably assured. Revenue is typically recognized at time of shipment. Sales are recorded net of estimated returns, rebates and discounts. Amounts received from customers prior to the recognition of revenue are accounted for as customer pre-payments and are included in accrued expenses.

The Company has four sources of revenue: revenue from product sales; revenue from installation of products; service revenue generated from providing integrated design, project and construction management, site engineering and site permitting; and revenue from shipping and handling.

F-11

Product revenue is recognized on product-only orders upon passing of title and risk of loss, generally at time of shipment. However, product revenue related to orders where the customer requires the Company to install the product is recognized when the product is installed. Other than normal product warranties or the possibility of installation or post-shipment service, support and maintenance of certain solid-state LED video screens, billboards, or active digital signage, the Company has no post-shipment responsibilities.

Installation revenue is recognized when the products have been fully installed. The Company is not always responsible for installation of products it sells and has no post-installation responsibilities, other than normal warranties.

Service revenue from integrated design, project and construction management, and site permitting is recognized when all products have been installed at each individual retail site of the customer on a proportional performance basis.

Shipping and handling revenue coincides with the recognition of revenue from sale of the product.

The Company evaluates the appropriateness of revenue recognition in accordance with Emerging Issues Task Force (EITF) 00-21, “Revenue Arrangements with Multiple Deliverables,” and AICPA Statement of Position (SOP) 97-2, “Software Revenue Recognition.” Our solid-state LED video screens, billboards and active digital signage contain software elements which the Company has determined are incidental and excluded from the scope of SOP 97-2.

Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, “Accounting for Income Taxes;” accordingly, deferred income taxes are provided on items that are reported as either income or expense in different time periods for financial reporting purposes than they are for income tax purposes. Deferred income tax assets and liabilities are reported on the Company’s balance sheet. Significant management judgment is required in developing the Company’s income tax provision, including the determination of deferred tax assets and liabilities and any valuation allowances that might be required against deferred tax assets.

The Company operates in multiple taxing jurisdictions and is subject to audit in these jurisdictions. The Internal Revenue Service and other tax authorities routinely review the Company’s tax returns. These audits can involve complex issues which may require an extended period of time to resolve. In management’s opinion, adequate provision has been made for potential adjustments arising from these examinations.

The Company adopted the provisions of FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes,” on July 1, 2007. As a result of adoption, the Company recognized $2,582,000 in reserves for uncertain tax positions and recorded a charge of $2,582,000 to the July 1, 2007 retained earnings balance.

The Company is recording estimated interest and penalties related to potential underpayment of income taxes as a component of tax expense in the Consolidated Statements of Operations. The reserve for uncertain tax positions is not expected to change significantly in the next 12 months.

F-12

Asset Impairment

Carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment in accordance with Statement of Financial Accounting Standards No. 142 (SFAS No. 142), “Goodwill and Other Intangible Assets.” The Company’s impairment review involves the estimation of the fair value of goodwill and indefinite-lived intangible assets using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level, that requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate. The estimates of fair value of reporting units are based on the best information available as of the date of the assessment. The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge. Company management uses its judgment in assessing whether assets may have become impaired between annual impairment tests. Indicators such as adverse business conditions, economic factors and technological change or competitive activities may signal that an asset has become impaired. Also see Note 6.

Carrying values for long-lived tangible assets and definite-lived intangible assets, excluding goodwill and indefinite-lived intangible assets, are reviewed for possible impairment as circumstances warrant in connection with Statement of Financial Accounting Standards No. 144 (SFAS No. 144), “Accounting for the Impairment or Disposal of Long-Lived Assets.” Impairment reviews are conducted at the judgment of Company management when it believes that a change in circumstances in the business or external factors warrants a review. Circumstances such as the discontinuation of a product or product line, a sudden or consistent decline in the forecast for a product, changes in technology or in the way an asset is being used, a history of negative operating cash flow, or an adverse change in legal factors or in the business climate, among others, may trigger an impairment review. The Company’s initial impairment review to determine if a potential impairment charge is required is based on an undiscounted cash flow analysis at the lowest level for which identifiable cash flows exist. The analysis requires judgment with respect to changes in technology, the continued success of product lines and future volume, revenue and expense growth rates, and discount rates.

Credit and Collections

The Company maintains allowances for doubtful accounts receivable for probable estimated losses resulting from either customer disputes or the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against income. The Company determines its allowance for doubtful accounts by first considering all known collectibility problems of customers’ accounts, and then applying certain percentages against the various aging categories based on the due date of the remaining receivables. The resulting allowance for doubtful accounts receivable is an estimate based upon the Company’s knowledge of its business and customer base, and historical trends. The Company also establishes allowances, at the time revenue is recognized, for returns and allowances, discounts, pricing and other possible customer deductions. These allowances are based upon historical trends.

F-13

New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements.” This Statement provides a new definition of fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. The Statement applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, or the Company’s fiscal year 2009. Four FASB Staff Positions (FSP) were subsequently issued. In February 2007, FSP No. 157-2 delayed the effective date of this SFAS No. 157 for non-financial assets and non-financial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis to fiscal years beginning after November 15, 2008, or the Company’s fiscal year 2010. FSP No. 157-1, also issued in February 2007, excluded FASB No. 13 “Accounting for Leases” and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under FASB No. 13. However, this scope exception does not apply to assets acquired and liabilities assumed in a business combination that are required to be measured at fair value under FASB Statement No. 141, “Business Combinations” or FASB No. 141R, “Business Combinations.” This FSP is effective upon initial adoption of SFAS No. 157. There was no impact on the Company’s consolidated results of operations, cash flows or financial position as a result of adoption of this Statement, nor will there be with the adoption of FSP No. 157-2 on July 1, 2009.

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141(R), “Business Combinations,” which replaces SFAS No. 141. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition related costs as incurred. In April 2009, the Financial Accounting Standards Board issued FASB Staff Position FSP No. 141(R)-1 which applies to all assets and liabilities assumed in a business combination that arise from contingencies that would be within the scope of SFAS No. 5, “Accounting for Contingencies,” if not acquired or assumed in a business combination, except for assets or liabilities arising from contingencies that are subject to specific guidance in SFAS No. 141(R), “Business Combinations.” SFAS No. 141(R) and FSP No. 141(R)-1 are effective beginning July 1, 2009 and will apply prospectively to business combinations completed on or after that date.

In December 2008, the Financial Accounting Standards Board issued Emerging Issues Task Force EITF 08-7, “Accounting for Defensive Intangible Assets,” which clarifies how to account for acquired intangible assets in situations in which an entity does not intend to actively use the asset but intends to hold (lock up) the asset to prevent others from obtaining access to the asset (a defensive intangible asset), except for intangible assets that are used in research and development activities. EITF 08-7 is effective for LSI for intangible assets acquired on or after July 1, 2009.

In April 2009, the Financial Accounting Standards Board issued FASB Staff Position (FSP) No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” This FSP requires disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. This FSP is effective for interim reporting periods ending after June 15, 2009.

In May 2009, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 165, “Subsequent Events.” This Statement establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. In particular, this Statement sets forth: (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS No. 165 is effective for interim or annual periods ending after June 15, 2009, or the Company’s fiscal year ending June 30, 2009. The adoption of SFAS No. 165 did not have a material impact on the Company’s results of operations, cash flows or financial position.

F-14

In June 2009, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 167, “Amendments to FASB Interpretation No. 46(R).” This Statement amends certain requirements of FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities,” to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of financial statements. SFAS No. 167 is effective as of the beginning of the Company’s first annual reporting period that begins after November 15, 2009, or the Company’s fiscal year beginning July 1, 2010. The Company will evaluate the impact of adopting SFAS No. 167 and cannot currently estimate the impact on its consolidated results of operations, cash flows or financial position.

In June 2009, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 168, “The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles.” This Statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. It establishes the Codification as the source of authoritative GAAP and states that rules and interpretive releases of the Securities and Exchange Commission (SEC) under federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009, or the Company’s first fiscal quarter ended September 30, 2009.

F-15

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Management of LSI Industries Inc. and subsidiaries (the “Company” or “LSI”) is responsible for the preparation and accuracy of the financial statements and other information included in this report. LSI’s Management is also responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Securities Exchange Act Rules 13a-15(f). Under the supervision and with the participation of Management, including LSI’s Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting as of June 30, 2009, based on the criteria set forth in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the reality that judgments in decision making can be faulty, the possibility of human error, and the circumvention or overriding of the controls and procedures.

In meeting its responsibility for the reliability of the financial statements, the Company depends upon its system of internal accounting controls. The system is designed to provide reasonable assurance that assets are safeguarded and that transactions are properly authorized and recorded. The system is supported by policies and guidelines, and by careful selection and training of financial management personnel. The Company also has a Disclosure Controls Committee, whose responsibility is to help ensure appropriate disclosures and presentation of the financial statements and notes thereto. Additionally, the Company has an Internal Audit Department to assist in monitoring compliance with financial policies and procedures.

The Board of Directors meets its responsibility for overview of the Company’s financial statements through its Audit Committee which is composed entirely of independent Directors who are not employees of the Company. The Audit Committee meets periodically with Management and Internal Audit to review and assess the activities of each in meeting their respective responsibilities. Deloitte & Touche LLP has full access to the Audit Committee to discuss the results of their audit work, the adequacy of internal accounting controls, and the quality of financial reporting.

Based upon LSI’s evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that internal control over financial reporting was effective as of June 30, 2009. We reviewed the results of Management’s assessment with the Audit Committee of our Board of Directors. Additionally, our independent registered public accounting firm audited and independently assessed the effectiveness of the Company’s internal control over financial reporting. Deloitte & Touche LLP, an independent registered public accounting firm has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting, which is presented in the financial statements.

Robert J. Ready
President and Chief Executive Officer
(Principal Executive Officer)

Ronald S. Stowell
Vice President, Chief Financial Officer, and Treasurer
(Principal Financial Officer)

F-16

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
LSI Industries Inc.
Cincinnati, Ohio

We have audited LSI Industries Inc.’s and subsidiaries’ (the “Company’s”) internal control over financial reporting as of June 30, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report On Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on that risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company has maintained, in all material respects, effective internal control over financial reporting as of June 30, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended June 30, 2009 of the Company and our report dated September 11, 2009 expressed an unqualified opinion on those financial statements and financial statement schedule and includes an explanatory paragraph regarding the Company’s adoption of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of Financial Accounting Standards Board Statement No. 109, on July 1, 2007.

/s/ Deloitte & Touche LLP

Cincinnati, Ohio
September 11, 2009

F-17

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
LSI Industries Inc.
Cincinnati, Ohio

We have audited the accompanying consolidated balance sheets of LSI Industries Inc. and subsidiaries (the “Company”) as of June 30, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended June 30, 2009. Our audits also included the consolidated financial statement schedule listed in the Index at Item 15. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of LSI Industries Inc. and subsidiaries as of June 30, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2009, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 8 to the consolidated financial statements, the Company adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of Financial Accounting Standards Board Statement No. 109, on July 1, 2007.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of June 30, 2009, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 11, 2009 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Cincinnati, Ohio
September 11, 2009

F-18

LSI INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended June 30, 2009, 2008, and 2007
(In thousands, except per share)

	2009			2008			2007
Net sales	$	233,799		$	305,286		$	337,453
Cost of products and services sold		181,972			224,859			248,274
Gross profit		51,827			80,427			89,179
Selling and administrative expenses		51,571			60,642			57,219
Loss contingency (see Note 14)		200			2,800			(590	)
Goodwill and intangible asset impairment		14,467			27,955			—
Operating income (loss)		(14,411	)		(10,970	)		32,550
Interest (income)		(97	)		(360	)		(139	)
Interest expense		89			81			962
Income (loss) before income taxes		(14,403	)		(10,691	)		31,727
Income tax expense (benefit)		(989	)		2,357			10,938
Net income (loss)	$	(13,414	)	$	(13,048	)	$	20,789
Earnings (loss) per common share (see Note 4)
Basic	$	(0.62	)	$	(0.60	)	$	0.96
Diluted	$	(0.62	)	$	(0.60	)	$	0.95
Weighted average common shares outstanding
Basic		21,800			21,764			21,676
Diluted		21,800			21,764			21,924

The accompanying notes are an integral part of these financial statements.

F-19

LSI INDUSTRIES INC.

CONSOLIDATED BALANCE SHEETS
June 30, 2009 and 2008
(In thousands, except shares)

	2009			2008
ASSETS
Current Assets
Cash and cash equivalents	$	13,986		$	6,992
Accounts and notes receivable, less allowance for doubtful accounts of $532 and $585, respectively		29,681			38,857
Inventories		40,196			50,509
Refundable income taxes		3,619			1,834
Other current assets		4,635			6,111
Total current assets		92,117			104,303
Property, Plant and Equipment, at cost
Land		6,501			6,190
Buildings		35,270			33,344
Machinery and equipment		61,342			62,473
Construction in progress		167			125
		103,280			102,132
Less accumulated depreciation		(61,237	)		(57,378	)
Net property, plant and equipment		42,043			44,754
Goodwill, net		1,558			16,025
Other Intangible Assets, net		12,981			15,060
Other Assets, net		4,419			4,072
Total assets	$	153,118		$	184,214

The accompanying notes are an integral part of these financial statements.

F-20

	2009		2008
LIABILITIES & SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	9,249	$	15,452
Accrued expenses		10,368		15,988
Total current liabilities		19,617		31,440
Other Long-Term Liabilities		3,028		3,584
Commitments and contingencies (Note 14)
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 21,579,741 and 21,585,390 shares, respectively		82,833		81,665
Retained earnings		47,640		67,525
Total shareholders’ equity		130,473		149,190
Total liabilities & shareholders’ equity	$	153,118	$	184,214

The accompanying notes are an integral part of these financial statements.

F-21

LSI INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the years ended June 30, 2009, 2008, and 2007
(In thousands, except per share)

	Common Shares
	Number of						Retained
	Shares			Amount			Earnings			Total
Balance at June 30, 2006		21,462		$	78,087		$	86,898		$	164,985
Net income		—			—			20,789			20,789
Stock compensation awards		3			44			—			44
Purchase of treasury shares, net		(16	)		(292	)		—			(292	)
Deferred stock compensation		—			229			—			229
Stock option expense		—			721			—			721
Stock options exercised, net		44			537			—			537
Dividends — $0.51 per share		—			—			(10,952	)		(10,952	)
Balance at June 30, 2007		21,493			79,326			96,735			176,061
Net (loss)		—			—			(13,048	)		(13,048	)
Adoption of FIN 48 — reserve for uncertain tax positions		—			—			(2,582	)		(2,582	)
Stock compensation awards		2			44			—			44
Purchase of treasury shares, net		(7	)		(177	)		—			(177	)
Deferred stock compensation		—			150			—			150
Stock option expense		—			1,246			—			1,246
Stock options exercised, net		97			1,076			—			1,076
Dividends — $0.63 per share		—			—			(13,580	)		(13,580	)
Balance at June 30, 2008		21,585			81,665			67,525			149,190
Net (loss)		—			—			(13,414	)		(13,414	)
Stock compensation awards		6			41			—			41
Purchase of treasury shares, net		(11	)		(29	)		—			(29	)
Deferred stock compensation		—			(28	)		—			(28	)
Stock option expense		—			1,184			—			1,184
Stock options exercised, net		—			—			—			—
Dividends — $0.30 per share		—			—			(6,471	)		(6,471	)
Balance at June 30, 2009		21,580		$	82,833		$	47,640		$	130,473

The accompanying notes are an integral part of these financial statements.

F-22

LSI INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended June 30, 2009, 2008, and 2007
(In thousands)

	2009			2008			2007
Cash Flows From Operating Activities
Net income (loss)	$	(13,414	)	$	(13,048	)	$	20,789
Non-cash items included in net income (loss)
Depreciation and amortization		7,746			8,789			9,002
Goodwill and intangible asset impairment		14,467			27,955			—
Deferred income taxes		1,001			(5,904	)		545
Deferred compensation plan		(28	)		150			229
Stock option expense		1,184			1,246			721
Issuance of common shares as compensation		41			44			44
(Gain) loss on disposition of fixed assets		36			59			245
Allowance for doubtful accounts		(53	)		(237	)		166
Inventory obsolescence reserve		(228	)		(32	)		22
Change (excluding effects of acquisitions) in
Accounts receivable, gross		9,229			17,130			(4,359	)
Inventories, gross		10,541			(746	)		(4,408	)
Refundable income taxes		(1,785	)		(1,470	)		(225	)
Accounts payable		(6,203	)		(4,382	)		(3,140	)
Accrued expenses and other		(6,044	)		(224	)		3,281
Customer prepayments		(4	)		(16,670	)		14,052
Net cash flows from operating activities		16,486			12,660			36,964
Cash Flows From Investing Activities
Purchases of property, plant, and equipment		(2,994	)		(3,723	)		(5,960	)
Proceeds from sale of fixed assets		2			5			3,846
Purchases of short-term investments		—			—			(8,000	)
Proceeds from sale of short-term investments		—			8,000			—
Acquisition of a business, net of cash received		—			—			(141	)
Net cash flows (used in) investing activities		(2,992	)		4,282			(10,255	)
Cash Flows From Financing Activities
Proceeds from issuance of long-term debt		1,282			958			9,881
Payment of long-term debt		(1,282	)		(958	)		(26,474	)
Cash dividends paid		(6,471	)		(13,580	)		(10,952	)
Exercise of stock options		—			1,076			537
Issuance of treasury shares		159			85			15
Purchase of treasury shares		(188	)		(262	)		(307	)
Net cash flows (used in) financing activities		(6,500	)		(12,681	)		(27,300	)
Increase (decrease) in cash and cash equivalents		6,994			4,261			(591	)
Cash and cash equivalents at beginning of year		6,992			2,731			3,322
Cash and cash equivalents at end of year	$	13,986		$	6,992		$	2,731

The accompanying notes are an integral part of these financial statements.

F-23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation:

The consolidated financial statements include the accounts of LSI Industries Inc. (an Ohio corporation) and its subsidiaries, all of which are wholly owned. All intercompany transactions and balances have been eliminated.

Revenue Recognition:

The Company recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition.” Revenue is recognized when title to goods and risk of loss have passed to the customer, there is persuasive evidence of a purchase arrangement, delivery has occurred or services have been rendered, and collectibility is reasonably assured. Revenue is typically recognized at time of shipment. Sales are recorded net of estimated returns, rebates and discounts. Amounts received from customers prior to the recognition of revenue are accounted for as customer pre-payments and are included in accrued expenses.

The Company has four sources of revenue: revenue from product sales; revenue from installation of products; service revenue generated from providing integrated design, project and construction management, site engineering and site permitting; and revenue from shipping and handling.

Product revenue is recognized on product-only orders upon passing of title and risk of loss, generally at time of shipment. However, product revenue related to orders where the customer requires the Company to install the product is recognized when the product is installed. Other than normal product warranties or the possibility of installation or post-shipment service, support and maintenance of certain solid state LED video screens, billboards, or active digital signage, the Company has no post-shipment responsibilities.

Installation revenue is recognized when the products have been fully installed. The Company is not always responsible for installation of products it sells and has no post-installation responsibilities, other than normal warranties.

Service revenue from integrated design, project and construction management, and site permitting is recognized when all products have been installed at each individual retail site of the customer on a proportional performance basis.

Shipping and handling revenue coincides with the recognition of revenue from sale of the product.

The Company evaluates the appropriateness of revenue recognition in accordance with Emerging Issues Task Force (EITF) 00-21, “Revenue Arrangements with Multiple Deliverables,” and AICPA Statement of Position (SOP) 97-2, “Software Revenue Recognition.” Our solid-state LED video screens, billboards and active digital signage contain software elements which the Company has determined are incidental and excluded from the scope of SOP 97-2.

F-24

Credit and Collections:

The Company maintains allowances for doubtful accounts receivable for probable estimated losses resulting from either customer disputes or the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against income. The Company determines its allowance for doubtful accounts by first considering all known collectibility problems of customers’ accounts, and then applying certain percentages against the various aging categories of the remaining receivables. The resulting allowance for doubtful accounts receivable is an estimate based upon the Company’s knowledge of its business and customer base, and historical trends. The Company also establishes allowances, at the time revenue is recognized, for returns and allowances, discounts, pricing and other possible customer deductions. These allowances are based upon historical trends.

The following table presents the Company’s net accounts receivable at the dates indicated.

(In thousands)	6/30/09			6/30/08
Accounts receivable	$	30,213		$	39,442
less Allowance for doubtful accounts		(532	)		(585	)
Accounts receivable, net	$	29,681		$	38,857

Short-Term Investments:

Short-term investments consist of tax free (federal) investments in high grade government agency backed bonds for which the interest rate resets weekly and the Company has a seven day put option. These investments are classified as available-for-sale securities and are stated at fair market value, which represents the most recent reset amount at period end. The Company invested in these types of short-term investments for certain periods of time during fiscal years 2007 and 2008.

Cash and Cash Equivalents:

The cash balance includes cash and cash equivalents which have original maturities of less than three months. At June 30, 2009 and 2008 the bank balances included $0 and $3,376,000, respectively, in excess of FDIC insurance limits.

Inventories:

Inventories are stated at the lower of cost or market, with appropriate reserves recorded for obsolete inventory. Cost is determined on the first-in, first-out basis.

Property, Plant and Equipment and Related Depreciation:

Property, plant and equipment are stated at cost. Major additions and betterments are capitalized while maintenance and repairs are expensed. For financial reporting purposes, depreciation is computed on the straight-line method over the estimated useful lives of the assets as follows:

Buildings	28 - 40 years
Machinery and equipment	3 - 10 years
Computer software	3 - 8 years

Costs related to the purchase, internal development, and implementation of the Company’s fully integrated enterprise resource planning/business operating software system are either capitalized or expensed in accordance with the American Institute of Certified Public Accountants’ Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” The current business operating software was first implemented in January 2000. All costs capitalized for the business operating software are being depreciated over an eight year life from the date placed in service. Other purchased computer software is being depreciated over periods ranging from three to five years. Leasehold improvements are depreciated over the shorter of fifteen years or the remaining term of the lease. The Company recorded $5,667,000, $6,463,000, and $6,674,000 of depreciation expense in the years ended June 30, 2009, 2008 and 2007, respectively.

F-25

Intangible Assets:

Intangible assets consisting of customer relationships, trade names and trademarks, patents, technology and software, and non-compete agreements are recorded on the Company’s balance sheet and the definite-lived intangible assets are being amortized to expense on a straight line basis over periods ranging between two and twenty years. The excess of cost over fair value of assets acquired (“goodwill”) is not amortized but is subject to review for impairment. See additional information about goodwill and intangibles in Note 6. The Company periodically evaluates intangible assets for permanent impairment.

Fair Value of Financial Instruments:

The Company customarily has financial instruments consisting primarily of cash and cash equivalents and short-term investments, revolving lines of credit, and long-term debt. The fair value of these financial instruments approximates carrying value because of their short-term maturity and/or variable, market-driven interest rates. The Company has no financial instruments with off-balance sheet risk.

Product Warranties:

The Company offers a limited warranty that its products are free of defects in workmanship and materials. The specific terms and conditions vary somewhat by product line, but generally cover defects returned within one to five years from date of shipment. The Company records warranty liabilities to cover the estimated future costs for repair or replacement of defective returned products as well as products that need to be repaired or replaced in the field after installation. The Company calculates its liability for warranty claims by applying estimates to cover unknown claims, as well as estimating the total amount to be incurred for known warranty issues. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the Company’s warranty liabilities, which are included in accrued expenses in the accompanying consolidated balance sheets, during the years ended June 30 were as follows:

(In thousands)	2009			2008
Balance at beginning of the year	$	257		$	314
Additions charged to expense		557			1,141
Deductions for repairs and replacements		(591	)		(1,198	)
Balance at end of the year	$	223		$	257

Contingencies:

The Company is party to various negotiations, customer bankruptcies, and legal proceedings arising in the normal course of business. The Company provides reserves for these matters when a loss is probable and reasonably estimable. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, cash flows or liquidity. See also Note 14.

Employee Benefit Plans:

The Company has a defined contribution retirement plan and a discretionary profit sharing plan covering substantially all of its non-union employees in the United States, and a non-qualified deferred compensation plan covering certain employees. The costs of employee benefit plans are charged to expense and funded annually. Total costs were $1,592,000 in 2009, $2,197,000 in 2008, and $2,064,000 in 2007.

F-26

Research and Development Costs:

Research and development expenses are costs directly attributable to new product development and consist of salaries, payroll taxes, employee benefits, materials, supplies, depreciation and other administrative costs. All costs are expensed as incurred and are classified as operating expenses. Research and development costs incurred total $4,052,000 for fiscal 2009, $4,111,000 for fiscal 2008, and $2,592,000 for fiscal 2007.

Advertising Expense:

The Company recorded $301,000, $530,000 and $556,000 of advertising expense in 2009, 2008 and 2007, respectively. Advertising costs are expensed the first time the advertising occurs. Expense related to printed product or capabilities literature, brochures, etc. is recorded on a ratable basis over the useful life of that printed media.

Income Taxes:

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 (SFAS No. 109) and Financial Accounting Standards Board Interpretation No. 48 (FIN 48); accordingly, deferred income tax assets and liabilities are determined based upon the difference between the financial statement basis and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred income tax assets and liabilities are reported on the Company’s balance sheet. See also Note 8 and Note 12.

Earnings Per Common Share:

The computation of basic earnings per common share is based on the weighted average common shares outstanding for the period, net of treasury shares held in the Company’s non-qualified deferred compensation plan. The computation of diluted earnings per share is based on the weighted average common shares outstanding for the period and includes common share equivalents. Common share equivalents include the dilutive effect of stock options, contingently issuable shares and common shares to be issued under a deferred compensation plan, all of which totaled 226,000 shares in 2009, 210,000 shares in 2008, and 448,000 shares in 2007. See also Note 4.

Stock Options:

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 123(R), “Share-Based Payment,” effective July 1, 2005. SFAS No. 123(R) requires public entities to measure the cost of employee services received in exchange for an award of equity instruments and recognize this cost over the period during which an employee is required to provide the services.

There were no disqualifying dispositions of shares from stock option exercises in fiscal 2009. The Company recorded $228,500 in fiscal 2008 as a reduction of federal income taxes payable, $221,300 as an increase in common stock, and $7,200 as a reduction of income tax expense to reflect the tax credits it will receive as a result of disqualifying dispositions of shares from stock option exercises. This had the effect of reducing cash flow from operating activities and increasing cash flow from financing activities by $221,300. The Company recorded $115,200 in fiscal 2007 as a reduction of federal income taxes payable, $104,950 as an increase in common stock, and $10,250 as a reduction of income tax expense to reflect the tax credits it will receive as a result of disqualifying dispositions of shares from stock option exercises. This had the effect of reducing cash flow from operating activities and increasing cash flow from financing activities by $104,950. See further discussion in Note 10.

F-27

New Accounting Pronouncements:

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements.” This Statement provides a new definition of fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. The Statement applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, or the Company’s fiscal year 2009. Four FASB Staff Positions (FSP) were subsequently issued. In February 2007, FSP No. 157-2 delayed the effective date of this SFAS No. 157 for non-financial assets and non-financial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis to fiscal years beginning after November 15, 2008, or the Company’s fiscal year 2010. FSP No. 157-1, also issued in February 2007, excluded FASB No. 13 “Accounting for Leases” and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under FASB No. 13. However, this scope exception does not apply to assets acquired and liabilities assumed in a business combination that are required to be measured at fair value under FASB Statement No. 141, “Business Combinations” or FASB No. 141R, “Business Combinations.” This FSP is effective upon initial adoption of SFAS No. 157. There was no impact on the Company’s consolidated results of operations, cash flows or financial position as a result of adoption of this Statement, nor will there be with the adoption of FSP No. 157-2 on July 1, 2009.

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141(R), “Business Combinations,” which replaces SFAS No. 141. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition related costs as incurred. In April 2009, the Financial Accounting Standards Board issued FASB Staff Position FSP No. 141(R)-1 which applies to all assets and liabilities assumed in a business combination that arise from contingencies that would be within the scope of SFAS No. 5, “Accounting for Contingencies,” if not acquired or assumed in a business combination, except for assets or liabilities arising from contingencies that are subject to specific guidance in SFAS No. 141(R), “Business Combinations.” SFAS No. 141(R) and FSP No. 141(R)-1 are effective beginning July 1, 2009 and will apply prospectively to business combinations completed on or after that date.

In December 2008, the Financial Accounting Standards Board issued Emerging Issues Task Force EITF 08-7, “Accounting for Defensive Intangible Assets,” which clarifies how to account for acquired intangible assets in situations in which an entity does not intend to actively use the asset but intends to hold (lock up) the asset to prevent others from obtaining access to the asset (a defensive intangible asset), except for intangible assets that are used in research and development activities. EITF 08-7 is effective for LSI for intangible assets acquired on or after July 1, 2009.

In April 2009, the Financial Accounting Standards Board issued FASB Staff Position (FSP) No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” This FSP requires disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. This FSP is effective for interim reporting periods ending after June 15, 2009.

F-28

In May 2009, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 165, “Subsequent Events.” This Statement establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. In particular, this Statement sets forth: (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS No. 165 is effective for interim or annual periods ending after June 15, 2009, or the Company’s fiscal year ending June 30, 2009. The adoption of SFAS No. 165 did not have a material impact on the Company’s results of operations, cash flows or financial position.

In June 2009, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 167, “Amendments to FASB Interpretation No. 46(R).” This Statement amends certain requirements of FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities,” to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of financial statements. SFAS No. 167 is effective as of the beginning of the Company’s first annual reporting period that begins after November 15, 2009, or the Company’s fiscal year beginning July 1, 2010. The Company will evaluate the impact of adopting SFAS No. 167 and cannot currently estimate the impact on its consolidated results of operations, cash flows or financial position.

In June 2009, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 168, “The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles.” This Statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. It establishes the Codification as the source of authoritative GAAP and states that rules and interpretive releases of the Securities and Exchange Commission (SEC) under federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009, or the Company’s first fiscal quarter ended September 30, 2009.

Comprehensive Income:

The Company does not have any comprehensive income items, other than net income.

Subsequent Events:

For the fiscal year ended June 30, 2009, the Company has evaluated subsequent events for potential recognition and disclosure through September 11, 2009, the date of financial statement issuance.

Reclassifications:

Certain reclassifications may have been made to prior year amounts in order to be consistent with the presentation for the current year.

Use of Estimates:

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

F-29

NOTE 2 — BUSINESS SEGMENT INFORMATION

Statement of Financial Accounting Standards (SFAS) No. 131, “Disclosures about Segments of an Enterprise and Related Information,” establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in interim financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s President and Chief Executive Officer) in making decisions on how to allocate resources and assess performance. While the Company has twelve operating segments, it has only three reportable operating business segments (Lighting, Graphics, and Technology) and an All Other Category.

The Lighting Segment includes outdoor, indoor, and landscape lighting that has been fabricated and assembled for the commercial, industrial and multi-site retail lighting markets, including the petroleum/convenience store market. The Lighting Segment includes the operations of LSI Ohio Operations, LSI Metal Fabrication, LSI MidWest Lighting, LSI Lightron and LSI Greenlee Lighting. These operations have been integrated, thereby allowing the Company to achieve similar economic characteristics and meet the other requirements for aggregation in segment reporting.

The Graphics Segment designs, manufactures and installs exterior and interior visual image elements related to image programs, solid-state LED digital advertising and sports video screens. These products are used in visual image programs in several markets, including the petroleum/convenience store market, multi-site retail operations, sports, and advertising. The Graphics Segment includes the operations of Grady McCauley, LSI Retail Graphics and LSI Integrated Graphic Systems, which have been aggregated as such facilities manufacture two-dimensional graphics with the use of screen and digital printing, fabricate three-dimensional structural graphics sold in the multi-site retail and petroleum/convenience store markets, and exhibit each of the similar economic characteristics and meet the other requirements for aggregation in segment reporting.

The Technology Segment designs and produces high-performance light engines, large format video screens using LED (light emitting diode) technology, and certain specialty LED lighting. The primary markets served with LED video screens are the entertainment market, outdoor advertising billboards and sports markets not served by our Graphics Segment. The Technology Segment includes the operations of LSI Saco Technologies.

The All Other Category includes the Company’s operating segments that do not meet the aggregation criteria, nor the criteria to be a separate reportable segment. Operations of LSI Marcole (electrical wire harnesses), LSI Images (menu board systems), and LSI Adapt (surveying, permitting and installation management services related to products of the Graphics Segment) are combined into the All Other Category. Additionally, the Company’s Corporate Administration expense is included in the All Other Category.

The Company recorded an impairment of goodwill in fiscal 2009 in the amount of $14,467,000. This non-cash charge is included in the Lighting Segment in the amount of $11,185,000, in the Graphics Segment in the amount of $716,000 and in the All Other Category in the amount of $2,566,000. The Company recorded an impairment of goodwill and certain intangible assets in fiscal 2008 in the amount of $27,955,000. These non-cash charges are included in the Graphics Segment in the amount of $23,739,000, in the Technology Segment in the amount of $3,119,000 and in the Lighting Segment in the amount of $1,097,000. See further discussion in Note 6. The Company also recorded an expense of $200,000 in fiscal 2009 and of $2,800,000 in fiscal 2008 for a loss contingency in the All Other Category related to a menu board patent lawsuit. See Note 14.

F-30

Summarized financial information for the Company’s reportable business segments is provided for the following periods and as of June 30, 2009, June 30, 2008 and June 30, 2007:

(In thousands)	2009			2008			2007
Net sales:
Lighting Segment	$	160,475		$	183,694		$	191,697
Graphics Segment		60,765			85,244			107,764
Technology Segment		4,576			9,136			17,132
All Other Category		7,983			27,212			20,860
	$	233,799		$	305,286		$	337,453
Operating income (loss):
Lighting Segment	$	(3,911	)	$	15,310		$	17,219
Graphics Segment		2,646			(14,027	)		19,012
Technology Segment		(486	)		(4,876	)		480
All Other Category		(12,660	)		(7,377	)		(4,161	)
	$	(14,411	)	$	(10,970	)	$	32,550
Capital expenditures:
Lighting Segment	$	977		$	1,950		$	4,139
Graphics Segment		1,933			886			861
Technology Segment		45			270			730
All Other Category		39			617			230
	$	2,994		$	3,723		$	5,960
Depreciation and amortization:
Lighting Segment	$	3,467		$	3,852		$	3,804
Graphics Segment		1,234			1,299			1,345
Technology Segment		450			663			617
All Other Category		2,595			2,975			3,236
	$	7,746		$	8,789		$	9,002

	June 30,		June 30,		June 30,
	2009		2008		2007
Identifiable assets:
Lighting Segment	$	72,222	$	97,169	$	91,756
Graphics Segment		32,280		34,517		59,541
Technology Segment		12,317		13,806		42,549
All Other Category		36,299		38,722		39,766
	$	153,118	$	184,214	$	233,612

Segment net sales represent sales to external customers. Intersegment revenues were eliminated in consolidation as follows:

(In thousands)	2009		2008		2007
Lighting Segment intersegment net sales	$	6,097	$	4,278	$	3,844
Graphics Segment intersegment net sales	$	1,479	$	1,781	$	1,607
Technology Segment intersegment net sales	$	4,400	$	814	$	17
All Other Category intersegment net sales	$	4,307	$	12,755	$	11,411

F-31

Segment operating income, which is used in management’s evaluation of segment performance, represents net sales less all operating expenses including impairment of goodwill and intangible assets, but excluding interest expense and interest income.

Identifiable assets are those assets used by each segment in its operations. Corporate assets, which consist primarily of cash and cash equivalents and short-term investments, refundable income taxes, and certain intangible assets, are included in the All Other Category.

The Company considers its geographic areas to be: 1) the United States, and 2) Canada. The majority of the Company’s operations are in the United States; one operation is in Canada. The geographic distribution of the Company’s net sales and long-lived assets are as follows:

(In thousands)	2009		2008		2007
Net sales (a):
United States	$	229,223	$	296,150	$	320,321
Canada		4,576		9,136		17,132
	$	233,799	$	305,286	$	337,453

	June 30,		June 30,		June 30,
	2009		2008		2007
Long-lived assets (b):
United States	$	45,898	$	47,928	$	47,907
Canada		564	$	898	$	981
	$	46,462	$	48,826	$	48,888

a.	Net sales are attributed to geographic areas based upon the location of the operation making the sale.
b.	Long-lived assets includes property, plant and equipment, and other long term assets. Goodwill and intangible assets are not included in long-lived assets.

NOTE 3 — MAJOR CUSTOMER CONCENTRATIONS

There was no concentration of receivables as of June 30, 2009 or 2008. There were no customers or customer programs representing 10% or more of the Company’s net sales in fiscal years 2009, 2008 or 2007.

F-32

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:

(In thousands, except per share)	2009			2008			2007
BASIC EARNINGS PER SHARE
Net income (loss)	$	(13,414	)	$	(13,048	)	$	20,789
Weighted average shares outstanding during the period, net of treasury shares (a)		21,574			21,554			21,476
Weighted average shares outstanding in the Deferred Compensation Plan during the period		226			210			200
Weighted average shares outstanding		21,800			21,764			21,676
Basic earnings (loss) per share	$	(0.62	)	$	(0.60	)	$	0.96
DILUTED EARNINGS PER SHARE
Net income (loss)	$	(13,414	)	$	(13,048	)	$	20,789
Weighted average shares outstanding
Basic		21,800			21,764			21,676
Effect of dilutive securities (b):
Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any		—			—			248
Weighted average shares outstanding (c)		21,800			21,764			21,924
Diluted earnings (loss) per share	$	(0.62	)	$	(0.60	)	$	0.95

(a)	Includes shares accounted for like treasury stock in accordance with EITF 97-14.
(b)	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.
(c)	Options to purchase 1,512,367 common shares, 563,467 common shares, and 206,261 common shares at June 30, 2009, 2008, and 2007, respectively, were not included in the computation of diluted earnings per share because the exercise price was greater than the average fair market value of the common shares.

NOTE 5 — BALANCE SHEET DATA

The following information is provided as of June 30:

(In thousands)	2009		2008
Inventories:
Raw materials	$	20,498	$	25,150
Work-in-process		7,097		7,955
Finished goods		12,601		17,404
	$	40,196	$	50,509
Accrued Expenses:
Compensation and benefits	$	5,788	$	7,060
Customer prepayments		1,816		1,820
Accrued sales commissions		919		1,552
Loss contingency		—		2,800
Other accrued expenses		1,845		2,756
	$	10,368	$	15,988

F-33

NOTE 6 — GOODWILL AND OTHER INTANGIBLE ASSETS

In accordance with Statement of Financial Accounting Standard No. 142 (SFAS No. 142) “Goodwill and Other Intangible Assets,” the Company is required to perform an annual impairment test of its goodwill and indefinite-lived intangible assets. The Company performs this test as of July 1^st of each fiscal year and on an interim basis when an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company uses a combination of the market approach and the income (discounted cash flow) approach in determining the fair value of its reporting units. Under SFAS No. 142, the goodwill impairment test is a two-step process. Under the first step, the fair value of the Company’s reporting unit is compared to its respective carrying value. An indication that goodwill is impaired occurs when the fair value of a reporting unit is less than the carrying value. When there is an indication that goodwill is impaired, the Company is required to perform a second step. In step two, the actual impairment of goodwill is calculated by comparing the implied fair value of the goodwill with the carrying value of the goodwill.

The Company identified its reporting units in conjunction with its annual goodwill impairment testing. In connection with the integration of LSI Saco Technologies, the Company allocated certain amounts of the goodwill and intangible assets that resulted from the LSI Saco Technologies acquisition to certain of its reporting units based upon the relative fair values of these reporting units. The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing. These include operating results, forecasts, anticipated future cash flows and market place data, to name a few. There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

Due to current economic conditions, the effects of the recession on the Company’s markets and the decline in the Company’s stock price, management believed that additional goodwill impairment tests were required as of December 31, 2008, March 31, 2009 and June 30, 2009. The impairment test performed as of June 30, 2009 is actually the Company’s annual goodwill impairment test that was to be performed as of July 1, 2009; however, because the conditions that resulted in goodwill impairment were present as of June 30, 2009, the estimated impairment charge of $260,000 was recorded as of that date. Based upon the Company’s analysis as of these three balance sheet dates, it was determined that the goodwill associated with three reporting units was either fully or partially impaired. The total amount of the goodwill impairment in fiscal 2009 was $14,467,000, of which $11,185,000 was full impairment of the goodwill in one reporting unit in the Lighting Segment, $716,000 was full impairment of the goodwill in one reporting unit in the Graphics Segment, and $2,566,000 was a partial impairment of goodwill in one reporting unit in the All Other Category. The impairment charges were due to a combination of a decline in the market capitalization of the Company and/or a decline in the estimated forecasted discounted cash flows since the previous goodwill impairment test was performed.

The Company had previously performed its annual goodwill impairment test as of July 1, 2008. For purposes of this test, the Company determined that it had six operating segments or individual subsidiaries, which were determined to be the Company’s reporting units, that have goodwill. Based upon the Company’s analysis, it was determined that the goodwill associated with three reporting units was either fully or partially impaired in the amount of $26,175,000. It was also determined that other intangible assets associated with three reporting units was either fully or partially impaired. The total amount of impairment associated with other intangible assets was $1,780,000. Total impairment for both goodwill and other intangible assets was $27,955,000. The majority of impairment charges occurred in the Graphics Segment and totaled $23,739,000. The remaining impairment charges occurred in the Lighting Segment in the amount of $1,097,000 and in the Technology Segment in the amount of $3,119,000. The majority of the impairment charge in the Lighting Segment occurred as a result of the fiscal 2008 review of long-lived assets in connection with Statement of Financial Accounting Standard (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets.” It was determined that a certain trade name was fully impaired because it was no longer used in the Company’s marketing efforts. An impairment charge of $746,000 was recorded as of June 30, 2008 related to this trade name. The remaining impairment charge of $27,209,000 was primarily comprised of goodwill and was a direct result of the SFAS No. 142 testing. This impairment charge was due primarily to the combination of a decline in the market capitalization of the Company at June 30, 2008 and the decline in the estimated forecasted discounted cash flows expected by the Company. This impairment charge was recorded in fourth quarter of fiscal 2008 rather than in the first quarter of fiscal 2009 due to the decline in the company’s stock price as of June 30, 2008. A similar analysis was performed as of July 1, 2007 and July 1, 2006 and there was no impairment of goodwill.

F-34

The following table presents information about the Company’s goodwill and other intangible assets on the dates or for the periods indicated.

	As of June 30, 2009						As of June 30, 2008
	Carrying		Accumulated				Carrying		Accumulated
(In thousands)	Amount		Amortization		Net		Amount		Amortization		Net
Goodwill	$	1,650	$	92	$	1,558	$	16,549	$	524	$	16,025
Other Intangible Assets	$	22,219	$	9,238	$	12,981	$	22,219	$	7,159	$	15,060

Changes in the carrying amount of goodwill for the years ended June 30, 2008 and 2009, by operating segment, are as follows:

	Lighting			Graphics			Technology			All Other
(In thousands)	Segment			Segment			Segment			Category			Total
Balance as of June 30, 2007	$	11,320		$	24,030		$	3,119		$	3,731		$	42,200
Impairment		—			(23,056	)		(3,119	)		—			(26,175	)
Balance as of June 30, 2008		11,320			974			—			3,731			16,025
Impairment		(11,185	)		(716	)		—			(2,566	)		(14,467	)
Balance as of June 30, 2009	$	135		$	258		$	—		$	1,165		$	1,558

The gross carrying amount and accumulated amortization by major other intangible asset class is as follows:

	June 30, 2009				June 30, 2008
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
(In thousands)	Amount		Amortization		Amount		Amortization
Amortized Intangible Assets
Customer relationships	$	7,472	$	4,173	$	7,472	$	3,620
Patents		110		59		110		52
LED Technology firmware, software		10,448		4,478		10,448		2,985
Non-compete agreements		630		528		630		502
		18,660		9,238		18,660		7,159
Indefinite-Lived Intangible Assets
Trademarks and tradenames		3,559		—		3,559		—
		3,559		—		3,559		—
Total Intangible Assets	$	22,219	$	9,238	$	22,219	$	7,159

F-35

Aggregate amortization expense for other intangible assets was $2,079,000 in fiscal 2009, $2,326,000 in fiscal 2008 and $2,328,000 in fiscal 2007.

The Company expects to record amortization expense over each of the next five years as follows: 2010 through 2011 — $2,080,000 per year; 2012 — $2,079,000; 2013 — $1,816,000; 2014 — $110,000.

NOTE 7 — REVOLVING LINES OF CREDIT AND LONG-TERM DEBT

The Company has an unsecured $40 million revolving line of credit with its bank group. As of June 30, 2009, all $40 million of this line of credit was available. A portion of this credit facility is a $10 million committed line of credit that expires in the third quarter of fiscal 2010. The remainder of the credit facility is a $30 million three year committed line of credit that expires in fiscal 2011. Annually in the third quarter, the $30 million credit facility is renewable with respect to adding an additional year of commitment to replace the year just ended. Interest on the $30 million revolving line of credit is charged based upon an increment over the LIBOR rate as periodically determined, an increment over the Federal Funds Rate as periodically determined, or at the bank’s base lending rate, at the Company’s option. The increment over the LIBOR borrowing rate, as periodically determined, fluctuates between 50 and 75 basis points depending upon the ratio of indebtedness to earnings before interest, taxes, depreciation and amortization (EBITDA). The increment over the Federal Funds borrowing rate, as periodically determined, fluctuates between 150 and 200 basis points, and the commitment fee on the unused balance of the $30 million committed portion of the line of credit fluctuates between 15 and 25 basis points based upon the same leverage ratio. Interest on the $10 million line of credit is charged based upon a 250 basis point increment over the LIBOR rate as periodically determined. Under terms of these agreements, the Company has agreed to a negative pledge of assets, to maintain minimum levels of profitability and net worth, and is subject to certain maximum levels of leverage. The Company has obtained a waiver from its bank group related to submittal of its third quarter Form 10-Q and is in compliance with all of its loan covenants as of June 30, 2009.

The Company also has a $5 million line of credit for its Canadian subsidiary. The line of credit expires in the third quarter of fiscal 2010. Interest on the Canadian subsidiary’s line of credit is charged based upon an increment over the LIBOR rate or based upon a 250 basis point increment over the United States base rates if funds borrowed are denominated in U.S. dollars or an increment over the Canadian prime rate if funds borrowed are denominated in Canadian dollars. There have been only minimal borrowings against this line of credit during the year ended June 30, 2009.

NOTE 8 — RESERVE FOR UNCERTAIN TAX LIABILITIES

The Company adopted the provisions of FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes,” on July 1, 2007. As a result of adoption, the Company recognized $2,582,000 in reserves for uncertain tax positions and recorded a charge of $2,582,000 to the July 1, 2007 retained earnings balance. At June 30, 2009, tax and interest, net of potential federal tax benefits, were $1,873,000 and $447,000, respectively, of the total reserves of $2,734,000. Additionally, penalties were $414,000 of the reserve at June 30, 2009. Of the $2,734,000 reserve for uncertain tax positions, $2,320,000 would have an unfavorable impact on the effective tax rate if recognized. At June 30, 2008, tax and interest, net of potential federal tax benefits, were $2,098,000 and $534,000, respectively, of the total reserves of $3,225,000. Additionally, penalties were $593,000 of the reserve at June 30, 2008. Of the $3,225,000 reserve for uncertain tax positions, $2,632,000 would have an unfavorable impact on the effective tax rate if recognized.

F-36

The Company recognized a $226,000 tax benefit in fiscal 2009 related to the decrease in reserves for uncertain tax positions and a $385,000 tax expense in fiscal 2008 related to the increase in reserves for uncertain tax positions. The Company is recording estimated interest and penalties related to potential underpayment of income taxes as a component of tax expense in the Consolidated Statement of Operations. While it is reasonably possible that the amount of reserves for uncertain tax positions may change in the next twelve months, the Company does not anticipate that total reserves for uncertain tax positions will significantly change due to the settlement of audits or the expiration of statutes of limitations in the next twelve months.

The fiscal 2009 and 2008 activity in the Liability for Uncertain Tax Positions, which is included in Other Long-Term Liabilities, was as follows:

(in thousands)	2009			2008
Balance at beginning of the fiscal year	$	3,040		$	—
Unrecognized tax reserve — July 1, 2007 Adoption		—			2,449
Increases — tax positions in prior period		—			349
Decreases — tax positions in prior period		—			—
Increases — tax positions in current period		14			436
Decreases — tax positions in current period		—			—
Settlements and payments		(361	)		(179	)
Lapse of statute of limitations		—			(15	)
Unrecognized tax reserve — end of the fiscal year	$	2,693		$	3,040

The Company files a consolidated federal income tax return in the United States, and files various combined and separate tax returns in several foreign, state, and local jurisdictions. With limited exceptions, the Company is no longer subject to U.S. Federal, state and local tax examinations by tax authorities for fiscal years ending prior to June 30, 2005.

NOTE 9 — CASH DIVIDENDS

The Company paid cash dividends of $6,471,000, $13,580,000, and $10,952,000 in fiscal years 2009, 2008, and 2007, respectively. In August 2009, the Company’s Board of Directors declared a $0.05 per share regular quarterly cash dividend (approximately $1,202,000) payable on September 8, 2009 to shareholders of record September 1, 2009.

NOTE 10 — EQUITY COMPENSATION

On July 1, 2005, the Company adopted SFAS No. 123(R), “Share-Based Payment,” which requires the Company to measure the cost of employee services received in exchange for an award of equity instruments and to recognize this cost in the financial statements over the period during which an employee is required to provide services.

F-37

Stock Options

The Company has an equity compensation plan that was approved by shareholders which covers all of its full-time employees, outside directors and advisors. The options granted or stock awards made pursuant to this plan are granted at fair market value at date of grant or award. Options granted to non-employee directors become exercisable 25% each ninety days (cumulative) from date of grant and options granted to employees generally become exercisable 25% per year (cumulative) beginning one year after the date of grant. The number of shares reserved for issuance is 2,250,000, of which 897,683 shares were available for future grant or award as of June 30, 2009. This plan allows for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted and unrestricted stock awards, performance stock awards, and other stock awards. As of June 30, 2009, a total of 1,537,212 options for common shares were outstanding from this plan as well as two previous stock option plans (both of which had also been approved by shareholders), and of these, a total of 830,087 options for common shares were vested and exercisable. The approximate unvested stock option expense as of June 30, 2009 that will be recorded as expense in future periods is $2,069,100. The weighted average time over which this expense will be recorded is approximately 22 months.

The fair value of each option on the date of grant was estimated using the Black-Scholes option pricing model. The below listed weighted average assumptions were used for grants in the periods indicated.

	2009			2008			2007
Dividend yield		4.60	%		3.61	%		2.97	%
Expected volatility		45	%		36	%		39	%
Risk-free interest rate		3.0	%		4.3	%		4.8	%
Expected life	5.1 yrs.			4.3 yrs.			6.5 yrs.

At June 30, 2009, the 365,800 options granted in fiscal 2009 to non-employee directors had exercise prices ranging from $4.34 to $8.98, fair values ranging from $1.12 to $2.21, and remaining contractual lives of approximately nine and one-half to ten years.

At June 30, 2008, the 328,200 options granted in fiscal 2008 to both employees and non-employee directors had exercise prices ranging from $12.58 to $19.76, fair values ranging from $3.07 to $6.61, and remaining contractual lives of between four years eight months and nine years two months.

At June 30, 2007, the 250,700 options granted during fiscal 2007 to employees and non-employee directors had exercise prices ranging from $13.83 to $18.19, fair values ranging from $4.88 to $6.43 per option, and remaining contractual lives of four years to nearly ten years.

The Company records stock option expense using a straight line Black-Scholes method with an estimated 6.6% forfeiture rate (revised in the fourth quarter of fiscal 2009 from the 4.2% forfeiture rate previously used). The expected volatility of the Company’s stock was calculated based upon the historic monthly fluctuation in stock price for a period approximating the expected life of option grants. The risk-free interest rate is the rate of a five year Treasury security at constant, fixed maturity on the approximate date of the stock option grant. The expected life of outstanding options is determined to be less than the contractual term for a period equal to the aggregate group of option holders’ estimated weighted average time within which options will be exercised. It is the Company’s policy that when stock options are exercised, new common shares shall be issued. The Company recorded $1,184,000, $1,246,000, and $721,000 of expense related to stock options in fiscal years 2009, 2008 and 2007, respectively. As of June 30, 2009, the Company expects that approximately 671,500 outstanding stock options having a weighted average exercise price of $13.86, no aggregate intrinsic value, and weighted average remaining contractual terms of 8.3 years will vest in the future.

F-38

Information related to all stock options for the years ended June 30, 2009, 2008 and 2007 is shown in the table below:

	Twelve Months Ended
	June 30, 2009
				Weighted		Weighted
				Average		Average	Aggregate
				Exercise		Remaining	Intrinsic
	Shares			Price		Contractual Term	Value
Outstanding at 6/30/08		1,197,482		$	14.44	6.5 years	$	—
Granted		365,800		$	8.57
Forfeitures		(26,070	)	$	12.68
Exercised		—		$	—
Outstanding at 6/30/09		1,537,212		$	13.07	6.4 years	$	33,800
Exercisable at 6/30/09		830,087		$	12.52	4.8 years	$	2,550

	Twelve Months Ended
	June 30, 2008
				Weighted		Weighted
				Average		Average	Aggregate
				Exercise		Remaining	Intrinsic
	Shares			Price		Contractual Term	Value
Outstanding at 6/30/07		983,788		$	12.16		$	5,642,400
Granted		328,200		$	19.74
Forfeitures		(9,500	)	$	16.81
Exercised		(105,006	)	$	9.52
Outstanding at 6/30/08		1,197,482		$	14.44	6.5 years	$	—
Exercisable at 6/30/08		615,482		$	11.43	4.9 years	$	—

	Twelve Months Ended
	June 30, 2007
				Weighted		Weighted
				Average		Average	Aggregate
				Exercise		Remaining	Intrinsic
	Shares			Price		Contractual Term	Value
Outstanding at 6/30/06		783,957		$	10.32		$	5,232,500
Granted		250,700		$	17.54
Forfeitures		(4,750	)	$	11.57
Exercised		(46,119	)	$	10.00
Outstanding at 6/30/07		983,788		$	12.16	6.3 years	$	5,642,400
Exercisable at 6/30/07		540,631		$	10.33	4.7 years	$	4,090,400

F-39

The aggregate intrinsic value of options exercised during the years ended June 30, 2008 and 2007 was $913,700 and $391,000, respectively.

The Company received $855,000 of cash and 8,068 common shares of the Company’s stock from employees who exercised 105,006 options during the twelve months ended June 30, 2008. Additionally, the Company recorded $228,500 in fiscal 2008 as a reduction of federal income taxes payable, $221,300 as an increase in common stock, and $7,200 as a reduction of income tax expense related to the exercises of stock options in which the employees sold the common shares prior to the passage of twelve months from the date of exercise.

Information related to unvested stock options for the twelve months ended June 30, 2009 is shown in the table below:

				Weighted		Weighted
				Average		Average	Aggregate
				Exercise		Remaining	Intrinsic
	Shares			Price		Contractual Term	Value
Outstanding unvested stock options at 6/30/08		582,000		$	17.62	8.2 years	$	—
Vested		(235,125	)	$	15.30
Forfeitures		(5,550	)	$	16.55
Granted		365,800		$	8.57
Outstanding unvested stock options at 6/30/09		707,125		$	13.72	8.3 years	$	31,245

Stock Compensation Awards

The Company awarded a total of 6,032 and 2,558 common shares in fiscal 2009 and fiscal 2008, respectively, valued at their approximate $40,680 and $43,875 fair market values, respectively, on the dates of issuance pursuant to the compensation programs for non-employee Directors who receive a portion of their compensation as an award of Company stock and employees who receive a nominal stock award following their twentieth employment anniversary. Stock compensation awards are made in the form of newly issued common shares of the Company.

Deferred Compensation Plan

The Company has a non-qualified deferred compensation plan providing for both Company contributions and participant deferrals of compensation. The Plan is fully funded in a Rabbi Trust. All Plan investments are in common shares of the Company. As of June 30, 2009 there were 33 participants, all with fully vested account balances. A total of 222,832 common shares with a cost of $2,455,900, and 211,511 common shares with a cost of $2,426,800 were held in the Plan as of June 30, 2009 and June 30, 2008, respectively, and, accordingly, have been recorded as treasury shares. The change in the number of shares held by this plan is the net result of share purchases and sales on the open stock market for compensation deferred into the Plan and for distributions to terminated employees. The Company does not issue new common shares for purposes of the non-qualified deferred compensation plan. The Company accounts for assets held in the non-qualified deferred compensation plan in accordance with Emerging Issues Task Force 97-14, “Accounting for Deferred Compensation Arrangements where amounts earned are held in a Rabbi Trust and invested.” For fiscal year 2010, the Company estimates the Rabbi Trust for the Nonqualified Deferred Compensation Plan will make net repurchases in the range of 15,000 to 18,000 common shares of the Company. During fiscal years 2009 and 2008, the Company used approximately $188,500 and $262,100, respectively, to purchase common shares of the Company in the open stock market for either employee salary deferrals or Company contributions into the non-qualified deferred compensation plan. The Company does not currently repurchase its own common shares for any other purpose.

F-40

NOTE 11 — LEASES AND PURCHASE COMMITMENTS

The Company leases certain of its facilities and equipment under operating lease arrangements. Rental expense was $2,243,000 in 2009, $2,554,000 in 2008, and $2,779,000 in 2007. Minimum annual rental commitments under non-cancelable operating leases are: $1,589,000 in 2010, $1,558,000 in 2011, $1,296,000 in 2012, $1,008,000 in 2013 and $169,000 in 2014. Purchase commitments, including minimum annual rental commitments, of the Company totaled $22,404,000 and $22,546,000 as of June 30, 2009 and June 30, 2008, respectively.

NOTE 12 — INCOME TAXES

The following information is provided for the years ended June 30:

(In thousands)	2009			2008			2007
Components of income (loss) before income taxes
United States	$	(13,911	)	$	(5,818	)	$	32,376
Foreign		(492	)		(4,873	)		(649	)
Income (loss) before income taxes	$	(14,403	)	$	(10,691	)	$	31,727
Provision (benefit) for income taxes:
Current
U.S. federal	$	(1,629	)	$	7,523		$	9,898
State and local		(147	)		928			495
Foreign		(214	)		(190	)		—
Total current		(1,990	)		8,261			10,393
Deferred		1,001			(5,904	)		545
Total provision (benefit) for income taxes	$	(989	)	$	2,357		$	10,938
Reconciliation to federal statutory rate:
Federal statutory tax rate		34.0	%		35.0	%		35.0	%
State and local taxes, net of federal benefit		1.5			(5.8	)		1.2
Impact of Foreign Operations		3.6			(1.3	)		(1.0	)
Federal and state tax credits		1.1			4.4			(1.5	)
Goodwill		(27.9	)		(36.2	)		—
Valuation allowance		(3.2	)		(15.6	)		—
Other		(2.2	)		(2.5	)		0.8
Effective tax rate		6.9	%		(22.0	)%		34.5	%

The components of deferred income tax assets and (liabilities) at June 30, 2009 and 2008 are as follows:

(In thousands)	2009			2008
Reserves against current assets	$	160		$	377
Accrued expenses		1,093			1,191
Depreciation		(4,049	)		(4,065	)
Loss contingency		—			1,059
Goodwill, acquisition costs and intangible assets		5,181			4,832
Deferred compensation		890			900
State net operating loss carryover and credits		958			940
Foreign net operating loss carryover and credits		1,940			1,819
Valuation reserve		(1,940	)		(1,819	)
Net deferred income tax asset	$	4,233		$	5,234

F-41

Reconciliation to the balance sheets as of June 30, 2009 and 2008:

(In thousands)	2009		2008
Deferred income tax asset included in:
Other current assets	$	1,253	$	2,627
Long-term deferred income tax asset		2,980		2,607
Net deferred income tax asset	$	4,233	$	5,234

As of June 30, 2009 the Company has recorded two deferred state income tax assets, one in the amount of $18,000 related to a state net operating loss carryover generated by the Company’s New York subsidiary, and the other in the amount of $940,000, net of federal tax benefits, related to non-refundable state tax credits. As of June 30, 2008 the Company had recorded two deferred state income tax assets, one in the amount of $5,000 related to a state net operating loss carryover generated by the Company’s New York subsidiary, and the other in the amount of $935,000, net of federal tax benefits, related to non-refundable state tax credits. The Company has determined that these deferred state income tax assets totaling $958,000 and $940,000 as of June 30, 2009 and 2008, respectively, do not require any valuation reserves because, in accordance with Statement of Financial Accounting Standards No. 109 (SFAS No. 109), these assets will, more likely than not, be realized. The activity netted to an additional state income tax expense of $25,000, $16,000 and $249,000, respectively, in fiscal years 2009, 2008 and 2007.

Additionally, as of June 30, 2009 and 2008, the Company has recorded deferred tax assets for its Canadian subsidiary related to net operating loss carryover and to research and development tax credits totaling $1,940,000 and $1,819,000, respectively. In view of the impairment of the goodwill and certain intangible assets on the financial statements of this subsidiary and two consecutive loss years, the Company has determined these assets, more likely than not, will not be realized. Accordingly, full valuation reserves of $1,940,000 and $1,819,000 were recorded as of June 30, 2009 and 2008, respectively.

NOTE 13 — SUPPLEMENTAL CASH FLOW INFORMATION

(In thousands)	2009		2008		2007
Cash payments:
Interest	$	119	$	73	$	1,576
Income taxes	$	564	$	10,877	$	9,439
Issuance of common shares as compensation	$	41	$	44	$	44

NOTE 14 — LOSS CONTINGENCY

The Company is party to various negotiations and legal proceedings arising in the normal course of business, most of which are dismissed or resolved with minimal expense to the Company, exclusive of legal fees. Since October 2000, the Company had been the defendant in a complex lawsuit alleging patent infringement with respect to some of the Company’s menu board systems sold over the past approximately eleven years. Pursuant to settlement discussions initiated by the plaintiffs, the Company made a $2,800,000 offer to settle this matter and, accordingly, recorded a loss contingency reserve in the fourth quarter of fiscal 2008. Following additional discussions in the second quarter of fiscal 2009, the Company reached a full and complete settlement of all matters related to this menu board patent infringement lawsuit. Accordingly, an additional $200,000 expense was recorded in the second quarter of fiscal 2009 and a payment of $3,000,000 was made to the plaintiffs.

F-42

NOTE 15 — RELATED PARTY TRANSACTIONS

The Company has recorded expense for the following related party transactions in the fiscal years indicated (amounts in thousands):

	2009		2008		2007
Keating Muething & Klekamp PLL	$	266	$	177	$	222
American Engineering and Metal Working	$	202	$	192	$	559
3970957 Canada Inc.	$	180	$	189	$	176

As of the balance sheet date indicated, the Company had the following liabilities recorded with respect to related party transactions (amounts in thousands):

	June 30,		June 30,
	2009		2008
Keating Muething & Klekamp PLL	$	89	$	29
American Engineering and Metal Working	$	2	$	7

The law firm of Keating Muething & Klekamp PLL, of which one of the Company’s independent outside directors is a senior partner, is the Company’s primary outside law firm providing legal services in most all areas required other than patents and intellectual property. The manufacturing firm of American Engineering and Metal Working, which is owned and operated by the son of the president of the Company’s Graphics Segment, provides metal fabricated components. 3970957 Canada Inc., which is owned by the president and another executive of the Company’s LSI Saco Technologies subsidiary, owns the building that the Canadian operation occupies and rents. All related parties provide the Company either products or services at market-based arms-length prices.

NOTE 16 — SUBSEQUENT EVENT

On July 22, 2009, the Company completed the acquisition of certain net assets and 100% of the business of three related companies (AdL Technology, AdL Engineering and Kelmilfeen – collectively, “AdL”), which were privately owned and based in Columbus, Ohio. Consideration for the asset purchase of these businesses totaled $15,781,480, and consisted of 2,469,676 shares of LSI’s unregistered common stock (the fair value of which was determined based upon the closing market price of LSI’s common shares on the acquisition date) and cash of $1,333,875. This purchase price exceeds the fair value of the net assets being acquired, and it is estimated that when the purchase price allocation has been completed there will be significant goodwill recorded with this acquisition, as well as certain intangible assets. Additionally, LSI assumed long-term debt of $3,368,874 in the purchase of substantially all net assets of these businesses. The goodwill associated with the acquisition of AdL will consist largely of the synergies expected from combining AdL and LSI Industries and the vertical integration of the design and manufacture of electronic circuit boards used in many of the Company’s products. None of the goodwill will be deductible by the Company for tax purposes. Certain information necessary to perform the purchase accounting and determine the opening July 22, 2009 balance sheet of this 100% owned subsidiary, LSI ADL Technology, is not available at the time of filing of this Form 10-K. The following information is not available: (1) U.S. GAAP financial statements of the three acquired companies as of July 22, 2009 have not been prepared; (2) the valuation of all acquired fixed assets has not been finalized; and (3) the valuation of any intangible assets is in process, but has not been completed. It is expected that there won’t be any contingent liabilities or assets associated with the purchase of AdL. There were approximately $60,000 of acquisition related costs included in the June 30, 2009 financial statements, and the operations of LSI ADL Technology will be included in the Company’s operating results beginning July 23, 2009. Subject to further analysis, it is likely that the results of LSI ADL Technology will be reported in its own separate reportable business segment beginning in the first quarter of fiscal 2010.

F-43

LSI ADL Technology Inc. will design, engineer, and manufacture custom designed circuit boards, assemblies, and sub-assemblies used in various applications including the control of solid-state LED lighting. With the acquisition of AdL, we made a decision to further establish and advance our leadership position in LED lighting by vertically integrating our capabilities in connection with designing, engineering, and producing the solid-state electronics that control and power LEDs. LSI ADL will allow us to stay on the leading edge of product development, while at the same time providing opportunities to drive down manufacturing costs and control delivery of key components. ADL’s capabilities will also have applications in our other LED product lines such as digital scoreboards, advertising ribbon boards and billboards. The management team and all employees of the acquired companies remain with LSI ADL Technology.

NOTE 17 — SUMMARY OF QUARTERLY RESULTS (UNAUDITED)

	Quarter Ended											Fiscal
(In thousands except per share data)	Sept. 30		Dec. 31			March 31			June 30			Year
2009
Net sales	$	75,838	$	60,787		$	46,989		$	50,185		$	233,799
Gross profit		18,179		13,257			8,774			11,617			51,827
Loss contingency		—		200			—			—			200
Goodwill impairment		—		13,250			957			260			14,467
Net income (loss)		2,687		(13,377	)		(2,467	)		(257	)		(13,414	)
Earnings (loss) per share
Basic	$	0.12	$	(0.61	)	$	(0.11	)	$	(0.01	)	$	(0.62	)(a)
Diluted	$	0.12	$	(0.61	)	$	(0.11	)	$	(0.01	)	$	(0.62	)(a)
Range of share prices
High	$	10.91	$	8.28		$	7.39		$	6.51		$	10.91
Low	$	7.02	$	4.25		$	2.75		$	4.15		$	2.75
2008
Net sales	$	90,001	$	84,062		$	64,780		$	66,443		$	305,286
Gross profit		25,751		23,459			15,982			15,235			80,427
Loss contingency		—		—			—			2,800			2,800
Goodwill and intangible asset impairment		—		—			—			27,955			27,955
Net income (loss)		6,953		4,823			997			(25,821	)		(13,048	)
Earnings (loss) per share
Basic	$	0.32	$	0.22		$	0.05		$	(1.18	)	$	(0.60	)(a)
Diluted	$	0.32	$	0.22		$	0.05		$	(1.18	)	$	(0.60	)(a)
Range of share prices
High	$	21.39	$	23.05		$	18.65		$	14.41		$	23.05
Low	$	15.70	$	17.42		$	8.12		$	8.04		$	8.04
2007
Net sales	$	86,667	$	81,640		$	75,323		$	93,823		$	337,453
Gross profit		23,122		22,194			18,474			25,389			89,179
Net income		5,495		5,035			3,298			6,961			20,789
Earnings per share
Basic	$	0.25	$	0.23		$	0.15		$	0.32		$	0.96	(a)
Diluted	$	0.25	$	0.23		$	0.15		$	0.32		$	0.95
Range of share prices
High	$	18.95	$	20.81		$	20.04		$	18.45		$	20.81
Low	$	12.83	$	15.22		$	15.22		$	14.65		$	12.83

(a) The total of the earnings per share for each of the four quarters does not equal the total earnings per share for the full year because the calculations are based on the average shares outstanding during each of the individual periods.

At August 18, 2009, there were 427 shareholders of record. The Company believes this represents approximately 3,000 beneficial shareholders.

F-44

LSI INDUSTRIES INC.
SELECTED FINANCIAL DATA
(In thousands except per share)

The following data has been selected from the Consolidated Financial Statements of the Company for the periods and dates indicated:

Statement of Operations Data:

	2009			2008			2007			2006			2005
Net sales	$	233,799		$	305,286		$	337,453		$	280,470		$	282,440
Cost of products and services sold		181,972			224,859			248,274			209,057			210,144
Operating expenses		51,571			60,642			57,219			49,898			48,494
Loss contingency (a)		200			2,800			(590	)		—			590
Goodwill and intangible asset impairment (b)		14,467			27,955			—			—			186
Operating income (loss)		(14,411	)		(10,970	)		32,550			21,515			23,026
Interest (income)		(97	)		(360	)		(139	)		(550	)		(64	)
Interest expense		89			81			962			78			217
Income (loss) before income taxes		(14,403	)		(10,691	)		31,727			21,987			22,873
Income taxes		(989	)		2,357			10,938			7,544			8,237
Net income (loss)	$	(13,414	)	$	(13,048	)	$	20,789		$	14,443		$	14,636
Earnings (loss) per common share
Basic	$	(0.62	)	$	(0.60	)	$	0.96		$	0.72		$	0.74
Diluted	$	(0.62	)	$	(0.60	)	$	0.95		$	0.71		$	0.73
Cash dividends paid per share	$	0.30		$	0.63		$	0.51		$	0.56		$	0.37
Weighted average common shares
Basic		21,800			21,764			21,676			20,194			19,782
Diluted		21,800			21,764			21,924			20,429			20,087

Balance Sheet Data:

(At June 30)	2009		2008		2007		2006		2005
Working capital	$	72,500	$	72,863	$	68,397	$	66,787	$	67,189
Total assets		153,118		184,214		233,612		224,401		172,637
Long-term debt, including current maturities		—		—		—		16,593		—
Shareholders’ equity		130,473		149,190		176,061		164,985		138,040

(a)	The Company recorded loss contingency reserves in fiscal years 2009, 2008 and 2005, and reversed a loss contingency reserve in fiscal 2007 — all related to a patent litigation matter. See Note 14.
(b)	The Company recorded a significant impairment of goodwill and intangible assets in fiscal 2008 and 2009. See Note 6.

F-45

LSI INDUSTRIES INC. AND SUBSIDIARIES

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 2009, 2008, AND 2007

(In Thousands)

COLUMN A	COLUMN B		COLUMN C		COLUMN D			COLUMN E
			Additions
	Balance		Charged to					Balance
	Beginning		Costs and		(a)			End of
Description	of Period		Expenses		Deductions			Period
Allowance for Doubtful Accounts:
Year Ended June 30, 2009	$	585	$	135	$	(188	)	$	532
Year Ended June 30, 2008	$	822	$	155	$	(392	)	$	585
Year Ended June 30, 2007	$	656	$	469	$	(303	)	$	822
Inventory Obsolescence Reserve:
Year Ended June 30, 2009	$	1,638	$	1,568	$	(1,796	)	$	1,410
Year Ended June 30, 2008	$	1,606	$	1,479	$	(1,447	)	$	1,638
Year Ended June 30, 2007	$	1,584	$	1,687	$	(1,665	)	$	1,606
Deferred Tax Asset Valuation Reserve:
Year Ended June 30, 2009	$	1,819	$	121	$	—		$	1,940
Year Ended June 30, 2008	$	—	$	1,819	$	—		$	1,819
Year Ended June 30, 2007	$	622	$	—	$	(622	)	$	—

(a) For Allowance for Doubtful Accounts, deductions are uncollectible accounts charged off, less recoveries.

F-46

EXHIBIT INDEX

Exhibit No.			Exhibit Description
	10.9	*	LSI Industries Inc. Retirement Plan (Amended and Restated as of February 1, 2006).
	10.10	*	Fourth Amendment to the LSI Industries Inc. Retirement Plan (Amended and Restated as of February 1, 2006).
	21		Subsidiaries of the Registrant
	23.1		Consent of Independent Registered Public Accounting Firm
	31.1		Certification of Principal Executive Officer required by Rule 13a-14(a)
	31.2		Certification of Principal Financial Officer required by Rule 13a-14(a)
	32.1		18 U.S.C. Section 1350 Certification of Principal Executive Officer
	32.2		18 U.S.C. Section 1350 Certification of Principal Financial Officer

* Management Compensatory Agreements.

LSI will provide shareholders with any exhibit upon the payment of a specified reasonable fee, which fee shall be limited to LSI’s reasonable expenses in furnishing such exhibit.

EX-10.9

EXHIBIT 10.9

LSI INDUSTRIES INC. RETIREMENT PLAN

(Amended and Restated as of February 1, 2006)

TABLE OF CONTENTS

ARTICLE 1 INTRODUCTION AND PURPOSE	1-1
1.1 Amendment and Restatement	1-1
1.2 Purpose of the Plan	1-1
ARTICLE 2 DEFINITIONS	2-1
2.1 Account	2-1
2.2 Accounting Date	2-1
2.3 Actual Deferral Percentage	2-1
2.4 Adjusted Compensation	2-1
2.5 Administrator	2-1
2.6 Adoption Agreement	2-2
2.7 Affiliate	2-2
2.8 Annual Earnings	2-2
2.9 Annual Employer Contribution Account	2-3
2.10 Beneficiary	2-3
2.11 Board or Board of Directors	2-3
2.12 Code	2-3
2.13 Committee	2-3
2.14 Company	2-3
2.15 Dependent	2-3
2.16 Determination Date	2-4
2.17 Determination Period	2-4
2.18 Disability	2-4
2.19 Effective Date	2-4
2.20 Employee	2-4
2.21 Employer	2-5
2.22 Employer-Approved Leave of Absence	2-5
2.23 Entry Date	2-5
2.24 ERISA	2-5
2.25 Excess Earnings	2-5
2.26 Five-Percent Owner	2-5
2.27 Highly Compensated Employee	2-5
2.28 Hour of Service	2-5
2.29 Key Employee	2-6
2.30 Leased Employee	2-6
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	2-7
2.39 Profit Sharing Contribution Account	2-7
2.40 Rollover Account	2-7

i 

2.41 Section 401(k) Contribution Account	2-7
2.42 Severance	2-7
2.43 Six Consecutive Months	2-7
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
2.49 Valuation Date	2-9
2.50 Vesting Years	2-9
ARTICLE 3 ELIGIBILITY AND PARTICIPATION	3-1
3.1 Eligibility and Participation	3-1
3.2 Participants in the Prior Plan	3-1
3.3 Absences and Severances of Less Than 12 Months	3-1
3.4 Reemployment of Former Participant	3-1
ARTICLE 4 CONTRIBUTIONS AND ALLOCATION	4-1
4.1 Section 401(k) Contributions	4-1
4.2 Profit Sharing Contributions	4-3
4.3 Annual Employer Contributions	4-4
4.4 Minimum Contribution for Top-Heavy Years	4-6
4.5 Return of Contributions by the Employer	4-6
4.6 Catch-up Contributions	4-7
4.7 Participant After-Tax Contributions	4-7
4.8 Rollover Contributions	4-7
4.9 Reemployment of Veterans	4-7
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
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

ii 

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 New Minimum Distribution Requirements	8-3
8.7 Restrictions on Section 401(k) Withdrawals and Distributions	8-7
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	9-6
9.7 Transitional Rule	9-7
9.8 Direct Rollover	9-8
ARTICLE 10 DEATH BENEFITS	10-1
10.1 Preretirement Survivor Annuity	10-1
10.2 Balance of Death Benefit	10-3
ARTICLE 11 THE COMMITTEE	11-1
11.1 Committee	11-1
11.2 Membership	11-1
11.3 Rules and Regulations	11-1
11.4 Powers	11-1
11.5 Action of the Committee	11-2
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

iii 

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
14.5 Modification of Top-Heavy Rules	14-4
ARTICLE 15 MISCELLANEOUS	15-1
15.1 Construction	15-1
15.2 Assignment or Alienation of Benefits	15-1
15.3 Data	15-1
15.4 Employment Relationship	15-2
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

iv 

ARTICLE 1

INTRODUCTION AND PURPOSE

1.1 Amendment and Restatement. LSI Industries, Inc. hereby amends and restates the LSI Industries Inc. Retirement Plan in its entirety, effective as of February 1, 2006, 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 profit sharing plan.

1-1

ARTICLE 2

DEFINITIONS

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

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

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

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

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

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

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

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

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

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

2-1

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

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

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

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

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

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

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

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

2-2

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

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

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

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

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

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

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

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

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

2.15 “Dependent” means any unmarried:

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

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

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

(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.

2-3

The dependent must also be one of the following:

(a) age 18 or younger;

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

(c) a disabled dependent older than age 19.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2.28 (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;

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

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

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

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

(1) each Affiliate; and

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

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

2.29 “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.

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

2.32 “Normal Retirement Age” means age 60.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(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.

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

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

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

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

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

2.48 “Trustee” means the trustee under the Trust.

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

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

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ARTICLE 3

ELIGIBILITY AND PARTICIPATION

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

(a) he is at least 21 years old, and

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

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

3.3 Absences and Severances of Less Than 12 Months.

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

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

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

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ARTICLE 4

CONTRIBUTIONS AND ALLOCATION

4.1 Section 401(k) Contributions.

(a) Salary Deferral Contributions.

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

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

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

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

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

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

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

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

(2) the lesser of:

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

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

(c) Return of Excess Elective Deferrals.

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

(A) the lesser of:

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

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

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

(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 2¹/2 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.

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(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 4% of Annual Earnings plus 4% of Excess Earnings (hereinafter the “Annual Employer Contribution”) for such Plan Year paid by such Employer to each Participant who satisfies the requirements of Section 4.3(b).

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(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, such contributions will not be invested and begin receiving earnings or losses until the date they are posted to the Accounts.

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4.4 Minimum Contribution for Top-Heavy Years.

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

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

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

4.5 Return of Contributions by the Employer.

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

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

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

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

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

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

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

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

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

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

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ARTICLE 5

LIMITATIONS ON ANNUAL ADDITIONS

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

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

(1) all employer contributions (other than amounts restored in accordance with section 411(a)(3)(D) or 411(a)(7)(C) of the Code) allocated to his Account;

(2) all forfeitures allocated to his Account;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(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).

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

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

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

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

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

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

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

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

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

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

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

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

(b) Limitations after June 30, 2002.

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

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

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

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

(c) Treatment of Excess Annual Additions.

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

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

(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);

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

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

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

(b) Top-Heavy Rule. If a Limitation Year contains any portion of a Plan Year for which the Plan is a Top-Heavy Plan, then “1.0” shall be substituted for “1.25” in Sections 5.1(c)(2)(A) and 5.1(e)(2)(A); provided however, any limitation which results from the application of this sentence may be exceeded so long as there are no Defined Benefit Plan accruals for the individual and no employer contributions, forfeitures, or voluntary nondeductible contributions allocated to the individual; and provided further, this sentence shall not apply if the sum, for any Aggregation Group of which the Plan is a part, of the Key Employees’ benefits from all Defined Benefit Plans and Defined Contribution Plans does not exceed 90% of the total of all Participants’ benefits and if the Employer contribution would satisfy the requirements of Section 4.4(b) if “4%” were substituted for “3%” and “7¹/2%” were substituted for “5%.”

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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:

	Nonforfeitable
Vesting Years	Percentage
Less than 2		0	%
2		20	%
3		40	%
4		60	%
5		80	%
6 or more		100	%

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

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.

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(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 5 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 5 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.

(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 5 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.

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(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 2 calendar years after the date of notification, the benefits under the Plan of the Participant or Beneficiary will disposed of as follows:

(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.

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(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:

(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 the 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% 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 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.

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(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 Sections 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% 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 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 59¹/2, 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.

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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 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 30 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) Rollovers Disregarded in Involuntary Cash-Outs. For purposes of Section 10.1 of the Plan, the value of a Participant’s nonforfeitable account balance shall be determined including that portion of the account balance that is attributable to rollover contributions (and earnings allocable thereto) within the meaning of sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) of the Code effective on and after March 28, 2005. If the value of the Participant’s nonforfeitable account balance as so determined is $5,000 or less, the Plan shall immediately distribute the Participant’s entire nonforfeitable account balance in accordance with Section 9.1(c). The election shall apply with respect to distributions made after June 30, 2002.

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(d) 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 70¹/2 and who is no longer an Employee must commence no later than April 1^st of the calendar year following the end of the calendar year in which the Participant attains age 70¹/2. A Participant who is over the age of 70¹/2 and who is still an Employee is not required to take distributions until April 1^st of the 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 70¹/2 must commence no later than April 1^st of the calendar year following the end of the calendar year in which the Participant attains age 70¹/2.

8.6 New Minimum Distribution Requirements.

(a) General Rules.

(1) Effective Date. The provisions of this Section will apply for purposes of determining required minimum distributions for calendar years beginning with the 2003 calendar year.

(2) Precedence. The requirements of this Section will take precedence over any inconsistent provisions of the Plan.

(3) Requirements of Treasury Regulations Incorporated. All distributions required under this Section will be determined and made in accordance with the Treasury Regulations under section 401(a)(9) of the Code.

(4) TEFRA Section 242(b)(2) Elections. Notwithstanding the other provisions of this Section, distributions may be made under a designation made before January 1, 1984, in accordance with section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that relate to section 242(b)(2) of TEFRA.

(b) Time and Manner of Distribution.

(1) Required Beginning Date. The Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s required beginning date.

(2) Death of Participant Before Distributions Begin. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

(A) If the Participant’s surviving spouse is the Participant’s sole designated beneficiary, then, distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70¹/2, if later.

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(B) If the Participant’s surviving spouse is not the Participant’s sole designated beneficiary, then distributions to the designated beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.

(C) If there is no designated beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(D) If the Participant’s surviving spouse is the Participant’s sole designated beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this Section 8.6(b)(2), other than Section 8.6(b)(2)(A), will apply as if the surviving spouse were the Participant.

For purposes of this Section 8.6(b)(2) and Section 8.6(d), unless Section 8.6(b)(2)(D) applies, distributions are considered to begin on the Participant’s required beginning date. If Section 8.6(b)(2)(D) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under Section 8.6(b)(2)(A). If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant’s required beginning date (or to the Participant’s surviving spouse before the date distributions are required to begin to the surviving spouse under Section 8.6(b)(2)(A)), the date distributions are considered to begin is the date distributions actually commence.

(3) Forms of Distribution. Unless the Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the required beginning date, as of the first distribution calendar year distributions will be made in accordance with Sections 8.6(c) and (d). If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of section 401(a)(9) of the Code and the Treasury Regulations.

(c) Required Minimum Distributions During Participant’s Lifetime.

(1) Amount of Required Minimum Distribution For Each Distribution Calendar Year. During the Participant’s lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of:

(A) the quotient obtained by dividing the Participant’s Account balance by the distribution period in the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s age as of the Participant’s birthday in the distribution calendar year; or

(B) if the Participant’s sole designated beneficiary for the distribution calendar year is the Participant’s spouse, the quotient obtained by dividing the Participant’s Account balance by the number in the Joint and Last Survivor Table set forth in section 1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the distribution calendar year.

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(2) Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death. Required minimum distributions will be determined under this Section 8.6(c) beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the Participant’s date of death.

(d) Required Minimum Distributions After Participant’s Death.

(1) Death On or After Date Distributions Begin.

(A) Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a designated beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant’s designated beneficiary, determined as follows:

(i) The Participant’s remaining life expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(ii) If the Participant’s surviving spouse is the Participant’s sole designated beneficiary, the remaining life expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For distribution calendar years after the year of the surviving spouse’s death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

(iii) If the Participant’s surviving spouse is not the Participant’s sole designated beneficiary, the designated beneficiary’s remaining life expectancy is calculated using the age of the beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.

(B) No Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is no designated beneficiary as of September 30 of the year after the year of the Participant’s death, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account balance by the Participant’s remaining life expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(2) Death Before Date Distributions Begin.

(A) Participant Survived by Designated Beneficiary. If the Participant dies before the date distributions begin and there is a designated beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account balance by the remaining life expectancy of the Participant’s designated beneficiary, determined as provided in Section 8.6(d)(1).

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(B) No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no designated beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(C) Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole designated beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under Section 8.6(b)(2)(A), this Section 8.6(d)(2) will apply as if the surviving spouse were the Participant.

(e) Definitions.

(1) Designated Beneficiary. The individual who is designated as a Beneficiary and is the designated beneficiary under section 401 (a)(9) of the Code and section 1.401 (a)(9)- 1, Q&A-4, of the Treasury Regulations.

(2) Distribution Calendar Year. A calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant’s required beginning date. For distributions beginning after the Participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under Section 8.6(b)(2). The required minimum distribution for the Participant’s first distribution calendar year will be made on or before the Participant’s required beginning date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participant’s required beginning date occurs, will be made on or before December 31 of that distribution calendar year.

(3) Life Expectancy. Life expectancy as computed by use of the Single Life Table in section 1.401(a)(9)-9 of the Treasury Regulations.

(4) Participant’s Account Balance. The Account balance as of the last valuation date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the Account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. The Account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.

(5) Required Beginning Date. The date specified in Section 8.5(d) of the Plan.

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8.7 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 death;

(b) the Participant’s incurrence of a Disability;

(c) 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);

(d) 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;

(e) 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;

(f) to the extent provided in Section 8.5, attainment of age 70¹/2; or

(g) the Participant’s separation from service, provided, however, the Participant’s elective deferrals, qualified nonelective contributions (if any), qualified matching contributions (if any), and earnings attributable to these contributions shall be distributed on account of the Participant’s severance from employment occurring after June 30, 2002. However, such a distribution shall be subject to the other provisions of the Plan regarding distributions, other than provisions that require a separation from service before such amounts may be distributed.

An event described in (c), (d) or (e) 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 determined pursuant to Section 8.5(c), 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(a)). Effective on and after March 28, 2005, in the event of a mandatory distribution greater than $1,000 in accordance with the provisions of this section, if the Participant does not elect to have such distribution paid directly to an eligible retirement plan specified by the Participant in a direct rollover or to receive the distribution directly in accordance with this section, then the distribution shall be paid in a direct rollover to an individual retirement plan designated by the Plan Administrator.

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

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(2) the Participant has not waived such Annuity pursuant to (c) below.

(b) Definition of Qualified Joint and Survivor Annuity.

(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 ¹/2 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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(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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(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 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.

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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 70¹/2, 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.

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 70¹/2, 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.

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(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 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.

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(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 10 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).

(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.

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(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.

(c) Direct Rollovers of Plan Distributions.

(1) Effective Date. This Section shall apply to distributions made after June 30, 2002.

(2) Modification of Definition of Eligible Retirement Plan. For purposes of the direct rollover provisions in Section 9.8 of the Plan, an eligible retirement plan shall also mean an annuity contract described in section 403(b) of the Code and an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in section 414(p) of the Code.

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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% 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 70¹/2) 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:

(i) the first day of the Plan Year in which the Participant attains age 35, or

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(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 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.

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(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.

(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

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(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.

(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 70¹/2, 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

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(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;

(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.

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(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 satisfy the requirements of the applicable Treasury Regulations under section 401(a)(9) of the Code.

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(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

(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.

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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 Participant with respect to whom such qualified order applies, but only if the qualified order provides for the immediate distribution.

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(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.

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(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.

(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.

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(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

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 who satisfies (either before or after the amendment) the preamendment conditions for the subsidy.

12-1

(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.

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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.

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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;

(3) a 5% owner (as defined in section 416(i) of the Code) of the Employer; or

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(4) a 1% 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%.

(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.

(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.

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(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. This amount shall be adjusted as provided by the Secretary of Treasury and in accordance with section 401(a)(17)(B) of the Code.

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.

(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.

14-3

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 14.3 if “4%” were substituted for “3%” and “7¹/2%” were substituted for “5%”.

14.5 Modification of Top-Heavy Rules.

(a) Effective Date. This Section shall apply for purposes of determining whether the Plan is a Top-Heavy Plan under section 416(g) of the Code for Plan Years beginning after June 30, 2002, and whether the Plan satisfies the minimum benefits requirements of section 416(c) of the Code for such years. This Section amends Article 14 of the Plan.

(b) Determination of Top-Heavy Status.

(1) Key Employee. Key Employee means any Employee or former Employee (including any deceased Employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Employer having Annual Earnings greater than $130,000 (as adjusted under section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a 5% owner of the Employer, or a 1% owner of the Employer having Annual Earnings of more than $150,000. For this purpose, Annual Earnings means compensation within the meaning of section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.

(2) Determination of Present Values and Amounts. This Section 14.5(b)(2) shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of Employees as of the Determination Date.

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(3) Distributions During Year Ending on the Determination Date. The present values of accrued benefits and the amounts of Account balances of an Employee as of the Determination Date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under section 416(g)(2) of the Code during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting “5-year period” for “1-year period.”

(4) Employees not Performing Services During Year Ending on the Determination Date. The accrued benefits and accounts of any individual who has not performed services for the Employer during the 1-year period ending on the Determination Date shall not be taken into account.

14-5

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

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.

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IN WITNESS WHEREOF, LSI INDUSTRIES INC. has caused this Plan to be executed as of this ___ day of                     , 2006.

LSI INDUSTRIES INC.
 

By:  

EX-10.10

EXHIBIT 10.10

FOURTH AMENDMENT TO THE

LSI INDUSTRIES INC. RETIREMENT PLAN
(Amended and Restated as of February 1, 2006)

This FOURTH AMENDMENT made as of this 19^th day of August, 2009, by LSI Industries Inc. (hereinafter referred to as the “Corporation”).

W I T N E S S E T H:

WHEREAS, the Corporation maintains the LSI Industries Inc. Retirement Plan amended and restated as of February 1, 2006 (the “Plan”);

WHEREAS, Section 12.1 of the Plan allows the Corporation to modify or amend the Plan in whole or in part; and

WHEREAS, the Corporation desires to amend the Plan to reduce the amount of the Annual Employer Contribution from 4% to 2% for the Plan Year that begins on July 1, 2009 and ends on June 30, 2010 and for each Plan Year thereafter, unless subsequent amendments are made.

NOW, THEREFORE, the Plan is hereby amended as follows:

1. Effective for the Plan Year ending June 30, 2010 and subsequent Plan Years, Section 4.3(a) is amended by adding a sentence at the end thereof to read as follows:

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

2. Effective for the Plan Year ending June 30, 2010 and subsequent Plan Years, Section 4.3(c) is amended by adding a sentence at the end thereof to read as follows:

The allocation formula described above shall be amended by replacing “4%” each place it appears with “2%” effective for Plan Years ending on or after June 30, 2010.

3. Effective for the Plan Year ending June 30, 2010 and subsequent Plan Years, Section 5.3(b) is amended by adding a sentence at the end thereof to read as follows:

Effective for Plan Years beginning on or after July 1, 2009, this provision shall be applied on the basis of the Annual Employer Contribution being 2% of Annual Earnings plus 2% of Excess Earnings.

LSI Industries Inc. has signed this Fourth Amendment and otherwise ratifies and approves the Plan in all other respects on the date and year first above written.

LSI INDUSTRIES INC.
 

BY:  

ITS: 

EX-21

EXHIBIT 21

Subsidiaries of the Registrant

		Percent
	Business and	Owned by			State of
Subsidiary	Location	Registrant			Incorporation
Grady McCauley Inc.	Digital image and screen printed graphics		100	%	Ohio
	North Canton, OH
LSI Greenlee Lighting Inc.	Landscape lighting		100	%	Delaware
	Dallas, TX
LSI Adapt Inc.	Project management and installation services		100	%	Ohio
	North Canton, OH
*LSI ADL Technology Inc.	Electronic Circuit Boards		100	%	Ohio
	Hilliard, OH
LSI Kentucky LLC	Menu board systems; metal fabrication		100	%	Ohio
	Independence, KY
LSI Lightron Inc.	Fluorescent lighting		100	%	Ohio
	New Windsor, NY
LSI Marcole Inc.	Electrical wire harnesses		100	%	Tennessee
	Manchester, TN
LSI MidWest Lighting Inc.	Fluorescent lighting		100	%	Kansas
	Kansas City, KS
LSI Retail Graphics LLC	Interior graphics and signs		100	%	Ohio
	Woonsocket, RI
LSI Integrated Graphics LLC	Screen and digital printed materials,		100	%	Ohio
	and illuminated and non-illuminated
	architectural graphics
	Houston, TX
LSI Saco Technologies Inc.	LED lighting and LED video screen		100	%	Quebec, Canada
	manufacturing, research and development
	Montreal, Quebec

* This subsidiary was acquired July 22, 2009.

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Post-Effective Amendment No. 2 to Registration Statement No. 333-137675 on Form S-3 and Registration Statement Nos. 333-11503, 333-91531, 333-100038, 333-100039, and 333-110784 on Form S-8 of our reports dated September 11, 2009 relating to the consolidated financial statements and financial statement schedule of LSI Industries Inc. and subsidiaries (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of Financial Accounting Standards Board No. 109, on July 1, 2007), and the effectiveness of LSI Industries Inc. and subsidiaries’ internal control over financial reporting, appearing in this Annual Report on Form 10-K of LSI Industries Inc. and subsidiaries for the year ended June 30, 2009.

/s/ Deloitte & Touche LLP

Cincinnati, Ohio
September 11, 2009

EX-31.1

EXHIBIT 31.1

Certification of Principal Executive Officer
Pursuant to Rule 13a-14(a)

I, Robert J. Ready, certify that:

1. I have reviewed this annual report on Form 10-K of LSI Industries Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 11, 2009

/s/ Robert J. Ready  

Principal Executive Officer 

EX-31.2

EXHIBIT 31.2

Certification of Principal Financial Officer
Pursuant to Rule 13a-14(a)

I, Ronald S. Stowell, certify that:

1. I have reviewed this annual report on Form 10-K of LSI Industries Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 11, 2009

/s/ Ronald S. Stowell  

Principal Financial Officer 

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF ROBERT J. READY

Pursuant to Section 1350 of Chapter 63 of the
United States Code and Rule 13a-14b

In connection with the filing with the Securities and Exchange Commission of the Annual Report of LSI Industries Inc. (the “Company”) on Form 10-K for the fiscal year ended June 30, 2009 (the “Report”), I, Robert J. Ready, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert J. Ready

Robert J. Ready

Chairman of the Board, Chief Executive Officer and President

September 11, 2009

A signed original of this written statement required by Section 906 has been provided to LSI Industries Inc. and will be retained by LSI Industries Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF RONALD S. STOWELL

Pursuant to Section 1350 of Chapter 63 of the
United States Code and Rule 13a-14b

In connection with the filing with the Securities and Exchange Commission of the Annual Report of LSI Industries Inc. (the “Company”) on Form 10-K for the fiscal year ended June 30, 2009 (the “Report”), I, Ronald S. Stowell, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ronald S. Stowell

Ronald S. Stowell

Vice President, Chief Financial Officer, and Treasurer

September 11, 2009

A signed original of this written statement required by Section 906 has been provided to LSI Industries Inc. and will be retained by LSI Industries Inc. and furnished to the Securities and Exchange Commission or its staff upon request.