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Exhibit 10.16
 
AMENDMENT ONE TO

RETIREMENT PLAN FOR EMPLOYEES OF

 
CAPITAL SOUTHWEST CORPORATION AND ITS AFFILIATES

As Amended and Restated Effective April 1, 2011

WHEREAS, effective as of April 1, 2011, the Retirement Plan for Employees of
Capital Southwest Corporation and Its Affiliates (the "Plan") was amended and
restated in its entirety;
 
WHEREAS, by the terms of Section 6.4 of the Plan, the Plan may be amended; and
WHEREAS, it is necessary that certain technical amendments be made to the Plan
in order to comply with final regulations issued under section 436 of the
Internal Revenue Code;
 
NOW, THEREFORE, the Plan is hereby amended, effective as of the dates specified
below, as follows:
 
Section 4.9 of the Plan is amended to read in its entirety as follows:
 
“4.9  - FUNDING-BASED LIMITATIONS

(A)      Limitations Applicable If the Plan's Adjusted Funding Target Attainment
Percentage Is Less Than 80 Percent, But Not Less Than 60 Percent:

Notwithstanding any other provisions of the Plan, if the Plan's adjusted funding
target attainment percentage for a Plan Year is less than 80 percent (or would
be less than 80 percent to the extent described in Section 4.9(A)(2) below) but
is not less than 60 percent, then the limitations set forth in this paragraph
(A) apply.
 

 
(1)
50 Percent Limitation on Single Sum Payments, Other Accelerated Forms of
Distribution, and Other Prohibited Payments: A Participant or Beneficiary is not
permitted to elect, and the Plan shall not pay, a single sum payment or other
optional form of benefit that includes a prohibited payment with an annuity
starting date on or after the applicable Section 436 measurement date, and the
Plan shall not make any payment for the purchase of an irrevocable commitment
from an insurer to pay benefits or any other payment or transfer that is a
prohibited payment, unless the present value of the portion of the benefit that
is being paid in a prohibited payment does not exceed the lesser of:

 
 
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(a)
50 percent of the present value of the benefit payable in the optional form of
benefit that includes the prohibited payment;

 
or
 

 
(b)
100 percent of the PBGC maximum benefit guarantee amount (as defined in Section
1.436-1(d)(3)(iii)(C) of the Treasury Regulations).

 
The limitation set forth in this Section 4.9(A)(1) does not apply to any payment
of a benefit which under Section 411(a)(11) of the Internal Revenue Code may be
immediately distributed without the consent of the Participant. If an optional
form of benefit that is otherwise available under the terms of the Plan is not
available to a Participant or Beneficiary as of the annuity starting date
because of the application of the requirements of this Section 4.9(A)(1), the
Participant or Beneficiary is permitted to elect to bifurcate the benefit into
unrestricted and restricted portions (as described in Section
1.436-1(d)(3)(iii)(D) of the Treasury Regulations). The Participant or
Beneficiary may also elect any other optional form of benefit otherwise
available under the Plan at that annuity starting date that would satisfy the 50
percent/PBGC maximum benefit guarantee amount limitation described in this
Section 4.9(A)(1), or may elect to defer the benefit in accordance with any
general right to defer commencement of benefits under the Plan.
 

 
(2)
Plan Amendments Increasing Liability for Benefits: No amendment to the Plan that
has the effect of increasing liabilities of the Plan by reason of increases in
benefits, establishment of new benefits, changing the rate of benefit accrual,
or changing the rate at which benefits become nonforfeitable shall take effect
in a Plan Year if the adjusted funding target attainment percentage for the Plan
Year is:

 

 
(a) 
Less than 80 percent;

 
or
 

 
(b)
80 percent or more, but would be less than 80 percent if the benefits
attributable to the amendment were taken into account in determining the
adjusted funding target attainment percentage.

 
The limitation set forth in this Section 4.9(A)(2) does not apply to any
amendment to the Plan that provides a benefit increase under a Plan formula that
is not based on compensation, provided that the rate of such increase does not
exceed the contemporaneous rate of increase in the average wages of Participants
covered by the amendment.
 
 
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(B)
Limitations Applicable If the Plan's Adjusted Funding Target Attainment
Percentage Is Less Than 60 Percent: Notwithstanding any other provisions of the
Plan, if the Plan's adjusted funding target attainment percentage for a Plan
Year is less than 60 percent (or would be less than 60 percent to the extent
described in Section 4.9(B)(2) below), then the limitations in this paragraph
(B) apply.

 

 
(1)
Single Sums, Other Accelerated Forms of Distribution, and Other Prohibited
Payments Not Permitted: A Participant or Beneficiary is not permitted to elect,
and the Plan shall not pay, a single sum payment or other optional form of
benefit that includes a prohibited payment with an annuity starting date on or
after the applicable Section 436 measurement date, and the Plan shall not make
any payment for the purchase of an irrevocable commitment from an insurer to pay
benefits or any other payment or transfer that is a prohibited payment. The
limitation set forth  in this Section 4.9(B)(1) does not apply to any payment of
a benefit which under Section 411(a)(11) of the Internal Revenue Code may be
immediately distributed without the consent of the Participant.

 

 
(2)
Shutdown Benefits and Other Unpredictable Contingent Event Benefits Not
Permitted to Be Paid: An unpredictable contingent event benefit with respect to
an unpredictable contingent event occurring during a Plan Year shall not be paid
if the adjusted funding target attainment percentage for the Plan Year is:

 
(a) 
Less than 60 percent;

 
or
 

 
(b)
60 percent or more, but would be less than 60 percent if the adjusted funding
target attainment percentage were redetermined applying an actuarial assumption
that the likelihood of occurrence of the unpredictable contingent event during
the Plan Year is 100 percent.

 

 
(3)
Benefit Accruals Frozen: Benefit accruals under the Plan shall cease as of the
applicable Section 436 measurement date. In addition, if the Plan is required to
cease benefit accruals under this Section 4.9(B)(3), then the Plan is not
permitted to be amended in a manner that would increase the liabilities of the
Plan by reason of an increase in benefits or establishment of new benefits.

 
 
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(C)
Limitations Applicable If the Plan Sponsor Is In Bankruptcy: Notwithstanding any
other provisions of the Plan, a Participant or Beneficiary is not permitted to
elect, and the Plan shall not pay, a single sum payment or other optional form
of benefit that includes a prohibited payment with an annuity starting date that
occurs during any period in which the Plan Sponsor is a debtor in a case under
title 11, United States Code, or similar Federal or State law, except for
payments made within a Plan Year with an annuity starting date that occurs on or
after the date on which the Plan's enrolled actuary certifies that the Plan's
adjusted funding target attainment percentage for that Plan Year is not less
than 100 percent. In addition, during such period in which the Plan Sponsor is a
debtor, the Plan shall not make any payment for the purchase of an irrevocable
commitment from an insurer to pay benefits or any other payment or transfer that
is a prohibited payment, except for payments that occur on a date within a Plan
Year that is on or after the date on which the Plan's enrolled actuary certifies
that the Plan's adjusted funding target attainment percentage for that Plan Year
is not less than 100 percent. The limitation set forth in this Section 4.9(C)
does not apply to any payment of a benefit which under Section 411(a)(11) of the
Internal Revenue Code may be immediately distributed without the consent of the
Participant.

 

 
(D) 
Provisions Applicable After Limitations Cease to Apply:

 

 
(1)
Resumption of Prohibited Payments: If a limitation on prohibited payments under
Section 4.9(A)(1), Section 4.9(B)(1) or Section 4.9(C) applied to the Plan as of
a Section 436 measurement date, but that limit no longer applies to the Plan as
of a later Section 436 measurement date, then that limitation does not apply to
benefits with annuity starting dates that are on or after that later Section 436
measurement date.

 
In addition, after the Section 436 measurement date on which the limitation on
prohibited payments under Section 4.9(A)(1) ceases to apply to the Plan, any
Participant or Beneficiary who had an annuity starting date within the period
during which that limitation applied to the Plan is permitted to make a new
election (within 90 days after the Section 436 measurement date on which the
limit ceases to apply or, if later, 30 days after receiving notice of the right
to make such election) under which the form of benefit previously elected is
modified at a new annuity starting date to be changed to a single sum payment
for the remaining value of the Participant or Beneficiary's benefit under the
Plan, subject to the other rules in this section of the Plan and applicable
requirements of Section 401(a) of the Internal Revenue Code, including spousal
consent.
 
In addition, after the Section 436 measurement date on which the limitation on
prohibited payments under Section 4.9(B)(1) ceases to apply to the Plan, any
Participant or Beneficiary who had an annuity starting date within the period
during which that limitation applied to the Plan is permitted to make a new
election (within 90 days after the Section 436 measurement date on which the
limit ceases to apply or, if later, 30 days after receiving notice of the right
to make such election) under which the form of benefit previously elected is
modified at a new annuity starting date to be changed to a single sum payment
for the remaining value of the Participant's or Beneficiary's benefit under the
Plan, subject to the other rules in this section of the Plan (including Section
4.9(A)(1)) and applicable requirements of Section 401(a) of the Internal Revenue
Code, including spousal consent.
 
 
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(2)
Resumption of Benefit Accruals: If a limitation on benefit accruals under
Section 4.9(B)(3) applied to the Plan as of a Section 436 measurement date, but
that limitation no longer applies to the Plan as of a later Section 436
measurement date, then benefit accruals shall resume prospectively and that
limitation does not apply to benefit accruals that are based on service on or
after that later Section 436 measurement date, except as otherwise provided
under the Plan. The Plan shall comply with the rules relating to partial years
of participation and the prohibition on double proration under Department of
Labor regulation 29 CFR Section 2530.204-2(c) and (d).

 
In addition, benefit accruals that were not permitted to accrue because of the
application of Section 4.9(B)(3) shall be restored when that limitation ceases
to apply if the continuous period of the limitation was 12 months or less and
the Plan's enrolled actuary certifies that the adjusted funding target
attainment percentage for the Plan Year would not be less than 60 percent taking
into account any restored benefit accruals for the prior Plan Year.
 

 
(3)
Shutdown and Other Unpredictable Contingent Event Benefits: If an unpredictable
contingent event benefit with respect to an unpredictable contingent event that
occurs during the Plan Year is not permitted to be paid after the occurrence of
the event because of the limitation of Section 4.9(B)(2), but is permitted to be
paid later in the same Plan Year (as a result of additional contributions or
pursuant to the enrolled actuary's certification of the adjusted funding target
attainment percentage for the Plan Year that meets the requirements of Section
1.436-1(g)(5)(ii)(B) of the Treasury Regulations), then that unpredictable
contingent event benefit shall be paid, retroactive to the period that benefit
would have been payable under the terms of the Plan (determined without regard
to Section 4.9(B)(2)). If the unpredictable contingent event benefit does not
become payable during the Plan Year in accordance with the preceding sentence,
then the Plan is treated as if it does not provide for that benefit.

 

 
(4)
Treatment of Plan Amendments That Do Not Take Effect: If a Plan amendment does
not take effect as of the effective date of the amendment because of the
limitation of Section 4.9(A)(2) or Section 4.9(B)(3), but is permitted to take
effect later in the same Plan Year (as a result of additional contributions or
pursuant to the enrolled actuary's certification of the adjusted funding target
attainment percentage for the Plan Year that meets the requirements of Section
1.436-1(g)(5)(ii)(C) of the Treasury Regulations), then the Plan amendment must
automatically take effect as of the first day of the Plan Year (or, if later,
the original effective date of the amendment). If the Plan amendment cannot take
effect during the same Plan Year, then it shall be treated as if it were never
adopted, unless the Plan amendment provides otherwise.

 
 
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(E)
Notice Requirement: See Section 101(j) of ERISA for rules requiring the Plan
Administrator of a single employer defined benefit pension Plan to provide a
written notice to Participants and Beneficiaries within 30 days after certain
specified dates if the Plan has become subject to a limitation described in
Section 4.9(A)(1), Section 4.9(B) or Section 4.9(C).

 

 
(F)
Methods to Avoid or Terminate Benefit Limitations: See Section 436(b)(2),
(c)(2), (e)(2), and (f) of the Internal Revenue Code and Section 1.436-1(f) of
the Treasury Regulations for rules relating to employer contributions and other
methods to avoid or terminate the application of the limitations set forth in
Sections 4.9(A), (B) and (C) for a Plan Year. In general, the methods a Plan
Sponsor may use to avoid or terminate one or more of the benefit limitations
under Sections 4.9(A), (B) and (C) for a Plan Year include employer
contributions and elections to increase the amount of Plan assets which are
taken into account in determining the adjusted funding target attainment
percentage, making an employer contribution that is specifically designated as a
current year contribution that is made to avoid or terminate application of
certain of the benefit limitations, or providing security to the Plan.

 

 
(G) 
Special Rules:

 

 
(1) 
Rules of Operation for Periods Prior to and After Certification of Plan's
Adjusted Funding Target Attainment Percentage:

 

 
(a)
In General. Section 436(h) of the Internal Revenue Code and Section 1.436-1(h)
of the Treasury Regulations set forth a series of presumptions that apply (i)
before the Plan's enrolled actuary issues a certification of the Plan's adjusted
funding target attainment percentage for the Plan Year and (ii) if the Plan's
enrolled actuary does not issue a certification of the Plan's adjusted funding
target attainment percentage for the Plan Year before the first day of the 10th
month of the Plan Year (or if the Plan's enrolled actuary issues a range
certification for the Plan Year pursuant to Section 1.436-1(h)(4)(ii) of the
Treasury Regulations but does not issue a certification of the specific adjusted
funding target attainment percentage for the Plan by the last day of the Plan
Year). For any period during which a presumption under Section 436(h) of the
Internal Revenue Code and Section 1.436-1(h) of the Treasury Regulations applies
to the Plan, the limitations under Sections 4.9(A), (B) and (C) are applied to
the Plan as if the adjusted funding target attainment percentage for the Plan
Year were the presumed adjusted funding target attainment percentage determined
under the rules of Section 436(h) of the Internal Revenue Code and Section
1.436-1(h)(1), (2), or (3) of the Treasury Regulations. These presumptions are
set forth in Section 4.9(G)(1)(b), (c) and (d).

 
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(b)
Presumption of Continued Underfunding Beginning First Day of Plan Year. If a
limitation under Section 4.9(A), (B) or (C) applied to the Plan on the last day
of the preceding Plan Year, then, commencing on the first day of the current
Plan Year and continuing until the Plan's enrolled actuary issues a
certification of the adjusted funding target attainment percentage for the Plan
for the current Plan Year, or, if earlier, the date Section 4.9(G)(1)(c) or
Section 4.9(G)(1)(d) applies to the Plan:

 

 
(i)
The adjusted funding target attainment percentage of the Plan for the current
Plan Year is presumed to be the adjusted funding target attainment percentage in
effect on the last day of the preceding Plan Year; and

 

 
(ii)
The first day of the current Plan Year is a Section 436 measurement date.

 

 
(c) 
Presumption of Underfunding Beginning First Day of 4th Month.

 
If the Plan's enrolled actuary has not issued a certification of the adjusted
funding target attainment percentage for the Plan Year before the first day of
the 4th month of the Plan Year and the Plan's adjusted funding target attainment
percentage for the preceding Plan Year was either at least 60 percent but less
than 70 percent or at least 80 percent but less than 90 percent, or is described
in Section 1.436-1(h)(2)(ii) of the Treasury Regulations, then, commencing on
the first day of the 4th month of the current Plan Year and continuing until the
Plan's enrolled actuary issues a certification of the adjusted funding target
attainment percentage for the Plan for the current Plan Year, or, if earlier,
the date Section 4.9(G)(1)(d) applies to the Plan:
 

 
(i)
The adjusted funding target attainment percentage of the Plan for the current
Plan Year is presumed to be the Plan's adjusted funding target attainment
percentage for the preceding Plan Year reduced by 10 percentage points; and

 
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(ii) 
The first day of the 4th month of the current Plan Year is aSection 436
measurement date.

 
(d)
Presumption of Underfunding On and After First Day of 10th Month. If the Plan's
enrolled actuary has not issued a certification of the adjusted funding target
attainment percentage for the Plan Year before the first day of the 10th month
of the Plan Year (or if the Plan's enrolled actuary has issued a range
certification for the Plan Year pursuant to Section 1.436-1(h)(4)(ii) of the
Treasury Regulations but has not issued a certification of the specific adjusted
funding target attainment percentage for the Plan by the last day of the Plan
Year), then, commencing on the first day of the 10th month of the current Plan
Year and continuing through the end of the Plan Year:

 

 
(i) 
The adjusted funding target attainment percentage of thePlan for the current
Plan Year is presumed to be less than 60 percent; and

 

 
(ii)
The first day of the 10th month of the current Plan Year is a section 436
measurement date.

 

 
(2) 
New Plans, Plan Termination, Certain Frozen Plans, and Other Special Rules:

 

 
(a) 
First 5 Plan Years. The limitations in Section 4.9(A)(2), Section 4.9(B)(2), and
Section 4.9(B)(3) do not apply to a new plan for the first 5 plan years of the
plan, determined under the rules of Section 436(i) of the Internal Revenue Code
and Section 1.436-1(a)(3)(i) of the Treasury Regulations.

 

 
(b)
Plan Termination. The limitations on prohibited payments in Section 4.9(A)(1),
Section 4.9(B)(1), and Section 4.9(C) do not apply to prohibited payments that
are made to carry out the termination of the Plan in accordance with applicable
law. Any other limitations under this section of the Plan do not cease to apply
as a result of termination of the Plan.

 

 
(c)
Exception to Limitations on Prohibited Payments Under   Certain Frozen Plans.
The limitations on prohibited payments set forth in Sections 4.9(A)(1),
4.9(B)(1) and 4.9(C) do not apply for a Plan Year if the terms of the Plan, as
in effect for the period beginning on September 1, 2005, and continuing through
the end of the Plan Year, provide for no benefit accruals with respect to any
participants. This Section 4.9(G)(2)(c) shall cease to apply as of the date any
benefits accrue under the Plan or the date on which a Plan amendment that
increases benefits takes effect.

 
 
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(d)
Special Rules Relating to Unpredictable Contingent Event Benefits and Plan
Amendments Increasing Benefit Liability. During any period in which none of the
presumptions under Section 4.9(G)(1) apply to the Plan and the Plan's enrolled
actuary has not yet issued a certification of the Plan's adjusted funding target
attainment percentage for the Plan Year, the limitations under Section 4.9(A)(2)
and Section 4.9(B)(2) shall be based on the inclusive presumed adjusted funding
target attainment percentage for the Plan, calculated in accordance with the
rules of Section 1.436- 1(g)(2)(iii) of the Treasury Regulations.

 

 
(3)
Special Rules Under PRA 2010:

 

 
(a)
Payments Under Social Security Leveling Options. For purposes of determining
whether the limitations under Section 4.9(A)(1) or Section 4.9(B)(1) apply to
payments under a social security leveling option, within the meaning of Section
436(j)(3)(C)(i) of the Internal Revenue Code, the adjusted funding target
attainment percentage for a Plan Year shall be determined in accordance with the
“Special Rule for Certain Years” under Section 436(j)(3) of the Internal Revenue
Code and any Treasury Regulations or other published guidance thereunder issued
by the Internal Revenue Service.

 

 
(b)
Limitation on Benefit Accruals. For purposes of determining whether the accrual
limitation under Section 4.9(B)(3) applies to the Plan, the adjusted funding
target attainment percentage for a Plan Year shall be determined in accordance
with the “Special Rule for Certain Years” under Section 436(j)(3) of the
Internal Revenue Code (except as provided under Section 203(b) of the
Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act
of 2010, if applicable).

 

 
(4)
Interpretation of Provisions: The limitations imposed by this section of the
Plan shall be interpreted and administered in accordance with Section 436 of the
Internal Revenue Code and Section 1.436-1 of the Treasury Regulations.

 
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(H)
Definitions: The definitions in the following Treasury Regulations apply for
purposes of Sections 4.9(A) through (G): Section 1.436-1(j)(1) defining adjusted
funding target attainment percentage; Section 1.436-1(j)(2) defining annuity
starting date; Section 1.436-1(j)(6) defining prohibited payment; Section 1.436-
1(j)(8) defining Section 436 measurement date; and section 1.436-1(j)(9)
defining an unpredictable contingent event and an unpredictable contingent event
benefit.

 

 
(I) 
Effective Date: The rules in Sections 4.9(A) through (H) are effective for Plan
Years beginning after December 31, 2007.”

 
IN WITNESS WHEREOF, CAPITAL SOUTHWEST CORPORATION has caused this instrument to
be executed by its duly authorized officer on this 20th day of January, 2013.

  CAPITAL SOUTHWEST CORPORATION             By
/s/ Tracy L. Morris
            Title: Chief Operating Officer,             Chief Financial Officer,
Secretary and Treasurer  

 
 
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