Exhibit 10.1

 

Execution Version

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT (“Agreement”) made and entered into as of the 16th day of
October, 2018 by and between LSI Industries Inc. (the “Company”), with principal
offices located at 10000 Alliance Road, Cincinnati, Ohio 45242 and James A.
Clark (the “Executive”) with a residence address on the records of the Company.

 

WITNESSETH:

 

WHEREAS, the Company and its affiliates and subsidiaries are engaged in the
business of designing, engineering, manufacturing and marketing a broad array of
solutions, products and technologies for lighting and graphics applications (the
“Business”);

 

WHEREAS, the Company and the Executive desire to enter into this Agreement,
which, effective as of the date hereof, shall govern the terms of the
Executive's employment.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
below and other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company and the Executive hereby agree, as follows:

 

1.     Employment. The Company hereby employs the Executive as the Chief
Executive Officer and President of the Company with the duties and
responsibilities set forth in Section 4.

 

2.     Term; Start Date. The term of Executive’s employment with the Company
shall commence on November 1, 2018 (the “Effective Date”) and shall end on that
date on which such employment shall be terminated under the provisions of
Section 8 hereof. Such term, regardless of the length thereof, shall be referred
to herein as the “Employment Term”.

 

3.     Work Location. The Executive’s principal place of employment shall be the
Company’s current principal office at 10000 Alliance Road, Cincinnati, Ohio
45242 (the “Principal Office”) and Executive shall perform his duties at the
Principal Office.

 

4.     Duties and Responsibilities.

 

(a)     Description. The Executive shall be employed by the Company in such
capacity or capacities, and shall perform such duties and exercise such powers,
as are (i) commensurate with a Chief Executive Officer and President of a
business of comparable size and type and (ii) consistent with his title, subject
to such reasonable directions and restrictions as the Board of Directors of the
Company may from time to time designate. The Executive shall report to the Board
of Directors of the Company.

 

(b)     Time and Effort. Subject to Section 4(a) above, the Executive shall:

 

(i)     from the Principal Office, devote his full working time and attention to
the business and affairs of the Company, its subsidiaries and other affiliates
and shall not, without the prior consent in writing of the Company, directly or
indirectly, undertake any other business or occupation or become an employee,
agent or director (or a person acting in a capacity similar to that of a
director) of, or a consultant to, any other company, trust, firm, individual or
person; provided, however, that nothing herein shall be construed so as to
prevent the Executive from making investments of a strictly passive nature, so
long as the undertaking forming the subject matter of any such investment is not
otherwise in conflict with the Executive’s contractual or other legal
obligations to the Company;

 

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(ii)     perform those duties that may be assigned by the Board of Directors of
the Company to the Executive diligently and faithfully to the best of the
Executive’s abilities and in the best interests of the Company and its
affiliates; and

 

(iii)     use his best efforts to promote the interests of the Company and its
affiliates.

 

5.     Compensation.

 

(a)     Base Salary. The Company shall pay the Executive a base salary at the
annual rate of Five Hundred Fifty Thousand Dollars ($550,000) (the “Base
Salary”), payable in accordance with the Company’s payroll procedures, subject
to all withholdings provided for in Section 10. The Company shall review the
Base Salary annually for an increase based on market trends, industry
compensation information, internal considerations and Company and Executive’s
performance, which shall be made subject to and at the sole and absolute
discretion of the Board of Directors or, if the Board shall so elect, the
Compensation Committee.

 

(b)     Bonus. The Executive shall have the opportunity to receive an annual
bonus through the participation in the Company’s incentive compensation plans
for executive officers, as adopted from time to time by the Board of Directors
or the Compensation Committee, as the case may be, including, without
limitation, the LSI Industries Inc. Short Term Incentive Plan (STIP) for Named
Executive Officers—FY 2019 (“2019 STIP”) and successor plans at the “B6 Chief
Executive Officer Level.” Executive’s opportunity to receive a bonus pursuant to
the 2019 STIP shall be as follows: (i) at the threshold level of performance,
Executive’s fiscal year 2019 bonus opportunity shall be 40% of base salary
(representing 50% of target bonus opportunity); (ii) at the target level of
performance, the bonus opportunity shall be 80% of base salary (representing
100% of target bonus opportunity); and (iii) at the maximum level of
performance, Executive’s fiscal year 2019 bonus opportunity shall be 160% of
base salary (representing 200% of target bonus opportunity). The 2019 STIP plan
document shall govern all terms and conditions associated with the 2019 STIP. A
summary table for the 2019 STIP is attached hereto as Exhibit A and incorporated
herein by reference. For purposes of Executive’s participation in the 2019 STIP,
notwithstanding the foregoing, to the extent that Executive’s 2019 STIP award as
determined in accordance with the terms and conditions of the 2019 STIP exceeds
the amount of the Signing Bonus (as defined in Section 7(b)), the Company shall
pay Executive the amount equal to the difference between such 2019 STIP award
and the Signing Bonus. Such payment shall be made at the same time all other
2019 STIP awards are paid. The Board of Directors, or Compensation Committee, as
the case may be, shall have the right to adjust the threshold, target, maximum
and other payouts and percentages in bonus plans that are successor plans to the
2019 STIP.

 

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(c)     Stock. Subject to the approval of the Compensation Committee of the
Board of Directors and not earlier than August 1, 2020, the Executive shall have
the opportunity to receive share-based awards to be issued under the Company’s
Amended and Restated 2012 Stock Incentive Plan (“2012 Stock Incentive Plan”),
including, without limitation, stock options, restricted shares, and restricted
share units pursuant to and in accordance with the long term incentive plans of
the Company as adopted from time to time by the Board of Directors or the
Compensation Committee, as the case may be. Beginning with grants on or after
August 1, 2020 pursuant to such long term incentive plans, subject to the
approval of the Compensation Committee, Executive shall be entitled to receive
share-based awards on an annual basis in an amount currently anticipated to be
approximately his then current Base Salary. In addition to the foregoing,
subject to the approval of the Compensation Committee, the Company shall grant
to Executive on the Effective Date the Option (defined below) which shall be
intended to qualify as an “inducement grant” under NASDAQ Listing Rule
5635(c)(4) and which shall not be granted pursuant to the Company’s 2012 Stock
Incentive Plan. “Option” means a non-statutory stock option with a term of ten
(10) years to purchase 500,000 shares of the Company’s common stock of which:
(A) fifty percent (50%) shall vest in full on the third anniversary of the date
of grant; (B) twenty-five percent (25%) shall vest upon (I) satisfaction of the
condition that Executive shall be employed by the Company as the Company’s Chief
Executive Officer on the third anniversary of the Effective Date (the “CEO
Employment Condition”) and (II) the closing price per share of the Company’s
common stock on the NASDAQ Global Select Market at any time prior to the
expiration of the ten (10) year term of the Option shall be equal to or greater
than $9.50 per share; and (C) twenty-five percent (25%) shall vest upon
(I) satisfaction of the CEO Employment Condition, and (II) the closing price per
share of the Company’s common stock on the NASDAQ Global Select Market at any
time prior to the expiration of the ten (10) year term of the Option shall be
equal to or greater than $15.00 per share. The per share exercise price of the
Option shall be the fair market value of the Company’s common stock (which shall
be the closing price per share on the NASDAQ Global Select Market) as of the
date of the grant of the Option. For the avoidance of doubt, Sections 9(a)(iv)
and 9(a)(v) of this Agreement shall not apply to the Option.

 

6.     Other Benefits. The Executive shall also be entitled to the following:

 

(a)     Employee Benefit Plans. The Executive shall also be entitled to such
benefits, and to participate in such benefit plans, as may be in effect from
time to time and generally available to senior executive officers of the
Company. Your participation will be subject to the terms of the applicable plan
documents and generally applicable Company policies as the same may be in effect
from time to time, and any other restrictions or limitations imposed by law.

 

(b)     Director & Officers Insurance. The Company shall maintain director’s and
officer’s liability insurance policies consistent with Company policies and
procedures in effect from time to time and shall cause Executive to be covered
under such policies during the Employment Term. Upon termination of the
Executive’s employment for any reason, the Company will cause such policies to
cover Executive in respect of acts and omissions during the period of employment
as if the Executive was still an officer, director and/or employee, as
applicable.

 

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(c)     Paid Time Off. During the Employment Term, the Executive shall be
entitled to four weeks per year of Paid Time Off (PTO) in accordance with the
Company’s PTO policy. The Executive’s PTO will be scheduled at such times as
will least interfere with the business of the Company.

 

7.     Reimbursement of Expenses.

 

(a)     General. The Company shall reimburse the Executive for such expenses as
may be reasonably incurred by the Executive in furtherance of the Executive’s
performance of his duties hereunder, subject to and in accordance with the
Company policies concerning reimbursement of such expenses and provided, in any
event, that the Executive timely furnishes to the Company a complete and
accurate accounting of all such, expenses.

 

(b)     Relocation Expense; Temporary Housing Expense; Signing Bonus. The
Company will pay a lump sum of $180,000 (the “Relocation Package”) to Executive
for purposes of reimbursing the Executive for out-of-pocket expenses incurred by
him in connection with a relocation to the Cincinnati area, including, without
limitation, expenses for temporary housing. In the event that the reimbursement
to the Executive under this Section 7(b) is taxable to him as income under
applicable federal and/or state law, the Company shall report such income to
taxing authorities as required by applicable law and will not "gross-up" such
payments and the Executive shall be solely responsible for any such tax. The
Company also shall pay Executive a lump sum of $110,000 (the “Signing Bonus”)
not later than September 15, 2019. In the event that the Executive terminates
his employment with the Company pursuant to Section 8(e) prior to the second
anniversary of the Effective Date, then Executive shall be responsible for
repaying the Company the Signing Bonus and Relocation Package on a prorated
basis pursuant to the period of time the Executive remained in employment not
later than thirty (30) days after such termination of employment.

 

8.     Termination of Employment. The Executive’s employment hereunder shall or
may, as the case may be, be terminated under the following circumstances:

 

(a)     Death. The Executive’s employment hereunder shall terminate upon his
death.

 

(b)     Total Disability. The Company may terminate the Executive’s employment
hereunder upon the Executive becoming “Totally Disabled.” For purposes of this
Agreement, the Executive shall be deemed “Totally Disabled” if, as determined by
the Company, he is deemed “totally disabled” (or other words to such effect)
under any long-term disability plan maintained by the Company

 

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(c)     Termination by the Company for Cause. The Company may immediately
terminate the Executive’s employment hereunder for Cause at any time by notice
given to the Executive. For purposes of this Agreement, the term “Cause” shall
mean any of the following: (i) indictment for, conviction of, or plea of guilty
or no contest by the Executive to a felony, or of any criminal act; (ii) the
unreasonable deliberate and material failure or refusal by the Executive to
perform, consistent with the terms of this Agreement, his employment duties
hereunder (other than as a result of PTO, sickness, disability, illness or
injury), and the failure to rectify the same within thirty (30) days after the
Company shall have given notice to the Executive identifying such failure or
refusal and demanding that it be rectified; (iii) the Executive’s commission of
any act of fraud, embezzlement, dishonesty or other willful misconduct that has
caused, or would reasonably be expected to cause, material injury or economic
harm to the Company; (iv) an act of gross negligence on the part of the
Executive that has caused, or would reasonably be expected to cause, material
injury or economic harm to the Company; (v) a deliberate or material violation
of a written material Company policy; or (vi) a material breach of this
Agreement (or any successor thereto or amendment thereof) which (and only if the
same shall be curable) Executive fails to cure within thirty (30) days after the
Company shall have given notice to the Executive identifying such breach and
demanding that it be cured.

 

(d)     Termination by the Executive for Good Reason. The Executive may
terminate his employment hereunder for Good Reason. For purposes of this
Agreement, the term “Good Reason” shall mean the occurrence of any of the
following: (i) a material breach by the Company of this Agreement; (ii) a
material reduction in the Executive’s authority, duties and responsibilities
hereunder; (iii) the Board of Directors requires the Executive to permanently
relocate from the greater Cincinnati area as a condition of his employment. The
parties acknowledge that Good Reason shall include any circumstance under which
Executive ceases to be the chief executive officer of the Company following the
occurrence of a Change of Control. The Executive may not terminate his
employment for Good Reason unless he has provided written notice to the Company
of the existence of the circumstances providing justification for termination
for Good Reason within ten (10) days of the Executive becoming aware of the
facts giving rise to Good Reason and the Company has thirty (30) days from the
date on which the Executive provides notices to cure such circumstances. If the
Executive does not terminate his employment within 60 days after the first
occurrence of the circumstances giving rise to Good Reason, then the Executive
will be deemed to have waived his right to terminate for Good Reason with
respect to such circumstances.

 

(e)     Voluntary Termination. Either the Company or the Executive may terminate
the Executive’s employment under this Agreement at any time for any reason or no
reason upon such prior written notice to the other party as is provided for
below in Section 8(f) (a termination effected by the Company under this
provision being referred to as a termination “Without Cause”). Accordingly, each
of the Company and the Executive acknowledges that Executive’s employment with
the Company is on a so-called “at-will” basis, and that no minimum period of
employment is required hereunder or otherwise. Executive shall give the Company
at least sixty days’ prior written notice in the event of a termination by him
under this Section 8(e). The Company shall not be obligated to give the
Executive any prior written notice in connection with a termination by it under
this Section 8(e), but may do so in its sole and absolute discretion.

 

(f)     Notice of Termination. Any termination of employment by the Company or
the Executive under this Agreement shall be communicated by Notice of
Termination to the other party hereto. For purposes of this Agreement, a “Notice
of Termination” shall mean a notice in writing which shall indicate the specific
termination provision in this Agreement relied upon to terminate the Executive’s
employment and, except in the case of Section 8(e), setting forth, in reasonable
detail, the facts and circumstances claimed to provide a basis for termination
of the Executive’s employment under the provision so indicated.

 

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9.     Economic Consequences of a Termination of Employment.

 

(a)     Under all Circumstances. Under all circumstances upon termination of
employment the Executive or his estate, as the case may be, shall be entitled
to:

 

(i)     Any accrued but unpaid Base Salary for services rendered up to the date
on which the Executive’s employment shall actually have ceased (the “Termination
Date”);

 

(ii)     Payment for any accrued and unpaid PTO or similar pay to which he is
entitled under Company policies;

 

(iii)     Continue coverage under the applicable group health plan(s) maintained
by the Company in accordance with the Consolidated Omnibus Budget Reconciliation
Act of 1985;

 

(iv)     If the Executive’s employment shall be terminated by the Company
Without Cause, the Executive shall terminate his employment for Good Reason, and
in the event of the Executive’s death or Total Disability, all unvested stock
options (other than stock options that may vest upon the achievement of
performance conditions, including, without limitation, the price of the
Company’s common stock) shall immediately and without further action become
fully vested; and

 

(v)     Exercise his vested stock options (including those vested in accordance
with subparagraph (iv) above) as follows: (A) for stock options that may vest as
a result of Executive’s death or Total Disability, Executive (or Executive’s
estate, as the case may be) may exercise such stock options for a period of
twelve (12) months after such termination of employment (or the remaining term
of such stock option, if shorter); (B) for stock options that may vest as a
result of termination of Executive’s employment by the Company Without Cause or
termination of employment by Executive for Good Reason, Executive may exercise
such stock options for a period of ninety (90) days after such termination of
employment (or the remaining term of such stock option, if shorter); and (C) for
stock options that may vest based on the achievement of performance conditions,
including, without limitation, the price of the Company’s common stock, such
options shall be forfeited upon Executive’s termination of employment if such
performance conditions have not been achieved as of the date of Executive’s
termination of employment.

 

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(b)     Termination Without Cause or With Good Reason.

 

(i)     No Change of Control. In the event that (A) either the Company shall
terminate the employment of the Executive hereunder Without Cause or the
Executive shall terminate his employment hereunder for Good Reason or resigns
without any reason and (B) the related Termination Notice shall not have been
given during a Change of Control Period (as defined below), the Executive shall,
in addition to those rights provided under Section 9(a), be entitled to a
severance payment equal to twelve (12) months of the Executive’s then Base
Salary plus a cash bonus payment equal to the then applicable “target” amount as
that term may be defined or interpreted under the cash bonus plan in effect at
the time of Executive’s termination of employment (the “Severance Payment”).
Subject to the provisions contained in Sections 9(d) and 18, the Severance
Payment shall be made during the twelve (12) month period following the
Termination Date in substantially equal installments as and when regular payroll
payments are made by the Company. Notwithstanding the foregoing, in the event
the Executive is a “specified employee” as provided under Section 18, Severance
Payments shall not commence or be made until first day of the seventh month
after his termination of employment (or at such other date so that such payment
is made in a manner that is either exempt from or compliant with the
requirements of Section 409A) and the first installment of any payment of salary
to which Executive is entitled hereunder shall be paid in a lump sum amount
representing seven months of Executive’s Base Salary. In addition, if the
Executive elects continued coverage under COBRA, Company shall pay Executive, on
a monthly basis, an additional cash payment that equals the COBRA premium, as
long as Executive remains eligible for COBRA coverage, for a period of twelve
(12) months. For the avoidance of doubt, the Executive shall not be entitled to
receive any payment under this Section 9(b)(i) if the Company terminates the
Executive’s employment for Cause.

 

(ii)     Change of Control. In the event that (A) either the Company shall
terminate the employment of the Executive hereunder Without Cause or the
Executive shall terminate his employment hereunder for Good Reason and (B) the
related Termination Notice shall have been given during a Change of Control
Period, the Executive shall, be entitled to a severance payment in accordance
with the Company’s Change In Control Policy effective October 3, 2011 (as such
policy may be amended from time to time ) (the “Change In Control Policy”).

 

(c)     Definitions. For purposes of this Agreement, the following terms shall
have the meanings assigned thereto below:

 

(i)     “Change of Control” shall have the same meaning ascribed thereto in the
Change In Control Policy; and

 

(ii)     “Change of Control Period” shall mean the period beginning on the date
on which a Change of Control occurs and ending on the one (1) year anniversary
of such date.

 

(d)     Release. Executive’s entitlement to any severance benefits under Section
9(b) shall be subject to Executive executing a release of claims in favor of the
Company, its affiliates and their respective officers and directors in a form
provided by the Company (the “Release”) and such Release becoming effective and
irrevocable within forty-five (45) days following the Executive’s separation
from service. The first payment shall include all amounts that otherwise would
have been due prior to the effective date of the Release under the terms of
Section 9(b) as though those amounts commenced immediately upon Executive’s
separation from service with any payments due thereafter shall be paid as
provided in Section 9(b). If any payment under Section 9(b) is deferred
compensation subject to Section 409A of the Code, and if such forty-five (45)
day period begins in one calendar year and ends in the next calendar year, the
payment or benefit shall not be made or commence before the second such calendar
year, even if the Release becomes irrevocable in the first such calendar year.
In other words, Executive is not permitted to influence the calendar year of
payment based on the timing of his signing of the Release.

 

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(e)     Specified Benefits. Except as specifically provided in this Section 9,
the Executive shall not be entitled to any compensation or other benefits in
connection with any termination of his employment.

 

10.     Withholding of Taxes. (a) If any amount, entitlement or benefit paid or
payable to Executive or provided for his benefit under this Agreement and under
any other agreement, plan or program of the Company or any of its affiliates
(such payments, entitlements and benefits referred to as a “Payment”) is subject
to the excise tax imposed under Section 4999 of the Code or any similar federal
or state law (an “Excise Tax”), then notwithstanding anything contained in this
Agreement to the contrary, to the extent that any or all Payments would be
subject to the imposition of an Excise Tax, the Payments shall be reduced (but
not below zero) if and to the extent that such reduction would result in
Executive retaining a larger amount, on an after-tax basis (taking into account
federal, state and local income taxes and the imposition of the Excise Tax),
than if Executive received all of the Payments (such reduced amount hereinafter
referred to as the “Limited Payment Amount”).  The reduction of the Payments due
hereunder, if applicable, shall be made by first reducing cash Payments and
then, to the extent necessary, reducing those Payments having the next highest
ratio of Parachute Value (as defined below) to actual present value of such
Payments as of the date of the change in control, as determined by the
Determination Firm (as defined in Section 10(b) below).  For purposes of this
Section 10, present value shall be determined in accordance with Section
280G(d)(4) of the Code.  For purposes of this Section 10, the “Parachute Value”
of a Payment means the present value as of the date of the change in control of
the portion of such Payment that constitutes a “parachute payment” under Section
280G(b)(2) of the Code, as determined by the Determination Firm for purposes of
determining whether and to what extent the Excise Tax will apply to such
Payment. For purposes of this Section 10, a “change in control” means a change
in the ownership or effective control of the Company or in the ownership of a
substantial portion of the assets of the Company, as determined in accordance
with Section 280G(b)(2) of the Code and the regulations promulgated thereunder.

 

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(b) All calculations under this Section 10 shall be made by a nationally
recognized accounting firm or compensation consulting firm designated by the
Company and reasonably acceptable to Executive (other than the accounting firm
that is regularly engaged by any party who has effectuated a change in control)
(the “Determination Firm”).  For purposes of determining whether and the extent
to which the Payments will be subject to the Excise Tax: (i) no portion of the
Payments the receipt or enjoyment of which Executive shall have waived at such
time and in such manner as not to constitute a “payment” within the meaning of
Section 280G(b) of the Code shall be taken into account; (ii) no portion of the
Payments shall be taken into account which, in the opinion of tax counsel (“Tax
Counsel”) reasonably acceptable to Executive and selected by the Determination
Firm, does not constitute a “parachute payment” within the meaning of Section
280G(b)(2) of the Code (including, without limitation, by reason of Section
280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of
such Payments shall be taken into account which, in the opinion of Tax Counsel,
constitutes reasonable compensation for services actually rendered, within the
meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as
set forth in Section 280G(b)(3) of the Code) that is allocable to such
reasonable compensation; and (iii) the value of any non-cash benefit or any
deferred payment or benefit included in the Payments shall be determined by the
Determination Firm in accordance with the principles of Sections 280G(d)(3) and
(4) of the Code. The Determination Firm shall provide its calculations, together
with detailed supporting documentation, both to the Company and Executive within
60 days after the change in control or the date of termination, whichever is
later (or such earlier time as is requested by the Company) and, with respect to
the Limited Payment Amount, shall deliver its opinion to Executive that he is
not required to report any Excise Tax on his federal income tax return with
respect to the Limited Payment Amount (collectively, the “Determination”).  The
Company shall pay all fees and expenses of the Determination Firm and Tax
Counsel.  Within 15 days after Executive’s receipt of the Determination,
Executive shall have the right to dispute the Determination (the
“Dispute”).  The existence of the Dispute shall not in any way affect the right
of Executive to receive the Payments in accordance with the Determination.  If
there is no Dispute, the Determination by the Determination Firm shall be final,
binding and conclusive upon the Company and Executive (except as provided in
subsection (c) below).

 

(c) If, after the Payments have been made to Executive, it is established that
the Payments made to, or provided for the benefit of, Executive exceed the
limitations provided in subsection (a) above (an “Excess Payment”) or are less
than such limitations (an “Underpayment”), as the case may be, then the
provisions of this subsection (c) shall apply.  If it is established, pursuant
to a final determination of a court or an Internal Revenue Service (“IRS”)
proceeding which has been finally and conclusively resolved, that an Excess
Payment has been made, Executive shall repay the Excess Payment to the Company
on demand.  In the event that it is determined (i) by the Determination Firm,
the Company (which shall include the position taken by the Company on its
federal income tax return) or the IRS, (ii) pursuant to a determination by a
court or (iii) upon a resolution to the satisfaction of Executive of a Dispute,
that an Underpayment has occurred, the Company shall pay an amount equal to the
Underpayment to Executive within 10 days of such determination or resolution
together with interest on such amount at the applicable federal short-term rate,
as defined under Code Section 1274(d) as in effect on the first date that such
amount should have been paid to Executive under this Agreement, from such date
until the date that such Underpayment is made to Executive.

 

(d) In the event that the provisions of Code Section 280G and 4999 or any
successor provisions are repealed without succession, this Section 10 shall be
of no further force or effect.

 

11.     Entire Agreement and Amendments. This Agreement shall constitute the
entire agreement between the parties and supersedes all existing agreements
between them, whether oral or written, with respect to the subject matter
hereof; provided, however, that the parties hereby acknowledge and agree that
nothing in this Agreement shall in any way limit the rights of the parties under
the Restrictive Covenant Agreement entered into by the parties hereto or any
other agreement or instrument containing non-competition, non-solicitation
and/or non-disclosure covenants applicable to Executive. Any waiver, alteration,
or modification of any of the provisions of this Agreement, or cancellation or
replacement of this Agreement shall be accomplished in writing and signed by the
respective parties.

 

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12.     Notices. All notices, requests, demands and other communications
provided for or permitted under this Agreement shall be in writing and shall be
either personally delivered (including delivery by express couriers such as
Federal Express) or sent by prepaid certified mail, return receipt requested,
addressed to the party to which notice is to be given at the address set forth
above for such party, or to such other address as such party may have fixed by
notice given in accordance with the terms hereof. Any notice sent as aforesaid
shall be deemed given and effective upon the earlier of (a) delivery to the
address for the receiving party provided for herein and (b) the date falling
three days after notice of attempted delivery has been left at the address to
which a notice to the receiving party is to be sent hereunder.

 

13.     Governing Law and Disputes.

 

(a)     This Agreement shall be construed in accordance with, and the rights of
the parties shall be governed by, the internal substantive laws of the State of
Ohio without regard to conflicts of laws principles.

 

(b)     Any dispute or controversy arising under, out of, in connection with, or
in relation to this Agreement or the Executive’s employment with the Company
shall be finally determined and settled by arbitration in Hamilton County, Ohio,
in accordance with the rules and procedures of the American Arbitration
Association and its National Rules for Resolution of Employment Disputes.  In
any arbitration proceeding, the arbitrator will apply the terms of this
Agreement as written, the Federal Arbitration Act, and other relevant federal
and state laws, including time limits on claims.

 

(c)     The rights and claims of the Executive covered by this section
specifically include, but are not limited to, all of the Executive’s rights or
claims arising out of or in any way related to the Executive’s employment with
Company, such as rights or claims arising under the Age Discrimination in
Employment Act, as amended, Title VII of the Civil Rights Act of 1964, as
amended (including amendments contained in the Civil Rights Act of 1991), the
Americans With Disabilities Act, 42 U.S.C. § 1981, the Fair Labor Standards Act,
the Executive Retirement Income Security Act, state anti-discrimination
statutes, other state or local laws regarding employment, common law theories
such as breach of express or implied contract, wrongful discharge, defamation,
and negligent or intentional infliction of emotional distress.  Excluded from
this section are all unemployment benefits claims, workers’ compensation claims,
claims for injunctive relief concerning the covenants in Sections 9(b) and 11 of
this Agreement, and claims not lawfully subject to arbitration, including
charges or complaints filed with an administrative agency (but not litigation
connected with any such charge or complaint). Any litigation connected with such
claims, charges or complaints shall be brought exclusively in federal or state
courts located in Hamilton County, Ohio.

 

14.     Severability. If any term or provision of this Agreement is declared
illegal or unenforceable by any court of competent jurisdiction and cannot be
modified to be enforceable, such term or provision shall immediately become null
and void, leaving the remainder of this Agreement in full force and effect.

 

15.     Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original and when taken together shall
constitute one agreement.

 

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16.     Assignment. The rights and obligations of the Executive under this
Agreement are personal to the Executive and are not assignable or delegable.
This Agreement may not be assigned by the Company except to an affiliate of the
Company, provided that such affiliate assumes the Company’s obligations under
this Agreement; provided, further, that if the Company merges or effects a
consolidation or share exchange with or into, or sells or otherwise transfers
substantially all its assets to, another business entity, the Company may
assign, its rights hereunder to that business entity without the consent of the
Executive, provided that it causes such business entity to assume the Company’s
obligations under this Agreement as a condition of such assignment. This
Agreement shall be binding upon the Company and any successors thereto.

 

17.     Waiver. No waiver of any party hereto of a breach of any provision of
this Agreement by any other party shall operate or be construed as a waiver of
any subsequent breach by such other party. The failure of any party hereto to
take any action by reason of such breach shall not deprive such party of the
right to take action at any time while such breach continues.

 

18.     Section 409A. Notwithstanding anything to the contrary set forth herein,
this Agreement shall be interpreted and administered in a manner so that any
amount or benefit payable hereunder shall be paid or provided in a manner that
is either exempt from or compliant with the requirements of Section 409A of the
Code (“Section 409A”) and applicable Internal Revenue Service guidance and
Treasury Regulations issued thereunder. For purposes of Section 409A,
Executive’s right to receive installment payments pursuant to this agreement
shall be treated as a right to receive a series of separate and distinct
payments. Nevertheless, the tax treatment of the benefits provided under the
Agreement is not warranted or guaranteed. In the event that the Executive is a
“specified employee” within the meaning of Section 409A, payments under
Section 9(b) of this Agreement shall not commence or be made until the first day
of the seventh month following the Termination Date, or shall be otherwise
modified, but only to the minimum extent necessary to avoid the imposition of
the additional twenty percent (20%) tax imposed under Section 409A; provided,
however, that any such modification shall preserve, to the maximum extent
possible in a Section 409A compliant manner, the original intent of the parties
to this Agreement. In addition, the parties hereby agree that it is their
intention that all payments or benefits provided under this Agreement are exempt
from or comply with Section 409A, and this Agreement shall be interpreted
accordingly. The Executive is advised to seek independent advice from his tax
advisor(s) with respect to the application of Section 409A to any payments or
benefits under this Agreement. Notwithstanding the foregoing, the Company does
not guarantee the tax treatment of any payments or benefits under this
Agreement, including without limitation under the Code or other federal, state
or local.

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by the
undersigned duly authorized persons as of the day and year first stated above.

 

 

LSI INDUSTRIES INC.

 

 

 

 

 

       

 

 

 

 

 

By:

/s/ Wilfred T. O’Gara

 

 

Name:

Wilfred T. O’Gara

 

 

Title: 

Chairman of the Board of Directors 

 

 

 

 

    /s/ James A. Clark         James A. Clark  

 

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