Exhibit 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") made and entered into as of the 1st day of
October, 2014 (the "Effective Date"), by and between LSI Industries Inc. (the
"Company"), with principal offices located at 10000 Alliance Road, Cincinnati,
Ohio 45242 and Dennis W. Wells (the "Executive") currently residing at 401 W.
Main St., Georgetown, Kentucky 40324.
WITNESSETH:
WHEREAS, the Company desires to engage the Executive as an executive officer and
the Executive desires to accept such engagement;
WHEREAS, the Company and the Executive desire to enter into this Agreement,
which, effective as of the date hereof (the "Effective Date"), 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
Operating Officer of the Company with the duties and responsibilities set forth
in Section 4.
2.            Term; Start Date.  The term of Executive's employment hereunder
shall commence on 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".  For purposes of this Agreement, the term "Contract Year"
shall refer to each twelve (12) month period beginning on the day and month of
the Effective Date and ending on the day immediately preceding the yearly
anniversary of the Effective Date.  Notwithstanding the above, the parties agree
that the Executive shall begin to actually render services hereunder, and
accordingly begin to earn his Base Salary (as defined below) hereunder, on
October 1, 2014.
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").
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 Operating Officer of a business of
comparable size and type and (ii) consistent with his title, subject to such
reasonable directions and restrictions as the Executive Chairman of the Company
may from time to time designate.  The Executive shall report to the Executive
Chairman of the Company.
(b)            Time and Effort.  Subject to Section 4(a) above, beginning on the
Effective Date, 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;
(ii)            perform those duties that may be assigned by the Executive
Chairman or 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.
(c)            Plan of Action and Transition.  Within six (6) months after the
Effective Date, the Executive shall present to the Company's Board of Directors
his "plan of action" for the Company, including a revised fiscal 2015 budget
based on such plan of action.  Upon the Board's acceptance of the Executive's
plan of action and revised 2015 budget, Robert J. Ready shall resign as
Executive Chairman, vacate his office and continue as the Chairman of the Board
of the Company.  Simultaneously, the Board will elect the Executive as the Chief
Executive Officer of the Company (replacing the title and office of Chief
Operating Officer) and thereafter the Executive shall report to the Board of
Directors.
As part of the Executive's plan of action, the Executive shall give early
priority to (i) developing a new compensation plan for the executive officers of
the Company and (ii) finding a Chief Technology Officer (CTO) and/or a qualified
replacement for Jim Sferra, in each case acceptable to the Board.
(d)            Non-Disclosure Agreement.  Nothing in this Agreement is intended
to impair or be in derogation of the Executive's obligations under that certain
Non-Competition, Proprietary Information and Inventions Agreement, executed by
the Executive in connection with his employment with the Company (the
"Non-Disclosure Agreement").
5.            Compensation.
(a)            Base Salary.  During the time that the Executive serves as the
Chief Operating Officer of the Company, the Company shall pay the Executive a
base salary at the annual rate of Three Hundred Fifty Thousand Dollars
($350,000) (the "Base Salary"), payable in accordance with the Company's payroll
procedures, subject to all withholdings provided for in Section 10.  During the
time that the Executive serves as the Chief Executive Officer of the Company,
the Company shall pay the Executive a Base Salary at the annual rate of Five
Hundred Thousand Dollars ($500,000).  The Company shall review the Base Salary
annually for an increase for the following Contract Year 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 thereof.
(b)            Bonus.  The Executive shall have the opportunity to receive an
annual bonus of up to 50% to 100% of his Base Salary ("Target Bonus") as
determined by the Board.
(c)            Stock.  Subject to the approval of the Compensation Committee of
the Board of Directors as provided in Section  5(c)(iii), the Executive will be
granted the following:
(i)            Non-qualified options to purchase one hundred thousand (100,000)
shares of the Company's common stock under the Company's Amended and Restated
2012 Stock Incentive Plan as of August 21, 2013 (the "Option Plan") at a
per-share exercise price equal to the fair market value of the Company's common
stock on the Effective Date, with a term of ten (10) years from the date of
grant and with 25% of such options vesting on each anniversary date of the
grant.
(ii)            Upon the Executive's election as Chief Executive Officer,
non-qualified options to purchase one hundred thousand (100,000) shares of the
Company's common stock under the Option Plan at a per-share exercise price equal
to the fair market value of the Company's common stock on the date thereof, with
a term of ten (10) years from the date of grant and vesting as set forth in
subparagraph (i) above.
(iii)            Except as otherwise provided herein, all such options are
subject to the terms, conditions and restrictions set forth in the Option Plan. 
The stock options granted hereby shall be set forth in Award Agreements issued
under the terms of the Option Plan and confirmed by the Compensation Committee
as soon as possible after the Effective Date.
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 (and subject in any event to the participation standards and other terms
and conditions of any such benefits or plans).
(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.
(c)            Paid Time Off.  During the Employment Term, the Executive shall
be entitled to 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 Expenses.  The Company will reimburse the Executive,
for out-of-pocket expenses, of the types described below, incurred by him in
connection with a relocation to the Cincinnati area, provided that the Executive
timely furnishes to the Company a complete and accurate accounting of all such
expenses.  The out-of-pocket expenses which are reimbursable under this
Section 7(b) are: (A) reasonable legal fees and real estate commissions incurred
in connection with the sale of Executive's current residence; (B) reasonable
expenses incurred in connection with the transportation of personal property to
Cincinnati; and (C) reasonable legal fees, closings costs and other reasonable
expenses associated with the purchase of a residence in Cincinnati.  In the
event that the reimbursements to the Executive under this Section 7(b) are
taxable to him as income under applicable federal and/or state law, the Company
will not "gross-up" such payments and the Executive shall be solely responsible
for any such tax.
(c)            Temporary Housing and Travel.  The Company will reimburse
Executive for his reasonable out-of-pocket expenses associated with travel
between Cincinnati and Georgetown, Kentucky and temporary housing costs in
Cincinnati for up to six (6) months after the Effective Date (until Executive
relocates to Cincinnati).
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, (i) he is deemed "totally disabled" (or other
words to such effect) under any long-term disability plan maintained by the
Company or (ii) he is unable, by reason of physical or mental disability, to
perform, in all material respects the essential duties and responsibilities
under this Agreement with reasonable accommodations.  If requested by the
Company, and at its expense, the Executive shall submit to Executive's physician
to determine whether the Executive is Totally Disabled.  If the Company is not
satisfied with the diagnoses of the Executive's physician, the Company may
request, at its expense, an examination by a physician selected by the Company
in connection with the Company's attempts to determine whether the Executive is
Totally Disabled.  If the diagnosis of the Executive's physician and the
Company's physician are not in agreement, the Company may deliver written notice
to each of the physicians requesting that the physicians select a third
physician to examine the Executive and such third physician's diagnosis shall be
binding upon the Executive and the Company.  If the Executive's physician and
the Company's physician are unable to agree upon a third physician within thirty
(30) days after the Company delivers notice, the Company may initiate
arbitration through the AAA and the appointed arbitrator shall select a third
physician.
(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
immediately terminate his employment hereunder for Good Reason at any time by
notice given to the Company which notice shall be provided within ten (10) days
of Executive becoming aware of the facts giving rise to Good Reason.  For
purposes of this Agreement, the term "Good Reason" shall mean the occurrence of
any of the following and the failure of the Company to rectify the same within
thirty (30) days after the Executive shall have given written notice to the
Company which identifies the action complained of and demands that it be
rectified: (i) a material breach by the Company of this Agreement; (ii) a
material reduction in the Executive's duties and responsibilities hereunder;
(iii) a reduction in the Executive's Base Salary or Target Bonus specified in
Section 5(b) (other than any such reduction which is applicable
(proportionately) to all senior level executives of the Company); (iv) the
Executive involuntarily ceases to be the Company's Chief Operating Officer or
Chief Executive Officer (as applicable) or (v) 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.
(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, if any,
as is provided for below (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 (60) 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 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.
9.            Economic Consequences of a Termination of Employment.
(a)            Under all Circumstances.  Under all circumstances, upon
termination, 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)            Any medical, dental, life insurance or similar "welfare"
benefits to which the Executive may be entitled upon termination pursuant to the
plans, policies and arrangements referred to in Section 6 hereof, which shall be
paid in accordance with the terms of such plans, policies and arrangements;
(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 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) for a period of twelve (12) months (or
the remaining term of any such stock option, if shorter) in accordance with the
terms of the Option Plan.
(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 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
thirty-six (36) months of the Executive's then Base Salary, which payment shall
be made during the thirty-six (36) month period following the Termination Date
in substantially equal installments as and when regular payroll payments are
made by the Company.  In such circumstances, during the thirty-six (36) month
following the Termination Date, the Executive shall also be entitled to medical,
dental, life insurance or similar "welfare" benefits substantially similar in
scope and cost to Executive as such benefits available to Executive immediately
prior to Termination; provided that such benefits shall be discontinued to the
extent that Executive obtains employment providing comparable benefits during
such thirty-six (36) month period.  For purposes of the proviso in the
immediately preceding sentence, if Executive becomes employed by a new employer,
for Executive's health and welfare benefits to be determined to be "comparable,"
the new employer must maintain a major medical plan that does not limit,
restrict or exempt Executive or Executive's dependents with respect to any
pre-existing conditions which were covered under the Company's medical plan
prior to Executive's termination of employment.  Executive's right to
continuation coverage under the Consolidated Omnibus Budget Reconciliation Act
of 1985  ("COBRA") shall be provided at the earlier of the end of the thirty-six
(36) month period or the discontinuance of coverage because the Executive
obtains employment providing comparable benefits.
(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").  In
such circumstances, during the twenty-four (24) month period following
termination, the Executive shall also be entitled to medical, dental, life
insurance or similar "welfare" benefits substantially similar in scope and cost
to Executive as such benefits available to Executive immediately prior to the
Change in Control Period; provided that such benefits shall be discontinued to
the extent that Executive obtains employment providing comparable benefits
during such twenty-four (24) month period.  For purposes of the proviso in the
immediately preceding sentence, if Executive becomes employed by a new employer,
for Executive's health and welfare benefits to be determined to be "comparable,"
new employer must maintain a major medical plan that does not limit, restrict or
exempt Executive or Executive's dependents with respect to any pre-existing
conditions which were covered under the Company's medical plan prior to
Executive's termination of employment.  Executive's right to continuation
coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 
("COBRA") shall be provided at the earlier of the end of the twenty-four (24)
month period or the discontinuance of coverage because the Executive obtains
employment providing comparable benefits.
(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.  Notwithstanding anything to the contrary set forth
herein, prior to the receipt of any benefits under Section 9(b), the Executive
shall be required to execute a appropriate release of claims agreement (the
"Release").  Any payments required to be paid pursuant to Section 9(b) shall
commence on the forty-fifth day following termination of the Executive so long
Executive shall have delivered a fully executed Release within thirty (30) days
after the date of Executive's termination of employment and Executive has not
revoked such Release within the applicable revocation period. If Executive fails
to deliver such Release within such time period or if Executive revokes such
Release, any payment due under Section 9(b) shall be forfeited.  Without
limiting the foregoing, such Release shall specifically relate to all of the
Executive's rights and claims in existence at the time of such execution (other
than those surviving rights referred to in this Section 9, Executive's right to
enforce this Agreement and Executive's rights to the benefits in this Agreement)
and shall confirm the Executive's obligations under the Non-Disclosure
Agreement.  If any payment under Section 9(b) is non-exempt deferred
compensation for purpose of the Section 409A (as defined below), 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.
(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.
(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.  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.
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.  This Agreement shall be construed in accordance
with, and the rights of the parties shall be governed by, the laws of the State
of 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.
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 and applicable Internal Revenue Service guidance and Treasury
Regulations issued thereunder.  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 of
the Code ("Section 409A"), payments under Section 9(b) of this Agreement shall
not commence or be made until six (6) months 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.
19.            Attorney's Fees.  The Company will reimburse the Executive for up
to $2,500 in attorney's fees that the Executive incurred in the negotiation,
drafting and conclusion of this Agreement.  If a dispute arises between the
Executive and the Company over the interpretation, application, enforcement or
termination of this Agreement, the Company will reimburse the Executive for his
attorney's fees, costs and disbursements incurred if he is the prevailing party
on at least one of the material issues in dispute.
[Signature Pages Follow]

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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/ Robert J. Ready                 
 
 
Name:  Robert J. Ready
 
 
Title:  Executive Chairman
 
 
 
 
 
 
 
 
  /s/ Dennis W. Wells            
 
 
Dennis W. Wells