Exhibit 10.3

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of the
26th day of June, 2006, by and between 4349466 CANADA, INC., a corporation duly
incorporated under the Canadian Business Corporations Act (the “Company”), and
FRED JALBOUT (the “Employee”).

WHEREAS LSI Industries Inc. (“LSI”) has agreed to purchase from Saco
Technologies Inc. (the “Seller”) all of the issued and outstanding Common Stock
of the Company and to carry on the Business (as hereinafter defined) as LSI Saco
Technologies Inc. pursuant to a Stock Purchase Agreement dated of even date
herewith (the “Purchase Agreement”);

WHEREAS it is a condition precedent to LSI and the Company entering into the
Purchase Agreement that the Employee enter into this Agreement with the Company
in the form hereof;

WHEREAS the Employee shall become employed by the Company from and after the
Closing Date;

WHEREAS the parties agree that the Company requires the protection of its
legitimate business interests;

WHEREAS the parties consequently desire to enter into this Agreement setting
forth the terms and conditions of the employment of the Employee with the
Company and the benefits attaching thereto.

1. ENTIRE AGREEMENT

This Agreement (including any attachments and exhibits hereto, and any ancillary
agreements, as the case may be), contains the entire agreement as to the terms
of the Employee’s employment with the Company and replaces and supersedes all
previous negotiations, understandings, arrangements and agreements, whether
written or verbal, express or implied between the parties. No other
representations, covenants, undertakings or other prior or contemporaneous
agreements, oral or written, relating to the Employee’s employment will be
deemed to exist or to bind either the Employee or the Company. Both the Company
and the Employee understand and agree that they have not relied on any statement
or representation by the other party or any of its representatives in entering
into this Agreement, except where such statements and representations are set
forth herein. This Agreement shall not in any way limit or restrict the scope of
the undertakings of the Employee contained, as the case may be, in the Purchase
Agreement as seller or owner thereunder.

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2. DEFINITIONS

For the purposes of this Agreement, the following terms have the meanings set
out below:

“Affiliate” means with respect to any Person, any other Person directly or
indirectly controlled, by or under common control with that other Person,
including any subsidiaries or other entities controlled by that other Person.

“Business” means the development, design, manufacture and sale of large-format
video screens and high-performance light engine devices derived from light
emitting diode technology.

“Person” means an individual, corporation, company, co-operative, partnership,
trust, unincorporated association, entity with juridical personality,
governmental authority or governmental body.

“Territory” means the United States, Canada and any other country in which
products of the Company’s Business have been sold, leased or distributed in the
12 months preceding the date of this Agreement.

3. TERM OF AGREEMENT

The term of this Agreement shall be for an initial three (3) year term
commencing effective as of the date first set forth above and terminating on
third anniversary of such date (the “Term”). Thereafter, this Agreement may be
renewed at the election of the Company, in its sole discretion, for successive
one year periods by giving sixty (60) days written notice of such renewal prior
to the end of the then current Term; provided the Employee may elect not to
renew this Agreement by giving the Company written notice of such election
within fifteen (15) days of receipt of such notice.

4. DUTIES AND RESPONSIBILITIES

 

  4.1 During the Term, the Employee shall:

 

  (a) Serve as President of LSI Technology Solutions Plus and President and
Chief Executive Officer of the Company and perform all duties customarily
attendant to such position and such other duties as may be assigned from
time-to-time by the Chief Executive Officer or the Chairman of the Board of LSI;

 

  (b) Do all that is reasonably within the Employee’s power to promote, develop
and extend the operations and favourable reputation of the Company;

 

  (c)

Devote the Employee’s full time effort, skill, attention and energies to the
performance of the Employee’s duties of employment under this Agreement and in
all respects carry out the objectives of the Company as well as diligently and
faithfully serve the Company and promote its

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interests in all matters to the best of the Employee’s ability and judgment; and

 

  (d) Furnish, in a timely manner, all information, reports, disclosures,
assistance and explanations in connection with the performance of the Employee’s
duties under this Agreement as may be required from time to time.

5. COMPENSATION

 

  5.1 The Company agrees to pay the Employee an annual base salary, less
deductions properly withheld by law, for all services provided under this
Agreement of CAN$227,000.00, payable in accordance with the normal payroll
practices of the Company. The Board of Directors of LSI shall conduct an annual
review of the services rendered by the Employee hereunder for the preceding year
and may, at its sole discretion, determine to increase the Employee’s base
salary in such amount as the Board may determine.

 

  5.2 On the date of execution of this Agreement, Employee shall receive a one
time grant of options to purchase 20,000 shares of LSI’s Common Stock at a
purchase price equal to the fair market value of the stock on the date of grant.
Such options will be granted pursuant to the 2003 LSI Industries Inc. Equity
Compensation Plan, as amended November 6, 2003, as such shall be amended from
time to time (the “Plan”). During the Term, the Employee shall be eligible to
participate in the Plan, subject to the terms and conditions of the Plan.

 

  5.3 Commencing on July 1, 2007, the Employee shall be eligible to receive a
bonus equal to between 20% and 50% of the Employee’s annual base salary as
stated in Section 5.1 which shall be paid at the sole discretion of the Board of
Directors of LSI. Such bonus shall be an amount determined by the Board of
Directors of LSI in their sole discretion.

 

  5.4 The Employee shall be eligible to participate in a Deferred Compensation
Plan, subject to its terms, and shall receive an annual contribution in an
amount equivalent to that amount contributed to other similarly situated
employees of LSI pursuant to LSI’s Retirement Plan.

6. EXPENSES

The Company shall reimburse the Employee for reasonable expenses incurred in the
course of performing his duties pursuant to this Agreement, the whole subject to
Company policy for reimbursement of such expenses, which policy may be amended
from time to time by the Company.

7. BENEFITS AND VACATION

 

  7.1

The Employee shall be entitled to participate in such group [RRSP], medical,
dental, visual and/or disability plans, if any, as may be provided (and amended
or

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replaced) by the Company for its employees, subject to the Employee meeting and
sustaining qualification and eligibility requirements for such plans.

 

  7.2 During the Term, the Employee will be entitled to an annual vacation of
four (4) weeks, to be taken at times mutually agreed upon between the Employee
and the Company. The Employee shall not be entitled to carry forward any days of
vacation beyond the year in which the Employee became entitled to such vacation.

8. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION

 

  8.1 The Employee agrees that, during the Term and thereafter, the Employee
will not, directly or indirectly, disclose to any Person or entity, or use for
the benefit of the Employee or any Person or entity, any confidential,
non-public, secret or proprietary information relating to the Business,
prospects, or plans of the Company or its Affiliates (“Confidential
Information”). The Employee shall not be in violation of this section for a
disclosure pursuant to a court action or governmental rule, regulation, or other
proceeding (“Ordered Disclosure”) provided that the Employee has notified the
Company of the Ordered Disclosure within two business days of being notified of
the request for Ordered Disclosure. The Employee agrees to cooperate in good
faith with the Company in responding to the Ordered Disclosure in order to
prevent, limit or impose restrictions on the Ordered Disclosure. In no event,
however, shall this section require the Employee to take action or otherwise be
in violation of any law relating to the Ordered Disclosure.

 

  8.2 On cessation of the Employee’s employment with the Company for whatever
reason, the Employee shall immediately provide to the Company all working
papers, reports, manuals, documents, and the like (including all originals and
copies) in the Employee’s possession which contain Confidential Information
(which are acknowledged by the Employee as being the property of the Company)
and any other property belonging to the Company or its Affiliates in the
Employee’s possession.

 

  8.3 The Employee agrees that, during the Term and thereafter, the Employee
will not disclose, or cause to be disclosed, any negative, adverse or derogatory
comments or information of a substantial nature about:

 

  (a) the Company or its Affiliates, or any management member of the Company or
its Affiliates;

 

  (b) any products or services provided by the Company or its Affiliates; or

 

  (c) the prospects for the future of the Company or its Affiliates.

 

  8.4

Subsequent to the cessation of the Employee’s employment with the Company, for
whatever reason, the Company may seek the assistance, cooperation or testimony
of the Employee in connection with any investigation, litigation or

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proceeding arising out of matters within the knowledge of the Employee and
related to the Employee’s position with the Company. The Employee shall provide
assistance, cooperation or testimony as reasonably required by the Company. If
such assistance, cooperation or testimony requires more than a nominal
commitment of the Employee’s time, the Company will compensate the Employee for
such time at a per diem rate derived from the Employee’s salary at the time of
the Employee’s employment with the Company ended as well as all other reasonable
costs and expenses incurred by the Employee, acting reasonably, associated with
the Employee’s assistance pursuant to this section.

9. COVENANT NOT TO SOLICIT OR COMPETE WITH THE BUSINESS

 

  9.1 The Employee agrees that during the Term and for a period of twenty-four
(24) months following the cessation of the Employee’s employment for whatever
reason, the Employee shall not, directly or indirectly, on his own behalf or on
behalf of, or in connection with, any other Person, as principal, agent,
creditor, advisor, consultant, owner, partner, independent contractor, employee,
shareholder, director, officer or in any capacity whatsoever:

 

  (a) employ, offer employment to, solicit the employment or service of, or
procure or assist any Person to employ, offer employment to, solicit the
employment or service of, or otherwise entice away from the employment or
service of the Company or its Affiliates, any Person who is employed by the
Company or its Affiliates;

 

  (b) canvas or solicit or accept or interfere with the business of any
Customer, or procure or assist in the canvassing or soliciting of the business
of any Customer, or canvas or solicit or accept the business of any Prospective
Customer, or procure or assist in the canvassing or soliciting of any
Prospective Customer.

 

  9.2 The Employee and the Company agree that the following terms shall have the
following meanings:

 

  (a) “Customer” shall mean any and all Persons having, to the knowledge of the
Employee, purchased services from the Company or its Affiliates at any time
during the twelve (12) months preceding the termination of the Employee’s
employment;

 

  (b) “Prospective Customer” shall mean any Person canvassed or solicited by the
Company or its Affiliates, to the knowledge of the Employee, at any time during
the twelve (12) months preceding the termination of the Employee’s employment,
irrespective of whether or not such Person thereafter purchased services from
the Company or its Affiliates.

 

  9.3

The Employee acknowledges that the Employee is a key employee occupying a
special relationship with the Company and consequently the Employee, during the
Term, will receive from the Company, special knowledge and Confidential

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Information of the Company, including, but not limited to, corporate books and
records, financial information, personnel information, lists of customers and
suppliers, processes or dealings, patents, inventions, discoveries, information,
data, programs, know-how, knowledge and other trade secrets. The Employee also
acknowledges that this special knowledge and Confidential Information are
valuable to the Company and, therefore, their protection and maintenance
constitute a legitimate interest to be protected by the Company by the
enforcement of a covenant not to compete. Consequently, the Employee agrees that
during the Term and for a period of twenty-four (24) months after the Employee’s
resignation or the termination of the Employee’s employment with the Company, as
the case may be, on his own behalf, or on behalf of, or in connection with, any
Person, whether directly or indirectly, as principal, agent, creditor, advisor,
consultant, owner, partner, independent contractor, employee, shareholder,
director, officer, or in any capacity whatsoever, carry on or be engaged in or
have any financial or other interest in, or be otherwise commercially involved
in any endeavour, activity or business in all or part of the Territory, which is
substantially the same or is in competition, in whole or in part, with the
Business.

 

  9.4 The Employee shall not be in breach of this Section 9 by virtue of his
holding, as a passive investor, not more than 5% of the issued and outstanding
shares of a corporation which is listed on a recognized stock exchange or by
reason of providing part-time services to a charity, not-for-profit organization
or educational institution for which the Employee does not receive any
compensation or remuneration.

 

  9.5 The Employee acknowledges that a remedy at law for any breach or attempted
breach of this Section 9 will be inadequate and that any breach of this
Section 9 will result in irreparable harm to the Company. Accordingly, the
Company shall, in addition to any other remedy that may be available, be
entitled to specific performance and injunctive and other equitable relief in
case of any such breach or attempted breach.

 

  9.6 The Employee acknowledges that this Section 9 contains reasonable
limitations as to time, geographical area and scope of activity to be restrained
that do not impose a greater restraint than is reasonable or necessary to
protect the goodwill or other legitimate business interests of the Company.

10. TERMINATION OF AGREEMENT BY THE COMPANY

 

  10.1 “Cause” shall mean the following events or conditions:

 

  (a)

the Employee’s commission of a criminal act or other indictable offence (other
than minor misdemeanors) pursuant to the provisions of the Criminal Code
(Canada) or any other criminal or penal statute of any jurisdiction, which the
Company reasonably determines may have an

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adverse effect upon the reputation or goodwill of the Company or its Affiliates
or on the performance of the Employee’s duties;

 

  (b) a breach by the Employee of, or the Employee’s failure or refusal to
perform, in any material respect, any of the Employee’s obligations under this
Agreement or any other agreement between the Employee and the Company, where the
Employee fails to cure such deficiency within ten (10) days after receipt of
notice thereof (provided, however, that no notice shall be given in the event of
a breach by the Employee, of any of the restrictive covenants which are set
forth in Section 9);

 

  (c) the Employee’s commission of any immoral act that would bring disrepute to
LSI, the Company or the Business;

 

  (d) a material breach by the Employee of his duties towards the Company or its
Affiliates, where the Employee fails to cure such deficiency in all material
respects within ten (10) days after receipt of notice thereof;

 

  (e) theft, fraud, embezzlement from the Company or its Affiliates or any other
material act of dishonesty relating to the Employee’s employment;

 

  (f) gross negligence or willful misconduct or fraud by the Employee in the
performance of his duties; and

 

  (g) any other matter which, pursuant to applicable law, constitutes serious
reason for termination without either notice or payment in lieu of notice.

 

  10.2 Termination of Agreement for Cause.

The Company may terminate this Agreement for Cause, upon simple notice from the
Company to the Employee, without providing the Employee other notice, severance
pay, pay in lieu of notice, or any indemnity whatsoever, except as may otherwise
be required by applicable law.

 

  10.3 Termination of Agreement Without Cause.

The Company may terminate this Agreement without Cause at any time upon written
notice, provided the Company shall be obligated to the Employee, at its
election, either (a) continue to pay the Employee the Employee’s base salary
payable in accordance with the normal payroll practices of the Company for the
remainder of the then current Term, or (b) provide the Employee with a lump sum
payment representing the Employee’s then monthly base salary, less deductions
required to be withheld by law, for the remainder of the then current Term. In
exchange for this payment, the Employee undertakes to execute a full and
complete release of all claims against the Company, its Affiliates and their
employees, officers, directors, agents and shareholders, in a form to be
determined by the Company, the whole at the Company’s sole discretion.

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  10.4 Termination of Agreement Due to Death of the Employee.

This Agreement shall automatically terminate on the death of the Employee and
the Company shall have no further obligations to the Employee or to the
Employee’ estate pursuant to this Agreement. Any entitlements under this
Agreement or otherwise accrued by the Employee at the time of the Employee’s
death not yet paid to the Employee will be paid to the appropriate legal
designate of the Employee.

11. NOTICES

The parties agree that any notice to be given pursuant to this Agreement, shall
be deemed to have been adequately given if such notice is (a) mailed by prepaid,
registered post to the party for whom the notice is intended, (b) delivered
personally, (c) sent by an internationally recognized overnight courier service
with next day delivery guaranteed and delivery charges prepaid, to the following
address:

To the Company:

LSI Industries

10000 Alliance Road

Cincinnati, Ohio 45242

Attention: Ronald S. Stowell

With a required copy to:

Keating Muething Klekamp PLL

One East Fourth Street, Suite 1400

Cincinnati, Ohio 45202

Attention: Paul V. Muething

To the Employee:

Fred Jalbout

260 Strathcona

Mont-Royal, QC

H3R 1E7

With a required copy to:

Davies Ward Phillips & Vineberg LLP

1501 McGill College Avenue, 26th Floor

Montreal, Canada H3A 3N9

Attention: Denis Ferland

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12. GENERAL

 

  12.1 If any part or parts of this Agreement shall be held illegal or null and
void by any Court or administrative body of competent jurisdiction, such
determination shall not affect the remaining parts of this Agreement and they
shall remain in full force and effect as if such part of parts determined
illegal or void had not been included in the Agreement.

 

  12.2 All dollar amounts referred to in this Agreement, unless otherwise
specified, are in Canadian funds.

 

  12.3 All payments in this Agreement will be subject to applicable income tax
and other deductions normally made by the Company and required by law.

 

  12.4 This Agreement shall be governed and construed under and in accordance
with the laws of the Province of Quebec.

 

  12.5 This Agreement may not be modified or amended except by instrument in
writing signed by the parties to this Agreement.

 

  12.6 Any party to this Agreement may change its address for notice set out in
Section 11 in this Agreement by notice of the change of address to the other
party.

 

  12.7 This Agreement is personal to the Employee and shall not be assigned by
him. The Employee shall not hypothecate, delegate, encumber, alienate, transfer,
or otherwise dispose of the Employee’s rights and duties under this Agreement.
The Company may assign this Agreement without the Employee’s consent to any
other entity and on such assignment, the provisions of this Agreement applicable
to the Company shall be construed as being applicable to the entity to which
this Agreement has been assigned. This Agreement shall enure to the benefit of
and be binding on the successors and permitted assigns of the Company.

 

  12.8 Waiver of any breach of this Agreement is not a waiver of any subsequent
breach of this Agreement, nor is any forbearance to seek a remedy for any breach
a waiver of any rights and remedies with respect to any subsequent breach.

 

  12.9 If any clause, section, phrase, provision, or portion of this Agreement
or its application to any person or circumstance shall be held invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable the remainder of this Agreement and shall not affect
the application of any clause, provision, or portion to other persons or
circumstances.

 

  12.10 The Employee agrees that Sections 8 and 9 of this Agreement shall
survive any change, modification, or alteration to any of the terms of the
Employee’s employment as well as the termination of the Employee’s employment
for any reason whatsoever.

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  12.11 The Employee acknowledges that he has had full opportunity to review and
consider the content of this Agreement and to obtain adequate and independent
legal advice with respect to this Agreement, prior to its execution by the
Employee. Further, the Employee acknowledges and represents that the Employee
does execute this Agreement voluntarily with full knowledge of its terms and
conditions.

 

  12.12 The parties hereto acknowledge that they have requested and are
satisfied that this Agreement and all related documents be drawn up in the
English language. Les parties aux présentes reconnaissent avoir requis que la
présente entente et les documents qui y sont relatifs soient rédigés en anglais.

SIGNATURE PAGE TO FOLLOW.

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4349466 CANADA, INC.

   

FRED JALBOUT

Per:   /s/ Ronald S. Stowell       /s/ Fred Jalbout   Authorized Signatory      
Fred Jalbout                    Witness