Exhibit 10.1

 

 

LSI INDUSTRIES INC.
NONQUALIFIED STOCK OPTION AGREEMENT / INDUCEMENT AWARDS

 

Summary of Nonqualified Stock Option Grant

 

LSI Industries Inc., an Ohio corporation (the "Company"), grants to the Grantee
named below, in accordance with the terms of this Nonqualified Stock Option
Agreement (the "Agreement"), an option to purchase shares of common stock
(“Shares”) of the Company at an exercise price per share as described below:

 

Name of Grantee:

James A. Clark

Number of Underlying Shares:

 

500,000

   

 

Exercise Price Per Share:

$4.40

   

 

Grant Date:

 

November 1, 2018

   

Expiration Date:

 

November 1, 2028

   

 

 

Terms of Agreement

 

1.     Grant of Nonqualified Stock Option. Subject to and upon the terms,
conditions, and restrictions set forth in this Agreement, the Company hereby
grants to the Grantee as of the Grant Date, an option to purchase Shares at the
exercise price per share as set forth above (the “Option”). It is the intent of
the Company and the Grantee that the Option will not qualify as an “incentive
stock option” under Section 422 of the Internal Revenue Code of 1986, as amended
from time to time. Even though the Option is not granted pursuant to the LSI
Industries Inc. Amended and Restated 2012 Stock Incentive Plan, as of November
17, 2016 (the "Plan"), the terms and conditions of the Plan apply to the Option
to the same extent as if the Option was awarded pursuant to the Plan, except
that the authorized number of Shares provision under Section 5(a) of the Plan
and the award limitation provisions under Section 5(c) of the Plan shall not
apply to the Option. The applicable terms of the Plan are incorporated by
reference in this Agreement. In the event that any provision of this Agreement
is inconsistent with the terms of the Plan, the terms of this Agreement will
control. The Grantee acknowledges and agrees that, in addition to continued
employment as Chief Executive Officer by the Company, the grant of the Option is
additional consideration for, and conditioned upon, Grantee’s execution and
delivery of the Restrictive Covenant and Confidentiality Agreement attached
hereto as Exhibit I (the “RCCA”). In the event the Company determines that the
Grantee has breached any of the covenants or agreements set forth in the RCCA,
in addition to any other remedy under the RCCA, the Company shall be entitled,
at its option, to cancel and cause the forfeiture of any outstanding unexercised
portion of the Option (whether vested or unvested) and any other outstanding
awards under the Plan, by written notice to the Grantee.

 

2.     Vesting of Option.

 

(a)     Except as otherwise provided in this Agreement, the Option shall vest as
follows: (i) 250,000 Shares shall vest in full on November 1, 2021 if Grantee is
employed by the Company as the Company’s Chief Executive Officer on such date;
(ii) 125,000 Shares shall vest upon (A) satisfaction of the condition that the
Grantee shall be employed by the Company as the Company’s Chief Executive
Officer on November 1, 2021 (the “CEO Employment Condition”) and (B) the closing
price per share of the Company’s common stock on the NASDAQ Global Select Market
at any time prior to the Expiration Date shall be equal to or greater than $9.50
per share; and (iii) 125,000 Shares shall vest upon (A) satisfaction of the CEO
Employment Condition, and (B) the closing price per share of the Company’s
common stock on the NASDAQ Global Select Market at any time prior to the
Expiration Date shall be equal to or greater than $15.00 per share. The portion
of the Option described in Section 2(a)(i) shall be referred to herein as the
“Time Portion.” The portion of the Option described in Sections 2(a)(ii) and 2
(a)(iii) shall be referred to herein as the “Performance Portion.”

 

 

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(b)     The Time Portion of the Option (but not the Performance Portion of the
Option) shall vest in full prior to the date or satisfaction of the conditions
in Section 2(a)(i) if: (i) the Grantee satisfies the requirements for
Retirement, as defined in the Plan, including separation from employment with
the Company; (ii) the Company terminates Grantee’s employment with the Company
without Cause (as defined in Grantee’s Employment Agreement with the Company
dated October 16, 2018 (the “Employment Agreement”); or (iii) Grantee terminates
his employment with the Company for Good Reason (as defined in the Employment
Agreement). The Time Portion of the Option shall be exercisable for ninety (90)
days following the occurrence of the conditions described in this Section 2(b)
or the remaining term of the Option, if shorter.

 

(c)     The Time Portion of the Option (but not the Performance Portion of the
Option) shall vest in full prior to the date or satisfaction of the conditions
in Section 2(a)(i), Section 2(a)(ii) and Section 2(a)(iii) upon the occurrence
of any of the following: (i) the Grantee dies while in the employ of the
Company; (ii) the Grantee has a Disability, as defined in the Plan; or (iii)
there is a Change in Control event described in Section 2(g) of the Plan. The
Time Portion of the Option shall be exercisable for one year following the
occurrence of the conditions described in Section 2(c)(i) and 2(c)(ii) or the
remaining term of the Option, if shorter.

 

(d)     The Committee may, in its sole discretion, accelerate the time at which
the Option becomes vested and non-forfeitable to a time prior to the date or
satisfaction of the conditions in Section 2(a) or to a time other than provided
in Section 2(b) or Section 2(c)(i), (ii) or (iii) on such terms and conditions
as it deems appropriate in accordance with the terms and conditions of the Plan.

 

3.     Forfeiture of Option. Any portion of the Option that has not yet vested
pursuant to Section 2 shall be forfeited automatically without further action or
notice if the Grantee ceases to be employed by the Company for Cause (as defined
in the Employment Agreement) or if such termination of employment is other than
as provided in Section 2(b), 2(c) or 2(d) hereof. For the avoidance of doubt,
except in connection with a Change of Control event described Section 2(g) of
the Plan, the Performance Portion of the Option shall be forfeited automatically
without further action or notice if the Grantee ceases to be employed by the
Company at a time when neither of the per share closing price conditions set
forth in Section 2(a)(ii) and Section 2(a)(iii) have been met.

 

4.     Exercise and Payment.

 

(a)     The Option granted under this Agreement shall be exercisable on the date
or satisfaction of the conditions in Section 2(a). The Option granted under this
Agreement may not be exercised as to less than one hundred (100) Shares at any
time.

 

(b)     The Option may be exercised for the number of Shares specified by
Grantee’s delivery of instructions through and in accordance with the procedures
maintained on behalf of the Company, accompanied by full payment in the manner
and subject to the conditions set forth pursuant to the terms of the Plan for
the number of Shares in respect of which it is exercised.  If any applicable law
or regulation requires the Company to take any action with respect to the Shares
specified in such notice, or if any action remains to be taken under the
Articles of Incorporation or Code of Regulations of the Company to effect due
issuance of the Shares, then the Company shall take such action and the day for
delivery of such stock shall be extended for the period necessary to take such
action.

 

5.     Transferability. The Option may not be transferred and shall not be
subject in any manner to assignment, alienation, pledge, encumbrance or charge,
unless otherwise provided under the Plan. Any purported transfer or encumbrance
in violation of the provisions of this Section 5 shall be void, and the other
party to any such purported transaction shall not obtain any rights to or
interest in the Option.

 

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6.     Voting and Other Rights. The Grantee will not have any rights of a
shareholder of the Company with respect to the Option until the delivery of the
underlying Shares into which the Option is exercised.

 

7.     Continuous Employment. Unless otherwise specified by the Plan, for
purposes of this Agreement, the continuous employment of the Grantee with the
Company shall not be deemed to have been interrupted, and the Grantee shall not
be deemed to have ceased to be an employee of the Company, by reason of a leave
of absence approved by the Committee.

 

8.     No Employment Contract. Nothing contained in this Agreement shall confer
upon the Grantee any right with respect to continuance of employment by the
Company, nor limit or affect in any manner the right of the Company to terminate
the employment or adjust the compensation of the Grantee.

 

9.     Relation to Other Benefits. Any economic or other benefit to the Grantee
under this Agreement or the Plan shall not be taken into account in determining
any benefits to which the Grantee may be entitled under any profit-sharing,
retirement, disability or other benefit or compensation plan maintained by the
Company and shall not affect the amount of any life insurance coverage available
to any beneficiary under any life insurance plan covering employees of the
Company.   

 

10.     Taxes and Withholding. By his acceptance of this Agreement, the Grantee
agrees to reimburse the Company for any taxes required by any government to be
withheld or otherwise deducted and paid by the Company with respect to the
issuance or disposition of the Shares subject to the Option. In lieu thereof,
the Company shall have the right to withhold the amount of such taxes from any
other sums due or to become due from the Company to the Grantee. The Company
may, in its discretion, hold the stock certificate or certificates to which the
Grantee is entitled upon the exercise of the Option as security for the payment
of such withholding tax liability, until cash sufficient to pay that liability
has been accumulated. In addition, at any time that the Company becomes subject
to a withholding obligation under applicable law with respect to the exercise of
the Option (the “Tax Date”), except as set forth below, the Grantee may elect to
satisfy, in whole or in part, the Grantee’s related personal tax liabilities (an
“Election”) by (a) directing the Company to withhold from the Shares issuable in
the related exercise either a specified number of Shares or Shares having a
specified value (in each case not in excess of the maximum required tax
withholding amount), (b) tendering Shares previously issued pursuant to the
exercise of an Award or other Shares owned by the Grantee or (c) combining any
or all of the foregoing Elections in any fashion. An Election shall be
irrevocable. The withheld Shares and other Shares tendered in payment shall be
valued at their fair market value on the Tax Date. The Committee may disapprove
of any Election, suspend or terminate the right to make Elections or provide
that the right to make Elections shall not apply to particular Shares or
exercises. The Committee may impose any additional conditions or restrictions on
the right to make an Election as it shall deem appropriate, including any
limitations necessary to comply with Section 16 of the Exchange Act.

 

11.     Adjustments. The number and kind of Shares deliverable pursuant to the
Option are subject to adjustment as provided in Section 8 of the Plan.   

 

12.     Compliance with Law. While the Company shall make reasonable efforts to
comply with all applicable federal and state securities laws and listing
requirements with respect to the Shares that may be delivered pursuant hereto,
the Company shall not be obligated to deliver any Shares pursuant to this
Agreement if the delivery thereof would result in a violation of any such law or
listing requirement.

 

13.     Amendments. Subject to the terms of the Plan, the Committee may modify
this Agreement upon written notice to the Grantee. Any amendment to the Plan
shall be deemed to be an amendment to this Agreement to the extent that the
amendment is applicable hereto.

 

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14.     Severability. In the event that one or more of the provisions of this
Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.

 

15.     Relation to Plan and Employment Agreement. This Agreement is subject to
the terms and conditions of the Plan as specified in Section 1. However, in the
event that any provision of this Agreement is inconsistent with the terms of the
Plan, the terms of this Agreement will control. Specifically, without
limitation, Sections 2 and 3 of this Agreement shall supersede Section 10(a) of
the Plan. This Agreement and the Plan contain the entire agreement and
understanding of the parties with respect to the subject matter contained in
this Agreement, and supersede all prior written or oral communications,
representations and negotiations in respect thereto. For the avoidance of doubt,
in the event of any inconsistency between the Employment Agreement and this
Agreement, the terms of this Agreement shall govern. Capitalized terms used
herein without definition shall have the meanings assigned to them in the Plan.
The Committee acting pursuant to the Plan, as constituted from time to time,
shall, except as expressly provided otherwise herein, have the right to
determine any questions which arise in connection with the grant of the Option.

 

16.     Successors and Assigns. Without limiting Section 5, the provisions of
this Agreement shall inure to the benefit of, and be binding upon, the
successors, administrators, heirs, legal representatives and assigns of the
Grantee, and the successors and assigns of the Company.

 

17.     No Advice Regarding Award. The Company is not providing any tax, legal
or financial advice, nor is the Company making any recommendations regarding the
acquisition or sale of the underlying securities. The Grantee is hereby advised
to consult with the Grantee’s personal tax, legal or financial advisors
regarding the decision to enter into this Agreement before taking any action
related to this Agreement.

 

18.     Governing Law.

 

(a)     The interpretation, performance, and enforcement of this Agreement,
including tort claims, shall be governed by the laws of the State of Ohio,
without giving effect to the principles of conflict of laws thereof.

 

(b)     Any party bringing a legal action or proceeding against another party
arising out of or relating to this Agreement may bring the legal action or
proceeding only in the United States District Court for the Southern District of
Ohio and any of the courts of the State of Ohio, in each case sitting in
Cincinnati, Ohio.

 

(c)     Each of the Company and the Grantee waives, to the fullest extent
permitted by law, (i) any objection which it may now or later have to the laying
of venue of any legal action or proceeding arising out of or relating to this
Agreement brought in any court of the State of Ohio sitting in Cincinnati, Ohio
or the United States District Court for the Southern District of Ohio sitting in
Cincinnati, Ohio, including, without limitation, a motion to dismiss on the
grounds of forum non conveniens or lack of subject matter jurisdiction; and (ii)
any claim that any action or proceeding brought in any such court has been
brought in an inconvenient forum.

 

(d)     Each of the Company and the Grantee submits to the exclusive
jurisdiction (both personal and subject matter) of (i) the United States
District Court for the Southern District of Ohio sitting in Cincinnati, Ohio and
its appellate courts, and (ii) any court of the State of Ohio sitting in
Cincinnati, Ohio and its appellate courts, for the purposes of all legal actions
and proceedings arising out of or related to this Agreement.

 

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19.     Electronic Delivery. The Grantee hereby consents and agrees to
electronic delivery of any documents that the Company may elect to deliver
(including, but not limited to, prospectuses, prospectus supplements, grant or
award notifications and agreements, account statements, annual and quarterly
reports, and all other forms of communications) in connection with this
Agreement. The Grantee understands that, unless earlier revoked by the Grantee
by giving written notice to the Secretary of the Company, this consent shall be
effective for the duration of the Agreement. The Grantee also understands that
he or she shall have the right at any time to request that the Company deliver
written copies of any and all materials referred to above at no charge. The
Grantee hereby consents to any and all procedures the Company has established or
may establish for an electronic signature system for delivery and acceptance of
any such documents that the Company may elect to deliver, and agrees that his or
her electronic signature is the same as, and shall have the same force and
effect as, his or her manual signature. The Grantee consents and agrees that any
such procedures and delivery may be affected by a third party engaged by the
Company to provide administrative services related to the Plan. By accepting
this award, Grantee acknowledges that a copy of the Plan, Plan Summary and
Prospectus, and the Company's most recent Annual Report and Proxy Statement (the
"Prospectus Information") either have been received by Grantee or are available
for viewing on the Company's intranet site or internet site at
www.lsi-industries.com, and consents to receiving this Prospectus Information
electronically, or, in the alternative, agrees to contact Debi Lauber at (513)
372-3008 to request a paper copy of the Prospectus Information at no charge.
Grantee also represents that she or he is familiar with the terms and provisions
of the Prospectus Information. These terms and conditions constitute a legal
contract that will bind both Grantee and the Company as soon as Grantee accepts
the Award as described above.

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its
behalf by its duly authorized officer and the Grantee has also executed this
Agreement, as of the Grant Date.

 

 

LSI INDUSTRIES INC. 

 

 

 

 

 

 

 

 

 

 

By:

/S/ Howard E. Japlon  

 

 

 

Name: Howard E. Japlon 

 

 

 

Title: EVP, HR & Legal 

 

 

 

GRANTEE 

 

 

 

 

 

 

 

 

 

 

By:

/S/ James A. Clark

 

 

 

Name: James A. Clark 

 

 

 

 

 

 

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Exhibit I

 

Restrictive Covenant and Confidentiality Agreement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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