Exhibit 10.3

 

LSI INDUSTRIES INC. 2019 OMNIBUS AWARD PLAN

 

NON-QUALIFIED STOCK OPTION GRANT AGREEMENT

 

LSI INDUSTRIES INC. (the “Company”) hereby irrevocably grants you (the
“Participant”), on _________, 2020 (the “Grant Date”) the right and option to
purchase __________ shares of the Company’s common stock, no par value per share
(“Common Stock”), subject to the restrictions, terms and conditions herein.

 

WHEREAS, the Compensation Committee (the “Committee”) of the Board of Directors
of the Company (the “Board”) has determined that it would be in the best
interests of the Company and its stockholders to grant the award of options
provided for herein to the Participant, on the terms and conditions described in
this Stock Option Grant Agreement (the “Agreement”); and

 

WHEREAS, the Company intends that the award of options provided for herein shall
be governed by the terms and conditions of this Agreement and the Company’s 2019
Omnibus Award Plan (the “Plan”).

 

NOW, THEREFORE, for and in consideration of the promises and the covenants of
the parties contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, for themselves, and their permitted successors and assigns,
hereby agree as follows:

 

 

1.

Terms and Conditions.

 

 

a.

Vesting.  The option herein granted shall become exercisable in whole or in part
as follows:

 

i.     Exercisable as to 33% of the shares (rounded down to the nearest whole
share) on the first anniversary of the Grant Date;

 

ii.     Exercisable as to an additional 33% of the shares (rounded down to the
nearest whole share) on the second anniversary of the Grant Date;

 

iii.     Exercisable in its entirety on and after the third anniversary of the
Grant Date;

 

iv.     Exercisable in its entirety (x) upon the death of the Participant while
the Participant is employed by the Company or (y) in the event of Disability (as
defined in the Plan) of the Participant while the Participant is employed by the
Company;

 

iv.     If the Participant retires from the Company at any time following the
first anniversary of this Agreement and at such time satisfies the Normal
Retirement Criteria (defined below), the option herein granted shall continue to
become exercisable as set forth in clauses (ii) through (iii) of this Section
1(a).  The Normal Retirement Criteria will be satisfied if the Participant shall
(x) retire (and satisfy the Company’s criteria for retirement at such time) from
the Company, (y) be at least 55 years of age at the time of such retirement, and
(z) have at least ten credited years of service with the Company or its
subsidiaries at the time of such retirement;

 

 

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v.     If at the time of retirement the Participant satisfies the Normal
Retirement Criteria and subsequently dies or becomes Disabled before the
Participant’s option herein granted becomes exercisable in its entirety as set
forth in clause (iii) of this Section 1(a), the option herein granted shall
become exercisable as set forth in clause (iv) of this Section 1(a);

 

vi.     Notwithstanding anything to the contrary in Section 1(a)(iv), in the
event of a Change in Control (as defined in the Plan), unless the successor
company, or a parent of the successor company in the Change in Control agrees to
assume, replace, or substitute the option granted hereunder (as of the
consummation of such Change in Control) with an option on substantially
identical terms, as determined by the Committee, if the Participant’s employment
with the Company or its Affiliates (or any successor thereto) is terminated
within [twenty-four(24) months for Clark Galeese and Caneris/twelve (12) months
for others] following a Change in Control either (x) by the Company or its
Affiliates (or any successor thereto) without Cause (as defined in the Plan) or
(y) by the Participant with Good Reason, the option granted hereunder shall
become exercisable in its entirety as of the date of such termination. As used
herein, “Good Reason” shall mean the occurrence of any of the following: (i) a
material diminution in the Participant’s authority, duties or responsibilities
or change in title or change in reporting relationship; (ii) a material
diminution in the Participant’s annual base salary as in effect on the date of
this Agreement or as the same may be increased from time to time; (iii) a
material diminution in the budget over which the Participant retains authority;
(iv) the Company fails to pay or provide any amount or benefit that the Company
is obligated to pay or provide under this Agreement or any other employment,
compensation, benefit or reimbursement plan, agreement or arrangement of the
Company to which the Participant is a party or in which the Participant
participates; (v) the relocation of the Participant’s principal place of
employment to a location which increases the Participant’s one−way commuting
distance by more than 50 miles, or the Company’s requiring the Participant to
travel on business other than to an extent substantially consistent with the
Participant’s business travel obligations prior to the Change in Control; (vi) a
significant adverse change occurs, whether of a quantitative or qualitative
nature, in the indemnification protection provided to the Participant for acts
and omissions arising out of his service on behalf of the Company or any other
entity at the request of the Company; or (vii) the Company fails to obtain the
assumption of this Agreement pursuant to this Section. If the Participant does
not terminate his employment within 60 days after the first occurrence of the
circumstances giving rise to Good Reason, then the Participant will be deemed to
have waived such right to terminate for Good Reason with respect to such
circumstances.

 

 

b.

Forfeiture.  The unexercised portion of the option herein granted, to the extent
the option is vested, shall automatically and without notice terminate and
become null and void at the time of the earliest of the following to occur:

 

 

i.

the expiration of ten years from the date on which the option was granted;

 

 

ii.

the expiration of 90 days from the date of termination of the Participant’s
employment from the Company in the event such termination of employment does not
result from the Participant’s death or Disability (including, without
limitation, Company’s termination of Participant’s employment without Cause or
Participant’s termination of employment for Good Reason);

 

 

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iii.

twelve months after the date of the Participant’s Disability when such
Disability occurs while the Participant is employed by the Company;

 

 

iv.

twelve months after death of the Participant when the Participant dies while
employed by the Company; and

 

 

v.

Participant’s termination of employment with the Company for Cause.

 

 

c.

Notwithstanding the foregoing, in the event that any unexercised portion of the
option herein granted would terminate and become null and void in accordance
with Section 1(b)and the Fair Market Value of the unexercised portion of the
option herein granted exceeds the full price for each of the shares purchased
pursuant to such option, the then vested portion of the option herein granted
shall be deemed to be automatically exercised by the Participant on such last
trading day by means of  a net exercise without any action by the Participant.  
Upon such automatic exercise, the Company shall deliver to the Participant the
number of shares of Common Stock for which the option was deemed exercised less
the number of shares of Common Stock having a Fair Market Value, as of such
date, sufficient to (1) pay the full price for each of the shares of Common
Stock purchased pursuant to the option herein granted and (2) satisfy all
applicable required tax withholding obligations.  Any fractional share shall be
settled in cash.  For the avoidance of doubt, and notwithstanding any provision
(or interpretation) of Section 1(b) to the contrary, the unexercised portion of
the option herein granted shall automatically and without notice terminate and
become null and void upon the expiration of ten years from the date of this
Agreement.

 

 

d.

The full price for each of the shares purchased pursuant to the option herein
granted shall be $______ per share.

 

 

e.

Full payment for shares purchased by the Participant shall be made at the time
of the exercise of the option in whole or in part.  No shares shall be issued
until full payment therefore has been made, and the Participant shall have none
of the rights of a shareholder with respect to any shares subject to this option
until such shares shall have been issued.

 

 

f.

No option granted hereunder may be assigned, alienated, pledged, attached, sold,
or otherwise transferred or encumbered by the Participant other than by will or
by the laws of descent and distribution and any such purported assignment,
alienation, pledge, attachment, sale, transfer, or encumbrance shall be void and
unenforceable against the Company or any Affiliate.

 

 

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g.

In the event of one or more stock splits, stock dividends, stock changes,
reclassifications, recapitalizations, or combinations of shares prior to
complete exercise of the option herein granted which change the character or
amount of the shares subject to the option, this option to the extent that it
shall not have been exercised, shall entitle the Participant or the
Participant’s executors or administrators to receive in substitution such number
and kind of shares as he, she or they would have been entitled to receive if the
Participant or the Participant’s executors or administrators had actually owned
the shares subject to this option at the time of the occurrence of such change;
provided, however, that if the change is of such nature that the Participant or
the Participant’s executors or administrators, upon exercise of the option,
would receive property other than shares of stock, then the Board shall adjust
the option so that he, she or they shall acquire only shares of stock upon
exercise, making such adjustment in the number and kind of shares to be received
as the Board shall, in its sole judgment, deem equitable; provided, further,
that the foregoing shall not limit the Company’s ability to otherwise adjust the
option in a manner consistent with Section 12 of the Plan.

 

 

2.

Restrictive Covenant; Clawback; Incorporation by Reference.

 

 

a.

Restrictive Covenant.  The option granted hereunder is conditioned upon the
Participant’s agreement to this Agreement and compliance with the Restrictive
Covenant and Confidentiality Agreement executed by the Participant. 

 

 

b.

Clawback.  Notwithstanding anything to the contrary contained herein, the option
granted hereunder may be terminated and become null and void without
consideration if the Participant, as determined by the Committee in its sole
discretion (i) engages in an activity that is in conflict with or adverse to the
interests of the Company or any Affiliate, including but not limited to fraud or
conduct contributing to any financial restatements or irregularities, or (ii)
without the consent of the Company, while employed by or providing services to
the Company or any Affiliate or after termination of such employment or service,
violates a non-competition, non-solicitation or non-disclosure covenant or
agreement (including, as applicable, the Restrictive Covenant and
Confidentiality Agreement executed by the Participant) between the Participant
and the Company or any Affiliate.  If the Participant engages in any activity
referred to in the preceding sentence, the Participant shall, at the sole
discretion of the Committee, forfeit any gain realized in respect of the option
granted hereunder (which gain shall be deemed to be an amount equal to the
difference between the price for shares set forth in Section 1(d) above and the
Fair Market Value (as defined in the Plan), on the applicable exercise date, of
the shares of Common Stock for which the option was exercised), and repay such
gain to the Company.

 

 

c.

Incorporation by Reference.  The provisions of the Plan are hereby incorporated
herein by reference.  Except as otherwise expressly set forth herein, this
Agreement shall be construed in accordance with the provisions of the Plan and
any capitalized terms not otherwise defined in this Agreement shall have the
definitions set forth in the Plan. 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 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 described herein.

 

 

3.

Compliance with Legal Requirements.  The granting and delivery of the option
granted hereunder, and any other obligations of the Company under this
Agreement, shall be subject to all applicable federal, state, local, and foreign
laws, rules, and regulations and to such approvals by any regulatory or
governmental agency as may be required.

 

 

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4.

Transferability.  The option granted hereunder may not be assigned, alienated,
pledged, attached, sold, or otherwise transferred or encumbered by the
Participant other than by will or by the laws of descent and distribution and
any such purported assignment, alienation, pledge, attachment, sale, transfer,
or encumbrance shall be void and unenforceable against the Company or any
Affiliate.

 

 

5.

Miscellaneous.

 

 

a.

Waiver.  Any right of the Company contained in this Agreement may be waived in
writing by the Committee.  No waiver of any right hereunder by any party shall
operate as a waiver of any other right, or as a waiver of the same right with
respect to any subsequent occasion for its exercise, or as a waiver of any right
to damages.  No waiver by any party of any breach of this Agreement shall be
held to constitute a waiver of any other breach or a waiver of the continuation
of the same breach.

 

 

b.

Severability.  The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, and each other provision of this Agreement shall be severable
and enforceable to the extent permitted by law.

 

 

c.

No Right to Employment.  Nothing contained in this Agreement shall be construed
as giving the Participant any right to be retained, in any position, as an
employee, consultant, or director of the Company or its Affiliates or shall
interfere with or restrict in any way the right of the Company or its
Affiliates, which are hereby expressly reserved, to remove, terminate or
discharge the Participant with or without cause at any time for any reason
whatsoever.  Although over the course of employment terms and conditions of
employment may change, the at-will term of employment of the Participant will
not change.

 

 

d.

Successors.  The terms of this Agreement shall be binding upon and inure to the
benefit of the Company, its successors and assigns, the Participant and the
beneficiaries, executors, administrators, heirs and successors of the
Participant.

 

 

e.

Entire Agreement.  This Agreement, the Plan and, if applicable, the Restrictive
Covenant and Confidentiality Agreement contain the entire agreement and
understanding of the parties hereto with respect to the subject matter contained
herein and supersede all prior communications, representations and negotiations
in respect thereto; provided, however, the Participant understands that the
Participant may have an existing agreement(s) with the Company, through prior
awards, acquisition of a prior employer or otherwise, that may include the same
or similar covenants as those in the Restrictive Covenant and Confidentiality
Agreement referenced above, and acknowledges that the Restrictive Covenant and
Confidentiality Agreement is meant to supplement any such agreement(s) such that
the covenants in the agreements that provide the Company with the greatest
protection enforceable under applicable law shall control, and that the parties
do not intend to create any ambiguity or conflict through the execution of the
Restrictive Covenant and Confidentiality Agreement that would release the
Participant from the obligations the Participant has assumed under the
restrictive covenants in any of these agreements.  No change, modification or
waiver of any provision of this Agreement shall be valid unless the same be in
writing and signed by the parties hereto, except for any changes permitted
without consent of the Participant under the Plan.

 

 

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f.

Governing Law.  This Agreement shall be construed and interpreted in accordance
with the laws of the State of Ohio without regard to principles of conflicts of
law thereof, or principles of conflicts of laws of any other jurisdiction which
could cause the application of the laws of any jurisdiction other than the State
of Ohio. Each of the Company and the Participant 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.

 

 

g.

Headings.  The headings of the Sections hereof are provided for convenience only
and are not to serve as a basis for interpretation or construction and shall not
constitute a part of this Agreement.

 

 

 

By accepting this Agreement through the online acceptance tool on
________________ website, the Participant agrees to all of the terms and
conditions in this Agreement and the Plan and consents to the electronic
delivery of any documents that the Company elects to deliver in connection with
this Agreement.

 

  LSI INDUSTRIES INC.                     By:        

Name:

     

Title:

                    PARTICIPANT                               Name: