Document:

Document

Exhibit 4.7

Description of Registrant’s Securities 
Jefferies Group LLC (the “Company,” “we,” “us,” or “our”) has four classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended: (1) our limited liability company interests, (2) our 5.125% Senior Notes due 2023, (3) our 4.850% Senior Notes due 2027, and (4) our 2.75% Senior Notes Due 2032.
Description of Limited Liability Company Interests
The following is description is a summary of our limited liability company interests and does not purport to be complete.  It is subject to and qualified in its entirety by reference to our Limited Liability Company Agreement of the Company, dated as of March 1, 2013 (the “LLC Agreement”), and certain relevant provisions of the Delaware Limited Liability Company Act (the “Act”) and the General Corporation Law of the State of Delaware (the “DGCL”). 
Authorized Capital
Our LLC Agreement authorizes our board of directors to issue an unlimited number of additional limited liability company interests of a single class for consideration or for no consideration and on the terms and conditions established by our board of directors in its sole discretion without the approval of any members. 
Distributions 
Our board of directors may cause us to distribute any cash held by it to the extent such cash distribution is not in violation of Sections 18-607 or 18-804 of the Act or other applicable law to our members at any time. 
Liquidation 
Upon our dissolution, liquidation or winding up, members shall be entitled to receive, after paying or making reasonable provision for all of the our creditors to the extent required by Section 18-804 of the Act (and subject to any preferred or other equity interests we may issue in the future), the remaining funds of the Company on a pro-rata basis. 
Voting Rights 
Our members have no voting rights except with respect to the following matters specifically set forth in the LLC Agreement, each of which must be approved by all members: 
•our dissolution (to the fullest extent permitted by law) or liquidation, in whole or in part; 
•the filing of a petition seeking or consenting to reorganization or relief under any applicable federal or state bankruptcy law; 
•consenting to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of us or a substantial part of our property; 
•our merger, conversion or consolidation with any other entity; 
•the sale of all or substantially all (which shall have the meaning given to such term in the jurisprudence interpreting and applying Section 271 of the DGCL, as if the Company were a Delaware corporation, as such jurisprudence may continue to develop) of our assets; or 
•any amendment or restatement or termination of our LLC Agreement. 

Other Rights and Preferences

Our limited liability company interests are not subject to any sinking fund or redemption provisions or preemptive, conversion or exchange rights.

Description of the Notes
The following description of our 5.125% Senior Notes due 2023 (the “2023 Notes”), our 4.850% Senior Notes due 2027 (the “2027 Notes”) and our 2.75% Senior Notes Due 2032 (the “2032 Notes”, and together with the 2027 Notes and the 2023 Notes, the “Notes”) is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to, in the case of the 2023 Notes, the indenture dated as of March 12, 2002 between us and the Bank of New York Mellon (“BNYM”), as trustee, as supplemented by a first supplemental indenture, dated as of July 15, 2003, a second supplemental indenture, dated as of December 19, 2012, as supplemented, and as supplemented by a third supplemental indenture, dated as of March 1, 2013 (collectively, the “Original Indenture”), and in the case of the 2027 Notes and the 2032 Notes, the indenture, dated as of May 26, 2016 (the “Senior Indenture”), between us, Jefferies Group Capital Finance Inc. and BNYM, as trustee, which are incorporated by reference as exhibits to the Annual Report on Form 10-K. Unless otherwise specified, the terms “Issuers,” “we,” “our,” and “us” as used herein, refer to Jefferies Group LLC and Jefferies Group Capital Finance Inc., its wholly-owned subsidiary. The terms the “Company” and “Jefferies Group” refers to Jefferies Group LLC, alone. 

General
The initial aggregate principal amount of the 2023 Notes is $600,000,000 the initial aggregate principal amount of the 2027 Notes is $750,000,000 and the initial aggregate principal amount of the 2032 Note is $500,000,000.
Interest Payments and Maturity
The 2023 Notes will mature on January 20, 2023 the 2027 Notes will mature on January 15, 2027 and the 2032 Notes will mature on October 15, 2032. The 2023 Notes bear interest at a rate of 5.125%, the 2027 Notes bear interest at a rate of 4.850%, and the 2032 Notes bear interest at a rate of 2.75%.
Interest on the 2023 Notes accrues from January 18, 2013, or from the most recent interest payment date to which interest has been paid or provided for. We pay interest on the 2023 Notes on January 20 and July 20 of each year, commencing July 22, 2013 to holders of record at the close of business on the immediately preceding January 5 and July 5. 
Interest on the 2027 Notes accrues from January 17, 2017, or from the most recent interest payment date to which interest has been paid or provided for. We pay interest on the 2027 Notes on January 15 and July 15 of each year, commencing July 15, 2017 to holders of record at the close of business on the immediately preceding January 1 and July 1. 
Interest on the 2032 Notes accrues from October 7, 2020, or from the most recent interest payment date to which interest has been paid or provided for. We pay interest on the 2032 Notes on April 15 and October 15 of each year, commencing April 15, 2021 to holders of record at the close of business on the immediately preceding April 1 and October 1.
Interest is be calculated on the basis of a 360-day year comprising twelve 30-day months. Interest on the Notes will be paid by check mailed to the persons in whose names the Notes are registered at the close of business on the applicable record date or, at our option, by wire transfer to accounts maintained by such persons with a bank located in the United States. The principal of the Notes will be paid upon surrender of the Notes at the corporate trust office of the trustee. For so long as the Notes are represented by global notes, we will make payments of interest by wire transfer to The Depository Trust Company (DTC) or its nominee, which will distribute payments to beneficial holders in accordance with its customary procedures.
The Notes are not entitled to any sinking fund.
Ranking 
The Notes will be senior unsecured obligations, each ranking equally with all of our existing and future senior indebtedness and senior to any future subordinated indebtedness. 
Optional Redemption 
    

The Notes are redeemable, in whole at any time or in part from time to time, at our option at a redemption price equal to the greater of: 
(i) 100% of the principal amount of the Notes to be redeemed; or 
 ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including any such portion of such payments of interest accrued as of the date of redemption), discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below), plus 50 basis points with respect to the 2023 Notes, 40 basis points with respect to the 2027 Notes, and 35 basis points with respect to the 2032 Notes, plus accrued interest thereon to the date of redemption. 
Notwithstanding the foregoing, installments of interest on Notes that are due and payable on interest payment dates falling on or prior to a redemption date will be payable on the interest payment date to the registered holders as of the close of business on the relevant record date according to the Notes and the Indenture. 
“Comparable Treasury Issue” means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes. 
“Comparable Treasury Price” means, with respect to any redemption date, (i) the average of four Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (ii) if the Trustee, with respect to the 2023 Notes, or the Quotation Agent, with respect to the 2027 Notes and the 2032 Notes, obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations, or (iii) if only one Reference Treasury Dealer Quotation is received, such quotation. 
“Quotation Agent” means the Reference Treasury Dealer appointed by us. 
“Reference Treasury Dealer” means (i) the Company with respect to the 2023 Notes and Jefferies LLC with respect to the 2027 Notes and 2032 Notes (or its affiliates that are Primary Treasury Dealers) and their respective successors, as applicable; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a “Primary Treasury Dealer”), we will substitute therefore another Primary Treasury Dealer, and (ii) any other Primary Treasury Dealer selected by us. 
“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, with respect to the 2023 Notes, or the Quotation Agent, with respect to the 2027 Notes and the 2032 Notes, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee, with respect to the 2023 Notes, and the Quotation Agent, with respect to the 2027 Notes and the 2032 Notes, by such reference treasury dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date. 
“Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price of such redemption date. 
Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each registered holder of the Notes to be redeemed. Unless we default in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the Notes or portions thereof called for redemption. If less than all the Notes are to be redeemed, the 2023 Notes shall be selected by the Trustee by a method the Trustee deems appropriate, and the 2027 Notes and the 2032 Notes shall be selected in accordance with the procedures of DTC.
Redemption upon a Tax Event 
We may redeem the debt securities in whole, but not in part, on not more than 60 days’ and not less than 30 days’ notice, at a redemption price equal to 100% of their principal amount, plus all accrued but unpaid interest through the redemption date if we determine that as a result of a change in tax law (as defined below):

    

•we have or will become obligated to pay additional amounts as described under the heading “Payment of Additional Amounts”; or
•there is a substantial possibility that we will be required to pay such additional amounts.

A change in tax law that would trigger the provisions of the preceding paragraph is any change in or amendment to the laws, treaties, regulations or rulings of the United States or any political subdivision or taxing authority thereof, or any proposed change in the laws, treaties, regulations or rulings, or any change in the official application, enforcement or interpretation of the laws, treaties, regulations or rulings (including a holding by a court of competent jurisdiction in the United States) or any other action (other than an action predicated on law generally known on or before the date of the applicable prospectus supplement for the particular issuance of debt securities to which this section applies except for proposals before the Congress prior to that date) taken by any taxing authority or a court of competent jurisdiction in the United States, or the official proposal of the action, whether or not the action or proposal was taken or made with respect to us.

Prior to the publication of any notice of redemption, we shall deliver to the trustee an officers’ certificate stating that we are entitled to effect the aforementioned redemption and setting forth a statement of facts showing that the conditions precedent to our right to so redeem have occurred, and an opinion of counsel to such effect based on such statement of facts.

Payment of Additional Amounts 

We will pay to the holder of any debt security who is a United States alien holder (as defined below) such additional amounts as may be necessary so that every net payment of principal of and interest on the debt security, after deduction or withholding for or on account of any present or future tax, assessment or other governmental charge imposed upon or as a result of such payment by the United States or any taxing authority thereof or therein, will not be less than the amount provided in such debt security to be then due and payable. We will not be required, however, to make any payment of additional amounts for or on account of:

•any tax, assessment or other governmental charge that would not have been imposed but for the existence of any present or former connection between such holder (or between a fiduciary, settlor, beneficiary of, member or shareholder of, or possessor of a power over, such holder, if such holder is an estate, trust, partnership or corporation) and the United States, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor), being or having been a citizen or resident or treated as a resident of the United States or being or having been engaged in trade or business or present in the United States or having or having had a permanent establishment in the United States;
•any tax, assessment or other governmental charge that would not have been imposed but for the presentation by the holder of the debt security for payment on a date more than 10 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later;
•any estate, inheritance, gift, sales, transfer, excise, personal property or similar tax, assessment or other governmental charge;
•any tax, assessment or other governmental charge imposed by reason of such holder’s past or present status as a passive foreign investment company, a controlled foreign corporation, a personal holding company or foreign personal holding company with respect to the United States, or as a corporation which accumulates earnings to avoid United States federal income tax;
    

•any tax, assessment or other governmental charge which is payable otherwise than by withholding from payment of principal of, or interest on, such debt security; 
•any tax, assessment or other governmental charge required to be withheld by any paying agent from any payment of principal of, or interest on, any debt security if such payment can be made without withholding by any other paying agent;
•any tax, assessment or other governmental charge that is imposed by reason of a holder’s present or former status as (i) the actual or constructive owner of 10% or more of the total combined voting power of our stock, as determined for purposed of Section 871(h)(3)(B) of the Internal Revenue Code of 1986, as amended (the “Code”), (or any successor provision) or (ii) a controlled foreign corporation that is related to us, as determined for purposes of Section 881(c)(3)(C) of the Code (or any successor provision); 
•any tax, assessment or other governmental charge (i) in the nature of a backup withholding tax, (ii) as a result of the failure to comply with information reporting requirements or (iii) imposed under the Hiring Incentives to Restore Employment Act of 2010 or any substantially similar successor legislation, any current or future regulations or official interpretations thereof, any agreement entered into pursuant thereto, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection therewith; or
•any combinations of items identified in the bullet points above.

Covenants with respect to the 2023 Notes
Limitations on Liens. The Original Indenture provides that we will not, and will not permit any material subsidiary to, incur, issue, assume or guarantee any indebtedness for borrowed money if such indebtedness is secured by a pledge of, lien on, or security interest in any shares of common stock of any material subsidiary, without providing that each series of senior debt securities and, at our option, any other indebtedness ranking equally and ratably with such indebtedness, is secured equally and ratably with (or prior to) such other secured indebtedness. The indenture defines material subsidiary to be any subsidiary that represents 5% or more of our consolidated net worth as of the date of determination. 

Limitations on Transactions with Affiliates. The Original Indenture provides that we will not, and will not permit any subsidiary to, sell, lease, transfer or otherwise dispose of any of our or its properties or assets to, or purchase any property or asset from, or enter into any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any affiliate of ours unless: 

•the transaction with the affiliate is made on terms no less favorable to us or the subsidiary than those that would have been obtained in a comparable transaction with an unrelated person; and
•in the case of any affiliate transaction involving consideration in excess of $25 million in any fiscal year, we deliver to the trustee a certificate to the effect that our board of directors has determined that the transaction complies with the requirements described in the above bullet point and that the transaction has been approved by a majority of the disinterested members of our board of directors.
This covenant will not apply to any employment agreement entered into in the ordinary course of business and consistent with past practices, to any transaction between or among us and our subsidiaries or to transactions entered into prior to the date the 2023 Notes are issued. 
Limitations on Mergers and Sales of Assets. The Original Indenture provides that we will not merge or consolidate or transfer or lease our assets substantially as an entirety, and another person may not transfer or lease its assets substantially as an entirety to us, unless: 

    

•either (1) we are the continuing corporation, or (2) the successor corporation, if other than us, is a U.S. corporation and expressly assumes by supplemental indenture the obligations evidenced by the securities issued pursuant to the indenture; and
•immediately after the transaction, there would not be any default in the performance of any covenant or condition of the indenture.
As defined in the Original Indenture, the word “corporation” includes limited liability companies formed under the laws of Delaware or New York as well as certain other entities which are not business corporations.
In the event of any transaction described in and complying with the conditions listed in this covenant in which we are not the continuing entity, the successor person formed or remaining or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of us, and we would be discharged from all obligations and covenants under the indenture and the 2023 Notes. We have amended this covenant to allow us, in our discretion, to add a subsidiary which is a business corporation as a co-obligor on debt securities issued under the indenture if the successor person is not a business corporation. 

Covenants with respect to the 2027 Notes and the 2032 Notes
Limitations on Liens. The Senior Indenture provides that we will not, and will not permit any material subsidiary to, incur, issue, assume or guarantee any indebtedness for borrowed money if such indebtedness is secured by a pledge of, lien (other than permitted liens) on, or security interest in any voting stock of any material subsidiary, without effectively providing that each series of senior debt securities and, at our option, any other indebtedness ranking equally and ratably with such indebtedness, is secured equally and ratably with (or prior to) such other secured indebtedness. The indenture defines material subsidiary to be any subsidiary that represents 5% or more of our consolidated net worth as of the date of determination. 
Limitations on Mergers and Sales of Assets. The Senior Indenture provides that neither the Company nor Jefferies Group Capital Finance Inc. will merge into, consolidate with or convert into, or convey, transfer or lease its assets substantially as an entirety, and another person may not consolidate with, merge into or convert into either Issuer, unless: 

•either (1) such Issuer is the continuing corporation, or (2) the successor corporation, if other than such Issuer, is a domestic corporation, partnership or trust and expressly assumes by supplemental indenture the obligations evidenced by the securities issued pursuant to the Senior Indenture;
•immediately after the transaction, there would not be any default in the performance of any covenant or condition of the Senior Indenture;
•if as a result of such consolidation or merger or conversion or such conveyance, an Issuer’s assets or properties would become subject to a pledge, lien or other similar encumbrance which would not be permitted under the indenture, such Issuer or its successor takes steps as necessary to effectively secure the securities equally and ratably with (or prior to) all indebtedness secured thereby; and
•we have delivered an officers’ certificate and an opinion of counsel to the trustee as required under the Senior Indenture. 
For purposes of the Senior Indenture, “corporation” is defined to include a corporation, association, company (including a limited liability company), joint-stock company, business trust or other similar entity. 
Other than the restrictions described above, the indenture does not contain any covenants or provisions that would protect holders of the 2027 Notes and/or the 2032 Notes in the event of a highly leveraged transaction. Specifically, the Senior Indenture does not limit the amount of indebtedness we may incur. 
Book-Entry, Delivery and Form 
    

We have obtained the information in this section concerning DTC, Clearstream, Euroclear and the book-entry system and procedures from sources that we believe to be reliable, but we take no responsibility for the accuracy of this information. 
The Notes were issued as fully-registered global notes which will be deposited with, or on behalf of, The Depository Trust Company, New York, New York, which we refer to as “DTC,” and registered, at the request of DTC, in the name of Cede & Co. Beneficial interests in the global Notes will be represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct or indirect participants in DTC. Investors may elect to hold their interests in the global notes through either DTC (in the United States) or (in Europe) through Clearstream Banking S.A., or “Clearstream,” formerly Cedelbank, or through Euroclear Bank S.A./N.V., as operator of the Euroclear System, or “Euroclear.” Investors may hold their interests in the global notes directly if they are participants of such systems, or indirectly through organizations that are participants in these systems. Clearstream and Euroclear will hold interests on behalf of their participants through customers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their respective depositaries, which in turn will hold these interests in customers’ securities accounts in the depositaries’ names on the books of DTC. Citibank, N.A. will act as depositary for Clearstream and JPMorgan Chase Bank will act as depositary for Euroclear. We will refer to Citibank and JPMorgan Chase Bank in these capacities as the “U.S. Depositaries.” Beneficial interests in the global notes will be held in denominations of $5,000 and integral multiples of $1,000 in excess thereof. Except as set forth below, the global notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. 

Notes represented by a global note can be exchanged for definitive Notes, in registered form only if: 
•DTC notifies us that it is unwilling or unable to continue as depositary for that global note and we do not appoint a successor depositary within 90 days after receiving that notice;
•at any time DTC ceases to be a clearing agency registered under the Securities Exchange Act of 1934 and we do not appoint a successor depositary within 90 days after becoming aware that DTC has ceased to be registered as a clearing agency;
•we in our sole discretion determine that global note will be exchangeable for definitive Notes, in registered form and notify the trustee of our decision; or
•an event of default with respect to the Notes represented by that global note, has occurred and is continuing.
 A global note that can be exchanged as described in the preceding sentence will be exchanged for definitive Notes, issued in denominations of $5,000 and integral multiples of $1,000 in excess thereof in registered form for the same aggregate amount. The definitive Notes will be registered in the names of the owners of the beneficial interests in the global note as directed by DTC. 
We will make principal and interest payments on all Notes represented by a global note to the paying agent which in turn will make payment to DTC or its nominee, as the sole registered owner and the sole holder of the Notes represented by the global note, for all purposes under the indenture. Accordingly, we, the trustee and any paying agent will have no responsibility or liability for: 
•any aspect of DTC’s records relating to, or payments made on account of, beneficial ownership interests in a Note represented by a global note;
•any other aspect of the relationship between DTC and its participants or the relationship between those participants and the owners of beneficial interests in a global note held through those participants; or
•the maintenance, supervision or review of any of DTC’s records relating to those beneficial ownership interests.
DTC has advised us that its current practice is to credit participants’ accounts on each payment date with payments in amounts proportionate to their respective beneficial interests in the principal amount of the global note as shown on DTC’s records, upon DTC’s receipt of funds and corresponding detail information. The underwriter will initially designate the accounts to be credited. Payments by participants to owners of beneficial interests in a global note will 
    

be governed by standing instructions and customary practices, as is the case with securities held for customer accounts registered in “street name,” and will be the sole responsibility of those participants. Book-entry Notes may be more difficult to pledge because of the lack of a physical note. 
DTC 
So long as DTC or its nominee is the registered owner of a global note, DTC or its nominee, will be considered the sole owner and holder of the Notes represented by that global note for all purposes of the indenture. Owners of beneficial interests in the Notes will not be entitled to have the Notes registered in their names, will not receive or be entitled to receive physical delivery of the Notes in definitive form and will not be considered owners or holders of Notes under the indenture. Accordingly, each person owning a beneficial interest in a global note must rely on the procedures of DTC and, if that person is not a DTC participant, on the procedures of the participant through which that person owns its interest, to exercise any rights of a holder of Notes. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of the securities in certificated form. These laws may impair the ability to transfer beneficial interests in a global note. Beneficial owners may experience delays in receiving distributions on their Notes since distributions will initially be made to DTC and must then be transferred through the chain of intermediaries to the beneficial owner’s account. 
We understand that, under existing industry practices, if we request holders to take any action, or if an owner of a beneficial interest in a global note desires to take any action which a holder is entitled to take under the indenture, then DTC would authorize the participants holding the relevant beneficial interests to take that action and those participants would authorize the beneficial owners owning through such participants to take that action or would otherwise act upon the instructions of beneficial owners owning through them. 

Beneficial interests in a global note will be shown on, and transfers of those ownership interests will be effected only through, records maintained by DTC and its participants for that global note. The conveyance of notices and other communications by DTC to its participants and by its participants to owners of beneficial interests in the Notes will be governed by arrangements among them, subject to any statutory or regulatory requirements in effect. 
DTC has advised us that it is a limited-purpose trust company organized under the New York banking law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered under the Securities Exchange Act of 1934. 
DTC holds the securities of its participants and facilitates the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of its participants. The electronic book-entry system eliminates the need for physical certificates. DTC’s participants include securities brokers and dealers, including the underwriter, banks, trust companies, clearing corporations and certain other organizations, some of which, and/or their representatives, own DTC. Banks, brokers, dealers, trust companies and others that clear through or maintain a custodial relationship with a participant, either directly or indirectly, also have access to DTC’s book-entry system. The rules applicable to DTC and its participants are on file with the Securities and Exchange Commission. 
DTC has advised us that the above information with respect to DTC has been provided to its participants and other members of the financial community for informational purposes only and is not intended to serve as a representation, warranty or contract modification of any kind. 
Clearstream 
Clearstream has advised us that it is incorporated under the laws of Luxembourg as a professional depositary. Clearstream holds securities for its participating organizations, or “Clearstream Participants,” and facilitates the clearance and settlement of securities transactions between Clearstream Participants through electronic book-entry changes in accounts of Clearstream Participants, thereby eliminating the need for physical movement of certificates. Clearstream provides to Clearstream Participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic securities markets in several countries. As a professional depositary, Clearstream is subject to regulation by the Luxembourg Commission for the Supervision of the Financial Sector (Commission de 
    

Surveillance du Secteur Financier). Clearstream Participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations and may include the underwriter. Clearstream’s U.S. Participants are limited to securities brokers and dealers and banks. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream Participant either directly or indirectly. 
Distributions with respect to Notes held beneficially through Clearstream will be credited to cash accounts of Clearstream Participants in accordance with its rules and procedures, to the extent received by the U.S. Depositary for Clearstream. 
Euroclear 
Euroclear has advised us that it was created in 1968 to hold securities for participants of Euroclear, or “Euroclear Participants,” and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Euroclear performs various other services, including securities lending and borrowing and interacts with domestic markets in several countries. Euroclear is operated by Euroclear Bank S.A./N.V., or the “Euroclear Operator,” under contract with Euroclear plc, a U.K. corporation. All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not Euroclear plc. Euroclear plc establishes policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants include banks, including central banks, securities brokers and dealers and other professional financial intermediaries and may include the underwriter. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly. 
The Euroclear Operator is a Belgian bank. As such it is regulated by the Belgian Banking and Finance Commission. 
Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System, and applicable Belgian law, which we will refer to in this prospectus supplement as the “Terms and Conditions.” The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no record of or relationship with persons holding through Euroclear Participants. 
Distributions with respect to Notes held beneficially through Euroclear will be credited to the cash accounts of Euroclear Participants in accordance with the Terms and Conditions, to the extent received by the U.S. Depositary for Euroclear. 
Euroclear has further advised us that investors that acquire, hold and transfer interests in the Notes by book-entry through accounts with the Euroclear Operator or any other securities intermediary are subject to the laws and contractual provisions governing their relationship with their intermediary, as well as the laws and contractual provisions governing the relationship between such an intermediary and each other intermediary, if any, standing between themselves and the global notes. 
Global Clearance and Settlement Procedures 
Initial settlement for the Notes will be made in immediately available funds. Secondary market trading between DTC participants will occur in the ordinary way in accordance with DTC rules and will be settled in immediately available funds using DTC’s Same-Day Funds Settlement System. Secondary market trading between Clearstream Participants and/or Euroclear Participants will occur in the ordinary way in accordance with the applicable rules and operating procedures of Clearstream and Euroclear and will be settled using the procedures applicable to conventional eurobonds in immediately available funds. 
Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream Participants or Euroclear Participants, on the other, will be effected through DTC in accordance with DTC rules on behalf of the relevant European international clearing system by its U.S. Depositary; 
    

however, such cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its U.S. Depositary to take action to effect final settlement on its behalf by delivering or receiving Notes through DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream Participants and Euroclear Participants may not deliver instructions directly to their respective U.S. Depositaries. 
Because of time-zone differences, credits of Notes received through Clearstream or Euroclear as a result of a transaction with a DTC participant will be made during subsequent securities settlement processing and dated the business day following the DTC settlement date. Such credits or any transactions in such Notes settled during such processing will be reported to the relevant Euroclear Participants or Clearstream Participants on such business day. Cash received in Clearstream or Euroclear as a result of sales of Notes by or through a Clearstream Participant or a Euroclear Participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC. 
Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of Notes among participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform such procedures and such procedures may be modified or discontinued at any time. Neither we nor the paying agent will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective direct or indirect participants of their obligations under the rules and procedures governing their operations. 
Events of Default
Each of the following events will constitute an event of default under the indenture with respect to the Notes issued:  
•default in the payment of any interest upon any debt security of such series when it becomes due and payable, and continuance of such default for a period of 30 days; or
•default in the payment of the principal of or any premium on any debt security of such series when due; or
•our failure to made any required scheduled installment payment, for 30 days on debt securities of such series; or
•failure to perform for 90 days after notice any other covenant in the relevant indenture other than a covenant included in the relevant indenture solely for the benefit of a series of debt securities other than such series; or
•our failure to pay beyond any applicable grace period, or the acceleration of, indebtedness in excess of $10,000,000, with respect to the 2023 Notes, and $50,000,000, with respect to the 2027 Notes and the 2032 Notes; or
•certain bankruptcy, or insolvency events, whether voluntary or not

Discharge, Defeasance and Covenant Defeasance
Regarding the 2023 Notes
After we have deposited with the trustee, cash or government securities, in trust for the benefit of the holders sufficient to pay the principal of, premium, if any, and interest on the debt securities of such series when due, and satisfied certain other conditions, including receipt of an opinion of counsel that holders will not recognize taxable gain or loss for federal income tax purposes, then:
•we will be deemed to have paid and satisfied our obligations on all outstanding debt securities of such series, which is known as defeasance and discharge (Section 14.02 of the Original Indenture); or
•we will cease to be under any obligation, other than to pay when due the principal of, premium, if any, and interest on such debt securities, relating to the debt securities of such series, which is known as covenant defeasance (Section 14.03 of the Original Indenture).
    

When there is a defeasance and discharge, the applicable indenture will no longer govern the debt securities of such series, we will no longer be liable for payments required by the terms of the debt securities of such series and the holders of such debt securities will be entitled only to the deposited funds. When there is a covenant defeasance, however, we will continue to be obligated to make payments when due if the deposited funds are not sufficient.
Regarding the 2027 Notes and the 2032 Notes
The provisions for full defeasance and covenant defeasance described below apply to each senior and subordinated debt security. When there is a defeasance and discharge, the applicable indenture will no longer govern the debt securities of such series; we will no longer be liable for payments required by the terms of the debt securities of such series and the holders of such debt securities will be entitled only to the deposited funds. When there is a covenant defeasance, however, we will continue to be obligated to make payments when due if the deposited funds are not sufficient. 
Defeasance and Discharge. If there is a change in United States federal tax law, we can legally release ourselves from all payment and other obligations on any debt securities. This is called full defeasance and is further described in Section 13.02 of the Senior Indenture. For us to do so, each of the following must occur: 
•We must deposit in trust for the benefit of all holders of those debt securities money or a combination of money and United States government or United States government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on those debt securities on their various due dates;
•There must be a change in current United States federal tax law or an Internal Revenue Service ruling that lets us make the above deposit without causing the holders to be taxed on those debt securities any differently than if we did not make the deposit and just repaid those debt securities ourselves. Under current federal tax law, the deposit and our legal release from a debt security would be treated as though we took back the debt security and returned an appropriate share of the cash and notes or bonds deposited in trust. In that event, there may be a recognized gain or loss on the debt security;
•We must deliver to the trustee a legal opinion of our counsel confirming the tax law change described above; and
•In the case of the subordinated debt securities, the following requirements must also be met: 
o     No event or condition may exist that would prevent us from making payments of principal, premium or interest on those subordinated debt securities on the date of the deposit referred to above or during the 90 days after that date; and
o     We must deliver to the trustee an opinion of counsel to the effect that (a) the trust funds will not be subject to any rights of holders of senior indebtedness and (b) after the 90-day period referred to above, the trust funds will not be subject to any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, except that if a court were to rule under any of those laws in any case or proceeding that the trust funds remained our property, then the relevant trustee and the holders of the subordinated debt securities would be entitled to some enumerated rights as secured creditors in the trust funds.
If we ever fully defeased a debt security, the trust deposit would make any and all payments on the applicable debt security. We would not be responsible for any payment in the event of any shortfall, and we will be deemed to have paid and satisfied our obligations on all outstanding debt securities of such series. 
Covenant Defeasance. Under current United States law, we can make the same type of deposit described above and be released from the restriction on liens described and any other restrictive covenants relating to a debt security. This is called covenant defeasance and is further described in Section 13.03 of the Senior Indenture. In that event, you would lose the protection of those restrictive covenants. In order to achieve covenant defeasance for any debt securities, we must: 
•deposit in trust for the benefit of the holders of those debt securities money or a combination of money and United States government or United States government agency notes or bonds that will generate enough 
    

cash to make interest, principal and any other payments on those debt securities on their various due dates; and
•deliver to the trustee a legal opinion of our counsel confirming that under current United States federal income tax law we may make the above deposit without causing the holders to be taxed on those debt securities any differently than if we did not make the deposit and just repaid those debt securities ourselves.
In addition, in order to achieve covenant defeasance for any subordinated debt securities that have the benefit of any restrictive covenants, both conditions described in the last bullet point under “Defeasance” above must be satisfied. Subordinated debt securities will not have the benefit of any restrictive covenants unless the applicable prospectus supplement specifically provides that they do. 
We will cease to be under any obligation, other than to pay when due the principal of, premium, if any, and interest on such debt securities, relating to the debt securities of such series (Section 13.04 of the Senior Indenture). 
Concerning the Trustee under the Indentures 
We have and may continue to have banking and other business relationships with The Bank of New York Mellon, or any subsequent trustee, in the ordinary course of business.ex_222126.htm

Exhibit 10.1

 

 

FORM OF CHANGE IN CONTROL AGREEMENT

 

THIS CHANGE IN CONTROL AGREEMENT (the “Agreement”), is effective as of __________ , between LSI INDUSTRIES INC., and Ohio corporation (the “Company”), and _________ (“Executive”).

 

WHEREAS, the Company considers it in the best interests of its shareholders to foster the continued employment of key management personnel; and

 

WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company and its shareholders; and

 

WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s key management personnel, including the Executive, to their assigned duties without distraction in the face of the possibility of a Change in Control;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows:

 

1.     Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof.

 

2.     Term of Agreement. The Term of this Agreement shall commence on the date hereof and shall continue in effect twenty-four (24) calendar months after the calendar month in which a Change in Control occurs. Notwithstanding the foregoing, this Agreement shall terminate if the Executive ceases to be an employee of the Company and its subsidiaries for any reason prior to a Change in Control. However, anything in this Agreement (including the preceding sentence) to the contrary notwithstanding, if a Change in Control occurs and if, within twelve months prior to the date on which such Change in Control occurs, the Executive’s employment with the Company is terminated by the Company without Cause or an event occurs that would, if it took place after the Change in Control, constitute Good Reason for termination of employment by the Executive, then for purposes of this Agreement such termination of employment of the Executive by the Company without Cause or event constituting Good Reason shall be deemed to occur during the twenty-four (24) month period following the Change in Control and, if the Executive terminates his employment for such Good Reason before or after the Change in Control, such termination of employment by the Executive shall likewise be deemed to occur during the twenty-four (24) month period following the Change in Control.

 

 

 

 

3.     Company’s Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive’s covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 2, Section 6.3, or Section 9.1 hereof, no amounts shall be payable under this Agreement unless the Executive’s employment with the Company terminates following a Change in Control and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment enforceable against the Company nor, except as provided in Section 4 below, enforceable against the Executive, and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company.

 

4.     The Executive’s Covenants. The Executive agrees to remain in the employ of the Company, subject to the terms and conditions of this Agreement, if a Potential Change in Control occurs during the Term and the Executive is then in the employ of the Company, until the earliest of (a) the date which is six (6) months from the date of such Potential Change in Control, (b) the date of a Change in Control, (c) the date of termination by the Executive of the Executive’s employment for Good Reason or by reason of death, Disability or Retirement, or (d) the termination by the Company of the Executive’s employment for any reason; provided that Executive’s agreement to remain in the employ of the Company shall be subject to the condition that no adverse change affecting the Executive occurs after the Potential Change in Control, including, but not limited to, changes in his title, duties, responsibilities, authority, reporting relationships, work location, compensation, benefits or indemnification rights.

 

5.     Certain Compensation Other Than Severance Payments.

 

5.1.     If the Executive’s employment shall be terminated for any reason other than by the Company for Cause following a Change in Control and during the Term, the Company shall pay the Executive his full salary through the date of termination at the rate in effect immediately prior to the date of termination or, if higher, the rate in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, together with all compensation and benefits payable to the Executive through the date of termination under the terms of the Company’s compensation and benefit plans, programs and arrangements as in effect immediately prior to the date of termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason.

 

5.2.     If the Executive’s employment shall be terminated for any reason other than by the Company for Cause following a Change in Control and during the Term, the Company shall pay the Executive his (i) annual bonus at the target level for the fiscal year of the Company preceding the fiscal year of the Company in which the termination occurs, if the bonus for such prior fiscal year had not been paid at the time of termination and (ii) his annual bonus at the target level for the year in which the termination occurs prorated through the termination date. Additionally, such bonuses shall be paid within 15 days following the termination date.

 

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5.3.     Subject to Section 6.1 hereof, if the Executive’s employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay to the Executive the Executive’s normal post−termination compensation and benefits as such payments become due, including, without limitation, all earned but unused vacation. Any such post−termination compensation and benefits shall be determined under, and paid in accordance with, the Company’s retirement, insurance, deferred compensation and other compensation and benefit plans, programs and arrangements as in effect immediately prior to the date of termination or, if more favorable to the Executive, as in effect immediately prior to the occurrence of the first event or circumstance constituting Good Reason. Executive also shall be entitled to continue to participate in medical and dental plans as permitted by the terms of the applicable plan, with the full COBRA payment to be paid by the Company, with benefits substantially similar to those of the Company in effect prior to the Change in Control for ________ months beginning on the later of the effective date of the Change in Control or termination of Executive’s employment. In the event the applicable plans do not permit coverage, Executive shall be paid an additional cash payment, on a monthly basis, in an amount that equals the COBRA payment for the ________ month period or such portion of this period during which medical and dental plans were not provided.

 

5.4.     In the event of a Change in Control, unless the successor company, or a parent of the successor company in the Change in Control agrees to assume, replace, or substitute all stock options (including, without limitation, stock options with performance measures) granted to the Executive by the Company under the 2019 Omnibus Award Plan (the “2019 Plan”) during the term of Executive’s employment with the Company (as of the consummation of such Change in Control) with stock options on substantially identical terms, as determined by the Compensation Committee of the Board of Directors (the “Committee”), if the Executive’s employment with the Company or its Affiliates (or any successor thereto) is terminated within twenty four (24) months following a Change in Control either (x) by the Company or its Affiliates (or any successor thereto) without Cause or (y) by the Executive with Good Reason, all such stock options shall become vested and exercisable in their entirety as of the date of such termination.

 

5.5.     In the event of a Change in Control, unless the successor company, or a parent of the successor company in the Change in Control agrees to assume, replace, or substitute all unvested portions of restrict stock awards and/or restricted stock unit awards (collectively, “RSUs”) granted to the Executive by the Company under the 2019 Plan during the term of Executive’s employment with the Company (as of the consummation of such Change in Control) with RSUs on substantially identical terms, as determined by the Committee, if the Executive’s employment with the Company or its Affiliates (or any successor thereto) is terminated within twenty four (24) months following a Change in Control either (x) by the Company or its Affiliates (or any successor thereto) without Cause or (y) by the Executive with Good Reason, all such RSUs shall become vested and exercisable in their entirety as of the date of such termination.

 

5.6.     In the event of a Change in Control, all of the performance stock units (“PSUs”) granted to the Executive by the Company under the 2019 Plan during the term of Executive’s employment with the Company (as of the consummation of such Change in Control) will convert at the target performance level into time-based RSUs vesting in equal installments over three years commencing from the date of the original grant date of the PSUs.

 

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6.     Severance Payments.

 

6.1.     Subject to Section 6.2 and Section 6.3 hereof, if the Executive has a Separation from Service following a Change in Control and during the Term either by the Company or by the Executive, other than (a) by the Company for Cause, (b) by reason of death or Disability, or (c) by the Executive without Good Reason (any such Separation from Service being hereafter sometimes referred to as a “Compensable Termination”), then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 (“Severance Payments”), in addition to any payments and benefits to which the Executive is entitled under Sections 5 and 6.3 hereof. Notwithstanding the foregoing, the Executive shall not be eligible to receive any payment or benefit provided for in this Section 6.1 until the Executive shall have executed a release substantially in the form of Exhibit A hereto effective as of the date of the Compensable Termination or a date subsequent thereto and shall not have revoked said release. No later than the latest date for payment provided for in Section 6.2, the Executive must have properly executed the release and returned it to the Company, and such release must have become fully effective and irrevocable. If that condition is not met, the Executive shall not be entitled at any time to any payment or benefit provided for in this Section 6.1. The Severance Payments are in lieu of any severance benefits that would otherwise be payable or provided pursuant to any severance plan or practice of the Company other than those payments and benefits to which the Executive is entitled under Sections 5 and 6.3 hereof.

 

(i)     The Company shall pay the Executive, at the time provided in Section 6.2 below, a lump sum cash payment equal to _______ times (____ x) the Executive’s annual base salary at the rate in effect immediately prior to the Compensable Termination or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason (“Base Salary”).

 

(ii)     The Company shall pay the Executive, at the time provided in Section 6.2 below, a lump sum cash payment equal to _______ times (___ x) the full amount of the Executive’s target level bonus (as may be defined in the Company’s short-term incentive plan (or similar plan)) for the fiscal year of the Company in which the Compensable Termination occurs or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason.

 

(iii)     The Company will pay the Executive for all earned but unused vacation leave at the time of the Compensable Termination.

 

6.2.     All payments to be made pursuant to subsections (i) through (iii) of Section 6.1 above shall be made within 45 calendar days after the date on which a Compensable Termination occurs. It is the intention of the parties that the condition of a Compensable Termination constitutes a “substantial risk of forfeiture” within the meaning of the Treasury Regulations under section 409A of the Code and that the payments pursuant to subsection (i) through (iii) of Section 6.1 above meet the “short-term deferral” exception under such Treasury Regulations; and the parties shall interpret this Agreement accordingly.

 

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6.3.     In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then Executive’s benefits under this Agreement shall be either

 

(i)     delivered in full, or

 

(ii)     delivered as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by Executive on an after−tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. If a reduction in severance and other benefits constituting “parachute payments” is necessary so that benefits are delivered to a lesser extent, reduction will occur in the following order: reduction of cash payments, cancellation of equity awards granted within the twelve (12) month period prior to a “change in control” (as determined under Code Section 280G) that are deemed to have been granted contingent upon the change in control (as determined under Code Section 280G), cancellation of accelerated vesting of equity awards, reduction of employee benefits.

 

Unless the Company and Executive otherwise agree in writing, any determination required under this Section shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Section 280G and 4999 of the Code. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.

 

7.     Payments During Dispute. Any payments to which the Executive may be entitled under this Agreement, including, without limitation, under sections 5 and 6 hereof, shall be made forthwith on the applicable date(s) for payment specified in this Agreement. If for any reason the amount of any payment due to the Executive cannot be finally determined on that date, such amount shall be estimated on a good faith basis by the Company and the estimated amount shall be paid no later than 10 days after such date. As soon as practicable thereafter, the final determination of the amount due shall be made and any adjustment requiring a payment to or from the Executive shall be made as promptly as practicable.

 

8.     No Mitigation. The Company agrees that, if the Executive’s employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof or any other provision of this Agreement. Further, the amount of any payment or benefit provided for in this Agreement shall not be reduced (a) by any compensation earned by the Executive as the result of employment by another employer, (b) by retirement benefits, (c) by offset against any amount claimed to be owed by the Executive to the Company, or (d) otherwise.

 

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9.     Successors; Binding Agreement.

 

9.1.     In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform the Company’s obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession during the Term shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive’s employment for Good Reason after a Change in Control and during the Term, except that, for purposes of implementing the foregoing, the date on which the Executive’s employment terminates (for any reason other than Cause) within 30 days before, or at any time during the Term and on or after, the date on which any such succession becomes effective during the Term shall be deemed the date of the Compensable Termination.

 

9.2.     This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive’s estate.

 

10.   Notices. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed, if to the Executive, to his most recent address shown on the books and records of the Company at the time notice is given and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt:

 

To the Company:

 

LSI Industries Inc.

10000 Alliance Road

Cincinnati, Ohio 45242

Attention: General Counsel

 

With a required copy (which shall not constitute notice) to:

 

Keating Muething & Klekamp PLL

One East Fourth Street, Suite 1400

Cincinnati, Ohio 45202

Attention: Mark Reuter

 

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11.   Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement constitutes the entire agreement of the parties concerning the specific subject matter addressed by this Agreement and supersedes all prior agreements addressing the terms and conditions contained herein. Except as set forth in Sections 5.4, 5.5 and 5.6, nothing in this Agreement is intended to amend or otherwise alter the change in control provisions or any other provisions of any (a) stock option or other compensation or incentive award that may heretofore have been or may hereafter be granted to the Executive, or (b) employee benefit or fringe benefit plan in which the Executive may heretofore have been or may hereafter be a participant. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio. All references to sections of the Code or the Exchange Act shall be deemed also to refer to any successor provisions to such sections and to United States Internal Revenue Service or United States Securities and Exchange Commission regulations and official guidance published thereunder. Any payments provided for hereunder shall be subject to any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration.

 

12.   Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

13.   Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

 

14.   Settlement of Disputes; Arbitration.

 

14.1.     All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive’s claim has been denied.

 

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14.2.     Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in the Cincinnati, Ohio metropolitan area in accordance with the employment dispute resolution rules of the American Arbitration Association then in effect. If Executive substantially prevails in any dispute or controversy, the arbitrator shall require the Company to reimburse the Executive for the payment of all legal fees and expenses incurred by the Executive in connection with such dispute or controversy. Judgment may be entered on the arbitrator’s award in any court having jurisdiction.

 

15.   Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below:

 

(A)     “Affiliate” shall have the meaning set forth in Rule 12b−2 promulgated under Section 12 of the Exchange Act.

 

(B)     “Base Salary” shall have the meaning set forth in subsection (iii) of Section 6.1.

 

(C)     “Beneficial Owner” shall have the meaning set forth in Rule 13d−3 under the Exchange Act.

 

(D)     “Board” shall mean the Board of Directors of the Company.

 

(E)     “Cause” for termination by the Company of the Executive’s employment shall mean any of the following: (A) the good faith determination by the Committee that the Executive has ceased to perform his or her duties to the Company (other than as a result of his or her incapacity due to physical or mental illness or injury), which failure amounts to an intentional and extended neglect of his or her duties, provided that no such failure shall constitute Cause unless the Executive has been given notice of such failure and (if cure is reasonably possible) has not cured such act or omission within thirty (30) days following receipt of such notice, (B) the Executive having been convicted of, or plead guilty or no contest to, a felony or any crime involving as a material element fraud or dishonesty, (C) the consistent failure of the Executive to follow the lawful instructions of the Board or his or her direct superiors, which failure amounts to an intentional and extended neglect of his or her duties to the Company thereof (which is not cured within 30 days after notice thereof is provided to Executive).

 

(F)     A “Change in Control” shall mean the occurrence of any of the following events:

 

(i) any Person, excluding the Company, any Subsidiary of the Company, or any employee benefit plan sponsored or maintained by the Company (including any trustee of any such plan acting in his or her capacity as trustee), becoming the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing 25% or more of the total combined voting power of the Company’s then outstanding securities;

 

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(ii) the merger, consolidation or other business combination of the Company (a “Transaction”), other than a Transaction immediately following which the stockholders of the Company immediately prior to the Transaction continue to be the beneficial owners of securities of the resulting entity representing more than 75% of the voting power in the resulting entity, in substantially the same proportions as their ownership of Company voting securities immediately prior to the Transaction;

 

(iii) the sale of all or substantially all of the Company’s assets, other than a sale immediately following which the shareholders of the Company immediately prior to the sale are the beneficial owners of securities of the purchasing entity representing more than 75% of the voting power in the purchasing entity, in substantially the same proportions as their ownership of Company voting securities immediately prior to the sale of assets; or

 

(iv) during any one year period, individuals who at the beginning of such period constitute the Board and any new director whose election to the Board or nomination for election by the Company’s shareholders was approved by a vote of at least two−thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority of the Board. Notwithstanding anything herein to the contrary, and only to the extent that a payment hereunder is subject to Code Section 409A and payment hereunder pursuant to the application of the definition of “Change in Control” above would cause such payment not to otherwise comply with Code Section 409A, such payment may occur upon a Change in Control only to the extent that the event constitutes a “change in the ownership or effective control” of the Company or a “change in the ownership of a substantial portion of the assets” of the Company under Code Section 409A.

 

(G)      “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

(H)     “Company” shall mean LSI Industries Inc. and, except in determining under Section 15(F) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise.

 

(I)     “Compensable Termination” shall have the meaning set forth in Section 6.1.

 

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(J)     “Disability” shall be deemed the reason for the termination by the Company of the Executive’s employment, if, as determined by the Company, (i) he or she is deemed to have a “disability” (or other words to such effect) under any long-term disability plan maintained by the Company or employment agreement Executive may have with the Company or (ii) in the absence of such a plan or employment agreement, the complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which the Executive was employed or served when such disability commenced, as determined by the Committee based upon medical evidence acceptable to it.

 

(K)     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

 

(L)     “Executive” shall mean the individual named in the first paragraph of this Agreement.

 

(M)     “Good Reason” for termination by the Executive of the Executive’s employment shall mean the occurrence (without the Executive’s express written consent) after any Change in Control, of any one of the following acts by the Company, or failures by the Company to act:

 

(i)     a change in the Executive’s status, title, position or responsibilities (including reporting responsibilities) which, in the Executive’s reasonable judgment, represents an adverse change from or limitation with respect to his status, title, position or responsibilities as in effect immediately prior thereto; the assignment to or diminution of the Executive of any duties or responsibilities which, in the Executive’s reasonable judgment, are inconsistent with his status, title, position or responsibilities;

 

(ii)     a material diminution in the Executive’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 Executive retains authority;

 

(iv)     the Company fails to pay or provide any material 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 Executive is a party or in which the Executive participates;

 

(v)     the relocation of the Executive’s principal place of employment to a location which increases the Executive’s one−way commuting distance by more than 50 miles, or the Company’s requiring the Executive to travel on business other than to an extent substantially consistent with the Executive’s business travel obligations prior to the Change in Control;

 

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(vi)     a significant adverse change occurs, whether of a quantitative or qualitative nature, in the indemnification protection provided to the Executive 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 Section 9.1.

 

The Executive’s right to terminate the Executive’s employment for Good Reason shall not be affected by the Executive’s incapacity due to physical or mental illness. The Executive must notify the Company of the existence of a condition described in (i) through (vii) above within ninety (90) days of the initial existence of the condition, and the Company may remedy the condition within thirty (30) days and not be required to pay any amount hereunder due to such condition.

 

(N)     “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company.

 

(O)      “Potential Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:

 

(viii)     the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

 

(ix)     the Company or any Person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control;

 

(x)     any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates); or

 

(xi)     the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

 

(P)     “Retirement” shall be deemed the reason for the termination by the Executive of the Executive’s employment if such employment is terminated in accordance with the Company’s retirement policy, including early retirement, generally applicable to its salaried employees.

 

- 11 -

 

 

(Q)     “Separation from Service” means termination of employment with the Company. However, the Executive shall not be deemed to have a Separation from Service if he continues, at his option, to provide services to the Company in a capacity other than as an employee and if he is providing services at an annual rate that is fifty percent (50%) or more of the services he rendered, on average, during the immediately preceding three (3) full calendar years of employment with the Company (or if employed by the Company less than three years, such lesser period) and the annual remuneration for his services is fifty percent (50%) or more of the annual remuneration earned during the final three (3) full calendar years of employment (of if less, such lesser period); provided, however, that a Separation from Service will be deemed to have occurred if his service with the Company is reduced to an annual rate that is less than Fifty percent (50%) of the services he rendered, on average, during the immediately preceding three (3) full calendar years of employment with the Company (or if employed by the Company less than three (3) years, such lesser period) or the annual remuneration for his services is less than fifty percent (50%) of the annual remuneration earned during the three (3) full calendar years of employment with the Company (or if less, such lesser period).

 

(R)     “Severance Payments” shall have the meaning set forth in Section 6.1 hereof.

 

(S)     “Subsidiary” means a corporation or other form of business association of which shares (or other ownership interests) having more than 50% of the voting power are owned or controlled, directly or indirectly, by the Company.

 

(T)     “Term” shall mean the period of time described in Section 2 hereof (including any extension or continuation described therein).

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

 

	
			 

				
			LSI INDUSTRIES INC.

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				
			 

				
			 

			
	
			 

				
			 

				
			Name:

				
			 

			
	
			 

				
			 

				
			Title:

				
			 

			
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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EXHIBIT A

 

LSI INDUSTRIES INC.

RELEASE OF CLAIMS

 

This Release of Claims (“Agreement”) is made by and between LSI Industries Inc. (the “Company”), and ____________ (“Executive”).

 

WHEREAS, Executive has agreed to enter into a release of claims in favor of the Company upon certain events specified in the Change in Control Agreement by and between the Company and Executive (the “Change in Control Agreement”).

 

NOW THEREFORE, in consideration of the mutual promises made herein, the Parties hereby agree as follows:

 

1.     Termination. Executive’s employment from the Company terminated on [DATE].

 

2.     Confidential Information. Executive shall continue to maintain the confidentiality of all confidential and proprietary information of the Company and shall continue to comply with the terms and conditions of the [Restrictive Covenant and Confidentiality Agreement] between Executive and the Company (the “Restrictive Covenant Agreement”). Executive shall return all the Company property and confidential and proprietary information in his possession to the Company on the Effective Date of this Agreement.

 

3.     Payment of Salary. Executive acknowledges and represents that the Company has paid all salary, wages, bonuses, accrued vacation, commissions and any and all other benefits due to Executive, except for payments due under Section 5.2 and 5.3 of the Change in Control Agreement and as set forth on Annex 1 hereto.

 

4.     Release of Claims. Except as set forth in the last paragraph of this Section 4, Executive agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Executive by the Company. Executive, on behalf of himself, and his respective heirs, family members, executors and assigns, hereby fully and forever releases the Company and its past, present and future officers, agents, directors, employees, investors, shareholders, administrators, affiliates, divisions, subsidiaries, parents, predecessor and successor corporations, and assigns, from, and agrees not to sue or otherwise institute or cause to be instituted any legal or administrative proceedings concerning any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that he may possess arising from any omissions, acts or facts that have occurred up until and including the Effective Date of this Agreement including, without limitation,

 

(a)     any and all claims relating to or arising from Executive’s employment relationship with the Company and the termination of that relationship;

 

A-1

 

 

(b)     any and all claims relating to, or arising from, Executive’s right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

 

(c)     any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; breach of contract, both express and implied; breach of a covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; and conversion;

 

(d)     any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, and The Worker Adjustment and Retraining Notification Act;

 

(e)     any and all claims for violation of the federal, or any state, constitution;

 

(f)     any and all claims arising out of any other laws and regulations relating to employment or employment discrimination; and

 

(g)     any and all claims for attorneys’ fees and costs.

 

Executive agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. Nothing in this Agreement waives Executive’s rights to indemnification or any payments under any fiduciary insurance policy, if any, provided by any act or agreement of the Company, state or federal law or policy of insurance.

 

5.     Acknowledgment of Waiver of Claims under ADEA. Executive acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary. Executive and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement. Executive acknowledges that the consideration given for this waiver and release Agreement is in addition to anything of value to which Executive was already entitled. Executive further acknowledges that he has been advised by this writing that (a) he should consult with an attorney prior to executing this Agreement; (b) he has at least twenty−one (21) days within which to consider this Agreement; (c) he has seven (7) days following the execution of this Agreement by the parties to revoke the Agreement; (d) this Agreement shall not be effective until the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs for doing so, unless specifically authorized by federal law. Any revocation should be in writing and delivered to [HR Contact Name] at the Company by close of business on the seventh day from the date that Executive signs this Agreement.

 

A-2

 

 

6.     No Pending or Future Lawsuits. Executive represents that he has no lawsuits, claims, or actions pending in his name, or on behalf of any other person or entity, against the Company or any other person or entity referred to herein. Executive also represents that he does not intend to bring any claims on his own behalf or on behalf of any other person or entity against the Company or any other person or entity referred to herein.

 

7.     Application for Employment. Executive understands and agrees that, as a condition of this Agreement, he shall not be entitled to any employment with the Company, its subsidiaries, or any successor, and he hereby waives any right, or alleged right, of employment or re−employment with the Company.

 

8.     No Cooperation. Executive agrees that he will not counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against the Company and/or any officer, director, employee, agent, representative, shareholder or attorney of the Company, unless under a subpoena or other court order to do so.

 

9.     Cooperation with Company. Executive agrees to cooperate, at the request of the Company, in the defense and/or prosecution of any charges, claims, investigations (internal or external), administrative proceedings and/or lawsuits relating to matters occurring during or relating to Executive’s period of employment about which Executive may have relevant information. Executive shall further reasonably cooperate with regard to the transition of Executive’s job duties and business relationships. Executive agrees to respond to reasonable requests for information from the Company in a timely manner. Executive shall be compensated at the hourly rate for providing such assistance equating to his Base Salary and paid monthly.

 

10.     Non-Disparagement.     Executive shall not engage, except as required by applicable law, in any conduct that involves the making or publishing of written or oral statements or remarks (including the repetition or distribution of derogatory rumors, allegations, negative reports or comments) that are disparaging, deleterious or damaging to the integrity, reputation or goodwill of the Company.

 

11.     No Admission of Liability. No action taken by the Company, either previously or in connection with this Agreement shall be deemed or construed to be (a) an admission of the truth or falsity of any claims heretofore made or (b) an acknowledgment or admission by the Company of any fault or liability whatsoever to the Executive or to any third party.

 

12.     Costs. The Parties shall each bear their own costs, expert fees, attorneys’ fees and other fees incurred in connection with this Agreement.

 

A-3

 

 

13.     Authority. Executive represents and warrants that he has the capacity to act on his own behalf and on behalf of all who might claim through him to bind them to the terms and conditions of this Agreement.

 

14.     No Representations. Executive represents that he has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Neither party has relied upon any representations or statements made by the other party hereto which are not specifically set forth in this Agreement.

 

15.     Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.

 

16.     Entire Agreement. This Agreement, along with the Restrictive Covenant Agreement, and Executive’s written equity compensation agreements with the Company, represents the entire agreement and understanding between the Company and Executive concerning Executive’s separation from the Company.

 

17.     No Oral Modification. This Agreement may only be amended in writing signed by Executive and a duly authorized officer of the Company (other than Executive).

 

18.     Governing Law. This Agreement shall be governed by the internal substantive laws, but not the choice of law rules, of the State of Ohio.

 

19.     Effective Date. Each Party has seven (7) days after that Party signs this Agreement to revoke it. This Agreement will become effective on the eighth (8th) day after Executive signed this Agreement, so long as it has been signed by both Parties.

 

20.     Counterparts. This Agreement may be executed in counterparts, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.

 

21.     Voluntary Execution of Agreement. This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the Parties hereto, with the full intent of releasing all claims. The Parties acknowledge that:

 

(a)     They have read this Agreement;

 

(b)     They have had the opportunity of being represented in the preparation, negotiation, and execution of this Agreement by legal counsel of their own choice or that they have voluntarily declined to seek such counsel;

 

(c)     They understand the terms and consequences of this Agreement and of the releases it contains;

 

(d)     They are fully aware of the legal and binding effect of this Agreement.

 

[Remainder of page intentionally left blank. Signature page follows.]

 

A-4

 

 

IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

 

LSI Industries Inc.

 

Dated: [MONTH], 20 

 

 

 

	By:	 	 

 

	 	, an individual

 

Dated: [MONTH], 20 

 

	By:	 	 

 

[          ]

 

A-6

 

 

ANNEX I

 

UNPAID SALARY, WAGES, BONUSES, ACCRUED VACATION, COMMISSIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A-7

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