UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Act of 1934
Date of Report (Date of earliest event reported): October 1, 2014
LSI INDUSTRIES INC.
(Exact name of Registrant as specified in its Charter)
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Ohio
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0-13375
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31-0888951
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(State or Other Jurisdiction of Incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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10000 Alliance Road, Cincinnati, Ohio
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45242
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant's telephone number, including area code
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793-3200
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 5.02 – Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Effective October 1, 2014 LSI Industries Inc. ("LSI") entered into Amendments to the Amended Agreements dated January 25, 2005 with each of Robert J. Ready and James P. Sferra with respect to each executive officer's employment with LSI. Also effective October 1, 2014 LSI entered into an Employment Agreement with Dennis W. Wells with respect to his employment with LSI as its new Chief Operating Officer.
Amendments to Ready Agreement
The Amendment to Amended Agreement between LSI and Robert J. Ready effective October 1, 2014 (the "Ready Amendment") provides:
- Mr. Ready resigned as Chief Executive Officer of LSI and its subsidiaries and LSI's Board of Directors (the "Board") appointed him as LSI's Executive Chairman;
- For the next three years, Mr. Ready shall remain an employee of LSI and receive the same benefits furnished to senior executive officers of LSI. As compensation for his continued employment, Ready shall continue to be paid his current annual rate for the first six months of the first year and thereafter shall be paid at an annual rate of 60% of the average of his last five full fiscal years' compensation for the second six months of the first year, and at annual rates of 50% and 40%, respectively, of the average of his last five full fiscal years' compensation for the second and third years;
- Upon acceptance of the Board of the "plan of action" to be submitted to the Board prior to April 1, 2015 by LSI's new Chief Operating Officer, Mr. Ready will resign as Executive Chairman; and
- Mr. Ready shall continue as Chairman of the Board until further action by the Board.
Amendments to Sferra Agreement
The Amendment to Amended Agreement between LSI and James P. Sferra effective October 1, 2014 (the "Sferra Amendment") provides:
- Mr. Sferra's transition from full time employment shall commence when he is notified that LSI has hired a Chief Technology Officer or other senior executive who will provide LSI the management services that Mr. Sferra currently provides;
- For the next three years thereafter, Mr. Sferra shall remain an employee of LSI and receive the same benefits furnished to senior executive officers of LSI. As compensation for his continued employment, Mr. Sferra shall continue to be paid his current annual rate for the first six months of the first year and thereafter shall be paid at an annual rate of 60% of the average of his last five full fiscal years' compensation for the second six months of the first year, and at annual rates of 50% and 40%, respectively, of the average of his last five full fiscal years' compensation for the second and third years.
Wells Employment Agreement
The Employment Agreement between LSI and Dennis W. Wells effective October 1, 2014 (the "Wells Agreement") provides:
- Mr. Wells shall serve as LSI's Chief Operating Officer and within six months shall present to the Board a "plan of action," which shall include a revision of the fiscal 2015 budget for LSI;
- Upon the Board's acceptance of such "plan of action" the Board shall elect Mr. Wells as LSI's Chief Executive Officer;
- Mr. Wells shall receive an annual base salary of $350,000 while serving as LSI's Chief Operating Officer which shall increase to $500,000 when he is promoted to Chief Executive Officer. Mr. Wells shall also have the opportunity to receive an annual bonus of up to 50% to 100% of his base salary as determined by the Board;
- Subject to the approval of the Compensation Committee of the Board, LSI shall grant Mr. Wells non-qualified options to purchase 200,000 shares of the LSI's common stock under LSI's Amended and Restated 2012 Stock Incentive Plan (the "Plan");
- LSI shall reimburse Mr. Wells for certain out-of-pocket expenses, including relocation expenses, and shall cause Mr. Wells to be covered under LSI's director's and officer's liability insurance policy;
- There is no required minimum period of employment and either LSI or Mr. Wells may terminate his employment at any time for any reason or no reason. If Mr. Wells voluntarily terminates the Wells Agreement, he must give LSI at least 60 days' prior written notice; and
- If LSI voluntarily terminates the Wells Agreement, LSI is not obligated to give Mr. Wells any prior written notice. In the event that LSI terminates the employment of Mr. Wells Without Cause or if he terminates his employment for Good Reason, each as defined in the Wells Agreement, Mr. Wells is entitled to a severance payment equal to thirty-six months of his then current base salary. If such termination occurs during a change of control period, Mr. Wells is entitled to a severance payment equal to up to twenty-four months of his then current base salary plus the average of the bonus amounts paid to Mr. Wells for each of the two fully-completed fiscal years prior to the change of control.
Mr. Wells, age 53, most recently served as the Chief Operating Officer of Glantz Dynamic Solutions, a privately-owned supplier of digital signage supplies and a division of N. Glantz & Son LLC, since 2013. Prior to that, Mr. Wells served as President and General Manager of France, a Scott Fetzer Co., a privately-owned manufacturer and supplier of various signage solutions, from 2009 to 2010 and then as Chief Operating Officer of Fulham, Inc., a privately-owned global manufacturer and supplier of lighting solutions, from 2010 to 2013. Mr. Wells received his BBA in Accounting from Eastern Kentucky University.
The summary of the Ready Amendment, Sferra Amendment and Wells Agreement described above does not purport to be complete and is qualified in its entirety by reference to the Ready Amendment, Sferra Amendment and Wells Agreement, the respective copies of which are attached hereto as Exhibits 10.1, 10.2 and 10.3 and are incorporated herein by reference. Please see these exhibits for further information.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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10.1
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Amendment to Amended Agreement between Robert J. Ready and LSI
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10.2
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Amendment to Amended Agreement between James P. Sferra and LSI
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10.3
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Employment Agreement between Dennis W. Wells and LSI
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99.1
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Press Release dated October 1, 2014
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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LSI INDUSTRIES INC.
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BY:/s/ Ronald S. Stowell
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Ronald S. Stowell
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Vice President, Chief Financial
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Officer and Treasurer
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(Principal Financial and Accounting Officer)
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October 1, 2014
Exhibit 10.3
EMPLOYMENT AGREEMENT ("Agreement") made and entered into as of the 1
st day of
October, 2014 (the "Effective Date"), by and between LSI Industries Inc. (the "Company"), with principal offices located at 10000 Alliance Road, Cincinnati, Ohio 45242 and Dennis W. Wells (the "Executive") currently residing at 401 W. Main St., Georgetown, Kentucky 40324.
WITNESSETH:
WHEREAS, the Company desires to engage the Executive as an executive officer and the Executive desires to accept such engagement;
WHEREAS, the Company and the Executive desire to enter into this Agreement, which, effective as of the date hereof (the "Effective Date"), shall govern the terms of the Executive's employment;
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth below and other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and the Executive hereby agree, as follows:
1. Employment. The Company hereby employs the Executive as the Chief Operating Officer of the Company with the duties and responsibilities set forth in Section 4.
2. Term; Start Date. The term of Executive's employment hereunder shall commence on the Effective Date and shall end on that date on which such employment shall be terminated under the provisions of Section 8 hereof. Such term, regardless of the length thereof, shall be referred to herein as the "Employment Term". For purposes of this Agreement, the term "Contract Year" shall refer to each twelve (12) month period beginning on the day and month of the Effective Date and ending on the day immediately preceding the yearly anniversary of the Effective Date. Notwithstanding the above, the parties agree that the Executive shall begin to actually render services hereunder, and accordingly begin to earn his Base Salary (as defined below) hereunder, on October 1, 2014.
3. Work Location. The Executive's principal place of employment shall be the Company's current principal office at 10000 Alliance Road, Cincinnati, Ohio 45242 (the "Principal Office").
4. Duties and Responsibilities.
(a) Description. The Executive shall be employed by the Company in such capacity or capacities, and shall perform such duties and exercise such powers, as are (i) commensurate with a Chief Operating Officer of a business of comparable size and type and (ii) consistent with his title, subject to such reasonable directions and restrictions as the Executive Chairman of the Company may from time to time designate. The Executive shall report to the Executive Chairman of the Company.
(b) Time and Effort. Subject to Section 4(a) above, beginning on the Effective Date, the Executive shall:
(i) from the Principal office, devote his full working time and attention to the business and affairs of the Company, its subsidiaries and other affiliates and shall not, without the prior consent in writing of the Company, directly or indirectly, undertake any other business or occupation or become an employee, agent or director (or a person acting in a capacity similar to that of a director) of, or a consultant to, any other company, trust, firm, individual or person; provided, however, that nothing herein shall be construed so as to prevent the Executive from making investments of a strictly passive nature, so long as the undertaking forming the subject matter of any such investment is not otherwise in conflict with the Executive's contractual or other legal obligations to the Company;
(ii) perform those duties that may be assigned by the Executive Chairman or Board of Directors of the Company to the Executive diligently and faithfully to the best of the Executive's abilities and in the best interests of the Company and its affiliates; and
(iii) use his best efforts to promote the interests of the Company and its affiliates.
(c) Plan of Action and Transition. Within six (6) months after the Effective Date, the Executive shall present to the Company's Board of Directors his "plan of action" for the Company, including a revised fiscal 2015 budget based on such plan of action. Upon the Board's acceptance of the Executive's plan of action and revised 2015 budget, Robert J. Ready shall resign as Executive Chairman, vacate his office and continue as the Chairman of the Board of the Company. Simultaneously, the Board will elect the Executive as the Chief Executive Officer of the Company (replacing the title and office of Chief Operating Officer) and thereafter the Executive shall report to the Board of Directors.
As part of the Executive's plan of action, the Executive shall give early priority to (i) developing a new compensation plan for the executive officers of the Company and (ii) finding a Chief Technology Officer (CTO) and/or a qualified replacement for Jim Sferra, in each case acceptable to the Board.
(d) Non-Disclosure Agreement. Nothing in this Agreement is intended to impair or be in derogation of the Executive's obligations under that certain Non-Competition, Proprietary Information and Inventions Agreement, executed by the Executive in connection with his employment with the Company (the "Non-Disclosure Agreement").
(a) Base Salary. During the time that the Executive serves as the Chief Operating Officer of the Company, the Company shall pay the Executive a base salary at the annual rate of Three Hundred Fifty Thousand Dollars ($350,000) (the "Base Salary"), payable in accordance with the Company's payroll procedures, subject to all withholdings provided for in Section 10. During the time that the Executive serves as the Chief Executive Officer of the Company, the Company shall pay the Executive a Base Salary at the annual rate of Five Hundred Thousand Dollars ($500,000). The Company shall review the Base Salary annually for an increase for the following Contract Year based on market trends, industry compensation information, internal considerations and Company and Executive's performance, which shall be made subject to and at the sole and absolute discretion of the Board of Directors or, if the Board shall so elect, the Compensation Committee thereof.
(b) Bonus. The Executive shall have the opportunity to receive an annual bonus of up to 50% to 100% of his Base Salary ("Target Bonus") as determined by the Board.
(c) Stock. Subject to the approval of the Compensation Committee of the Board of Directors as provided in Section 5(c)(iii), the Executive will be granted the following:
(i) Non-qualified options to purchase one hundred thousand (100,000) shares of the Company's common stock under the Company's Amended and Restated 2012 Stock Incentive Plan as of August 21, 2013 (the "Option Plan") at a per-share exercise price equal to the fair market value of the Company's common stock on the Effective Date, with a term of ten (10) years from the date of grant and with 25% of such options vesting on each anniversary date of the grant.
(ii) Upon the Executive's election as Chief Executive Officer, non-qualified options to purchase one hundred thousand (100,000) shares of the Company's common stock under the Option Plan at a per-share exercise price equal to the fair market value of the Company's common stock on the date thereof, with a term of ten (10) years from the date of grant and vesting as set forth in subparagraph (i) above.
(iii) Except as otherwise provided herein, all such options are subject to the terms, conditions and restrictions set forth in the Option Plan. The stock options granted hereby shall be set forth in Award Agreements issued under the terms of the Option Plan and confirmed by the Compensation Committee as soon as possible after the Effective Date.
6. Other Benefits. The Executive shall also be entitled to the following:
(a) Employee Benefit Plans. The Executive shall also be entitled to such benefits, and to participate in such benefit plans, as may be in effect from time to time and generally available to senior executive officers of the Company (and subject in any event to the participation standards and other terms and conditions of any such benefits or plans).
(b) Director & Officers Insurance. The Company shall maintain director's and officer's liability insurance policies consistent with Company policies and procedures in effect from time to time and shall cause Executive to be covered under such policies during the Employment Term. Upon termination of the Executive's employment for any reason, the Company will cause such policies to cover Executive in respect of acts and omissions during the period of employment as if the Executive was still an officer, director and/or employee, as applicable.
(c) Paid Time Off. During the Employment Term, the Executive shall be entitled to Paid Time Off (PTO) in accordance with the Company's PTO policy. The Executive's PTO will be scheduled at such times as will least interfere with the business of the Company.
7. Reimbursement of Expenses.
(a) General. The Company shall reimburse the Executive for such expenses as may be reasonably incurred by the Executive in furtherance of the Executive's performance of his duties hereunder, subject to and in accordance with the Company policies concerning reimbursement of such expenses and provided, in any event, that the Executive timely furnishes to the Company a complete and accurate accounting of all such, expenses.
(b) Relocation Expenses. The Company will reimburse the Executive, for out-of-pocket expenses, of the types described below, incurred by him in connection with a relocation to the Cincinnati area, provided that the Executive timely furnishes to the Company a complete and accurate accounting of all such expenses. The out-of-pocket expenses which are reimbursable under this Section 7(b) are: (A) reasonable legal fees and real estate commissions incurred in connection with the sale of Executive's current residence; (B) reasonable expenses incurred in connection with the transportation of personal property to Cincinnati; and (C) reasonable legal fees, closings costs and other reasonable expenses associated with the purchase of a residence in Cincinnati. In the event that the reimbursements to the Executive under this Section 7(b) are taxable to him as income under applicable federal and/or state law, the Company will not "gross-up" such payments and the Executive shall be solely responsible for any such tax.
(c) Temporary Housing and Travel. The Company will reimburse Executive for his reasonable out-of-pocket expenses associated with travel between Cincinnati and Georgetown, Kentucky and temporary housing costs in Cincinnati for up to six (6) months after the Effective Date (until Executive relocates to Cincinnati).
8. Termination of Employment. The Executive's employment hereunder shall or may, as the case may be, be terminated under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate upon his death.
(b) Total Disability. The Company may terminate the Executive's employment hereunder upon the Executive becoming "Totally Disabled." For purposes of this Agreement, the Executive shall be deemed "Totally Disabled" if, as determined by the Company, (i) he is deemed "totally disabled" (or other words to such effect) under any long-term disability plan maintained by the Company or (ii) he is unable, by reason of physical or mental disability, to perform, in all material respects the essential duties and responsibilities under this Agreement with reasonable accommodations. If requested by the Company, and at its expense, the Executive shall submit to Executive's physician to determine whether the Executive is Totally Disabled. If the Company is not satisfied with the diagnoses of the Executive's physician, the Company may request, at its expense, an examination by a physician selected by the Company in connection with the Company's attempts to determine whether the Executive is Totally Disabled. If the diagnosis of the Executive's physician and the Company's physician are not in agreement, the Company may deliver written notice to each of the physicians requesting that the physicians select a third physician to examine the Executive and such third physician's diagnosis shall be binding upon the Executive and the Company. If the Executive's physician and the Company's physician are unable to agree upon a third physician within thirty (30) days after the Company delivers notice, the Company may initiate arbitration through the AAA and the appointed arbitrator shall select a third physician.
(c) Termination by the Company for Cause. The Company may immediately terminate the Executive's employment hereunder for Cause at any time by notice given to the Executive. For purposes of this Agreement, the term "Cause" shall mean any of the following: (i) indictment for, conviction of, or plea of guilty or no contest by the Executive to a felony, or of any criminal act; (ii) the unreasonable deliberate and material failure or refusal by the Executive to perform, consistent with the terms of this Agreement, his employment duties hereunder (other than as a result of PTO, sickness, disability, illness or injury), and the failure to rectify the same within thirty (30) days after the Company shall have given notice to the Executive identifying such failure or refusal and demanding that it be rectified; (iii) the Executive's commission of any act of fraud, embezzlement, dishonesty or other willful misconduct that has caused, or would reasonably be expected to cause, material injury or economic harm to the Company; (iv) an act of gross negligence on the part of the Executive that has caused, or would reasonably be expected to cause, material injury or economic harm to the Company; (v) a deliberate or material violation of a written material Company policy; or (vi) a material breach of this Agreement (or any successor thereto or amendment thereof) which (and only if the same shall be curable) Executive fails to cure within thirty (30) days after the Company shall have given notice to the Executive identifying such breach and demanding that it be cured.
(d) Termination by the Executive for Good Reason. The Executive may immediately terminate his employment hereunder for Good Reason at any time by notice given to the Company which notice shall be provided within ten (10) days of Executive becoming aware of the facts giving rise to Good Reason. For purposes of this Agreement, the term "Good Reason" shall mean the occurrence of any of the following and the failure of the Company to rectify the same within thirty (30) days after the Executive shall have given written notice to the Company which identifies the action complained of and demands that it be rectified: (i) a material breach by the Company of this Agreement; (ii) a material reduction in the Executive's duties and responsibilities hereunder; (iii) a reduction in the Executive's Base Salary or Target Bonus specified in Section 5(b) (other than any such reduction which is applicable (proportionately) to all senior level executives of the Company); (iv) the Executive involuntarily ceases to be the Company's Chief Operating Officer or Chief Executive Officer (as applicable) or (v) the Board of Directors requires the Executive to permanently relocate from the greater Cincinnati area as a condition of his employment. The parties acknowledge that Good Reason shall include any circumstance under which Executive ceases to be the chief executive officer of the Company following the occurrence of a Change of Control.
(e) Voluntary Termination. Either the Company or the Executive may terminate the Executive's employment under this Agreement at any time for any reason or no reason upon such prior written notice to the other party, if any, as is provided for below (a termination effected by the Company under this provision being referred to as a termination "Without Cause"). Accordingly, each of the Company and the Executive acknowledges that Executive's employment with the Company is on a so-called "at-will" basis, and that no minimum period of employment is required hereunder or otherwise. Executive shall give the Company at least sixty (60) days' prior written notice in the event of a termination by him under this Section 8(e). The Company shall not be obligated to give the Executive any prior written notice in connection with a termination by it under this Section 8(e), but may do so in its sole and absolute discretion.
(f) Notice of Termination. Any termination by the Company or the Executive under this Agreement shall be communicated by Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice in writing which shall indicate the specific termination provision in this Agreement relied upon to terminate the Executive's employment and, except in the case of Section 8(e), setting forth, in reasonable detail, the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated.
9. Economic Consequences of a Termination of Employment.
(a) Under all Circumstances. Under all circumstances, upon termination, the Executive or his estate, as the case may be, shall be entitled to:
(i) Any accrued but unpaid Base Salary for services rendered up to the date on which the Executive's employment shall actually have ceased (the "Termination Date");
(ii) Payment for any accrued and unpaid PTO or similar pay to which he is entitled under Company policies;
(iii) Any medical, dental, life insurance or similar "welfare" benefits to which the Executive may be entitled upon termination pursuant to the plans, policies and arrangements referred to in Section 6 hereof, which shall be paid in accordance with the terms of such plans, policies and arrangements;
(iv) If the Executive's employment shall be terminated by the Company Without Cause, the Executive shall terminate his employment for Good Reason, and in the event of the Executive's Death or Total Disability, all unvested stock options shall immediately and without further action become fully vested; and
(v) Exercise his vested stock options (including those vested in accordance with subparagraph (iv) above) for a period of twelve (12) months (or the remaining term of any such stock option, if shorter) in accordance with the terms of the Option Plan.
(b) Termination Without Cause or With Good Reason.
(i) No Change of Control. In the event that (A) either the Company shall terminate the employment of the Executive hereunder Without Cause or the Executive shall terminate his employment hereunder for Good Reason and (B) the related Termination Notice shall not have been given during a Change of Control Period (as defined below), the Executive shall, in addition to those rights provided under Section 9(a), be entitled to a severance payment equal to thirty-six (36) months of the Executive's then Base Salary, which payment shall be made during the thirty-six (36) month period following the Termination Date in substantially equal installments as and when regular payroll payments are made by the Company. In such circumstances, during the thirty-six (36) month following the Termination Date, the Executive shall also be entitled to medical, dental, life insurance or similar "welfare" benefits substantially similar in scope and cost to Executive as such benefits available to Executive immediately prior to Termination; provided that such benefits shall be discontinued to the extent that Executive obtains employment providing comparable benefits during such thirty-six (36) month period. For purposes of the proviso in the immediately preceding sentence, if Executive becomes employed by a new employer, for Executive's health and welfare benefits to be determined to be "comparable," the new employer must maintain a major medical plan that does not limit, restrict or exempt Executive or Executive's dependents with respect to any pre-existing conditions which were covered under the Company's medical plan prior to Executive's termination of employment. Executive's right to continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") shall be provided at the earlier of the end of the thirty-six (36) month period or the discontinuance of coverage because the Executive obtains employment providing comparable benefits.
(ii) Change of Control. In the event that (A) either the Company shall terminate the employment of the Executive hereunder Without Cause or the Executive shall terminate his employment hereunder for Good Reason and (B) the related Termination Notice shall have been given during a Change of Control Period, the Executive shall, be entitled to a severance payment in accordance with the Company's Change In Control Policy effective October 3, 2011 (as such policy may be amended from time to time ) (the "Change In Control Policy"). In such circumstances, during the twenty-four (24) month period following termination, the Executive shall also be entitled to medical, dental, life insurance or similar "welfare" benefits substantially similar in scope and cost to Executive as such benefits available to Executive immediately prior to the Change in Control Period; provided that such benefits shall be discontinued to the extent that Executive obtains employment providing comparable benefits during such twenty-four (24) month period. For purposes of the proviso in the immediately preceding sentence, if Executive becomes employed by a new employer, for Executive's health and welfare benefits to be determined to be "comparable," new employer must maintain a major medical plan that does not limit, restrict or exempt Executive or Executive's dependents with respect to any pre-existing conditions which were covered under the Company's medical plan prior to Executive's termination of employment. Executive's right to continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") shall be provided at the earlier of the end of the twenty-four (24) month period or the discontinuance of coverage because the Executive obtains employment providing comparable benefits.
(c) Definitions. For purposes of this Agreement, the following terms shall have the meanings assigned thereto below:
(i) "Change of Control" shall have the same meaning ascribed thereto in the Change In Control Policy; and
(ii) "Change of Control Period" shall mean the period beginning on the date on which a Change of Control occurs and ending on the one (1) year anniversary of such date.
(d) Release. Notwithstanding anything to the contrary set forth herein, prior to the receipt of any benefits under Section 9(b), the Executive shall be required to execute a appropriate release of claims agreement (the "Release"). Any payments required to be paid pursuant to Section 9(b) shall commence on the forty-fifth day following termination of the Executive so long Executive shall have delivered a fully executed Release within thirty (30) days after the date of Executive's termination of employment and Executive has not revoked such Release within the applicable revocation period. If Executive fails to deliver such Release within such time period or if Executive revokes such Release, any payment due under Section 9(b) shall be forfeited. Without limiting the foregoing, such Release shall specifically relate to all of the Executive's rights and claims in existence at the time of such execution (other than those surviving rights referred to in this Section 9, Executive's right to enforce this Agreement and Executive's rights to the benefits in this Agreement) and shall confirm the Executive's obligations under the Non-Disclosure Agreement. If any payment under Section 9(b) is non-exempt deferred compensation for purpose of the Section 409A (as defined below), and if such forty-five (45) day period begins in one calendar year and ends in the next calendar year, the payment or benefit shall not be made or commence before the second such calendar year, even if the Release becomes irrevocable in the first such calendar year. In other words, Executive is not permitted to influence the calendar year of payment based on the timing of his signing of the Release.
(e) Specified Benefits. Except as specifically provided in this Section 9, the Executive shall not be entitled to any compensation or other benefits in connection with any termination of his employment.
10. Withholding of Taxes. (a) If any amount, entitlement or benefit paid or payable to Executive or provided for his benefit under this Agreement and under any other agreement, plan or program of the Company or any of its affiliates (such payments, entitlements and benefits referred to as a "Payment") is subject to the excise tax imposed under Section 4999 of the Code or any similar federal or state law (an "Excise Tax"), then notwithstanding anything contained in this Agreement to the contrary, to the extent that any or all Payments would be subject to the imposition of an Excise Tax, the Payments shall be reduced (but not below zero) if and to the extent that such reduction would result in Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the imposition of the Excise Tax), than if Executive received all of the Payments (such reduced amount hereinafter referred to as the "Limited Payment Amount"). The reduction of the Payments due hereunder, if applicable, shall be made by first reducing cash Payments and then, to the extent necessary, reducing those Payments having the next highest ratio of Parachute Value (as defined below) to actual present value of such Payments as of the date of the change in control, as determined by the Determination Firm (as defined in Section 10(b) below). For purposes of this Section 10, present value shall be determined in accordance with Section 280G(d)(4) of the Code. For purposes of this Section 10, the "Parachute Value" of a Payment means the present value as of the date of the change in control of the portion of such Payment that constitutes a "parachute payment" under Section 280G(b)(2) of the Code, as determined by the Determination Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment. For purposes of this Section 10, a "change in control" means a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company, as determined in accordance with Section 280G(b)(2) of the Code and the regulations promulgated thereunder.
(b) All calculations under this Section 10 shall be made by a nationally recognized accounting firm or compensation consulting firm designated by the Company and reasonably acceptable to Executive (other than the accounting firm that is regularly engaged by any party who has effectuated a change in control) (the "Determination Firm"). For purposes of determining whether and the extent to which the Payments will be subject to the Excise Tax: (i) no portion of the Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a "payment" within the meaning of Section 280G(b) of the Code shall be taken into account; (ii) no portion of the Payments shall be taken into account which, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to Executive and selected by the Determination Firm, does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code (including, without limitation, by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Payments shall be taken into account which, in the opinion of Tax Counsel, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the "base amount" (as set forth in Section 280G(b)(3) of the Code) that is allocable to such reasonable compensation; and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Payments shall be determined by the Determination Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. The Determination Firm shall provide its calculations, together with detailed supporting documentation, both to the Company and Executive within 60 days after the change in control or the date of termination, whichever is later (or such earlier time as is requested by the Company) and, with respect to the Limited Payment Amount, shall deliver its opinion to Executive that he is not required to report any Excise Tax on his federal income tax return with respect to the Limited Payment Amount (collectively, the "Determination"). The Company shall pay all fees and expenses of the Determination Firm and Tax Counsel. Within 15 days after Executive's receipt of the Determination, Executive shall have the right to dispute the Determination (the "Dispute"). The existence of the Dispute shall not in any way affect the right of Executive to receive the Payments in accordance with the Determination. If there is no Dispute, the Determination by the Determination Firm shall be final, binding and conclusive upon the Company and Executive (except as provided in subsection (c) below).
(c) If, after the Payments have been made to Executive, it is established that the Payments made to, or provided for the benefit of, Executive exceed the limitations provided in subsection (a) above (an "Excess Payment") or are less than such limitations (an "Underpayment"), as the case may be, then the provisions of this subsection (c) shall apply. If it is established, pursuant to a final determination of a court or an Internal Revenue Service ("IRS") proceeding which has been finally and conclusively resolved, that an Excess Payment has been made, Executive shall repay the Excess Payment to the Company on demand. In the event that it is determined (i) by the Determination Firm, the Company (which shall include the position taken by the Company on its federal income tax return) or the IRS, (ii) pursuant to a determination by a court or (iii) upon a resolution to the satisfaction of Executive of a Dispute, that an Underpayment has occurred, the Company shall pay an amount equal to the Underpayment to Executive within 10 days of such determination or resolution together with interest on such amount at the applicable federal short-term rate, as defined under Code Section 1274(d) as in effect on the first date that such amount should have been paid to Executive under this Agreement, from such date until the date that such Underpayment is made to Executive.
(d) In the event that the provisions of Code Section 280G and 4999 or any successor provisions are repealed without succession, this Section 10 shall be of no further force or effect.
11. Entire Agreement and Amendments. This Agreement shall constitute the entire agreement between the parties and supersedes all existing agreements between them, whether oral or written, with respect to the subject matter hereof. Any waiver, alteration, or modification of any of the provisions of this Agreement, or cancellation or replacement of this Agreement shall be accomplished in writing and signed by the respective parties.
12. Notices. All notices, requests, demands and other communications provided for or permitted under this Agreement shall be in writing and shall be either personally delivered (including delivery by express couriers such as Federal Express) or sent by prepaid certified mail, return receipt requested, addressed to the party to which notice is to be given at the address set forth above for such party, or to such other address as such party may have fixed by notice given in accordance with the terms hereof. Any notice sent as aforesaid shall be deemed given and effective upon the earlier of (a) delivery to the address for the receiving party provided for herein and (b) the date falling three days after notice of attempted delivery has been left at the address to which a notice to the receiving party is to be sent hereunder.
13. Governing Law. This Agreement shall be construed in accordance with, and the rights of the parties shall be governed by, the laws of the State of Ohio.
14. Severability. If any term or provision of this Agreement is declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, such term or provision shall immediately become null and void, leaving the remainder of this Agreement in full force and effect.
15. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and when taken together shall constitute one agreement.
16. Assignment. The rights and obligations of the Executive under this Agreement are personal to the Executive and are not assignable or delegable. This Agreement may not be assigned by the Company except to an affiliate of the Company, provided that such affiliate assumes the Company's obligations under this Agreement; provided, further, that if the Company merges or effects a consolidation or share exchange with or into, or sells or otherwise transfers substantially all its assets to, another business entity, the Company may assign, its rights hereunder to that business entity without the consent of the Executive, provided that it causes such business entity to assume the Company's obligations under this Agreement as a condition of such assignment. This Agreement shall be binding upon the Company and any successors thereto.
17. Waiver. No waiver of any party hereto of a breach of any provision of this Agreement by any other party shall operate or be construed as a waiver of any subsequent breach by such other party. The failure of any party hereto to take any action by reason of such breach shall not deprive such party of the right to take action at any time while such breach continues.
18. Section 409A. Notwithstanding anything to the contrary set forth herein, this Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements of Section 409A of the Code and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder. Nevertheless, the tax treatment of the benefits provided under the Agreement is not warranted or guaranteed. In the event that the Executive is a "specified employee" within the meaning of Section 409A of the Code ("Section 409A"), payments under Section 9(b) of this Agreement shall not commence or be made until six (6) months following the Termination Date, or shall be otherwise modified, but only to the minimum extent necessary to avoid the imposition of the additional twenty percent (20%) tax imposed under Section 409A; provided, however, that any such modification shall preserve, to the maximum extent possible in a Section 409A compliant manner, the original intent of the parties to this Agreement. In addition, the parties hereby agree that it is their intention that all payments or benefits provided under this Agreement are exempt from or comply with Section 409A, and this Agreement shall be interpreted accordingly. The Executive is advised to seek independent advice from his tax advisor(s) with respect to the application of Section 409A to any payments or benefits under this Agreement. Notwithstanding the foregoing, the Company does not guarantee the tax treatment of any payments or benefits under this Agreement, including without limitation under the Code or other federal, state or local.
19. Attorney's Fees. The Company will reimburse the Executive for up to $2,500 in attorney's fees that the Executive incurred in the negotiation, drafting and conclusion of this Agreement. If a dispute arises between the Executive and the Company over the interpretation, application, enforcement or termination of this Agreement, the Company will reimburse the Executive for his attorney's fees, costs and disbursements incurred if he is the prevailing party on at least one of the material issues in dispute.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by the undersigned duly authorized persons as of the day and year first stated above.
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LSI INDUSTRIES INC.
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By: /s/ Robert J. Ready
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Name: Robert J. Ready
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Title: Executive Chairman
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/s/ Dennis W. Wells
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Dennis W. Wells
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Exhibit 99.1
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CONTACT: BOB READY OR
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FOR IMMEDIATE RELEASE
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RON STOWELL
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DATE: OCTOBER 1, 2014
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(513) 793-3200
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LSI INDUSTRIES INC. ANNOUNCES NEW MANAGEMENT APPOINTMENTS
Cincinnati, OH; October 1, 2014 – LSI Industries Inc. (NASDAQ: LYTS) today announced that it has appointed Dennis W. Wells as Chief Operating Officer (COO) effective immediately. Mr. Wells joins LSI after a several month search by a special committee of the Board of Directors working closely with senior management. This addition to LSI's management team is consistent with the succession planning described in the April 24, 2014 press release. Concurrent with the hiring of Dennis Wells, Robert Ready steps down as Chief Executive Officer (CEO) and takes the interim title of Executive Chairman. Mr. Ready will work closely with Mr. Wells to provide a smooth management transition. Within six months it is expected that Mr. Wells will be appointed CEO, at which time Mr. Ready will step down as Executive Chairman and remain as Chairman of the Board. As of Mr. Well's appointment as COO, Mr. Ready will transition to an employee consultant to LSI, and will be available to provide consulting services for a period of three years.
Mr. Wells, age 53, has experience in lighting, graphics, and lighting controls. Prior to joining LSI he was COO, Glantz Dynamic Solutions. Previous employers include Fulham, Inc., Acuity Brands Lighting, and Schneider Electric. Mr. Wells holds a BBA - Accounting from Eastern Kentucky University and has completed MBA coursework at the University of Missouri as well as the Executive Management Program at Northwestern - Kellogg School.
As part of strengthening the LSI management team, Shawn M. Toney, Executive Vice President, Sales, was appointed President, LSI Lighting Solutions, on August 20, 2014. Mr. Toney, age 46, has been with LSI for over five years and has made substantial contributions to the Company's lighting business, starting with the Commercial & Industrial lighting market and moving into niche markets. Previously, Mr. Toney had been with Cooper Lighting, Siemens Energy and Automation, and GE Lighting. He holds a BBA in Marketing from Ohio University.
Mr. Ready stated, "I want to assure you that our entire management team stands ready to work with the new COO and understands that our succession plan has been implemented after careful thought under the direction of our Board of Directors. The business experience of our executives and key employees runs very deep. Scott Ready as President, LSI Industries Inc. since 2010, has over 30 years of experience with the Company; Ron Stowell as CFO has been with LSI for 22 years; David McCauley, President, LSI Graphics Solutions, has been on board since 1997 when we acquired his business; and Shawn Toney, recently promoted to President, LSI Lighting Solutions, joined LSI five years ago. In addition, we have many other managers and key employees with long service and outstanding capabilities. As I step back, but look forward, I see a loyal, stable, in-place management team being complemented and made stronger by bringing on board Dennis Wells as the COO. LSI is a leading company in the lighting and graphics industries, and I am confident that we have the leadership team, talent, and experience needed to make it grow and prosper."
Mr. Wells commented, "I am very excited to join the LSI Team. LSI has a long history of success in bringing Lighting and Graphics together to create a complete Image Solution for their customers. I look forward to bringing my skills and knowledge to the table along with those of the LSI management team and leading LSI into the future."
LSI Industries Inc.
October 1, 2014
With the COO now hired, LSI will be stepping up its search for a Chief Technology Officer (CTO) to complement the executive management team. Upon the hiring of a CTO, or other senior executive who will provide the management services of Jim Sferra, Mr. Sferra will transition to an employee consultant to the Company and substantially reduce his day-to-day involvement. The Executive Search Committee of the Board of Directors will have responsibility for selecting the CTO.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995
This document contains certain forward-looking statements that are subject to numerous assumptions, risks or uncertainties. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Forward-looking statements may be identified by words such as "estimates," "anticipates," "projects," "plans," "expects," "intends," "believes," "seeks," "may," "will," "should" or the negative versions of those words and similar expressions, and by the context in which they are used. Such statements, whether expressed or implied, are based upon current expectations of the Company and speak only as of the date made. Actual results could differ materially from those contained in or implied by such forward-looking statements as a result of a variety of risks and uncertainties over which the Company may have no control. These risks and uncertainties include, but are not limited to, the impact of competitive products and services, product demand and market acceptance risks, potential costs associated with litigation and regulatory compliance, reliance on key customers, financial difficulties experienced by customers, the cyclical and seasonal nature of our business, the adequacy of reserves and allowances for doubtful accounts, fluctuations in operating results or costs whether as a result of uncertainties inherent in tax and accounting matters or otherwise, unexpected difficulties in integrating acquired businesses, the ability to retain key employees of acquired businesses, unfavorable economic and market conditions, and the results of asset impairment assessments. You are cautioned to not place undue reliance on these forward-looking statements. In addition to the factors described in this paragraph, the risk factors identified in our Form 10-K and other filings the Company may make with the SEC constitute risks and uncertainties that may affect the financial performance of the Company and are incorporated herein by reference. The Company does not undertake and hereby disclaims any duty to update any forward-looking statements to reflect subsequent events or circumstances.
About the Company
Leadership. Strength. Innovation. Those are the key values behind the smart vision upon which LSI Industries Inc. was founded when established in 1976. Today LSI demonstrates this in our dedication to advancing technology throughout all aspects of our business – in both product solutions and production techniques. We are committed to American innovation through technology.
We are a vertically integrated manufacturer who combines assimilated technology, design and manufacturing to produce the most efficient, high quality products possible. We are dedicated to advancing solid-state technology to make affordable, high performance, energy efficient lighting and custom graphic products that bring value to our customers. In addition, we can provide sophisticated lighting and energy management control solutions to help customers manage their energy performance. Further, we offer design support, engineering, installation and project management for custom graphics rollout programs for today's retail environment.
LSI Industries Inc.
October 1, 2014
LSI is proud to be an American company with an American work force, building an American product. We are a U.S. manufacturer with marketing / sales efforts throughout the world with concentration currently on North America, Latin America, Australia, New Zealand, Asia, Europe and the Middle East. Our major markets include the commercial / industrial lighting, petroleum / convenience store, multi-site retail (including automobile dealerships, restaurants and national retail accounts), sports and entertainment markets. Headquartered in Cincinnati, Ohio, LSI has facilities in Ohio, Kansas, Kentucky, New York, North Carolina, Oregon, Rhode Island, and Texas. The Company's common shares are traded on the NASDAQ Global Select Market under the symbol LYTS.
As we redefine LSI Industries' place in the markets we serve, we will emphasize our commitment to preserving the foundation of a well-managed, financially strong and creatively unique company with even stronger emphasis on a growing technology base. Through the Leadership, Strength and Innovation that is core to our culture, we move forward continuing our transition to a technology-reliant company with lighting and graphics and the ability to provide the stronger performance our many partners expect.
For further information, contact either Bob Ready, Chief Executive Officer, or Ron Stowell, Vice President, Chief Financial Officer, and Treasurer at (513) 793-3200.
Additional note: Today's news release, along with past releases from LSI Industries, is available on the Company's internet site at www.lsi-industries.com or by email or fax, by calling the Investor Relations Department at (513) 793-3200.