SCHEDULE 14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
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Notice of Annual Meeting of
Shareholders
and Proxy
Statement
October
3, 2008
Dear
Shareholder:
We invite
you to attend our Annual Meeting of Shareholders on Thursday, November 20, 2008,
at 10:00 a.m. at the Company’s headquarters located at 10000 Alliance Road,
Cincinnati, Ohio. At the meeting, you will hear a report on our
operations and have a chance to meet your Company’s directors and
executives.
This
booklet includes the formal notice of the meeting and the proxy
statement. The proxy statement tells you more about the agenda and
procedures for the meeting. It also describes how the Board operates
and provides information about our director candidates.
Even if
you only own a few shares, we want your shares to be represented at the
meeting. I urge you to complete, sign, date and promptly return your
proxy card in the enclosed envelope.
Sincerely
yours,
/s/Robert
J. Ready
Robert J.
Ready
Chairman
of the Board,
Chief
Executive Officer, and President
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS OF
LSI INDUSTRIES
INC.
Time:
10:00 a.m., Eastern Standard
Time
Date:
Thursday, November 20,
2008
Place:
LSI Industries Corporate
Headquarters
10000 Alliance Road
Cincinnati, Ohio 45242
Purpose:
•
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Elect
as Directors the six nominees named in the attached proxy
materials
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•
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Ratify
the appointment of Deloitte & Touche LLP as the Company’s independent
registered public accounting firm for fiscal year 2009
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•
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Amend
the Company’s Code of Regulations to authorize the Board of Directors to
amend the Code of Regulations
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•
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Conduct
other business if properly raised
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Only
shareholders of record on September 22, 2008 may vote at the
meeting. The approximate mailing date of the Proxy Statement and
accompanying proxy card is October 3, 2008.
Your
vote is important. Please complete, sign, date, and promptly return
your proxy card in the enclosed envelope.
/s/
Robert J. Ready
Robert J.
Ready
Chairman
of the Board,
Chief
Executive Officer, and President
October
3, 2008
LSI
Industries Inc.
Proxy
Statement
Table of
Contents
Page
INTRODUCTION
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1
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VOTING
AT ANNUAL MEETING
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1
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General
Information
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1
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Principal
Shareholders
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2
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Shareholder
Proposals
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2
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Proposal
1. Election of Directors
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2
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Proposal
2. Ratification of Appointment of Independent Registered Public
Accounting Firm
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3
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Proposal
3. Amendment of the Company's Code of
Regulations
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4
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Other
Matters
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5
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MANAGEMENT
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5
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Directors
and Executive Officers
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5
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Section
16(a) Beneficial Ownership Reporting Compliance
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7
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EXECUTIVE
COMPENSATION
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7
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Compensation
Discussion and Analysis
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7
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COMPENSATION
COMMITTEE REPORT
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16
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Compensation
Tables and Other Information
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17
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CORPORATE
GOVERNANCE
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23
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DIRECTOR
COMPENSATION
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24
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COMMITTEES
OF THE BOARD
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26
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COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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31
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RELATED
PERSON TRANSACTIONS
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31
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OTHER
MATTERS
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32
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QUESTIONS
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32
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ANNEX
A
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A-1
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The
Company makes available, free of charge on its website, all of its filings that
are made electronically with the Securities and Exchange Commission (“SEC”),
including Forms 10-K, 10-Q, and 8-K. To access these filings, go to
the Company’s website (www.lsi-industries.com) and click on the “SEC Filings”
tab in the left margin on the “Investor Relations” page. Copies of
the Company’s Annual Report on Form 10-K for the fiscal year ended June 30,
2008, including financial statements and schedules thereto, filed with the SEC
are also available without charge to shareholders upon written request addressed
to:
LSI
Industries Inc.
Ronald
S. Stowell,
Vice
President, Chief Financial Officer
&
Treasurer
10000
Alliance Road
Cincinnati,
Ohio 45242
LSI
INDUSTRIES INC.
10000
Alliance Road
Cincinnati,
Ohio 45242
Telephone
(513) 793-3200
__________________________________________
P
R O X Y S T A T E M E N T
Annual
Meeting of Shareholders
November
20, 2008
INTRODUCTION
The Board of Directors of LSI
Industries Inc. is requesting your proxy for the Annual Meeting of Shareholders
on November 20, 2008, and at any postponement or adjournment of such
meeting. This Proxy Statement and the accompanying proxy card were
first mailed on October 3, 2008 to shareholders of record as of September 22,
2008.
VOTING AT ANNUAL
MEETING
General
Information
In order to carry on the business of
the meeting, we must have a quorum. This means at least a majority of
the outstanding shares eligible to vote must be represented at the meeting
either by proxy or in person. Shareholders may vote in person or by
proxy at the Annual Meeting. Proxies given may be revoked at any time
by filing with the Company (to the attention of Ronald S. Stowell) either a
written revocation or a duly executed proxy bearing a later date, or by
appearing at the Annual Meeting and voting in person. If you hold
shares through someone else, such as a stockbroker or bank, you may get material
from them asking how you want to vote. Specifically, if your shares
are held in the name of your stockbroker or bank and you wish to vote in person
at the meeting, you should request your stockbroker or bank to issue you a proxy
covering your shares. If you have instructed a broker to vote your
shares, you must follow directions received from your broker to change your
vote. All shares will be voted as specified on each properly executed
proxy card. If no choice is specified, the shares will be voted as
recommended by the Board of Directors, namely “FOR” Proposal 1 to elect the six
persons nominated as directors by the Nominating and Corporate Governance
Committee of the Board of Directors, “FOR” Proposal 2 (Ratification of
Appointment of Independent Registered Public Accounting Firm), and “FOR”
Proposal 3 (Amendment of the Company’s Code of Regulations). If any
other matters come before the meeting or any postponement or adjournment
thereof, each proxy will be voted in the discretion of the individuals named as
proxies on the proxy card.
As of September 22, 2008, the record
date for determining shareholders entitled to notice of and to vote at the
Annual Meeting, LSI Industries had 21,570,695 Common Shares
outstanding. Each share is entitled to one vote. Only
shareholders of record at the close of
business
on September 22, 2008, will be entitled to vote at the Annual
Meeting. Abstentions and shares otherwise not voted for any reason,
including broker non-votes, will have no effect on the outcome of any vote taken
at the Annual Meeting. Broker non-votes occur when a broker returns a
proxy card but does not have authority to vote on a particular
proposal.
Principal
Shareholders
As of September 22, 2008, the following
are the only shareholders known by the Company to own beneficially 5% or more of
its outstanding Common Shares:
|
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Amount
and Nature of
Beneficial
Ownership
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Royce
& Associates LLC
1414
Avenue of the Americas, 9th Floor
New
York, NY 10019-2578
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2,075,166
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9.42%
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Columbia
Management Group, Inc.
590
Madison Avenue
New
York, NY 10022-2524
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1,342,834
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6.10%
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Shareholder
Proposals
Shareholders who desire to have
proposals included in the Notice for the 2009 Annual Meeting of Shareholders
must submit their proposals to the Company at its offices on or before June 5,
2009.
The form of Proxy for the Annual
Meeting of Shareholders grants authority to the persons designated therein as
proxies to vote in their discretion on any matters that come before the meeting,
or any adjournment thereof, except those set forth in the Company’s Proxy
Statement and except for matters as to which adequate notice is
received. In order for a notice to be deemed adequate for the 2009
Annual Shareholders’ Meeting, it must be received prior to August 20,
2009. If there is a change in the anticipated date of next year’s
annual meeting or if these deadlines change by more than 30 days, we will notify
you of this change through our Form 10-Q filings.
Proposal
1. Election of Directors
The Company's Code of Regulations
provides that the Board of Directors be composed of six directors, each of whom
is elected for a one-year term. The terms of the Company’s directors
expire at the 2008 Annual Meeting of Shareholders.
The Nominating and Corporate Governance
Committee of the Board has nominated for reelection the six current directors,
namely, Gary P. Kreider, Dennis B. Meyer, Wilfred T. O'Gara, Robert J. Ready,
Mark A. Serrianne and James P. Sferra. Proxies solicited by the Board
will be voted for the election of these six nominees.
All directors elected at the Annual
Meeting will be elected to hold office for one year and until their successors
are elected and qualified. In voting to elect directors, shareholders
are
entitled
to one vote for each share held of record. Shareholders are not
entitled to cumulate their votes in the election of directors.
Should any of the nominees become
unable to serve, proxies will be voted for any substitute nominee designated by
the Board. The six nominees receiving the highest number of votes
cast will be elected.
Recommendation of the Board
of Directors
|
The
Board of Directors recommends a vote FOR each of the six directors
nominated in this Proxy Statement. Nominees receiving the
highest number of votes will be
elected.
|
Proposal
2. Ratification of Appointment of Independent Registered Public
Accounting Firm
The Audit Committee of the Board of
Directors appointed Deloitte & Touche LLP as the Company's independent
registered public accountants for fiscal 2009. Deloitte & Touche
LLP has been the independent registered public accounting firm for the Company
since December 2005. Although not required by law, the Board is
seeking shareholder ratification of its selection. If ratification is not
obtained, the Audit Committee intends to continue the employment of Deloitte
& Touche LLP at least through fiscal 2009.
Representatives of Deloitte &
Touche LLP are expected to be present at the Shareholders' Meeting and will be
given an opportunity to make a statement, if they so desire, and to respond to
appropriate questions that may be asked by shareholders.
Audit
Fees
The Company expensed the following fees
from Deloitte & Touche LLP in the fiscal years ended June 30, 2007 and 2008,
respectively:
Deloitte & Touche
LLP
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Audit
fees
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$
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668,507
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$
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670,012
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Audit-related
fees
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13,950
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24,104
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Tax
fees
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158,913
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94,188
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All
other fees
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3,195
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3,195
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Total
fees
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$
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844,565
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$
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791,499
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Audit fees
represent
fees and out-of-pocket expenses related to the audit of the Company’s financial
statements; review, documentation and testing of the Company's system of
internal controls; filing of the Form 10-K; services related to review of the
Company’s quarterly financial statements and Form 10-Q’s; and attendance at the
Company’s quarterly Audit Committee meetings.
Audit-related fees
represent fees for consultation related to accounting and regulatory filing
matters, acquisition due diligence services, and to audits of the Company’s
qualified retirement plan.
Tax fees
relate to
services and out-of-pocket expenses related to tax compliance (or filing of the
Company’s various income and franchise tax returns), tax planning,
and tax
advice.
All
other fees
represent fees related to services and consultation related to
various planning matters.
|
Recommendation of the
Board of Directors
|
|
The
Board of Directors recommends a vote FOR Proposal 2. The
affirmative vote of a majority of Common Shares voting at the Annual
Meeting is required for approval of this
proposal.
|
Proposal
3. Amendment of the Company’s Code of Regulations
The Board
of Directors is recommending that the Company’s Code of Regulations be amended
to allow the Board to amend such Regulations without shareholder approval in the
circumstances described in this proxy statement and as set forth on Annex
A.
Article X
of the Company’s Regulations allows shareholders to amend the Regulations only
by the affirmative vote or written consent of the shareholders of record
entitled to exercise a majority of the voting power. Annex A shows the new
language of Article X reflecting the proposed amendment.
The Ohio
Revised Code was amended on October 12, 2006 to, among other things, allow
directors to amend Regulations in certain respects without shareholder
approval.
Prior to
the amendments, all changes to Regulations were required to be accomplished by
shareholder action. The 2006 amendments liberalized the law to allow
directors to amend the Regulations without shareholder approval in various areas
that are not deemed to impact fundamental shareholder rights. The
amendments first require the shareholders to grant amending authority to the
directors through the Articles or Regulations. However, the amendment
reserves to the shareholders the sole authority to amend the Regulations in
certain areas, such as those defining, limiting or regulating the exercise of
the authority of shareholders, setting the percentage of shareholders entitled
to call special meetings, establishing notices of meetings and qualifications of
shareholders, establishing quorum definitions, setting terms and classifications
of directors, and removing directors and filling vacancies in the Board of
Directors. Shareholders can always override amendments made by
directors and Regulations may never divest shareholders of the power to adopt,
amend or repeal Regulations.
The
directors, once granted general authority by shareholders, will therefore be
free to amend the Regulations in such areas as the establishment of the fiscal
year, the time and place of meetings, establishment of officers and committees
and enactment of indemnification provisions.
The Board
of Directors believes that the amendment to the Regulations as set forth on
Annex A is in the best interests of the Company’s shareholders because the
amendment will allow the Company to take advantage of the developments in Ohio
corporate law as described above to adapt Ohio’s statutory business framework to
modern conditions and will allow the Board to act quickly to respond to the
needs of the Company that may arise from time to time.
Recommendation of the Board
of Directors
|
The
Board of Directors recommends a vote FOR Proposal 3. The
affirmative vote of a majority of Common Shares voting at the Annual
Meeting is required for approval of this
proposal.
|
Other
Matters
Approval of any other matters
considered at the Annual Meeting, including postponement or adjournment, will
require the affirmative vote of a majority of Common Shares voting at the
meeting.
MANAGEMENT
Directors and Executive
Officers
The directors and executive officers of
LSI Industries are:
|
|
|
Common
Shares
Beneficially
Owned
|
|
|
|
|
|
|
|
|
Robert
J. Ready (a)
68
|
Chairman,
President, and Chief Executive Officer
|
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1,050,545
|
(e)(f)
|
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4.77%
|
|
|
|
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|
|
|
|
|
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Fred
D. Jalbout
52
|
President
of LSI Saco Technologies Inc.
|
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866,250
|
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3.93%
|
|
|
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|
|
|
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|
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James
P. Sferra (a)
69
|
Executive
Vice President- Manufacturing; Secretary and Director
|
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482,345
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(e)(f)
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2.19%
|
|
|
|
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|
|
|
|
|
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Ronald
S. Stowell
58
|
Vice
President, Chief Financial Officer and Treasurer
|
|
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107,671
|
(e)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
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David
W. McCauley
59
|
President
of LSI Graphic Solutions
Plus
and President of
Grady McCauley Inc.
|
|
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75,276
|
(e)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
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Scott
D. Ready
46
|
President
of LSI Lighting Solutions
Plus
|
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167,055
|
(e)(f)
|
|
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*
|
|
|
|
|
|
|
|
|
|
|
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Wilfred
T. O’Gara (b)(c)(d)
51
|
Director
|
|
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37,261
|
(e)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
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Gary
P. Kreider (b)(d)(h)
70
|
Director
|
|
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29,799
|
(e)
|
|
|
*
|
|
|
|
|
|
|
|
|
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Dennis
B. Meyer (b)(c)(d)
74
|
Director
|
|
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26,884
|
(e)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
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Mark
A. Serrianne (b)(c)(d)
61
|
Director
|
|
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20,428
|
(e)
|
|
|
*
|
|
|
|
|
|
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All
Directors and Executive Officers as a Group (Ten Persons)
|
|
|
|
|
|
|
|
|
|
|
|
|
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2,772,879
|
(g)
|
|
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12.59%
|
|
Information
as of September 22, 2008
(a)
|
Executive
Committee Member
|
(b)
|
Compensation
Committee Member
|
(c)
|
Audit
Committee Member
|
(d)
|
Nominating
and Corporate Governance Committee Member
|
(e)
|
Includes
options exercisable within 60 days as follows: Mr. Robert Ready
of 98,125 shares, Mr. Jalbout of 16,250 shares, Mr. Sferra of 94,375
shares, Mr. Stowell of 60,000 shares, Mr. McCauley of 39,063 shares, Mr.
Scott Ready of 49,375 shares, Mr. O’Gara of 31,002 shares, Mr. Kreider of
21,625 shares, Mr. Meyer of 22,563 shares, and Mr. Serrianne of 17,500
shares.
|
(f)
|
Includes
indirect beneficial ownership for Mr. Robert Ready of 90,635 shares, for
Mr. Sferra of 12,622 shares, and for Mr. Scott Ready of 5,625
shares.
|
(g)
|
This
total counts only once 90,635 shares reported above as both indirect
beneficial holdings of Robert J. Ready and as direct holdings of Scott D.
Ready.
|
(h)
|
Certain
of Mr. Kreider’s shares are pledged as security in brokerage margin loan
accounts from time to time whether or not there are loans outstanding with
respect to such accounts.
|
*
|
Less
than 1%
|
Fred D. Jalbout has served as President
of LSI Saco Technologies Inc. since June 26, 2006, the date the Company acquired
SACO Technologies Inc. Mr. Jalbout had been President and Chief
Executive Officer and a principal owner of SACO Technologies Inc. since he
acquired the assets of that company in 2002. Prior to that time, Mr.
Jalbout served as Chairman, Chief Executive Officer and President of SACO’s
predecessor company.
Robert J. Ready is the founder of the
Company and has been its President and a Director since 1976. Mr.
Ready was appointed Chairman of the Board of Directors in February
1985. Mr. Ready is also a Director of Meridian Bioscience,
Inc.
James P. Sferra shared in the formation
of the Company. Mr. Sferra has served as Corporate Vice President of
Manufacturing from November 1989 to November 1992, and as Executive Vice
President-Manufacturing since then. Prior to that, he served as Vice
President-Manufacturing of LSI Lighting Systems, a division of the
Company. Mr. Sferra has served as a Director since 1976, and was
appointed Secretary in 1996.
Ronald S. Stowell has served as Chief
Financial Officer since December 1992, and was appointed Treasurer in November
1993 and Vice President in November 1997. From 1985 to November 1992,
Mr. Stowell served as Corporate Controller of Essef Corporation (a Nasdaq listed
company), Chardon, Ohio, a manufacturer of high performance composite and
engineered plastics products.
David W. McCauley has served as
President of LSI Graphic Solutions
Plus
since April 2003 and as
either President or Vice President of Operations of Grady McCauley Inc. (a
subsidiary of the Company involved in graphics) since June
1997. Prior to the June 1997 acquisition date, Mr. McCauley was a
founder and Vice President of Grady McCauley, Inc.
Scott D. Ready has served as President
of LSI Lighting Solutions
Plus
since July
2004. Prior to that, he held various sales and other positions at the
Company, including Vice President of the Image Group, Vice President Petroleum
Sales, and Regional Sales Manager. Mr. Scott Ready has been employed
by the Company since 1985, and is the son of Robert J. Ready.
Gary P. Kreider has been a Director
since April 2002. For over five years Mr. Kreider has been a senior
partner in the Cincinnati law firm of Keating Muething & Klekamp PLL, the
Company’s outside counsel. His primary practice areas are securities
law, mergers and acquisitions, and general corporate law, and he has been with
Keating Muething & Klekamp since 1963. Effective October 1,
2005 Mr. Kreider no longer has a vote or partnership interest in the firm’s
earnings although his affiliation with the firm continues. Mr.
Kreider has been an Adjunct Professor of Law in securities regulation at the
University of Cincinnati College of Law since 1977 and is a past Chairman of the
Ohio State Bar Association Corporate Law Committee. Mr. Kreider is
also a Director of Meridian Bioscience, Inc.
Dennis B. Meyer has been a Director
since August 2001. Mr. Meyer retired from the Board and Executive
Committee of Midmark Corporation in January 2005. Mr. Meyer was
Executive Vice President of Midmark Corporation from 1985 to 2001, and held
several other executive and managerial positions during his 36 years with that
company.
Wilfred T. O'Gara was appointed a
Director of the Company in January 1999. Mr. O'Gara has been the
President and Chief Executive Officer of The O'Gara Group, Inc., a security and
defense related firm, since 2003.
Mark A. Serrianne was appointed a
Director of the Company in August 2004. Mr. Serrianne has been
Chairman of Northlich, Inc. since January, 2008 and was principal owner and
Chief Executive Officer of Northlich from 1998 to January,
2008. Northlich is a privately held brand strategy, marketing
communication and public relations company with headquarters in Cincinnati,
Ohio. Mr. Serrianne has held a number of positions with Northlich
from 1974 through 1996 when he became President.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of the Securities
Exchange Act of 1934 requires the Company’s officers, directors, and persons who
own more than ten percent of the Company’s Common Shares to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. Such persons are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file within two days of
a transaction in shares of the Company. Based solely upon its review
of copies of such forms received by it, and upon written representations from
certain reporting persons that no Forms 5 were required for those persons, the
Company believes that during fiscal 2008 all other filing requirements were met,
with the exception that Mr. Stowell filed an ownership report late as a result
of untimely notification from the Plan Trustee of a regular monthly purchase
transaction for the Company’s Nonqualified Deferred Compensation
Plan.
EXECUTIVE
COMPENSATION
Compensation Discussion and
Analysis
This section discusses and analyzes the
compensation awarded to, earned by, or paid to the executive officers set forth
in the Summary Compensation Table on page 17 of this Proxy Statement
(collectively, the “named executive officers” or “NEOs”). It also
discusses the principles underlying our policies and decisions.
Who
oversees the Company’s compensation program?
Our Board of Directors has appointed a
Compensation Committee (“the Committee”) composed of independent directors to
oversee our compensation policies and programs. The Committee’s
functions and members are described on page 27 of this Proxy
Statement. One important purpose of the Committee is to review and
approve the compensation of our named executive officers.
Our CEO provides recommendations to the
Committee with respect to various components of compensation for the named
executive officers. After reviewing compensation information of our
competitors and other companies based in the greater Cincinnati area as
described below, our CEO provided to the Committee recommendations for increases
in salary for the NEOs. Noting that the base salary for most
employees of LSI increased on an average of 3.6%, our CEO recommended to the
Committee that the salary levels of the presidents for the Lighting and Graphic
Solutions segments increase by approximately 4%. Our CEO also
recommended that our CFO’s salary increase by approximately 5% and the salary of
our Executive Vice-President-Manufacturing increase by approximately
7%. Our CEO did not provide any recommendation to the Committee with
respect to his salary level.
Our CEO also makes recommendations to
the Committee with respect to the bonus payments to be made pursuant to the
Company’s Incentive Compensation Plan. A description of this
Incentive Plan and a discussion of the Committee’s process for determining
payments pursuant to the Incentive Plan are discussed below. Our CEO
also makes recommendations for all named executive officers, including himself,
to the Committee with respect to the amount of stock option awards to be
made. Our CEO makes these recommendations based on his consideration
of the compensation expense to the company, the fair value of the equity awards
and the performance of LSI and NEO contributions toward such
performance. Our CEO also makes recommendations on bonus amounts for
all named executive officers and himself based on the specific base guidelines
set forth in the Incentive Plan.
The Committee seriously considers the
input of our CEO in connection with its compensation processes and
decisions. Although the Committee is not obligated to follow all of
the CEO’s recommendations, the Committee views the input of the CEO as
meaningful, particularly with respect to the compensation to be paid to other
NEOs as such other NEOs report directly to the CEO. The Committee
believes that the CEO is in a helpful position to provide input relating to the
performance and compensation issues it considers with respect to NEO
compensation. NEOs other than our CEO do not provide recommendations
to the Committee with respect to compensation matters.
What
are the objectives of the Company’s compensation program?
In setting our compensation program,
the Committee strives to enhance the Company’s overall fundamental objective of
providing long-term value for our shareholders and employees. The
Committee also places major emphasis on retaining current management and
incentivizing key managers to align their interests to make them consistent with
the Company’s growth. The Committee believes that the interests of
management and shareholders can be more closely aligned by providing executives
with competitive levels of compensation that will enable us to attract and
retain key executives by rewarding exceptional individual performance, and by
tying executive pay to overall corporate performance.
What
is the compensation program designed to reward?
Our compensation program is designed to
reward both individual and Company performance, measured by overall Company
results and the attainment of individuals goals and
productivity. Each year our Compensation Committee decides whether or
not to grant annual cash incentives to our corporate officers, including the
named executive officers. These annual cash incentives are designed
to reward the attainment throughout the year of certain personal goals, as well
as the Company’s overall profitability. Factors evaluated when
analyzing the attainment of personal goals include the officer’s attitude,
performance, and contribution to the Company’s profitability and
success. With respect to the Company’s overall profitability, one of
the measures that is considered by the Committee is the Company’s fiscal year
operating income.
What
are the elements of compensation?
The table below summarizes the elements
of our compensation program for our named executive officers.
Element
|
Form of Compensation
|
Purpose
|
Base
Salaries
|
Cash
|
Provide
competitive, fixed compensation to attract and retain exceptional
executive talent
|
Annual
Cash Incentives
|
Cash
|
Provides
a direct financial incentive to achieve corporate and individual operating
goals
|
Long-Term
Equity Incentives
|
Incentive
Stock Options, nonqualified stock options, restricted stock and stock
appreciation rights
|
Encourages
executive officers to build and maintain a long-term equity ownership
position in LSI so that their interests are aligned with our
shareholders
|
Health,
Retirement and Other Benefits
|
Eligibility
to participate in benefit plans generally available
to
our employees, including Retirement Plan contributions, premiums paid on
long-term disability and life insurance policies; nonqualified deferred
compensation plan; and certain perquisites
|
Benefit
plans are part of a broad-based employee benefits program; the
nonqualified deferred compensation plan and perquisites provide
competitive benefits to our executive
officers
|
Each of
these elements of pay is described below.
Base
Salaries
The Compensation Committee annually
reviews the base salaries of our named executive officers and each such
officer’s level of responsibility and potential, as well as salary levels
offered by competitors and the overall marketplace competition. Each
executive’s
particular
division is reviewed, and its contribution to the overall results of the Company
is assessed.
The Committee applies a collective,
subjective evaluation of the above factors to determine the annual base
compensation level of its named executive officers in light of the Company’s
performance and, in certain cases, the performance of various
divisions. The Committee does not utilize a particular objective
formula as a means of establishing annual base salary levels.
After considering information relating
to the average increase in salary levels for all LSI employees as well as
information relating to salaries paid to the executive officers of companies in
LSI’s peer group identified below, the Committee attempts to assess whether
proposed increases in salary levels for NEOs are subjectively fair and in
amounts high enough to retain such NEOs. Based on this information,
at its meeting on August 21, 2007, the Committee determined to increase the base
salaries for fiscal 2008 by approximately 4% for its Presidents for the Lighting
and Graphic Solutions segments, by 5% for the Chief Financial Officer, by 7.3%
for the Executive Vice-President-Manufacturing, and by 7.7% for the
CEO. The Committee believed these increases to be reasonable in light
of the data reviewed and considerations identified above.
Annual Cash
Incentives
The Committee strongly believes that
annual cash incentives provide a direct financial incentive to achieve corporate
and individual operating goals.
The Committee used the fiscal 2006
Corporate Officer Incentive Compensation Plan for the purpose of calculating
guideline bonuses and awarding annual cash incentives. This Incentive
Plan is an entirely discretionary plan. Under the Incentive Plan, a
graduated scale of bonus potential (stated as a percentage of base wage or
salary) is identified at indicated levels of achievement of the Incentive Plan
Performance Driver. The graduated scale of bonus potential
is:
100% achievement of plan = 20%
bonus
110% achievement of plan = 35%
bonus
120% achievement of plan = 50%
bonus
While the
percentage achievement of the incentive plan performance driver may be used as a
rough guideline for determination of the bonus award, the bonus award is
completely discretionary. Factors such as the NEO’s attitude,
performance and contribution to the profitability and success of LSI, as well as
the overall profitability of LSI are some of the potential subjective and
objective factors considered in the determination of a bonus award under this
Plan.
The Incentive Plan requires the CEO to
submit a recommended list of corporate officer awards to the Committee for
adjustment and/or approval. As the amount of bonus award is
completely discretionary, it may be equal to, less than, or greater than the
guideline bonus award computed pursuant to the Plan.
The bonus performance driver for all
named executive officers, including the CEO and CFO, was LSI’s operating income
as compared to LSI’s budgeted operating income.
|
The
targets for each of the above metrics and corresponding company results
are as follows:
|
LSI
Operating
Income
Target
|
LSI
Operating
Income
Result
|
$27,456,000
|
$(11,944,000)
(a)
|
(a) Includes
non-cash goodwill and intangible asset impairment charge of $28,929,000 and loss
contingency settlement of $2,800,000.
The 2008 actual result by percentage
for the performance driver that we use for the Incentive Plan was as
follows:
Bonus
Performance Driver Achievement
|
|
Corporate-wide
|
|
|
Operating
Income
|
(143.5)%
|
The Committee determined, at its
meeting on August 20, 2008, based upon the above performance, there would be no
incentive compensation awarded for fiscal 2008. At this same meeting,
the Committee made no change to the annual base salaries of the named executive
officers for fiscal 2009 and granted stock options to each of the named
executive officers as follows: Messrs. R. Ready and Sferra- 20,000, Messrs. S.
Ready, Stowell and McCauley- 30,000.
In prior years, more than one
performance driver had been in place for the presidents of the Lighting and
Graphics Segments and a specified weighting of each driver was
used. The following performance drivers were evaluated against the
budgeted operating plan for the fiscal year: (1) LSI’s consolidated
operating income; (2) net sales of the respective segment; and (3) operating
income of the respective segment. It is believed that the move in
fiscal 2008 to only one performance driver for all named executives, as well as
all LSI employees covered by the incentive compensation plan, has unified and
motivated all employees to work as a team to achieve and exceed the goal of
operating income that is established for LSI each year. This target
of operating income is derived from LSI’s business plan and represents a goal
that the Committee believed to be challenging for LSI, yet achievable if senior
and operating management meet or surpass their goals and
objectives. Management and the Committee believe that this alignment
of objectives and LSI’s business plan and the performance measurement on which
bonuses are based is in the best interests of all of LSI’s
shareholders.
As of the date of mailing of this Proxy
Statement, the Company is unable to make any definitive statements about the
specific performance goals that will be applied on a going-forward basis for any
incentive compensation. However, the Committee believes that the
performance drivers and measurements set forth in the Incentive Plan may be
helpful in this regard even though such specific targets and measures have not
yet been determined.
Recovery of Prior
Awards
Except as provided by applicable laws
and regulations, we do not have a policy with respect to adjustment or recovery
of awards or payments if relevant company performance measures upon which
previous awards were based are restated or otherwise adjusted in a manner that
would reduce the size of such award or payment. Under those
circumstances, we expect that the Compensation Committee and the Board would
evaluate whether compensation adjustments were appropriate based upon the facts
and circumstances surrounding the applicable restatement or
adjustment.
Long-Term Equity
Incentives
Long-term equity incentive compensation
is comprised of nonqualified stock options, restricted stock, and stock
appreciation rights. These awards are made under the 2003 Equity
Compensation Plan, as amended. The purpose of such awards is to
encourage executive officers to build and maintain a long-term equity ownership
position in the Company so that their interests are aligned with those of our
shareholders.
The 2003 Equity Compensation Plan was
adopted by our shareholders for the purpose of allowing LSI to compete
successfully in retaining and attracting key employees of outstanding ability,
to stimulate the efforts of such employees toward the Company's objectives and
to encourage the identification of their interests with those of the Company's
shareholders. Under the 2003 Plan the Committee has authority in its discretion
to determine, after considering the recommendations or advice of any officer or
employee of the Company or attorneys, consultants, accountants or other advisors
as it may select, to whom, and the time or times at which, awards may be
granted, the number of shares, units or other rights subject to each award, the
exercise, base or purchase price of an award (if any), the time or times at
which an award will become vested, exercisable or payable, the performance goals
and other conditions of an award, the duration of the award, and all other terms
of the award. In other words, the Committee has the discretion to determine the
recipients and terms and conditions of all awards granted under the Plan. This
broad amount of discretion that the Plan provides to the Committee allows the
Committee to consider the Company's results and the role of management in
enabling the Company to achieve such results. We incorporate this flexibility
into our compensation programs and in the assessment process to respond to and
adjust for the evolving business environment.
In connection with the stock options
granted to the NEOs under the 2003 Equity Compensation Plan, the Committee
exercised its discretion under the Plan after it analyzed the achievement by the
NEOs of the specific performance driver noted above, and reviewed information
relating to historical grants of stock options by the Company and peer
companies. In recognition of the company’s performance under the
leadership of the NEOs as described above, the Committee sought to reward the
NEOs by awarding them stock options in an amount that would be significant in
relation to the other annual compensation paid to these individuals, and in the
Committee’s judgment, reasonable and appropriate after considering the NEO’s
total compensation in relation to that of the most senior executives of the peer
group. The size of the award was not determined by application of any
formula, but rather reflected the Committee’s consideration of the results of
the Company in 2007, and the Committee’s desire to encourage and reward such
levels of performance as the 2003 Plan is designed to allow.
The
Committee is responsible for administration of this Plan, both with respect to
executive officers and all other employees. To that end, based on the
CEO’s recommendation,
the
Committee determines which employees receive options, the time of grant, and the
number of shares subject to the option. All option exercise prices
are set at the last closing sale price for the Company’s common shares on the
effective date of grant. The Committee bases its individual stock
options awards upon LSI performance, the past contributions of the particular
employee and the capability of the employee to impact positively our future
success and profitability.
Although LSI does not have a written
policy regarding the timing or practices related to granting equity awards,
neither LSI nor the Committee engages in spring-loading, back-dating or
bullet-dodging practices. Specifically, the Committee approved the
option grants to the NEOs at a meeting on August 20, 2008 with the option grants
to be effective on August 22, 2008 with the exercise price to be the closing
price as reported on Nasdaq on August 22, 2008. LSI issued an
earnings announcement on the morning of August 21, 2008.
For fiscal year 2008, the Committee
granted long-term equity incentive awards in the form of stock options under the
2003 Equity Compensation Plan to the named executive officers. The
Committee based the stock option awards on LSI’s overall financial performance
for 2008, the amount of equity award grants made in the prior year and the
recommendation of the CEO to the Committee regarding such grants.
Health, Retirement and Other
Benefits
The Company’s benefits program includes
retirement plans and group insurance plans. The objective of our
group insurance plans is to provide our executive officers with reasonable and
competitive levels of protection which could interrupt the officer’s employment
and/or income received as an active employee.
The objective of the retirement plans
is to provide a competitive level of retirement income to executive officers and
to reward them for continued service with the Company. The retirement
plans offered to named executive officers include the Nonqualified Deferred
Compensation Plan and the Retirement Plan. The Retirement Plan is a
designated money purchase pension plan with a 401(k) component and a profit
sharing component, and is generally available to all of our non-union employees
with at least six consecutive months of employment. The Nonqualified
Deferred Compensation Plan is discussed in more detail on pages 20 and 21 of
this Proxy Statement.
Executive perquisites are kept by the
Committee to a minimal level and do not play a significant role in executive
compensation. These benefits, and their incremental cost to the
Company, are described on page 17 in the Summary Compensation Table and its
footnotes. The Committee believes these perquisites to be reasonable,
comparable with peer companies, and consistent with the Company’s overall
compensation practices.
On January 25, 2005, the Company
entered into amended agreements with our CEO and Executive Vice
President - Manufacturing. These agreements govern the respective executive’s
transition from full-time employment at such time as the executive notifies the
Company that the transition shall commence. The agreements provide, among other
things, that as compensation for their continued employment during a three year
transitional period, those executives shall be paid for their respective
services in each year at annual rates of 60%, 50% and 40%, respectively, of the
average of their respective last five full fiscal years’
compensation.
How
does each element fit into the overall compensation objectives, and affect
decisions regarding other elements?
We believe that each element of our
compensation program plays a substantial role in maximizing long-term value for
our shareholders and employees because of the significant emphasis on
pay-for-performance principles. Generally, in 2007 approximately 5%
to 15% of a named executive officer’s total compensation was dependent upon
achieving business and financial goals, and realizing other performance
objectives identified in the Incentive Plan. As such, through this
mix of pay, non-performance has a significant affect on the amount of
compensation realized by executive officers.
We consider competitive market
compensation paid by other companies, such as the greater-Cincinnati based
companies and companies that we consider are peers or competitors as identified
below, but we do not attempt to maintain a certain target percentile within a
peer group or otherwise rely on those data to determine executive
compensation. Rather, we incorporate flexibility into our
compensation programs and in the assessment process to respond to and adjust for
the evolving business environment. We strive to achieve an
appropriate mix between equity incentive awards and cash payment in order to
meet our objective. Other than as set forth in our Incentive
Compensation Plan, which is a purely discretionary plan, any apportionment goal
is not applied rigidly and does not control our compensation
decisions. We use it as another tool to assess an executive’s total
pay opportunities and whether we have provided the appropriate incentives to
accomplish our compensation objectives. Our mix of compensation
elements is designed to reward recent results and motivate long-term performance
through a combination of cash and equity incentive awards. We also
seek to balance compensation elements that are based on financial, operational
and strategic metrics with others that are based on the performance of LSI
shares. We believe the most important indicator of whether our
compensation objectives are being met is our ability to motivate our named
executive officers to deliver superior performance and retain them to continue
their careers with LSI on a cost-effective basis.
Compensation information of named
executive officers of the following companies was reviewed and considered by the
Committee:
Greater Cincinnati-based
Companies
Chiquita
Brands International Inc.
|
Kendle
International Inc.
|
LCA
Vision Inc.
|
Meridian
Bioscience, Inc.
|
The
Midland Company
|
NTC
Technologies
|
Multi-Color
Corporation
|
Robbins
& Meyers, Inc.
|
Standard
Register Corporation
|
|
Peer Group
Companies
Acuity
Brands Inc.
|
Color
Kentics Inc.
|
Cooper
Industries Inc.
|
Daktronics
Inc.
|
Genlyte
Group Inc.
|
Hubbel
Corporation.
|
The companies identified above were
recommended by a financial advisor (who is not a compensation consultant)
engaged by the Compensation Committee. The advisor recommended the
greater Cincinnati-based companies on the basis that such companies had
revenues, assets and other financial and operational features similar to those
of LSI. The peers
identified
above are other companies that LSI has historically considered to be its
competitors with respect to its lighting business.
Does
the Company have any Termination or Change-in-Control Agreements with its Named
Executive Officers?
The Company does not have any change in
control agreements with its named executive officers, but does have employment
agreements with Messrs. Ready and Sferra. The Company has not pursued
change in control agreements with its named executive officers because the
Company continues to focus on its ongoing operations as an independent
enterprise. For a further discussion on this topic, please see the
section titled “Potential Payments Upon Termination or Change in Control” on
page 22 of this Proxy Statement.
Does
the Committee review internal pay equity information or tally
sheets?
Although the Committee does not review
tally sheets, it does consider information prepared internally with respect to
an analysis of internal pay equity for the salaries of the named executive
officers with respect to each other.
What
are the tax treatments of the particular forms of compensation?
Section 162(m) of the Internal Revenue
Code places a limit of $1,000,000 on the amount of compensation we may deduct in
any one year with respect to each named executive officer. There is
an exception to the $1,000,000 limitation for performance-based compensation
meeting certain requirements. The Committee believes that all
compensation paid to the named executive officers for fiscal year 2008 is
properly deductible under Section 162(m), but no assurance can be made in this
regard.
COMPENSATION COMMITTEE
REPORT
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis required by Item 402(b) of Regulation S-K with
management. Based on these reviews and discussions, the Compensation
Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in the Company’s proxy statement on Schedule
14A.
Members
of the Compensation Committee:
|
Dennis
B. Meyer (Chairman)
|
|
Gary
P. Kreider
|
|
Wilfred
T. O’Gara
|
|
Mark
A. Serrianne
|
The following tables set forth
information regarding annual, long-term, and other compensation paid by the
Company to its Chief Executive Officer, Chief Financial Officer and each of the
other three named executive officers at June 30, 2008 for services rendered to
the Company and its subsidiaries.
Compensation
Tables and Other Information
The
following table provides information regarding the compensation earned by our
Chief Executive Officer, Chief Financial Officer and our three other most highly
compensated executive officers during fiscal years 2007 and 2008.
SUMMARY
COMPENSATION TABLE
Name
and Principal Position
|
|
Fiscal
Year
|
|
|
Salary
($) (1)
|
|
|
Bonus
($) (2)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards ($) (3)
|
|
|
Non-Equity
Incentive Plan Compensation
($)
|
|
|
Change
in Pension Value and Nonqualified Deferred Compensation Earnings
($)
|
|
|
All
Other Compensation
($) (4)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
J. Ready
Chairman,
President and Chief
Executive
Officer
|
|
|
2008
2007
|
|
|
$
|
622,500
581,667
|
|
|
$
|
--
155,000
|
|
|
$
|
--
--
|
|
|
$
|
132,140
155,250
|
|
|
$
|
--
--
|
|
|
$
|
--
--
|
|
|
$
|
162,296
156,500
|
|
|
$
|
916,936
1,048,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
S. Stowell
Vice
President, Chief Financial
Officer
and Treasurer
|
|
|
2008
2007
|
|
|
$
|
273,976
260,993
|
|
|
$
|
--
75,000
|
|
|
$
|
--
--
|
|
|
$
|
165,175
124,200
|
|
|
$
|
--
--
|
|
|
$
|
--
--
|
|
|
$
|
79,960
91,723
|
|
|
$
|
519,111
551,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
P. Sferra
Executive
Vice President –
Manufacturing;
Secretary
|
|
|
2008
2007
|
|
|
$
|
494,333
463,333
|
|
|
$
|
--
125,000
|
|
|
$
|
--
--
|
|
|
$
|
132,140
155,250
|
|
|
$
|
--
--
|
|
|
$
|
--
--
|
|
|
$
|
93,461
85,247
|
|
|
$
|
719,934
828,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
D. Ready
President
of LSI Lighting
Solutions
Plus
|
|
|
2008
2007
|
|
|
$
|
258,333
245,833
|
|
|
$
|
--
20,000
|
|
|
$
|
--
--
|
|
|
$
|
165,175
124,200
|
|
|
$
|
--
--
|
|
|
$
|
--
--
|
|
|
$
|
49,719
56,391
|
|
|
$
|
473,227
446,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
W. McCauley
President
of LSI Graphic
Solutions
Plus
|
|
|
2008
2007
|
|
|
$
|
240,500
231,667
|
|
|
$
|
--
60,000
|
|
|
$
|
--
--
|
|
|
$
|
165,175
124,200
|
|
|
$
|
--
--
|
|
|
$
|
--
--
|
|
|
$
|
55,353
42,100
|
|
|
$
|
461,028
457,967
|
|
|
1.
|
Salary
compensation represents the base salary paid during the fiscal
year.
|
|
2.
|
Bonus
compensation represents the discretionary incentive compensation expensed
during the fiscal year and paid out in August following the fiscal
year-end.
|
|
3.
|
Option
awards compensation represents the number of stock options granted during
the fiscal year times the fair value at the time of grant. See
discussion related to all assumptions made in the valuation of stock
options in accordance with SFAS No. 123(R) in Note 10 to the Company’s
financial statements included in the Company’s Form 10-K for the fiscal
year ended 6/30/08.
|
|
4.
|
All
other compensation includes the items indicated in the table
below.
|
ALL
OTHER COMPENSATION
Name
|
|
Fiscal
Year
|
|
|
Automobile
allowance and Operating expenses (1)
|
|
|
Professional
Fee Allowance
|
|
|
Life
Insurance
(2)
|
|
|
Long-term
Disability Insurance (3)
|
|
|
Qualified
Retirement Plan Contribu-tions (4)
|
|
|
Non-qualified
Deferred Compensation Plan Contributions (5)
|
|
|
Pay
in Lieu of Time Off (6)
|
|
|
Contribu-tion
to Affiliated Charitable Event (7)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
J. Ready
|
|
|
2008
2007
|
|
|
$
|
33,239
32,308
|
|
|
$
|
5,000
5,000
|
|
|
$
|
6,995
7,132
|
|
|
$
|
5,111
6,367
|
|
|
$
|
15,814
14,987
|
|
|
$
|
51,137
45,071
|
|
|
$
|
45,000
45,635
|
|
|
$
|
--
--
|
|
|
$
|
162,296
156,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
S. Stowell
|
|
|
2008
2007
|
|
|
$
|
22,133
21,466
|
|
|
$
|
--
--
|
|
|
$
|
22,424
22,415
|
|
|
$
|
--
--
|
|
|
$
|
15,814
14,987
|
|
|
$
|
11,404
21,727
|
|
|
$
|
7,435
11,128
|
|
|
$
|
750
--
|
|
|
$
|
79,960
91,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
P. Sferra
|
|
|
2008
2007
|
|
|
$
|
22,293
20,426
|
|
|
$
|
3,000
3,000
|
|
|
$
|
7,006
7,132
|
|
|
$
|
11,742
11,184
|
|
|
$
|
15,814
14,987
|
|
|
$
|
33,606
28,518
|
|
|
$
|
--
--
|
|
|
$
|
--
--
|
|
|
$
|
93,461
85,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
D. Ready
|
|
|
2008
2007
|
|
|
$
|
15,951
15,742
|
|
|
$
|
--
--
|
|
|
$
|
686
562
|
|
|
$
|
--
--
|
|
|
$
|
15,814
14,987
|
|
|
$
|
5,268
7,695
|
|
|
$
|
12,000
17,405
|
|
|
$
|
--
--
|
|
|
$
|
49,719
56,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
W. McCauley
|
|
|
2008
2007
|
|
|
$
|
17,893
22,243
|
|
|
$
|
--
--
|
|
|
$
|
2,243
2,113
|
|
|
$
|
--
--
|
|
|
$
|
15,814
15,032
|
|
|
$
|
7,753
2,712
|
|
|
$
|
11,650
--
|
|
|
$
|
--
--
|
|
|
$
|
55,353
42,100
|
|
|
1.
|
Automobile
allowance includes an annual cash allowance plus the tax grossed-up amount
of automobile operating expenses (gasoline, maintenance,
etc.).
|
|
2.
|
Life
insurance includes the taxable premium associated with the Company’s group
term life insurance program. Additionally, for Mr. Stowell,
life insurance compensation also includes $20,100 from the tax grossed-up
amount of premium on an individual life insurance
policy.
|
|
3.
|
Long-term
disability premiums are for supplemental individual policies for Mr.
Robert Ready and Mr. Sferra.
|
|
4.
|
Qualified
retirement plan contributions are made to the accounts of each executive
pursuant to the LSI Industries Inc. Retirement Plan. These
contributions include a guaranteed contribution of 4% of covered
compensation (as defined by the Plan and ERISA regulations), plus 4% of
covered compensation that is above the applicable FICA limit, plus a pro
rata share of the Company’s discretionary profit sharing
contribution.
|
|
5.
|
Nonqualified
deferred compensation plan contributions are made to the Company’s
executives’ accounts at the same percentage as in the Company’s qualified
retirement plan (see note 4 above) for any compensation (salary and bonus)
not receiving a benefit in the qualified retirement plan due to ERISA
imposed limits on covered compensation or because the executive elected to
defer salary and/or bonus into the deferred compensation
plan. Additionally, Mr. Stowell received a matching
contribution related to deferral of a portion of his salary and bonus as
provided for in the Company’s deferred compensation
plan.
|
|
6.
|
Certain
executives did not take time off for all earned vacation or for a floating
holiday, and therefore received pay at their normal base salary rate in
lieu of time off.
|
|
7.
|
The
Company made a contribution to a charitable event with which Mr. Stowell
is affiliated.
|
GRANTS
OF PLAN-BASED AWARDS
This
table sets forth certain information regarding all grants of plan-based awards
made to the named executive officers during fiscal 2008.
Name
|
Grant
Date
|
Date
of Committee Action
|
All
Other Option Awards: Number of Securities Underlying
Options (#)
|
Exercise
or Base Price of Option Awards ($/share)
|
Grant
Date Fair Value of Stock and Option Awards
|
|
|
|
|
|
|
|
Robert
J. Ready
|
8/24/07
|
8/21/07
|
20,000
|
$19.76
|
$6.61
|
|
|
|
|
|
|
|
|
Ronald
S. Stowell
|
8/24/07
|
8/21/07
|
25,000
|
$19.76
|
$6.61
|
|
|
|
|
|
|
|
|
James
P. Sferra
|
8/24/07
|
8/21/07
|
20,000
|
$19.76
|
$6.61
|
|
|
|
|
|
|
|
|
Scott
D. Ready
|
8/24/07
|
8/21/07
|
25,000
|
$19.76
|
$6.61
|
|
|
|
|
|
|
|
|
David
W. McCauley
|
8/24/07
|
8/21/07
|
25,000
|
$19.76
|
$6.61
|
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The
following table provides information regarding unexercised stock options and
unvested stock awards held by our named executive officers as of June 30,
2008.
|
Option
Awards
(1)
|
Stock
Awards
|
Name
|
Grant
Date
|
Number
of Securities Underlying Unexercised Options Exercisable
(#)
|
Number
of Securities Underlying Unexercised Options Unexercisable
(#)
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
Market
Value of Shares or Units of Stock That Have Not Vested
($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
That Have Not Vested
(#)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or
Other Rights That Have Not
Vested
($)
|
|
|
|
|
|
|
|
|
|
|
|
Robert
J. Ready
|
7/3/00
11/14/01
10/27/04
8/24/06
8/24/07
|
--
28,125
22,500
20,000
6,250
--
|
--
--
--
10,000
18,750
20,000
|
--
--
--
--
--
--
|
--
$
8.23
11.68
9.96
17.60
19.76
|
--
7/3/10
11/14/11
10/27/14
8/24/16
8/24/17
|
--
--
--
--
--
--
|
--
--
--
--
--
--
|
--
--
--
--
--
--
|
--
--
--
--
--
--
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
S. Stowell
|
11/14/01
10/27/04
8/24/06
8/24/07
|
--
18,750
22,300
5,000
--
|
--
--
2,700
15,000
25,000
|
--
--
--
--
--
|
--
$11.68
9.96
17.60
19.76
|
--
11/14/11
10/27/14
8/24/16
8/24/17
|
--
--
--
--
--
|
--
--
--
--
--
|
--
--
--
--
--
|
--
--
--
--
--
|
|
|
|
|
|
|
|
|
|
|
|
James
P. Sferra
|
7/3/00
11/14/01
10/27/04
8/24/06
8/24/07
|
--
28,125
18,750
24,500
6,250
--
|
--
--
--
5,500
18,750
20,000
|
--
--
--
--
--
--
|
--
$
8.23
11.68
9.96
17.60
19.76
|
--
7/3/10
11/14/11
10/27/14
8/24/16
8/24/17
|
--
--
--
--
--
--
|
--
--
--
--
--
--
|
--
--
--
--
--
--
|
--
--
--
--
--
--
|
|
|
|
|
|
|
|
|
|
|
|
Scott
D. Ready
|
7/3/00
11/14/01
3/1/02
10/27/04
8/24/06
8/24/07
|
--
4,375
7,500
1,250
15,000
5,000
--
|
--
--
--
--
5,000
15,000
25,000
|
--
--
--
--
--
--
--
|
--
$
8.23
11.68
15.84
9.96
17.60
19.76
|
--
7/3/10
11/14/11
3/1/12
10/27/14
8/24/16
8/24/17
|
--
--
--
--
--
--
--
|
--
--
--
--
--
--
--
|
--
--
--
--
--
--
--
|
--
--
--
--
--
--
--
|
|
|
|
|
|
|
|
|
|
|
|
David
W. McCauley
|
11/14/01
10/27/04
8/24/06
8/24/07
|
--
2,813
15,000
5,000
--
|
--
--
5,000
15,000
25,000
|
--
--
--
--
--
|
--
$11.68
9.96
17.60
19.76
|
--
11/14/11
10/27/14
8/24/16
8/24/17
|
--
--
--
--
--
|
--
--
--
--
--
|
--
--
--
--
--
|
--
--
--
--
--
|
(1) Stock options
have a ten-year term and generally vest at a rate of 25% per year beginning with
the first anniversary of the date of grant.
OPTION
EXERCISES AND STOCK VESTED
The
following table provides information for each of the named executive officers on
stock option exercises during fiscal 2008, including the number of shares
acquired upon exercise and the value realized.
|
Option
Awards
|
Stock
Awards
|
Name
|
Number
of Shares
Acquired
on Exercise
(#)
|
Value
Realized
on
Exercise
(1)
($)
|
Number
of Shares
Acquired
on Vesting
(#)
|
Value
Realized
on
Vesting
($)
|
|
|
|
|
|
Robert
J. Ready
|
None
|
N/A
|
None
|
N/A
|
|
|
|
|
|
Ronald
S. Stowell
|
18,750
|
$230,563
|
None
|
N/A
|
|
|
|
|
|
James
P. Sferra
|
9,375
|
$120,656
|
None
|
N/A
|
|
|
|
|
|
Scott
D. Ready
|
7,825
|
$ 57,295
|
None
|
N/A
|
|
|
|
|
|
David
W. McCauley
|
None
|
N/A
|
None
|
N/A
|
(1)
|
The
value realized on exercise is the market value at the time of exercise of
the shares purchased less the exercise price
paid.
|
NONQUALIFIED
DEFERRED COMPENSATION
The
Company has a nonqualified deferred compensation plan that allows for both
employee contributions and company contributions. This is a funded
plan so that when contributions are made into the plan they are 100% invested in
common stock of the Company. A group of employees of the company
having an annual base salary above a certain limit are invited to defer a
portion of their salary and/or bonus into this plan. A company
matching contribution may be made on up to 40% of an executive’s salary and
bonus compensation at a matching percentage that is either 20%, 25% or 30% for
the named executive officers, depending upon the actual return on average
shareholders’ equity (“ROE”) achieved as compared to the plan for the fiscal
year. The matching percentage achieved in fiscal 2008 was
zero. An executive’s deferral into the plan in the current fiscal
year can be matched for the current fiscal year as well as the two subsequent
fiscal years if the ROE targets are achieved in any of those years. A
company make up contribution will also be made into the plan on behalf of the
named executives at the same percentage as in the Company’s qualified retirement
plan for any salary and bonus compensation not receiving a benefit in the
qualified retirement plan due to ERISA imposed limits on covered compensation or
because the executive elected to defer salary and/or bonus into the deferred
compensation plan.
The
following table provides information relating to the activity in the Deferred
Compensation Plan accounts of the named executive officers during fiscal 2008
and the aggregate balance of the accounts as of June 30, 2008.
Name
|
|
Executive
Contributions in Fiscal 2008
($)
(1)
|
|
|
Registrant
Contributions in Fiscal 2008
($)
(2)
|
|
|
Aggregate
Earnings in Fiscal 2008
($)
(3)
|
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
|
Aggregate
Balance at June 30, 2008
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
J. Ready
|
|
$
|
--
|
|
|
$
|
45,071
|
|
|
$
|
(505,524
|
)
|
|
$
|
--
|
|
|
$
|
415,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
S. Stowell
|
|
$
|
12,441
|
|
|
$
|
22,868
|
|
|
$
|
(289,731
|
)
|
|
$
|
--
|
|
|
$
|
240,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
P. Sferra
|
|
$
|
--
|
|
|
$
|
28,518
|
|
|
$
|
(315,901
|
)
|
|
$
|
--
|
|
|
$
|
259,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
D. Ready
|
|
$
|
--
|
|
|
$
|
7,695
|
|
|
$
|
(12,773
|
)
|
|
$
|
--
|
|
|
$
|
9,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
W. McCauley
|
|
$
|
--
|
|
|
$
|
2,712
|
|
|
$
|
(203,139
|
)
|
|
$
|
--
|
|
|
$
|
168,404
|
|
(1)
|
Executive
contributions are included as part of the Executives’ salary in the
Summary Compensation Table. This was also the case in prior
years.
|
(2)
|
LSI
contributions included in this table were accrued as expense by the
Company in fiscal 2007 and funded into the Named Executive’s account in
fiscal 2008. As such, these amounts are not included in the
Summary Compensation Table; however, the amount accrued as expense in
fiscal 2008 is included.
|
(3)
|
Aggregate
earnings are included as part of the Executives’ change in nonqualified
deferred compensation earnings in the Summary Compensation
Table. These aggregate earnings were not reported as Executive
Compensation in years prior to fiscal 2007. Aggregate earnings
represent the change in the market price of common stock of the company as
all account balances in the nonqualified deferred compensation plan are
invested in common stock of the
Company.
|
(4)
|
Named
executives and other managers with balances in the nonqualified deferred
compensation plan are fully vested in their own contributions to the plan,
and vest in company contributions in the same manner as in the LSI
Retirement Plan (20% after two years of service with the Company, with 20%
additional vesting each year thereafter until becoming fully vested at six
years). Participants in this plan may receive installments or
lump sum distributions upon termination of employment from the Company
(not before a date which is six months after termination for the named
executive officers). There is also a provision for hardship
distributions in the event of an unforeseeable emergency that would result
in a severe financial hardship to the participant. All
distributions are made in the form of common shares of the
Company.
|
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Except as described above, the named
executive officers do not have employment, severance or change-in-control
agreements with the Company. In addition, any agreements, plans or
arrangements that provide for payments to a named executive officer at,
following, or in connection with any termination (including retirement) of such
named executive officer, do not discriminate in scope, terms or operation in
favor of the named executive officer, and are available generally to all
salaried employees. All options granted under the Company’s
shareholder approved plans provide for the acceleration of vesting upon a change
in control or upon the executive’s retirement pursuant to a plan approved by the
Company.
Under separate agreements, Messrs.
Robert Ready and Sferra will receive disability payments for up to 50 months at
60% of their average salary and bonus received in the last five fiscal years,
reduced by any Social Security payments, if they become disabled while employed
by LSI. Health insurance will be maintained for the person, his
spouse and dependent children for five years, in the case of Mr. Ready, or ten
years, in the case of Mr. Sferra, after termination or death. If such
person dies while employed by LSI or while receiving disability payments, the
Company shall pay their heirs one million dollars less any payments made as
disability compensation or from any policies of life insurance maintained by
LSI. In order to provide clear continuity of management influence,
LSI has also agreed to employ Messrs. Ready and Sferra as consultants for a
transition period of three years commencing at an unspecified time in the future
when such person determines to retire from employment. As described
above, compensation will be at annual rates of 60%, 50%, and 40% of the average
of the last five full fiscal year salary levels. The establishment of
provisions for consulting services by Messrs. Ready and Sferra are intended to
facilitate a smooth transition as part of any future management succession
plan.
CORPORATE
GOVERNANCE
LSI
Industries Inc. is an Ohio corporation and, therefore, governed by the corporate
laws of the State of Ohio. Since its shares are publicly traded on
the NASDAQ Global Select Market and it files reports with the Securities and
Exchange Commission, it is also subject to NASD rules as well as various
provisions of federal securities laws as recently changed by the Sarbanes-Oxley
Act. In accordance with Nasdaq rules, our Board of Directors
affirmatively determines the independence of each director and nominee for
election as a director in accordance with the elements of independence set forth
in the Nasdaq listing standards and Exchange Act rules. LSI's Director
Independence Standards are available at our website www.lsi-industries.com.
Based on these standards, the Board determined that each of the
following members of the Board is independent: Messrs. Kreider,
Meyer, O’Gara and Serrianne.
Governance
of the corporation is placed in the hands of the Directors who, in turn, elect
officers to manage the business operations. The Board oversees the
management of LSI Industries on your behalf. It reviews the Company's
long-term strategic plans and exercises direct decision making authority in all
major decisions, such as significant acquisitions, the declaration of dividends,
major capital expenditures and the establishment of critical
policies.
During
fiscal 2008, the Board of Directors met on six occasions and took one Action in
Writing. In addition to all of the committee meetings disclosed in
this report, the independent directors met on one occasion during fiscal 2008
without the presence of the Company's management or executives. The
independent directors select one of such directors to preside over each session
as a lead director.
The
Company expects all directors to attend shareholders’ meetings. All
directors attended the 2007 Annual Meeting. Each of the directors
attended 100% of the aggregate of all meetings of the Board and committees of
which they were a member.
Shareholders
may communicate with the full Board or individual directors on matters of
concern by mail or through our website in each case to the attention of the
Secretary of LSI Industries Inc.
DIRECTOR
COMPENSATION
Non-employee directors of the Company
received $25,000 ($10,000 of which was in the form of common shares of the
Company, paid quarterly at the closing price of the Company's common shares at
the end of the first business day of that quarter), plus $1,500 for each meeting
attended. Committee members received $6,000 or $3,000, respectively,
for serving as Chairman or a member of the Audit Committee, $3,000 or $1,500,
respectively, for serving as Chairman or a member of either the Compensation or
Nominating and Corporate Governance Committee, plus either $500 or $750 per
committee meeting. Gary Kreider serves as Board Secretary. Mr.
Kreider receives no fees for this service except that he receives committee
meeting fees for serving as Board secretary for committees of which he is not a
member. Directors who are employees of the Company do not receive any
compensation for serving as a Director. Non-employee directors
received, at the time of their election as directors, an annual grant of an
option to purchase 1,500 common shares at the market price at the time of
grant. Options granted to non-employee directors in fiscal 2008 had
exercise prices equal to the fair market value of LSI common shares on the date
of grant, were exercisable 25% each ninety days following the date of grant and
had ten year terms. Each of the outside independent directors was
awarded 1,500 stock options (the exercise price was $19.68 per share) when they
were elected as Directors at the November 15, 2007 Annual Shareholders’ Meeting,
as well as 2,500 stock options in August 2007 (exercise price was $19.76 per
share).
The following table sets forth
information regarding compensation paid by the Company to its outside
independent Board members during fiscal 2008.
Name
(1)
|
|
Fees
Earned
Or
Paid
in
Cash
($)
|
|
|
Stock
Awards
($)
(2)
|
|
|
Option
Awards
$
(3)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Change
in
Pension
Value
And
Nonqualified
Deferred
Compensation
Earnings
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
Gary
P. Kreider
|
|
$
|
35,750
|
|
|
$
|
10,006
|
|
|
$
|
23,466
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
69,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dennis
B. Meyer
|
|
$
|
38,750
|
|
|
$
|
10,006
|
|
|
$
|
23,466
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
72,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wilfred
T. O’Gara
|
|
$
|
40,250
|
|
|
$
|
10,006
|
|
|
$
|
23,466
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
73,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
A. Serrianne
|
|
$
|
36,250
|
|
|
$
|
10,006
|
|
|
$
|
23,466
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
69,722
|
|
(1) The
table above includes all outside independent directors of the
Company.
(2)
|
Stock
awards are made to each outside independent director quarterly as part of
their annual retainer such that the annual value of stock awarded, based
upon the closing price on the first business day of each calendar quarter,
is equal to approximately $10,000.
|
(3)
|
The
aggregate number of stock options outstanding for each outside independent
director as of June 30, 2008 were as follows: Mr. Kreider
21,625 shares; Mr. Meyer 22,563 shares; Mr. O’Gara 31,002 shares; and Mr.
Serrianne 17,500 shares. See further discussion related to all
assumptions made in the valuation in Note 10 to the Company’s financial
statements included in the Company’s Form 10-K for the fiscal year ended
6/30/08.
|
COMMITTEES OF THE
BOARD
The Directors have organized themselves
into the committees described below to help carry out Board
responsibilities. In particular, Board committees work on key issues
in greater detail than would be possible at full Board meetings. Each
committee reviews the results of its meetings with the full
Board. Other than the Executive Committee, each Committee has a
charter.
The LSI
Board of Directors reviewed, approved and adopted the LSI Industries Inc. Code
of Ethics at its April 2004 meeting. There have been no amendments to
the Code of Ethics nor any waivers granted to employees, managers or executive
officers. The Company's Code of Ethics is available as Exhibit 14 to
the Form 10-K filed for the year ended June 30, 2004. The Company
intends to post on its website within four business days any amendments or
waivers to the Code of Ethics.
Each of
the following committees, except for the Executive Committee, is composed of
nonemployee directors each of whom meets the relevant independence requirements
established by Nasdaq and the Sarbanes-Oxley Act that apply to their particular
assignments.
The Executive
Committee
The Executive Committee, composed of
Messrs. Ready (Chairman), and Sferra, is responsible, during the intervals
between meetings of the Board of Directors, for exercising all the powers of the
Board of Directors in the management and control and the business of the Company
to the extent permitted by law. The Executive Committee did not meet
during fiscal 2008.
The Audit
Committee
The Audit Committee is governed by an
Audit Committee Charter adopted by the Board of Directors. The Audit
Committee is composed of Messrs. O’Gara (Chairman), Meyer, and
Serrianne. Wilfred T. O'Gara has been designated as the Audit
Committee financial expert by the Board of Directors, and meets all requirements
as a financial expert as established by the Securities and Exchange
Commission. The Audit Committee met five times in fiscal
2008.
The Audit
Committee is solely responsible for the appointment, compensation, retention and
oversight of the Company's independent registered public accounting firm, our
auditors. The Audit Committee also evaluates information received
from both the outside auditor and management to determine whether the auditor is
independent of management. The independent registered public
accounting firm reports directly to the Audit Committee. A copy of
the Committee’s Charter is available on LSI's website,
www.lsi-industries.com.
The primary function of the Audit
Committee is to assist the Board of Directors in fulfilling its oversight
responsibilities by reviewing the following:
1.
|
The
financial reports and other financial information provided by the Company
to any governmental body or the public,
|
2.
|
The
Company’s systems of internal control regarding finance, accounting, legal
compliance and ethics that management and the Board have established,
and
|
3.
|
The
Company’s auditing, accounting and financial reporting processes
generally.
|
The Audit
Committee has established procedures for the receipt, retention and treatment of
complaints concerning accounting, internal controls or auditing matters and has
established procedures for the confidential and anonymous submission by
employees of any concerns they may have regarding questionable accounting or
auditing matters.
The Audit
Committee approves all audit and non-audit services performed for the Company by
its independent registered public accounting firm prior to the time that those
services are commenced. The Chairman also has the authority to
approve these services between regularly scheduled meetings. In this
event, the Chairman reports approvals made by him to the full Committee at each
of its meetings. For these purposes, the Committee, or its Chairman,
is provided with information as to the nature, extent and purpose of each
proposed service, as well as the approximate timeframe and proposed cost
arrangements for that service.
The
Company adheres to a policy that limits the scope of consulting services that
may be provided by the independent registered public accounting firm that
performs the annual audit. This policy draws a distinction between
audit, audit-related and non-audit services, and prohibits the independent
registered public accounting firm from performing certain non-audit
services. The Company will not use its independent registered public
accounting firm to perform certain non audit-related services such as
non-financial or management consulting services, business strategy consulting,
information technology consulting, internal audit, price allocation appraisals
and fairness opinions. Audit-related and tax consulting services that
will be permitted include: retirement plan and 401(k) audits,
securities registration and reporting,
tax
compliance and planning,
advice on the application of accounting policies, guidance on acquisition
accounting and assistance with due diligence audits.
During the year, the Committee has
discussed with both Deloitte & Touche LLP and management the Company’s
actions to establish, document, test and evaluate controls and procedures
pursuant to new requirements of the Sarbanes-Oxley Act.
The Audit Committee approves Engagement
Letters from the Company's independent registered public accounting firm for the
major components of their services rendered, such as the year end audit, audit
of the Company's Retirement Plan, tax compliance work, etc. All other
services are approved in advance on a project-by-project basis by the Audit
Committee, acting through its Chairman, and are subsequently additionally
approved by the Audit Committee itself following its quarterly detailed review
and discussion of fees from the Company's independent registered public
accounting firm.
The Audit Committee has advised the
Company it has determined that the non-audit services rendered by Deloitte &
Touche LLP in fiscal 2008 are compatible with maintaining their independence
during fiscal year 2008.
Report of the Audit
Committee
The Audit Committee engaged Deloitte
& Touche LLP, an independent registered public accounting firm, to conduct
fiscal 2008 audits for the purpose of expressing an audit opinion on the
conformity of the audited year-end financial statements with accounting
principles generally accepted in the United States, as well as an audit opinion
on the Company’s system of internal control over financial
reporting. The Committee also discussed with Deloitte & Touche
LLP the overall scope and plan for their audit. Following these
audits, the Audit Committee reviewed with Deloitte & Touche LLP their
judgments as to the quality, not just the acceptability, of the Company’s
accounting principles and such other matters as are required to be discussed
with the Committee under auditing standards generally accepted in the United
States, including Statement of Auditing Standards No. 114 (SAS 114 – The
Auditor’s Communication with Those Charged with Governance), as amended (AICPA
Professional Standards, Vol. 1 AU Section 380) as adopted by the Public Company
Accounting Oversight Board in Rule 3200T and Rule
2-07 of
Regulation S-X. SAS 114 requires Deloitte & Touche LLP to provide
the Committee with additional information regarding the scope and results of
their audit of the Company’s financial statements with respect to (i) their
responsibility under auditing standards generally accepted in the United States,
(ii) significant accounting policies, (iii) management judgments and estimates,
(iv) any significant audit adjustments, (v) any disagreements with management
and (vi) any difficulties encountered in performing the audit. The
Committee also reviewed with Deloitte & Touche LLP their assessment of the
Company’s system of internal control over financial reporting.
Deloitte & Touche LLP also provided
a letter containing the disclosures required by Independence Standards Board No.
1 (Independence Discussions with Audit Committees) as adopted by the Public
Company Accounting Oversight Board in Rule 3600T with respect to relationships
between Deloitte & Touche LLP and either the Company or management that in
its professional judgment may reasonably be thought to bear on
independence. This letter from Deloitte & Touche LLP confirms
that, in its professional judgment, it is independent of the Company within the
meaning of the federal securities laws and the requirements of the Independence
Standards Board. The Audit Committee has advised Company management
that it has determined that the services rendered by Deloitte & Touche LLP
during fiscal year 2008 are compatible with maintaining their independence as
the Company’s auditors.
The Audit Committee reviewed and
discussed with management the audited financial statements for the year ended
June 30, 2008. In reliance on the reviews and discussions described
above, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended June 30, 2008 for filing with the Securities and Exchange
Commission.
|
Respectfully
submitted by members of the
|
|
Audit
Committee
|
|
Wilfred T. O’Gara,
Chairman
|
|
Dennis B.
Meyer
|
|
Mark A.
Serrianne
|
The Nominating and Corporate
Governance Committee
The
Nominating and Corporate Governance Committee, composed of Messrs. Kreider
(Chairman), Meyer, O’Gara and Serrianne, is responsible for nominating persons
for election as directors at each annual shareholders’ meeting and to fill any
Board vacancies that may arise between meetings. The Nominating and
Corporate Governance Committee will consider nominees recommended by security
holders in written correspondence directed to the Secretary of the
Company. The Committee takes into account, among other factors which
it may deem appropriate, the judgments, skill, diversity, business experience,
and the needs of the Board as its function relates to the business of the
Company. The Nominating and Corporate Governance Committee met twice
during fiscal year 2008 to nominate the slate of directors for the 2007 Annual
Shareholders’ Meeting and to discuss other corporate governance
matters. The Nominating and Governance Committee did not seek the
recommendation of any of the director candidates named in this proxy statement,
nor did it receive a recommendation from any shareholder, non-management
director, executive officer or third-party search firm in connection with its
own approval of such candidates. The Company has not paid any fee to a third
party to assist it in identifying or evaluating nominees.
A copy of the Committee’s
Charter is available on LSI's website.
The Compensation
Committee
The Compensation Committee, composed of
Messrs. Meyer (Chairman), Kreider, O’Gara, and Serrianne met one time during
fiscal 2008. The Compensation Committee is governed by a written charter adopted
by the Board. A copy of the Compensation Committee Charter is available on our
website,
www.lsi-industries.com
.
In discharging the responsibilities of the Board of Directors relating to
compensation of LSI’s Chief Executive Officer and other senior executive
officers, the purposes of the Compensation Committee are, among others, (i) to
review and approve the compensation of LSI's Chief Executive Officer and other
senior executive officers and (ii) to oversee the compensation policies and
programs of LSI, including stock and benefit plans. The Compensation Committee’s
specific functions include adopting, administering and approving LSI's incentive
compensation and stock plans and awards, including amendments to the plans or
awards and performing such duties and responsibilities under the terms of any
executive compensation plan, incentive-compensation plan or equity-based plan.
The Compensation Committee has the authority to delegate any of its
responsibilities to subcommittees as the Compensation Committee may deem
appropriate in its sole discretion. While the Committee has from time to time
considered the use of outside consultants to assist in the evaluation of the
Company’s executive compensation programs and practices, it did not engage such
a consultant during the fiscal year ending June 30, 2008. At this
time, the Committee believes that it has the necessary resources available to
survey the compensation practices of the Company’s peer group and keep abreast
of compensation developments in the marketplace. The Compensation
Committee engaged a consultant for the fiscal year ending June 30, 2007, in
connection with the gathering and analysis of peer company executive officer
compensation data, including the following as reported in their respective Proxy
Statements: annual base salary, bonus, all other compensation, stock
options, stock awards, as well as the existence of employment contracts,
severance agreements, post-retirement benefits, change of control provisions,
etc. The CEO provides input and recommendations to the Compensation
Committee with respect to the compensation to be paid to the nonemployee members
of the Board.
LSI's executive compensation policies
are designed to support the corporate objective of maximizing the long-term
value of LSI for its shareholders. To achieve this objective, the Committee
believes it is important to provide competitive levels of compensation to
attract and retain the most qualified employees, to recognize individuals who
exceed expectations and to closely link executive compensation with corporate
performance. The methods by which the Committee believes LSI's long-term
objectives can be achieved are through incentive compensation plans and equity
compensation plans.
The Compensation Committee processes
and procedures for the consideration and determination of executive and director
compensation are discussed in the section entitled “Compensation Discussion and
Analysis.”
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
Gary P. Kreider, who is a member of the
Compensation Committee, is designated as a senior partner of Keating Muething
& Klekamp PLL, Cincinnati, Ohio, a law firm that provided legal services to
the Company in fiscal year 2008, but he has no vote or interest in the firm’s
earnings. Except as described above, none of the members of the
Compensation Committee has ever been an officer or employee of LSI. None of the
members of the Compensation Committee is or was a participant in any related
person transaction in fiscal 2008 (see the section titled Related Person
Transactions in this proxy statement for a description of our policy on related
person transactions). Lastly, none of the members of the Compensation Committee
is an executive officer of another entity, at which one of our executive
officers serves on the Board of Directors. No named executive officer of LSI
serves as a director or as a member of a committee of any company of which any
of LSI's nonemployee directors are executive officers.
RELATED PERSON
TRANSACTIONS
J. Scott Sferra, age 44, is Vice
President Manufacturing of the Cincinnati Operations of LSI Industries and is
the son of James P. Sferra, Director, Secretary and Executive Vice President
Manufacturing of LSI Industries. In fiscal year 2008, J. Scott
Sferra's total compensation was $120,388.
During fiscal 2008, the Company paid
approximately $192,000 to American Engineering and Metal Working, a company
owned and operated by Kurt McCauley, David McCauley's son, for fabricated metal
products. The Company believes that the rates charged by American Engineering
for these products are comparable to those that the Company would have paid if
it had purchased such products from other suppliers in transactions negotiated
at arms length.
LSI engages Keating Muething &
Klekamp PLL, a Cincinnati, Ohio-based law firm with which Mr. Kreider is
affiliated as described above, for a variety of legal services. Mr. Kreider's
son is a partner at KMK. LSI paid the firm fees of approximately $177,000 for
legal services during the fiscal year ending June 30, 2008. Neither receives any
direct compensation from fees paid by LSI to the firm.
Nasdaq rules require the Company to
conduct an appropriate review of all related party transactions (those required
to be disclosed by the Company pursuant to SEC Regulation S-K Item 404) for
potential conflict of interest situations on an ongoing basis and that all such
transactions must be approved by the Audit Committee or another committee
comprised of independent directors. As a result, the Audit Committee annually
reviews all such related party transactions and approves each related party
transaction if it determines that it is in the best interests of the Company. In
considering the transaction, the Committee may consider all
relevant
factors, including as applicable (i) the Company’s business rationale for
entering into the transaction; (ii) the alternatives to entering into a related
person transaction; (iii) whether the transaction is on terms comparable to
those available to third parties, or in the case of employment relationships, to
employees generally; (iv) the potential for the transaction to lead to an actual
or apparent conflict of interest and any safeguards imposed to prevent such
actual or apparent conflicts; and (vi) the overall fairness of the transaction
to the Company. The Company adheres to its written policy described above for
potential related person transactions and approval of such related person
transactions are also evidenced by internal Company resolutions where applicable
and/or our practice of approving transactions in this manner.
OTHER
MATTERS
LSI Industries is not aware of any
other matters to be presented at the Annual Meeting of Shareholders other than
those specified in the Notice.
QUESTIONS
If you have any questions or need more
information about the Annual Shareholders’ Meeting, write to or
contact:
|
LSI
Industries Inc.
|
|
Ronald
S. Stowell,
|
|
Vice
President, Chief Financial
|
|
Officer
& Treasurer
|
|
10000
Alliance Road
|
|
Cincinnati,
Ohio 45242
|
|
(513)
793-3200
|
For more information about your share
ownership, call Computershare Investor Services, LLC at (312)
588-4993.
We also invite you to visit the LSI
Industries website on the Internet at
www.lsi-industries.com
.
Internet
site materials are for your general information only and are not part of this
proxy solicitation.
|
|
By
order of the Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
/s/ James
P. Sferra
|
|
|
|
James
P. Sferra
|
|
|
|
Secretary
|
|
Dated:
October 3, 2008
|
|
|
|
ANNEX A
ARTICLE
X
Amendments
This Code
of Regulations of the Corporation (and as it may be amended from time-to-time)
may be amended or added to by the affirmative vote or the written consent of the
Shareholders of record entitled to exercise a majority of the voting power on
such proposal
or by the directors to the extent permitted
by the Ohio Revised Code
, except for an amendment to Article II,
Section 2(b) relating to the classification of Directors which shall require the
affirmative vote of two-thirds (2/3) of the holders of outstanding shares;
provided, however, that if an amendment or addition
or
is
adopted by written
consent without a meeting of the Shareholders, it shall be the duty of the
Secretary to enter the amendment or addition in the records of the Corporation,
and to mail a copy of such amendment or addition to each Shareholder of record
who would be entitled to vote thereon and did not participate in the adoption
thereof.
A-1
LSI INDUSTRIES
INC.
PROXY
|
The
undersigned hereby appoints
Gary P. Kreider, Dennis B.
Meyer and Robert J. Ready,
or any one of them, proxies
of
the undersigned, each with the power of substitution, to vote all Common
Shares which the undersigned would be entitled
to
vote at the Annual Meeting of Shareholders of LSI Industries Inc. to be
held on November 20, 2008 at 10:00 a.m., Eastern
Standard
Time at the Company’s headquarters located at 10000 Alliance Road,
Cincinnati, Ohio and any postponement or adjournment of such meeting on
the matters specified below and in their discretion with respect to such
other business as may properly come before the meeting or any postponement
or adjournment
thereof.
|
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" THE FOLLOWING PROPOSALS:
1. Authority
to elect as Directors the six nominees below.
FOR
___ WITHHOLD
AUTHORITY ___
Gary P. Kreider, Dennis B. Meyer, Wilfred T.
O'Gara, Robert J. Ready, Mark A. Serrianne and James P.
Sferra
WRITE THE NAME OF ANY NOMINEE(S)
FOR
WHOM AUTHORITY TO VOTE IS WITHHELD
_______________________________________________________
2.
|
Ratification of the appointment
of Deloitte & Touche LLP as the Company's independent registered
public accounting firm for fiscal 2009.
|
FOR
___ AGAINST
___ ABSTAIN
___
3. Amendment
of the Company's Code of Regulations to authorize the Board of Directors to
amend the Code of Regulations.
FOR
___ AGAINST
___ ABSTAIN
___
THIS PROXY WILL BE VOTED AS
RECOMMENDED BY THE BOARD OF DIRECTORS UNLESS A CONTRARY CHOICE IS
SPECIFIED.
|
|
_______________________,
2008
|
|
|
|
|
|
|
|
IMPORTANT: Please
sign exactly as name appears hereon indicating, where proper, official
position or representative capacity. In the case of joint
holders, all should sign.
|
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
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