lyts20210914_def14a.htm

DEF 14A 1 lyts20210914_def14a.htm FORM DEF 14A lyts20210914_def14a.htm

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

	☐	Preliminary Proxy Statement
	☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e) (2))
	☒	Definitive Proxy Statement
	☐	Definitive Additional Materials
	☐	Soliciting Material Under Rule 14a-12

LSI Industries Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

	☒	No fee required.
	☐	Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11.

(1)

Title of each class of securities to which transaction applies:

(2)

Aggregate number of securities to which transaction applies:

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined)

(4)

Proposed maximum aggregate value of transaction:

(5)

Total fee paid:

	☐	Fee paid previously with preliminary materials.
	☐	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of this filing.

(1)

Amount Previously Paid:

(2)

Form, Schedule or Registration Statement No.:

(3)

Filing Party:

(4)

Date Filed:

2021 Annual Meeting of Shareholders

September 15, 2021

Dear Shareholders:

We are pleased to invite you to attend our 2021 Annual Meeting of Shareholders. The meeting will be held on Tuesday, November 2, 2021, at 9:00 a.m. This year’s Annual Meeting will be a virtual meeting of shareholders. We believe that hosting a virtual meeting provides expanded access and improved communication between our shareholders and the Company. Only shareholders of record on September 7, 2021 may attend and vote at the Meeting. You will be able to attend the Annual Meeting online, vote your shares electronically, and submit your questions during the Annual Meeting by visiting www.virtualshareholdermeeting.com/LYTS2021. You will also be able to attend by telephone in “listen only” mode by calling 1-877-328-2502 (U.S. toll free) or 1-412-317-5419 (International dial in). You will not be able to attend the Annual Meeting in person.

The enclosed Notice of the Meeting and Proxy Statement provide detailed information about the items of business to be conducted at the Annual Meeting and voting procedures for the Meeting. The Proxy Statement also provides information about our Board candidates, the Board and the Board Committees.

We are sending a Notice of Internet Availability of Proxy Materials to you on or about September 15, 2021. The Notice contains instructions that explain how to access and review the proxy materials and our Annual Report on Form 10-K on the internet. The Company believes that this process allows us to provide our shareholders with the information they need in an efficient and timely manner. The approximate mailing date of the Proxy Statement and the accompanying proxy card also is September 15, 2021.

A complete list of shareholders entitled to vote at the Annual Meeting will be available for examination by any shareholder for any purpose in connection with the Annual Meeting during normal business hours at our principal executive offices for a period of at least 10 days prior to the Annual Meeting.

Even if you own only a few shares, we want your shares to be represented at the meeting. We urge you to complete, sign, date and promptly return your proxy card in the enclosed envelope.

Sincerely yours,



James A. Clark		Wilfred T. O’Gara
Chief Executive Officer		Chairman of the Board

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE

ANNUAL MEETING TO BE HELD ON NOVEMBER 2, 2021

The Notice of Meeting and Proxy Statement and the Company’s Annual Report on

Form 10-K are available at investors.lsicorp.com/financials/annual-reports

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF

LSI INDUSTRIES INC.

Time: 9:00 a.m., Eastern Standard Time

Date: Tuesday, November 2, 2021

Place: www.virtualshareholdermeeting.com/LYTS2021 or 1-877-328-2502 (U.S. toll free) / 1-412-317-5419 (International dial in) - listen only mode

Purpose:

●

Elect as members of the Board of Directors the six nominees named in the Proxy Statement;

●

Ratify the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for fiscal 2022;

●

Approve on an advisory basis the compensation of the Company’s named executive officers;

●

Amend the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s common stock by 10 million shares; and

●

Approve the Company’s 2021 Employee Stock Purchase Plan.

Only shareholders of record on September 7, 2021 may vote at the meeting. The approximate mailing date of the Proxy Statement and proxy card is September 15, 2021.

Your vote is important. Please complete, sign, date, and promptly return your proxy card in the enclosed envelope.

/s/ Thomas A. Caneris

Thomas A. Caneris

Executive Vice President, Human Resources and General Counsel; Secretary

September 15, 2021

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE

ANNUAL MEETING TO BE HELD ON NOVEMBER 2, 2021

The Notice of Meeting and Proxy Statement and the Company’s Annual Report on

Form 10-K are available at investors.lsicorp.com/financials/annual-reports

Table of Contents

Page

INTRODUCTION	1
VOTING AT ANNUAL MEETING	1
General Information	1
2021 ANNUAL MEETING PROPOSALS	2
Proposal 1. Election of Directors	2
Proposal 2. Ratification of Appointment of Independent Registered Public Accounting Firm	2
Proposal 3. Advisory Vote on Executive Compensation	3
Proposal 4. Amendment of the Company’s Articles of Incorporation to Increase the Number of Authorized Shares of the Company’s Common Stock	4
NOMINEES FOR BOARD OF DIRECTORS	9
EXECUTIVE OFFICERS	11
SECURITY OWNERSHIP	13
EXECUTIVE COMPENSATION	14
Compensation Discussion and Analysis	14
COMPENSATION COMMITTEE REPORT	25
CEO PAY RATIO DISCLOSURE	32
EQUITY COMPENSATION PLAN INFORMATION	33
CORPORATE GOVERNANCE	33
DIRECTOR COMPENSATION	35
COMMITTEES OF THE BOARD	36
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION	39
RELATED PERSON TRANSACTIONS	39
OTHER MATTERS	40
QUESTIONS	40
ANNEX A—NON-GAAP MEASURES	A-1
ANNEX B—LSI INDUSTRIES INC. 2021 EMPLOYEE STOCK PURCHASE PLAN	B-1

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 and any amendments thereto. To access these filings, go to the Company’s website (www.lsicorp.com) and click on the “SEC Filings” tab in the left margin on the “Investors” page. Copies of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021, 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.

Thomas A. Caneris

EVP Human Resources and General Counsel and Secretary

10000 Alliance Road

Cincinnati, Ohio 45242

LSI INDUSTRIES INC.

10000 Alliance Road

Cincinnati, Ohio 45242

(513) 793-3200

P R O X Y S T A T E M E N T

Annual Meeting of Shareholders

November 2, 2021

INTRODUCTION

The Board of Directors of LSI Industries Inc. is requesting your proxy for the Annual Meeting of Shareholders on November 2, 2021, and at any postponement or adjournment of such meeting. This Proxy Statement and the accompanying proxy card were first made available on or about September 15, 2021 to shareholders of record as of September 7, 2021.

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 virtually. Shareholders may vote by proxy or attend the Annual Meeting virtually and vote through the internet at the Annual Meeting. Proxies given may be revoked at any time by filing with the Company (to the attention of Office of the Secretary) either a written revocation or a duly executed proxy bearing a later date, or by appearing virtually at the Annual Meeting and voting through the internet. 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 virtually at the meeting through the internet, 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. The Company will bear the entire cost of soliciting proxies from our shareholders.

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: FOR Proposal 1 to elect as members of the Board of Directors the six nominees named in this Proxy Statement; FOR Proposal 2 to ratify the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for fiscal 2022; FOR Proposal 3 to approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers; FOR Proposal 4 to amend the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s common stock; and FOR Proposal 5 to approve the Company’s 2021 Employee Stock Purchase Plan.

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. With respect to Proposal 1, the six nominees receiving the greatest number of votes will be elected. Proposal 2 FOR the ratification of appointment of the Company’s Independent Registered Public Accounting Firm will be adopted only if it receives approval by a majority of the Common Shares voting, virtually or by proxy, at the Annual Meeting. Proposal 3 FOR the approval of the compensation of the Company’s named executive officers requires by the affirmative vote of at least a majority of the Common Shares present, virtually or by proxy, at the Annual Meeting. Because Proposal 3 on executive compensation is an advisory vote, the Board of Directors will give due consideration to the result of the vote; however, the result of the vote will not be binding on the Company. Proposal 4 FOR the amendment of the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s common stock requires the affirmative vote of at least two-thirds of the outstanding Common Shares. Proposal 5 FOR the approval of the Company’s 2021 Employee Stock Purchase Plan requires the affirmative vote of at least a majority of the Common Shares present, virtually or by proxy, at the Annual Meeting.

Banks or brokers holding shares for beneficial owners must vote those shares as instructed. If the bank or broker has not received instructions from you, as the beneficial owner, the bank or broker generally has discretionary voting power only with respect to the ratification of appointment of the independent registered public accountants. A bank or broker does not have discretion to cast votes with respect to the election of Directors unless it has received voting instructions from you as the beneficial owner of the shares. It is therefore important that you provide instructions to your bank or broker if your shares are held by such a bank or broker so that your vote with respect to Directors is counted.

As of September 7, 2021, the record date for determining shareholders entitled to notice of and to vote at the Annual Meeting, the Company had 26,988,547 Common Shares outstanding. Each share is entitled to one vote. Only shareholders of record at the close of business on September 7, 2021, will be entitled to vote at the Annual Meeting. Abstentions and shares otherwise not voted for any reason, including broker non-votes, will be considered as present at the meeting for the purpose of determining the presence of a quorum and have no effect on the outcome of any vote taken at the Annual Meeting, except as otherwise described herein. Broker non-votes occur when a broker returns a proxy card but does not have authority to vote on a particular proposal.

Shareholder Proposals

Shareholders who desire to have proposals included in the Notice for the 2022 Annual Meeting of Shareholders must submit their proposals to the Company at its offices on or before May 20, 2022.

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 or postponement 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 2022 Annual Shareholders’ Meeting, it must be received prior to August 3, 2022. If there is a change in the anticipated date of next year’s annual meeting or if these deadlines change by more than thirty days, the Company will notify shareholders of this change through its SEC filings.

2021 ANNUAL MEETING PROPOSALS

Proposal 1. Election of Directors

The Nominating and Corporate Governance Committee of the Board has nominated for re-election the six current members of the Board of Directors: Robert P. Beech, Ronald D. Brown, James A. Clark, Amy L. Hanson, Chantel E. Lenard and Wilfred T. O'Gara. Please see the “Nominees for Board of Directors” section of this Proxy Statement for additional information about each nominee.

All individuals elected at the 2021 Annual Meeting will hold office for a one-year term expiring at the 2022 Annual Meeting and until their successors are elected and qualified or until their earlier resignation, retirement or removal. Shareholders are entitled to one vote for each share held of record. Proxies solicited by the Board will be voted FOR the election of these six nominees. Shareholders are not entitled to cumulate their votes in the election of members of the Board of Directors. If any of the nominees become unable to serve, proxies will be voted for any substitute nominee designated by the Board.

The Board of Directors recommends a vote FOR each of the six individuals nominated in this Proxy Statement. The six nominees receiving the greatest 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 has appointed Grant Thornton LLP as the Company’s independent registered public accounting firm for fiscal 2022. Grant Thornton has been the independent registered public accounting firm for the Company since September 8, 2009 and had also previously served the Company in this capacity from April 2002 to December 2005. Although not required by law, the Board is seeking shareholder ratification of its appointment of Grant Thornton. If ratification of the appointment is not obtained, the Audit Committee intends to continue the employment of Grant Thornton at least through fiscal 2022.

Representatives of Grant Thornton are expected to be present at the Annual Meeting and will be given an opportunity to make a statement, if they so desire, and to respond to appropriate questions. The aggregate fees billed to the Company by Grant Thornton for the fiscal years ended June 30, 2021 and June 30, 2020 were as follows:

Fee Category	2021		2020
Audit Fees	$	888,500	$	771,900
Audit-related Fees	$	37,500	$	16,000
Tax Fees	$	154,563	$	168,328
All Other Fees	$	148,714	$	0
Total Fees	$	1,229,277	$	956,228

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. Tax fees represent fees for services and out-of-pocket expenses related to tax compliance (or filing of the Company’s various income and franchise tax returns), tax planning, tax advice, and tax due diligence for acquisitions. All other fees represent fees related to financial acquisition due diligence matters.

Please see the “Committees of the Board” section of this Proxy Statement for additional information about the Audit Committee.

The Board of Directors recommends a vote FOR this proposal. The affirmative vote of a majority of Common Shares voting at the Annual Meeting is required to approve this proposal.

Proposal 3. Advisory Vote on Executive Compensation

The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, provides the Company’s shareholders the opportunity at the Annual Meeting to vote on an advisory resolution on the compensation of the Company’s named executive officers. This advisory vote is commonly known as “Say-on-Pay”. Please see the “Executive Compensation” section of this Proxy Statement for additional information regarding the Compensation Committee and fiscal 2021 executive compensation. Since the vote is advisory, it will not be binding on the Compensation Committee or the Board of Directors; however, the Compensation Committee and the Board of Directors will take the results of the vote into account when reviewing the Company’s executive compensation plan and programs.

The Compensation Committee is committed to maintaining executive compensation plans and programs that enable the Company to attract and retain a superior management team with incentives targeted to build long-term shareholder value. The Company’s compensation plans and programs utilize a mix of base salary, short-term annual cash incentive awards and long-term equity-based incentive awards to align executive compensation with the Company’s annual and long-term performance. These plans and programs reflect the Committee’s philosophy that executive compensation should provide greater rewards for superior performance, as well as accountability for underperformance. At the same time, the Committee believes the Company’s executive compensation plans and programs do not encourage excessive risk-taking by management. The Board of Directors believes that this philosophy and practice have resulted in executive compensation decisions that are appropriate and that have benefited the Company over time. For these reasons, the Board of Directors requests that shareholders approve the compensation of the Company’s named executive officers as described in this Proxy Statement pursuant to SEC disclosure rules, including the Compensation Discussion and Analysis, the executive compensation tables and the related footnotes and narratives accompanying the tables.

The Board of Directors recommends a vote FOR this proposal. The Board of Directors will give due consideration to the result of this non-binding advisory vote.

Proposal 4. Amendment of the Company’s Articles of Incorporation to Increase the Number of Authorized Shares of the Company’s Common Stock

The Board of Directors proposes and recommends the approval of an amendment to LSI’s Amended and Restated Articles of Incorporation (the “Articles”) to increase the number of authorized shares of common stock, no par value per share, from 40,000,000 shares presently authorized to 50,000,000 shares. Accordingly, the Board proposes to amend the first paragraph of Article FOURTH of the Articles to read in its entirety as follows:

“FOURTH: The maximum number of shares which the Corporation is authorized to have outstanding is: A. Fifty Million (50,000,000) shares of common stock, without par value (the “Common Shares”); and B. One Million (1,000,000) shares of preferred stock, without par value (the “Preferred Shares,” and together with the Common Shares, collectively referred to herein as the “Shares”).”

The Board has determined that the proposal to increase the number of shares of authorized shares of common stock is desirable and in our shareholders’ best interest because it would provide LSI with the ability to support our present capital needs and future anticipated growth and would provide us with the flexibility to consider and respond to future business opportunities and needs as they arise, including equity offerings, acquisitions, stock dividends, issuances under stock incentive plans and other corporate purposes. The availability of additional shares of common stock would permit us to proceed with certain of these actions without the delay and expense associated with holding a special meeting of shareholders to obtain shareholder approval each time an opportunity arises that would require the issuance of shares of our common stock.

The additional shares of common stock would be identical in all respects to the shares of our common stock now authorized, including, without limitation, the same par value, the same voting rights, and the same rights to dividends and other distributions. The proposed amendment would not change the terms of our common stock nor would it affect the rights of the holders of any currently issued and outstanding shares of our stock. If this proposal is approved, the additional shares of our common stock may be issued from time to time upon authorization of our Board, without further approval by our shareholders, unless otherwise required by applicable law, and for the consideration that our Board may determine is appropriate and as may be permitted by applicable law. The authorization of the additional shares of our common stock sought by this proposal would not have any immediately dilutive effect on the proportionate voting power or other rights of our existing shareholders. To the extent that the additional authorized shares of our stock are issued in the future, however, they may decrease the existing shareholders’ percentage equity ownership and, depending on the price at which they are issued, could be dilutive to existing shareholders. LSI has no present intention to issue any additional common stock in connection with any exchange, merger, consolidation, acquisition or similar transaction.

This proposal is not being made in response to any hostile attempts by any third party to obtain control of the Company but the availability for issuance of additional shares of common stock could enable our Board to make it more difficult or to discourage an attempt to obtain control of LSI. For example, the issuance of shares of common stock in a public or private sale, merger or similar transaction would increase the number of outstanding shares, diluting the interest of a party attempting to obtain control of the Company and deterring or rendering more difficult a merger, tender offer, proxy contest or an extraordinary corporate transaction opposed by our Board. As a result, authorizing additional shares of common stock may adversely impact shareholders who desire a change in management and/or the Board or to participate in a tender offer or other sale transaction involving a change in control of LSI.

As of August 31, 2021, of the 40,000,000 shares of common stock presently authorized, a total of 26,594,660 shares were issued and outstanding and 393,887 shares were held in the Company’s treasury. In addition, 2,429,185 shares remain reserved for issuance under LSI’s 2019 Omnibus Award Plan and other equity award plans. There are currently no shares of preferred stock issued and outstanding.

The affirmative vote of holders of two-thirds of the outstanding Common Shares is required for adoption of the proposed amendment to LSI’s Articles. The failure to vote, abstentions and broker non-votes will have the same effect as a vote against this proposal, although abstentions and broker non-votes will be counted as “present” for purposes of determining a quorum. The proposed amendment, if adopted by the shareholders, will become effective on the date on which the certificate of amendment to the Articles is filed with the Secretary of State of Ohio, which we expect would be shortly after the annual meeting.

The Board of Directors recommends a vote FOR this proposal. The affirmative vote of at least two-thirds of the outstanding Common Shares is required to approve this proposal.

Proposal 5. Approval of the Company’s 2021 Employee Stock Purchase Plan

On August 18, 2021, the Board of Directors adopted, subject to the approval of shareholders, the LSI Industries Inc. 2021 Employee Stock Purchase Plan (the “ESPP” or the “Plan”), under which an aggregate of 270,000 shares of the Company’s common stock has been reserved for issuance. The Board of Directors believes that the Plan promotes the interests of the Company and its shareholders by encouraging employees of the Company to become shareholders, and therefore promote the Company’s growth and success. The Board of Directors also believes that the opportunity to acquire a proprietary interest in the success of the Company through the acquisition of shares of common stock pursuant to the Plan is an important aspect of the Company’s ability to attract and retain highly qualified and motivated employees.

The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code; although we may also make offerings under the ESPP that are not intended to qualify under Section 423 of the Internal Revenue Code for eligible employees at foreign subsidiaries.

Set forth below are: (i) a summary of the principal features of the ESPP; and (ii) a description of the U.S. federal income tax consequences under the ESPP. The following description is a summary of the ESPP and is qualified in its entirety by reference to the applicable provisions of the Plan, which is attached hereto as Annex B and may be accessed from the SEC’s home page at www.sec.gov. Any shareholder who wishes to obtain a copy of the actual plan document may do so by written request to: Executive Vice President, Human Resources, LSI Industries Inc. 10000 Alliance Road, Cincinnati, Ohio 45242.

Summary of the ESPP

Overview and Purpose

The purpose of the ESPP is to provide eligible employees (as defined in the Plan) an opportunity to acquire stock ownership in the Company in order to grow with the Company, to help employees provide for their future security, to encourage them to remain employed by the Company and to help align the interests of the employees with those of the Company’s shareholders.

Eligibility

Participation will be limited to employees of the Company or a Designated Subsidiary (as defined in the Plan). Employees are generally eligible to participate in the Plan after six months of employment, provided they customarily are employed at least 20 hours per week and more than five months a year and satisfy the enrollment procedures and other requirements set forth in the Plan. No employee shall be granted any options under the Plan if, after giving effect to such grant, the employee would own (or be deemed to own) 5% or more of the Company’s voting power or value of classes of stock of the Company or any of its subsidiaries. No employee will be able to purchase shares to the extent that such employee would purchase $25,000 of market value of the shares in any calendar year. The Plan administrator may exclude an employee who is a “highly compensated employee” of the Company or any Designated Subsidiary (within the meaning of Section 414(q) of the Code), or who is such a “highly compensated employee” (A) with compensation above a specified level, (B) who is an officer or (C) who is subject to the disclosure requirements of Section 16(a) of the Securities Exchange Act of 1934. Directors are not eligible to participate in the Plan. It is currently anticipated that Company officers will not be excluded from Plan participation. In addition, employees who are citizens or residents of a foreign jurisdiction will not be eligible to participate in the Plan if the grant of an option under the Plan is prohibited under the laws of the foreign jurisdiction or compliance with the laws of the foreign jurisdiction will cause the Plan to violate the terms of Section 423 of the Internal Revenue Code. As of June 30, 2021, approximately 1,300 employees are eligible to participate in the Plan.

Offerings

The Plan allows eligible employees to purchase shares of our common stock during certain Offering Periods (as defined in the Plan), which generally consist of a series of separate consecutive three-month offerings with each Offering Period beginning on January 1, April 1, July 1, and October 1 subject to the right of the administrator in its sole discretion to sooner terminate the Plan or to change the commencement date or term of any offering period. The Committee may change the duration of future offerings and/or the start and end dates of future offering periods, subject to a maximum of 27 months and to the extent permitted under Section 423 of the Internal Revenue Code.

Shares Available under the Plan

A total of 270,000 shares of common stock are initially authorized and reserved for issuance under the Plan, subject to equitable adjustments to reflect a share split, reverse share split, share dividend, combination, amalgamation, consolidation, reorganization, arrangement or reclassification of the shares, or any other increase or decrease in the number shares effected without receipt of consideration by the Company. Shares made available for sale under the Plan may be authorized but unissued shares or treasury shares.

Participation

Participation in the Plan is entirely voluntary. Eligible employees wishing to participate in the Plan will be required to submit enrollment materials to the Company prior to the commencement of an offering that authorizes the Company to deduct from such employee’s payroll.

Payroll Deductions

Participating employees may elect to have an amount between 1% and 10% of his or her Compensation (as defined in the Plan) on each pay day occurring during an Offering Period deducted from each paycheck. During the Offering Period, participating employees may increase or decrease the amount of his payroll deductions. The Company may limit the number of election changes made by the Participant.

Withdrawal

Employees may receive a refund of all withholdings during an Offering Period by providing the Company with notice of their withdrawal.

Re-Enrollment

Participating employees will be automatically re-enrolled in the next Offering Period unless they advise the Company otherwise.

Purchase of Shares

On the last day of each Offering Period, each participant shall be granted an option to purchase a number of whole shares of common stock determined by dividing such participant’s accumulated payroll deductions by the applicable purchase price. The purchase price shall be equal to 90% of the market price of the Company’s common stock on the last day of the Offering Period, or such other price determined by the administrator. As of August 31, 2021, the closing price of a share of our common stock was $8.30. No participating employee shall purchase more than 2,000 shares of common stock during an Offering Period.

Shareholder Rights

Participating employees will have no rights as shareholders, including dividends or voting rights, with respect to any shares until such shares are actually purchased.

Transferability

Purchase rights granted to participating employees under the Plan are not assignable or transferable (other than by will or laws of descent and distribution) and may be exercised only by the participating employee (or beneficiary) during his lifetime.

Termination of Employment

Upon an employee’s termination of employment for any reason or if an employee is no longer an eligible employee, the employee will be deemed to have withdrawn from the Plan and such employee’s balance shall be paid to the employee or the employee’s estate, if applicable.

Termination and Amendment

The Board shall have the right to amend the Plan at any time. Any amendment that increases the aggregate number of shares of the Company’s common stock to be issued under the Plan, as adopted by the Board of Directors, must be approved by a vote of the shareholders of the Company within twelve (12) months before or after the adoption of such amendment by the Board of Directors. All other amendments to the Plan will be subject to shareholder approval only to the extent required by applicable law or regulation.

The Board has the right at any time to suspend or terminate the Plan for any reasons. If the Plan is terminated, the Board may provide, in its discretion, either that the outstanding purchase rights will expire in accordance with the applicable Offering Period (or such earlier date as the Board may specify), or that each participating employee’s payroll deductions will be returned to the participant without interest.

Effective Date and Term

If the Plan is approved by the shareholders at the Annual Meeting, the Plan will be effective with respect

to Offering Periods commencing on or after January 1, 2022. The Plan will expire immediately prior to the tenth anniversary of the date it is approved by the Board.

Administration of the Plan

The Plan is administered by the Board of Directors which has delegated the authority to administer the Plan to the Compensation Committee, who may further delegate its authority to administer the Plan.

Corporate Transactions

In the event of a merger or similar corporate transaction, the Offering Period will be shortened and end before the consummation of the transaction if the outstanding options to purchase shares are not assumed by the acquiring company.

Resale Limitations

The purpose of the Plan is to provide common stock to employees for investment purposes and not for resale. However, employees may sell any common stock purchased under the Plan, subject to any holding periods imposed by the Plan, the administrator, or by applicable federal, state or foreign tax or securities laws.

New Plan Benefits

Participation in the Plan is voluntary and we cannot presently determine the benefits or amounts that will be received pursuant to the Plan in the future, as such amounts will depend on the amount of contributions eligible employees choose to make, the actual purchase price of shares in future offering periods, and the market value of the common stock on various future dates. Non-employee directors are not eligible to participate in the Plan. No rights have been granted and no Common Shares have been issued with respect to the 270,000 shares for which shareholder approval is being sought.

Registration with the SEC

If the ESPP is approved by our shareholders, we expect to file a Registration Statement on Form S-8 with the SEC to register the shares of common stock that will be issuable under the Plan.

Certain Federal Tax Consequences with Respect to Awards

The following brief summary of the effect of U.S. federal income taxation upon the participating employee and the Company with respect to the shares purchased under the Plan does not propose to be complete, and does not discuss the tax consequences of a participant’s death or the income tax laws of any state, locality or foreign country in which the participant may reside.

The Plan is intended to be an “employee stock plan” within the meaning of Section 423 of the Internal Revenue Code. The amounts deducted from the salary of a participating employee will constitute ordinary income taxable to the employee. The right to purchase shares of common stock under the Plan will not have any U.S. federal income tax consequences to either the participating employee or the Company or any of its affiliates. The purchase of common stock under the Plan will not have any immediate U.S. federal income tax consequences to the participating employee.

The determination of U.S. federal income tax consequences of a subsequent disposition of shares purchased under the Plan depends on whether the shares are disposed of after the expiration of one year after the date those shares are purchased by the participating employee and two years after first day of the Offering Period (referred to below as the “holding periods”). If the holding periods are met, 10% of the fair market value of the shares of common stock on the first day of the Offering Period (or such other percentage equal to the applicable purchase price discount), or, if less, the excess, if any, of the sale price of the shares at the time of such disposition or death over the total purchase price of the shares, will be treated as ordinary income and any additional gain will be treated as long-term capital gain. Neither the Company nor any of its affiliates employing the participating employee will be entitled to any U.S. federal income tax deduction with respect to the amount treated as long-term capital gain or as ordinary income as a result of the rules described above for shares disposed of after expiration of the holding periods.

If the shares are disposed of prior to the expiration of the holding periods (a “disqualifying disposition”), generally the excess of the fair market value of those shares on the purchase date over the aggregate purchase price will be ordinary income at the time of such disqualifying disposition, and the Company will be entitled to a U.S. federal tax deduction in a like amount. Any disposition proceeds in excess of (or below) the value of the shares at the exercise date will result in capital gain (or loss) to the participant and will not be deductible to us.

To the extent any (i) grant of an option to purchase shares, (ii) purchase of shares, or (iii) disposition of shares purchased under the Plan gives rise to any tax withholding obligation, the Company may implement appropriate procedures to ensure that such tax withholding obligations are met. Those procedures may include, without limitation, increased withholding from an employee’s current compensation, withholding from shares otherwise issuable under the Plan, or a sale of a portion of the shares purchased under the Plan, which sale may be required and initiated by the Company. Each participating employer shall give the Company prompt written notice of any disposition or other transfer of shares acquired pursuant to the exercise of an option acquired under the Plan, if such disposition or transfer is made within two years after the date of grant or within one year after the exercise date.

The foregoing is a general summary of the material U.S. federal income tax consequences of the Plan and is intended to reflect the current provisions of the Internal Revenue Code and the regulations thereunder. This summary is not intended to be a complete statement of applicable law, nor does it address foreign, state, local and payroll tax considerations. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant. Each eligible employee who is outside the United States or is otherwise not a U.S. taxpayer should seek, and must depend upon, the advice of his or her own independent legal and tax advisor or advisors in all non-U.S. jurisdictions relevant to such employee. The foregoing should not be considered as tax advice and each eligible employee is advised to consult his or her own independent tax advisor.

The Board of Directors recommends a vote FOR this proposal. The affirmative vote of a majority of the Common Shares voting at the Annual Meeting is required for this proposal.

Other Matters

The affirmative vote of a majority of Common Shares present virtually or by proxy at the meeting is required to approve any other matters considered at the Annual Meeting, including postponement or adjournment.

NOMINEES FOR BOARD OF DIRECTORS

The following individuals have been nominated for election by the Board of Directors as recommended by the Nominating and Corporate Governance Committee. Each nominee is currently a member of the Board of Directors.

The Board of Directors recommends a vote FOR each of the six nominees. The six nominees receiving the greatest number of votes will be elected.

Robert P. Beech (age 68) has been a Director since July 2013. Mr. Beech is currently the President of PentaBeech, LLC, a privately held strategy and innovation advisory firm. Mr. Beech was formerly the Executive Chairman of Eccrine Systems, Inc., a privately held Cincinnati-based biotechnology company that he co-founded in 2013. Mr. Beech was engaged as Entrepreneur-in-Residence for life sciences at CincyTechUSA from 2013 to 2020. From 2004 through 2012 he was a senior executive at Precigen, Inc. (formerly Intrexon Corporation), when it was a privately held biotechnology company based in Maryland. Prior to 2003, he was Chief Executive Officer of Digineer, Inc., an international healthcare IT software and services company he founded in 1986 and led until 2002. The Board believes that Mr. Beech’s substantial experience leading high-technology ventures as a CEO or senior corporate executive qualify him to serve on the Board. He serves as Chair of the Company’s Nominating and Corporate Governance Committee and is a member of the Audit Committee.

Ronald D. Brown (age 68) has been a Director since November 6, 2018. He served as Interim Chief Executive Officer of the Company from April 23, 2018 to November 1, 2018. Mr. Brown served as Interim President & CEO of Cincinnati Incorporated from July 2020 to December 2020. Cincinnati Incorporated is a privately owned machine tool company. He served from March 2017 to 2018 as Vice Chairman of The Armor Group, Inc. which he joined in 2013 as chief operating officer. The Armor Group, Inc. is a certified woman-owned corporation that manufactures equipment and products and provides related services to a variety of industrial markets. Mr. Brown was Chairman and Chief Executive Officer of Milacron Inc. (NYSE) from 2001 to 2008 and President and Chief Operating Officer of Milacron Inc. from 1999 through 2001. Milacron is a supplier of plastic processing and metalworking fluid technologies. Mr. Brown has served as a director of A. O. Smith Corporation (NYSE) since 2001 and is the chairperson of its Nominating and Governance Committee and a member of its Personnel and Compensation Committee. A. O. Smith manufactures and markets comprehensive lines of water heaters and water treatment products. He also joined the James Advantage Funds Trust in 2014 as an independent trustee and serves on its Audit and Governance and Compensation Committees. The Board believes that Mr. Brown’s experience as the chief executive officer and chairman of a publicly held company provides valuable insight as to the issues and opportunities facing the Company. Further, he has international and manufacturing experience with The Armor Group and in his previous positions at Milacron. In addition, Mr. Brown has experience as a chief financial officer and a corporate attorney. The Board also believes that his legal background makes him well-suited to address legal and governance requirements of the SEC and NASDAQ. Mr. Brown serves on the Company’s Executive and Compensation Committees.

James A. Clark (age 57) has been Chief Executive Officer since November 2018 and a Director since January 2019. Mr. Clark previously served as President and CEO at Alliance Tire Americas, Inc. (a KKR portfolio company) and as Managing Director at Dunes Point Capital. Mr. Clark has over 25 years of experience as a senior operating executive in global manufacturing and product services companies. Prior to joining Dunes Point Capital, he served as Vice President of Strategy and Corporate Development at Rexel Holdings USA, where he was responsible for the strategic planning and M&A activities for REXEL’s $3.5 billion of revenues in U.S. operations. Prior to joining REXEL, Mr. Clark served in several senior executive positions with United Technologies Corporation (UTC) and General Electric (GE), including President of Electronic Security Products Group and CMO- VP of Global Sales for GE Security. He holds a BA in Business from The State University of New York – Regents and participated in postgraduate study programs at Northwestern University - Kellogg School of Business and the University of Virginia - Darden School of Business. The Board believes that Mr. Clark's substantial management and operating experience, as well as his position as our Chief Executive Officer, qualify him to serve on the Board. Mr. Clark is a member of the Company’s Executive Committee.

Amy L. Hanson (age 63) has been a Director of the Company since January 2019. Ms. Hanson is currently the CEO of Amy Hanson Advisory Services, a retail management strategic services consulting firm, since April 2016. Ms. Hanson also serves on the boards of Messer, Inc. (one of the of the Midwest’s largest construction companies), Strivve, Inc. (formerly Switch Inc.), a Seattle based fin-tech start up, and Credit First National Association (CFNA), a bank subsidiary of Bridgestone Americas. Prior to that she was an Executive Vice President and Corporate Officer for Macy’s Inc., a leading department store retailer with over 680 stores throughout the US for over 30 years. Ms. Hanson had responsibilities for leading financial, credit and customer services for Macy’s. During her career at Macy’s, she also had direct responsibilities for procurement, real estate, store planning, design and construction as well as serving as Vice Chairman for Macy’s North. The Board believes that Ms. Hanson’s insight and experience in finance, strategic planning, and leadership through times of change, acquisitions and mergers for Macy’s qualify her to serve on the Board, as well as chair the Audit Committee, and as a member of the Compensation and Nominating and Corporate Governance Committees.

Chantel E. Lenard (age 52) has been a Director of the Company since June 17, 2020. Ms. Lenard presently serves as a Lecturer of Marketing in the MBA program at the University of Michigan Ross School of Business. Ms. Lenard retired from Ford Motor Company (NYSE: F) in 2017, having served as the top marketing executive for Ford in both the U.S. and Asia. From 2013 to 2017, Ms. Lenard held the position of U.S. Chief Marketing Officer, leading the organization’s pricing, promotions, media, digital marketing, product strategy, and consumer experience activities. From 2010 to 2013, Ms. Lenard was based in Shanghai, China, as Vice President of Marketing for Ford’s Asia Pacific and Africa operations, where she led the marketing activities for 11 countries across the region. In addition to her marketing roles, Ms. Lenard held a number of leadership positions in strategy, sales, finance, and purchasing during her 25-year career with Ford. Ms. Lenard has served as a member of the Board of Directors of TTM Technologies Inc. (Nasdaq: TTMI) since November 2018 and Uni-Select Inc. (TSX: UNS) since May 2020. The Board believes that Ms. Lenard’s substantial marketing and management experience, particularly her leadership positions in strategy, sales, finance, and purchasing, qualify her to serve on the Board as well as on the Audit Committee and Compensation Committee.

Wilfred T. O'Gara (age 64) has been a Director since January 1999 and was appointed Chairman in August 2018. Mr. O’Gara is the Managing Director of Buffalo Fork Holdings, LLC, an investment company. He previously served as Chief Executive Officer of Isoclima SpA from July 2017 to August 2018. Isoclima SpA produces transparent armor and other specialized glass and polycarbonate products for military and civilian armored vehicles. Prior to joining Isoclima, Mr. O'Gara served as Vice Chairman of The O’Gara Group, a security and defense related firm, from 2016 until July 2017 and he was the President and Chief Executive Officer from 2003 to 2017. Mr. O’Gara has been identified as an “audit committee financial expert” under SEC guidelines given his understanding of accounting and financial reporting, disclosures and controls. The Board believes that Mr. O’Gara’s independence from management, experience as a successful principal executive and his designation as an audit committee financial expert make his service integral to the Board. He serves on the Company’s Executive Committee and the Nominating and Corporate Governance Committee.

Board Qualifications and Succession Planning

The Nominating and Corporate Governance Committee periodically reviews the skills, experience and characteristics required of Board members in the context of the current make-up of the Board and screens and recommends nominees for director to the full Board. Its assessment includes the skills of Board candidates, such as an understanding of technologies pertinent to the Company’s businesses, manufacturing, marketing, finance, regulation and public policy, experience, age, diversity and ability to provide strategic insight and direction on the Company’s key strategic initiatives. In addition to skills and experience, Board candidates are considered based upon various criteria, such as their personal integrity and judgment, business and social perspective, and concern for the long-term interests of the Company’s shareholders. After receiving recommendations for nominations from the Committee, the Board nominates candidates for Director. The Committee, or other members of the Board of Directors, may identify a need to add new members to the Board of Directors with specific skills or to fill a vacancy on the Board. At that time, the Committee would initiate a search, seeking input from Board members and senior management and, to the extent it deems appropriate, engaging a search firm. An initial qualified candidate or a slate of qualified candidates may be identified through this process and presented to the Committee for its evaluation and approval. The Committee would then seek full Board approval of the selected candidate.

Board Disclosure Board Diversity Matrix (As of September 1, 2021)

Total Number of Directors

Part I: Gender Identity	Female	Male	Non-Binary	Did Not Disclose Gender
Directors	2	4	-	-
Part II: Demographic Background
African American or Black	-	-	-	-
Alaskan Native or Native American	-	-	-	-
Asian	-	-	-	-
Hispanic or Latinx	-	-	-	-
Native Hawaiian or Pacific Islander	-	-	-	-
White	6	-	-	-
Two or More Races or Ethnicities	-	-	-	-
LGBTQ+	-
Did Not Disclose Demographic Background	-

EXECUTIVE OFFICERS

The following are the Company’s current executive officers (not including our CEO, James A. Clark, whose biographical information is set forth above under “Nominees for Board of Directors”) and the named executive officers as identified in the compensation tables in the Compensation Discussion and Analysis section of this proxy statement.

Jeffery S. Bastian (age 61) has been Vice President and Chief Accounting Officer since June 2017, and prior to that he was the Company’s Vice President and Controller since 2004. He has served the Company for thirty years in various finance and accounting roles. Prior to LSI, he was with Touche Ross and Company from 1986 to 1989. He graduated from Eastern Kentucky University with a BS degree in Environmental Sciences and obtained an MBA from Wright State University.

Michael C. Beck (age 64) has been Senior Vice President of Operations since February 2019. Mr. Beck served as Vice President, North Region for Simpler Consulting, an IBM Company, from 2014 through January 2019. Previous roles included VP Quality and Operational Excellence for the Otis Elevator and UTC Fire & Security Divisions of United Technologies Corporation, and Vice President Manufacturing for the Construction Division of Terex Corporation. He graduated from Michigan State University with a B.S. in Mechanical Engineering, and from the Kellogg Graduate School of Management at Northwestern University with a Master of Management. Mr. Beck also holds an M.S. degree in Applied Statistics from Oakland University.

Thomas A. Caneris (age 59) joined the Company as its Senior Vice President, Human Resources and General Counsel and Secretary in August 2019. He was named as an Executive Vice President in August 2021. Prior to joining the Company, Mr. Caneris served as Senior Vice President Human Resources, General Counsel & Secretary of PharMerica Corporation, a pharmacy services provider from August 2007 to April 2019. Mr. Caneris received his J.D. from the University of Cincinnati College of Law.

James E. Galeese (age 64) joined the Company as its Executive Vice President and Chief Financial Officer in June 2017. Mr. Galeese, from 2014 to June 2017, served as Vice President, Chief Financial Officer, and as a Director of privately held Universal Trailer Holding Corporation (manufacturer of trailers for the hauling requirements of businesses and individuals). He was with Philips Electronics NV from 1998 to 2014 as Senior Vice President and Chief Financial Officer for its North American Lighting business and its Electronics business. Prior to that Mr. Galeese served in the financial Controllership organization of Square D Company / Schneider Electric. He graduated from Miami University with a degree in Business Administration and obtained an MBA from Xavier University.

Michael A. Prachar (age 52) joined the Company in June 2019 as Vice President of Lighting Products. He was promoted to the Company’s Chief Marketing Officer in January 2020. Prior to joining the Company, Mr. Prachar served in various marketing leadership positions with Honeywell from 2018 to 2019; Milacron LLC from 2011 to 2017; Rexnord Corporation from 2008 to 2011 and Emerson Power Transmission Corporation from 2000 to 2008.

SECURITY OWNERSHIP

The following table sets forth the beneficial ownership of the Company’s Common Shares as of September 7, 2021 by each person or group known by the Company to beneficially own more than five percent of the outstanding Common Shares, each Director, each Named Executive Officer, and all Directors and Named Executive Officers as a group. Unless otherwise indicated, the holders of all shares shown in the table have sole voting and investment power with respect to such shares. In determining the number and percentage of shares beneficially owned by each person, shares that may be acquired by such person pursuant to stock options within sixty days of September 7, 2021 are deemed outstanding for purposes of determining the number of outstanding shares for such person and are not deemed outstanding for such purpose for any other shareholder. Unless otherwise indicated below, the address of each beneficial owner is c/o LSI Industries Inc., 10000 Alliance Road, Cincinnati, Ohio 45242.

Name of Beneficial Owner	Common Shares Beneficially Owned	Percent Beneficially Owned
Royce & Associates, LP 745 Fifth Avenue New York, NY 10151 (1)	2,109,070	7.9
Dimensional Fund Advisors LP Palisades West Building One 6300 Bee Cave Road Austin, TX 78746 (2)	1,816,007	6.8
Kennedy Capital Management, Inc. 10829 Olive Blvd. St. Louis, MO 63141 (3)	2,251,628	8.4
Accretive Capital Management LLC Richard E. Fearon, Jr. 85 Wall Street Madison, CT 06443 (4)	1,897,544	7.1
Systematic Financial Management, L.P. 300 Frank W. Burr Blvd., Glenpointe East, 7th Floor, Teaneck, NJ 07666 (5)	1,351,596	5.1%

Directors
Robert P. Beech	73,813	*
Ronald D. Brown	46,035	*
Amy L. Hanson	34,424	*
Chantel E. Lenard	9,933	*
Wilfred T. O'Gara	96,428	*

Named Executive Officers
James A. Clark	324,874	*
James E. Galeese	321,869	*
Thomas A. Caneris	140,151	*
Michael C. Beck	116,810	*
Jeffery S. Bastian	183,422	*

Directors and NEOs as a Group(6)	1,347,759	4.9%

*Less than 1%

(1) Based on Schedule 13G/A filed on or about January 27, 2021.

(2) Based on Schedule 13G/A filed on or about February 16, 2021.

(3) Based on Schedule 13G filed on or about February 16, 2021.

(4) Based on Schedule 13D/A filed on or about May 7, 2021. Includes 1,580,360 shares held directly by Accretive Capital Partners, LLC (“ACP”) and 57,771 shares held directly by Accretive Capital Catalyst, LLC (“ACC”), of which Accretive Capital Management, LLC (“ACM”) is the manager, and Mr. Fearon is the managing member of Accretive Capital Management, LLC. ACM shares voting and dispositive power with respect to 1,638,131 shares. ACP shares voting and dispositive power with respect to 1,580,630 shares. ACC shares voting and dispositive power with respect to 57,771 shares. Fearon shares voting and dispositive power with respect to 1,897,544 shares.

(5) Based on Schedule 13G filed on or about February 11, 2021. Reporting person reports sole voting power over 834,896 shares.

(6) Amounts in the table include shares of common stock which may be acquired upon the exercise of stock options which have vested or will have vested within 60 days of September 7, 2021: O’Gara – 5,500; Clark -- 250,000; Galeese -- 219,733; Caneris -- 56,245; Beck -- 54,044; Bastian -- 139,027; Directors and NEOs as a group -- 724,548.

Delinquent Section 16(a) Reports

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, the Company believes that during fiscal 2021 all filing requirements were met.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This Compensation Discussion and Analysis section reviews the Company’s compensation philosophy and executive compensation and arrangements for fiscal 2021 that apply to the Company’s current Named Executive Officers (“NEOs”):

Name	Title
James A. Clark	Chief Executive Officer
James E. Galeese	EVP and Chief Financial Officer
Thomas A. Caneris	EVP, HR and General Counsel
Michael C. Beck	SVP, Operations
Jeffery S. Bastian	VP, Chief Accounting Officer

This section should be read in conjunction with the Summary Compensation Table, the other compensation related tables, and their accompanying narratives and footnotes.

Fiscal 2021 Financial Performance Summary and Growth

The Company’s production facilities remained open as an essential business throughout the pandemic under safe and hygienic practices. The Company significantly strengthened its financial position in fiscal 2021. Notwithstanding the turmoil brought by the COVID-19 pandemic. the Company generated Adjusted Operating Income of $12.5 million versus $7.0 million in the prior year. Adjusted Net Income was $9.5 million compared to $4.1 million in the prior year. Adjusted diluted EPS was $0.36 in fiscal 2021 compared to $0.15 in fiscal 2020. Return on Net Assets (RONA) improved to 11.8% from 4.1% in fiscal 2020. Additionally, the Company made a significant acquisition in the later part of the fourth quarter of fiscal 2021 with the purchase of JSI Holding.

Executive Compensation Philosophy and Design

The Company’s executive compensation program is designed to drive a pay-for-performance culture. The program strives to align corporate performance with executive pay, delivering competitive total compensation upon the achievement of the Company’s performance objectives. The achievement of those objectives in turn will create long-term shareholder value. The executive compensation program is also designed to attract, retain and motivate leaders who will focus on the creation of long-term shareholder value. The Company’s pay-for-performance philosophy for the executive compensation program employs a mix of compensation elements - base salary, short-term incentives and long-term incentives - to link executive compensation to Company performance and to clearly align executive interests with shareholder interests.

Responsiveness to 2020 Say-on-Pay Vote

At the 2020 Annual Meeting of Shareholders, approximately 99 percent of the votes cast were in favor of the advisory vote to approve executive compensation. We believe that these vote results, together with feedback received during the Company’s ongoing shareholder engagement, reflect that shareholders are pleased with the structure of the Company’s compensation programs put into place by the Compensation Committee for fiscal year 2020. The Compensation Committee considered this support when reviewing compensation for fiscal year 2021, particularly with respect to the design and structure of the Company’s executive compensation program. Specifically, the Compensation Committee established a long-term incentive plan for fiscal 2021 including three equity-based components: stock options, performance share units (“PSUs”) and restricted stock units (“RSUs”). The award of PSUs was intended to create long-term performance alignment for the executive team based on achieving critical operating performance results based on three-year goals related to return on net assets (“RONA”) and cumulative adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) over a three-year performance cycle. The fiscal 2021 PSU awards may cliff vest on the third anniversary grant date if specified three-year RONA and EBITDA objectives are achieved.

With respect to fiscal year 2022 incentive compensation, the Compensation Committee continued its focus on aligning the Company’s executive compensation program with shareholder value creation and continued to use PSUs as a meaningful component of executive compensation.

Compensation Committee Oversight of Executive Compensation Program

The Compensation Committee oversees the Company’s executive compensation philosophy and the design and implementation of its executive compensation program. The Committee reviews and approves, or recommends that the Board of Directors approve, all elements of the Company’s executive compensation program. Any new executive compensation plan or program must be approved by the Board based on the recommendation of the Compensation Committee. The Committee sets the compensation of the Chief Executive Officer (“CEO”).

The CEO annually reviews the performance of the other NEOs. After considering the CEO’s assessment and recommendations, the Compensation Committee determines and approves the compensation of the other NEOs. The Compensation Committee has absolute discretion to approve the recommendations of the CEO or to make adjustments as the Committee deems appropriate. The CEO and other executive officers from time to time work with the Committee to gather and compile data needed for benchmarking purposes or for other analysis conducted by the Committee or Committee’s independent compensation consulting firm, Frederic W. Cook & Co., Inc. (“FW Cook”).

The Compensation Committee retained FW Cook to provide advice on executive compensation matters, including the types and levels of executive compensation and the competitiveness of the Company’s executive compensation program relative to competitors for executive talent. FW Cook reports directly to the Committee and interacts with management at the Committee’s direction. The Committee and its chairperson have regular opportunities to meet with FW Cook in executive session without management present. The Committee considered the independence of FW Cook in light of current SEC rules and NASDAQ listing standards and concluded that no conflict of interest exists that would prevent FW Cook from independently advising the Committee.

Compensation Committee Evaluation of Executive Compensation Philosophy and Design

The Compensation Committee evaluates and monitors the Company’s executive compensation philosophy and the design of its executive compensation program to assure the Company’s continued ability to attract, retain and motivate leaders who will focus on the creation of long-term shareholder value. The Committee believes that a competitive pay-for-performance executive compensation program employing a mix of compensation elements – base salary, short-term incentives and long-term incentives – links executive compensation to Company performance and clearly aligns executive interests with shareholder interests.

The Compensation Committee reviews competitive market data for comparable executive level positions as a point of reference in its executive compensation decisions. The Committee also reviews the Company’s financial performance, individual NEO performance, and the Company’s competitive environment. The Committee also considers compensation information disclosed by a peer group of companies and industry reference companies with which the Company competes for business and executive talent. The Committee also considers information derived from published survey data that compares the elements of each NEO’s target total direct compensation to the market information for executives with similar roles. FW Cook compiles this information for the Committee and adjusts the published survey data to reflect the Company’s revenue size in relation to the survey participants to more accurately reflect the scope of responsibility for each NEO.

The Compensation Committee, with input from FW Cook, continued to use the same peer group that was used in the prior year, except that two of the companies included last year were removed from the peer group: Continental Materials Corp. is now a private company and Revolution Lighting Technologies, Inc. was delisted. The peer companies were selected primarily based upon the following criteria: (i) similar business operations/industry/competitors for investor capital, (ii) sales and market capitalization between approximately 1/3 and 3 to 4 times the Company’s sales and market capitalization, and (iii) competitors for executive talent.

For fiscal 2021 compensation purposes, our peer group consisted of 15 companies.

FY21 Peer Group
AAON Inc.	CTS Corporation	Key Tronic Corporation
Ameresco, Inc.	Daktronics, Inc.	Napco Security Technologies, Inc.
Broadwind Energy Inc.	Eastern Company	PGT Innovations, Inc.
CECO Environmental Corp.	Encore Wire Corporation	Powell Industries, Inc.
CPI Aerostructures, Inc.	Gorman-Rupp Company	Trex Company Inc.
.

Practices Implemented to serve Shareholder Long-term Interests

The following tables summarize certain executive compensation governance practices that the Committee believes will drive financial performance and serve long-term shareholder interests.

Practices the Company Follows
Payfor performance	A significant portion of executive compensation is at-risk and tied to the achievement of various performance objectives that are disclosed to shareholders.
NEO salary guidelines set annually	The Company generally considers NEO salaries as part of its annual performance review process in an effort to be responsive to industry trends.
Balances short-term and long-term incentives	The Company’s incentive programs provide an appropriate balance of annual and longer-term incentives, with long term incentive compensation comprising a significant percentage of target total compensation.
Uses multiple performance metrics	The Company mitigates the risk of the undue influence of a single performance metric by utilizing multiple performance metrics for the short- and long- term incentive plans.
Caps award payouts	Cash incentive payouts under the short-term incentive plan are capped at 150% of target.
Market-based approach for determining NEO target pay	Target compensation for NEOs is set after consideration of market data at peer group companies, industry reference companies and other market data.
Stock ownership and retention guidelines for all NEOs	The Company also maintains stock ownership guidelines for its directors and NEOs. Until director or NEO meets their requirement, they must retain 50% the net after-tax shares received from awards under the Company’s equity compensation plans.
Conducts a risk assessment	The Compensation Committee annually conducts a compensation risk assessment to determine whether the compensation program, or elements thereof, create risks that are reasonably likely to have a material adverse effect on the Company.
Acts through an independent Compensation Committee	The Compensation Committee is comprised entirely of independent directors and has retained an independent compensation consulting firm.

Practices the Company Prohibits
No excise tax gross-up payments	The Company does not enter into any new contractual agreements that include excise tax gross-up payments.
No re-pricing of options	The Company has never repriced or otherwise reduced the per-share exercise price of any outstanding stock options. Re-pricing of stock options is not permitted under our equity award plans without first obtaining approval from the shareholders of the Company. The Company and the Committee will not reprice underwater options without the consent of the Company’s shareholders.
No pledging or hedging of shares	The Company’s insider trading policy restricts Board members and executive officers from entering into hedging transactions with respect to the Company’s securities and from holding the Company’s securities in margin accounts or otherwise pledging such securities as collateral for loans. No Board member or executive officer implemented any pledges or hedging transaction.
No special perquisites to executives	The Company does not provide executives with benefit programs or perquisites that are not generally made available to all Company employees, except in limited circumstances.

Elements of Executive Compensation

As more fully described below, the Company’s executive compensation program consists of four elements: a competitive base salary benchmarked against a peer group of companies as well as industry reference companies and other relevant market data; a short-term cash incentive plan tied to the Company’s annual financial performance results and the NEO’s individual performance; a long-term incentive plan utilizing equity in various forms; and customary benefits. The Company’s executive compensation program is designed to reward executives with above-market pay for results which exceed the Company’s target performance goals and objectives. The following table summarizes the elements of the NEO compensation program.

Element	Form of Compensation	Purpose
Base Salary	Cash	Provides competitive, fixed compensation to attract and retain superior executive talent.
Short-Term Incentive Plan	Cash	Provides a direct financial incentive to achieve annual Company and individual performance objectives.
Long-Term Incentive Plan	Stock Options, PSUs and RSUs	Encourages the executive team to earn, build and maintain a long-term equity ownership position through Company and individual performance so that executive interests are aligned with shareholder interests. A portion of the awards are earned only if certain performance objectives are achieved.
Health, Retirement and Other Benefits	NEOs participate in benefit plans generally available to our employees, including the 401K plan; premiums paid on long-term disability and life insurance policies; and the Company also offers a nonqualified deferred compensation plan	Benefit plans are part of a broad-based employee benefits program; the nonqualified deferred compensation plan provides c0mpetitive benefits to our executive officers

The Compensation Committee reviews the risk profile of the elements of the Company’s executive compensation program, including the performance metrics and objectives used in connection with incentive awards. The Committee considers the risks a NEO might be incentivized to take with respect to such elements, metrics and objectives. When establishing the mix among these elements, the Committee carefully calibrates the elements to avoid encouraging excessive risk taking. The Company’s executive compensation program is balanced between annual and long-term incentive compensation to ensure alignment with short-term objectives and with the Company’s long-term business plan and shareholder interests. The Committee also determines that the overall mix of equity-based awards has been allocated to promote an appropriate combination of retention and incentive objectives.

The Committee believes that the Company’s executive compensation program does not encourage the NEOs to engage in business activities or other behavior that might threaten the value of the Company or shareholder interests. The Committee regularly monitors and evaluates the mix of compensation, especially equity compensation, awarded to the NEOs, and the extent to which such compensation aligns NEO interests with shareholder interests. In connection with this practice, the Committee has, from time to time, reconsidered the structure of the Company’s executive compensation program and the relative weighting of various elements of pay. Please refer to the discussion in the “Compensation Mix” section.

Base Salary

The Compensation Committee reviews each NEO’s base salary, the scope of each NEO’s level of responsibility and potential, as well as base salary levels offered by competitors and the overall marketplace. Base salary is set at a level that is market competitive in order to attract and retain highly qualified leaders. Base salary reflects the NEO’s scope of responsibility, breadth of experience, ability to contribute to, and impact corporate performance, and a demonstrated track record of individual performance. The Committee has engaged FW Cook to assist in benchmarking each NEO’s base salary and total direct compensation opportunity and each element of executive compensation. The assessment also factors in peer group and industry reference company data and other relevant market data.

In general, the Company seeks to provide target compensation opportunities that are competitive with its peer group companies and other compensation data sources, as provided by FW Cook. There may be instances which indicate the need to pay above target level compensation and the Company is prepared to do so within reasonable limits. The Committee applies a collective, subjective evaluation of the above factors to determine the annual base salary level of each NEO in light of the Company’s performance and such NEO’s individual performance. The Committee does not utilize a particular objective formula as a means of establishing annual base salary levels.

The Compensation Committee did not increase the base salaries of any NEOs in Fiscal 2021, except for Mr. Clark who received an increase of $33,500 (5.9%) to more align his base salary with the peer group median base salary.

Short-Term Incentive Plan

The Company’s annual short-term incentive plan (the “STIP”) provides for the payment of an annual cash incentive and motivates the NEOs to achieve and exceed the Company’s annual operating plan objectives. In August 2020, the Compensation Committee adopted the Fiscal Year 2021 Short Term Incentive Plan (the “FY21 STIP”). The performance criteria under the FY21 STIP are comprised eighty percent (80%) on a Company performance-based component of adjusted EBITDA and twenty percent (20%) based on net sales. Company performance is measured by comparing the Company’s adjusted EBITDA for the fiscal year ended June 30, 2021, to a target adjusted EBITDA for the entire 2021 fiscal year set by the Committee and by comparing the Company’s net sales for the fiscal year ended June 30, 2021 to a target net sales for the entire 2021 fiscal year set by the Committee. The Committee continues to believe that the measure of adjusted EBITDA reflects operating performance because it excludes amortization of intangibles, which can be confusing and unclear. Adjusted EBITDA also is a highly referenced and preferred performance metric with the shareholder and analyst community. Adjusted EBITDA is a non-GAAP financial measure. Please see Annex A for further discussion regarding our use of Non-GAAP measures. The Committee sees each of adjusted EBITDA and net sales as a measure that aligns with incentivizing growth in shareholder value creation.

Like the FY20 STIP, the FY21 STIP places emphasis on EBITDA over net sales, with EBITDA weighted 80% and net sales weighted 20% of the total incentive. As set forth below, the Company significantly exceeded target performance for both metrics in a very uncertain environment resulting from the pandemic.

FY21 STIP Performance Metrics
Performance Metric	Threshold Achievement	Target Achievement	Maximum Achievement	Actual Results
Net Sales	$285 Million	$294 Million	$305 Million	$316 Million
Adjusted EBITDA	$7.351 Million	$8.648 Million	$11.242 Million	$20.6 Million

2021 Potential Payout Levels

Executive	Threshold Achievement (% of base salary)	Target Achievement (% of base alary)	Maximum Achievement (% of base salary)
James A. Clark	40	80	120
James E. Galeese	25	50	75
Thomas A. Caneris	25	50	75
Michael C. Beck	25	50	75
Jeffery S. Bastian	20	40	60

Long-Term Incentive Plan (LTIP)

The Company’s long-term incentive plan (the “LTIP”) provides for the award of stock options, restricted stock units, and performance share units under the 2019 Omnibus Award Plan. The LTIP rewards executives for achieving the company’s long-term performance goals which in turn will create long-term shareholder value. The grant of equity-based compensation provides a strong longer-term alignment of NEO interests with shareholder interests. The Company has adopted stock ownership and retention guidelines for the executive team to reinforce such alignment.

In connection with the LTIP equity awards granted to the NEOs, the Compensation Committee generally exercises broad discretion to achieve an appropriate balance between retention and incentive objectives. The Committee attempts to reward the NEOs with LTIP equity awards in an amount that would be significant in relation to the other annual compensation paid to the NEOs, 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 companies in similar industries identified in reports prepared for the Committee. The size of the award is not determined by application of any formula, but rather reflects the Committee’s subjective judgment with regard to encouraging and rewarding high levels of performance.

The Compensation Committee is responsible for administration of the 2019 Omnibus Award Plan, with respect to executive officers, including the NEOs, Board members and all other employees. After consultation with Mr. Clark, Mr. Galeese and Mr. Caneris concerning possible grants to employees other than themselves, the Committee determines the individuals who will receive equity awards, the date of grant, the vesting and/or performance conditions of the grant, and the number of shares or units awarded. All stock option exercise prices are set at the closing sale price reported on Nasdaq for the Company’s Common Shares on the effective date of the grant. The Committee bases its individual equity awards upon Company performance, the past contributions of the particular employee and the capability of the employee to positively impact the Company’s future success and profitability. Although the Company does not have a written policy regarding the timing of or practices related to granting equity awards, neither the Company nor the Committee engages in re-pricing, spring-loading, back-dating or bullet-dodging practices. The Committee usually grants annual equity awards to the NEOs on or around the time of its August meeting.

In August 2020, the Compensation Committee adopted the Fiscal 2021 Long Term Incentive Plan (the “FY20 LTIP”). The FY21 LTIP provides for the issuance of equity awards consisting of nonqualified stock options, RSUs and PSUs. The FY21 LTIP’s terms are consistent with making a substantial portion of each NEO’s compensation dependent on attaining Company performance over a longer term.

The Committee views the FY21 LTIP grants of RSUs as a retention tool; the RSUs vest over three years. The Committee believes the FY21 LTIP grants of stock options (which vest in equal annual installments over three years and have a ten-year exercise term) and three-year PSU awards focus on long-term performance and shareholder alignment. Mr. Clark’s FY21 LTIP stock option award represented of 50% PSUs, 25% RSUs, and 25% stock options the value of the total grants to him. For Messrs. Beck, Caneris and Galeese, the awards consisted of 40% PSUs, 35% RSUs and 25% stock options. The value of Mr. Bastian’s FY21 LTIP award consisted of 25% stock options, 40% PSUs and 35% RSUs. The Committee believes that this LTIP mix makes the overall grant value more heavily performance-oriented over a longer period, with three years representing an appropriate performance cycle.

Stock options granted under the FY21 LTIP vest ratably over a three-year period and are exercisable for ten years from the date of grant. RSUs vest 50% on the first anniversary of the date of grant and 25% on the second and third anniversaries of the date of grant.

All PSU awards are subject to a three-year performance period. The vesting of the PSU awards is subject to the achievement of a three-year cumulative adjusted EBITDA and a Return on Net Assets (“RONA”) performance objective. Specifically, PSU awards will cliff vest at the end of the third year if specific adjusted EBITDA and RONA targets are achieved. Each performance metric is weighted at 50% of the PSU. Adjusted EBITDA serves as a proxy for cash flow and the amount of profit that can be made from the Company’s current assets and operations. Adjusted EBITDA is a non-GAAP financial measure. Please see Annex A for further discussion regarding our use of Non-GAAP measures. RONA measures the effectiveness with which the Company uses its assets and working capital to sustain growth. The Compensation Committee believes adjusted EBITDA and RONA are common metrics used by the investment and analyst community and that improvements in adjusted EBITDA and RONA will result in growth in shareholder value.

FY21 LTIP Performance Metrics – 3-year Vesting Period

Performance

Metric as a

Percent of

Target

Weight of

Performance

Metric

Threshold

Achievement as

a Percentage of

Target

Achievement

Maximum

Achievement

as a

Percentage

of Target

Threshold

Payout

Target

Payout

Maximum

Payout

RONA % (3-year average)

50%

85%

100%

110%

50%

100%

150%

Adjusted EBITDA (cumulative)

50%

90%

100%

110%

50%

100%

150%

The following table shows the Committee’s FY21 LTIP Awards to the NEOs.

FY21 LTIP Awards

Executive	Stock Options	RSUs	PSUs
James A. Clark	76,271	26,471	52,941
James E. Galeese	22,586	10,974	12,542
Thomas A. Caneris	21,928	10,654	12,176
Michael C. Beck	21,070	10,238	11,000
Jeffery S. Bastian	13,096	7,272	6,363

Fiscal 2022 Equity Compensation Developments

As of the date of this Proxy Statement, the Compensation Committee has not yet adopted a Fiscal 2022 Long-Term Incentive Plan (the “FY22 LTIP”).

NEO Stock Holding Requirements

The Company maintains Stock Ownership and Retention Guidelines (the “Guidelines”) applicable to NEOs. All NEOs are in compliance with the Guidelines. The Guidelines require the following stock ownership multiples:

NEO	Multiple of Base Salary
James, A Clark	5x
James E. Galeese	2x
Thomas A. Caneris	2x
Michael C. Beck	2x
Jeffery S. Bastian	2x

Until a NEO meets his requirement, he must retain 50% the net after-tax shares received from awards under the Company’s equity compensation plans.

In addition, each NEO is prohibited from selling Company stock acquired by exercising stock options or the vesting of other equity grants until such Officer is in compliance with his or her ownership requirement; provided, however NEOs may immediately sell Company stock acquired by exercising stock options or other equity grants in amounts not exceeding the retention ratio. Once a NEO has met his minimum ownership requirement, he shall be deemed to have met his share ownership requirement regardless of fluctuations in the price of the Company’s shares or changes in t base salary or cash retainer, unless the NEO sold shares in excess of the retention ratio in the proceeding twelve (12) months. In such case, the determination of the NEO’s compliance with the minimum share requirements shall begin anew.

Clark Employment Agreement

Mr. Clark’s employment with the Company began effective November 1, 2018. In connection with his employment, the Company and Mr. Clark entered into an Employment Agreement which provides:

●

Annual base salary of $550,000, a signing bonus of $110,000, and relocation expense package of $180,000.

●

Eligibility to receive incentive compensation under LSI’s Short-Term Incentive Plans.

	●	A non-statutory stock option (the “Clark Option”) with a term of ten years to purchase 500,000 shares of the Company’s common stock of which: (A) fifty percent (50%) shall vest in full on the third anniversary of the date of grant; (B) twenty-five percent (25%) shall vest upon (I) satisfaction of the condition that he shall be employed by the Company as the Company’s CEO for three years (the “CEO Employment Condition”) and (II) the closing price per share of the Company’s common stock on the NASDAQ Global Select Market at any time prior to the expiration of the ten year term of the Clark Option shall be equal to or greater than $9.50 per share; and (C) twenty-five percent (25%) shall vest upon (I) satisfaction of the CEO Employment Condition, and (II) the closing price per share of the Company’s common stock on the NASDAQ Global Select Market at any time prior to the expiration of the ten year term of the Clark Option shall be equal to or greater than $15.00 per share. The Clark Option is intended to qualify as an “inducement grant” under NASDAQ Listing Rule 5635(c)(4) and was not granted pursuant to the Company’s Amended and Restated 2012 Stock Incentive Plan.
	●	Eligibility to receive additional share-based awards on an annual basis.

●

If the Company terminates Mr. Clark’s employment without cause, it shall pay severance, subject to receipt of an appropriate release of claims agreement, in an amount equal to one year of his then current base salary plus an incentive payment equal to the then applicable “target” amount.

Caneris Offer Letter

In connection with his employment with the Company as Senior Vice President - Human Resources and General Counsel, which began on August 5, 2019, Mr. Caneris and the Company executed an Employment Offer Letter which provides:

●

Annual base salary of $345,000, a signing bonus of $50,000, and relocation expense package of $50,000.

●

A non-statutory stock option (the “Caneris Option”) with a term of ten years to purchase 100,000 shares of the Company’s common stock which shall vest on the third anniversary of the grant date. The Caneris Option is intended to qualify as an “inducement grant” under NASDAQ Listing Rule 5635(c)(4) and was not granted pursuant to the Company’s Amended and Restated 2012 Stock Incentive Plan.

Clawbacks: Recovery of Prior Equity Awards

In the event the Company is required to prepare an accounting restatement due to the material noncompliance with any financial reporting requirement under the federal securities laws, the Compensation Committee shall require reimbursement to the Company (i.e., a clawback) of any equity award granted under the LTIP where: (i) the payment was predicated upon achieving certain financial results that were subsequently the subject of a substantial restatement of the Company’s financial statements filed with the SEC; (ii) the Compensation Committee determines the officer engaged in intentional misconduct that caused or substantially caused the need for the accounting restatement; and (iii) a lower payment would have been made to such officer based upon the restated financial results. In each such instance, the Company will, to the extent practicable, seek to recover from the officer the amount by which any performance-based awards paid to such officer for the relevant period exceeded the lower payment that would have been made based on the restated financial results. This compensation recovery policy applies to financial statements for periods ending after June 30, 2016.

Health, Retirement and Other Benefits

The Company’s benefits program includes a 401K savings plan and group life, short-term disability and long-term disability 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 401K savings plan is to provide a competitive level of retirement savings and income to executive officers and to reward them for continued service with the Company. The executive officers may also participate in the Company’s Nonqualified Deferred Compensation Plan. Please see the “Nonqualified Deferred Compensation” section of this Proxy Statement for additional information.

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 in the All Other 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. The Company does not provide tax gross-ups.

Compensation Mix

The Compensation Committee does not attempt to maintain a certain target compensation mix. The Committee seeks an appropriate mix between equity incentive awards and cash payments in order to meet the Company’s various objectives around pay-for-performance, retention, and motivation of executive talent. Other than as set forth in various compensation plans, any apportionment goal is not applied rigidly and does not control the Committee’s compensation decisions. The Committee uses it as another tool to assess total compensation opportunities and whether the appropriate incentives have been provided to accomplish the Company’s compensation objectives. The mix of compensation elements is designed to reward short-term results and motivate long-term performance through a combination of cash and equity incentive awards. The Committee believes the most important indicator that compensation objectives are being met is the ability to motivate the NEOs to deliver superior performance and to retain the NEOs to continue their careers with the Company on a cost-effective basis.

Change in Control Agreements and Supplemental Benefits Agreements

Effective January 26, 2021, the Company entered into Change in Control Agreements and Supplemental Benefits Agreements with each of the following executive officers: James A. Clark, Chief Executive Officer; James E. Galeese, Executive Vice President and Chief Financial Officer; and Thomas A. Caneris, Senior Vice President, Human Resources and General Counsel.

The Change in Control Agreements provide that if the executive’s employment terminates during a change in control period (generally defined as the twenty-four months after a change in control) other than in connection with death, disability, “cause” or “good reason,” (each as defined in such agreements), he is entitled to a severance payment equal to a multiple of his then-current base salary plus his target bonus for the severance period. The multiple for Mr. Clark is two and one-half times; the multiple for each of Mr. Galeese and Mr. Caneris is two times. The agreements provide for continued participation in medical and dental plans, with full COBRA payments to be paid by the Company. The agreements also provide that in the event of a change in control and upon a subsequent qualifying termination of employment, unless the successor company agrees to assume, replace or substitute the executive’s stock options, restricted stock awards, and/or restricted stock unit awards (“RSUs”), such awards shall become vested in full and exercisable in their entirety. The agreements further provide that in the event of a change in control all performance stock units granted to the executive will convert at the target performance level into time-based RSUs vesting in equal installments over three years.

The Supplemental Benefits Agreements provide that if the executive’s employment is terminated by the Company without “cause” or the executive terminates his employment for “good reason” (each as defined in such agreements), at any time outside of a change in control period (generally defined as the twenty-four months after a change in control), the executive is entitled to a severance payment equal to a multiple of the sum of one year of base salary and his annual target bonus. The multiple for Mr. Clark is one and one-half times; the multiple for each of Mr. Galeese and Mr. Caneris is one time. The agreements provide that if the executive’s employment is terminated by the Company without “cause,” the executive terminates his employment for “good reason” or in the event of the executive’s retirement when the executive satisfies applicable retirement criteria, or in the event of executive’s death or disability: (A) all unvested stock options (other than stock options that may vest upon the achievement of performance conditions) shall immediately and without further action become fully vested; and (B) all unvested stock options that may vest upon the achievement of performance conditions, all unvested restricted stock unit awards, all unvested restricted stock awards and all unvested performance stock unit awards shall continue to vest pursuant to their original vesting schedules. The agreements also provide for continuation of coverage under group health plans maintained by the Company, additional cash COBRA payments for six months (in the case of Mr. Clark only) and non-competition covenants.

Non-GAAP Measurements

RONA, adjusted cumulative EBITDA, and adjusted EBITDA, are non-GAAP measures. Please see Annex A for the definition of such terms and a reconciliation to GAAP.

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.

Respectfully submitted by the members of the Compensation Committee.

Ronald D. Brown,

Chairman

Amy L. Hanson

Chantel E. Lenard

The following table sets forth information regarding compensation paid to the NEOs for fiscal 2021.

SUMMARY COMPENSATION TABLE

Name and Principal Position	Fiscal Year	Salary (1)	Bonus (2)	Option Awards (3)	Stock Awards (4)	Non-Equity Incentive Plan Compensation	Change in Pension Value and Nonqualified Deferred Compensation	All Other Compensation (5)	Total

James A. Clark Chief Executive Officer	2021 2020 2019	$559,189 $564,202 $353,670	$720,000 $271,920 $110,000	$180,355 - $811,250	$540,000 $200,000 -	- - -	$20,660 $9,261 -	$130,221 $37,250 $184,644	$2,150,425 $1,082,663 $1,459,564

James E. Galeese EVP, Chief Financial Officer	2021 2020 2019	$336,216 $352,962 $340,476	$266,513 $100,000 $86,250	$53,408 $71,101 $89,946	$159,909 $71,069 $135,109	- - -	$32,682 $50,744 $(12,898)	$35,852 $20,434 $13,855	$884,580 $666,310 $652,739

Thomas A. Caneris SVP, HR & General Counsel	2021 2020	$323,769 $296,567	$258,750 $145,000	$51,852 $171,691	$155,244 $69,001	- -	$54,317 $22,060	$170,589 $120,540	$1,014,521 $824,859

Michael C. Beck SVP, Operations	2021 2020 2019	$314,288 $330,000 $118,925	$248,625 $50,000 $50,363	$49,823 $66,329 $35,833	$149,178 $66,301 -	- - -	$35,484 $16,264 -	$121,090 $56,780 $52,937	$918,488 $585,674 $258,059

Jeffery S. Bastian VP, Chief Accounting Officer	2021 2020 2019	$237,739 $239,076 $244,563	$148,349 $29,670 $10,086	$30,968 $25,972 $28,196	$92,718 $60,575 -	- - -	$18,218 $27,549 $(6,885)	$33,747 $20,362 $7,940	$561,739 $403,204 $283,900

(1)

Salary compensation represents the base salary paid during the fiscal year. For fiscal 2020, salary represents a partial year for Mr. Caneris who joined the Company in August 2020. For fiscal year 2019, salary represents a partial year for Mr. Clark who joined the Company in November 2018 and Mr. Beck who joined the Company in February 2019.

(2)

Bonus compensation represents the incentive and discretionary compensation expensed during the fiscal year and paid in the following fiscal year. The bonus compensation for Mr. Caneris in 2020 also includes a $50,000 signing bonus. For 2019, bonus compensation for Mr. Clark includes a $110,000 signing bonus; and for Mr. Beck includes a $45,000 signing bonus.

(3)

Stock option award compensation represents the grant date fair value which will be expensed for financial statement reporting purposes in accordance with FASB ASC Topic 71 (Compensation–Stock Compensation). There can be no assurance that the value realized from the exercise of stock options, if any, will equal the amount of ASC 718 compensation expense recorded. See discussion related to all assumptions made in the valuation of stock options in accordance with ASC 718 in Note 10 to the Company’s financial statements included in the Company’s Form 10-K for the fiscal year ended June 30, 2021.

(4)

Stock awards in 2021 to Messrs. Clark, Galeese, Caneris, Beck, and Bastian are comprised of RSU and PSU awards. The 2021 RSU awards are as follows: Mr. Clark of $180,00; Mr. Galeese of $74,623; Mr. Caneris of $72,447; Mr. Beck of $69,618; and Mr. Bastian of $49,450. The 2021 PSU awards are as follows: Mr. Clark of $360,000; Mr. Galeese of $85,286; Mr. Caneris of $82,797; Mr. Beck of $79,560; and Mr. Bastian of $43,268. Stock awards in 2020 to Messrs. Clark, Galeese, Caneris, Beck, and Bastian are comprised of PSU awards Mr. Bastian’s 2020 awards also consist of an RSU award of $25,960. Mr. Galeese’s 2019 stock awards consist of a PSU award.

For all years, RSU compensation represents the grant date fair value and PSUs at 100% of target payout. For the 2020 and 2021 PSUs, the minimum is 50% of target payout and the maximum is 150% of target payout.

(5)

See the “All Other Compensation” table for an explanation of the amounts shown in this column.

ALL OTHER COMPENSATION

The following table describes each element of the All Other Compensation column for 2021 in the Summary Compensation Table.

Name	Fiscal Year	Life Insurance (1)		Qualified Retirement Plan or 401K Plan Contributions (2)		Non-qualified Deferred Compensation Plan Contributions (3)		Relocation Allowance		Post Employment Payments		Total

	2021		$2,000		$3,462		$124,759		--		--		$130,221
James A. Clark	2020		$2,000		$6,856		$28,394		--		--		$37,250
	2019		$2,000		$2,644		--		$180,000		--		$184,644

	2021		$2,000		$2,050		$31,802		--		-		$35,852
James E. Galeese	2020		$2,000		$7,813		$10,621		--		--		$20,434
	2019		$2,000		$11,855		--		--		--		$13,855

	2021		$2,000		$796		$167,793		--		--		$170,589
Thomas A. Caneris	2020		$2,000		$2,787		$65,753		$50,000		--		$120,540


	2021		$2,000		$1,913		$117,177		--		--		121,090
Michael C. Beck	2020		$2,000		$4,903		$49,877		-		--		$56,780
	2019		$2,000		$937		--		$50,000		--		$52,937

	2021		$2,000		$1,426		$30,321		--		--		$33,747
Jeffery S. Bastian	2020		$2,000		$3,971		$14,391		--		--		$20,362
	2019		$2,000		$5,940		--		--		--		$7,940

The Company does not provide automobile, personal expense or professional fee allowances.

(1)

Life insurance represents the taxable premium associated with the Company’s group term life insurance program.

(2)

The amounts represent 401K plan matching contributions.

(3)

The amounts represent non-qualified deferred compensation employer matching contributions.

GRANTS OF PLAN-BASED AWARDS

The following table sets forth certain information regarding all grants of plan-based awards made to the NEOs during fiscal 2021.

		Estimated Future Payouts Under Non-Equity Incentive Plan Awards			Estimated Future Payouts Under Equity Incentive Plan Awards
Executive	Grant Date	Threshold ($)	Target ($)	Maximum ($)	Threshold (#)	Target (#)	Maximum (#)	Stock Option Awards: Number of Securities Underlying Options (1)	Stock Unit Awards: Number of Securities Underlying Options (1)	Performance Stock Unit Awards: Number of Securities Underlying Awards (2)	Exercise or Base Price of Option and RSU Awards ($/share)	Grant Date Fair Value of Stock Option and PSU Awards

James A. Clark	8/19/20				26,471	52,941	79,412	76,271	26,471	52,941	$6.80	$720,355

James E. Galeese	8/19/20				6,271	12,542	18,813	22,586	10,974	12,542	$6.80	$213,317

Thomas A. Caneris	8/19/20				6,088	12,176	18,264	21,928	10,654	12,176	$6.80	$207,096

Michael C. Beck	8/19/20				5,850	11,700	17,550	21,070	10,238	11,700	$6.80	$199,001

Jeffery S. Bastian	8/19/20				3,182	6,363	9,545	13,096	7,272	6,363	$6.80	$123,686

(1)

Stock Options vest ratably in three equal annual installments, beginning on the first anniversary of the award, subject to continued employment of the Named Executive Officer. RSUs vest over three years as follows: (1) 50% on the first anniversary of the award; (2) 25% on the second anniversary; and (3) 25% on the third anniversary.

(2)

PSUs will cliff vest at the end of three years if certain adjusted EBITDA and RONA targets are met.

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, 2021.

Option Awards

Stock Awards

Name

Grant

Date

Number of

Securities

Underlying

Unexercised

Options

Exercisable

(#)

Numbers 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 Pay

Out Value of

Unearned

Shares, Units

or Other

Rights That

Have Not

Vested

James A. Clark

(4) 11/1/18

(3) 8/21/19

(2) 8/19/20

(7) 8/19/20

(3) 8/19/20

76,271

500,000

$4.40

$6.80

11/1/28

8/19/30

26,471

$212,033

52,219

52,941

$418,274

$424,057

James E. Galeese

(1) 6/12/17

(2) 8/17/17

(2) 8/16/18

(3) 8/16/18

(2) 8/21/19

(3) 8/21/19

(2) 8/19/20

(7) 8/19/20

(3) 8/19/20

60,000

38,000

42,533

25,202

21,267

50,404

22,586

$9.15

$5.92

$4.94

$3.83

$6.80

6/12/27

8/17/27

8/16/28

8/21/29

8/19/30

10,974

$87,902

27,350

18,556

12,542

$219,074

$148,634

$100,461

Thomas A. Caneris

(5) 8/5/19

(1) 8/21/19

(3) 8/21/19

(2) 8/19/20

(7) 8/19/20

(3) 8/19/20

24,468

100,000

48,936

21,928

$4.04

$3.83

$6.80

8/5/29

8/21/29

8/19/30

10,654

$85,339

18,016

12,176

$144,308

$97,530

Michael C. Beck

(5) 2/11/19

(2) 8/21/19

(3) 8/21/19

(2) 8/19/20

(7) 8/19/20

(3) 8/19/20

23,511

50,000

47,021

21,070

$3.18

$3.83

$6.80

2/11/29

8/21/29

8/19/30

10,238

$82,006

17,311

11,700

$138,661

$93,717

Jeffery S. Bastian

(1) 8/16/12

(1) 8/23/13

(1) 11/20/14

(1) 7/1/15

(1) 7/1/16

(1) 6/12/17

(2) 8/17/17

(2) 8/16/18

(2) 8/21/19

(6) 8/21/19

(3) 8/21/19

(2) 8/19/20

(7) 8/19/20

(3) 8/19/20

11,250

17,000

20,000

15,000

10,000

3,750

18,000

13,333

9,206

6,667

18,412

13,096

$6.58

$7.20

$6.81

$9.39

$11.06

$9.15

$5.92

$4.94

$3.83

$6.80

8/16/22

8/23/23

11/20/24

7/1/25

7/1/26

6/12/27

8/17/27

8/16/28

8/21/29

8/19/30

6,778

7,272

$54,292

$58,249

9,038

6,363

$72,394

$50,968

(1)

Stock options have a ten-year term and vest ratably over a four-year period beginning with the first anniversary date of grant.

(2)

Stock options have a ten-year term and vest ratably over a three-year period beginning on the first anniversary of the date of grant.

(3)

PSUs are unearned and vesting of the PSUs is subject to the achievement of three-year performance objectives.

(4)

Inducement Grant of Performance Stock Options made as part of the executive’s initial employment with the Company.

(5)

Inducement grant of Stock Options made as part of the executive’s initial employment with the Company.

(6)

RSUs granted prior to August 19, 2020 vest ratably over a three-year period beginning on the first anniversary of the date of grant. Upon vesting accrued cash dividends are paid to the executive.

(7)

RSUs granted on August 19, 2020 vest over a three-year period as follows: (1) 50% on the first anniversary of the award; (2) 25% on the second anniversary of the award; and (3) 25% on the third anniversary of the award. Upon vesting, accrued cash dividends are paid to the executive.

OPTION EXERCISES AND STOCK VESTED

The following table provides information for each of the NEOs on stock option exercises and RSU vesting during fiscal 2021, including the number of shares acquired upon exercise and the value realized.

Executive

Number of

Shares

Acquired on

Exercise (#)

Value

Realized on

Exercise ⁽¹⁾

Number of

Shares

Acquired on

Vesting (#)

Value Realized

on Vesting

James A. Clark

None

N/A

None

N/A

James E. Galeese

None

N/A

2,833

$18,839

Thomas A. Caneris

None

N/A

None

N/A

Michael C. Beck

None

N/A

None

N/A

Jeffery S. Bastian

None

N/A

3,759

$26,123

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 up to 40% of their salary and/or bonus into this plan. The Company makes a matching contribution equal the amount contributed by the employee. 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 NEOs during fiscal 2021 and the aggregate balance of the accounts as of June 30, 2021.

Executive	Executive Contributions in Fiscal 2021 (1)	LSI Contributions in Fiscal 2021	Aggregate Earnings in Fiscal 2021 (2)	Aggregate Withdrawals / Distributions in Fiscal 2021	Aggregate Balance at June 30, 2021 (3)

James A. Clark	$124,759	$124,759	$20,660	-	$336,228

James E. Galeese	$31,802	$31,802	$32,682	-	$235,115

Thomas A. Caneris	$167,793	$167,763	$54,317	-	$543,469

Michael C. Beck	$117,177	$117,177	$35,484	-	$385,854

Jeffery S. Bastian	$30,321	$30,321	$18,218	-	$164,167

(1)

NEO’s contributions are included as part of the NEO’s salary in the Summary Compensation Table. This was also the case in prior years.

(2)

Aggregate earnings are included as part of each NEO’s change in nonqualified deferred compensation earnings in the Summary Compensation Table. Aggregate earnings represent the change in the market price the Company’s Common Shares as all account balances in the Plan are invested in Common Shares.

(3)

NEOs and other Plan participants are fully vested in their plan account balances. Participants may receive installment or lump sum distributions upon termination of employment from the Company (not before a date which is six months after termination for the NEOs). 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 Common Shares.

POTENTIAL PAYMENTS ON TERMINATION OR CHANGE IN CONTROL

Effective January 26, 2021, the Company entered into Change in Control Agreements and Supplemental Benefits Agreements with each of the following executive officers: James A. Clark, Chief Executive Officer; James E. Galeese, Executive Vice President and Chief Financial Officer; and Thomas A. Caneris, Executive Vice President, Human Resources and General Counsel.

Equity Award Acceleration

The terms of stock options granted under all of LSI’s shareholder approved equity compensation plans generally provide for the acceleration of vesting upon a change in control or upon the executive officer’s death, disability or retirement.

Equity Acceleration on Change in Control

Upon a Change of Control event, all unvested equity grants made to a NEO will immediately vest. PSUs granted under the 2019 Omnibus Plan will vest at target. The Company’s Amended and Restated 2012 Stock Incentive Plan gives the Board of Directors alternatives on converting the PSU awards to buyer securities, cash payment, etc., and are not included in the table below. In general, a change in control occurs if (i) a person or entity acquires 25% or more of the Company’s Common Shares or (ii) a majority of the Board is replaced in any one-year period other than by new directors approved by two-thirds of the existing directors.

Equity Acceleration on Death, Disability or Retirement

If an NEO’s employment with the Company is terminated by reason of death, disability or retirement, his stock options will vest in full and become immediately exercisable.

As of June 30, 2021, the current NEOs held the following amounts of unvested Stock Options, RSUs and PSUs: Mr. Clark, 576,271 stock options, 26,471 RSUs and 105,160 PSUs; Mr. Galeese, 94,257 stock options, 10,974 RSUs and 58,448 PSUs; Mr. Caneris, 170,864 stock options, 10,654 RSUs and 30,192 PSUs; Mr. Beck, 118,091 stock options, 10,238 RSUs and 11,700 PSUs; and Mr. Bastian, 38,175 stock options, 11,791 RSUs and 6,363 PSUs. The closing market price of the Company’s Common Shares was $8.01 per share on June 30, 2021. Any value reported in the table below relates only to those unexercised stock options (whether vested or unvested) having an exercise price less than the June 30, 2021 closing market price of $8.01 per share.

The following table shows the potential payments, other than those generally available to all salaried employees, that would be payable to each NEO assuming a qualifying change in control or other triggering event had occurred on June 30, 2021.

Name	Payments Under Change in Control Agreements		Aggregate Value of Vested Equity Awards		Aggregate Value of Unvested Equity Awards		Deferred Compensation Plan Account Balances

James A. Clark		$2,700,000		--		$2,951,652		$336,228

James E. Galeese		$1,066,050		$315,341		$859,378		$235,115

Thomas A. Caneris		$1,035,000		$102,276		$955,262		$543,469

Michael C. Beck		-		$98,276		$639,266		$385,854

Jeffery S. Bastian		-		$170,891		$258,690		$164,167

CEO PAY RATIO DISCLOSURE

As of June 30, 2021, the Company’s employee population consisted of 1,095 individuals. The Company did not exclude any employees from our determination of the median employee. The Company determined the compensation of its median employee for this purpose by: (i) calculating the annual total compensation based on the W-2 Box 1 amount for each of its employees; (ii) wages and salaries were annualized for those employees who were not employed for the full fiscal year based on their applicable work schedules; (iii) ranking the annual total compensation of all employees (excluding the PEO) from highest to lowest. The median amount was selected from the annualized list.

The Company is providing disclosure of the ratio of the annual total compensation of its principal executive officer (“PEO”) to its median employee’s annual total compensation as required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K. For purposes of the disclosure required by Item 402(u), the Company is referencing the compensation of the Company’s Chief Executive Officer, James A. Clark. Mr. Clark’s annual total compensation for fiscal 2021 was $2,150,425. The median employee’s (excluding the PEO) annual total compensation for fiscal 2020 was $38,400. We used the same median employee in our pay ratio calculation for fiscal 2021 as we used for fiscal 2020 because there was no change in our employee population or employee compensation arrangements that we believed would significantly impact our pay ratio disclosure. The median employee for fiscal 2021 was a non-exempt, full-time employee located in the United States. Therefore, the Company reasonably estimates that the fiscal 2021 ratio of the PEO’s annual total compensation to the annual total compensation of our median employee was 56.0 to 1.

Under the SEC’s rules and guidance, there are numerous ways to determine the compensation of a company’s median employee, including the employee population sampled, the elements of pay and benefits used, any assumptions made and the use of statistical sampling. In addition, no two companies have identical employee populations or compensation programs, and pay, benefits and retirement plans may differ by country even within the same company. As such, the Company’s pay ratio may not be comparable to the pay ratio reported by other companies.

EQUITY COMPENSATION PLAN INFORMATION

The following table presents information about all of the Company’s equity compensation plans as of June 30, 2021.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		2,776,621		$6.27		2,573,450
Equity compensation plans not approved by security holders		408,135		$6.66		--
Total		3,184,756		$6.32		2,573,450

CORPORATE GOVERNANCE

The Company is an Ohio corporation and is governed by the corporate laws of the State of Ohio. The Company’s Common Shares are publicly traded on the NASDAQ Global Select Market and the Company files reports with the Securities and Exchange Commission. The Company is also subject to NASDAQ rules as well as various provisions of federal securities laws, the Sarbanes-Oxley Act, and the Dodd-Frank Act. In accordance with NASDAQ rules, the 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. The Company’s Director Independence Standards are available the Company’s website, www.lsicorp.com. Based on these standards, the Board determined that each of the following members of the Board are independent: Mr. Beech, Mr. Brown, Ms. Hanson, Ms. Lenard, and Mr. O'Gara.

Board of Directors

The Board of Directors elects or appoints the Company’s executive officers to manage the Company’s business operations and oversees the management of the Company on behalf of its shareholders. It reviews the Company's long-term strategic plans and exercises direct decision-making authority in all major corporate decisions, such as acquisitions or divestitures, the declaration of dividends, major capital expenditures and the establishment of critical corporate policies.

The Executive Committee 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 Board of Directors held four (4) meetings during fiscal 2021 either in person or telephonically. The independent Directors discussed matters in executive session at the end of certain Board meetings, Executive Committee meetings and other Committee meetings, in each instance without the presence of the Company's senior management executives.

Each member of the Board of Directors is expected to attend the Annual Meeting. Each Board member who was a Board member at the time of the Company’s 2020 Annual Meeting attended the meeting. Each Board member attended at least 80% of the aggregate of all meetings of the Board, Board Committees of which she or he was a member and independent Director meetings.

Shareholders may communicate with the Board or any individual member of the Board on matters of concern by mail addressed to the Corporate Headquarters at 10000 Alliance Road, Cincinnati, Ohio 45242 or through the Company’s website at www.lsicorp.com, in each case to the attention of the Secretary of the Company.

Board Leadership Structure

Mr. O’Gara, a non-employee independent director, serves as Chairman of the Board of Directors and has served on the Board since 1999. The Board believes that this structure is currently an appropriate leadership model for the Company’s size and the history and nature of its business operations. He is intimately familiar with the Company’s business and in a good position to identify and evaluate strategic issues facing the Company.

As noted above, the Board of Directors is currently comprised of six members, five of whom are non-employee directors who meet the NASDAQ Guidelines for independence and who meet periodically in executive session, factors which help ensure independent oversight of the Company. The Board of Directors recognizes that no single leadership model is right for all companies at all times, and for this reason, the Nominating and Corporate Governance Committee, working closely with the entire Board, periodically considers the Company’s current leadership structure, as well as alternative structures, in its review of overall Board composition and succession planning. The Board has determined that the Company’s leadership structure is appropriate given the scope of its business, the nature and allocation of the responsibilities of the CEO and the other NEOs and the views of the Company’s shareholders as evidenced by the voting results of recent Board elections.

Risk Oversight

The Company believes the role of management, including the NEOs, is to identify and manage risks confronting the Company. The Board of Directors also plays an integral part in overseeing the processes used by management to identify and report these risks, if any, and in monitoring corporate actions so as to confine risk to appropriate levels. The Board of Directors and each Board committee frequently engages in the discussion of risks facing the Company at their regularly scheduled meetings.

The Company’s leadership structure and overall corporate governance model is designed to aid the Board in its oversight of risk management. For example: the Audit Committee serves a key risk oversight function in carrying out its review of the Company’s financial reporting and internal reporting processes, as required by the Sarbanes-Oxley Act of 2002; the Compensation Committee helps oversee risks relating to the Company’s executive compensation plan; and the Nominating and Corporate Governance Committee contributes to the overall risk oversight process by periodically reviewing the Company’s Board committee charters and evaluating potential Director nominees.

DIRECTOR COMPENSATION

The compensation program for the Company’s non-employee Directors has been approved by the Compensation Committee. Non-employee Director annual compensation is $120,000, of which $60,000 is comprised of Common Shares and the remainder is cash. In addition, Committee Chairs receive the following amounts annually: Audit Committee Chair $17,500; Compensation Committee Chair $15,500; Nominating and Corporate Governance Committee Chair $13,500. The Chairman of the Board receives a $50,000 annual retainer. Directors who are employees of the Company do not receive any compensation for serving as a member of the Board of Directors.

The following table sets forth information regarding compensation paid by the Company to its non-employee Directors during fiscal 2021.

SEC Form DEF 14A filed by LSI Industries Inc.