UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.      )

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LSI Industries Inc.

(Name of Registrant as Specified In Its Charter)

 

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

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Notice of Annual Meeting of Shareholders
and Proxy Statement

October 2, 2009

Dear Shareholder:

We invite you to attend our Annual Meeting of Shareholders on Thursday, November 19, 2009, at 10:00 a.m. at the Company’s headquarters located at 10000 Alliance Road, Cincinnati, Ohio. At the meeting, you will hear a report on our operations and have a chance to meet your Company’s Directors and executives.

This booklet includes the formal notice of the meeting and the proxy statement. The proxy statement tells you more about the agenda and procedures for the meeting. It also describes how the Board operates and provides information about our Director candidates.

The Company is pleased to take advantage of new U.S. Securities and Exchange Commission rules that allow companies to furnish their proxy materials over the Internet. As a result, we are including a Notice of Internet Availability of Proxy Materials (the “Notice”) with this proxy statement. The Notice contains instructions on how to access and review the proxy materials and our Annual Report on Form 10-K over the Internet. The Company believes that this new process will allow us to provide our shareholders with the information they need in a more timely manner.

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

Sincerely yours,

/s/ Robert J. Ready
Robert J. Ready Chairman of the Board, Chief Executive Officer, and President

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING TO BE HELD ON NOVEMBER 19, 2009
The Notice of Meeting, Proxy Statement and Proxy Card as well as the Company’s Annual Report on Form 10-K are available at www.edocumentview.com/LYTS for Beneficial Holders and at www.envisionreports.com/LYTS for Registered Holders

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF
LSI INDUSTRIES INC.

Time:

10:00 a.m., Eastern Standard Time

Date:

Thursday, November 19, 2009

Place:

LSI Industries Corporate Headquarters
10000 Alliance Road
Cincinnati, Ohio 45242

Purpose:

•		Elect as Directors the six nominees named in the accompanying proxy materials
•		Ratify the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for fiscal 2010
•		Amend the Company’s Articles of Incorporation to increase authorized Common Shares
•		Amend the Company’s 2003 Equity Compensation Plan to increase the Common Shares available for potential awards
•		Conduct other business if properly raised

Only shareholders of record on September 21, 2009 may vote at the meeting. The approximate mailing date of the Proxy Statement and accompanying proxy card is October 2, 2009.

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

/s/ Robert J. Ready
Robert J. Ready Chairman of the Board, Chief Executive Officer, and President

October 2, 2009

LSI Industries Inc.
Proxy Statement

Table of Contents

		Page
INTRODUCTION			1
VOTING AT ANNUAL MEETING			1
General Information			1
Principal Shareholders			2
Shareholder Proposals			2
Proposal 1. Election of Directors			3
Proposal 2. Ratification of Appointment of Independent Registered Public Accounting Firm			3
Proposal 3. Amendment of the Articles of Incorporation to increase the authorized Common Shares			5
Proposal 4. Amendment of the Company’s 2003 Equity Compensation Plan to increase the Common Shares available for potential awards			6
Other Matters			10
MANAGEMENT			10
Directors and Executive Officers			10
Section 16(a) Beneficial Ownership Reporting Compliance			13
EXECUTIVE COMPENSATION			13
Compensation Discussion and Analysis			13
COMPENSATION COMMITTEE REPORT			21
Compensation Tables and Other Information			22
CORPORATE GOVERNANCE			28
DIRECTOR COMPENSATION			29
COMMITTEES OF THE BOARD			30
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION			34
RELATED PERSON TRANSACTIONS			34
OTHER MATTERS			35
QUESTIONS			35
AMENDMENT TO ARTICLES OF INCORPORATION OF LSI INDUSTRIES			A-1
AMENDMENT TO 2003 EQUITY COMPENSATION 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.lsi-industries.com) and click on the “SEC Filings” tab in the left margin on the “Investor Relations” page. Copies of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2009, including financial statements and schedules thereto, filed with the SEC are also available without charge to shareholders upon written request addressed to:

LSI Industries Inc.
Ronald S. Stowell,
Vice President, Chief Financial Officer
& Treasurer
10000 Alliance Road
Cincinnati, Ohio 45242

LSI INDUSTRIES INC.

10000 Alliance Road
Cincinnati, Ohio 45242

Telephone (513) 793-3200

P R O X Y    S T A T E M E N T

Annual Meeting of Shareholders
November 19, 2009

INTRODUCTION

The Board of Directors of LSI Industries Inc. is requesting your proxy for the Annual Meeting of Shareholders on November 19, 2009, and at any postponement or adjournment of such meeting. This Proxy Statement and the accompanying proxy card were first mailed on October 2, 2009 to shareholders of record as of September 21, 2009.

VOTING AT ANNUAL MEETING

General Information

In order to carry on the business of the meeting, we must have a quorum. This means at least a majority of the outstanding shares eligible to vote must be represented at the meeting either by proxy or in person. Shareholders may vote in person or by proxy at the Annual Meeting. Proxies given may be revoked at any time by filing with the Company (to the attention of Ronald S. Stowell) either a written revocation or a duly executed proxy bearing a later date, or by appearing at the Annual Meeting and voting in person. If you hold shares through someone else, such as a stockbroker or bank, you may get material from them asking how you want to vote. Specifically, if your shares are held in the name of your stockbroker or bank and you wish to vote in person at the meeting, you should request your stockbroker or bank to issue you a proxy covering your shares. If you have instructed a broker to vote your shares, you must follow directions received from your broker to change your vote. The Company will bear the entire cost of soliciting proxies from our shareholders. In addition, the Company has engaged Georgeson Inc., a proxy solicitation firm, to assist in the solicitation of proxies from the Company’s shareholders. The Company has agreed to pay Georgeson Inc. customary fees for its services totaling approximately $14,000 as well as reimburse Georgeson Inc. for its out of pocket expenses for such items as mailing, copying, phone calls, faxes and other related matters, and to indemnify Georgeson Inc. against any losses arising out of its proxy soliciting services.

All shares will be voted as specified on each properly executed proxy card. If no choice is specified, the shares will be voted as recommended by the Board of Directors, namely “FOR” Proposal 1 to elect the six persons nominated as Directors by the Nominating and Corporate Governance Committee of the Board of Directors, “FOR” Proposal 2 (Ratification of Appointment of Independent Registered Public Accounting Firm), “FOR” Proposal 3 (Amendment of the Company’s Articles of Incorporation), and “FOR” Proposal 4 (Amendment of the Company’s 2003 Equity Compensation 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.

As of September 21, 2009, the record date for determining shareholders entitled to notice of and to vote at the Annual Meeting, LSI Industries had 24,039,937 Common Shares outstanding. Each share is entitled to one vote. Only shareholders of record at the close of business on September 21, 2009, will be entitled to vote at the Annual Meeting. Abstentions and shares otherwise not voted for any reason, including broker non-votes, will have no effect on the outcome of any vote taken at the Annual Meeting, 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.

Principal Shareholders

As of September 21, 2009, the following are the only shareholders known by the Company to own beneficially 5% or more of its outstanding Common Shares:

		Amount and Nature of				Percent
Name of Beneficial Owner		Beneficial Ownership				Of Class
Craig A. Miller, David T. Feeney and Kevin A. Kelly			2,469,676				10.04	%
2727 Scioto Parkway Columbus, Ohio 43221
Royce & Associates LLC			2,081,015				8.46	%
1414 Avenue of the Americas, 9th Floor New York, NY 10019-2578
Columbia Management Group, Inc.			1,490,809				6.06	%
590 Madison Avenue New York, NY 10022-2524

Shareholder Proposals

Shareholders who desire to have proposals included in the Notice for the 2010 Annual Meeting of Shareholders must submit their proposals to the Company at its offices on or before June 4, 2010.

The form of Proxy for the Annual Meeting of Shareholders grants authority to the persons designated therein as proxies to vote in their discretion on any matters that come before the meeting, or any adjournment thereof, except those set forth in the Company’s Proxy Statement and except for matters as to which adequate notice is received. In order for a notice to be deemed adequate for the 2010 Annual Shareholders’ Meeting, it must be received prior to August 19, 2010. If there is a change in the anticipated date of next year’s annual meeting or if these deadlines change by more than 30 days, we will notify you of this change through our Form 10-Q filings.

Proposal 1. Election of Directors

In accordance with the Company’s Regulations, the number of LSI Directors has been set at six, and each Director is elected for a one-year term. The terms of the Company’s Directors expire at the 2009 Annual Meeting of Shareholders.

The Nominating and Corporate Governance Committee of the Board has nominated for reelection the six current Directors, namely, Gary P. Kreider, Dennis B. Meyer, Wilfred T. O’Gara, Robert J. Ready, Mark A. Serrianne and James P. Sferra. Proxies solicited by the Board will be voted for the election of these six nominees.

All Directors elected at the Annual Meeting will be elected to hold office for one year and until their successors are elected and qualified. In voting to elect Directors, shareholders are entitled to one vote for each share held of record. Shareholders are not entitled to cumulate their votes in the election of Directors.

In August 2009, the Board of Directors revised its Committee membership structure. Mr. Kreider, an independent outside Director since 2002, no longer chairs or serves on any of the Board Committees. He remains a Director and serves as recording secretary for the Board of Directors and each of its Committees.

Should any of the nominees become unable to serve, proxies will be voted for any substitute nominee designated by the Board. The six nominees receiving the highest number of votes cast will be elected.

Recommendation of the Board of Directors

The Board of Directors recommends a vote FOR each of the six Directors nominated in this Proxy Statement. Nominees receiving the highest number of votes will be elected.

Proposal 2. Ratification of Appointment of Independent Registered Public Accounting Firm

The Audit Committee of the Board of Directors, as part of the Company’s ongoing process of reviewing the cost effectiveness of its suppliers and service providers, requested proposals for the audit of the Company’s fiscal 2010 financial statements and internal controls over financial reporting from three independent registered public accounting firms, including Deloitte & Touche LLP, the Company’s audit firm since December 2005. Through a rigorous evaluation process, which considered not only cost of the audit services, but also the audit approach, experience of the firm and proposed engagement team, and the quality and thoroughness of the audit plan, the Audit Committee appointed Grant Thornton LLP as the Company’s independent registered public accountants for fiscal 2010. Grant Thornton LLP had 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 selection. If ratification is not obtained, the Audit Committee intends to continue the employment of Grant Thornton LLP at least through fiscal 2010.

Deloitte & Touche LLP served as the Company’s independent registered public accountants from December 2005 through September 11, 2009. Deloitte’s report on the Company’s financial statements for each of the last two fiscal years did not contain an adverse opinion or a disclaimer of opinion, nor was it qualified or modified, except for emphasis of a matter related to the Company’s adoption of FIN 48 on July 1, 2007, as to uncertainty, audit scope, or accounting principles. During the Company’s two most recent fiscal years and the subsequent period of fiscal 2010 preceding the dismissal of Deloitte, there were no disagreements on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the satisfaction of Deloitte, would have caused it to make a reference to the subject matter in connection with its report.

As previously reported and as discussed under Item 9A of the Company’s Annual Report on Form 10-K/A for the fiscal year ended June 30, 2008, management identified a material weakness in our internal control over financial reporting related to the identification of reporting units. To address this material weakness and to ensure that the Company properly considers and applies the related financial accounting principles, we implemented new procedures with respect to how the goodwill impairment tests are conducted, re-analyzed the technical application of the related financial accounting principles and re-defined our reporting units for goodwill impairment testing so that goodwill impairment tests are now performed at the operating segment level. The Company has authorized Deloitte to respond fully to the inquiries of Grant Thornton LLP concerning the subject matter of the material weakness described above.

Except for the material weakness discussed above, during the Company’s two most recent fiscal years and the subsequent period of fiscal 2010 preceding Deloitte’s dismissal, there have been no reportable events (as defined in Regulation S-K Item 304(a)(1)(v)).

Representatives of Grant Thornton LLP and Deloitte & Touche LLP are expected to be present at the Annual Shareholders’ Meeting and will be given an opportunity to make a statement, if they so desire, and to respond to appropriate questions that may be asked by shareholders.

Audit Fees

The Company expensed the following fees from Deloitte & Touche LLP in the fiscal years ended June 30, 2008 and 2009, respectively:

Deloitte & Touche LLP

		2008				2009
Audit fees		$	670,012			$	628,253
Audit-related fees			24,104				66,000
Tax fees			94,188				90,400
All other fees			3,195				—
Total fees		$	791,499			$	784,653

Audit fees represent fees and out-of-pocket expenses related to the audit of the Company’s financial statements; review, documentation and testing of the Company’s system of internal controls; filing of the Form 10-K; services related to review of the Company’s quarterly financial statements and Form 10-Q’s; and attendance at the Company’s quarterly Audit Committee meetings. Audit-related fees represent fees for consultation related to accounting and regulatory filing matters, acquisition due diligence services, and to audits of the Company’s qualified retirement plan. Tax fees relate to services and out-of-pocket expenses related to tax compliance (or filing of the Company’s various income and franchise tax returns), tax planning, and tax advice. All other fees represent fees related to services and consultation related to various planning matters.

Recommendation of the Board of Directors

The Board of Directors recommends a vote FOR Proposal 2. The affirmative vote of a majority of Common Shares voting at the Annual Meeting is required for approval of this proposal.

Proposal 3. Amendment of the Articles of Incorporation to increase the authorized Common Shares

The Company’s shareholders last increased authorized Common Shares in 1995 by amending the Articles to increase the shares by 231% to the present 30,000,000. Since then, the Company has utilized Common Shares in its equity compensation plans through stock options for employees and Directors, through direct grants to Directors as part of their fees, and in acquisitions. Many sellers of companies prefer to receive Common Shares rather than cash as that may enable them to defer recognition of income taxes until they sell the shares. Accordingly, the Board of Directors has recommended that the shareholders amend the Articles of Incorporation to increase authorized Common Shares by 33% to 40,000,000. The proposed amendment to the Articles is attached to this Proxy Statement as Annex A. At the record date for the Shareholders’ Meeting, September 21, 2009, the Company had 24,039,937 Common Shares outstanding, an additional 2,713,910 shares (assuming Shareholder adoption of Proposal 4 of this Proxy Statement) reserved for the Company’s 2003 Equity Compensation Plan, an additional 269,237 shares (outstanding stock options) reserved for the Company’s 1995 Stock Option plans, and an additional 234,060 shares held in the Company’s Nonqualified Deferred Compensation Plan. Therefore, of the 30,000,000 Common Shares authorized by the Articles of Incorporation, only 2,742,856 remain available for issuance.

The Board of Directors has determined that it would be advisable to amend the Articles of Incorporation to authorize the Company to issue up to 40,000,000 Common Shares and believes that it would be advisable to have these additional shares authorized for issuance from time to time. Share issuances by LSI Industries could involve sales for cash, issuances for acquisitions, issuances for compensation, further option or other incentive plans, stock splits, stock dividends, or other similar occurrences. The issuance of additional Common Shares through stock dividends or splits will not affect the percentage ownership of shareholders. Issuance for stock options, compensation and other benefit plans, and for acquisitions would affect the percentage of stock ownership and could dilute the equity interests of then current Shareholders, but their effect upon earnings per share would depend upon the earnings realized from the cash received or business acquired in such issuances. There are no plans, understandings, or arrangements or prospects to issue additional Common Shares except upon the exercise of stock options and in payment of Directors’ fees and as otherwise described herein.

Ohio law allows the Directors to issue authorized Common Shares without notice to or approval of shareholders except in certain limited instances involving certain types of transactions, including mergers and acquisitions. LSI’s Articles of Incorporation do not grant Shareholders pre-emptive rights to acquire shares.

Recommendation of the Board of Directors

The Board of Directors has approved the amendment to the Articles of Incorporation to increase total authorized Common Shares to 40,000,000 and recommends a vote FOR Proposal 3. The affirmative vote of the holders of two-thirds of the outstanding Common Shares is required for approval of this Amendment to the Articles of Incorporation. The failure to vote, abstentions, and broker non-votes will have the same effect as a vote against the proposal.

Proposal 4. Amendment of the Company’s 2003 Equity Compensation Plan to increase the Common Shares available for potential awards

The Company currently utilizes its 2003 Equity Compensation Plan (Amended and Restated through January 25, 2006), which was approved by the Shareholders at the 2003 Annual Meeting of Shareholders, to enable LSI and its subsidiaries to compete successfully in retaining and attracting key employees, Directors and advisors of outstanding ability, to stimulate the efforts of such persons toward LSI’s objectives and to encourage the identification of their interests with those of LSI’s shareholders. The Plan is administered by the Compensation Committee of the Board of Directors. This Committee has the authority to select persons to whom awards may be granted and determines the types of awards, the number of common shares or monetary units for the awards, and the terms and conditions of each award. The Committee has the flexibility to award the following types of equity compensation:

Stock Options. The Plan provides that the purchase price of the Company’s Common Shares purchasable under any stock option (incentive stock option or non-qualified stock options) shall be determined by the Committee, provided that the purchase price of any incentive stock option shall not be less than 100% of the fair market value of the Company’s Common Shares on the date that the option is granted. Payment of the purchase price for option shares must be made in cash unless some other form of consideration is approved by the Committee at or after grant.

Stock Appreciation Rights (SARs). The Plan provides that the Committee may grant SARs (the right to receive, for each unit awarded, cash and/or Common Shares of the Company equal in value to the excess of the fair market value of one common share on the date of exercise of the SAR over the reference price per common share established on the date the SAR was granted) to any eligible employee, advisor or non-employee director in accordance with terms and conditions established by the Committee.

Restricted and Unrestricted Stock Awards. Restricted stock awards consist of the Company’s Common Shares which are subject to such conditions, restrictions and limitations as the Committee determines to be appropriate. After the full vesting of restricted stock awards, the recipient shall have all rights of a shareholder of the Company, including the right to vote and the right to receive cash dividends. Upon termination of employment during the restriction period, all restricted stock shall be forfeited subject to certain exceptions as authorized by the Committee. The Committee may also issue unrestricted shares on a bonus basis for no cash consideration.

Performance Awards. The Plan provides that the Committee may, in its discretion, grant Performance Awards, consisting of the right to receive either Common Shares or cash of an equivalent value, or both, at the end of a specified performance period or a fixed dollar amount payable in cash or Common Shares, or both, at the end of a specified performance period, to eligible employees and advisors. The committee shall determine the eligible employees and advisors to whom and the time or times at which Performance Awards shall be granted, the number of Common Shares or the amount of cash to be awarded to any person, the duration of the period during which, and the conditions under which a participant’s Performance Award will vest, and any other terms and conditions of the Performance Award. The Committee may condition the grant or vesting of a Performance Award upon the attainment of specified performance goals; the appreciation in the fair market value, book value or other measure of value of the Common Shares; the performance of the Company based on earnings or cash flow; or such other factors or criteria as the Committee shall determine.

Other Stock Awards. The Plan authorizes the Committee to grant to employees of the Company and its affiliates, either alone or in addition to other awards granted under the Plan, awards, including Common Shares or other awards that are valued in whole or in part by reference to, or are otherwise based on, Common Shares or other securities of the Company or any subsidiary of the Company. These other stock awards may be paid in cash, Common Shares, other property or in a combination thereof, as the Committee shall determine. The Committee shall determine the employees to whom other stock awards are to be made, the times at which such Awards are to be made, the number of Common Shares to be granted pursuant to such awards and all other conditions of such awards. Other stock awards may be issued for no cash consideration or for such minimum consideration as may be required by applicable law. Common Shares (including securities convertible into Common Shares) and other securities purchased pursuant to purchase rights granted pursuant to other stock awards may be purchased for such consideration as the Committee shall determine, but at a price not less than the fair market value of such Common Shares or other securities on the date of grant, unless the Committee otherwise elects.

Termination of Awards

Awards terminate immediately if employment is terminated for cause or violation of a written employment or non-competition agreement. Upon death, disability or retirement, options become exercisable to their full extent and may be exercisable for a period of one year after the date of death or disability, or 90 days in the case of retirement. In the case of a liquidation of the Company or any merger in which it is not the survivor or in which 75% or more of its outstanding shares are converted in consideration other than stock, all awards will become exercisable for a period of at least 20 days after notice of the transaction, and thereafter will expire. All awards will also become exercisable in full if anyone becomes the beneficial owner, as defined under the Securities Exchange Act of 1934, of 25% or more of the voting power of the Company or if there is a change in a majority of the Board of Directors effected without the approval of then current directors.

Amendment and Termination of the 2003 Plan

The Plan may be amended or terminated by the Board of Directors of the Company provided that no such action shall impair the rights of a participant without the participant’s consent and provided that no amendment shall be made without shareholder approval which shall increase the total number of Common Shares of the Company reserved for issuance under the Plan, or cause the Plan or any award granted under the Plan to fail to meet certain tax conditions.

Federal Income Tax Consequences

The following information is not intended to be a complete discussion of the federal income tax consequences of participation in the 2003 Equity Compensation Plan and is qualified in its entirety by references to the Code and the regulations adopted under the Code. The provisions of the Code described in this section include current tax law only and do not reflect any proposals to revise current tax law. The federal income tax consequences applicable to officers, directors, and other persons who are subject to potential liability under Section 16(b) of the Exchange Act may be different than the federal income tax consequences applicable to persons who are not subject to Section 16(b). The federal income tax consequences applicable to all persons, whether or not subject to Section 16(b), are described below.

The grant of an option or Stock Appreciation Right (SAR) will create no tax consequences for an optionee or the Company. Upon exercising a non-qualified stock option or SAR, the optionee must recognize ordinary income equal to the difference between the exercise price and the fair market value of the Company shares on the date of exercise and the Company will be entitled to a deduction for the same amount. There is no regular income tax consequence for the optionee upon an exercise of an incentive stock option, and no deduction is available to the Company unless the shares are sold within two years of the grant of the option or one year from its exercise, in which case the tax treatment will be that accorded to the exercise of a non-qualified option.

With respect to other awards granted under the Plan that are settled either in cash or in Common Shares of the Company, or other property that is either transferable or not subject to substantial risk of forfeiture, the participant must recognize ordinary income equal to the cash or the fair market value of the Company’s Common Shares or other property received and the Company will be entitled to a deduction for the same amount. With respect to awards that are settled in Company Common Shares or other property that is restricted as to transferability and subject to substantial risk of forfeiture, the participant must recognize ordinary income equal to the fair market value of the Company’s Common Shares or other property received at the first time the Company’s Common Shares or other property became transferable or not subject to substantial risk of forfeiture, whichever occurs earlier; the Company will be entitled to a deduction for the same amount.

The 2003 Equity Compensation Plan currently has 2,250,000 Common Shares authorized, of which a total of 1,952,065 shares have been granted or awarded and 297,935 shares are available. As the Company continues to grow, the Board of Directors believes it appropriate to increase the Common Shares authorized for this Plan up to a total of 2,800,000 shares, an increase of 550,000 shares. The proposed amendment to the 2003 Equity Compensation Plan is attached to this Proxy Statement as Annex B. With this increase in shares authorized for this Plan, there will be a total of 847,935 Common Shares available for potential award through November 2013. The closing price of LSI’s Common Shares on September 21, 2009 was $7.04.

New Plan Benefits

Because awards under the Plan are made in the sole discretion of the Compensation Committee, it cannot be determined at this time what benefits or amounts, if any, will be received by or allocated to any person or group of persons under the 2003 Equity Compensation Plan. The following table discloses the awards made in fiscal 2009. These awards are not necessarily representative of future awards that may be made under the 2003 Equity Compensation Plan.

NEW PLAN BENEFITS
2003 EQUITY COMPENSATION PLAN

		Number of				Dollar Value								Dollar Value
		Common				of Common				Number of				of Options
Name and Principal Position		Shares				Shares				Options				(a)
Robert J. Ready			—			$	—				20,000			$	91,241
Chairman, President and Chief Executive Officer
Ronald S. Stowell			—			$	—				30,000			$	89,989
Vice President, Chief Financial Officer and Treasurer
James P. Sferra			—			$	—				20,000			$	88,637
Executive Vice President – Manufacturing; Secretary
Scott D. Ready			—			$	—				30,000			$	92,957
President of LSI Lighting Solutions Plus
David W. McCauley			—			$	—				30,000			$	92,957
President of LSI Graphic Solutions Plus
Named Executive Officers as a Group			—			$	—				130,000			$	455,781
Non-employee Directors as a Group			5,812			$	40,000				16,000			$	5,520
Non-NEO Employees as a Group			220			$	680				219,800			$	684,952

EQUITY COMPENSATION PLAN INFORMATION

The following table presents information about the Company’s equity compensation plans (LSI Industries 1995 Stock Option Plan, the LSI Industries Inc. 1995 Directors’ Stock Option Plan and the 2003 Stock Incentive Plan) as of September 21, 2009.

(c)

Number of securities

remaining available

(a)

(b)

for future issuance

Number of securities

Weighted-average

under equity

to be issued upon

exercise price of

compensation plans

exercise of

outstanding

(excluding securities

outstanding options,

options, warrants

reflected in column

Plan Category

warrants and rights

and rights

(a))

Equity Compensation plans approved by security holders

2,135,212

$

13.07

297,935

Equity compensation plans not approved by security holders

—

—

—

Total

2,135,212

$

13.07

297,935

Recommendation of the Board of Directors

The Board of Directors recommends a vote FOR Proposal 4. The affirmative vote of a majority of Common Shares voting at the Annual Meeting is required for approval of this proposal.

Other Matters

Approval of any other matters considered at the Annual Meeting, including postponement or adjournment, will require the affirmative vote of a majority of Common Shares voting at the meeting.

MANAGEMENT

Directors and Executive Officers

The Directors and executive officers of LSI Industries are:

				Common Shares
				Beneficially Owned
Name and Age		Position		Amount			Percentage
Robert J. Ready (a)		Chairman, President, and		1,072,327	(e)(f)		4.36	%
69		Chief Executive Officer
Fred D. Jalbout		President of LSI Saco		611,427			2.48	%
53		Technologies Inc.
James P. Sferra (a)		Executive Vice President-		501,925	(e)(f)		2.04	%
70		Manufacturing; Secretary and Director

				Common Shares
				Beneficially Owned
Name and Age		Position		Amount			Percentage
Ronald S. Stowell		Vice President, Chief Financial		129,785	(e)		*
59		Officer and Treasurer
David W. McCauley		President of LSI Graphic		94,346	(e)		*
60		Solutions Plus and President of Grady McCauley Inc.
Scott D. Ready		President of LSI Lighting
47		Solutions Plus		180,550	(e)(f)		*
Wilfred T. O’Gara (b)(c)(d)		Director		40,018	(e)		*
52
Gary P. Kreider (h)		Director		35,369	(e)		*
71
Dennis B. Meyer (b)(c)(d)		Director		32,454	(e)		*
75
Mark A. Serrianne (b)(c)(d)		Director		25,998	(e)		*
62
All Directors and Executive Officers as a Group (Ten Persons)				2,633,564	(g)		10.70	%

Information as of September 21, 2009

Robert J. Ready is the founder of the Company and has been its President and a Director since 1976. Mr. Ready was appointed Chairman of the Board of Directors in February 1985. Mr. Ready is also a Director of Meridian Bioscience, Inc.

Fred D. Jalbout has served as President of LSI Saco Technologies Inc. since June 26, 2006, the date the Company acquired SACO Technologies Inc. Mr. Jalbout had been President and Chief Executive Officer and a principal owner of SACO Technologies Inc. since he acquired the assets of that company in 2002. Prior to that time, Mr. Jalbout served as Chairman, Chief Executive Officer and President of SACO’s predecessor company.

James P. Sferra shared in the formation of the Company. Mr. Sferra has served as Corporate Vice President of Manufacturing from November 1989 to November 1992, and as Executive Vice President-Manufacturing since then. Prior to that, he served as Vice President-Manufacturing of LSI Lighting Systems, a division of the Company. Mr. Sferra has served as a Director since 1976, and was appointed Secretary in 1996.

Ronald S. Stowell has served as Chief Financial Officer since December 1992, and was appointed Treasurer in November 1993 and Vice President in November 1997. From 1985 to November 1992, Mr. Stowell served as Corporate Controller of Essef Corporation (a Nasdaq listed company), Chardon, Ohio, a manufacturer of high performance composite and engineered plastics products.

David W. McCauley has served as President of LSI Graphic Solutions Plus since April 2003 and as either President or Vice President of Operations of Grady McCauley Inc. (a subsidiary of the Company involved in graphics) since June 1997. Prior to the June 1997 acquisition date, Mr. McCauley was a founder and Vice President of Grady McCauley, Inc.

Scott D. Ready has served as President of LSI Lighting Solutions Plus since July 2004. Prior to that, he held various sales and other positions at the Company, including Vice President of the Image Group, Vice President Petroleum Sales, and Regional Sales Manager. Mr. Scott Ready has been employed by the Company since 1985, and is the son of Robert J. Ready.

Gary P. Kreider has been a Director since April 2002. For over five years Mr. Kreider has been a senior partner in the Cincinnati law firm of Keating Muething & Klekamp PLL, the Company’s outside counsel. His primary practice areas are securities law, mergers and acquisitions, and general corporate law, and he has been with Keating Muething & Klekamp since 1963. Effective October 1, 2005 Mr. Kreider no longer has a vote or partnership interest in the firm’s earnings although his affiliation with the firm continues. Mr. Kreider has been an Adjunct Professor of Law in securities regulation at the University of Cincinnati College of Law since 1977 and is a past Chairman of the Ohio State Bar Association Corporation Law Committee. Mr. Kreider is also a Director of Meridian Bioscience, Inc.

Dennis B. Meyer has been a Director since August 2001. Mr. Meyer retired from the Board and Executive Committee of Midmark Corporation in January 2005. Mr. Meyer was Executive Vice President of Midmark Corporation from 1985 to 2001, and held several other executive and managerial positions during his 36 years with that company.

Wilfred T. O’Gara was appointed a Director of the Company in January 1999. Mr. O’Gara has been the President and Chief Executive Officer of The O’Gara Group, Inc., a security and defense related firm, since 2003.

Mark A. Serrianne was appointed a Director of the Company in August 2004. Mr. Serrianne retired as Chairman of Northlich, Inc. September 30, 2008 and was principal owner and Chief Executive Officer of Northlich from 1998 to January, 2008. Northlich is a privately held brand strategy, marketing communication and public relations company with headquarters in Cincinnati, Ohio. Mr. Serrianne has held a number of positions with Northlich from 1974 through 1996 when he became President.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s officers, Directors, and persons who own more than ten percent of the Company’s Common Shares to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Such persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file within two days of a transaction in shares of the Company. Based solely upon its review of copies of such forms received by it, and upon written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that during fiscal 2009 all other filing requirements were met, with the exception that Mr. Stowell filed an ownership report late as a result of untimely notification from the Plan Trustee of a regular monthly purchase transaction for the Company’s Nonqualified Deferred Compensation Plan and each of Messrs. Kreider, Meyer, O’Gara and Serrianne filed one late Form 4 to report a quarterly stock grant for service as a Director.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This section discusses and analyzes the compensation awarded to, earned by, or paid to the executive officers set forth in the Summary Compensation Table on page 22 of this Proxy Statement (collectively, the “named executive officers” or “NEOs”). It also discusses the principles underlying our policies and decisions.

Who oversees the Company’s compensation program?

Our Board of Directors has appointed a Compensation Committee composed of independent Directors to oversee our compensation policies and programs. The Committee’s functions and members are described on page 33 of this Proxy Statement. One important purpose of the Committee is to review and approve the compensation of our named executive officers.

Our CEO provides recommendations to the Committee with respect to various components of compensation for the named executive officers. While noting the extraordinary efforts of the named executive officers during fiscal 2009, after considering the uncertain macroeconomic conditions as well as the particular challenges facing the Company as it adapts to meet these conditions, our CEO provided to the Committee his recommendation not to increase base salaries for the NEOs for fiscal 2009, but to keep NEO base salaries at fiscal 2008 levels. Our CEO did not provide any recommendation to the Committee with respect to his salary level.

Our CEO also makes recommendations to the Committee with respect to the bonus payments to be made pursuant to the Company’s Incentive Compensation Plan. A description of this Incentive Plan and a discussion of the Committee’s process for determining payments pursuant to the Incentive Plan are discussed below. Our CEO also makes recommendations for all named executive officers, including himself, to the Committee with respect to the amount of stock option awards to be made. Our CEO makes these recommendations based on his consideration of the compensation expense to the company, the fair value of the equity awards and the performance of LSI and NEO contributions toward such performance. Our CEO also makes recommendations on bonus amounts for all named executive officers and himself based on the specific base guidelines set forth in the Incentive Plan.

The Committee seriously considers the input of our CEO in connection with its compensation processes and decisions. Although the Committee is not obligated to follow all of the CEO’s recommendations, the Committee views the input of the CEO as meaningful, particularly with respect to the compensation to be paid to other NEOs as such other NEOs report directly to the CEO. The Committee believes that the CEO is in the best position to provide input relating to the performance and compensation issues it considers with respect to NEO compensation. NEOs other than our CEO do not provide recommendations to the Committee with respect to compensation matters.

What are the objectives of the Company’s compensation program?

In setting our compensation program, the Committee strives to enhance the Company’s overall fundamental objective of providing long-term value for our shareholders and employees. The Committee also places major emphasis on retaining current management and incentivizing key managers to align their interests to make them consistent with the Company’s growth. The Committee believes that the interests of management and shareholders can be more closely aligned by providing executives with competitive levels of compensation that will enable us to attract and retain key executives by rewarding exceptional individual performance, and by tying executive pay to overall corporate performance.

What is the compensation program designed to reward?

Our compensation program is designed to reward both individual and Company performance, measured by overall Company results and the attainment of individual’s goals and productivity. Each year our Compensation Committee decides whether or not to grant annual cash incentives to our corporate officers, including the named executive officers. These annual cash incentives are designed to reward the attainment throughout the year of certain personal goals, as well as the Company’s overall profitability. Factors evaluated when analyzing the attainment of personal goals include the officer’s attitude, performance, and contribution to the Company’s profitability and success. With respect to the Company’s overall profitability, the primary measure considered by the Committee is the Company’s fiscal year operating income.

What are the elements of compensation?

The table below summarizes the elements of our compensation program for our named executive officers.

Element		Form of Compensation		Purpose		Risk Profile
Base Salaries		Cash		Provide competitive, fixed compensation to attract and retain exceptional executive talent		Low to Moderate
Annual Cash Incentives		Cash		Provides a direct financial incentive to achieve corporate and individual operating goals		Moderate to High

Element		Form of Compensation		Purpose		Risk Profile
Long-Term Equity Incentives		Incentive Stock Options, nonqualified stock options, restricted stock and stock appreciation rights		Encourages executive officers to build and maintain a long-term equity ownership position in LSI so that their interests are aligned with our shareholders		High
Health, Retirement and Other Benefits		Eligibility to participate in benefit plans generally available to our employees, including Retirement Plan contributions, premiums paid on long-term disability and life insurance policies; nonqualified deferred compensation plan; and certain perquisites		Benefit plans are part of a broad-based employee benefits program; the nonqualified deferred compensation plan and perquisites provide competitive benefits to our executive officers		Low

Each of these elements of pay is described below in further detail.

The Committee has reviewed the risk profile of the pay elements of the Company’s executive compensation program, including the performance drivers used in connection with incentive awards, and has considered the risks an NEO might be incentivized to take with respect to such elements. When establishing the mix among these elements, the Committee is careful not to encourage excessive risk taking. Specifically, the performance drivers contained in the Company’s executive compensation programs have been balanced between annual and long-term incentive compensation to ensure that both components are aligned and consistent with our long-term business plan and that our overall mix of equity-based awards has been allocated to promote an appropriate combination of incentive and retention objectives.

The Committee believes that the Company’s executive compensation program does not incentivize the NEOs to engage in business activities or other behavior that would threaten the value of the Company or the investments of its shareholders.

The Committee continues to monitor and evaluate on an on-going basis the mix of compensation, especially equity compensation, awarded to the named executive officers, and the extent to which such compensation aligns the interests of the NEOs with those of our shareholders. 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 our discussion under “Pay Mix” beginning on page 20.

Base Salaries

The Compensation Committee annually reviews the base salaries of our named executive officers and each such officer’s level of responsibility and potential, as well as salary levels offered by competitors and the overall marketplace competition. Each executive’s particular division is reviewed, and its contribution to the overall results of the Company is assessed.

The Committee applies a collective, subjective evaluation of the above factors to determine the annual base compensation level of its named executive officers in light of the Company’s performance and, in certain cases, the performance of various divisions. The Committee does not utilize a particular objective formula as a means of establishing annual base salary levels.

After considering industry-wide and company-specific economic conditions, the Committee attempts to assess whether recommendations with respect to salary levels for NEOs are subjectively fair and in amounts high enough to retain such NEOs.

Based on this information, at its meeting on August 20, 2008, the Committee determined not to increase the NEOs’ base salaries for fiscal 2009. The Committee believed its decision not to increase NEO base salaries to be reasonable in light of the data reviewed and considerations identified above.

Annual Cash Incentives

The Committee strongly believes that annual cash incentives provide a direct financial incentive to achieve corporate and individual operating goals.

The Committee used the fiscal 2006 Corporate Officer Incentive Compensation Plan for the purpose of calculating guideline bonuses and awarding annual cash incentives. This Incentive Plan is an entirely discretionary plan. Under the Incentive Plan, a graduated scale of bonus potential (stated as a percentage of base wage or salary) is identified at indicated levels of achievement of the Incentive Plan Performance Driver. The graduated scale of bonus potential is:

100% achievement of plan = 20% bonus
110% achievement of plan = 35% bonus
120% achievement of plan = 50% bonus

While the percentage achievement of the incentive plan performance driver may be used as a rough guideline for determination of the bonus award, the bonus award is completely discretionary. Factors such as the NEO’s attitude, performance and contribution to the profitability and success of LSI, as well as the overall profitability of LSI are some of the potential subjective and objective factors considered in the determination of a bonus award under this Plan.

The Incentive Plan requires the CEO to submit a recommended list of corporate officer awards to the Committee for adjustment and/or approval. As the amount of bonus award is completely discretionary, it may be equal to, less than, or greater than the guideline bonus award computed pursuant to the Plan.

The bonus performance driver for all named executive officers, including the CEO and CFO, was LSI’s operating income as compared to LSI’s budgeted operating income.

The targets for each of the above metrics and corresponding company results are as follows:

LSI Operating			LSI Operating
Income Target			Income Result
$	12,271,000		$	(13,414,000	)(a)

The 2009 actual result by percentage for the performance driver that we use for the Incentive Plan was as follows:

Bonus Performance Driver Achievement

		Corporate-wide
Operating Income			(209.3	)%

The Committee determined, at its meeting on August 18, 2009, based upon the above performance, there would be no incentive compensation awarded for fiscal 2009. At this same meeting, the Committee increased the annual base salaries of the named executive officers for fiscal 2010 by approximately 2 ¹/2%, which is commensurate with wage and salary increases approved for fiscal 2010 for substantially all LSI employees, and granted stock options to each of the named executive officers as follows: Mr. R. Ready – 65,000, Mr. Sferra- 60,000, Messrs. S. Ready and Stowell – 45,000 and Mr. McCauley — 30,000. Additionally, on August 19, 2009, the Board of Directors amended the LSI Industries Inc. Retirement Plan to reduce the guaranteed annual contribution from 4% to 2% for all covered employees, including the named executive officers.

Prior to fiscal 2008, more than one performance driver had been in place for the presidents of the Lighting and Graphics Segments and a specified weighting of each driver was used. The following performance drivers were evaluated against the budgeted operating plan for the fiscal year: (1) LSI’s consolidated operating income; (2) net sales of the respective segment; and (3) operating income of the respective segment. Beginning with fiscal 2008, the Company moved to only one performance driver for all named executives, as well as all LSI employees covered by the incentive compensation plan. Management and the Committee believe that this move has unified and motivated all employees to work as a team to achieve and exceed the goal of operating income that is established for LSI each year. This target of operating income is derived from LSI’s business plan and, while more conservative than the operating income target used in fiscal 2008, because of the challenging economic situation discussed above, this target represents a goal that the Committee believed to be challenging for LSI, yet achievable if senior and operating management meet or surpass their goals and objectives. Management and the Committee believe that this alignment of objectives and LSI’s business plan and the performance measurement on which bonuses are based is in the best interests of all of LSI’s shareholders.

As of the date of mailing of this Proxy Statement, the Company is unable to make any definitive statements about the specific performance goals that will be applied on a going-forward basis for any incentive compensation. However, the Committee believes that the performance drivers and measurements set forth in the Incentive Plan may be helpful in this regard even though such specific targets and measures have not yet been determined.

Recovery of Prior Awards

Except as provided by applicable laws and regulations, we do not have a policy with respect to adjustment or recovery of awards or payments if relevant company performance measures upon which previous awards were based are restated or otherwise adjusted in a manner that would reduce the size of such award or payment. Under those circumstances, we expect that the Compensation Committee and the Board would evaluate whether compensation adjustments were appropriate based upon the facts and circumstances surrounding the applicable restatement or adjustment.

Long-Term Equity Incentives

Long-term equity incentive compensation is comprised of nonqualified stock options, restricted stock, and stock appreciation rights. These awards are made under the 2003 Equity Compensation Plan, as amended. The purpose of such awards is to encourage executive officers to build and maintain a long-term equity ownership position in the Company so that their interests are aligned with those of our shareholders.

The 2003 Equity Compensation Plan was adopted by our shareholders for the purpose of allowing LSI to compete successfully in retaining and attracting key employees and Directors of outstanding ability, to stimulate the efforts of such persons toward the Company’s objectives and to encourage the identification of their interests with those of the Company’s shareholders. Under the 2003 Plan, the Committee has authority in its discretion to determine, after considering the recommendations or advice of any officer or employee of the Company or attorneys, consultants, accountants or other advisors as it may select, to whom, and the time or times at which, awards may be granted, the number of shares, units or other rights subject to each award, the exercise, base or purchase price of an award (if any), the time or times at which an award will become vested, exercisable or payable, the performance goals and other conditions of an award, the duration of the award, and all other terms of the award. In other words, the Committee has the discretion to determine the recipients and terms and conditions of all awards granted under the Plan. This broad amount of discretion that the Plan provides to the Committee allows the Committee to consider the Company’s results and the role of management in enabling the Company to achieve such results. We incorporate this flexibility into our compensation programs and in the assessment process to respond to and adjust for the evolving business environment.

In connection with the stock options granted to the NEOs under the 2003 Equity Compensation Plan, the Committee exercised its discretion under the Plan after it analyzed the achievement by the NEOs of the specific performance driver noted above, and reviewed information relating to historical grants of stock options by the Company and peer companies. In recognition of the company’s performance under the leadership of the NEOs as described above, the Committee sought to reward the NEOs by awarding them stock options in an amount that would be significant in relation to the other annual compensation paid to these individuals, and in the Committee’s judgment, reasonable and appropriate after considering the NEO’s total compensation in relation to that of the most senior executives of the peer group. The size of the award was not determined by application of any formula, but rather reflected the Committee’s desire to encourage and reward high levels of performance as the 2003 Plan is designed to allow.

The Committee is responsible for administration of this Plan, both with respect to executive officers, including the NEOs, the Directors and all other employees. To that end, based on the CEO’s recommendation, the Committee determines which employees and Directors receive options, the time of grant, and the number of shares subject to the option. All option exercise prices are set at the last closing sale price for the Company’s common shares on the effective date of grant. The Committee bases its individual stock options awards upon LSI performance, the past contributions of the particular employee and the capability of the employee to impact positively our future success and profitability.

Although LSI does not have a written policy regarding the timing or practices related to granting equity awards, neither LSI nor the Committee engages in spring-loading, back-dating or bullet-dodging practices. Specifically, the Committee approved the option grants to the NEOs effective as of August 21, 2009 with the option grants to be effective on August 21, 2009 with the exercise price to be the closing price as reported on Nasdaq on August 21, 2009. LSI issued an earnings announcement on the morning of August 20, 2009.

For fiscal year 2009, the Committee granted long-term equity incentive awards in the form of stock options under the 2003 Equity Compensation Plan to the named executive officers. The Committee based the stock option awards on LSI’s overall financial performance for 2009, the amount of equity award grants made in the prior year and the recommendation of the CEO to the Committee regarding such grants.

Health, Retirement and Other Benefits

The Company’s benefits program includes retirement plans and group insurance plans. The objective of our group insurance plans is to provide our executive officers with reasonable and competitive levels of protection which could interrupt the officer’s employment and/or income received as an active employee.

The objective of the retirement plans is to provide a competitive level of retirement income to executive officers and to reward them for continued service with the Company. The retirement plans offered to named executive officers include the Nonqualified Deferred Compensation Plan and the Retirement Plan. The Retirement Plan is a designated money purchase pension plan with a 401(k) component and a profit sharing component, and is generally available to all of our non-union employees with at least six consecutive months of employment. The Nonqualified Deferred Compensation Plan is discussed in more detail on pages 26 and 27 of this Proxy Statement.

Executive perquisites are kept by the Committee to a minimal level and do not play a significant role in executive compensation. These benefits, and their incremental cost to the Company, are described on page 23 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.

On January 25, 2005, the Company entered into amended agreements with our CEO and Executive Vice President — Manufacturing. These agreements govern the respective executive’s transition from full-time employment at such time as the executive notifies the Company that the transition shall commence. The Company has not been advised of any such notifications as of the date of this Proxy Statement. The agreements provide, among other things, that as compensation for their continued employment during a three year transitional period, those executives shall be paid for their respective services in each year at annual rates of 60%, 50% and 40%, respectively, of the average of their respective last five full fiscal years’ compensation. These agreements are described further on page 28.

Pay Mix

We believe that each element of our compensation program plays a substantial role in maximizing long-term value for our shareholders and employees because of the significant emphasis on pay-for-performance principles. For example, in 2007 5% to 17% of a named executive officer’s total compensation was dependent upon achieving business and financial goals, and realizing other performance objectives identified in the Incentive Plan. As such, through this mix of pay, non-performance has a significant affect on the amount of compensation realized by executive officers.

While we did not engage in any such analysis in fiscal 2009, from time to time we have considered competitive market compensation paid by other companies, such as greater-Cincinnati based companies and companies that we consider to be peers or competitors, but we do not attempt to maintain a certain target percentile within a peer group or otherwise rely on those data to determine executive compensation. Rather, we incorporate flexibility into our compensation programs and in the assessment process to respond to and adjust for the evolving business environment. We strive to achieve an appropriate mix between equity incentive awards and cash payment in order to meet our objective. Other than as set forth in our Incentive Compensation Plan, which is a purely discretionary plan, any apportionment goal is not applied rigidly and does not control our compensation decisions. We use it as another tool to assess an executive’s total pay opportunities and whether we have provided the appropriate incentives to accomplish our compensation objectives. Our mix of compensation elements is designed to reward recent results and motivate long-term performance through a combination of cash and equity incentive awards. We also seek to balance compensation elements that are based on financial, operational and strategic metrics with others that are based on the performance of LSI shares. We believe the most important indicator of whether our compensation objectives are being met is our ability to motivate our named executive officers to deliver superior performance and retain them to continue their careers with LSI on a cost-effective basis.

Termination or Change-in-Control Agreements

The Company does not have any change in control agreements with its named executive officers, but does have employment agreements with Messrs. Ready and Sferra. The Company has not pursued change in control agreements with its named executive officers because the Company continues to focus on its ongoing operations as an independent enterprise. For a further discussion on this topic, please see the section titled “Potential Payments Upon Termination or Change in Control” on page 27 of this Proxy Statement.

Internal Pay Equity

Although the Committee does not review tally sheets, it does consider information prepared internally with respect to an analysis of internal pay equity for the salaries of the named executive officers with respect to each other.

Tax Treatments

Section 162(m) of the Internal Revenue Code places a limit of $1,000,000 on the amount of compensation we may deduct in any one year with respect to each named executive officer. There is an exception to the $1,000,000 limitation for performance-based compensation meeting certain requirements. The Committee believes that all compensation paid to the named executive officers for fiscal year 2009 is properly deductible under Section 162(m), but no assurance can be made in this regard.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement on Schedule 14A.

Members of the Compensation Committee:		Dennis B. Meyer (Chairman)
		Gary P. Kreider (Mr. Kreider’s service on this Committee ended effective June 30, 2009)
		Wilfred T. O’Gara
		Mark A. Serrianne

The following tables set forth information regarding annual, long-term, and other compensation paid by the Company to its Chief Executive Officer, Chief Financial Officer and each of the other three named executive officers at June 30, 2009 for services rendered to the Company and its subsidiaries.

Compensation Tables and Other Information

The following table provides information regarding the compensation earned by our Chief Executive Officer, Chief Financial Officer and our three other most highly compensated executive officers during fiscal years 2007, 2008 and 2009.

SUMMARY COMPENSATION TABLE

																										Change in
																										Pension
																						Non-				Value and
																						Equity				Nonqualified
																						Incentive				Deferred
														Stock				Option				Plan				Compensation				All Other
		Fiscal				Salary				Bonus				Awards				Awards				Compensation				Earnings				Compensation
Name and Principal Position		Year				($) (1)				($) (2)				($)				($) (3)				($)				($)				($) (4)				Total ($)
Robert J. Ready			2009			$	630,000			$	—			$	—			$	91,241			$	—			$	—			$	142,621			$	863,862
Chairman, President and Chief			2008				622,500				—				—				98,842				—				—				162,296				883,638
Executive Officer			2007				581,667				155,000				—				60,657				—				—				156,500				953,824
Ronald S. Stowell			2009			$	276,168			$	—			$	—			$	89,989			$	—			$	—			$	74,388			$	440,545
Vice President, Chief Financial			2008				273,976				—				—				83,999				—				—				79,960				437,935
Officer and Treasurer			2007				260,993				75,000				—				53,626				—				—				91,723				481,342
James P. Sferra			2009			$	500,000			$	—			$	—			$	88,637			$	—			$	—			$	80,954			$	669,591
Executive Vice President —			2008				494,333				—				—				94,207				—				—				93,461				682,001
Manufacturing; Secretary			2007				463,333				125,000				—				62,522				—				—				85,247				736,102
Scott D. Ready			2009			$	260,000			$	—			$	—			$	92,957			$	—			$	—			$	32,802			$	385,759
President of LSI Lighting			2008				258,333				—				—				87,040				—				—				49,719				395,092
Solutions Plus			2007				245,833				20,000				—				43,801				—				—				56,391				366,025
David W. McCauley			2009			$	242,000			$	—			$	—			$	92,957			$	—			$	—			$	50,327			$	385,284
President of LSI Graphic			2008				240,500				—				—				87,040				—				—				55,353				382,893
Solutions Plus			2007				231,667				60,000				—				43,801				—				—				42,100				377,568

ALL OTHER COMPENSATION

						Automobile																				Non-qualified
						allowance												Long-				Qualified				Deferred								Contribution to
						and												term				Retirement				Compensation								Affiliated
						Operating				Professional				Life				Disability				Plan				Plan				Pay in Lieu				Charitable
		Fiscal				expenses				Fee				Insurance				Insurance				Contributions				Contributions				of Time Off				Event				Total
Name		Year				(1)				Allowance				(2)				(3)				(4)				(5)				(6)				(7)				($)
Robert J. Ready			2009			$	30,624			$	—			$	6,858			$	6,480			$	14,320			$	35,877			$	48,462			$	—			$	142,621
			2008				33,239				5,000				6,995				5,111				15,814				51,137				45,000				—				162,296
			2007				32,308				5,000				7,132				6,367				14,987				45,071				45,635				—				156,500
Ronald S. Stowell			2009			$	22,416			$	—			$	22,422			$	—			$	14,320			$	5,670			$	9,560			$	—			$	74,388
			2008				22,133				—				22,424				—				15,814				11,404				7,435				750				79,960
			2007				21,466				—				22,415				—				14,987				21,727				11,128				—				91,723
James P. Sferra			2009			$	22,616			$	3,000			$	7,090			$	12,328			$	14,320			$	21,600			$	—			$	—			$	80,954
			2008				22,293				3,000				7,006				11,742				15,814				33,606				—				—				93,461
			2007				20,426				3,000				7,132				11,184				14,987				28,518				—				—				85,247
Scott D. Ready			2009			$	15,272			$	—			$	810			$	—			$	14,320			$	2,400			$	—			$	—			$	32,802
			2008				15,951				—				686				—				15,814				5,268				12,000				—				49,719
			2007				15,742				—				562				—				14,987				7,695				17,405				—				56,391
David W. McCauley			2009			$	17,073			$	—			$	2,895			$	—			$	14,320			$	2,077			$	13,962			$	—			$	50,327
			2008				17,893				—				2,243				—				15,814				7,753				11,650				—				55,353
			2007				22,243				—				2,113				—				15,032				2,712				—				—				42,100

GRANTS OF PLAN-BASED AWARDS

This table sets forth certain information regarding all grants of plan-based awards made to the named executive officers during fiscal 2009.

														Exercise
										All Other Option				or Base
										Awards: Number of				Price of
										Securities				Option				Grant Date Fair
						Date of				Underlying Options				Awards				Value of Stock and
Name		Grant Date				Committee Action				(#)				($/share)				Option Awards
Robert J. Ready			8/22/08				8/20/08				20,000			$	8.98			$	2.21
Ronald S. Stowell			8/22/08				8/20/08				30,000			$	8.98			$	2.21
James P. Sferra			8/22/08				8/20/08				20,000			$	8.98			$	2.21
Scott D. Ready			8/22/08				8/20/08				30,000			$	8.98			$	2.21
David W. McCauley			8/22/08				8/20/08				30,000			$	8.98			$	2.21

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, 2009.

		Option Awards(1)																								Stock Awards
																																						Equity
																																		Equity				Incentive
																																		Incentive				Plan
																																		Plan				Awards:
																																		Awards:				Market or
														Equity																				Number				Payout
														Incentive																				of				Value of
														Plan																Market				Unearned				Unearned
														Awards:												Number of				Value of				Shares,				Shares,
						Number of				Number of				Number of												Shares				Shares				Units or				Units or
						Securities				Securities				Securities												or Units				or Units				Other				Other
						Underlying				Underlying				Underlying												of Stock				of Stock				Rights				Rights
						Unexercised				Unexercised				Unexercised				Option								That				That				That				That
						Options				Options				Unearned				Exercise				Option				Have Not				Have Not				Have Not				Have Not
						Exercisable				Unexercisable				Options				Price				Expiration				Vested				Vested				Vested				Vested
Name		Grant Date				(#)				(#)				(#)				($)				Date				(#)				($)				(#)				($)
Robert J. Ready			7/3/00				28,125				—				—			$	8.23				7/3/10				—				—				—				—
			11/14/01				22,500				—				—				11.68				11/14/11				—				—				—				—
			10/27/04				30,000				—				—				9.96				10/27/14				—				—				—				—
			8/24/06				12,500				12,500				—				17.60				8/24/16				—				—				—				—
			8/24/07				5,000				15,000				—				19.76				8/24/17				—				—				—				—
			8/22/08				—				20,000				—				8.98				8/22/18				—				—				—				—
Ronald S. Stowell			11/14/01				18,750				—				—			$	11.68				11/14/11				—				—				—				—
			10/27/04				25,000				—				—				9.96				10/27/14				—				—				—				—
			8/24/06				10,000				10,000				—				17.60				8/24/16				—				—				—				—
			8/24/07				6,250				18,750				—				19.76				8/24/17				—				—				—				—
			8/22/08				—				30,000				—				8.98				8/22/18				—				—				—				—
James P. Sferra			7/3/00				28,125				—				—			$	8.23				7/3/10				—				—				—				—
			11/14/01				18,750				—				—				11.68				11/14/11				—				—				—				—
			10/27/04				30,000				—				—				9.96				10/27/14				—				—				—				—
			8/24/06				12,500				12,500				—				17.60				8/24/16				—				—				—				—
			8/24/07				5,000				15,000				—				19.76				8/24/17				—				—				—				—
			8/22/08				—				20,000				—				8.98				8/22/18				—				—				—				—
Scott D. Ready			7/3/00				4,375				—				—			$	8.23				7/3/10				—				—				—				—
			11/14/01				7,500				—				—				11.68				11/14/11				—				—				—				—
			3/1/02				1,250				—				—				15.84				3/1/12				—				—				—				—
			10/27/04				20,000				—				—				9.96				10/27/14				—				—				—				—
			8/24/06				10,000				10,000				—				17.60				8/24/16				—				—				—				—
			8/24/07				6,250				18,750				—				19.76				8/24/17				—				—				—				—
			8/22/08				—				30,000				—				8.98				8/22/18				—				—				—				—
David W. McCauley			11/14/01				2,813				—				—			$	11.68				11/14/11				—				—				—				—
			10/27/04				20,000				—				—				9.96				10/27/14				—				—				—				—
			8/24/06				10,000				10,000				—				17.60				8/24/16				—				—				—				—
			8/24/07				6,250				18,750				—				19.76				8/24/17				—				—				—				—
			8/22/08				—				30,000				—				8.98				8/22/18				—				—				—				—

OPTION EXERCISES AND STOCK VESTED

The following table provides information for each of the named executive officers on stock option exercises during fiscal 2009, including the number of shares acquired upon exercise and the value realized.

Option Awards

Stock Awards

Number of

Shares

Number of

Acquired

Value

Shares

Value

on

Realized on

Acquired on

Realized on

Exercise

Exercise(1)

Vesting

Vesting

Name

(#)

($)

(#)

($)

Robert J. Ready

None

N/A

None

N/A

Ronald S. Stowell

None

N/A

None

N/A

James P. Sferra

None

N/A

None

N/A

Scott D. Ready

None

N/A

None

N/A

David W. McCauley

None

N/A

None

N/A

NONQUALIFIED DEFERRED COMPENSATION

The Company has a nonqualified deferred compensation plan that allows for both employee contributions and company contributions. This is a funded plan so that when contributions are made into the plan they are 100% invested in Common Stock of the Company. A group of employees of the company having an annual base salary above a certain limit are invited to defer a portion of their salary and/or bonus into this plan. A company matching contribution may be made on up to 40% of an executive’s salary and bonus compensation at a matching percentage that is either 20%, 25% or 30% for the named executive officers, depending upon the actual return on average shareholders’ equity (“ROE”) achieved as compared to the plan for the fiscal year. The matching percentage achieved in fiscal 2009 was zero. An executive’s deferral into the plan in the current fiscal year can be matched for the current fiscal year as well as the two subsequent fiscal years if the ROE targets are achieved in any of those years. A company make up contribution will also be made into the plan on behalf of the named executives at the same percentage as in the Company’s qualified retirement plan for any salary and bonus compensation not receiving a benefit in the qualified retirement plan due to ERISA imposed limits on covered compensation or because the executive elected to defer salary and/or bonus into the deferred compensation plan.

The following table provides information relating to the activity in the Deferred Compensation Plan accounts of the named executive officers during fiscal 2009 and the aggregate balance of the accounts as of June 30, 2009.

																		Aggregate
		Executive				Registrant				Aggregate				Aggregate				Balance at
		Contributions				Contributions				Earnings in				Withdrawals/				June 30,
		in Fiscal 2008				in Fiscal 2009				Fiscal 2009				Distributions				2009
Name		($) (1)				($) (2)				($) (3)				($)				($)
Robert J. Ready		$	—			$	51,137			$	(155,859	)		$	—			$	310,751
Ronald S. Stowell		$	15,136			$	11,404			$	(84,787	)		$	—			$	182,140
James P. Sferra		$	—			$	33,606			$	(98,006	)		$	—			$	195,195
Scott D. Ready		$	—			$	5,268			$	(5,232	)		$	—			$	9,917
David W. McCauley		$	—			$	7,753			$	(58,292	)		$	—			$	117,865