UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 26, 2013
INSIGNIA SYSTEMS, INC.
(Exact name of registrant as specified in its chapter)
| Minnesota | 1-13471 | 41-1656308 |
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 8799 Brooklyn Blvd., Minneapolis, Minnesota | 55445 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code (763) 392-6200
| (Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Appointment of Chairman of Board of Directors; Employment of Scott F. Drill
Effective March 26, 2013, the Board of Directors of Insignia Systems, Inc. (the “Company”) appointed Gordon F. Stofer as Chairman of the Board, consistent with its past practice of having a non-executive Chairman. Scott F. Drill, Chief Executive Officer (“CEO”) and Secretary, stepped down from the role of Chairman. Mr. Stofer has served on the Company’s Board of Directors since February 1990. Mr. Drill will remain as a member of the Board, CEO and Secretary.
Also effective March 26, 2013, the Company and Mr. Drill entered into an employment agreement through December 31, 2014 (“Employment Agreement”), at which time Mr. Drill’s employment with the Company will end. In addition, effective March 26, 2013, the Company and Mr. Drill entered into the First Amendment to his May 1, 2012 Amended Change in Control Severance Agreement (“First Amendment”). The material terms and conditions of the Employment Agreement and the First Amendment (together with the May 1, 2012 Amended Change in Control Severance Agreement, collectively, the “Change in Control Agreement”) are set forth below.
Executive Compensatory Arrangements
Employment Agreement/First Amendment to Amended Change in Control
Agreement of
Scott F. Drill
Effective March 26, 2013, the Company and Mr. Drill entered into the Employment Agreement which generally provides that he will remain employed as CEO at his current annual base salary of $158,100 until December 31, 2014, or earlier, if the Board of Directors chooses to retain another CEO. The Employment Agreement also provides that Mr. Drill will no longer be eligible for annual cash incentive payments or stock option grants.
In the event the Company hires another CEO prior to December 31, 2014, Mr. Drill’s employment would continue through December 31, 2014, at the same base salary to perform such duties as assigned by the Board. Mr. Drill will transition certain operational duties to the Company’s President and COO, Glen P. Dall, and will focus on advice and consultation with senior management, participation in key customer relationships, and work with the Board on planning and strategy.
Mr. Drill’s employment is subject to termination for cause prior to December 31, 2014, as “Cause” is defined in the Employment Agreement. The Employment Agreement also provides that Mr. Drill is not eligible for any severance at the end of his employment, except in the event of a change in control as provided in the Change in Control Agreement.
By way of further clarification, effective March 26, 2013, the Company and Mr. Drill entered into the First Amendment to Mr. Drill’s May 1, 2012 Amended Change in Control Severance Agreement. The First Amendment provides, among other things, that in event of a “Change in Control” as defined in the Change in Control Agreement and subsequent termination of employment (including voluntary resignation but not due to death or Cause), Mr. Drill will receive a payment of two times his base salary. For purposes of the First Amendment only his base salary is defined as $316,200, resulting in a possible payment of approximately $632,400. The Change in Control Agreement further provides that Mr. Drill is eligible for a payment only in a limited circumstance. Finally, if the Company fails to satisfy the compensation terms of the Employment Agreement, the First Amendment will be null and void, and the terms and conditions of Mr. Drill’s May 1, 2012 Amended Change in Control Severance Agreement will once again be in effect.
The foregoing description of the Employment Agreement and the Change in Control Agreement is intended to be a summary only and is qualified in its entirety by reference to the Employment Agreement and the Change in Control Agreement, which are attached to this Current Report as Exhibits 10.1 and 10.2 and incorporated by reference as if fully set forth herein.
2013 Executive Officer Incentive Bonus Plan
On March 26, 2013, the Compensation Committee of the Company’s Board of Directors approved the 2013 Executive Officer Incentive Bonus Plan (“Executive Bonus Plan”). The employees eligible to participate in the Executive Bonus Plan are Mr. Dall and John C. Gonsior, the Company’s Vice President of Finance, Chief Financial Officer and Treasurer. The Executive Bonus Plan provides that each eligible employee may earn an annual cash bonus in a range of 5%-70% of his 2013 annual base salary if certain target levels of POPS revenue and corporate operating income are achieved by the Company in fiscal year 2013. If a minimum target level is not met in fiscal year 2013, the eligible employees will not earn a cash bonus.
All bonus calculations are subject to review and approval by the Compensation Committee prior to payment. In the event of a qualifying change in control, and subsequent triggering termination of employment, Mr. Dall and Mr. Gonsior would be eligible to receive a pro-rated lump sum distribution of incentive compensation, if applicable.
The foregoing description of the Executive Bonus Plan is intended to be a summary only and is qualified in its entirety by reference to the Executive Bonus Plan, which is attached to this Current Report as Exhibit 10.3 and incorporated by reference as if fully set forth herein.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number | Description |
| 10.1 | Scott F. Drill Employment Agreement |
| 10.2 | Exhibit A to Scott F. Drill Employment Agreement (First Amendment to Amended Change in Control Severance Agreement together with May 1, 2012, Amended Change in Control Severance Agreement of Scott F. Drill) |
| 10.3 | 2013 Executive Officer Incentive Bonus Plan |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Insignia Systems, Inc. | ||
| (Registrant) | ||
| Date: March 29, 2013 | By: | /s/ John C. Gonsior |
| John C. Gonsior Vice President, Finance and CFO | ||
EXHIBIT INDEX
| Exhibit Number | Description |
| 10.1 | Scott F. Drill Employment Agreement |
| 10.2 | Exhibit A to Scott F. Drill Employment Agreement (First Amendment to Amended Change in Control Severance Agreement together with May 1, 2012, Amended Change in Control Severance Agreement of Scott F. Drill) |
| 10.3 | 2013 Executive Officer Incentive Bonus Plan |
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (“Agreement”) is made by and between Insignia Systems, Inc. (“Company” or “Insignia”) with headquarters at 8799 Brooklyn Blvd., Minneapolis, Minnesota 55445 and Scott F. Drill (“Executive”).
RECITALS
WHEREAS, the Company desires to retain Executive as an employee of the Company, and Executive desires to be so employed.
NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive, intending to be legally bound, hereby agree as follows:
1. Terms of Employment.
1.1 Commencement Date. This Agreement shall become effective on March 26, 2013 (the Commencement Date”).
1.2 Position and Duties.
1.2.1 The Company will employ Executive in the capacity of Chief Executive Officer (“CEO”), reporting to the Company’s Board of Directors for the term set forth in Section 2, and subject to Sections 1.2.2 and 7. While employed as the CEO, Executive will transition certain of his operational duties to the Company’s President and Chief Operating Officer. In his role as CEO, Executive will focus on: i) advice and consultation with the President and COO, the CFO (including oversight in the area of financial reporting) and other senior managers; ii) participating in key customer relationships as he deems necessary or as requested by the President and COO; and iii) working with the Company’s Board of Directors on long-range planning and strategy.
1.2.2 Notwithstanding the foregoing, if the Board of Directors determines a new CEO is required or desirable prior to December 31, 2014, Executive agrees to voluntarily relinquish the CEO title and to perform such duties as the Board of Directors deems advisable giving consideration to Executive’s reduced number of hours, lower compensation, and agreed upon intent to spend more time away from the Company’s offices. In the event that Executive no longer serves as CEO, his employment will continue for the term specified in Section 2. He will continue to receive the compensation and benefits specified in Sections 3.1 and 3.3 and will also be provided his current office at the Company.
1.3 Best Efforts. During Executive’s employment by the Company, Executive agrees to devote his best efforts to the best interests of the Company on a reduced-time basis commensurate with the duties of his position and compensation level. Executive agrees to perform his duties with the highest standards of one holding such position in similar businesses or enterprises. While in the role of CEO, Executive agrees to make himself reasonably available to senior management and the Chairman of the Board of Directors by phone or in person, as circumstances may require.
1.4 Position on Board of Directors. Executive agrees to relinquish the role of Chairman of the Company’s Board of Directors upon the signing of this Agreement. Executive and the Company agree that Executive shall continue to serve as a member of the Company’s Board of Directors, subject to re-election by the Company’s shareholders. Executive hereby agrees that he will receive no director’s fees until after December 2014. After December 31, 2014, assuming his re-election, Executive will receive regular a pro-rated portion of director’s fees and regular director meeting fees until the next annual shareholders meeting.
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2. Term of Employment. The term of this Agreement will continue from the Commencement Date through the 31st day of December, 2014, except under circumstances set forth in Section 6 of this Agreement and in Exhibit A hereto.
3. Compensation and Benefits.
3.1 Salary. For all services rendered by Executive pursuant to this Agreement, the Company will pay Executive an annual base salary (“Base Compensation”) equal to One Hundred Fifty-Eight Thousand One Hundred Dollars ($158,100). Payment will occur at regular payroll intervals in accordance with the Company’s standard payroll practices.
3.2 Incentive Compensation. Executive agrees that upon signing this Agreement, he will not be eligible to receive incentive compensation of any kind, including but not limited to executive bonuses and stock option grants.
3.3 Fringe Benefits. Executive will be entitled to continue to receive his current executive benefits package and to participate in the Company’s standard employee benefit programs on the same terms as other senior executives of the Company, as applicable.
3.4 Severance Payments. Executive hereby agrees, and hereby waives and releases the Company from any formal or informal obligation, whether written or verbal, for payment of severance benefits other than those called for upon a Change in Control and as set forth in Exhibit A to this Agreement.
3.5 Business Expenses. Executive will be entitled to reimbursement of all reasonable, business-related travel and other expenses incurred by Executive in the ordinary course of business on behalf of the Company, so long as such expenses are incurred, documented and authorized pursuant to the Company’s expense reimbursement policies.
4. Insurance Policies.
The Company will keep all Directors and Officers insurance policies current and will identify Executive, if appropriate, on all such policies.
5. Location.
Executive will provide his services primarily in the Minneapolis, Minnesota, and Rio Verde, Arizona areas.
6. Termination of Employment by the Company.
6.1 For Cause. For purposes of this Agreement, the Company will have the right to terminate Executive’s employment for Cause. For purposes of this Agreement, “Cause” shall mean:
6.1.1 Executive’s conviction of a felony;
6.1.2 The willful and continued failure of Executive to perform his essential duties; or
6.1.3 Gross misconduct which is materially injurious to the Company.
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For purposes of this Section 6.1, an act or failure to act by Executive shall not be “willful” unless it is done, or omitted to be done, in bad faith and without any reasonable belief that Executive’s action or omission was in the best interests of the Company.
6.2 Notice. The matters referred to in Sections 6.1.2 and 6.1.3 shall not be deemed to constitute “Cause” unless the Company has first given Executive written notice specifying the conduct by Executive that constitutes such failure or gross misconduct and Executive has failed to remedy the same to the reasonable satisfaction of the Company’s Board of Directors.
7. Change in Control Obligations. Executive and the Company hereby acknowledge that Executive agreed to amend his Change in Control Agreement in return, in part, for the terms and conditions of this Agreement. In the event that the Company does not comply with the provisions of Section 3 of this Agreement, the amendment to the Change in Control Agreement shall be null and void. In the event of a change in control in the ownership of the Company, the Company’s and Executive’s obligations, including but not limited to those set forth in Section 6 of this Agreement, shall be governed by the Change in Control Agreement, as amended, and attached hereto as Exhibit A.
8. Delay of Payment.
Notwithstanding anything to the contrary, to the extent that Executive is a “key employee” pursuant to the provisions of Section 409A of the Internal Revenue Code as of the date that any change in control benefits or other deferred compensation becomes payable to the Executive hereunder, and such severance benefits are required to be delayed until the date six months following Executive’s termination of employment in order to avoid additional tax under Section 409A of the Code, payment and provision of such severance benefits or other deferred compensation shall be delayed until the date six months after Executive’s termination of employment.
9. Confidentiality.
9.1 Confidential Nature of Relationship. Executive acknowledges that his employment by the Company creates a relationship of confidence and trust with respect to Confidential Information (as hereinafter defined). During the course of his employment with the Company, the Company agrees to provide Executive with access to Confidential Information. Executive expressly undertakes to retain in strict confidence all Confidential Information transmitted or disclosed to Executive by the Company or the Company’s clients, and will never make any use of such information except as (and then, only to the extent) required to perform Executive’s employment duties for the Company. Executive will take such protective measures as may be reasonably necessary to preserve the secrecy and interest of the Company in the Confidential Information. If Executive becomes aware of any unauthorized use or disclosure of Confidential Information by any person or entity, Executive will promptly and fully advise the Company of all facts known to Executive concerning such unauthorized use or disclosure.
9.2 Definition. “Confidential Information” means all commercially sensitive information and data of a confidential nature, in their broadest context, originated by, on behalf of or within the knowledge or possession of the Company or its clients (including any subsidiary, division or legal affiliate thereof). Without in any way limiting the foregoing, Confidential Information includes, but is not limited to: information that has been designated as proprietary and/or confidential; information constituting trade secrets; information of a confidential nature that, by the nature of the circumstances surrounding the disclosure, should in good faith be treated as proprietary and/or confidential; and information and data conceived, discovered or developed in whole or in part by Executive while employed by the Company. Confidential Information also includes information of a confidential nature relating to the Company’s clients, prospective clients, strategic business relationships, business opportunities, products, services, suppliers, personnel, pricing, recruiting strategies, job candidate information, employee information, sales strategies, technology, methods, processes, research, development, systems, techniques, finances, accounting, purchasing and business plans.
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9.3 Exclusions. Confidential Information does not include information which: (A) is generic; (B) is or becomes part of the public domain through no act or omission of Executive; (C) was in Executive’s lawful possession prior to the disclosure and was not obtained by Executive in breach, either directly or indirectly, of any obligation to the Company or any client of the Company’s; (D) is lawfully disclosed to Executive a third party without restriction on disclosure; or (E) is independently developed by Executive using his own resources, entirely on his own time, and without the use of any Confidential Information.
9.4 Additional Confidentiality Agreements. Executive agrees to execute such additional non-disclosure and confidentiality agreements as the Company or its clients may from time to time request.
10. Use of Confidential or Material Non-Public Information; Code of Ethics and Company Policies.
10.1 Confidential or Material, Non-Public Information. Executive acknowledges that he is prohibited from using or sharing any Confidential Information for personal gain or advantage (in securities transactions or otherwise), or for the personal gain or advantage of anyone with whom Executive improperly shares such information. Specifically as to material, non-public information of the Company, Executive agrees to comply with the Company’s insider trading policy in effect at the commencement of employment and as amended from time to time.
10.2 Code of Ethics. Executive agrees to fully comply with any Code of Ethics (or similar policy) of the Company either having general applicability to its employees or specifically to Executive and with all company policies.
11. Return of Property. Upon any termination of his employment with the Company, Executive agrees to promptly return to the Company: (A) all materials of any kind in Executive’s possession (or under Executive’s control) incorporating Confidential Information or otherwise relating to the Company’s business (including but not limited to all such materials and/or information stored on any computer or other storage device owned or used by Executive); and (B) all Company property in Executive’s possession, including (but not limited to) computers, cellular telephones, pagers, credit cards, keys, records, files, manuals, books, forms, documents, letters, memoranda, data, tables, photographs, video tapes, audio tapes, computer disks and other computer storage media, all materials that include trade secrets, and all copies, summaries or notes of any of the foregoing.
12. Restrictions Against Competition.
12.1 Restricted Period. During his employment by the Company and for a period of twelve (12) months after termination of such employment for any reason, Executive agrees that he will not, on behalf of himself, or on behalf of any other person, company, entity, partnership or other entity or enterprise, directly or indirectly, as an employee, proprietor, partner, or independent contractor, provide services of the same or similar type he provided to the Company under this Agreement, to any Competitor of the Company, anywhere in the United States.
12.2 Definitions. For purposes of this Section 14, “Competitor” means any company engaged in the in-store signage industry within the United States.
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13. Assignment.
This Agreement sets forth personal obligations of Executive, which may not be transferred, delegated or assigned by Executive. The Company may assign this Agreement to any successor or affiliate.
14. Indemnity; Cooperation in Legal Actions.
14.1 Indemnity. The Company will indemnify Executive against any claims arising from or related to his good faith performance of his duties and obligations hereunder to the fullest extent allowed by Company By-laws and the Minnesota Business Corporation Act.
14.2 Cooperation in Legal Actions. In connection with any action or proceeding against Executive, whether pending or threatened, for which the Company is obliged to indemnify Executive, the Company will pay or reimburse Executive in advance of the final disposition for reasonable expenses, including reasonable attorneys’ fees, necessarily incurred by Executive. Executive will cooperate fully with the Company, at no expense to Executive, in the defense of any action, suit, claim, or proceeding commenced or threatened against the Company in conjunction with any action, suit, claim or proceeding commenced or threatened against him. In addition to the foregoing, Executive further agrees to provide assistance to the Company, at the Company’s expense, as may be reasonably requested by the Company or its attorneys in connection with the litigation of any action, suit, claim, or proceeding involving the Company, whether not pending or to be commenced, which arises out of or is related to any matters in which Executive was involved or for which he was responsible during the term of his employment with the Company.
15. Survival.
The rights and obligations set forth in Sections 7-9, 10.1, 11-14 and 17-18 shall survive the termination or expiration of this Agreement. Such provisions of this Agreement shall survive termination of Executive’s employment regardless of whether Executive resigns or is involuntarily discharged.
16. Miscellaneous.
16.1 Headings; Construction. The headings of Sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. This Agreement shall be construed without regard to any presumption or other rule requiring construction hereof against the party causing this Agreement to be drafted.
16.2 Benefit. Subject to Section 12, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
16.3 Waiver. Any delay by either party in asserting a right under this Agreement or any failure by either party to assert a right under this Agreement will not constitute a waiver by the asserting party of any right hereunder, and the asserting party may subsequently assert any or all of its rights hereunder as if the delay or failure to assert rights had not occurred.
16.4 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.
16.5 Severability. If the final determination of a court of competent jurisdiction declares, after the expiration of the time within which judicial review (if permitted) of such determination may be perfected, that any term of provision hereof is invalid or unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired, and (b) the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision.
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17. Entire Agreement; Amendment.
17.1 Entire Agreement. Both Executive and the Company agree that this Agreement, the exhibits to this Agreement and any contemporaneous stock option agreement between the Company and Executive, constitute the entire agreement between them with respect to the subject matter thereof. There were no inducements or representations leading to the execution of this Agreement except as stated in this Agreement. Accordingly, this Agreement (together with the exhibits to this Agreement and any contemporaneous stock option agreement between the Company and Executive) expressly supersedes any and all prior oral and written agreements, representations and promises between the parties relating to Executive’s employment with the Company.
17.2 Amendment. This Agreement may be amended or modified only with the written consent of both Executive and the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever.
18. Notices.
Any notice hereunder by either party to the other shall be given in writing by personal delivery or certified mail, return receipt requested. If addressed to Executive, the notice shall be delivered or mailed to Executive at the address most recently communicated in writing by Executive to the Company, or if addressed to the company, the notice shall be delivered or mailed to the Company at its executive offices to the attention of the CEO of the Company. A notice shall be deemed given, if by personal delivery, on the date of such delivery or, if by certified mail, on the date shown on the applicable return receipt.
19. Governing Law; Disputes; Arbitration of Termination of Employment for Cause.
19.1 Governing Law; Disputes. The Company is headquartered in Minneapolis, Minnesota and the parties expect that many of Executive’s contacts with the Company will occur through or in connection with its Minneapolis office. Therefore, the parties agree that this Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Minnesota, as such laws are applied to agreements entered into and to be performed entirely within Minnesota between Minnesota residents, without reference to principles of conflicts or choice of law under which the law of any other jurisdiction would apply. Except (and only) as set forth in Section 19.2 below, the undersigned each irrevocably consent to the jurisdiction of the United States District Court for the District of Minnesota and the courts of the State of Minnesota in any suit, action or proceeding brought under, based on or related to or in connection with this Agreement, and each of the undersigned agrees that either of the aforesaid courts will be the exclusive original forum for any such action.
19.2 Arbitration of Termination of Employment for Cause. Any dispute arising out of or relating to termination of Executive’s employment for Cause pursuant to Section 6 of this Agreement, shall be discussed between the disputing parties in a good faith effort to arrive at a mutual settlement of any such controversy. If, notwithstanding, such dispute cannot be resolved, such dispute shall be settled by binding arbitration. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a retired state or federal judge or an attorney who has practiced business law or business litigation for at least 10 years. If the parties cannot agree on an arbitrator within 20 days, any party may request that the chief judge of the District Court for Hennepin County, Minnesota, select an arbitrator. Arbitration will be conducted pursuant to the provisions of this Agreement, and the commercial arbitration rules of the American Arbitration Association, unless such rules are inconsistent with the provisions of this Agreement. Limited civil discovery shall be permitted for the production of documents and taking of depositions. Unresolved discovery disputes may be brought to the attention of the arbitrator who may dispose of such dispute. The arbitrator shall have the authority to award any remedy or relief that a court of this state could order or grant; provided, however, that punitive or exemplary damages shall not be awarded. The Company shall pay the fees and expenses of the arbitrator. Unless otherwise agreed by the parties, the exclusive location of any arbitration proceedings shall be Hennepin County, Minnesota.
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19.3 Incorporation by Reference. The following exhibits are hereby incorporated by reference and each is an integral part of this Agreement:
Exhibit A – Amended Change in Control Severance Agreement dated May 1, 2012, together with First Amendment to Amended Change in Control Severance Agreement dated March 26, 2013.
IN WITNESS WHEREOF, the parties have executed this Agreement by their signatures below, to become effective on the Commencement Date noted above:
| Insignia Systems, Inc. | Scott F. Drill | |||
| By: | /s/ John Gonsior | By: | /s/ Scott F. Drill | |
| Its: | CFO | Dated: | March 26, 2013 | |
| Dated: | March 28, 2013 | |||
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EXHIBIT 10.2
Exhibit A
FIRST AMENDMENT TO
AMENDED CHANGE IN CONTROL SEVERANCE
AGREEMENT
THIS FIRST AMENDMENT (“First Amendment”) is entered into the 26th day of March, 2013, by and between Insignia Systems, Inc., a Minnesota corporation (the “Company”), and Scott F. Drill (the “Executive”).
WHEREAS, the Company and Executive (collectively the “Parties”) are parties to that certain Employement Agreement dated March 26, 2013 (“Employment Agreement”).
WHEREAS, the Parties are also parties to that certain Amended Change in Control Severance Agreement dated May 1, 2012 (“Change in Control Agreement”) .
WHEREAS, the Parties would like to make certain changes to the Change in Control Agreement, as more particularly set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive, intending to be legally bound, hereby agree as follows:
1. Section 3 of the Change in Control Agreement.
a. Amount of Severance Payment. The first two paragraphs of Section 3 of the Change in Control Agreement are hereby deleted in their entirety and replaced with the following:
3. Amount of Severance Payment. If a Change in Control occurs during Executive’s employment with the Company and after the date of this Agreement and Executive subsequently ceases to be employed by the Company prior to the second anniversary of the Change in Control, then the Company shall pay Executive a lump sum severance payment equal to two (2) times Executive’s annual base salary (as defined below) if the Change in Control is one in which News America Marketing In-Store Services LLC or any of its affiliated companies is the acquiring entity, and the Executive ceases to be employed for any reason (including voluntary resignation) other than death or cause (as defined below). The Company shall be entitled to deduct from the lump sum severance payment any amounts which the Company is required by law to withhold from such a payment.
Only for purposes of this Section 3, the term “annual base salary” means $316,200.
b. Remaining Provision. The remaining provision of Section 3 of the Change in Control Agreement concerning timing of payment and Section 409A of the Internal Revenue Code shall remain in full force and effect.
2. Section 4 of the Change in Control Agreement.
a. Section 4 of the Change in Control Agreement is hereby deleted in its entirety and replaced with the following:
4. Circumstances in Which Severance Shall Not Be Paid. Notwithstanding the provisions of Section 3, the Company shall not be obligated to make any lump sum severance payment under this Agreement if, following a Change in Control, Executive ceased to be employed by the Company due to:
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(a) Executive’s death or disability; or
(b) termination of Executive by the Company for Cause (as defined below).
For purposes of this Section 4, the following defined terms have the meanings indicated:
“Cause” means termination by the Company of Executive’s employment due to:
(1) conviction of a felony;
(2) the willful and continued failure of Executive to perform his essential duties; or
(3) gross misconduct which is materially injurious to the Company;
provided, however, that the matters referred to in clause (2) or (3) shall not be deemed to constitute “Cause” unless the Company has first given Executive written notice specifying the conduct by Executive that constitutes such failure or gross misconduct and Executive has failed to remedy the same to the reasonable satisfaction of the Company’s Board of Directors.
3. Ratification. Except as specifically provided in this First Amendment, each and every provision of the Change in Control Agreement, as amended through the date hereof remains, and is, in all respects, in full force and effect. Notwithstanding the foregoing, in the event the Company fails to meet the provisions of Section 3 of Executive’s Employment Agreement, this First Amendment shall be rendered null and void, and the terms of the Change in Control Agreement shall be in full force and effect except that the amount of the the lump sum payment due, if any, shall remain equal to two (2) times the Executive’s annual base salary set at $316,200 for the purposes of this First Amendment to the Change in Control Agreement.
4. Counterparts. This First Amendment may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.
5. Miscellaneous. The provisions hereof are binding upon and inure to the benefit of the Parties and their respective personal representatives, successors and assigns. This First Amendment, together with the Employment Agreement and Change in Control Agreement, constitute the entire understanding between the Parties in respect to the subject matter hereof.
IN WITNESS HEREOF, the Parties have executed this First Amendment as of the date set forth herein.
| Insignia Systems, Inc. | Scott F. Drill | |||
| By: | /s/ John Gonsior | By: | /s/ Scott F. Drill | |
| Its: | CFO | Dated: | March 26, 2013 | |
| Dated: | March 28, 2013 | |||
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AMENDED CHANGE IN CONTROL SEVERANCE
AGREEMENT
AGREEMENT made as of May 1, 2012, by and between Insignia Systems, Inc., a Minnesota corporation (the “Company”), and Scott F. Drill (the “Executive”).
WHEREAS, the Company, as a publicly held corporation, recognizes the possibility of a change in control of the Company, and that such possibility and the uncertainty and questions which it may raise could result in Executive leaving the Company or in distraction of Executive in the performance of Executive’s duties to the detriment of the Company and its shareholders; and
WHEREAS, it is in the best interests of the Company and its shareholders to encourage the availability of Executive’s services to parties who may in the future acquire control of the Company and to provide an incentive for Executive to remain with the Company during any period of uncertainty leading up to a change in control;
WHEREAS, based on the foregoing, the Company wishes to provide that, in the event of a change in control of the Company, Executive will receive certain benefits if Executive’s employment by the Company ceases for certain reasons within a specified period following the change in control;
NOW, THEREFORE, in consideration of the foregoing and the provisions of this Agreement, the parties hereto agree as follows:
1. General Provisions. This Company shall pay Executive a lump sum severance payment if Executive ceases to be employed by the Company within two years following a Change in Control (as defined below) for certain reasons specified in this Agreement. Nothing in this Agreement alters the “at will” nature of Executive’s employment by the Company. This means that either before or after a Change in Control, either the Company or the Executive may terminate Executive’s employment by the Company, either with or without cause, for any reason or no reason. This Agreement relates only to whether Executive shall be entitled to certain severance payments following cessation of employment. No right to severance payments shall arise under this Agreement unless and until there occurs a Change in Control.
2. Definition of Change in Control. For purposes of this Agreement, a “Change in Control” shall be considered to occur if any of the following occurs after the date of this Agreement:
| (a) | the closing of the sale of all or substantially all of the assets of the Company; |
| (b) | the closing of a merger, consolidation or corporate reorganization of the Company which results in the stockholders of the Company immediately prior to such event owning less than 50% of the combined voting power of the Company’s capital stock immediately following such event; |
| (c) | the acquisition by any person (or persons who would be considered a group under the federal securities laws) who as of the date of this Agreement own less than 25% of the voting power of the Company’s outstanding voting securities, of beneficial ownership of securities representing 40% or more of the combined voting power or the Company’s then outstanding securities; or |
| (d) | the election to the Company’s board of directors of persons who constitute a majority of the board of directors and who were not nominated for election by the board of directors as part of a management slate. |
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3. Amount of Severance Payment. If a Change in Control occurs after the date of this Agreement and Executive subsequently ceases to be employed by the Company prior to the second anniversary of the Change in Control, then the Company shall pay Executive a lump sum severance payment equal to twenty-four (24) months of Executive’s base salary (as defined below) if (a) the Change in Control is a “hostile takeover” and the Executive ceases to be employed for any reason (including voluntary resignation) other than death or cause (as defined below), or (b) the Change in Control is not a “hostile takeover” and the Executive ceases to be employed due to a reason not precluding payment under Section 4. The Company shall be entitled to deduct from the lump sum severance payment any amounts which the Company is required by law to withhold from such a payment.
For purposes of this Section 3, the terms “base salary” and “hostile takeover” are defined as follows. “Base salary” means either $316,200 or the Executive’s annual base salary in effect immediately prior to the Change in Control, whichever is higher. “Hostile takeover” means a Change in Control (a) that is not approved in advance of a public announcement by the Company’s Board of Directors or a committee of the Board of Directors authorized by the Board to consider the Change in Control, or (b) in which the acquiring entity is a direct competitor of the Company, including but not limited to Valassis Sales and Marketing Services, Inc., News America Marketing In-Store, Inc., and Vestcom International, Inc., and their affiliated companies.
Payment due under this Agreement shall be made on the 60th day after Executive’s termination of employment, except that if Executive is then a “key employee” of the Company, as defined in Section 409A of the Internal Revenue Code, payment shall be made on the date which is six months after termination of employment, or to his heirs upon his death if earlier; provided, however, that no payment shall be made unless Executive has first delivered to the Company the Release described in Section 11, and the Release has not been rescinded during any applicable rescission period.
4. Circumstances in Which Severance Shall Not Be Paid. Notwithstanding the provisions of Section 3(b) above, the Company shall not be obligated to make any lump sum severance payment under this Agreement if, following a Change in Control, Executive ceased to be employed by the Company due to:
| (a) | Executive’s death or disability; |
| (b) | termination of Executive by the Company for Cause (as defined below); or |
| (c) | resignation by Executive for any reason other than a Good Reason (as defined below), including retirement. |
For purposes of this Section 4, the following defined terms have the meanings indicated:
“Cause” means termination by the Company of Executive’s employment due to:
| (1) | conviction of a felony; |
| (2) | the willful and continued failure of Executive to perform his essential duties; or |
| (3) | gross misconduct which is materially injurious to the Company; |
provided, however, that the matters referred to in clause (2) or (3) shall not be deemed to constitute “Cause” unless the Company has first given Executive written notice specifying the conduct by Executive that constitutes such failure or gross misconduct and Executive has failed to remedy the same to the reasonable satisfaction of the Company’s Board of Directors.
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“Good Reason” shall mean any of the following, unless Executive gives his or her prior written consent:
| (1) | the assignment to Executive of any duties inconsistent with Executive’s status or position with the Company, or a substantial reduction in the nature or status of Executive’s responsibilities from those in effect immediately prior to the Change in Control; |
| (2) | a reduction by the Company in Executive’s annual base salary in effect immediately prior to the Change in Control; |
| (3) | the relocation of the Company’s principal executive offices to a location more than fifty miles from Minneapolis, Minnesota or the Company requiring Executive to be based anywhere other than the Company’s principal executive offices, except for required travel on the Company’s business to an extent substantially consistent with Executive’s prior business travel obligations; |
| (4) | the failure by the Company to continue to provide Executive with benefits at least as favorable to those enjoyed by Executive under any of the Company’s pension, life insurance, medical, health and accident, disability, deferred compensation, incentive awards, incentive stock options, or savings plans in which Executive was participating at the time of the Change in Control, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive Executive of any material fringe benefit enjoyed at the time of the Change in Control, or the failure by the Company to provide Executive with the number of paid vacation days to which Executive is entitled at the time of the Change in Control, provided, however, that the Company may amend any such plan or programs as long as such amendments do not reduce any benefits to which Executive would be entitled upon termination; or |
| (5) | any termination of Executive’s employment which is not made pursuant to a Notice of Termination satisfying the requirements in Section 5 below. |
5. Notice of Termination. Any termination of Executive’s employment by the Company or by Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with the notice provisions of Section 6. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which indicates the specific facts and circumstances claimed to provide the basis for termination.
6. Method of Giving Notice. All notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage pre-paid, addressed to the last known residence address of the Executive, or in the case of the Company, to its principal office to the attention of each of the then directors of the Company with a copy to its Secretary, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
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7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the parties. No waiver by either party thereto at any time of any breach by the other party to this Agreement, or of compliance with any condition or provision of this Agreement to be performed by such other party, shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or similar time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. This Agreement shall be governed by the laws of the State of Minnesota. This Agreement supersedes all prior agreements on this subject matter.
8. Arbitration of Disputes. Any and all disputes between the parties relating to this Agreement or any alleged breach of this Agreement shall be resolved by binding arbitration held in the City of Minneapolis pursuant to the Commercial Arbitration Rules of the American Arbitration Association before a single arbitrator. In the event that Executive is determined by the arbitrator to be the prevailing party in such an arbitration, the arbitrator shall award Executive, as an additional element of damages, his or her attorneys’ fees and legal expenses actually incurred in the enforcement of this Agreement and in the arbitration proceeding. Judgment on the arbitration award may be entered by any court having jurisdiction.
9. Successors. This Agreement shall be binding upon and inure to the benefit of the respective heirs, personal representatives, successors and assigns of the parties hereto.
10. Exclusive Benefits. The benefits provided by this Agreement are in lieu of all other severance, change in control, or similar benefits payable to Executive due to termination following a Change in Control.
11. Release. As a condition to receiving any benefits under this Agreement, Executive shall be required to deliver a standard release to the Company releasing the Company and its shareholder, directors, officers, employees, agents and affiliates from any and all claims relating to Executive’s employment and termination of employment.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
| EXECUTIVE: | INSIGNIA SYSTEMS, INC. | ||
| /s/ Scott F. Drill | By: | /s/ John Gonsior | |
| Scott F. Drill | |||
| Its: | CFO | ||
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EXHIBIT 10.3
INSIGNIA SYSTEMS, INC.
2013 EXECUTIVE OFFICER INCENTIVE BONUS PLAN
1. Purpose. The purpose of this Plan is to assist the corporation in retaining and motivating certain officers of the corporation for the benefit of the corporation and its shareholders.
2. Eligibility. The employees eligible to participate in this Plan are the individuals employed in the following positions as of the date of adoption of the Plan:
| · | President and Chief Operating Officer |
| · | Chief Financial Officer |
An eligible employee must be employed on December 31, 2013 to earn a bonus, except as provided under section 10 below.
3. Duration of Plan. This Plan shall be effective for the corporation’s fiscal year ending December 31, 2013.
4. Bonus Amounts. Each eligible employee may earn a bonus in 2013, equal to a specified percentage of his then base salary as of December 31, 2013, based upon the amount of POPS revenue and corporate operating income, earned by the Company in 2013. The calculation of corporate operating income shall be exclusive of any non-recurring items, as approved by the Compensation Committee.
Attached is a schedule showing different tiers of bonus levels, and the minimum amounts of POPS revenue and corporate operating income required to earn the bonus payable at each tier. If the amount of POPS revenue and/or corporate operating income earned by the Company in 2013 increases above the minimum amounts required for any tier, but does not reach the minimum amounts required for the next tier, the bonus percentages payable within such tier shall increase proportionately.
5. Calculation and Approval of Bonuses. Bonus amounts shall be calculated by the corporation’s CFO based on the accounting methods and procedures used in preparing the corporation’s audited financial statements for 2013.
All bonus calculations shall be reviewed and approved by the Compensation Committee prior to payment. The Compensation Committee retains sole and absolute discretion to increase, decrease or otherwise modify any bonus payable to any eligible employee.
6. Payment of Bonuses. Earned bonuses shall be paid as soon as administratively feasible after December 31, 2013. All payments shall be reduced by applicable withholdings.
7. Non-Assignability. An eligible employee may not assign or transfer his right to payment under this Plan, except to his heirs in the event of his death after December 31, 2013 and prior to payment, and his right to payment may not be attached by his creditors.
8. No Continued Employment. Nothing contained in this Plan shall be construed as guaranteeing continued employment to any eligible employee.
9. Administration. The Plan shall be administered by the Compensation Committee, which shall have the authority to construe and interpret the Plan, and determine amounts payable under the Plan.
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10. Change of Control. Should a change of control occur, as defined in any change of control or similar agreement between the corporation and the executive, and there is a subsequent termination of employment triggering the corporation’s obligations under that change of control agreement, the eligible employee will be entitled to receive a pro-rata portion of the amount of bonus that would be paid if the year-to-date financial performance were extrapolated for the year based upon that information and the prospects for the balance of the fiscal year as the Compensation Committee will determine.
SCHEDULE
| POPS Revenue-Based Bonus | ||
| Bonus Tier | Minimum POPS Revenue |
Bonus as Percentage of Salary |
| Minimum | approx. 87% of Target | 7.0% |
| Plan | 100% of Target | 12.0% |
| Exceed | approx.109% of Target | 20.0% |
| Significantly Exceed | approx. 117% of Target | 40.0% |
| Corporate Operating Income-Based Bonus | ||
| Bonus Tier | Minimum Corporate Operating Income |
Bonus as Percentage of Salary |
| Minimum | 40% of Target | 5.0% |
| Plan | 100% of Target | 10.0% |
| Exceed | 160% of Target | 20.0% |
| Significantly Exceed | 200% of Target | 30.0% |
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