CHANGE IN CONTROL AGREEMENT
THIS
AGREEMENT, is hereby entered into on June 30, 2017 and is effective
as of July 17, 2017 (the “Effective Date”), by and
between Insignia Systems, Inc., a Minnesota corporation (the
“Company”), and Xxxxxxx
Xxxxxxxx (the “Executive”).
WHEREAS, the Board
of Directors of the Company (the “Board”) recognizes that,
as is the case with many business organizations, the possibility of
a Change in Control exists and that such possibility, and the
uncertainty and questions which it may raise among management, may
result in the departure or distraction of management personnel to
the detriment of the Company; and
WHEREAS, the Board
has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members of
the Company’s management, including the Executive, to their
assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a Change
in Control.
NOW,
THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and Executive hereby agree
as follows:
1. Defined Terms. The definitions
of capitalized terms used in this Agreement are provided in the
last Section hereof.
2. Term of Agreement. This
Agreement shall commence on the Effective Date and shall continue
in effect for a period of three (3) years thereafter. Commencing on
the third anniversary of the Effective Date and on each anniversary
thereafter (“Anniversary Date”), this
Agreement shall automatically be renewed for one (1) additional
year beyond the term otherwise established, unless one party
provides written notice to the other party, at least one-hundred
and twenty (120) days in advance of an Anniversary Date, of its
intent not to renew this Agreement for an additional one year term.
Notwithstanding the foregoing, if a Change in Control shall have
occurred after the Effective Date and during the term of this
Agreement, this Agreement shall continue in effect for a period of
not less than twenty-four (24) months beyond the month in
which a Change in Control occurred.
3. Compensation Other Than Severance
Payments.
3.1 Following a Change
in Control and during the term of this Agreement, during any period
that the Executive fails to perform the Executive’s full-time
duties with the Company as a result of a “disability”
(as defined in Treas. Reg. § 1.409A-3(i)(4)), the Company
shall pay the Executive’s current base salary to the
Executive at the rate in effect at the commencement of any such
period, together with all compensation and benefits payable to the
Executive under the terms of any compensation or benefit plan,
program or arrangement maintained by the Company during such
period, until the Executive’s employment is terminated by the
Company.
3.2 If the
Executive’s employment shall be terminated for any reason
following a Change in Control and during the term of this
Agreement, the Company shall pay the Executive’s current base
salary through the Date of Termination, together with all
compensation and benefits to which the Executive is entitled in
respect of all periods preceding the Date of
Termination
under the terms of the Company’s compensation and benefit
plans, programs or arrangements.
4. Severance
Payments.
4.1 If a Qualifying
Termination shall occur, in addition to any payments and benefits
to which the Executive is entitled under Section 3 hereof, the
Company shall pay the Executive the payments described in this
Section 4.1 (the “Severance Payments”);
provided, however, that, in the case of clauses (A), (B), (C), (D)
and (F) below, the Executive shall have executed and not revoked a
release of claims in the form set forth in Exhibit A hereto. The
Executive shall also be entitled to the Severance Payments (and any
payments and benefits under Section 3) if the Executive’s
employment is terminated by the Company other than (x) for Cause or
(y) by reason of death or Disability within the six (6) month
period immediately preceding a Change in Control and the Executive
reasonably demonstrates that such termination is otherwise in
connection with or in anticipation of a Change in Control that
actually occurs during the term of the Agreement (a
“Pre-Change in
Control Termination”); provided, however, that, in the
case of clauses (A), (B), (C), (D) and (F) below, Executive shall
have executed and not revoked a release of claims in the form set
forth in Exhibit A hereto; and provided further, however, that any
such payments shall be offset by the amount of severance previously
paid to the Executive under any employment agreement between the
Executive and the Company and, to the extent permitted by Section
409A of the Code, any other severance policy, plan or program of
the Company.
(A) In lieu of any
further salary payments to the Executive for periods subsequent to
the Date of Termination and in lieu of any severance benefit
otherwise payable to the Executive, the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to
seventy-five (75%) of the Executive’s annual base salary then
in effect (or immediately prior to any reduction resulting in a
termination for Good Reason, if applicable) (the
“Change in Control
Salary”).
(B) Notwithstanding
any provision of any annual incentive plan to the contrary, the
Company shall pay to the Executive an amount, in cash, equal to the
sum of (i) any unpaid incentive compensation which has been
allocated or awarded to the Executive for a completed fiscal year
preceding the Date of Termination under any such plan and which, as
of the Date of Termination, is contingent only upon the continued
employment of the Executive to a subsequent date, and (ii) a
pro rata portion to the Date of Termination of Executive’s
target bonus for the year in which the Date of Termination occurs
(or the target in effect immediately prior to the first occurrence
of an event or circumstance constituting Good Reason), calculated
by multiplying such target bonus by the fraction obtained by
dividing the number of full months and any fractional portion of a
month during such year through the Date of Termination by twelve
(12).
(C) For the
six month period immediately following the Date of
Termination, the Company shall arrange to provide the Executive
(which includes the Executive’s eligible dependents for
purposes of this subsection (C)) with life, disability, accident
and health insurance benefits substantially similar to those which
the Executive was receiving immediately prior to the Date of
Termination (or immediately prior to any reduction resulting
in
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a
termination for Good Reason, if applicable); provided, however,
that (i) the Executive’s and his qualified dependents’
COBRA eligibility period shall include the period during which the
Company is providing benefits under this subsection (C);
(ii) unless the Executive consents to a different method (or
elects COBRA coverage at applicable COBRA rates), such health
insurance benefits shall be provided through a third-party insurer;
and (iii) the Executive shall be responsible for the payment
of premiums for such benefits in the same amount as active
employees of the Company. Benefits otherwise receivable by the
Executive pursuant to this subsection (C) shall be reduced to the
extent comparable benefits (including continued coverage for any
preexisting medical condition of any person covered by the benefits
provided to the Executive and his eligible dependents immediately
prior to the Date of Termination) are actually received by or made
available to the Executive by a subsequent employer during the
twenty-four month period following the Executive’s Date
of Termination (and any such benefits actually received by or made
available to the Executive shall be reported to the Company by the
Executive). Notwithstanding the foregoing, in the event of a
Pre-Change in Control Termination, on the sixtieth (60th) day
following the Change in Control the Company shall pay or reimburse
the Executive for any amounts or benefits it would have been
responsible to pay or provide to the Executive under this Section
4.1(C) during the period prior to the Change in Control, had the
Change in Control occurred on the Date of Termination.
(D) If the Executive
would have become entitled to benefits under the Company’s
post-retirement health care or life insurance plans (as in effect
immediately prior to the Date of Termination (or immediately prior
to any reduction resulting in a termination for Good Reason, if
applicable)) had the Executive’s employment terminated at any
time during the period of twenty four months after the Date of
Termination, the Company shall provide such post-retirement health
care or life insurance benefits to the Executive (subject to any
employee contributions required under the terms of such plans in
the same amounts as active employees of the Company) commencing on
the later of (i) the date that such coverage would have first
become available or (ii) the date that benefits described in
subsection (C) of this Section 4.1 terminate.
(E) The Company shall
pay the Executive, at a daily salary rate calculated from the
Executive’s annual base salary in effect immediately prior to
the Date of Termination (or immediately prior to any reduction
resulting in a termination for Good Reason, if applicable), a lump
sum amount equal to all earned but unused paid time off days
through the Date of Termination.
(F) The Company shall
pay, no later than the last day of the calendar year in which they
are incurred, the reasonable fees and expenses of a full service
nationally recognized executive outplacement firm until the earlier
of the date the Executive secures new employment or the date which
is twenty-four months following the Executive’s Date of
Termination; provided that in no event shall the aggregate amount
of such payments exceed $5,000.
4.2 Benefit
Limitation.
(A) Anything
in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment (including any acceleration of
vesting of stock based benefits) or distribution by the Company to
or for the benefit of the Executive (whether paid or
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payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise) (a “Payment”)
would be subject to the excise tax imposed by Section 4999 of the
Code (the “Excise
Tax”), the amounts and
benefits payable under this Agreement shall be reduced by an amount
that would result in no Excise Tax being imposed; provided that the
amounts and benefits payable under this Agreement shall not be
reduced unless the amounts and
benefits the Executive would receive after such reduction would be
greater than the amounts and benefits the Executive would receive if there were no reduction and the
Excise Tax were paid by the Executive (such reduction, the
“Cut
Back”). For
purposes of determining whether any Payments should be subject to
the Cut-Back, (i) Executive shall be deemed to pay federal income
tax at the highest marginal rate of federal income taxation in the
calendar year in which the Date of Termination occurs and state and
local income taxes at the highest marginal rate of taxation in the
state and locality of the Executive's residence on the Date of
Termination, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local
taxes, (ii) no portion of the Payments the receipt or enjoyment of
which the Executive shall have waived at such time and in such
manner as not to constitute a "payment" within the meaning of
section 280G(b) of the Code shall be taken into account, (iii) no
portion of the Payments shall be taken into account which, in the
opinion of the Accounting Firm, does not constitute a "parachute
payment" within the meaning of section 280G(b)(2) of the Code,
including by reason of section 280G(b)(4)(A) of the Code, (iv) the
Severance Payments shall be reduced only to the extent necessary so
that the Payments in their entirety constitute reasonable
compensation for services actually rendered within the meaning of
section 280G(b)(4)(B) of the Code or are otherwise not subject to
disallowance as deductions by reason of section 280G of the Code,
in the opinion of the Accounting Firm, and (v) the value of any
noncash benefit or any deferred payment or benefit included in the
Payments shall be determined by the Accounting Firm in accordance
with the principles of sections 280G(d)(3) and (4) of the Code.
Unless the Executive shall have
given prior written notice to the Company specifying a different
order of payments and benefits to be reduced to achieve the
Cut-Back, any payments and benefits to be reduced hereunder shall
be determined in a manner that has the least economic cost to the
Executive, on an after-tax basis, and to the extent the economic
cost is equivalent, such payments and benefits shall be reduced in
the inverse order of when the payments and benefits would have been
made or provided to the Executive until the reduction specified
herein is achieved. The Executive may specify the order of
reduction of the payments and benefits only to the extent that
doing so does not directly or indirectly alter the time or method
of payment of any amount that is deferred compensation subject to
(and not exempt from) Section 409A of the Code.
(B) All
determinations required to be made under this Section 4.2 shall be
made by a nationally recognized accounting firm designated by the
Company (the “Accounting
Firm”) which shall
provide detailed supporting calculations both to the Company and
the Executive within fifteen (15) business days after there
has been a Cut-Back, or such earlier time as requested by the
Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change in Control, the Company shall appoint another nationally
recognized accounting firm to make the determinations required
hereunder (which accounting firm instead shall be the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any determination by the Accounting
Firm shall be binding upon the Company and the
Executive.
4.3 Payment of Severance
Payments.
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(A) Each payment
provided for in Section 4.1 hereof is intended to constitute a
separate payment within the meaning of Section 409A of the
Code. The payments provided for in subsections (A) and (C) of
Section 4.1 hereof shall be made on the sixtieth (60th) day
following the Date of Termination subject to Section 4.3(B) below;
and in the event the Executive becomes entitled to Severance
Payments pursuant to the second sentence of Section 4.1, the
payments provided for in subsections (A) and (C) of Section
4.1 hereof shall be made on the sixtieth (60th) day following the
actual Change in Control that triggered the Severance
Payments.
(B) If any payment,
compensation or other benefit provided to the Executive in
connection with his employment termination is determined, in whole
or in part, to constitute “nonqualified deferred
compensation” within the meaning of Section 409A of the
Code and the Executive is a “specified employee,” as
such term is defined under Section 409A(a)(2)(B)(i) of the Code,
all such payments shall be suspended during the six-month period
following the Executive’s “separation from
service” within the meaning of Treas. Reg.
§ 1.409A-1(h) or any successor thereto. The Company is
entitled to determine whether any amounts under this Agreement are
to be suspended, and the Company shall have no liability to the
Executive for any such determination or any errors made by the
Company in identifying the Executive as a specified employee. If
any amounts are suspended pursuant to the foregoing, such amounts
shall be paid on the earlier of (i) the first business day
following the expiration of the six-month period referred to in the
first sentence of this subsection or (ii) the date of the
Executive’s death. Any amounts so suspended shall earn
interest thereon, if applicable, calculated based upon the then
prevailing monthly short-term applicable federal rate.
Notwithstanding the foregoing, to the extent that the foregoing
applies to the provision of any ongoing welfare benefits to the
Executive that would not be required to be delayed if the premiums
therefor were paid by the Executive, the Executive shall pay the
full cost of premiums for such welfare benefits during the
six-month period and the Company shall pay the Executive an amount
equal to the amount of such premiums paid by the Executive during
such six-month period on the first business day of the month
following the expiration of the six-month period referred to
above.
(C) A termination of
employment shall not be deemed to have occurred for purposes of any
provision of this Agreement providing for the payment of any
amounts or benefits subject to Section 409A of the Code upon or
following a termination of employment unless such termination is
also a “separation from service” as defined in Treas.
Reg. § 1.409A-1(h) or any successor thereto, including the
default presumptions thereunder, and for purposes of any such
provision of this Agreement, references to a
“resignation,” “termination,”
“terminate,” “termination of employment” or
like terms shall mean separation from service.
(D) The parties hereto
acknowledge and agree that the interpretation of Section 409A
of the Code and its application to the terms of this Agreement is
uncertain and may be subject to change as additional guidance and
interpretations become available. Anything to the contrary herein
notwithstanding, all benefits or payments provided by the Company
to the Executive that would be deemed to constitute
“nonqualified deferred compensation” within the meaning
of Section 409A of the Code are intended to comply with
Section 409A of the Code. If, however, any such benefit or
payment is deemed not to comply with Section 409A of the Code,
the Company and the Executive agree to renegotiate in good faith
any such benefit or payment (including, without limitation, as to
the timing of any severance payments payable hereunder)
so
5
that
either (i) Section 409A of the Code will not apply or
(ii) compliance with Section 409A of the Code will be
achieved.
(E) Notwithstanding
anything to the contrary contained in this Agreement, any
reimbursement for a cost or expense under this Agreement shall be
paid in no event later than the end of the taxable year following
the taxable year in which the Executive incurs such cost or
expense. With regard to any provision herein that provides for
reimbursement of costs and expenses or in-kind benefits, except as
permitted by Section 409A of the Code, (i) the right to
reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit, and (ii) the
amount of expenses eligible for reimbursements or in-kind benefits
provided during any taxable year shall not affect the expenses
eligible for reimbursement or in-kind benefits to be provided in
any other taxable year; provided, however, that the foregoing
clause (ii) shall not be violated with regard to expenses
reimbursed under any arrangement covered by Section 105(b) of the
Code solely because such expenses are subject to a limit related to
the period the arrangement is in effect.
4.4 The Company shall
reimburse the Executive for all reasonable legal fees and expenses
incurred by the Executive in attempting to obtain or enforce rights
or benefits provided by this Agreement, if, with respect to any
such right or benefit, the Executive is successful in obtaining or
enforcing such right or benefit (including by negotiated
settlement).
5. Restrictive
Covenants.
5.1 During the
Executive’s employment with the Company and for a period of
twelve (12) months thereafter:
(A) the Executive shall
not, directly for the Executive or any third party, become engaged
in any business or activity which is directly in competition with
any services or products sold by, or any business or activity
engaged in by, the Company or any of its affiliates; provided,
however, that this provision shall not restrict the Executive from
owning or investing in publicly traded securities, so long as the
Executive’s aggregate holdings in any company do not exceed
5% of the outstanding equity of such company and such investment is
passive;
(B) the Executive shall
not solicit any person who was a customer of the Company or any of
its affiliates during the period of the Executive’s
employment hereunder, or solicit potential customers who are or
were identified through leads developed during the course of
employment with the Company, or otherwise divert or attempt to
divert any existing business of the Company or any of its
affiliates; and
(C) the Executive shall
not, directly for the Executive or any third party, solicit,
induce, recruit or cause another person in the employment of the
Company or any of its affiliates to terminate such employee’s
employment for the purposes of joining, associating, or becoming
employed with any business or activity which is in competition with
any services or products sold, or any business or activity engaged
in, by the Company or any of its affiliates.
5.2 The Executive
agrees that he will not, while employed with the Company or at any
time thereafter for any reason, in any fashion, form or manner,
either directly or indirectly, divulge, disclose or communicate to
any person, firm, corporation or other business entity, in
any
6
manner
whatsoever, any confidential information or trade secrets
concerning the business of the Company, including, without limiting
the generality of the foregoing, any customer lists or other
customer identifying information, the techniques, methods or
systems of the Company’s operation or management, any
information regarding its financial matters, or any other material
information concerning the business of the Company, its manner of
operation, its plans or other material data. The provisions of this
Section 5.2 shall not apply to (i) information that is public
knowledge other than as a result of disclosure by the Executive in
breach of this Section 5.2; (ii) information disseminated by
the Company to third parties in the ordinary course of business;
(iii) information lawfully received by the Executive from a
third party who, based upon inquiry by the Executive, is not bound
by a confidential relationship to the Company, or (iv) information
disclosed under a requirement of law or as directed by applicable
legal authority having jurisdiction over the
Executive.
5.3 The Executive
agrees that he will not, while employed with the Company or at any
time thereafter for any reason, in any fashion, form or manner,
either directly or indirectly, disparage or criticize the Company,
or otherwise speak of the Company, in any negative or unflattering
way to anyone with regard to any matters relating to the
Executive’s employment by the Company or the business or
employment practices of the Company. The Company agrees that it
will not, in any fashion, form or manner, either directly or
indirectly, disparage or criticize the Executive or otherwise speak
of the Executive in any negative or unflattering way to anyone with
regard to any matters relating to the Executive’s employment
with the Company. This Section shall not operate as a bar to (i)
statements reasonably necessary to be made in any judicial,
administrative or arbitral proceeding, or (ii) internal
communications between and among the employees of the Company with
a job-related need to know about this Agreement or matters related
to the administration of this Agreement.
5.4 The Executive
understands that in the event of a violation of any provision of
Section 5, the Company shall have the right to (i) seek
injunctive relief, in addition to any other existing rights
provided in this Agreement or by operation of law, without the
requirement of posting bond and (ii) stop making any future
payments or providing benefits under this Agreement. The remedies
provided in this Section 5.4 shall be in addition to any legal or
equitable remedies existing at law or provided for in any other
agreement between the Executive and the Company or any of its
affiliates, and shall not be construed as a limitation upon, or as
an alternative or in lieu of, any such remedies. If any provisions
of Section 5 shall be determined by a court of competent
jurisdiction to be unenforceable in part by reason of it being too
great a period of time or covering too great a geographical area,
it shall be in full force and effect as to that period of time or
geographical area determined to be reasonable by the
court.
5.5 The Executive
acknowledges that the provisions of Section 5 shall extend to any
business that becomes an affiliate of or successor to the Company
or any of its affiliates on account of such Change in
Control.
6. Requirement of Release.
Notwithstanding anything in this Agreement to the contrary, the
release of claims referenced in Section 4.1 above shall completely
release the Company, its parent and affiliates and their respective
officers, directors and employees (collectively the
“Released
Parties” and individually a “Released Party”) and
which shall forever waive all claims of any nature that the
Executive may have against any Released Party, including
without
7
limitation
all claims arising out of Executive’s employment within the
Company or the termination of that employment. If the Executive
does not execute an effective release, such release does not become
irrevocable or such release is revoked, in each case, prior to the
time of payment prescribed in Section 4.1 above, the
Company’s obligations to provide the benefits described in
Section 4.1(C) hereof shall cease immediately.
7. Termination
Procedures.
7.1 Notice of Termination. After a
Change in Control and during the term of this Agreement, any
purported termination of the Executive’s employment (other
than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in
accordance with Section 10 hereof. For purposes of this
Agreement, a “Notice
of Termination” shall mean a notice which shall
indicate whether the termination is for Cause, without Cause, by
reason of Disability, for Good Reason or otherwise and shall set
forth in reasonable detail the facts and circumstances claimed to
provide the basis for termination of the Executive’s
employment; provided, that the failure of the Executive or the
Company to set forth in the Notice of Termination any particular
facts or circumstances shall not waive any right of such party or
preclude such party from asserting such facts or circumstances in
enforcing his or its rights hereunder.
7.2 Date of Termination.
“Date of
Termination,” with respect to any purported
termination of the Executive’s employment after a Change in
Control and during the term of this Agreement, shall mean
(i) if the Executive’s employment is terminated for
Disability, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the
full-time performance of the Executive’s duties during such
thirty (30) day period), and (ii) if the Executive’s
employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination
by the Company, shall not be less than thirty (30) days
(except in the case of a termination for Cause) and, in the case of
a termination by the Executive, shall not be less than fifteen
(15) days nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given).
“Date of
Termination,” with respect to any Pre-Change in
Control Termination shall mean the date of such termination as
reasonably determined by the Company.
8. No Mitigation. The Company
agrees that, if the Executive’s employment with the Company
terminates during the term of this Agreement, the Executive shall
not be required to seek other employment or to attempt in any way
to reduce any amounts payable to the Executive by the Company
pursuant to Section 4 hereof. Further, the amount of any payment or
benefit provided for in this Agreement (other than Section 4.1
(C) hereof) shall not be reduced by any compensation earned by
the Executive as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.
9. Successors; Binding
Agreement.
9.1 In addition to any
obligations imposed by law upon any successor to the Company, the
Company shall require (i) any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business or assets of the
8
Company
(on a consolidated basis) and (ii) in
the case of a disposition of all or substantially all of the
business or assets of the Company (on
a consolidated basis) to more than one entity in a single
transaction or series of related transactions, the entity
that will employ the Executive
immediately after such disposition (such successor or other entity in clause (i) or
(ii), a “Successor”)
to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession or disposition had taken place
prior to the effectiveness of any such succession or disposition.
If such assumption and agreement is obtained prior to the
effectiveness of any such succession or disposition and the
Executive accepts employment with the Successor, the
Executive’s employment shall not be treated as a termination
of the Executive’s employment with the Company (unless
otherwise required in order to comply with the definition of
“separation from service” as set forth in Treas. Reg.
§ 1.409A-1(h) or any successor regulation
thereto).
9.2 This Agreement
shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder (other than amounts which, by
their terms, terminate upon the death of the Executive) if the
Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or
administrators of the Executive’s estate.
10. Notices. For the purpose of
this Agreement, 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 mail, return receipt requested, postage prepaid,
addressed, if to the Executive, to the address shown for the
Executive in the personnel records of the Company and, if to the
Company, to the address set forth below, 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 actual receipt:
To the
Company:
Insignia
Systems, Inc.
0000
Xxxxxxxx Xxxx., Xxxxxxxxxxx, XX 00000
Attention:
Xxxx Xxxxx-Xxxxxx
00. 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 Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or of any lack 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 subsequent time. This Agreement supersedes any other agreements
or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof which have been made by either
party; provided,
however, that this
Agreement shall supersede any agreement setting forth the terms and
conditions of the Executive's termination of employment with the
Company only in the event that the Executive's employment with the
Company is terminated on or following a Change in Control, by the
Company without Cause or by the Executive for Good Reason, as
defined herein, or the Executive incurs a Pre-Change in
Control
9
Termination,
as defined herein. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of Minnesota. All references to sections of the Code shall be
deemed also to refer to any successor provisions to such sections.
Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed.
The obligations of the Company and the Executive under Sections 4
and 5 hereof shall survive the expiration of the term of this
Agreement. This Agreement is not intended by the parties hereto to
constitute an employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended.
12. Validity. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and
effect.
13. Counterparts. This Agreement
may be executed in several counterparts, each of which shall be
deemed to be an original but all of which together will constitute
one and the same instrument.
14. Settlement of Disputes;
Arbitration. All claims by the Executive for benefits under
this Agreement shall be directed in writing to and determined by
the Committee, which shall give full consideration to the
evidentiary standards set forth in this Agreement. Any denial by
the Committee of a claim for benefits under this Agreement shall be
delivered to the Executive in writing and shall set forth the
specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Committee shall afford a reasonable
opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the
Committee a decision of the Committee within sixty (60) days
after notification by the Committee that the Executive’s
claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Minneapolis, Minnesota in accordance
with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator’s award in
any court having jurisdiction.
15. Definitions. For purposes of
this Agreement, the following terms shall have the meanings
indicated below:
(A) “Accounting Firm” shall
have the meaning stated in Section 4.2(B) hereof.
(B) “Anniversary Date” shall
have the meaning stated in Section 2 hereof.
(C) “Board” shall mean the
Board of Directors of the Company.
(D) “Cause” for termination by
the Company of the Executive’s employment shall mean
(i) the deliberate and continued failure by the Executive to
devote substantially all the Executive’s business time and
best efforts to the performance of the Executive’s duties
after a demand for substantial performance is delivered to the
Executive by the Board which specifically identifies the manner in
which the Executive has not substantially performed such duties;
(ii) the deliberate engaging by the Executive in gross
misconduct which is demonstrably
10
and
materially injurious to the Company, monetarily or otherwise; or
(iii) the Executive’s conviction of, or plea of guilty
or nolo contendere to, a
felony or any criminal charge involving moral turpitude. For the
purposes of this Agreement, no act, or failure to act, on the part
of the Executive shall be considered “deliberate”
unless done, or omitted to be done, by the Executive not in good
faith and without reasonable belief that such action or omission
was in the best interests of the Company.
(E) A “Change in
Control” shall be deemed
to have occurred if any of the following shall have occurred after
the Effective Date:
(i) the closing of the
sale of all or substantially all of the assets of the
Company;
(ii) 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;
(iii) 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
(iv) 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.
Notwithstanding anything to the contrary herein, solely for the
purpose of determining the timing of payment or timing of
distribution of any compensation or benefit that constitutes
“non-qualified deferred compensation” within the
meaning of Section 409A of the Internal Revenue Code of 1986, as
amended, a Change in Control shall not be deemed to occur under
this Agreement unless the events that have occurred would also
constitute a “Change in the Ownership or Effective Control of
a Corporation or in the Ownership of a Substantial Portion of the
Assets of a Corporation” under Treasury Department Final
Regulation 1.409A-3(i)(5), or any successor provision.
(F) “Change
in Control Salary” shall have the meaning stated in
Section 4.1(A)(i) hereof.
(G) “COBRA” shall mean the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
from time to time.
(H) “Code” shall mean the
Internal Revenue Code of 1986, as amended from time to
time.
(I) “Committee” shall mean
(i) the individuals (not fewer than three in number) who, on
the date six (6) months before a Change in Control, constitute
the
11
Compensation
Committee of the Board (or its successor), plus (ii) in the
event that fewer than three individuals are available from the
group specified in clause (i) above for any reason, such
individuals otherwise constituting members of the Board as may be
appointed by the individual or individuals so available (including
for this purpose any individual or individuals previously so
appointed under this clause (ii)); provided, that, if after such
appointments fewer than three individuals constitute the Committee,
then the Board shall appoint additional members of the Committee so
that the Committee shall have no fewer than three members, a
majority of which additional appointees, if available, shall be
“independent directors” (as defined under the rules of
the Nasdaq Stock Market).
(J) “Company” shall mean Insignia Systems, Inc., as hereinbefore
defined, or any Successor that has assumed this Agreement pursuant
to Section 10.1 hereof.
(K) “Cut Back” shall have the
meaning stated in Section 4.2(A) hereof.
(L) “Date of Termination”
shall have the meaning stated in Section 7.2
hereof.
(M) “Disability” shall be
deemed the reason for the termination by the Company of the
Executive’s employment, if, as a result of the
Executive’s incapacity due to physical or mental illness, the
Executive shall have been absent from the full-time performance of
the Executive’s duties with the Company for a period of six
(6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given,
the Executive shall not have returned to the full-time performance
of the Executive’s duties.
(N) “Exchange Act” shall mean
the Securities Exchange Act of 1934, as amended from time to
time.
(O) “Excise Tax” shall have
the meaning stated in Section 4.2(A) hereof.
(P) “Good Reason” for
termination by the Executive of the Executive’s employment
shall mean the occurrence (without the Executive’s express
written consent), during the term of this Agreement, of any one of
the following acts by the Company, or failures by the Company to
act:
(i) a material
diminution in the Executive’s authority, duties, or
responsibilities or the assignment to Executive of duties or
responsibilities that are materially inconsistent from those in
effect immediately prior to the Change in Control, provided,
however, that a change in the Company’s status as a publicly
held corporation filing reports under the Exchange Act shall not be
deemed to constitute Good Reason hereunder;
(ii) a
reduction of fifteen percent (15%) or more by the Company in the
Executive’s annual base salary as in effect on the date
hereof or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all senior
executive officers of the Company;
12
(iii) the
failure by the Company to continue in effect any compensation plan
in which the Executive participates immediately prior to the Change
in Control which is material to the Executive’s total
compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect
to such plan, or the failure by the Company to continue the
Executive’s participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable in terms
of compensation opportunity (“materially less
favorable” shall be a reduction of fifteen percent (15%) or
more in the compensation opportunity), as existed immediately prior
to the Change in Control except for across-the-board compensation
plan reductions similarly affecting all senior executive officers
of the Company;
(iv) the
failure by the Company to continue to provide the Executive with
benefits substantially similar to those enjoyed by the Executive
under any of the Company’s retirement, life insurance,
medical, health and accident, or disability plans in which the
Executive was participating immediately prior to the Change in
Control, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits (a
“material reduction” shall be a reduction of ten
percent (10%) or more in the value of the aggregate benefits), or
deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Change in Control except for
(i) across-the-board benefit reductions similarly affecting
all senior executive officers of the Company or (ii) reduction or
elimination of Executive’s annual comprehensive
“executive” physical examinations, financial planning
or other perquisites; or
(v) a material
breach by the Company of its obligations under this Agreement;
or
The
Executive’s continued employment shall not constitute consent
to, or a waiver of rights with respect to, any act or failure to
act constituting Good Reason hereunder.
The
Executive’s right to terminate employment for Good Reason
shall be subject to the following conditions: (i) any amounts
payable upon a Good Reason termination shall be paid only if the
Executive actually terminates employment within one hundred and
eighty (180) days following the initial existence of the Good
Reason condition and (ii) the amount, time and form of payment
upon a termination of employment for Good Reason shall be the same
as the amount, time and form of payment payable upon an involuntary
termination without Cause. The Executive must also provide notice
to the Company of the Good Reason condition within ninety
(90) days of the initial existence of such condition and the
Company must be given at least thirty (30) days to remedy such
situation.
(Q) “Notice of Termination”
shall have the meaning stated in Section 7.1 hereof.
(R) “Payment” shall have the
meaning stated in Section 4.2(A) hereof.
(S) “Pre-Change in Control
Termination” shall have the meaning stated in Section
4.1 hereof.
13
(T) “Qualifying Termination”
shall mean a termination of the Executive’s employment,
concurrent with, or during the twenty-four month period following,
a Change in Control, unless such termination is (i) by the
Company for Cause, (ii) by reason of death or Disability, or
(iii) by the Executive without Good Reason.
(U) “Released Parties” or
“Released
Party” shall have the meaning stated in Section 6
hereof.
(V) “Severance Payments” shall
mean those payments described in Section 4.1 hereof.
(W) “Successor” shall have the
meaning stated in Section 10.1 hereof.
INSIGNIA SYSTEMS,
INC.
By:
/s/ Xxxxx
Xxxxxxxx
Name: Xxxxx
Xxxxxxxx
Title:
Chair of the Board of Directors
Xxxxxxx
Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
14
EXHIBIT A
FORM OF RELEASE AGREEMENT
THIS
RELEASE AGREEMENT (the “Release”) is made as of this
30th day
of June, 2017, by and between Xxxxxxx Xxxxxxxx
(“Executive”) and Insignia Systems, Inc. (the
“Company”).
1.
FOR AND IN
CONSIDERATION of the payments and benefits provided in the Change
in Control Agreement between Executive and the Company dated as of
June 30, 2017, (as such agreement may be amended, restated or
replaced, the “Change in Control Agreement”),
Executive, for herself, her successors and assigns, executors and
administrators, now and forever hereby releases and discharges the
Company, together with all of its past and present parents,
subsidiaries, and affiliates, together with each of their officers,
directors, stockholders, partners, employees, agents,
representatives and attorneys, and each of their subsidiaries,
affiliates, estates, predecessors, successors, and assigns
(hereinafter collectively referred to as the “Releasees”) from any and
all rights, claims, charges, actions, causes of action, complaints,
sums of money, suits, debts, covenants, contracts, agreements,
promises, obligations, damages, demands or liabilities of every
kind whatsoever, in law or in equity, whether known or unknown,
suspected or unsuspected, which Executive or Executive’s
executors, administrators, successors or assigns ever had, now has
or may hereafter claim to have by reason of any matter, cause or
thing whatsoever; arising from the beginning of time up to the date
of the Release: (i) relating in any way to Executive’s
employment relationship with the Company or any of the Releasees,
or the termination of Executive’s employment relationship
with the Company or any of the Releasees; (ii) arising under or
relating to the Change in Control Agreement; (iii) arising under
any federal, local or state statute or regulation, including,
without limitation, the Age Discrimination in Employment Act of
1967, as amended by the Older Workers Benefit Protection Act, Title
VII of the Civil Rights Act of 1964, the Americans with
Disabilities Act of 1990, the Employee Retirement Income Security
Act of 1974, and/or the applicable state law against
discrimination, each as amended; (iv) relating to wrongful
employment termination or breach of contract; or (v) arising under
or relating to any policy, agreement, understanding or promise,
written or oral, formal or informal, between the Company and any of
the Releasees and Executive; provided, however, that notwithstanding
the foregoing, nothing contained in the Release shall in any way
diminish or impair: (i) the Executive's ability to enforce the
provisions of Sections 4.1(C) and (D) of the Change in Control
Agreement, (ii) any direct or indirect holdings of equity in
Insignia Systems, Inc.; (iii) any claims for accrued and vested
benefits under any of the Company's employee retirement and welfare
benefit plans; and (iv) any rights or claims Executive may have
that cannot be waived under applicable law; (collectively, the
“Excluded
Claims”). Executive further acknowledges and agrees
that, except with respect to Excluded Claims, the Company and the
Releasees have fully satisfied any and all obligations whatsoever
owed to Executive arising out of Executive’s employment with
the Company or any of the Releasees, and that no further payments
or benefits are owed to Executive by the Company or any of the
Releasees.
2.
Executive
understands and agrees that, except for the Excluded Claims,
Executive has
knowingly
relinquished, waived and forever released any and all rights to any
personal recovery in any action or proceeding that may be commenced
on Executive’s behalf arising out of the aforesaid employment
relationship or the termination thereof, including, without
limitation, claims for back pay, front pay, liquidated damages,
compensatory damages, general damages, special damages, punitive
damages, exemplary damages, costs, expenses and attorneys’
fees.
3.
Executive
acknowledges and agrees that Executive has been advised to consult
with an attorney of Executive’s choosing prior to signing the
Release. Executive understands and agrees that Executive has the
right and has been given the opportunity to review the Release with
an attorney of Executive’s choice should Executive so desire.
Executive also agrees that Executive has entered into the Release
freely and voluntarily. Executive further acknowledges and agrees
that Executive has had at least forty-five (45) calendar days to
consider the Release, although Executive may sign it sooner if
Executive wishes. In addition, once Executive has signed the
Release, Executive shall have seven (7) additional days from the
date of execution to revoke Executive’s consent and may do so
by writing to: Insignia Systems, Inc., 0000 Xxxxxxxx Xxxxxxxxx,
Xxxxxxxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000. The Release shall not be
effective, and no payments shall be due under Section 4 of the
Change in Control Agreement, until the eighth (8th) day after
Executive shall have executed the Release and returned it to the
Company, assuming that Executive had not revoked Executive’s
consent to the Release prior to such date.
4.
It is understood
and agreed by Executive that the payment made to Executive is not
to be construed as an admission of any liability whatsoever on the
part of the Company or any of the other Releasees, by whom
liability is expressly denied.
5.
The Release is
executed by Executive voluntarily and is not based upon any
representations or statements of any kind made by the Company or
any of the other Releasees as to the merits, legal liabilities or
value of Executive’s claims. Executive further acknowledges
that Executive has had a full and reasonable opportunity to
consider the Release and that Executive has not been pressured or
in any way coerced into executing the Release.
6.
The exclusive venue
for any disputes arising hereunder shall be the state or federal
courts located in the State of Minnesota, and each of the parties
hereto irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of
the venue of any such proceeding brought in such a court and any
claim that any such proceeding brought in such a court has been
brought in an inconvenient forum. Each of the parties hereto also
agrees that any final and unappealable judgment against a party
hereto in connection with any action, suit or other proceeding may
be enforced in any court of competent jurisdiction, either within
or outside of the United States. A certified or exemplified copy of
such award or judgment shall be conclusive evidence of the fact and
amount of such award or judgment.
7.
The Release and the
rights and obligations of the parties hereto shall be governed and
construed in accordance with the laws of the State of Minnesota. If
any provision hereof
is
unenforceable or is held to be unenforceable, such provision shall
be fully severable, and this document and its terms shall be
construed and enforced as if such unenforceable provision had never
comprised a part hereof, the remaining provisions hereof shall
remain in full force and effect, and the court construing the
provisions shall add as a part hereof a provision as similar in
terms and effect to such unenforceable provision as may be
enforceable, in lieu of the unenforceable provision.
8.
The Release shall
inure to the benefit of and be binding upon the Company and its
successors and assigns.
IN
WITNESS WHEREOF, Executive and the Company have executed the
Release as of the date and year first written above.
INSIGNIA SYSTEMS,
INC.
By:
/s/ Xxxxxxxx
Xxxxxx
Name:
Xxxxxxxx Xxxxxx
Title:
President and CEO
Xxxxxxx
Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
