EXHIBIT 10.3
CHANGE IN CONTROL SEVERANCE AGREEMENT
AGREEMENT made as of this 24th day of February, 2003 by and between
Insignia Systems, Inc., a Minnesota corporation (the "Company"), and Denni Xx
Xxxxxx (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.
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 gross base salary which was in effect
immediately prior to the Change in Control. 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, and the net amount shall be
paid to Executive not later than the ten days after employment ceases.
4. Circumstances in Which Severance Shall Not Be Paid.
Notwithstanding the provisions of Section 3 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 Retirement (as defined below);
(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).
For purposes of this Section 4, the following defined terms have the meanings
indicated:
"Retirement" means retirement at or after the date the Executive has
attained age 65;
"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.
"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.
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.
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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EXECUTIVE: INSIGNIA SYSTEMS, INC.
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxxx Drill
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Denni Xx Xxxxxx Its: CEO
