INSIGNIA SYSTEMS INC/MN (Form: 10-Q, Received: 08/09/2011 16:15:05)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended June 30, 2011

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from ___________________ to _________________

Commission File Number: 1-13471

INSIGNIA SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Minnesota	41-1656308
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

8799 Brooklyn Blvd.

Minneapolis, MN 55445

(Address of principal executive offices)

(763) 392-6200

(Registrant’s telephone number, including area code)

Not applicable.

(Former name, former address and former fiscal year if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller Reporting Company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Number of shares outstanding of Common Stock, $.01 par value, as of August 4, 2011, was 15,319,928.

Insignia Systems, Inc.

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PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Balance Sheets – June 30, 2011 and December 31, 2010 (unaudited)	3

	Statements of Operations – Three and six months ended June 30, 2011 and 2010 (unaudited)	4

	Statements of Cash Flows – Six months ended June 30, 2011 and 2010 (unaudited)	5

	Notes to Financial Statements – June 30, 2011 (unaudited)	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16

Item 4.	Controls and Procedures	16


PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	17

Item 1A.	Risk Factors	17

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18

Item 3.	Defaults Upon Senior Securities	18

Item 4.	Removed and Reserved	18

Item 5.	Other Information	18

Item 6.	Exhibits	18

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Insignia Systems, Inc .

CONDENSED BALANCE SHEETS

(Unaudited)

	June 30, 2011		December 31, 2010
ASSETS
Current Assets:
Cash and cash equivalents	$	40,288,000	$	13,196,000
Short-term investments		—		500,000
Accounts receivable, net		3,422,000		3,227,000
Inventories		434,000		414,000
Deferred tax assets, net		151,000		151,000
Prepaid expenses and other		724,000		360,000
Total Current Assets		45,019,000		17,848,000

Other Assets:
Property and equipment, net		1,982,000		975,000
Non-current deferred tax assets, net		166,000		5,551,000
Other		4,398,000		227,000

Total Assets	$	51,565,000	$	24,601,000

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	1,475,000	$	2,335,000
Income tax payable		12,903,000		—
Accrued liabilities
Compensation		1,355,000		809,000
Legal		97,000		376,000
Employee stock purchase plan		99,000		170,000
Retailer payments		28,000		1,119,000
Other		331,000		400,000
Deferred revenue		350,000		134,000
Total Current Liabilities		16,638,000		5,343,000

Long-Term Liabilities:
Accrued compensation		800,000		—
Accrued income taxes		353,000		—
Total Liabilities		17,791,000		5,343,000

Commitments and Contingencies		—		—

Shareholders' Equity		33,774,000		19,258,000

Total Liabilities and Shareholders' Equity	$	51,565,000	$	24,601,000

See accompanying notes to financial statements.

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Insignia Systems, Inc.

STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30						Six Months Ended June 30
	2011			2010			2011			2010
Services revenues	$	4,446,000		$	7,562,000		$	8,820,000		$	12,699,000
Products revenues		580,000			764,000			1,153,000			1,510,000
Total Net Sales		5,026,000			8,326,000			9,973,000			14,209,000

Cost of services		2,705,000			3,482,000			5,248,000			5,918,000
Cost of goods sold		383,000			499,000			751,000			1,016,000
Total Cost of Sales		3,088,000			3,981,000			5,999,000			6,934,000
Gross Profit		1,938,000			4,345,000			3,974,000			7,275,000

Operating Expenses:
Selling		1,408,000			1,775,000			2,963,000			3,411,000
Marketing		433,000			411,000			847,000			806,000
General and administrative		1,237,000			1,508,000			3,263,000			2,855,000
Gain from litigation settlement, net		—			—			(89,762,000	)		—
Total Operating Expenses		3,078,000			3,694,000			(82,689,000	)		7,072,000
Operating Income (Loss)		(1,140,000	)		651,000			86,663,000			203,000

Other Income (Expense):
Interest income		21,000			8,000			42,000			26,000
Interest expense		—			(5,000	)		—			(10,000	)
Total Other Income		21,000			3,000			42,000			16,000
Income (Loss) Before Taxes		(1,119,000	)		654,000			86,705,000			219,000

Income tax benefit (expense)		444,000			—			(33,507,000	)		—
Net Income (Loss)	$	(675,000	)	$	654,000		$	53,198,000		$	219,000

Net income (loss) per share:
Basic	$	(0.04	)	$	0.04		$	3.37		$	0.01
Diluted	$	(0.04	)	$	0.04		$	3.26		$	0.01

Shares used in calculation of net income (loss) per share:
Basic		15,542,000			15,487,000			15,766,000			15,434,000
Diluted		15,542,000			16,924,000			16,341,000			16,815,000

Cash dividends declared per common share:	$	0.00		$	0.00		$	2.00		$	0.00

See accompanying notes to financial statements.

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Insignia Systems, Inc.

STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended June 30	2011			2010
Operating Activities:
Net income	$	53,198,000		$	219,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		256,000			161,000
Deferred income tax expense		5,385,000			—
Stock-based compensation		372,000			402,000
Changes in operating assets and liabilities:
Accounts receivable		(195,000	)		(1,700,000	)
Inventories		(20,000	)		(14,000	)
Prepaid expenses and other		(618,000	)		159,000
Accounts payable		(860,000	)		92,000
Accrued liabilities		(164,000	)		(307,000	)
Income tax payable		15,143,000			—
Accrued income taxes		353,000			—
Excess tax benefit		(2,240,000	)		—
Deferred revenue		216,000			(525,000	)
Net cash provided by (used in) operating activities		70,826,000			(1,513,000	)

Investing Activities:
Purchases of property and equipment		(1,180,000	)		(275,000	)
Acquisition of selling arrangement		(4,000,000	)		—
Purchases of investments		—			(2,600,000	)
Proceeds from sale of investments		500,000			3,600,000
Net cash provided by (used in) investing activities		(4,680,000	)		725,000

Financing Activities:
Proceeds from issuance of common stock, net		3,090,000			714,000
Excess tax benefit		2,240,000			—
Dividends paid		(31,335,000	)		—
Repurchase of common stock, net		(13,049,000	)		(474,000	)
Net cash provided by (used in) financing activities		(39,054,000	)		240,000
Increase (decrease) in cash and cash equivalents		27,092,000			(548,000	)
Cash and cash equivalents at beginning of period		13,196,000			8,797,000
Cash and cash equivalents at end of period	$	40,288,000		$	8,249,000

Supplemental disclosures for cash flow information:
Cash paid during periods for income taxes	$	12,617,000		$	40,000

Non-cash financing activities:
Cashless exercise of options	$	800,000		$	—

See accompanying notes to financial statements.

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Insignia Systems, Inc.

Notes To Financial Statements

(Unaudited)

1. Summary of Significant Accounting Policies.

Description of Business . Insignia Systems, Inc. (the “Company”) markets in-store advertising products, programs and services to consumer packaged goods manufacturers (customers) and retailers. The Company has been in business since 1990. The Company’s products and services includes the Insignia POPSign® program, thermal sign card supplies for the Company’s SIGNright and Impulse systems, Stylus software and laser printable cardstock and label supplies. Since 1998, the Company has been focusing on providing in-store services through the Insignia Point-of- Purchase Services (Insignia POPS®) in-store advertising program.

Basis of Presentation . Financial statements for the interim periods included herein are unaudited; however, they contain all adjustments, including normal recurring accruals, which in the opinion of management, are necessary to present fairly the financial position of the Company at June 30, 2011, its results of operations for the three and six months ended June 30, 2011 and 2010, and its cash flows for the six months ended June 30, 2011 and 2010. Results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.

The financial statements do not include certain footnote disclosures and financial information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America and, therefore, should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

The Summary of Significant Accounting Policies in the Company’s 2010 Annual Report on Form 10-K describes the Company’s accounting policies.

Inventories . Inventories are primarily comprised of parts and supplies for Impulse and SIGNright machines, sign cards, and rollstock. Inventory is valued at the lower of cost or market using the first-in, first-out (FIFO) method, and consists of the following:

	June 30, 2011		December 31, 2010
Raw materials	$	237,000	$	132,000
Work-in-process		8,000		25,000
Finished goods		189,000		257,000
	$	434,000	$	414,000

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Property and Equipment . Property and equipment consists of the following:

	June 30, 2011			December 31, 2010
Property and Equipment:
Production tooling, machinery and equipment	$	2,350,000		$	2,344,000
Office furniture and fixtures		260,000			258,000
Computer equipment and software		1,036,000			936,000
Web site		38,000			38,000
Leasehold improvements		351,000			351,000
Construction in progress		1,072,000			—
		5,107,000			3,927,000
Accumulated depreciation and amortization		(3,125,000	)		(2,952,000	)
Net Property and Equipment	$	1,982,000		$	975,000

Stock-Based Compensation . The Company measures and recognizes compensation expense for all stock-based payments at fair value using the Black-Scholes option pricing model to determine the weighted average fair value of options and employee stock purchase plan rights. The Company recognizes stock-based compensation expense on a straight-line method over the requisite service period of the award.

There were 322,000 stock option awards granted during the six months ended June 30, 2011, and the Company estimated the fair value of these awards using the following weighted average assumptions: expected life of 4.3 years, expected volatility of 70%, dividend yield of 0% and risk-free interest rate of 1.81%. The total fair value of stock option awards granted during the six months ended June 30, 2011 and 2010 was approximately $737,000 and $745,000, respectively. The Company estimated the fair value of stock-based rights granted during the six months ended June 30, 2011 under the employee stock purchase plan using the following weighted average assumptions: expected life of 1 year, expected volatility of 30%, dividend yield of 0% and risk-free interest rate of 0.30%. The total fair value of stock-based rights granted under the employee stock purchase plan during the six months ended June 30, 2011 and 2010 was approximately $63,000 and $80,000, respectively. Total stock-based compensation expense recorded for the three and six months ended June 30, 2011, was $227,000 and $372,000, respectively, and for the three and six months ended June 30, 2010 was $289,000 and $402,000, respectively. The total option exercises in the three and six months ended June 30, 2011 were 8,000 and 1,617,000, for which the Company received proceeds of $21,000 and $2,936,000. Total option exercises in the three and six months ended June 30, 2010 were 139,000 and 328,000, for which the Company received proceeds of $76,000 and $614,000.

Dividends Paid . On February 22, 2011, the Board of Directors approved a special $2.00 per common share dividend totaling $31,335,000. The dividend was accrued at March 31, 2011 and paid on May 2, 2011.

Net Income (Loss) Per Share . Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average shares outstanding and excludes any dilutive effects of stock options and warrants. Diluted net income (loss) per share gives effect to all diluted potential common shares outstanding during the period. During the three months ended June 30, 2010, 1,437,000 stock options and warrants were included in the computation of diluted net income (loss) per share. Due to the net loss incurred during the three months ended June 30, 2011, all stock options were anti-dilutive. Options and warrants to purchase approximately 710,000 and 481,000 shares of common stock with weighted average exercise prices of $6.56 and $7.73 were outstanding at June 30, 2011 and 2010 and were not included in the computation of common stock equivalents for the three months ended June 30, 2011 and 2010 because their exercise prices were higher than the average fair market value of the common shares during the reporting period . Options and warrants to purchase approximately 512,000 and 459,000 shares of common stock with weighted average exercise prices of $7.25 and $7.87 were outstanding at June 30, 2011 and 2010 and were not included in the computation of common stock equivalents for the six months ended June 30, 2011 and 2010 because their exercise prices were higher than the average fair market value of the common shares during the reporting period.

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Weighted average common shares outstanding for the three and six months ended June 30, 2011 and 2010 were as follows:

	Three Months Ended June 30				Six Months Ended June 30
	2011		2010		2011		2010
Denominator for basic net income per share - weighted average shares		15,542,000		15,487,000		15,766,000		15,434,000

Effect of dilutive securities:
Stock options and warrants		—		1,437,000		575,000		1,381,000

Denominator for diluted net income per share - weighted average shares		15,542,000		16,924,000		16,341,000		16,815,000

2. Restatement. As announced on August 3, 2011, the Company is restating its financial statements as of and for the year ended December 31, 2010 and the quarter ended March 31, 2011. The restatement for 2010 is expected to decrease the previously reported amounts of deferred tax assets and shareholders’ equity by approximately $1,000,000 as of December 31, 2010, and decrease 2010 net income by the same amount, with a proportionate decrease in earnings per share. The amounts shown in this filing in the Balance Sheet as of December 31, 2010 are adjusted to what the Company currently expects will be the adjusted amounts upon completion of the restatement as of and for the year ended December 31, 2010, but the final amounts could vary from these estimates.

3. Commitments and Contingencies.

Legal . On September 23, 2004, the Company brought suit against News America and Albertson’s Inc. (Albertson’s) in Federal District Court in Minneapolis, Minnesota, for violations of federal and state antitrust and false advertising laws, alleging that News America has acquired and maintained monopoly power through various wrongful acts designed to harm the Company in the in-store advertising and promotion products and services market. The suit sought injunctive relief sufficient to prevent further antitrust injury and an award of treble damages for the harm caused to the Company. On September 20, 2006, the State of Minnesota through its Attorney General intervened as a co-plaintiff in the business disparagement portion of the case. In December 2006, News America filed counterclaims in the case that included claims of alleged interference with contracts and alleged libel and slander against Insignia and one of its officers. On February 4, 2008, the Court approved a consent decree entered into by News America and the State of Minnesota under which News America agreed to not violate Minnesota’s statutes prohibiting commercial disparagement. On July 29, 2008, the Company and Albertson’s entered into a settlement agreement and mutual release, in which they each agreed to release all claims against the other, and the Company agreed to dismiss its lawsuit against Albertson’s.

On February 7, 2011, trial in the Company’s lawsuit against News America commenced in U.S. District Court for the District of Minnesota. On February 9, 2011, the Company and News America entered into a Settlement Agreement to settle the lawsuit. Pursuant to the Settlement Agreement, News America paid the Company $125,000,000, and the Company paid News America $4,000,000 in exchange for a 10-year arrangement to sell signs with price into News America’s network of retailers as News America’s exclusive agent. The Company believes the $4,000,000 represents the fair value of this arrangement and is amortizing this amount on a straight-line basis over the 10-year term of the arrangement. Amortization expense related to this arrangement was $83,000 for each of the three and six months ended June 30, 2011. The Company expects amortization expense of $400,000 per year for the next five years related to this arrangement. The definitive agreement for the 10-year arrangement was approved by the U.S. District Court on June 6, 2011 and signed by both parties. The Settlement Agreement included the dismissal with prejudice of the Company’s lawsuit against News America. Certain issues have arisen in connection with the implementation of the definitive agreement, which the parties are attempting to resolve.

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A reconciliation of the settlement proceeds to the gain from litigation settlement recognized in the statement of operations is as follows:

	Three Months Ended June 30				Six Months Ended June 30
	2011		2010		2011			2010

Settlement proceeds	$	—	$	—	$	125,000,000		$	—
Less contingent attorney's fees		—		—		(31,250,000	)		—
Less bonuses paid to employees		—		—		(3,988,000	)		—
Gain from litigation settlement, net	$	—	$	—	$	89,762,000		$	—

Legal fees of $1,018,000 were incurred in connection with the lawsuit as the Company prepared for trial, worked through settlement discussions, and post-settlement activities. Additionally, during the six months ended June 30, 2011, a contingent fee payment of $31,250,000 was made to the Company’s lead trial counsel out of the settlement proceeds. Management does not expect significant legal fees and expenses in future periods after post-settlement activities are concluded. Legal fees and expenses are expensed as incurred and are included in general and administrative expenses in the statements of operations, except for the contingent fee payment which was included as a reduction of the gain from the litigation settlement.

The Company is subject to various other legal proceedings in the normal course of business. Management believes the outcome of these proceedings will not have a material adverse effect on the Company’s financial position or results of operations.

4. Income Taxes. As a result of the taxable income generated by the settlement proceeds, $5,385,000 of the deferred tax assets were utilized during the first six months of 2011. For the three months ended June 30, 2011, an income tax benefit was recorded of $444,000, or 39.7% of loss before income taxes. For the six months ended June 30, 2011, the provision for income taxes was $33,507,000, or 38.6% of income before income taxes. The income tax provision (benefit) during the three and six months ended June 30, 2011, is comprised of federal and state taxes. The primary difference between the Company’s June 30, 2011, effective tax rate and the statutory federal rate is due to state income taxes. For the six months ended June 30, 2010, no provision for income taxes or tax benefit was recorded as a full valuation allowance existed on the Company’s deferred tax assets.

As of June 30, 2011, the Company had unrecognized tax benefits totaling $353,000 excluding interest which relate to state nexus issues (included in long-term liabilities). The amount of the unrecognized tax benefits, if recognized, that would affect the effective income tax rates of future periods is $353,000. Due to the current statute of limitations regarding the unrecognized tax benefits, the unrecognized tax benefits and associated interest is reviewed quarterly.

5. Concentrations. During the six months ended June 30, 2011, Nestle Co., Valassis Sales and Marketing Services, Inc., and Hormel Foods Corp., accounted for 31%, 15%, and 10%, respectively, of the Company’s total net sales. At June 30, 2011, these customers accounted for 21%, 11%, and 14%, respectively, of the Company’s total accounts receivable. During the six months ended June 30, 2010, Valassis Sales and Marketing Services, Inc., General Mills, Inc., and Nestle Co. accounted for 20%, 19% and 17%, respectively, of the Company’s total net sales. At June 30, 2010, these customers represented 26%, 13% and 15%, respectively, of the Company’s total accounts receivable.

Although there are a number of customers that the Company sells to, the loss of a major customer could adversely affect operating results. Additionally, the loss of a major retailer from the Company’s retail network could adversely affect operating results.

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6. New Accounting Pronouncements. In October 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) No. 2009-13, Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force , that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under previous U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence (“VSOE”) if available, third-party evidence if VSOE is not available, or estimated selling price if neither VSOE nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. This standard became effective for the Company in January 2011 and did not have a material impact on the Company’s results of operations or financial condition.

In October 2009, the FASB issued ASU 2009-14, Certain Revenue Arrangements That Include Software Elements — a consensus of the FASB Emerging Issues Task Force . This ASU removes tangible products containing software components and nonsoftware components that function together to deliver the tangible product’s essential functionality from the scope of the software revenue guidance in Subtopic 985-605 of the Codification. Additionally, ASU 2009-14 provides guidance on how a vendor should allocate arrangement consideration to deliverables in an arrangement that includes both tangible products and software that is not essential to the product’s functionality. This standard became effective for the Company in January 2011 and did not have a material impact on the Company’s results of operations or financial condition.

In December 2009, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures Topic 820 “Improving Disclosures about Fair Value Measurements.” This ASU requires new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in Codification Subtopic 820-10. The FASB’s objective is to improve these disclosures and, thus, increase the transparency in financial reporting. Several of the new disclosures were effective for reporting periods beginning after December 15, 2009, with the remaining new disclosures effective for reporting periods beginning after December 15, 2010. The Company adopted the amended guidance and it did not have a significant impact on the Company’s financial statements.

In July 2010, the FASB issued ASU 2010-20, Receivables Topic 310 “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses,” to enhance the disclosures required for financing receivables (for example, loans, trade accounts receivable, notes receivable, and receivables relating to a lessor’s leveraged, direct financing, and sales-type leases) and allowances for credit losses. The amended disclosures are designed to provide more information to financial statement users regarding the credit quality of a creditor’s financing receivables and the adequacy of its allowance for credit losses. The amended guidance is effective for period-end balances beginning with the first interim or annual reporting period ending on or after December 15, 2010. The amended guidance is effective for activity during a reporting period beginning on or after December 15, 2010. The Company adopted the amended guidance and it did not have a significant impact on the Company’s financial statements.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU provides a consistent definition of fair value between U.S. GAAP and International Financial Reporting Standards. Additionally, the ASU changes certain fair value measurement principles and expands the disclosures for fair value measurements. ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011 and is to be applied prospectively. The adoption of this ASU is not expected to have a material impact on the Company’s financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Insignia Systems, Inc. markets in-store advertising programs, services and products to retailers and consumer packaged goods manufacturers. The Company’s services and products include the Insignia Point-of-Purchase Services (POPS) in-store advertising program, thermal sign card supplies for the Company’s SIGNright and Impulse systems, Stylus software and laser printable cardstock and label supplies.

Results of Operations

The following table sets forth, for the periods indicated, certain items in the Company’s Statements of Operations as a percentage of total net sales.

	Three Months Ended June 30						Six Months Ended June 30
	2011			2010			2011			2010
Net Sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of Sales		61.4			47.8			60.2			48.8
Gross Profit		38.6			52.2			39.8			51.2
Operating expenses:
Selling		28.0			21.3			29.7			24.0
Marketing		8.6			4.9			8.5			5.7
General and administrative		24.6			18.1			32.7			20.1
Gain from litigation settlement, net		—			—			(900.1	)		—
Total operating expenses		61.2			44.3			(829.2	)		49.8
Operating income (loss)		(22.6	)		7.9			869.0			1.4
Other income		0.4			—			0.4			0.1
Income (loss) before taxes		(22.2	)		7.9			869.4			1.5
Income tax expense (benefit)		(8.8	)		—			336.0			—
Net income (loss)		(13.4	)%		7.9	%		533.4	%		1.5	%

Decreased net sales in the first six months of 2011 compared to the first six months of 2010, combined with the effect of fixed costs in the costs of sales, resulted in a decrease in gross profit in the 2011 period. The decrease in gross profit and increased operating expenses in the 2011 period were dramatically offset by the litigation settlement, resulting in significant net income in 2011 as compared to the net income in the 2010 period. See the non-GAAP financial measures information which follows later in this section for a comparison of the 2011 and 2010 periods’ non-GAAP net income (loss).

Three and Six Months ended June 30, 2011 Compared to Three and Six Months Ended June 30, 2010

Net Sales. Net sales for the three months ended June 30, 2011, decreased 39.6% to $5,026,000 compared to $8,326,000 for the three months ended June 30, 2010. Net sales for the six months ended June 30, 2011, decreased 29.8 % to $9,973,000 compared to $14,209,000 for the six months ended June 30, 2010.

Service revenues from our POPSign programs for the three months ended June 30, 2011, decreased 41.2% to $4,446,000 compared to $7,562,000 for the three months ended June 30, 2010. The decrease was primarily due to a decrease of 42.2% in the number of signs placed, which was partially offset by a 3.5% increase in the average sign price. Service revenues from our POPSign programs for the six months ended June 30, 2011, decreased 30.5% to $8,820,000 compared to $12,699,000 for the six months ended June 30, 2010. The decrease in service revenues for the six-month period was due primarily to a 28.1% decrease in the number of signs placed combined with a 3.6% decrease in the average sign price. The decrease in the number of signs displayed in the 2011 periods was primarily related to the expiration of the Kroger retailer contract at the end of 2010. For the three and six months ended June 30, 2010, revenue recognized by advertising in Kroger stores was $2,901,000 and $4,884,000, respectively.

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Product sales for the three months ended June 30, 2011, decreased 24.1% to $580,000 compared to $764,000 for the three months ended June 30, 2010. Product sales for the six months ended June 30, 2011, decreased 23.6% to $1,153,000 compared to $1,510,000 for the six months ended June 30, 2010. The decreases in both 2011 periods were primarily due to lower sales of laser printer supplies.

Gross Profit. Gross profit for the three months ended June 30, 2011, decreased 55.4% to $1,938,000 compared to $4,345,000 for the three months ended June 30, 2010. Gross profit for the six months ended June 30, 2011, decreased 45.4% to $3,974,000 compared to $7,275,000 for the six months ended June 30, 2010. Gross profit as a percentage of total net sales decreased to 38.6% for the three months ended June 30, 2011, compared to 52.2% for the three months ended June 30, 2010. Gross profit as a percentage of total net sales decreased to 39.8% for the six months ended June 30, 2011, compared to 51.2% for the six months ended June 30, 2010.

Gross profit from our POPSign program revenues for the three months ended June 30, 2011, decreased 57.3% to $1,741,000 compared to $4,080,000 for the three months ended June 30, 2010. Gross profit from our POPSign program revenues for the six months ended June 30, 2011, decreased 47.3% to $3,572,000 compared to $6,781,000 for the six months ended June 30, 2010. The decreases in both 2011 periods were primarily due to decreased sales. Gross profit as a percentage of POPSign program revenues for the three months ended June 30, 2011, decreased to 39.2% compared to 54.0% for the three months ended June 30, 2010. Gross profit as a percentage of POPSign program revenues for the six months ended June 30, 2011, decreased to 40.5% compared to 53.4% for the six months ended June 30, 2010. The decreases in gross profit as a percentage of POPSign program revenues in both 2011 periods were primarily due to increased retailer costs and the effect of fixed costs on lower sales.

Gross profit from our product sales for the three months ended June 30, 2011, decreased 25.7% to $197,000 compared to $265,000 for the three months ended June 30, 2010. Gross profit from our product sales for the six months ended June 30, 2011, decreased 18.6% to $402,000 compared to $494,000 for the six months ended June 30, 2010. The decreases in both 2011 periods were primarily due to decreased sales. Gross profit as a percentage of product sales was 34.0% for the three months ended June 30, 2011, compared to 34.7% for the three months ended June 30, 2010. The decrease was primarily due to the effect of fixed costs on lower sales partially offset by lower variable costs. Gross profit as a percentage of product sales was 34.9% for the six months ended June 30, 2011, compared to 32.7% for the six months ended June 30, 2010. The increase was primarily due to higher margin sales partially offset by the effect of fixed costs on lower total net sales.

Operating Expenses

Selling. Selling expenses for the three months ended June 30, 2011, decreased 20.7% to $1,408,000 compared to $1,775,000 for the three months ended June 30, 2010. Selling expenses for the six months ended June 30, 2011, decreased 13.1% to $2,963,000 compared to $3,411,000 for the six months ended June 30, 2010. Decreases in the 2011 periods were primarily due to decreased sales commissions related to decreased POPSign program revenues.

Selling expenses as a percentage of total net sales increased to 28.0% for the three months ended June 30, 2011, compared to 21.3% for the three months ended June 30, 2010. Selling expenses as a percentage of total net sales increased to 29.7% for the six months ended June 30, 2011, compared to 24.0% for the six months ended June 30, 2010. The increases in the selling expenses as a percentage of total net sales in the 2011 periods were due to the effect of fixed selling expenses on lower sales.

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Marketing. Marketing expenses for the three months ended June 30, 2011, increased 5.4% to $433,000 compared to $411,000 for the three months ended June 30, 2010. Marketing expenses for the six months ended June 30, 2011, increased 5.1% to $847,000 compared to $806,000 for the six months ended June 30, 2010. Increased expenses in the 2011 periods were primarily the result of increased staffing levels and the related employee benefit costs.

Marketing expenses as a percentage of total net sales increased to 8.6% for the three months ended June 30, 2011, compared to 4.9% for the three months ended June 30, 2010. Marketing expenses as a percentage of total net sales increased to 8.5% for the six months ended June 30, 2011, compared to 5.7% for the six months ended June 30, 2010. The increases in marketing expenses as a percentage of total net sales in the 2011 periods were primarily due to the effect of the increased costs discussed above in combination with decreased sales.

General and administrative. General and administrative expenses for the three months ended June 30, 2011, decreased 18.0% to $1,237,000 compared to $1,508,000 for the three months ended June 30, 2010. General and administrative expenses for the six months ended June 30, 2011, increased 14.3% to $3,263,000 compared to $2,855,000 for the six months ended June 30, 2010. The decrease in the second quarter 2011 period was primarily due to decreased legal expense. The increase in the six month 2011 period was primarily due to increased legal expense, staffing levels and travel related expenses.

General and administrative expenses as a percentage of total net sales increased to 24.6% for the three months ended June 30, 2011, compared to 18.1% for the three months ended June 30, 2010. General and administrative expenses as percentage of total net sales increased to 32.7% for the six months ended June 30, 2011, compared to 20.1% for the six months ended June 30, 2010. The increase in the second quarter 2011 period and in the six month 2011 period were primarily due to the increased costs discussed above in relation to decreased sales.

Legal fees and expenses were $305,000 for the three months ended June 30, 2011, compared to $566,000 for the three months ended June 30, 2010. Legal fees and expenses were $1,294,000 for the six months ended June 30, 2011, compared to $1,089,000 for the six months ended June 30, 2010. The legal fees in each quarter were incurred primarily in connection with the News America lawsuit described in Note 3 to the financial statements. Management does not expect significant legal fees and expenses in future periods in connection with post-settlement activities.

Gain from litigation settlement. On February 9, 2011, the Company entered into a Settlement Agreement in its lawsuit against News America. As part of the Settlement Agreement, News America paid the Company $125,000,000, and the Company paid News America $4,000,000 in exchange for a 10-year arrangement to sell signs with price into News America’s network of retailers as News America’s exclusive agent. Netted against this settlement was a contingent fee payment of $31,250,000 to the Company’s lead trial counsel as well as performance bonus payments of $3,988,000 to certain employees in connection with the settlement, resulting in a net pre-tax gain of $89,762,000.

Other Income. Other income for the three months ended June 30, 2011, was $21,000 compared to $3,000 for the three months ended June 30, 2010. Other income for the six months ended June 30, 2011, was $42,000 compared to $16,000 for the six months ended June 30, 2010. Higher other income in the 2011 periods was primarily due to increased interest income in the 2011 periods as a result of higher cash and cash equivalents balances in the 2011 periods, which was partially offset by lower interest rates.

Income Taxes. As a result of the taxable income generated by the settlement proceeds, $5,385,000 of the deferred tax assets were utilized during the first six months of 2011. For the three months ended June 30, 2011, an income tax benefit was recorded of $444,000, or 39.7% of loss before income taxes. For the six months ended June 30, 2011, the provision for income taxes was $33,507,000, or 38.6% of income before income taxes. The income tax provision (benefit) during the three and six months ended June 30, 2011, is comprised of federal and state taxes. The primary difference between the Company’s June 30, 2011, effective tax rate and the statutory federal rate is due to state income taxes. For the six months ended June 30, 2010, no provision for income taxes or tax benefit was recorded as a full valuation allowance existed on the Company’s deferred tax assets.

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Net Income (Loss). The net loss for the three months ended June 30, 2011, was $(675,000) compared to a net income of $654,000 for the three months ended June 30, 2010. Net income for the six months ended June 30, 2011, was $53,198,000 compared to $219,000 for the six months ended June 30, 2010.

Non-GAAP Financial Measures

To supplement the Company’s financial statements presented in accordance with accounting principles generally accepted in the United States (GAAP), the Company has provided certain non-GAAP financial measures of financial performance in prior public announcements. These non-GAAP measures include:

•	net income (loss) before gain from litigation settlement (net of tax), and
•	net income (loss) before gain from litigation settlement (net of tax) and News America-related legal expense.

The Company’s reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, or superior to, GAAP results.

These non-GAAP measures are provided to enhance investors’ overall understanding of the Company’s current financial performance and ability to generate cash flows. In many cases non-GAAP financial measures are used by analysts and investors to evaluate the Company’s performance. Reconciliation to the nearest GAAP measure can be found in the financial table included below.

	Three Months Ended June 30					Six Months Ended June 30
	2011			2010		2011			2010
Net income (loss)	$	(675,000	)	$	654,000	$	53,198,000		$	219,000
Adjustment:
Gain from litigation settlement (net of tax) (see below)		—			—		(55,062,000	)		—
Non-GAAP net income (loss) before gain from litigation settlement (net of tax)		(675,000	)		654,000		(1,864,000	)		219,000
Adjustment:
News America related legal expense		192,000			523,000		1,018,000			927,000
Non-GAAP net income (loss) before gain from litigation settlement (net of tax) and News America related legal expense	$	(483,000	)	$	1,177,000	$	(846,000	)	$	1,146,000

Gain from litigation settlement (net of tax):
Settlement proceeds	$	—		$	—	$	125,000,000		$	—
Less contingent attorney's fees		—			—		(31,250,000	)		—
Less bonuses paid to employees		—			—		(3,988,000	)		—
		—			—		89,762,000			—
Less settlement related income taxes		—			—		(34,700,000	)		—
Gain from litigation settlement (net of tax)	$	—		$	—	$	55,062,000		$	—

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Liquidity and Capital Resources

The Company has financed its operations with proceeds from public and private stock sales and sales of its services and products. At June 30, 2011, working capital was $28,381,000 compared to $12,505,000 at December 31, 2010. During the six months ended June 30, 2011, cash, cash equivalents and short-term investments increased $26,592,000 from $13,696,000 at December 31, 2010, to $40,288,000 at June 30, 2011.

Net cash provided by operating activities during the six months ended June 30, 2011, was $70,826,000. Net income of $53,198,000, plus non-cash adjustments of $6,013,000 and changes in operating assets and liabilities of $11,615,000 resulted in the $70,826,000 of cash provided by operating activities. The net non-cash adjustments of $6,013,000 consisted of deferred income tax expense, stock-based compensation expense, and depreciation and amortization expense. The most significant component of the $11,615,000 change in operating assets and liabilities was income tax payable. Income tax payable increased by $15,143,000, before the excess tax benefit of $2,240,000 was reclassified to additional paid-in capital, primarily due to taxable income related to the litigation settlement. Accrued retailer payments decreased $1,091,000 primarily related to the payment to one of our retailers, and accrued compensation increased $1,346,000 primarily due to the terms of the performance bonus plan related to the News America settlement, partially offset by decreased accrued commissions. The Company expects accounts receivable, accounts payable, accrued liabilities and deferred revenue to fluctuate during future periods depending on the level of POPSign revenues and related business activity as well as billing arrangements with customers and payment terms with retailers.

Net cash of $4,680,000 was used in investing activities during the six months ended June 30, 2011. Proceeds from the sale of investments were more than offset by the purchase of property and equipment and the payment of $4,000,000 in exchange for a 10-year business arrangement. Proceeds of $500,000 during the six months consisted entirely of redemptions of 6-month certificates of deposit. Capital expenditures of $1,180,000 during the period consisted primarily of the construction in progress of a laser die cutter and related equipment. The Company expects capital expenditures of approximately $1,000,000 as it completes the purchase and installation of the laser die cutter and related equipment.

Net cash of $39,054,000, which included dividends paid of $31,335,000 and an excess tax benefit of $2,240,000, was used in financing activities during the six months ended June 30, 2011. The repurchase of common stock of $13,049,000, pursuant to a plan adopted on February 22, 2011, and further amended May 25, 2011, was partially offset by $3,090,000 of proceeds from the issuance of common stock from the exercise of employee stock options and the employee stock purchase plan.

The Company believes that based upon current business conditions, its existing cash balance and future cash from operations will be sufficient for its cash requirements for the remainder of 2011 and for the next twelve months. However, there can be no assurances that this will occur or that the Company will be able to secure additional financing from public or private stock sales or from other financing agreements if needed.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 1 to the annual financial statements as of and for the year ended December 31, 2010, included in our Form 10-K filed with the Securities and Exchange Commission on March 16, 2011. We believe our most critical accounting policies and estimates include the following:

•	revenue recognition;
•	allowance for doubtful accounts;
•	income taxes; and
•	stock-based compensation.

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Cautionary Statement Regarding Forward-Looking Information

Statements made in this quarterly report on Form 10-Q, in the Company’s other SEC filings, in press releases and in oral statements to shareholders and securities analysts, which are not statements of historical or current facts, are “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of the Company to be materially different from the results or performance expressed or implied by such forward-looking statements. The words “believes,” “expects,” “anticipates,” “seeks” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. These statements are subject to the risks and uncertainties that could cause actual results to differ materially and adversely from the forward-looking statements. These risks and uncertainties include, but are not limited to, the risks presented in our Annual Report on Form 10-K for the year ended December 31, 2010, and updated in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Company’s management carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, including the circumstances surrounding the recently announced restatement of the 2010 Form 10-K, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report. Disclosure controls and procedures ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and are designed to ensure that information required to be disclosed by us in these reports is accumulated and communicated to the Company’s management, including its Chief Executive Office and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosures.

(b) Changes in Internal Controls Over Financial Reporting

There was no change in our internal controls over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, other than the Company’s hiring of a new chief financial officer effective June 13, 2011.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On September 23, 2004, the Company brought suit against News America and Albertson’s Inc. (Albertson’s) in Federal District Court in Minneapolis, Minnesota, for violations of federal and state antitrust and false advertising laws, alleging that News America has acquired and maintained monopoly power through various wrongful acts designed to harm the Company in the in-store advertising and promotion products and services market. The suit sought injunctive relief sufficient to prevent further antitrust injury and an award of treble damages for the harm caused to the Company. On September 20, 2006, the State of Minnesota through its Attorney General intervened as a co-plaintiff in the business disparagement portion of the case. In December 2006, News America filed counterclaims in the case that included claims of alleged interference with contracts and alleged libel and slander against Insignia and one of its officers. On February 4, 2008, the Court approved a consent decree entered into by News America and the State of Minnesota under which News America agreed to not violate Minnesota’s statutes prohibiting commercial disparagement. On July 29, 2008, the Company and Albertson’s entered into a settlement agreement and mutual release, in which they each agreed to release all claims against the other, and the Company agreed to dismiss its lawsuit against Albertson’s.

Item 1A. Risk Factors

We described the most significant risk factors applicable to the Company in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2010. We believe there have been no material changes from the risk factors disclosed on Form 10-K.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On February 22, 2011, the Board of Directors authorized the repurchase of up to $15,000,000 of the Company’s common stock on or before January 31, 2012, under a new plan. On May 25, 2011 the Board amended the plan to increase the maximum share purchase amount from $15,000,000 to $20,000,000. The plan does not obligate the Company to repurchase any particular number of shares, and may be suspended at any time at the Company’s discretion.

Our share repurchase program activity for the three months ended June 30, 2011, under the plan was:

	Total Number Of Shares Repurchased		Average Price Paid Per Share		Total Number Of Shares Purchased As Part Of Publicly Announced Plans Or Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under The Plans Or Programs
April 1-30, 2011		125,000	$	6.95		1,708,744	$	8,453,000
May 1-31, 2011		272,940	$	4.45		1,981,684	$	7,224,000
June 1-30, 2011		69,470	$	3.88		2,051,154	$	6,951,000

Item 3. Defaults upon Senior Securities

None.

Item 4. Removed and Reserved

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are included herewith :

10.1	Change in Control Severance Agreement with John C. Gonsior dated June 13, 2011
10.2	Exclusive Agreement for Sale and Implementation of Specified Signs with Price approved June 6, 2011 (confidential treatment requested)
31.1	Certification of Principal Executive Officer
31.2	Certification of Principal Financial Officer
32	Section 1350 Certification

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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, thereunto duly authorized.

Dated: August 9, 2011	Insignia Systems, Inc.
	(Registrant)

	/s/ Scott F. Drill
	Scott F. Drill President and Chief Executive Officer (principal executive officer)

	/s/ John C. Gonsior
	John C. Gonsior Vice President, Finance and Chief Financial Officer (principal financial officer)

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EXHIBIT INDEX

10.1	Change in Control Severance Agreement with John C. Gonsior dated June 13, 2011

10.2	Exclusive Agreement for Sale and Implementation of Specified Signs with Price approved June 6, 2011 (confidential treatment requested)

31.1	Certification of Principal Executive Officer

31.2	Certification of Principal Financial Officer

32	Section 1350 Certification

Exhibit 10.1

CHANGE IN CONTROL SEVERANCE AGREEMENT

AGREEMENT made as of this 13 ^th day of June, 2011 by and between Insignia Systems, Inc., a Minnesota corporation (the “Company”), and John Gonsior (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 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.

Payment due under this Agreement shall be made on the 60 ^th 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 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.

“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. 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/ John Gonsior	By	/s/ Scott Drill

	Its	CEO

EXHIBIT 10.2

CONFIDENTIAL TREATMENT REQUESTED

EXCLUSIVE AGREEMENT FOR SALE AND
IMPLEMENTATION OF SPECIFIED SIGNS WITH PRICE

This Exclusive Agreement For Sale and Placement of Specified Signs with Price (this “Agreement”) is entered into effective as of April 15, 2011, by and between Insignia Systems, Inc. (“Insignia”), and News America Marketing In-Store Services L.L.C. (“NAM”) and News America Marketing Properties, LLC (“NAMP”).

WHEREAS, the parties have been involved in litigation in the Federal District Court for the District of Minnesota, Insignia Systems, Inc. v. News America Marketing In-Store, Inc. , et al., Civ. No. 04-4213 JRT/AJB (D.MN); and

WHEREAS, the parties have settled the above-referenced litigation pursuant to the terms of the Settlement Agreement between the parties dated February 9, 2011 (“Settlement Agreement”); and

WHEREAS, as part of the settlement the parties agreed on a Term Sheet (Joint Exhibit A) setting forth the material terms for the placement of signs with price, which the parties now wish to set out in this long form agreement; and

NOW, THEREFORE, in consideration of the foregoing, and in consideration of the terms and conditions contained herein, the parties agree as follows:


1.	Payment . In consideration for the rights granted to Insignia by NAM in this Agreement, Insignia has paid NAM the sum of $4,000,000 receipt of which is hereby acknowledged by NAM.

2.	Definitions .

	A.	NAM PPG Retailers shall mean retailers within the NAM Retailers Network, as it exists from time to time, which accept NAM PPG signs.

	B.	NAM Non-PPG Retailers shall mean retailers within the NAM Retailers Network, as it exists from time to time, which do not accept NAM PPG signs.

	C.	NAM Retailers Network shall mean all retailers with whom NAM has a contract or business relationship for placement of in-store advertising.

	D.	Specified Signs with Price shall mean Price Pop Guaranteed signs which have content limited to the elements set forth on Exhibit 1 .

	E.	Signs with Price shall mean any in-store advertising signs which state a product price.


	F.	Insignia Signs with Price shall mean Signs with Price which Insignia produces and sells other than Specified Signs with Price, such as the Insignia POPSign.

3.	Grant of Exclusive Rights for Specified Signs with Price .

	A.	Insignia [ * ] shall have the right to sell Specified Signs with Price, for placement in the entire NAM Retailers Network which accept Specified Signs with Price, subject to the terms hereof. Insignia may not use any selling agents other than [ * ] to sell Specified Signs with Price. Only Insignia and not [ * ] may process orders for placement of signs under this Agreement.

	B.	Insignia may only contract with [ * ] to sell Specified Signs with Price to only the CPG’s to whom [ * ] had prior to February 9, 2011 serviced with respect to Insignia’s Signs with Price (the “[ * ] Permitted Clients”). If and when requested by NAM from time to time, an executive officer of Insignia shall certify that the only clients to whom [ * ] has offered Specified Signs with Price are the [ * ] Permitted Clients. Insignia agrees that, at NAM’s request, Magistrate Judge Boylan, in camera, can review such records as is necessary to confirm whether [ * ] has offered Specified Signs with Price to any clients other than the [ * ] Permitted Clients.

	C.	NAM and NAMP will sell no Signs with Price, directly or indirectly, for placement in the NAM Retailers Network stores during the term of this Agreement, except (i) NAM may sell signs bearing price related messages for placement in stores in the NAM Retailers Network, as long as such signs do not have a retail price on the sign; and (ii) nothing herein restricts NAM from providing any services other than those for which Insignia has exclusive rights under this Agreement, including without limitation any merchandising services. Except as specifically provided in Section 20, in no case shall NAM use any of the intellectual property licensed pursuant to this Agreement.

	D.	Nothing in this Agreement shall prevent or restrict Insignia from providing any Signs with Price to a retailer: (1) at the retailer’s request; and (2) in conformance with the retailer’s specifications, provided that nothing herein constitutes a waiver of or an agreement by NAM not to enforce any rights NAM has under its agreements with retailers in the NAM Retailers Network, except as specifically provided herein with respect to Specified Signs with Price.

*Indicates confidential information which has been omitted and filed separately with the Commission under Rule 24b-2.


	E.	To avoid confusion:

		i.	Insignia may place only Specified Signs with Price with any NAM PPG Retailer with which NAM has an exclusive retailer arrangement, under Section 5.A.

		ii.	Insignia may place only Specified Signs with Price with any NAM Non-PPG Retailer with which NAM has an exclusive retailer arrangement, under Section 5.B.

		iii.	Insignia may place its own Signs with Price with any NAM PPG Retailer with whom NAM does not have an exclusive retailer arrangement by contracting directly with such retailer. At Insignia’s sole option, Insignia may elect to place Specified Signs with Price with any such retailer under the terms of this Agreement, Section 5.A.

		iv.	Insignia may place any of Insignia’s Signs with Price with any NAM Non-PPG Retailer with which NAM does not have an exclusive retailer arrangement by contracting directly with such retailer or, at its sole option, Insignia may place Specified Signs with Price with such retailer pursuant to this Agreement, Section 12.

4.	Sold Programs . NAM shall service those PPG programs which NAM sold prior to February 9, 2011 (the “Previously Sold Programs”). The list of the Previously Sold Programs (which includes the dates of such programs and the product categories for such programs) is set out on Exhibit 9 . As the Previously Sold Programs were sold on a category exclusive basis, Insignia will not sell Specified Signs with Price into NAM Retailers Network for the particular product category at the contracted retail stores and during the dates of such Previously Sold Programs all as listed on Exhibit 9 . NAM will not enter into any additional such category exclusive arrangements with respect to Signs with Price after February 9, 2011.

5.	Sign Placement Procedure with NAM Retailers .

	A.	Placement of Specified Signs with Price with any NAM PPG Retailers shall be subject to Exhibit 7 and the following:

		i.	Specified Signs with Price must conform to the retailers’ specifications for price-specific signage as same may exist from time to time.


	ii.	For each Specified Sign with Price provided by Insignia in respect of a NAM PPG Retailer, Insignia shall pay NAM a [ * ] Access Fee and an Installation Fee of [ * ] per cycle, subject to Exhibit 5.

	iii.	Insignia shall use NAM to install all Specified Signs with Price in the NAM PPG Retailers.

	iv.	Insignia to the extent necessary shall notify NAM in writing of the proposed placement (including the dates for placement, stores, as further provided on Exhibit 7 .

	v.	Nothing in this Agreement shall prevent Insignia from placing its Insignia Signs with Price with a PPG Retailer with which: (a) NAM does not have exclusive rights which would prohibit the placement of Insignia Signs with Price; and (b) Insignia has a contract to place Signs with Price. If Insignia uses NAM to install such signs, Insignia shall pay NAM the Installation Fee, but no Access Fee for such sign. Nothing in this Agreement shall constitute a waiver of or prevent NAM from enforcing any rights it has under its agreements with retailers in the NAM Retailers Network, except as specifically provided herein with respect to Specified Signs with Price.

B.	For the NAM Non-PPG Retailers at which Insignia wishes to place Specified Signs with Price, NAM and Insignia will work cooperatively (as described in Section 9.A.) and NAM shall assist Insignia to present to each of the NAM Non-PPG Retailers the opportunity to accept Specified Signs with Price. If a NAM Non-PPG Store agrees to accept Signs with Price, the following shall apply:

	i.	NAM and Insignia have prepared a standard acknowledgement to be signed by NAM, Insignia and, the NAM Non-PPG Retailers (if agreed upon by the NAM Non-PPG Retailers), (the “Standard Acknowledgement”) (attached as Exhibit 14 ) under which, among other things, NAM acknowledges Insignia will have the right to place Specified Signs with Price in the stores of such retailer. The Standard Acknowledgement provides that Insignia and the NAM Non-PPG Retailers will agree to a sign placement agreement and that Insignia (and not NAM) will be solely responsible to pay any placement fee directly to the NAM Non-PPG Retailers.

	ii.	For each Specified Sign with Price provided by Insignia in respect of a NAM Non-PPG Retailer, Insignia shall pay NAM an Installation Fee of [ * ] and an Access Fee of [ * ] per cycle , subject to Exhibit 5.

*Indicates confidential information which has been omitted and filed separately with the Commission under Rule 24b-2.


		iii.	NAM agrees to allow Specified Signs with Price in such stores, subject to the terms herein and in the Standard Acknowledgement.

		iv.	Insignia shall use NAM to install all Specified Signs with Price in the NAM Non-PPG Retailers.

		v.	Insignia to the extent necessary shall notify NAM in writing of the proposed placement (including the dates for placement, stores, as further provided in Exhibit 7 .

	C.	The following shall apply for all Specified Signs with Price programs (i.e., those placed in NAM PPG Retailers and NAM Non-PPG Retailers):

		i.	Payment of the Access Fee and Installation Fees will be made within thirty (30) days after the start of the applicable cycle.

		ii.	Within three (3) weeks following the expiration of each cycle, NAM shall provide to Insignia a compliance report calculating installation, in accordance with Exhibit 5. Subject to Section 5.C.ii., the compliance report shall be used to determine whether any credits contemplated by Section 17 and Exhibit 5 are to be extended to Insignia.

		iii.	During the Term, Insignia shall have the right, but not the obligation, at its sole cost and expense to have performed Compliance Audits as set forth on Exhibit 10.

6.	Price Information . The parties recognize that timely and accurate information of retail prices from the retailers is necessary for a Specified Signs with Price program. Upon notice from Insignia, NAM will request that all NAM PPG Retailers adopt the price information transmission system utilized by Insignia. If a Retailer refuses to utilize such system, NAM will provide such information as is required by Insignia to implement the Specified Signs with Price program. Until the expiration or termination of NAM’s current contract for such information with ODT, this will be provided to Insignia by ODT pursuant to such contract. NAM will pay the base fee ODT charges for providing such information to Insignia under such contract. Thereafter, NAM will provide such information directly to Insignia, if the contract with ODT is not renewed or extended. Insignia will reimburse NAM for any material incremental expense needed to satisfy Insignia’s communication requirements. If a Retailer refuses to utilize such system, NAM will provide such information to Insignia as is provided to NAM by the Retailer.

7.	Other NAM Information . NAM has provided Insignia with the names of the top fifteen (15) NAM PPG Retailers through the store level, including for each retailer the term of such contract and the key contact person for each. NAM, by the date of execution, will have also provided to Insignia a complete list of all retailers in


	the NAM’s Retailer Network, including for each retailer whether such retailer is a NAM PPG Retailer or a NAM Non-PPG Retailer.

	NAM will provide Insignia updates to any information provided by NAM under this Agreement per cycle or as occurs but no later than when such updates are provided generally to NAM’s clients and NAM’s sales staff.

	NAM will provide Insignia with the further information specified on Exhibit 12 .

8.	Retailer’s Contracts . If a NAM PPG Retailer does not renew the Price Pop Guaranteed portion of its agreement with NAM, Insignia will not be restricted from negotiating a contract with such retailer for Sign with Price business.

9.	NAM Obligations . During the term of this Agreement:

	A.	NAM and Insignia shall cooperate in solicitation of NAM Network Retailers to accept Specified Signs with Price as follows:

		i.	For NAM PPG Retailers

			a.	NAM shall provide a letter to each PPG Retailer in a form attached as Exhibit 6 in order to make the initial request referred to in Section 6 above.

			b.	If the NAM PPG Retailer rejects NAM’s request made pursuant to Section 6 above that the NAM PPG Retailer use Insignia’s price information transmission system, NAM will provide Insignia with the information provided to NAM by the Retailer and shall provide such information in accordance to Section 6.

		ii.	For NAM Non-PPG Retailers

			a.	NAM shall reasonably participate in joint meetings with Insignia and retailers to assist in sell in process of Specified Signs with Price.

			b.	NAM shall provide a retail liaison/contact at NAM if Insignia is meeting with retailers and needs confirmation that they can sign a Standard Acknowledgment.

	B.	NAM and Insignia will each appoint a corporate representative to provide information, coordinate activities with NAM, Insignia and retailers.

	C.	All information provided by Insignia to NAM as part of the placement procedure discussed in Section 5 and Exhibits 7, 7.1 and 7.2 will be considered confidential information for the purposes of Section 22 of this Agreement until such time as the Specified Signs with Price are placed at shelf.


10.	Fees Adjustments . Recognizing that the cost for retailer access and acceptance of programs may increase over time, the access fees set out in clauses 5.A.ii. 6.B.ii. shall be increased on a pro-rata basis to the extent access fees (taken in aggregate for all NAM tactics at the applicable retailer) paid by NAM to the applicable existing retailers in NAM’s network increase from the amounts (taken in the aggregate for all NAM tactics at the applicable retailer) being paid by NAM to such retailer as of the date of this Agreement. Insignia shall have the option to have an independent third party auditor, which shall be one of the “Big Four” accounting firms or otherwise mutually agreed upon by Insignia and NAM, and subject to execution by such auditor of a confidentiality agreement in a form reasonably satisfactory to NAM, review all applicable retailer contract records to the extent necessary to verify the pro-rata increase in access fees.

11.	Retailer Rejections . Neither party shall have any liability in the event a retailer or participating store refuses placement of any Specified Signs with Price (except for a credit or refund of Access Fees or Installation Fees for any amounts paid for such refused placement), subject to Exhibit 5.

12.	Non-PPG Merchandising . Insignia shall have the option, but not the obligation, to use NAM’s field force to install Insignia Signs with Price in accordance with Exhibit 7 : (i) in stores that accept both Insignia price specific signage and NAM programs (“In-Network Merchandising”); or (ii) in stores that accept Insignia price-specific signage but do not accept NAM programs (“ Out-of-Network Merchandising ”).

	A.	For In-Network Merchandising, Insignia shall pay NAM a fee of [ * ] per placement per cycle.

	B.	For Out-of-Network Merchandising, Insignia shall pay NAM a fee of [ * ] per cycle for each store (which includes up to [ * ] actual placements and removals in such store per cycle) and [ * ] per placement for signs in excess of [ * ] placements per store per cycle.

13.	Execution of Signs – NAM Retailers . For placement of Specified Signs with Price in NAM Retailers, NAM will provide Insignia with the information as well as Insignia providing NAM with the information and materials contemplated by Exhibit 7 by the deadlines specified on Exhibit 7 , or as otherwise mutually agreed.

*Indicates confidential information which has been omitted and filed separately with the Commission under Rule 24b-2.


14.	Notices . Any notices required or permitted under this Agreement shall be in writing and effective upon delivery if delivered by overnight courier, hand delivery, or e-mail as follows:


	If to Insignia:	Insignia Systems
		8799 Brooklyn Boulevard
		Minneapolis, MN 55445
		Attn: Mr. Scott Drill, President and CEO
		scottd@insigniasystems.com

	With a copy to:	Best & Flanagan LLP
		225 South Sixth Street, Suite 4000
		Minneapolis, MN 55402
		Attn: James C. Diracles
		jdiracles@bestlaw.com

	If to NAM:	News America Marketing
		1185 Avenue of the Americas, 27 ^th Floor
		New York, NY 10036
		Attn: Mr. Chris Mixson, President
		cmixson@newsamerica.com

	With a copy to:	News America Incorporated
		1211 Avenue of the Americas, 13 ^th Floor
		New York, NY 10036
		Attn: Mr. Louis F. Manzo
		lmanzo@newscorp.com


15.	Sign Placement. For purposes of this Agreement, placement includes the following:

	A.	Installation/placement of the sign in front of the product being promoted (or in one of the two alternate placement locations specified by Insignia) as contemplated by Exhibit 7 in accordance with the Price Pop Guaranteed standard sign placement guidelines;

	B.	Removal of sign at the end of the promotional period.

	C.	Any services in addition to the installation of a Specified Sign with Price at the start of a cycle and removal of a Specified Sign with Price at the end of a cycle may be requested by Insignia and if agreed upon by NAM will be billed at a rate to be mutually agreed upon.

16.	Installation and Other Activities . Installation and other activities under this Agreement shall be based upon NAM’s Price Pop Guaranteed cycle calendar, which for 2011, 2012, 2013 and 2014 is attached as Exhibit 11 and, for future years, will be determined by NAM consistent with historical practices.


17.	Installation Guarantee .

	A.	PPG Installation Guarantee shall mean the guarantee which NAM provides to consumer product goods manufacturers (“CPG’s”) with which it contracts that it will achieve at least a [ * ] compliance rate for installing signs as provided on Exhibit 5.

	B.	Subject to Insignia’s timely compliance with the terms and conditions of this Agreement, NAM will extend the PPG Installation Guarantee to Insignia for Specified Signs with Price and Insignia Signs with Price installed by NAM as further provided on Exhibit 5. If NAM does not meet the PPG Installation Guarantee of [ * ] as provided on Exhibit 5, as Insignia’s sole and exclusive remedy (except as provided in the following sentence), NAM will provide the credit or refund contemplated by Exhibit 5. If NAM’s average installation compliance calculated in accordance with Exhibit 5 is less than [ * ] for [ * ] or more cycles in a given calendar year, such compliance shall entitle Insignia to terminate this Agreement and avail itself of the remedy provided in Section 25.

18.	Representations and Warranties of the Parties . Each party represents and warrants to other party that this Agreement has been approved by all required corporate action, and upon due execution, shall constitute a valid and binding agreement of such party, enforceable in accordance with its terms. Each party also represents and warrants to the other party that entering into this Agreement shall not constitute a breach under any other contract, agreement or order to which the party is subject. Each party represents and warrants to the other party that all of the information provided by such party in connection with this Agreement is true and complete, and does not fail to include any information which is required to make the disclosed information true and complete. Each party represents and warrants to the other party that it will comply with all applicable laws, including the obligation of good faith and fair dealing implied in all contracts under Minnesota law, in connection with its performance under this Agreement.

19.	Representations and Warranties of NAM . NAM also represents and warrants to Insignia as follows:

	A.	All information regarding NAM Retailers provided by NAM to Insignia is current and correct.

	B.	Except as disclosed on Exhibit 4 , none of the contracts with NAM PPG Retailers includes any material restrictions on placement of Price Pop Guaranteed signs or Specified Signs with Price. NAM shall provide Insignia with written notice of any changes to the restrictions.

*Indicates confidential information which has been omitted and filed separately with the Commission under Rule 24b-2.


	C.	Specified Signs with Price qualify as a PPG Sign for placement with all NAM PPG Retailers.

20.	SmartSource Price Pop Guaranteed® Brand Intellectual Property License . In furtherance of Insignia’s sales activities in connection with the Specified Signs Price program contemplated by this Agreement, NAMP and NAM hereby each grant to Insignia, during the term of this Agreement, a worldwide, fully paid-up, royalty free, non-transferrable, non-sublicensable right and license to use the trademarks, service marks, copyrights, trade names and all other intellectual property associated and used in connection with NAM’s SmartSource Price Pop Guaranteed ® program as conducted by NAM (collectively, the “Price Pop Guaranteed Brand Intellectual Property”), which licenses shall be exclusive to Insignia for Specified Signs with Price. NAMP and NAM each warrants and represents to Insignia that the licenses granted under this Section 20 include all intellectual property rights currently used by NAM in connection with NAM’s SmartSource Price Pop Guaranteed ® program as conducted by NAM. Notwithstanding anything in this Agreement to the contrary, Insignia shall either use the SmartsSource Price Pop Guaranteed mark on not less than [ * ] of the Specified Signs with Price provided under this Agreement in each year of the Agreement and provide NAM with evidence and specimens of each usage or (ii) during such periods as NAM shall have obligations to print and install on behalf retailers private label SmartSource Price Pop Guaranteed programs, allow NAM use the Price Pop Guaranteed Brand Intellectual Property solely in connection NAM executing such private label programs.

	Each initial use of the Price Pop Guaranteed Brand Intellectual Property shall be subject to NAM’s prior written approval, not to be unreasonably withheld or delayed, and which approval is deemed to be granted if no response is given within five business days of Insignia’s written request delivered in accordance with Section 14 and NAM has failed to respond within three business days to Insignia’s written reminder of the initial request delivered in accordance with Section 14. As between the parties, all usage of the Price Pop Guaranteed Brand Intellectual Property and the goodwill associated therewith shall inure to the benefit of NAMP.

21.	Nonsolicitation . During the term of this Agreement, neither party shall recruit, solicit, hire, or attempt to hire any person who is then serving as an employee of the other party, or who was serving as an employee of the other party during the twelve months prior to that time.

22.	Mutual Indemnification . Insignia agrees to indemnify, defend and hold harmless NAM and its affiliated entities and their respective shareholders, directors, employees, agents, and representatives, against any loss, cost, damage or expense, including reasonable attorney’s fees, resulting from a lawsuit or claim made or asserted against or involving NAM by any third party arising out of


	Insignia’s breach or alleged breach of this Agreement, for any claims made by any of Insignia’s selling agents and for any claims made by any Insignia client related to performance of this Agreement (for the purposes of this paragraph, each a “Third Party Claim”). Upon receipt of any such Third Party Claim, NAM shall promptly notify Insignia, and Insignia shall have the option to assume defense of such Third Party Claim directly and pay all expenses associated therewith (including reasonable attorneys’ fees), or to leave defense of the Third Party Claim in the control of NAM, and reimburse NAM for all costs, liabilities, and expenses associated therewith, including reasonable attorneys’ fees. If Insignia chooses to assume direct responsibility for the defense of the Third Party Claim, it shall have the right to settle any such claims only with NAM’s consent, which consent shall not be unreasonably withheld.

	NAM agrees to indemnify, defend and hold harmless Insignia, and its affiliated entities and their respective shareholders, directors, employees, agents, and representatives, against any loss, cost, damage or expense, including attorney’s fees, resulting from a lawsuit or claim made or asserted against or involving Insignia by any third party arising out of NAM’s breach or alleged breach of this Agreement, other than for claims by any Insignia client related to performance of this Agreement (for the purposes of this paragraph, a “Third Party Claim”). Upon receipt of any such Third Party Claim, Insignia shall promptly NAM, and NAM shall have the option to assume defense of such Third Party Claim directly and pay all expenses associated therewith (including reasonable attorneys’ fees), or to leave defense of the Third Party Claim in the control of Insignia, and reimburse Insignia for all costs, liabilities, and expenses associated therewith, including reasonable attorneys’ fees. If NAM chooses to assume direct responsibility for the defense of the Third Party Claim, it shall have the right to settle any such claims only with Insignia’s consent, which consent shall not be unreasonably withheld.

	In the case of a breach by a NAM PPG retailer which causes harm to Insignia, NAM will either use commercially reasonable efforts to cure the breach by having the retailer perform as required by the contract or assign to Insignia the right to enforce the contract.

23.	Confidentiality . All information that the parties disclose to each other pursuant to this Agreement, including but not limited to the terms of their respective agreements with retailers, shall be kept confidential by the receiving party and not shared with any third party, including any competitors, except as set forth below. The receiving party shall treat the other party’s confidential information with the same care and take the same precautions that the receiving party uses to maintain the confidentiality of their own confidential and competitively sensitive documents and information, except: (i) to the extent necessary to comply with the law or a valid order of a court of competent jurisdiction, in which event(s) the party making such disclosure shall so notify the other as promptly as practicable (if possible, prior to making such disclosure), and shall seek confidential treatment of such information and/or in camera review, (ii) to the extent


	necessary to comply with the S.E.C. or other regulatory authorities or similar disclosure requirements under any applicable laws, (iii) as part of its normal business activities or reporting or review procedures to its parent and affiliated companies (other than [ * ] except as specifically contemplated below), banks, auditors, attorneys, accountants, insurers and similar professionals, provided, however, that such companies, banks, auditors, attorneys, accountants, insurers and similar professionals agree to be bound by the provisions of this paragraph, (iv) as required by the Internal Revenue Service or by any state tax authority (v) to the extent the information is publicly available provided same is not as a result of any disclosure by recipient, and (vi) in any proceeding to enforce this Agreement.

	Insignia shall be permitted to share with [ * ] only that information described on Exhibit 12 (the “Permissible [ * ] Information”) but no other confidential information shared by NAM or which Insignia may become aware of in connection with this Agreement and the transactions contemplated hereunder. Insignia shall take reasonable efforts to ensure that [ * ] (i) does not disclose any Permissible [ * ] Information to any third party and (ii) uses the Permissible [ * ] Information solely to sell Specified Signs with Price programs to the [ * ] Permitted Clients.

24.	Term . This Agreement shall continue in effect until the earlier of (a) a period of (10) years from the date hereof, or (b) termination by either party by written to the other party if the other party fails to cure a material breach of this Agreement within sixty (60) days after written notice thereof. The Agreement may be extended at the end of its term by the mutual written agreement of both parties. Any provision of this Agreement which is clearly intended by its plain meaning to survive termination shall continue for the period necessary to give it its full effect.

25.	Remedies . Both Insignia and NAM agree that it would be impracticable and extremely difficult to ascertain the amount of actual damages caused by material breach or default of this Agreement. Therefore, Insignia and NAM agree that, in the event of termination of this Agreement as a result of a material breach of this Agreement which is not cured within sixty (60) days after written notice thereof, the breaching party shall pay the non-breaching party the Liquidated Damages Amount (as defined below). The “Liquidated Damages Amount” shall mean: (1) in the case of breach resulting in termination of the Agreement [ * ] less [ * ] for each full contract year this Agreement has remained in effect up to termination (for example, if the Agreement is terminated in June 2014, the Liquidated Damages Amount would be [ * ] or the [ * ] reduced by [ * ] for the three full years the Agreement was in effect); and (2) in the event of a breach of this Agreement which does not trigger a termination, the non-breaching party shall be entitled to recover [ * ] as liquidated damages, or, at its option, its actual, direct damages not to exceed the Liquidated Damages Amount. Any payment due hereunder

*Indicates confidential information which has been omitted and filed separately with the Commission under Rule 24b-2.


	shall be paid immediately in cash, by wire transfer of same day funds. Insignia and NAM further agree that this liquidated damages provision represents reasonable compensation for the loss which would be incurred by a party due to any such breach. Such liquidated damages shall be the exclusive remedy in the event of such a termination.

26.	Dispute Resolution . The Federal District Court for the District of Minnesota (“Court”) will maintain jurisdiction pursuant to the terms of the Settlement Agreement and Magistrate Judge Arthur Boylan (“Judge Boylan”) shall resolve any disputes concerning this Agreement as part of the Court’s enforcement powers over court approved settlements. In the event of a dispute under this Agreement, including a dispute about whether a breach has occurred except with respect to disputes about the content of Specified Signs with Price which shall be resolved in accordance with Section 26A below. For all disputes other than those subject to 26.A. below, the parties shall meet and shall use good faith and commercially reasonable efforts to resolve the dispute. If the parties cannot resolve the dispute within fifteen (15) days after either party has requested a meeting, either party may request the Court to intervene in the dispute. The Court shall be requested to set an expedited schedule for resolving the dispute. The decision by the Court shall be binding and non-appealable.

26A.	Specified Signs with Price Content Disputes. From time to time, a dispute (each “Content Dispute”) may arise between NAM and Insignia as to whether a Sign with Price proposed by Insignia complies in all respects with the of Exhibit 1 and this Agreement (the “Sign Requirements”). A three member (the “Panel”) of advertising executives shall be established in accordance with Section 26A to be the sole decider as to whether a Specified Sign with Price complies in all respects with the Sign Requirements. Each of NAM and Insignia may appoint one person to the Panel provided such person meets all of the qualifications hereafter agreed to between the parties as of the date of the appointment. The two party appointed Panel members shall jointly agree upon third Panel member who must also satisfy the Qualifications. In the event a member is unable to serve as a result of death, incapacity or resignation, then, if such Panel member was appointed by a party, that party shall appoint the replacement Panel member and, if such Panel member was the jointly agreed upon third Panel member, the remaining Panel members shall jointly agree upon the replacement third Panel member who must also satisfy the Qualifications.

	NAM may submit a Specified Sign with Price to the Panel in the event of a Content Dispute. Notice of a submission must be made simultaneously to Insignia. Each party may, within three (3) business days (the “Submission Period”) of the Content Dispute submission, submit to the Panel a position paper of not more than two pages (excluding any necessary exhibits or illustrative examples). The Panel shall be required to render its decision within two (2) business days of the expiration of the Submission Period which decision shall be limited to (i) disclosing whether or not the Specified Sign with Price complies in all respects with the Sign Requirements and (ii) if the decision is that the


	Specified Sign with Price does not comply with the Sign Requirements, a brief description of what elements are non-compliant and what changes to the Specified Sign with Price are necessary to make the Specified Sign with Price compliant. Insignia may arrange to have the content of a Specified Sign with Price rejected by the Panel modified per the Panel’s direction and resubmitted to NAM. NAM shall either accept such modified Specified Sign with Price or initiate the Content Dispute mechanism. .

	NAM shall have no obligation to install (and no liability in respect of such lack of installation) any Specified Sign with Price affected by a Content Dispute until such time as such Content Dispute has been resolved by a Panel decision that the Specified Sign with Price complies in all respects with the Sign Requirements or NAM has accepted the Specified Sign with Price as revised per the Panel’s direction. All decisions of the Panel shall be final and non-appealable. The Panel shall be required to keep confidential all communications between the Panel and the parties. The parties and the Panel shall mutually agree upon the compensation to be paid to the Panel. The Panel compensation for each review of a Specified Sign with Price that is subject to a Content Dispute shall be borne by (i) Insignia, if the Panel decides that the Specified Sign with Price did not comply in all respects with the Sign Requirements or (ii) NAM, if the Panel decides that the Specified Sign with Price did comply in all respects with the Sign Requirements.

27.	Status . The parties are independent contractors and not partners or co-venturers. Insignia is being made an exclusive seller of NAM’s Price Pop Guaranteed program limited to the scope of this Agreement. Neither party shall have the authority to bind the other party to any debt, liability, contract, or obligation, and shall not owe fiduciary duties to the other. Further, NAM shall have no responsibility or liability under this Agreement to any party other than Insignia. NAM and Insignia expressly agree that there shall be no third party beneficiaries of this Agreement.

28.	Complete Agreement; Amendment . This Agreement constitutes the entire agreement between the parties on the subject matter hereof, superseding all prior oral and written agreements. In the event of any conflict between the Agreement and the Settlement Agreement, the Settlement Agreement shall govern. This Agreement may only be modified in a written amendment signed by both parties.

29.	Binding Effect; Assignment . This Agreement is binding upon, and shall inure to the benefit of, each of the parties and their respective successors and assigns. This Agreement may not be assigned in whole or in part by either party without the prior written consent of the other party, except that either party may assign this Agreement in connection with a sale, transfer or merger of substantially its entire business.


30.	No Waiver . Neither party makes any warranties or representations, either express or implied, as to fitness, merchantability, or any other matters of any kind or nature, except as expressly set forth herein. A waiver by either party hereto of any non-compliance, default or breach by the other of any provision hereof shall not be considered a waiver of any subsequent non-compliance, default or breach of the same or of any other provisions hereof. The failure of either party to object to or to take affirmative action with respect to any conduct of the other which is in violation of this Agreement shall not be construed as a waiver thereof, or of any future breach or subsequent wrongful conduct. Any waiver of any provision of this Agreement must be made by a party in a signed writing.

31.	Governing Law . This Agreement shall be governed in accordance with Minnesota law, without regard to conflict of law principles.

32.	Signatures . This Agreement may be signed in counterparts. A facsimile or electronic copy of this signed Agreement shall have the same effect as a manually-signed original copy.

IN WITNESS WHEREOF, the parties have caused the execution of this Agreement as of the day and year first above written.


INSIGNIA SYSTEMS, INC.		NEWS AMERICA MARKETING IN-STORE SERVICES, L.L.C.

By:	/s/ Scott Drill	By:	/s/ Chris Mixon
Its:	CEO	Its:	President

		NEWS AMERICA MARKETING PROPERTIES, L.L.C.

		By:	/s/ Chris Mixon
		Its:	President

EXHIBIT LIST


Exhibit 1	Specified Signs with Price Content

Exhibits 2A and 2B	Mock Ups from Term Sheet

Exhibit 3	Intentionally Omitted

Exhibit 4	Contracts with Material Restrictions

Exhibit 5	Installation Guarantee

Exhibit 6	Letter to Retailers

Exhibit 7	NAM Retailers Installation Guidelines

Exhibit 7.1	Production Timing Overview

Exhibit 7.2	ISI 2011 Selling Cycle Calendar

Exhibit 7.3	NAM Installation Guidelines

Exhibit 8	Intentionally Omitted

Exhibit 9	Existing PPG Sales

Exhibit 10	Audit Guidelines

Exhibit 11	Cycle Calendar

Exhibit 12	Required Information

Exhibit 13	Intentionally Omitted

Exhibit 14	Standard Acknowledgement

EXHIBIT 1

Specified Signs with Price content:


May contain only the following:
	-	Product Picture(s)

	-	Product Name(s)

	-	Product Size(s)

	-	UPC Numbers

	-	Retailer Logos

	-	Good Through Dates

	-	Tag Line (as defined below) or Price Related Messaging – NAM to allow on a non-exclusive basis price related messaging limited to type in mock up sent by Insignia attached as Exhibit 2A

	-	Price (more prominent than other elements)

The signs may not contain any other messaging.

Tear Strip allowed on each sign; provided however, that the tear strip is only used to remedy any discrepancy that occur between the featured price and a price change that takes place during the term of the 2 week cycle.

Except as contemplated by Section 20 of the Agreement, nothing in the specifications requires that the signs or the clips used to install them include the “SmartSource” or “News America Marketing” name.

A “Tag Line” is a trademark, slogan or phrase associated with the product, but not general advertising.

EXHIBIT 2A – MOCK UP FROM TERM SHEET

(IMAGE)

0 0Z

UPC: 0-00000-00000
00/00/00 - 00/00/00

EXHIBIT 2B – MOCK UP FROM TERM SHEET

(IMAGE)

0 0Z

UPC: 0-00000-00000
00/00/00 - 00/00/00

EXHIBIT 3 – INTENTIONALLY OMITTED

EXHIBIT 4 - CONTRACTS WITH MATERIAL RESTRICTIONS

Each retailer/participating store retains the right to approve or reject individual programs.

Sample Retailer restrictions (PPG Network – Restricted), will be updated periodically:

[ * ]

Retailer restrictions (PPG Network – Pre-approval) :

[ * ]

*Indicates confidential information which has been omitted and filed separately with the Commission under Rule 24b-2.

EXHIBIT 5 –INSTALLATION GUARANTEE

NAM shall issue to Insignia a refund or credit for any amount then due NAM if the rate installation (as calculated below) for a Specified Sign with Price program is less than [ * ] of the Final Store Count as further described below. The rate of installation is a percentage calculated by dividing the sum of the number of stores in which the Specified Sign with Price Program is successfully installed plus the number of stores NAM is unable to install the Specified Sign with Price Program in due to retail access issues outside the control of NAM by the Final Store Count and multiplying such number by one hundred (100). Retail access issues outside the control of NAM are (i) featured product is not in distribution or is out of stock, (ii) remodeling or resetting of stores, (iii) store closed or not open yet, (iv) Insignia or client directive not to install, (v) Insignia fails to provide NAM with the information or materials required by Exhibit 7 by deadlines specified in Exhibit 7 or (vi) price at shelf does not match price on sign, as categories may be updated from time to time upon prior written notice by NAM. The amount of the credit or refund shall be Insignia’s sole remedy under this guarantee and shall equal the per sign access fee and installation fee multiplied by the number of additional stores needed in the numerator of the rate of installation calculation above to make the rate of installation equal [ * ]. “Final Store Count” shall mean the number of stores in which the Specified Signs with Price are to be installed for each particular program based on the procedures contained in Exhibit 7 as of approximately seven (7) weeks prior to the start of the cycle for the Program.

*Indicates confidential information which has been omitted and filed separately with the Commission under Rule 24b-2.

EXHIBIT 6 –LETTER TO RETAILERS

Dear Retailer,

As you may know we have recently entered into a ten-year business arrangement with Insignia Systems. As of February 9 ^th , 2011 they are the exclusive provider of signs with price into the Price POP Guaranteed Network. News America will no longer sell that tactic.

Moving forward Insignia Systems and News America are requesting that your retail pricing data for those products sold into each cycle is submitted directly to Insignia. Insignia can take the pricing data the same way you are currently providing it to us, or potentially enhance the current process.

Either your NAM and/or Insignia representative will be contacting you soon for next steps. We want to minimize any interruption and effort for you. We are looking forward to a smooth transition and a successful program for all three parties moving forward.

Sincerely,
NAM Representative

EXHIBIT 7 – NAM RETAILERS INSTALLATION GUIDELINES

Unless noted, the following relates to placement of signs both NAM PPG and NON PPG Retailers.


A.	Sales Process and Order Entry. Insignia will follow the jointly agreed upon modified NAM’s PPG Sales Schedule (see exhibit 7.1, “Production Schedule Timing Overview”). NAM’s PPG Sales Schedule is subject to change if mutually agreed upon.

B.	Data Entry. Insignia will provide all required program data to NAM by the Final Cutoff Date as shown in exhibit 7.1. Entries will include but are not limited to participating stores, UPC’s, Product Description and Product Size.

C.	Program Specifications . The Specified Signs with Price must adhere to the specifications shown in Exhibit 1. In addition, each sign will contain any information required by NAM Field Representatives, i.e., cycle identification, etc.

D.	Print Quantity File/Manifests. NAM will provide Insignia with a print quantity file and shipping manifest per the schedule found in Exhibit 7.1.

E.	Product Authorization/Pricing . Insignia and/or NAM will request that the participating retailers provide weekly store level UPC specific distribution/pricing information. For each product authorized, all available/relevant pricing data should be provided, e.g., regular price, loyalty card (or other) sale price, BOGO, limits, and unit pricing information, effective dates, etc. Any such information received by NAM (or its contractor) will be immediately transmitted to Insignia. Business logic for void and “no price given” will follow retailer specifications.

	i.	Business Logic - By chain code (at start-up, and upon any changes)

		1.	Restrictions/exclusions/specifications
		2.	Ad break day
		3.	Day and time price is finalized
		4.	Pricing template (loyalty, sale price, etc.)
		5.	Artwork priority
		6.	Offset dates
		7.	Price requisition
		8.	Price acquisition
		9.	Weeks in cycle
		10.	Scheduling


		11.	Price display characteristics (size, font, “No price” verbiage)
		12.	Sign size, layout and perforation
		13.	Voids and week two ‘no price change’ ]

F.	Sign Creation/Sign Packet. Insignia or NAM pursuant to Exhibit 12 will create, collate and ship store level sign packets to specified NAM Field Representatives in time for each Retailer’s weekly Ad Break. Each sign packet will include as a minimum: information sheet (cycle identifier, chain name/id, Field Rep name/address, store number(s), and number of clings/vinyl pockets), artwork number(s), signs and shelf clips.

G.	Sign Placement.
	•	NAM Field Representative will install each sign in its primary location if possible, and, if not, its secondary location specified to NAM on ad break day, according to NAM’s Installation Guidelines, see Exhibit 7.3.

	•	NAM Field Representative will record in the Installation Report to Insignia whether or not the placement is successfully completed, and if not, the reason why.

	•	NAM Field Representatives will post any new/price updated signs during the second week of the promotional cycle.

	•	NAM Field Representatives will remove all applicable signs at the end of each promotional period.

H.	Installation. Installation and other activities under this Agreement shall be based upon a two week cycle (with the exception of other cycle lengths set by retailers such as [ * ] 4 week cycle).

I.	Reporting . Upon completion of each cycle, NAM shall provide Insignia Installation Reports and Billing invoices within fourteen (14) days.

*Indicates confidential information which has been omitted and filed separately with the Commission under Rule 24b-2.

EXHIBIT 7.1 – PRODUCTION TIMING OVERVIEW

In order to accommodate artwork review, the selling cycle close date needs to move back 1 week to 6 weeks prior to star in-store date.

EXHIBIT 7.1 – PRODUCTION TIMING OVERVIEW
[TO BE UPDATED]

(FLOW CHART)

ISI/NAM Production Timing Overview

Proposed
Sign with Price Timing

UPC/Store List Cut-off

Preliminary Notification #1
(75% of UPCs)

Selling Cycle Close

Print Quantity File

Manifest File

Artwork posted to Printers FTP

(End of Week)

Notification #2

Start Price, Print & Ship

Continue Price, Print & Ship

Start In-Store
(Adbreak Specific)

EXHIBIT 7.2 – ISI Selling Cycle Calendar

[Sales close dates below to be consistent with timing from Exhibit 7.1]

2011 Cycle Calendar

NAM Cycle

ISI Cycle

Store List/UPC Deadline

Sales Close Date

2011-11

4/15/2011

4/22/2011

2011-12

4/29/2011

5/6/2011

2011-13

5/13/2011

5/20/2011

2011-14

5/27/2011

6/3/2011

2011-15

6/10/2011

6/17/2011

2011-16

6/24/2011

7/1/2011

2011-17

7/8/2011

7/15/2011

2011-18

7/22/2011

7/29/2011

10A

2011-19

8/5/2011

8/12/2011

10B

2011-20

8/19/2011

8/26/2011

11A

2011-21

9/2/2011

9/9/2011

11B

2011-22

9/16/2011

9/23/2011

12A

2011-23

9/30/2011

10/7/2011

12B

2011-24

10/14/2011

10/21/2011

13A

2011-25

10/28/2011

11/4/2011

13B

2011-26

11/11/2011

11/18/2011

2012 Cycle Calendar

NAM Cycle

ISI Cycle

Store List/UPC Deadline

Sales Close Date

2012-01

11/25/2011

12/2/2011

2012-02

12/9/2011

12/16/2011

2012-03

12/23/2011

12/30/2011

2012-04

1/6/2012

1/13/2012

2012-05

1/20/2012

1/27/2012

2012-06

2/3/2012

2/10/2012

2012-07

2/17/2012

2/24/2012

2012-08

3/2/2012

3/9/2012

2012-09

3/16/2012

3/23/2012

2012-10

3/30/2012

4/6/2012

2012-11

4/13/2012

4/20/2012

2012-12

4/27/2012

5/4/2012

2012-13

5/11/2012

5/18/2012

2012-14

5/25/2012

6/1/2012

2012-15

6/8/2012

6/15/2012

2012-16

6/22/2012

6/29/2012

2012-17

7/6/2012

7/13/2012

2012-18

7/20/2012

7/27/2012

10A

2012-19

8/3/2012

8/10/2012

10B

2012-20

8/17/2012

8/24/2012

11A

2012-21

8/31/2012

9/7/2012

11B

2012-22

9/14/2012

9/21/2012

12A

2012-23

9/28/2012

10/5/2012

12B

2012-24

10/12/2012

10/19/2012

13A

2012-25

10/26/2012

11/2/2012

13B

2012-26

11/9/2012

11/16/2012

EXHIBIT 7.2 – ISI Selling Cycle Calendar

2013 Cycle Calendar

NAM Cycle

ISI Cycle

Store List/UPC Deadline

Sales Close Date

2013-01

11/23/2012

11/30/2012

2013-02

12/7/2012

12/14/2012

2013-03

12/21/2012

12/28/2012

2013-04

1/4/2013

1/11/2013

2013-05

1/18/2013

1/25/2013

2013-06

2/1/2013

2/8/2013

2013-07

2/15/2013

2/22/2013

2013-08

3/1/2013

3/8/2013

2013-09

3/15/2013

3/22/2013

2013-10

3/29/2013

4/5/2013

2013-11

4/12/2013

4/19/2013

2013-12

4/26/2013

5/3/2013

2013-13

5/10/2013

5/17/2013

2013-14

5/24/2013

5/31/2013

2013-15

6/7/2013

6/14/2013

2013-16

6/21/2013

6/28/2013

2013-17

7/5/2013

7/12/2013

2013-18

7/19/2013

7/26/2013

10A

2013-19

8/2/2013

8/9/2013

10B

2013-20

8/16/2013

8/23/2013

11A

2013-21

8/30/2013

9/6/2013

11B

2013-22

9/13/2013

9/20/2013

12A

2013-23

9/27/2013

10/4/2013

12B

2013-24

10/11/2013

10/18/2013

13A

2013-25

10/25/2013

11/1/2013

13B

2013-26

11/8/2013

11/15/2013

EXHIBIT 7.2 – ISI Selling Cycle Calendar

2014 Cycle Calendar

NAM Cycle

ISI Cycle

Store List/UPC Deadline

Sales Close Date

2014-01

11/22/2013

11/29/2013

2014-02

12/6/2013

12/13/2013

2014-03

12/20/2013

12/27/2013

2014-04

1/3/2014

1/10/2014

2014-05

1/17/2014

1/24/2014

2014-06

1/31/2014

2/7/2014

2014-07

2/14/2014

2/21/2014

2014-08

2/28/2014

3/7/2014

2014-09

3/14/2014

3/21/2014

2014-10

3/28/2014

4/4/2014

2014-11

4/11/2014

4/18/2014

2014-12

4/25/2014

5/2/2014

2014-13

5/9/2014

5/16/2014

2014-14

5/23/2014

5/30/2014

2014-15

6/6/2014

6/13/2014

2014-16

6/20/2014

6/27/2014

2014-17

7/4/2014

7/11/2014

2014-18

7/18/2014

7/25/2014

10A

2014-19

8/1/2014

8/8/2014

10B

2014-20

8/15/2014

8/22/2014

11A

2014-21

8/29/2014

9/5/2014

11B

2014-22

9/12/2014

9/19/2014

12A

2014-23

9/26/2014

10/3/2014

12B

2014-24

10/10/2014

10/17/2014

13A

2014-25

10/24/2014

10/31/2014

13B

2014-26

11/7/2014

11/14/2014

EXHIBIT 7.2 – ISI Selling Cycle Calendar

2015 Cycle Calendar

NAM Cycle

ISI Cycle

Store List/UPC Deadline

Sales Close Date

2015-01

11/21/2014

11/28/2014

2015-02

12/5/2014

12/12/2014

2015-03

12/19/2014

12/26/2014

2015-04

1/2/2015

1/9/2015

2015-05

1/16/2015

1/23/2015

2015-06

1/30/2015

2/6/2015

2015-07

2/13/2015

2/20/2015

2015-08

2/27/2015

3/6/2015

2015-09

3/13/2015

3/20/2015

2015-10

3/27/2015

4/3/2015

2015-11

4/10/2015

4/17/2015

2015-12

4/24/2015

5/1/2015

2015-13

5/8/2015

5/15/2015

2015-14

5/22/2015

5/29/2015

2015-15

6/5/2015

6/12/2015

2015-16

6/19/2015

6/26/2015

2015-17

7/3/2015

7/10/2015

2015-18

7/17/2015

7/24/2015

10A

2015-19

7/31/2015

8/7/2015

10B

2015-20

8/14/2015

8/21/2015

11A

2015-21

8/28/2015

9/4/2015

11B

2015-22

9/11/2015

9/18/2015

12A

2015-23

9/25/2015

10/2/2015

12B

2015-24

10/9/2015

10/16/2015

13A

2015-25

10/23/2015

10/30/2015

13B

2015-26

11/6/2015

11/13/2015

EXHIBIT 7.3 – NAM Installation Guidelines
Note that the below is just an example of guidelines for a particular cycle and will
be updated from time to time during the term.

[ * ]

*Indicates confidential information which has been omitted and filed separately with the Commission under Rule 24b-2.

EXHIBIT 8 – INTENTIONALLY OMITTED

EXHIBIT 9 – EXISTING PPG SALES

[ * ]

*Indicates confidential information which has been omitted and filed separately with the Commission under Rule 24b-2.

EXHIBIT 10 – AUDIT GUIDELINES

A “Compliance Audit” means that Insignia may select one client program for which to audit NAM’s compliance with the installation obligations in this Agreement by having an independent third party auditor reasonably acceptable to NAM and Insignia conduct an audit in accordance with the guidelines described below. NAM may choose to have a photo audit of such programs conducted. NAM’s photo audit, if undertaken, shall provide a time, date and location “stamped” (verified) photo of the Specified Signs with Price program installed in a store.

Any disagreements concerning a Compliance Audit including disagreements about the accuracy of the audit shall be submitted to binding arbitration. Unless the parties agree to one arbitrator, the dispute shall be brought before a panel of three arbitrators. Said panel shall consist of three arbitrators. Insignia and NAM shall each be entitled to appoint one arbitrator. The two appointed arbitrators shall then appoint a third arbitrator. The three arbitrators shall together comprise the binding arbitration panel. If the arbitration panel is tasked with determining the percentage of installation, it shall consider the findings of the independent auditor as well as any photo audit undertaken by NAM, together with any other evidence the arbitrators deem appropriate to consider. A decision agreed to between any two of the three arbitrators shall be deemed as a final binding decision. Cost of the arbitration shall be equally split between the parties.

If the parties agree that the Compliance Audit has revealed that NAM has failed to achieve the [ * ] installation guarantee as contemplated by Exhibit 5, Insignia shall be entitled to the remedy specified in Exhibit 5 and, if applicable, Section 17. If the parties have failed to agree on the accuracy of the audit and the disagreement is submitted to binding arbitration as described above, and if the arbitration decision determines that NAM has failed to achieve the [ * ] installation guarantee as contemplated by Exhibit 5, Insignia shall be entitled to the remedy specified in Exhibit 5 and, if applicable, Section 17.

NEWS AMERICA MARKETING COMPLIANCE AUDIT GUIDELINES
2 WEEK PRICE SIGNAGE PROGRAM

Effective 4/11

Research Supplier

An agreed upon third party auditor with prior experience in NAM programs and retail channels is required.

*Indicates confidential information which has been omitted and filed separately with the Commission under Rule 24b-2.

Collaboration

The client, the auditor and NAM should communicate throughout the process of research design, audit instructions, execution, tabulation and results to ensure agreement on the audit objectives and processes.

Timing

Compliance audits must be conducted within 3 days after the retailer’s sales price changes become effective. To ensure the auditor is educated as to the agreed upon objectives and processes, the audit should be scheduled at least 6 weeks in advance of the audit start date.

Sample Size Guidelines


1.	A geographically representative sample should be drawn.

2.	A representative sample of chain and independent retailers should be used. (Representative of the program buy.)

3.	Within each geography audited (market), stores should be selected based on each participating account’s share of that market’s stores. Specific stores should be selected to provide for a representative sample, while allowing for efficient routing of auditors.

4.	Adequate sample size for the total program and individual markets should be used.


	•	A [ * ] minimum total store sample is recommended.

	•	[ * ] stores per market are recommended. A minimum of [ * ] stores should be audited in each market.

Market List Guidelines


1.	A NAM store list for the specific program must be used to draw the audit sample.

2.	TDLinx numbers must be used to ensure accurate matching between the NAM store list and the auditor’s store list in sample selection and tabulation.

Audit Instruction Guidelines

The auditor will prepare audit instructions for review and approval by NAM and the client. The exact placement instructions and NAM product standards used by NAM’s field force for the program installation should be reflected in the audit instructions. The approved audit instructions will be used by the auditor to collect the data.

*Indicates confidential information which has been omitted and filed separately with the Commission under Rule 24b-2.

Data Collection


1.	Stocking conditions of the brand should be collected as part of the audit (Was the product in distribution in the audited store?)

2.	The shelf location of the price sign should be recorded.

Audit Result Guidelines

The audit results should be used in calculating compliance based on the rate of installation formula. NAM handheld information will be provided to the auditor to assist in providing a full understanding of retail conditions and their impact on program compliance.

Cost

The expense of any compliance Audit will be borne by Insignia, unless the Compliance Audit finds a failure by NAM to comply with the [ * ] PPG Installation Guaranty, in which case NAM will pay the entire cost of the audit.

*Indicates confidential information which has been omitted and filed separately with the Commission under Rule 24b-2.


EXHIBIT 11 – CYCLE CALENDAR

2011 Cycle Calendar

NAM Cycle	ISI Cycle	Cycle Dates
6A	2011-11	May 22 - June 4
6B	2011-12	June 5 - 18
7A	2011-13	June 19 - July 2
7B	2011-14	July 3 - 16
8A	2011-15	July 17 - 30
8B	2011-16	July 31 - August 13
9A	2011-17	August 14 - 27
9B	2011-18	August 28 - September 10
10A	2011-19	September 11 - 24
10B	2011-20	September 25 - October 8
11A	2011-21	October 9 - 22
11B	2011-22	October 23 - November 5
12A	2011-23	November 6 - 19
12B	2011-24	November 20 - December 3
13A	2011-25	December 4 - 17
13B	2011-26	December 18 - 31

2012 Cycle Calendar

NAM Cycle	ISI Cycle	Cycle Dates
1A	2012-01	January 1 - 14
1B	2012-02	January 15 - 28
2A	2012-03	January 29 - February 11
2B	2012-04	February 12 - 25
3A	2012-05	February 26 - March 10
3B	2012-06	March 11 - 24
4A	2012-07	March 25 - April 7
4B	2012-08	April 8 - 21
5A	2012-09	April 22 - May 5
5B	2012-10	May 6 - 19
6A	2012-11	May 20 - June 2
6B	2012-12	June 3 - 16
7A	2012-13	June 17 - 30
7B	2012-14	July 1 - 14
8A	2012-15	July 15 - 28
8B	2012-16	July 29 - August 11
9A	2012-17	August 12 - 25
9B	2012-18	August 26 - September 8
10A	2012-19	September 9 - 22
10B	2012-20	September 23 - October 6
11A	2012-21	October 7 - 20
11B	2012-22	October 21 - November 3
12A	2012-23	November 4 - 17
12B	2012-24	November 18 - December 1
13A	2012-25	December 2 - 15
13B	2012-26	December 15 - 29


EXHIBIT 11 – CYCLE CALENDAR

2013 Cycle Calendar

NAM Cycle	ISI Cycle	Cycle Dates
1A	2013-01	December 30 - January 12
1B	2013-02	January 13 - 26
2A	2013-03	January 27 - February 9
2B	2013-04	February 10 - 23
3A	2013-05	February 24 - March 9
3B	2013-06	March 10 - 23
4A	2013-07	March 24 - April 6
4B	2013-08	April 7 - 20
5A	2013-09	April 21 - May 4
5B	2013-10	May 5 - 18
6A	2013-11	May 19 - June 1
6B	2013-12	June 2 - 15
7A	2013-13	June 16 - 29
7B	2013-14	June 30 - July 13
8A	2013-15	July 14 - 27
8B	2013-16	July 28 - August 10
9A	2013-17	August 11 - 24
9B	2013-18	August 25 - September 7
10A	2013-19	September 8 - 21
10B	2013-20	September 22 - October 5
11A	2013-21	October 6 - 19
11B	2013-22	October 20 - November 2
12A	2013-23	November 3 - 16
12B	2013-24	November 17 - 30
13A	2013-25	December 1 - 14
13B	2013-26	December 15 - 28


EXHIBIT 11 – CYCLE CALENDAR

2014 Cycle Calendar

NAM Cycle	ISI Cycle	Cycle Dates
1A	2014-01	December 29 - January 11
1B	2014-02	January 12 - 25
2A	2014-03	January 26 - February 8
2B	2014-04	February 9 - 22
3A	2014-05	February 23 - March 8
3B	2014-06	March 9 - 22
4A	2014-07	March 23 - April 5
4B	2014-08	April 6 - 19
5A	2014-09	April 20 - May 3
5B	2014-10	May 4 - 17
6A	2014-11	May 18 - 31
6B	2014-12	June 1 - 14
7A	2014-13	June 15 - 28
7B	2014-14	June 29 - July 12
8A	2014-15	July 13 - 26
8B	2014-16	July 27 - August 9
9A	2014-17	August 10 - 23
9B	2014-18	August 24 - September 6
10A	2014-19	September 7 - 20
10B	2014-20	September 21 - October 4
11A	2014-21	October 5 - 18
11B	2014-22	October 19 - November 1
12A	2014-23	November 2 - 15
12B	2014-24	November 16 - 29
13A	2014-25	November 30 - December 13
13B	2014-26	December 14 - 27

Exhibit 11 - Cycle Calendar

2015 Cycle Calendar


NAM Cycle	ISI Cycle	Cycle Dates
1A	2015-01	December 28 - January 10
1B	2015-02	January 11 - 24
2A	2015-03	January 25 - February 7
2B	2015-04	February 8 - 21
3A	2015-05	February 22 - March 7
3B	2015-06	March 8 - 21
4A	2015-07	March 22 - April 4
4B	2015-08	April 5 - 18
5A	2015-09	April 19 - May 2
5B	2015-10	May 3 - 16
6A	2015-11	May 17 - 30
6B	2015-12	May 31 - June 13
7A	2015-13	June 14 - 27
7B	2015-14	June 28 - July 11
8A	2015-15	July 12 - 25
8B	2015-16	July 26 - August 8
9A	2015-17	August 9 - 22
9B	2015-18	August 23 - September 5
10A	2015-19	September 6 - 19
10B	2015-20	September 20 - October 3
11A	2015-21	October 4 - 17
11B	2015-22	October 18 - 31
12A	2015-23	November 1 - 14
12B	2015-24	November 15 - 28
13A	2015-25	November 29 - December 12
13B	2015-26	December 13 - 26

EXHIBIT 12 – REQUIRED INFORMATION

Information Required from NAM to Insignia (Timing)

PPG Stores


1.	Store list - By chain code (each cycle)
	a.	Number of stores
	b.	Store name
	c.	Store address
	d.	TDLinx code
	e.	NAM store ID
	f.	Chain store number

2.	Business Logic - By chain code (at start-up, and upon any changes)
	a.	Restrictions/exclusions/specifications
	b.	Ad break day
	c.	Day and time price is finalized
	d.	Pricing template (loyalty, sale price, etc.)
	e.	Artwork priority
	f.	Offset dates
	g.	Price requisition
	h.	Price acquisition
	i.	Weeks in cycle
	j.	Scheduling
	k.	Price display characteristics (size, font, “No price” verbiage)
	l.	Sign size, layout and perforation
	m.	Voids and week two ‘no price change’

3.	Business/Pricing contacts – by chain code (at start-up, and upon any changes)
	a.	Name
	b.	Title
	c.	Contact information

4.	*Pricing – By store (weekly, by production due date)
	a.	By UPC
	b.	Including voids/”do not carry”
	c.	Any additional information provided by retailer
	*As provided by retailer.

5.	Retailer contract end date – 6 months prior to scheduled contract end date

6.	Shipping manifest (weekly)
	d.	Field personnel/addresses
	e.	Store assignments

7.	Field installation reports (each cycle, within 3 weeks post cycle)

NAM Network Non-PPG (all retailers)


1.	Retailer name (upon execution of agreement)
	a.	Number of stores
	b.	Business contacts
		i.	Titles
		ii.	Contact Information

The only information to be shared by Insignia with [ * ] is set out below and may be used by [ * ] for the sole purpose of resale to [ * ] Permitted Clients only.


2.	Retailer names
	a.	Store counts
	b.	Select business logic
		i.	Cycle Timing
		ii.	Price
	c.	Restriction/exclusions
	d.	Sign specifications
	e.	Cycle calendar and timelines
	f.	Price Pop Guarantee installation reports
	g.	Sign samples

*Indicates confidential information which has been omitted and filed separately with the Commission under Rule 24b-2.

EXHIBIT 13 – INTENTIONALLY OMITTED

EXHIBIT 14 – STANDARD ACKNOWLEDGEMENT

This Standard Acknowledgement (this “ Acknowledgment ”) is entered into as of [INSERT DATE] by and among News America Marketing In-Store Services L.L.C. (“ NAM ”), Insignia Systems, Inc. (“ Insignia ”), and [INSERT RETAILER NAME] (“ Retailer ”).

WHEREAS NAM and Retailer have previously entered into an agreement, the [INSERT AGMT NAME] effective as of [INSERT DATE] (“ NAM-Retailer Agreement ”), in which Retailer authorizes NAM to install and maintain certain in-store advertising and promotional programs;

WHEREAS NAM and Insignia entered into an Exclusive Agreement For Sale And Placement of Specified Signs With Price which permits Insignia to sell Specified Signs with Price under certain circumstances;

WHEREAS Insignia and Retailer may enter into an agreement with each other (any such agreement executed by Insignia and Retailer as same may be amended from time to time, a “ Insignia-Retailer Agreement ”), which may permit placement in Retailer’s stores of “ Specified Signs with Price ” (defined as having the features of the Price Pop Guaranteed Signs meeting Retailer’s specifications and having only the content set forth on Attachment 1 and conform to the requirements of Attachment 1 );

NOW THEREFORE the parties acknowledge and agree as follows:


	1.	NAM Not a Party . The Insignia-Retailer Agreement shall be solely between Insignia and Retailer, and NAM shall not be a party to the Insignia-Retailer Agreement. Each of Insignia and Retailer hereby disclaim and release NAM from and against any and all claims and liabilities arising out of or in connection with the Insignia-Retailer Agreement.

	2.	Compliance . Provided that the terms of this Acknowledgement are complied with, NAM agrees not to enforce against Retailer or Insignia with respect to the Specified Signs with Price any exclusivity rights which NAM may have pursuant to the NAM-Retailer Agreement. Insignia and Retailer acknowledge and agree that NAM is entering into this Acknowledgement based on the representations, warranties and covenants made by Insignia and Retailer herein.

	3.	Representations Warranties and Covenants . Insignia and Retailer each represent, warrant and covenant to NAM that (i) the Insignia-Retailer Agreement does not and will not contain any terms or conditions that are inconsistent with the terms and conditions of this Acknowledgement; (ii) except as specifically contemplated by Section 2, this Acknowledgement


		does not limit or otherwise affect the rights granted to NAM by Retailer in the NAM-Retailer Agreement (including, without limitation, placement rights, exclusivity rights, etc.) for any product other than Specified Signs with Price; and (iii) the Insignia-Retailer Agreement does and will provide that NAM shall install all Specified Signs with Price in Retailer’s stores.

	4.	Conflict . In the event that notwithstanding the representations, warranties and covenants in this Acknowledgement, there is a term or condition in the Insignia-Retailer Agreement that is inconsistent with any of the terms or conditions in this Acknowledgement, the terms and conditions in this Acknowledgement shall prevail.

	5.	Confidentiality . Insignia and Retailer confirm that they have not and will not disclose to NAM any terms or provisions contained in the Insignia-Retailer Agreement except as may be required by legal process.

	6.	Term . The term of this Acknowledgment shall be for so long as Retailer has an agreement with NAM related to in store marketing.

Acknowledged and Agreed:

Insignia Systems, Inc.


By:
	Name:
	Title:

[INSERT RETAILER NAME]


By:
	Name:
	Title:

News America Marketing In-Store Services L.L.C.


By:
	Name:
	Title:

Attachment 1
Specifications

[FINAL VERSION OF EXHIBIT 1 TO BE INSERTED ONCE FINALIZED.]

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Scott F. Drill, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Insignia Systems, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

		a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within the Registrant, particularly during the period in which this report is being prepared; and

		b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

		c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

		d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

		a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

		b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: August 9, 2011	/s/ Scott F. Drill
	Scott F. Drill President and Chief Executive Officer (principal executive officer)

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, John C. Gonsior, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Insignia Systems, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

		a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within the Registrant, particularly during the period in which this report is being prepared; and

		b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

		c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

		d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

		a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

		b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: August 9, 2011	/s/ John C. Gonsior
	John C. Gonsior Vice President, Finance and Chief Financial Officer (principal financial officer)

Exhibit 32

SECTION 1350 CERTIFICATION

The undersigned certify that:

(1) The accompanying Quarterly Report on Form 10-Q for the period ended June 30, 2011, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the accompanying Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2011	/s/ Scott F. Drill
	Scott F. Drill President and Chief Executive Officer (principal executive officer)


Date: August 9, 2011	/s/ John C. Gonsior
	John C. Gonsior Vice President, Finance and Chief Financial Officer (principal financial officer)