Item 1.01 Entry into a Material Definitive Agreement.
On May 24, 2023, Insignia Systems, Inc. (the “Company”) entered into an Asset Purchase Agreement (the “Purchase Agreement”) with TIMIBO LLC (“Buyer”), an affiliate of Park Printing, Inc. (“Park”), pursuant to which the Company has agreed to sell substantially all of its assets and certain liabilities relating to the Company’s business of providing in-store advertising solutions to brands, retailers, shopper marketing agencies and brokerages for a cash purchase price of $3.5 million. The purchase price is subject to a post-closing adjustment depending on the net balance of (i) cash received by the Company for programs that remained unexecuted as of the date of Closing (as defined in the Purchase Agreement), minus (ii) the payments made by the Company to vendors for unexecuted programs. The Company is retaining and expects to continue to develop its previously announced non-bank lending business.
The obligations of each of the Company and Buyer to consummate the transactions contemplated by the Purchase Agreement are subject to specified conditions, including, among other matters: the approval by Company shareholders of the Purchase Agreement and the transactions contemplated therein and delivery of employment offer letters executed by certain employees. Park has agreed to guarantee all of Buyer’s covenants, agreements and other liabilities under the Purchase Agreement.
The Purchase Agreement contains customary representations and warranties from the Company and Buyer. It also contains customary covenants, including providing (i) for each of the parties to use reasonable best efforts to consummate the transactions contemplated in the Purchase Agreement, and (ii) for the Company to carry on its business in the ordinary course of business consistent with past practice during the period between the execution of the Purchase Agreement and the Closing. The Company also agreed not to solicit, initiate or propose the making, submission or announcement of, or knowingly encourage, facilitate or assist, any proposal or offer that constitutes, or would reasonably be expected to lead to, any Acquisition Proposal (as defined in the Purchase Agreement). Notwithstanding the foregoing, the Company continues to explore other strategic options to maximize shareholder value and actions or communications that specifically contemplate the Transactions (as defined in the Purchase Agreement) are not subject to this restriction. Potential strategic alternatives that may be evaluated include, but are not limited to, an acquisition, merger, business combination, in-licensing, start-up of new business or other strategic initiatives that do not conflict with the Purchase Agreement. There can be no assurance that the ongoing process will result in any other transactions or initiatives.
The Purchase Agreement contains termination rights for each of the Company and Buyer, including, without limitation, in the event that (i) any governmental entity issues a non-appealable final order permanently enjoining the transactions contemplated by the Purchase Agreement; (ii) the transactions contemplated by the Purchase Agreement are not consummated by September 30, 2023 (the “Termination Date”); (iii) the Purchase Agreement is not approved by the Company’s shareholders, or (iv) the other party breaches its representations, warranties or covenants under the Purchase Agreement, which breach would give rise to the failure of a closing condition and such breach is not cured within the earlier of 30-days of receipt of written notice of such breach and the Termination Date.
The Purchase Agreement provides that the Company or Buyer will be obligated to pay to the other a termination fee of $175,000 if the Purchase Agreement is terminated under certain circumstances. Additionally, the Company has agreed to reimburse Buyer for up to $100,000 for actual out-of-pocket expenses and fees paid or payable by Buyer under certain circumstances. Each party has agreed to indemnify the other for certain losses, subject to certain limitations.
The foregoing description of the Purchase Agreement does not purport to be complete and is subject to, and qualified by, the full text of the Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
The Purchase Agreement contains representations, warranties, covenants and other terms, provisions and conditions that the parties made to each other as of specific dates. The assertions embodied therein were made solely for purposes of the Purchase Agreement and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating their respective terms. Moreover, they may be subject to a contractual standard of materiality that may be different from what may be viewed as material to shareholders, or may have been used for the purpose of allocating risk between the parties rather than establishing matters as facts. For the foregoing reasons, no person should rely on such representations, warranties, covenants or other terms, provisions or conditions as statements of factual information at the time they were made or otherwise. Unless required by applicable law, the Company undertakes no obligation to update such information.
Simultaneously with the execution of the Purchase Agreement, Buyer entered into Support Agreements, dated May 24, 2023 (the “Support Agreements”), with all executive officers and directors of the Company and specified shareholders Air T, Inc., Groveland Capital LLC, AO Partners I, L.P., and Glenhurst Co. (collectively, the “Company Holders”). As of May 24, 2023, the Company Holders held, in the aggregate, approximately 43.8% of the Company’s outstanding shares of common stock. Pursuant to the Support Agreements, each Company Holder has agreed, with respect to all of the voting securities of the Company that such Company Holder beneficially owns as of the date thereof or thereafter, to vote in favor of the Purchase Agreement. The Support Agreements are scheduled to expire as of the Closing.
The foregoing description of the Support Agreements does not purport to be complete and is subject to, and qualified by, the full text of the form of Support Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.