EXHIBIT 4.1
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INSIGNIA SYSTEMS, INC.
2003 INCENTIVE STOCK OPTION PLAN
(Adopted by Board of Directors February 24, 2003)
(Approved by Shareholders on May 20, 2003)
1. PURPOSE. The purpose of this Plan is to provide a means whereby
Insignia Systems, Inc. (the "Company"), may be able, by granting options to
purchase stock in the Company, to attract, retain and motivate capable and loyal
employees, directors, consultants and advisors of the Company and its
subsidiaries, for the benefit of the Company and its shareholders. Both
incentive stock options which qualify for favorable tax treatment under Section
422 of the Internal Revenue Code (the "Code"), and nonqualified stock options
which do not qualify for favorable tax treatment, may be granted under the Plan.
2. RESERVATION OF SHARES. A total of 350,000 shares of the authorized but
unissued shares of Common Stock of the Company, par value $.01 per share, is
reserved for issue upon the exercise of options granted under the Plan. If any
option expires or terminates for any reason without having been exercised in
full, the unpurchased shares covered thereby shall become available for
additional options which may be issued to persons eligible under the Plan so
long as it remains in effect. Shares reserved for issue as provided herein shall
cease to be reserved upon termination of the Plan.
3. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors (the "Committee"). The Committee shall be
appointed by the Board of Directors and shall be comprised solely of two or more
"non-employee directors" within the meaning of SEC Rule 16b-3. Each member of
the Committee shall also be an "outside director" within the meaning of Code
Section 162(m). The Committee shall have the full power to construe and
interpret the Plan and to establish and amend rules and regulations for its
administration. The Committee shall determine which persons shall be granted
options hereunder, the number of shares for which each option shall be granted,
the types of options to be granted, and any limitations on the exercise of
options in addition to those imposed by this Plan. The Committee may also waive
any restrictions on the exercise of outstanding options and approve amendments
to outstanding options, provided there is no conflict with the terms of the
Plan. The Committee shall apply such criteria as it deems appropriate in
determining the persons to whom options are granted and the number of shares to
be covered by each option.
4. ELIGIBILITY. An option may be granted to any employee, director,
consultant or advisor of the Company or its subsidiaries, except that no
consultant or advisor shall be granted options in connection with the offer and
sale of securities in a capital raising transaction on behalf of the Company.
The maximum number of shares for which any person may be granted options under
the Plan in any year is limited to 100,000 shares.
5. OPTION GRANTS TO OUTSIDE DIRECTORS. Each outside director of the
Company shall automatically be granted an option to purchase 10,000 shares of
Common Stock on the date first appointed or elected as a director. Each outside
director shall also automatically be granted an option to purchase 5,000 shares
of Common Stock on (a) the date of each subsequent annual meeting of the
shareholders, provided the outside director is either reelected or continues to
serve as an outside director, or (b) the anniversary of the prior year's grant
in any year in which there is no meeting of the shareholders. In no event shall
a director receive more than one grant in any fiscal year.
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The period within which an option granted to an outside director must
be exercised shall be the earlier of (a) ten years from the date of grant, or
(b) 90 days after the director ceases to be a director for any reason. Options
granted to outside directors shall be immediately exercisable in full when
granted.
6. EXERCISE PRICE. The per share exercise price for each option shall be
determined by the Committee at the time of grant, provided that the per share
exercise price for any incentive stock option, and any option granted to an
outside director, shall be not less than the fair market value of the Common
Stock on the date the option is granted. In making such determination, the
Committee shall rely on market quotations, if available, but if not available,
upon independent appraisals of the stock or such other information deemed
appropriate by the Committee.
7. CHANGES IN PRESENT STOCK. In the event of a recapitalization, merger,
consolidation, reorganization, stock dividend, stock split or other change in
capitalization affecting the Company's present capital stock, appropriate
adjustment may be made by the Committee in the number and kind of shares and the
option price of shares which are or may become subject to options granted or to
be granted hereunder.
8. EXERCISE OF OPTION. Receipt by the Company of a written notice from an
optionee, specifying the number of shares to be purchased, and accompanied by
payment of the purchase price for such shares, shall constitute exercise of the
option as to such shares. The date of receipt by the Company of such written
notice shall be the date of exercise of the option. The Company may accept
payment from a broker and, upon receipt of written instructions from the
optionee, deliver the purchased shares to the broker.
9. OPTION AGREEMENT PROVISIONS. Each option granted under the Plan shall
be evidenced by a Stock Option Agreement executed by the Company and the
optionee, and shall be subject to the following terms and conditions, and such
other terms and conditions as may be prescribed by the Committee:
(a) PAYMENT. The full purchase price of the shares acquired upon
exercise of an option shall be paid in cash, certified or
cashier's check, or in the form of Common Stock of the Company
with a market value equal to the option exercise price and free
and clear of all liens and encumbrances.
The Committee in its sole discretion may also permit the
"cashless exercise" of an option. In the event of a cashless
exercise, the optionee shall surrender the option to the Company,
and the Company shall issue the optionee the number of shares
determined as follows:
X = Y (A-B) /A where:
X = the number of shares to be issued to the optionee.
Y = the number of shares with respect to which the option is
being exercised.
A = the closing sale price of the Common Stock on the date
of exercise, or in the absence thereof, the fair market
value on the date of exercise.
B = the option exercise price.
(b) EXERCISE PERIOD. The period within which an option must be
exercised shall be fixed by the Committee, and shall not exceed
ten years from the date of grant for an incentive
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stock option. The Committee may provide that an option will vest
and become exercisable upon the completion of specified periods
of employment, or the attainment of specified performance goals.
To the extent exercisable, an option may be exercised in whole or
in part. Outstanding unvested options shall become immediately
exercisable in full in the event the Company is acquired by
merger, purchase of all or substantially all of the Company's
assets, or purchase of a majority of the outstanding stock by a
single party or a group acting in concert.
(c) RIGHTS OF OPTIONEE BEFORE EXERCISE. The holder of an option shall
not have the rights of a shareholder with respect to the shares
covered by his or her option until such shares have been issued
to him or her upon exercise of the option.
(d) NO RIGHTS TO CONTINUED EMPLOYMENT. Nothing in the Plan or in any
Stock Option Agreement entered into pursuant hereto shall be
construed to confer upon any optionee any right to continue in
the employ of his or her employer or interfere in any way with
the right of his or her employer to terminate his or her
employment at any time.
(e) DEATH OF OPTIONEE. Upon the death of an optionee, the option, or
any portion thereof, may be exercised to the extent the optionee
was entitled to do so at the time of the optionee's death, by his
or her executor or administrator or other person entitled by law
to the optionee's rights under the option, at any time within one
year subsequent to the date of death. The option shall
automatically expire one year after the optionee's death to the
extent not exercised.
(f) DISABILITY OF OPTIONEE. If an optionee is an employee of the
Company or its subsidiaries, and if the optionee's employment is
terminated due to his or her disability, the optionee may, within
one year of such termination, exercise any unexercised portion of
the option to the extent he or she was entitled to do so at the
time of such termination. The option shall automatically expire
one year after such termination to the extent not exercised.
(g) OTHER TERMINATION OF EMPLOYMENT. If an optionee is an employee of
the Company or its subsidiaries, and if the optionee's employment
is terminated other than by death, disability, or conduct which
is contrary to the best interests of his or her employer, the
optionee may, within 90 days of such termination, exercise any
unexercised portion of the option to the extent he or she was
entitled to do so at the time of such termination. The option
shall automatically expire 90 days after such termination to the
extent not exercised. If the optionee's employment is terminated
by his or her employer for conduct which is contrary to the best
interests of his or her employer, or if the optionee violates any
written nondisclosure agreement with his or her employer, as
determined in either case by the optionee's employer in its sole
discretion, the unexercised portion of the optionee's option
shall automatically expire at that time. Inter-company transfers
and approved leaves of absence for up to 90 days shall not be
considered termination of employment.
(h) NON-TRANSFERABILITY OF OPTION. No option shall be transferable by
the optionee other than by will or by the laws of descent and
distribution, and each option shall be exercisable during the
optionee's lifetime only by the optionee. No option may be
attached or subject to levy by an optionee's creditors.
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(i) DATE OF GRANT. The date on which the Committee approves the
granting of an option shall be considered the date on which such
option is granted.
10. ADDITIONAL PROVISIONS FOR INCENTIVE STOCK OPTIONS.
(a) DOLLAR LIMIT. Each option granted to an employee shall constitute
an incentive stock option, provided that no more than $100,000 of
such options (based upon the fair market value of the underlying
shares as of the date of grant) can first become exercisable for
any employee in any calendar year. To the extent an option grant
exceeds the $100,000 limitation, it shall constitute a
non-qualified stock option. Each Stock Option Agreement with an
employee shall specify the extent to which it is an incentive
and/or non-qualified stock option. For purposes of applying the
$100,000 limitation, options granted under this Plan and all
other incentive stock option plans of the Company and any parent
or subsidiary corporation shall be included.
(b) TEN PERCENT SHAREHOLDERS. No incentive stock option shall be
granted to any employee who at the time directly or indirectly
owns more than 10 percent of the combined voting power of all
classes of stock of the Company or of a parent or subsidiary
corporation, unless the exercise price is not less than 110
percent of the fair market value of such stock on the date of
grant, and unless the option is not exercisable more than five
years after the date of grant.
11. RESTRICTIONS ON TRANSFER. During any period in which the offering of
the shares under the Plan is not registered under federal and state securities
laws, an optionee shall agree in his or her option agreement that he or she is
acquiring shares under the Plan for investment purposes, and not for resale, and
that the shares cannot be resold or otherwise transferred except pursuant to
registration or unless, in the opinion of counsel for the Company, registration
is not required.
Any restrictions upon shares acquired upon exercise of an option pursuant
to the Plan and the Stock Option Agreement shall be binding upon the optionee,
and his or her heirs, executors, and administrators. Any stock certificate
issued under the Plan which is subject to restrictions shall be endorsed so as
to refer to the restrictions on transfer imposed by the Plan, and by applicable
securities laws.
12. WITHHOLDING OF TAXES. The Company shall make such provisions and take
such steps as it may deem necessary or appropriate for the withholding of any
taxes that the Company is required by any law or regulation to withhold in
connection with any option including, but not limited to, withholding a portion
of the shares issuable on exercise of an option, or requiring the optionee to
pay to the Company, in cash, an amount sufficient to cover the Company's
withholding obligations.
13. DURATION OF PLAN. The Plan shall terminate ten years after the date of
its adoption by the Board of Directors, unless sooner terminated by issuance of
all shares reserved for issuance hereunder, or by the Board of Directors
pursuant to Section 13. No option shall be granted under the Plan after such
termination date.
14. TERMINATION OR AMENDMENT OF THE PLAN. The Board of Directors may at
any time terminate the Plan, or make such modifications to the Plan as it shall
deem advisable. No termination or amendment of the Plan may, without the consent
of the optionee to whom any option shall previously have been granted, adversely
affect the rights of such optionee under such option.
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15. SHAREHOLDER APPROVAL. The Board of Directors shall submit the Plan to
the shareholders for their approval within 12 months of the date of its adoption
by the Board. Options granted prior to such approval are contingent on receipt
of such approval, and shall automatically lapse if such approval is not granted.
The Board shall also submit any amendments to the shareholders for approval if
required by applicable law or regulation.
16. INTERPRETATION. The Plan shall be interpreted in accordance with
Minnesota law.
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