Exhibit 10.1

 

FORM OF

INCENTIVE STOCK OPTION AGREEMENT

 

INSIGNIA SYSTEMS, INC.

2013 OMNIBUS STOCK AND INCENTIVE PLAN

 

You have been granted an option to purchase shares of the Company, subject to
the terms and conditions of the Company’s 2013 Omnibus Stock and Incentive Plan
(the “Plan”) and the Option Agreement set forth below, as follows:

 

Name of Optionee:

 

                                             

 

 

 

Date of Grant:

 

                    , 20     

 

 

 

Total number of Option Shares:

 

                Shares of Common Stock

 

 

 

Exercise price per share:

 

$                [Fair Market Value on Date of Grant(1)]

 

 

 

Expiration date of option*:

 

                        , 20     [insert expiration date(2)]

 

Vesting Schedule:

 

First Exercisable

 

Number of Option Shares

 

 

 

 

 

 

 

[1st Anniversary]

 

1/3

 

 

[2nd Anniversary]

 

1/3

 

 

[3rd Anniversary]

 

1/3

 

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* Subject to earlier expiration as provided below.

 

THIS AGREEMENT, made effective as of this       day of                       ,
20    , by and between Insignia Systems, Inc., a Minnesota corporation (the
“Company”), and                              (“Optionee”).

 

W I T N E S S E T H:

 

WHEREAS, Optionee on the date hereof is an employee of the Company or one of its
Subsidiaries; and

 

WHEREAS, the Company wishes to grant an incentive stock option to Optionee to
purchase shares of the Company’s Common Stock pursuant to the Company’s 2013
Omnibus Stock and Incentive Plan (the “Plan”); and

 

WHEREAS, the Compensation Committee of the Board of Directors (“Committee”) has
authorized the grant of an incentive stock option to Optionee;

 

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(1) If Optionee is a 10% shareholder of the Company, this must be 110% of Fair
Market Value.

(2) If Optionee is a 10% shareholder of the Company, this cannot be greater than
5 years.

 

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NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree as follows:

 

1.                                      Grant of Option. Insignia Systems, Inc.,
a Minnesota corporation (together with all successors thereto, the “Company”),
hereby grants to the Optionee, who is an employee of the Company or one of its
Subsidiaries, an option (the “Stock Option”) to purchase on or prior to the
expiration date specified above, subject to earlier termination as is specified
herein (the “Option Period”), all or any part of the number of shares indicated
above (the “Option Shares”) of the Company’s common stock, $.01 par value (the
“Common Stock”), at the per share option exercise price specified above, which
shall be 100%(3) of the Fair Market Value on the date of grant (the “Exercise
Price”), subject to the terms and conditions set forth in this Option Agreement
(the “Agreement”) and in the Company’s 2013 Omnibus Stock and Incentive Plan, as
may be amended from time to time (the “Plan”). This Stock Option is intended to
qualify as an “incentive stock option” as defined in Section 422(b) of the
Internal Revenue Code of 1986. All capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Plan.

 

2.                                      Acceptance. Your execution of this
Agreement will indicate your acceptance of and your willingness to be bound by
its terms. This Agreement imposes no obligation upon you to purchase any of the
Option Shares. Your obligation to purchase Option Shares can arise only upon
your exercise of this Option in the manner set forth in Section 4 below. This
Option may not be exercised unless you have executed and returned this Agreement
to the Company.

 

3.              Duration and Exercisability.

 

a.                                      General. The term during which this
Option may be exercised shall terminate on the close of business on
                       , 20     [5th/10th anniversary(4)], except as otherwise
provided in Sections 3(b) through 3(d) below. This Option shall become
exercisable according to the following vesting schedule:

 

First Exercisable

 

Number of Option Shares

[1st Anniversary]

 

1/3

[2nd Anniversary]

 

1/3

[3rd Anniversary]

 

1/3

 

Once the Option becomes exercisable, Optionee may continue to exercise this
Option under the terms and conditions of this Agreement until the termination of
the Option as provided herein. If Optionee does not purchase upon an exercise of
this Option the full number of shares which Optionee is then entitled to
purchase, Optionee may purchase upon any subsequent exercise prior to this
Option’s termination such previously unpurchased shares in addition to those
Optionee is otherwise entitled to purchase.

 

b.                                      Continuous Relationship with the Company
Required (except upon Disability or Death).  Except as otherwise provided in
Sections 3(d) and (e) below, this Option may not be exercised unless the
Optionee, at the time he or she exercises this Option, is, and has been at all
times since the date of grant, an employee of the Company as defined in
Section 424(e) or (f) of the Code (“Eligible Participant”).  If Optionee’s
relationship with the Company or any Subsidiary is terminated for any reason
except as provided in Sections 3(c) through (e) below, this Option shall
completely terminate on the close of business on the 90th day after such
termination. In such period following the termination of Optionee’s
relationship, this Option shall be exercisable only to the extent the Option was
exercisable on the vesting date immediately preceding such termination of the
relationship, but had not previously been exercised. To the extent this Option
was not exercisable upon such termination of Optionee’s relationship, or if

 

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(3) If Optionee is a 10% shareholder of the Company, this must be 110% of Fair
Market Value.

(4) If Optionee is a 10% shareholder of the Company, this cannot be greater than
5 years.

 

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Optionee does not exercise the Option within the time specified in this
Section 3(b), all rights of Optionee under this Option shall be forfeited.

 

c.                                       Other Termination of Employment. If
Optionee’s employment is terminated for: (i) conduct which is contrary to the
best interests of his or her employer, or (ii) if Optionee violates any written
non-disclosure agreement with his or her employer, as determined in either case
by the Optionee’s employer in its sole discretion, any unexercised portion of
this Option shall automatically expire at the time of Optionee’s termination.
Inter-company transfers and approved leaves of absence for up to 90 days shall
not be considered termination of employment.

 

d.                                      Disability. If Optionee’s relationship
with the Company ceases because of disability (as defined in Code Section 22(e),
or any successor provision), this Option shall terminate on the close of
business on the one-year anniversary date of such termination of the
relationship. In such period following the termination of Optionee’s
relationship, this Option shall be exercisable only to the extent the Option was
exercisable on the vesting date immediately preceding such termination, but had
not previously been exercised. To the extent this Option was not exercisable
upon such termination of the relationship, or if Optionee does not exercise the
Option within the time specified in this Section 3(d), all rights of Optionee
under this Option shall be forfeited.

 

e.                                       Death. In the event of Optionee’s
death, this Option shall terminate on the close of business on the one-year
anniversary date of the date of Optionee’s death. In such period following
Optionee’s death, this Option shall be exercisable by the person or persons to
whom Optionee’s rights under this Option shall have passed by Optionee’s will or
by the laws of descent and distribution only to the extent the Option was
exercisable at the time of Optionee’s death. To the extent this Option was not
exercisable upon the date of Optionee’s death, or if such person or persons do
not exercise this Option within the time specified in this Section 3(e), all
rights under this Option shall be forfeited.

 

4.              Manner of Exercise.

 

a.                                      General. The Option may be exercised
only by Optionee (or other proper party in the event of death or incapacity),
subject to the conditions of the Plan and subject to such other administrative
rules as the Committee or Board of Directors may deem advisable, by delivering
within the Option Period written notice of exercise to the Company at its
principal office. The notice shall state the number of shares as to which the
Option is being exercised and shall be accompanied by payment in full of the
Exercise Price for all shares designated in the notice. The exercise of the
Option shall be deemed effective upon receipt of such notice by the Company and
upon payment that complies with the terms of the Plan and this Agreement. The
Option may be exercised with respect to any number or all of the shares as to
which it can then be exercised and, if partially exercised, may be so exercised
as to the unexercised shares any number of times during the Option Period as
provided herein.

 

b.                                      Form of Payment. Subject to approval by
the Committee, the Exercise Price for Shares purchased under an Option shall be
paid in full to the Company by delivery of consideration equal to the product of
the Exercise Price and the number of Option Shares purchased. Such consideration
must be paid before the Company will issue the shares being purchased and must
be in a form or a combination of forms acceptable to the Committee for that
purchase, which forms may include: (a) cash; (b) check or wire transfer;
(c) tendering shares of Common Stock already owned by the Optionee, provided
that the such shares have been held for the minimum period required by
applicable accounting rules to avoid a charge to the Company’s earnings for
financial reporting purposes or were not acquired from the Company as
compensation; (d) to the extent permitted by applicable law, delivery of a
properly executed exercise notice, together with irrevocable instructions to a
brokerage firm designated by the Company to deliver promptly to the Company the
aggregate amount of sale or loan proceeds to pay the Option Exercise Price and
any withholding tax obligations that may arise in connection with the exercise,
all in accordance with the regulations of the Federal Reserve Board; or (e) such
other consideration as the Committee may permit in its sole discretion.

 

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Optionee may execute a “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 set
forth below:

 

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 Fair Market Value on the date of exercise.

B=the Option Exercise Price.

 

5.              Transferability of Option. During the lifetime of Optionee, the
accrued Option shall be exercisable only by Optionee or by the Optionee’s
guardian or other legal representative, and shall not be assignable or
transferable by Optionee, in whole or in part, other than by will or by the laws
of descent and distribution.  Any attempt to transfer or encumber this Option or
the Option Shares shall be null and void and shall void this Option.

 

6.              This Option Subject to Plan. The Option evidenced by this
Agreement is granted pursuant to the Plan, a copy of which Plan has been made
available to Optionee and is hereby incorporated into this Agreement. This
Agreement is subject to and in all respects limited and conditioned as provided
in the Plan.  The Plan governs this Option and, in the event of any questions as
to the construction of this Agreement or in the event of a conflict between the
Plan and this Agreement, the Plan shall govern, except as the Plan otherwise
provides.

 

7.              Securities Matter and Certain Transactions.

 

a.                                      Shares Reserved. The Company shall at
all times during the Option Period reserve and keep available such number of
shares as will be sufficient to satisfy the requirements of this Agreement.

 

b.                                      Rights as Shareholder. This Agreement
shall not confer on Optionee any right with respect to the continuance of any
relationship with the Company or any of its Subsidiaries, nor will it interfere
in any way with the right of the Company to terminate any such relationship.
Optionee shall have no rights as a shareholder with respect to shares subject to
this Option until such shares have been issued to Optionee upon exercise of this
Option. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property), distributions or other rights
for which the record date is prior to the date such shares are issued, except as
provided in Section 4(c) of the Plan.

 

c.                                       Securities Law Compliance. The exercise
of all or any parts of this Option shall only be effective at such time as
counsel to the Company shall have determined that the issuance and delivery of
Common Stock, whether or not in certificated form, pursuant to such exercise
will not violate any state or federal securities or other laws. Optionee may be
required by the Company, as a condition of the effectiveness of any exercise of
this Option, to agree in writing that all Common Stock to be acquired pursuant
to such exercise shall be held, until such time that such Common Stock is
registered and freely tradable under applicable state and federal securities
laws, for Optionee’s own account without a view to any further distribution
thereof and that such shares will be not transferred or disposed of except in
compliance with applicable state and federal securities laws.

 

d.                                      Stock Legend. The Board may require that
the certificates or evidence for any shares of Common Stock purchased by
Optionee (or, in the case of death, Optionee’s successors) shall bear an
appropriate legend to reflect the restrictions of Sections 7(c) and 7(f)-(g) of
this Agreement.

 

e.                                       Mergers, Recapitalizations, Stock
Splits, Etc. Pursuant and subject to Section 4(c) of

 

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the Plan, certain changes in the number or character of the Common Stock of the
Company (through sale, merger, consolidation, exchange, reorganization,
divestiture (including a spin-off), liquidation, recapitalization, stock split,
stock dividend or otherwise) shall result in an adjustment, reduction or
enlargement, as appropriate, in Optionee’s rights with respect to any
unexercised portion of the Option (i.e., Optionee shall have such
“anti-dilution” rights under the Option with respect to such events, but shall
not have “preemptive” rights).

 

f.                                        Change in Control. For purposes of
this Section 7(f), the term “Change in Control” shall have the meaning set forth
in Section 2 of the Plan. Upon the occurrence of a Change in Control, the
Compensation Committee shall have the right, in its sole and absolute
discretion, but not the obligation, to take actions to make one or more
adjustments or modifications to this Option pursuant to Section 9(g) of the
Plan.

 

g.                                       Accounting Compliance. Optionee agrees
that, if a reclassification, reorganization, liquidation or other transaction
described in Section 4(c) of the Plan occurs and Optionee is an “affiliate” of
the Company or any Subsidiary (as defined in applicable legal and accounting
principles) at the time of such transaction, Optionee will comply with all
requirements of Rule 145 of the Securities Act of 1933, as amended, and the
requirements of such other legal or accounting principles, and will execute any
documents necessary to ensure such compliance.

 

h.                                      Withholding Taxes. In order to permit
the Company to comply with all applicable federal, state, local or foreign
payroll, withholding, income or other tax laws or regulations, the Company may
take such action as it deems appropriate to insure that, if necessary, all
applicable federal state, local or foreign payroll, withholding, income or other
taxes are withheld from any amounts payable by the Company to Optionee. If the
Company is unable to withhold such federal or other taxes, for whatever reason,
Optionee hereby agrees to pay to the Company an amount equal to the amount the
Company would otherwise be required to withhold under federal or other
applicable law. Optionee may, subject to the approval and discretion of the
Board of Directors or such administrative rules it may deem advisable, elect to
have all or a portion of such tax withholding obligations satisfied by
delivering shares of the Company’s Common Stock or by electing to have the
Company withhold shares of Common Stock otherwise issuable to Optionee. Such
shares shall have a Fair Market Value equal to the minimum required tax
withholding, based on the minimum statutory withholding rates for federal and
state tax purposes, including payroll taxes, that are applicable to the
supplemental income resulting from the exercise of this Option. In no event may
the Company withhold shares having a Fair Market Value in excess of such
statutory minimum required tax withholding.

 

i.                                          Certain Tax Matters. If the Optionee
fails to comply with the requirements of Section 422(a) of the Code (as from
time to time redesignated or amended), subsection (a)(1) of which currently
requires that any shares of Common Stock not be disposed of within two years of
the date of grant and one year from the date on which such shares of Common
Stock are acquired, Optionee understands that the tax treatment otherwise
applicable to the Option shall not be available.  The Optionee agrees to notify
the Company in writing immediately after Optionee makes a disqualifying
disposition (within the meaning of Sections 421 and 422 of the Code) of any of
the Common Stock.  The Company’s obligations under this Agreement shall be
subject to all applicable tax and other withholding requirements, and the
Company shall, to the extent permitted by law, have the right to deduct any
withholding amounts from any payment or transfer of any kind otherwise due to
the Optionee.  The Company may, in its discretion, require that the Optionee pay
to the Company at or after (as determined by the Committee) the time of exercise
of any portion of the Option any such additional amount as the Company deems
necessary to satisfy its liability to withhold federal, state or local income
tax or any other taxes incurred by reason of the exercise or the transfer of the
Common Stock.

 

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j.                                         Incentive Stock Option Limit. To the
extent that the aggregate Fair Market Value of Common Stock with respect to
which Incentive Stock Options are exercisable by you for the first time during
any calendar year exceeds $100,000 (the Fair Market Value being determined as of
the date of grant for the Option), such portion in excess of $100,000 shall be
treated as Nonqualified Stock Options. This provision shall be applied by taking
Incentive Stock Options into account in the order in which they were granted (or
with respect to an Incentive Stock Option for which the vesting schedule has
been accelerated, when acceleration occurs). If the $100,000 limitation applies
to an Incentive Stock Option, the Company may, but is not required to, (i) issue
a separate stock certificate or make a separate book-entry notation for the
stock that is issued with respect to the portion of the Incentive Stock Option
that is treated as an Incentive Stock Option and designate such stock as
Incentive Stock Option stock in the Company’s transfer records and (ii) issue a
separate stock certificate or make a separate book-entry notation for the stock
that is issued with respect to the portion of the Incentive Stock Option that is
treated as an Nonqualified Stock Option and designate such stock as Nonqualified
Stock Option stock in the Company’s transfer records. The Committee, in its sole
discretion, may determine the Fair Market Value of Common Stock for purposes of
Incentive Stock Options pursuant to a method that differs from the method that
is set forth in the definition of Fair Market Value for purposes of the Plan if
it is necessary to comply, or advisable in the Committee’s sole discretion to
ensure compliance, with the provisions of Section 422 of the Code.

 

8.              Miscellaneous.

 

a.                                      Binding Effect. This Agreement shall be
binding upon the heirs, executors, administrators and successors of the parties
hereto.

 

b.                                      Governing Law. This Agreement and all
rights and obligations hereunder shall be construed in accordance with the Plan
and governed by the laws of the State of Minnesota.

 

c.                                       Entire Agreement. This Agreement and
the Plan set forth the entire agreement and understanding of the parties hereto
with respect to the grant and exercise of this Option and the administration of
the Plan and supersede all prior agreements, arrangements, plans and
understandings relating to the grant and exercise of this Option and the
administration of the Plan.

 

d.                                      Amendment and Waiver. This Agreement may
be amended, waived, modified or canceled by the Committee at any time, provided
that all such amendments, waivers, modifications or cancellations shall comply
with and not be prohibited by the provisions of the Plan, and any amendment,
waiver, modification or cancellation that has an adverse effect on your rights
under this Agreement shall be with your consent in a written instrument executed
by you and the Company.

 

e.                                       Counterparts.  This Agreement may be
executed in counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first above written.

 

 

INSIGNIA SYSTEMS, INC.

 

 

 

By:

 

 

Its:

 

 

OPTIONEE:

 

 

 

[Printed Name]

 

 

 

 

 

[Signature]

 

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