Exhibit 10.2

 

FORM OF

NONQUALIFIED STOCK OPTION AGREEMENT

FOR NON-EMPLOYEE DIRECTORS

 

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(1)

 

 

 

Exercise price per share:

 

$                [Fair Market Value on Date of Grant]

 

 

 

Expiration date of option*:

 

                     , 20     [10th anniversary]

 

Vesting Schedule:

 

First Exercisable

 

Number of Option Shares

 

 

 

 

 

 

 

Date of Grant

 

100%

 

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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 a non-employee director of the Company
or one of its Subsidiaries; and

 

WHEREAS, the Company wishes to grant a nonqualified 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 a nonqualified stock option to Optionee;

 

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

 

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(1) Per Section 4(d)(iv) of the Plan, non-employee directors may not be granted
Awards in the aggregate that exceed 25% of Shares available under the Plan.

 

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1.              Grant of Option. Insignia Systems, Inc., a Minnesota corporation
(together with all successors thereto, the “Company”), hereby grants to the
Optionee, who is a Director of the Company and is not an employee of the
Company, 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 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 not 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     [10th anniversary], except as otherwise provided
in Sections 3(b) and 3(c) below. This Option shall become immediately
exercisable upon the date of grant. 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 as otherwise provided in Section 3(c) below, this Option may
not be exercised unless the Optionee, at the time of exercise, is, and has been
at all times since the date of grant, a Director of the Company.  If Optionee’s
service as a Director of the Company ceases for any reason except as provided in
Section 3(c) below, this Option shall completely terminate on the earlier of
(i) the close of business on the 90th day after such termination, and (ii) the
expiration date of this Option stated in Section 3(a) above. Optionee’s service
as a Director shall be deemed to have ceased on the earliest of the following:
(i) death; (ii) resignation; (iii) removal by the Company’s shareholders;
(iv) disqualification; or (v) the date his or her successor is elected and
qualifies. In such period following the cessation of Optionee’s service as a
Director, this Option shall be exercisable only to the extent the Option was
exercisable on the date of such cessation, but had not previously been
exercised. To the extent this Option was not exercisable upon such cessation of
Optionee’s service as a Director, or if Optionee does not exercise the Option
within the time specified in this Section 3(b) or Section 3(c) below, all rights
of Optionee under this Option shall be forfeited.

 

c.                                       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(c), all
rights under this Option shall be forfeited.

 

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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.

 

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.

 

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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 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
Committee, in its sole and absolute discretion, and without the consent of the
Optionee, shall have the right to make adjustments and 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

 

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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.

 

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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