Exhibit 4.2 to Insignia Systems, Inc. Form S-8 dated August 13, 2009



EXHIBIT
4.2


INSIGNIA
SYSTEMS, INC.

EMPLOYEE STOCK PURCHASE PLAN

(Amended through January 27, 2009)


          1.           Establishment
of Plan. Insignia Systems, Inc. (hereinafter referred to as the “Company”)
proposes to grant to certain employees of the Company the opportunity to
purchase common stock of the Company. Such common stock shall be purchased
pursuant to the plan herein set forth which shall be known as the “INSIGNIA
SYSTEMS, INC. EMPLOYEE STOCK PURCHASE PLAN” (hereinafter referred to as the
“Plan”). The Company intends that the Plan shall qualify as an “Employee Stock
Purchase Plan” under Section 423 of the Internal Revenue Code of 1986, as
amended, and shall be construed in a manner consistent with the requirements of
said Section 423 and the regulations thereunder. 


          2.           Purpose.
The Plan is intended to encourage stock ownership by employees of the Company,
and as an incentive to them to remain in employment, improve operations,
increase profits, and contribute more significantly to the Company’s success.


          3.           Administration.
The Plan shall be administered by a stock purchase committee (hereinafter
referred to as the “Committee”) consisting of not less than three directors or
employees of the Company, as designated by the Board of Directors of the
Company (hereinafter referred to as the “Board of Directors”). The Board of
Directors shall fill all vacancies in the Committee and may remove any member
of the Committee at any time, with or without cause. The Committee shall select
its own chairman and hold its meetings at such times and places as it may
determine. All determinations of the Committee shall be made by a majority of
its members. Any decision which is made in writing and signed by a majority of
the members of the Committee shall be effective as fully as though made by a
majority vote at a meeting duly called and held. The determinations of the
Committee shall be made in accordance with its judgment as to the best
interests of the Company, its employees and it shareholders and in accordance
with the purposes of the Plan; provided, however, that the provisions of the
Plan shall be construed in a manner consistent with the requirements of Section
423 of the Internal Revenue Code, as amended. Such determinations shall be
binding upon the Company and the participants in the Plan unless otherwise
determined by the Board of Directors. The Company shall pay all expenses of
administering the Plan. No member of the Board of Directors or the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any option granted under it.


          4.           Duration
and Phases of the Plan. (a) The Plan will commence on January 1, 1993, and
will continue until terminated by the Board pursuant to Section 15, except that
any phase commenced prior to such termination shall, if necessary, be allowed
to continue beyond such termination until completion. 


          (b)          The
Plan shall be carried out in one or more phases, each phase being for a period
of one year. Each phase shall commence immediately after the termination of the
preceding phase. The existence and date of commencement of a phase (the
“Commencement Date”) shall be determined by the Committee, provided that the
commencement of the first phase shall be within twelve (12) months before or
after the date of approval of the Plan by the shareholders of 


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the Company. In the event all of the stock reserved
for grant of options hereunder is issued pursuant to the terms hereof prior to
the commencement of one or more phases scheduled by the Committee or the number
of shares remaining is so small, in the opinion of the Committee, as to render
administration of any succeeding phase impracticable, such phase or phases
shall be canceled. Phases shall be numbered successively as Phase 1, Phase 2
and Phase 3.


          (c)          The
Board of Directors may elect to accelerate the termination date of any phase
effective on the date specified by the Board of Directors in the event of (i)
any consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares would be
converted into cash, securities or other property, other than a merger of the
Company in which shareholders immediately prior to the merger have the same
proportionate ownership of stock in the surviving corporation immediately after
the merger; (ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company, or (iii) any plan or liquidation or dissolution of
the Company.


          5.           Eligibility.
All Employees, as defined in Paragraph 19 hereof, who are employed by the
Company at least one day prior to the Commencement Date of a phase shall be
eligible to participate in such phase.


          6.           Participation.
Participation in the Plan is voluntary. An eligible Employee may elect to
participate in any phase of the plan, and thereby become a “Participant” in the
Plan, by completing the Plan payroll deduction form provided by the Company and
delivering it to the Company or its designated representative prior to the
Commencement Date of that phase. Payroll deductions for a Participant shall
commence on the first payday after the Commencement Date of the phase and shall
terminate on the last payday immediately prior to or coinciding with the
termination date of that phase unless sooner terminated by the Participant as
provided in Paragraph 9 hereof.


          7.           Payroll
Deductions. (a) Upon enrollment, a Participant shall elect to make contributions
to the Plan by payroll deductions (in full dollar amounts and in amounts
calculated to be as uniform as practicable throughout the period of the phase),
in the aggregate amount not in excess of 10% of such Participant’s Base Pay for
the term of the Phase, as determined according to Paragraph 19 hereof.


          The
minimum authorized payroll deduction must aggregate to not less than $10 per
pay period. 


          (b)          In
the event that the Participant’s compensation for any pay period is terminated
or reduced from the compensation rate for such a period as of the Commencement
Date of the phase for any reason so that the amount actually withheld on behalf
of the Participant as of the termination date of the phase is less than the
amount anticipated to be withheld over the phase year as determined on the
Commencement Date of the phase, then the extent to which the Participant may
exercise his option shall be based on the amount actually withheld on his
behalf. In the event of a change in the pay period of any Participant, such as
from bi-weekly to monthly, an appropriate adjustment shall be made to the
deduction in each new pay period so as to ensure the deduction of the proper
amount authorized by the Participant. 


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          (c)          All
payroll deductions made for Participants shall be credited to their accounts
under the Plan. A Participant may not make any separate cash payments into such
account. 


          (d)          Except
for his right to discontinue participation in the Plan as provided in Paragraph
9, no Participant shall be entitled to increase or decrease the amount to be
deducted in a given phase after the Commencement Date.


          8.            Options.


	
 

	
 

	
 

	
 

	
 


	
 

	
(a)

	
Grant of Option.


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(i)

	
A Participant who is employed by the Company as of
 the Commencement Date of a phase shall be granted an option as of such date
 to purchase a number of full shares of Company common stock to be determined
 by dividing the total amount to be credited to that Participant’s account
 under Paragraph 7 hereof by the option price set forth in Paragraph
 8(a)(ii)(A) hereof, subject to the limitations of Paragraph 10 hereof.


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
The option price for such shares of common stock
 shall be the lower of:


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
A.

	
Eighty-five percent (85%) of the fair market value
 of such shares of common stock on the Commencement Date of the phase; or


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
B.

	
Eighty-five percent (85%) of the fair market value
 of such shares of common stock on the termination date of the phase.


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(iii)

	
The fair market value of shares of common stock of
 the Company shall be determined by the Committee for each valuation date in a
 manner acceptable under Section 423 of the Internal Revenue Code of 1986.


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(iv)

	
Anything herein to the contrary notwithstanding, no
 Employee shall be granted an option hereunder:


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
A.

	
Which exceeds a 10,000 share limit per Employee for
 each plan phase;


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
B.

	
Which permits his rights to purchase stock under all
 employee stock purchase plans of the Company, its subsidiaries or its parent,
 if any, to accrue at a rate which exceeds Twenty-Five Thousand Dollars
 ($25,000) of the fair market value of such stock (determined at the time such
 option is granted) for each calendar year in which such option is outstanding
 at any time;


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
C.

	
If immediately after the grant such Employee would
 own and/or hold outstanding options to purchase stock possessing five percent
 (5%) or more of the total combined voting power or value of all classes of
 stock of the Company, its parent, if any, or of any subsidiary of the
 Company. For purposes of determining stock 





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ownership under this Paragraph, the rules of Section
 424(d) of the Internal Revenue Code, as amended, shall apply; or


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
D.

	
Which can be exercised after the expiration of 27
 months from the date the option is granted.


	
 

	
 

	
 

	
 

	
 


	
 

	
(b)

	
Exercise of Option. 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(i)

	
Unless a Participant gives written notice to the
 Company pursuant to Paragraph 8(b)(ii) or Paragraph 9 prior to the
 termination date of a phase, his option for the purchase of shares will be
 exercised automatically for him as of such termination date for the purchase
 of the number of full shares of Company common stock which the accumulated
 payroll deductions in his account at that time will purchase at the
 applicable option price, subject to the limitations set forth in Paragraph 10
 hereof. 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
A Participant may, by written notice to the Company
 at any time during the thirty (30) day period immediately preceding the
 termination date of a phase, elect, effective as of the termination date of
 that phase, to exercise his option for a specified number of full shares less
 than the maximum number which may be purchased under his option. 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(iii)

	
As promptly as practicable after the termination
 date of any phase, the Company will deliver to each Participant herein the
 common stock purchased upon the exercise of his option, together with a cash
 payment equal to the balance, if any, of his account which was not used for
 the purchase of common stock with interest accrued thereon. 





          9.           Withdrawal
or Termination of Participation. (a) A Participant may, at any time prior
to the termination date of a phase, withdraw all payroll deductions then
credited to his account by giving written notice to the Company. Promptly upon
receipt of such notice of withdrawal, all payroll deductions credited to the
Participant’s account will be paid to him with interest accrued thereon and no
further payroll deductions will be made during the phase. In such event, the
option granted the Participant under that phase of the Plan shall lapse
immediately. Partial withdrawals of payroll deductions hereunder may not be
made.


          (b)          In
the event of the death of a Participant, the person or persons specified in
Paragraph 14 may give notice to the Company within sixty (60) days of the death
of the Participant electing to purchase the number of full shares which the
accumulated payroll deductions in the account of such deceased Participant will
purchase at the option price specified in Paragraph 8(a)(ii) and have the
balance in the account distributed in cash with interest accrued thereon. If no
such notice is received by the Company within said sixty (60) days, the
accumulated payroll deductions will be distributed in full in cash with
interest accrued thereon.


          (c)          Upon
termination of Participant’s employment for any reason other than death of the
Participant, the payroll deductions credited to his account, plus interest,
shall be returned to him.


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          10.          Stock
Reserved for Options. (a) One Million Two Hundred Thousand (1,200,000)
shares of the Company’s common stock are reserved for issuance upon the
exercise of options to be granted under the Plan. Shares subject to the
unexercised portion of any lapsed or expired option may again be subject to
option under the Plan.


          (b)          If
the total number of shares of the Company common stock for which options are to
be granted for a given phase as specified in Paragraph 8 exceeds the number of
shares then remaining available under the Plan (after deduction of all shares
for which options have been exercised or are then outstanding) and if the
Committee does not elect to cancel such phase pursuant to Paragraph 4, the
Committee shall make a pro rata allocation of the shares remaining available in
as uniform and equitable a manner as it shall consider practicable. In such
event, the options to be granted and the payroll deductions to be made pursuant
to the Plan which would otherwise be effected may, in the discretion of the
Committee, be reduced accordingly. The Committee shall give written notice of
such reduction to each Participant affected.


          (c)          The
Participant (or a joint tenant named pursuant to Paragraph 10(d) hereof) shall
have no rights as a shareholder with respect to any shares subject to the
Participant’s option until the date of the issuance of a stock certificate
evidencing such shares. 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 stock
certificate is actually issued, except as otherwise provided in Paragraph 12
hereof.


          (d)          The
shares of the Company common stock to be delivered to a Participant pursuant to
the exercise of an option under the Plan will be registered in the name of the
Participant or, if the Participant so directs by written notice to the Committee
prior to the termination date of that phase of the Plan, in the names of the
Participant and one other person the Participant may designate as his joint
tenant with rights of survivorship, to the extent permitted by law.


          11.          Accounting
and Use of Funds. Payroll deductions for each Participant shall be credited
to an account established for him under the Plan. A Participant may not make
any separate case payments into such account. Such account shall be solely for
bookkeeping purposes and no separate fund or trust shall be established
hereunder and the Company shall not be obligated to segregate such funds. All
funds from payroll deductions received or held by the Company under the Plan
may be used, without limitation, for any corporate purpose by the Company. 


          12.          Adjustment
Provision. (a) Subject to any required action by the shareholders of the
Company, the number of shares covered by each outstanding option, and the price
per share thereof in each such option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of the Company common
stock resulting from a subdivision or consolidation of shares or the payment of
a share dividend (but only on the shares) or any other increase or decrease in
the number of such shares effected without receipt of consideration by the
Company.


          (b)          In
the event of a change in the shares of the Company as presently constituted,
which is limited to a change of all its authorized shares with par value into
the same number of 


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shares with a different part value or without par
value, the shares resulting from any such change shall be deemed to be the
shares within the meaning of this Plan.


          13.          Non-Transferability
of Options. (a) Options granted under any phase of the Plan shall not be
transferable except under the laws of descent and distribution and shall be
exercisable only by the Participant during his lifetime and after his death
only by his beneficiary of the representative of his estate as provided in
Paragraph 9(b) hereof.


          (b)          Neither
payroll deductions credited to a Participant’s account, nor any rights with
regard to the exercise of an option or to receive common stock under any phase
of the Plan may be assigned, transferred, pledged, or otherwise disposed of in
any way by the Participant. Any such attempted assignment, transfer, pledge or
other disposition shall be null and void and without effect, except that the
Company may, at its option, treat such act as an election to withdraw funds in
accordance with Paragraph 9. 


          14.          Designation
of Beneficiary. A Participant may file a written designation of a
beneficiary who is to receive any cash to the Participant’s credit plus
interest thereon under any phase of the Plan in the event of such Participant’s
death prior to exercise of his option pursuant to Paragraph 9(b) hereof, or to
exercise his option and become entitled to any stock and/or cash upon such
exercise in the event of the Participant’s death prior to exercise of the
option pursuant to Paragraph 9(b) hereof. The beneficiary designation may be
changed by the Participant at any time by written notice to the Company. 


          Upon
the death of a Participant and upon receipt by the Company of proof deemed
adequate by it of the identity and existence at the Participant’s death of a
beneficiary validly designated under the Plan, the Company shall in the event
of the Participant’s death under the circumstances described in Paragraph 9(b)
hereof, allow such beneficiary to exercise the Participant’s option pursuant to
Paragraph 9(b) if such beneficiary is living on the termination date of the
phase and deliver to such beneficiary the appropriate stock and/or cash after
exercise of the option. In the event there is no validly designated beneficiary
under the Plan who is living at the time of the Participant’s death under the
circumstances described in Paragraph 9(b) or in the event the option lapses,
the Company shall deliver the cash credited to the account of the Participant
with interest to the executor or administrator of the estate of the
Participant, or if no such executor or administrator has been appointed to the
knowledge of the Company, it may, in its discretion, deliver such cash to the
spouse or to any one or more dependents or relatives of the Participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate. The Company will not be responsible for or
be required to give effect to the disposition of any cash or stock or the
exercise of any option in accordance with any will or other testamentary
disposition made by such Participant or in accordance with the provision of any
law concerning intestacy, or otherwise. No designated beneficiary shall, prior
to the death of a Participant by whom he has been designated, acquire any
interest in any stock or in any option or in the cash credited to the
Participant under any phase of the Plan.


          15.          Amendment
and Termination. The Plan may be terminated at any time by the Board of
Directors provided that, except as permitted in Paragraph 4(c) with respect to
an acceleration of the termination date of any phase, no such termination will
take effect with respect to any options then outstanding. Also, the Board may,
from time to time, amend the Plan as it may deem proper and in the best
interests of the Company or as may be necessary to comply 


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with Section 423 of the Internal Revenue Code of 1986,
as amended, or other applicable laws or regulations; provided, however, that no
such amendment shall, without prior approval of the shareholders of the Company
(1) increase the total number of shares for which options may be granted under
the Plan (except as provided in Paragraph 12 herein), (2) permit aggregate
payroll deductions in excess of ten percent (10%) of a Participant’s
compensation as of the Compensation Date of a phase, or (3) impair any
outstanding option.


          16.          Interest.
In any situation where the Plan provides for the payment of interest on a
Participant’s payroll deductions, such interest shall be determined by
averaging the month-end balances in the Participant’s account for the period of
his participation and computing interest thereon at the initial rate of three
percent (3%) per annum. This interest rate may be adjusted periodically by the
Committee as it deems appropriate. 


          17.          Notices.
All notices or other communications in connection with the Plan or any phase
thereof shall be in the form specified by the Committee and shall be deemed to
have been duly given when received by the Participant or his designated
personal representative or beneficiary or by the Company or its designated
representative, as the case may be.


          18.          Participation
of Subsidiaries. The Employees of any Subsidiary of the Company shall be
entitled to participate in the Plan on the same basis as Employees of the
Company, unless the Board of Directors determines otherwise. Effective as of
the date of coverage of any Subsidiary, any references herein to the “Company”
shall be interpreted as referring to such Subsidiary as well as to Insignia
Systems, Inc.


          In
the event that any Subsidiary which is covered under the Plan ceases to be a
Subsidiary of Insignia Systems, Inc. the employees of such Subsidiary shall be
considered to have terminated their employment for purposes of Paragraph 9
hereof as of the date such Subsidiary ceases to be such a Subsidiary. 


          19.          Definitions.
(a) “Subsidiary” shall include any corporation defined as a subsidiary of the
Company in Section 424(f) of the Internal Revenue Code of 1986, as amended.


          (b)          “Employee”
shall mean any employee, including an officer, of the Company who as of the day
immediately preceding the Commencement Date of a phase is customarily employed
by the Company for more than twenty (20) hours per week and more than five (5)
months in a calendar year.


          (c)          “Base
Pay” is the regular pay for employment for each employee as annualized for a
twelve (12) month period, exclusive of overtime, commissions, bonuses,
disability payments, shift differentials, incentives and other similar
payments, determined as of the Commencement Date of each phase. 


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