Exhibit 4.1 to Insignia Systems, Inc. Form S-8 dated August 13, 2009



EXHIBIT
4.1


INSIGNIA
SYSTEMS, INC.

2003 INCENTIVE STOCK OPTION PLAN

(Adopted by Board of Directors February 24, 2003)

(Approved by Shareholders on May 20, 2003)

(Amended through January 27, 2009)


          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
2,625,000 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, 


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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.


          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.





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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 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 





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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.


	
 

	
 

	
 

	
 


	
 

	
(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.


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          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.


          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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