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  Exhibit 10.2    
    

 
 

  INTEGRATED ALARM SERVICES GROUP, INC.
  2003 STOCK OPTION PLAN    
    

	1.
	PURPOSE
OF PLAN; ADMINISTRATION 

        1.1   Purpose.

        The
Integrated Alarm Services Group, Inc. 2003 Stock Option Plan (hereinafter, the "Plan") is hereby established to grant to officers and other employees of Integrated Alarm
Services Groups, Inc. (the "Company") or of its parents or subsidiaries (as defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended (the
"Code")), if any (individually and collectively, the Company"), and to non-employee directors, consultants and advisors and other persons
who may perform significant services for or on behalf of the Company, a favorable opportunity to acquire common stock, $.001 par value ("Common Stock"), of the Company and, thereby, to create an
incentive for such persons to remain in the employ of or provide services to the Company and to contribute to its success. 

        The
Company may grant under the Plan both incentive stock options within the meaning of Section 422 of the Code ("Incentive Stock Options") and stock options that do not qualify
for treatment as Incentive Stock Options ("Nonstatutory Options"). Unless expressly provided to the contrary herein, all references herein to "options," shall include both incentive Stock Options and
Nonstatutory Options. 

        1.2   Administration.

        The
Plan shall be administered by the Board of Directors of the Company (the "Board"), if each member is a "Non-Employee Director" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended ("Rule 16b-3"), or a committee (the "Committee") of two or more directors, each of whom is a
Non-Employee Director. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the
Board. Vacancies in the Committee may be filled by the Board. Until such time that the Committee is properly appointed, the Board shall administer the Plan in accordance with the terms of this
Section 1.2. 

        A
majority of the members of the Committee shall constitute a quorum for the purposes of the Plan. Provided a quorum is present, the Committee may take action by affirmative vote or
consent of a majority of its members present at a meeting. Meetings may be held telephonically as long as all members are able to hear one another, and a member of the Committee shall be deemed to be
present for this purpose if he or she is in simultaneous communication by telephone with the other members who are able to hear one another. In lieu of action at a meeting, the Committee may act by
written consent of a majority of its members. 

        Subject
to the express provisions of the Plan, the Committee shall have the authority to construe and interpret the Plan and all Stock Option Agreements (as defined in
Section 3.4) entered into pursuant hereto and to define the terms used therein, to prescribe, adopt, amend and rescind rules and regulations relating to the administration of the Plan and to
make all other determinations necessary or advisable for the administration of the Plan; provided, however, that the Committee may delegate nondiscretionary administrative duties to such employees of
the Company as it deems proper; and, provided, further, in its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the
Plan. Subject to the express limitations of the Plan, the Committee shall designate the individuals 

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        from
among the class of persons eligible to participate as provided in Section 1.3 who shall receive options, whether an optionee will receive Incentive Stock Options or
Nonstatutory Options, or both, and the amount, price, restrictions and all other terms and provisions of such options (which need not be identical). 

        Members
of the Committee shall receive such compensation for their services as members as may be determined by the Board. All expenses and liabilities which members of the Committee
incur in connection with the administration of this Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers,
brokers or other persons. The Committee, the Company and the Company's officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. No members of the
Committee or Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, and all members of the Committee shall be fully protected by
the Company in respect of any such action, determination or interpretation. 

        1.3   Participation.

        Officers
and other employees of the Company, non-employee directors, consultants and advisors and other persons who may perform significant services on behalf of the Company
shall be eligible for selection to participate in the Plan upon approval by the Committee; provided, however, that only "employees" (within the meaning of Section 3401(c) of the Code) of the
Company shall be eligible for the grant of Incentive Stock Options. An individual who has been granted an option may, if otherwise eligible, be granted additional options if the Committee shall so
determine. No person is eligible to participate in the Plan by matter of right; only those eligible persons who are selected by the Committee in its discretion shall participate in the Plan. 

        1.4   Stock
Subject to the Plan. 

        Subject
to adjustment as provided in Section 3.5, the stock to be offered under the Plan shall be shares of authorized but unissued Common Stock, including any shares repurchased
under the terms of the Plan or any Stock Option Agreement entered into pursuant hereto. The cumulative aggregate number of shares of Common Stock to be issued under the Plan shall not exceed 600,000,
subject to adjustment as set forth in Section 3.5. 

        If
any option granted hereunder shall expire or terminate for any reason without having been fully exercised, the unpurchased shares subject thereto shall again be available for the
purposes of the Plan. For purposes of this Section 1.4, where the exercise price of options is paid by means of the grantee's surrender of previously owned shares of Common Stock, only the net
number of additional shares issued and which remain outstanding in connection with such exercise shall be deemed "issued" for purposes of the Plan.  

	2.
	STOCK
OPTIONS 

        2.1   Exercise
Price; Payment. 

        (a)   The
exercise price of each Incentive Stock Option granted under the Plan shall be determined by the Committee, but shall not be less than 100% of the "Fair Market Value"
(as defined below) of Common Stock on the date of grant. If an Incentive Stock Option is granted to an employee who at the time such option is granted owns (within the meaning of section 424(d)
of the Code) more than 10% of the total combined voting power of all classes of capital stock of the Company, the option exercise price shall be at least 110% of the Fair Market Value of Common Stock
on the date of grant. The exercise price of each Nonstatutory Option also shall be determined by the Committee, but shall not be less than 85% of the Fair Market Value of Common Stock on the date of
grant. The status of each option granted under the Plan as either an Incentive Stock Option or a Nonstatutory Option shall 

2

 

be
determined by the Committee at the time the Committee acts to grant the option, and shall be clearly identified as such in the Stock Option Agreement relating thereto. 

        "Fair
Market Value" for purposes of the Plan shall mean: (i) the closing price of a share of Common Stock on the principal exchange on which shares of Common Stock are then
trading, if any, on the day immediately preceding the date of grant, or, if shares were not traded on the day preceding such date of grant, then on the next preceding trading day during which a sale
occurred; or (ii) if Common Stock is not traded on an exchange but is quoted on Nasdaq or a successor quotation system, (1) the last sales price (if Common Stock is then listed on the
Nasdaq Stock Market) or (2) the mean between the closing representative bid and asked price (in all other cases) for Common Stock on the day prior to the date of grant as reported by Nasdaq or
such successor quotation system; or (iii) if there is no listing or trading of Common Stock either on a national exchange or over-the-counter, that price determined in
good faith by the Committee to be the fair value per share of Common Stock, based upon such evidence as it deems necessary or advisable. 

        (b)   In
the discretion of the Committee at the time the option is exercised, the exercise price of any option granted under the Plan shall be paid in full in cash, by check
or by the optionee's interest-bearing promissory note (subject to any limitations of applicable state corporations law) delivered at the time of exercise; provided, however, that subject to the timing
requirements of Section 2.7, in the discretion of the Committee and upon receipt of all regulatory approvals, the person exercising the option may deliver as payment in whole or in part of such
exercise price certificates for Common Stock of the Company (duly endorsed or with duly executed stock powers attached), which shall be valued at its Fair Market Value on the day of exercise of the
option, or other property deemed appropriate by the Committee; and, provided further, that, subject to Section 422 of the Code, so-called cashless exercises as permitted under
applicable rules and regulations of the Securities and Exchange Commission and the Federal Reserve Board shall be permitted in the discretion of the Committee. Without limiting the Committee's
discretion in this regard, consecutive book entry stock-for-stock exercises of options (or "pyramiding") also are permitted in the Committee's discretion. 

        Irrespective
of the form of payment, the delivery of shares issuable upon the exercise of an option shall be conditioned upon payment by the optionee to the Company of amounts sufficient
to enable the Company to pay all federal, state, and local withholding taxes resulting, in the Company's judgment, from the exercise. In the discretion of the Committee, such payment to the Company
may be effected through (i) the Company's withholding from the number of shares of Common Stock that would otherwise be delivered to the optionee by the Company on exercise of the option a
number of shares of Common Stock equal in value (as determined by the Fair Market Value of Common Stock on the date of exercise) to the aggregate withholding taxes, (ii) payment by the optionee
to the Company of the aggregate withholding taxes in cash, (iii) withholding by the Company from other amounts contemporaneously owed by the Company to the optionee, or (iv) any
combination of these three methods, as determined by the Committee in its discretion. 

        2.2   Option
Period. 

        (a)   The
Committee shall provide, in the terms of each Stock Option Agreement, when the option subject to such agreement expires and becomes unexercisable, but in no event
will an Incentive Stock Option granted under the Plan be exercisable after the expiration of ten years from the date it is granted. Without limiting the generality of the foregoing, the Committee may
provide in the Stock Option Agreement that the option subject thereto expires 30 days following a Termination of Employment (as defined in Section 3.2 hereof) for any reason other than
death or disability, or six months following a Termination of Employment for disability or following an optionee's death. 

        (b)   Outside
Date for Exercise. Notwithstanding any provision of this Section 2.2, in no event shall any option granted under the Plan be exercised after the
expiration date of such option set forth in the applicable Stock Option Agreement. 

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        2.3   Exercise
of Options. 

        Each
option granted under the Plan shall become exercisable and the total number of shares subject thereto shall be purchasable, in a lump sum or in such installments, which need not be
equal, as the Committee shall determine; provided, however, that each option shall become exercisable in full no later than ten years after such option is granted, and each option shall become
exercisable as to at least 10% of the shares of Common Stock covered thereby on each anniversary of the date such option is granted; and provided, further, that if the holder of an option shall not in
any given installment period purchase all of the shares which such holder is entitled to purchase in such installment period, such holder's right to purchase any shares not purchased in such
installment period shall continue until the expiration or sooner termination of such holder's option. The Committee may, at any time after grant of the option and from time to time, increase the
number of shares purchasable in any installment, subject to the total number of shares subject to the option and the limitations set forth in Section 2.5. At any time and from time to time
prior to the time when any exercisable option or exercisable portion thereof becomes unexercisable under the Plan or the applicable Stock Option Agreement, such option or portion thereof may be
exercised in whole or in part; provided, however, that the Committee may, by the terms of the option, require any partial exercise to be with respect to a specified minimum number of shares. No option
or installment thereof shall be exercisable except with respect to whole shares. Fractional share interests shall be disregarded, except that they may be accumulated as provided above and except that
if such a fractional share interest constitutes the total shares of Common Stock remaining available for purchase under an option at the time of exercise, the optionee shall be entitled to receive on
exercise a certified or bank cashier's check in an amount equal to the Fair Market Value of such fractional share of stock. 

        2.4   Transferability
of Options. 

        Except
as the Committee may determine as aforesaid, an option granted under the Plan shall, by its terms, be nontransferable by the optionee other than by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order (as defined by the Code), and shall be exercisable during the optionee's lifetime only by the optionee or by his or her guardian or
legal representative. More particularly, but without limiting the generality of the immediately preceding sentence, an option may not be assigned, transferred (except as provided in the preceding
sentence), pledged or hypothecated (whether by operation of law or otherwise), and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of any option contrary to the provisions of the Plan and the applicable Stock Option Agreement, and any levy of any attachment or similar process upon an option,
shall be null and void, and otherwise without effect, and the Committee may, in its sole discretion, upon the happening of any such event, terminate such option forthwith. 

        2.5   Limitation
on Exercise of Incentive Stock Options. 

        To
the extent that the aggregate Fair Market Value (determined on the date of grant as provided in Section 2.1 above) of the Common Stock with respect to which Incentive Stock
Options granted hereunder (together with all other Incentive Stock Option plans of the Company) are exercisable for the first time by an optionee in any calendar year under the Plan exceeds $100,000,
such options granted hereunder shall be treated as Nonstatutory Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by
taking options into account in the order in which they were granted. 

        2.6   Disqualifying
Dispositions of Incentive Stock Options. 

        If
Common Stock acquired upon exercise of any Incentive Stock Option is disposed of in a disposition that, under Section 422 of the Code, disqualifies the option holder from the
application of Section 421(a) of the Code, the holder of the Common Stock immediately before the disposition shall 

4

 

comply
with any requirements imposed by the Company in order to enable the Company to secure the related income tax deduction to which it is entitled in such event. 

        2.7   Certain
Timing Requirements. 

        At
the discretion of the Committee, shares of Common Stock issuable to the optionee upon exercise of an option may be used to satisfy the option exercise price or the tax withholding
consequences of such exercise, in the case of persons subject to Section 16 of the Securities Exchange Act of 1934, as amended, only (i) during the period beginning on the third business
day following the date of release of the quarterly or annual summary statement of sales and earnings of the Company and ending on the twelfth business day following such date or (ii) pursuant
to an irrevocable written election by the optionee to use shares of Common Stock issuable to the optionee upon exercise of the option to pay all or part of the option price or the withholding taxes
made at least six months prior to the payment of such option price or withholding taxes. 

        2.8   No
Effect on Employment. 

        Nothing
in the Plan or in any Stock Option Agreement hereunder shall confer upon any optionee any right to continue in the employ of the Company, any Parent Corporation or any Subsidiary
or shall
interfere with or restrict in any way the rights of the Company, its Parent Corporation and its Subsidiaries, which are hereby expressly reserved, to discharge any optionee at any time for any reason
whatsoever, with or without cause. 

        For
purposes of the Plan, "Parent Corporation" shall mean any corporation in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company
then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. For purposes of the Plan, "Subsidiary" shall mean any
corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other corporations in such chain.  

	3.
	OTHER
PROVISIONS 

        3.1   Sick
Leave and Leaves of Absence. 

        Unless
otherwise provided in the Stock Option Agreement, and to the extent permitted by Section 422 of the Code, an optionee's employment shall not be deemed to terminate by
reason of sick leave, military leave or other leave of absence approved by the Company if the period of any such leave does not exceed a period approved by the Company, or, if longer, if the
optionee's right to reemployment by the Company is guaranteed either contractually or by statute. A Stock Option Agreement may contain such additional or different provisions with respect to leave of
absence as the Committee may approve, either at the time of grant of an option or at a later time. 

        3.2   Termination
of Employment. 

        For
purposes of the Plan "Termination of Employment," shall mean the time when the employee-employer relationship between the optionee and the Company, any Subsidiary or any Parent
Corporation is terminated for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of an optionee by the Company, any Subsidiary or any Parent Corporation, (ii) at the discretion of the Committee, terminations
which result in a temporary severance of the employee-employer relationship, and (iii) at the discretion of the Committee, terminations which are followed by the simultaneous establishment of a
consulting relationship by the Company, a Subsidiary or any Parent Corporation with the former employee. Subject to Section 3.1, the Committee, in its absolute discretion, shall determine the
affect of all 

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matters
and questions relating to Termination of Employment; provided, however, that, with respect to Incentive Stock Options, a leave of absence or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that such leave of absence or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the
then-applicable regulations and revenue rulings under said Section. 

        3.3   Issuance
of Stock Certificates. 

        Upon
exercise of an option, the Company shall deliver to the person exercising such option a stock certificate evidencing the shares of Common Stock acquired upon exercise.
Notwithstanding the foregoing, the Committee in its discretion may require the Company to retain possession of any certificate evidencing stock acquired upon exercise of an option which remains
subject to repurchase under the provisions of the Stock Option Agreement or any other agreement signed by the optionee in order to facilitate such repurchase provisions. 

        3.4   Terms
and Conditions of Options. 

        Each
option granted under the Plan shall be evidenced by a written Stock Option Agreement ("Stock Option Agreement") between the option holder and the Company providing that the option
is subject to the terms and conditions of the Plan and to such other terms and conditions not inconsistent therewith as the Committee may deem appropriate in each case. 

        3.5   Adjustments
Upon Changes in Capitalization; Merger and Consolidation. 

        If
the outstanding shares of Common Stock are changed into, or exchanged for cash or a different number or kind of shares or securities of the Company or of another corporation through
reorganization, merger, recapitalization, reclassification, stock split-up, reverse stock
split, stock dividend, stock consolidation, stock combination, stock reclassification or similar transaction, an appropriate adjustment shall be made by the Committee in the number and kind of shares
as to which options may be granted. In the event of such a change or exchange, other than for shares or securities of another corporation or by reason of reorganization, the Committee shall also make
a corresponding adjustment changing the number or kind of shares and the exercise price per share allocated to unexercised options or portions thereof, which shall have been granted prior to any such
change, shall likewise be made. Any such adjustment, however, shall be made without change in the total price applicable to the unexercised portion of the option (except for any change in the
aggregate price resulting from rounding-off of share quantities or prices). 

        In
the event of a "spin-off" or other substantial distribution of assets of the Company which has a material diminutive effect upon the Fair Market Value of the Common Stock,
the Committee in its discretion shall make an appropriate and equitable adjustment to the exercise prices of options then outstanding under the Plan. 

        Where
an adjustment under this Section 3.5 of the type described above is made to an Incentive Stock Option, the adjustment will be made in a manner which will not be considered a
"modification" under the provisions of subsection 424(b)(3) of the Code. 

        In
connection with the dissolution or liquidation of the Company or a partial liquidation involving 50% or more of the assets of the Company, a reorganization of the Company in which
another entity is the survivor, a merger or reorganization of the Company under which more than 50% of the Common Stock outstanding prior to the merger or reorganization is converted into cash or into
a security of another entity, a sale of more than 50% of the Company's assets, or a similar event that the Committee determines, in its discretion, would materially alter the structure of the Company
or its ownership, the Committee, upon 30 days prior written notice to the option holders, may, in its discretion, do one or more of the following: (i) shorten the period during which
options are exercisable (provided they remain exercisable for at least 30 days after the date the notice is given); (ii) accelerate any vesting 

6

 

schedule
to which an option is subject; (iii) arrange to have the surviving or successor entity grant replacement options with appropriate adjustments in the number and kind of securities and
option prices, or (iv) cancel options upon payment to the option holders in cash, with respect to each option to the extent then exercisable (including any options as to which the exercise has
been accelerated as contemplated in clause (ii) above), of any amount that is the equivalent of the Fair Market Value of the Common Stock (at the effective time of the dissolution, liquidation,
merger, reorganization, sale or other event) or the fair market value of the option. In the case of a change in corporate control, the Committee may, in considering the advisability or the terms and
conditions of any acceleration of the exercisability of any option pursuant to this Section 3.5, take into account the penalties that may result directly or indirectly from such acceleration to
either the Company or the option holder, or both, under Section 280G of the Code, and may decide to limit such acceleration to the extent necessary to avoid or mitigate such penalties or their
effects. 

        No
fractional share of Common Stock shall be issued under the Plan on account of any adjustment under this Section 3.5. 

        3.6   Rights
of Participants and Beneficiaries. 

        The
Company shall pay all amounts payable hereunder only to the option holder or beneficiaries entitled thereto pursuant to the Plan. The Company shall not be liable for the debts,
contracts or engagements of any optionee or his or her beneficiaries, and rights to cash payments under the Plan may not be taken in execution by attachment or garnishment, or by any other legal or
equitable proceeding while in the hands of the Company. 

        3.7   Government
Regulations. 

        The
Plan, and the grant and exercise of options and the issuance and delivery of shares of Common Stock under options granted hereunder, shall be subject to compliance with all
applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law) and federal margin requirements and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to
such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or
desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan and options granted hereunder shall be deemed amended to the extent necessary
to conform to such laws, rules and regulations. 

        3.8   Amendment
and Termination. 

        The
Board or the Committee may at any time suspend, amend or terminate the Plan and may, with the consent of the option holder, make such modifications of the terms and conditions of
such option holder's option as it shall deem advisable, provided, however, that, without approval of the Company's stockholders given within twelve months before or after the action by the Board or
the Committee, no action of the Board or the Committee may, (A) materially increase the benefits accruing to participants under the Plan; (B) materially increase the number of securities
which may be issued under the Plan; or (C) materially modify the requirements as to eligibility for participation in the Plan. No option may be granted during any suspension of the Plan or
after such termination. The amendment, suspension or termination of the Plan shall not, without the consent of the option holder affected thereby, alter or impair any rights or obligations under any
option theretofore granted under the Plan. No option way be granted during any period of suspension nor after termination of the Plan, and in no event may any option be granted under the Plan after
the expiration of ten years from the date the Plan is adopted by the Board. 

7

 

        3.9   Time
of Grant And Exercise of Option. 

        An
option shall be deemed to be exercised when the Secretary of the Company receives written notice from an option holder of such exercise, payment of the exercise price determined
pursuant to Section 2.1 of the Plan and set forth in the Stock Option Agreement, and all representations, indemnifications and documents reasonably requested by the Committee. 

        3.10 Privileges
of Stock Ownership; Non-Distributive Intent; Reports to Option Holders. 

        A
participant in the Plan shall not be entitled to the privilege of stock ownership as to any shares of Common Stock not actually issued to the optionee. Upon exercise of an option at a
time when there is not in effect under the Securities Act of 1933, as amended, a Registration Statement relating to the Common Stock issuable upon exercise or payment therefor and available for
delivery a Prospectus meeting the requirements of Section 10(a)(3) of said Act, the optionee shall represent and warrant in writing to the Company that the shares purchased are being acquired
for investment and not with a view to the distribution thereof. 

        The
Company shall furnish to each optionee under the Plan the Company's annual report and such other periodic reports, if any, as are disseminated by the Company in the ordinary course
to its stockholders. 

        3.11 Legending
Share Certificates. 

        In
order to enforce any restrictions imposed upon Common Stock issued upon exercise of an option granted under the Plan or to which such Common Stock may be subject, the Committee may
cause a legend or legends to be placed on any share certificates representing such Common Stock, which legend or legends shall make appropriate reference to such restrictions, including, but not
limited to, a restriction against sale of such Common Stock for any period of time as may be required by applicable laws or regulations. If any restriction with respect to which a legend was placed on
any certificate ceases to apply to Common Stock represented by such certificate, the owner of the Common Stock represented by such certificate may require the Company to cause the issuance of a new
certificate not bearing the legend. 

        Additionally,
and not by way of limitation, the Committee may impose such restrictions on any Common Stock issued pursuant to the Plan as it may deem advisable, including, without
limitation, restrictions under the requirements of any stock exchange upon which Common Stock is then traded. 

        3.12 Use
of Proceeds. 

        Proceeds
realized pursuant to the exercise of options under the Plan shall constitute general funds of the Company. 

        3.13 Changes
in Capital Structure; No Impediment to Corporate Transactions. 

        The
existence of outstanding options under the Plan shall not affect the Company's right to effect adjustments, recapitalizations, reorganizations or other changes in its or any other
corporation's capital structure or business, any merger or consolidation, any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting Common Stock, the dissolution or
liquidation of the Company's or any other corporation's assets or business, or any other corporate act, whether similar to the events described above or otherwise. 

        3.14 Effective
Date of the Plan. 

        The
Plan shall be effective as of the date of its approval by the stockholders of the Company within twelve months after the date of the Board's initial adoption of the Plan. Options may
be granted but not exercised prior to stockholder approval of the Plan. If any options are so granted and stockholder approval shall not have been obtained within twelve months of the date of adoption
of this 

8

 

Plan
by the Board of Directors, such options shall terminate retroactively as of the date they were granted. 

        3.15 Termination. 

        The
Plan shall terminate automatically as of the close of business on the day preceding the tenth anniversary date of its adoption by the Board or earlier as provided in
Section 3.8. Unless otherwise
provided herein, the termination of the Plan shall not affect the validity of any option agreement outstanding at the date of such termination. 

        3.16 No
Effect on Other Plans. 

        The
adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company, any Subsidiary or any Parent Corporation. Nothing in the Plan shall be
construed to limit the right of the Company (i) to establish any other forms of incentives or compensation for employees of the Company, any Subsidiary or any Parent Corporation or
(ii) to grant or assume options or other rights otherwise than under the Plan in connection with any proper corporate purpose including but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, firm or association. 

9

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Exhibit 10.2

INTEGRATED ALARM SERVICES GROUP, INC. 2003 STOCK OPTION PLANQuickLinks
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  Exhibit 10.3    
    

 
 

  INTEGRATED ALARM SERVICES GROUP, INC.
  2004 STOCK INCENTIVE PLAN    
    

        Integrated
Alarm Services Group, Inc., a corporation existing under the laws of the State of Delaware (the "Company"), hereby establishes and adopts the following 2004 Stock
Incentive Plan (the "Plan").  

	1.
	PURPOSE
OF THE PLAN 

        1.1.  Purpose.
The purpose of the Plan is to assist the Company and its Affiliates in attracting and retaining selected individuals to serve as directors, employees,
consultants and advisors of the Company who are expected to contribute to the Company's success and to achieve its long-term objectives, which will inure to the benefit of all stockholders
of the Company through the additional incentives inherent in the Awards hereunder.  

	2.
	DEFINITIONS

        2.1.  "Affiliate"
shall mean (i) any person or entity that directly, or through one or more intermediaries, controls, or is controlled by, or is under common control
with, the Company (including any Subsidiary) or (ii) any entity in which the Company has a significant equity interest, as determined by the Committee. 

        2.2.  "Award"
shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Performance Share Award, or Deferred Stock Award relating to Shares granted pursuant to
the provisions of the Plan. 

        2.3.  "Award
Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award granted by the Committee hereunder. 

        2.4.  "Board"
shall mean the board of directors of the Company. 

        2.5.  "Code"
shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. 

        2.6.  "Committee"
shall mean the Compensation Committee of the Board, consisting of no fewer than two Directors, each of whom is an independent non-employee
director within the meaning of Section 162(m)(4)(C)(i) of the Code, or any successor provision thereto, and the NASDAQ regulations. 

        2.7.  "Covered
Employee" shall mean a "covered employee" within the meaning of Section 162(m)(3) of the Code, or any successor provision thereto. 

        2.8.  "Deferred
Stock Award" shall mean any award of share units granted pursuant to Section 8. 

        2.9.  "Director"
shall mean a non-employee member of the Board. 

        2.10.  "Employee"
shall mean any employee of the Company or any Affiliate. 

        2.11.  "Fair
Market Value" shall mean the average of the high and low market prices of the Company's shares on a particular reference date as reported on the NASDAQ or a
successor quotation system (or other principal exchange on which the Company's shares are then trading) on the day immediately preceding that date (or if there were no reported trading prices on such
date, on the last preceding date on which the trading prices were reported). 

        2.12.  "Freestanding
Stock Appreciation Right" shall have the meaning set forth in Section 6.1. 

        2.13.  "Limitations"
shall have the meaning set forth in Section 10.5. 

1

 

        2.14.  "Option"
shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or
periods as the Committee shall determine. Options granted under the Plan shall be non-qualified stock options. 

        2.15.  "Participant"
shall mean an Employee, Director, consultant or advisor who is selected by the Committee to receive an Award under the Plan. 

        2.16.  "Payee"
shall have the meaning set forth in Section 13.1. 

        2.17.  "Performance
Share Award" shall mean any grant pursuant to Section 9 of a unit valued by reference to a designated number of Shares, which value may be paid to
the Participant by delivery of such property as the Committee shall determine, including cash, Shares, or any combination thereof, upon achievement of such performance goals during the Performance
Period as the Committee shall establish at the time of such grant or thereafter. 

        2.18.  "Performance
Period" shall mean that period established by the Committee at the time any Performance Share Award is granted or at any time thereafter during which any
performance goals specified by the Committee with respect to such Award are to be measured. 

        2.19.  "Restricted
Stock" shall mean any Share or Share Unit issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such
other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse
separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate. 

        2.20.  "Restricted
Period" shall have the meaning set forth in Section 7.1. 

        2.21.  "Shares"
shall mean the shares of common stock of the Company, par value $0.001 per share. 

        2.22.  "Share
Unit" shall mean a right denominated by the value of a Share granted pursuant to the Plan 

        2.23.  "Stock
Appreciation Right" shall mean the right granted to a Participant pursuant to Section 6. 

        2.24.  "Subsidiary"
shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the
Award, each of the corporations other than the last corporation in the unbroken chain owns stock possessing more than 50% of the total combined voting power of all classes of stock in one of the other
corporations in the chain. 

        2.25.  "Substitute
Awards" shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the
right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines. 

        2.26.  "Tandem
Stock Appreciation Right" shall have the meaning set forth in Section 6.1.  

	3.
	SHARES
SUBJECT TO THE PLAN 

        3.1.  Number
of Shares. (a) Subject to adjustment as provided in Section 12.2, a total of 1,200,000 Shares shall be authorized for grant under the Plan. Any
Shares that are subject to Awards of Options or Stock Appreciation Rights shall be counted against this limit as one (1) Share for every one (1) Share granted. Any Shares that are
subject to Awards other than Options or Stock Appreciation Rights shall be counted against this limit as two (2) Shares for every one (1) Share granted. 

2

 

        (b)   If
any Shares subject to an Award are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award is settled for cash or otherwise does not
result in the issuance of all or a portion of the Shares subject to such Award, the Shares shall, to the extent of such forfeiture, expiration, termination, cash settlement or
non-issuance, again be available for Awards under the Plan, subject to Section 3.1(f) below. 

        (c)   In
the event that (i) any Option or other Award granted hereunder is exercised through the tendering of Shares (either actually or by attestation) or by the
withholding of Shares by the Company, or (ii) withholding tax liabilities arising from such Option or other Award are satisfied by the tendering of Shares (either actually or by attestation) or
by the withholding of Shares by the Company, then only the number of Shares issued net of the Shares tendered or withheld shall be counted for purposes of determining the maximum number of Shares
available for grant under the Plan. 

        (d)   Substitute
Awards shall not reduce the Shares authorized for grant under the Plan or authorized for grant to a Participant in any calendar year. Additionally, in the
event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by shareholders
and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate,
using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities
party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available shares
shall not be made after the date awards or grants could have been made under the terms of the
pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees or Directors or any Affiliate prior to such acquisition or
combination. 

        (e)   Any
Shares that again become available for grant pursuant to this Section 3 shall be added back as one (1) Share if such Shares were subject to Options or
Stock Appreciation Rights granted under the Plan or options or stock appreciation rights granted under the Prior Plans, and as two (2) Shares if such Shares were subject to Awards other than
Options or Stock Appreciation Rights granted under the Plan. 

        3.2.  Character
of Shares. Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares or shares purchased in the open market or
otherwise.  

	4.
	ELIGIBILITY
AND ADMINISTRATION 

        4.1.  Eligibility.
Any Employee, Director, consultant or advisor shall be eligible to be selected as a Participant. 

        4.2.  Administration.
a) The Plan shall be administered by the Committee. The Directors may remove from, add members to, or fill vacancies on, the Committee. 

        (b)   The
Committee shall have full power and authority, subject to the provisions of the Plan and subject to such orders or resolutions not inconsistent with the provisions
of the Plan as may from time to time be adopted by the Board, to: (i) select the Employees, Directors, consultants and advisors to whom Awards may from time to time be granted hereunder;
(ii) determine the type or types of Awards, not inconsistent with the provisions of the Plan, to be granted to each Participant hereunder; (iii) determine the number of Shares to be
covered by each Award granted hereunder; (iv) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder; (v) determine whether,
to what extent and under what circumstances Awards may be settled in cash, Shares or other property, subject to Section 8.1; (vi) determine whether, to what extent, and under what
circumstances cash, Shares, other property 

3

 

and
other amounts payable with respect to an Award made under the Plan shall be deferred either automatically or at the election of the Participant; (vii) determine whether, to what extent and
under what circumstances any Award shall be canceled or suspended; (viii) interpret and administer the Plan
and any instrument or agreement entered into under or in connection with the Plan, including any Award Agreement; (ix) correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any Award in the manner and to the extent that the Committee shall deem desirable to carry it into effect; (x) establish such rules and regulations and appoint such agents as it
shall deem appropriate for the proper administration of the Plan; (xi) determine whether any Award will have rights for the payment of dividends or dividend equivalents; and (xii) make
any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan. 

        (c)   Decisions
of the Committee shall be final, conclusive and binding on all persons or entities, including the Company, any Participant, any stockholder and any Employee or
any Affiliate. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings. Notwithstanding the foregoing or anything else to the contrary in the
Plan, any action or determination by the Committee specifically affecting or relating to an Award to a Director shall require the prior approval of the Board. 

        (d)   The
Committee may delegate to a committee of one or more directors of the Company or, to the extent permitted by law, to one or more officers or a committee of officers
the right to grant Awards to Employees who are not Directors or officers of the Company and to consultants and advisors and to cancel or suspend Awards to Employees who are not Directors or officers
of the Company and to consultants and advisors.  

	5.
	OPTIONS

        5.1.  Grant
of Options. Options may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan. Any Option shall be subject to
the terms and conditions of this Section 5 and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable. 

        5.2.  Award
Agreements. All Options granted pursuant to this Section 5 shall be evidenced by a written Award Agreement in such form and containing such terms and
conditions as the Committee shall determine which are not inconsistent with the provisions of the Plan. Granting of an Option pursuant to the Plan shall impose no obligation on the recipient to
exercise such Option. Any individual who is granted an Option pursuant to this Section 5 may hold more than one Option granted pursuant to the Plan at the same time. 

        5.3.  Option
Price. Other than in connection with Substitute Awards, the option price per each Share purchasable under any Option granted pursuant to this Section 5
shall not be less than 100% of the Fair Market Value of such Share on the date of grant of such Option. Other than pursuant to Section 12.2, the Committee shall not be permitted to
(a) lower the option price per Share of an Option after it is granted, (b) cancel an Option when the option price per Share exceeds the Fair Market Value of the underlying Shares in
exchange for another Award (other than in connection with Substitute Awards), and (c) take any other action with respect to an Option that may be treated as a repricing under the rules and
regulations of the NASDAQ. 

        5.4.  Option
Period. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Option shall be exercisable after the expiration of ten
years from the date the Option is granted, except in the event of death or disability. 

        5.5.  Exercise
of Options. Vested Options granted under the Plan shall be exercised by the Participant (or by the Participant's executors, administrators, guardian or legal
representative, as may be provided in an Award Agreement) as to all or part of the Shares covered thereby, by the giving of 

4

 

written
notice of exercise to the Company or its designated agent, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased.
Unless otherwise provided in an Award Agreement, full payment of such purchase price shall be made at the time of exercise and shall be made (a) in cash or by certified check or bank check or
wire transfer of immediately available funds, (b) by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a
period of at least six months (or such other period to avoid accounting charges against the Company's earnings), (c) if the Shares are traded on the NASDAQ or another principal exchange,
through the delivery of irrevocable instructions to a broker approved by the Committee to deliver promptly to the Company an amount equal to the purchase price, (d) with the consent of the
Committee, by delivery of other consideration (including, where permitted by law and the Committee, other Awards) having a Fair Market Value on the exercise date equal to the total purchase price,
(e) with the consent of the Committee, by withholding Shares otherwise issuable in connection with the exercise of the Option, (f) through any other method specified in an Award
Agreement, or (g) any combination of any of the foregoing. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other
office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time
prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the
date of such issuance. Except under certain circumstances contemplated by Section 11 or as may be set forth in an Award Agreement with respect to death or disability of a Participant, Options
will not be exercisable before the expiration of one year from the date the Option is granted. 

        5.6.  Form
of Settlement. In its sole discretion, the Committee may provide, at the time of grant, that the Shares to be issued upon an Option's exercise shall be in the form
of Restricted Stock or other similar securities, or may reserve the right so to provide after the time of grant.  

	6.
	STOCK
APPRECIATION RIGHTS 

        6.1.  Grant
and Exercise. The Committee may provide Stock Appreciation Rights (a) in conjunction with all or part of any Option granted under the Plan or at any
subsequent time during the term of such Option ("Tandem Stock Appreciation Right"), (b) in conjunction with all or part of any Award (other than an Option) granted under the Plan or at any
subsequent time during the term of such Award, or (c) without regard to any Option or other Award (a "Freestanding Stock Appreciation Right"), in each case upon such terms and conditions as the
Committee may establish in its sole discretion. 

        6.2.  Terms
and Conditions. Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined
from time to time by the Committee, including the following: 

        Upon
the exercise of a Stock Appreciation Right, the holder shall have the right to receive the excess of (i) the Fair Market Value of one Share on the date of exercise or such
other amount as the Committee shall so determine at any time during a specified period before the date of exercise over (ii) the grant price of the right on the date of grant, or in the case of
a Tandem Stock Appreciation Right granted on the date of grant of the related Option, as specified by the Committee in its sole discretion, which, except in the case of Substitute Awards or in
connection with an adjustment provided in Section 12.2, shall not be less than the Fair Market Value of one Share on such date of grant of the right or the related Option, as the case may be. 

        Upon
the exercise of a Stock Appreciation Right, the Committee shall determine in its sole discretion whether payment shall be made in cash, in whole Shares or other property, or any
combination thereof. 

5

 

        Any
Tandem Stock Appreciation Right may be granted at the same time as the related Option is granted or at any time thereafter before exercise or expiration of such Option. 

        Any
Tandem Stock Appreciation Right related to an Option may be exercised only when the related Option would be exercisable and the Fair Market Value of the Shares subject to the related
Option exceeds the option price at which Shares can be acquired pursuant to the Option. In addition, (i) if a
Tandem Stock Appreciation Right exists with respect to less than the full number of Shares covered by a related Option, then an exercise or termination of such Option shall not reduce the number of
Shares to which the Tandem Stock Appreciation Right applies until the number of Shares then exercisable under such Option equals the number of Shares to which the Tandem Stock Appreciation Right
applies, and (ii) no Tandem Stock Appreciation Right granted under the Plan to a person then subject to Section 16 of the Exchange Act shall be exercised during the first six months of
its term for cash. 

        Any
Option related to a Tandem Stock Appreciation Right shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has been exercised and vice versa, subject to
Section 6.2(d). 

        The
provisions of Stock Appreciation Rights need not be the same with respect to each recipient. The Committee may impose such other conditions or restrictions on the terms of exercise
and the exercise price of any Stock Appreciation Right, as it shall deem appropriate, including providing that the grant price of a Tandem Stock Appreciation Right may be less than the Fair Market
Value on the date of grant if the Tandem Stock Appreciation Right is added to an Option following the date of the grant of the Option. In connection with the foregoing, the Committee shall consider
the applicability and effect of Section 162(m) of the Code. 

        Notwithstanding
the foregoing provisions of this Section 6.2(g), but subject to Section 12.2, a Freestanding Stock Appreciation Right shall not have (i) grant price
less than Fair Market Value on the date of grant, or (ii) a term of greater than ten years. In addition to the foregoing, but subject to Section 12.2, the grant price of any Stock
Appreciation Right shall not be reduced after the date of grant. 

        The
Committee may impose such terms and conditions on Stock Appreciation Rights granted in conjunction with any Award (other than an Option) as the Committee shall determine in its sole
discretion.  

	7.
	RESTRICTED
STOCK AWARDS 

        7.1.  Grants.
Awards of Restricted Stock may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan (a "Restricted Stock
Award"). A Restricted Stock Award shall be subject to restrictions imposed by the Committee covering a period of time specified by the Committee (the "Restriction Period"). The provisions of
Restricted Stock Awards need not be the same with respect to each recipient. The Committee has absolute discretion to determine whether any consideration (other than services) is to be received by the
Company or any Affiliate as a condition precedent to the issuance of Restricted Stock. 

        7.2.  Award
Agreements. The terms of any Restricted Stock Award granted under the Plan shall be set forth in a written Award Agreement which shall contain provisions
determined by the Committee and not inconsistent with the Plan. 

        7.3.  Rights
of Holders of Restricted Stock. Beginning on the date of grant of a Restricted Stock Award in the form of actual Shares and subject to execution of the Award
Agreement, the Participant shall become a shareholder of the Company with respect to all Shares subject to the Award Agreement and shall have all of the rights of a shareholder, including the right to
vote such Shares and the right to receive distributions made with respect to such Shares; provided, however, that any Shares or any other 

6

 

property
(other than cash) distributed as a dividend or otherwise with respect to any Restricted Shares as to which the restrictions have not yet lapsed shall be subject to the same restrictions as
such Restricted Shares. The Committee shall have the discretion to provide dividend equivalents in connection with the grant of a Restricted Stock Award in the form of Share Units, subject to the same
restrictions as in the preceding sentence. 

        7.4.  Minimum
Vesting Period. Except for certain limited situations (including the death, disability or retirement of the Participant or a Change of Control referred to in
Section 11), Restricted Stock Awards subject solely to continued employment restrictions shall have a Restriction Period of not less than three years from date of grant (but permitting
pro-rata vesting over such time); provided, that the provisions of this Section 7.4 shall not be applicable to any Substituted Awards or grants of Restricted Stock in payment of
Performance Share Awards pursuant to Section 9. Subject to the foregoing three-year minimum vesting requirement, the Committee may, in its sole discretion, waive the forfeiture
period and any other conditions set forth in any Award Agreement subject to such terms and conditions as the Committee shall deem appropriate.  

	8.
	DEFERRED
STOCK AWARDS 

        8.1.  Stock
and Administration. Other Awards that are valued in whole or in part by reference to, or are otherwise based on, Shares ("Deferred Stock Awards") may be granted
hereunder to Participants, either alone or in addition to other Awards granted under the Plan, and such Deferred Stock Awards shall also be available as a form of payment in the settlement of other
Awards granted under the Plan, or other compensation payable outside the Plan. Deferred Stock Awards shall be paid only in Shares. Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Employees and Directors to whom and the time or times at which such Deferred Stock Awards shall be made, the number of Shares to be granted pursuant to such
Awards, and all other conditions of the Awards. The provisions of Deferred Stock Awards need not be the same with respect to each recipient. Except for certain limited situations (including the death,
disability or retirement of the Participant or a Change of Control referred to in Section 11), Deferred Stock Awards subject to any continued employment restrictions shall be subject to
restrictions imposed by the Committee for a period of not less than three years from date of grant (but permitting pro-rata vesting over such time); provided, that such restrictions shall
not be applicable to any Substituted Awards, grants of Deferred Stock Awards in payment of Performance Share Awards pursuant to Section 9, or grants of Deferred Stock Awards in payment of other
compensation payable outside the Plan. 

        8.2.  Terms
and Conditions. Shares (including securities convertible into Shares) subject to Awards granted under this Section 8 may be issued for no consideration or
for such minimum consideration as may be required by applicable law. Shares (including securities convertible into Shares) purchased pursuant to a purchase right awarded under this Section 8
shall be purchased for such consideration as the Committee shall determine in its sole discretion.  

	9.
	PERFORMANCE
SHARE AWARDS 

        9.1.  Terms
of Performance Share Awards. Performance Share Awards may be issued hereunder to Participants, for no consideration or for such minimum consideration as may be
required by applicable law, either alone or in addition to other Awards granted under the Plan. The performance criteria to be achieved during any Performance Period and the length of the Performance
Period shall be determined by the Committee upon the grant of each Performance Share Award; provided, however, that a Performance Period shall not be shorter than three years nor longer than five
years. Except as provided in Section 11 or as may be provided in an Award Agreement, Performance Share Awards will be distributed only after the end of the relevant Performance Period.
Performance Share Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Committee at the time of payment. The performance goals to be achieved
for each Performance Period shall be conclusively determined by the Committee and may be based upon the criteria set forth in 

7

 

Section 10.2.
The amount of the Award to be distributed shall be conclusively determined by the Committee. Performance Share Awards may be paid in a lump sum or in installments following the
close of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis.  

	10.
	CODE
SECTION 162(m) PROVISIONS 

        10.1.  Covered
Employees. Notwithstanding any other provision of the Plan, if the Committee determines at the time a Performance Share Award is granted to a Participant who
is, or is likely to be, as of the end of the tax year in which the Company would claim a tax deduction in connection with such Award, a Covered Employee, then the Committee may provide that this
Section 10 is applicable to such Award. 

        10.2.  Performance
Criteria. If a Performance Share Award is subject to this Section 10, then the lapsing of restrictions thereon and the distribution of cash, Shares
or other property pursuant thereto, as applicable, shall be subject to the achievement of one or more objective performance goals established by the Committee, which shall be based on the attainment
of specified levels of one or any combination of the following: [account acquisition; account retention; revenue growth; operating income; reductions in operating expenses; earnings before
taxes; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; pre-tax income before allocation of bonus'; earnings per share; net income;
return on stockholders' equity; return on assets; return on invested capital; attainment of strategic and operational initiatives; appreciation in and/or maintenance of the price of the Shares or any
other publicly-traded securities of the Company; market share, and/or comparisons with various stock market indices] of the Company or any Affiliate, division or business unit of the
Company for or within which the Participant is primarily employed. Such performance goals also may be based solely by reference to the Company's performance or the performance of an Affiliate,
division or business unit of the Company, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies. The
Committee may also exclude the impact of an event or occurrence which the Committee determines should appropriately be excluded, including (a) restructurings, discontinued operations,
extraordinary items, and other unusual or non-recurring charges, (b) an event either not directly related to the operations of the Company or not within the reasonable control of
the Company's management, or (c) cumulative changes in accounting standards, each as calculated in accordance with generally accepted accounting principles and disclosed in the Company's
financial statements, notes to the financial statements, or management's discussion and analysis. Such performance goals shall be set by the Committee within the time period prescribed by, and shall
otherwise comply with the requirements of, Section 162(m) of the Code, or any successor provision thereto, and the regulations thereunder. 

        10.3.  Adjustments.
Notwithstanding any provision of the Plan (other than Section 11), with respect to any Performance Share Award that is subject to this
Section 10, the Committee may adjust downwards, but not upwards, the amount payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance goals,
except in the case of the death or disability of the Participant. 

        10.4.  Restrictions.
The Committee shall have the power to impose such other restrictions on Awards subject to this Section 10 as it may deem necessary or appropriate
to ensure that such Awards satisfy all requirements for "performance-based compensation" within the meaning of Section 162(m)(4)(c) of the Code, or any successor provision thereto. 

        10.5.  Limitations
on Grants to Individual Participant. Subject to adjustment as provided in Section 12.2, no Participant may be granted during any consecutive
36-month period (i) Options or Stock Appreciation Rights with respect to more than 300,000 shares or (ii) Performance Share Awards that could result in the payment of more
than 150,000 shares (the "Limitations"). If an Award is cancelled, the cancelled Award shall continue to be counted toward the applicable limitations. 

8

 
	11.
	CHANGE
OF CONTROL PROVISIONS 

        11.1.  Impact
of Change of Control. The terms of any Award may provide in the Award Agreement evidencing the Award that, upon a "Change of Control" of the Company (as that
term may be defined therein), (a) Options and Stock Appreciation Rights outstanding as of the date of the Change of Control immediately vest and become fully exercisable,
(b) restrictions and deferral limitations on Restricted Stock lapse and the Restricted Stock become free of all restrictions and limitations and become fully vested, (c) all Performance
Share Awards shall be considered to be earned and payable (either in full or pro-rata based on the portion of Performance Period completed as of the date of the Change in Control), and any
deferral or other restriction shall lapse and such Performance Share Awards shall be immediately settled or distributed, (d) the restrictions and deferral limitations and other conditions
applicable to any Deferred Stock Awards or any other Awards shall lapse, and such Deferred Stock Awards or such other Awards shall become free of all restrictions, limitations or conditions and become
fully vested and transferable to the full extent of the original grant, and (e) such other additional benefits as the Committee deems appropriate shall apply, subject in each case to any terms
and conditions contained in the Award Agreement evidencing such Award. For purposes of the Plan, a "Change of Control" shall mean an event described in an Award Agreement evidencing the Award or such
other event as determined in the sole discretion of the Board. Notwithstanding any other provision of the Plan, the Committee, in its discretion, may determine that, upon the occurrence of a Change of
Control of the Company, each Option and Stock Appreciation Right outstanding shall terminate within a specified number of days after notice to the Participant, and such Participant shall receive, with
respect to each Share subject to such Option or Stock Appreciation Right, an amount equal to the excess of the Fair Market Value of such Share immediately prior to the occurrence of such Change of
Control over the exercise price per share of such Option and/or Stock Appreciation Right; such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property,
if any, payable in the transaction) or in a combination thereof, as the Committee, in its discretion, shall determine. 

        11.2.  Assumption
Upon Change of Control. Notwithstanding the foregoing, the terms of any Award Agreement may also provide that, if in the event of a Change of Control the
successor company assumes or substitutes for an Option, Stock Appreciation Right, Restricted Stock Award or Deferred Stock Award, then each outstanding Option, Stock Appreciation Right, Restricted
Stock Award or Deferred Stock Award shall not be accelerated as described in Sections 11.1(a), (b) and (d). For the purposes of this Section 11.2, an Option, Stock Appreciation
Right, Restricted Stock Award or Deferred Stock Award shall be considered assumed or substituted for if following the Change of Control the award confers the right to purchase or receive, for each
Share subject to the Option, Stock Appreciation Right, Restricted Stock Award or Deferred Stock Award immediately prior to the Change of Control, the consideration (whether stock, cash or other
securities or property) received in the transaction constituting a Change of Control by holders of Shares for each Share held on the effective date of such transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the transaction
constituting a Change of Control is not solely common stock of the successor company, the Committee may, with the consent of the successor company, provide that the consideration to be received upon
the exercise or vesting of an Option, Stock Appreciation Right, Restricted Stock Award or Deferred Stock Award, for each Share subject thereto, will be solely common stock of the successor company
substantially equal in fair market value to the per share consideration received by holders of Shares in the transaction constituting a Change of Control. The determination of such substantial
equality of value of consideration shall be made by the Committee in its sole discretion and its determination shall be conclusive and binding. Notwithstanding the foregoing, on such terms and
conditions as may be set forth in an Award Agreement, in the event of a termination of a Participant's employment in such successor company within a specified time 

9

 

period
following such Change in Control, each Award held by such Participant at the time of the Change in Control shall be accelerated as described in Sections 11.1(a), (b) and
(d) above.  

	12.
	GENERALLY
APPLICABLE PROVISIONS 

        12.1.  Amendment
and Modification of the Plan. The Board may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable, subject to any
requirement for stockholder approval imposed by applicable law, including the rules and regulations of the NASDAQ or any rule or regulation of any other principal exchange or quotation system on which
Shares are then listed or quoted; provided that the Board may not amend the Plan in any manner that would result in noncompliance with Rule 16b-3 of the Exchange Act; and further
provided that the Board may not, without the approval of the Company's stockholders, amend the Plan to (a) increase the number of Shares that may be the subject of Awards under the Plan (except
for adjustments pursuant to Section 12.2), (b) expand the types of awards available under the Plan, (c) materially expand the class of persons eligible to participate in the Plan,
(d) amend any provision of Section 5.3, (e) increase the maximum permissible term of any Option specified by Section 5.4, or (f) amend any provision of
Section 10.5. In addition, no amendments to, or termination of, the Plan shall in any way impair the rights of a Participant under any Award previously granted without such Participant's
consent. 

        12.2.  Adjustments.
In the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property), stock
split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Shares or the value thereof, such adjustments and other substitutions shall
be made to the Plan and to Awards as the Committee, in its sole discretion, deems equitable or appropriate, including such adjustments in the aggregate number, class and kind of securities that may be
delivered under the Plan and, in the aggregate or to any one Participant, in the number, class, kind and option or exercise price of securities subject to outstanding Awards granted under the Plan
(including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of, or other awards denominated in the shares of, another company) as the Committee may
determine to be appropriate in its sole discretion; provided, however, that the number of Shares subject to any Award shall always be a whole number. 

        12.3.  Transferability
of Awards. Unless otherwise authorized by the Committee in an Award Agreement, no Award and no Shares subject to Awards described in Section 8
that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by
will or the laws of descent and distribution or pursuant to qualified domestic relations order (as defined by the Code), and such Award may be exercised during the life of the Participant only by the
Participant or the Participant's guardian or legal representative. 

        12.4.  Termination
of Employment. The Committee shall determine and set forth in each Award Agreement whether any Awards granted in such Award Agreement will continue to be
exercisable, and the terms of such exercise, on and after the date that a Participant ceases to be employed by or to provide services to the Company or any Affiliate, whether by reason of death,
disability, voluntary or involuntary termination of employment or services, or otherwise. The date of termination of a Participant's employment or services will be determined by the Committee, which
determination will be final. 

        12.5.  Deferral;
Dividend Equivalents. The Committee shall be authorized to establish procedures pursuant to which the payment of any Award may be deferred. Subject to the
provisions of the Plan and any Award Agreement, the recipient of an Award (including any deferred Award) may, if so determined by the Committee, be entitled to receive, currently or on a deferred
basis, cash, stock or other property dividends, or cash payments in amounts equivalent to cash, stock or other property dividends on Shares with respect to the number of Shares covered by the Award,
as determined by the 

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Committee,
in its sole discretion, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested. 

	13.
	MISCELLANEOUS

        13.1.  Tax
Withholding. The Company shall have the right to make all payments or distributions pursuant to the Plan to a Participant (any such person, a "Payee") net of any
applicable Federal, State and local taxes required to be paid or withheld as a result of (a) the grant of any Award, (b) the exercise of an Option or Stock Appreciation Rights,
(c) the delivery of Shares or cash, (d) the lapse of any restrictions in connection with any Award or (e) any other event occurring pursuant to the Plan. The Company or any
Affiliate shall have the right to withhold from wages or other amounts otherwise payable to such Payee such withholding taxes as may be required by law, or to otherwise require the Payee to pay such
withholding taxes. If the Payee shall fail to make such tax payments as are required, the Company or its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from
any payment of any kind otherwise due to such Payee or to take such other action as may be necessary to satisfy such withholding obligations. The Committee shall be authorized to establish procedures
for election by Participants to satisfy such obligation for the payment of such taxes by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market
Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company's earnings), or by directing the Company to retain Shares (up to
the employee's minimum required tax withholding rate) otherwise deliverable in connection with the Award. 

        13.2.  Right
of Discharge Reserved; Claims to Awards. Nothing in the Plan nor the grant of an Award hereunder shall confer upon any Employee, Director, consultant or advisor
the right to continue in the employment or service of the Company or any Affiliate or affect any right that the Company or any Affiliate may have to terminate the employment or service of (or to
demote or to exclude from future Awards under the Plan) any such Employee, Director, consultant or advisor at any time for any reason. Except as specifically provided by the Committee, the Company
shall not be liable for the loss of existing or potential profit from an Award granted in the event of termination of an employment or other relationship. No Employee or Participant shall have any
claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Employees or Participants under the Plan. 

        13.3.  Prospective
Recipient. The prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have
any rights with respect to such Award, until and unless such recipient shall have executed an agreement or other instrument evidencing the Award and delivered a copy thereof to the Company, and
otherwise complied with the then applicable terms and conditions. 

        13.4.  Cancellation
of Award. Notwithstanding anything to the contrary contained herein, all outstanding Awards granted to any Participant shall be canceled if the
Participant, without the consent of the Company, while employed by the Company or any Affiliate or after termination of such employment or service, establishes a relationship with a competitor of the
Company or any Affiliate or engages in activity that is in conflict with or adverse to the interest of the Company or any Affiliate, as determined by the Committee in its sole discretion. 

        13.5.  Stop
Transfer Orders. All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stop-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then
listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. 

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        13.6.  Nature
of Payments. All Awards made pursuant to the Plan are in consideration of services performed or to be performed for the Company or any Affiliate, division or
business unit of the Company. Any income or gain realized pursuant to Awards under the Plan and any Stock Appreciation Rights constitute a special incentive payment to the Participant and shall not be
taken into account, to the extent permissible under applicable law, as compensation for purposes of any of the employee benefit plans of the Company or any Affiliate except as may be determined by the
Committee or by the Board or board of directors of the applicable Affiliate. 

        13.7.  Other
Plans. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such
approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. 

        13.8.  Severability.
If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such
provision shall (a) be deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid and/or enforceable and as so limited shall remain in full force and effect,
and (b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit
required under the Plan shall be held unlawful or otherwise invalid or unenforceable by a court of competent jurisdiction, such unlawfulness, invalidity or unenforceability shall not prevent any other
payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or
otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would
not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan. 

        13.9.  Construction.
All references in the Plan to "Section or "Sections," are intended to refer to the Section or Sections, as the case may be, of the Plan. As used in the
Plan, the words "include" and "including," and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words "without limitation." 

        13.10.  Unfunded
Status of the Plan. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made
to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder;
provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan. 

        13.11.  Governing
Law. The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Delaware and construed accordingly. 

        13.12.  Effective
Date of Plan; Termination of Plan. The Plan shall be effective on the date of the approval of the Plan by the holders of a majority of the shares entitled
to vote at a duly constituted meeting of the stockholders of the Company. The Plan shall be null and void and of no effect if the foregoing condition is not fulfilled and in such event each Award
shall, notwithstanding any of the preceding provisions of the Plan, be null and void and of no effect. Awards may be granted under the Plan at any time and from time to time on or prior to the fifth
anniversary of the effective date of the Plan, on which date the Plan will expire except as to Awards then outstanding under the Plan. Such outstanding Awards shall remain in effect until they have
been exercised or terminated, or have expired. 

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        13.13.  Foreign
Employees. Awards may be granted to Participants who are foreign nationals or employed outside the United States, or both, on such terms and conditions
different from those applicable to Awards to Participants employed in the United States as may, in the judgment of the Committee, be necessary or desirable in order to recognize differences in local
law or tax policy. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company's obligation with respect to tax equalization for Employees on
assignments outside their home country. 

        13.14.  Captions.
The captions in the Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the
provisions contained herein. 

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QuickLinks

Exhibit 10.3

INTEGRATED ALARM SERVICES GROUP, INC. 2004 STOCK INCENTIVE PLAN

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