SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
INSIGNIA SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
[LOGO]
INSIGNIA SYSTEMS, INC.
10801 Red Circle Drive
Minnetonka, MN 55343
-------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1998
- --------------------------------------------------------------------------------
TO THE STOCKHOLDERS OF INSIGNIA SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Insignia Systems, Inc. (the "Company"), a Minnesota corporation, will be held on
Thursday, May 21, 1998 at 9:00 a.m., Central Daylight Savings Time, at the
Company's Corporate Headquarters, 10801 Red Circle Drive, Minnetonka, Minnesota,
for the following purposes:
1. To elect directors to serve for the ensuing year and until
their successors are elected;
2. To ratify an amendment to the Company's Employee Stock
Purchase Plan to renew the term of the Plan for three
additional years;
3. To ratify an amendment to the Company's Stock Plan to increase
by 600,000 shares the number of shares available under the
Plan;
4. To ratify the appointment of Ernst & Young LLP as independent
auditors for the Company for the current year; and
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 30,
1998 as the record date for the determination of shareholders entitled to notice
of and to vote at the meeting.
By Order of the Board of Directors
G. L. Hoffman
Secretary
Minnetonka, Minnesota
April 15, 1998
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN
PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO
VOTE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PAID ENVELOPE ENCLOSED FOR THAT PURPOSE.
<PAGE>
[LOGO]
INSIGNIA SYSTEMS, INC.
-----------------------------------
PROXY STATEMENT
---------------------------------------------------
This Proxy Statement is furnished to the stockholders of Insignia
Systems, Inc. in connection with the Board of Directors' solicitation of proxies
to be voted at the annual meeting of stockholders to be held on May 21, 1998 or
any adjournment thereof (the "Meeting"). The mailing of this Proxy Statement to
stockholders commenced on or about April 15, 1998.
All expenses in connection with solicitation of proxies will be
borne by the Company. The Company will pay brokers, nominees, fiduciaries, or
other custodians their reasonable expenses for sending proxy material to, and
obtaining instructions from, persons for whom they hold stock of the Company.
The Company expects to solicit proxies by mail, but directors, officers, and
other employees of the Company may also solicit in person, by telephone, by
telegraph or by mail. The Company's principal offices are located at 10801 Red
Circle Drive, Minnetonka, Minnesota 55343.
Any proxy may be revoked at any time before it is voted by written
notice, mailed or delivered to the Secretary of the Company, or by revocation in
person at the Meeting; but if not so revoked, the shares represented by such
proxy will be voted in the manner directed by the shareholder. If no direction
is made, proxies received from stockholders will be noted "for" the proposals
set forth in the Notice of Meeting.
The Company has 6,877,721 shares of common stock, par value $.01 per
share (the "Common Stock") outstanding and entitled to vote at the Meeting. Each
share of Common Stock is entitled to one vote. Only stockholders of record at
the close of business on March 30, 1998 are entitled to vote at the meeting and
at any continuation or adjournment thereof. The presence, in person or by proxy,
of the holders of a majority of the shares of Common Stock entitled to vote at
the meeting will constitute a quorum for the transaction of business.
Under Minnesota law, each item of business properly presented at a
meeting of stockholders generally must be approved by the affirmative vote of
the holders of a majority of the voting power of the shares present, in person
or by proxy, and entitled to vote on that item of business. However, if the
shares present and entitled to vote on that item of business would not
constitute a quorum for the transaction of business at the meeting, then the
item must be approved by a majority of the voting power of the minimum number of
shares that would constitute such a quorum. Votes cast by proxy or in person at
the Meeting will be tabulated at the Meeting to determine whether or not a
quorum is present. Abstentions will be treated as unvoted for purposes of
determining the approval of the matter submitted to the shareholders for a vote.
If a broker indicates on the proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
<PAGE>
SECURITY OWNERSHIP OF
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table presents information provided to the Company as
to the beneficial ownership of Common Stock as of February 28, 1998 (i) by
persons known to the Company to hold 5% or more of such stock, (ii) each of the
directors of the Company, (iii) each of the executive officers named in the
Summary Compensation Table on page 3 and (iv) by all current officers and
directors as a group. Beneficial ownership includes shares available for
purchase under warrants or options which are either currently exercisable or
exercisable within 60 days after February 28, 1998.
Amount and Nature
Name and Address of of Beneficial Percent of
Beneficial Owner Ownership Shares
- --------------------------------------------- ----------------- ----------
G. L. Hoffman 1,020,134(1) 14.8%
10801 Red Circle Drive
Minnetonka, MN 55343
Scott F. Drill 45,834(2) .7%
10801 Red Circle Drive
Minnetonka, MN 55343
Erwin A. Kelen 155,000(3) 2.2%
Kelen Ventures
5500 Wayzata Blvd., Suite 1045
Golden Valley, MN 55416
Don E. Schultz 30,000(4) .4%
Agora, Inc.
1007 Church Street, Suite 105
Evanston, IL 60201
Gordon F. Stofer 113,774(5) 1.7%
Cherry Tree Ventures III
1400 Northland Plaza, 3800 W. 80th Street
Minneapolis, MN 55431
Frank D. Trestman 155,000(6) 2.2%
Trestman Enterprises
5500 Wayzata Blvd., Suite 1045
Golden Valley, MN 55416
Paul A. Moquist 236,657(7) 3.8%
10801 Red Circle Drive
Minnetonka, MN 55343
Perkins Capital Management, Inc. 2,491,000(8) 33.7%
708 East Lake Street
Wayzata, MN 55391
All current Directors and Officers as a Group 1,788,604(9) 25.8%
(8 persons)
- ---------------------------------------
(1) Includes 45,834 shares subject to options and warrants which are currently
exercisable.
(2) Includes 45,834 shares subject to options and warrants which are currently
exercisable.
<PAGE>
(3) Includes 105,000 shares subject to options and warrants which are
currently exercisable and 30,000 shares held in trust for Mr. Kelen's
children, as to which he disclaims beneficial ownership.
(4) Includes 30,000 shares subject to options and warrants which are currently
exercisable.
(5) Consists of 30,000 shares subject to options which are currently
exercisable by Mr. Stofer and 75,000 shares held by Cherry Tree Ventures
III, over which Mr. Stofer, as the Managing General Partner, has shared
voting and investment power.
(6) Includes 55,000 shares subject to options and warrants which are currently
exercisable. Also includes 40,000 shares held in trust for Mr. Trestman's
wife and children and 50,000 shares subject to warrants currently
exercisable by the trust, as to which Mr. Trestman disclaims beneficial
ownership.
(7) Includes 157,846 shares subject to options and warrants which are
currently exercisable and 10,600 shares held by Mr. Moquist's wife, as to
which Mr. Moquist disclaims beneficial ownership.
(8) Includes 710,000 shares subject to warrants which are currently
exercisable.
(9) Includes 534,514 shares subject to options and warrants currently
exercisable by officers and directors of the Company, 30,000 shares held
in trust for the children of a director, 40,000 shares held in trust for
the wife and children of another director and 10,600 shares held by the
wife of an officer.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows, for the fiscal years ending December 31,
1995, 1996 and 1997, the cash compensation paid by the Company, as well as
certain compensation paid or accrued for such years, to G. L. Hoffman, the
Company's President and Chief Executive Officer, and to each other executive
officer of the Company (together with Mr. Hoffman, the "Named Executives") whose
total cash compensation exceeded $100,000 during Fiscal 1995, 1996 and 1997 in
all capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Fiscal Year -------------------------- ------------
Ended Stock Options All Other
Name and Position December 31, Salary Bonus and Awards Compensation (1)
- ---------------------- ------------ ------ ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
G. L. Hoffman 1997 $158,800 -- -- $ 6,375
Chairman, President, 1996 $132,300 -- 50,000(2) $ 6,286
CEO and Secretary 1995 $126,000 -- -- $ 6,244
Paul A. Moquist 1997 $124,500 -- -- $ 6,665
Exec. Vice President, 1996 $112,000 -- 85,000(3) $ 6,357
Sales & Operations 1995 $105,000 -- 50,000(4) $ 6,317
</TABLE>
- ------------------------
(1) Includes amounts for car allowance and payment of life insurance premiums.
(2) Includes a stock option to purchase 50,000 shares at $1.38 per share.
(3) Includes a stock option to purchase 75,000 shares at $1.38 per share which
was granted to replace a canceled 75,000 share option with an exercise
price of $2.00 per share. Also includes a stock option to purchase 10,000
shares at $1.38 per share.
(4) Includes a stock option to purchase 50,000 shares at $1.50 per share.
STOCK OPTIONS
The Company's Stock Plan (the "Plan") provides for the granting of
stock options or restricted stock awards to key employees, consultants and
directors. An aggregate of 1,520,000 shares of common stock have been issued or
reserved for issuance under the Plan, as amended by the Board of Directors on
February 24, 1998, when 600,000 shares were added to the Plan.
<PAGE>
As of February 28, 1998, there are options outstanding under the
Plan for 1,047,600 shares. During the last three years (January 1, 1995 to
December 31, 1997), the Company has granted under the Plan options for a total
of 185,000 shares to executive officers at an average price of $1.41 per share,
options for a total of 45,000 shares to directors who are not executive officers
at an average price of $2.17 per share and options for a total of 336,900 shares
to other employees and to consultants at exercise prices ranging from $1.00 to
$3.625 per share. In 1995 options to purchase 54,077 shares were exercised by
current and former employees, one of whom was a former executive officer. No
options were exercised in 1996. In 1997 options to purchase 13,768 shares were
exercised by current and former employees. As of February 28, 1998, options
covering 487,975 shares have terminated with exercise prices ranging from $.50
to $4.50 per share.
OPTION GRANTS IN LAST FISCAL YEAR
There were no option grants to executives from January 1, 1997
through December 31, 1997.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executives concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year:
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the-Money Options
Shares at December 31, 1997 as of December 31, 1997(1)
Acquired Value --------------------------------- -------------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. L. Hoffman -- -- 16,667 33,333 -- --
Paul A. Moquist -- -- 136,667 23,333 -- --
</TABLE>
- --------------------
(1) Based on the market price of $1.28 per share for the Company's Common Stock
on December 31, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(1) of the Securities Act of 1934 requires the Company's
executive officers and directors to file reports with the Securities and
Exchange Commission concerning their initial ownership and changes in ownership
of Company securities. To the Company's knowledge, all such reports were filed
in a timely manner.
ITEM I
ELECTION OF DIRECTORS
The Board of Directors has fixed at six the size of the Board of
Directors to be elected at the Meeting and has nominated as the management slate
all of its current members. It is anticipated that proxies will be voted for the
management slate, and that each nominee will serve if elected. Should any
nominee be unable to serve, the persons named in the proxies may in their
discretion vote for a substitute.
<PAGE>
The names and ages of the management slate of nominees, their
principal occupations and other information is set forth below, based upon
information furnished to the Company by the nominees.
<TABLE>
<CAPTION>
Name and Age Occupation Director Since
- -------------------------- ------------------------------------------------ ----------------
<S> <C> <C>
G. L. Hoffman (48) Chairman and Secretary of the Company 1990
Scott F. Drill (45) President and Chief Executive Officer Feb. 1998
Erwin A. Kelen (62) Private Investor, Consultant 1990
Don E. Schultz (64) Professor, Consultant 1997
Gordon F. Stofer (51) Managing General Partner, Venture Capital Firm 1990
Frank D. Trestman (63) Private Investor, Consultant 1990
</TABLE>
BUSINESS EXPERIENCE
G. L. Hoffman, age 48, a co-founder of the Company, has been the
Chairman and Secretary of the Company since it was incorporated in January 1990.
Prior to that time he was a co-founder of Varitronic Systems, Inc., which
develops, manufactures and markets business graphic products. Mr. Hoffman was
employed as Chairman, Executive Vice President and Secretary of Varitronics from
1983 until January 1990. Mr. Hoffman had primary responsibility for developing
Varitronics' international marketing and private label distribution systems.
Scott F. Drill, age 45, has been President and Chief Executive
Officer of the Company since February 24, 1998. Since May 1996, Mr. Drill was a
partner in Minnesota Management Partners (MMP), a venture capital firm located
in Minneapolis, Minnesota. He remains a partner in MMP, which completed
investment of its capital in January of this year. From 1983 through March 1996
Mr. Drill was President and Chief Executive Officer of Varitronic Systems and
Chairman since 1990. Prior to starting Varitronics, Mr. Drill held senior
management positions in sales and marketing at Conklin Company and Kroy, Inc.
Erwin A. Kelen, age 62, has been a Director of the Company since
August 1990. Since October 1990 Mr. Kelen has served as President of Kelen
Ventures, a venture capital investment and consulting firm located in
Minneapolis, Minnesota. From January 1984 to October 1990 Mr. Kelen was
President and Chief Executive Officer of DataMyte Corporation, a manufacturer of
computerized factory data collection systems based in Minneapolis, Minnesota. He
is a director of Printronix, Inc., a manufacturer of printers for computer based
systems located in Irvine, California; Computer Network Technologies, Inc., a
Minneapolis-based designer and manufacturer of high-speed computer networking
equipment; and CyberOptics a Minneapolis-based manufacturer of laser sensors and
sensor systems.
Don E. Schultz, age 64, has been a Director of the Company since
September 1997. Since 1977 Mr. Schultz has been a professor at Northwestern
University. Mr. Schultz is also President of the consulting firm, Agora, Inc.
and is a Senior Partner in Targetbase Marketing International and The Targetbase
Institute.
Gordon F. Stofer, age 51, has been a Director of the Company since
February 1990. Since 1980 Mr. Stofer has been the managing general partner of
Cherry Tree Ventures, a venture capital investment firm located in Minneapolis,
Minnesota. Mr. Stofer is also a director of Ringer Corporation, a lawn care
products manufacturer and distributor in Eden Prairie, Minnesota; and Coda Music
Technology, Inc., a developer and marketer of proprietary music technology
products located in Eden Prairie, Minnesota.
<PAGE>
Frank D. Trestman, age 63, has been a Director of the Company since
August 1990. Since November 1986 Mr. Trestman has served as President of
Trestman Enterprises, a Minneapolis-based investment and consulting firm. Mr.
Trestman also serves as a director of Best Buy Co., Inc., a national retailer of
consumer electronic products based in Minneapolis, Minnesota, and Metris
Companies, an information based direct marketer of consumer credit products,
extended service plans and other fee based products and services to moderate
income consumers. Metris Companies is located in Minneapolis, Minnesota.
The Board of Directors has two standing committees, the Audit
Committee and the Compensation Committee, each consisting of Mr. Kelen, Mr.
Stofer and Mr. Trestman. The Audit Committee met once and the Compensation
Committee met once during 1997.
The Board of Directors met four times during 1997. Each director
attended at least 75% of the meetings held. The Company's directors do not
receive any fees for their service on the Board of Directors, other than
reimbursement of reasonable out-of-pocket expenses incurred on behalf of the
Company. The Company's amended Stock Plan provides for the annual grant to each
non-employee director of a non-qualified option to purchase 5,000 shares of
common stock at an exercise price equal to the closing market price on the date
of grant.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
ELECTION OF THE MANAGEMENT SLATE OF NOMINEES.
ITEM II
AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN
The Company's 1993 Employee Stock Purchase Plan (the "Purchase
Plan") was adopted by the Board of Directors and was approved by the Company's
shareholders on April 27, 1993. The purpose of the Purchase Plan is to
facilitate purchase of Company Common Stock by employees through payroll
deductions to foster a greater community of interest between the Company's
employees and its shareholders. There are approximately 93 employees, including
four executive officers, who are currently eligible to participate under the
Purchase Plan.
In its original form the Purchase Plan covered 1993 through 1995 and
reserved a total of 200,000 shares of common stock for employee purchase in
those three years. At the Annual Meeting of Shareholders on May 11, 1995, the
shareholders approved the addition of 200,000 shares to the Purchase Plan and
extended the Purchase Plan through 1996. The Purchase Plan was not extended
through 1997. As of the end of 1997 a total of 249,059 shares have been
purchased by employees under the Purchase Plan. The Company's Board of Directors
has approved and is hereby submitting to Stockholders for approval amendment to
the Purchase Plan which would renew the term of the Purchase Plan for three
additional years, (1998 through 2000) so as to allow greater participation by
the Company's employees over a longer period of time. The other terms of the
Purchase Plan would not change in any material aspect. The terms of the Purchase
Plan, with the proposed amendment, are summarized below:
TERM OF THE PURCHASE PLAN
The original Purchase Plan was for a total term of three years,
carried out in phases of one year each. Each phase commences immediately after
the termination of the preceding phase. The proposed Amendment would extend the
Purchase Plan for three one year phases, consisting of the years 1998 through
2000.
<PAGE>
ELIGIBILITY
Any employee of the Company who customarily works more than 20 hours
per week and more than five months in a calendar year, and who is employed by
the Company when a phase begins, is eligible to participate in the phase of the
Purchase Plan. Employees of any future subsidiary of the Company may also
participate.
PARTICIPATION
Eligible employees may voluntarily elect to participate in the
Purchase Plan by completing a payroll deduction authorization which is effective
on the first day of the applicable phase. Payroll deductions are limited to 10%
of the participating employee's base pay for the phase.
PURCHASE PRICE
The payroll deductions authorized by participating employees are
used to purchase newly issued shares of Common Stock from the Company at the end
of each phase. The purchase price is the lower of 85% of the fair market value
of the shares on the first day or the last day of the applicable phase of the
Purchase Plan.
EXERCISE AND WITHDRAWAL
Shares are purchased for participating employees automatically on
the last day of a phase, unless the participant elects in writing prior to such
date not to complete the purchase. A participant may at any time during a phase
give notice that he or she does not wish to continue to participate, and all
amounts withheld are then refunded with interest.
ADMINISTRATION AND AMENDMENT
The Purchase Plan is administered by a Committee appointed by the
Board of Directors. Each member of such Committee is either a director, officer
or employee of the Company. The Board of Directors may at any time amend the
Purchase Plan, except that no amendment may make changes in stock purchase
rights already granted that would adversely affect the rights of any
participant.
INCOME TAX CONSEQUENCES AND REGISTRATION WITH SEC
The Company believes that the Purchase Plan is a "qualified"
Purchase Plan under Section 423 of the Internal Revenue Code of 1986. Under the
Internal Revenue Code, no income will result to a participant upon the purchase
of shares, and no deduction will be allowed by the Company. The gain, if any,
resulting from a disposition of the share received by a Participant, is reported
according to the provisions of Section 423 of the Internal Revenue Code, and
will be taxed in part as ordinary income and in part as capital gain.
The Company has filed with the Securities and Exchange Commission a
registration statement covering the offering of shares under the Purchase Plan,
and a prospectus will be delivered to each eligible employee prior to the time
when an election to participate must be made.
SHAREHOLDER APPROVAL OF AMENDMENT
Approval of the proposed amendment to the Purchase Plan requires the
affirmative vote of a majority of the shares present and entitled to vote at the
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE AMENDMENT TO THE PURCHASE PLAN.
<PAGE>
ITEM III
AMENDMENT TO STOCK PLAN
The Board of Directors has adopted, subject to shareholder approval,
an amendment to the Company's Stock Plan (the "Plan"). The amendment provides
for an increase in the total number of shares available under the Plan by
600,000 shares to a total of 1,520,000 shares. As of February 28, 1998, a total
of 251,825 shares had been issued upon the exercise of options under the Plan
and there were options outstanding to purchase 1,047,600 shares under the Plan.
Therefore, without shareholder approval of the amendment to the Plan, the
Company believes that the remaining shares will be insufficient to cover future
option grants and awards. The Board of Directors deemed it prudent to increase
the shares available for grant under the Plan by 600,000 shares to facilitate
future option grants and restricted stock awards.
SUMMARY OF THE PLAN
The Plan provides for the granting of stock options or restricted
stock awards to key employees, consultants and directors. An aggregate of
1,520,000 shares of Common Stock have been issued or reserved for issuance under
the Plan, as amended by the Board of Directors. Shares covered by expired or
terminated stock options and forfeited shares of restricted stock may be used
for subsequent awards under the Plan.
The Plan is administered by the Company's Board of Directors or, if
the Board so determines, by a committee of "disinterested persons" as defined in
the Plan who are appointed by the Board. The Board or the committee has the
power to select recipients, make awards of stock options or restricted shares,
and adopt regulations and procedures for the Plan.
The Plan permits the award of both stock options that qualify as
"incentive stock options" under the Internal Revenue Code and options that do
not so qualify ("non-qualified options"). Incentive stock options differ as to
their tax treatment and are subject to a number of limitations under the
Internal Revenue Code. The exercise price of non-qualified options may not be
less than 85% of the fair market value of the stock on the date the option is
granted. Incentive stock options may not be granted with an exercise price less
than 100% of the fair market value of the Common Stock on the date of the grant
(or, for an option granted to a person holding more than 10% of the Company's
voting stock, at less than 110% of fair market value).
Following an optionee's death, disability or retirement, the
optionee's options may be exercised by the optionee (or the optionee's legal
representative or legatee) for a period of three years or until the expiration
of the stated term of the option, whichever is less. If an optionee's employment
with the Company terminates for any other reason, such optionee's options will
immediately terminate, except if such optionee is involuntarily terminated
without "case," in which even the optionee's vested options are exercisable for
the lesser of three months or the remaining term of the option. Options may not
be transferred other than by will or the laws of descent and distribution, and
during the lifetime of an optionee may be exercised only by the optionee.
The term of each option, which is fixed by the committee or the
Board at the time of grant, may not exceed ten years from the date the option is
granted (except that an incentive option granted to a person holding more than
10% of the Company's voting stock may be exercisable only for five years).
Options may be made exercisable in whole or in installments, as determined by
the committee or the Board. The vesting of options may be accelerated upon a
change in control of the Company.
The committee or the Board may also grant restrictive stock awards
under the Plan that result in shares of Common Stock being issued to a
participant subject to restrictions against disposition during a restricted
period established by the committee or the Board. The committee or the Board may
condition the grant of restricted stock upon the attainment of specified
performance goals or service requirements. The provisions of restricted stock
awards need not be the same with respect to each recipient. The shares of
restricted stock awarded under the Plan are to be held in custody by the Company
until the restrictions thereon have lapsed. During the period of the
restrictions, a participant has the right to vote the shares of restricted stock
and to receive dividends and distributions unless the committee or the Board
requires such
<PAGE>
dividends and distributions to be held by the Company subject to the same
restrictions as the restricted stock. If a participant terminates employment
during the period of the restrictions, all shares still subject to restrictions
will be forfeited and returned to the Company, subject to the right of the
committee or the Board to waive such restrictions in the event of a
participant's death, total disability, retirement or under special circumstances
approved by the committee or the Board. The Company has granted a 5,000 share
restricted stock award under the Plan to an outside consultant.
GRANTS OF OPTIONS
As of February 28, 1998, there are options outstanding under the
Plan for 1,047,600 shares. During the last three years (January 1, 1995 to
December 31, 1997), the Company has granted under the Plan options for a total
of 185,000 shares to executive officers at an average price of $1.41 per share,
options for a total of 45,000 shares to directors who are not executive officers
at an average price of $2.17 per share and options for a total of 336,900 shares
to other employees and to consultants at exercise prices ranging from $1.00 to
$3.625 per share. In 1995 options to purchase 54,077 shares were exercised by
current and former employees, one of whom was a former executive officer. No
options were exercised in 1996. In 1997 options to purchase 13,768 shares were
exercised by current and former employees. As of February 28, 1998, options
covering 487,975 shares have been canceled with exercise prices ranging from
$.50 to $4.50 per share.
FEDERAL INCOME TAX TREATMENT
Generally the grant of either an incentive stock option or a
non-qualified option under the Plan will not cause recognition of income by the
optionee or entitle the Company to an income tax deduction. Upon exercise of an
option the tax treatment will generally vary depending on whether the option is
an incentive stock option or a non-qualified option. The exercise of an
incentive stock option will generally not cause recognition of income by the
optionee or entitle the Company to a tax deduction. However, the amount by which
the fair market value of the shares obtained exceeds the exercise price on the
date of exercise is an item of tax preference to the optionee for alternative
minimum tax purposes.
The exercise of a non-qualified option will generally cause the
optionee to recognize taxable income equal to the difference between the
exercise price and the fair market value of the stock obtained on the day of
exercise. The Company must then in most cases obtain from the optionee funds to
meet tax withholding requirements arising from that income recognition. The
exercise of a non-qualified option will also generally entitle the Company to an
income tax deduction equal to the amount of the income recognized by the
exercising option holder.
The foregoing discussion of the federal income tax treatment of
options is necessarily general and any option holder should consult his tax
advisor as to his own particular circumstances and applicable laws and
regulations.
SHAREHOLDER APPROVAL
Approval of the amendment to the Plan requires the affirmative vote
of a majority of the shares present and entitled to vote at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE PROPOSED AMENDMENT TO THE PLAN.
<PAGE>
ITEM IV
APPROVAL OF AUDITORS
Ernst & Young LLP, independent auditors, have been the Company's
auditors since 1990. They have been reappointed by the Board of Directors as the
Company's auditors for the year ending December 31, 1998. Although shareholder
approval is not required, the Board of Directors requests it. In the event the
appointment should not be approved by the shareholders, the Board of Directors
will make another appointment to be effective at the earliest possible time.
A representative of Ernst & Young LLP is expected to be present at
the Meeting, will be given the opportunity to make a statement and will be
available to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP.
OTHER BUSINESS
The Management of the Company knows of no matters other than the
foregoing to be brought before the Meeting. However, the enclosed proxy gives
discretionary authority in the event any additional matters should be presented.
The proxy rules of the Securities and Exchange Commission permit
shareholders, after timely notice to issuers, to present proposals for
shareholder action in issuer proxy statements where such proposals are
consistent with applicable law, pertain to matters appropriate for shareholder
action and are not properly omitted by issuer action in accordance with the
proxy rules. The Company's next meeting of Shareholders (for the year ending
December 31, 1998) is expected to be held on or about May 13, 1999 and proxy
materials in connection with that meeting are expected to be mailed on or about
April 2, 1999. Any shareholder proposals prepared in accordance with the proxy
rules for inclusion in the Company's proxy materials must be received by the
Company on or before December 1, 1998.
The Company's Annual Report to Shareholders for the year ended
December 31, 1997 is being mailed to shareholders with this Proxy Statement.
Shareholders may receive, without charge, a copy of the Company's Annual Report
on Form 10-K, including financial statements and schedules thereto, as filed
with the Securities and Exchange Commission, by writing to: Vice President of
Finance, Insignia Systems, Inc., 10801 Red Circle Drive, Minnetonka, MN 55343,
or by calling the Company at (612) 930-8200.
By Order of the Board of Directors
G. L. Hoffman
Secretary
<PAGE>
PROXY
INSIGNIA SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints G. L. HOFFMAN and JOHN R. WHISNANT, or either of
them acting alone, with full power of substitution, as proxies to represent and
vote, as designated below, all shares of Common Stock of Insignia Systems, Inc.
registered in the name of the undersigned, at the Annual Meeting of the
Shareholders, to be held on Thursday, May 21, 1998, at 9:00 a.m., Central
Daylight Standard Time, at the Company's Corporate Headquarters, 10801 Red
Circle Drive, Minnetonka, Minnesota, and at any adjournment thereof:
1. ELECTION OF DIRECTORS
Nominees: G. L. HOFFMAN, SCOTT F. DRILL, ERWIN A. KELEN, DON E. SCHULTZ,
GORDON F. STOFER AND FRANK D. TRESTMAN
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except those whose names have to vote for all nominees listed
been stricken above) above
(To withhold authority to vote for any individual nominee, strike a line
through the nominee's name in the list above.)
2. TO RATIFY AN AMENDMENT TO THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN TO
RENEW THE TERM OF THE PLAN FOR THREE ADDITIONAL YEARS:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO RATIFY AN AMENDMENT TO THE COMPANY'S STOCK PLAN TO INCREASE THE NUMBER OF
SHARES AVAILABLE UNDER THE PLAN:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED, AND TO BE COMPLETED AND SIGNED ON THE REVERSE SIDE)
<PAGE>
(CONTINUED FROM THE OTHER SIDE)
4. TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR
THE CURRENT YEAR:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Dated: ___________________________, 1998
________________________________________
________________________________________
PLEASE DATE AND SIGN ABOVE exactly as
name appears at the left, indicating,
where appropriate, official position or
representative capacity. If stock is
held in joint tenancy, each joint owner
should sign.
