STOCK OPTION AGREEMENT RELATING TO THE AEROGROW INTERNATIONAL, INC.
EXHIBIT
10.5
RELATING
TO THE
AEROGROW
INTERNATIONAL, INC.
2005
EQUITY COMPENSATION PLAN
This
Stock Option Agreement dated as of this ______ day of ______________ 2005
("Option Agreement") is between AeroGrow International, Inc., a Nevada
corporation (the "Company"), and ______________________ (the
"Optionee").
RECITALS
WHEREAS,
the Company has adopted the AeroGrow International, Inc. 2005 Equity
Compensation Plan (the "Plan") for the purpose of providing employees,
consultants and directors of the Company with additional incentive to promote
the success of the business, to increase their proprietary interest in the
success of the Company, and to encourage them to remain in the employ of,
or as
a consultant or director to, the Company; and
WHEREAS,
the Company, acting through the Compensation Committee of its Board of Directors
(the "Committee"), has determined that its interests will be advanced by
the
issuance to Optionee of stock options under the Plan;
NOW,
THEREFORE, for and in consideration of the promises contained herein and
the
benefits to be derived herefrom, the parties agree as follows:
1. Option.
Subject
to the terms and conditions contained herein, the Company hereby irrevocably
grants to Optionee [incentive stock options as defined in Section 422 of
the
Internal Revenue Code of 1986, as amended ("Code") OR non-qualified stock
options as defined in the Plan] ("Options") to purchase from the Company
______________ shares of the Company's common stock, $0.001 par value ("Common
Stock"), at a price of $_____________ per share (the "Option Price") which
the
Committee has in good faith determined to be no less than 100% of the fair
market value of the Common Stock as of the date of this Agreement.
2. Option
Period.
The
Options herein granted may be exercised by Optionee in whole or in part on
or
after the dates on which the right to exercise the Option for such shares
of
Common Stock has vested ("Option Period"), in accordance with the following
schedule, unless sooner terminated pursuant to the terms of this Option
Agreement: [for
example]
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Number
of
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Date
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Shares
Purchasable
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__________,
2005
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_____________
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__________,
2006
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_____________
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__________,
2007
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_____________
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__________,
2008
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_____________
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__________,
2009
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_____________
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__________,
2010
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_____________
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Notwithstanding
anything in this Agreement to the contrary, the Committee in its sole discretion
may waive the foregoing schedule of vesting and, upon written notice to the
Optionee, accelerate the earliest date on which any of the Options granted
hereunder are exercisable. Notwithstanding any other provisions contained
herein, the Options shall not be exercisable after the fifth anniversary
of this
Option Agreement.
3. Procedure
for Exercise.
The
Options may be exercised by written notice by Optionee to the Secretary of
the
Company setting forth the number of shares of Common Stock with respect to
which
the Option is to be exercised accompanied by payment of the Option Price
for the
shares to be purchased, and specifying the address to which the certificate
for
such shares is to be mailed. Payment shall be by means of cash or personal
check
payable to the order of the Company, together with any applicable withholding
taxes pursuant to Section 13. As promptly as practicable after receipt of
such
written notification and payment, the Company shall deliver to Optionee
certificates for the number of shares of Common Stock with respect to which
such
Option has been so exercised.
4. Termination
of [Employment/Directorship/Consulting Arrangement.]
If
Optionee's [employment/directorship/consulting arrangement] with the Company
is
terminated during the Option Period for any reason, Options granted to him
which
are not exercisable on such date thereupon terminate. Subject to Sections
5, 10
and 16 below, any Options that are exercisable on the date of such termination
which have not been exercised within [90 days of such termination [for ISOs]
OR
180 days of such termination [for NQs to employees] OR the fifth anniversary
of
this Option Agreement [for NQs to consultants]] shall expire and be of no
force
or effect.
5. Retirement,
Disability or Death.
If
Optionee's [employment/consulting arrangement/directorship] with the Company
is
terminated by his retirement, disability or death, all Options hereunder
exercisable at the date of such retirement, disability or death shall be
thereafter exercisable by Optionee, his executor or administrator, or the
person
or persons to whom his rights under this Option Agreement shall pass by will
or
by the laws of descent and distribution, as the case may be, for a period
of
three (3) years from the date of Optionee's retirement, disability or death
unless this Option Agreement should earlier terminate in accordance with
its
other terms. Optionee shall be deemed to be disabled if, in the option of
a
physician selected by the Committee, he is incapable of performing services
for
the Company by reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be of long, continued
and indefinite duration. Retirement means Optionee has: (1) reached age 65
and
completed five (5) years of service with the Company; (2) with the consent
of
the Committee, completed five (5) years of service with the Company prior
to age
65 but after reaching age 60; or (3) in such other circumstances as may be
determined by the Committee in its sole discretion and judgment. Such
determination of the Committee shall be final and binding on the Company,
the
Optionee, and his heirs or representatives.
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6. Transferability.
This
Option Agreement shall not be transferable by Optionee otherwise than by
Optionee's will or by the laws of descent and distribution. During the lifetime
of Optionee, the Options shall be exercisable only by Optionee. Any heir
or
legatee of Optionee shall take rights herein granted subject to the terms
and
conditions hereof. No such transfer of this Option Agreement to heirs or
legatees of Optionee shall be effective to bind the Company unless the Company
shall have been furnished with written notice thereof and a copy of such
evidence as the Committee may deem necessary to establish the validity of
the
transfer and the acceptance by the transferee or transferees of the terms
and
conditions hereof.
7. No
Rights as Stockholder.
Optionee shall have no rights as a stockholder with respect to any shares
of
Common Stock covered by this Option Agreement until the date of issuance
of a
certificate for shares of Common Stock purchased pursuant to this Option
Agreement. Until such time, Optionee shall not be entitled to dividends or
to
vote at meetings of the stockholders of the Company. Except as provided in
Section 9 hereof, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash or securities or other property) paid or
distributions or other rights granted in respect of any share of Common Stock
for which the record date for such payment, distribution or grant is prior
to
the date upon which the Optionee shall have been issued share certificates,
as
provided hereinabove.
8. Extraordinary
Corporate Transactions.
If the
Company recapitalizes or otherwise changes its capital structure, or merges,
consolidates, sells all of its assets or dissolves (each of the foregoing
a
"Fundamental Change"), then thereafter upon any exercise of Options theretofore
granted, the Optionee shall be entitled to purchase, in lieu of the number
of
shares of Common Stock as to which Options shall then be exercisable, the
number
and class of shares of stock and securities to which the Optionee would have
been entitled pursuant to the terms of the Fundamental Change if, immediately
prior to such Fundamental Change, the Optionee had been the holder of record
of
the number of shares of Common Stock as to which such Options is then
exercisable.
9. Changes
in Capital Structure.
The
existence of outstanding Options shall not affect in any way the right or
power
of the Company or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company,
or any
issuance of Common Stock or subscription rights thereto, or any issuance
of
bonds, debentures, preferred or prior preference stock ahead of or affecting
the
Common Stock or the rights thereof, or the dissolution or liquidation of
the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceedings, whether of a similar character
or
otherwise. If the outstanding shares of Common Stock of the Company shall
at any
time be changed or exchanged by declaration of a stock dividend, stock split,
combination of shares, or recapitalization, then the number and kind of shares
subject to the Plan or subject to any Options theretofore granted, and the
Option Price and the prices at which portions of the Options may be exercisable
on an accelerated basis as set forth in Section 2, shall be appropriately
and
equitably adjusted so as to maintain the proportionate number of shares without
changing the aggregate Option Price.
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10. Change
of Control.
In the
event that there is a proposed Change in Control (as defined in the Plan),
the
Options shall become immediately exercisable notwithstanding the provisions
of
Section 2. Optionee shall be given reasonable notice of such Change of Control
Event and shall have a period of at least thirty (30) days thereafter to
exercise the Options.
11. Compliance
With Securities Laws.
Upon
the acquisition of any shares pursuant to the exercise of the Options herein
granted, Optionee (or any person acting under Section 6) will enter into
such
written representations, warranties and agreements as the Company may reasonably
request in order to comply with applicable securities laws or with this Option
Agreement.
12. Compliance
With Laws.
Notwithstanding any of the other provisions hereof, Optionee agrees that
he or
she will not exercise the Options granted hereby, and that the Company will
not
be obligated to issue any shares pursuant to this Option Agreement, if the
exercise of the Options or the issuance of such shares of Common Stock would
constitute a violation by the Optionee or by the Company of any provision
of any
law or regulation of any governmental authority.
13. Withholding
of Tax.
To the
extent that the exercise of the Options or the disposition of shares of Common
Stock acquired by exercise of Options results in compensation income to the
Optionee for federal or state income tax purposes, the Optionee shall pay
to the
Company at the time of such exercise or disposition (or such other time as
the
law permits if the Optionee is subject to Section 16(b) of the Exchange Act)
such amount of money as the Company may require to meet its obligation under
applicable tax laws or regulations; and, if the Optionee fails to do so,
the
Company is authorized to withhold from any cash remuneration then or thereafter
payable to the Optionee, any tax required to be withheld by reason of such
resulting compensation income or Company may otherwise refuse to issue or
transfer any shares otherwise required to be issued or transferred pursuant
to
the terms hereof.
14. Resolution
of Disputes.
As a
condition of the granting of the Options hereby, the Optionee and his heirs
and
successors agree that any dispute or disagreement which may arise hereunder
shall be determined by the Committee in its sole discretion and judgment,
and
that any such determination and any interpretation by the Committee of the
terms
of this Option Agreement shall be final and shall be binding and conclusive,
for
all purposes, upon the Company, Optionee, his heirs and personal
representatives.
15. Legends
on Certificate.
The
certificates representing the shares of Common Stock purchased by exercise
of
Options will be stamped or otherwise imprinted with legends in such form
as the
Company or its counsel may require with respect to any applicable restrictions
on sale or transfer and the stock transfer records of the Company will reflect
stop-transfer instructions with respect to such shares.
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16. Forfeiture.
If
[Optionee's employment or consulting arrangement is terminated For Cause
OR
Optionee is removed as a director For Cause] (as defined below), Optionee
agrees
that (i) all unexercised Options shall terminate, (ii) the Company shall
have
the right to repurchase any or all shares of Common Stock received upon the
exercise of Options and which were then held by Optionee for an amount equal
to
the Option Price times the number of shares of Common Stock so repurchased
and
(iii) the Optionee shall pay to the Company the amount by which the proceeds
from any sale of the Common Stock received upon exercise of Options exceeded
the
Option Price of such Common Stock sold. "For Cause" shall mean (i) gross
disregard of the Company's best interest, (ii) misappropriation or embezzlement
of corporate funds or other property (iii) conviction of a felony involving
moral turpitude or which in the opinion of the Committee brings Optionee
into
disrepute or causes harm to the Company's business, customer relations,
financial condition or prospects, or (iv) violation of any statutory or common
law duty of loyalty to the Company.
17. Notices.
Every
notice hereunder shall be in writing and shall be given by registered or
certified mail. All notices of the exercise of any Options hereunder shall
be
directed to AeroGrow International, Inc., 000 00xx Xxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxx 00000, Attention: Secretary. Any notice given by the Company to
Optionee directed to him at his address on file with the Company shall be
effective to bind him and any other person who shall acquire rights hereunder.
The Company shall be under no obligation whatsoever to advise Optionee of
the
existence, maturity or termination of any of Optionee's rights hereunder
and
Optionee shall be deemed to have familiarized him or herself with all matters
contained herein and in the Plan which may affect any of Optionee's rights
or
privileges hereunder.
18. Construction
and Interpretation.
Whenever the term "Optionee" is used herein under circumstances applicable
to
any other person or persons to whom this award, in accordance with the
provisions of Section 6 hereof, may be transferred, the word "Optionee" shall
be
deemed to include such person or persons. References to the masculine gender
herein also include the feminine gender for all purposes.
19. Option
Agreement Subject to Plan.
This
Option Agreement is subject to the Plan. The terms and provisions of the
Plan
(including any subsequent amendments thereto) are hereby incorporated herein
by
reference thereto. In the event of a conflict between any term or provision
contained herein and a term or provision of the Plan, the applicable terms
and
provisions of the Plan will govern and prevail. All definitions of words
and
terms contained in the Plan shall be applicable to this Option
Agreement.
20. Optionee's
Relationship.
Any
questions as to whether and when there has been a termination of Optionee's
employment, directorship or consulting arrangement, and the cause of such
termination, shall be determined by the Committee and its determination shall
be
final. Nothing contained herein shall be construed as conferring upon the
Optionee the right to continue in the employ of the Company, nor shall anything
contained herein be construed or interpreted to limit the "employment at
will"
relationship between the Optionee and the Company.
21. Binding
Effect.
This
Option Agreement shall be binding upon and inure to the benefit of any
successors to the Company and all persons lawfully claiming under
Optionee.
22. Governing
Law.
This
Option Agreement shall be construed in accordance with the laws of the State
of
Colorado and the Code.
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IN
WITNESS WHEREOF, the parties have executed this Option Agreement on the day
and
year first indicated above.
| AEROGROW INTERNATIONAL, INC. | |||
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By:
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Name:
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Title:
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| OPTIONEE | |||
| Signature: |
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Name:
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