Item
1. Plan Information
GrowGeneration,
Corp., a Colorado corporation (the “Company”), is filing this Registration Statement in order to register 5,000,000
shares of common stock, par value $0.001 per share (the “Common Stock”) and such additional shares of Common Stock
reserved for issuance pursuant to the Company’s Amended and Restated 2018 Equity Incentive Plan.
The
documents containing the information specified in this Part I will be sent or given to participants in the Amended and Restated
2018 Equity Incentive Plan as specified by Rule 428(b)(1) of the Securities Act of 1933, as amended (the “Securities Act”).
Such documents are not being filed with the SEC either as part of this Registration Statement or as prospectuses or prospectus
supplements pursuant to Rule 424 of the Securities Act. These documents and the documents incorporated by reference in Item 3
of Part II of this Registration Statement, taken together, constitute a prospectus that meets the requirements of Section 10(a)
of the Securities Act (the “Prospectus”).
General
On
January 7, 2018, the Board of Directors (the “Board”) of the Company adopted the 2018 Equity Incentive Plan (the “2018
Plan”), which was approved and ratified by the shareholders on April 20, 2018. A total of 2,500,000 shares of Common Stock
were authorized for issuance under the 2018 Plan. On February 7, 2020, the Board approved the amendment and restatement of the
2018 Plan to increase the number of shares issuable thereunder from 2,500,000 to 5,000,000, which amendment was approved by shareholders
on May 11, 2020 (as amended and restated, the “Amended 2018 Plan”). As of June 11, 2020, there have been a total of
(i) 1,899,000 options issued under the Amended 2018 Plan (of which 1,843,500 options are currently outstanding, 43,833 have been
exercised, and 11,667 have been forfeited which will be available for future grants), and (ii) 690,833 shares of Common Stock
issued under the Amended 2018 Plan. There are a total of 2,421,834 shares of Common Stock available to be issued under the Amended
2018 Plan.
The
general purpose of the Amended 2018 Plan is to provide an incentive to the Company’s employees, directors, consultants and
advisors by enabling them to share in the future growth of the Company’s business. The Board believes that the granting
of stock options, restricted stock awards, unrestricted stock awards and similar kinds of equity-based compensation promotes continuity
of management and increases incentive and personal interest in the welfare of the Company by those who are primarily responsible
for shaping and carrying out its long range plans and securing its growth and financial success.
The
Board believes that the Amended 2018 Plan will advance the Company’s interests by enhancing its ability to (a) attract and
retain employees, consultants, directors and advisors who are in a position to make significant contributions to the Company’s
success; (b) reward the Company’s employees, consultants, directors and advisors for these contributions; and (c) encourage
employees, consultants, directors and advisors to take into account the Company’s long-term interests through ownership
of its shares.
Description
of the Amended and Restated 2018 Equity Incentive Plan
The
following description of the principal terms of the Amended 2018 Plan is a summary and is qualified in its entirety by the full
text of the Amended 2018 Plan, which was filed as Exhibit 10.3 to the Annual Report on Form 10-K for fiscal year ended December
31, 2019, filed on March 27, 2020.
Administration. The
Amended 2018 Plan is administered by the Board. The Board may grant options to purchase shares of our common stock, stock appreciation
rights, restricted stock units, restricted or unrestricted shares of our common stock, performance shares, performance units,
other cash-based awards and other stock-based awards. The Board also has broad authority to determine the terms and conditions
of each option or other kind of equity award, adopt, amend and rescind rules and regulations for the administration of the Amended
2018 Plan and amend or modify outstanding options, grants and awards.
Eligibility. Persons
eligible to receive awards under the Amended 2018 Plan are employees, directors and consultants of our Company and our subsidiaries.
As of June 11, 2020, approximately 254 employees, three non-employee directors, and approximately six consultants are eligible to participate
in the Amended 2018 Plan. The Board may at any time and from time to time grant awards under the Amended 2018 Plan to eligible
persons on a discretionary basis.
Shares
Subject to the Amended 2018 Plan. The aggregate number of shares of Common Stock available for issuance in connection
with options and awards granted under the Amended 2018 Plan is 5,000,000, subject to customary adjustments for stock splits, stock
dividends or similar transactions. Incentive stock options may be granted under the Amended 2018 Plan with respect to all of those
shares. If any option or stock appreciation right granted under the Amended 2018 Plan terminates without having been exercised
in full or if any award is forfeited, or if shares of Common Stock are withheld to cover withholding taxes on options or other
awards, the number of shares of Common Stock as to which such option or award was forfeited, or which were withheld, will be available
for future grants under the Amended 2018 Plan. The maximum aggregate number of shares of Common Stock with respect to one or more
awards that may be granted to any employee, director or consultant during any calendar year shall be 1,000,000 and the maximum
aggregate amount of cash that may be paid in cash during any calendar year with respect to one or more awards payable in cash
shall be $600,000.
Terms
and Conditions of Options. Options granted under the Amended 2018 Plan may be either “incentive stock options”
that are intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”)
or “nonstatutory stock options” that do not meet the requirements of Section 422 of the Code. Incentive stock options
may be granted only to employees. Each option grant will be evidenced by an award agreement that will specify the terms and conditions
as determined by the Board. The Board will determine the exercise price of options granted under the 204 Plan. The exercise price
of stock options may not be less than the fair market value, on the date of grant, per share of Common Stock issuable upon exercise
of the option (or 110% of fair market value in the case of incentive options granted to a ten-percent stockholder).
If
on the date of grant the Common Stock is listed on a stock exchange or a national market system, the fair market value shall be
the closing sale price on the last trading day before the date of grant. If no such prices are available, the fair market value
shall be determined in good faith by the Board based upon the advice of a qualified valuation expert.
No
option may be exercisable for more than ten years (five years in the case of an incentive stock option granted to a ten-percent
stockholder) from the date of grant. Options granted under the Amended 2018 Plan will be exercisable at such time or times as
the Board prescribes at the time of grant. No employee may receive incentive stock options that first become exercisable in any
calendar year in an amount exceeding $100,000.
Generally,
the option price may be paid (a) in cash or by bank check, (b) through delivery of shares of Common Stock having a fair market
value equal to the purchase price, (c) through cashless exercise, or (d) a combination of these methods.
No
option may be transferred other than by will or by the laws of descent and distribution, and during a recipient’s lifetime
an option may be exercised only by the recipient.
The
following table sets forth stock options that were approved by the Board to the persons and groups named below under the Amended
2018 Plan as of December 31, 2019.
Name and Position
|
|
Number of
Shares of
Common
Stock
underlying
Stock
Options
|
|
Darren Lampert, Chief Executive Officer
|
|
|
375,000
|
|
Michael Salaman, President
|
|
|
375,000
|
|
Monty Lamirato, Chief Financial Officer
|
|
|
170,000
|
|
Tony Sullivan, Chief Operating Officer
|
|
|
280,000
|
|
All executive officers as a group
|
|
|
1,180,000
|
|
All non-executive directors as a group
|
|
|
225,000
|
|
All non-executive officer employees as a group
|
|
|
217,333
|
|
Stock
Appreciation Rights. The Board may grant stock appreciation rights under the Amended 2018 Plan in such amounts as
the Board in its sole discretion will determine. Each stock appreciation right grant will be evidenced by an award agreement that
will specify the terms and conditions as determined by the Board. The exercise price per share of a stock appreciation right will
be determined by the Board, but will not be less than 100% of the fair market value of a share of Common Stock on the date of
grant. The maximum term of any SAR granted under the Amended 2018 Plan is ten years from the date of grant. Generally, each SAR
stock appreciation right will entitle a participant upon exercise to an amount equal to:
|
●
|
the
excess of the fair market value on the exercise date of one share of Common Stock over the exercise price, multiplied
by
|
|
|
|
|
●
|
the
number of shares of Common Stock covered by the stock appreciation right.
|
Payment
may be made in shares of our common stock, in cash, or partly in Common Stock and partly in cash, all as determined by the Board.
Restricted
Stock and Restricted Stock Units. The Board may award restricted Common Stock and/or restricted stock units
under the Amended 2018 Plan in such amounts as the Board in its sole discretion will determine. The Board will determine the restrictions
and conditions applicable to each award of restricted stock or restricted stock units, as evidenced in an award agreement, which
may include performance-based conditions. Dividends and other distributions with respect to restricted stock may be paid to the
holder of the shares as and when dividends are paid to stockholders, unless otherwise provided in the award agreement. Unless
the Board determines otherwise, holders of restricted stock will have the right to vote the shares.
Performance
Shares and Performance Units. The Board may award performance shares and/or performance units under the Amended
2018 Plan in such amounts as the Board in its sole discretion will determine. Each performance unit will have an initial value
that is established by the Board on or before the date of grant. Each performance share will have an initial value equal to the
fair market value of a share on the date of grant. The Board at its discretion will set performance objectives or other vesting
provisions. The Board will determine the restrictions and conditions applicable to each award of performance shares and performance
units, as evidenced in an award agreement.
Effect
of Certain Corporate Transactions. In the event of a change in control (as defined in the Amended 2018 Plan), the
Board has the discretion and without the need for the consent of any recipient of an award to take the following actions as to
an outstanding award: (i) awards will be assumed, or substantially equivalent awards will be substituted, by the acquiring
or succeeding corporation; (ii) awards will terminate upon or immediately prior to the consummation of such change in control;
(iii) outstanding awards will vest and become exercisable, or restrictions applicable to an award will lapse, in whole or in part
prior to or upon consummation of such change in control, and terminate upon or immediately prior to the effectiveness of such
change in control; (iv) an award is terminated in exchange for an amount of cash and/or property, if any, equal to the amount
that would have been attained upon the exercise of such award; (v) an award is replaced with other rights or property selected
by the Board in its sole discretion; or (vi) any combination of the foregoing.
Amendment,
Termination. The Board may at any time amend, alter, amend the terms of awards in any manner not inconsistent with
the Amended 2018 Plan, provided that no amendment shall adversely affect the rights of a participant with respect to an outstanding
award without the participant’s consent. In addition, the Board may at any time amend, suspend, or terminate the Amended
2018 Plan, provided that (i) no such amendment, suspension or termination shall materially and adversely affect the rights of
any participant under any outstanding award without the consent of such participant and (ii) to the extent necessary to comply
with any applicable law or stock exchange rule, the Company will obtain stockholder consent of amendment to the plan.
Tax
Withholding. Prior to the delivery of any shares or cash pursuant to an award or exercise thereof, the Company will have
the power and the right to deduct or withhold, or require a holder of such award to remit to the Company, an amount sufficient
to satisfy federal, state, local, foreign or other taxes required to be withheld with respect to such award or exercise thereof.
Grants
of Awards. The grant of awards under the Amended 2018 Plan is discretionary, and the Company cannot determine now the
specific number or type of options or awards to be granted in the future to any particular person or group.