Document:

Exhibit
10.12

 

PHG/CWP/JBB/kt

01/18/08

 

FIRST LEASE
AMENDMENT

 

THIS FIRST LEASE AMENDMENT
(the “First Amendment”) is executed this 25th day of January, 2008, and
effective October 1, 2007, by and between DUGAN REALTY, L.L.C., an Indiana
limited liability company (“Landlord”), and GAIAM, INC., a Colorado corporation
(“Tenant”).

 

W  I  T
N  E  S  S  E  T  H :

 

WHEREAS, Landlord and Tenant
entered into a certain lease dated October 5, 2005 (the “Lease”), whereby
Tenant leases from Landlord certain premises consisting of approximately
147,000 square feet of space (the “Current Premises”) in a building commonly
known as Building 7 (the “Building”), located at 5455 West Chester Road, West
Chester, Ohio 45069, in World Park at Union Centre (the “Park”); and

 

WHEREAS, the Lease Term expired September 30, 2007;
and

 

WHEREAS, Tenant has
continuously remained in the Current Premises and has continued to pay rent
therefor during such period of holdover; and

 

WHEREAS, Landlord and Tenant desire to extend the
Lease Term; and

 

WHEREAS, Landlord
and  Tenant  desire  to  reduce  the  Current
Premises  by  approximately  73,250  square  feet
(the  “Relinquished  Space”);  and

 

WHEREAS, Landlord and Tenant
desire to amend certain provisions of the Lease to reflect such extension,
reduction and other changes to the Lease;

 

NOW, THEREFORE, in
consideration of the foregoing premises, the mutual covenants herein contained
and each act performed hereunder by the parties, Landlord and Tenant hereby
agree that the Lease is amended as follows:

 

1.                                      Incorporation
of Recitals. The above recitals are hereby incorporated into
this First Amendment as if fully set forth herein.

 

2.                                      Extension of
Lease Term. The Lease Term is hereby extended through June 30,
2010.

 

3.                                      Amendment of Section 1.01. Basic
Lease Provisions and Definitions.

 

(a)                                   Commencing October
1, 2007, Section 1.01 of the Lease is hereby amended by deleting
subsections D, E, G and K and substituting the following in lieu thereof:

 

“D.                              Minimum Annual Rent:

 

	
  October
  1, 2007 – February 29, 2008

  	
   

  	
  $219,734.40
  per year.

  

 

E.                                      Monthly Rental
Installments:

 

 

	
  October
  1, 2007 – February 29, 2008

  	
   

  	
  $ 43,946.88 per month.

  

 

G.                                     Lease Term:
extended through June 30, 2010.

 

K.                                    Brokers: Duke
Realty Services, LLC representing Tenant, and Colliers Turley Martin Tucker
representing Tenant.

 

(b)                                 Provided Tenant
has surrendered the Relinquished  Space in accordance with
Paragraph 8 of this First Amendment, commencing March 1, 2008, Section 1.01
of the Lease is further amended by incorporating Exhibit A-1, attached hereto and incorporated herein
by reference, on which the Current Premises less the Relinquished  Space
is depicted, in lieu of Exhibit A
to the Lease which is hereby deleted. Hereinafter, the Current Premises
less the Relinquished  Space shall be referred to as the “Leased
Premises”.

 

(c)                                  Provided Tenant
has surrendered the Relinquished  Space in accordance with
Paragraph 8 of this First Amendment, commencing March 1, 2008, Section 1.01
of the Lease is further amended by deleting subsections A, B, C, D and E and
substituting the following in lieu thereof:

 

“A.                             Leased Premises
(shown on Exhibit A-1 attached hereto): 5455 West
Chester Road, West Chester, Ohio 46069; Building No. 7 (the “Building”);
located in World Park at Union Centre (the “Park”);

 

B.                                     Rentable Area:
73,750 square feet;

 

C.                                     Tenant’s
Proportionate Share: 50.17%;

 

D.                                    Minimum Annual
Rent:

 

	
  March
  1, 2008 – February 28, 2009

  	
   

  	
  $272,874.96
  per year

  
	
  March
  1, 2009 - February 28, 2010

  	
   

  	
  $278,037.48
  per year

  
	
  March
  1, 2010 – June 30, 2010

  	
   

  	
  $ 94,645.84 (4 months);

  

 

E.                                     Monthly Rental
Installments:

 

	
  March
  1, 2008 – February 28, 2009

  	
   

  	
  $ 22,739.58 per month

  
	
  March
  1, 2009 - February 28, 2010

  	
   

  	
  $ 23,169.79 per month

  
	
  March
  1, 2010 – June 30, 2010

  	
   

  	
  $ 23,661.46 per month;”

  

 

2

 

4.                                      Amendment of Section 2.02. Construction
of Tenant Improvements. Section 2.02 of the Lease is hereby
amended by incorporating the following:

 

“Tenant is presently in
possession of the Leased Premises, has inspected same, and accepts the same “AS IS” without representation or warranty by Landlord of
any kind and with the understanding that Landlord shall have no responsibility
with respect thereto. Tenant acknowledges that the Tenant Improvements in Exhibit B  of the Lease have been
completed in a satisfactory manner. Notwithstanding the foregoing, in the event
Landlord leases the Relinquished  Space, or any portion thereof,
to a third party, Landlord shall, at its sole cost and expense, demise the
Current Premises and Relinquished  Space.”

 

5.                                      Amendment of Section 9.02. Tenant’s
Insurance. Section 9.02 of the Lease is hereby amended as
follows:

 

(a)                                   Subparagraph B. of Section 9.02
of the Lease is hereby deleted in its entirety and the following shall be
substituted in lieu thereof:

 

“B.                              Commercial
General Liability Insurance (which insurance shall not exclude blanket,
contractual liability, broad form property damage, personal injury, or fire
damage coverage) covering the Leased Premises and Tenant’s use thereof against
claims for bodily injury or death and property damage, which insurance shall
provide coverage on an occurrence basis with a per occurrence limit of not less
than $11,000,000 for each policy year, which limits may be satisfied by any
combination of primary and excess or umbrella per occurrence policies.”

 

(b)                                  Subparagraph D. of Section 9.02
of the Lease is hereby amended by adding the following: “with limits of not
less than an amount equal to two (2) years rent hereunder.”

 

(c)                                   The last paragraph of Section 9.02
of the Lease is hereby deleted in its entirety and the following shall be
substituted in lieu thereof:

 

“All insurance required by
Tenant hereunder shall (i) be issued by one or more insurance companies
reasonably acceptable to Landlord, licensed to do business in the State in
which the Leased Premises is located and having an AM Best’s rating of A IX or
better, and (ii) provide that said insurance shall not be materially
changed, canceled or permitted to lapse on less than thirty (30) days’ prior
written notice to Landlord. In addition, Tenant’s insurance shall protect Tenant
and Landlord as their interests may appear, naming Landlord, Landlord’s
managing agent, and any mortgagee requested by Landlord, as additional insureds
under its commercial general liability policies. On or before November 1, 2007,
and thereafter, within thirty (30) days prior to the expiration of each such
policy, Tenant shall furnish Landlord with certificates of insurance in the
form of ACORD 25 or ACORD 25-S (or other evidence of insurance reasonably
acceptable to Landlord), evidencing all required coverages, together with a
copy of the endorsements to Tenant’s commercial general liability policies
evidencing primary and non-contributory coverage afforded to the appropriate
additional insureds. Upon Tenant’s receipt of a request from Landlord, Tenant
shall provide Landlord with copies of all insurance policies, including all
endorsements, evidencing the coverages required hereunder. If Tenant fails to
carry such insurance and furnish Landlord with such 

 

3

 

certificates of insurance or copies of insurance policies (if
applicable), Landlord may obtain such insurance on Tenant’s behalf and Tenant
shall reimburse Landlord upon demand for the cost thereof as Additional Rent.
Landlord reserves the right from time to time to require Tenant to obtain
higher minimum amounts or different types of insurance if it becomes customary
for other landlords of similar buildings in the area to require similar sized
tenants in similar industries to carry insurance of such higher minimum amounts
or of such different types.”

 

6.                                       Incorporation
of Section 16.14. The following is hereby incorporated as Section 16.14
of the Lease:

 

“Section 16.14. Patriot
Act. Each of Landlord and Tenant, each as to itself, hereby represents its
compliance with all applicable anti-money laundering laws, including, without
limitation, the USA Patriot Act, and the laws administered by the United States
Treasury Department’s Office of Foreign Assets Control, including, without
limitation, Executive Order 13224 (“Executive Order”). Each of Landlord and
Tenant further represents (i) that it is not, and it is not owned or
controlled directly or indirectly by any person or entity, on the SDN List
published by the United States Treasury Department’s Office of Foreign Assets
Control and (ii) that it is not a person otherwise identified by
government or legal authority as a person with whom a U.S. Person is prohibited
from transacting business. As of the date hereof, a list of such designations
and the text of the Executive Order are published under the internet website
address www.ustreas.gov/offices/enforcement/ofac.”

 

7.                                       Incorporation
of Section 16.15. Option to Extend. The following is
hereby incorporated as Section 16.15 of the Lease:

 

“Section 16.15. Option to Extend.

 

(a)                                     Grant and
Exercise of Option. Provided that (i) no default has occurred and
is then continuing, (ii) the creditworthiness of Tenant is then reasonably
acceptable to Landlord and (iii) Tenant originally named herein or its
Permitted Transferee remains in possession of and has been continuously
operating in the entire Leased Premises throughout the Lease Term, Tenant shall
have one (1) option to extend the Lease Term for one (1) additional
period of eight (8) months (the “Extension Term”). The Extension Term
shall be upon the same terms and conditions contained in the Lease except (x) Tenant
shall not have any further option to extend, (y) any improvement
allowances or other concessions applicable to the Leased Premises under the
Lease shall not apply to the Extension Term, and (z) the Minimum Annual
Rent shall be adjusted as set forth herein (“Rent Adjustment”). Tenant shall
exercise such option by delivering to Landlord, no later than six (6) months
prior to the expiration of the current Lease Term, written notice of Tenant’s
desire to extend the Lease Term. Tenant’s failure to properly exercise such
option shall be deemed a waiver of such option. If Tenant properly exercises
its option to extend, Landlord shall notify Tenant of the Rent Adjustment no
later than ninety (90) days prior to the commencement of the Extension Term.
Tenant shall be deemed to have accepted the Rent Adjustment if it fails to
deliver to Landlord a written objection thereto within five (5) business
days after receipt thereof. If Tenant properly exercises its option to extend,
Landlord and Tenant shall execute an amendment to the Lease (or, at Landlord’s
option, a new lease on the form then in use for the

 

4

 

Building) reflecting the terms and conditions of the
Extension Term within thirty (30) days after Tenant’s acceptance (or deemed
acceptance) of the Rent Adjustment.

 

(b)                                 Rent Adjustment. The Minimum
Annual Rent for the Extension Term shall be an amount equal to the Minimum
Annual Rent then being quoted by Landlord to prospective renewing tenants of
the Building for space of comparable size and quality and with similar or
equivalent improvements as are found in the Building, and if none, then in
similar buildings in the vicinity; provided, however, that in no event shall
the Minimum Annual Rent during the Extension Term be less than the highest
Minimum Annual Rent payable during the immediately preceding term. The Monthly
Rental Installments shall be an amount equal to one-twelfth (1/12) of the
Minimum Annual Rent for the Extension Term and shall be paid at the same time
and in the same manner as provided in the Lease.”

 

8.                                      Incorporation of Section 16.16.
Right of First Refusal. The following is hereby incorporated as Section 16.16
of the Lease:

 

“Section 16.16. Right of First
Refusal.

 

(a)                                  Provided that (i) no
default has occurred and is then continuing, (ii) the creditworthiness of
Tenant is then reasonably acceptable to Landlord, and (iii) Tenant
originally named herein or a Permitted Transferee remains in possession of and
has been continuously operating in the entire Leased Premises throughout the
Lease Term, and subject to any rights of other tenants to the Refusal Space (as
defined herein) and Landlord’s right to renew or extend the lease term of any
other tenant with respect to the portion of the Refusal Space now or hereafter
leased by such other tenant, Tenant shall have a on-going right of first
refusal (“Refusal Option”) to lease additional space in the Building located
contiguous to the Leased Premises as shown crosshatched on the attached Exhibit G  (“Refusal Space”). Prior
to entering into any lease that includes all or any portion of the Refusal
Space, Landlord shall notify Tenant in writing (“Landlord’s Notice”) of
Landlord’s receipt of an arms-length offer to lease such space that Landlord is
willing to accept from a bona fide third party offeror (“Bona Fide Offer”) and
setting forth the material terms of the Bona Fide Offer and such other terms as
are herein provided. If the Bona Fide Offer includes space in the Building in
addition to the Refusal Space, then the Refusal Space shall be deemed to
include, and this Refusal Option shall be deemed to apply to, all of the space
included in the Bona Fide Offer. Tenant shall have five (5) days after
Tenant receives Landlord’s Notice in which to notify Landlord in writing of its
election to lease the Refusal Space upon the terms set forth in Landlord’s
Notice. If Tenant declines to exercise this Refusal Option or fails to give
such written notice within the time period required, Tenant shall be deemed to
have waived this Refusal Option, and thereafter this Refusal Option shall be
void and of no further force or effect, and Landlord shall be free to lease the
Refusal Space to the bona fide offeror or any other third party. The Refusal
Space shall be offered to Tenant at the rental rate and upon such other terms
and conditions as are set forth in the Bona Fide Offer and herein.

 

(b)                                 If Tenant shall
exercise the Refusal Option, the parties shall enter into an amendment to this
Lease adding the Refusal Space to the Leased Premises upon the terms and
conditions set forth herein and making such other modifications to this Lease

 

5

 

 

as are appropriate under the circumstances. If
Tenant shall fail to enter into such amendment within ten (10) days
following Tenant’s exercise of the Refusal Option, then Landlord may terminate
this Refusal Option, by notifying Tenant in writing, in which event this
Refusal Option shall become void and of no further force or effect, and
Landlord shall thereafter be free to lease the Refusal Space to the bona fide
offeror or any other third party.

 

9.                                     Incorporation of Section 16.17.
Option to Expand. The following is hereby incorporated as Section 16.17
of the Lease:

 

“Section 16.17. Option
to Expand. Any time during the Lease Term and provided that (i) no default
has occurred and is then continuing, (ii) the creditworthiness of Tenant
is then reasonably acceptable to Landlord, and (iii) Tenant originally
named herein or its Permitted Transferee remains in possession of and has been
continuously operating in the entire Leased Premises throughout the Lease Term,
subject to any rights of other tenants to the Expansion Space (as defined
herein) and Landlord’s right to renew or extend the lease term of any other
tenant with respect to the portion of the Expansion Space now or hereafter
leased by such other tenant, Tenant shall have the right to expand the Leased
Premises to include all or a portion of the Relinquished Space (the “Expansion
Space”).  In the event Tenant elects to
exercise its expansion option, Tenant hereby agrees that Tenant shall provide
Landlord with written notice of its desire to expand, and Tenant may, at its
election, extend the Lease Term for the existing Leased Premises to be
coterminous with the term for the Expansion Space and the Minimum Annual Rent
for such extension term shall be an amount equal to the Minimum Annual Rent
then being quoted by Landlord to prospective renewal tenants of the Building
for space of comparable size and quality and with similar or equivalent
improvements as are found in the Building, and if none, then in similar
buildings in the Park; provided, however, that in no event shall the Minimum
Annual Rent during such extension term be less than the highest Minimum Annual
Rent payable during the immediately preceding term. If such extension is at
least twenty-eight (28) months then (i) the lease term of Tenant’s lease
with Landlord’s affiliate, Dugan Financing LLC at Building 8 in the Park shall
also be extended to be coterminous with the Lease Term, and (ii) Landlord
shall provide Tenant with a tenant improvement allowance of up to Thirty
Thousand Dollars ($30,000.00) to be used toward improvements for the Leased
Premises, as expanded; provided, however, if Tenant elects not to extend the
Lease Term for the existing Leased Premises or elects to extend the Lease Term
and such extension is for less than twenty-eight (28) months, the per square
foot rate for the Leased Premises shall be Three and 50/100 Dollars ($3.50) per
square foot.

 

10.                               Surrender of Relinquished
Space. Tenant hereby agrees to surrender the Relinquished Space to Landlord
on or before March 1, 2008 in accordance with the terms of Section 2.03
of the Lease. Provided Tenant surrenders the Relinquished Space as provided
herein, Tenant’s obligation to pay rent for the Relinquished Space shall
terminate on February 29, 2008; provided that Tenant shall continue to be
liable for rent obligations accruing prior to March 1, 2008. In the event,
however, that Tenant fails to deliver the Relinquished Space to Landlord in
accordance with this paragraph before March 1, 2008, in addition to any other
rights and remedies that Landlord has under the Lease, Tenant shall pay rent
for the Relinquished Space in accordance with Section 2.04 of the
Lease until Tenant delivers the Relinquished Space to Landlord in accordance
with this paragraph.

 

11.                               Brokerage Commissions. The parties
hereby represent and warrant that the only real estate brokers involved in the
negotiation and execution of this First Amendment are Duke Realty Services,
LLC, representing Landlord, and Colliers Turley Martin Tucker representing
Tenant. Each

 

6

 

party shall indemnify the other party from any and all liability for
the breach of this representation and warranty on its part and shall pay any
compensation to any other broker or person who may be entitled thereto.

 

12.                               Tenant’s
Representations and Warranties. The undersigned represents
and warrants to Landlord that (i) Tenant is duly organized, validly
existing and in good standing in accordance with the laws of the state under which
it was organized; (ii) all action necessary to authorize the execution of
this First Amendment has been taken by Tenant; and (iii) the individual
executing and delivering this First Amendment on behalf of Tenant has been
authorized to do so, and such execution and delivery shall bind Tenant. Tenant,
at Landlord’s request, shall provide Landlord with evidence of such authority.

 

13.                               Examination of
Amendment. Submission of this instrument for examination or
signature to Tenant does not constitute a reservation or option, and it is not
effective until execution by and delivery to both Landlord and Tenant.

 

14.                               Definitions. Except as
otherwise provided herein, the capitalized terms used in this First Amendment
shall have the definitions set forth in the Lease.

 

15.                               Incorporation. This First
Amendment shall be incorporated into and made a part of the Lease, and all
provisions of the Lease not expressly modified or amended hereby shall remain
in full force and effect.

 

(SIGNATURES CONTAINED ON FOLLOWING PAGE)

 

7

 

IN WITNESS WHEREOF, the
parties have caused this First Amendment to be executed on the day and year
first written above.

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  DUGAN
  REALTY, L.L.C.,

  
	
   

  	
  an
  Indiana limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Duke
  Realty Limited Partnership, 

  an Indiana limited partnership, its member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Duke
  Realty Corporation, 

  an Indiana corporation, its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Jon C. Burger

  
	
   

  	
   

  	
   

  	
   

  	
  Jon C. Burger

  
	
   

  	
   

  	
   

  	
   

  	
  Senior
  Vice President 

  Cincinnati Group

  

 

	
  STATE
  OF OHIO

  	
  )

  	
   

  
	
   

  	
  )
  SS:

  	
   

  
	
  COUNTY
  OF HAMILTON

  	
  )

  	
   

  

 

Before me, a Notary Public in and for said County and State, personally
appeared Jon C. Burger, by me known to be the Senior Vice President, Cincinnati
Group of Duke Realty Corporation, an Indiana corporation, the general partner
of Duke Realty Limited Partnership, the member of Dugan Realty, L.L.C., an
Indiana limited liability company, who acknowledged the execution of the
foregoing “First Lease Amendment” on behalf of said limited liability company.

 

WITNESS my hand and Notarial Seal this 25th  day of January,
2008.

 

	
  

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ROSE ANDRIACCO

  	
   

  	
  /s/
  Rose Andriacco

  
	
  Notary Public, State of Ohio

  	
   

  	
  Notary
  Public

  
	
  My Commission Expires March 8, 2010

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Printed
  Signature)

  

 

 

	
  My
  Commission Expires:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  My
  County of Residence:

  	
  Clermont

  	
   

  

 

8

 

	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  GAIAM,
  INC., a Colorado corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark Lipien

  
	
   

  	
   

  	
   

  
	
   

  	
  Printed:

  	
      Mark
  Lipien

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
     VP

  

 

	
  STATE
  OF COLORADO

  	
  )

  	
   

  
	
   

  	
  )
  SS:

  	
   

  
	
  COUNTY
  OF BROOMFIELD

  	
  )

  	
   

  

 

Before me, a Notary Public in and for said County and State, personally
appeared Mark Lipien, by me known and by me known to be the Vice President of
Gaiam, Inc., a Colorado corporation, who acknowledged the execution of the
foregoing “First Lease Amendment” on behalf of said corporation.

 

WITNESS my hand and Notarial
Seal this 21st day of January, 2008.

 

 

	
   

  	
  /s/ Chelli Lalik

  
	
   

  	
  Notary Public

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
      Chelli Lalik

  
	
   

  	
  (Printed Signature)

  

 

 

	
  My Commission Expires:

  	
  4-12-2008

  	
   

  
	
   

  	
   

  	
   

  
	
  My
  County of Residence:

  	
  Jefferson

  	
   

  

 

9

 

 

EXHIBIT A-1

 

 

 

EXHIBIT GExhibit 10.15

 

GAIAM, INC.

 

EMPLOYEE STOCK OPTION AGREEMENT

 

This
Stock Option Agreement set forth below (this “Agreement”) is dated as of the
date of grant set forth below and is between Gaiam, Inc., a Colorado
corporation (“Gaiam”), and the individual named below (the “Grantee”).

 

Gaiam
has established its 2009 Long-Term Incentive Plan (the “Plan”) to advance the
interests of Gaiam and its shareholders by providing incentives to certain
eligible persons who contribute significantly to the strategic and long-term
performance objectives and growth of Gaiam and any parent or subsidiary of
Gaiam.

 

This
Agreement evidences an option grant as follows:

 

	
  Granted
  to:

  
	
  Number
  of Shares:

  
	
  Effective
  Date of Grant:

  
	
  Expiration
  Date:

  
	
  Exercise
  Price Per Share:

  
	
  Vesting
  Dates:

  

 

Pursuant
to the provisions of the Plan, the Board of Directors of Gaiam (the “Board”) or
a Committee designated by the Board (the “Committee”) has full power and
authority to direct the execution and delivery of this Agreement in the name
and on behalf of Gaiam.  The Board or the
Committee authorized the execution and delivery of this Agreement. All
capitalized terms not otherwise defined in this Agreement have the same meaning
given such capitalized terms in the Plan.

 

Agreement

 

The
parties agree as follows:

 

Section 1.  Grant of Stock Option; Term.   Subject and pursuant to all terms and
conditions stated in this Agreement and in the Plan, Gaiam hereby grants to
Grantee an option (the “Option”) to
purchase the number of shares (the “Option Shares”)
of Gaiam’s Class A common stock, par value $0.0001 per share (the “Common Shares”), set forth above, at
the exercise price set forth above. 
Except as otherwise provided in this Agreement or the Plan, the Option
may not be exercised after the close of business on the expiration date set
forth above. Grantee hereby accepts the Option on such terms and conditions,
including, without limitation, the confidentiality and non-compete provisions
set forth in Section 8 of this Agreement. 
The Option is a Nonqualified Stock Option (as such term is defined in
the Plan). Grantee shall, subject to the limitations of this Agreement and the
Plan, have the right to exercise the Option by purchasing all or any part of
the vested Option Shares then available for purchase under the vesting schedule
set forth above (less any Option Shares previously purchased upon exercise of
this Option).

 

Section 2.  Procedures for Exercise.  Grantee shall exercise all or any part of
the Option by delivering to Gaiam: (i) written notice of the number of
vested Option Shares to be purchased, (ii) a duly executed Stock
Restriction Agreement substantially in the form of Appendix A (unless

 

 

such agreement would have
expired according to its terms), (iii) payment of the exercise price of
such Option Shares in the form of cash or, if
permitted by the Committee, qualified Common Shares, the surrender of another
outstanding Award under the Plan or any combination thereof, and (iv) payment
of any required withholding pursuant to Section 10. The Option
shall be deemed to have been exercised as of the close of business on the date
the required documents and required consideration are received by Gaiam. For
purposes of this Section 2, Common Shares shall be deemed to be “qualified”
Common Shares if they have been held by Grantee for six months or such other
period as set from time to time by the Board or the Committee.

 

Section 3.  Termination of Employment, Retirement, Disability or Death.

 

(a)                                  Vesting shall cease on the date Grantee
ceases to be employed by the Company. 
Following Grantee’s last day of employment with the Company, this Option
shall only be exercisable for the number of Option Shares that are vested as of
Grantee’s last day of employment with by the Company (less any Option Shares
previously acquired upon exercise of this Option).

 

(b)                                 Except as provided in Section 3(c) or
3(d), following Grantee’s last day of employment with the Company, this Option
may be exercised at any time and from time to time within the lesser of (i) the
30 day period commencing on the first day after Grantee’s last day of
employment with the Company or (ii) the remaining term of the Option.

 

(c)                                  If termination of employment occurs due
to death or disability while Grantee is an employee of the Company, then this Option
may be exercised at any time and from time to time within the lesser of (i) the
one year period commencing on the first day after Grantee’s last day of
employment with the Company or (ii) the remaining term of the Option.

 

(d)                                 If termination of employment occurs due
to retirement at or after normal retirement age, as prescribed from time to
time by the Company’s retirement policy, or retirement under circumstances
approved by the Committee (either before or after retirement), then this Option
may be exercised at any time within the lesser of (i) the three month
period commencing on the first day after Grantee’s last day of employment with
the Company, or, if Grantee dies during the three month period commencing on
the first day after Grantee’s last day of employment with the Company, then the
one year period commencing on the first day after Grantee’s last day of
employment with the Company, or (ii) the remaining term of the Option.

 

Section 4.  Issuance and Delivery of Option Shares.  The stock certificate(s) representing
Option Shares shall be issued to Grantee subject to satisfaction of the
applicable tax withholding requirements set forth in Section 10.  The issuance of Option Shares shall be in
accordance with the provisions of Section 5.

 

Section 5.  No Issuance of Option Shares if Violation.  Gaiam shall not issue stock
certificate(s) representing Option Shares if the administrator of the Plan
or its authorized agent determines, in its sole discretion that the issuance of
such certificate would violate the terms of the Plan, this Agreement or
applicable law.

 

Section 6.  Rights as an Employee or Shareholder.  Except as otherwise provided
in the Plan, no person shall be, or have any of the rights or privileges of, a
shareholder of Gaiam with 

 

2

 

respect to any of the
Option Shares unless and until certificates representing such shares shall have
been issued and delivered to such person. 
Neither the Plan nor this Agreement shall be deemed to give Grantee any
right with respect to continued employment with the Company, nor shall the Plan
or the Agreement be deemed to limit in any way the Company’s right to terminate
Grantee’s employment at any time.

 

Section 7.  Nondisparagement and Further Assistance.  During Grantee’s
employment and thereafter, Grantee will not make any disclosure, issue any
public statements or otherwise cause to be disclosed any information which is
designed, intended or might reasonably be anticipated to discourage suppliers,
customers or employees of the Company or otherwise have a negative impact or
adverse effect on the Company.  Grantee
will provide assistance reasonably requested by the Company in connection with
actions taken by Grantee while employed by the Company, including but not
limited to assistance in connection with any lawsuits or other claims against
the Company arising from events during the period in which Grantee was
employed.

 

Section 8.  Nondisclosure of Confidential Information; Non-Compete.  In consideration of the
receipt of the Option, Grantee agrees (i) not to disclose to any third
party any trade secrets or any other confidential information of the Company
(including but not limited to cost or pricing information, customer lists,
commission plans, supply information, internal business procedures, market
studies, expansion plans, potential acquisitions, terms of any acquisition or
potential acquisition or the existence of any negotiations concerning the same
or any similar non-public  information
relating to the Company’s internal operations, business policies or practices)
acquired during Grantee’s employment by the Company or after the termination of
such employment, or (ii) use or permit the use of any of the Company’s
trade secrets or confidential information in any way to compete (directly or
indirectly) with the Company or in any other manner adverse to the
Company.  In addition, Grantee agrees
that, without the prior written consent of the Company, signed by the Company’s
Chief Executive Officer, Grantee will not, during the term of Grantee’s
employment by the Company or for a period of two years thereafter (i) accept
employment with, serve as a consultant to, or accept compensation from any
person, firm or corporation (including any new business started by Grantee,
either alone or with others) whose products and or services compete with those
offered by the Company, in any geographic market in which the Company is then
doing business or to Grantee’s knowledge plans to do business, (ii) contact
or solicit any customers of the Company for the purposes of diverting any
existing or future business of such customers to a competing source, (iii) contact
or solicit any vendors to the Company (directly or indirectly) for the purpose
of causing, inviting or encouraging any such vendor to alter or terminate his,
her or its business relationship with the Company, or (iv) contact or
solicit any employees of the Company (directly or indirectly) for the purpose
of causing, inviting or encouraging any such employee to alter or terminate
his, her or its employment relationship with the Company.

 

The
Company will be entitled to enforce its rights under this Agreement
specifically, to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights to which it may be
entitled.  Grantee agrees and
acknowledges that money damages may not be an adequate remedy for breach of the
provisions of this Agreement and that the Company may in its sole discretion
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.

 

Grantee
agrees that this covenant is reasonable with respect to its duration,
geographic area and scope.  It is the
desire and intent of the parties that the provisions of this Section 8
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each

 

3

 

jurisdiction in which
enforcement is sought.  Accordingly, if
any particular portion of this Section 8 shall be adjudicated to be
invalid or unenforceable, this Section 8 shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable, such
deletion to apply only with respect to the operation of this Section 8 in
the particular jurisdiction in which such adjudication is made.

 

Section 9.  Securities Laws.  Grantee acknowledges that applicable
securities laws may restrict the right and govern the manner in which Grantee
may dispose of the Option Shares obtained upon exercise of the Option and
Grantee agrees not to offer, sell or otherwise dispose of any such shares in a
manner that would violate the Securities Act of 1933, as amended, or any other
federal or state law.  Gaiam intends,
within 12 months of its initial public offering of shares, to file a
registration statement on Form S-8 to register the shares to be issued
upon exercise of this Option.

 

Section 10.  Income Taxes.  Grantee acknowledges that when Grantee is
required to recognize income for federal, state or local income tax purposes on
account of the grant, vesting and/or exercise of the Option, pursuant to this
Agreement, that such income shall be subject to withholding of tax by the
Company.  Grantee agrees that the Company
may either withhold an appropriate amount from any compensation or any other
payment of any kind then payable or that may become payable to Grantee or, require
Grantee to make a cash payment to the Company equal to the amount of
withholding required in the opinion of the Company.  In the event Grantee does not make such
payment when requested, the Company may refuse to issue or cause to be
delivered any shares under this Agreement or any other incentive plan agreement
entered into by Grantee and the Company until such payment has been made or
arrangements for such payment satisfactory to the Company have been made.  Grantee agrees further to notify the Company
promptly if Grantee files an election pursuant to Section 83(b) of
the Internal Revenue Code of 1986, as amended, with respect to any Option
Shares.

 

Section 11.  Prohibition on Transfer or Assignment.  Except as provided in the
Plan, neither this Agreement nor the Option may be transferred or assigned,
other than an assignment by will or by laws of descent and distribution, and
this Option shall be exercisable during the Grantee’s lifetime only by Grantee
or by such permitted assignee.

 

Section 12.  Binding Effect; No Third Party Beneficiaries.  This Agreement shall be
binding upon and inure to the benefit of the Company and Grantee and their
respective heirs, representatives, successors and permitted assigns.  This Agreement shall not confer any rights or
remedies upon any person other than Gaiam and the Grantee and their respective
heirs, representatives, successors and permitted assigns.  The parties agree that this Agreement shall
survive the exercise or termination of the Option.

 

Section 13.  Agreement to Abide by Plan; Conflict between Plan and Agreement.  The Plan is hereby
incorporated by reference into this Agreement and made a part hereof as though
fully set forth in this Agreement. 
Grantee, by execution of this Agreement, (i) represents that he is
familiar with the terms and provisions of the Plan and (ii) agrees to
abide by all of the terms and conditions of this Agreement and the Plan.  Grantee accepts as binding, conclusive and
final all decisions or interpretations of the administrator of the Plan upon
any question arising under the Plan and this Agreement (including, without
limitation, the cause of any termination of Grantee’s employment with the
Company).  In the event of any conflict
between the Plan and this Agreement, the Plan shall control and this Agreement
shall be deemed to be modified accordingly.

 

4

 

Section 14.  Entire Agreement.  This Agreement constitutes the entire
agreement between the parties and supersedes any prior understandings,
agreements, or representations by or between the parties, written or oral, to
the extent they related in any way to the subject matter hereof.

 

Section 15.  Choice of Law.  To the extent not superseded by federal
law, the laws of the state of Colorado shall control in all matters relating to
this Agreement and any action relating to this Agreement must be brought in
Denver, Colorado.

 

Section 16.  Notice.  All notices, requests, demands, claims, and other
communications under this Agreement shall be in writing.  Any notice, request, demand, claim, or other
communication under this Agreement shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient at the address
set forth below the recipient’s signature to this Agreement.  Either party to this Agreement may send any
notice, request, demand, claim, or other communication under this Agreement to
the intended recipient at such address using any other means (including
personal delivery, expedited courier, messenger service, telecopy, ordinary
mail, or electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Either party to this Agreement
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other party notice
in the manner set forth in this section.

 

Section 17.  Counterparts.  This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

 

EXECUTED as of the date of grant set forth above.

 

 

	
  GAIAM,
  INC.

  	
   

  	
  GRANTEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
  833 W. South
  Boulder Road

  	
   

  	
  Address:

  	
                         

  
	
   

  	
  Louisville,
  CO  80027

  	
   

  	
   

  	
                         

  
	
   

  	
  Attn.:  Stock
  Option Administration

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Social Security
  No.

  	
                         

  
							

 

5

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