Exchange Act of 1934 (Amendment No. )
RECENT REVERSE STOCK
SPLIT
On January 25, 2017, we consummated a reverse stock split of all
outstanding shares of our Class A common stock at a ratio of one-for-30, whereby 30 shares of Class A common stock were combined
into one share of Class A common stock (the “2017 Reverse Stock Split”). The 2017 Reverse Stock Split was previously
authorized by a vote of our shareholders on January 23, 2017. We did not decrease our authorized shares of capital stock in connection
with the 2017 Reverse Stock Split.
Unless otherwise stated, share amounts in this proxy statement are
presented to reflect the 2017 Reverse Stock Split in all periods.
PROPOSAL 1
AMENDMENT AND RESTATEMENT OF THE REAL GOODS
SOLAR, INC. 2008 LONG-TERM INCENTIVE PLAN
(Item No. 1 on Proxy Card)
General
The board of directors
recommends that the shareholders approve an amendment and restatement to the Incentive Plan to increase the number of shares of
Class A common stock authorized for issuance under the Incentive Plan and the maximum number of shares that a participant may receive
under the Incentive Plan in a fiscal year. The amendment and restatement, if approved, would provide that the shares of Class A
common stock authorized for issuance under the Incentive Plan would be fixed at an amount that is equal to 1,900,000, and that
no participant in the Incentive Plan may receive awards under the Incentive Plan for more than 500,000 shares of Class A common
stock in any one fiscal year.
Currently a maximum of
52,536 shares of Class A common stock is authorized for issuance under the Incentive Plan and no participant may receive awards
under the Incentive Plan for more than 16,666 shares of Class A common stock in any one fiscal year. Other than such increases,
the amended Incentive Plan would be identical to the existing Incentive Plan. Included below is a summary of the material features
of the Incentive Plan, as amended, a copy of which is attached to this proxy statement as Annex A. We expect to file a Registration
Statement on Form S-8 with respect to the additional shares of Class A common stock to be authorized pursuant to the Plan as soon
as reasonably practicable after shareholder approval and prior to the offering of any such shares.
The board of directors
believes that authorizing 1,900,000 shares of Class A common stock for issuance with the Incentive Plan is in our best interests
to allow us to maintain a sufficient buffer of shares to account for expected future distribution upon exercise of outstanding
warrants.
The following table illustrates
the percentage 1,900,000 shares of Class A commons stock to be authorized under the Incentive Plan would represent compared to
the number of shares of Class A commons stock issued and outstanding on the Record Date. The table also illustrates
how that percentage may change if the number of issued and outstanding shares of Class A common stock changes in the future as
a result of the exercise of outstanding warrants that could be exercised at exercise prices below $4 per share:
Authorized Shares as a percentage of outstanding shares and projected
outstanding shares, if warrants are exercised:
|
|
|
Exercise
Price
|
|
|
Warrants
|
|
|
Cumulative
Outstanding Shares
|
|
|
Percentage of
hypothetical
Outstanding Shares
|
|
|
Outstanding shares April 25, 2017
|
|
|
|
|
|
|
|
|
|
|
7,480,906
|
|
|
|
25%
|
|
|
Series G Warrants
|
|
|
$1.36
|
|
|
|
8,302
|
|
|
|
7,489,208
|
|
|
|
25%
|
|
|
Series A, C & I Warrants
|
|
|
$1.27
|
|
|
|
616,679
|
|
|
|
8,105,887
|
|
|
|
23%
|
|
|
Series K Warrants
|
|
|
$3.10 - $3.875
|
|
|
|
3,895,500
|
|
|
|
12,001,387
|
|
|
|
16%
|
|
|
Series M Warrants
|
|
|
$2.40 - $3.125
|
|
|
|
1,920,000
|
|
|
|
13,921,387
|
|
|
|
14%
|
|
Our shareholders approved an amendment to the Incentive Plan at
our 2016 annual meeting held November 16, 2016 to increase the number of shares authorized for issuance and the number of shares
that a participant may receive in a fiscal year. Subsequent to that, on January 25, 2017, we consummated a reverse stock split
of all outstanding shares of our Class A common stock at a ratio of one-for-30, whereby 30 shares of Class A common stock were
combined into one share of Class A common stock. As a result of the reverse stock split, the number of shares authorized for issuance
and the number of shares that a participant may receive in a fiscal year under the Incentive Plan went from 1,576,068 and 500,000,
respectively, before the reverse split to 52,536 and 16,666, respectively, after the reverse split. We have not made any awards
under the Incentive Plan after the amendment approved at our 2016 annual meeting held November 16, 2016.
Equity awards have been
historically and, we believe, will continue to be, an important component of our overall compensation program for all of our employees
and directors. As described above, after our January 25, 2017 reverse stock split, only an insignificant number of shares of Class
A common stock are available for issuance under the Incentive Plan. We believe it is important for our long-term success that the
interests of our employees and directors are tied to our success as “owners” of our business. We believe that our Incentive
Plan can build shareholder value by attracting and retaining talented employees and directors. In some circumstances we may also
grant equity awards to consultants to provide incentives for such consultants to exert maximum efforts for our success. Since 2015,
we have been unable to use equity awards as a meaningful component of our compensation program because, among other things, our
reverse stock splits consummated during that time-period substantially reduced the number of shares authorized for issuance and
the number of shares that a participant may receive in a fiscal year. We believe we must begin to offer a more competitive equity
compensation packages in order to retain and motivate the talent necessary for our continued growth and success. We carefully monitor
the equity compensation and equity holdings of our employees, directors and consultants as well as the type of equity awards we
grant to ensure these awards continue to provide incentives for the recipients to work towards our success. Traditionally, stock
options have been the primary focus of our equity program. The potential value of stock options is realized only if our share price
increases, and so stock options provide a strong incentive for individuals to work to build shareholder value and are most attractive
to individuals who share our objectives and goals. Approval of Proposal 1 will allow us to grant stock options and other equity
awards at levels we determine to be appropriate in order to attract new employees and directors, retain our existing employees
and directors and to provide incentives for such persons to exert maximum efforts for our success and ultimately increase stockholder
value.
Summary of the Incentive Plan
The Incentive Plan was
approved by our board of directors and by Gaia, Inc., our then-sole shareholder formerly named Gaiam, Inc., on January 30, 2008,
amended by a vote of the shareholders at the annual meeting of shareholders held June 11, 2012, further amended by a vote of the
shareholders at a special meeting of the shareholders held January 14, 2014, further amended by a vote of the shareholders at the
annual meeting held November 18, 2015, and further amended by a vote of the shareholders at the annual meeting held November 16,
2016. The purpose of the Incentive Plan is to advance the interests of our company and the shareholders by providing incentives
to certain employees and other key individuals who perform services for us, including those who contribute significantly to the
strategic and long-term performance objectives and growth of our company. Any person who is a full or part-time employee or who
performs services for our company, including each of our directors, consultants and advisors, is eligible for selection by the
Incentive Plan administrator for the grant of awards under the Incentive Plan. Three officers, five non-employee directors and
approximately 170 non-officer employees qualify to participate in the Incentive Plan.
Our board of directors
has designated our compensation committee to administer the Incentive Plan. The Incentive Plan administrator may delegate administrative
responsibilities if so permitted by applicable law, other than with respect to executive officers who are subject to Section 16
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Incentive Plan provides for the granting
of several types of awards, including stock options, stock appreciation rights, or SARs, restricted stock, restricted stock units,
performance grants and other awards deemed by the Incentive Plan administrator to be consistent with the purposes of the Incentive
Plan. Awards may be granted alone, or in conjunction with one or more other awards, as determined by the Incentive Plan administrator.
If our shareholders approve
the amendment and restatement of the Incentive Plan described above, the maximum aggregate number of shares of Class A common stock
that may be issued and outstanding, or subject to awards outstanding, under the Incentive Plan would be fixed at 1,900,000, and
no participant may receive awards under the Incentive Plan for more than 500,000 shares of Class A common stock in any one fiscal
year, subject to certain adjustments, such as in the event of a stock split. Currently the maximum aggregate number of shares of
Class A common stock that may be issued and outstanding, or subject to awards outstanding, under the Incentive Plan cannot exceed
52,536 shares of Class A common stock, subject to adjustment as described below. Since 2008 and as of April 25, 2017, 205 shares
of Class A common stock have been issued as awards or upon exercise of options granted under the Incentive Plan. As of April 25,
2017, an immaterial number of shares of Class A common stock were reserved for issuance upon exercise of outstanding options and
awards. Currently, no participant may receive awards under the Incentive Plan for more than 16,666 shares of Class A common stock
in any one fiscal year, subject to certain adjustments, such as in the event of a stock split.
The Class A common stock issued under the Incentive Plan may be
either newly issued shares, treasury shares, reacquired shares or any combination thereof. If our Class A common stock issued as
restricted stock or otherwise subject to repurchase or forfeiture rights is reacquired by us pursuant to such rights, or if any
award is canceled, terminates or expires unexercised, the Class A common stock which would otherwise have been issuable pursuant
to such awards will be available for issuance under new awards.
The Incentive Plan administrator has exclusive
discretion to select the employees and other key individuals performing services for us to whom awards will be granted; to determine
the type, size and terms of each award; to modify within certain limits the terms of any award; to determine the time when awards
will be granted; to establish performance objectives; to prescribe the form of documents representing awards under the Incentive
Plan; and to make all other determinations that it deems necessary or desirable in the interpretation and administration of the
Incentive Plan. The Incentive Plan administrator has the authority to administer and interpret the Incentive Plan, and its decisions
are final, conclusive and binding.
Awards Under the Incentive
Plan
Stock Options
. A
stock option, which may be a nonqualified or an incentive stock option, is the right to purchase a specified number of shares of
Class A common stock at a price fixed by the Incentive Plan administrator. The option exercise price for nonqualified options may
be equal to or greater than the fair market value of the Class A common stock. In the case of incentive stock options, the option
exercise price may not be less than the fair market value of the underlying shares of Class A common stock on the date of grant
and, with respect to incentive stock options granted to our employees or any of our affiliates who own more than 10% of the voting
power of all classes of our stock or the stock of any of our affiliates, the option exercise price may not be less than 110% of
fair market value on the date of the grant.
Stock options will generally
expire not later than ten years or, in the case of incentive stock options granted to employees who own more than 10% of our stock,
five years, after the date on which they are granted. Stock options become exercisable at such times and in such installments as
the Incentive Plan administrator determines. Payment of the option exercise price must be made in full at the time of exercise
in cash, by tendering to us shares of Class A common stock, by a combination thereof or by any other means that the Incentive Plan
administrator deems appropriate, which may include the surrender of rights in one or more outstanding awards.
Stock Appreciation Rights
.
A SAR provides the holder with the rights to receive, without payment to us, cash, Class A common stock, other property or any
combination thereof, based on the increase in the value of the number of shares of Class A common stock specified in the award
over a specified period of time. SARs may be granted either alone or in conjunction with other awards under the Incentive Plan.
The holder of a SAR may elect between exercising the underlying option for shares of Class A common stock or surrendering the SAR
in exchange for the receipt of a cash payment equal to the excess of the fair market value on the surrender date over the exercise
price, times the number of shares of Class A common stock subject to the award. The Incentive Plan administrator will establish
the terms and conditions of SARs, including the exercise price per share and the term of each SAR.
Restricted Stock and
Restricted Stock Units
. A restricted stock award is an award of a number of shares of Class A common stock that are subject
to certain restrictions, such as a requirement that the shares of Class A common stock shall be forfeited if the holder’s
employment or performance of services for us terminates. RSUs are awards denominated in units of shares of Class A common stock
under which the settlement of the award is subject to such conditions and terms (such as continued employment with our company)
as the Incentive Plan administrator may determine appropriate. RSUs may be settled in cash, shares of Class A common stock or a
combination of the foregoing, as determined by the Incentive Plan administrator on the grant date. The Incentive Plan administrator
will determine whether participants holding shares of restricted stock or RSUs are entitled to receive dividends and other distributions
paid with respect to those shares during the period of restriction, prior to the time such shares are reflected as outstanding
shares on RGS Energy’s stock ledger.
Performance Grants
. Performance grants are grants of cash,
shares of Class A common stock, or other consideration such as other of our company’s securities or property or a combination
thereof that is paid based on the performance of the holder, our company, one or more of our subsidiaries, divisions or units,
or any combination thereof. The award of a performance grant entitles the recipient to receive a specified amount determined by
the Incentive Plan administrator, if the terms and conditions specified in the Incentive Plan and the award, including performance
objectives which must be set within the first 90 days of any performance period, are satisfied. Payment of any amount with respect
to a performance grants will be made by RGS Energy as promptly as practicable after the end of the award period specified in the
award or at such other time or times as the Incentive Plan administrator may determine, and may be made in cash, shares of Class
A common stock, other securities or property of RGS Energy, or any combination thereof or in such other manner, as determined by
the Incentive Plan administrator in its discretion.
Additional Information
Under the Incentive Plan,
if any change in the outstanding shares of Class A common stock occurs by reason of a stock split, reverse stock split, stock dividend,
recapitalization, combination, reclassification or other distribution of the Class A common stock without our receipt of consideration,
then the number of shares of Class A common stock underlying and the exercise price of any outstanding awards shall be proportionately
adjusted. If any change in the outstanding shares of Class A common stock occurs by reason of any split-up, split-off, spin-off,
merger, rights offering, reorganization, sale by us of all of our assets, distribution to shareholders (other than a stock split,
stock dividend or a normal cash dividend on the Class A common stock) or other extraordinary or unusual event (other than a stock
split or stock dividend on the Class A common stock as provided above), then, unless otherwise provided in an individual award
agreement, our compensation committee shall make an equitable adjustment in the terms of any outstanding award or in the number
of shares of Class A common stock available for awards.
The Incentive Plan permits
the Incentive Plan administrator to determine whether it is advisable for us or any of our affiliates to provide financing in connection
with the exercise of an award and the payment of related taxes, or to assist in obtaining financing from a bank or other third
party in this regard. Such assistance may take any form permitted by applicable law and be on such terms as the Incentive Plan
administrator considers appropriate, which may include a direct loan, a guaranty of the obligation to a third party or the maintenance
by us or any of our affiliates of deposits with a bank or third party.
The Incentive Plan administrator
may permit payment of taxes required to be withheld with respect to an award in any appropriate manner, which may include by the
surrender to us of shares of Class A common stock owned by such person or that would otherwise be distributed, or have been distributed,
as the case may be, pursuant to such award.
Generally, no awards under
the Incentive Plan may be assigned or transferred in whole or in part, either directly or by operation of law or otherwise (except
in the event of a holder’s death), although the Incentive Plan administrator may approve transfers of awards to certain permitted
transferees as defined under the Incentive Plan.
The expenses of the Incentive Plan are borne
by us. The Incentive Plan will terminate upon the earlier of the adoption of a resolution by the board of directors terminating
the Incentive Plan or ten years following the effective date, unless extended by action of the board of directors for up to an
additional five years for the grant of awards other than incentive stock options. The board of directors may amend the Incentive
Plan at any time and from time to time for any purpose consistent with the goals of the Incentive Plan. However, if failure to
obtain shareholder approval would adversely affect compliance of the Incentive Plan with Rule 16b-3 promulgated under the Exchange
Act, or other applicable law or regulation, no amendment will be effective unless and until approved by shareholders.
Benefits Under the Amended
Incentive Plan
The benefits that will
be awarded or paid under the amended Incentive Plan are not currently determinable. Awards granted under the amended Incentive
Plan are within the discretion of the Incentive Plan administrator, and the administrator has not determined future awards or who
might receive them.
Equity Compensation Plan Information
The following table summarizes equity compensation plan information
for our Class A common stock as of December 31, 2016:
|
|
|
Number of securities
to be issued upon
exercise of
outstanding options
and rights
|
|
|
Weighted average
exercise
price of
outstanding options, and
rights
|
|
|
Number of securities
remaining available for
future issuance under
equity compensation plans
|
|
|
Equity compensation plans approved by security holders
|
|
|
205
|
|
|
$
|
15,880
|
|
|
|
52,331
|
|
U.S. Federal Income Tax Consequences
The following is a summary
of the principal current U.S. federal income tax consequences of transactions under the Incentive Plan. This summary does not describe
all federal tax consequences under the Incentive Plan, nor does it describe state, local or foreign tax consequences.
Incentive Stock Options
.
No taxable income is realized by the employee upon the grant or exercise of an incentive stock option. However, the exercise of
an incentive stock option may result in alternative minimum tax liability for the employee. If the employee does not dispose of
the shares of Class A common stock received upon exercise of an incentive stock option within two years from the date of grant
(or within one year after the transfer of such shares of Class A common stock to the employee), then upon sale of such shares of
Class A common stock, any amount realized in excess of the exercise price will be taxed to the employee as a long-term capital
gain and any loss sustained will be a long-term capital loss. In that case, no deduction will be allowed to RGS Energy for U.S.
federal income tax purposes.
If the shares of Class
A common stock acquired upon the exercise of an incentive stock option are disposed of prior to the expiration of the two-year
and one-year holding periods described above, generally the employee will realize ordinary income in the year of disposition. The
ordinary income will equal the amount of the excess (if any) of the fair market value of the shares of Class A common stock at
exercise (or, if less, the amount realized on an arms’ length sale of such shares of Class A common stock) over the exercise
price thereof, and RGS Energy will be entitled to deduct such amount. Any further gain realized will be taxed as short-term or
long-term capital gain and will not result in any deduction by RGS Energy. Special rules may apply where all or a portion of the
exercise price of the incentive stock option is paid by tendering shares of Class A common stock.
If an incentive stock option
is exercised at a time when it does not qualify for the tax treatment described above, the option is treated as a nonqualified
stock option. Generally, an incentive stock option will not be eligible for the tax treatment described above if it is exercised
more than three months following termination of employment (one year following termination of employment by reason of permanent
and total disability), except in certain cases where the incentive stock option is exercised after the death of an employee.
Nonqualified Options
. No income is realized
by the employee at the time a nonqualified stock option is granted under the Incentive Plan. Generally, at exercise, ordinary income
is realized by the employee in an amount equal to the difference between the option price and the fair market value of the shares
of Class A common stock on the date of exercise, and RGS Energy receives a tax deduction for the same amount. At disposition, appreciation
or depreciation after the date of exercise is treated as either short-term or long-term capital gain or loss, depending on how
long the shares of Class A common stock have been held.
Vote Required
Approval of this Proposal
1 requires the affirmative vote of a majority of the votes cast “FOR” or “AGAINST” the proposal. For purposes
of determining the number of votes cast on the matter, only those cast “FOR” or “AGAINST” are included,
while abstentions and broker non-votes are not included.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” APPROVING THE AMENDMENT TO THE REAL GOODS SOLAR, INC. 2008 LONG-TERM INCENTIVE PLAN
OTHER MATTERS
Generally, Colorado law provides that only business
within the purpose or purposes descried in the notice for a special meeting of shareholders may be conducted as such special meeting.
Our management does not intend to present, and has no information as of the date of preparation of this proxy statement that others
will present, any business at the special meeting, other than business pertaining to matters set forth in the notice of special
meeting and this proxy statement. However, if other matters requiring the vote of the shareholders properly come before the special
meeting, it is the intention of the persons named in the enclosed proxy to vote the proxies held by them in accordance with their
best judgment on such matters.
YOUR VOTE IS IMPORTANT
WE URGE YOU TO DATE, SIGN AND PROMPTLY RETURN YOUR PROXY, OR TO
VOTE BY THE INTERNET OR BY TELEPHONE PROMPTLY, SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES.
ANNEX A
REAL GOODS SOLAR, INC. 2008 LONG-TERM INCENTIVE
PLAN
AMENDED AND RESTATED APRIL 5, 2017, SUBJECT
TO APPROVAL BY SHAREHOLDERS
Section 1. Purpose.
The purpose of
this Plan is to advance the interests of Real Goods and its shareholders by providing incentives to certain Eligible Persons (as
defined below) who contribute significantly to the strategic and long-term performance objectives and growth of the Company.
Section 2. Definitions.
Certain capitalized
terms applicable to this Plan are set forth in Appendix A.
Section 3. Administration.
The Committee
shall administer this Plan and shall have all the powers vested in it by the terms of this Plan, such powers to include exclusive
authority to select the Eligible Persons to be granted Awards under this Plan, to determine the type, size, terms and conditions
of the Award to be made to each Eligible Person selected, to modify or waive the terms and conditions of any Award that has been
granted, to determine the time when Awards will be granted, to establish performance objectives, to make any adjustments necessary
or desirable as a result of the granting of Awards to Eligible Persons located outside the United States and to prescribe the form
of the agreements evidencing Awards made under this Plan. Awards may, in the discretion of the Committee, be made under this Plan
in assumption of, or in substitution for, outstanding Awards previously granted by the Company, or an entity acquired by the Company
or with which the Company combines. The number of Class A Shares underlying such substitute Awards shall be counted against the
aggregate number of shares of Class A Shares available for Awards under this Plan. The Committee is authorized to interpret this
Plan and the Awards granted under this Plan, to establish, amend and rescind any rules and regulations relating to this Plan, and
to make any other determinations that it deems necessary or desirable for the administration of this Plan. The Committee may correct
any defect or supply any omission or reconcile any inconsistency in this Plan or in any Award in the manner and to the extent the
Committee deems necessary or desirable to carry it into effect. Any decision of the Committee in the interpretation and administration
of this Plan, as described in this Plan, shall lie within its sole and absolute discretion and shall be final, conclusive and binding
on all parties concerned. The Committee may act only by a majority of its members in office, except that the Committee may authorize
any one or more of its members or any officer of the Company to execute and deliver documents or to take any other ministerial
action on behalf of the Committee with respect to Awards made to Participants or to be made to Eligible Persons. Notwithstanding
the foregoing or any other provision of this Plan, the Committee shall not have the authority to accelerate the time or schedule
of any payment in a manner which is not permitted under Code Section 409A, or to grant or amend any Award in any manner which would
result in an inclusion of any amount in gross income under Code Section 409A(a)(1). No member of the Committee and no officer of
the Company shall be liable for anything done or omitted to be done by such member or officer, by any other member of the Committee
or by any officer of the Company in connection with the performance of duties under this Plan, except for such member’s or
officer’s own willful misconduct or as expressly provided by law. In addition to all other rights of indemnification and
reimbursement to which a member of the Committee and an officer of the Company may be entitled, Real Goods shall indemnify and
hold harmless each such member or officer who was or is a party or is threatened to be made a party to any threatened, pending
or completed proceeding or suit in connection with the performance of duties under this Plan against expenses (including reasonable
attorneys’ fees), judgments, fines, liabilities, losses and amounts paid in settlement actually and reasonably incurred by
him in connection with such proceeding or suit, except for his own willful misconduct or as expressly provided otherwise by law.
Expenses (including reasonable attorneys’ fees) incurred by such a member or officer in defending any such proceeding or
suit shall be paid by Real Goods in advance of the final disposition of such proceeding or suit upon receipt of a written affirmation
by such member or officer of his good faith belief that he has met the standard of conduct necessary for indemnification and a
written undertaking by or on behalf of such member or officer to repay such amount if it shall ultimately be determined that he
is not entitled to be indemnified by Real Goods as authorized in this Section.
Section 4. Participation.
Consistent with the purposes of
this Plan, the Committee shall have exclusive power to select the Eligible Persons who may participate in this Plan and be granted
Awards under this Plan. Eligible Persons may be selected individually or by groups or categories, as determined by the Committee
in its discretion.
Section 5. Awards under this Plan.
(a)
Types of Awards
. Awards under
this Plan may include, but need not be limited to, one or more of the following types, either alone or in any combination thereof:
(i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Restricted Stock Units, (v) Performance Grants
and (vi) any other type of Award deemed by the Committee in its discretion to be consistent with the purposes of this Plan (including,
but not limited to, Awards of or options or similar rights granted with respect to unbundled stock units or components thereof,
and Awards to be made to Participants who are foreign nationals or are employed or performing services outside the United States).
(b)
Maximum Number of Shares that May be
Issued.
The maximum aggregate number of Class A Shares that may be issued and outstanding, or subject to Awards outstanding,
under the Plan cannot exceed 1,900,000 Class A Shares, subject to adjustment as provided in Section 15. No Eligible Person may
receive Awards under this Plan for more than 500,000 Class A Shares in any one fiscal year of the Company, subject to adjustment
as provided in Section 15. Class A Shares issued pursuant to this Plan may be either authorized but unissued shares, treasury shares,
reacquired shares or any combination thereof. If any Class A Shares issued as Restricted Stock, Restricted Stock Units or otherwise
subject to repurchase or forfeiture rights are reacquired by the Company pursuant to such rights or, if any Award is canceled,
terminates or expires unexercised, any Class A Shares that would otherwise have been issuable pursuant thereto will be available
for issuance under new Awards.
(c)
Rights with Respect to Class A Shares
and Other Securities
. Except as provided in subsection 8(c) with respect to Awards of Restricted Stock and unless otherwise
determined by the Committee in its discretion, a Participant to whom an Award is made (and any person succeeding to such a Participant’s
rights pursuant to this Plan) shall have no rights as a shareholder with respect to any Class A Shares or as a holder with respect
to other securities, if any, issuable pursuant to any such Award until the date of the issuance of a book entry or stock certificate
to such Participant for such Class A Shares or other instrument of ownership, if any. Except as provided in Section 15, no adjustment
shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities,
other property or other forms of consideration, or any combination thereof) for which the record date is prior to the date such
book entry or stock certificate or other instrument of ownership, if any, is required to be issued based upon the date any Award
was exercised. In all events, a Participant with whom an Award agreement is made to issue Class A Shares in the future shall have
no rights as a shareholder with respect to such Class A Shares related to such agreement until issuance to such Participant of
a book entry or stock certificate representing such shares.
Section 6. Stock Options.
The Committee
may sell Purchased Options or grant other Stock Options either alone, or in conjunction with other Awards, either at the time of
grant or by amendment thereafter; provided that an Incentive Stock Option may be granted only to Eligible Persons who are employees
of Real Goods (or any parent or subsidiary of Real Goods) and who have other Awards only to the extent that such other Awards do
not disqualify the Incentive Stock Option’s status as such under the Code. Each Stock Option granted or sold under this Plan
shall be evidenced by an agreement in such form as the Committee shall prescribe from time to time in accordance with this Plan
and shall comply with the applicable terms and conditions of this Plan, and with such other terms and conditions, including, but
not limited to, restrictions upon the Stock Option or the Class A Shares issuable upon exercise thereof, as the Committee, in its
discretion, shall establish.
(a) The exercise price of a Stock Option may
be equal to or greater than the Fair Market Value of the Class A Shares subject to such Stock Option at the time the Stock Option
is granted, as determined by the Committee; provided, however, that in the case of an Incentive Stock Option granted to a Ten Percent
Employee, such exercise price shall not be less than 110% of such Fair Market Value at the time the Stock Option is granted.
(b) The Committee shall determine the number
of Class A Shares to be subject to each Stock Option. In the case of a Stock Option awarded in conjunction with another Award,
the number of Class A Shares subject to an outstanding Stock Option may be reduced on an appropriate basis to the extent that the
other Award has been exercised, paid to or otherwise received by the Participant, as determined by the Committee.
(c) Any Stock Option may be exercised during
its term only at such time or times and in such installments as the Committee may establish.
(d) A Stock Option shall not be exercisable:
(i) in the case of any Incentive Stock Option granted to a Ten Percent
Employee, after the expiration of five years from the date it is granted, and, in the case of any other Stock Option, after the
expiration of ten years from the date it is granted; and
(ii) unless payment in full is made for the
shares being acquired thereunder at the time of exercise as provided in subsection 6(i).
(e) The Committee shall determine in its discretion
and specify in each agreement evidencing a Stock Option the effect, if any, the termination of the Participant’s employment
with or performance of services for the Company shall have on the exercisability of the Stock Option; provided, however, that an
Incentive Stock Option shall not be exercisable at a time that is beyond the time an Incentive Stock Option may be exercised in
order to qualify as such under the Code and provided, further, that if a Participant’s employment is terminated for a reason
other than “cause” (as defined in such Participant’s Award agreement or employment agreement, if any), then such
Participant’s right to exercise his or her Stock Options (to the extent that the Participant is entitled to exercise on the
date employment terminates) shall continue until the earlier of the option expiration date or (i) at least six (6) months from
the date of termination if termination was caused by death or disability and (ii) at least thirty (30) days from the date of termination
if termination was caused by other than death or disability.
(f) It is the intent of Real Goods that Nonqualified
Stock Options granted under this Plan not be classified as Incentive Stock Options, that the Incentive Stock Options granted under
this Plan be consistent with and contain or be deemed to contain all provisions required under Section 422 and the other appropriate
provisions of the Code and any implementing regulations (and any successor provisions thereof), and that any ambiguities in construction
shall be interpreted in order to effectuate such intent. If a Stock Option is intended to be an Incentive Stock Option, and if
for any reason such Stock Option (or portion thereof) shall fail to qualify as an Incentive Stock Option, then, to the extent of
such failure, such Stock Option (or portion thereof) shall be regarded as a Nonqualified Stock Option granted under this Plan;
provided, that, such Stock Option (or portion thereof) otherwise complies with this Plan’s requirements relating to Nonqualified
Stock Options. In no event shall any member of the Committee or the Company (or its employees, officers or directors) have any
liability to any Participant (or any other person) due to the failure of a Stock Option to qualify for any reason as an Incentive
Stock Option.
(g) A Purchased Option may contain such additional
terms not inconsistent with this Plan, including but not limited to the circumstances under which the purchase price of such Purchased
Option may be returned to the holder of the Purchased Option, as the Committee may determine in its sole discretion.
(h) For purposes of payments made to exercise Stock Options, such
payment shall be made in such form (including, but not limited to, cash, Class A Shares, the surrender of all or part of an Award
or another outstanding Award under this Plan or any combination thereof) as the Committee may determine in its discretion.
Section 7. Stock Appreciation Rights.
The Committee may grant Stock Appreciation Rights either alone, or in conjunction with other Awards, either at the time of grant
or by amendment thereafter. Each Award of Stock Appreciation Rights granted under this Plan shall be evidenced by an agreement
in such form as the Committee shall prescribe from time to time in accordance with this Plan and shall comply with the applicable
terms and conditions of this Plan, and with such other terms and conditions, including, but not limited to, restrictions upon the
Award of Stock Appreciation Rights or the Class A Shares issuable upon exercise thereof, as the Committee, in its discretion, shall
establish.
(a) The Committee shall determine the number
of Class A Shares to be subject to each Award of Stock Appreciation Rights. In the case of an Award of Stock Appreciation Rights
awarded in conjunction with another Award, the number of Class A Shares subject to an outstanding Award of Stock Appreciation Rights
may be reduced on an appropriate basis to the extent that the other Award has been exercised, paid to or otherwise received by
the Participant, as determined by the Committee.
(b) The Committee shall determine in its discretion and specify
in each agreement evidencing an Award of Stock Appreciation Rights the effect, if any, the termination of the Participant’s
employment with or performance of services for the Company shall have on the exercisability of the Award of Stock Appreciation
Rights.
(c) An Award of Stock Appreciation Rights
shall entitle the holder to exercise such Award or to surrender unexercised another Award (or any portion of such other Award)
to Real Goods and to receive from Real Goods in exchange thereof, without payment to Real Goods, that number of Class A Shares
having an aggregate value equal to (or, in the discretion of the Committee, less than) the excess of the Fair Market Value of one
share, at the time of such exercise, over the exercise price, times the number of shares subject to the Award, or portion thereof,
that is so exercised or surrendered, as the case may be. The Committee shall be entitled in its discretion to elect to settle the
obligation arising out of the exercise of a Stock Appreciation Right by the payment of cash or Other Real Goods Securities or property,
or other forms of payment or any combination thereof, as determined by the Committee, equal to the aggregate value of the Class
A Shares it would otherwise be obligated to deliver. Any such election by the Committee shall be made as soon as practicable after
the receipt by the Committee of written notice of the exercise of the Stock Appreciation Right.
(d) A Stock Appreciation Right may provide
that it shall be deemed to have been exercised at the close of business on the business day preceding the expiration date of the
Stock Appreciation Right or of the related Stock Option (or other Award), or such other date as specified by the Committee, if
at such time such Stock Appreciation Right has a positive value. Such deemed exercise shall be settled or paid in the same manner
as a regular exercise thereof as provided in subsection 7(d) of this Agreement.
Section 8. Restricted Stock and Restricted
Stock Units.
The Committee may grant Awards of Restricted Stock and Restricted Stock Units either alone, or in conjunction
with other Awards, either at the time of grant or by amendment thereafter. Each Award of Restricted Stock or Restricted Stock Units
under this Plan shall be evidenced by an agreement in such form as the Committee shall prescribe from time to time in accordance
with this Plan and shall comply with the applicable terms and conditions of this Section and this Plan, and with such other terms
and conditions as the Committee, in its discretion, shall establish.
(a) The Committee shall determine the number
of Class A Shares to be issued to a Participant pursuant to the Award of Restricted Stock or Restricted Stock Units, and the extent,
if any, to which they shall be issued in exchange for cash, other consideration, or both.
(b) Until the expiration of such period as
the Committee shall determine from the date on which the Award is granted and subject to such other terms and conditions as the
Committee in its discretion shall establish (the “
Restricted Period
”), a Participant to whom an Award of Restricted
Stock is made shall be issued, but shall not be entitled to the delivery of, a book entry or stock certificate representing the
Class A Shares subject to such Award.
(c) Unless otherwise determined by the Committee
in its discretion, a Participant to whom an Award of Restricted Stock has been made (and any person succeeding to such a participant’s
rights pursuant to this Plan) shall have, after issuance of a certificate for the number of Class A Shares awarded and prior to
the expiration of the Restricted Period, ownership of such Class A Shares, including the right to vote such Class A Shares and
to receive dividends or other distributions made or paid with respect to such Class A Shares (provided that such Class A Shares,
and any new, additional or different shares, or Other Real Goods Securities or property, or other forms of consideration that the
Participant may be entitled to receive with respect to such Class A Shares as a result of a stock split, stock dividend or any
other change in the corporation or capital structure of Real Goods, shall be subject to the restrictions set forth in this Plan
as determined by the Committee in its discretion), subject, however, to the options, restrictions and limitations imposed thereon
pursuant to this Plan.
(d) The Committee shall determine in its discretion
and specify in each agreement evidencing an Award of Restricted Stock or Restricted Stock Units the effect, if any, the termination
of the Participant’s employment with or performance of services for the Company during the Restricted Period shall have on
such Award of Restricted Stock.
(e) The Committee may grant Awards of Dividend
Equivalents to Participants in connection with Awards of Restricted Stock Units. The Committee may provide, at the date of grant
or thereafter, that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in
additional Class A Shares, or other investment vehicles as the Committee may specify; provided that, unless otherwise determined
by the Committee, Dividend Equivalents shall be subject to all conditions and restrictions of the underlying Restricted Stock Units
to which they relate.
Section 9. Performance Grants.
The Committee may grant Awards
of Performance Grants either alone, or in conjunction with other Awards, either at the time of grant or by amendment thereafter.
The Award of a Performance Grant to a Participant will entitle him to receive a specified amount determined by the Committee (the
“
Actual Value
”), if the terms and conditions specified in this Plan and in the Award are satisfied. Each Award
of a Performance Grant shall be subject to the applicable terms and conditions of this Plan, and to such other terms and conditions,
including but not limited to, restrictions upon any cash, Class A Shares, Other Real Goods Securities or property, or other forms
of payment, or any combination thereof, issued with respect to the Performance Grant, as the Committee, in its discretion, shall
establish, and shall be embodied in an agreement in such form and substance as is determined by the Committee.
(a) The Committee shall determine the value
or range of values of a Performance Grant to be awarded to each Participant selected for an Award and whether or not such a Performance
Grant is granted in conjunction with another Award. As determined by the Committee, the maximum value of each Performance Grant
(the “
Maximum Value
”) shall be: (i) an amount fixed by the Committee at the time the Award is made or amended
thereafter, (ii) an amount that varies from time to time based in whole or in part on the then current value of the Class A Shares,
Other Real Goods Securities or property, or other securities or property, or any combination thereof or (iii) an amount that is
determinable from criteria specified by the Committee. Performance Grants may be issued in different classes or series having different
names, terms and conditions. In the case of a Performance Grant awarded in conjunction with another Award, the Performance Grant
may be reduced on an appropriate basis to the extent that the other Award has been exercised, paid to or otherwise received by
the Participant, as determined by the Committee.
(b) The award period (“
Award Period
”)
related to any Performance Grant shall be a period determined by the Committee. At the time each Award is made or within the first
90 days of any performance period, the Committee shall establish performance objectives to be attained within the Award Period
as the means of determining the Actual Value of such a Performance Grant. The performance objectives shall be based on such measure
or measures of performance, which may include, but need not be limited to, the performance of the Participant, the Company or one
or more of its divisions or units, or any combination of the foregoing, as the Committee shall determine, and may be applied on
an absolute basis or be relative to industry or other indices or any combination thereof. The Actual Value of a Performance Grant
shall be equal to its Maximum Value only if the performance objectives are attained in full, but the Committee shall specify the
manner in which the Actual Value of Performance Grants shall be determined if the performance objectives are met in part. Such
performance measures, the Actual Value or the Maximum Value, or any combination thereof, may be adjusted in any manner by the Committee
in its discretion at any time and from time to time during or as soon as practicable after the Award Period, if it determines that
such performance measures, the Actual Value or the Maximum Value, or any combination thereof, are not appropriate under the circumstances.
(c) The Committee shall determine in its discretion
and specify in each agreement evidencing a Performance Grant the effect, if any, the termination of the Participant’s employment
with or performance of services for the Company during the Award Period shall have on such Performance Grant.
(d) The Committee shall determine whether the
conditions of a Performance Grant have been met and, if so, shall ascertain the Actual Value of the Performance Grant. If the Performance
Grant has no Actual Value, the Award and such Performance Grant shall be deemed to have been canceled and the associated Award,
if any, may be canceled or permitted to continue in effect in accordance with its terms. If the Performance Grant has any Actual
Value and:
(i) was not awarded in conjunction with another
Award, the Committee shall cause an amount equal to the Actual Value of the Performance Grant earned by the Participant to be paid
to him or his permitted assignee or Beneficiary; or
(ii) was awarded in conjunction with another
Award, the Committee shall determine, in accordance with criteria specified by the Committee (A) to cancel the Performance Grant,
in which event no amount with respect thereto shall be paid to the Participant or his permitted assignee or Beneficiary, and the
associated Award may be permitted to continue in effect in accordance with its terms, (B) to pay the Actual Value of the Performance
Grant to the Participant or his permitted assignee or Beneficiary as provided below, in which event the associated Award may be
canceled or (C) to pay to the Participant or his Beneficiary, the Actual Value of only a portion of the Performance Grants, in
which event all or a portion of the associated Award may be permitted to continue in effect in accordance with its terms or be
canceled, as determined by the Committee.
Such determination by the Committee shall be made as promptly as
practicable following the end of the Award Period or upon the earlier termination of employment or performance of services, or
at such other time or times as the Committee shall determine, and shall be made pursuant to criteria specified by the Committee.
(e) Payment of any amount with respect to
the Performance Grants that the Committee determines to pay as provided above shall be made by Real Goods as promptly as practicable
after the end of the Award Period or at such other time or times as the Committee shall determine, and may be made in cash, Class
A Shares, Other Real Goods Securities or property, or other forms of payment, or any combination thereof or in such other manner,
as determined by the Committee in its discretion. Notwithstanding anything in this Section to the contrary, the Committee may,
in its discretion, determine and pay out the Actual Value of the Performance Grants at any time during the Award Period.
Section 10. Deferral of Compensation.
The Committee shall determine whether or not an Award shall be made in conjunction with the deferral of the Participant’s
salary, bonus or other compensation, or any combination thereof, and whether or not such deferred amounts may be:
(i) forfeited to Real Goods or to other Participants
or any combination thereof, under certain circumstances (which may include, but need not be limited to, certain types of termination
of employment or performance of services for the Company);
(ii) subject to increase or decrease in value
based upon the attainment of or failure to attain, respectively, certain performance measures; and/or
(iii) credited with income equivalents (which
may include, but need not be limited to, interest, dividends or other rates of return) until the date or dates of payment of the
Award, if any.
Notwithstanding the foregoing or any other
provision of this Plan, any deferral of compensation under this Section 10 must comply with the provisions of Code Section 409A,
and no deferral of compensation under this Section 10 which would result in an inclusion of any amount in gross income under Code
Section 409A(a)(1) is permitted.
Section 11. Deferred Payment of Awards.
The Committee may specify that the payment of all or any portion of cash, Class A Shares, Other Real Goods Securities or property,
or any other form of payment, or any combination thereof, under an Award shall be deferred until a later date. Deferrals shall
be for such periods or until the occurrence of such events, and upon such terms, as the Committee shall determine in its discretion,
provided however, that any such deferral shall comply with the requirements of Code Section 409A. Deferred payments of Awards may
be made by undertaking to make payment in the future based upon the performance of certain investment equivalents (which may include,
but need not be limited to, government securities, Class A Shares, other securities, property or consideration, or any combination
thereof), together with such additional amounts of income equivalents (which may be compounded and may include, but need not be
limited to, interest, dividends or other rates of return or any combination thereof) as may accrue thereon until the date or dates
of payment, such investment equivalents and such additional amounts of income equivalents to be determined by the Committee in
its discretion.
Section 12. Transferability of Awards.
A Participant’s rights and interest under this Plan or any Award may not be assigned or transferred, hypothecated or encumbered
in whole or in part either directly or by operation of law or otherwise, including, but not by way of limitation, execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner; provided, however, the Committee may permit such transfer to
a Permitted Transferee; and provided, further, that, unless otherwise permitted by the Code, any Incentive Stock Option granted
pursuant to this Plan shall not be transferable other than by will, by the laws of descent and distribution, and shall be exercisable
during the Participant’s lifetime only by Participant or by such Permitted Transferee.
Section 13. Amendment or Substitution of Awards under this Plan.
The terms of any outstanding Award under this Plan may be amended or modified from time to time by the Committee in its discretion
in any manner that it deems appropriate (including, but not limited to, acceleration of the date of exercise of any Award and/or
payments thereunder and repricing of any Award) if the Committee could grant such amended or modified Award under the terms of
this Plan at the time of such amendment or modification; provided that no such amendment or modification shall adversely affect
in a material manner any right of a Participant under the Award without such Participant’s written consent, unless the Committee
determines in its discretion that there have occurred or are about to occur significant changes in the Participant’s position,
duties or responsibilities, or significant changes in economic, legislative, regulatory, tax, accounting or cost/benefit conditions
that are determined by the Committee in its discretion to have or to be expected to have a substantial effect on the performance
of the Company, or any affiliate, division or department thereof, on this Plan or on any Award under this Plan and provided further
that the Committee shall not have the authority to accelerate the time or schedule of any payment in a manner which is not permitted
under Code Section 409A, or to grant or amend any Award in any manner which would result in an inclusion of any amount in gross
income under Code Section 409A(a)(1). The Committee may, in its discretion, permit holders of Awards under this Plan to surrender
outstanding Awards in order to exercise or realize the rights under other Awards, or in exchange for the grant of new Awards, or
require holders of Awards to surrender outstanding Awards as a condition precedent to the grant of new Awards under this Plan.
Section 14. Termination of a Participant.
For all purposes under this Plan, the Committee shall determine whether a Participant has terminated employment with, or the performance
of services for, the Company, provided, however, an absence or leave approved by the Company, to the extent permitted by applicable
provisions of the Code, shall not be considered an interruption of employment or performance of services for any purpose under
this Plan.
Section 15. Dilution and Other Adjustments.
If any change in the outstanding Class A Shares of the Company occurs by reason of any stock split, reverse stock split, stock
dividend, split-up, split-off, spin-off, recapitalization, merger, consolidation, rights offering, reorganization, combination,
subdivision or exchange of shares, any distribution to shareholders other than a normal cash dividend, or other extraordinary or
unusual event, the Committee shall make such adjustment in: (i) the aggregate number of shares that may be delivered under the
Plan as described in Section 5(b) and the individual Award maximums under Section 5(b); (ii) the number and exercise price of outstanding
Stock Options and outstanding Stock Appreciation Rights; (iii) the number of outstanding Restricted Stock Units; and (iv) the number
of shares subject to any other Awards granted under the Plan (provided that the number of shares subject to Awards shall always
be a whole number), in each case as may be determined to be appropriate by the Committee, and such adjustments shall be final,
conclusive and binding for all purposes of the Plan. The Committee may also provide for the adjustment and settlement of outstanding
Awards as it deems appropriate and consistent with the Plan’s purpose in the event of a change in control of Real Goods,
and such adjustments or settlements shall be final, conclusive and binding for all purposes of the Plan.
Section 16. Designation of Beneficiary
by Participant.
A Participant may name a beneficiary to receive any payment to which such Participant may be entitled with
respect to any Award under this Plan in the event of death, on a written form to be provided by and filed with the Committee, and
in a manner determined by the Committee in its discretion (a “
Beneficiary
”). The Committee reserves the right
to review and approve Beneficiary designations. A Participant may change his Beneficiary from time to time in the same manner,
unless such Participant has made an irrevocable designation. Any designation of a Beneficiary under this Plan (to the extent it
is valid and enforceable under applicable law) shall be controlling over any other disposition, testamentary or otherwise, as determined
by the Committee in its discretion. If no designated Beneficiary survives the Participant and is living on the date on which any
amount becomes payable to such a Participant’s Beneficiary, such payment will be made to the legal representatives of the
Participant’s estate, and the term “Beneficiary” as used in this Plan shall be deemed to include such person
or persons. If there are any questions as to the legal right of any Beneficiary to receive a distribution under this Plan, the
Committee in its discretion may determine that the amount in question be paid to the legal representatives of the estate of the
Participant, in which event the Company, the Board, the Committee, the Designated Administrator (if any), and the members thereof,
will have no further liability to anyone with respect to such amount.
Section 17. Financial Assistance.
If
the Committee determines that such action is advisable, the Company may assist any Participant in obtaining financing from the
Company (or under any program of the Company approved pursuant to applicable law), or from a bank or other third party, on such
terms as are determined by the Committee, and in such amount as is required to accomplish the purposes of this Plan, including,
but not limited to, to permit the exercise of an Award, the participation therein, and/or the payment of any taxes with respect
thereto. Such assistance may take any form that the Committee deems appropriate, including, but not limited to, a direct loan from
the Company, a guarantee of the obligation by the Company or the maintenance by the Company of deposits with such bank or third
party.
Section 18. Miscellaneous Provisions.
(a) Any proceeds from Awards shall constitute
general funds of Real Goods.
(b) Except as otherwise determined by the
Committee, no fractional shares may be delivered under an Award, but in lieu thereof a cash or other adjustment may be made as
determined by the Committee in its discretion.
(c) No Eligible Person or other person shall have any claim or right
to be granted an Award under this Plan. Determinations made by the Committee under this Plan need not be uniform and may be made
selectively among Eligible Persons under this Plan, whether or not such Eligible Persons are similarly situated. Neither this Plan
nor any action taken hereunder shall be construed as giving any Eligible Person any right to continue to be employed by or perform
services for the Company, and the right to terminate the employment of or performance of services by Eligible Persons at any time
and for any reason is specifically reserved.
(d) No Participant or other person shall have
any right with respect to this Plan, the Class A Shares reserved for issuance under this Plan or in any Award, contingent or otherwise,
until written evidence of the Award shall have been delivered to the recipient and all the terms, conditions and provisions of
this Plan and the Award applicable to such recipient (and each person claiming under or through him) have been met.
(e) No Class A Shares, Other Company Securities,
other securities or property or other forms of payment shall be issued hereunder with respect to any Award unless counsel for Real
Goods shall be satisfied that such issuance will be in compliance with applicable law and any applicable rules of any stock exchange
or other market quotation system on which Class A Shares are listed.
(f) It is the intent of Real Goods that this
Plan comply in all respects with any applicable provisions of Rule 16b-3 and Section 162(m) with respect to Awards granted to executive
officers of Real Goods, that any ambiguities or inconsistencies in construction of this Plan be interpreted to give effect to such
intention and that if any provision of this Plan is found not to be in compliance with any applicable provisions of Rule 16b-3
or Section 162(m), such provision shall be deemed null and void with respect to Awards granted to executive officers of the Company
to the extent required to permit such Awards to comply with Rule 16b-3 and Section 162(m). It is also the intent of Real Goods
that this Plan comply in all respects with the provisions of the Code providing favorable treatment to Incentive Stock Options,
that any ambiguities or inconsistencies in construction of this Plan be interpreted to give effect to such intention and that if
any provision of this Plan is found not to be in compliance with the Incentive Stock Option provisions of the Code, such provision
shall be deemed null and void with respect to Incentive Stock Options granted to employees of Real Goods (or any parent or subsidiary
of Real Goods) to the extent required to permit such Incentive Stock Options to receive favorable treatment under the Code. It
is the intent of Real Goods that this Plan comply in all respects with any applicable provisions of Code Section 409A with respect
to Awards granted under this plan and any amendment or revision of such Awards, that any ambiguities or inconsistencies in construction
of this Plan be interpreted to give effect to such intention and that if any provision of this Plan is found not to be in compliance
with any applicable provisions of Code Section 409A such Plan provision shall be deemed null and void to the extent required to
permit such Awards to comply with any applicable provisions of Code Section 409A. Specifically, the Committee shall not have the
authority to accelerate the time or schedule of any payment in a manner which is not permitted under Code Section 409A or the regulations
issued thereunder, or to grant or amend any Award in any manner which would result in an inclusion of any amount in gross income
under Code Section 409A(a)(1).
(g) The Company shall have the right to deduct
from any payment made under this Plan any federal, state, local or foreign income or other taxes required by law to be withheld
with respect to such payment. It shall be a condition to any obligation of Real Goods to issue Class A Shares, Other Real Goods
Securities or property, other securities or property, or other forms of payment, or any combination thereof, upon exercise, settlement
or payment of any Award under this Plan, that the Participant (or any Beneficiary or person entitled to act) pay to Real Goods,
upon its demand, such amount as may be required by the Company for the purpose of satisfying any liability to withhold federal,
state, local or foreign income or other taxes. If the amount requested is not paid, Real Goods may refuse to issue Class A Shares,
Other Real Goods Securities or property, other securities or property, or other forms of payment, or any combination thereof. Notwithstanding
anything in this Plan to the contrary, the Committee may, in its discretion, permit a Participant (or any Beneficiary or person
entitled to act) to elect to pay a portion or all of the amount requested by the Company for such taxes with respect to such Award,
at such time and in such manner as the Committee shall deem to be appropriate (including, but not limited to, by authorizing Real
Goods to withhold, or agreeing to surrender to Real Goods on or about the date such tax liability is determinable, Class A Shares,
Other Real Goods Securities or property, other securities or property, or other forms of payment, or any combination thereof, owned
by such person or a portion of such forms of payment that would otherwise be distributed, or have been distributed, as the case
may be, pursuant to such Award to such person, having a Fair Market Value equal to the amount of such taxes).
(h) The expenses of this Plan shall be borne by Real Goods; provided,
however, Real Goods may recover from a Participant or his Beneficiary, heirs or assigns any and all damages, fees, expenses and
costs incurred by the Company arising out of any actions taken by a Participant in breach of this Plan or any agreement evidencing
such Participant’s Award.
(i) This Plan shall be unfunded. The Company
shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment
of any Award under this Plan, and rights to the payment of Awards shall be no greater than the rights of the Company’s general
creditors.
(j) By accepting any Award or other benefit
under this Plan, each Participant and each person claiming under or through such Participant shall be conclusively deemed to have
indicated his acceptance and ratification of, and consent to, any action taken under this Plan by the Company, the Board, the Committee
or the Designated Administrator (if applicable).
(k) The appropriate officers of the Company
shall cause to be filed any reports, returns or other information regarding Awards hereunder of any Class A Shares issued pursuant
hereto as may be required by applicable law and any applicable rules of any stock exchange or other market quotation system on
which Class A Shares are listed.
(l) The validity, construction, interpretation,
administration and effect of this Plan, and of its rules and regulations, and rights relating to this Plan and to Awards granted
under this Plan, shall be governed by the substantive laws, but not the choice of law rules, of the State of Colorado.
(m) Records of the Company shall be conclusive
for all purposes under this Plan or any Award, unless determined by the Committee to be incorrect.
(n) If any provision of this Plan or any Award
is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of this
Plan or any Award, but such provision shall be fully severable, and this Plan or Award, as applicable, shall be construed and enforced
as if the illegal or invalid provision had never been included in this Plan or Award, as applicable.
(o) The terms of this Plan shall govern all
Awards under this Plan and in no event shall the Committee have the power to grant any Award under this Plan that is contrary to
any of the provisions of this Plan.
(p) For purposes of interpretation of this
Plan, the masculine pronoun includes the feminine and the singular includes the plural wherever appropriate.
Section 19. Plan Amendment or Suspension.
This Plan may be amended or suspended in whole or in part at any time from time to time by the Board. No amendment of this Plan
shall adversely affect in a material manner any right of any Participant with respect to any Award previously granted without such
Participant’s written consent, except as permitted under Section 13.
Section 20. Plan Termination.
This
Plan shall terminate upon the earlier of the following dates or events to occur:
(a) the adoption of a resolution of the Board
terminating this Plan; or
(b) the close of business on the tenth anniversary
of the Effective Date; provided, however, that the Board may, prior to such date, extend the term of this Plan for an additional
period of up to five years for the grant of Awards other than Incentive Stock Options. No termination of this Plan shall materially
alter or impair any of the rights or obligations of any Participant, without such Participant’s consent, under any Award
previously granted under this Plan, except that subsequent to termination of this Plan, the Committee may make amendments or modifications
permitted under Section 13. Notwithstanding anything in this Plan to the contrary, the Committee shall not grant any Award pursuant
to this Plan after the tenth anniversary of the earlier to occur of (i) the date this Plan is adopted by the Board and (ii) the
Effective Date.
Section 21. Effective Date.
This Plan
shall be effective, and Awards may be granted under this Plan, on or after the Effective Date.
APPENDIX A
The following terms shall have the meaning
indicated:
“
Actual Value
” has the
meaning set forth in Section 9.
“
Award
” shall mean an award
of rights to an Eligible Person under this Plan.
“
Award Period
” has the
meaning set forth in subsection 9(b).
“
Beneficiary
” has the meaning
set forth in Section 16.
“
Board
” shall mean the
board of directors of Real Goods.
“
Class A Shares
” shall
mean shares of Class A Common Stock, par value $.0001 per share, of Real Goods and stock of any other class into which such shares
may thereafter be changed.
“
Code
” shall mean the Internal
Revenue Code of 1986, as it now exists or may be amended from time to time, and the rules and regulations promulgated thereunder,
as they may exist or may be amended from time to time.
“
Code Section 409A
” shall
mean Section 409A of the Code, any rules or regulations promulgated thereunder, as they may exist or may be amended from time to
time, and any successor to such section.
“
Committee
” shall mean
the person or persons responsible for administering this Plan. The Board shall constitute the Committee until the Board appoints
a Board Committee, after which time the Board Committee shall constitute the Committee, provided, however, that at any time the
Board may designate itself as the Committee or designate itself to administer certain of the Committee’s authority under
this Plan, including administering certain Awards under this Plan, subject to satisfying the requirements of Rule 16b-3 and Section
162(m), if applicable. The Board or the Board Committee may designate a Designated Administrator to constitute the Committee or
to administer certain of the Committee’s authority under this Plan, including administering certain Awards under this Plan,
subject to the right of the Board or the Board Committee, as applicable, to revoke such designation at any time and to make such
designation on such terms and conditions as it may determine in its discretion. For purposes of this definition, the “
Board
Committee
” shall mean a committee of the Board designated by the Board to administer this Plan. Except as otherwise determined
by the Board, the Board Committee (i) shall be comprised of not fewer than two directors, (ii) shall meet any applicable requirements
under Rule 16b-3, including any requirement that the Board Committee consist of “nonemployee directors” (as defined
in Rule 16b-3), (iii) shall meet any applicable requirements under Section 162(m), including any requirement that the Board Committee
consist of “outside directors” (as defined in Treasury Regulation §1.162-27(e)(3)(i) or any successor regulation),
and (iv) shall meet any applicable requirements of any stock exchange or other market quotation system on which Class A Shares
are listed. For purposes of this definition, the “
Designated Administrator
” shall mean one or more persons designated
by the Board or a Board Committee to act as a Designated Administrator pursuant to this Plan. Except as otherwise determined by
the Board, a Designated Administrator shall only be appointed if Rule 16b-3 and Section 162(m) permits such appointment and the
exercise of any authority without adversely affecting the ability of Awards to officers of Real Goods to comply with the conditions
for Rule 16b-3 or Section 162(m). The resolutions of the Board or Board Committee designating the authority of the Designated Administrator
shall (i) specify the total number of Class A Shares subject to Awards that may be granted pursuant to this Plan by the Designated
Administrator, (ii) may not authorize the Designated Administrator to designate him or herself as the recipient of any Awards pursuant
to this Plan and (iii) shall otherwise comply with the requirements of applicable law.
“
Company
” shall mean Real
Goods and any parent, subsidiary or affiliate of Real Goods.
“
Dividend Equivalents
”
shall mean an Award of cash or other Awards with a Fair Market Value equal to the dividends which would have been paid on the Class
A Shares underlying an outstanding Award or Restricted Stock Units had such Class A Shares been outstanding.
“
Effective Date
” shall
mean January 30, 2008.
“
Eligible Person(s)
” shall
mean those persons who are full or part-time employees of the Company or other individuals who perform services for the Company,
including, without limitation, directors who are not employees of the Company and consultants and advisors who perform services
for the Company.
“
Exchange Act
” shall mean
the Securities Exchange Act of 1934, as it now exists or may be amended from time to time, and the rules promulgated thereunder,
as they may exist or may be amended from time to time.
“
Fair Market Value
” shall
mean such value rounded up to the nearest cent as determined by the Committee by reasonable application of a reasonable valuation
method in accordance with applicable law, including Code Section 409A.
“
Incentive Stock Option
”
shall mean a Stock Option that is an incentive stock option as defined in Section 422 of the Code. Incentive Stock Options are
subject, in part, to the terms, conditions and restrictions described in Section 6.
“
Maximum Value
” has the
meaning set forth in subsection 9(a).
“
Nonqualified Stock Option
”
shall mean a Stock Option that is not an incentive stock option as defined in Section 422 of the Code. Nonqualified Stock Options
are subject, in part, to the terms, conditions and restrictions described in Section 6.
“
Other Real Goods Securities
”
shall mean Real Goods securities (which may include, but need not be limited to, unbundled stock units or components thereof, debentures,
preferred stock, warrants, securities convertible into Class A Shares or other property) other than Class A Shares.
“
Participant
” shall mean
an Eligible Person to whom an Award has been granted under this Plan.
“
Performance Grant
” shall
mean an Award subject, in part, to the terms, conditions and restrictions described in Section 9, pursuant to which the recipient
may become entitled to receive cash, Class A Shares, Other Real Goods Securities or property, or other forms of payment, or any
combination thereof, as determined by the Committee.
“
Permitted Transferee
”
means, except as otherwise determined by the Committee (i), any person defined as an employee in the Instructions to Registration
Statement Form S-8 promulgated by the Securities and Exchange Commission, as such Form may be amended from time to time, which
persons include, as of the date of adoption of this Plan, executors, administrators or beneficiaries of the estates of deceased
Participants, guardians or members of a committee for incompetent former Participants, or similar persons duly authorized by law
to administer the estate or assets of former Participants, (ii) Participants’ family members who acquire Awards from the
Participant other than for value, through a gift or a domestic relations order, and (iii) any trust established for the benefit
of any person described in clause (i) above. For purposes of this definition, “
family member
” includes any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Participant’s
household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest,
a foundation in which these persons (or the Participant) control the management of assets, and any other entity in which these
persons (or the Participant) own more than fifty percent of the voting interests. For purposes of this definition, neither (i)
a transfer under a domestic relations order in settlement of marital property rights; nor (ii) a transfer to an entity in which
more than fifty percent of the voting interests are owned by family members (or the Participant) in exchange for an interest in
that entity is considered a transfer for “
value
”.
“
Plan
” shall mean this
Real Goods Solar, Inc. 2008 Long-Term Incentive Plan.
“
Purchased Option
” shall
mean a Stock Option that is sold to an Eligible Person at a price determined by the Committee. Purchased Options are subject, in
part, to the terms, conditions and restrictions described in Section 6.
“
Real Goods
” shall mean
Real Goods Solar, Inc., a Colorado corporation.
“
Restricted Period
” has
the meaning set forth in subsection 8(b).
“
Restricted Stock
” shall
mean an Award of Class A Shares that is issued subject, in part, to the terms, conditions and restrictions described in Section
8.
“
Restricted Stock Units
”
shall mean an Award of a right to receive Class A Shares that is issued subject, in part, to the terms, conditions and restrictions
described in Section 8.
“
Rule 16b-3
” shall mean
Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act and any successor rule.
“
Section 162(m)
” shall
mean §162(m) of the Code, any rules or regulations promulgated thereunder, as they may exist or may be amended from time to
time, or any successor to such section.
“
Stock Appreciation Right
”
shall mean an Award of a right to receive (without payment to Real Goods) cash, Class A Shares, Other Real Goods Securities or
property, or other forms of payment, or any combination thereof, as determined by the Committee, based on the increase in the value
of the number of Class A Shares specified in the Stock Appreciation Right. Stock Appreciation Rights are subject, in part, to the
terms, conditions and restrictions described in Section 7.
“
Stock Option
” shall mean
an Award of a right to purchase Class A Shares. The term Stock Option shall include Nonqualified Stock Options, Incentive Stock
Options and Purchased Options.
“
Ten Percent Employee
”
shall mean an employee of the Company who owns stock representing more than ten percent of the voting power of all classes of stock
of Real Goods or any parent or subsidiary of Real Goods.
“
Treasury Regulation
” shall mean a final, proposed
or temporary regulation of the Department of Treasury under the Code and any successor regulation.