EXHIBIT 10.2

 

GAIAM, INC.

 

1999 LONG-TERM INCENTIVE PLAN

AMENDED AND RESTATED AS OF JANUARY 2, 2006

 

SECTION 1.  PURPOSE.  THE PURPOSE OF THIS PLAN IS TO ADVANCE THE INTERESTS OF
GAIAM 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.  THE DEFINITIONS APPLICABLE TO THIS PLAN ARE PROVIDED
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 AND TERMS OF THE AWARD TO BE MADE
TO EACH ELIGIBLE PERSON SELECTED, TO MODIFY THE TERMS 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. 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 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 MEMBERS THEREOF MAY AUTHORIZE ANY ONE
OR MORE OF THEIR 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 OR TO BE MADE TO PARTICIPANTS. 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 HIM, 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 HIS OWN WILLFUL MISCONDUCT OR AS EXPRESSLY PROVIDED
BY STATUTE. 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, THE COMPANY 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 STATUTE. EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES)
INCURRED BY A SUCH A MEMBER OR OFFICER IN DEFENDING ANY SUCH PROCEEDING OR SUIT
SHALL BE PAID BY THE COMPANY 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 THE COMPANY AS AUTHORIZED IN THIS
SECTION.

 

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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) PERFORMANCE GRANTS AND (V) 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.  THERE MAY BE ISSUED
UNDER THIS PLAN (AS RESTRICTED STOCK, IN PAYMENT OF PERFORMANCE GRANTS, PURSUANT
TO THE EXERCISE OF STOCK OPTIONS OR STOCK APPRECIATION RIGHTS OR IN PAYMENT OF
OR PURSUANT TO THE EXERCISE OF SUCH OTHER AWARDS AS THE COMMITTEE, IN ITS
DISCRETION, MAY DETERMINE) AN AGGREGATE OF NOT MORE THAN 2,100,000 COMMON
SHARES, SUBJECT TO ADJUSTMENT AS PROVIDED IN SECTION 15. NO ELIGIBLE PERSON MAY
RECEIVE AWARDS UNDER THIS PLAN FOR MORE THAN 400,000 COMMON SHARES IN ANY ONE
FISCAL YEAR OF GAIAM, SUBJECT TO ADJUSTMENT AS PROVIDED IN SECTION 15. COMMON
SHARES ISSUED PURSUANT TO THIS PLAN MAY BE EITHER AUTHORIZED BUT UNISSUED
SHARES, TREASURY SHARES, REACQUIRED SHARES OR ANY COMBINATION THEREOF. IF ANY
COMMON SHARES ISSUED AS RESTRICTED STOCK 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 COMMON SHARES THAT
WOULD OTHERWISE HAVE BEEN ISSUABLE PURSUANT THERETO WILL BE AVAILABLE FOR
ISSUANCE UNDER NEW AWARDS.

 

(C)           RIGHTS WITH RESPECT TO COMMON 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
COMMON 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 STOCK CERTIFICATE
TO HIM FOR SUCH COMMON 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 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 COMMON SHARES IN THE FUTURE, SHALL HAVE
NO RIGHTS AS A SHAREHOLDER WITH RESPECT TO COMMON SHARES RELATED TO SUCH
AGREEMENT UNTIL ISSUANCE TO HIM OF A 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 ASSOCIATED 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 THE COMPANY AND WHO HAVE ASSOCIATED AWARDS ONLY TO THE EXTENT THAT SUCH
ASSOCIATED AWARDS DO NOT DISQUALIFY THE INCENTIVE STOCK OPTION’S STATUS AS SUCH
UNDER THE CODE. EACH

 

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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
Section and this Plan, and with such other terms and conditions, including, but
not limited to, restrictions upon the Stock Option or the Common 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 COMMON 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 AN EMPLOYEE OF
THE COMPANY, THE EXERCISE PRICE SHALL NOT BE LESS THAN THE FAIR MARKET VALUE OF
THE COMMON SHARES SUBJECT TO SUCH STOCK OPTION AT THE TIME THE STOCK OPTION IS
GRANTED, OR IF 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. IN NO EVENT, HOWEVER, WILL THE EXERCISE PRICE PER SHARE OF A STOCK
OPTION BE LESS THAN THE PAR VALUE PER SHARE OF A COMMON SHARE.

 

(B)           THE COMMITTEE SHALL DETERMINE THE NUMBER OF COMMON SHARES TO BE
SUBJECT TO EACH STOCK OPTION. IN THE CASE OF A STOCK OPTION AWARDED IN
CONJUNCTION WITH AN ASSOCIATED AWARD, THE NUMBER OF COMMON SHARES SUBJECT TO AN
OUTSTANDING STOCK OPTION MAY BE REDUCED ON AN APPROPRIATE BASIS TO THE EXTENT
THAT THE ASSOCIATED 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.

 

(F)            IN THE CASE OF AN INCENTIVE STOCK OPTION, THE AMOUNT OF THE
AGGREGATE FAIR MARKET VALUE OF COMMON SHARES (DETERMINED AT THE TIME OF GRANT OF
THE STOCK OPTION) WITH RESPECT TO WHICH INCENTIVE STOCK OPTIONS ARE EXERCISABLE
FOR THE FIRST TIME BY AN EMPLOYEE OF THE COMPANY DURING ANY CALENDAR YEAR (UNDER
ALL SUCH PLANS OF HIS EMPLOYER CORPORATION AND ITS PARENT AND SUBSIDIARY
CORPORATIONS) SHALL NOT EXCEED $100,000 OR SUCH OTHER AMOUNT AS IS SPECIFIED IN
THE CODE.

 

(G)           IT IS THE INTENT OF GAIAM 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

 

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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.

 

(H)           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.

 

(I)            FOR PURPOSES OF PAYMENTS MADE TO EXERCISE STOCK OPTIONS, SUCH
PAYMENT SHALL BE MADE IN SUCH FORM (INCLUDING, BUT NOT LIMITED TO, CASH, COMMON
SHARES, THE SURRENDER OF ANOTHER OUTSTANDING AWARD UNDER THIS PLAN OR ANY
COMBINATION THEREOF) AS THE COMMITTEE MAY DETERMINE IN ITS DISCRETION; PROVIDED,
HOWEVER, THAT, UNLESS THE COMMITTEE DETERMINES OTHERWISE, FOR PURPOSES OF MAKING
SUCH PAYMENT IN COMMON SHARES, SUCH SHARES SHALL BE VALUED AT THEIR FAIR MARKET
VALUE ON THE DAY OF EXERCISE AND SHALL HAVE BEEN HELD BY THE PARTICIPANT FOR A
PERIOD OF AT LEAST SIX (6) MONTHS.

 

SECTION 7.  STOCK APPRECIATION RIGHTS.  THE COMMITTEE MAY GRANT STOCK
APPRECIATION RIGHTS EITHER ALONE, OR IN CONJUNCTION WITH ASSOCIATED 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
SECTION AND THIS PLAN, AND WITH SUCH OTHER TERMS AND CONDITIONS, INCLUDING, BUT
NOT LIMITED TO, RESTRICTIONS UPON THE AWARD OF STOCK APPRECIATION RIGHTS OR THE
COMMON SHARES ISSUABLE UPON EXERCISE THEREOF, AS THE COMMITTEE, IN ITS
DISCRETION, SHALL ESTABLISH.

 

(A)           THE COMMITTEE SHALL DETERMINE THE NUMBER OF COMMON 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 AN ASSOCIATED AWARD, THE
NUMBER OF COMMON SHARES SUBJECT TO AN OUTSTANDING AWARD OF STOCK APPRECIATION
RIGHTS MAY BE REDUCED ON AN APPROPRIATE BASIS TO THE EXTENT THAT THE ASSOCIATED
AWARD HAS BEEN EXERCISED, PAID TO OR OTHERWISE RECEIVED BY THE PARTICIPANT, AS
DETERMINED BY THE COMMITTEE.

 

(B)           THE AWARD OF STOCK APPRECIATION RIGHTS SHALL NOT BE EXERCISABLE:

 

(i)            unless the Associated Award, if any, is at the time exercisable;

 

(ii)           if the Associated Award is a Stock Option and the Fair Market
Value per share of the Common Shares on the exercise date does not exceed the
exercise price per share of such Stock Option; and

 

(iii)         if the Associated Award is an Incentive Stock Option and the
exercise of the Award of Stock Appreciation Rights would disqualify the
Incentive Stock Option as such under the Code.

 

(C)           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.

 

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(D)           AN AWARD OF STOCK APPRECIATION RIGHTS SHALL ENTITLE THE HOLDER TO
EXERCISE SUCH AWARD OR TO SURRENDER UNEXERCISED AN ASSOCIATED AWARD (OR ANY
PORTION OF SUCH ASSOCIATED AWARD) TO GAIAM AND TO RECEIVE FROM GAIAM IN EXCHANGE
THEREOF, WITHOUT PAYMENT TO GAIAM, THAT NUMBER OF COMMON 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 THE
ASSOCIATED 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 GAIAM SECURITIES OR PROPERTY, OR OTHER FORMS OF
PAYMENT OR ANY COMBINATION THEREOF, AS DETERMINED BY THE COMMITTEE, EQUAL TO THE
AGGREGATE VALUE OF THE COMMON 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.

 

(E)           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.  THE COMMITTEE MAY GRANT AWARDS OF RESTRICTED
STOCK EITHER ALONE, OR IN CONJUNCTION WITH ASSOCIATED AWARDS, EITHER AT THE TIME
OF GRANT OR BY AMENDMENT THEREAFTER. EACH AWARD OF RESTRICTED STOCK 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 COMMON SHARES TO BE
ISSUED TO A PARTICIPANT PURSUANT TO THE AWARD OF RESTRICTED STOCK, 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 STOCK
CERTIFICATE REPRESENTING THE COMMON 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 COMMON SHARES AWARDED AND
PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD, OWNERSHIP OF SUCH COMMON
SHARES, INCLUDING THE RIGHT TO VOTE SUCH COMMON SHARES AND TO RECEIVE DIVIDENDS
OR OTHER DISTRIBUTIONS MADE OR PAID WITH RESPECT TO SUCH COMMON SHARES (PROVIDED
THAT SUCH COMMON SHARES, AND ANY NEW, ADDITIONAL OR DIFFERENT SHARES, OR OTHER
GAIAM SECURITIES OR PROPERTY, OR OTHER FORMS OF CONSIDERATION THAT THE
PARTICIPANT MAY BE ENTITLED TO RECEIVE WITH RESPECT TO SUCH COMMON SHARES AS A
RESULT OF A STOCK SPLIT, STOCK DIVIDEND OR ANY OTHER CHANGE IN THE CORPORATION
OR CAPITAL STRUCTURE OF GAIAM, 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.

 

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(D)           THE COMMITTEE SHALL DETERMINE IN ITS DISCRETION AND SPECIFY IN
EACH AGREEMENT EVIDENCING AN AWARD OF RESTRICTED STOCK 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.

 

SECTION 9.  PERFORMANCE GRANTS.  THE COMMITTEE MAY GRANT AWARDS OF PERFORMANCE
GRANTS EITHER ALONE, OR IN CONJUNCTION WITH ASSOCIATED 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 SECTION AND THIS PLAN,
AND TO SUCH OTHER TERMS AND CONDITIONS, INCLUDING BUT NOT LIMITED TO,
RESTRICTIONS UPON ANY CASH, COMMON SHARES, OTHER GAIAM 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 AN
ASSOCIATED 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 COMMON SHARES, OTHER GAIAM 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 AN
ASSOCIATED AWARD, THE PERFORMANCE GRANT MAY BE REDUCED ON AN APPROPRIATE BASIS
TO THE EXTENT THAT THE ASSOCIATED 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,
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.

 

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(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 an Associated 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 an Associated 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 GAIAM 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, COMMON
SHARES, OTHER GAIAM 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:

 

(A)           FORFEITED TO THE COMPANY 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);

 

(B)           SUBJECT TO INCREASE OR DECREASE IN VALUE BASED UPON THE ATTAINMENT
OF OR FAILURE TO ATTAIN, RESPECTIVELY, CERTAIN PERFORMANCE MEASURES; AND/OR

 

(C)           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.

 

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SECTION 11.  DEFERRED PAYMENT OF AWARDS.  THE COMMITTEE MAY SPECIFY THAT THE
PAYMENT OF ALL OR ANY PORTION OF CASH, COMMON SHARES, OTHER GAIAM 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, COMMON 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) 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
HIS 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.

 

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SECTION 15.  DILUTION AND OTHER ADJUSTMENTS.  IF ANY CHANGE IN THE OUTSTANDING
COMMON SHARES OF THE COMPANY OCCURS BY REASON OF ANY STOCK SPLIT OF OR STOCK
DIVIDEND ON THE COMMON SHARES, THEN, EXCEPT AS OTHERWISE DETERMINED BY THE
COMMITTEE, THE TERMS OF ANY OUTSTANDING AWARDS SHALL BE EQUITABLY ADJUSTED. IF
ANY CHANGE IN THE OUTSTANDING COMMON SHARES OCCURS BY REASON OF ANY SPLIT-UP,
SPLIT-OFF, SPIN-OFF, RECAPITALIZATION, MERGER, CONSOLIDATION, RIGHTS OFFERING,
REORGANIZATION, COMBINATION OR EXCHANGE OF SHARES, SALE BY THE COMPANY OF ALL OF
ITS ASSETS, DISTRIBUTION TO SHAREHOLDERS (OTHER THAN A STOCK DIVIDEND OR A
NORMAL CASH DIVIDEND ON THE COMMON SHARES), OR OTHER EXTRAORDINARY OR UNUSUAL
EVENT (OTHER THAN A STOCK SPLIT OF THE COMMON STOCK AS PROVIDED ABOVE), THEN THE
COMMITTEE MAY DETERMINE, IN ITS DISCRETION, TO TERMINATE ALL OUTSTANDING AWARDS
IMMEDIATELY PRIOR TO THE CONSUMMATION OF ANY SUCH EVENT, OR MAKE AN EQUITABLE
ADJUSTMENT IN THE TERMS OF ANY OUTSTANDING AWARD AND/OR THE NUMBER OF COMMON
SHARES AVAILABLE FOR AWARDS. ANY SUCH TERMINATION OR ADJUSTMENT MADE BY THE
COMMITTEE AND SHALL BE FINAL, CONCLUSIVE AND BINDING FOR ALL PURPOSES OF THE
PLAN. UNLESS OTHERWISE PROVIDED BY THE COMMITTEE, ALL OUTSTANDING AWARDS SHALL
TERMINATE IMMEDIATELY PRIOR TO THE CONSUMMATION OF ANY DISSOLUTION OR
LIQUIDATION OF THE COMPANY.

 

SECTION 16.  DESIGNATION OF BENEFICIARY BY PARTICIPANT.  A PARTICIPANT MAY NAME
A BENEFICIARY TO RECEIVE ANY PAYMENT TO WHICH HE MAY BE ENTITLED WITH RESPECT TO
ANY AWARD UNDER THIS PLAN IN THE EVENT OF HIS 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 GAIAM.

 

(B)           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

 

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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 COMMON 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 COMMON SHARES, OTHER GAIAM SECURITIES OR PROPERTY, OTHER
SECURITIES OR PROPERTY OR OTHER FORMS OF PAYMENT SHALL BE ISSUED HEREUNDER WITH
RESPECT TO ANY AWARD UNLESS COUNSEL FOR GAIAM 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 COMMON SHARES ARE
LISTED.

 

(F)            IT IS THE INTENT OF GAIAM THAT THIS PLAN COMPLY IN ALL RESPECTS
WITH RULE 16B-3 AND SECTION 162(M) WITH RESPECT TO AWARDS GRANTED TO EXECUTIVE
OFFICERS OF GAIAM, 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 RULE 16B-3 OR
SECTION 162(M), SUCH PROVISION SHALL BE DEEMED NULL AND VOID WITH RESPECT TO
AWARDS GRANTED TO EXECUTIVE OFFICERS OF GAIAM TO THE EXTENT REQUIRED TO PERMIT
SUCH AWARDS TO COMPLY WITH RULE 16B-3 AND SECTION 162(M). IT IS ALSO THE INTENT
OF GAIAM 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 THE COMPANY TO THE EXTENT REQUIRED TO PERMIT SUCH
INCENTIVE STOCK OPTIONS TO RECEIVE FAVORABLE TREATMENT UNDER THE CODE.

 

IT IS THE INTENT OF GAIAM 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 THE OBLIGATION OF GAIAM TO ISSUE COMMON SHARES, OTHER GAIAM
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 GAIAM, 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

 

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IS NOT PAID, GAIAM MAY REFUSE TO ISSUE COMMON SHARES, OTHER GAIAM 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 AN ELIGIBLE PERSON (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 GAIAM TO WITHHOLD, OR AGREEING TO SURRENDER TO
GAIAM ON OR ABOUT THE DATE SUCH TAX LIABILITY IS DETERMINABLE, COMMON SHARES,
OTHER GAIAM 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 THE COMPANY; PROVIDED,
HOWEVER, THE COMPANY 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 HIM 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
COMMON 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 COMMON 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.

 

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(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)           UPON THE ADOPTION OF A RESOLUTION OF THE BOARD TERMINATING THIS
PLAN; OR

 

(B)           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 PERSON, WITHOUT HIS 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.

 

SECTION 21.  EFFECTIVE DATE.  THIS PLAN SHALL BE EFFECTIVE, AND AWARDS MAY BE
GRANTED UNDER THIS PLAN, ON OR AFTER THE EFFECTIVE DATE.

 

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APPENDIX A

 

THE FOLLOWING TERMS SHALL HAVE THE MEANING INDICATED:

 

(A)           “ACTUAL VALUE” HAS THE MEANING SET FORTH IN SECTION 9.

 

(B)           “ASSOCIATED AWARD” SHALL MEAN AN AWARD GRANTED CONCURRENTLY OR
SUBSEQUENTLY IN CONJUNCTION WITH ANOTHER AWARD.

 

(C)           “AWARD” SHALL MEAN AN AWARD OF RIGHTS TO AN ELIGIBLE PERSON UNDER
THIS PLAN.

 

(D)           “AWARD PERIOD” HAS THE MEANING SET FORTH IN SUBSECTION 9(B).

 

(E)           “BENEFICIARY” HAS THE MEANING SET FORTH IN SECTION 16.

 

(F)            “BOARD” SHALL MEAN THE BOARD OF DIRECTORS OF GAIAM.

 

(G)           “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.

 

(H)           “COMMITTEE” SHALL MEAN THE PERSON OR PERSONS RESPONSIBLE FOR
ADMINISTERING THE 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 THE PLAN, INCLUDING ADMINISTERING CERTAIN AWARDS
UNDER THE PLAN. 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 THE PLAN, INCLUDING ADMINISTERING CERTAIN AWARDS
UNDER THE PLAN, SUBJECT TO THE RIGHT OF THE BOARD OR THE BOARD COMMITTEE, AS
APPLICABLE, TO REVOKE ITS 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 COMMON SHARES ARE LISTED. FOR PURPOSES OF THIS DEFINITION, THE
“DESIGNATED ADMINISTRATOR” SHALL MEAN A PERSON OR PERSON 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 PERMITS SUCH APPOINTMENT AND THE EXERCISE OF ANY
AUTHORITY WITHOUT ADVERSELY AFFECTING THE ABILITY OF AWARDS TO OFFICERS OF GAIAM
TO COMPLY WITH THE CONDITIONS FOR RULE 16B-3 OR SECTION 162(M).

 

(I)            “COMPANY” SHALL MEAN GAIAM AND ANY PARENT, SUBSIDIARY OR
AFFILIATE OF GAIAM.

 

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(J)            “COMMON SHARES” SHALL MEAN SHARES OF CLASS A COMMON STOCK, PAR
VALUE $0.0001 PER SHARE, OF GAIAM AND STOCK OF ANY OTHER CLASS INTO WHICH SUCH
SHARES MAY THEREAFTER BE CHANGED.

 

(K)           “EFFECTIVE DATE” SHALL JUNE 1, 1999.

 

(L)            “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 INDEPENDENT CONTRACTORS WHO PERFORM SERVICES FOR
THE COMPANY.

 

(M)          “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.

 

(N)           “FAIR MARKET VALUE” SHALL MEAN SUCH VALUE ROUNDED UP TO THE
NEAREST CENT AS DETERMINED BY THE COMMITTEE IN ACCORDANCE WITH APPLICABLE LAW.

 

(O)           “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.

 

(P)           “MAXIMUM VALUE” HAS THE MEANING SET FORTH IN SUBSECTION 9(A).

 

(Q)           “GAIAM” SHALL MEAN GAIAM, INC., A COLORADO CORPORATION.

 

(R)           “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.

 

(S)           “OTHER GAIAM SECURITIES” SHALL MEAN GAIAM SECURITIES (WHICH MAY
INCLUDE, BUT NEED NOT BE LIMITED TO, UNBUNDLED STOCK UNITS OR COMPONENTS
THEREOF, DEBENTURES, PREFERRED STOCK, WARRANTS, SECURITIES CONVERTIBLE INTO
COMMON SHARES OR OTHER PROPERTY) OTHER THAN COMMON SHARES.

 

(T)            “PARTICIPANT” SHALL MEAN AN ELIGIBLE PERSON TO WHOM AN AWARD HAS
BEEN GRANTED UNDER THIS PLAN.

 

(U)           “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, COMMON SHARES, OTHER GAIAM
SECURITIES OR PROPERTY, OR OTHER FORMS OF PAYMENT, OR ANY COMBINATION THEREOF,
AS DETERMINED BY THE COMMITTEE.

 

(V)            “PERMITTED TRANSFEREE” MEANS (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 THE PLAN, (A)
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, AND (B) PARTICIPANTS’ FAMILY MEMBERS WHO
ACQUIRE AWARDS FROM THE PARTICIPANT OTHER THAN FOR VALUE, THROUGH A GIFT OR A
DOMESTIC RELATIONS ORDER AND (II) ANY TRUST ESTABLISHED FOR THE BENEFIT OF

 

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ANY PERSON DESCRIBED IN CLAUSE (I). 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”.

 

(W)           “PLAN” SHALL MEAN THIS GAIAM, INC. 1999 LONG-TERM INCENTIVE PLAN.

 

(X)           “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.

 

(Y)           “RESTRICTED PERIOD” HAS THE MEANING SET FORTH IN SUBSECTION 8(B).

 

(Z)           “RESTRICTED STOCK” SHALL MEAN AN AWARD OF COMMON SHARES THAT ARE
ISSUED SUBJECT, IN PART, TO THE TERMS, CONDITIONS AND RESTRICTIONS DESCRIBED IN
SECTION 8.

 

(AA)         “RULE 16B-3” SHALL MEAN RULE 16B-3 PROMULGATED BY THE SECURITIES
AND EXCHANGE COMMISSION UNDER THE EXCHANGE ACT AND ANY SUCCESSOR RULE.

 

(BB)         “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.

 

(cc)         “Section 409A” shall mean §409A 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.

 

(DD)         “STOCK APPRECIATION RIGHT” SHALL MEAN AN AWARD OF A RIGHT TO
RECEIVE (WITHOUT PAYMENT TO GAIAM) CASH, COMMON SHARES, OTHER GAIAM 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
COMMON SHARES SPECIFIED IN THE STOCK APPRECIATION RIGHT. STOCK APPRECIATION
RIGHTS ARE SUBJECT, IN PART, TO THE TERMS, CONDITIONS AND RESTRICTIONS DESCRIBED
IN SECTION 7.

 

(EE)         “STOCK OPTION” SHALL MEAN AN AWARD OF A RIGHT TO PURCHASE COMMON
SHARES. THE TERM STOCK OPTION SHALL INCLUDE NONQUALIFIED STOCK OPTIONS,
INCENTIVE STOCK OPTIONS AND PURCHASED OPTIONS.

 

(FF)           “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 GAIAM OR ANY PARENT OR SUBSIDIARY OF GAIAM.

 

(GG)         “TREASURY REGULATION” SHALL MEAN A FINAL, PROPOSED OR TEMPORARY
REGULATION OF THE DEPARTMENT OF TREASURY UNDER THE CODE AND ANY SUCCESSOR
REGULATION.

 

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