3 May 1998

Dear Ron,

     We at Real Goods Trading Corporation are very happy to offer
you the position of President of the Company. This letter sets
forth the material terms of our offer; if you wish to accept our
offer, please sign the enclosed copy of this letter and return it
so we receive it not later than 5pm, 6 May 1998.  If we have not
received it by then, the offer will expire at that time.  We
apologize for the formality of this letter, but ongoing state and
federal legal developments require us to document the employment
relationship carefully. We would expect that you will begin at
the earliest possible time but not later than 18 May 1998.

1.   TITLE.  Your title will be President.  As such, you will
     report to the CEO. Initially the Solar Living Center, Real
     Goods Renewables, and certain other aspects of the company
     that we have been discussing will report to me as CEO; all
     other operations of the company will report to you. Our
     responsibilities will be divided up and consistent with the
     chart of responsibilities that we will jointly develop over
     the next several days. We would expect that over time some
     of the responsibilities that I retain will migrate to you.

2.   SALARY.  Your salary will be at the annual rate of
     $120,000, payable bi-weekly in accordance with our normal
     payroll procedures.  We will make customary withholdings.
     The fact that your salary is stated in annual terms
     should not be construed to create a minimum employment
     term or notice requirement. The compensation committee of
     the Board of Directors will review executive salaries at
     or about budget time for FY 2000. It is reasonable to
     assume that the compensation committee will increase your
     salary to not less than $135,000 per year for your second
     year of employment.

3.   SIGNING BONUS.  A signing bonus of $15,000 will be paid
     to you in twelve equal installments over the first year
     of your employment so long as you are still employed
     with Real Goods.

4.   STOCK OPTIONS.  Our stock option program is
     administered by the Compensation Committee of the Board
     of Directors.  We have agreed to request a grant to
     you of options to purchase 120,000 shares of the
     Company s common stock upon hire. We expect that the
     Compensation Committee of the Board of Directors will
     approve this request that will be effective upon hire
     date.

5.   PERFORMANCE BONUS.   So long as the company meets its
     budgeted revenue growth plans, we will pay you a
     performance bonus based upon operating earnings before
     extraordinary items and before income taxes
     (hereinafter referred to as OEBIT) for company-wide
     financial performance. In the fiscal year ending 31
     March 1999, we will pay you 15% of the  OEBIT  for any
     amount over 3%  OEBIT  but the bonus will be capped at
     $40,000. After the cap has been reached you will
     receive a bonus of 7.5% on any amount of OEBIT
     thereafter. For the fiscal year ending 31 March 2000,
     we will pay you 15% of the  OEBIT  for any amount over
     4.5% OEBIT  but the bonus will be capped at $60,000
     (you will be paid a bonus of  7.5% of any  OEBIT  over
     and above the cap) and for the fiscal year ending 31
     March 2001, we will pay you 15% of the  OEBIT  for any
     amount over 6% OEBIT  but the bonus will be capped at
     $80,000. After the cap has been reached you will
     receive a bonus of 7.5% on any amount of OEBIT
     thereafter.

6.   SEVERANCE. If we terminate your employment for any reason
     other than cause within twelve months of your start date,
     you will be given three months severance pay. In addition,
     if your compensation from your new employment in the next
     six months is less than $60,000, then we will pay you at the
     end of the six month period the difference between $60,000
     and your actual salary for the six month period upon
     verification. The severance pay for the six month period
     following the first three months is expressly contingent
     upon your putting forth your best efforts to secure
     employment starting within two weeks after your termination.

7.   RELOCATION EXPENSES.  We will pay all actual relocation
     expenses (costs of mover and transportation) for you and
     your wife to move to the Northern California area from
     San Diego up to a maximum of  $10,000. If you are terminated
     for a reason other than cause within twelve months of your
     start date, and if you relocate back to the San Diego
     area, we will pay up to $5,000 of actual relocation
     expenses. Further we will lend you an amount equal to your
     real estate commission on the sale of your residence in San
     Diego (but not more than $20,000). The amount of that loan
     together with 6.5% interest will be forgiven ratably over
     the first thirty six months of your employment. If we
     terminate your employment for any reason other than  cause 
     then we will forgive the entire balance of the loan. If you
     resign from employment, then the balance of the loan becomes 
     due and payable upon your last day of employment.

8.   FRINGE BENEFITS.  While there can be no assurance that we
     will continue any particular program, we hope to be able to
     continue to provide useful fringe benefit programs for our
     employees.  If you or any member of your family has any
     special medical problems which may be "preexisting
     conditions" as referred to in the enclosure, please be aware
     that insurance coverage for those conditions may not be
     available under our plan. If you wish further information
     either before or after accepting this position, please let
     us know.

9.   AT WILL EMPLOYMENT.  Your employment is "at will" - there is
     no fixed term or minimum term.  Either you or we may
     terminate your employment at any time for any reason or for
     no reason.  The only way this "at will" provision can be
     modified or amended is in writing signed by the CEO of the
     Company specifically addressed to you and specifically
     modifying this paragraph.

10.  HANDBOOK.  The employee handbook, which we are sending to
     you, governs the relationship of Real Goods and its
     employees.  As you know, this type of document is
     flexible; we may change it at any time and from time to
     time.  You and all of our employees will be governed by such
     changes as they become effective, which may be with or
     without notice.

11.  PROPRIETARY INFORMATION OF OTHERS.  We are hiring you for
     your personal skills and character.  We expressly do not
     want you to bring with you any property or proprietary
     information belonging to a prior employer or any other
     person.  If you do have any property or proprietary
     information belonging to a prior employer, please return it
     forthwith and do not use it in your employment with us.

12.  CONFIDENTIALITY.  As is customary, you have special
     responsibilities to protect the confidentiality of our own
     confidential and proprietary information and confidential
     information which may be provided to us by others.  It is a
     condition precedent to the effectiveness of your employment
     that you sign and return a copy of our standard employee
     confidentiality agreement.  Please note that if you do
     reserve any rights to inventions, you must complete Exhibit
     A before returning the agreement to us.  By commencing
     employment, you agree to execute a document of similar tenor
     from time to time in the form provided by us.

13.  INS REQUIREMENTS.  On your first day of employment, and
     possibly from time to time thereafter, you will have to show
     us proof of your identity as well as your legal right to
     work in the United States as required by the U. S.
     Immigration and Naturalization Service.  In most cases, your
     driver's license and a Social Security card shouldsatisfy
     the regulations.  (Foreign nationals requiring permission to
     work in the United States will be asked to provide documents
     appropriate to their individual status.) 

14.  ARBITRATION.  You specifically agree that any disagreement
     with respect to termination of your employment or matters
     leading up to termination of your employment shall be
     subject to binding mandatory arbitration in San Francisco,
     California before a single arbitrator, selected in
     accordance with the rules of the American Arbitration
     Association which rules shall govern the proceedings (except
     as otherwise expressly provided herein).  The arbitration
     shall be conducted in accordance with the California
     Arbitration Act, California Code of Civil Procedure Sections
     1280 et seq. and the provisions of Section 1283.05 are
     expressly incorporated into this arbitration agreement. 
     Judgment may be entered to enforce any arbitral award by any
     court of competent jurisdiction.  The prevailing party in
     any legal proceeding or arbitration shall be entitled to
     recover its reasonable attorneys' fees, costs and
     disbursements.  We both agree that arbitration is the sole
     and exclusive remedy for any disagreement arising out of
     such matters.

15.  ENTIRE STATEMENT.  It is most important that you agree with
     us that this letter constitutes the entire statement of our
     agreement and that there are no oral agreements or
     understandings or any other written agreements which
     directly or indirectly affect the employment relationship
     between us and you.  If there are any, please do not sign
     this agreement until you have consulted with our director of
     human relations and either modified this agreement to state
     those understandings or agreed that there are no such
     understandings or agreements.  This document is fully
     integrated with respect to the at-will component of your
     employment.

     We apologize again for the legalistic form of this letter;
however, in the current environment, we believe it is best for
both of us to spell things out as clearly and carefully as we
can.  Despite these formalities, we really do look forward to
your joining us.  If the foregoing is acceptable, please sign and
return the enclosed copy of this letter.

                              Very truly yours,

                              Real Goods Trading Corporation

                              [S] JOHN SCHAEFFER
                              By: John Schaeffer
                              Title: CEO

AGREED:
[S]RONALD ZELL
   Ronald Zell

     Ronald Zell                                        
     Print Name

Dated: May 4, 1998