**EXHIBIT 10.2**

** **

**GAIAM, INC.**

 

# **1999 LONG-TERM INCENTIVE PLAN**

AMENDED AND RESTATED AS OF JANUARY 2, 2006

 

### **Section 1.  *Purpose***.  The purpose of thisPlan is to advance the interests of Gaiam and its shareholders by providingincentives to certain Eligible Persons (as defined below) who contributesignificantly to the strategic and long-term performance objectives and growthof the Company.

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### **Section 2.  *Definitions***.  The definitionsapplicable to this Plan are provided in Appendix A.

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### **Section 3.  *Administration*.**  The Committeeshall administer this Plan and shall have all the powers vested in it by theterms of this Plan, such powers to include exclusive authority to select theEligible 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, tomodify the terms of any Award that has been granted, to determine the time whenAwards will be granted, to establish performance objectives, to make anyadjustments necessary or desirable as a result of the granting of Awards toEligible Persons located outside the United States and to prescribe the form ofthe agreements evidencing Awards made under this Plan. The Committee isauthorized to interpret this Plan and the Awards granted under this Plan, toestablish, amend and rescind any rules and regulations relating to this Plan,and to make any other determinations that it deems necessary or desirable forthe administration of this Plan. The Committee may correct any defect or supplyany omission or reconcile any inconsistency in this Plan or in any Award in themanner and to the extent the Committee deems necessary or desirable to carry itinto effect. Any decision of the Committee in the interpretation andadministration of this Plan, as described this Plan, shall lie within its soleand absolute discretion and shall be final, conclusive and binding on allparties concerned. The Committee may act onlyby a majority of its members in office, *except* that themembers thereof may authorize any one or more of their members or any officerof the Company to execute and deliver documents or to take any otherministerial action on behalf of the Committee with respect to Awards made or tobe made to Participants.Notwithstanding the foregoing or any other provision of this Plan, theCommittee shall not have the authority to accelerate the time or schedule ofany payment in a manner which is not permitted under Code Section 409A, or togrant or amend any Award in any manner which would result in an inclusion ofany amount in gross income under Code Section 409A(a)(1).

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### No member of theCommittee and no officer of the Company shall be liable for anything done oromitted to be done by him, by any other member of the Committee or by anyofficer of the Company in connection with the performance of duties under thisPlan, *except* for his own willful misconduct oras expressly provided by statute. In addition to all other rights ofindemnification and reimbursement to which a member of the Committee and anofficer of the Company may be entitled, the Company shall indemnify and holdharmless each such member or officer who was or is a party or is threatened tobe made a party to any threatened, pending or completed proceeding or suit inconnection with the performance of duties under this Plan against expenses(including reasonable attorneys’ fees), judgments, fines, liabilities, lossesand amounts paid in settlement actually and reasonably incurred by him inconnection with such proceeding or suit, *except* for hisown willful misconduct or as expressly provided otherwise by statute. Expenses(including reasonable attorneys’ fees) incurred by a such a member or officerin defending any such proceeding or suit shall be paid by the Company inadvance of the final disposition of such proceeding or suit upon receipt of awritten affirmation by such member or officer of his good faith belief that hehas met the standard of conduct necessary for indemnification and a writtenundertaking by or on behalf of such member or officer to repay such amount ifit shall ultimately be determined that he is not entitled to be indemnified bythe Company as authorized in this Section.

 

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### **Section 4.  *Participation*.**  Consistent withthe purposes of this Plan, the Committee shall have exclusive power to selectthe Eligible Persons who may participate in this Plan and be granted Awardsunder this Plan. Eligible Persons may be selected individually or by groups orcategories, as determined by the Committee in its discretion.

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### **Section 5.  *Awards under this Plan*.**

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###### **(a)**           *Types of Awards*.  Awards under this Plan mayinclude, but need not be limited to, one or more of the following types, eitheralone 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 inits discretion to be consistent with the purposes of this Plan (including, butnot limited to, Awards of or options or similar rights granted with respect tounbundled stock units or components thereof, and Awards to be made toParticipants who are foreign nationals or are employed or performing servicesoutside the United States).

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###### **(b)**           *Maximum Number of Shares that May be Issued*.  Theremay be issued under this Plan (as Restricted Stock, in payment of PerformanceGrants, pursuant to the exercise of Stock Options or Stock Appreciation Rightsor in payment of or pursuant to the exercise of such other Awards as theCommittee, in its discretion, may determine) an aggregate of not more than2,100,000 Common Shares, subject to adjustment as provided in Section 15.No Eligible Person may receive Awards under this Plan for more than 400,000Common Shares in any one fiscal year of Gaiam, subject to adjustment asprovided in Section 15. Common Shares issued pursuant to this Plan may beeither authorized but unissued shares, treasury shares, reacquired shares orany combination thereof. If any Common Shares issued as Restricted Stock orotherwise subject to repurchase or forfeiture rights are reacquired by theCompany pursuant to such rights or, if any Award is canceled, terminates orexpires unexercised, any Common Shares that would otherwise have been issuablepursuant thereto will be available for issuance under new Awards.

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###### **(c)**           *Rights with Respect to Common Shares and Other Securities*.  Except as provided in subsection 8(c) withrespect to Awards of Restricted Stock and unless otherwise determined by theCommittee in its discretion, a Participant to whom an Award is made (and any personsucceeding to such a Participant’s rights pursuant to this Plan) shall have norights as a shareholder with respect to any Common Shares or as a holder withrespect to other securities, if any, issuable pursuant to any such Award untilthe date of the issuance of a stock certificate to him for such Common Sharesor other instrument of ownership, if any. Except as provided inSection 15, no adjustment shall be made for dividends, distributions orother rights (whether ordinary or extraordinary, and whether in cash,securities, other property or other forms of consideration, or any combinationthereof) for which the record date is prior to the date such stock certificateor other instrument of ownership, if any, is required to be issued based uponthe date any Award was exercised. In all events, a Participant with whom anAward agreement is made to issue Common Shares in the future, shall have norights as a shareholder with respect to Common Shares related to such agreementuntil issuance to him of a stock certificate representing such shares.

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### **Section 6.  *Stock Options*.**  The Committeemay sell Purchased Options or grant other Stock Options either alone, or inconjunction with Associated Awards, either at the time of grant or by amendmentthereafter; *provided* that an Incentive Stock Optionmay be granted only to Eligible Persons who are employees of the Company andwho have Associated Awards only to the extent that such Associated Awards donot 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 anagreement in such form as the Committee shall prescribe from time to time inaccordance with this Plan and shall comply with the applicable terms andconditions of this Section and this Plan, and with such other terms andconditions, including, but not limited to, restrictions upon the Stock Optionor the Common Shares issuable upon exercise thereof, as the Committee, in itsdiscretion, shall establish.

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###### **(a)**           Theexercise price of a Stock Option may be equal to or greater than the FairMarket Value of the Common Shares subject to such Stock Option at the time theStock Option is granted, as determined by the Committee; *provided,however*, that in the case of an Incentive Stock Option granted to anemployee of the Company, the exercise price shall not be less than the FairMarket Value of the Common Shares subject to such Stock Option at the time theStock Option is granted, or if granted to a Ten Percent Employee, such exerciseprice shall not be less than 110% of such Fair Market Value at the time theStock Option is granted. In no event, however, will the exercise price pershare of a Stock Option be less than the par value per share of a Common Share.

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###### **(b)**           TheCommittee shall determine the number of Common Shares to be subject to eachStock Option. In the case of a Stock Option awarded in conjunction with anAssociated Award, the number of Common Shares subject to an outstanding StockOption may be reduced on an appropriate basis to the extent that the AssociatedAward has been exercised, paid to or otherwise received by the Participant, asdetermined by the Committee.

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###### **(c)**           AnyStock Option may be exercised during its term only at such time or times and insuch installments as the Committee may establish.

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###### **(d)**           AStock Option shall not be exercisable:

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**(i)**            inthe case of any Incentive Stock Option granted to a Ten Percent Employee, afterthe expiration of five years from the date it is granted, and, in the case ofany other Stock Option, after the expiration of ten years from the date it isgranted; and

 

**(ii)**           unlesspayment in full is made for the shares being acquired thereunder at the time ofexercise as provided in subsection 6(i).

 

###### **(e)**           TheCommittee shall determine in its discretion and specify in each agreementevidencing a Stock Option the effect, if any, the termination of theParticipant’s employment with or performance of services for the Company shallhave on the exercisability of the Stock Option; *provided,however*, that an Incentive Stock Option shall not be exercisable ata time that is beyond the time an Incentive Stock Option may be exercised inorder to qualify as such under the Code.

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###### **(f)**            Inthe case of an Incentive Stock Option, the amount of the aggregate Fair MarketValue of Common Shares (determined at the time of grant of the Stock Option)with respect to which incentive stock options are exercisable for the firsttime by an employee of the Company during any calendar year (under all suchplans 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.

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###### **(g)**           Itis the intent of Gaiam that Nonqualified Stock Options granted under this Plannot be classified as Incentive Stock Options, that the Incentive Stock Optionsgranted under this Plan be consistent with and contain or be deemed to containall provisions required under

 

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###### Section 422and the other appropriate provisions of the Code and any implementingregulations (and any successor provisions thereof), and that any ambiguities inconstruction shall be interpreted in order to effectuate such intent.

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###### **(h)**           APurchased Option may contain such additional terms not inconsistent with thisPlan, including but not limited to the circumstances under which the purchaseprice of such Purchased Option may be returned to the holder of the PurchasedOption, as the Committee may determine in its sole discretion.

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###### **(i)**            Forpurposes of payments made to exercise Stock Options, such payment shall be madein such form (including, but not limited to, cash, Common Shares, the surrenderof another outstanding Award under this Plan or any combination thereof) as theCommittee may determine in its discretion; *provided, however,*that, unless the Committee determines otherwise, for purposes of making suchpayment in Common Shares, such shares shall be valued at their Fair MarketValue on the day of exercise and shall have been held by the Participant for aperiod of at least six (6) months.

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### **Section 7.  *Stock Appreciation Rights*.**  TheCommittee may grant Stock Appreciation Rights either alone, or in conjunctionwith Associated Awards, either at the time of grant or by amendment thereafter.Each Award of Stock Appreciation Rights granted under this Plan shall beevidenced by an agreement in such form as the Committee shall prescribe fromtime to time in accordance with this Plan and shall comply with the applicableterms and conditions of this Section and this Plan, and with such other termsand conditions, including, but not limited to, restrictions upon the Award ofStock Appreciation Rights or the Common Shares issuable upon exercise thereof,as the Committee, in its discretion, shall establish.

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###### **(a)**           TheCommittee shall determine the number of Common Shares to be subject to eachAward of Stock Appreciation Rights. In the case of an Award of StockAppreciation Rights awarded in conjunction with an Associated Award, the numberof Common Shares subject to an outstanding Award of Stock Appreciation Rightsmay be reduced on an appropriate basis to the extent that the Associated Awardhas been exercised, paid to or otherwise received by the Participant, as determinedby the Committee.

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###### **(b)**           TheAward of Stock Appreciation Rights shall not be exercisable:

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

 

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

 

**(iii)**         ifthe Associated Award is an Incentive Stock Option and the exercise of the Awardof Stock Appreciation Rights would disqualify the Incentive Stock Option assuch under the Code.

 

###### **(c)**           TheCommittee shall determine in its discretion and specify in each agreementevidencing an Award of Stock Appreciation Rights the effect, if any, thetermination of the Participant’s employment with or performance of services forthe Company shall have on the exercisability of the Award of Stock AppreciationRights.

 

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###### **(d)**           AnAward of Stock Appreciation Rights shall entitle the holder to exercise suchAward or to surrender unexercised an Associated Award (or any portion of suchAssociated Award) to Gaiam and to receive from Gaiam in exchange thereof,without payment to Gaiam, that number of Common Shares having an aggregatevalue equal to (or, in the discretion of the Committee, less than) the excessof the Fair Market Value of one share, at the time of such exercise, over theexercise price, times the number of shares subject to the Award or theAssociated Award, or portion thereof, that is so exercised or surrendered, asthe case may be. The Committee shall be entitled in its discretion to elect tosettle the obligation arising out of the exercise of a Stock Appreciation Rightby the payment of cash or Other Gaiam Securities or property, or other forms ofpayment or any combination thereof, as determined by the Committee, equal tothe aggregate value of the Common Shares it would otherwise be obligated todeliver. Any such election by the Committee shall be made as soon aspracticable after the receipt by the Committee of written notice of theexercise of the Stock Appreciation Right.

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###### **(e)**           AStock Appreciation Right may provide that it shall be deemed to have beenexercised at the close of business on the business day preceding the expirationdate of the Stock Appreciation Right or of the related Stock Option (or otherAward), or such other date as specified by the Committee, if at such time suchStock Appreciation Right has a positive value. Such deemed exercise shall besettled or paid in the same manner as a regular exercise thereof as provided insubsection 7(d) of this Agreement.

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### **Section 8.  *Restricted Stock***.  The Committeemay grant Awards of Restricted Stock either alone, or in conjunction withAssociated Awards, either at the time of grant or by amendment thereafter. EachAward of Restricted Stock under this Plan shall be evidenced by an agreement insuch form as the Committee shall prescribe from time to time in accordance withthis Plan and shall comply with the applicable terms and conditions of thisSection and this Plan, and with such other terms and conditions as theCommittee, in its discretion, shall establish.

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###### **(a)**           TheCommittee shall determine the number of Common Shares to be issued to aParticipant pursuant to the Award of Restricted Stock, and the extent, if any,to which they shall be issued in exchange for cash, other consideration, orboth.

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###### **(b)**           Untilthe expiration of such period as the Committee shall determine from the date onwhich the Award is granted and subject to such other terms and conditions asthe Committee in its discretion shall establish (the “***RestrictedPeriod***”), a Participant to whom an Award of Restricted Stock ismade shall be issued, but shall not be entitled to the delivery of, a stockcertificate representing the Common Shares subject to such Award.

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###### **(c)**           Unlessotherwise determined by the Committee in its discretion, a Participant to whoman Award of Restricted Stock has been made (and any person succeeding to such aparticipant’s rights pursuant to this Plan) shall have, after issuance of acertificate for the number of Common Shares awarded and prior to the expirationof the Restricted Period, ownership of such Common Shares, including the rightto vote such Common Shares and to receive dividends or other distributions madeor paid with respect to such Common Shares (*provided* thatsuch Common Shares, and any new, additional or different shares, or Other GaiamSecurities or property, or other forms of consideration that the Participantmay be entitled to receive with respect to such Common Shares as a result of astock split, stock dividend or any other change in the corporation or capitalstructure of Gaiam, shall be subject to the restrictions set forth in this Planas determined by the Committee in its discretion), subject, however, to theoptions, restrictions and limitations imposed thereon pursuant to this Plan.

 

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###### **(d)**           TheCommittee shall determine in its discretion and specify in each agreementevidencing an Award of Restricted Stock the effect, if any, the termination ofthe Participant’s employment with or performance of services for the Companyduring the Restricted Period shall have on such Award of Restricted Stock.

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### **Section 9.  *Performance Grants*.**  TheCommittee may grant Awards of Performance Grants either alone, or inconjunction with Associated Awards, either at the time of grant or by amendmentthereafter. The Award of a Performance Grant to a Participant will entitle himto receive a specified amount determined by the Committee (the “***Actual Value***”), if the terms andconditions specified in this Plan and in the Award are satisfied. Each Award ofa Performance Grant shall be subject to the applicable terms and conditions ofthis Section and this Plan, and to such other terms and conditions, includingbut not limited to, restrictions upon any cash, Common Shares, Other GaiamSecurities 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 andsubstance as is determined by the Committee.

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###### **(a)**           TheCommittee shall determine the value or range of values of a Performance Grantto be awarded to each Participant selected for an Award and whether or not sucha Performance Grant is granted in conjunction with an Associated Award. Asdetermined 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 oramended thereafter, (ii) an amount that varies from time to time based inwhole or in part on the then current value of the Common Shares, Other GaiamSecurities or property, or other securities or property, or any combination thereofor (iii) an amount that is determinable from criteria specified by theCommittee. Performance Grants may be issued in different classes or serieshaving different names, terms and conditions. In the case of a PerformanceGrant awarded in conjunction with an Associated Award, the Performance Grantmay be reduced on an appropriate basis to the extent that the Associated Awardhas been exercised, paid to or otherwise received by the Participant, asdetermined by the Committee.

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###### **(b)**           Theaward period (“***Award Period***”) related to anyPerformance Grant shall be a period determined by the Committee. At the timeeach Award is made, the Committee shall establish performance objectives to beattained within the Award Period as the means of determining the Actual Valueof such a Performance Grant. The performance objectives shall be based on suchmeasure or measures of performance, which may include, but need not be limitedto, the performance of the Participant, the Company or one or more of itsdivisions or units, or any combination of the foregoing, as the Committee shalldetermine, and may be applied on an absolute basis or be relative to industryor other indices or any combination thereof. The Actual Value of a PerformanceGrant shall be equal to its Maximum Value only if the performance objectivesare attained in full, but the Committee shall specify the manner in which theActual Value of Performance Grants shall be determined if the performanceobjectives are met in part. Such performance measures, the Actual Value or theMaximum Value, or any combination thereof, may be adjusted in any manner by theCommittee in its discretion at any time and from time to time during or as soonas practicable after the Award Period, if it determines that such performance measures,the Actual Value or the Maximum Value, or any combination thereof, are notappropriate under the circumstances.

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###### **(c)**           TheCommittee shall determine in its discretion and specify in each agreementevidencing a Performance Grant the effect, if any, the termination of theParticipant’s employment with or performance of services for the Company duringthe Award Period shall have on such Performance Grant.

 

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###### **(d)**           TheCommittee shall determine whether the conditions of a Performance Grant havebeen 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 PerformanceGrant 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 itsterms. If the Performance Grant has any Actual Value and:

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**(i)**            wasnot awarded in conjunction with an Associated Award, the Committee shall causean amount equal to the Actual Value of the Performance Grant earned by theParticipant to be paid to him or his permitted assignee or Beneficiary; or

 

**(ii)**           wasawarded in conjunction with an Associated Award, the Committee shall determine,in accordance with criteria specified by the Committee (A) to cancel thePerformance Grant, in which event no amount with respect thereto shall be paidto the Participant or his permitted assignee or Beneficiary, and the AssociatedAward 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 orhis permitted assignee or Beneficiary as provided below, in which event theAssociated Award may be canceled or (C) to pay to the Participant or hisBeneficiary, the Actual Value of only a portion of the Performance Grants, inwhich event all or a portion of the Associated Award may be permitted tocontinue in effect in accordance with its terms or be canceled, as determinedby the Committee.

 

###### Such determination by theCommittee shall be made as promptly as practicable following the end of theAward Period or upon the earlier termination of employment or performance ofservices, or at such other time or times as the Committee shall determine, andshall be made pursuant to criteria specified by the Committee.

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###### **(e)**           Paymentof any amount with respect to the Performance Grants that the Committeedetermines to pay as provided above shall be made by Gaiam as promptly aspracticable after the end of the Award Period or at such other time or times asthe Committee shall determine, and may be made in cash, Common Shares, OtherGaiam Securities or property, or other forms of payment, or any combinationthereof or in such other manner, as determined by the Committee in its discretion.Notwithstanding anything in this Section to the contrary, the Committee may, inits discretion, determine and pay out the Actual Value of the PerformanceGrants at any time during the Award Period.

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### **Section 10.  *Deferral of Compensation*.**  TheCommittee shall determine whether or not an Award shall be made in conjunctionwith the deferral of the Participant’s salary, bonus or other compensation, orany combination thereof, and whether or not such deferred amounts may be:

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###### **(a)**           forfeitedto the Company or to other Participants or any combination thereof, undercertain circumstances (which may include, but need not be limited to, certaintypes of termination of employment or performance of services for the Company);

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###### **(b)**           subjectto increase or decrease in value based upon the attainment of or failure toattain, respectively, certain performance measures; and/or

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###### **(c)**           creditedwith income equivalents (which may include, but need not be limited to,interest, dividends or other rates of return) until the date or dates ofpayment of the Award, if any.

 

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### **Section 11.  *Deferred Payment of Awards*.**  TheCommittee may specify that the payment of all or any portion of cash, CommonShares, Other Gaiam Securities or property, or any other form of payment, orany 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, andupon such terms, as the Committee shall determine in its discretion, provided however, that any suchdeferral shall comply with the requirements of Code Section 409A. Deferredpayments of Awards may be made by undertaking to make payment in the futurebased upon the performance of certain investment equivalents (which mayinclude, 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 becompounded and may include, but need not be limited to, interest, dividends orother rates of return or any combination thereof) as may accrue thereon untilthe date or dates of payment, such investment equivalents and such additionalamounts of income equivalents to be determined by the Committee in itsdiscretion.

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### **Section 12.  *Transferability of Awards*.**  AParticipant’s rights and interest under this Plan or any Award may not beassigned or transferred, hypothecated or encumbered in whole or in part eitherdirectly or by operation of law or otherwise, including, but not by way oflimitation, execution, levy, garnishment, attachment, pledge, bankruptcy or inany other manner; *provided, however,*the Committeemay permit such transfer to a Permitted Transferee; and *provided,further*, that, unless otherwise permitted by the Code, any IncentiveStock Option granted pursuant to this Plan shall not be transferable other thanby will, by the laws of descent and distribution, and shall be exercisableduring the Participant’s lifetime only by Participant or by such PermittedTransferee.

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### **Section 13.  *Amendment or Substitution of Awards under this Plan*.**  Theterms of any outstanding Award under this Plan may be amended or modified fromtime to time by the Committee in its discretion in any manner that it deemsappropriate (including, but not limited to, acceleration of the date ofexercise of any Award and/or payments thereunder) if the Committee could grantsuch amended or modified Award under the terms of this Plan at the time of suchamendment or modification; *provided* thatno such amendment or modification shall adversely affect in a material mannerany right of a Participant under the Award without his written consent, unlessthe Committee determines in its discretion that there have occurred or areabout to occur significant changes in the Participant’s position, duties orresponsibilities, or significant changes in economic, legislative, regulatory,tax, accounting or cost/benefit conditions that are determined by the Committeein its discretion to have or to beexpected to have a substantial effect on the performance of the Company, or anyaffiliate, division or department thereof, on this Plan or on any Award underthis Plan and provided further that the Committee shall not have the authorityto accelerate the time or schedule of any payment in a manner which is notpermitted under Code Section 409A, or to grant or amend any Award in any mannerwhich would result in an inclusion of any amount in gross income under Code Section409A(a)(1). The Committee may, in its discretion, permit holders of Awardsunder this Plan to surrender outstanding Awards in order to exercise or realizethe rights under other Awards, or in exchange for the grant of newAwards, or require holders of Awards to surrender outstanding Awards as acondition precedent to the grant of new Awards under this Plan.

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### **Section 14.  *Termination of a Participant*.**  Forall purposes under this Plan, the Committee shall determine whether aParticipant has terminated employment with, or the performance of services for,the Company; *provided, however*, an absence orleave approved by the Company, to the extent permitted by applicable provisionsof the Code, shall not be considered an interruption of employment orperformance of services for any purpose under this Plan.

 

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### **Section 15.  *Dilution and Other Adjustments*.**  Ifany change in the outstanding Common Shares of the Company occurs by reason ofany stock split of or stock dividend on the Common Shares, then, except asotherwise determined by the Committee, the terms of any outstanding Awardsshall be equitably adjusted. If any change in the outstanding Common Sharesoccurs by reason of any split-up, split-off, spin-off, recapitalization, merger,consolidation, rights offering, reorganization, combination or exchange ofshares, 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 CommonStock as provided above), then the Committee may determine, in its discretion,to terminate all outstanding Awards immediately prior to the consummation ofany such event, or make an equitable adjustment in the terms of any outstandingAward and/or the number of Common Shares available for Awards. Any suchtermination or adjustment made by the Committee and shall be final, conclusiveand binding for all purposes of the Plan. Unless otherwise provided by theCommittee, all outstanding Awards shall terminate immediately prior to theconsummation of any dissolution or liquidation of the Company.

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### **Section 16.  *Designation of Beneficiary by Participant*.**  AParticipant may name a beneficiary to receive any payment to which he may beentitled 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 amanner determined by the Committee in its discretion (a “***Beneficiary***”).The Committee reserves the right to review and approve Beneficiarydesignations. A Participant may change his Beneficiary from time to time in thesame manner, unless such Participant has made an irrevocable designation. Anydesignation of a Beneficiary under this Plan (to the extent it is valid andenforceable under applicable law) shall be controlling over any otherdisposition, testamentary or otherwise, as determined by the Committee in itsdiscretion. If no designated Beneficiary survives the Participant and is livingon the date on which any amount becomes payable to such a Participant’sBeneficiary, such payment will be made to the legal representatives of theParticipant’s estate, and the term “***Beneficiary***”as used in this Plan shall be deemed to include such person or persons. Ifthere are any questions as to the legal right of any Beneficiary to receive adistribution under this Plan, the Committee in its discretion may determinethat the amount in question be paid to the legal representatives of the estateof the Participant, in which event the Company, the Board, the Committee, theDesignated Administrator (if any), and the members thereof, will have nofurther liability to anyone with respect to such amount.

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### **Section 17.  *Financial Assistance*.**  If theCommittee determines that such action is advisable, the Company may assist anyParticipant in obtaining financing from the Company (or under any program ofthe Company approved pursuant to applicable law), or from a bank or other thirdparty, on such terms as are determined by the Committee, and in such amount asis required to accomplish the purposes of this Plan, including, but not limitedto, to permit the exercise of an Award, the participation therein, and/or thepayment of any taxes with respect thereto. Such assistance may take any formthat the Committee deems appropriate, including, but not limited to, a directloan from the Company, a guarantee of the obligation by the Company or themaintenance by the Company of deposits with such bank or third party.

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### **Section 18.  *Miscellaneous Provisions*.**

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###### **(a)**           Anyproceeds from Awards shall constitute general funds of Gaiam.

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###### **(b)**           Nofractional shares may be delivered under an Award, but in lieu thereof a cashor other adjustment may be made as determined by the Committee in itsdiscretion.

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###### **(c)**           NoEligible Person or other person shall have any claim or right to be granted anAward under this Plan. Determinations made by the Committee under this Planneed not be uniform and may be made selectively among Eligible Persons underthis Plan, whether or not

 

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###### such EligiblePersons are similarly situated. Neither this Plan nor any action takenhereunder shall be construed as giving any Eligible Person any right to continueto be employed by or perform services for the Company, and the right toterminate the employment of or performance of services by Eligible Persons atany time and for any reason is specifically reserved.

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###### **(d)**           NoParticipant or other person shall have any right with respect to this Plan, theCommon Shares reserved for issuance under this Plan or in any Award, contingentor otherwise, until written evidence of the Award shall have been delivered tothe recipient and all the terms, conditions and provisions of this Plan and theAward applicable to such recipient (and each person claiming under or throughhim) have been met.

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###### **(e)**           NoCommon Shares, Other Gaiam Securities or property, other securities or propertyor other forms of payment shall be issued hereunder with respect to any Awardunless counsel for Gaiam shall be satisfied that such issuance will be incompliance with applicable law and any applicable rules of any stock exchangeor other market quotation system on which Common Shares are listed.

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###### **(f)**            Itis the intent of Gaiam that this Plan comply in all respects with Rule 16b-3and Section 162(m) with respect to Awards granted to executive officers ofGaiam, that any ambiguities or inconsistencies in construction of this Plan beinterpreted to give effect to such intention and that if any provision of thisPlan is found not to be in compliance with Rule 16b-3 or Section 162(m), suchprovision shall be deemed null and void with respect to Awards granted toexecutive officers of Gaiam to the extent required to permit such Awards tocomply with Rule 16b-3 and Section 162(m). It is also the intent of Gaiam thatthis Plan comply in all respects with the provisions of the Code providingfavorable treatment to Incentive Stock Options, that any ambiguities or inconsistenciesin construction of this Plan be interpreted to give effect to such intentionand that if any provision of this Plan is found not to be in compliance withthe Incentive Stock Option provisions of the Code, such provision shall bedeemed null and void with respect to Incentive Stock Options granted toemployees of the Company to the extent required to permit such Incentive StockOptions to receive favorable treatment under the Code.

######  

### It is the intent of Gaiam that this Plan comply in all respects withany applicable provisions of Code Section 409A with respect to Awards grantedunder this plan and any amendment or revision of such Awards, that anyambiguities or inconsistencies in construction of this Plan be interpreted togive effect to such intention and that if any provision of this Plan is foundnot to be in compliance with any applicable provisions of Code Section 409Asuch Plan provision shall be deemed null and void to the extent required topermit such Awards to comply with any applicable provisions of Code Section409A. Specifically, the Committee shall not have the authority to acceleratethe time or schedule of any payment in a manner which is not permitted underCode section 409A or the regulations issued thereunder, or to grant or amendany Award in any manner which would result in an inclusion of any amount ingross income under Code Section 409A(a)(1).

###  

###### **(g)**           TheCompany shall have the right to deduct from any payment made under this Planany federal, state, local or foreign income or other taxes required by law tobe withheld with respect to such payment. It shall be a condition to theobligation of Gaiam to issue Common Shares, Other Gaiam Securities or property,other securities or property, or other forms of payment, or any combinationthereof, upon exercise, settlement or payment of any Award under this Plan,that the Participant (or any Beneficiary or person entitled to act) pay toGaiam, upon its demand, such amount as may be required by the Company for thepurpose of satisfying any liability to withhold federal, state, local orforeign income or other taxes. If the amount requested

 

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###### is not paid, Gaiammay refuse to issue Common Shares, Other Gaiam Securities or property, other securitiesor property, or other forms of payment, or any combination thereof.Notwithstanding anything in this Plan to the contrary, the Committee may, inits discretion, permit an Eligible Person (or any Beneficiary or personentitled to act) to elect to pay a portion or all of the amount requested bythe Company for such taxes with respect to such Award, at such time and in suchmanner as the Committee shall deem to be appropriate (including, but notlimited to, by authorizing Gaiam to withhold, or agreeing to surrender to Gaiamon or about the date such tax liability is determinable, Common Shares, OtherGaiam Securities or property, other securities or property, or other forms ofpayment, or any combination thereof, owned by such person or a portion of suchforms 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 MarketValue equal to the amount of such taxes).

######  

###### **(h)**           Theexpenses of this Plan shall be borne by the Company; *provided,however*, the Company may recover from a Participant or hisBeneficiary, heirs or assigns any and all damages, fees, expenses and costsincurred by the Company arising out of any actions taken by a Participant inbreach of this Plan or any agreement evidencing such Participant’s Award.

######  

###### **(i)**            ThisPlan shall be unfunded. The Company shall not be required to establish anyspecial or separate fund or to make any other segregation of assets to assurethe payment of any Award under this Plan, and rights to the payment of Awardsshall be no greater than the rights of the Company’s general creditors.

######  

###### **(j)**            Byaccepting any Award or other benefit under this Plan, each Participant and eachperson claiming under or through him shall be conclusively deemed to haveindicated his acceptance and ratification of, and consent to, any action takenunder this Plan by the Company, the Board, the Committee or the DesignatedAdministrator (if applicable).

######  

###### **(k)**           Theappropriate officers of the Company shall cause to be filed any reports,returns or other information regarding Awards hereunder of any Common Sharesissued pursuant hereto as may be required by applicable law and any applicablerules of any stock exchange or other market quotation system on which CommonShares are listed.

######  

###### **(l)**            Thevalidity, construction, interpretation, administration and effect of this Plan,and of its rules and regulations, and rights relating to this Plan and toAwards granted under this Plan, shall be governed by the substantive laws, butnot the choice of law rules, of the State of Colorado.

######  

###### **(m)**          Recordsof the Company shall be conclusive for all purposes under this Plan or anyAward, unless determined by the Committee to be incorrect.

######  

###### **(n)**           Ifany provision of this Plan or any Award is held to be illegal or invalid forany reason, the illegality or invalidity shall not affect the remainingprovisions of this Plan or any Award, but such provision shall be fullyseverable, and this Plan or Award, as applicable, shall be construed and enforcedas if the illegal or invalid provision had never been included in this Plan orAward, as applicable.

######  

###### **(o)**           Theterms of this Plan shall govern all Awards under this Plan and in no eventshall the Committee have the power to grant any Award under this Plan that iscontrary to any of the provisions of this Plan.

 

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###### **(p)**           Forpurposes of interpretation of this Plan, the masculine pronoun includes thefeminine and the singular includes the plural wherever appropriate.

######  

### **Section 19.  *Plan Amendment or Suspension*.**  ThisPlan may be amended or suspended in whole or in part at any time from time totime by the Board. No amendment of this Plan shall adversely affect in amaterial manner any right of any Participant with respect to any Awardpreviously granted without such Participant’s written consent, except aspermitted under Section 13.

###  

### **Section 20.  *Plan Termination*.**  This Planshall terminate upon the earlier of the following dates or events to occur:

###  

###### **(a)**           uponthe adoption of a resolution of the Board terminating this Plan; or

######  

###### **(b)**           thetenth anniversary of the Effective Date; *provided, however*,that the Board may, prior to such date, extend the term of this Plan for anadditional period of up to five years for the grant of Awards other thanIncentive Stock Options. No termination of this Plan shall materially alter orimpair 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 amendmentsor modifications permitted under Section 13.

######  

### **Section 21.  *Effective Date*.**  This Plan shallbe effective, and Awards may be granted under this Plan, on or after theEffective Date.

 

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**APPENDIXA**

** **

### The following terms shallhave the meaning indicated:

### ** **

###### **(a)**           “***Actual Value***” has the meaning setforth in Section 9.

######  

###### **(b)**           “***Associated Award***” shall mean anAward granted concurrently or subsequently in conjunction with another Award.

######  

###### **(c)**           “***Award***” shall mean an award of rightsto an Eligible Person under this Plan.

###### ** **

###### **(d)**           “***Award Period***” has the meaning setforth in subsection 9(b).

######  

###### **(e)**           “***Beneficiary***” has the meaning setforth in Section 16.

###### ** **

###### **(f)**            “***Board***” shall mean the board ofdirectors of Gaiam.

###### ** **

###### **(g)**           “***Code***” shall mean the InternalRevenue Code of 1986, as it now exists or may be amended from time to time, andthe rules and regulations promulgated thereunder, as they may exist or may beamended from time to time.

###### ** **

###### **(h)**           “***Committee***” shall mean the person orpersons responsible for administering the Plan. The Board shall constitute theCommittee until the Board appoints a Board Committee, after which time theBoard Committee shall constitute the Committee, provided, however, that at anytime the Board may designate itself as the Committee or designate itself toadminister certain of the Committee’s authority under the Plan, includingadministering certain Awards under the Plan. The Board or the Board Committeemay designate a Designated Administrator to constitute the Committee or toadminister certain of the Committee’s authority under the Plan, includingadministering certain Awards under the Plan, subject to the right of the Boardor the Board Committee, as applicable, to revoke its designation at any timeand to make such designation on such terms and conditions as it may determinein its discretion. For purposes of this definition, the *“**Board Committee**”* shall mean a committee of theBoard designated by the Board to administer this Plan. Except as otherwisedetermined by the Board, the Board Committee (i) shall be comprised of notfewer than two directors, (ii) shall meet any applicable requirements underRule 16b-3, including any requirement that the Board Committee consist of “nonemployeedirectors” (as defined in Rule 16b-3), (iii) shall meet any applicablerequirements under Section 162(m), including any requirement that the BoardCommittee 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 requirementsof any stock exchange or other market quotation system on which Common Sharesare listed. For purposes of this definition, the *“**Designated Administrator**”*shall mean a person orperson designated by the Board or a Board Committee to act as a DesignatedAdministrator pursuant to this Plan. Except as otherwise determined by theBoard, a Designated Administrator shall only be appointed if Rule 16b-3 permitssuch appointment and the exercise of any authority without adversely affectingthe ability of Awards to officers of Gaiam to comply with the conditions forRule 16b-3 or Section 162(m).

###### ** **

###### **(i)**            “***Company***” shall mean Gaiam and anyparent, subsidiary or affiliate of Gaiam.

 

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###### **(j)**            “***Common Shares***” shall mean shares ofClass A common stock, par value $0.0001 per share, of Gaiam and stock of anyother class into which such shares may thereafter be changed.

###### ** **

###### **(k)**           “***Effective Date***” shall June 1, 1999.

###### ** **

###### **(l)**            “***Eligible Person(s)***” shall mean thosepersons who are full or part-time employees of the Company or other individualswho perform services for the Company, including, without limitation, directorswho are not employees of the Company and consultants and independentcontractors who perform services for the Company.

###### ** **

###### **(m)****          “*Exchange Act”*** shall mean the Securities Exchange Act of1934, as it now exists or may be amended from time to time, and the rulespromulgated thereunder, as they may exist or may be amended from time to time.

###### ** **

###### **(n)**           “***Fair Market Value***” shall mean suchvalue rounded up to the nearest cent as determined by the Committee inaccordance with applicable law.

###### ** **

###### **(o)**           “***Incentive Stock Option***” shall mean aStock Option that is an incentive stock option as defined in Section 422 of theCode. Incentive Stock Options are subject, in part, to the terms, conditionsand restrictions described in Section 6.

######  

###### **(p)**           “***Maximum Value***” has the meaning setforth in subsection 9(a).

######  

###### **(q)**           “***Gaiam***” shall mean Gaiam, Inc., aColorado corporation.

###### ** **

###### **(r)**           “***Nonqualified Stock Option***” shallmean a Stock Option that is not an incentive stock option as defined in Section422 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 meanGaiam securities (which may include, but need not be limited to, unbundledstock units or components thereof, debentures, preferred stock, warrants,securities convertible into Common Shares or other property) other than CommonShares.

######  

###### **(t)**            “***Participant***” shall mean an EligiblePerson to whom an Award has been granted under this Plan.

######  

###### **(u)**           “***Performance Grant***” shall mean anAward subject, in part, to the terms, conditions and restrictions described inSection 9, pursuant to which the recipient may become entitled to receivecash, Common Shares, Other Gaiam Securities or property, or other forms ofpayment, or any combination thereof, as determined by the Committee.

######  

###### **(v)**            *“**Permitted Transferee**”*means(i) any person defined as an employee in the Instructions to RegistrationStatement Form S-8 promulgated by the Securities and Exchange Commission, assuch Form may be amended from time to time, which persons include, as of thedate of adoption of the Plan, (a) executors, administrators or beneficiaries ofthe estates of deceased Participants, guardians or members of a committee forincompetent former Participants, or similar persons duly authorized by law toadminister 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 forthe benefit of

 

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###### any persondescribed in clause (i). For purposes of this definition, “***familymember***” 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, orsister-in-law, including adoptive relationships, any person sharing theParticipant’s household (other than a tenant or employee), a trust in whichthese persons have more than fifty percent of the beneficial interest, afoundation in which these persons (or the Participant) control the managementof assets, and any other entity in which these persons (or the Participant) ownmore than fifty percent of the voting interests. For purposes of thisdefinition, neither (i) a transfer under a domestic relations order insettlement of marital property rights; nor (ii) a transfer to an entity inwhich more than fifty percent of the voting interests are owned by familymembers (or the Participant) in exchange for an interest in that entity isconsidered a transfer for “***value***”.

######  

###### **(w)**           “***Plan***” shall mean this Gaiam, Inc.1999 Long-Term Incentive Plan.

###### ** **

###### **(x)**           “***Purchased Option***” shall mean a StockOption that is sold to an Eligible Person at a price determined by theCommittee. Purchased Options are subject, in part, to the terms, conditions andrestrictions described in Section 6.

######  

###### **(y)**           “***Restricted Period***” has the meaningset forth in subsection 8(b).

######  

###### **(z)**           “***Restricted Stock***” shall mean anAward 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-3promulgated by the Securities and Exchange Commission under the Exchange Actand any successor rule.

######  

###### **(bb)**         “***Section 162(m)***” shall mean §162(m)of the Code, any rules or regulations promulgated thereunder, as they may existor 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 promulgatedthereunder, as they may exist or may be amended from time to time, or anysuccessor to such section.

** **

###### **(dd)**         “***Stock Appreciation Right***” shall meanan Award of a right to receive (without payment to Gaiam) cash, Common Shares,Other Gaiam Securities or property, or other forms of payment, or anycombination thereof, as determined by the Committee, based on the increase inthe value of the number of Common Shares specified in the Stock AppreciationRight. Stock Appreciation Rights are subject, in part, to the terms, conditionsand restrictions described in Section 7.

######  

###### **(ee)**         “***Stock Option***” shall mean an Award ofa right to purchase Common Shares. The term Stock Option shall includeNonqualified Stock Options, Incentive Stock Options and Purchased Options.

###### ** **

###### **(ff)**           “***Ten Percent Employee***” shall mean anemployee of the Company who owns stock representing more than ten percent ofthe voting power of all classes of stock of Gaiam or any parent or subsidiaryof Gaiam.

###### ** **

###### **(gg)**         “***Treasury Regulation***” shall mean afinal, proposed or temporary regulation of the Department of Treasury under theCode and any successor regulation.

 

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