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Stock-Based Compensation

9 Months Ended

Sep. 30, 2025

Stock-Based Compensation [Abstract]

STOCK-BASED COMPENSATION

NOTE 12—STOCK-BASED COMPENSATION

2024 Omnibus Incentive Plan

On March 6, 2024, the shareholders of ESGEN approved the Zeo Energy Corp. 2024 Omnibus Incentive Equity Plan (the “Incentive Plan”), which became effective upon the Closing. 3,220,400 of the outstanding shares of class A common stock of the Company (the “Plan Share Reserve”) shall be available for awards under the Incentive Plan. Each Award granted under the Plan will reduce the Plan Share Reserve by the number of shares of common stock underlying the Award. Notwithstanding the foregoing, the Plan Share Reserve shall be automatically increased on the first day of the 2025 fiscal year through the 2029 fiscal year by a number of shares of common stock equal to the lesser of (i) the positive difference, if any, between 2% of the then-outstanding shares of common stock on the last day of the immediately preceding fiscal year, and (ii) a lower number of shares of common stock as may be determined by the Board.

The purpose of the Incentive Plan is to provide a means through which the Company and the other members of the Company and its subsidiaries (the “Company Group”) may attract and retain key personnel and to provide a means whereby directors, officers, employees, consultants and advisors of the Company and the other members of the Company Group can acquire and maintain an equity interest in the Company, or be paid incentive compensation measured by reference to the value of common stock, thereby strengthening their commitment to the welfare of the Company Group and aligning their interests with those of the Company’s stockholders.

March 2024 Grant

On March 13, 2024, the Company entered into an executive employment agreement with the Company’s CEO. In addition to the CEO’s annual salary and cash bonus, the CEO became eligible to receive certain grants of vested shares under the Incentive Plan as follows:

	●	50,000 vested shares to be granted on the date that is 12 months after the grant date.

	●	50,000 vested shares to be granted on the date that is 24 months after the grant date; and

	●	50,000 vested shares to be granted on the date that is 35 months after the after the grant date.

The Company determined the grant date fair value per share was $6.97, a Level 1 measurement, by reference to the publicly traded stock price on March 13, 2024.

Further, if, within three (3) years of the effective date of the Closing, (i) the volume-weighted average price of shares of the publicly traded stock of the Company exceeds $7.50 for 20 or more days of any consecutive 30-day period, then the CEO will be granted vested equity from the Incentive Plan equal to 1% of the total issued and outstanding capital stock of the Company, (ii) the volume-weighted average price of shares of the publicly traded stock of the Company exceeds $12.50 for 20 or more days of any consecutive 30-day period, then the CEO will be granted additional vested equity from the Incentive Plan equal to 1% of the total issued and outstanding capital stock of the Company, (iii) and the volume-weighted average price of shares of the publicly traded stock of the Company exceeds $15.00 for 20 or more days of any consecutive 30-day period, then the CEO will be granted additional vested equity from the Incentive Plan equal to 1% of the total issued and outstanding capital stock of the Company.

The per unit fair value and derived service period for each tranche of performance based executive shares is included in the valuation of performance-based equity bonus awards as of March 13, 2024, as follows:

Fair Value Summary		Tranche 1				Tranche 2				Tranche 3
Tranche per unit fair value		$	5.96			$	4.53			$	3.82
Stock price on valuation date		$	6.97			$	6.97			$	6.97
Derived service period			0.35 years				1.19 years				1.47 years

During the three and nine months ended September 30, 2025, the Company recognized $269,530 and $1,554,202, respectively, in equity compensation expense related to these awards. As of September 30, 2025, the remaining unrecognized compensation expense was $505,086 and is expected to be recognized over the remaining 1.37-year vesting period.

February 2025 Grants

On February 5, 2025, the Company granted an aggregate of 790,000 restricted shares of class A common stock under the Incentive Plan to 10 employees and two executives. The restricted shares vest in three equal installments as follows.

	●	One-third (1/3) on the date that is six months following the grant date;

	●	One-third (1/3) on the date that is 18 months following the grant date; and

	●	One-third (1/3) on the date that is 30 months following the grant date.

On February 5, 2025, the Company granted an aggregate of 275,000 restricted shares of class A common stock under the Incentive Plan to eight employees. The restricted shares vest in three equal installments as follows.

	●	One-third (1/3) on the date that is 12 months following the grant date;

	●	One-third (1/3) on the date that is 24 months following the grant date; and

	●	One-third (1/3) on the date that is 36 months following the grant date.

The Company determined the grant date fair value per share was $2.57, a Level 1 measurement, by reference to the publicly traded stock price on February 5, 2025.

During the three and nine months ended September 30, 2025, the Company recognized $282,309 and $875,229, respectively, in equity compensation expense related to these awards. As of September 30, 2025, the remaining unrecognized compensation expense was $1,677,637 and is expected to be recognized over the remaining 2.35-year vesting period.

July 2025 Grants

On July 5, 2025, the Company granted an aggregate of 140,000 restricted shares of class A common stock under the Incentive Plan to four employees. The restricted shares vest in three equal installments as follows.

	●	One-third (1/3) on the date that is 12 months following the grant date;

	●	One-third (1/3) on the date that is 24 months following the grant date; and

	●	One-third (1/3) on the date that is 36 months following the grant date.

The Company determined the grant date fair value per share was $2.79, a Level 1 measurement, by reference to the publicly traded stock price on July 5, 2025.

During the three and nine months ended September 30, 2025, the Company recognized $31,034 in equity compensation expense related to these awards. As of September 30, 2025, the remaining unrecognized compensation expense was $359,566 and is expected to be recognized over the remaining 2.76-year vesting period.

Sun Managers, LLC Management Incentive Plan

Sun Managers intends to grant class B units (as defined in the SM LLCA) in Sun Managers through the Sun Managers, LLC Management Incentive Plan (the “Management Incentive Plan”) adopted by Sun Managers to certain eligible employees or service providers of OpCo, Sunergy or their subsidiaries, in the discretion of Timothy Bridgewater, as manager of Sun Managers. Such class B units may be subject to a vesting schedule, and once such class B units become vested, there may be an exchange opportunity through which the grantees may request (subject to the terms of the Management Incentive Plan and the OpCo amended and restated limited liability company agreement in its entirely (the “OpCo A&R LLC Agreement”)) the exchange of their class B units into Seller OpCo Units (together with an equal number of Zeo class V shares), which may then be converted into Zeo class A common Stock (subject to the terms of the Management Incentive Plan and the OpCo A&R LLC Agreement). Grants under the Management Incentive Plan will be made after ESGEN Closing.

Although Sun Managers is the legal issuer of the awards, all compensatory payments made by Sun Managers to individuals providing services to or for the benefit of the Company or its subsidiaries (including equity interests in Sun Managers) are treated as compensation paid by the Company under ASC Topic 718, “Compensation – Stock Compensation.” In accordance with the OpCo A&R LLCA, the Company allocates 100% of all related expense and deduction items to Sun Managers. These compensatory payments are accounted for as capital contributions from Sun Managers to the Company, with no new equity units issued in return.

On March 31, 2025, Sun Managers LLC granted an aggregate of 875,000 restricted shares of Zeo class A common stock under the Management Incentive Plan to three employees and one executive. The restricted shares vested immediately upon grant. During the three and nine months ended September 30, 2025, the Company recognized $528,500 and $1,321,250, respectively, in equity compensation expense related to these awards.

On August 4, 2025, Sun Managers LLC granted an aggregate of 350,000 restricted shares of Zeo class A common stock under the Management Incentive Plan to two employees. The restricted shares vested immediately upon grant. During the three and nine months ended September 30, 2025, the Company recognized $840,000 in equity compensation expense related to these awards.

On August 13, 2025, Sun Managers LLC granted an aggregate of 168,500 restricted shares of Zeo class A common stock under the Management Incentive Plan to four employees. The restricted shares vested immediately upon grant. During the three and nine months ended September 30, 2025, the Company recognized $384,180 in equity compensation expense related to these awards.

On September 17, 2025, Sun Managers LLC granted an aggregate of 255,000 restricted shares of Zeo class A common stock under the Management Incentive Plan to three employees. The restricted shares vested immediately upon grant. During the three and nine months ended September 30, 2025, the Company recognized $288,150 in equity compensation expense related to these awards.

Seasonal Manager Stock Compensation Plan

Beginning January 1, 2025, certain eligible sales managers may earn shares of the Company’s class A common stock under the Seasonal Manager Stock Compensation Plan, which operates under the umbrella of the Management Incentive Plan. Managers are eligible to earn 40 shares per kW installed for projects sold by the manager’s organization, provided they exceed 1,500 kW installed during a calendar year, and as long as the manager sells 700kW the subsequent calendar year. The number of shares awarded may be reduced if the average price for Zeo stock during the quarter in which an installations are completed exceeds $5 per share, the number of shares granted per kW will be correspondingly decreased.

The managers become eligible to receive certain grants of vested shares under the Seasonal Manager Stock Compensation Plan as follows:

	●	50% of the shares for which Manager becomes eligible during a calendar year will be granted in Q1 (prior to the end of March) of the following calendar year (the “Tranche 1 Grant”) if Manager remains eligible at the time of the grant.

	●	The remaining 50% of the shares for which Manager becomes eligible during a calendar year are granted in the Q1 of the second year following the calendar year in which eligibility is earned (the “Tranche 2 Grant”) if Manager remains eligible at the time of the grant.

On March 31, 2025, Sun Managers LLC granted an aggregate of 577,910 restricted shares of Zeo class A common stock under the Management Incentive Plan to 10 sales managers. The restricted shares vest in two equal installments as follows.

	●	One-half (1/2) immediately on the grant date; and

	●	One-half (1/2) on the date that is 12 months following the grant date.

During the three and nine months ended September 30, 2025, the Company recognized $109,975 and $655,082, respectively, in equity compensation expense related to these awards. As of September 30, 2025, the remaining unrecognized compensation expense was $217,564 and is expected to be recognized over the remaining 0.50-year vesting period.