RESTRICTED STOCK AGREEMENT

 

This Restricted Stock Agreement (the “Agreement”) is entered into by and between
NeuMedia, Inc., a Delaware corporation (the “Company”), and Vivid Entertainment,
LLC, a California limited liability company (”Vivid”).

 

WHEREAS, the Company and Vivid have entered into that certain [Settlement
Agreement] (the “Settlement Agreement”) as of the date hereof pursuant to which
the Company has agreed to issue Two Million Five Hundred Thousand (2,500,000)
shares of Common Stock (the “Shares”) of the Company to Vivid in connection with
the terms of the Settlement Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement and the Settlement Agreement, the Company and Vivid
hereby agree as follows:

 

1.          Issue of Common Stock.

 

(a)          Subject to the terms and conditions of this Agreement and the
Settlement Agreement, the Company hereby issues, and Vivid hereby accepts as
payment in full in accordance with the terms of the Settlement Agreement, the
Shares.

 

(b)          The Board of Directors of the Company has authorized the issue of
the Shares pursuant to the terms of the Settlement Agreement.

 

2.          Closing.

 

(a)          On the date hereof, the Company shall deliver or cause to be
delivered the following:

 

(i)          a duly executed copy of the Settlement Agreement; and

 

(ii)         the Shares registered in the name of Vivid to a brokerage account
designated in writing to the Company by Vivid.

 

(b)          On the date hereof, Vivid shall deliver or cause to be delivered a
duly executed copy of the Settlement Agreement.

 

3.          Company Representations and Warranties. The Company hereby
represents and warrants to Vivid that as of the date hereof:

 

(a)          Organization and Business. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted. The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership or use of property or the nature of
the business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. As used in this Agreement, the term “Material Adverse Effect” means any
material adverse effect on the business, operations, assets (including
intangible assets), liabilities (actual or contingent), financial condition, or
prospects of the Company and its subsidiaries, taken as a whole.

 

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(b)          Valid Issuance. When issued and delivered in accordance with the
terms of this Agreement and the Settlement Agreement, the Shares will be duly
and validly issued, fully paid, and non-assessable, and will be free of Liens
other than restrictions on transfer. The Shares are not subject to preemptive
rights or any other similar rights.

 

(c)          Authorization; Enforceability. All corporate action on the part of
the Company and its officers necessary for the authorization, execution and
delivery of this Agreement and the authorization, issuance, sale and delivery of
the Shares has been taken, and this Agreement constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except to the extent limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors’ rights and general principles of equity that
restrict the availability of equitable or legal remedies.

 

(d)          No Conflict. The execution, delivery and performance of this
Agreement and the consummation by the Company of the transactions contemplated
hereby and thereby will not: (i) conflict with or result in a violation of any
provision of the charter or by-laws of the Company or (ii) violate or conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which with notice or lapse of time or both could become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement or instrument to which the Company is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to the Company or by which any property or
asset of the Company is bound or affected. Except for filings pursuant to
Regulation D of the Securities Act, and applicable state securities laws, which
have been made or will be made by the Company in connection with the issuance of
the Shares, the Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental
agency, regulatory agency, self regulatory organization or stock market or any
third party in order for it to execute, deliver or perform any of its
obligations under this Agreement.

 

(e)          No General Solicitation. Neither the Company nor any person
participating on the Company’s behalf in the transactions contemplated hereby
has conducted any “general solicitation,” as such term is defined in Regulation
D promulgated under the Securities Act, with respect to the Shares.

 

(f)          Offering. Subject to the accuracy of the representations and
warranties of Vivid in Section 4 of this Agreement, the issuance of the Shares
pursuant to this Agreement constitutes transactions exempt from the registration
requirements of Section 5 of the Securities Act and from the registration or
qualification requirements of applicable state securities laws.

 

4.          Vivid Representations and Warranties. Vivid represents and warrants
to the Company that as of the date hereof:

 

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(a)          Authorization; Enforcement. This Agreement has been duly and
validly authorized by Vivid, (ii) has been duly executed and delivered by Vivid,
and (iii) will constitute, upon execution and delivery by Vivid and the Company,
the valid and binding agreements of Vivid enforceable in accordance with their
terms, except to the extent limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors’ rights and general principles of equity that restrict
the availability of equitable or legal remedies.

 

(b)          Investment Purpose. Vivid is acquiring the Shares for investment
for its own account only and not with a view to, or for resale in connection
with, any “distribution” thereof within the meaning of the Securities Act. Vivid
further represents that it does not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Shares.

 

(c)          Professional Advice; Investment Experience. Vivid has reviewed, or
caused its representatives to review, the publicly available filings made by the
Company with the SEC, and Vivid has carefully considered such filings in
connection with its entry into this Agreement. Vivid has such knowledge, skill,
and experience in technical, business, financial, and investment matters so that
it is capable of evaluating the merits and risks of an investment in the Shares.
Vivid has retained, and relied upon, appropriate professional advice regarding
the technical, investment, tax, and legal merits and consequences of this
Agreement and owning the Shares.

 

(d)          Reliance on Exemptions. Vivid understands that the Shares are being
issued to it in reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws (the “Securities
Laws”) and that the Company is relying upon the truth and accuracy of, and
Vivid’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Vivid set forth herein in order to
determine the availability of such exemptions. Vivid is an “accredited investor”
within the meaning of Regulation D under the Securities Act.

 

(e)          Restricted Securities. Vivid understands that the Shares are
“restricted securities” under applicable Securities Laws and that, pursuant to
these laws, Vivid must hold the Shares indefinitely unless they are registered
with the SEC and qualified by state authorities, or an exemption from such
registration and qualification requirements is available. Vivid acknowledges
that the Company has no obligation to register or qualify the Shares for resale,
except as provided in this Agreement. Vivid further acknowledges that if an
exemption from registration or qualification is available, it may be conditioned
on various requirements including, but not limited to, the time and manner of
sale, the holding period for the Shares, and requirements relating to the
Company which are outside of Vivid’s control, and which the Company is under no
obligation and may not be able to satisfy.

 

(f)          Risk of Loss. The Purchaser is capable of sustaining a complete
loss of the investment in the Shares, and Vivid has no need for liquidity in the
investment in the Shares. Vivid understands and acknowledges that an investment
in the Shares is highly risky and that it could suffer a complete loss of its
investment.

 

(g)          No Other Representations. Other than the representations and
warranties contained herein [or in the Settlement Agreement], Vivid has not
received and is not relying on any representation, warranties or assurances as
to the Company, its business or its prospects from the Company or any other
person or entity.

 

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5.          Market Stand-Off. Except as otherwise expressly provided in this
Agreement, during the two (2) year period (the “Restricted Period”) beginning on
the date hereof, Vivid shall not, without the prior written consent of the
Company (i) lend, offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any Shares, or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Shares, whether any such transaction described in clause (i) or
(ii) above is to be settled by delivery of stock or such other securities, in
cash or otherwise. In the event of the declaration of a stock dividend, a
spin-off, a stock split, a recapitalization or a similar transaction affecting
the Company’s outstanding securities without receipt of consideration, any new,
substituted or additional securities that are by reason of such transaction
distributed with respect to the Shares, any such new, substituted or additional
securities shall immediately be subject to the restrictions set forth in this
Section 5. To enforce the restrictions set forth in this Section 5, the Company
may impose stop-transfer instructions with respect to the Shares until the end
of the Restricted Period. In the event that any holders of the Company’s equity
securities that are affiliated with any of Trinad Capital, Coast Asset
Management or Peter Guber (together, the “Specified Stockholders”) agree to
subject to any restrictions on transfer that extend beyond the end of the
Restricted Period with respect to their respective equity securities of the
Company, Vivid agrees that the Restricted Period with respect to its Shares
shall be extended for the same period of time as is applicable to the shortest
period applicable to any of the Specified Stockholders, provided, that, in no
event shall the Restricted Period applicable to the Shares be extended more than
one (1) year after the end of the Restricted Period.

 

6.          Restrictive Legends and Stop-Transfer Orders.

 

(a)          Legends. The certificate or certificates representing the Shares
shall bear the following legends (as well as any legends required by applicable
state corporate law and the Securities Laws):

 

(i)THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (OR OTHER EVIDENCE) IN A FORM
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.

 

(ii)THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF A RESTRICTED STOCK AGREEMENT BETWEEN THE COMPANY
AND THE SHAREHOLDER DATED JANUARY 1,2011, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.

 

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(iii)Any legend required to be placed thereon by any appropriate securities
commissioner.

 

(b)          Stop-Transfer Notices. Vivid agrees that, to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop
transfer” instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.

 

7.          Piggyback Registration.

 

(a)          Piggyback Registration Rights. The Company agrees that if, after
the date hereof, the Board shall authorize the filing of a registration
statement under the Securities Act (other than a registration statement on Form
S-8, Form S-4 or any other form that does not include substantially the same
information as would be required in a form for the general registration of
securities) in connection with the proposed offer of shares of Common Stock of
the Company, the Company shall: (A) promptly notify Vivid that such registration
statement will be filed and that the Shares issued pursuant to this Agreement
and then held by Vivid (hereinafter the “Registrable Securities”) may be
included in such registration statement at the request of Vivid; (B) use its
commercially reasonable efforts to cause the registration of such Registrable
Securities that Vivid requests to be registered; and (C) use its commercially
reasonable efforts to cause such registration statement to become effective as
promptly as reasonably practicable. If Vivid desires to include in such
registration statement all or any part of the Registrable Securities held by
/it, it shall, within ten (10) days after the above-described notice from the
Company, so notify the Company in writing. If Vivid decides not to include all
of its Registrable Securities in any registration statement thereafter filed by
the Company, Vivid shall nevertheless continue to have the right to include any
Registrable Securities in any subsequent registration statement or registration
statements as may be filed by the Company with respect to offerings of its
securities, all upon the terms and conditions set forth herein. Notwithstanding
the foregoing, if any of the Specified Stockholders at any time desire to
register any shares of stock of the Company held by them: (i) the Company shall,
at Vivid’s option, use its commercially reasonable efforts to cause registration
of the Restricted Stock, simultaneously with registration of the stock of the
Specified Stockholders, to the extent necessary to permit their unrestricted
sale and (ii) the restrictions set forth in Section 5 shall immediately
terminate should any Specified Stockholders sell stock of the Company.

 

(b)          Underwriting Requirements. In connection with any registration
statement subject to Section 7(a) involving an underwritten offering of shares
of the Company’s capital stock, the Company shall not be required to include any
of the Registrable Securities in such underwriting unless Vivid accepts the
terms of the underwriting as agreed upon between the Company and its
underwriters, and then only in such quantity as such underwriter in its sole
discretion determines will not jeopardize the success of the offering by the
Company. If the underwriter determines that less than all of the Registrable
Securities that Vivid has requested to be registered (the “Requested
Securities”) can be included in such offering, then the securities to be
registered and sold by any person other than the Company shall be allocated
among such persons in proportion (as nearly as practicable to) the number of
shares of Common Stock requested to be registered by each such person.
Notwithstanding the foregoing, in no event shall the number of Requested
Securities included in the offering be reduced if any shares of Common Stock of
the Company owned by any of the Specified Stockholders are included in such
offering.

 

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(c)          Abandonment or Delay of Registration. Notwithstanding any other
provision of this Section 7, the Company may at any time abandon or delay any
registration commenced by the Company. In the event of such abandonment by the
Company, the Company shall not be required to continue registration of the
Registrable Securities requested by the Vivid for inclusion and the Purchaser
shall retain the right to request inclusion of the Registrable Securities as set
forth above.

 

(d)          Expenses. Vivid shall be responsible for all underwriting discounts
and selling commissions with respect to the Registrable Securities being sold by
Vivid to the extent paid, or to be paid, by all other holders of equity
securities of the Company and all fees and expenses of any counsel retained by
Vivid. The Company will pay all other expenses incurred by the Company
associated with each registration, including, without limitation, all filing and
printing fees, the Company’s counsel and accounting fees and expenses, costs
associated with clearing the Vivid’s Registrable Securities for sale under
applicable Securities Laws, and listing fees.

 

(e)          Effectiveness.

 

(i) The Company may delay the disclosure of material non-public information
concerning the Company by suspending the use of any prospectus included in any
registration statement contemplated hereunder required to contain such
information, the disclosure of which at the time is not, in the good faith
opinion of the Company, in the best interests of the Company (an “Allowed
Delay”); provided, that the Company shall promptly (a) notify Vivid of the
existence of an Allowed Delay, (b) advise Vivid in writing to cease all sales
under the registration statement until the end of the Allowed Delay and (c) use
commercially reasonable efforts to terminate an Allowed Delay as promptly as
practicable.

 

(f)          Other Registration Rights Agreements. Nothing in this Agreement
shall limit the Company’s right to grant registration rights to other persons.
In the event of any change or changes in the Company’s outstanding Common Stock
by reason of any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or any similar transaction, the Company
shall adjust the number of shares of the Company’s Common Stock granted to Vivid
to prevent substantial dilution of the rights granted to Vivid.

 

8.          Miscellaneous.

 

(a)          Governing Law. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.

 

(b)          Entire Agreement; Enforcement of Rights. This Agreement sets forth
the entire agreement and understanding of the parties relating to the subject
matter herein and merges all prior discussions between them. No modification of
or amendment to this Agreement, nor any waiver of any rights under this
Agreement, shall be effective unless in writing signed by the parties to this
Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.

 

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(c)          Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. If the parties cannot reach a mutually agreeable and
enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.

 

(d)          Construction. This Agreement is the result of negotiations between
and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.

 

(e)          Notices. Any notice required or permitted by this Agreement shall
be in writing and shall be deemed sufficient when delivered personally or sent
by fax or 48 hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, and addressed to the party to be notified
at such party’s address or fax number as set forth below or as subsequently
modified by written notice.

 

(f)          Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

 

(g)          Successors and Assigns. The rights and benefits of this Agreement
shall inure to the benefit of, and be enforceable by the Company’s successors
and assigns. The rights and obligations of Vivid under this Agreement may only
be assigned with the prior written consent of the Company.

 

(h)          Third Party Beneficiary. This Agreement is intended for the benefit
of the undersigned parties and their respective permitted successors and assigns
and is not for the benefit of, nor may any provision hereof be enforced by, any
other person.

 

(i)          Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

(j)          Expenses. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement.

 

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the Company and Vivid have executed this Agreement effective
as of January 1, 2011.

 

VIVID ENTERTAINMENT, LLC:   NEUMEDIA, INC.:       By: [ILLEGIBLE]   By:
[ILLEGIBLE]           Name: [ILLEGIBLE]   Name: [ILLEGIBLE]           Its: CEO  
Its: CFO

 

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