Document:

Exhibit 10.20

 

STOCK AND WARRANT
PURCHASE AGREEMENT

 

by and among

 

WATCHIT MEDIA, INC.

 

and

 

THE PURCHASERS

IDENTIFIED HEREIN

 

Dated as of April 28,
2006

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I.                   DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Defined Terms

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II.                  SALE
  AND PURCHASE OF COMMON STOCK AND WARRANTS

  	
  3

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Sale and Purchase of Common Stock and Warrants

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE III.                 CLOSING

  	
  4

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Closing

  	
  4

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Deliveries by the Company at the Closing

  	
  4

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Deliveries by the Purchasers at the Closing

  	
  4

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Form of Documents and Instruments

  	
  4

  
	
   

  	
   

  	
   

  
	
  3.5

  	
  Additional Closings

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV.                 REPRESENTATIONS
  AND WARRANTIES OF THE COMPANY

  	
  5

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Organization of the Company

  	
  5

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Capitalization

  	
  5

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  Authority Relative to this Agreement

  	
  6

  
	
   

  	
   

  	
   

  
	
  4.4

  	
  No Conflicts

  	
  6

  
	
   

  	
   

  	
   

  
	
  4.5

  	
  Exemption from Registration

  	
  6

  
	
   

  	
   

  	
   

  
	
  4.6

  	
  Litigation

  	
  6

  
	
   

  	
   

  	
   

  
	
  4.7

  	
  SEC Reports and Financial Statements

  	
  6

  
	
   

  	
   

  	
   

  
	
  4.8

  	
  Governmental and Other Approvals

  	
  7

  
	
   

  	
   

  	
   

  
	
  4.9

  	
  No Brokers

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE V.                  REPRESENTATIONS,
  WARRANTIES AND AGREEMENTS OF PURCHASERS

  	
  7

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Purchase for Investment

  	
  7

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  No Brokers

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI.                 COVENANTS

  	
  9

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Legend

  	
  9

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Shares Issuable Upon Exercise

  	
  10

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Observation Rights

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII.               REGISTRATION
  RIGHTS

  	
  11

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Registration

  	
  11

  
				

 

i

 

	
  7.2

  	
  Temporary Suspension of Use of Registration
  Statement

  	
  11

  
	
   

  	
   

  	
   

  
	
  7.3

  	
  Liquidated Damages

  	
  12

  
	
   

  	
   

  	
   

  
	
  7.4

  	
  Registration Procedures

  	
  12

  
	
   

  	
   

  	
   

  
	
  7.5

  	
  Expenses of Registration

  	
  13

  
	
   

  	
   

  	
   

  
	
  7.6

  	
  Indemnification by Company

  	
  13

  
	
   

  	
   

  	
   

  
	
  7.7

  	
  Indemnification by Offering Holders

  	
  14

  
	
   

  	
   

  	
   

  
	
  7.8

  	
  Notification of Certain Events

  	
  15

  
	
   

  	
   

  	
   

  
	
  7.9

  	
  Indemnification Procedures

  	
  15

  
	
   

  	
   

  	
   

  
	
  7.10

  	
  Rule 144

  	
  15

  
	
   

  	
   

  	
   

  
	
  7.11

  	
  Transfer of Securities

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII.              MISCELLANEOUS

  	
  16

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Assignment

  	
  16

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  Notices

  	
  16

  
	
   

  	
   

  	
   

  
	
  8.3

  	
  Choice of Law

  	
  16

  
	
   

  	
   

  	
   

  
	
  8.4

  	
  Prevailing Party Attorney Fees

  	
  17

  
	
   

  	
   

  	
   

  
	
  8.5

  	
  Counterparts

  	
  17

  
	
   

  	
   

  	
   

  
	
  8.6

  	
  Invalidity

  	
  17

  
	
   

  	
   

  	
   

  
	
  8.7

  	
  Headings

  	
  17

  
	
   

  	
   

  	
   

  
	
  8.8

  	
  Severability

  	
  17

  

 

ii

 

SCHEDULES AND
EXHIBITS

 

	
  Schedule 1

  	
  –

  	
  List of
  Purchasers

  
	
  Exhibit A

  	
  –

  	
  Form of Warrant

  

 

iii

 

STOCK AND WARRANT
PURCHASE AGREEMENT

 

This
Stock and Warrant Purchase Agreement, dated as of April 28, 2006, is made by
and among Watchit Media, Inc., a Delaware corporation (the “Company”),
and each of the persons or entities set forth on Schedule 1 hereto
(each, a “Purchaser” and collectively, the “Purchasers”).

 

RECITALS

 

WHEREAS,
the Company desires to sell to the Purchasers, and the Purchasers desire to
purchase from the Company, an aggregate of 5,555,556 shares (the “Shares”)
of the Company’s common stock, par value $0.01 per share (the “Common Stock”),
and warrants to purchase an additional 2,777,778 shares of Common Stock (the “Warrant
Shares”).

 

NOW,
THEREFORE, in consideration of the mutual covenants and premises contained
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1           Defined
Terms. As used herein, the terms below shall have the following meanings:

 

“Affiliate”
shall mean with respect to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, a Person shall be deemed to
be “controlled by” another Person if such latter Person possesses, directly or
indirectly, power either to direct or cause the direction of management or
policies of a Person, whether through the ability to exercise voting power, by
contract or otherwise.

 

“Agreement”
means this Purchase Agreement, together with all schedules attached hereto.

 

“Board
of Directors” means the Board of Directors of the Company as of the date of
this Agreement.

 

“Business
Day” shall mean any day other than a Saturday, Sunday or other day on which
banks are required or permitted to close in the State of New York or the State
of California.

 

“Closing”
has the meaning set forth in Section 3.1 of this Agreement.

 

“Closing
Date” has the meaning set forth in Section 3.1 of this Agreement.

 

“Commission”
means the Securities and Exchange Commission.

 

 

“Common
Stock” has the meaning set forth in the Recitals.

 

“Company”
has the meaning set forth in the Introductory Paragraph.

 

“DGCL”
means the Delaware General Corporation Law, as amended from time to time.

 

“Effectiveness
Deadline Date” has the meaning set forth in Section 7.1 of this
Agreement.

 

“Encumbrance”
means any claim, lien, pledge, option, charge, easement, security interest,
right-of-way, encumbrance or other rights of third parties, and, with respect
to any securities, any agreements, understandings or restrictions affecting the
voting rights or other incidents of record or beneficial ownership pertaining
to such securities.

 

“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, including
the rules and regulations promulgated thereunder.

 

“Filing
Period” has the meaning set forth in Section 7.1 of this Agreement.

 

“Governmental
Authority” shall mean any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, or any court,
in each case whether of the United States or any foreign jurisdiction.

 

“Material
Adverse Effect” shall mean any event or condition that has had, or could
reasonably be expected to have, a material adverse change or effect on the
business, assets, properties, performance, operations or financial condition of
the Company and its subsidiaries, taken as a whole; provided, however,
that in no event shall any of the following, alone or in combination, be deemed
to constitute, nor shall any of the following be taken into account in
determining whether there has been or will be, a Material Adverse Effect:  (i) any change or effect that results or
arises from changes affecting any of the industries in which the Company
operates generally or the United States economy generally; or (ii) any change
or effect that results or arises from changes affecting general worldwide
economic or capital market conditions.

 

“Maximum
Delay Period” has the meaning set forth in Section 7.2 of this
Agreement.

 

“Person”
shall mean any natural person, corporation, division of a corporation,
partnership, limited liability partnership, limited liability company, trust,
joint venture, association, company, estate, unincorporated organization or
government or any agency or political subdivision thereof.

 

“Private
Placement Legend” has the meaning set forth in Section 6.1 of this
Agreement.

 

“Purchase
Price” has the meaning set forth in Section 2.1 of this
Agreement.

 

2

 

“Purchaser”
or “Purchasers” has the meaning set forth in the Introductory Paragraph.

 

“Registration
Statement” has the meaning set forth in Section 7.1 of this
Agreement.

 

“Securities
Act” shall mean the Securities Act of 1933, as amended, including the rules
and regulations promulgated thereunder.

 

“SEC
Reports” has the meaning set forth in Section 4.7 of this Agreement.

 

“Shares”
has the meaning set forth in the Recitals.

 

“Transaction”
means, taken together, the transactions contemplated under this Agreement.

 

“Transfer
Agent” means the Computershare Trust Company NA.

 

“Warrant”
has the meaning set forth in Section 2.1 of this Agreement.

 

“Warrant
Shares” has the meaning set forth in the Recitals.

 

ARTICLE II.

SALE AND PURCHASE OF COMMON STOCK
AND WARRANTS

 

2.1           Sale
and Purchase of Common Stock and Warrants.

 

(a)           Subject to the terms and conditions hereof and in
reliance upon the representations and warranties of the Purchasers and the
Company contained herein or made pursuant hereto, the Company agrees to sell to
each of the Purchasers, and each Purchaser severally agrees to purchase from
the Company on the Closing Date, the number of shares of Common Stock set forth
opposite such Purchaser’s name on Schedule 1 hereto at a purchase price of $0.09
per share (the “Purchase Price”). In connection with the sale by the
Company to Purchaser of the shares of Common Stock set forth opposite such
Purchaser’s name on Schedule 1 hereto, the Company shall issue to each
Purchaser a warrant (the “Warrant”) in the form of Exhibit A
hereto to purchase the number of Warrant Shares set forth opposite such
Purchaser’s name on Schedule 1 hereto, it being agreed and understood that
each Purchaser shall receive a Warrant representing the right to purchase one half
Warrant Share for every Share purchased hereunder at $0.27 per share.

 

(b)           Upon the issuance of the Shares hereunder, and
consistent with, pursuant to and subject to the Company’s existing Rights
Agreement, dated as of September 24, 1997, as amended by Amendment No. 1 to
Rights Agreement, dated as of June 13, 2002 (as the same may be amended from
time to time, the “Rights Agreement”), between the Company and Computershare
Trust Company NA (formerly EquiServe Trust Company, N.A., as successor to
BankBoston N.A.), as rights agent, one right issuable pursuant to the Rights
Agreement or any other right issued in substitution thereof (a “Company Right”)
shall be issued together with and

 

3

 

shall attach to each Share issued pursuant to the terms and
conditions of this Agreement, unless the Company Rights shall have expired or
been redeemed prior to the Closing Date.

 

ARTICLE III.

CLOSING

 

3.1           Closing.
The closing of the transactions contemplated herein (the “Closing”)
shall occur concurrently with the execution of this Agreement (the date on
which the Closing occurs is referred to herein as the “Closing Date”) at
the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New
York 10178, unless the parties hereto otherwise agree.

 

3.2           Deliveries
by the Company at the Closing. At the Closing, the Company shall issue and
deliver to the Purchasers:

 

(a)           certificates evidencing the Shares and Warrants in the
name of the Purchasers in the respective amounts set forth on Schedule 1
hereto, provided,  that,
if a certificate for the Shares is not delivered to any Purchaser at the
Closing, the Company will deliver to such Purchaser evidence of a written
direction to the Transfer Agent instructing the Transfer Agent to deliver such
certificate to such Purchaser within five (5) Business Days of the Closing Date
and such written direction shall satisfy the Company’s obligation under this
Section 3.2(a) with respect to such Purchaser; and

 

(b)           all such other documents and instruments as
contemplated by this Agreement as the Purchasers or their counsel shall
reasonably request to consummate or evidence the Transaction.

 

3.3           Deliveries
by the Purchasers at the Closing. At the Closing, each Purchaser shall
deliver to the Company:

 

(a)           the Purchase Price for the Shares and Warrants being
purchased by such Purchaser, with such payment to be made by check made payable
to the Company or by wire transfer of immediately available funds to the
account designated in writing by the Company to such Purchaser at least one
Business Day prior to Closing; and

 

(b)           all such other documents and instruments as
contemplated by this Agreement as the Company or its counsel shall reasonably
request to consummate or evidence the Transaction.

 

3.4           Form of
Documents and Instruments. All of the documents and instruments delivered
at the Closing shall be in form and substance, and shall be executed and
delivered, in a manner reasonably satisfactory to the parties’ respective
counsel.

 

3.5           Additional
Closings. Each Purchaser acknowledges that the Company may, but is not
obligated, to sell from time to time additional shares of Common Stock and
warrants to purchase additional shares of Common Stock pursuant to stock and
warrant purchase agreements substantially the form of this Agreement. The
closings under any such stock and warrant purchase agreements shall occur from
time to time at the discretion of the Company.

 

4

 

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF
THE COMPANY

 

The
Company represents and warrants to the Purchasers as follows:

 

4.1           Organization
of the Company. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
qualified to do business and is in good standing in all jurisdictions where
either (i) the nature of its properties or business so requires or
(ii) the failure to be in good standing could reasonably be expected to
have a Material Adverse Effect. The Company has the corporate power and
authority to (a) own, lease, and operate its properties and to carry on its
business as presently being, or as now intended to be, or as now intended to
be, conducted and (b) to execute, deliver and perform its obligations under
this Agreement and any other documents contemplated hereby to which it is or
will be a party.

 

4.2           Capitalization.
The authorized capital stock of the Company consists of (i) 100,000,000 shares
of Common Stock and (ii) 500,000 shares of preferred stock, par value $0.01 per
share (“Preferred Stock”). As of the date hereof, 39,079,852 shares of
the Common Stock were issued and outstanding, including those shares of Common
Stock issued pursuant to this Agreement. As of the date hereof, no shares of
Preferred Stock were issued or outstanding. As of the date hereof, a total of 19,730,676
shares of Common Stock were issuable upon exercise of options outstanding
pursuant to the Company’s 1995 Long-Term Incentive Plan, the Company’s 1998
Long-Term Incentive Plan and the Company’s 2000 Long-Term Incentive Plan
(collectively, the “Incentive Plans”) and exercise of warrants
outstanding, including those warrants issued pursuant to this Agreement. Except
as set forth in the immediately preceding sentence, no shares of capital stock,
options, warrants, convertible securities or any other equity securities of the
Company are issued or outstanding except for the Company Rights. Under the
Rights Agreement, until the distribution date, (a) the Company Rights will be
evidenced (subject to the provisions of Sections 3(b) and 3(c) thereof) by the
certificates for Common Stock registered in the names of the holders of thereof
(which certificates shall also be deemed to be Rights Certificates, as such
term is defined in the Rights Agreement) and not by separate Rights
Certificates and (b) the right to receive Rights Certificates will be
transferable only in connection with the transfer of Common Stock. All of the
outstanding shares of the Company’s respective capital stock have been duly
authorized and validly issued and are fully paid and nonassessable. All shares
of Common Stock subject to issuance as aforesaid, upon issuance on the terms
and conditions specified in the instruments pursuant to which they are
issuable, shall, and the shares of Common Stock to be issued pursuant to this
Agreement will be, duly authorized, and upon payment of the Purchase Price with
respect to the Shares and upon payment of the exercise price with respect to
the Warrant Shares, will be validly issued, fully paid and nonassessable. All
of the outstanding shares of capital stock of each of the Company’s
subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and all such shares are owned by the Company or another subsidiary free and
clear of all security interests, liens, claims, pledges, agreements,
limitations in the Company’s voting rights, charges or other encumbrances of any
nature whatsoever. As of the date hereof, other than as set forth above, the
Company has no other securities authorized, reserved for issuance, issued or
outstanding.

 

5

 

4.3           Authority
Relative to this Agreement. The Company has all necessary corporate power
and authority to execute and deliver this Agreement, and to perform its
obligations hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby has been duly and validly
authorized by all necessary corporate action on the part of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by the Purchasers,
constitutes a legal and binding obligation of the Company, enforceable against
the Company in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting creditors’ rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies.

 

4.4           No
Conflicts. The execution and delivery by the Company of this Agreement the
performance by the Company of its obligations under this Agreement and the
consummation of the transactions contemplated hereby do not and will not (i)
conflict with, or constitute a default under, any material Contract to which
the Company is a party, (ii) result in a violation of the Company’s
organizational documents, or any order, judgment or decree of any court or
Governmental Authority having jurisdiction over the Company or any of its
assets or properties or (iii) result in, or require, the creation or imposition
of any Encumbrance upon any of the assets or properties of the Company.

 

4.5           Exemption
from Registration. Assuming the accuracy on the date hereof and on the
Closing Date of the representations and warranties of each Purchaser set forth
in Article V below, the issuance and the sale of the Shares and the Warrants to
the Purchasers hereunder are exempt from the registration requirements of the
Securities Act.

 

4.6           Litigation.
There are no actions, suits, proceedings or investigations pending, or to the
knowledge of the Company, threatened, against or affecting the Company, except
for those that could not reasonably be expected to have either individually or
in the aggregate a Material Adverse Effect on the Company. The Company is not
in default with respect to any order, writ, injunction, judgment, decree or
rule of any Governmental Authority, except for such defaults that could not
reasonably be expected to have either individually or in the aggregate a
Material Adverse Effect on the Company.

 

4.7           SEC
Reports and Financial Statements.

 

(a)           The Company has filed all forms, reports and documents
required to be filed by it pursuant to Section 13 or Section 15(d) of the
Exchange Act within the last 12 months on a timely basis or has received a
valid extension of time for filing. The Company has made available to the
Purchasers the Company’s (i) Annual Report on Form 10-K for the fiscal year
ended December 31, 2005, (ii) Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2005, (iii) Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005 and (iv) Quarterly Report on Form 10-Q for the
quarter ended September 30, 2005 (collectively the “SEC Reports”). The
SEC Reports complied as to form in all material respects with the rules and
regulations of the Commission under the Exchange Act on the date of filing and
as of such

 

6

 

date (or if amended or superseded by a filing prior to the
date of this Agreement, on the date of such filing) did not contain any untrue
statement of a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.

 

(b)           Each of the consolidated financial statements
(including, in each case, any related notes thereto) (the “Financial
Statements”) contained in the SEC Reports (i) was prepared in accordance
with generally accepted accounting principles (“GAAP”) applied on a
consistent basis throughout the periods involved (except as may be expressly
described in the notes thereto) and (ii) fairly presents in all material
respects the consolidated financial position of the Company as at the
respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated.

 

4.8           Governmental
and Other Approvals. All authorizations, approvals, orders, consents,
licenses, registrations or filings from or with any Governmental Authority
required for the execution, delivery and performance by the Company of this
Agreement has been duly obtained or made, and are in full force and effect, and
if any further authorizations, approvals, orders, consents, licenses,
registrations or filings should hereafter become necessary, the Company shall
obtain or make all such authorizations, approvals, orders, consents, licenses,
registrations or filings.

 

4.9           No
Brokers. The Company has not employed, and is not subject to the valid
claim of, any broker, finder, consultant or other intermediary in connection
with the transactions contemplated by this Agreement who might be entitled to a
fee or commission from the Company in connection with the transactions
contemplated by this Agreement. However, the Company may pay commissions and
finders fees to those who have assisted it in finding investors for the
transactions contemplated by this Agreement.

 

ARTICLE V.

REPRESENTATIONS, WARRANTIES AND
AGREEMENTS

OF PURCHASERS

 

Each
Purchaser, severally and not jointly, hereby represents and warrants, solely as
to such Purchaser and not as to any other Purchaser, to the Company as follows:

 

5.1           Purchase
for Investment.

 

(a)           Such Purchaser is acquiring the Shares and Warrants
and will acquire the Warrant Shares solely by and for his, her or its own
account, for investment purposes only and not for the purpose of resale or
distribution; and such Purchaser has no contract, undertaking, agreement or
arrangement with any Person to sell, transfer, distribute, fractionalize,
pledge, or otherwise dispose of to such Person or anyone else any Shares,
Warrants or Warrant Shares; and such Purchaser has no present plans or
intentions to enter into any such contract, undertaking or arrangement.

 

(b)           Such Purchaser has all necessary power and authority
to acquire the Shares and Warrants and will have all necessary power and
authority to acquire the Warrant

 

7

 

Shares and such acquisitions will not contravene any law,
rule or regulation binding on him, her or it or any investment guideline or
restriction applicable to him, her or it.

 

(c)           No consent, approval, order or authorization of, or
declaration, filing or registration with, any Government Authority or third
party is required to be obtained or made by such Purchaser in connection with
the execution and delivery by such Purchaser of this Agreement or the
consummation of the transactions contemplated hereby (including, without
limitation such Purchaser’s acquisition of Shares, Warrants or Warrant Shares).

 

(d)           Such Purchaser acknowledges that (i) he, she or it is
an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act; (ii) he, she or it has such knowledge and experience
in financial and business matters in general that it has the capacity to
evaluate the merits and risks of an investment in the Shares, Warrants and
Warrant Shares and to protect his, her or its own interest in connection with
an investment in the Shares, Warrants and Warrant Shares; (iii) he, she or it
is able to bear the economic risk of his, her or its investment in the Shares,
Warrants and Warrant Shares for an indefinite period of time; (iv) the Company
has made available to him, her or it the opportunity to evaluate the merits and
risks of his, her or its investment in the Company; (v) he, she or it has been afforded
access to information about the Company and the opportunity to ask questions
of, and to receive answers from, officers and directors of the Company
concerning the Company, its business and financial condition and any other
matters relating to the operation of the Company and the offering of the
Shares, Warrants and Warrant Shares; (vi) he, she or it has not purchased the
Shares or Warrants as a result of any general solicitation or advertising (as
those terms are used in Regulation D of the Securities Act), including
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar media or broadcast over radio or television, or
seminar or meeting who’s attendees have been invited by general solicitation or
general advertising and (vii) he, she or it is not relying on any communication
(written or oral) of the Company, other than those written representations in
this Agreement, as investment advice or as a recommendation to purchase the
Shares and Warrants.

 

(e)           Such Purchaser understands that the Shares, the
Warrants and the Warrant Shares have not been registered under the Securities
Act or the securities laws of any State. Such Purchaser agrees and represents
that he, she or it will not voluntarily sell, assign, pledge or otherwise
dispose of any Shares, Warrants, Warrant Shares or any portion thereof unless,
there is delivered to the Company evidence, satisfactory to the Company, which
may include an opinion of counsel reasonably acceptable to the Company, to confirm
that such Shares, Warrants or Warrant Shares may be legally sold or disposed of
without registration or qualification under the applicable state or federal
statutes, or the Shares, Warrants or Warrant Shares, as the case may be, shall
have been so registered or qualified and an appropriate registration statement
shall then be in effect; the Purchaser understands that the certificates
representing the Shares, Warrants and Warrant Shares will bear a Private
Placement Legend (as defined below) containing the foregoing restriction.

 

(f)            Such Purchaser is fully aware that the Shares,
Warrants and Warrant Shares are being issued and sold to the Purchaser in
reliance upon the exemption provided for in Section 4(2) of the Act and Rule
506 promulgated thereunder and similar exemptions provided under state
securities laws on the grounds that no public offering is involved and that the

 

8

 

representations, warranties and agreements set forth in this
Agreement are essential to the claiming of such exemptions.

 

(g)           Nothing in this Article V shall limit or
modify the representations and warranties of the Company in Article IV
of this Agreement or the right of the Purchasers to rely thereon.

 

5.2           No
Brokers. Such Purchaser has not employed, and is not subject to the valid
claim of, any broker, finder, consultant or other intermediary in connection
with the transactions contemplated by this Agreement who is entitled to a fee
or commission in connection with the transactions contemplated by this
Agreement.

 

ARTICLE VI.

COVENANTS

 

6.1           Legend.
Each Purchaser agrees to the placement on certificates representing Shares,
Warrants and Warrant Shares of a legend (the “Private Placement Legend”)
substantially as set forth below:

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
SECURITIES LAW, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.

 

(a)           The Private Placement Legend shall be removed from any
such certificate if (i) the securities represented thereby are sold pursuant to
an effective registration statement under the Securities Act, (ii) there is
delivered to the Company such satisfactory evidence, which may include an
opinion of counsel, as reasonably may be requested by the Company, to confirm
that neither such legend nor the restrictions on transfer set forth therein are
required to ensure that transfers of such securities will not violate the
registration and prospectus delivery requirements of the Securities Act, or
(iii) the securities represented thereby may be resold pursuant to Rule 144(k)
promulgated under the Securities Act.

 

(b)           The certificates representing the Shares shall also
bear a legend substantially as set forth below:

 

THIS CERTIFICATE ALSO
EVIDENCES A BENEFICIAL INTEREST IN AND ENTITLES THE HOLDER HEREOF TO CERTAIN
RIGHTS AS SET FORTH IN THE RIGHTS AGREEMENT BETWEEN WATCHIT MEDIA, INC. (THE “COMPANY”)
AND COMPUTERSHARE TRUST COMPANY NA (FORMERLY EQUISERVE TRUST COMPANY, N.A., AS
SUCCESSOR TO

 

9

 

BANKBOSTON, N.A.) (THE “RIGHTS
AGENT”), DATED AS OF SEPTEMBER 24, 1997, AS AMENDED BY AMENDMENT NO. 1 TO
RIGHTS AGREEMENT, DATED AS OF JUNE 13, 2002 (THE “RIGHTS AGREEMENT”), AND AS
THE SAME MAY BE AMENDED FROM TIME TO TIME, THE TERMS OF WHICH ARE HEREBY
INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICES OF THE COMPANY. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN
THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES
AND BENEFICIAL INTERESTS THEREIN WILL NO LONGER BE EVIDENCED BY THIS
CERTIFICATE. THE COMPANY WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF
THE RIGHTS AGREEMENT, AS IN EFFECT ON THE DATE OF MAILING, WITHOUT CHARGE,
PROMPTLY AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN
CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY,
ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR
ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER
CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY
BECOME NULL AND VOID.

 

(c)           No other legends shall be placed on such certificates
without the consent of the Purchasers.

 

6.2           Shares
Issuable Upon Exercise. The Company shall reserve and keep available, out
of its authorized and unissued capital stock, solely for the purpose of
effecting the exercise of the Warrants, the full number of shares of Common
Stock as shall from time to time be sufficient to effect the exercise of
Warrants from time to time outstanding.

 

6.3           Board
Observation Rights. Up to and until the earlier to occur of (a) the
Purchasers holding less than 5% of the total outstanding Common Stock of the
Company or (b) a Change of Control Transaction (as defined below), the Company
agrees that the Purchasers shall have the right to have one individual (the “Observer”)
attend any meeting of the board of directors of the Company (the “Board”). The
Observer shall not have the right to vote on any matter presented to the Board.
The Company shall give the Observer written notice of each meeting of the Board
at substantially the same time and in substantially the same manner as the
members of the Board receive notice of such meetings, and the Company shall
permit the Observer to attend as an observer at all meetings thereof. The
Observer shall be entitled to receive all written materials and other information
given to the directors in connection with such meetings at the same time such
materials and information are given to the directors, and the Purchasers shall
keep such materials and information confidential. The Observer shall not have
the right to participate in any actions by written consent in lieu of a meeting
of the Board, nor shall the Observer have the right to attend, vote on any
matter presented at, or receive notice regarding, any meetings of any committee
of the Board; provided, however that the Observer

 

10

 

shall receive a copy of all written consents in lieu of a meeting of
the Board at the same time as such written consents are circulated to the Board.
The Company shall reimburse the Observer for out-of-pocket expenses associated
with attending meetings of the Board in the same manner that the Company
reimburses its directors. For purposes of this paragraph, a “Change of Control
Transaction” shall mean any consolidation or merger of the Company with or into
any other corporation or other entity or person, any sale of equity interests
of the Company, or any recapitalization, reclassification, or other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger, sale or reorganization, do not hold at least twenty
five percent of the resulting or surviving corporation’s voting power
immediately after such consolidation, merger, sale or reorganization, or the
sale, lease, or other disposition of all or substantially all of the assets of
the Company.

 

ARTICLE VII.

REGISTRATION RIGHTS

 

7.1           Registration.
On or prior to the 45th day following the Closing Date (the “Filing Period”),
the Company shall use its commercially reasonable efforts to prepare and file
with the Commission on one occasion, a registration statement and such other
documents as may be necessary in the advice of counsel for the Company, and use
its commercially reasonable efforts to have such registration statement
declared effective within 75 days of filing with the Commission (the “Effectiveness
Deadline Date”) in order to comply with the provisions of the Securities
Act so as to permit (i) the registered resale of the Warrants and the
exercise of the Warrants for Warrant Shares by any person to whom the Warrants
are resold pursuant to such resale registration and (ii) the registered resale
of the Shares and the Warrant Shares by each and every holder of Shares and
Warrants sold in the Offering (the “Offering Securities”) who desires to
register the resale of their shares (the “Registration Statement”). Prior
to filing such Registration Statement with the Commission, the Company shall
give each holder of Offering Securities notice at the address of such holder
appearing on the register and transfer records of Company of the Company’s
intention to register the resale of such Offering Securities. The obligations
of the Company to give such notice shall be limited to the Purchasers and their
permitted assigns. Purchasers who desire to register the resale of their shares
are referred to herein as “Offering Holders.”  Once effective, the Company shall maintain
the effectiveness of the Registration Statement until the earlier of (a) the
date that all of the Offering Securities have been sold, or (b) the date that
the Company receives an opinion of counsel to the Company that all of the
Offering Securities may be freely traded without registration rights under the
Securities Act, under Rule 144 promulgated under the Securities Act or
otherwise.

 

7.2           Temporary
Suspension of Use of Registration Statement. Notwithstanding the foregoing
provisions of this Article VII, the Company may voluntarily suspend
the effectiveness of any such Registration Statement for a limited time, which
in no event shall be longer than 60 consecutive or non-consecutive days in any
12-month period (the “Maximum Delay Period”), if the Company has been
advised by counsel or underwriters to the Company that the offering of any
Offering Securities pursuant to the Registration Statement would materially
adversely affect, or would be improper in view of (or improper without
disclosure in a prospectus), a proposed financing, a reorganization,
recapitalization, merger, consolidation, or similar transaction involving the
Company. If any event occurs that would cause the Registration Statement to

 

11

 

contain a material misstatement or omission or not to be effective and
usable during the period that such Registration Statement is required to be
effective and usable, the Company shall promptly file an amendment to the
Registration Statement and use its commercially reasonable efforts to cause
such amendment to be declared effective as soon as practicable thereafter. Upon
request during the Filing Period, the Offering Holders shall furnish promptly
to the Company such information regarding their holdings and the proposed
manner of distribution thereof as shall be required in connection with any such
Registration Statement and shall continue to furnish promptly to the Company
any subsequent information required to be disclosed in order to make any
previously furnished information not materially misleading. Notwithstanding any
provision contained herein to the contrary, the Company’s obligation to
include, or continue to include, Offering Securities in any such Registration Statement
under this Article VII shall terminate to the extent such shares
may be freely sold under Rule 144(k) promulgated under the Securities Act.

 

7.3           Liquidated
Damages. The parties hereto agree that the Purchasers of the Shares and the
Warrant Shares will suffer damages if the Company fails to perform its
obligations under Section 7.1 or Section 7.2 hereof and that it
would not be feasible to ascertain the extent of such damages. Accordingly, if
(i) such Registration Statement is not filed with the Commission by the end of
the Filing Period, (ii) such Registration Statement is not declared effective
by the Commission on or prior to the Effectiveness Deadline Date or (iii) such
Registration Statement ceases to be effective for a period of time in excess of
that provided for in Section 7.2, in addition to any rights the
Purchasers may have under this Agreement or applicable law, the Company will
make pro rata payments to each Purchaser, as liquidated damages and not as a
penalty, in an amount per 30-day period (or pro rata portion thereof) equal to
2.0% of the aggregate amount paid by such Purchaser on the Closing Date to the
Company in respect of the Shares and Warrant Shares, (x) in the case of clause
(i), for the period starting on the last day of the Filing Period to the date
on which such Registration Statement is filed, (y) in the case of clause (ii),
for the period from the Effectiveness Deadline Date to the date on which such
Registration Statement becomes effective and (z) in the case of clause (iii),
for any period in excess of the Maximum Delay Period in which such Registration
Statement ceases to be effective. Such payments shall be made to each Purchaser
in cash or by wire transfer of immediately available funds not later than three
Business Days following the end of each 30-day period.

 

7.4           Registration
Procedures. If and whenever the Company is required by the provisions of
this Agreement to use its commercially reasonable efforts to effect the
registration of the Offering Securities under the Securities Act for the
account of an Offering Holder, the Company will, as promptly as possible:

 

(a)           prepare and file with the SEC a Registration Statement
with respect to such securities and use its commercially reasonable efforts to
cause such Registration Statement to become and remain effective;

 

(b)           prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement effective
and to comply with the requirements of the Securities

 

12

 

Act and the rules and regulations promulgated by the SEC
thereunder relating to the sale or other disposition of the securities covered
by such Registration Statement;

 

(c)           furnish to each Offering Holder such numbers of copies
of a prospectus complying with the requirements of the Securities Act, and such
other documents as such Offering Holder may reasonably request in order to
facilitate the public sale or other disposition of the Offering Securities
owned by such Offering Holder, but such Offering Holder shall not be entitled
to use any selling materials other than a prospectus;

 

(d)           use its commercially reasonable efforts to register or
qualify the securities covered by such Registration Statement under the state
securities laws as any Offering Holder shall reasonably request, and do any and
all such other acts and things as may be necessary or advisable to enable such
Offering Holder to consummate the public sale or other disposition of the
Offering Securities owned by such Offering Holder in such states; provided,
however, that the Company shall not be obligated to register or qualify such
securities in any jurisdiction in which such registration or qualification
would require the Company to qualify as a foreign corporation or file any
general consent to service of process where it is not then so qualified or has
not theretofore so consented; and

 

(e)           provide a transfer agent for the Common Stock not
later than the effective date of the applicable Registration Statement.

 

7.5           Expenses
of Registration. Except as provided below in this Article VII,
the expenses incurred by the Company in connection with action taken by the
Company to comply with this Article VII, including, without
limitation, all registration and filing fees, printing and delivery expenses,
accounting fees, fees and disbursements of counsel to the Company, consultant
and expert fees, premiums for liability insurance, if applicable, obtained in
connection with a Registration Statement filed to effect such compliance, if
applicable, and all expenses, including counsel fees, for complying with state
securities laws, shall be paid by the Company. All fees and disbursements of
any counsel, experts, or consultants employed by any Offering Holder shall be
borne by such Offering Holder. The Company shall not be obligated in any way in
connection with any registration pursuant to this Article VII, for
any selling commissions or discounts payable to any underwriter or broker for
securities to be sold by such Offering Holder. It shall be a condition
precedent to the obligation of the Company to take any action pursuant to this Article VII
that the Company shall have received an undertaking satisfactory to it from
each Offering Holder to pay all expenses required to be borne by such Offering
Holder and to furnish or cause to be furnished to the Company, specifically for
use in the preparation of the Registration Statement and prospectus, written
information concerning (i) the securities held by such Offering Holder and any
underwriter of such securities, (ii) the intended method of disposition thereof
and (iii) any additional information or documentation as the Company shall
reasonably request and as may be required by administrators of the Securities
Act or state securities laws in connection with the action to be taken by the
Company hereunder pursuant to such registration.

 

7.6           Indemnification
by Company. To the extent permitted by law, the Company will indemnify and
hold harmless each Offering Holder, its officers, directors and each
underwriter of such securities, and any person who controls such Offering
Holder or underwriter within the

 

13

 

meaning of Section 15 of the Securities Act, against all claims,
actions, losses, damages, liabilities and expenses, joint or several, to which
any of such persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue statement of any material fact contained in any Registration
Statement under which such securities were registered under the Securities Act,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
to state therein a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, and
will promptly reimburse such Offering Holder, its officers, directors and each
underwriter of such securities, and each such controlling person or entity for
any legal and any other expenses reasonably incurred by such Offering Holder,
such underwriter, or such controlling person or entity in connection with
investigating or defending any such loss, action, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage, liability or action arises out
of or is based upon an untrue statement or omission made in such Registration
Statement, preliminary prospectus or prospectus, or such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by such Offering Holder or such underwriter
specifically for use in the preparation thereof, and provided further, however,
that the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability or action arises out of or is based upon
an untrue statement or omission made in any preliminary prospectus or final
prospectus if (i) such Offering Holder failed to send or deliver a copy of the
final prospectus or prospectus supplement with or prior to the delivery of
written confirmation of the sale of the Offering Securities and (ii) the final
prospectus or prospectus supplement would have corrected such untrue statement
or omission.

 

7.7           Indemnification
by Offering Holders. In the event of any registration of any securities
under the Securities Act pursuant to this Article VII, each
Offering Holder will, or will furnish the written undertaking of such other
person or entity as shall be acceptable to the Company to, indemnify and hold harmless
the Company, its officers, directors and any person who controls the Company
within the meaning of Section 15 of the Securities Act, its agents, counsel and
accountants, against any losses, claims, damages, liabilities, or actions,
joint or several, to which the Company, its officers, directors, such
controlling person or entity or its agents, counsel and accountants, may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities, or actions arise out of or are based upon any untrue
statement of any material fact contained in any Registration Statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, in each case
to the extent and only to the extent that any such loss, claim, damage,
liability, or action arises out of or is based upon an untrue statement or
omission made in such Registration Statement, preliminary prospectus or
prospectus or such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such Offering Holder or
any underwriter of such Offering Holder’s securities specifically for use in
the preparation thereof, and will promptly reimburse the Company, its officers,
directors and any person who controls the Company within the meaning of Section
15 of the Securities Act and its agents, counsel and accountants in connection
with investigating or defending any such loss, action, claim, damage,

 

14

 

liability or action; provided, however, that the aggregate amount which
any such Offering Holder shall be required to pay pursuant to this Section 7.7
shall be limited to the dollar amount of the gross proceeds received by such
Offering Holder upon the sale of the Shares or Warrant Shares pursuant to the Registration
Statement giving rise to such claim. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company,
its officers, directors and any person who controls the Company within the
meaning of Section 15 of the Securities Act, and shall survive the transfer of
the Shares by such Offering Holder.

 

7.8           Notification
of Certain Events. At any time when a prospectus relating to the Offering
is required to be delivered under the Securities Act, the Company will promptly
notify the Offering Holder of the happening of any event, upon the notification
or awareness of such event by an executive officer of the Company, as a result of
which the prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of material fact or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances then existing, not misleading.

 

7.9           Indemnification
Procedures. Any party entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party’s
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (which consent may not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim.

 

7.10         Rule 144.
With a view to making available to the Offering Holder the benefits of Rule 144
promulgated under the Securities Act, the Company agrees that it will use its
commercially reasonable efforts to maintain registration of its shares
represented by Common Stock under Section 12 or 15 of the Exchange Act and to
file with the SEC in a timely manner all reports and other documents required
to be filed by an issuer of securities registered under the Exchange Act so as
to maintain the availability of Rule 144 promulgated under the Securities Act. Upon
the request of any record owner, the Company will deliver to such owner a
written statement as to whether it has complied with the reporting requirements
of Rule 144 promulgated under the Securities Act.

 

7.11         Transfer
of Securities. The Purchasers may assign their rights under this Article
VII to any party to whom the Purchasers transfer Shares, Warrants or
Warrant Shares in a private sale. If the Purchasers transfer any restricted securities
purchased under this Agreement following the effectiveness of the Registration
Statement required by this Article VII, the Company shall, upon the
request of any such transferee, file a prospectus supplement or post-effective
amendment, as applicable, to permit the registered resale of such securities by
such transferee(s).

 

15

 

ARTICLE VIII.

MISCELLANEOUS

 

8.1           Assignment.
Other than as set forth in Section 7.11, neither this Agreement nor any
of the rights or obligations hereunder may be assigned by (i) the Company
without the prior written consent of each of the Purchasers and (ii) any
Purchaser without the prior written consent of the Company. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their permitted respective successors and assigns, and no
other Person shall have any right, benefit or obligation hereunder.

 

8.2           Notices.
Unless otherwise provided herein, any notice, request, instruction or other
document to be given hereunder by any party to the other shall be in writing
and delivered by hand-delivery, registered first-class mail, telex, telecopier,
or air courier guaranteeing overnight delivery, as follows:

 

If to
the Company:

 

Watchit
Media, Inc.

655
Montgomery Street, Suite 1000

San
Francisco, California  94111

Attention:  James
R. Lavelle

Telephone:  (415)
477-9900

Facsimile:   (415)
399-0756

 

With a
copy to:

 

Morgan,
Lewis & Bockius LLP

101
Park Avenue

New
York, New York  10178

Attention:  David
W. Pollak, Esq.

Telephone:  (212)
309-6000

Facsimile:  (212)
309-6001

 

If to
any Purchaser:

 

At the
address set forth below such Purchaser’s name on Schedule 1 hereto.

 

or to such other place and with such other copies as
either party may designate as to itself by written notice to the other.

 

All
such notices, requests, instructions or other documents shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; when
receipt is acknowledged by addressee, if by telecopier transmission; and on the
next Business Day if timely delivered to a nationally recognized courier
guaranteeing overnight delivery.

 

8.3           Choice
of Law. This Agreement shall be construed, interpreted and the rights of
the parties determined in accordance with the internal laws of the State of
California. Each of the parties to this Agreement hereby irrevocably and
unconditionally consents to submit to the

 

16

 

exclusive jurisdiction of the courts of the State of California and the
United States of America located in the County of Los Angeles for any action or
proceeding arising out of or relating to this Agreement (and agrees not to
commence any action or proceeding relating thereto except in such courts), and
further agrees that service of any process, summons, notice or document by U.S.
registered mail to its respective address set forth in Section 8.2 hereof shall
be effective service of process for any action or proceeding brought against it
in any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any action or
proceeding arising out of this Agreement in the courts of the State of
California or the United States of America located in the County of Los Angeles,
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.

 

8.4           Prevailing
Party Attorney Fees. In any litigation, arbitration or other proceeding by
which one party either seeks to enforce its rights under this Agreement
(whether in contract, tort or both) or seeks a declaration of rights or
obligations under this Agreement, the prevailing party shall be awarded its
reasonable attorney fees and reasonable expenses incurred.

 

8.5           Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

 

8.6           Invalidity.
In the event that any one or more of the provisions contained in this Agreement
or in any other instrument referred to herein, shall, for any reason, be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.

 

8.7           Headings.
The headings of the Articles and Sections herein are inserted for convenience
of reference only and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.

 

8.8           Severability.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall not invalidate the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable the remainder of such provision in any other jurisdiction.

 

[Signature Pages
to Follow]

 

17

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.

 

 

	
   

  	
  WATCHIT
  MEDIA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Lavelle

  	
   

  
	
   

  	
   

  	
  Name:
  James Lavelle

  	
   

  
	
   

  	
   

  	
  Title:
  Chairman and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PURCHASERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/
  Colton Melby

  	
   

  
	
   

  	
  Colton
  Melby

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
     /s/
  Cliff Melby

  	
   

  
	
   

  	
  Cliff
  Melby

  

 

 

Schedule 1

 

LIST OF PURCHASERS

 

	
  Purchaser

  	
   

  	
  Common
  Stock

  	
   

  	
  Warrants

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Colton Melby

  	
   

  	
  3,333,334

  	
   

  	
  1,666,667

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tel: 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fax: 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E-mail: 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cliff Melby

  	
   

  	
  2,222,222

  	
   

  	
  1,111,111

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tel: 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fax: 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E-mail: 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  5,555,556

  	
   

  	
  2,777,778

  	
   

  

 

 

Exhibit A

 

Form of
Warrant<PAGE>

                                                                    Exhibit 10.1

                              TB WOOD'S CORPORATION

                  2006 STOCK-BASED INCENTIVE COMPENSATION PLAN

                                       1

<PAGE>

                              TB WOOD'S CORPORATION

                  2006 STOCK-BASED INCENTIVE COMPENSATION PLAN

         Section 1. Purpose of the Plan. The purpose of the Plan is to assist
the Company, its Subsidiaries and Affiliates in attracting and retaining valued
Employees and Non-Employee Directors by offering them a greater stake in the
Company's success and a closer identity with it, and to encourage ownership of
the Company's stock by such Employees and Non-Employee Directors.

         Section 2. Definitions. As used herein, the following definitions shall
apply:

                  2.1. "Affiliate" means any entity other than the Subsidiaries
in which the Company has a substantial direct or indirect equity interest, as
determined by the Board.

                  2.2. "Award" means an award of Deferred Stock, Restricted
Stock, Options or SARs under the Plan.

                  2.3. "Award Agreement" means the written agreement, instrument
or document evidencing an Award.

                  2.4. "Board" means the Board of Directors of the Company.

                  2.5. "Change of Control" means and includes each of the
following: (i) the acquisition, in one or more transactions, of beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) by any
person or entity or any group of persons or entities who constitute a group
(within the meaning of Section 13(d)(3) of the Exchange Act), other than (x) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or a Subsidiary, (y) a person who acquires such securities directly
from the Company in a privately-negotiated transaction, or (z) a person who as
of the effective date of the Plan owns more than 40% of the Company's
outstanding voting securities (a "Substantial Shareholder"), of any securities
of the Company such that, as a result of such acquisition, such person, entity
or group either (A) beneficially owns (within the meaning of Rule l3d-3 under
the Exchange Act), directly or indirectly, more than 35% of the Company's
outstanding voting securities entitled to vote on a regular basis for a majority
of the members of the Board or (B) otherwise has the ability to elect, directly
or indirectly, a majority of the members of the Board; (ii) a change in the
composition of the Board such that a majority of the members of the Board are
not Continuing Directors; (iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other Company, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the total voting power represented by the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one or more transactions) all
or substantially all of the Company's assets. Notwithstanding the foregoing, a
Change in Control shall be deemed to occur if a Substantial Shareholder either
acting alone or as part of a group (within the meaning of Section 13(d)(3) of
the Exchange Act) acquires, in one or more transactions, more than 65% of the
Company's outstanding voting securities.

                                        2
<PAGE>

However, in no event will any of the preceding events be deemed to be a Change
of Control if, prior to any transaction or transactions causing such change, a
majority of the Continuing Directors shall have voted not to treat such
transaction or transactions as resulting in a Change of Control.

                  2.6. "Code" means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include reference to any
successor provision of the Code.

                  2.7. "Common Stock" means the Class A Common Stock of the
Company, par value $.01 per share.

                  2.8. "Company" means TB Wood's Corporation, a Delaware
corporation, or any successor corporation.

                  2.9. "Committee" means the committee designated by the Board
to administer the Plan under Section 4. The Committee shall have at least two
members, each of whom shall be a member of the Board, a Non-Employee Director
and an Outside Director.

                  2.10. "Continuing Director" means, as of any date of
determination, any member of the Board who (i) was a member of such Board on the
date which is twenty-four months prior to the date of determination or (ii) was
nominated for election or elected to such Board with the affirmative vote of a
majority of the Continuing Directors who were members of such Board at the time
of such nomination or election.

                  2.11. "Deferred Stock" means an Award made under Section 6.1
of the Plan to receive Common Stock at the end of a specified Deferral Period.

                  2.12. "Deferral Period" means the period during which the
receipt of a Deferred Stock Award under Section 6.1 of the Plan will be
deferred.

                  2.13. "Employee" means an officer or other key employee of the
Company, a Subsidiary or an Affiliate including a director who is such an
employee.

                  2.14. "Exchange Act" means the Securities Exchange Act of
1934, as amended. A reference to any provision of the Exchange Act or rule
promulgated under the Exchange Act shall include reference to any successor
provision or rule.

                  2.15. "Fair Market Value" means on any given date, the value
per share of the Common Stock as determined by the Committee if the Common Stock
is not traded in a public market, and, if the Common Stock is traded in a public
market, shall be, if the Common Stock is listed on a national securities
exchange or included in the NASDAQ Stock Market National Market System, the last
reported sale price thereof on such date, or, if the Common Stock is not so
listed or included, the mean between the last reported "bid" and "asked" prices
thereof on such date, as reported on NASDAQ or, if not so reported, as reported
by the National Daily Quotation Bureau, Inc. or as reported in the customary
financial reporting service, as applicable and as the Committee determines.

                                      3
<PAGE>

                  2.16. "Incentive Stock Option" means an Option or portion
thereof intended to meet the requirements of an incentive stock option as
defined in Section 422 of the Code and designated as an Incentive Stock Option.

                  2.17. "Non-Employee Director" means a member of the Board who
is not an Employee.

                  2.18. "Non-Qualified Option" means an Option or portion
thereof not intended to be an Incentive Stock Option, and designated as a
Non-Qualified Option.

                  2.19. "Option" means a right granted under the Plan to
purchase a specified number of shares of Common Stock at a specified price. An
Option may be an Incentive Option or a Non-Qualified Option.

                  2.20. "Outside Director" means a member of the Board defined
as such under Section 162(m) of the Code and the regulations thereunder, or any
successor thereto.

                  2.21. "Participant" means any individual who receives an
Award.

                  2.22. "Performance Cycle" means the period selected by the
Committee during which the performance of the Company, any Subsidiary, any
Affiliate or any department thereof, or any individual is measured for the
purpose of determining the extent to which a Performance Goal has been achieved.

                  2.23. "Performance Goal" means a goal, expressed in terms such
as profits or revenue targets on an absolute or per share basis (including, but
not limited to, EBIT, EBITDA, operating income, EPS), market share targets,
profitability targets as measured through return ratios, stockholder returns,
qualitative milestones, clinical or product development milestones or
capital-raising targets or any other financial or other measurement deemed
appropriate by the Committee, as it relates to the results of operations or
other measurable progress of either the Company as a whole or any Subsidiary,
Affiliate, division, or department.

                  2.24. "Plan" means the TB Wood's Corporation 2006 Stock-Based
Incentive Compensation Plan herein set forth, as amended from time to time.

                  2.25. "Prior Plan" means the TB Wood's Corporation 1996
Stock-Based Incentive Compensation Plan.

                  2.26. "Restricted Stock" means Common Stock awarded by the
Committee under Section 6.2 of the Plan.

                  2.27. "Restriction Period" means the period during which
Restricted Stock awarded under Section 6.2 of the Plan is subject to forfeiture.

                  2.28. "SAR" means a stock appreciation right awarded by the
Committee under Section 6.4 of the Plan.

                                      4
<PAGE>

                  2.29. "Subsidiary" means any corporation, partnership, joint
venture or other business entity of which 50% or more of the outstanding voting
power is beneficially owned, directly or indirectly, by the Company.

                  2.30. "Ten Percent Shareholder" means a person who on any
given date owns, either directly or indirectly (taking into account the
attribution rules contained in Section 424(d) of the Code), stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or a Subsidiary.

         Section 3. Eligibility. Any Employee or Non-Employee Director shall be
eligible to receive an Award; provided, however, that only persons who are key
employees of the Company or any subsidiary corporation (within the meaning of
Section 424(f) of the Code) may be granted Options which are intended to qualify
as Incentive Stock Options.

         Section 4. Administration and Implementation of Plan.

                  4.1. The Plan shall be administered by the Committee;
provided, however, that the Board shall administer and otherwise exercise all
powers of the Committee under the Plan with respect to Awards granted to
Non-Employee Directors. Any action of the Committee in administering the Plan
shall be final, conclusive and binding on all persons, including the Company,
its Subsidiaries, Affiliates, their employees, Participants, persons claiming
rights from or through Participants and stockholders of the Company.

                  4.2. Subject to the provisions of the Plan, the Committee
shall have full and final authority in its discretion (a) to select the
Employees and Non-Employee Directors who will receive Awards pursuant to the
Plan, (b) to determine the type or types of Awards to be granted to each
Participant, (c) to determine the number of shares of Common Stock to which an
Award will relate, the terms and conditions of any Award granted under the Plan
(including, but not limited to, restrictions as to vesting, transferability or
forfeiture, exercisability or settlement of an Award and waivers or
accelerations thereof, and waivers of or modifications to performance conditions
relating to an Award, based in each case on such considerations as the Committee
shall determine) and all other matters to be determined in connection with an
Award; (d) to determine whether, to what extent, and under what circumstances an
Award may be canceled, forfeited, or surrendered; (e) to determine whether, and
to certify that, Performance Goals to which the settlement of an Award is
subject are satisfied; (f) to correct any defect or supply any omission or
reconcile any inconsistency in the Plan, and to adopt, amend and rescind such
rules and regulations as, in its opinion, may be advisable in the administration
of the Plan; and (g) to make all other determinations as it may deem necessary
or advisable for the administration of the Plan.

         Section 5. Shares of Common Stock Subject to the Plan.

                  5.1. Subject to adjustment as provided in Section 9, the total
number of shares of Common Stock available for Awards under the Plan shall be
325,000 shares, increased for shares of Common Stock that were reserved under
the Prior Plan but not subject to grant or as to which any outstanding grant
under the Prior Plan that are subsequently forfeited, canceled or expire
unexercised. Common Stock awarded under the Plan may be reserved or made
available from the Company's authorized and unissued Common Stock or from Common
Stock reacquired and held in the Company's treasury.

                                      5
<PAGE>

                  5.2. Subject to adjustment as provided in Section 9, the
maximum number of shares that may be awarded to any Employee as an Award under
the Plan during any calendar year shall not exceed 70,000 shares. Subject to
adjustment as provided in Section 9, the maximum number of shares of Common
Stock available to be issued under the Plan as Restricted Stock shall be 100,000
shares.

                  5.3. If any shares subject to an Award are forfeited or such
Award otherwise terminates or is settled for any reason whatsoever without an
actual distribution of shares to the Participant, any shares counted against the
number of shares available for issuance pursuant to the Plan with respect to
such Award shall, to the extent of any such forfeiture, settlement, or
termination, again be available for Awards under the Plan; provided, however,
that the Committee may adopt procedures for the counting of shares relating to
any Award to ensure appropriate counting, avoid double counting, and provide for
adjustments in any case in which the number of shares actually distributed
differs from the number of shares previously counted in connection with such
Award. If a Participant tenders shares (either actually, by attestation or
otherwise) to pay all or any part of the exercise price on any Option or if any
shares payable with respect to any Award are retained by the Company in
satisfaction of the Participant's obligation for taxes, the number of shares
tendered or retained shall again be available for Awards under the Plan. Shares
issued under the Plan through the settlement, assumption or substitution of
outstanding awards to grant future awards as a commitment of the Company, any
Subsidiary or Affiliate in connection with the acquisition of another entity
shall not reduce the maximum number of shares available for delivery under the
Plan.

         Section 6. Awards. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter, such additional
terms and conditions, not inconsistent with the provisions of the Plan, as the
Committee shall determine, including terms requiring forfeiture of Awards in the
event of the termination of employment or other relationship with the Company or
any Subsidiary or Affiliate by the Participant; provided, however, that the
Committee shall retain full power to accelerate or waive any such additional
term or condition as it may have previously imposed. All Awards shall be
evidenced by an Award Agreement. The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such Performance Goals as may be specified by the Committee.

                  6.1. Deferred Stock. An Award of Deferred Stock is an
agreement by the Company to deliver to the Participant a specified number of
shares of Common Stock at the end of a specified Deferral Period. Such an Award
shall be subject to the following terms and conditions.

                           (a) Upon determination of the number of shares of
Deferred Stock to be awarded to a Participant, the Committee shall direct that
the same be credited to the Participant's account on the books of the Company
but that issuance and delivery of the same shall be deferred until the date or
dates provided in the Award Agreement granting the Award. Prior to issuance and
delivery of the Deferred Stock, the Participant shall have no rights as a
stockholder with respect to any shares of Deferred Stock credited to the
Participant's account.

                           (b) Amounts equal to any dividends declared during
the Deferral Period with respect to the number of shares covered by a Deferred
Stock Award will be paid to the Participant currently, or deferred and deemed to
be reinvested in additional Deferred Stock, or otherwise reinvested on such
terms as are determined at the time of the Award by the Committee, in its sole
discretion, and specified in the Award Agreement.

                                      6
<PAGE>

                           (c) The Committee may condition the grant of an Award
of Deferred Stock or the expiration of the Deferral Period upon the
Participant's achievement of one or more Performance Goal(s) specified in the
Award Agreement. If the Participant fails to achieve the specified Performance
Stock Goal(s), the Committee shall not grant the Deferred Stock Award to the
Participant, or the Participant shall forfeit the Award and no Common Stock
shall be transferred to him pursuant to the Deferred Stock Award.

                           (d) The Deferral Period may consist of one or more
installments. At the end of the Deferral Period or any installment thereof the
shares of Deferred Stock applicable to such installment credited to the account
of a Participant shall be issued and delivered to the Participant (or, where
appropriate, the Participant's legal representative) in accordance with the
terms of the Award Agreement.

                  6.2. Restricted Stock. An Award of Restricted Stock is a grant
by the Company of a specified number of shares of Common Stock to the
Participant, which shares are subject to forfeiture upon the happening of
specified events. Such an Award shall be subject to the following terms and
conditions:

                           (a) Upon determination of the number of shares of
Restricted Stock to be granted to the Participant, the Committee shall direct
that a certificate or certificates representing the number of shares of Common
Stock be issued to the Participant with the Participant designated as the
registered owner. The certificate(s) representing such shares shall be legended
as to sale, transfer, assignment, pledge or other encumbrances during the
Restriction Period and deposited by the Participant, together with a stock power
endorsed in blank, with the Company, to be held in escrow during the Restriction
Period.

                           (b) During the Restriction Period the Participant
shall have the right to receive dividends from and to vote the shares of
Restricted Stock.

                           (c) The Award Agreement shall specify the duration of
the Restriction Period and the performance, employment or other conditions under
which the Restricted Stock may be forfeited to the Company. At the end of the
Restriction Period the restrictions imposed hereunder shall lapse with respect
to the number of shares of Restricted Stock as determined by the Committee, and
the legend shall be removed and such number of shares delivered to the
Participant (or, where appropriate, the Participant's legal representative).

                           (d) In the sole discretion of the Committee, an Award
Agreement regarding Restricted Stock may provide for a tax reimbursement cash
payment to be made by the Company to any Participant in connection with the tax
consequences resulting from an Award of Restricted Stock, the lapse of
restrictions on any Restricted Stock or the payment by a Participant of any
taxes related thereto, subject to such conditions as the Committee may specify.

                  6.3. Options. Options give a Participant the right to purchase
a specified number of shares of Common Stock from the Company for a specified
time period at a fixed (or other determinable) price. Options may be either
Incentive Stock Options or Non-Qualified Stock Options. The grant of Options
shall be subject to the following terms and conditions:

                                      7
<PAGE>

                           (a) Option Price: The price per share at which Common
Stock may be purchased upon exercise of an Option shall be determined by the
Committee, but shall be not less than the Fair Market Value of a share of Common
Stock on the date of grant.

                           (b) Term of Options: The Award Agreements shall
specify when an Option may be exercisable and the terms and conditions
applicable thereto. The term of an Option shall in no event be greater than ten
years (five years in the case of an Incentive Stock Option granted to a Ten
Percent Shareholder) and no Option may be exercisable sooner than six months
from date of grant.

                           (c) Incentive Stock Options: Each provision of the
Plan and each Award Agreement relating to an Incentive Stock Option shall be
construed so that each Incentive Stock Option shall be an incentive stock option
as defined in Section 422 of the Code, and any provisions of the Award Agreement
thereof that cannot be so construed shall be disregarded. In no event may a
Participant be granted an Incentive Stock Option which does not comply with the
grant and vesting limitations prescribed by Section 422 (d) of the Code.
Incentive Stock Options may not be granted to employees of Affiliates or
Non-Employee Directors.

                           (d) Payment of Option Price: The Committee shall
determine the time or times at which an Option may be exercised in whole or in
part, whether the exercise price for an Option shall be paid in cash, by the
surrender at Fair Market Value of Common Stock, by any combination of cash and
shares of Common Stock, or with other property (including notes or other
contractual obligations of Participants to make payment on a deferred basis),
the means or methods of payment, including by "attestation" and through
"cashless exercise" arrangements, to the extent permitted by applicable law, and
the methods by which, or the time or times at which, Common Stock will be
delivered or deemed to be delivered to Participants upon the exercise of such
Option.

                  6.4. Stock Appreciation Rights. A SAR shall confer on the
Participant a right to receive, upon exercise thereof, the excess of (A) the
Fair Market Value of one share of Common Stock on the date of exercise over (B)
the grant price of the SAR as determined by the Committee, but which may never
be less than the Fair Market Value of a share of Common Stock on the date of
grant. The grant of SARs shall be subject to the following terms and conditions:

                           (a) The Committee shall determine the time or times
at which a SAR may be exercised in whole or in part, the method of exercise,
method of settlement, form of consideration payable in settlement, method by
which Common Stock will be delivered or deemed to be delivered to Participants,
whether or not a SAR shall be in tandem with any other Award, and any other
terms and conditions of any SAR.

                           (b) The term of a SAR shall in no event be greater
than ten years.

                  6.5. Additional Provisions Applicable to Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution for, any
other Award granted under the Plan or any award granted under any other plan of
the Company or any Subsidiary, Affiliate or any business entity acquired by the
Company, any Subsidiary or Affiliate, or any other right of a Participant to
receive payment from the Company, any Subsidiary or Affiliate.

                                      8
<PAGE>

         Section 7. Exchange and Buy Out Provisions. The Committee may at any
time exchange or buy out any previously granted Award or may provide in any
Award Agreement terms and conditions under which a Participant must sell, or
offer to sell, to the Company any unexercised Award, whether or not vested, or
any Common Stock acquired pursuant to such Award for a payment in cash, Common
Stock or other property based on such terms and conditions as the Committee
shall determine and communicate to a Participant at the time that such offer is
made or as may be set forth in the Award Agreement.

         Section 8. Change of Control. In the event of a Change of Control, all
Awards granted under the Plan (including Performance-Based Awards) that are
still outstanding and not yet vested or exercisable or which are subject to
restrictions shall vest on the Change of Control.

         Section 9. Adjustments upon Changes in Capitalization.

                  9.1. In the event that the Committee shall determine that any
stock dividend, recapitalization, forward split or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase or
share exchange, extraordinary or unusual cash distribution or other similar
corporate transaction or event, affects the Common Stock such that an adjustment
is appropriate in order to prevent dilution or enlargement of the rights of
Participants under the Plan, then the Committee shall, in such manner as it may
deem equitable, adjust any or all of (i) the number and kind of shares of Common
Stock which may thereafter be issued in connection with Awards, (ii) the number
and kind of shares of Common Stock issuable in respect of outstanding Awards,
(iii) the aggregate number and kind of shares of Common Stock available under
the Plan, and (iv) the exercise or grant price relating to any Award or, if
deemed appropriate, make provision for a cash payment with respect to any
outstanding Award; provided, however, in each case, that no adjustment shall be
made that would cause the Plan to violate Section 422(b)(1) of the Code with
respect to Incentive Stock Options or that would adversely affect the status of
any Award that is "performance-based compensation" under Section 162(m) of the
Code.

                  9.2. In addition, the Committee is authorized to make
adjustments in the terms and conditions of, and the criteria included in,
Awards, including any Performance Goals, in recognition of unusual or
nonrecurring events (including, without limitation, events described in Section
13.1) affecting the Company, any Subsidiary or Affiliate, or in response to
changes in applicable laws, regulations, or accounting principles.
Notwithstanding the foregoing, no adjustment shall be made in any outstanding
Awards to the extent that such adjustment would adversely affect the status of
the Award as "performance-based compensation" under Section 162(m) of the Code.

         Section 10. Termination and Amendment.

                  10.1. Changes to the Plan and Awards. The Board may amend,
alter, suspend, discontinue, or terminate the Plan without the consent of the
Company's stockholders or Participants, except that any such amendment,
alteration, suspension, discontinuation, or termination shall be subject to the
approval of the Company's stockholders if (i) such action would increase the
number of shares subject to the Plan, (ii) decrease the price at which Awards
may be granted, or (iii) such stockholder approval is required by any federal or
state law or regulation or the rules of any stock exchange or automated
quotation system on which the Common Stock may then be listed or quoted, and the
Board may otherwise, in its discretion, determine to submit other such changes
to the Plan to the stockholders for approval; provided, however, that without
the consent of an affected Participant, no amendment, alteration, suspension,

                                      9
<PAGE>

discontinuation, or termination of the Plan may materially and adversely affect
the rights of such Participant under any Award theretofore granted and any Award
Agreement relating thereto. The Committee may waive any conditions or rights
under, or amend, alter, suspend, discontinue, or terminate, any Award
theretofore granted and any Award Agreement relating thereto; provided, however,
that without the consent of an affected Participant, no such amendment,
alteration, suspension, discontinuation, or termination of any Award may
materially and adversely affect the rights of such Participant under such Award.

                  10.2. The foregoing notwithstanding, any Performance Goal or
other performance condition specified in connection with an Award shall not be
deemed a fixed contractual term, but shall remain subject to adjustment by the
Committee, in its discretion at any time in view of the Committee's assessment
of the Company's strategy, performance of comparable companies, and other
circumstances, except to the extent that any such adjustment to a performance
condition would adversely affect the status of an Award as "performance-based
compensation" under Section 162(m) of the Code.

         Section 11. No Right to Award, Employment or Service. Neither the Plan
nor any action taken hereunder shall be construed as giving any Employee any
right to be retained in the employ of the Company, any Subsidiary or Affiliate.
For purposes of this Plan, transfer of employment between the Company and its
Subsidiaries and Affiliates shall not be deemed a termination of employment.
Nothing contained herein or in any individual Award Agreement shall be construed
to confer on any Non-Employee Director any right to continue as a director of
the Company or reduce any right of the Company, the Board or the stockholders of
the Company to remove such Non-Employee Director as a director of the Company,
with or without cause.

         Section 12. Taxes. The Company or any Subsidiary is authorized to
withhold from any payment relating to an Award under the Plan, including from a
distribution of Common Stock or any payroll or other payment to a Participant
amounts of withholding and other taxes due in connection with any transaction
involving an Award, and to take such other action as the Committee may deem
advisable to enable the Company and Participants to satisfy obligations for the
payment of withholding taxes and other tax obligations relating to any Award.
This authority shall include authority to withhold or receive Common Stock or
other property and to make cash payments in respect thereof in satisfaction of a
Participant's tax obligations. Withholding of taxes in the form of shares of
Common Stock from the profit attributable to the exercise of any Option shall
not occur at a rate that exceeds the minimum required statutory federal and
state withholding rates.

         Section 13. Limits on Transferability; Beneficiaries. No Award or other
right or interest of a Participant under the Plan shall be pledged, encumbered,
or hypothecated to, or in favor of, or subject to any lien, obligation, or
liability of such Participant to, any party, other than the Company, any
Subsidiary or Affiliate, or assigned or transferred by such Participant
otherwise than by will or the laws of descent and distribution, and such Awards
and rights shall be exercisable during the lifetime of the Participant only by
the Participant or his or her guardian or legal representative. Notwithstanding
the foregoing, the Committee may, in its discretion, provide that Awards or
other rights or interests of a Participant granted pursuant to the Plan (other
than an Incentive Stock Option) be transferable, without consideration, to
immediate family members (i.e., children, grandchildren or spouse), to trusts
for the benefit of such immediate family members and to partnerships in which
such family members are the only partners. The Committee may attach to such
transferability feature such terms and conditions as it deems advisable. In
addition, a Participant may, in the manner established by the Committee,
designate a beneficiary (which may be a person or a trust) to exercise the
rights of the Participant, and to receive any distribution, with respect to any
Award upon the death of the Participant. A beneficiary, guardian, legal
representative or other person claiming any rights under the Plan from or
through any Participant shall be subject to all terms and conditions of the Plan
and any Award Agreement applicable to such Participant, except as otherwise
determined by the Committee, and to any additional restrictions deemed necessary
or appropriate by the Committee.

                                      10
<PAGE>

         Section 14. No Rights to Awards; No Stockholder Rights. No Participant
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Participants. No Award shall confer on
any Participant any of the rights of a stockholder of the Company unless and
until Common Stock is duly issued or transferred to the Participant in
accordance with the terms of the Award.

         Section 15. Foreign Nationals. Without amending the Plan, Awards may be
granted to Employees who are foreign nationals or employed outside the United
States or both, on such terms and conditions different from those specified in
the Plan as may, in the judgment of the Committee, be necessary or desirable to
further the purpose of the Plan.

         Section 16. Securities Law Requirements.

                  (a) No Award granted hereunder shall be exercisable if the
Company shall at any time determine that (a) the listing upon any securities
exchange, registration or qualification under any state or federal law of any
Common Stock otherwise deliverable upon such exercise, or (b) the consent or
approval of any regulatory body or the satisfaction of withholding tax or other
withholding liabilities, is necessary or appropriate in connection with such
exercise. In any of the events referred to in clause (a) or clause (b) above,
the exercisability of such Awards shall be suspended and shall not be effective
unless and until such withholding, listing, registration, qualifications or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company in its sole discretion, notwithstanding any
termination of any Award or any portion of any Award during the period when
exercisability has been suspended.

                  (b) The Committee may require, as a condition to the right to
exercise any Award that the Company receive from the Participant, at the time
any such Award is exercised, vests or any applicable restrictions lapse,
representations, warranties and agreements to the effect that the shares are
being purchased or acquired by the Participant for investment only and without
any present intention to sell or otherwise distribute such shares and that the
Participant will not dispose of such shares in transactions which, in the
opinion of counsel to the Company, would violate the registration provisions of
the Securities Act of 1933, as then amended, and the rules and regulations
thereunder. The certificates issued to evidence such shares shall bear
appropriate legends summarizing such restrictions on the disposition thereof.

         Section 17. Termination. Unless the Plan shall theretofore have been
terminated, the Plan shall terminate on the 10-year anniversary of the effective
date, and no Awards under the Plan shall thereafter be granted.

                                      11
<PAGE>

         Section 18. Fractional Shares. The Company will not be required to
issue any fractional common shares pursuant to the Plan. The Committee may
provide for the elimination of fractions and for the settlement of fractions in
cash.

         Section 19. Discretion. In exercising, or declining to exercise, any
grant of authority or discretion hereunder, the Committee may consider or ignore
such factors or circumstances and may accord such weight to such factors and
circumstances as the Committee alone and in its sole judgment deems appropriate
and without regard to the effect such exercise, or declining to exercise such
grant of authority or discretion, would have upon the affected Participant, any
other Participant, any employee, the Company, any Subsidiary, any Affiliate, any
stockholder or any other person.

         Section 20. Governing Law. The validity and construction of the Plan
and any Award Agreements entered into thereunder shall be construed and enforced
in accordance with the laws of the State of Delaware, but without giving effect
to the choice of law principles thereof.

         Section 21. Adoption of the Plan and Effective Date. The Plan shall be
adopted by the Board and shall be effective as of such date.

                                      12

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