Document:

EXHIBIT 10.2

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT
AGREEMENT (“Agreement”) is made and entered into August 9, 2005, by and
between MedicalCV, Inc., a
corporation duly organized and existing under the laws of the State of
Minnesota, with a place of business at 9725 South Robert Trail, Inver Grove
Heights, Minnesota 55077 (hereinafter referred to as the “Company”),
and John H. Jungbauer, a resident
of the state of Minnesota (hereinafter referred to as “Executive”).

 

BACKGROUND OF AGREEMENT

 

•                       Executive is
currently the Vice President, Finance and Chief Financial Officer of the
Company and is employed on an at-will basis.

 

•                       The Company and
Executive desire to memorialize the terms and conditions of Executive’s
employment, including additional terms and conditions which have been approved
by the Company’s Board of Directors.

 

In consideration of the
foregoing, the Company and Executive agree as follows:

 

ARTICLE 1

EMPLOYMENT

 

1.01  Subject
to the terms of Articles 3 and 6, the Company hereby agrees to employ Executive
pursuant to the terms of this Agreement, and Executive agrees to such
employment.  Executive is currently
employed by the Company as its Vice President, Finance and Chief Financial
Officer and shall continue to hold such title under the terms of this
Agreement.

 

1.02  Executive
shall generally have the authority, responsibilities, and such duties as are
customarily performed by the chief financial officer and principal accounting
officer of a public company of similar size and industry, specifically
including, without limitation, the following responsibilities:

 

(i)                                     working with
senior management of the Company and its Board of Directors (the “Board”) in
formulating short and long term goals and developing, implementing, and executing
strategies to attain Company objectives;

 

(ii)                                  endeavoring to
establish and maintain a relationship of trust and credibility with members of
the senior management team, the Board, its committees, outside auditors and
legal counsel;

 

(iii)                               supervising the
implementation of the Company’s policies and business processes in order to
meet the corporate governance and internal control requirements established by
the senior management team, the Board and relevant laws, including, but not
limited to:  (A) designing and
implementing effective disclosure controls and procedures that are necessary to
insure accurate financial reporting; (B) conducting periodic reviews and
evaluations of the effectiveness of the Company’s disclosure controls and
procedures, including, without limitation,

 

 

interfacing with the senior
management team and other Company personnel, the Board, Audit Committee,
outside auditors and legal counsel to insure the effectiveness of the Company’s
disclosure controls and procedures and related matters; (C) accurately
reporting the results of Company operations and related matters to the
Securities and Exchange Commission, Nasdaq and other regulatory agencies; and (D) acting
as a certifying officer of the Company’s financial reporting under the Exchange
Act and other regulatory agencies;

 

(iv)                              managing and
protecting the Company’s capital and liquid assets and monitoring and advising
management regarding the availability of adequate capital at all times;

 

(v)                                 regularly and
systematically appraising and evaluating the Company’s performance results
against the Company’s established objectives; and

 

(vi)                              consistent with
the foregoing, such other finance functions as the Chief Executive Officer may
assign to Executive from time to time during his employment period.

 

Executive shall also render
such additional services and duties within the scope of Executive’s experience
and expertise as may be reasonably requested of him from time to time by the
Board.

 

1.03 
Executive shall report to the Chief Executive Officer and shall direct,
and shall generally be subject to direction, orders and advice of the Board.

 

ARTICLE 2

BEST EFFORTS OF EXECUTIVE

 

2.01  In his
capacity as Vice President, Finance and Chief Financial Officer, Executive
shall use his best energies and abilities in the performance of his duties,
services and responsibilities for the Company.

 

2.02  During
the term of his employment, Executive shall devote substantially all of his
business time and attention to the business of the Company and its subsidiaries
and affiliates and shall not engage in any substantial activity inconsistent
with the foregoing, whether or not such activity shall be engaged in for
pecuniary gain, unless approved by the Board; provided, however, that, to the
extent such activities do not violate, or substantially interfere with his
performance of his duties, services and responsibilities under this Agreement,
Executive shall be permitted to serve on civic or charitable boards or
committees thereof.

 

ARTICLE 3

NATURE OF EMPLOYMENT

 

3.01 
Executive’s employment pursuant to this Agreement shall be on an at-will
basis, with either Executive or the Company having the right to terminate
Executive’s employment with or without cause on not less than sixty (60) days’
prior written notice, subject to the Company’s obligations to Executive
pursuant to Sections 6 and 7.  The terms
and conditions of this Agreement may be amended from time to time with the
consent of the Company and Executive. 
All such amendments shall be effective when memorialized by a written
agreement between the Company and Executive or by resolutions of the Board or
the Company’s Compensation Committee (the “Committee”).

 

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ARTICLE 4

COMPENSATION AND BENEFITS

 

4.01  During
the term of employment hereunder, Executive shall be paid a base salary at the
rate of Two Hundred Thousand ($200,000) per year (“Base Salary”), payable in
bi-weekly installments in accordance with the Company’s established pay
periods, reduced by all deductions and withholdings required by law and as
otherwise specified by Executive.  The
Company shall cause the Committee to review Executive’s performance and Base
Salary level each calendar year during the Term, commencing, 2006.  Executive’s Base Salary may be increased (but
not decreased), in the sole discretion of the Board.  In the event Executive’s employment shall,
for any reason, terminate during the Term, Executive’s final monthly Base
Salary payment shall be made on a pro-rated basis as of the last day of the
month in which such employment terminated.

 

4.02  During
the term of employment, in addition to payments of Base Salary set forth above,
Executive shall be eligible to participate in any performance-based cash bonus
plan for senior executives based upon achievement of goals established with
respect to each fiscal year by the Board or Committee after reasonable
consultation with Executive, but Executive’s participation and performance
goals therein shall remain within the discretion of the Board or Committee.

 

4.03  During
the term of employment, Executive shall be entitled to participate in employee
benefit plans, policies, programs, perquisites and arrangements, as the same
may be provided and amended from time to time, that are provided generally to
similarly situated executive employees of the Company, to the extent Executive
meets the eligibility requirements for any such plan, policy, program,
perquisite or arrangement.

 

4.04  The
Company shall reimburse Executive for all reasonable business expenses incurred
by Executive in carrying out Executive’s duties, services, and responsibilities
under this Agreement.  Executive shall
comply with generally applicable policies, practices and procedures of the
Company with respect to reimbursement for, and submission of expense reports,
receipts or similar documentation of, such expenses.

 

4.05  If the
Company, based upon an opinion of legal counsel or a judicial determination,
determines that Section 304 of the Sarbanes-Oxley Act of 2002 is applicable
to Executive, to the extent that the Company is required to prepare an
accounting restatement due to the material noncompliance of the Company, as a
result of misconduct, with any financial reporting requirement under the
securities laws, Executive shall reimburse the Company for any bonus or other
incentive or equity-based compensation received from the Company during the 12-month
period following the first public issuance or filing with the Securities and
Exchange Commission (whichever first occurs) of the financial document
embodying such financial reporting requirement and any profits received from
the sale of the Company’s securities during that 12-month period.  In the event Executive fails to make prompt
reimbursement of any such amount, the Company may, to the extent permitted by
applicable law, deduct the amount required to be reimbursed from Executive’s
compensation otherwise due under this Agreement.

 

ARTICLE 5

VACATION AND LEAVE OF ABSENCE

 

5.01 
Executive shall be entitled to three (3) weeks of paid vacation per
year, in addition to the Company’s normal holidays.  Vacation time will be scheduled taking into
account the Executive’s duties and obligations at the Company.  Unused paid vacation time shall not
accumulate from year to year,

 

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unless otherwise approved in writing by the Board or Committee.  Sick leave and all other leaves of absence
will be in accordance with the Company’s stated personnel policies.

 

ARTICLE 6

TERMINATION

 

6.01  The
Company may terminate Executive’s employment without Cause by giving Executive
at least sixty (60) days written notice thereof.  In the event of such termination, Executive
shall receive only the severance compensation set forth in Article 7.01
and Executive shall also be entitled to all or a portion of any bonus due
Executive pursuant to any bonus plan or arrangement established or mutually
agreed-upon prior to termination, to the extent earned or performed through the
date of termination, based upon the requirements or criteria of such bonus plan
or arrangement, as the Board shall in good faith determine.  Such pro-rated bonus, shall be payable at the
time and in the manner payable to other executives of the Company who
participate in such plan or arrangement.

 

6.02 
Executive’s employment will be deemed terminated as of the date of the
death of the Executive.  In the event of
such termination, there shall be payable to Executive’s estate compensation
earned through the date of death together with a pro-rata portion of any bonus
due Executive pursuant to any bonus plan or arrangement established or mutually
agreed-upon prior to termination, to the extent earned or performed based upon
the requirements or criteria of such plan or arrangement, as the Board shall in
good faith determine.  Such pro-rated
bonus, shall be payable at the time and in the manner payable to other
executives of the Company who participate in such plan or arrangement.

 

6.03  Any
other provision of this Agreement notwithstanding, the Company may terminate
Executive’s employment upon written notice specifying a termination date based
on any of the following events that constitute Cause:

 

(a)               Any commission
or nolo contendere plea by Executive to a felony, gross misdemeanor or misdemeanor
involving moral turpitude, or any public conduct by Executive that has or can
reasonably be expected to have a detrimental effect on the Company;

 

(b)              Any act of
material misconduct, willful and gross negligence, or breach of duty to the
Company, including, but not limited to, embezzlement, fraud, dishonesty,
nonpayment of an obligation owed to the Company, or willful breach of fiduciary
duty to the Company which results in a material loss, damage, or injury to the
Company;

 

(c)               Any material
breach of any material provision of this Agreement or of the Company’s
announced rules, codes or polices, which remains uncured or uncorrected for a
period of thirty (30) days following written notice thereof to Executive
specifying such breach;

 

(d)              Any act of
insubordination by Executive; however, an act of insubordination by Executive
shall not constitute Cause if Executive cures or remedies such insubordination
within thirty (30) days after written notice to Executive, without material
harm or loss to the Company, unless such insubordination is a part of a pattern
of chronic insubordination, which may be evidenced by reports or warning
letters given by the Company to Executive, in which case such insubordination
is deemed not curable.

 

(e)               Any
unauthorized disclosure of any Company trade secret or confidential
information, or conduct constituting unfair competition with respect to the
Company, including inducing a party to breach a contract with the Company; or

 

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(f)                 A willful
violation of federal or state securities laws or regulations.

 

In making such determination, the Board shall
act in good faith and give Executive a reasonably detailed written notice and a
reasonable opportunity to be heard on the issues at a Board or Committee
meeting.  For purposes of this Agreement,
no act or failure by the Executive shall be considered “willful” if such act is
done by Executive in good faith in the belief that such act is or was lawful
and in the best interest of the Company or one or more of its businesses.  Nothing in this paragraph 6.03 shall be
construed to prevent Executive from contesting the Board or Committee’s
determination that Cause exists.  In the
event of such termination, and not withstanding any contrary provision
otherwise stated, Executive shall receive only his Base Salary earned through
the date of termination.

 

6.04  The
employment of the Executive shall in no event be considered to have been
terminated for Cause if the termination of his employment took place:

 

(a)                             as a result of
an act or omission which occurred more than 360 days prior to the Executive’s
having been given notice of the termination of his employment for such act or
omission, unless the commission of such act or such omission could not at the
time of such commission or omission have been known to a member of the Board
(other than the Executive, if he is then a member of the Board), in which case
there shall not be termination for Cause if notice of termination took place
more than 360 days from the date that the commission of such act or such
omission was or could reasonably have been so known; or

 

(b)                            as a result of
a continuing course of action which commenced and was or reasonably could have
been known to a member of the Board (other than the Executive) more than 360
days prior to notice having been given to the Executive of the termination of
his employment.

 

6.05 
Executive may terminate his employment upon sixty (60) days prior
written notice to the Company for “Good Reason.”  For purposes of this Agreement, “Good Reason”
means any of the following actions taken by the Company without Cause:

 

(a)                             the Company or
any of its subsidiaries reduces Executive’s Base Salary or current equity
compensation plan opportunities (participation in any such plans or programs
remaining in the discretion of the Board or Committee), or benefit plans (other
than company-wide changes to benefit plans covering all full-time eligible
employees);

 

(b)                            without
Executive’s express written consent, the Company or any of its subsidiaries
significantly reduces Executive’s job authority and responsibility over
financial accounting of the Company as contemplated by Article 1;

 

(c)                             without
Executive’s express written consent, the Company or any of its subsidiaries
requires Executive to change the location of Executive’s job or office, so that
Executive will be based at a location more than fifty (50) miles from the
location of Executive’s job or office immediately preceding notice of such
requirement.

 

(d)                            a successor
company fails or refuses to assume the Company’s obligations under this
Agreement; or

 

(e)                             the Company or
any successor company breaches any of the material provisions of this
Agreement; provided, however, that Executive shall provide detailed information
to the

 

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Company in such written
notice and such grounds for Good Reason are not remedied or continue for a
period of thirty (30) days or more following receipt of such notice.

 

6.06  During
the term of his employment and for 24 months after the date of Executive’s
termination of employment, (i) Executive shall not, directly or
indirectly, make or publish any disparaging statements (whether written or
oral) regarding the Company or any of its affiliated companies or businesses,
or the affiliates, directors, officers, agents, principal shareholders or
customers of any of them and (ii) neither the Company or any of its
affiliated companies or businesses or their affiliates, directors, or officers
shall directly or indirectly, make or publish any disparaging statements
(whether written or oral) regarding Executive. 
Information which the Company or Executive is required to make or
disclose regarding the other to comply with laws or regulations, or makes in a
pleading on the advice of litigation counsel, shall not constitute a
disparaging statement.

 

6.07  Upon any
termination of Executive’s employment with the Company, Executive shall be
deemed to have resigned from all other positions he then holds as an officer,
employee or director or other independent contactor of the Company or any of
its subsidiaries or affiliates, unless otherwise agreed by the Company and
Executive.

 

ARTICLE 7

SEVERANCE PAYMENTS

 

7.01  The
Company, its successors or assigns, will pay Executive as severance pay a lump
sum amount equal to six (6) months of the Executive’s monthly Base Salary
for full-time employment at the time of Executive’s termination (the “Severance
Payment”) if the employment of Executive is terminated by the Company without cause
or by Executive for Good Reason.

 

(a)                        If Executive
becomes entitled to a Severance Payment under this Agreement, and Executive is
eligible to and elects to continue medical coverage as provided by law
(commonly referred to as the COBRA continuation period), then the Company will
pay the cost of premiums for COBRA coverage for Executive and his eligible
dependents for a period of six months following termination, or if sooner,
until Executive is no longer eligible for COBRA coverage.  Executive must be eligible for COBRA
coverage, elect COBRA during the COBRA election period, and comply with all
requirements to obtain such coverage, to be eligible for coverage and for this
benefit.

 

(b)                       If, on the six (6) month
anniversary of the Severance Payment pursuant to Section 7.01, Executive
is unemployed and is not rendering services as an independent contractor,
Executive shall be entitled to continue to receive monthly payments of Base
Salary and COBRA coverage for the period ending on the earlier of (a) the
date Executive is reemployed; (b) commences rendering services as an
independent contractor; or (c) is covered by another medical plan;
provided, however, that such payments shall in no event continue for more than
an additional six (6) months. 
Executive shall report to the Company in writing his reemployment or
engagement as a consultant.

 

(c)                        Nothing in this
Subsection 7.01 shall limit the authority of the Committee or Board to
terminate Executive’s employment in accordance with Section 6.03.  Payment of severance payments pursuant to Section 7.01,
less customary withholdings, shall be made in one lump sum within thirty (30)
days of the Executive’s termination or resignation.

 

7.02  In
addition to the Severance Payment pursuant to Section 7.01, the Company
will pay

 

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Executive a pro-rata portion of any bonus earned by Executive as of the
date of termination, as provided by Sections 6.01 and 6.02.  The payments to Executive pursuant to
Sections 6.01, 6.02 or 7.01 are not intended to be cumulative or duplicative
and an amount payable as a payment of Base Salary or pro-rata bonus under any
one of such sections shall be reduced to the extent of similar payments made
under another of such sections.  In
addition, the severance payment of Base Salary shall be reduced by the amount
of cash severance-type benefits to which Executive may be entitled pursuant to
any other cash severance plan, agreement, policy or program of the Company or
any of its subsidiaries; including any payment for post-employment
restrictions, provided that if the amount of cash severance benefits
payable under such other severance plan, agreement, policy or program is
greater than the amount payable pursuant to this Agreement, Executive will be entitled
to receive the amounts payable under such other plan, agreement, policy or
program which exceeds the Base Salary severance payment.  Without limiting other payments which would
not constitute “cash severance-type benefits” hereunder, any cash settlement of
stock options, accelerated vesting of stock options and retirement, pension and
other similar benefits shall not constitute “cash severance-type benefits” for
purposes of this Section 7.02.

 

7.03 
Notwithstanding any other provision of this Agreement, the Company and
Executive intend that any payments, benefits or other provisions applicable to
this Agreement comply with the payout and other limitations and restrictions
imposed under Section 409A of the Code (“Section 409A”), as clarified
or modified by guidance from the U.S. Department of Treasury or the Internal
Revenue Service – in each case if and to the extent Section 409A is
otherwise applicable to this Agreement and such compliance is necessary to
avoid the penalties otherwise imposed under Section 409A.  In this connection, the Company and Executive
agree that the payments, benefits and other provisions applicable to this
Agreement, and the terms of any deferral and other rights regarding this
Agreement, shall be deemed modified if and to the extent necessary to comply
with the payout and other limitations and restrictions imposed under Section 409A,
as clarified or supplemented by guidance from the U.S. Department of Treasury
or the Internal Revenue Service – in each case if and to the extent Section 409A
is otherwise applicable to this Agreement and such compliance is necessary to
avoid the penalties otherwise imposed under Section 409A.

 

7.04  The
Company may withhold from any amounts payable under this Agreement all federal,
state, city or other taxes required by applicable law to be withheld by the
Company.

 

7.05  The
provisions of this Article 7 will be deemed to survive the termination of
this Agreement for the purposes of satisfying the obligations of the Company
and Executive thereunder.

 

ARTICLE 8

NONDISCLOSURE AND INVENTIONS

 

8.01  Except
as permitted or directed by the Company or as may be required in the proper
discharge of Executive’s employment hereunder, Executive shall not, during his
employment or at any time thereafter, divulge, furnish or make accessible to
anyone or use in any way any Confidential Information of the Company.  “Confidential Information” means any
information or compilation of information that the Executive learns or develops
during the course of his employment that is not generally known, that is
proprietary to or within the unique knowledge of the Company, from which it
derives economic value (whether or not conceived, originated, discovered, or
developed in whole or in part by Executive). 
Confidential Information includes but is not limited to, the following
types of information and other information of a similar nature (whether or not
reduced to writing), all of which Executive agrees constitutes the valuable
trade secrets of the Company: research, designs, development, know how,
computer programs and processes, marketing plans and techniques, existing and
contemplated products and services, customer and product names and related
information, prices sales, inventory,

 

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personnel, computer programs and related documentation, technical and
strategic plans, and finances. 
Confidential Information also includes any information of the foregoing
nature that the Company treats as proprietary or designates as Confidential
Information, whether or not owned or developed by the Company.  “Confidential Information” does not include
information that (a) is or becomes generally available to the public
through no fault of Executive, (b) was known to Executive prior to its
disclosure by the Company, as demonstrated by files in existence at the time of
the disclosure, (c) becomes known to Executive, without restriction, from
a source other than the Company, without breach of this Agreement by Executive
and otherwise not in violation of the Company’s rights, or (d) is
explicitly approved for release by written authorization of the Company.

 

8.02 
Executive acknowledges that new and valuable proprietary concepts,
methods, processes, discoveries, trade secrets (as defined in the Minnesota
Uniform Trade Secrets Act), improvements, adaptations, or ideas (herein
individually and collectively referred to as “Inventions”) may be developed,
originated, authorized, conceived, invented, or made by Executive, either alone
or jointly with others, in the course of Executive’s employment by the
Company.  All such Inventions shall be
the exclusive property of the Company, whether or not be patentable or
copyrightable, and they may or may not be shown or described in writing or
reduced to practice.  With respect to all
such Inventions developed, originated, authored, conceived, or invented, or
made by Executive (whether in whole or in part) during Executive’s employment
by the Company, Executive shall:

 

(i)                                     keep accurate,
complete and timely records all such Inventions, which records shall be the
Company’s property and be retained on the Company’s premises;

 

(ii)                                  promptly and
fully disclose and describe all such Inventions to the Company;

 

(iii)                               assign (and
Executive hereby does assign) to the Company all of Executive’s rights to such
Inventions and to applications for letters patent or copyrights in all
countries and to letters patent or copyrights granted with respect to such
Inventions in all countries; and

 

(iv)                              acknowledge and
deliver promptly to the Company (without charge to the Company but at the
expense of the Company) such written instruments and cooperate and do such
other acts as may be necessary in the opinion of the Company to preserve
property rights to such Inventions against forfeiture, abandonment, or loss and
to obtain and maintain letters patent or copyrights and to vest the entire
right and title thereto exclusively in the Company.

 

(b)                                 If Executive is
needed, at any time, to give testimony, evidence, or opinions in any litigation
or proceeding involving any patents or copyrights or applications for patents
or copyrights, both domestic and foreign, relating to inventions, improvements
discoveries, software, writings or other works of authorship conceived,
developed or reduced to practice by Executive, Executive agrees to do so.  With respect to any obligations performed by
the Executive under this Section following termination of Executive’s
employment, the Company will pay or reimburse all reasonable out-of-pocket
expenses.

 

(c)                                  The obligations
of this paragraph shall continue beyond the termination of employment with
respect to Inventions conceived or made by Executive during the period of his
employment and shall be binding upon assigns, executors, administrators and
other legal representatives.  For
purposes of this Agreement, any Invention relating to the business of the
Company on which Executive files or claims a copyright, or files a patent
application,

 

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within one (1) year
after termination of employment with the Company, shall be presumed to cover
Inventions conceived by Executive during the term of his employment with the
Company, subject to proof to the contrary by good faith, written and duly
corroborated records establishing that such Invention was conceived and made
following termination of employment.

 

NOTICE:  The
Company hereby notifies Executive that the foregoing does not apply to
inventions or ideas for which no equipment, supplies, facility, or trade secret
information of the Company was used and that was developed entirely on
Executive’s own time, and (1) which does not relate (a) directly to
the business of the Company and (b) to the Company’s actual or
demonstrably anticipated research or development, or (2) which does not
result from any work performed by Executive for the Company.

 

8.03  In the
event of a breach or threatened breach by Executive of the provisions of this Article 8,
the Company shall be entitled to an injunction restraining Executive from
directly or indirectly disclosing, disseminating, lecturing upon, publishing or
using such confidential, trade secret or proprietary information (whether in
whole or in part) and restraining Executive from rendering any services or
participating with any person, firm, corporation, association or other entity
to whom such knowledge or information (whether in whole or in part) has been
disclosed, without the posting of a bond or other security.  Nothing herein shall be construed as
prohibiting the Company from pursuing any other equitable or legal remedies
available to it for such breach or threatened breach, including the recovery of
damages from Executive.

 

8.04 
Executive agrees not to directly or indirectly use or disclose
Confidential Information for the benefit of anyone other than the Company,
either during or after employment with the Company and during the term of his
employment and at all times thereafter, agrees:

 

(a)                        to receive,
maintain, and use Confidential Information in the strictest confidence and,
except with the consent of the Company, not to directly or indirectly reveal,
report, publish, disclose, or transfer, any Confidential Information to any
person, firm, corporation, or other entity or utilize any Confidential
Information for Executive’s own benefit or intended benefit or for the benefit
or intended benefit of any other person, firm, corporation or other entity; and

 

(b)                       not to put into
issue the confidentiality of any of the Confidential Information, Company’s
ownership thereof, or its status as valuable trade secrets of Company.

 

Executive acknowledges that all notes, data,
reference materials, documents, business plans, the Company business and
financial records, computer programs, and other materials that in any way
incorporate, embody, or reflect any of the Confidential Information, whether
prepared by Executive or others, are the exclusive property of the Company, and
Executive agrees to forthwith deliver to the Company all such materials,
including all copies or memorializations thereof, in Executive’s possession or
control, whenever requested to do so by the Company, and in any event, upon
termination of Executive’s employment with the Company.

 

8.05  The
Executive understands and agrees that any violation of this Article 8
while employed by the Company may result in immediate disciplinary action by
the Company, including termination of employment for Cause.

 

8.06  The
provisions of this Article 8 shall survive termination of this Agreement
indefinitely.

 

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ARTICLE 9

NONCOMPETITION AND NON-RECRUITMENT

 

9.01 
Executive agrees that during the term of his employment and for a period
of one (1) year after termination of employment (the “Restricted Period”)
he will not directly or indirectly render service (including services in
research) to any person or entity in connection with the design, development,
manufacture, marketing, or sale of a Competitive Product that is sold or
intended for use or sale in any geographic area in which the Company actively
markets a Company Product or has planned to actively market a Company Product
of the same general type or function. 
This territory currently includes North America, Europe and Japan.

 

(a)                                  Without
limiting the generality of the above, Executive expressly agrees that during
the Restriction Period discussed above, he will not directly or indirectly (on
his own behalf or on behalf of another person or entity) sell competitive
Products to, attempt to sell such products to, or otherwise solicit purchases
of such services or products from, the following:

 

(i)                                     any customer
with whom Executive (or any other Executive or representative under Executive’s
supervision) has had direct or indirect contact or to whom Executive (or any
other Executive or representative under Executive’s supervision) has directly
or indirectly sold such services or products during the period of Executive’s
employment; or

 

(ii)                                  any prospective
customer who has been directly or indirectly solicited by Company, or who has
approached Company, and with whom Executive (or any other Executive or
representative under the Executive’s supervision) has had direct or indirect
contact or to whom Executive (or any other Executive or representative under
Executive’s supervision) has directly or indirectly attempted to sell such
services or products during the term of Executive’s employment.

 

(b)                                 Executive
further agrees that during the Restriction Period he will not directly or
indirectly (i) in any way interfere or attempt to interfere with the
Company’s relationships with any of its current or potential customers, or (ii) employ
or attempt to employ any of the Company’s then Executives on behalf of any
other entity, whether or not such entity competes with the Company.

 

(c)                                  For the
purposes of this Section 9.01,

 

(i)                                     “Competitive
Product” means any surgical product or research to develop information useful
in connection with a product or service that is being designed, developed,
manufactured, marketed or sold by anyone other than the Company and is of the
same general type, performs similar functions, or is used for the same purposes
as a Company Product on which the Employee worked, dealt with, or marketed
during the preceding two years of employment or about which he received or had
knowledge of Confidential Information; provided, however, that the term “surgical
product” shall not include non-invasive or percutaneous products; and

 

(ii)                                  “Company
Product” means any product, product line or service (including any component
thereof or research to develop information useful in connection with a product
or service) that is being designed, developed, manufactured,

 

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marketed or sold by the
Company or with respect to which the Company has acquired Confidential Information
which it intends to use in the design, development, manufacture, marketing or
sale of a product or service.

 

9.02  At its
sole option, the Company may, by express written notice to Executive, waive or
limit the time and/or geographic area in which Executive cannot engage in
competitive activity or the scope of such competitive activity.

 

9.03 
Executive agrees that breach by him of the provisions of this Article 9
will cause the Company irreparable harm that is not fully remedied by monetary
damages.  In the event of a breach or
threatened breach by Executive of the provisions of this Article 9, the
Company shall be entitled to an injunction restraining Executive from directly
or indirectly competing or recruiting as prohibited herein, without posting a
bond or other security.  Nothing herein
shall be construed as prohibiting the Company from pursuing any other equitable
or legal remedies available to it for such breach or threatened breach,
including the recovery of damages from Executive.

 

9.04  The
Executive understands and agrees that any violation of this Article 9
while employed by the Company may result in immediate disciplinary action by
the Company, including termination of employment for Cause.

 

9.05  The
obligations contained in this Article 9 shall survive the termination of
this Agreement indefinitely.

 

ARTICLE 10

 

MISCELLANEOUS

 

10.01  Governing
Law.  This Agreement shall be
governed and construed according to the laws of the State of Minnesota without
regard to conflicts of law provisions. 
The Company and Executive agree that if any action is brought pursuant
to this Agreement that is not otherwise resolved by arbitration pursuant to Section 10.06,
such dispute shall be resolved only in the District Court of Hennepin County,
Minnesota, or the United States District Court for Minnesota, and each party
hereto unconditionally (a) submits for itself in any proceeding relating
to this Agreement, or for recognition and enforcement of any judgment in
respect thereof, to the exclusive jurisdiction of the Hennepin County,
Minnesota District Courts or the United States Federal District Court for
Minnesota, and agrees that all claims in respect to any such proceeding shall
be heard and determined in Hennepin County, Minnesota, Minnesota District Court
or, to the extent permitted by law, in such federal court, (b) consents
that any such proceeding may and shall be brought in such courts and waives any
objection that it may now or thereafter have to the venue or jurisdiction of
any such proceeding in any such court or that such proceeding was brought in an
inconvenient court and agrees not to plead or claim the same; waives all right
to trial by jury in any proceeding (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement, or its performance
under or the enforcement of this Agreement; (d) agrees that service of
process in any such proceeding may be effected by mailing a copy of such
process by registered or certified mail (or any substantially similar form of
mail), postage prepaid, to such party at its address as provided in Section 10.06;
and (e) agrees that nothing in this Agreement shall affect the right to
effect service of process in any other manner permitted by the laws of the
State of Minnesota.

 

10.02  Successors.  This Agreement is personal to Executive and
Executive may not assign or transfer any part of his rights or duties
hereunder, or any compensation due to him hereunder, to any other person or
entity.  This Agreement may be assigned
by the Company and the Company.  The
Company shall require any successor or assignee, whether direct or indirect, by
purchase, merger, consolidation or

 

11

 

otherwise, to all or substantially all the business or assets of the Company,
expressly and unconditionally to assume and agree to perform the Company’s
obligations under this Agreement, in the same manner and to the same extent
that the Company would be required to perform if no such succession or
assignment had taken place.  In such
event, the term “Company,” as used in this Agreement, shall mean the Company as
defined above and any successor or assignee to the business or assets which by
reason hereof becomes bound by the terms and provisions of this Agreement.

 

10.03  Waiver.  The waiver by the Company of the breach or
nonperformance of any provision of this Agreement by Executive will not operate
or be construed as a waiver of any future breach or nonperformance under any
such provision of this Agreement or any similar agreement with any other
Executive.

 

10.04  Entire
Agreement; Modification.  This
Agreement supersedes, revokes and replaces any and all prior oral or written
understandings, if any, between the parties relating to the subject matter of
this Agreement.  The parties agree that
this Agreement: (a) is the entire understanding and agreement between the
parties; and (b) is the complete and exclusive statement of the terms and
conditions thereof, and there are no other written or oral agreements in regard
to the subject matter of this Agreement. 
Except for modifications described in Article 3, this Agreement
shall not be changed or modified except by a written document signed by the
parties hereto.

 

10.05  Severability
and Blue Penciling.  To the extent
that any provision of this Agreement shall be determined to be invalid or
unenforceable as written, the validity and enforceability of the remainder of
such provision and of this Agreement shall be unaffected.  If any particular provision of this Agreement
shall be adjudicated to be invalid or unenforceable, the Company and Executive
specifically authorize the tribunal making such determination to edit the
invalid or unenforceable provision to allow this Agreement, and the provisions
thereof, to be valid and enforceable to the fullest extent allowed by law or
public policy.

 

10.06  Arbitration.  Any dispute, claim or controversy arising
under this Agreement shall, at the request of any party hereto be resolved by
binding arbitration by a single arbitrator selected by employer and Executive,
with arbitration governed by The United States Arbitration Act (Title 9, U.S.
Code); provided, however, that a dispute, claim or controversy shall be subject
to adjudication by a court in any proceeding against the Company or Executive
involving third parties (in addition to the Company or Executive).  Such arbitrator shall be a disinterested
person who is either an attorney, retired judge or labor relations arbitrator.  In the event employer and Executive are
unable to agree upon such arbitrator, the arbitrator shall, upon petition by
either the Company or Executive, be designated by a judge of the Hennepin
County District Court.  The arbitrator
shall have the authority to make awards of damages as would any court in
Minnesota having jurisdiction over a dispute between employer and Executive,
except that the arbitrator may not make an award of exemplary damages or
consequential damages.  In addition, the
Company and Executive agree that all other matters arising out of Executive’s
employment relationship with the Company shall be arbitrable, unless otherwise
restricted by law.

 

(a)                        In any
arbitration proceeding, each party shall pay the fees and expenses of its or
his own legal counsel.

 

(b)                       The arbitrator,
in his or her discretion, shall award legal fees and expenses and costs of the
arbitration, including the arbitrator’s fee, to a party who substantially
prevails in its claims in such proceeding.

 

(c)                        Notwithstanding
this Section 10.06, in the event of noncompliance or violation, as the
case may be, of Sections 8 or 9 of this Agreement, the Company may
alternatively apply

 

12

 

to a court of competent
jurisdiction for a temporary restraining order, injunctive and/or such other
legal and equitable remedies as may be appropriate, if it and such court
reasonably determines that the Company would have no adequate remedy at law for
such violation or noncompliance.

 

10.07  Legal
Fees.  If any contest or dispute
shall arise between the Company and Executive regarding any provision of this
Agreement, and such dispute results in court proceedings or arbitration, a
party that prevails to a substantial extent with respect to a claim brought and
pursued in connection with such dispute, shall be entitled to recover its legal
fees and expenses reasonably incurred in connection with such dispute.  Such reimbursement shall be made as soon as
practicable following the resolution of the dispute (whether or not appealed)
to the extent a party receives documented evidence of such fees and expenses.

 

10.08  Notices.  For purposes of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when personally delivered or may send by certified
mail, return receipt requested, postage prepaid, addressed to Executive at his
residence address appearing on the records of the Company and to the Company at
its then current executive offices to the attention of the Board.  All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third
business day after the mailing thereof, except that notice of change of address
shall be effective only upon actual receipt. 
No objection to the method of delivery may be made if the written notice
or other communication is actually received.

 

10.09  Survival.  The provisions of this Article 10 shall
survive the termination of this Agreement, indefinitely.

 

IN WITNESS WHEREOF the
following parties have executed the above instrument the day and year first
above written.

 

	
   

  	
  MEDICALCV,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Marc P.
  Flores

  	
   

  
	
   

  	
   

  	
  Marc P.
  Flores

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ John H.
  Jungbauer

  	
   

  
	
   

  	
   

  	
  John H.
  Jungbauer

  
						

 

13Exhibit 10.1

 

This TRANSACTION AGREEMENT is made as of August
4, 2005, among GAIAM, INC., a Colorado corporation (“Gaiam”)
and REVOLUTION LIVING LLC, a
Delaware limited liability company (“Revolution Living”) and LIFE BALANCE MEDIA HOLDINGS LLC, a Delaware
limited liability company (“Wisdom”).

 

WHEREAS, Gaiam desires to issue and sell to
Revolution Living, and Revolution Living desires to purchase from Gaiam, shares
of Gaiam’s Class A common stock, par value $0.0001 per share (“Class A
Common Stock”), in such amounts, on such dates and otherwise on the terms
and subject to the conditions set forth in this Agreement;

 

WHEREAS, Wisdom desires to issue and sell to Gaiam,
and Gaiam desires to purchase from Wisdom, units of a newly created class of
series A preferred interests (the “Wisdom Preferred Units”) of Wisdom,
in such amounts, on such dates and otherwise on the terms and subject to the
conditions set forth this Agreement and in the Wisdom LLC Agreement (as defined
below);

 

WHEREAS, Gaiam, Jirka Rysavy (“Rysavy”),
Revolution Living and Stephen M. Case (“Case”) are entering into a
Shareholders Agreement dated as of the date of this Agreement pursuant to
which, among other things, such persons are agreeing to certain matters related
to the transactions contemplated by this Agreement and the operation of Gaiam
and Wisdom; and

 

WHEREAS, Gaiam and Wisdom desire to enter into a
Cooperation Agreement (as defined below) for the mutual benefit of Gaiam and
Wisdom, on the terms and subject to the conditions set forth in the Cooperation
Agreement.

 

NOW,
THEREFORE, in
consideration of the foregoing and the covenants, agreements, representations
and warranties contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties, the parties hereto hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1                               Definitions.

 

Capitalized terms used and
not otherwise defined in this Agreement have the meaning ascribed to them below
or in the other locations of this Agreement specified below:

 

“Affiliate” means,
with respect to any specified Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such specified Person.  Any relative or spouse (including any partner
with whom such person resides on a permanent basis) of the specified Person,
any relative of such spouse, any spouse of any such relative or any other
Person who, directly or indirectly, is under common ownership or control with,
or is owned or controlled by such spouse or relative shall be considered an
Affiliate of such Person.  As used in
this definition, the term “control” means the possession, directly or
indirectly, of the power to direct the management and

 

S-1

 

policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.  As
used in this definition, the term “relative” means any former or current
spouse, parent, grandparent, great-grandparent, great-great-grandparent, child,
grandchild, great-grandchild, great-great-grandchild, sibling, first uncle,
first aunt or first cousin (in each case, whether natural or adoptive).  The parties agree that the term “Affiliate”
as used with respect to Case and Revolution Living does not include (i) Time
Warner Inc., (ii) any Affiliates of Time Warner Inc. or (iii) any member or
investor in any Affiliate of Revolution Living; provided that, absent such
relationship as a member or investor in any Affiliates of Revolution Living,
such member or investor is not an Affiliate of Case or Revolution Living.

 

“Agreement” means
this Agreement together with all schedules and exhibits hereto, as the same may
from time to time be amended, modified, supplemented or restated in accordance
with the terms hereof.

 

“Applicable Law”
means, with respect to any Person, all provisions of laws, statutes,
ordinances, rules, regulations, listing requirements, permits, certificates or
orders of any Governmental Authority or securities exchange applicable to such
Person or any of its assets or property or to which such Person or any of its
assets or property is subject, and all judgments, injunctions, orders and
decrees of all courts and arbitrators in proceedings or actions in which such
Person is a party or by which it or any of its assets or properties is or may
be bound or subject.

 

“Articles of
Incorporation” has the meaning given to it in Section 4.1(a).

 

“Business Day” means
each day except for Saturday, Sunday, Federal holidays and any other
state-recognized holidays in the State of Colorado.

 

“Breaching Party” has
the meaning given to it in Section 6.9.

 

“By-laws” has the
meaning given to it in Section 4.1(a).

 

“Case” has the
meaning given in the Recitals.

 

“Claim” means any
claim, demand, assessment, judgment, order, decree, action, cause of action,
litigation, suit, investigation or other Proceeding.

 

“Class A Common Stock”
has the meaning given to it in the Recitals.

 

“Class A Stock Purchase
Agreement” means Class A Stock Purchase Agreement, dated as of June 10,
2005 and restated as of June 16, 2005, among Gaiam and the purchasers therein.

 

“Class B Common Stock”
means Gaiam’s Class B Common Stock, par value $0.0001 per share.

 

“Closing” has the
meaning given to it in Section 3.1.

 

“Closing Date” has
the meaning given to it in Section 3.1.

 

S-2

 

“Code” means the
Internal Revenue Code of 1986, as amended.

 

“Commission” means
the United States Securities and Exchange Commission.

 

“Commission Filings”
means all reports, forms, registration statements, proxy statements, and other
filings filed by Gaiam with the Commission (and all notes, exhibits and
schedules thereto and documents incorporated by reference therein and all
certificates and statements required by the Commission pursuant to
Sarbanes-Oxley).

 

“Common Stock” means
the Class A Common Stock and the Class B Common Stock.

 

“Contract” means any
written or oral contract, agreement, credit agreement, note, bond, mortgage,
indenture, lease, sublease, purchase order, instrument, permit, concession,
franchise or license.

 

“Cooperation Agreement”
means the Cooperation Agreement, substantially in the form attached hereto as Exhibit
B, as the same may from time to time be amended, modified, supplemented or
restated in accordance with the terms thereof.

 

“Documents” means,
individually or collectively, this Agreement, the Shareholders Agreement, the
Cooperation Agreement, the Wisdom LLC Agreement, the Rysavy Employment
Agreement, the Powers Employment Agreement and all other documents executed in
connection with the transactions contemplated by this Agreement.

 

“Equity Incentive Plan”
means Gaiam’s 1999 Long-Term Incentive Plan and Gaiam’s Employee Stock Purchase
Plan, each as amended from time to time.

 

“Exchange Act” means
the Securities and Exchange Act of 1934, as amended.

 

“Fully-Diluted Capital
Stock” means, as of any date, without duplication, (i) the total number of
shares of Common Stock outstanding on such date, plus (ii) the total number of
outstanding options, warrants and other equity-linked securities that are
exercisable into Common Stock on or after such date, plus (iii) the total
number of shares of Common Stock reserved for issuance pursuant to obligations
of Gaiam to issue shares of Common Stock, other than pursuant to obligations of
Gaiam to issue shares of Common Stock under this Agreement after such date.

 

“Fundamental Documents”
means the documents by which any Person (other than an individual) establishes
its legal existence or which govern its internal affairs.  The “Fundamental Documents” of Gaiam are the
Articles of Incorporation and the By-laws. 
The Fundamental Documents of Wisdom are the Certificate of Formation and
the Wisdom LLC Agreement.

 

“GAAP” means United
States generally accepted accounting principles, consistently applied.

 

“Gaiam” has the
meaning given to it in the Preamble.

 

S-3

 

“Gaiam Accountants”
has the meaning given to it in Section 6.8.

 

“Gaiam Board” means
the board of directors of Gaiam.  To the
extent any decision or other action in connection with this Agreement is taken
by the Gaiam Board, such decision or action shall be made or taken by directors
of Gaiam who not nominees of, or otherwise affiliated or associated with,
Revolution Living (unless the decision or other action relates solely to a
decision in which none of Revolution Living or its Affiliates has any interest,
other than indirectly through its ownership of Common Stock of Gaiam).

 

“Gaiam Financial
Statements” has the meaning given to it in Section 4.1(f)(ii).

 

“Governmental Authority”
means any domestic or foreign government or political subdivision thereof,
whether on a Federal, state or local level and whether executive, legislative
or judicial in nature, including any agency, authority, board, bureau,
commission, court, department or other instrumentality thereof.

 

“Guarantee” means any
obligation, contingent or otherwise, or any Person guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person in any manner, whether directly or indirectly, including any
obligation of such Person direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation or to purchase (or to advance or supply funds for the purchase
of) any security for the payment of such Indebtedness or other obligation, (ii)
to purchase property, securities or services for the purpose of assuring the
owner of such Indebtedness or other obligation of payment thereof, (iii) to
purchase or otherwise pay for merchandise, materials supplies, services or
other property under an arrangement which provides that payment for such
merchandise, materials, supplies, services or other property will be made
regardless of whether delivery of such merchandise, materials, supplies,
services or other property is ever made or tendered, or (iv) to maintain the
working capital, equity capital or other financial statement condition of any
primary obligor; provided, however, that the term Guarantee will
not include endorsement of instruments for deposit and collection in the
ordinary course of business.

 

“Indebtedness” of a
Person means, without duplication, (i) all obligations of such Person for
borrowed money, (ii) all obligations of such Person evidenced by (or which
customarily would be evidenced by) bonds, debentures, notes or similar
instruments, (iii) all reimbursement obligations of such Person with respect to
letters of credit and similar instruments, (iv) all obligations of such Person
under conditional sale or other title retention agreements relating to property
or assets purchased by such Person, (v) all obligations of such Person incurred,
issued or assumed as the deferred purchase price of property or services other
than accounts payable incurred and paid on terms customary in the business of
such Person (it being understood that “deferred purchase price” in connection
with any purchase of property or assets will include only that portion of the
purchase price which will be deferred beyond the date on which the purchase is
actually consummated), (vi) all obligations secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or
not the obligations secured thereby have been assumed, (vii) all obligations of
such Person under forward sales, futures, options and other similar hedging
arrangements (including interest rate hedging or protection

 

S-4

 

agreements), (viii) all Guarantees by such Person of obligations of
others, (ix) all capitalized lease obligations of such Person and (x) the
Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer, but only to the extent to which there is
recourse to such Person for payment of such Indebtedness.

 

“Intellectual Property
Rights” has the meaning given to it in Section 4.1(l).

 

 “Knowledge” or words of similar import
of any Person means (i) actual knowledge of such Person (including the actual
knowledge of the officers, key employees and directors of such Person) and (ii)
that knowledge which could have been acquired by such Person after making such
due inquiry and exercising such due diligence as a prudent businessperson would
have made or exercised in the management of his or her business affairs,
including due inquiry of those key employees and professionals of such Person
who could reasonably be expected to have actual knowledge of the matters in
question.

 

“Lead Investor” has
the meaning given to it in the Wisdom LLC Agreement.

 

“Liability” means any
Indebtedness, commitment, liability or obligation, of any kind, character or
nature whatsoever, whether known or unknown, asserted or unasserted, absolute
or contingent, accrued or unaccrued, liquidated or unliquidated and whether due
or to become due, regardless of when asserted.

 

“Lien” means any
security interest, pledge, lien, claim, proxy, bailment (in the nature of a
pledge or for purposes of security), mortgage, deed of trust, the grant of a
power to confess judgment, conditional sale or title retention agreement (including
any lease in the nature thereof), charge, encumbrance, easement, reservation,
restriction, cloud, right of first refusal or first offer, option, commitment
or other similar arrangement or interest in real or personal property, whether
oral or written.

 

 “Material Adverse Effect” means, with
respect to any Person, a material adverse effect on the business, operations,
assets, condition (financial or otherwise) or operating results, Liabilities of
such Person, taken as a whole.

 

“Material Agreements”
has the meaning given to it in Section 4.1(i)(x).

 

“NASD” means the
National Association of Securities Dealers, Inc..

 

“Nasdaq” has the
meaning given to it in Section 4.1(t).

 

“Nonbreaching Party”
has the meaning given to it in Section 6.9.

 

“Orders” means judgments,
writs, decrees, injunctions, orders, compliance agreements or settlement
agreements of or with any Governmental Authority or arbitrator.

 

“Party” means each of
Gaiam, Revolution Living and Wisdom.

 

“Permits” means
licenses, certificates and permits from Governmental Authorities.

 

S-5

 

“Permitted Liens”
means (i) liens on any Person’s furniture, fixtures and equipment granted to
any of such Person’s landlords as collateral for their office and factory leases,
(ii) Liens for Taxes not yet due and payable and for which an appropriate
reserve has been taken, (iii) rights of way, easements and other minor defects
in title which do not adversely affect in any material respect the use or value
of the real property subject to such, and (iv) other Liens not to exceed
$10,000 in the aggregate.

 

“Person” will be
construed in the broadest sense and will include an individual, a partnership,
a corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization, and any other entity,
including a Governmental Authority.

 

“Powers Employment
Agreement” means the Employment Agreement between Gaiam and Lynn Powers,
substantially in the form attached hereto as Exhibit E-2, as the same
may from time to time be amended, modified, supplemented or restated in
accordance with the terms thereof.

 

“Proceeding” means
any action, suit, proceeding, complaint, charge, hearing, inquiry or
investigation before or by a Governmental Authority or an arbitrator or
administrator.

 

“Revolution Living”
has the meaning given to it in the Preamble.

 

“Rysavy” has the
meaning given in the Recitals.

 

“Rysavy Employment
Agreement” means the Employment Agreement between Gaiam and Rysavy,
substantially in the form attached hereto as Exhibit E-1, as the same
may from time to time be amended, modified, supplemented or restated in
accordance with the terms thereof.

 

“Sarbanes-Oxley”
means the Sarbanes-Oxley Act of 2002, as amended.

 

“Securities” means,
with respect to any Person, such Person’s “securities” as defined in Section
2(1) of the Securities Act and includes such Person’s capital stock or other
equity interests or any options, warrants or other securities or rights that
are directly or indirectly convertible into, or exercisable or exchangeable
for, such Person’s capital stock or other equity interests.

 

“Securities Act”
means the Securities Act of 1933, as amended.

 

“Shareholders Agreement”
means the Shareholders Agreement, in the form executed simultaneously herewith
and attached hereto as Exhibit A, as the same may from time to time be
amended, modified, supplemented or restated in accordance with the terms
thereof.

 

“Subject Gaiam Shares”
means shares of Class A Common Stock to be issued to or purchased by Revolution
Living pursuant to the terms of this Agreement.

 

“Subject Wisdom Units”
means Wisdom Preferred Units to be purchased by Gaiam pursuant to the terms of
this Agreement.

 

S-6

 

“Subject Person” has
the meaning given to it in the definition of “Subsidiary”.

 

“Subsidiary” means,
at any time, with respect to any Person (the “Subject Person”), any
Person of which either (x) more than 50% of the Securities entitled to vote in
the election of directors or comparable Persons performing similar functions
(excluding Securities entitled to vote only upon the failure to pay dividends
thereon or other contingencies) or (y) more than a 50% interest in the profits
or capital of such Person, are at the time owned or controlled directly or
indirectly by the Subject Person or through one or more Subsidiaries of the
Subject Person.

 

“Tax” means any Taxes
and the term “Taxes” means, with respect to any Person, (A) all income
taxes (including any tax on or based upon net income, or gross income, or
income as specially defined, or earnings, or profits, or selected items of
income, earnings or profits) and all gross receipts, sales, use, ad valorem,
transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) on such Person and (B) any Liability for the
payment of any amount of the type described in the immediately preceding clause
(A) as a result of (i) being a “transferee” (within the meaning of Section
6901 of the Code or any other Applicable Law) of another Person,
(ii) being a member of an affiliated, combined or consolidated group or
(iii) a contractual arrangement or otherwise.

 

“Treasury Regulations”
means pronouncements, as amended from time to time, or their successor
pronouncements, which clarify, interpret and apply the provisions of the Code,
and which are designated as “Treasury Regulations” by the United States
Department of the Treasury.

 

“Wisdom” has the
meaning given to it in the Preamble.

 

“Wisdom Board” means
the board of directors of Wisdom.

 

“Wisdom LLC Agreement”
means that certain Second Amended and Restated Limited Liability Company
Agreement of Life Balance Media Holdings LLC, as amended and restated as of the
date of this Agreement, by and among the members of Wisdom, as the same may
from time to time be amended, modified, supplemented or restated in accordance
with the terms thereof.

 

“Wisdom Material
Agreements” has the meaning given to it in Section 5.1(h)(x).

 

“Wisdom Preferred Units”
has the meaning given to it in the Recitals.

 

“Wisdom Units” means
the Preferred Units, Profits Units, Management Units and Common Units and any
other unit of membership interest in Life Balance Holdings LLC.

 

S-7

 

1.2                               Rules of Construction.

 

The use in this Agreement of
the term “including” means “including, without limitation.”  The words “herein,” “hereof,” “hereunder”
and other words of similar import refer to this Agreement as a whole, including
the schedules and exhibits, as the same may from time to time be amended,
modified, supplemented or restated, and not to any particular section,
subsection, paragraph, subparagraph or clause contained in this Agreement.  All references to sections, schedules and
exhibits mean the sections of this Agreement and the schedules and exhibits
attached to this Agreement, except where otherwise stated.  The title of and the section and paragraph
headings in this Agreement are for convenience of reference only and will not
govern or affect the interpretation of any of the terms or provisions of this
Agreement.  The use herein of the
masculine, feminine or neuter forms will also denote the other forms, as in
each case the context may require or permit. 
Where specific language is used to clarify by example a general
statement contained herein, such specific language will not be deemed to
modify, limit or restrict in any manner the construction of the general
statement to which it relates.  The
language used in this Agreement has been chosen by the Parties to express their
mutual intent, and no rule of strict construction will be applied against any
Party.  Unless expressly provided
otherwise, the measure of a period of one month or year for purposes of this
Agreement will be that date of the following month or year corresponding to the
starting date, provided that if no corresponding date exists, the measure will
be that date of the following month or year corresponding to the next day
following the starting date.  For
example, one month following February 18 is March 18, and one month following
March 31 is May 1.

 

ARTICLE II

PURCHASE AND SALE OF SUBJECT GAIAM SHARES AND SUBJECT WISDOM UNITS

 

2.1                               Authorization of the Subject
Gaiam Shares.

 

Gaiam has authorized the
issuance to Revolution Living at the Closing of an aggregate of 2,500,000
shares of Class A Common Stock.

 

2.2                               Purchase and Sale of
Securities.

 

Subject to the terms and
conditions contained in this Agreement, at the Closing:

 

(a)           Gaiam will issue, sell and deliver to Revolution Living
that number of the shares of Class A Common Stock set forth on Schedule I
hereto at the price set forth on Schedule I. 
Revolution Living will pay, to an account designated by Gaiam prior to
the Closing, the amount set forth opposite Revolution Living’s name on Schedule
I hereto with respect to the Class A Common Stock being purchased at the
Closing by wire transfer of immediately available funds.

 

(b)           Wisdom will issue, sell and deliver to Gaiam’s wholly
owned subsidiary, Gaiam Media, Inc., that number of Wisdom Preferred Units set
forth on Schedule II hereto.  The
Wisdom Preferred Units will have rights set forth in the Wisdom LLC Agreement
set forth as Exhibit C to this Agreement.  Gaiam will cause Gaiam Media, Inc. to will
pay Wisdom, to an account of Wisdom designated by Wisdom prior to the Closing,
the amount set forth opposite

 

S-8

 

Gaiam’s name on Schedule
II hereto with respect to the Subject Wisdom Units being purchased at the
Closing by wire transfer of immediately available funds.

 

ARTICLE III

THE CLOSING; DELIVERY OF DOCUMENTS AT THE CLOSINGS

 

3.1                               The Closing.

 

The closing (the “Closing”)
hereunder and the consummation of the transactions contemplated to occur
simultaneously therewith shall take place at the offices of O’Melveny &
Myers LLP, 1625 Eye Street, N.W., Washington, D.C. 20006 on the second Business
Day after the satisfaction or, if permissible, waiver of the applicable conditions
(except those conditions which by their nature are to be satisfied as part of
the Closing) set forth in this Article III and in Article VII, or
at such other time and place as is otherwise agreed upon by the Parties hereto
(each such date, a “Closing Date”).

 

3.2                               Deliveries at the Closing.

 

(a)           Deliveries by Gaiam at the Closing.

 

The obligation of Revolution
Living to consummate the Closing is subject to the delivery by Gaiam of the
following items or the satisfaction of the following conditions precedent
(unless waived by Revolution Living):

 

(i)            Consents and Approvals.  All consents, approvals, authorizations,
filings and notices required to consummate the transactions contemplated hereby
with respect to the transactions to be consummated at the Closing will have
been obtained, made or given and will be in full force and effect, including,
without limitation, (A) the requisite consent of the Gaiam Board and (B) any
filings or consents required by any Governmental Authority.

 

(ii)           Opinion of Counsel.  Revolution Living will have received a legal
opinion of Bartlit Beck Herman Palenchar & Scott LLP, counsel to Gaiam,
addressed to Revolution Living and dated as of the Closing Date, in
substantially the form attached hereto as Exhibit D-1.

 

(iii)          Good Standing Certificates.  Gaiam will have delivered to Revolution
Living a certificate of the Secretary of State of the State of Colorado, dated
as of a recent date as to the due incorporation or organization of Gaiam and
its good standing in such jurisdiction.

 

(iv)          Secretary’s Certificate.  Gaiam will have delivered to Revolution
Living a certificate of the Secretary or an Assistant Secretary of Gaiam, dated
as of the Closing Date and certifying on behalf of Gaiam: (A) that attached
thereto is a true, correct and complete copy of each of the Fundamental
Documents of Gaiam as in effect on the date of such certification; (B) that
attached thereto is a true, correct and complete copy of all resolutions
adopted by the Gaiam Board authorizing the execution, delivery and

 

S-9

 

performance of the Documents
and the transactions contemplated thereby, which resolutions have been
unanimously approved by the Gaiam Board, and that all such resolutions are in
full force and effect; and (C) the incumbency and specimen signature of all
officers of Gaiam executing the Documents, and any certificate or instrument
furnished pursuant hereto.

 

(v)           Delivery of Purchase Price.  Gaiam will have delivered to Wisdom by wire
transfer of immediately available funds the amount specified in Schedule II
to such Wisdom bank account as Revolution Living will designate to Gaiam in
writing no less than two Business Days prior to Closing.

 

(vi)          Issuance of the Class A Common
Stock.  Gaiam will have delivered to
Revolution Living a stock certificate representing the number of shares of
Class A Common Stock being purchased by Revolution Living at the Closing as set
forth on Schedule I opposite Revolution Living’s name with respect to
the Closing against receipt by Gaiam of payment of the amount specified in Schedule
I with respect to the Closing by wire transfer of immediately available
funds to an account designated by Gaiam no less than two (2) Business Days
prior to the Closing.

 

(vii)         Officer’s Certificate as to
Conditions Precedent.  Gaiam will
have delivered to Revolution Living an officer’s certificate certifying that
the conditions precedent to Revolution Living’s obligations set forth in Sections
7.1(a), 7.1(b) and 7.1(f) have been satisfied.

 

(b)           Deliveries by Revolution Living at
the Closing.

 

The obligation of Gaiam to
consummate the Closing is subject to the delivery by Revolution Living of the
following items or the satisfaction of the following conditions precedent
(unless waived by Gaiam):

 

(i)            Consents and Approvals.  All consents, approvals, authorizations,
filings and notices required to consummate the transactions contemplated hereby
with respect to the transactions to be consummated at the Closing will have
been obtained, made or given and will be in full force and effect, including,
without limitation, (A) the requisite consent of Revolution Living’s board of
directors and (B) any filings or consents required by any Governmental
Authority.

 

(ii)           Opinion of Counsel.  Gaiam will have received a legal opinion of
O’Melveny & Myers LLP, counsel to Revolution Living, addressed to Gaiam and
dated as of the Closing Date, in substantially the form attached hereto as Exhibit D-2.

 

(iii)          Good Standing Certificates.  Revolution Living will have delivered to
Gaiam a certificate of the Secretary of State of the State of Delaware, dated
as of a recent date as to the due organization of Wisdom and Revolution Living
and their good standing in such jurisdiction.

 

(iv)          Secretary’s Certificate.  Revolution Living will have delivered to
Gaiam a certificate of the Secretary or an Assistant Secretary of Revolution
Living, dated as of the

 

S-10

 

Closing Date and certifying
on behalf of Revolution Living: (A) that attached thereto is a true, correct
and complete copy of each of the Fundamental Documents of Revolution Living as
in effect on the date of such certification; (B) that attached thereto is a
true, correct and complete copy of all resolutions adopted by the board of
directors (and any committees thereof) of Revolution Living authorizing the
execution, delivery and performance of the Documents and the transactions
contemplated thereby, and that all such resolutions are in full force and
effect; (C) the incumbency and specimen signature of all officers of Revolution
Living executing the Documents, and any certificate or instrument furnished
pursuant hereto; and (D) that the individuals to be designated by Gaiam to the
board of directors of Wisdom pursuant to the Shareholders Agreement as of the
time of the Closing Date have been duly elected and appointed to the board of
directors of Wisdom.

 

(v)           Delivery of Purchase Price.  Revolution Living will have delivered to
Gaiam by wire transfer of immediately available funds the amount specified in Schedule
I to such bank account as Gaiam will designate to Revolution Living in
writing no less than two Business Days prior to Closing.

 

(vi)          Delivery of Wisdom Preferred Units.  Wisdom will have delivered to Gaiam the
Wisdom Preferred Units being purchased by Gaiam at the Closing as set forth on Schedule
II hereto against receipt by Revolution Living of evidence of payment to
Wisdom of the amount specified in Schedule II with respect to the
Closing by wire transfer of immediately available funds to an account
designated by Revolution Living no less than two (2) Business Days prior to the
Closing.

 

(vii)         Officer’s Certificate as to
Conditions Precedent.  Revolution
Living and Wisdom, as applicable, will have delivered to Gaiam an officer’s
certificate certifying that the conditions precedent to Gaiam’s obligations set
forth in Sections 7.2(a), 7.2(b), 7.2(e) and 7.2(f)
have been satisfied.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF GAIAM

 

4.1          Representations and Warranties in
connection with Sales of Subject Gaiam Shares .

 

Gaiam hereby represents and
warrants to Revolution Living, as of the date hereof and as of the Closing
Date, as follows:  

 

(a)           Organization, Power, Authority and
Good Standing.

 

Each of Gaiam and its
Subsidiaries is duly organized, validly existing and in good standing under the
Applicable Laws of its respective jurisdiction of incorporation or formation
and has all requisite corporate or other power and authority to own, lease and
operate its properties and other assets and to carry on its business as
presently conducted and as proposed to be conducted.  Each of Gaiam and its Subsidiaries is duly
qualified, validly existing and/or in good standing to transact business as a
foreign Person in those respective jurisdictions which constitute the
jurisdictions in which the character of the property owned, leased or operated
by

 

S-11

 

Gaiam or such Subsidiary or the nature of the activities conducted by
Gaiam or such Subsidiary makes such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse Effect.  A copy of the Amended and Restated Articles
of Incorporation of Gaiam in effect on the date hereof (the “Articles of
Incorporation”) and Restated By-laws of Gaiam in effect on the date hereof
(the “By-laws”) is filed as an exhibit to the Commission Filings.

 

(b)           Capitalization.

 

(i)            Immediately upon consummation of the
Closing, the authorized, issued and outstanding capital stock of Gaiam will
consist of:

 

50,000,000
shares of preferred stock, $0.0001 par value per share, none of which are
issued and outstanding; and

 

150,000,000
shares of Class A Common Stock, of which: 
(1) 12,304,295 shares were validly issued and outstanding, fully paid
and nonassessable as of August 1, 2005; (2) no shares are held as treasury
shares; (3) 1,876,272 shares are reserved for issuance in accordance with
Gaiam’s Equity Incentive Plan; and (4) 5,400,000 shares are reserved for
issuance upon conversion of the 5,400,000 outstanding shares of Class B Common
Stock.

 

50,000,000
shares of Class B Common Stock, of which (1) 5,400,000 shares are validly
issued and outstanding, fully paid and nonassessable; and (2) no shares are
held as treasury shares or reserved for issuance.

 

(ii)           Gaiam’s Commission Filings accurately
reflect the outstanding Indebtedness of Gaiam.

 

(iii)          Except as described in the Commission
Filings, the Articles of Incorporation or as contemplated by the Documents,
there are, and immediately after consummation of the Closing there will be, no
(i) outstanding warrants, options, agreements, convertible Securities or other
commitments or instruments pursuant to which Gaiam is obligated to issue, sell
or otherwise transfer any of its Securities, (ii) preemptive rights or similar
rights to purchase or otherwise acquire Securities of Gaiam pursuant to any
Applicable Law, Gaiam’s Fundamental Documents or any Contract to which Gaiam is
a party, or (iii) Liens (such as a right of first refusal, right of first
offer, irrevocable proxy, voting trust or voting agreement) created by Gaiam
with respect to the sale or voting of any Securities of Gaiam (whether
outstanding or issuable upon the conversion, exchange or exercise of
outstanding Securities).

 

(iv)          No outstanding Securities of Gaiam are
entitled to any anti-dilution or similar adjustments upon the issuance of
additional Securities of Gaiam or otherwise.

 

(v)           There are no obligations to redeem,
repurchase or otherwise acquire shares of capital stock or other Securities of
Gaiam pursuant to any Applicable Law, any Fundamental Document of Gaiam or any
Contract to which Gaiam is a party or may be bound.

 

S-12

 

(vi)          Except as contemplated by the
Documents and the Class A Stock Purchase Agreement, no Person has any right to
cause Gaiam to effect the registration under the Securities Act of any shares
of Common Stock or any other Securities of Gaiam.

 

(vii)         All Securities issued by Gaiam have
been either issued in transactions in accordance with, or exempt from
registration under, the Securities Act and the rules and regulations
promulgated thereunder and all applicable state securities or “blue sky” laws,
and Gaiam has not violated the Securities Act or any applicable state
securities or “blue sky” laws in connection with the issuance of any such
Securities.

 

(c)           Authorization of Agreement, Etc.

 

(i)            Gaiam has any and all requisite
corporate power and authority to execute and deliver the Documents and to
perform its obligations under and to consummate the transactions contemplated
by each such Document.  The execution,
delivery and performance by Gaiam of each Document to which it is a party and
the issuance, sale and delivery of the Subject Gaiam Shares has been duly
authorized by all requisite corporate action by Gaiam, including the unanimous
approval of the Gaiam Board, and this Agreement and each other Document has
been duly executed and delivered by Gaiam. 
No other corporate or shareholder action (including, without limitation,
approval of the Documents and the transactions contemplated hereby by the
shareholders of Gaiam) on the part of Gaiam is necessary for such
authorization, execution and delivery. 
Each of the Documents constitutes a legal, valid and binding obligation
of Gaiam enforceable against Gaiam in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar Applicable Laws affecting creditors’ rights and
remedies generally, and subject, in the case of enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
Proceeding at law or in equity).

 

(ii)           The authorization, reservation,
issuance, sale and delivery, as applicable, of the Subject Gaiam Shares have
been duly and validly authorized by all requisite corporate action on the part
of Gaiam.  The Subject Gaiam Shares
(assuming the issuance thereof in accordance with this Agreement), will be duly
and validly issued and outstanding, fully paid and nonassessable, with no
personal liability attaching to the ownership thereof, free and clear of any
Liens (other than those created by the holder) and, except as otherwise set
forth in the Documents, with no restrictions on the voting rights thereof and
not subject to any preemptive rights, rights of first refusal or other similar
rights of the shareholders of Gaiam.

 

(d)           No Conflicts.

 

The execution, delivery and
performance by Gaiam of this Agreement and each of the other Documents and the
consummation of the transactions contemplated hereby and thereby, including
without limitation, the issuance, sale and delivery of the Subject Gaiam
Shares, and compliance with the provisions hereof and thereof by Gaiam, does
not or will not, as the case may be, (a) violate any provision of Applicable
Law or any Order applicable to Gaiam or any of its properties or assets or (b)
conflict with or result in any breach of any of the terms, conditions

 

S-13

 

or provisions of, or constitute (with notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any Lien upon any of the
properties or assets of Gaiam under any Material Agreement to which it is a
party or by which Gaiam or its assets or properties are or may be bound, except
that consent may be required under the 2005 Amended and Restated Credit
Agreement dated July 29, 2005 among Gaiam, certain of its Subsidiaries and
Wells Fargo Bank, National Association, or (c) conflict with or violate any
provision of the Fundamental Documents of Gaiam currently in effect.

 

(e)           Approvals.

 

Except for Commission
Filings and filings with Nasdaq, no Permit or Order, authorization, consent or
approval of or by, or any notification of or filing with, any Person is
required in connection with the (i) execution, delivery or performance by Gaiam
of each Document to which it is a party, or (ii) issuance of the Subject Gaiam
Shares at the Closing.

 

(f)            Commission Filings; Financial
Statements.

 

(i)            Gaiam is a company required to file
periodic reports with the Commission and has, since November 1999, filed in a
timely manner all Commission Filings required to have been filed with the
Commission under the Securities Act and the Exchange Act, as the case may be,
and the rules and regulations of the Commission promulgated thereunder
applicable thereto.  As of the respective
dates of their filing with the Commission, or the date of any amendment thereto
filed on or prior to the date hereof, the Commission Filings complied as to
form in all material respects with the applicable provisions of the Securities
Act and the Exchange Act and the rules and regulations of the Commission
promulgated thereunder applicable thereto and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading.

 

(ii)           Each of the historical consolidated
financial statements of Gaiam (including any related notes or schedules)
included in Gaiam’s annual report for the year ended December 31, 2004 and any
annual report on Form 10-K or quarterly report on Form 10-Q filed thereafter
(the “Gaiam Financial Statements”) was prepared (i) in accordance with
the books and records of Gaiam and (ii) in accordance with GAAP (except as may
be disclosed therein).  Such financial
statements fairly present in all material respects the consolidated financial
position of Gaiam and its Subsidiaries as of the dates thereof and the
consolidated results of operations, cash flows and changes in shareholders’
equity for the periods indicated (subject, in the case of the unaudited interim
financial statements, to normal, recurring year-end audit adjustments).

 

(iii)          The Gaiam Financial Statements
complied, when filed, as to form in all material respects with the applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto, including, but not limited to, the applicable
requirements of Regulation S-X promulgated under the Exchange Act and
Sarbanes-Oxley.

 

S-14

 

(iv)          The Chief Executive Officer and the
Chief Financial Officer of Gaiam have signed, and Gaiam has furnished to the
Commission, all certifications required by Section 906 of Sarbanes-Oxley;
such certifications contain no qualifications or exceptions to the matters certified
therein and have not been modified or withdrawn; and neither Gaiam nor any of
its officers has received notice from any Governmental Authority questioning or
challenging the accuracy, completeness, form or manner of filing or submission
of such certifications. Except as disclosed in the Commission Filings, to
Gaiam’s Knowledge, each director and executive officer of Gaiam has filed with
the Commission on a timely basis all statements required by Section 16(a)
of the Exchange Act and the rules and regulations thereunder since January 1,
2004.

 

(g)           Accounting.

 

Gaiam maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management’s general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. Gaiam maintains disclosure controls and procedures required by
Rule 13a-15 or 15d-15 under the Exchange Act, which controls and procedures are
effective to ensure that all material information concerning Gaiam and its
Subsidiaries is made known on a timely basis to the individuals responsible for
the preparation of Gaiam’s filings with the Commission and other public
disclosure documents.

 

(h)           Private Offering.

 

Assuming the accuracy of the
representations of Revolution Living in Section 5.2(b), the offering,
sale, issuance and delivery by Gaiam of the Subject Gaiam Shares are exempt
from the registration and prospectus delivery requirements of the Securities
Act and applicable state securities laws and the rules and regulations
promulgated thereunder.  Neither Gaiam or
its Subsidiaries, nor any Person acting on their behalf, has offered or sold or
will offer or sell any Securities, or has taken or will take any other action
(including, without limitation, any offering of any Securities of Gaiam under
circumstances that would require, under the Securities Act or any applicable
blue-sky laws, the integration of such offering with the transactions
contemplated by this Agreement), which would subject the transactions
contemplated by this Agreement to the registration provisions of the Securities
Act.

 

(i)            Material Agreements.

 

(x)            Gaiam has filed, as an exhibit to
the Commission Filings (i) any notes, bonds, mortgages, or indentures or (ii)
other material written or oral Contracts, agreements, instruments and other
understandings, in each case that is required to be filed as an exhibit to the
Commission Filings (collectively, the “Material Agreements”).

 

S-15

 

(y)           Each Material Agreement constitutes a
valid and binding obligation of Gaiam and/or Subsidiary party thereto.  Each of Gaiam and the Subsidiaries have in
all material respects performed all of the material obligations required to be
performed by each of them to date pursuant to the Material Agreements, and
there exists no default, or any event which upon the giving of notice or the passage
of time, or both, would give rise to a claim of a default in the performance by
Gaiam or any of the Subsidiaries, except where such default or event,
individually or in the aggregate, has not had nor could it reasonably be
expected to have a Material Adverse Effect.

 

(j)            Absence of Undisclosed Liabilities.

 

Neither Gaiam nor any of its
Subsidiaries has any Liability required to be disclosed in the consolidated
financial statements for Gaiam and its Subsidiaries for the fiscal year ended
December 31, 2004, other than Liabilities disclosed in the Commission Filings
or incurred in the ordinary course of business consistent with past practice
since December 31, 2004 (none of which results from, arises out of, relates to,
or was caused by, any breach of contract, breach of warranty, tort,
infringement or violation of Applicable Law where such breach or event,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect).

 

(k)           Compliance with Laws.

 

Neither Gaiam nor any
Subsidiary is in violation of and, to the Knowledge of Gaiam, none is under
investigation by a Governmental Authority with respect to or has been
threatened to be charged with or given notice of any violation of, any
Applicable Law (including Sarbanes-Oxley), except violations that have not had,
and could not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Gaiam and the Subsidiaries taken as a whole.

 

(l)            Intellectual Property Rights.

 

Gaiam has sufficient title
or ownership of, or rights by license or other agreement to all of the patents,
patent applications, trademarks, service marks, trademark and service mark
applications and registrations, trade names, copyright applications and
registrations (the “Intellectual Property Rights”) necessary for, or
used in, the conduct of its business as presently conducted and as presently
proposed to be conducted.  Such
Intellectual Property Rights are not subject to any Lien or any rights of
others, however evidenced or created which could reasonably be expected to have
a Material Adverse Effect on Gaiam or its operations.

 

(m)          Taxes.

 

(i)            All Tax returns required to be filed
by Gaiam and each of its Subsidiaries has been accurately prepared and timely
filed in all material respects, and all Taxes for which Gaiam or any of its
Subsidiaries may be held liable (other than the Taxes referred to in the next
sentence), have been paid or accrued within the prescribed period or any
extension thereof.  All Taxes required to
be withheld by Gaiam or any of its Subsidiaries, including but not limited to,
Taxes arising as a result of payments or distributions (or amounts allocable)
to foreign Persons or to employees of Gaiam or any of its

 

S-16

 

Subsidiaries, have been
collected and withheld, and have been either paid to the respective
Governmental Authorities, set aside in accounts for such purpose, or accrued,
reserved against, and entered upon the books and records of the employer.

 

(ii)           Neither Gaiam nor any of its
Subsidiaries has been notified that either the Internal Revenue Service or any
other Taxing authority has raised any issues, or has an intent to raise such
issues, in connection with any Taxes or Tax return of Gaiam or any of its
Subsidiaries, which issues, if adversely determined, would be reasonably likely
to have a Material Adverse Effect.

 

(n)           Litigation Proceedings.

 

Except as set forth in the
Commission Filings, there are no Proceedings pending or, to the Knowledge of
Gaiam, threatened against or involving Gaiam or any of the Subsidiaries,
whether at law or in equity, whether civil or criminal in nature or by or
before any Governmental Authority, which if adversely determined could
individually or in the aggregate have a Material Adverse Effect on Gaiam and
its Subsidiaries taken as a whole, nor to the Knowledge of Gaiam does there
exist any reasonable basis therefore.

 

(o)           Insurance.

 

Each of Gaiam and the
Subsidiaries carries insurance in such amounts and covering such risks as is
adequate for the conduct of Gaiam’s business and the value of its properties.

 

(p)           Investment Company.

 

Neither Gaiam nor any
Subsidiary is an “investment company” within the meaning of such term under the
Investment Company Act of 1940 and the rules and regulations of the Commission
thereunder which is required to register as an investment company.

 

(q)           Brokers.

 

In connection with the
transactions contemplated by this Agreement, none of Gaiam, any of Gaiam’s
Subsidiaries or any of their respective officers, directors, shareholders or
employees (or any Affiliate of the foregoing) has employed any broker or finder
or incurred any actual or potential Liability or obligation, whether direct or
indirect, for any brokerage fees, commissions or finders’ fees in connection
with the transactions contemplated by this Agreement which would be payable by
Revolution Living.

 

S-17

 

(r)           Application of Takeover Protections.

 

(i)            As of the date of this Agreement,
Gaiam and the Gaiam Board have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Articles of Incorporation or the laws of the
State of Colorado which is or could become applicable to Revolution Living as a
result of the transactions contemplated by this Agreement, including, without
limitation, Gaiam’s issuance of the Subject Gaiam Shares and Revolution
Living’s ownership of the Subject Gaiam Shares.

 

(ii)           As of the date of this Agreement,
Gaiam has not adopted a shareholder rights plan or similar arrangement relating
to accumulations of beneficial ownership on Common Stock or a change in control
of Gaiam.

 

(s)           Certificates of Officers.

 

Any certificate signed by
any officer or Gaiam and delivered to Revolution Living will be deemed a
representation and warranty by Gaiam to Revolution Living as to the matters
covered thereby.

 

(t)            Listed Securities.

 

As of the Closing, (i)
Gaiam’s Class A Common Stock is quoted on the Nasdaq National Market System (“Nasdaq”)
under the ticket symbol “GAIA” and (ii) no stop order suspending the trading of
the Class A Common Stock on Nasdaq exists.

 

4.2          Representations and Warranties of
Gaiam with Respect to Purchases of Subject Wisdom Units.  

 

Gaiam hereby represents and
warrants to Wisdom, as of the date hereof and as of the Closing Date, on behalf
of itself and any Subsidiary it designates to hold the Subject Wisdom Units, as
follows:

 

(a)           Investment Representations.

 

(i)            The Subject Wisdom Units are being
acquired for Gaiam’s own account, for investment and not with a view to the
distribution thereof in violation of the Securities Act or applicable foreign
or state securities laws.

 

(ii)           Gaiam understands that (i) the
Subject Wisdom Units have not been, and will not be, registered under the
Securities Act or applicable foreign or state securities laws, by reason of
their sale by Wisdom in a transaction exempt from the registration requirements
of the Securities Act and applicable foreign and state securities laws and (ii)
the Subject Wisdom Units must be held by Gaiam indefinitely unless a subsequent
disposition thereof is registered under the Securities Act and applicable
foreign and state securities laws or is exempt from registration thereof.

 

S-18

 

(iii)          Gaiam is aware of the provisions of
Rule 144 promulgated under the Securities Act that permit limited resale of
shares purchased in a private placement subject to the satisfaction of certain
conditions.  The Subject Wisdom Units
will bear a legend reflecting these conditions on transferability thereof and
stop transfer instructions will be given to Wisdom’s transfer agent
accordingly.

 

(iv)          Gaiam is an “accredited investor” (as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act).

 

(v)           Revolution Living and/or Wisdom has
made available to Gaiam or its representatives information relating to Wisdom,
its ownership and management and other information about Wisdom and all
agreements, documents, records and books that Gaiam has requested relating to
an investment in the Subject Wisdom Units which may be acquired by Gaiam hereunder.  Gaiam has reviewed the information provided
by Revolution Living and/or Wisdom and understands and accepts the risks
associated with an investment in Wisdom, including the terms of this Agreement,
the rights of the Lead Investor to control the Board of Directors of Wisdom,
and the risk that matters described in the information provided may not
materialize.  Gaiam has had an
opportunity to ask questions of, and receive answers from a Person or Persons
acting on behalf of Revolution Living and Wisdom concerning the terms and
conditions of this investment, and answers have been provided to all of such
questions to the full satisfaction of Gaiam. 
Gaiam has such knowledge and experience in financial and business
matters that it is capable of evaluating the risks and merits of this
investment and to suffer a complete loss of its investment.

 

(vi)          Gaiam has no need for liquidity in its
investment in the Subject Wisdom Units and is able to bear the economic risk of
its investment in the Subject Wisdom Units and the complete loss of all of such
investment.

 

(vii)         Gaiam understands that there is no
public market for the Subject Wisdom Units and that the transferability of the
Subject Wisdom Units is restricted.

 

(viii)        Gaiam is able to fend for itself in the
transactions contemplated by this Agreement, can bear the economic risk of
investment in the Subject Wisdom Units and has such knowledge and experience in
financial or business matters to be capable of evaluating the merits and risks
of the investment in the Subject Wisdom Units. 
Gaiam is fully aware of:  (A) the
speculative nature of the investment in the Subject Wisdom Units, (B) the
financial risk involved, (C) the lack of liquidity for the Subject Wisdom
Units, and (D) the transfer restrictions and any repurchase rights applicable
to the Subject Wisdom Units.  Gaiam has
consulted with its professional, tax and legal advisors with respect to the
federal, state, local and foreign income tax consequences of the undersigned’s
participation as a member of Wisdom.

 

(ix)           Neither Wisdom nor any other Person,
including Revolution Living, will have or be subject to any liability or
indemnification obligation to Gaiam or any other Person resulting from the
distribution to Gaiam, or Gaiam’s use of, any information provided to Gaiam,
including without limitation, the information described in clause (v),

 

S-19

 

related to the business of
Wisdom and any information, projections, documents or material made available
to Gaiam, whether orally or in writing, or in any other form in expectation or
furtherance of the transactions contemplated by this Agreement, except Wisdom
to the extent that a representation or warranty in this Agreement made by
Wisdom specifically identifies and addresses such information.

 

(x)            Except for the representations and
warranties contained in this Agreement, Gaiam acknowledges that none of Wisdom,
any of its Affiliates and any other Person makes any other express or implied
representation or warranty with respect to (i) the Subject Wisdom Units,
including without limitation the probable success or profitability of ownership
of Subject Wisdom Units, (ii) Wisdom, including without limitation, the
operation of its business by its officers, directors, managers, employees, or
members, (iii) the business, assets, performance (whether historical, present
or future) of Wisdom, including without limitation the probable success or
profitability of Wisdom or (iv) otherwise with respect to any other information
provided to Gaiam or other Persons, whether on behalf of Revolution Living,
Wisdom or such other Persons.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF WISDOM

 

5.1          Representations and Warranties to
Gaiam in connection with Sales of Subject Wisdom Units.

 

Wisdom hereby represents and
warrants to Gaiam, as of the date hereof and as of the Closing Date, as
follows:

 

(a)           Organization, Power, Authority and
Good Standing.

 

Wisdom was formed on
December 30, 2004 and conducted no business prior to its acquisition of assets
on March 17, 2005.  Each of Wisdom and
its Subsidiaries is duly organized, validly existing and in good standing under
the Applicable Laws of its respective jurisdiction of incorporation or
formation and has all requisite corporate or other power and authority to own,
lease and operate its properties and other assets and to carry on its business
as presently conducted and as proposed to be conducted.  Except as set forth on Schedule 5.1(a),
each of Wisdom and its Subsidiaries is duly qualified, validly existing and/or
in good standing to transact business as a foreign Person in those respective
jurisdictions in which the character of the property owned, leased or operated
by Wisdom or such Subsidiary or the nature of the activities conducted by Wisdom
or such Subsidiary makes such qualification necessary, except where the failure
to be so qualified would not have a Material Adverse Effect.  A copy of the Wisdom LLC Agreement in effect
on the date hereof has been delivered to Gaiam.

 

(b)           Capitalization.

 

(i)            Schedule 5.1(b)(i) accurately
reflects the capitalization of Wisdom immediately upon consummation of the
Closing.

 

S-20

 

(ii)           Schedule
5.1(b)(ii) accurately reflects the capitalization of Wisdom after giving
effect to the transactions contemplated by this Agreement.

 

(iii)          Except as
contemplated by Wisdom’s Fundamental Documents or as otherwise set forth on

Schedule 5.1(b)(iii), there are, and immediately after consummation of
the Closing there will be, no (i) outstanding warrants, options, agreements,
convertible Securities or other commitments or instruments pursuant to which
Wisdom is obligated to issue, sell or otherwise transfer any Securities, (ii)
preemptive rights or similar rights to purchase or otherwise acquire Securities
of Wisdom pursuant to any Applicable Law, Wisdom’s Fundamental Documents or any
Contract to which Wisdom is a party, or (iii) Lien (such as a right of first
refusal, right of first offer, proxy, voting trust or voting agreement) created
by Wisdom or, to the Knowledge of Wisdom, any of its members with respect to
the sale or voting of any Securities of Wisdom (whether outstanding or issuable
upon the conversion, exchange or exercise of outstanding Securities).

 

(iv)          Except as set forth
in the Wisdom LLC Agreement, (x) no outstanding Securities of Wisdom are
entitled to any anti-dilution or similar adjustments upon the issuance of
additional Securities of Wisdom or otherwise and (y) there are no obligations
to redeem, repurchase or otherwise acquire shares of capital stock or other
Securities of Wisdom pursuant to any Applicable Law, any Fundamental Document
of Wisdom or any Contract to which Wisdom is a party or may be bound.

 

(v)           Except as
contemplated by the Wisdom Documents, no Person has any right to cause Wisdom
to effect the registration under the Securities Act of any shares of Common
Stock or any other Securities of Wisdom.

 

(vi)          Except for Life
Balance Media LLC, a Delaware limited liability company and wholly-owned by
Wisdom, Wisdom does not have any Subsidiaries, nor does it own any capital
stock, any other equity or long-term Indebtedness or any equity interest,
directly or indirectly, in any other Person.

 

(vii)         All Securities
issued by Wisdom have been either issued in transactions in accordance with, or
exempt from registration under, the Securities Act and the rules and
regulations promulgated thereunder and all applicable state securities or “blue
sky” laws, and Wisdom has not violated the Securities Act or any applicable
state securities or “blue sky” laws in connection with the issuance of any such
Securities.  To Wisdom’s Knowledge, there
are no restrictions upon the voting rights associated with, or the transfer of,
any of the Securities of Wisdom, except as provided by (i) United States
federal or state securities laws or (ii) the terms and provisions of the Wisdom
Documents.

 

(c)           Authorization of
Agreement, Etc.

 

The
authorization, reservation, issuance, sale and delivery, as applicable, of the
Subject Wisdom Units have been duly and validly authorized by all requisite
corporate or other action on the part of Wisdom.  Except as set forth in the Wisdom LLC
Agreement, the Subject Wisdom Units (assuming the issuance thereof in
accordance with this Agreement), will be duly and

 

S-21

 

validly issued and outstanding and fully
paid, with no personal liability attaching to the ownership thereof, free and
clear of any Liens whatsoever and with no restrictions on the voting rights
thereof, not subject to any preemptive rights, and not subject to any rights of
first refusal or other similar rights of the members of Wisdom.

 

(d)           No Conflicts.

 

The execution,
delivery and performance by Wisdom of this Agreement and each of the other
Documents and the consummation of the transactions contemplated hereby and
thereby, including without limitation, the issuance, sale and delivery of the
Subject Wisdom Units, and compliance with the provisions hereof and thereof by
Wisdom, does not or will not, as the case may be, (a) violate any provision of
Applicable Law or any Order applicable to Wisdom or any of its properties or
assets or (b) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any Lien upon any of the
properties or assets of Wisdom under any material Contract to which it is a
party or by which Wisdom or its assets or properties are or may be bound or (c)
conflict with or violate any provision of the Fundamental Documents of Wisdom
currently in effect.

 

(e)           Approvals.

 

No Permit or
Order, authorization, consent or approval of or by, or any notification of or
filing with, any Person is required in connection with the (i) execution,
delivery or performance by Wisdom of each Document to which it is a party or
(ii) sale of the Subject Wisdom Units.

 

(f)            Accounting.

 

Wisdom
maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management’s general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or specific
authorization; and (iii) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.

 

(g)           Private Offering.

 

Assuming the
accuracy of the representations of Gaiam in Section 4.2, the offering,
sale, issuance and delivery by Wisdom of the Subject Wisdom Units are exempt
from the registration and prospectus delivery requirements of the Securities
Act and applicable state securities laws and the rules and regulations
promulgated thereunder.  Neither Wisdom
nor any Person acting on its behalf has offered or sold or will offer or sell
any Securities of Wisdom, or has taken or will take any other action
(including, without limitation, any offering of any Securities of Wisdom under
circumstances that would require, under the Securities Act or any applicable
blue-sky laws, the integration of such offering with the transactions
contemplated by this Agreement), which would subject the transactions
contemplated by this Agreement to the registration provisions of the Securities
Act.

 

S-22

 

(h)           Material Agreements.

 

(x)            Except as set forth
on Schedule 5.1(h), neither Wisdom nor any of its Subsidiaries is a
party to (i) any notes, bonds, mortgages, indentures or (ii) other material
written or oral Contracts, agreements, instruments and other understandings, in
each case that would have been required to be described in a prospectus
pursuant to the Securities Act (collectively, the “Wisdom Material
Agreements”).

 

(y)           Each Material
Agreement constitutes a valid and binding obligation of Wisdom and/or
Subsidiary party thereto and is enforceable against such other party in
accordance with its terms.  Each of
Wisdom and the Subsidiaries have in all material respects performed all of the
obligations required to be performed by each of them to date pursuant to the
Material Agreements, and there exists no default, or any event which upon the
giving of notice or the passage of time, or both, would give rise to a claim of
a default in the performance by Wisdom or any of the Subsidiaries or, to the
Knowledge of Wisdom, any other party to any of the Material Agreements, except
where such default or event, individually or in the aggregate, has not had nor
could it reasonably be expected to have a Material Adverse Effect.

 

(i)            Absence of Undisclosed Liabilities.

 

Except as set
forth on Schedule 5.1(i), neither Wisdom nor any of its Subsidiaries has
any Liability required to be disclosed in the consolidated financial statements
for Wisdom and its Subsidiaries as at June 30, 2005 that was not disclosed
therein, other than Liabilities incurred in the ordinary course of business
consistent with past practice since March 17, 2005 (none of which results from,
arises out of, relates to, or was caused by, any breach of contract, breach of
warranty, tort, infringement or violation of Applicable Law where such breach
or event, individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect).

 

(j)            Compliance with Laws.

 

Neither Wisdom
nor any Subsidiary is in violation of, and to the Knowledge of Wisdom none is
under investigation by a Governmental Authority with respect to or has been
threatened to be charged with or given notice of any violation of, any
Applicable Law (including Sarbanes-Oxley), except violations that have not had,
and could not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Wisdom and the Subsidiaries taken as a whole.

 

(k)           Taxes.

 

(i)            All Tax returns
required to be filed by Wisdom and each of its Subsidiaries has been accurately
prepared and timely filed in all material respects, and all Taxes for which
Wisdom or any of its Subsidiaries may be held liable (other than the Taxes
referred to in the next sentence), have been paid or accrued within the
prescribed period or any extension thereof. 
All Taxes required to be withheld by Wisdom or any of its Subsidiaries,
including but not limited to, Taxes arising as a result of payments or
distributions (or amounts allocable) to foreign Persons or to employees of
Wisdom or any

 

S-23

 

of its
Subsidiaries, have been collected and withheld, and have been either paid to
the respective Governmental Authorities, set aside in accounts for such
purpose, or accrued, reserved against, and entered upon the books and records
of the employer.

 

(ii)           Wisdom qualifies
(and has since the date of its formation qualified), and will qualify
immediately after the Closing Date, to be treated as a partnership for Federal
income Tax purposes, and neither Wisdom nor any member of Wisdom has taken a
position or filed any election inconsistent with such treatment, and no Taxing
authority has taken a position inconsistent with such treatment.

 

(iii)          Neither Wisdom nor
any of its Subsidiaries has been notified that either the Internal Revenue
Service or any other Taxing authority has raised any issues, or has an intent
to raise such issues, in connection with any Taxes or Tax return of Wisdom or
any of its Subsidiaries, which issues, if adversely determined, would be
reasonably likely to have a Material Adverse Effect.

 

(l)            Intellectual Property Rights.

 

Wisdom has
sufficient title or ownership of, or rights by license or other agreement to
all of the Intellectual Property Rights necessary for, or used in, the conduct
of its business as presently conducted and as presently proposed to be
conducted.  Such Intellectual Property
Rights are not subject to any Lien or any rights of others, however evidenced
or created which could reasonably be expected to have a Material Adverse Effect
on Wisdom or its operations.

 

(m)          Litigation Proceedings.

 

Except as set
forth on Schedule 5.1(m), there are no Proceedings pending or, to the
Knowledge of Wisdom, threatened against or involving Wisdom or any of the
Subsidiaries, whether at law or in equity, whether civil or criminal in nature
or by or before any Governmental Authority, which if adversely determined could
individually or in the aggregate have a Material Adverse Effect on Wisdom and
its Subsidiaries taken as a whole, nor to the Knowledge of Wisdom does there
exist any reasonable basis therefore.

 

(n)           Insurance.

 

Each of Wisdom
and the Subsidiaries carries insurance in such amounts and covering such risks
as is adequate for the conduct of Wisdom’s business and the value of its
properties.

 

(o)           Investment Company.

 

Neither Wisdom
nor any of its Subsidiaries is an “investment company” within the meaning of
such term under the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder require to register as an investment
company.

 

(p)           Brokers.

 

In connection
with the transactions contemplated by this Agreement, none of Wisdom, any of
Wisdom’s Subsidiaries or any of their respective officers, directors,
stockholders or

 

S-24

 

employees (or any Affiliate of the foregoing)
has employed any broker or finder or incurred any actual or potential Liability
or obligation, whether direct or indirect, for any brokerage fees, commissions
or finders’ fees in connection with the transactions contemplated by this
Agreement which would be payable by Gaiam.

 

(q)           Certificates of Officers.

 

Any certificate
signed by any officer or Wisdom and delivered to Gaiam will be deemed a
representation and warranty by Wisdom to Gaiam as to the matters covered
thereby.

 

5.2          Representations and Warranties in
connection with Purchases of Subject Gaiam Shares.

 

Revolution
Living hereby represents and warrants to Gaiam, as of the date hereof and as of
the Closing Date, as follows:

 

(a)           Authorization of the Documents.

 

Revolution
Living has the requisite power and authority (corporate or otherwise) to
execute, deliver and perform the Documents to which it is a party and the
transactions contemplated thereby, and the execution, delivery and performance
by Revolution Living of the Documents to which it is a party have been duly
authorized by all requisite action by Revolution Living and each such Document,
when executed and delivered by Revolution Living, constitutes a legal, valid
and binding obligation of Revolution Living, enforceable against Revolution
Living in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
Applicable Laws affecting creditors’ rights and remedies generally, and
subject, in the case of enforceability, to general principles of equity
(regardless of whether enforcement is sought in a Proceeding at law or in
equity).

 

(b)           Investment Representations.

 

(i)            The Subject Gaiam
Shares are being acquired for Revolution Living’s own account, for investment
and not with a view to the distribution thereof in violation of the Securities
Act or applicable foreign or state securities laws.

 

(ii)           Revolution Living
understands that (i) the Subject Gaiam Shares have not been, and will not be,
registered under the Securities Act or applicable foreign or state securities
laws, by reason of their issuance by Gaiam in a transaction exempt from the
registration requirements of the Securities Act and applicable foreign and
state securities laws and (ii) the Subject Gaiam Shares must be held by
Revolution Living indefinitely unless a subsequent disposition thereof is
registered under the Securities Act and applicable foreign and state securities
laws or is exempt from registration thereof

 

(iii)          Revolution Living
is aware of the provisions of Rule 144 promulgated under the Securities Act that
permit limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions.  The
Subject Gaiam Securities will bear a legend reflecting these conditions on
transferability thereof and stop transfer instructions will be given to Gaiam’s
transfer agent accordingly.

 

S-25

 

(iv)          Revolution Living is
an “accredited investor” (as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act).

 

(v)           Gaiam has made
available to Revolution Living or its representatives information relating to
Gaiam, its ownership and management and other information about Gaiam and all
agreements, documents, records and books that Revolution Living has requested
relating to an investment in the Subject Gaiam Shares which may be acquired by
Revolution Living hereunder.  Revolution
Living has reviewed the information provided by Gaiam and understands and
accepts the risks associated with an investment in Gaiam, including the terms
of this Agreement, and the risk that matters described in the information
provided may not materialize.  Revolution
Living has had an opportunity to ask questions of, and receive answers from a
Person or Persons acting on behalf of Gaiam concerning the terms and conditions
of this investment, and answers have been provided to all of such questions to
the full satisfaction of Revolution Living. 
Revolution Living has such knowledge and experience in financial and
business matters that it is capable of evaluating the risks and merits of this
investment and to suffer a complete loss of its investment.

 

(vi)          Revolution Living is
able to bear the economic risk of its investment in the Subject Gaiam Shares
and the complete loss of all of such investment.

 

(vii)         Revolution Living is
able to fend for itself in the transactions contemplated by this Agreement, can
bear the economic risk of investment in the Subject Gaiam Shares and has such
knowledge and experience in financial or business matters to be capable of
evaluating the merits and risks of the investment in the Subject Gaiam
Shares.  Revolution Living is fully aware
of the speculative nature of the investment in the Subject Gaiam Shares and the
financial risk involved.  Revolution
Living has consulted with its professional, tax and legal advisors with respect
to the federal, state, local and foreign income tax consequences of the
undersigned’s investment in Gaiam. thereto.

 

(viii)        Revolution Living
has not employed or otherwise retained any broker or finder in connection with
the transactions contemplated by this Agreement

 

(ix)           Revolution Living
is not purchasing the Subject Gaiam Securities as a result of any
advertisement, article, notice or other communication regarding the Subject
Gaiam Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

 

(x)            Neither Gaiam nor
any other Person will have or be subject to any liability or indemnification
obligation to Revolution Living or any other Person resulting from the
distribution to Revolution Living, or Revolution Living’s use of, any
information provided to Gaiam, including without limitation, the information
described in clause (v), related to the business of Gaiam and any information,
projections, documents or material made available to Revolution Living, whether
orally or in writing, or in any other form in expectation or furtherance of the
transactions contemplated by this Agreement, except

 

S-26

 

Gaiam to the
extent that a representation or warranty in this Agreement made by Gaiam
specifically identifies and addresses such information.

 

(xi)           Except for the
representations and warranties contained in this Agreement, Revolution Living
acknowledges that none of Gaiam, its Affiliates and any other Person makes any
other express or implied representation or warranty with respect to (i) the
Subject Gaiam Shares, including without limitation the probable success or
profitability of ownership of Subject Gaiam Shares, (ii) Gaiam, including
without limitation, the operation of its business by its officers, directors,
managers, employees, or shareholder, (iii) the business, assets, performance
(whether historical, present or future) of Gaiam, including without limitation
the probable success or profitability of Gaiam or (iv) otherwise with respect
to any other information provided to Revolution Living or other Persons,
whether on behalf of Gaiam or such other Persons.

 

(c)           No Conflicts.

 

The execution,
delivery and performance by Revolution Living of this Agreement and each of the
other Documents and the consummation of the transactions contemplated hereby
and thereby, and compliance with the provisions hereof and thereof by
Revolution Living, does not or will not, as the case may be, (a) violate any
provision of Applicable Law or any Order applicable to Revolution Living or any
of its properties or assets or (b) conflict with or result in any breach of any
of the terms, conditions or provisions of, or constitute (with notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any Lien upon
any of the properties or assets of Revolution Living under any material
Contract to which it is a party or by which Revolution Living or its assets or
properties are or may be bound or (c) conflict with or violate any provision of
the Fundamental Documents of Revolution Living currently in effect.

 

(d)           Approvals.

 

No Permit or
Order, authorization, consent or approval of or by, or any notification of or
filing with, any Person is required in connection with the (i) execution,
delivery or performance by Revolution Living of each Document to which it is a
party or (ii) sale of the Subject Wisdom Units to Gaiam.

 

(e)           No Short Position.

 

Neither
Revolution nor any of its Affiliates has an open short position in the Class A
Common Stock, and Revolution agrees that it will not, and that it will cause
its Affiliates not to, engage in any short sales of, or hedging transactions
with respect to the Class A Common Stock.

 

S-27

 

ARTICLE VI

ADDITIONAL COVENANTS

 

6.1                               Advice
of Changes; Filings.

 

To the extent
requested by Revolution Living, Gaiam shall confer with Revolution Living on a
regular and frequent basis as reasonably requested by Revolution Living, report
on operational matters and promptly advise Revolution Living orally and, if
requested by Revolution Living, in writing of any material change with respect
to Gaiam or any Subsidiary.  Gaiam shall
promptly provide to Revolution Living (and its counsel) copies of all filings
made by Gaiam or any Subsidiary with any Governmental Authority (other than the
Commission Filings) in connection with this Agreement and the transactions
contemplated hereby.  This Section 6.1
shall terminate upon the earlier to occur of (i) the expiration of the Option
(as defined in the Shareholders Agreement), and (ii) expiration of Revolution
Living’s right to invoke the buy/sell procedures under Section 5.4 of the
Shareholders Agreement.

 

6.2                               Reasonable
Efforts; Notification.

 

Upon the terms
and subject to the conditions set forth in this Agreement, each of the Parties
agrees to use all commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other Party in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement, including (i) ensuring that
all conditions to the Closing set forth in this Agreement are satisfied as soon
as reasonably practical, including executing and delivering all documents
required to be delivered by such Party at any the Closing and taking any and
all actions which may be necessary on its part to cause each other Party to the
Documents to so execute and deliver each Document, (ii) the obtaining of all
necessary actions or non-actions, waivers, consents and approvals from
Governmental Authorities and the making of all necessary registrations and
filings (including filings with Governmental Authorities, if any) and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental
Authority, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iv) the defending of any lawsuits or other
legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of any of the transactions contemplated by this
Agreement, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Authority vacated or reversed, and
(v) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the
purposes of, this Agreement.  In
connection with and without limiting the foregoing, Gaiam and the Gaiam Board
shall (x) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to this
Agreement or any of other transactions contemplated by this Agreement and
(y) if any state takeover statute or similar statute or regulation becomes
applicable to any transaction contemplated by this Agreement, take all action
not prohibited by such statute or regulation to ensure that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect
of such statute or regulation on this Agreement and the transactions
contemplated by this

 

S-28

 

Agreement. 
Nothing in this Agreement shall be deemed to require Gaiam or Revolution
Living to dispose of or hold separate any asset or collection of assets.

 

6.3                               NASD.

 

As soon as
reasonably practical, Gaiam will file a listing application with the NASD with
respect to the shares of Class A Common Stock being sold to Revolution Living
pursuant to this Agreement.  Revolution
Living agrees to reasonably cooperate and assist Gaiam, to the extent
necessary, in the preparation of such listing application.

 

6.4                               Litigation
Cooperation.

 

Should any
third-party suit or Proceeding be instituted by or against Revolution Living in
any manner relating to Gaiam, Gaiam shall, without expense to Revolution
Living, make available Gaiam and its officers, employees and agents and Gaiam’s
books and records, to the extent that Revolution Living may deem them
reasonably necessary in order to prosecute or defend any such suit or
Proceeding.  Should any third-party suit
or Proceeding be instituted by or against Gaiam in any manner relating to
Revolution Living or Wisdom, Revolution Living shall, without expense to Gaiam,
make available Revolution Living and its officers, employees and agents and
Revolution Living’s books and records, to the extent that Gaiam may deem them
reasonably necessary in order to prosecute or defend any such suit or
Proceeding.

 

6.5                               Performance
of Documents; Inconsistent Agreements.

 

Each of the
Parties will perform and observe all of the terms and provisions of each Document
to be performed or observed by it, maintain each such Document in full force
and effect, and enforce such Document in accordance with its terms. Neither
Party will enter into any agreement containing any provision which could (a) be
violated or breached by the exercise or performance by such Party of any of its
respective rights or obligations under any Document, or (b) impair the ability
of such Party to comply with the terms of the Documents.

 

6.6                               Disclosure
of Transactions and Other Material Information.

 

Gaiam will
file a current report of Form 8-K with the Commission describing the terms of
the transactions contemplated by the Documents and including as exhibits to
such Form 8-K the form of this Agreement, the Subject Gaiam Shares and the
Shareholder Agreement, in the form required by the Exchange Act and within the
time periods required by the Exchange Act. 
Revolution Living shall file a Statement of Beneficial Ownership on
Schedule 13D and a Form 3 along with such other filings as may be required by
federal securities laws and the rules and regulations of the Commission, within
the time periods required by such laws.

 

6.7                               Public
Announcements.

 

(a)           Neither Party will make any written
or other public disclosure regarding the other Party without the prior written
consent of the other Party, except as may be required by Applicable Law or the
rules and regulations of Nasdaq (including pursuant to Section 6.3)
above) and, in such case, by first promptly notifying the other Party of such
obligation and allowing the other Party to provide comment to any such
disclosure prior thereto.

 

S-29

 

(b)           Except as otherwise required by
Applicable Law or by the rules of Nasdaq, so long as this Agreement is in
effect, none of Gaiam (or any of its Subsidiaries),or Revolution Living (or any
of its Subsidiaries), will issue or cause the publication of any press release
or make any other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other party, which
consent will not be unreasonably withheld. 
Gaiam and Revolution Living will cooperate with each other in the
development and distribution of all press releases and other public
announcements with respect to this Agreement and the transactions contemplated
hereby, and will furnish the other with drafts of any such releases and
announcements as far in advance as practicable.

 

(c)            This
Section 6.7 shall terminate upon the earliest to occur of the expiration
or exercise of the Option.

 

6.8                               Revolution
Living Information Rights.

 

(a)           In the event Gaiam is no longer a
reporting company under, and is no longer required to file periodic reports
pursuant to, the Exchange Act, Gaiam will furnish Revolution Living with the
following:

 

(i)            Quarterly
Reports.  As soon as available, but
not later than 45 days after the end of each quarter in each fiscal year
(other than the last quarter in each fiscal year) of Gaiam, a consolidated
balance sheet of Gaiam and the related consolidated statements of income,
shareholders’ equity and cash flows, unaudited but prepared in accordance
with GAAP consistently applied and certified by the President or the Chief
Financial Officer of Gaiam, such consolidated balance sheet to be as of
the end of such quarter and such consolidated statements of income,
shareholders’ equity and cash flows to be for such quarter and for
the period from the beginning of the fiscal year to the end of such
quarter, in each case with comparative statements for the prior fiscal year.

 

(ii)           Annual Audit.  As soon as available, but not later than 90
days after the end of each fiscal year of Gaiam, audited consolidated financial
statements of Gaiam, which will include a consolidated statement of cash flows
and statement of operations for such fiscal year and a consolidated balance
sheet as at the last day thereof, each prepared in accordance with GAAP
consistently applied (except as set forth in the notes thereto), and
accompanied by the report of a firm of independent certified public accountants
selected by the Gaiam Board (the “Gaiam Accountants”).  Gaiam will maintain a system of accounting
sufficient to enable the Gaiam Accountants to render the report referred to in
this clause.

 

(iii)          Annual Operating
Plan.  Within 60 days after the
beginning of each fiscal year of Gaiam, an annual operating plan, including a
qualitative summary by the President of Gaiam and an updated consolidated
budget, projected income statements, balance sheets and cash flow statements
(setting forth in detail the assumptions therefor) on a monthly basis for Gaiam
and its Subsidiaries for such fiscal year of Gaiam.

 

(iv)          GAAP Reporting.  The financial statements and reports
delivered under this subsection will fairly present in all material respects
the financial position and results

 

S-30

 

of operations
of Gaiam at the dates thereof and for the periods then ended and will have been
prepared in accordance with GAAP, in the case of unaudited financial statements,
subject to normal year-end audit adjustments and the absence of footnotes.

 

(b)           Access to Records and Properties.  Gaiam will afford Revolution Living, during
normal business hours and with reasonable advance notice, reasonable access to
(i) visit and inspect the assets, properties and information (financial or
otherwise) of Gaiam, (ii) examine upon reasonable advance notice, the books of
accounts and records of Gaiam and (iii) make copies of such records and permit
Revolution Living to discuss all aspects of Gaiam and each Subsidiary with any
officers, employees of Gaiam and with the Gaiam Accountants, in each case
consistent with the highest level of access to information and inspection
rights granted by Gaiam to other shareholders; provided, however,
that such investigation will not unreasonably interfere with the operations of
Gaiam.  Gaiam will instruct the Gaiam
Accountants to discuss such aspects of the financial condition of Gaiam with
Revolution Living as Revolution Living may reasonably request, and to permit
Revolution Living to inspect, copy and make extracts from such financial
statements, analyses, work papers and other documents and information
(including electronically stored documents and information) prepared by the
Gaiam Accountants with respect to Gaiam as Revolution Living may reasonably
request.  Revolution Living acknowledges
that any information obtained from Gaiam or its officers and employees may be
material undisclosed information under federal and state securities laws, and
that Revolution Living agrees to hold all such information confidential and not
trade on the basis of any material undisclosed information obtained from Gaiam
or its officers and employees.

 

(c)           Termination.  This Section 6.8 shall terminate upon
Revolution Living and its permitted transferees beneficially owning in the
aggregate fewer than five percent (5%) of the Fully-Diluted Capital Stock.

 

6.9                               Nonsolicitation.

 

From and after
the Closing Date, neither Wisdom nor Gaiam will, and neither will permits its
controlled Subsidiaries to:  (i) except
as otherwise provided below, solicit any material business customers of the
other Party (directly or indirectly) for the express purpose of diverting
existing business of such customers; (ii) solicit any content providers or
licensors of the other Party (directly or indirectly) for the express purpose
of causing, inviting or encouraging any such content provider to alter or
terminate his, her or its business relationship with the other Party; or (iii)
hire or solicit any employees of the other Party (directly or indirectly) for
the purpose of causing, inviting or encouraging any such employee to alter or
terminate his, her or its employment relationship with the other Party; provided,
that it shall not be a violation of this provision to conduct general
solicitations of employment at a career fair or similar conference for
employers or in a journal, newspaper or other publication of general
circulation or in trade publications or other similar media.  Each Party shall notify the other, from time
to time, of the business customers, licensors and content providers it believes
to be covered by the terms of this Section.  Notwithstanding clause (i)
above, it shall not be a violation of this Section 6.9 to solicit
any cable television multi-system operator (MSO), internet portal or service,
wireless service or equipment provider, satellite service or consumer equipment
provider, or other aggregator or distributor of (x) video on demand (VOD), (y)
video over internet protocol (VoIP) or (z) similar mechanism or media to
distribute content produced, controlled, or licensed by a Party or to

 

S-31

 

engage in
activities contemplated by the Cooperation Agreement.  If, at any time, either Wisdom or Gaiam, as
the case may be (the “Breaching Party”), is in breach of its obligations
to the other party (the “Nonbreaching Party”) under the Cooperation
Agreement, the Nonbreaching Party shall be relieved of its obligations under
this Section 6.9 until such breach is cured by the Breaching Party and
the Breaching Party is no longer in default of its obligations under the
Cooperation Agreement.  This Section
6.9 shall terminate upon termination of the Cooperation Agreement.

 

ARTICLE VII

CONDITIONS TO CLOSING

 

7.1                               Conditions
to Revolution Living’s Obligations.

 

The obligation
of Revolution Living to consummate the applicable Closing is subject to the
satisfaction of the following conditions precedent (unless waived by Revolution
Living):

 

(a)           Gaiam shall have performed its
obligations under, and shall have complied with, all the covenants and
agreements set forth in this Agreement in all material respects, and all
representations and warranties contained in Article IV shall be true and
correct in all material respects (except those representations and warranties
that are qualified as to materiality, which shall be true and correct in all
respects) as of the Closing Date (except for those representations and
warranties which are made as of a specific date, which shall have been true and
correct as of such date).

 

(b)           Gaiam and Rysavy each shall have duly
executed and delivered to Revolution Living each of the Documents to which
Gaiam and/or Rysavy, as the case may be, is to be a party, and such Documents
shall be in full force and effect and be binding against Gaiam and/or Rysavy,
as the case may be, as of the Closing.

 

(c)           No Applicable Law shall have been
enacted after the date hereof and no Proceeding shall be pending which
prohibits or seeks to prohibit, or materially restricts or delays the
consummation of the transactions contemplated by the Documents or materially
restricts or impairs the ability of Revolution Living to own Securities of
Gaiam.

 

(d)           There shall be no Proceeding pending
or threatened by the NASD to terminate the NASD’s quotation of the Common Stock
on the Nasdaq.

 

(e)           Gaiam shall have made and/or obtained
all notices, consents, approvals, and authorizations necessary to consummate
the transactions contemplated hereby, including without limitation all
applicable filings under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.

 

(f)            Gaiam shall have in effect director
and officer liability insurance with coverage of at least $10,000,000 from a
nationally recognized insurance company rated “A” or above, and otherwise in
form and substance reasonably satisfactory to Revolution Living.

 

S-32

 

7.2                               Conditions
to Gaiam’s Obligations.

 

The obligation
of Gaiam to consummate the applicable Closing is subject to the satisfaction of
the following conditions precedent (unless waived by Gaiam):

 

(a)           Each of Revolution Living and Wisdom
shall have performed its obligations under, and shall have complied with, all
the covenants and agreements set forth in this Agreement in all material
respects, and all representations and warranties contained in Article V
shall be true and correct in all material respects (except those
representations and warranties that are qualified as to materiality, which shall
be true and correct in all respects) as of the Closing Date (except for those
representations and warranties which are made as of a specific date, which
shall have been true and correct as of such date).

 

(b)           Revolution Living and Case each shall
have duly executed and delivered to Gaiam each of the Documents to which
Revolution Living and/or Case, as the case may be, is to be a party, and such
Documents shall be in full force and effect and be binding against Revolution
Living and/or Case, as the case may be, as of the Closing.

 

(c)           No Applicable Law shall have been
enacted after the date hereof and no Proceeding shall be pending which
prohibits or seeks to prohibit, or materially restricts or delays the
consummation of the transactions contemplated by the Documents or materially
restricts or impairs the ability of Gaiam to own Securities of Wisdom.

 

(d)           Revolution Living shall have made
and/or obtained all notices, consents, approvals, and authorizations necessary
to consummate the transactions contemplated hereby, including without
limitation all applicable filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.

 

(e)           Any requisite consent of investors in
Wisdom (other than Revolution Living) to the terms of this Agreement and the
other Documents shall have been obtained.

 

(f)            The requisite members of Wisdom will
have executed and delivered the Wisdom LLC Agreement.

 

ARTICLE VIII

ISSUANCES AND TRANSFER OF SECURITIES

 

8.1                               Restrictive
Legends.

 

Each
certificate evidencing the Subject Gaiam Shares or the Subject Wisdom Units,
and each certificate for any such securities issued to subsequent transferees
of any such certificate, will (unless otherwise permitted by the Shareholders
Agreement) be stamped or otherwise imprinted with a legend in substantially the
following form:

 

“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS.  THESE

 

S-33

 

SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED OR PLEDGED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH APPLICABLE
STATE SECURITIES LAWS, OR IF THE PROPOSED TRANSFER MAY BE EFFECTED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OR REGISTRATION OR QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS.  THESE
SECURITIES ARE SUBJECT TO THE TERMS AND PROVISIONS OF THE TRANSACTION
AGREEMENT, DATED AS OF AUGUST 4, 2005, AS AMENDED FROM TIME TO TIME, AND THE
HOLDER OF THIS CERTIFICATE IS ENTITLED TO THE BENEFITS THEREOF.  COPIES OF SUCH AGREEMENTS MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF THE ISSUER HEREOF.”

 

8.2                               Removal
of Legend.

 

Each
certificate or other instrument evidencing the securities issued upon the
transfer of any Subject Gaiam Shares or Subject Wisdom Units, as the case may
be (and each certificate or other instrument evidencing any untransferred
balance of such Securities) will bear the legend set forth in Section 8.1
hereof unless (i) in the opinion of counsel to the holder of such Securities
registration of future transfer is not required by the applicable provisions of
the Securities Act or (ii) Wisdom will have waived the requirement of such
legends with respect to Subject Wisdom Units; provided, however,
that such legend will not be required on any certificate or other instrument
evidencing the securities issued upon such transfer in the event such transfer
will be made in compliance with the requirements of Rule 144 (as amended from
time to time) promulgated under the Securities Act (or successor rule thereto).

 

ARTICLE IX

TERMINATION

 

9.1                               Termination.

 

This Agreement
may not be terminated (except by written agreement of all Parties hereto) after
the Closing.  This Agreement may be
terminated at any time prior to the Closing by:

 

(a)           the mutual written consent of each
Party hereto; or

 

(b)           Revolution Living, if there has been
a breach by Gaiam of any representation, warranty, covenant or agreement on the
part of Gaiam contained in this Agreement which breach is material and which
Gaiam fails to cure within five (5) Business Days after written notice thereof
is given by Revolution Living (except no cure period will be provided for a
breach which by its nature cannot be cured); or

 

(c)           Gaiam if there has been a breach by
Revolution Living or Wisdom of any representation, warranty, covenant or
agreement on the part of Revolution Living or Wisdom contained in this
Agreement which breach is material and which Revolution Living or Wisdom

 

S-34

 

fails to cure within five (5) Business Days
after written notice thereof is given by Gaiam (except no cure period will be
provided for a breach which by its nature cannot be cured); or

 

(d)           Revolution Living or Gaiam, if any
permanent injunction or other Order of a Governmental Authority preventing the
Closing will have become final and nonappealable; or

 

(e)           Revolution Living or Gaiam if the
Closing does not occur on or prior to August 31, 2005;

 

provided,
however, that neither Revolution Living or Gaiam will be entitled to
terminate this Agreement pursuant to Section 9.1(b), Section 9.1(c)
or Section 9.1(e) if such Party’s fraud or breach of this Agreement
(including Section 6.2) has prevented the satisfaction of a condition.

 

9.2                               Termination
Procedures.

 

Any
termination pursuant to Section 9.1(a) will be effected by a written
instrument signed by Revolution Living and Gaiam, and any other termination
pursuant to Section 9.1 will be effected by written notice from the
Party or Parties so terminating to the other Party hereto, which notice will
specify the Section of this Agreement pursuant to which this Agreement is being
terminated.

 

9.3                               Effect
of Termination.

 

In the event
of the termination of this Agreement as provided in Section 9.1, this
Agreement will be of no further force or effect and there will be no liability
or obligation on the part of Revolution Living or Gaiam or their respective
officers, directors or Affiliates, except for this Section 9.3, Sections
6.4 and 6.7 and Article X, each of which will survive the
termination of this Agreement; provided, however, that the
Liability of any Party for any breach by such party of the representations,
warranties, covenants or agreements of such Party set forth in this Agreement
occurring prior to the termination of this Agreement will survive the
termination of this Agreement.

 

ARTICLE X

MISCELLANEOUS

 

10.1               Parties In Interest;
Assignment.

 

This Agreement
will bind and inure to the benefit of the Parties and their respective
successors, assigns, heirs and personal representatives.  No Party may assign this Agreement or any of
its rights, interests or obligations hereunder or thereunder without the prior
written consent of the other Party; provided, however, that
Revolution Living may assign any of its rights under this Agreement, or any
other document or investment contemplated hereby to Case or any Affiliate,
member or limited partner of Revolution Living controlled by Case.  Upon any transfer of any Subject Gaiam
Shares, the transferee will be bound by, and entitled to the benefits of, this
Agreement with respect to such transferred Securities in the same manner as the
transferring Person.  Upon any transfer
of any Subject Wisdom Units, the transferee will be

 

S-35

 

bound by, and entitled to the benefits of,
this Agreement with respect to such transferred Securities in the same manner
as the transferring Person.

 

10.2               Entire Agreement.

 

This
Agreement, each other Document and the other writings and agreements referred
to herein or delivered pursuant hereto contain the entire agreement and understanding
of the Parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the Parties with respect thereto.

 

10.3               Notices.

 

All notices,
demands and requests of any kind to be delivered to any party in connection
with this Agreement (whether or not required to be delivered hereunder) will be
in writing and will be deemed to have been duly given if personally delivered,
if sent by facsimile or if sent by internationally-recognized overnight courier
or by registered or certified mail, return receipt requested and postage
prepaid, addressed as follows:

 

(a)           if to Gaiam, to:

 

	
  Gaiam, Inc.

  
	
  360
  Interlocken Blvd.

  
	
  Broomfield,
  Colorado  80021

  
	
  Attention:

  	
  Jirka Rysavy

  
	
  Telephone:

  	
  303-222-3645

  
	
  Telecopy:

  	
  303-222-3609

  

 

 

with a copy
to:

 

	
  Bartlit Beck
  Herman Palenchar & Scott LLP

  
	
  1899
  Wynkoop, Suite 800

  
	
  Denver,
  Colorado 80202

  
	
  Attention:

  	
  Thomas R.
  Stephens

  
	
  Telephone:

  	
  303-592-3100

  
	
  Telecopy:

  	
  303-592-3140

  

 

(b)           If to Revolution Living, to:

 

	
  Revolution
  Living LLC

  
	
  1717 Rhode
  Island Avenue, N.W.

  
	
  Washington,
  D.C. 20036

  
	
  Attention:

  	
  Ronald A.
  Klain

  
	
  Telephone:

  	
  202-776-1405

  
	
  Telecopy:

  	
  202-776-1499

  

 

S-36

 

with a copy
to:

 

	
  O’Melveny
  & Myers LLP

  
	
  1625 Eye
  Street, N.W.

  
	
  Washington,
  D.C. 20006

  
	
  Attention:

  	
  David G.
  Pommerening

  
	
  Telephone:

  	
  202-383-5110

  
	
  Telecopy:

  	
  202-383-5414

  

 

(c)           If to Wisdom, to:

 

	
  Life Balance
  Media Holdings LLC

  
	
  10 East 40th
  Street, 26th Floor

  
	
  New York, NY
  10016

  
	
  Attention:

  	
  C.J. Kettler

  
	
  Telephone:

  	
  212-497-8065

  
	
  Telecopy:

  	
  212-213-0540

  

 

with a copy
to:

 

	
  O’Melveny
  & Myers LLP

  
	
  1625 Eye
  Street, N.W.

  
	
  Washington,
  D.C. 20006

  
	
  Attention:

  	
  David G.
  Pommerening

  
	
  Telephone:

  	
  202-383-5110

  
	
  Telecopy:

  	
  202-383-5414

  

 

or to such
other address as the Party to who notice is to be given may have furnished to
the other Party hereto in writing in accordance with the provisions of this Section
10.3.  Any such notice or
communication will be deemed to have been received (i) in the case of personal
delivery or delivery by facsimile, on the date of such delivery, (ii) in the
case of internationally-recognized overnight courier, on the next Business Day
after the date when sent and (iii) in the case of mailing, on the third
Business Day following that on which the piece of mail containing such
communication is posted.

 

10.4               Amendments.

 

This Agreement
may not be modified or amended, or any of the provisions hereof waived, except
by written agreement of the Parties.

 

10.5               Extension; Waiver.

 

The Parties
may (a) extend the time for the performance of any of the obligations or other
acts of the other Party, (b) waive any inaccuracies in the representations and
warranties contained in this Agreement or in any document delivered pursuant to
this Agreement and (c) waive compliance with any of the agreements or
conditions contained in this Agreement. 
Any agreement on the part of a party to any such extension or waiver
will be valid only if set forth in

 

S-37

 

an instrument in writing signed on behalf of
such party, and any such waiver will not operate or be construed as a waiver of
any subsequent breach by the other party.

 

10.6               Counterparts.

 

This Agreement
may be executed in any number of original or facsimile counterparts, and each
such counterpart hereof will be deemed to be an original instrument, but all
such counterparts together will constitute but one agreement.  Facsimile counterpart signatures to this
Agreement will be acceptable and binding.

 

10.7               Governing Law.

 

(a)           All questions concerning the
construction, interpretation and validity of this Agreement will be governed by
and construed and enforced in accordance with the domestic laws of the State of
Colorado without giving effect to any choice or conflict of law provision or
rule (whether in the State of Colorado or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Colorado.  In furtherance of the
foregoing, the internal law of the State of Colorado will control the
interpretation and construction of this Agreement, even if under such
jurisdiction’s choice of law or conflict of law analysis, the substantive law
of some other jurisdiction would ordinarily or necessarily apply.

 

(b)           BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE
THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF
THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS
RELATED HERETO.

 

10.8               No Third Party Reliance.

 

Anything
contained herein to the contrary notwithstanding, the representations and
warranties contained in this Agreement (a) are being given as an inducement to the
other Party to enter into this Agreement and the other Documents (and each
Party acknowledges that the other Party has expressly relied thereon) and (b)
are solely for the benefit of the other Party. 
Accordingly, no third party (including, without limitation, any holder
of Securities of Gaiam, Revolution Living or Wisdom) or anyone acting on behalf
of such third party (other than a Party) will be a beneficiary of such
representations and warranties and no such third party will have any rights of
contribution against any Party with respect to such representations or
warranties or any matter subject to or resulting in indemnification under this
Agreement or otherwise.

 

10.9               Submission to Jurisdiction.

 

Any Proceeding
with respect to this Agreement may be brought in the courts of the State of
Colorado and the United States of America for the District of Colorado and, by
execution and

 

S-38

 

delivery of this Agreement, each Party hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts.  Each Party hereby irrevocably waives, in
connection with any such action or Proceeding, any objection, including, without
limitation, any objection to the venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any such
action or Proceeding in such respective jurisdictions.  Each Party hereby irrevocably consents to the
service of process of any of the aforementioned courts in any such action or
Proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to it at its address as set forth herein.  Nothing herein will affect the right of any
Party to serve process in any other manner permitted by Applicable Law or to
commence Proceedings or otherwise proceed against any other Party in any other
jurisdiction.

 

10.10             Severability.

 

It is the
desire and intent of the Parties that the provisions of this Agreement and the
other Documents be enforced to the fullest extent permissible under the
Applicable Law and public policies applied in each jurisdiction in which
enforcement is sought.  Accordingly, in
the event that any provision of this Agreement or the other Documents would be
held in any jurisdiction to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, will be ineffective, without
invalidating the remaining provisions of this Agreement or such other Document
or affecting the validity or enforceability of such provision in any
jurisdiction.  Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not be invalid,
prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or such other Document or affecting the validity
or enforceability of such provision in any other jurisdiction.

 

10.11             Independence of Agreements.

 

All agreements
and covenants hereunder will be given independent effect so that if a certain
action or condition constitutes a default under a certain agreement or
covenant, the fact that such action or condition is permitted by another
agreement or covenant will not affect the occurrence of such default, unless
expressly permitted under an exception to such covenant.  In addition, all representations and
warranties hereunder will be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject
matter is correct or is not breached will not affect the incorrectness of or a
breach of the representation and warranty first referred to in this sentence.

 

10.12             Further Assurances.

 

Each Party
will duly execute and deliver, or cause to be duly executed and delivered, at
its own cost and expense, such further instruments and documents and to take
all such action, in each case as may be necessary or proper in the reasonable
judgment of any other Party to carry out the provisions and purposes of the
Agreement, the other Documents, and to comply with Applicable Law, including,
but not limited to, all information necessary to effect any securities,
governmental, bank regulatory or other governmental filings.

 

S-39

 

10.13             Remedies.

 

In case any
one or more of the representations, warranties, covenants and/or agreements set
forth in this Agreement will have been breached by a Party, the other Party may
proceed to protect and enforce its rights either by suit in equity and/or by
action at law, including an action for damages as a result of any such breach
and/or an action for specific performance of any such covenant or agreement
contained in this Agreement.

 

 

*    *    *   
*    *

 

IN
WITNESS WHEREOF, each of the undersigned has duly
executed this Transaction Agreement as of the date first written above.

 

	
   

  	
  GAIAM:

  	 

	 
	
   

  	
   

  
	 
	
   

  	
  GAIAM, INC.

  
	 
	
   

  	
   

  
	 
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	 

	
   

  	
   

  	
  Name:

  	 

	
   

  	
   

  	
  Title:

  	 

	
   

  	
   

  	 

	 
	
   

  	
   

  
	 
	
   

  	
  REVOLUTION LIVING:

  
	 
	
   

  	
   

  
	 
	
   

  	
  REVOLUTION LIVING LLC

  
	 
	
   

  	
   

  
	 
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	 

	
   

  	
   

  	
  Name:

  	 

	
   

  	
   

  	
  Title:

  	 

	
   

  	
   

  	 

	 
	
   

  	
   

  
	 
	
   

  	
  WISDOM:

  
	 
	
   

  	
   

  
	 
	
   

  	
  LIFE BALANCE MEDIA HOLDINGS LLC

  
	 
	
   

  	
   

  
	 
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	 

	
   

  	
   

  	
  Name:

  	 

	
   

  	
   

  	
  Title:

  	 

						

 

S-40

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