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CAPITAL MASTER FUND, LTD.
STOCKHOLDER OF NEW MOTION, INC.
EXCHANGE AGREEMENT (the "Agreement")
made and entered into as of January 31, 2007, by and among MPLC, Inc., a
Delaware corporation ("MPLC"),
Trinad Capital Master Fund, Ltd. ("Trinad"),
Motion, Inc., a Delaware corporation ("New
all of the stockholders of New Motion listed under the caption "Stockholders" on
the signature page hereof. The Stockholders shall be referred to herein
collectively as the "Stockholders"
individually as a "Stockholder."
Stockholders own all of the New Motion Shares (as defined in Section 1.1).
desires to acquire all of the New Motion Shares from the Stockholders in
exchange for shares of MPLC's equity securities, and the Stockholders desire
contribute all of the New Motion Shares to MPLC in exchange for shares of MPLC's
equity securities, on the terms and conditions hereinafter set
about the date of this Agreement, Trinad and/or its affiliates intend to invest
$3,500,000 into MPLC in exchange of shares of MPLC's equity securities and,
simultaneously with the Closing (as defined in Section 1.2), certain other
investors will be investing $6,500,000 into MPLC in exchange for shares of
MPLC's equity securities.
transactions described in these recitals represent a combined plan to capitalize
MPLC and the parties intend, by executing this Agreement, and effecting such
transactions, to implement a tax-exempt contribution of property under Section
351 of the Internal Revenue Code of 1986, as amended (the "Code").
THEREFORE, in consideration of the covenants, promises and representations
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
the Closing and subject to and upon the terms and conditions of this Agreement,
the Stockholders agree to contribute, transfer, assign and deliver to MPLC,
and clear of all liens, encumbrances, claims and other restrictions, and MPLC
agrees to acquire from the Stockholders, all of the outstanding shares of
capital stock of New Motion ("New
by the Stockholders as specifically set forth on Schedule
As of Closing, the New Motion Shares shall constitute all of the issued and
outstanding New Motion Shares. The exchange of New Motion Shares contemplated
hereunder and the other transactions contemplated hereunder shall be referred
herein as the "Transaction"
this Agreement shall have been terminated pursuant to Article 9 hereof, the
closing of the Transaction (the "Closing") shall take place at the offices of
Stubbs Alderton & Markiles, LLP, 15260 Ventura Boulevard, 20th Floor,
Sherman Oaks, CA 91403 at a time and date to be specified by the parties, which
shall be no later than the third business day after the satisfaction or waiver
of the conditions set forth in Article 7, or at such other time, date and
location as the parties hereto agree in writing (the "Closing
exchange for the New Motion Shares, MPLC shall issue to the Stockholders 500,000
Series C Convertible Preferred Stock, par value $0.10 per share, of MPLC (the
accordance with Schedule
Subject to Stockholder Approval as defined in Section 4.3(a) hereof and after
giving effect to the Reverse Split contemplated by Section 6.14(a), the MPLC
Preferred Shares shall be convertible into that number of shares of MPLC's
Common Stock ("Conversion
to 9,000,000, less the number of shares of MPLC Common Stock (on a post Reverse
Split basis) issuable upon exercise of all New Motion Options and Warrants
defined in Section 1.7 below) following their assumption by MPLC pursuant to
Section 1.7 below. Immediately following the Transaction, but prior to giving
effect to any issuance of securities in connection with the Series B Financing
(as defined in Section 4.3 below) (and assuming no exercise or conversion of
outstanding options or convertible securities), the Stockholders will own
approximately 83.36% of the total combined voting power of all classes of MPLC
stock entitled to vote.
of Certificates Representing the New Motion Shares. At
Closing, each Stockholder shall deliver the certificate(s) representing the
Motion Shares owned by such Stockholder, duly endorsed for transfer to MPLC
accompanied by stock powers duly endorsed for transfer to MPLC, with (i) all
such other documents as may be required to vest in MPLC good and marketable
title to the New Motion Shares free and clear of any and all Liens (as defined
in Section 2.3 hereof) and (ii) all necessary documentary stamps. New Motion
shall recognize and record the transfers described in this Section 1.4 on its
of Certificates Representing MPLC's Preferred Shares. At
Closing, MPLC will issue MPLC's Preferred Shares to the Stockholders as provided
MPLC's Preferred Shares, when issued, shall be restricted shares and may not be
sold, transferred or otherwise disposed of by the Stockholders without
registration under the Securities Act of 1933, as amended ("Securities
available exemption from registration under the Securities Act. The certificates
representing MPLC's Preferred Shares will contain the appropriate restrictive
is intended by the parties hereto that the Stockholders' contribution and
transfer of the New Motion Shares to MPLC in exchange for MPLC's Preferred
Shares constitutes a tax-deferred exchange within the meaning of Section 351
Closing, MPLC will assume each outstanding employee or director stock option
each outstanding warrant of New Motion listed on Schedule 3.3
Motion Options and Warrants")
each such New Motion Option and Warrant will become an option or warrant (i)
purchase that number of shares (on a post Reverse Split basis) of MPLC Common
Stock obtained by multiplying the number of shares of New Motion Common Stock
issuable upon the exercise of such option or warrant by the Exchange Ratio,
at an exercise price per share (on a post Reverse Split basis) equal to the
share exercise price of such option or warrant divided by the Exchange Ratio,
and (iii) otherwise upon the same terms and conditions as such option or
warrant. The "Exchange
the quotient of (a) 9,000,000 divided by (b) the sum of (i) the number of shares
of New Motion Common Stock outstanding as of the Closing, plus (ii) number
shares of New Motion Common Stock issuable upon the exercise of all New Motion
Options and Warrants outstanding as of the Closing (but specifically excluding
any shares issuable pursuant to the IVG Note, as defined in Section 1.8 below).
Based on the current number of shares of New Motion Common Stock outstanding
the current number of shares of New Motion Common Stock issuable upon the
exercise of all New Motion Options and Warrants set forth in Section 3.3 below,
the Exchange Ratio will be approximately 1.453, assuming no change to such
numbers between the date of this Agreement and the Closing Date.