I think I know the answer to this one, but I want to check I'm not missing something.
Watcher (and Grimbeorn v Trolls) has the text "does not exhaust to defend".
Does this mean that he can defend when already exhausted?
I think the answer is yes, because whilst the rulebook (p18) has the clear requirement that "a character must exhaust to be declared as a defender" [which obviously the Watcher's card text overrides], I don't believe that there is any global statement in rulebook or FAQ that only unexhausted characters may defend (or attack for that matter).