8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): February 10, 2006

New Frontier Media, Inc.

(Exact name of registrant as specified in its charter)

Colorado

(State or Other Jurisdiction of Incorporation)

000-23697	84-1084061
(Commission File Number)	(IRS Employer Identification Number)

7007 Winchester Circle, Suite 200, Boulder, Colorado 80301

(Address of Principal Executive Offices)

(303) 444-0900

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

□ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

□ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14-12)

□ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b))

□ Pre-commencement communications pursuant to Rule 13-e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01 Completion of Acquisition or Disposition of Assets.

On February 10, 2006, the Registrant completed the acquisition of all the capital stock of MRG Entertainment, Inc., a California corporation (“MRG Entertainment”), and all of the capital stock of MRG Entertainment’s affiliated companies, including Lifestyles Entertainment, Inc., a California corporation (“Lifestyles”), pursuant to that certain Stock Purchase Agreement dated as of February 6, 2006 between the Registrant, Marc Laurence Greenberg Trust Dated May 11, 2001, Goldberg Family Trust Dated June 15, 2001, Marc Laurence Greenberg and Richard Bruce Goldberg.

The Registrant acquired all of the capital stock of MRG Entertainment and its affiliates in exchange for $15 million in cash and $5 million of New Frontier Media common stock, as well as a three-year performance incentive of $2 million.

MRG Entertainment and its affiliates are producers and distributors of mainstream films and soft erotic features and events. Their titles, which include a library of over 350 hours of content, are distributed on U.S. premium pay TV channels such as Showtime and Cinemax, as well as on pay-per-view channels across a range of cable and satellite distribution platforms. MRG Entertainment and its affiliates also distribute a full range of independently produced motion pictures to markets around the world.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement

On February 10, 2006, the Registrant entered into an earnout agreement (the “Earnout Agreement”) with Marc Laurence Greenberg, Richard B. Goldberg, Marc Laurence Greenberg Trust dated May 11, 2001, and Goldberg Family Trust dated June 15, 2001 (collectively, the “Trusts”) in which the Registrant agreed, subject to the terms and conditions of the Earnout Agreement, to pay to the Trusts up to an aggregate amount of $2 million, to be paid, if at all, as follows: (i) in the event EBITDA (as defined in the Earnout Agreement) of MRG Entertainment and its affiliates for the period between and including January 1, 2006 and December 31, 2006 equals or exceeds $5,250,000, the Registrant shall make a one-time lump sum payment to the Trusts in the amount of $666,667; (ii) in the event the EBITDA of MRG Entertainment and its affiliates for the period between and including January 1, 2007 and December 31, 2007 equals or exceeds $5,750,000, the Registrant shall make a one-time lump sum payment to the Trusts in the amount of $666,667; and (iii) in the event the EBITDA of MRG Entertainment and its affiliates for the period between and including January 1, 2008 and December 31, 2008 equals or exceeds $6,000,000, the Registrant shall make a one-time lump sum payment to the Trusts in the amount of $666,667.

Item 3.02 Unregistered Sales of Equity Securities

On February 10, 2006, the Registrant issued and sold to the Trusts as partial consideration for MRG Entertainment and its affiliates 748,570 shares of its common stock, par value $.0001. The foregoing shares were issued in a private placement transaction pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933 without engaging in any general solicitation or advertising of any kind and without payment of underwriting discounts or underwriting commissions to any person.

Item 9.01 Financial Statements and Exhibits

Listed below are the financial statements and pro forma financial information filed as a part of this report:

(a) Financial Statements of Business Acquired

Audited financial statements of MRG Entertainment, Inc. and Subsidiaries and Lifestyle Entertainment, Inc. as of, and for the nine months ended, September 30, 2005.

(b) Pro Forma Financial Information

Pro forma financial information of the Registrant showing the effects of the acquisition of MRG Entertainment, Inc. and its affiliates for the twelve months ended March 31, 2005, the nine months ended December 31, 2005, and as of December 31, 2005.

(c) Not applicable.

(d) Exhibits

10.1 Stock Purchase Agreement dated February 6, 2006 between the Registrant, Marc Laurence Greenberg Trust, Goldberg Family Trust, Marc Laurence Greenberg and Richard Bruce Goldberg

10.2 Earnout Agreement dated February 10, 2006 between the Registrant, Marc Laurence Greenberg, Richard B. Goldberg, Marc Laurence Greenberg Trust and Goldberg Family Trust

10.3 Registration Rights Agreement dated February 10, 2006 between the Registrant, Marc Laurence Greenberg Trust, Goldberg Family Trust, Marc Laurence Greenberg and Richard Bruce Goldberg.

10.4 Escrow Agreement dated February 10, 2006 between the Registrant, First Community Bank, N.A., Marc Laurence Greenberg Trust, Goldberg Family Trust, Marc Laurence Greenberg and Richard Bruce Goldberg.

10.5 Employment Agreement dated February 10, 2006 between MRG Entertainment, Inc. and Richard Bruce Goldberg.

10.6 Employment Agreement dated February 10, 2006 between MRG Entertainment, Inc. and Marc Laurence Greenberg.

10.7 Non-Competition, Non-Solicitation and Trade Secrecy Agreement dated February 10, 2006 between the Registrant, MRG Entertainment, Inc. and Richard Bruce Goldberg.

10.8 Non-Competition, Non-Solicitation and Trade Secrecy Agreement dated February 10, 2006 between the Registrant, MRG Entertainment, Inc. and Marc Laurence Greenberg.

99.1 Press Release

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	NEW FRONTIER MEDIA, INC.
Dated: February 10, 2006	By:/s/ Michael Weiner Michael Weiner Chief Executive Officer

MRG ENTERTAINMENT, INC. AND SUBSIDIARIES

AND LIFESTYLES ENTERTAINMENT, INC.

Financial Statements

Table of Contents

Audited Financial Statements:
Report of Independent Registered Public Accounting Firm	F-1
Combined and Consolidated Balance Sheet September 30, 2005	F-2
Combined and Consolidated Statement of Income and Retained Earnings –	F-3
Nine month period ended September 30, 2005
Combined and Consolidated Statement of Cash Flows – Nine month period ended September 30, 2005	F-4
Notes to Combined and Consolidated Financial Statements	F-5
Pro Forma Financial Statements:
Unaudited Pro Forma Consolidated Condensed Financial Statements	F-13
Notes to the Unaudited Pro Forma Financial Statements	F-16

Grant Thornton

Accountants and Business Advisors

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of

MRG Entertainment, Inc, and Lifestyles Entertainment, Inc.:

We have audited the accompanying combined and consolidated balance sheet of MRG Entertainment, Inc. and subsidiaries and Lifestyles Entertainment, Inc. (collectively the “Company”) as of September 30, 2005 and the related statements of income and retained earnings and cash flows for the nine month period then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America as established by the Auditing Standards Board of the American Institute of Certified Public Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the combined and consolidated financial statements referred to above present fairly, in all material respects, the financial position of MRG Entertainment, Inc. and subsidiaries and Lifestyles Entertainment, Inc. as of September 30, 2005, and the results of their operations and their cash flows for the nine month period then ended, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the combined and consolidated financial statements, certain errors in the December 31, 2004 financial statements were discovered by Company management during the nine month period ended September 30, 2005. Accordingly, an adjustment has been made to accumulated deficit as of January 1, 2005.

/s/ Grant Thornton LLP

Los Angeles, California

February 6, 2006

Suite 300

1000 Wilshire Blvd.

Los Angeles, CA 90017-2464

T 213.627.1717

F 213.624.6793

W www.grantthornton.com

Grant Thornton LLP

US Member of Grant Thornton International

F-1

MRG ENTERTAINMENT, INC. AND SUBSIDIARIES AND LIFESTYLES ENTERTAINMENT, INC.
Combined and Consolidated Balance Sheet
September 30, 2005
ASSETS
Cash					$ 165,608
Retricted cash					75,158
Accounts receivable					1,543,554
Stockholder advances					90,800
Film costs, net					4,077,295
Recoupable costs and producer advances					1,066,832
Prepaid expenses and other assets					49,133
Property and equipment, net					133,745
				Total assets	$ 7,202,125
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank line of credit					$ 1,700,000
Accrued payroll, bonuses and related costs					2,163,052
Accounts payable and accrued liabilities					384,984
Producers and participations payable					883,172
Income taxes payable					602,920
Deferred income taxes					2,574
Deferred revenue					397,019
Stockholder loans					250,000
				Total liabilities	6,383,721
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
	Common stock:
		MRG Entertianment, Inc. - no par, 1,000,000 shares authorized,
			200,000 shares issued and outstanding		40,000
		Lifestyles Entertainment, Inc. - no par, 1,000,000 shares authorized,
			none isssued and outstanding		-
	Paid-in capital				20,000
	Retained earnings				758,404
				Total stockholders' equity	818,404
				Total liabilities and stockholders' equity	$ 7,202,125
	The accompanying notes are an integral part of the audited financial statement

F-2

MRG ENTERTAINMENT, INC. AND SUBSIDIARIES AND LIFESTYLES ENTERTAINMENT, INC.
Combined and Consolidated Statement of Income and Retained Earnings
Nine-Month Period Ended September 30, 2005
Licenses revenue - owned films			$ 8,134,153
Licenses revenue - distributed films			1,466,217
Other revenues			207,403
	Net revenues		9,807,773
Cost of revenues			4,251,629
	Gross margin		5,556,144
Salaries and wages			3,543,401
Selling, general and administrative			911,159
	Operating expenses		4,454,560
		Operating income	1,101,584
Interest expense			233,935
		Income before provision for income taxes	867,649
Provision for income taxes			391,901
		Net income	475,748
Accumulated deficit - beginning of period as previously reported			(166,307)
Correction of errors			448,963
Retained earnings - beginning of period as restated			282,656
Retained earnings - end of period			$ 758,404
	The accompanying notes are an integral part of the audited financial statement

F-3

MRG ENTERTAINMENT, INC. AND SUBSIDIARIES AND LIFESTYLES ENTERTAINMENT, INC.
Combined and Consolidated Statement of Cash Flows
Nine-Month Period Ended September 30, 2005
Cash flows from operating activities:
	Net income				$ 475,748
	Adjustments to reconcile net income to cash
		provided by operating activities:
			Amortization of film costs		3,897,101
			Depreciation and amortization		32,557
			Loss on disposal of property and equipment		5,771
			Deferred tax provision		6,971
	Changes in assets and liabilities
			Decrease in accounts receivable		1,952,378
			Increase in film costs		(3,717,232)
			Increase in prepaid expenses and other assets		(17,537)
			Increase in recoupable costs and producer advances		(463,204)
			Increase in accounts payable and accrued liabilities		1,819,354
			Increase in producers and participations payable		642,830
			Decrease in deferred revenue		(215,805)
			Increase in income taxes payable		291,652
			Decrease in restricted cash		92,101
				Total adjustments	4,326,937
				Net cash provided by operating activities	4,802,685
Cash flows from investing acitivities
	Purchase of property and equipment				(34,679)
	Cash proceeds from the sale of property and equipment				4,550
				Net cash used in investing activities	(30,129)
Cash flows from financing activities
	Net payments under line of credit				(4,599,763)
	Advances to stockholders				(90,800)
				Net cash used in financing activities	(4,690,563)
Net increase in cash					81,993
Cash, beginning of period					83,615
Cash, end of period					$ 165,608
		The accompanying notes are an integral part of the audited financial statement

F-4

MRG ENTERTAINMENT, INC. AND SUBSIDIARIES AND LIFESTYLES ENTERTAINMENT, INC.

Notes to Combined and Consolidated Financial Statements

September 30, 2005

1. Organization and Significant Accounting Policies

Organization

MRG Entertainment, Inc. (“MRG,”) a California corporation, was formed on December 20, 1995. MRG is a film and television production company as well as distribution company. Lifestyles Entertainment, Inc. (“Lifestyles”) a California S corporation, was formed on September 14, 2004. Lifestyles is a film and television distribution company focused on producing and distributing adult content. Both companies are headquartered in Los Angeles, California, and are solely owned and operated by their two founding stockholders. MRG distributes titles under the name Mainline Releasing and through its wholly-owned subsidiary Lightning Entertainment, Inc. Additionally, MRG owns four production companies, Magic Hour Pictures, Inc., Third Street Pictures, Inc., Lightning Entertainment Productions, Inc. and SG Productions, Inc. all of which are wholly owned. The Companies distribute titles in the United States and internationally.

Principles of Combination and Consolidation and Basis of Presentation

The accompanying combined and consolidated financial statements (the “financial statements”) include the consolidated accounts of MRG and its wholly-owned subsidiaries, combined with the accounts of Lifestyles (collectively referred to herein as the Company). All significant intercompany accounts and transactions have been eliminated in consolidation and combination.

The Company follows the accounting guidance of Statement of Position 00-2, “Accounting by Producers or Distributors of Films,” issued by the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (“SOP 00-2”). The Company has presented an unclassified balance sheet in accordance with the provisions of SOP 00-02.

Correction of Previously Reported Financial Statements

Certain errors in the December 31, 2004 financial statements were discovered by Company management during the nine-month period ended September 30, 2005. Accordingly, an adjustment has been made to decrease the accumulated deficit as of January 1, 2005 in the amount of approximately of $449,000. The components of the adjustment (increasing) or decreasing the previously reported accumulated deficit include: the deferral of revenue recognition of $(260,000), capitalization of recoupable costs and producer advances previously expensed of $701,000, impairment of recoupable costs of $(78,000), capitalization of previously expensed overhead of $420,000 to film costs, acceleration of rent expense recognition of $(35,000), increase in film cost amortization of $(50,000) and related tax adjustments of $(249,000). The effect on net income for the previous year ended December 31, 2004 was immaterial.

Use of Estimates

In preparing financial statements in conformity with U.S. generally accepted accounting principles, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. For example, estimates are used in management’s forecast of anticipated revenues (“ultimate revenues”), which is used to amortize film costs, and in determining allowances for accounts receivable and recoupable costs and producer advances. Actual results could differ from those estimates.

F-5

MRG ENTERTAINMENT, INC. AND SUBSIDIARIES AND LIFESTYLES ENTERTAINMENT INC.

Notes to Combined and Consolidated Financial Statements (continued)

Restricted Cash

Restricted cash represents amounts on deposit with a bank that are contractually designated by agreements between the Company and certain film producers related to amounts received from licensing arrangements of the producers’ films.

Revenue Recognition

Revenue from the sale or licensing of films and television programs is recognized upon meeting all of the recognition requirements of SOP 00-2. For films where the license fee is fixed and determinable, licensing revenues are recognized on the date when the license period commences for each film, the film is delivered to the distributor for exploitation pursuant to the terms and conditions of the licensing agreement, and collectibility of the license fee is reasonably assured. For distribution in the home video market the Company’s share of licensing revenues is recognized as it occurs and is reported to the Company by third-party providers. For distribution in the pay-per-view market the Company recognizes revenues in the viewing period based on management estimates and as reported by third-party providers.

For represented titles, the Company only recognizes its percentage share of the licensing revenues. The producers’ share or participation of licensing revenues is recorded as a liability until remitted to the producer. There are no producers’ participations on owned films. The Company is generally allowed a marketing fee under the terms of its distribution contracts with producers, which is usually stated as a fixed amount typically recoupable over a 12 to 18 month period. The marketing fee is recognized as revenue when recouped as such recoupments generally correspond to the performance of the related marketing activities.

Deferred revenue includes cash payments to the Company for which revenue recognition criteria has not been met. For represented titles, deferred revenues include the entire license fee collected by the Company from the licensee, which includes amounts payable to producers.

Producers and Participations Payable

Producer payable represent amounts due to the producers from the exhibition of represented films based on the terms of contracts between the Company and producers. Participations payable include amounts due to another distributor in a revenue-share arrangement based on the financial results of certain pay-per-view titles distributed by the Company. Producer and participations payable are expected to be paid in full during the next twelve months.

Accounts Receivable

The Company’s accounts receivable are primarily due from film production and distribution companies and customers in the cable and satellite industries. For represented titles, accounts receivable include the entire license fee due the Company from the licensee, which includes amounts payable to producers. The Company evaluates whether an allowance for doubtful accounts is necessary by considering a number of factors including the length of time a receivable is outstanding, collection history, the customer’s current ability to pay its obligation to the Company and the condition of the general economy and the industry in which the Company’s customers operate. The Company does not believe an allowance for doubtful accounts is necessary at September 30, 2005.

F-6

MRG ENTERTAINMENT, INC. AND SUBSIDIARIES AND LIFESTYLES ENTERTAINMENT INC.

Notes to Combined and Consolidated Financial Statements (continued)

Concentration of Credit Risk

At September 30, 2005, approximately 25% and 22% of accounts receivable are due from two pay-per-view distributors, respectively. Net revenues earned from these two distributors were approximately 11% from one and 16% from the other of total net revenue for the nine-month period ended September 30, 2005. Approximately 22% of net revenues was earned on the sale of a film to an independent film producer and distribution company.

Film Costs

Capitalized costs of film and television product (“film costs”), which are produced or acquired for sale or license, are stated at the lower of cost, less accumulated amortization, or fair value. Film costs consist of direct production costs and production overhead and include costs associated with completed titles and those in development. Interest expense is not capitalized as the production runs are short-term in nature. Film costs are amortized based on the ratio of the current period’s revenues to estimated ultimate revenues, for a period not exceeding ten years, from all sources on an individual film forecast basis. Film cost valuation is reviewed on a title-by-title basis when an event or change in circumstance indicates the fair value of a title is less than the unamortized cost. Estimated losses, if any, are provided in the current period earnings on an individual film forecast basis when such losses are estimated.

Estimates of ultimate revenues can change significantly due to a variety of factors, including the level of market acceptance of film and television product. Accordingly, revenue estimates are reviewed periodically and amortization is adjusted on a prospective basis, as necessary. Such adjustments could have a material effect on results of operations in future periods.

Recoupable Costs and Producer Advances

Recoupable costs and producer advances represent amounts contractually allowed and non-refundable advances as provided in distribution arrangements with producers. Such amounts will be recouped against future licensing fees before submitting to producers the residual distribution fees. The Company evaluates recoupable costs and producer advances for impairment based on estimates of future licensing fees.

Advertising Costs

The Company expenses marketing and advertising costs, including film exploitation costs, as incurred. Advertising costs for the period were $228,299.

Financial Instruments

The carrying value of the Company’s accounts receivable, accounts payable and accrued liabilities, producer and participations payable, and income tax payable approximates fair value due primarily to their short-term nature. Long-term receivables are discounted using MRG’s incremental borrowing rate. The carrying value of the Company’s line of credit approximates fair value due to the line’s rate of interest approximating market rates. Generally, fair values are based on estimates using present value techniques. The fair value of stockholder loans cannot be determined due to the related party nature of such transactions.

F-7

MRG ENTERTAINMENT, INC. AND SUBSIDIARIES AND LIFESTYLES ENTERTAINMENT INC.

Notes to Combined and Consolidated Financial Statements (continued)

Long-Lived Assets

The Company reviews long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of such assets, the Company performs an analysis of the anticipated undiscounted future net cash flows of the individual assets over the remaining amortization period and recognizes an impairment loss if the carrying value exceeds the expected future cash flows. The impairment loss is measured based upon the difference between the fair value of the asset and its recorded carrying value

Income Taxes

The Company accounts for income taxes pursuant to Statements of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes.” Under SFAS No. 109, deferred income tax assets and liabilities are computed based on the temporary difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal income tax rate in effect for the year in which the differences are expected to reverse. Deferred income tax expenses and credits are based on the changes in the deferred income tax assets and liabilities from period to period. Lifestyles is an S-Corporation, and as such the taxable income of Lifestyles is allocated to the stockholders based on their respective ownership. Additionally, as an S-Corporation, Lifestyles is subject to a 1.5% California Franchise tax.

Statement of Cash Flows

The Company prepares its statements of cash flows using the indirect method as defined under SFAS No. 95, “Statement of Cash Flows.” During 2005, the Company made cash payments of approximately $200,000 and $90,200 for interest and income taxes, respectively.

Comprehensive Income

SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for reporting comprehensive income and its components in the financial statements. Comprehensive income as defined includes all changes in equity (net assets) during a period from non-owner sources. During the period, there were no differences between comprehensive income and net income as reported in the accompanying financial statements.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued SFAS No. 154, “Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3” in May 2005. SFAS No. 154 replaces Accounting Principle Board (“APB”) Opinion No. 20, “Accounting Changes”, and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”, and changes the requirements for the accounting and reporting of a change in accounting principle, including voluntary changes. The Statement carries forward the guidance of APB Opinion No. 20, for reporting a correction of an error in previously issued financial statements and changes in estimates. This Statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company does not expect the adoption of SFAS No. 154 will have a significant impact on its financial position or results of operations.

F-8

MRG ENTERTAINMENT, INC. AND SUBSIDIARIES AND LIFESTYLES ENTERTAINMENT INC.

Notes to Combined and Consolidated Financial Statements (continued)

2. Property and Equipment

Property and equipment consist of the following as of September 30, 2005:

Equipment	$ 207,294
Furniture and Fixtures	47,314
Computers	34,650
Software	29,967
Leasehold improvements	3,750
	322,975
Accumulated depreciation and amortization	(189,230)
	$ 133,745

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method ranging from 5 to 7 years. Leasehold improvements are amortized over the lesser of the useful life or the term of the lease. Depreciation and amortization expense for the period was $32,557.

3. Film Costs

Film costs consist of the following as of September 30, 2005:

Released, less amortization of $19,212,000	$ 2,486,645
Completed, not released	862,768
In-production	665,446
In development	62,436
	$ 4,077,295

Based on management’s estimate of ultimate revenues as of September 30, 2005, approximately 70% of completed and unamortized film costs are expected to be amortized during the next twelve months, and substantially amortized by September 30, 2008.

4. Income Taxes

Temporary differences that give rise to deferred tax (liabilities) assets are approximately as follows:

Accelerated depreciation	$ (46,766)
Allowances on distribution costs incurred	31,071
Deferred rent expense	11,341
Other	1,780
	$ (2,574)

During the period, the income tax provision includes current tax expense of $384,930 and deferred tax expense of $6,971. The current tax provision is comprised of approximately $222,000 for federal, $83,000 for state, and $80,000 for foreign income taxes. A tax credit is taken against federal income tax for the full amount of foreign taxes paid. The deferred provision is primarily a state provision only.

F-9

MRG ENTERTAINMENT, INC. AND SUBSIDIARIES AND LIFESTYLES ENTERTAINMENT INC.

Notes to Combined and Consolidated Financial Statements (continued)

Differences between the income tax provision in the accompanying financial statements and the income tax expense computed at the federal rate of 34% is that (i) Lifestyles is an S Corporation for tax purposes and therefore its income passes through to the shareholders who bear the responsibility of paying income taxes thereon, ii) state taxes net of federal benefit (5.83%), and iii) disallowed expenses for tax purposes of $15,000. Lifestyles had net losses of approximately $(82,000) for the period.

5. Bank Line of Credit and Stockholder Loans

The Company has a line of credit with a bank in the amount of $6.5 million with interest payments due monthly. The interest rate is the bank’s prime rate plus 0.25%. At September 30, 2005, the interest rate was 7.25%. At September 30, 2005, the Company had outstanding borrowings of $1,700,000. Available borrowings are limited to eligible receivables and a film-library credit of $1.5 million. At September 30, 2005, the Company had availability under the line of credit of approximately $2.8 million.

The line of credit includes various restrictive financial covenants, with which the Company is in compliance at September 30, 2005. The line of credit also includes certain change of ownership restrictions. Borrowings are secured by substantially all of the Company’s assets and are personally guaranteed by the stockholders of the Company. The line of credit has a renewal date of September 1, 2005 and in December 2005 was extended through March 1, 2006 with substantially the same terms other than a reduction in the credit line to $6 million.

The Company has outstanding stockholders loans totaling $250,000, which are subordinate to the bank line of credit. The loans are due on demand, unsecured and bear interest at 7% per annum.

6. Commitments and Contingencies

Office Lease

The Company leases its office facilities under operating lease agreements, the latest of which expires in November 2008. Rent expense approximated $96,000 during the period ended September 30, 2005.

Future minimum annual lease payments under all non-cancelable operating leases are approximately as follows:

Period Ending September 30,
2006	$ 131,000
2007	135,000
2008	139,000

Legal Proceedings and Contingencies

The Company is involved in various legal proceedings in the normal course of its business. While the result of any litigation contains an element of uncertainty, management presently believes that the outcome of any known, pending or threatened legal proceeding or claim, individually or combined, will not have a material adverse effect on the Company’s financial position or results of operations.

F-10

MRG ENTERTAINMENT, INC. AND SUBSIDIARIES AND LIFESTYLES ENTERTAINMENT INC.

Notes to Combined and Consolidated Financial Statements (continued)

The Company is currently in dispute with an individual in which the Company received a judgment against the individual of approximately $1.5 million, including interest. Because collectibility is uncertain, the Company has not recognized the judgment in the accompanying financial statements. If collected, the judgment would have a significant favorable impact on the Company’s financial position and results of operations.

The Company has employment agreements with its stockholders dated January 1, 2005 providing employment for a seven year term, subject to provisions of the agreements, and compensation and severance arrangements, including certain payment obligations, for up to five years, by the Company in the event of incapacitation of the stockholders as defined in the agreements.

7. Related Party Transactions

During the period, the Company accrued $1,950,000 of bonuses payable to the officers/stockholders. This bonus expense is included in salaries and wages in the accompanying statement of income.

During the period, the Company has made unsecured, non-interest bearing advances to stockholders in the amount of $90,800 at September 30, 2005, which is reflected as stockholder advances in the accompanying balance sheet.

Company’s stockholders have loaned the Company $250,000 – see note 5. Interest expensed during the period on these loans was $13,125, which has been accrued in accounts payable and accrued liabilities.

8. Profit Sharing Plan

The Company has a defined-contribution, profit-sharing plan that covers all eligible employees. Contributions are discretionary based on the discretion of the Board of Directors. During the period, the Company has accrued $88,000 for the anticipated 2005 contribution.

9. Subsequent Event

On February 6, 2006, the Company and its stockholders executed a stock purchase agreement to sell all of the outstanding common stock of MRG and Lifestyles to a publicly held corporation.

F-11

NEW FRONTIER MEDIA, INC.

UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

On February 10, 2006, (“the Transaction date”) New Frontier Media, Inc. (“New Frontier Media”) purchased 100% of the outstanding capital stock (“the Acquisition”) of MRG Entertainment, Inc. and its affiliated companies (“MRG”). The total estimated purchase price was $21.0 million, comprised of $15.0 million in cash, $5 million of New Frontier Media common stock and $1.0 million in estimated acquisition related costs.

The following unaudited pro forma consolidated condensed financial statements have been prepared based on the historical consolidated financial statements of New Frontier Media after giving effect to the acquisition of MRG and the assumptions and adjustments described in the accompanying notes to these unaudited pro forma consolidated condensed financial statements.

New Frontier Media and MRG have different fiscal years end, which end on March 31^st and December 31^st, respectively.

The unaudited pro forma consolidated condensed statement of operations for the year ended March 31, 2005 gives effect to the acquisition of MRG as if it had occurred at the beginning of the year and has been derived from:

• the audited historical consolidated statement of operations of New Frontier Media for the year ended March 31, 2005; and

• the unaudited historical consolidated statement of operations of MRG for the year ended December 31, 2004.

The unaudited pro forma consolidated condensed statement of operations for the nine-months ended December 31, 2005 gives effect to the acquisition of MRG as if it had occurred at the beginning of the period and has been derived from:

• the unaudited historical consolidated statement of operations of New Frontier Media for the nine-months ended December 31, 2005; and

• the audited historical consolidated statement of operations of MRG for the nine-months ended September 30, 2005.

The unaudited pro forma consolidated condensed balance sheet as of December 31, 2005 gives effect to the acquisition of MRG as if it had occurred on December 31, 2005 and has been derived from:

• the unaudited historical consolidated balance sheet of New Frontier Media as of December 31, 2005; and

• the audited historical consolidated balance sheet of MRG as of September 30, 2005.

Because these unaudited pro forma consolidated condensed financial statements have been prepared based on preliminary estimates of fair values attributable to the Acquisition, the actual amounts recorded for the Acquisition may differ materially from the information presented in these unaudited pro forma consolidated condensed financial statements. The total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed based on management’s best estimates of fair value, with the excess cost over net tangible and identifiable intangible assets acquired being allocated to goodwill. We retained the services of a third party valuation firm to assist in the preliminary valuation of the intangible assets and certain tangible assets acquired and liabilities assumed. These allocations are subject to change pending a final analysis of the fair value of the assets acquired and liabilities assumed, which could result in material changes from the information presented. The pro forma consolidated condensed balance sheet does not purport to be indicative of the financial position that would have resulted had the transaction taken place on December 31, 2005.

The pro forma information presented is for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved if the Acquisition had occurred at the beginning of the periods presented, nor is it indicative of future operating results. The unaudited pro forma consolidated condensed financial statements do not reflect any operating efficiencies and cost savings that we may achieve with respect to the consolidated companies. The pro forma information should be read in conjunction with the accompanying notes thereto, and in conjunction with the historical consolidated financial statements and accompanying notes of New Frontier Media included in its annual reports on Form 10-K and quarterly reports on Form 10-Q. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable.

F-12

New Frontier Media, Inc. and Subsidiaries

Unaudited Pro Forma Consolidated Condensed Balance Sheet

December 31, 2005

(in thousands)

	New Frontier Media Historical December 31, 2005	MRG Historical September 30, 2005	Adjustments		Pro Forma Combined
CURRENT ASSETS:
Cash and cash equivalents	$22,910	$166	(925)	(A)
			(1,700)	(B)	20,451
Restricted Cash	-	75	-		75
Marketable securities	15,192	-	(11,112)	(C)	4,080
Accounts receivable, net of $21	9,195	1,544			10,739
Prepaid expenses	568	49			617
Deferred tax asset	404	-			404
Other	422	1,157	(102)	(D)
					1,477
TOTAL CURRENT ASSETS	48,691	2,991	(13,839)		37,843
FURNITURE AND EQUIPMENT, net	3,874	134			4,008
OTHER ASSETS:
Prepaid distribution rights, net	9,088				9,088
Film Library, net		4,077	(4,077)	(E)
			8,500	(E)	8,500
Marketable securities	3,888	-	(3,888)	(C)	-
Deferred tax asset	83	-			83
Goodwill	3,743	-	15,786	(E)	19,529
Other identifiable assets, net	17	-			17
Other	938				938
TOTAL OTHER ASSETS	17,757	4,077	16,321		38,155
TOTAL ASSETS	$70,322	$7,202	$2,482		$80,006
CURRENT LIABILITIES:
Accounts payable	1,537	385			1,922
Current portion of obligations under cap leases	19	-			19
Bank line of credit	-	1,700	(1,700)	(B)	-
Deferred revenue	509	397			906
Taxes payable	1,597	603			2,200
Stockholder loans	-	250			250
Producers and Participations payable	-	883			883
Accrued liabilities	2,941	2,163			5,104
TOTAL CURRENT LIABILITIES	6,603	6,381	(1,700)		11,284
LONG TERM LIABILITIES:
Deferred rent	204	-			204
Deferred tax liability	-	3			3
Deferred lease incentive	679	-			679
TOTAL LONG TERM LIABILITIES	883	3	-		886
TOTAL LIABILITIES	7,486	6,384	(1,700)		12,170
COMMITTMENT AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock	2	40	(40)	(F)	2
Additional paid-in capital	56,393	20	5,000	(G)
			(20)	(F)	61,393
Accumulated earnings	6,528	758	(758)	(F)	6,528
Acccumulated other comprehensive loss	(87)	-			(87)
TOTAL SHAREHOLDERS' EQUITY	62,836	818	4,182		67,836
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$70,322	$7,202	$2,482		$80,006

F-13

New Frontier Media, Inc. & Subsidiaries

Unaudited Pro Forma Consolidated Condensed Statement of Operations

For the Nine Months Ended December 31, 2005

(in thousands, except per share data)

	New Frontier Media Historical Nine Months Ended December 31, 2005	MRG Historical Nine Months Ended September 30, 2005	Adjustments		Pro Forma Combined
NET SALES	$33,912	$9,808			$43,720
COST OF SALES	10,735	4,252	2,000	(H)	16,987
GROSS MARGIN	23,177	5,556	(2,000)		26,733
OPERATING EXPENSES
Sales and Marketing	3,654				3,654
General and Administrative	7,708	4,454	(1,980)	(I)	10,182
TOTAL OPERATING EXPENSES	11,362	4,454	(1,980)		13,836
OPERATING INCOME	11,815	1,102	(20)		12,897
OTHER INCOME/(EXPENSE) Interest Income	893	-	(338)	(J)	555
Interest Expense	(38)	(234)	234	(K)	(38)
Other Income	14	-			14
TOTAL OTHER INCOME	869	(234)	(104)		531
NET INCOME BEFORE PROVISION FOR INCOME TAXES	12,684	868	(124)		13,428
PROVISION FOR INCOME TAXES	(4,702)	(392)	30	(L)	(5,018)
			46	(M)
NET INCOME	$7,982	$476	(48)		$8,410
Basic income per share	$0.35				$0.36
Basic weighted average shares outstanding	22,738		749		23,487
Diluted income per share	$0.34				$0.35
Diluted weighted average shares outstanding	23,196		749		23,945

F-14

New Frontier Media, Inc. & Subsidiaries

Unaudited Pro Forma Consolidated Condensed Statement of Operations

For the Year Ended March 31, 2005

(in thousands, except per share data)

	New Frontier Media Historical Year Ended March 31, 2005	MRG Historical Year Ended December 31, 2004	Adjustments		Pro Forma Combined
NET SALES	$46,277	$11,778			$58,055
COST OF SALES	16,047	5,523	2,228	(H)	23,798
GROSS MARGIN	30,230	6,255	(2,228)		34,257
OPERATING EXPENSES
Sales and Marketing	4,862	-			4,862
General and Administrative	10,097	4,897	(1,318)	(I)	13,676
Restructuring Recovery	(546)	-			(546)
TOTAL OPERATING EXPENSES	14,413	4,897	(1,318)		17,992
OPERATING INCOME	15,817	1,358	(910)		16,265
OTHER INCOME/(EXPENSE)
Interest income	403	-	(300)	(J)	103
Interest expense	(104)	(201)	201	(K)	(104)
Other income	47	(2)			45
TOTAL OTHER INCOME	346	(203)	(99)		44
NET INCOME BEFORE PROVISION FOR INCOME TAXES	16,163	1,155	(1,009)		16,309
PROVISION FOR INCOME TAXES	(5,041)	(401)	373	(M)	(5,069)
NET INCOME	$11,122	$754	($636)		$11,240
Basic income per share	$0.50				$ 0.49
Basic weighted average shares outstanding	22,265		749		23,014
Diluted income per share	$0.48				$ 0.47
Diluted weighted average shares outstanding	23,067		749		23,816

F-15

Note 1. Basis of Pro Forma Presentation

The pro forma consolidated condensed financial statements included herein have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission.

Because these unaudited pro forma consolidated condensed financial statements have been prepared based on preliminary estimates of fair values attributable to the Acquisition, the actual amounts recorded for the Acquisition may differ materially from the information presented in these unaudited pro forma consolidated condensed financial statements.

The unaudited pro forma consolidated condensed financial statements do not reflect any operating efficiencies and cost savings that we may achieve with respect to the consolidated companies. The pro forma information should be read in conjunction with the accompanying notes thereto, and in conjunction with the historical consolidated financial statements and accompanying notes of New Frontier Media included in its annual reports on Form 10-K and quarterly reports on Form 10-Q.

Note 2. Acquisition of MRG

Purchase Price

The total estimated purchase price of the Acquisition was $21.0 million, comprised of $15.0 million in cash, $5 million of New Frontier Media common stock and $1.0 million in estimated acquisition related costs.

Under provisions of the Stock Purchase Agreement, MRG's principal officers and owners are able to earn up to $2 million over three years if certain performance targets are met. In addition, MRG's principal officers and owners are eligible to receive $0.3 million for the repayment of loans outstanding at the date of Acquisition if certain working capital requirements are met and are able to receive up to $1.0 million over three years if certain producer advances are collected during this time period.

F-16

The $2.0 million earnout and a $1.3 million working capital adjustment have not been given effect in the pro forma unaudited consolidated condensed financial statements and will be recorded when the contingencies are resolved.

Had the contingent amounts been recorded, the cash payment would have increased by $3.3 million, with a corresponding increase in goodwill of $1.3 million and an increase to compensation expense of approximately $2.0 million, which will be recognized over three years if certain performance requirements are met.

Preliminary Purchase Price Allocation

The total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed based on management’s best estimates of fair value, with the excess cost over net tangible and identifiable intangible assets acquired being allocated to goodwill.

We retained the services of a third party valuation firm to assist in the preliminary valuation of the intangible assets and certain tangible assets acquired and liabilities assumed. These allocations are subject to change pending a final analysis of the fair value of the assets acquired and liabilities assumed, which could result in material changes from the information presented.

New Frontier Media is still assessing the identification and valuation of the net tangible assets and other identifiable intangibles, which may be carved out from goodwill. This assessment is expected to be completed by March 15, 2006 and may result in fair values that are different than the preliminary estimates of these amounts. Adjustments to these estimates will be included in the allocation of the purchase price of MRG, if the adjustment is determined within the purchase price allocation period of up to twelve months.

F-17

The total estimated purchase price of $21.0 million has been allocated as follows (in millions):

Cash Paid	$       15,000
FMV of stock used as consideration	5,000
Estimated direct acquisition costs	1,027
Total estimated purchase price	21,027
Less: Fair value of total current assets acquired	2,991
Less: Fair value of fixed assets	134
Plus: Liabilities Assumed	6,384
Total excess purchase price	24,286
Allocated to Film Library	8,500
Goodwill	$       15,786

Note 3. Pro Forma Adjustments

The following pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable:

(A) To record pro forma estimate of additional acquisition related expenses expected to be incurred, less amounts previously accounted for and deferred by New Frontier Media of $102,000 and included in other current assets.

(B) To record payoff of outstanding line of credit of MRG, which is required to be repaid upon a change in control.

(C) To record the use of cash associated with cash portion of purchase price consideration of $15 million.

(D) To reclassify deferred acquisition related transaction costs to Goodwill.

(E) To record preliminary purchase price allocation to goodwill and increased basis in film library.

(F) To eliminate MRG Entertainment’s historical stockholders’ equity.

F-18

(G) To record the issuance of $5 million of New Frontier Media, Inc.’s stock as part of purchase price consideration.

(H) To accrue additional film amortization expense as a result of the increase to the basis of the Film Library. Film costs are amortized under SOP 00-2 based on the ratio of the current period's revenues to estimated ultimate revenues, for a period not exceeding ten years, from all sources on an individual film forecast basis. The additional amortization was based on the ratio of actual revenues recognized for the films for each period over the total estimated ultimate revenues to be derived from these films multiplied by the stepped up basis of the Film Library.

(I) To eliminate bonuses paid to MRG’s principal officers and owners. Although these two officers will have employment agreements with MRG after the Acquisition and are, at the discretion of New Frontier Media's Compensation Committee, eligible for an annual bonus of up to their base salary, these bonuses have not been taken into consideration as part of the Pro Forma adjustments.

In addition, MRG's principals and owners may be entitled to earn up to $2 million over three years if certain performance targets are met, which has not been considered in the pro forma consolidated condensed financial statements. Had the contingent earnout been accounted for, pro forma net income before income taxes and pro forma net income after pro forma income taxes would have decreased by $667,000 and $458,000 respectively, for the year ended March 31, 2005 and $500,250 and $312,650, respectively, for the nine months ended December 31, 2005. In addition, pro forma basic and diluted earnings per share would have decreased by $0.02 for the year ended March 31, 2005 and $0.01 for nine months ended December 31, 2005.

(J) To record a pro forma decrease in interest income resulting from cash utilized with the Acquisition, based on actual cash paid for the Acquisition of $15.0 million and the average historical interest rates earned on New Frontier Media funds of approximately 3% as of December 31, 2005 and 2% as of March 31, 2005.

(K) To record a pro forma decrease in interest expense resulting from the payoff of the outstanding line of credit.

(L) To record a tax benefit at an effective rate of 37% for the operating loss of $82,000 incurred by one of MRG’s affiliated companies that was organized as an S corporation for the nine months ended December 31, 2005.

(M) To record the tax effect of the pro forma adjustments at an effective tax rate of 37%.

Note 4. Unaudited Pro Forma Earnings Per Share Data

Basic and diluted pro forma earnings per share were calculated using the weighted average shares outstanding of New Frontier Media for the nine months ended December 31, 2005 and the year ended March 31, 2005, assuming the 748,570 shares issued in connection with the Acquisition were issued at the beginning of each period.

F-19

EX-10

                            STOCK PURCHASE AGREEMENT

                          DATED AS OF FEBRUARY 6, 2006

                                      AMONG

                            NEW FRONTIER MEDIA, INC.

                MARC LAURENCE GREENBERG TRUST DATED MAY 11, 2001

                    GOLDBERG FAMILY TRUST DATED JUNE 15, 2001

                                       AND

                             MARC LAURENCE GREENBERG

                                       AND

                               RICHARD B. GOLDBERG













                                                                                                             
ARTICLE I. DEFINITIONS........................................................................................... 1

ARTICLE II. PURCHASE AND SALE OF THE SHARES......................................................................11
         2.1        Purchase and Sale............................................................................11
         2.2        Closing......................................................................................11

ARTICLE III. PURCHASE PRICE; PAYMENT OF PURCHASE PRICE; ESCROW AGREEMENT.........................................11
         3.1        Purchase Price; Payment of Purchase Price....................................................11
         3.2        Contingent Payments..........................................................................12
         3.3        Escrow Amounts...............................................................................13

ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLERS REGARDING THE TARGETS......................................13
         4.1        Capitalization; Legal Status; Qualification; Title to Shares.................................14
         4.2        Subsidiaries.................................................................................14
         4.3        No Violation.................................................................................15
         4.4        Ownership of Assets..........................................................................15
         4.5        Financial Statements.........................................................................15
         4.6        Absence of Undisclosed Liabilities...........................................................16
         4.7        Real Property; Leased Real Property..........................................................16
         4.8        Insurance....................................................................................17
         4.9        Contracts....................................................................................17
         4.10       Litigation; Orders...........................................................................18
         4.11       Environmental Laws...........................................................................18
         4.12       Intellectual Property and Information Technology.............................................19
         4.13       Employees; Independent Contractors...........................................................20
         4.14       Employee Benefit Matters.....................................................................21
         4.15       Taxes........................................................................................24
         4.16       Brokers......................................................................................26
         4.17       Absence of Certain Changes or Events.........................................................26
         4.18       Permits......................................................................................28
         4.19       Accounts Receivable..........................................................................28
         4.20       Compliance with Laws.........................................................................29
         4.21       Transactions with Related Parties............................................................29
         4.22       Indebtedness to Affiliates...................................................................29
         4.23       Agents.......................................................................................29
         4.24       Commission Sales Contracts...................................................................29
         4.25       Customers....................................................................................30
         4.26       Books and Records............................................................................30
         4.27       No Material Misstatements or Omissions.......................................................30
         4.28       Shareholders, Directors and Officers.........................................................30
         4.29       Bank Accounts; Lock Boxes....................................................................30


                                       i





                                                                                                             
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF SELLERS REGARDING THEMSELVES........................................30
         5.1        Power and Authority; Authorizations; Execution and Validity..................................30
         5.2        Consents.....................................................................................31
         5.3        No Defaults or Conflicts.....................................................................31
         5.4        Brokers......................................................................................31
         5.5        Title to Shares; Litigation..................................................................31
         5.6        No Other Claims..............................................................................31
         5.7        Not Foreign Person...........................................................................31
         5.8        Investment...................................................................................31
         5.9        Grantor Trusts...............................................................................31

ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF PURCHASER..........................................................32
         6.1        Organization and Qualification...............................................................32
         6.2        Authority....................................................................................32
         6.3        Investment...................................................................................32
         6.4        Brokers......................................................................................32
         6.5        Litigation...................................................................................32
         6.6        Securities Filings...........................................................................32
         6.7        Purchaser's Common Stock.....................................................................33
         6.8        Consents.....................................................................................33
         6.9        No Violation.................................................................................33

ARTICLE VII. COVENANTS OF THE PARTIES............................................................................34
         7.1        Interim Conduct of Business by Targets.......................................................34
         7.2        Access to Information of Targets.............................................................35
         7.3        Opening Financial Statements.................................................................35
         7.4        Notification of Changes......................................................................36
         7.5        Consents.....................................................................................36
         7.6        Supplemental Disclosure......................................................................36
         7.7        Governmental Filings.........................................................................36
         7.8        Payoff of Revolving Credit Facility..........................................................36
         7.9        Seller Loans.................................................................................36
         7.10       Sale by Sellers of Purchaser's Common Stock..................................................37
         7.11       Certain Tax Matters..........................................................................37
         7.12       Employee Benefit Plans.......................................................................40
         7.13       Releases of Seller's Guarantees..............................................................41
         7.14       Further Assurances...........................................................................41

ARTICLE VIII. CONDITIONS PRECEDENT TO OBLIGATIONS TO CLOSE.......................................................41
         8.1        Conditions Precedent to Obligation of Purchaser..............................................41
         8.2        Conditions Precedent to Obligation of Sellers................................................43

ARTICLE IX. INDEMNIFICATION......................................................................................45
         9.1        Purchaser Claims for Indemnification.........................................................45
         9.2        Limits on Purchaser Claims for Indemnification...............................................45
         9.3        Purchaser Indemnification....................................................................46
         9.4        Assertion of Claims..........................................................................47
         9.5        Source of Recovery...........................................................................47
         9.6        Third Party Claims...........................................................................47



                                       ii





                                                                                                             
ARTICLE X. TERMINATION...........................................................................................48
         10.1       Termination of Agreement.....................................................................48
         10.2       Effect of Termination........................................................................49

ARTICLE XI. GENERAL  50
         11.1       Amendments...................................................................................50
         11.2       Waivers......................................................................................50
         11.3       Notices......................................................................................50
         11.4       Successors and Assigns; Parties in Interest..................................................51
         11.5       Severability.................................................................................51
         11.6       Entire Agreement.............................................................................51
         11.7       Governing Law................................................................................52
         11.8       Arbitration..................................................................................52
         11.9       Release of Information; Confidentiality......................................................52
         11.10      Certain Construction Rules...................................................................52
         11.11      Counterparts.................................................................................53
         11.12      General Release..............................................................................53



                                      iii



                            STOCK PURCHASE AGREEMENT

         THIS STOCK PURCHASE AGREEMENT, dated as of February 6, 2006 (this
"Agreement"), is entered into by and among New Frontier Media, Inc., a Colorado
corporation ("Purchaser"), Marc Laurence Greenberg Trust dated May 11, 2001 (the
"Greenberg Trust"), Goldberg Family Trust dated June 15, 2001 (the "Goldberg
Trust" and, together with the Greenberg Trust, the "Trusts"), Marc Laurence
Greenberg, an individual ("Greenberg"), and Richard B. Goldberg, an individual
("Goldberg").

         WHEREAS, the Trusts collectively own (i) 100% of the issued and
outstanding capital stock (the "MRG Shares") of MRG Entertainment, Inc., a
California corporation ("MRG") and (ii) 100% of the issued and outstanding
capital stock (the "Lifestyle Shares" and, together with the MRG Shares, the
"Shares"), of Lifestyles Entertainment, Inc., a California corporation
("Lifestyles"); and

         WHEREAS, Purchaser desires, upon the terms and conditions hereinafter
set forth, to purchase all of the Shares from the Trusts; and

         WHEREAS, Sellers (as hereinafter defined) desire, upon the terms and
conditions hereinafter set forth, that the Trusts sell all of the Shares to the
Purchaser.

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:


                                   ARTICLE I

                                   DEFINITIONS

         As used in this Agreement:

         "AAA" has the meaning specified in Section 11.8.

         "Act" means the Securities Act of 1933, as amended from time to time,
or any successor statute.

         "Affiliate" means, as to any Person, (a) any Subsidiary of such Person
and (b) any other Person which, directly or indirectly, controls, is controlled
by, or is under common control with, such Person and includes, in the case of a
Person other than an individual, each officer or director, general partner,
member, trustee or beneficiary of such Person, and each Person who is the
beneficial owner of 10% or more of such Person's outstanding stock or other
equity interests having ordinary voting power in the election of directors of
such Person. For the purposes of this definition, "control" means the possession
of the power to direct or cause the direction of management and policies of such
Person, whether through the ownership of voting stock, by contract or otherwise.

         "Agreement" has the meaning specified in the preamble..

         "Alternative A Cash Consideration" has the meaning specified in Section
3.1(a).

         "Alternative A Escrow Amount" has the meaning specified in Section
3.3(a)(i).




         "Alternative A Purchase Price" means the purchase price described in
Section 3.1(a).

         "Alternative A Stock Consideration" has the meaning specified in
Section 3.1(a).

         "Alternative B Escrow Amount" has the meaning specified in Section
3.3(a)(ii).

         "Alternative B Purchase Price" means the purchase price described in
Section 3.1(b).

         "Amended Tax Returns" has the meaning specified in Section 7.11(i).

         "Assets" has the meaning specified in Section 4.4.

         "Average Closing Price" means the simple arithmetic average of the
volume weighted average prices for the shares of Purchaser's Common Stock, as
calculated for the period beginning at 9:30 a.m., New York City time and
concluding at 4:00 p.m., New York City time, for each of the trading days in the
period of thirty (30) consecutive trading days ending on the trading day
immediately preceding the Closing Date, as reported by Bloomberg Financial LP
(using the NOOF Equity AQR function).

         "Basket" has the meaning specified in Section 9.2(b).

         "Benefit Plans" has the meaning specified in Section 4.14(a).

         "Bienstock Consulting Agreement" shall mean that certain Consulting
Agreement dated January 1, 2001 between MRG and Marc Bienstock.

         "Buy-Sell Agreement" has the meaning specified in Section 8.1(m).

         "Claims" has the meaning specified in Section 9.2(a).

         "Closing" has the meaning specified in Section 2.2.

         "Closing Date" has the meaning specified in Section 2.2.

         "COBRA" has the meaning specified in Section 4.14(m).

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Contract" means any written contract, agreement, indenture, note,
bond, loan, instrument, lease, conditional sale contract, mortgage, license,
franchise, insurance policy, commitment or other arrangement or agreement.

         "Copyrights" shall mean all domestic and foreign copyright interests in
any original work of authorship fixed in a tangible medium of expression,
whether registered or unregistered, including but not limited to all copyright
registrations or foreign equivalent, all applications for registration or
foreign equivalent, all moral rights, all common-law rights, and all rights to
register and obtain renewals and extensions of copyright registrations, together
with all other copyright interests accruing by reason of international copyright
convention, and the right to sue for past, present, or future infringement and
to collect and retain all damages and profits therefor and to obtain all other
forms of injunctive, equitable and other relief related thereto.


                                       2


         "Delinquent Tax Returns" has the meaning specified in Section 7.11(i).

         "Drop Dead Date" has the meaning specified in Section 10.1(b).

         "Earnings and Profits Payment" has the meaning specified in Section
3.2(a)(i).

         "Earnout Agreement" has the meaning specified in Section 3.1(a).

         "Earnout Consideration" has the meaning specified in Section 3.1(a).

         "Environmental Claims" means any written complaint, summons, citation,
notice, directive, order or claim, or any pending litigation, judicial or
administrative proceeding or judgment, from or by any Governmental Authority, or
any third party asserting or finding violations of Environmental Laws or
Releases of Hazardous Materials from (i) any assets, properties or business of
any Target or any corporate predecessor in interest for which a Target would be
liable under any Environmental Law; or (ii) from or onto any facilities which
received Hazardous Materials generated by a Target or any corporate predecessor
in interest for which a Target would be liable under any Environmental Law.

         "Environmental Law" means any Law concerning Releases into any part of
the indoor or outdoor environment, or activities that might result in damage to
the indoor or outdoor environment, or any law that is concerned in whole or in
part with the indoor or outdoor environment or with protecting or improving the
quality of the indoor or outdoor environment, natural resources, or wildlife or
protecting public and employee health and safety and includes, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conversation and
Recovery Act (42 U. S. C. ss. 6901 et seq.), the Clean Water Act (33 U. S. C.
ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss.7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. ss. 2601 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the Occupational
Safety and Health Act (29 U.S.C. ss. 651 et seq.), as such laws have been
amended or supplemented, and the regulations promulgated pursuant thereto, and
any and all analogous federal, state or local statutes, ordinances and
regulations imposing liability or establishing standards of conduct for the
protection of the environment.

         "Environmental Permit" means any Permit, approval, variance or
permission required or waiver or exemption granted under any applicable
Environmental Law.

         "ERISA Affiliate" has the meaning specified in Section 4.14(a).

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

         "Escrow Agent" has the meaning specified in Section 3.3(a).

         "Escrow Agreement" has the meaning specified in Section 3.3(b).

         "Escrow Amount" has the meaning specified in Section 3.3(a)(ii).

         "Estimated Opening Balance Sheet" has the meaning specified in Section
7.3.


                                       3


         "Exchange Act" has the meaning specified in Section 6.6.

         "Extended Drop Dead Date" has the meaning specified in Section 10.1(b).

         "Finally Resolved" means that the amount due to Purchaser Indemnitees
or Sellers, as the case may be, after such amount has been finally determined
under and in accordance with the provisions of ARTICLE IX, by agreement of the
parties hereto, or by the decision of a court of competent jurisdiction after
the expiration of all time periods in which to file any appeal, or as determined
in accordance with such other provisions of this Agreement or the Escrow
Agreements as may apply.

         "Financial Statements" means, collectively, the Historical Financial
Statements, the Latest Financial Statements and the Opening Financial
Statements.

         "GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time through the Closing Date as
applied on a consistent basis from period to period by the Targets in the past
as set forth in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and the
statements and pronouncements of the Financial Accounting Standards Board.

         "Goldberg" means the individual specified in the preamble.

         "Goldberg Trust" has the meaning specified in the preamble.

         "Governmental Authority" means any federal, state, local or foreign
government or governmental regulatory body and any of their respective
subdivisions, agencies, instrumentalities, authorities or tribunals.

         "Greenberg" means the individual specified in the preamble.

         "Greenberg Trust" has the meaning specified in the preamble.

         "Guaranteed Indebtedness" of any Person means all Indebtedness of any
other Person that is either (i) guaranteed directly or indirectly in any manner
by such Person, or (ii) secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien upon
or in property (including without limitation accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness.

         "Hamilton Judgment" has the meaning specified in Section 3.2(b).

         "Hazardous Materials" means (a) any element, compound or chemical that
is defined, listed or otherwise classified as a toxic or hazardous substance or
material, extremely hazardous substance or chemical, hazardous material,
hazardous waste, medical waste, biohazardous or infectious waste, or special
waste, under Environmental Laws; (b) petroleum, petroleum-based or
petroleum-derived products; (c) polychlorinated biphenyls; (d) any substance
exhibiting a hazardous waste characteristic including but not limited to
corrosivity, ignitibility, toxicity or reactivity as well as any radioactive
materials; and (e) any raw materials, building components (including but not
limited to asbestos-containing materials) and manufactured products containing
Hazardous Materials.

         "Historical Financial Statements" has the meaning specified in Section
4.5.


                                       4


         "Indebtedness" means, for any Person, without duplication, (a) all
indebtedness or other obligations of such Person for borrowed money or for the
deferred purchase price of any property, (b) any other indebtedness of such
Person which is evidenced by a note, mortgage, bond, indenture or similar
instrument, (c) all obligations under leases that are or should be, in
accordance with GAAP, recorded as capital leases in respect of which such Person
is liable as lessee, (d) all obligations owed pursuant to any interest rate
hedging arrangement, (e) Guaranteed Indebtedness and (f) all other indebtedness
secured by any Lien (other than Permitted Liens) on any property or asset owned
or held by such Person, other than pursuant to license agreements entered into
in the ordinary course of business.

         "Indemnified Party" has the meaning specified in Section 9.6(a).

         "Indemnifying Party" has the meaning specified in Section 9.6(a).

         "Individual Sellers" means, collectively, Greenberg and Goldberg, and
"Individual Seller" means either of them.

         "Intellectual Property" means and includes (a) Patent Rights, (b)
Trademark Rights, (c) Copyrights, (d) Know-How, (e) Trade Secrets and (f)
Internet domain name registrations.

         "Inventions" means and includes novel devices, processes, compositions
of matter, methods, techniques, observations, discoveries, apparatuses, designs,
expressions, theories and ideas, whether or not patentable.

         "IRS" has the meaning specified in Section 4.14(b).

         "Know-How" means scientific, engineering, mechanical, electrical,
financial, marketing or practical knowledge or experience used in the operation
of any Target.

         "Knowledge" or "Knowledge of Sellers" means the actual knowledge of
Greenberg or Goldberg; provided, however, Greenberg and/or Goldberg shall be
deemed to have actual knowledge of a particular fact or other matter if a
prudent individual would reasonably be expected to be aware of such fact or
other matter.

         "Latest Balance Sheet" has the meaning specified in Section 4.5.

         "Latest Financial Statements" has the meaning specified in Section 4.5.

         "Law" means any federal, state, local or foreign law, statute, rule,
ordinance, code or regulation.

         "Legal Proceeding" means any judicial, administrative or arbitral
action, suit, or proceeding (public or private), investigation, litigation,
complaint or claim, whether civil, criminal or regulatory, in law or in equity,
by a Governmental Authority or a third party, that is pending or that any Seller
or any Target has received written notice or has Knowledge.

         "Liabilities" means liabilities or obligations of any nature, whether
absolute, accrued, contingent, liquidated or otherwise, whether due or to become
due, whether asserted or unasserted and whether or not required to be reflected
or reserved against on a balance sheet under GAAP, including any liability for
Taxes.

                                       5


         "Licensed Intellectual Properties" has the meaning specified in Section
4.12(b).

         "Lien" means any lien, pledge, mortgage, deed of trust, security
interest, attachment, right of first refusal, option, claim, easement, covenant,
encroachment, title defect or any other encumbrance whatsoever.

         "Lifestyle Shares" has the meaning specified in the preamble.

         "Lifestyles" has the meaning specified in the preamble.

         "Losses" has the meaning specified in Section 9.1.

         "Material Adverse Effect" means any event, change, circumstances,
development or effect that has an adverse effect aggregating $50,000 or more on
the business, assets, liabilities, condition (financial or otherwise), or
results of operation of the entity and all its Subsidiaries, taken as a whole;
provided, in no event shall any of the following be taken into account (alone or
in combination with any other event identified in this proviso) in determining
whether there has been such a Material Adverse Effect: (i) any change, event,
circumstance, development or effect attributable to conditions generally in the
industry in which the Targets operate, except to the extent that any such
change, event, circumstance, development or effect has an adverse effect on the
entity and all its Subsidiaries that is materially and disproportionately
greater that the adverse effect on comparable entities operating in such
industry in which the party operates; (ii) general economic, political or market
conditions, or acts of terrorism or war (whether or not formally declared);
(iii) any change in Law generally applicable to the industry; and (iv) any
event, change, circumstance, development or effect arising out of or resulting
from (x) the public announcement or pendency of this Agreement and the
transactions contemplated by this Agreement, including, without limitation, the
Purchaser Transaction Agreements or the Seller Transaction Agreements, (y) the
performance of this Agreement or (z) the taking of any action that is required
or expressly permitted by this Agreement or consented to by the other party
pursuant to this Agreement.

         "Material Contracts" has the meaning specified in Section 4.9(a).

         "Minimum Working Capital Liquidity Threshold" means an amount equal to
$1,000,000.

         "Minimum Working Capital Shortfall Amount" means a dollar amount equal
to the Minimum Working Capital Liquidity Threshold minus the Opening Balance
Sheet Working Capital Amount; provided, however, in the event the calculation of
the Minimum Working Capital Shortfall Amount results in a dollar amount of $0.00
or a negative dollar amount, there shall not be, for purposes of this Agreement,
a Minimum Working Capital Shortfall Amount.

         "MRG Shares" has the meaning specified in the preamble.

         "MRG" has the meaning specified in the preamble.

         "Non-Income Tax" has the meaning specified in Section 7.11(h)(ii).

         "Opening Balance Sheet Working Capital Amount" means the amount of
working capital of the Targets based on the Opening Balance Sheet, as determined
in the sole discretion of Purchaser's Outside Audit Firm.


                                       6


         "Opening Balance Sheet" has the meaning specified in Section 7.3.

         "Opening Financial Statements" has the meaning specified in Section
7.3.

         "Order" means any order, judgment, injunction, ruling, writ, award or
decree by any court, administrative body or other tribunal or Governmental
Authority specifically identified by its terms as applicable to any Seller or
any Target.

         "Organizational Documents" means, with respect to any Person, the
relevant certificate or articles of incorporation, trusts, bylaws, memoranda,
constitutional, organizational or other formation and governance documents of
such Person.

         "Owned Intellectual Properties" has the meaning specified in Section
4.12(a).

         "Patent Rights" means and includes all domestic and foreign patents
(including without limitation certificates of invention and other patent
equivalents), provisional applications, patent applications and patents issuing
therefrom as well as any division, continuation or continuation in part,
reissue, extension, reexamination, certification, revival or renewal of any
patent, all Inventions and subject matter related to such patents, in any and
all forms, and the right to sue for past, present, or future infringement and to
collect and retain all damages and profits therefor and to obtain all other
forms of injunctive, equitable and other relief related thereto.

         "Pension Plan" has the meaning specified in Section 4.14(a).

         "Permit" means any permit, license, certificate (including a
certificate of occupancy) registration, authorization, application, filing,
notice, qualification, waiver of any of the foregoing or approval of a
Governmental Authority.

         "Permitted Liens" means: (a) Liens for Taxes that are not yet due and
payable or that are being contested in good faith by appropriate proceedings and
as to which adequate reserves have been established in accordance with GAAP, (b)
workers', repairmen's, and similar Liens imposed by Law that have not been
recorded and that have been incurred in the ordinary course of business
consistent with past practices relating to obligations as to which there is no
material default on the part of any Target and provided that such Liens do not
exceed $50,000 in the aggregate, and (c) Liens granted to licensors or licensees
of the Targets with respect to Intellectual Property or Products involved in
license or distribution agreements between a Target and such licensors or
licensees.

         "Person" means any natural person, corporation, partnership, limited
liability company, trust, unincorporated organization, Governmental Authority or
other entity.

         "Pre-Closing Returns" has the meaning specified in Section 7.11(b).

         "Pro Rata Share" means with respect to each Trust, the collective
number of shares in MRG and Lifestyles owned by it in proportion to all Shares
of MRG and Lifestyles owned by all Trusts as identified on Exhibit A.

         "Producer Advances" has the meaning specified in Section 3.2(a)(i).


                                       7


         "Producer's Report" has the meaning specified in Section 3.2(a)(iii).

         "Purchase Price" has the meaning specified in Section 2.1.

          "Purchaser" has the meaning specified in the preamble.

         "Purchaser Indemnitees" has the meaning specified in Section 9.1.

         "Purchaser Transaction Agreements" means this Agreement and the
agreements, instruments, documents and certificates to be executed at the
Closing by Purchaser, including the Escrow Agreements, the Seller Noncompetition
Agreements, the Earnout Agreement, the Seller Employment Agreements and the
Registration Rights Agreement.

         "Purchaser's Common Stock" means the shares of common stock of
Purchaser, or any other shares of capital stock into which such shares are
converted and any shares of capital stock or assets issued in respect thereof.

         "Purchaser's Indemnification Cap" has the meaning specified in Section
9.2(a).

         "Purchaser's Outside Audit Firm" means CNM, LLP.

         "Real Property Lease" has the meaning specified in Section 4.7.

         "Registration Rights Agreement" has the meaning specified in Section
7.10(b).

         "Related Party" means (i) any Seller, (ii) any Affiliate of any Seller
or any Target, or (iii) any grandparent, parent, brother, sister, child, spouse
or trustee of any such Affiliate, Seller or Target.

         "Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching, or migration into
the indoor or outdoor environment, or into or out of any property owned,
operated or leased by Targets including, without limitation, the movement of any
Hazardous Material or other substance through or in the air, soil, surface
water, groundwater or property, but excluding any release, emission or discharge
authorized under any Environmental Permit or provision of Environmental Law.

         "Released Parties" has the meaning specified in Section 11.12.

         "Required Consents" has the meaning specified in Section 4.3.

         "Revolving Credit Facility" means the credit facility identified in
that certain Accounts Receivable Loan Agreement dated as of April 18, 2003, as
amended (i) by that certain First Amendment to Accounts Receivable Loan
Agreement dated as of July 20, 2004, and (ii) that certain Second Amendment to
Accounts Receivable Loan Agreement dated as of December 22, 2004, by and among
MRG, Lightning Entertainment, Inc., Magic Hour Pictures, Inc., and City National
Bank.

         "Rights" means all arrangements, calls, commitments, contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any kind relating to, or securities or rights convertible
into or exchangeable or exercisable for, shares of the capital stock of a Person
or by which a Person is or may be bound to issue additional shares of its
capital stock.


                                       8


          "Schedule" means the disclosure schedule provided by Sellers to
Purchaser pursuant to this Agreement.

         "SEC" has the meaning specified in Section 6.6.

          "Securities Filings" has the meaning specified in Section 6.6.

         "Seller Employment Agreements" has the meaning specified in Section
8.1(o)(ii).

         "Seller Loans" has the meaning specified in Section 7.9.

         "Seller Noncompetition Agreements" has the meaning specified in Section
8.1(o)(ii).

         "Seller Transaction Agreements" means this Agreement and the other
agreements, instruments, documents and certificates to be executed at the
Closing by Sellers, including without limitation the Escrow Agreements, the
Seller Noncompetition Agreements, the Earnout Agreement, the Seller Employment
Agreements and the Registration Rights Agreement.

         "Sellers" means, collectively, the Trusts, Greenberg and Goldberg.

         "Sellers' Board Designee" has the meaning specified in Section 8.2(h).

         "Sellers' Indemnification Cap" has the meaning specified in Section
9.3.

         "Shares" has the meaning specified in the preamble.

         "Straddle Period" has the meaning specified in Section 7.11(h).

          "Subsidiary" of any Person means (i) a corporation of which more than
fifty percent (50%) of the outstanding shares of capital stock of each class
having ordinary voting power is owned by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries; or (ii) any other Person (other than a corporation) in which such
Person, or one or more other Subsidiaries of such Person or such Person and one
or more other Subsidiaries thereof directly or indirectly has more than fifty
percent (50%) of the voting power thereof.

         "Target" means any of the Targets.

         "Targets" means, collectively, MRG and Lifestyles and their respective
subsidiaries, whether wholly or partially owned by MRG or Lifestyles, as the
case may be, including without limitation, Lightning Entertainment, Inc., a
California corporation, SG Productions, Inc., a California corporation,
Lightning Entertainment Productions, Inc., a California corporation, Magic Hour
Pictures, Inc., a California corporation, and Third Street Pictures, Inc., a
California corporation.

         "Tax Accruals" means all Taxes that have been accrued in the Opening
Balance Sheet.


                                       9


         "Tax Return" means any return, report, information return or other
document (including any related or supporting information) filed or required to
be filed with any federal, state, local or foreign governmental entity or other
authority in connection with the determination, assessment or collection of any
Tax or the administration of any laws, regulations or administrative
requirements relating to any Tax.

         "Tax" or "Taxes" means all taxes, charges, fees, duties, levies or
other assessments, however denominated, imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, income or profit, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, business license, user,
transfer, fuel, environmental, excess profits, occupational, interest
equalization, windfall profits, severance and employees' income withholding,
workers' compensation, Pension Benefits Guaranty Corporation premiums,
unemployment and Social Security taxes, and other obligations of the same or of
a similar nature to any of the foregoing (all including any interest, penalties
or additions to tax related thereto imposed by any taxing authority).

         "Third Party Claim" has the meaning specified in Section 9.6(a).

         "Trade Secrets" means any formula, design, device or compilation, or
other information which is used or held for use by a business, which gives the
holder thereof an advantage or opportunity for advantage over competitors which
do not have or use the same, and which is not generally known by the public.
Trade Secrets can include, by way of example, formulas, market surveys, market
research studies, information contained on drawings and other documents, and
information relating to research, development or testing.

         "Trademark Rights" means and includes all domestic and foreign
trademarks, trade dress, service marks, trade names, icons, logos, slogans, and
any other indicia of source or sponsorship of goods and services, designs and
logotypes related to the above, in any and all forms, and all trademark
registrations and applications for registration related to such trademarks
(including, but not limited to intent to use applications), including the right
to sue for past, present, or future infringement and to collect and retain all
damages and profits therefor and to obtain all other forms of injunctive,
equitable and other relief related thereto, and all designs and logotypes
related to such trademarks, in any and all forms, and all trademark
registrations and applications for registration related to such trademarks.

         "Transfer Tax" means sales, use, transfer, real property transfer,
filing, recording, stock transfer, stamp, stamp duty reserve, value added,
documentary and other similar Tax.

         "Trust" means either of the Trusts.

         "Trusts" has the meaning specified in the preamble.

         "Uncapped Sections" has the meaning specified in Section 9.2(a).

         "Welfare Plan" has the meaning specified in Section 4.14(a).

         "Working Capital" means the consolidated working capital of all the
Targets, calculated as (i) the sum of current assets, including all accounts
receivable, inventory (library), prepaid expenses, cash and cash equivalents,
and minus (ii) the sum of all current liabilities, including all accounts
payable, advance billings, accrued payroll, accrued expenses and all amounts
outstanding under the Revolving Credit Facility.


                                       10



                                   ARTICLE II

                         PURCHASE AND SALE OF THE SHARES

     2.1 Purchase and Sale. Upon the terms and subject to the conditions set
forth in this Agreement, each of the Trusts hereby agrees to sell, assign and
transfer its Shares to Purchaser, and Purchaser hereby agrees to purchase and
acquire the Shares from each Trust. The purchase price to be paid by Purchaser
for the Shares as set forth in Section 3.1(a) or 3.1(b), whichever applies (the
"Purchase Price") shall, at Purchaser's option to be designated in writing by
Purchaser at least two (2) business days prior to the Closing, be payable in
accordance with Section 3.1(a) or 3.1(b), whichever applies as designated by
Purchaser. The Purchase Price will be paid to the Trusts in the proportions set
forth on Exhibit A.

     2.2 Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") will take place at Noon, Denver, Colorado time on February 10,
2006 at the offices of Kamlet Shepherd & Reichert, LLP, 1515 Arapahoe Street,
Tower One, Suite 1600, Denver, Colorado 80202, unless another time, date or
place is agreed to in writing by the parties hereto (such date upon which the
Closing occurs, the "Closing Date").

                                  ARTICLE III

                   PURCHASE PRICE; PAYMENT OF PURCHASE PRICE;
                                ESCROW AGREEMENT

     3.1 Purchase Price; Payment of Purchase Price.

            (a) Alternative A Purchase Price. In the event Purchaser elects to
         purchase the Shares for the purchase price described in this Section
         3.1(a) (the "Alternative A Purchase Price"), Purchaser shall pay
         aggregate consideration to the Trusts in an amount up to Twenty-Two
         Million Dollars ($22,000,000) consisting of (i) cash in the amount of
         $15,000,000 payable to the Trusts on the Closing Date by wire transfer
         of immediately available funds to accounts designated by them (the
         "Alternative A Cash Consideration"); (ii) that number of shares of
         Purchaser's Common Stock determined by dividing $5,000,000 by the
         Average Closing Price to be issued to the Trusts at Closing (the
         "Alternative A Stock Consideration"); and (iii) performance-based cash
         earnout payments up to an aggregate amount of $2,000,000 ("Earnout
         Consideration") payable to the Trusts in accordance with and subject to
         the provisions of an Earnout Agreement in the form attached as Exhibit
         B (the "Earnout Agreement").

            (b) Alternative B Purchase Price. In the event Purchaser elects to
         purchase the Shares for the purchase price described in this Section
         3.1(b) (the "Alternative B Purchase Price"), Purchaser shall pay
         aggregate consideration to the Trusts in the amount of Twenty Million
         Dollars ($20,000,000) in cash by wire transfer of immediately available
         funds to accounts designated by the Trusts.


                                       11


     3.2 Contingent Payments.

            (a) Earnings and Profit Payment.

                (i) After the Closing Date, as part of and in addition to the
            Purchase Price, Purchaser shall pay to Sellers an amount of up to
            One Million Dollars ($1,000,000) (the "Earnings and Profits
            Payment"), in respect of advances made by Targets to those certain
            producers identified on Schedule 3.2 ("Producer Advances") pursuant
            to the Contracts with such producers. The Earnings and Profits
            Payment is based on the recoupment by Targets of the Producer
            Advances identified on Schedule 3.2.

                (ii) Following the Closing Date, the Opening Balance Sheet shall
            be prepared as set forth in this Agreement. If the Opening Balance
            Sheet Working Capital Amount does not equal or exceed the Minimum
            Working Capital Liquidity Threshold (as determined in the sole
            discretion of Purchaser's Outside Audit Firm), the potential
            Earnings and Profits Payment shall be reduced by the amount of such
            shortfall.

                (iii) The Targets shall prepare and deliver to each producer
            identified on Schedule 3.2 a producer's report ("Producer's Report")
            on a timely basis as set forth in each Contract. The Producer's
            Report shall set forth the amounts collected by the applicable
            Target in connection with the applicable Contract during the
            relevant accounting period and the application of such amounts by
            the Target. If pursuant to the Producer's Report any portion of the
            Producer Advance has been recouped by the Target during the relevant
            accounting period, then within thirty (30) days thereafter,
            Purchaser shall pay to the Trusts on a pro-rata basis, the
            applicable portion of the Earnings and Profits Payment due based on
            the aggregate amount of the Producer Advances recouped (e.g., after
            taking into account the prior recovery by the Targets of the fees,
            expenses and commissions, any sales agency or similar fees payable
            to the Targets, any monies advanced by the Targets for repair or
            delivery costs or any marketing or similar fees); provided, however
            that Sellers shall not be entitled to any portion of the Earnings
            and Profit Payment for any recoupment of Producers Advances after
            February 10, 2009.

                (iv) All payments to be made to any Target in connection with
            any Producer Advances listed on Schedule 3.2 belong to the Targets
            and not to Sellers and payment to Sellers shall be expressly subject
            to the terms of this Section 3.2. The parties shall cooperate in
            good faith with each other in connection with the collection of
            monies to be applied to the Seller Producer Advances.

            (b) Hamilton Entertainment Judgment. Sellers and Purchaser
         acknowledge that an award of judgment in favor of MRG against Dean
         Hamilton Entertainment, Inc. and Dean Hamilton, individually, in the
         sum of $1,530,550.43 was entered by the Superior Court of the State of
         California for the County of Los Angeles on March 14, 2001 in the case
         of MRG Entertainment, Inc. v. Dean Hamilton Entertainment, Inc.; Dean
         Hamilton; and Does 1 through 20, Inclusive, Case No. BC 211209 (the
         "Hamilton Judgment"). Sellers and Purchaser agree as follows with
         respect to the Hamilton Judgment: (i) the Hamilton Judgment is
         presently and will continue to be a corporate asset of MRG; (ii) any
         proceeds recovered by MRG in connection with the Hamilton Judgment
         shall be distributed as follows: (A) 25% shall be payable to each of
         the Trusts (and shall be included as and added to the Purchase Price),
         provided, however, any such payments to the Trusts shall be net of all
         attorneys' fees, costs and expenses incurred by MRG in connection with
         the collection of such monies; and (B) the net balance shall be
         retained by MRG. Notwithstanding the foregoing, neither Purchaser nor
         MRG shall have any obligation to pursue the collection of any amount of
         the Hamilton Judgment.


                                       12


     3.3 Escrow Amounts.

            (a) Notwithstanding anything to the contrary contained in this
         Agreement, in order to secure the indemnity obligations of Sellers
         under this Agreement and in order to provide for the reimbursement of
         Purchaser in respect of such indemnity obligations, and without
         limiting any other rights which Purchaser may have pursuant to this
         Agreement, Purchaser shall deliver to First Community Bank (the "Escrow
         Agent"):

                (i) In the event that the Purchaser elects to pay the
            Alternative A Purchase Price, $2,550,000 of the Alternative A Cash
            Consideration in respect of Sellers' indemnity obligations under
            this Agreement ("Alternative A Escrow Amount") or, alternatively,

                (ii) In the event that the Purchaser elects to pay the
            Alternative B Purchase Price, $3,050,000 of the Alternative B
            Purchase Price ("Alternative B Escrow Amount" or the Alternative A
            Escrow Amount, whichever applies, is referred to as the "Escrow
            Amount").

            (b) The Escrow Amount shall be held by the Escrow Agent until
         distributed pursuant to the Escrow Agreement attached as Exhibit C (the
         "Escrow Agreement"), and shall be paid in accordance with Section 6 of
         the Escrow Agreement. The parties agree that up to $1,000,000 (plus
         interest earned thereon) may be released from the Escrow Amount
         following the completion of the IRS Audit (as such term is defined in
         the Escrow Agreement) subject to and in accordance with the terms of
         the Escrow Agreement. All costs and expenses incurred by any Target in
         connection with the IRS Audit and any costs and expenses associated
         with contesting the amount of any Tax Liability imposed by the IRS in
         connection with the IRS Audit (whether incurred by Purchaser, Targets
         or Sellers) shall be at the sole cost and expense of Sellers and
         reimbursed to Targets and Purchaser, as applicable; provided that
         Purchaser not charge Sellers for the reasonable assistance of Al
         Haferkamp (if employed by Purchaser or Targets), Greenberg and Goldberg
         in contesting the amount of such Tax Liability.


            (c) Notwithstanding the foregoing, this Section 3.3 shall be subject
         in all respects to the terms and conditions of the Escrow Agreement.

                                  ARTICLE IV.

         REPRESENTATIONS AND WARRANTIES OF SELLERS REGARDING THE TARGETS

         Sellers, jointly and severally, represent, warrant and covenant to
Purchaser as of the date hereof and the Closing Date, with full knowledge that
such representations, warranties and covenants are a material consideration and
inducement to the execution of this Agreement by Purchaser and the consummation
of the transactions contemplated hereunder, as follows:


                                       13


     4.1 Capitalization; Legal Status; Qualification; Title to Shares.

            (a) Each Target is a corporation duly organized, validly existing
         and in good standing under the laws of the State of California and has
         all necessary corporate power, authority and capacity to own all of its
         property and assets presently owned and to carry on its business as
         presently conducted. Each Target is duly qualified or licensed to do
         business and is in good standing as a foreign corporation in all
         jurisdictions where the nature or conduct of its business as now
         conducted requires such qualification. Sellers have furnished to
         Purchaser for each Target and Trust a complete and correct copy of its
         Organizational Documents, each as amended or restated, as in effect on
         the date of this Agreement and as in effect as of the Closing. None of
         the Targets or the Trusts is in violation of any of the provisions of
         its Organizational Documents. The minute books of each Target contain
         in all material respects complete and accurate records of all actions
         taken and resolutions adopted by its Board of Directors (and any
         committees thereof) and shareholders since its organization. The stock
         transfer ledger of each Target accurately reflects the ownership of its
         capital stock. Complete and accurate copies of all the minute books of
         each Target and the stock transfer ledger of each Target have been
         furnished to Purchaser.

            (b) The authorized and issued capital stock of each Target is set
         forth in Schedule 4.1 hereof. All of the shares of capital stock of
         each Target are fully paid and non-assessable and were validly and
         legally issued pursuant to a valid exemption from registration under
         applicable securities laws, including under the Act where it is
         applicable. There are no outstanding Rights obligating or which could
         obligate the Targets to issue any additional shares of their capital
         stock of any class or series. There are no outstanding rights to either
         demand registration of any shares of the capital stock of any class or
         series of the Targets under applicable securities laws or to sell any
         shares of the capital stock of any class or series of the Targets in
         connection with such a registration. None of the outstanding shares of
         capital stock of any class or series of the Targets on the date hereof
         has been issued in violation of any preemptive rights of the current or
         past shareholders of the Targets. Exhibit A sets forth a true and
         compete list of all the holders of the Shares and their respective Pro
         Rata Shares. Except as set forth on Schedule 4.1, there are no
         agreements, voting trusts or other agreements or understandings between
         or among any Sellers or to which any Seller is bound with respect to
         the transfer, sharing of profits or losses, or voting of any of its
         Shares.

            (c) Except as set forth on Schedule 4.1, the Trusts own the Shares
         free and clear of all Liens. Other than the Shares, there are no shares
         of capital stock of any Target which are not owned free and clear of
         all Liens by a Target or a direct or indirect Subsidiary of a Target.
         Upon delivery of certificates representing the Shares to be sold by the
         Trusts hereunder and payment therefor pursuant to this Agreement, the
         Purchaser will acquire good and marketable title to such Shares, free
         and clear of all Liens.

     4.2 Subsidiaries. (i) Except as set forth on Schedule 4.2, no Target has
any Subsidiaries, nor does any Target, directly or indirectly, own or have any
interest in the capital stock of, or any other equity interest in, any Person;
and (ii) Sellers have disclosed pursuant to this Agreement or its Schedules all
Subsidiaries that any Target, directly or indirectly, currently owns or has an
equity interest in. In the event any Target has ever had any direct or indirect
ownership interest in any Person not set forth on Schedule 4.2, such Target has
withdrawn or otherwise disposed of such interest and/or caused the dissolution
of such Person in accordance with applicable Laws.


                                       14


     4.3 No Violation. Except as set forth in Schedule 4.3 (collectively, the
"Required Consents"), the execution and delivery by Sellers of this Agreement or
any other Seller Transaction Agreements to which they are parties, the
consummation of the transactions contemplated hereby and thereby, and the
performance by Sellers of this Agreement and each other Seller Transaction
Agreement to which they are parties in accordance with their respective terms
and conditions will not:



            (a) Conflict with the Organizational Documents of any Seller or any
         of the Targets;

            (b) Require Sellers or any of the Targets to obtain any consents,
         approvals, Permits, authorizations or actions of, or make any filings
         with or give any notices to, any Governmental Authority or any other
         Person;

            (c) Violate any Law of any Governmental Authority applicable to
         Sellers or to any of the Targets which violation would have a Material
         Adverse Effect;

            (d) Violate any Orders of any court or Governmental Authority
         applicable to any Seller or any of the Targets or their respective
         properties, assets or businesses;

            (e) Violate, conflict with or result in a breach of any of the terms
         and conditions of, result in a material modification of the effect of,
         otherwise cause the termination of or give any other contracting party
         the right to terminate, accelerate, cancel, impose any fees or
         penalties, or constitute (or with notice or lapse of time or both
         constitute) a default under any contract, agreement, debt, note, lease,
         bond, mortgage, indenture or other similar instrument or license or
         result in the creation of any Lien upon the Shares or on any of the
         properties or assets of Sellers or any of the Targets; or

            (f) Violate or result in the loss of any right under, termination,
         revocation or suspension of any Permit.

     4.4 Ownership of Assets. Except as set forth on Schedule 4.4, the Targets
have or will have, as the case may be, good and indefeasible or marketable, as
appropriate, title to, or a valid leasehold interest in, or valid license to
use, the properties and assets shown or to be shown on the Latest Financial
Statements and the Opening Financial Statements, as the case may be, or acquired
thereafter and all other properties and assets they use in and which are
necessary for the conduct of the businesses of the Targets subject to no Liens
other than Permitted Liens (the "Assets"), except for (i) properties and assets
disposed of in the ordinary course of business since the date of the Latest
Financial Statements, (ii) defects in title that do not or would not have a
Material Adverse Effect. The equipment and other tangible and intangible assets
owned or leased by the Targets are sufficient to operate the businesses of the
Targets as presently conducted, and all such tangible assets are in good
operating condition, subject to ordinary wear and tear, and are fit for use in
the ordinary course of business.

     4.5 Financial Statements. Attached hereto on Schedule 4.5 are correct and
complete copies of (i) the unaudited consolidated balance sheet of the Targets
as of and for the years ending December 31, 2002 and December 31, 2003 and the
audited consolidated balance sheet of the Targets as of and for the year ending
December 31, 2004, together with the related unaudited statements of operations
and operating cash flows for the calendar years ended on such dates
(collectively, the "Historical Financial Statements"), and (ii) the audited
consolidated balance sheet of the Targets as of September 30, 2005 (the "Latest
Balance Sheet"), together with the related audited statements of operations and
operating cash flows for the period ended on such date (the Latest Balance Sheet
and related statements of operations and operating cash flows, the "Latest
Financial Statements"). The Historical Financial Statements and the Latest
Financial Statements (A) have been prepared from the books and records of the
Targets, (B) contain figures that arose out of bona fide licenses, sales and
deliveries of goods, performance of services or other bona fide business
transactions, (C) are true, complete and correct in all material respects, and
(D) present fairly the financial position of the Targets as of the dates
indicated, and the results of their operations and cash flows for the periods
presented. The Latest Balance Sheet will have footnote disclosures and customary
adjustments.



                                       15


     4.6 Absence of Undisclosed Liabilities.

            (a) None of the Targets has any Liabilities nor any unrealized or
         anticipated losses, except (A) Liabilities that are fully reflected or
         reserved against in the Latest Balance Sheet (including any notes
         thereto), which reserves are in accordance with GAAP, and (B)
         Liabilities incurred by the Targets which (1) have arisen after the
         date of the Latest Balance Sheet in the ordinary course of business
         (none of which is a result of any breach of contract, tort, breach of
         warranty or infringement or violation of Law by a Target) consistent
         with prior practice or (2) are not required by GAAP to be reflected or
         reserved against on a balance sheet. Except as set forth on Schedule
         4.6 or in the Latest Balance Sheet none of the Targets has or will have
         any Indebtedness. Except as set forth on Schedule 4.6, none of the
         Targets has or will be liable for any Guaranteed Indebtedness. Schedule
         4.6 further sets forth the outstanding principal amount, interest rate,
         maturity date, name of lender and party with respect to all
         Indebtedness of the Targets as of the date of the Latest Balance Sheet.

            (b) Since the date of the Latest Balance Sheet, (i) the businesses
         of the Targets have been conducted in the ordinary course consistent
         with past custom and practice, (ii) there has not occurred any event,
         change or development which has had or is reasonably expected to have,
         individually or in the aggregate, a Material Adverse Effect and (iii)
         there has not been any action or transaction that, if it were taken or
         occurred after the date hereof, would constitute a breach of Section
         7.1.

     4.7 Real Property; Leased Real Property. No Target owns any fee interest in
any real property. Schedule 4.7 sets forth the only real property lease and any
and all amendments thereto relating to the leased real property to which any
Target is a party or is bound (the "Real Property Lease"). Sellers have made
available to Purchaser a correct and complete copy of the Real Property Lease.
Except as disclosed on Schedule 4.7, (i) the Real Property Lease is in full
force and effect, (ii) there are no subleases under the Real Property Lease and
the Real Property Lease has not been assigned by any Person, (iii) no notices of
default or notices of termination have been received by a Target with respect to
the Real Property Lease which have not been withdrawn or canceled; and (iv) MRG
is not, and to the Knowledge of Sellers, the landlord is not in default under
the Real Property Lease. Other than the Real Property Lease, no Target is a
lessee or sublessee under any other real property lease or sublease. To the
Knowledge of Sellers, no part of the property subject to the Real Property Lease
is subject to any pending suit for condemnation or other taking by any
Governmental Authority and no such condemnation or other taking is threatened.



                                       16


         4.8 Insurance. Schedule 4.8 contains a true and complete list of all
insurance policies currently in effect, which are held by or applicable to the
Targets, and properties leased by them. All insurance policies listed on
Schedule 4.8 have been made available to Purchaser and all such insurance is in
full force and effect. Except as set forth in Schedule 4.8, no Target has
received any notice of cancellation or nonrenewal of any such insurance policy.
Except as set forth in Schedule 4.8, no Target has been refused any insurance
with respect to its assets, properties or businesses, nor has any coverage been
materially limited by any insurance carrier to which a Target has applied for
any such insurance or with which such Target has carried insurance during the
last three years. Except as set forth on Schedule 4.8, no further payments of
premiums will be due following the Closing by any Target with respect to
insurance coverages with an effective date prior to the Closing. To the
Knowledge of Sellers, neither this Agreement, nor any of the transactions
contemplated by this Agreement to occur at the Closing, will adversely affect
any Target's coverage with respect to periods prior to the Closing under the
terms of the insurance policies or programs.

         4.9 Contracts.

            (a) Material Contracts. Other than (A) the Real Property Lease, (B)
         Benefit Plans, (C) insurance policies listed on Schedule 4.8, (D)
         Licensed Intellectual Property, (E) the Bienstock Consulting Agreement,
         and (F) the Revolving Credit Facility, Schedule 4.9 lists, as of the
         date hereof, all of the following Contracts to which a Target is a
         party, or by which its assets are bound (together with the Contracts
         listed in clauses (A) - (D), the "Material Contracts"):

                (i) Individual Contracts with licensees identified on the Avails
            report and attached to Schedule 4.9;

                (ii) Any individual Contract for production of programs
            involving actual expenditures in excess of $25,000 during the last
            twelve (12) months;

                (iii) Contracts that establish a partnership, joint venture,
            material agency or other similar arrangements;

                (iv) Any Contract that relates to Indebtedness in excess of
            $25,000;

                (v) Any Contract that (a) provides for payments that are
            conditioned on or result from, in whole or in part, or (b) which may
            be terminated as the result of, a change of control of a Target or a
            change of management of a Target;

                (vi) Any Contract that relates to marketing, sales or
            advertising and provides for aggregate future payments of more than
            $25,000;

                (vii) Any Contract under which a Target has guaranteed the
            obligations of any Person, agreed to indemnify any Person (other
            than in the ordinary course of business), or agreed to share Tax
            liability with any Person;

                (viii) Any Contract that restricts the right of a Target to
            compete in any line of business, or to conduct any of its current
            lines of business in any geographic area;


                                       17


                (ix) Any Contract that provides for the sale or lease after the
            date hereof of any of the assets of any Target other than in the
            ordinary course of business;

                (x) Any Contract that binds a Target to make payments to any
            shareholder, partner, manager, director, officer, employee or
            independent contractor, or any former shareholder, partner, manager,
            director, officer, employee or independent contractor of such
            Target;

                (xi) All performance bonds with Governmental Authorities that
            are required to operate a Target's business;

                (xii) Any Contract pursuant to which a present or former
            employee of a Target has outstanding indebtedness to such Target;

                (xiii) Any Contract pursuant to which any Target provides, or
            may be required to provide, a party with "Most Favored Nation"
            status or similar type arrangement; and

                (xiv) Any Contract under which any Target outsources the
            performance of services, including, but not limited to, all
            production services agreements.

            (b) Material Contract Validity. All Material Contracts are valid,
         binding and in full force and effect, except to the extent
         enforceability may be limited by bankruptcy, insolvency,
         reorganization, fraudulent conveyance, moratorium or other similar laws
         relating to creditors' rights generally and to general principles of
         equity and except for such failures to be valid, binding and
         enforceable which, individually or in the aggregate, would not have a
         Material Adverse Effect. Sellers have provided to Purchaser true and
         correct copies of each Material Contract. None of the Targets, nor to
         the Knowledge of Sellers, any other party to such Material Contracts,
         is in default under any Material Contract, except (i) as set forth on
         Schedule 4.9 or (ii) any such default which, individually or in the
         aggregate, would not have a Material Adverse Effect.

     4.10 Litigation; Orders. Except as set forth on Schedule 4.10, (i) there
are no Legal Proceedings brought by, pending or, to the Knowledge of Sellers,
threatened in writing against or affecting any of the Targets or their
respective assets, and (ii) no Target is subject to any Order. There are no
Legal Proceedings pending against or, to the Knowledge of Sellers, threatened
against any of Sellers or Targets that questions the validity or legality of any
of the Seller Transaction Agreements or any action taken or to be taken by any
Seller or Target in connection herewith or therewith.

     4.11 Environmental Laws. Except as set forth on Schedule 4.11, (i) each
Target is in material compliance with all Environmental Laws; (ii) each Target
possesses and is in material compliance with all Environmental Permits required
to operate its facilities, assets and business; (iii) no Target is subject to
any Order that relates to any Environmental Law; (iv) no Target is subject to
any Environmental Claim and, to the Knowledge of Sellers, no unresolved
Environmental Claim has been asserted or threatened against any Target; (v) to
the Knowledge of Sellers, there has been no Release at any of the properties
currently or formerly owned or operated by any Target (at the time such
properties were owned or operated by the Targets and for which the Targets would
be liable under any Environmental Law) or, to the Knowledge of Sellers, a
predecessor in interest for which a Target would be liable; (vi) no Target has
received any written notice and Sellers have no Knowledge of any Environmental
Claims against any facilities that may have received Hazardous Materials
generated by a Target or any predecessor in interest for which such Target would
be liable; and (vii) Sellers have delivered to, or made available for review by,
Purchaser true and complete copies of all environmental reports, studies,
investigations or correspondence regarding any environmental liabilities of the
Targets or any environmental conditions at any property operated by a Target or
any predecessor in interest for which such Target would be liable which are in
possession of Sellers.


                                       18


     4.12 Intellectual Property and Information Technology.

            (a) Set forth on Schedule 4.12 is a true and complete listing of all
         issued patents, pending patent applications, registered trade and
         service marks, registered copyrights (to the Knowledge of Sellers),
         software systems and other technology or proprietary material used in
         connection with the conduct of the business of each Target that is
         owned by it as of the date hereof (the "Owned Intellectual
         Properties").

            (b) Set forth on Schedule 4.12 is a true and complete listing of all
         patents, registered trade or service marks, copyrighted material,
         software, documentation, technology, or other proprietary material
         which any Target licenses or otherwise has the right to use from third
         parties, other than software which is licensed pursuant to inbound
         "shrink-wrap" licenses and similar end-user licenses (the "Licensed
         Intellectual Properties").

            (c) To the Knowledge of Sellers, the Owned Intellectual Properties
         and the Licensed Intellectual Properties constitute all material
         intellectual property and information technology assets and properties
         used in connection with the conduct of the businesses of the Targets.

            (d) Each Target has good and marketable title to its Owned
         Intellectual Properties, free and clear of all Liens, other than
         Permitted Liens. Except as set forth on Schedule 4.12, each Target has
         the valid and enforceable right to use its Licensed Intellectual
         Properties in the manner the Licensed Intellectual Properties are used
         in connection with such Target's business as currently conducted, free
         and clear of all Liens, other than Permitted Liens, except where the
         failure to have such valid and enforceable rights would not result in a
         Material Adverse Effect. The consummation of the transactions
         contemplated by this Agreement will not affect the Targets' free and
         clear ownership of its Owned Intellectual Properties and will not
         interrupt or adversely affect in any manner such valid right to
         continue to use its Licensed Intellectual Properties in the manner the
         Licensed Intellectual Properties are used in connection with the
         businesses of the Targets as currently conducted.

            (e) To the Knowledge of Sellers, none of the Owned Intellectual
         Properties or the use thereof, nor does any Target's use of its
         Licensed Intellectual Properties, violate or infringe the rights of any
         third party, except where such violations or infringements would not
         reasonably be expected to have, individually or in the aggregate, a
         Material Adverse Effect. There is no claim existing or, to the
         Knowledge of Sellers, threatened by any Person. There is no Legal
         Proceeding pending which relates to the use by any Target of its Owned
         Intellectual Property or the Licensed Intellectual Property or to the
         validity or enforceability of any intellectual property rights
         associated with the Owned Intellectual Property or the Licensed
         Intellectual Property of each such Target. To the Knowledge of Sellers,
         no third party is violating or infringing upon any intellectual
         property rights associated with the Owned Intellectual Properties or
         the Licensed Intellectual Properties of any Target.


                                       19


            (f) Except as set forth on Schedule 4.12, no Target has specifically
         agreed to indemnify any Person against any charge of infringement of
         the intellectual property rights of any third party with respect to
         products, software systems, hardware systems, documentation or other
         technology or proprietary material used or distributed by such Target
         other than (i) subcontractors, customers, Persons granted the right to
         use such property and software developers engaged by a Target, (ii)
         employees, officers and directors of such Target, (iii) as set forth in
         any written agreement granting such Target the right to use its
         Licensed Intellectual Properties, or (iv) as set forth in any written
         agreement pursuant to which Target has (x) validly licensed to a third
         party the right to use any of its Owned Intellectual Properties, or (y)
         validly licensed or sublicensed to a third party the right to use any
         of its Licensed Intellectual Properties.

     4.13 Employees; Independent Contractors.

            (a) As of the Closing, there are no written employment, consulting,
         independent contractor, non-compete or severance agreement (or similar
         independent contractor agreement providing for compensation upon
         termination thereof) between each Target and any individual.

            (b) None of the Targets is a party to any collective bargaining or
         other labor union agreement applicable to any of the employees of any
         Target, and to the Knowledge of Sellers, no organizational efforts are
         pending on behalf of any labor union or organization with respect to
         any Target's employees. There is no organized work stoppage, labor
         strike, labor dispute, or slowdown pending or, to the Knowledge of
         Sellers, threatened against or involving any Target. No Target has
         received written notice of any unfair labor practice in the past two
         years and, except as set forth on Schedule 4.13, no such complaints are
         pending before the National Labor Relations Board or other similar
         Governmental Authority. No grievance or other labor dispute or, except
         as set forth on Schedule 4.13, proceeding or any arbitration proceeding
         arising out of or under any collective bargaining or other employee
         agreement is pending or, to the Knowledge of Sellers, threatened
         against any Target. Sellers are not aware of any actual or, to the
         Knowledge of Sellers, potential labor problem (or any problem
         pertaining to any independent contractor of any Target) that currently
         exists that could reasonably be expected to have a Material Adverse
         Effect. Each individual providing services to a Target, including any
         independent contractor, has been properly classified as an exempt
         employee, non-exempt employee, leased employee or independent
         contractor. Each Target is, and has at all times been, in compliance in
         all material respects with all applicable Laws with respect to
         employment and employment practices, terms and conditions of
         employment, wages, hours or work, employment standards, labor
         relations, workplace safety and insurance and occupational safety and
         health, and is not engaged in any unfair labor practices as defined
         under applicable Laws.

            (c) No Target has incurred any material liability or obligation
         under the Workers Adjustment and Restraining Notification Act or any
         similar laws, which remains unpaid or unsatisfied.


                                       20


            (d) Except as set forth on Schedule 4.13, (i) all of each Target's
         employment relationships with its employees are at-will and no employee
         is or will be entitled to any severance payments from any Target, and
         (ii) all of each Target's agreements with independent contractors are
         freely terminable and will not require termination payments by any
         Target following the Closing.

            (e) Except as set forth on Schedule 4.13, the Targets (i) have paid
         or accrued all wages, bonuses, vacation pay, sick pay and other
         compensation to all employees and independent contractors, as
         applicable, and (ii) will pay all wages, bonuses, vacation pay, sick
         pay and other compensation required to be paid to all such employees
         and independent contractors through and including the Closing Date.

            (f) Schedule 4.13 sets forth a list sets forth a complete and
         correct list of each (i) employee of each Target as of and on the
         Closing Date and whether such employee is classified as an exempt
         employee, non-exempt employee or leased employee; and (ii) independent
         contractor of each Target.

     4.14 Employee Benefit Matters.

            (a) Benefit Plans. Schedule 4.14 contains a list of all "employee
         pension benefit plans" (as defined in Section 3(2) of ERISA,
         hereinafter a "Pension Plan"), "employee welfare benefit plans" (as
         defined in Section 3(1) of ERISA, hereinafter a "Welfare Plan"),
         option, incentive, deferred compensation, severance pay, workers
         compensation, or other employee benefit plans or programs, trusts,
         arrangements, contracts, agreements, policies or commitments, and other
         employee fringe benefit plans or arrangements maintained, contributed
         to or required to be maintained or contributed to by any Target or any
         other person or entity that, together with such Target, is treated as a
         single employer under Section 414(b), (c), (m) or (o) of the Code (each
         an "ERISA Affiliate") for the benefit of any present or former
         officers, employees, managers, directors, independent contractors or
         leased employees of such Target who are entitled to participate by
         reason of their employment with or provision of services to such Target
         or any of its ERISA Affiliates, whether or not any of the foregoing is
         funded, whether insured or self-funded, and whether written or oral,
         (i) to which the Target or any of its ERISA Affiliates is a party or a
         sponsor or a fiduciary thereof or by which the Target or any of its
         ERISA Affiliates (or any of their rights, properties or assets) is
         bound or (ii) with respect to which the Target or any of any of its
         ERISA Affiliates has any obligation to make payments or contributions
         or may otherwise have any liability (all the foregoing being herein
         called "Benefit Plans").

            (b) Each Target has delivered or made available to Purchaser true,
         complete and correct copies of (i) each Benefit Plan (or, in the case
         of any unwritten Benefit Plans, descriptions thereof), (ii) the most
         recent annual report on Form 5500 filed with the Internal Revenue
         Service with respect to each Benefit Plan (if any such report was
         required by applicable law), (iii) the most recent summary plan
         description and related summaries of material modifications for each
         Benefit Plan for which such a summary plan description or summary of
         material modifications is required by applicable law, (iv) each trust
         agreement and insurance or annuity contract relating to any Benefit
         Plan and any other funding agreements that implement any such Benefit
         Plan, and (v) where applicable, the most recent determination letter
         received from the Internal Revenue Service the ("IRS").


                                       21


            (c) Benefit Plan Administration and Compliance.

                (i) Except as set forth on Schedule 4.14, (A) each Benefit Plan
            has been operated and administered in all material respects in
            accordance with its terms, (B) the Targets and such Benefit Plans
            are in compliance in all material respects with the applicable
            provisions of ERISA and the Code and any other applicable law
            (including regulations and rulings thereunder), and (C) all
            documents required to maintain each such Benefit Plan have been duly
            adopted (or otherwise approved, confirmed, ratified or executed) by
            the applicable Target in all material respects. Records have been
            maintained in accordance with Section 107 of ERISA. In addition,
            neither the Targets, Sellers, nor to the Knowledge of Sellers, any
            other fiduciary (as defined in Section 3(21) of ERISA), has any
            material liability for any breach of any fiduciary duties under
            Sections 404, 405 or 409 of ERISA with respect to any of Target's
            Benefit Plans.

                (ii) Except as disclosed in Schedule 4.14, to the Knowledge of
            Sellers, all reports, returns and similar documents with respect to
            the Benefit Plans required to be filed with any Governmental
            Authority or distributed to any Benefit Plan participant have been
            duly and timely filed or distributed. Except as disclosed in
            Schedule 4.14, there are no investigations by any Governmental
            Authority, termination proceedings or other claims (except claims
            for benefits payable in the normal operation of the Benefit Plans),
            suits or proceedings pending or, to the Knowledge of Sellers,
            threatened against or involving any Benefit Plan or asserting any
            rights or claims to benefits under any Benefit Plan that could give
            rise to any material liability.

            (d) Contributions and Payments. Except as disclosed in Schedule
         4.14, all contributions to, and payments from, the Benefit Plans that
         may have been required to be made in accordance with the terms of the
         Benefit Plans or applicable law have been timely made. All such
         contributions to, and payments from, the Benefit Plans, except those
         payments to be made from a trust qualified under Section 401(a) of the
         Code, for any period ending before the Closing Date that are not yet,
         but will be required to be made, will be properly accrued and reflected
         in the Financial Statements (including the Opening Financial
         Statements), in accordance with GAAP.

            (e) Qualification of Pension Plans. Except as disclosed in Schedule
         4.14, each Pension Plan that is intended to be qualified under Section
         401(a) of the Code has received a favorable opinion letter from the IRS
         to the effect that the master or prototype or volume submitter document
         underlying such Pension Plan and any trusts associated with therewith,
         are qualified and exempt from Federal income Taxes under Sections
         401(a) and 501(a), respectively, of the Code; no such opinion letter
         has been revoked, and, to the Knowledge of Sellers, revocation has not
         been threatened; to the Knowledge of Sellers no facts or circumstances
         exist that could be reasonably likely to have an adverse effect on such
         qualification; and no Pension Plan has been amended since the effective
         date of its most recent determination letter in any respect that could
         adversely affect its qualification or materially increase its cost.
         Each Target has delivered or made available to Purchaser a copy of the
         most recent opinion letter received with respect to its Pension Plan.


                                       22


         Each Target has also provided to Purchaser a list of all Pension Plans
         with respect to which a favorable determination or opinion letter is
         pending but has not yet been received as well as copies of all
         currently pending applications on IRS Form 5300 or Form 5307, as the
         case may be, relating to such Pension Plans. All amendments which were
         required to be made through the date hereof to maintain the continued
         qualified status of the Pension Plans under Section 401(a) of the Code
         have been made and to the extent any Pension Plan is not entitled to
         unqualified reliance on a favorable opinion letter issued with respect
         to an applicable master or prototype or volume submitter plan document,
         such Pension Plan has been timely submitted for a new determination
         letter within the time required by Section 401(b) of the Code. All
         Pension Plans have been operated in compliance with all requirements of
         ERISA and the Code, including without limitation the requirements of
         Sections 410(b) and 401(a)(4) thereof, and no event has occurred that
         could result in the qualified status under Section 401(a) of the Code
         of any such tax qualified Pension Plan being denied or revoked or
         subject any Pension Plan to Tax under Section 511 of the Code.

            (f) Pending Investigations and Claims. To the Knowledge of Sellers,
         there are no pending or threatened (in writing) lawsuits, claims (other
         than routine claims for benefits), investigations or audits with
         respect to the Benefit Plans or those of any Target's ERISA Affiliates.

            (g) Prohibited Transactions. Schedule 4.14 discloses: (i) any
         "prohibited transaction" (as defined in Section 4975 of the Code or
         Section 406 of ERISA) that has occurred that involves the assets of any
         Benefit Plan.

            (h) Absence of Certain Plans. None of the Pension Plans is a
         "defined benefit pension plan" (as defined in Section 3(35) of ERISA)
         nor is any Pension Plan subject to the requirements of Section 412 of
         the Code or Section 302 or Title IV of ERISA. Neither Target nor any of
         its ERISA Affiliates has contributed to or been obligated to contribute
         to a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
         during the past five years. No Benefit Plan is funded by a trust
         intended to be exempt from taxation under Section 501(c)(9) of the
         Code.

            (i) Controlled Group Liabilities. Except as disclosed in Schedule
         4.14, to the Knowledge of Sellers, no Targets nor any of their
         respective ERISA Affiliates have incurred any unpaid liability to a
         Pension Plan (other than for contributions not yet due) that, when
         aggregated with other such liabilities, would have a Material Adverse
         Effect.

            (j) Other Benefit Plan Liabilities. Except as disclosed in Schedule
         4.14, to the Knowledge of Sellers no Target nor any of its ERISA
         Affiliates has engaged in a transaction described in Section 4069 of
         ERISA.

            (k) Welfare Plans. The list of Welfare Plans in Schedule 4.14
         discloses whether each Welfare Plan is (i) unfunded, (ii) funded
         through a "welfare benefit fund", as such term is defined in Section
         419(e) of the Code, or other funding mechanism or (iii) insured. Each
         such Welfare Plan may be amended or terminated without material
         liability to any Target at any time after the Closing Date. Except as
         would not have a Material Adverse Effect, each Target complies with the
         applicable requirements of Section 4980B(f) of the Code with respect to
         each Benefit Plan or health care flexible spending account that is a
         group health plan, as such term is defined in Section 5000(b)(1) of the
         Code.


                                       23


            (l) Deal Payments. Except as set forth on Schedule 4.14, no employee
         or independent contractor of any Target will be entitled to any
         additional benefits or any acceleration of the time of payment or
         vesting of any benefits under any Benefit Plan or other contract or
         agreement.

            (m) No Post Employment Liabilities. Except as disclosed on Schedule
         4.14, no Target has any liability to provide retirement benefits or
         deferred compensation under any nonqualified plan, salary continuation,
         severance pay, or any benefits pursuant to a Welfare Plan, including
         life insurance or medical benefits to (i) any employee, independent
         contractor, officer, manager or director or former employee, officer,
         manager or director upon retirement or other termination of employment
         with the exception of employees and former employees and/or their
         qualified beneficiaries entitled to continuation of group health
         coverage from a Target for the legal period of entitlement pursuant to
         the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") or
         (ii) to any other Person (including any Person providing services to a
         Target currently or at any previous time in a capacity other than as a
         common law employee, any leased employee, any family members of current
         or former officers, employees, managers or directors and any managers
         and directors who are not employees). Except as disclosed on Schedule
         4.14, no Target has incurred any liability under FAS 106 or FAS 112.

            (n) All expenses or accrued liabilities of which Sellers or Targets
         are aware, related to any Benefit Plan through the date of this
         Agreement are reflected in the Financial Statements to the extent
         required by GAAP.

     4.15 Taxes.

            (a) All Tax Returns required to be filed for periods ending on or
         before the Closing Date by or on behalf of any Target have been or will
         be filed within the time prescribed by Law (including extensions of
         time permitted by Law). Such Tax Returns are or will be accurate,
         correct, and complete in all material respects, and have been or will
         be prepared in compliance with applicable Laws.

            (b) All Taxes of each Target that are due to any Governmental
         Authority on or before the Closing Date have been or will be timely
         paid.

            (c) There are no Liens for Taxes upon any of the properties or
         assets of any Target (except for Permitted Liens).

            (d) Except as set forth on Schedule 4.15, there are no audits,
         actions, proceedings, investigations, disputes or claims with respect
         to any Taxes or Tax Returns of any Target that are pending or, to the
         Knowledge of Sellers, threatened against any Target. Except as set
         forth on Schedule 4.15, no Target has received (i) written notice from
         any Taxing authority of its intent to examine or audit any of its Tax
         Returns, or (ii) a notice of deficiency or proposed adjustment for any
         amount of Tax proposed, asserted, or assessed by any Governmental
         Authority against such Target.


                                       24


            (e) Sellers have delivered to Purchaser correct and complete copies
         of all Federal corporate income Tax Returns, examination reports, and
         statements of deficiencies assessed against and agreed to by the
         Targets filed or received since 2002, and a list of all other Tax
         Returns that have been filed by any Target since January 1, 2002.

            (f) To the extent that any Target has ever been subject to any Tax
         in any country other than the United States, all such Taxes have been
         timely paid.

            (g) Except as disclosed on Schedule 4.15, no Target owns any
         "tax-exempt use property" within the meaning of Code Section 168(h) or
         "tax exempt bond financed property" within the meaning of Code Section
         168(g)(5).

            (h) No agreements relating to allocation or sharing of, or liability
         or indemnification for, Taxes exist between any Target and any other
         Person.

            (i) All Taxes required to be withheld, collected or deposited by any
         Target (including, but not limited to, amounts required to be withheld,
         collected or deposited with respect to amounts paid or owing to any
         employee, creditor, independent contractor or other Person) have been
         timely withheld, collected or deposited and, to the extent required,
         have been timely paid to the relevant taxing authority. All Persons
         characterized as independent contractors, and not as employees, were
         properly so characterized for all purposes under all applicable Laws
         (including, without limitation, their characterization as independent
         contractors for income and employment tax withholdings and payments).

            (j) No disclosure statement pursuant to Section 6662 of the Code or
         any comparable disclosure with respect to foreign, state and/or local
         Tax statutes has been filed with respect to any item relating to any
         Target nor is any such disclosure required with respect to any
         transactions occurring on or before the Closing Date.

            (k) No Target has received written notice from any taxing authority
         in any jurisdiction where the applicable Target did not file Tax
         Returns or did not pay Taxes, that such Target is or may be subject to
         taxation by that jurisdiction.

            (l) No Target has entered into any outstanding agreements or waivers
         that would extend the statutory period in which a taxing authority may
         assess or collect a Tax against it.

            (m) No closing agreements or settlement agreements pursuant to any
         provision of any Tax Law have been entered into with any taxing
         authority by or with respect to any Target which requires a Target to
         include any item of income in, or exclude any item of deduction from,
         any Tax Return for any taxable period ending after the Closing Date.
         Other than issues that have been or may be raised in connection with
         the IRS Audit, no issues have been raised in any examination by any
         taxing authority with respect to the businesses and operations of any
         Target which, by application of similar principles, reasonably could be
         expected to result in a proposed adjustment to the liability for Taxes
         for any other period not so examined.

            (n) There is no contract, agreement, plan or arrangement to which
         Targets are a party as of the date of this Agreement, including but not
         limited to the provisions of this Agreement, that, individually or
         collectively, should give rise to the payment of any amount that would
         not be deductible pursuant to Sections 280G or 404 of the Code (other
         than the temporary disallowance of a deduction under Section 404(a)(5)
         of the Code). There is no contract, agreement, plan or arrangement to
         which any Target is a party or by which it is bound to compensate any
         individual for excise taxes paid pursuant to Section 4999 of the Code.


                                       25


            (o) No Target has agreed, or is required, to make any adjustment
         under Section 481(a) of the Code by reason of a change in accounting
         method or otherwise.

            (p) No items of income attributable to transactions occurring on or
         before the close of the last preceding taxable year of any Target will
         be required to be included in taxable income by any Target in a
         subsequent taxable year by reason of any Target reporting income on the
         installment sales method of accounting, the cash method of accounting,
         the completed contract method of accounting or the percentage of
         completion capitalized cost method of accounting.

            (q) No Target is subject to any liability for Tax of any person,
         including, without limitation, liability arising from the application
         of U.S. Treasury Regulation Section 1.1502-6 or any analogous provision
         of state, local or foreign law.

            (r) No Target has constituted either a "distributing corporation" or
         a "controlled corporation" in a distribution of stock qualifying for
         tax-free treatment under Section 355 of the Code (x) in the two years
         prior to the date of this Agreement or (y) in a distribution which
         could otherwise constitute part of a "plan" or "series of related
         transactions" (within the meaning of Section 355(e) of the Code) in
         conjunction with the transaction contemplated hereby.

            (s) None of Sellers is a "foreign person" as defined in Section
         1445(f)(3) of the Code.

            (t) Lifestyles is an "S corporation" within the meaning of Section
         1361(a)(1) of the Code and has been at all times since its
         incorporation.

     4.16 Brokers. Neither Sellers nor the Targets have paid or become obligated
to pay any fee or commission to any broker, finder or intermediary in connection
with the transactions contemplated hereby.

     4.17 Absence of Certain Changes or Events. Except as set forth on Schedule
4.17, (i) since the date of the Latest Balance Sheet, there has not been any
transaction or occurrence in which any Target has, and (ii) from the date of
this Agreement through and including the Closing Date, there shall not be any
transaction or occurrence which shall cause any Target to have:

            (a) suffered any changes in its business, operations, assets,
         prospects, results of operations or financial condition, taken as a
         whole, which changes, individually or in the aggregate, would have a
         Material Adverse Effect;

            (b) incurred any material obligations or Liabilities of any nature
         other than items incurred in the ordinary course of business, or
         materially increased (or experienced any change in the assumptions
         underlying or the methods of calculating) any bad debt, contingency or
         other reserve, other than in the ordinary course of business;


                                       26


            (c) paid, discharged or satisfied any material claim, lien,
         encumbrance, obligation or Liability (whether absolute, accrued,
         contingent, and whether due or to become due), other than the payment,
         discharge or satisfaction in the ordinary course of business of claims,
         liens, encumbrances, obligations or Liabilities of the type reflected
         or reserved against, or to be reflected or reserved against, in the
         Financial Statements or which were incurred in the ordinary course of
         business;

            (d) to the Knowledge of Sellers, permitted, allowed or suffered any
         of its properties or assets (real, personal or mixed, tangible or
         intangible) to be subject to any Lien, other than Permitted Liens;

            (e) written down or written up the value of any equipment or
         inventory (including write downs by reason of shrinkage or markdowns),
         determined as collectible any accounts receivable or any portion
         thereof which were previously considered uncollectible, or written off
         as uncollectible any accounts receivable or any portion thereof, except
         for write downs, write ups and write offs in the ordinary course of
         business, none of which is material in amount;

            (f) canceled any debts or waived any claims or rights in excess of
         $25,000 individually;

            (g) assigned, pledged, licensed, transferred, hypothecated, disposed
         of or permitted to lapse any right to the use of any assumed name,
         Invention or other Intellectual Property or Licensed Intellectual
         Property, Copyrights, license or application therefore, except in the
         ordinary course of business, consistent with past practice;

            (h) except for commitments for capital expenditures not exceeding
         $25,000 in the aggregate made in the ordinary course of business,
         committed to make any capital expenditure not paid for or accrued prior
         to the Closing Date for additions to property, plant, equipment,
         intangible or capital assets or for any other purpose, other than for
         repairs or replacement except as set forth in Schedule 4.17;

            (i) incurred any Indebtedness for borrowed money, except for
         indebtedness incurred pursuant to the Revolving Credit Facility in the
         ordinary course of business consistent with past practice which amount
         is disclosed on Schedule 4.17 as of the Closing Date;

            (j) paid, loaned, distributed or advanced any amounts to, sold or
         transferred any properties or assets (real, personal or mixed, tangible
         or intangible) to, purchased, licensed or otherwise acquired any
         properties or assets the aggregate amount of which exceeds $50,000, or
         entered into any other agreement or arrangement with any Seller,
         Affiliate of any Seller, or Affiliate of any Target except for
         compensation not exceeding the rate of compensation in effect as of
         January 1, 2005 and for routine travel advances to officers and
         employees, or except as set forth in Schedule 4.17;

            (k) declared, set aside or paid any dividend or other distribution
         (whether in stock or property) with respect to any of its outstanding
         securities (including the Shares) or other equity interests, or made
         any redemption, purchase or other acquisition of any of its securities
         (including the Shares) or other equity securities;


                                       27


            (l) issued, sold, split, combined or reclassified any of its equity
         securities or interests, or issued, committed to issue or authorized
         any issuance of any options, warrants or other similar convertible
         securities or equity interests;

            (m) made any change in its accounting methods, principles or
         practices;

            (n) entered into any collective bargaining or labor agreement (oral
         and legally binding or written), or experienced any organized slowdown,
         material work interruption, strike or work stoppage;

            (o) sold, transferred, or otherwise disposed of any of its material
         assets except in the ordinary course of business;

            (p) granted or incurred any obligation for any increase in the
         compensation of any of its officers, employees or independent
         contractors, including, without limitation, any increase pursuant to
         any Benefit Plan except for raises and bonuses to officers or employees
         in the ordinary course of business and consistent with past practice;

            (q) suffered any uninsured casualty loss or damage in excess of
         $25,000 individually;

            (r) made or agreed to make any charitable contributions or incurred
         or agreed to incur any non business expenses in excess of $25,000; or

            (s) agreed, so as to legally bind itself or any other Target whether
         in writing or otherwise, to take any of the actions set forth in this
         Section 4.17 and not otherwise permitted by this Agreement.

     4.18 Permits. Each Target has all Permits that are necessary for its
business and there has occurred no default under any such Permits, except where
the failure to have such Permit or such default would not have a Material
Adverse Effect. There are no pending Legal Proceedings relating to the
suspension, revocation or modification of any such Permits. The execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby, do not and will not result in any suspension,
revocation, cancellation or invalidation of any Permit that is necessary for the
conduct of any Target's business. Schedule 4.18 contains a list of all Permits
currently held and in effect or currently applied for by any Target.

     4.19 Accounts Receivable. Except as set forth on Schedule 4.19, all of the
accounts, notes and loans receivable that have been recorded on the books of the
Targets are bona fide and represent amounts validly due, and adequate reserves
for doubtful accounts have been or will be set aside as reflected on the Latest
Balance Sheet and the Opening Balance Sheet, respectively. No account debtor has
asserted any setoff, deduction or defense with respect thereto, and, to the
Knowledge of Sellers, no account debtor has any valid setoff, deduction or
defense. All of such accounts, notes and loans receivable are free and clear of
any Liens (other than Permitted Liens), or other charges; none of such accounts,
notes or loans receivable are subject to any offsets or claims of offset. Except
as set forth on Schedule 4.19, none of the obligors of such accounts, notes or
loans receivable have given notice that they will or may refuse to pay the full
amount thereof or any portion thereof. Except as set forth on Schedule 4.19,
since the date of the Latest Balance Sheet, each Target has collected accounts
receivable only in accordance with its regular collection practices and has not
granted any rebates, discounts, advances or allowances to any customers and has
not otherwise sold, discounted or disposed of any accounts receivable.
Notwithstanding the foregoing, Sellers do not guarantee to Purchaser the full
collection by Targets of their respective accounts receivable.


                                       28


     4.20 Compliance with Laws. Except as set forth on Schedule 4.20, each
Target has complied, and is in compliance, in all material respects, with all
Laws and Orders applicable to its business and has filed with the proper
Governmental Authorities all statements and reports required by the Laws and
Orders to which it or any of its properties or operations are subject, except
where the failure to comply or to so file would not have a Material Adverse
Effect. To the Knowledge of Sellers, the operation of the properties and
business of each Target in the manner in which it is now and has been operated
does not violate in any material respect any zoning ordinances, municipal
regulations or other rules, regulations or Laws. To the Knowledge of Sellers, no
claim has been made by any Governmental Authority to the effect that the
business conducted by any Target fails to comply, in any material respect, with
any Law.

     4.21 Transactions with Related Parties. Except as set forth on Schedule
4.21, no agreement or transaction between a Target and any Related Party has
been entered into which, if not existing, would have resulted in a Material
Adverse Effect or, irrespective of whether such agreement or transaction would
result in a Material Adverse Effect, will continue after the Closing Date.

            (a) No Related Party is a director or officer of, or has any direct
         or indirect interest in (other than the ownership of not more than 5%
         of the publicly traded shares of), any Person that is a customer,
         supplier, vendor, landlord, sales representative or competitor of any
         Target;

            (b) No Related Party owns or has any interest, directly or
         indirectly, in whole or in part, in any tangible or intangible property
         used in the conduct of the business of any Target;

            (c) Other than expense advance reimbursements in the ordinary course
         of business, no Affiliate of any Target owes any money to, nor is any
         such Affiliate owed any money by, any Target; and

            (d) No Target has, directly or indirectly, guaranteed or assumed any
         indebtedness for borrowed money or otherwise for the benefit of any
         Related Party.

     4.22 Indebtedness to Affiliates. Except as set forth on Schedule 4.22 and
except as provided in Section 7.9, as of the Closing and, following the Closing
Date, no Target will be liable for any Indebtedness owed to any Seller or any
Affiliate thereof. Additionally, except as set forth on Schedule 4.22, no
present or former employee or officer of a Target has any Indebtedness,
including accrued interest, owed to any Target.

     4.23 Agents. Except as set forth on Schedule 4.23, no Target has designated
or appointed any Person to act for it or on its behalf pursuant to any power of
attorney or any agency which is presently in effect (other than such of a
Target's managers, directors, officers and employees to whom such Target has
given the authority to act for it in the ordinary course of its business) or
pursuant to any license agreement relating to the Intellectual Property entered
into in the ordinary course of business.

     4.24 Commission Sales Contracts. Except as set forth on Schedule 4.24, no
Target has a relationship with any Person whose compensation from a Target is in
whole or in part determined on a commission basis.


                                       29


     4.25 Customers. Except as set forth on Schedule 4.25, no customer that is a
party to a Material Contract has canceled or otherwise terminated, or, to the
Knowledge of Sellers, threatened in writing to cancel, terminate or materially
modify in any manner, its relationship with such Target.

     4.26 Books and Records. The minute books and records of each Target
contains a true, complete and correct record of all actions taken at all
meetings and by all written consents in lieu of meetings of its shareholders,
board of directors, and committees thereof. To the Knowledge of Sellers, there
are no agreements (other than the Target Stockholders Agreements) regarding the
ownership, voting or rights of any Person in any Target. The accounting,
financial reporting, Tax and business books and records of each Target (i)
accurately and fairly reflect in all material respects the business and
condition of such Target and the transactions and the assets and Liabilities of
such Target with respect thereto, and (ii) have been maintained in all material
respects in accordance with good business and bookkeeping practices.

     4.27 No Material Misstatements or Omissions. The representations and
warranties made by Seller in this ARTICLE IV and, to the Knowledge of Sellers,
the information made available by Sellers and Targets pursuant to this
Agreement, including the Schedules hereto, do not contain any untrue statement
of a material fact or omit any material fact necessary to make the statements
herein or in the Schedules hereto, as the case may be, not misleading.

     4.28 Shareholders, Directors and Officers. Schedule 4.28 lists all of the
shareholders, directors and officers of each Target.

     4.29 Bank Accounts; Lock Boxes. Attached hereto as Schedule 4.29 is a list
of all banks or other financial institutions with which any Target has an
account or maintains a lock box or safe deposit box, showing the type and
account number of each such account, lock box and safe deposit box and the names
of the persons authorized as signatories thereon or to act or deal in connection
therewith.

                                   ARTICLE V.

         REPRESENTATIONS AND WARRANTIES OF SELLERS REGARDING THEMSELVES

         Each Seller hereby severally represents and warrants to Purchaser
solely with respect to himself or itself, as applicable, as follows:

     5.1 Power and Authority; Authorizations; Execution and Validity. Such
Seller has all requisite power and authority to execute and deliver this
Agreement and Seller Transaction Agreements to which it is a party and to
perform his or its obligations hereunder and thereunder. The execution, delivery
and performance by such Seller of the Seller Transaction Agreements to which
such Seller is a party and the consummation by such Seller of the transactions
contemplated to be consummated by such Seller thereby, have been or will be duly
authorized by all necessary action on the part of such Seller (including trust
action, if applicable) and no other action on the part of such Seller is
necessary with respect thereto. Each of the Seller Transaction Agreements to
which such Seller is a party, when duly and validly executed and delivered by
such Seller, will constitute a legal, valid and binding obligation of such
Seller and will be enforceable against such Seller in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization and similar laws affecting creditors generally and by the
availability of equitable remedies.


                                       30


     5.2 Consents. Neither the execution and delivery by a Seller of this
Agreement or the Seller Transaction Agreements to which such Seller is a party
nor the consummation or performance by such Seller of the transactions
contemplated hereunder or thereunder to be consummated or performed by such
Seller will require prior to the Closing any consent from, authorization or
approval or other action by, notice to or declaration, filing or a registration
with, any Governmental Authority or any other third party which such Seller has
not already obtained.

     5.3 No Defaults or Conflicts. Neither the execution and delivery by a
Seller of this Agreement or the Seller Transaction Agreements to which such
Seller is a party nor the consummation or performance by such Seller of the
transactions contemplated hereunder or thereunder to be consummated or performed
by such Seller violates or conflicts with, or constitutes a breach of any of the
terms or provisions of or a default under, results in or will result in the
creation or imposition of any Lien upon any property or asset of such Seller
(including any Shares owned by such Target), the trigger of any charge, payment
or requirement of consent, or the acceleration or increase of the maturity of
any payment date under: (a) any Contract or (b) any applicable Law or Order to
which such Seller or any of such Seller's respective properties is subject,
except as set forth on Schedule 5.3.

     5.4 Brokers. No Seller has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary in connection with the
transactions contemplated hereby.

     5.5 Title to Shares; Litigation. Each Trust has, good and marketable title
to the Shares set forth opposite its name on Exhibit A free and clear of all
Liens (other than those imposed by federal and state securities laws). Each
Trust has the full power, right and authority to vote and transfer the Shares
owned by it and no other Person has any claim or interest in the Shares owned by
such Trust. The Trusts are permissible shareholders of Lifestyles. There are no
Legal Proceedings brought by, pending or, to the Knowledge of Sellers,
threatened in writing against or affecting the Shares. No Seller is a party to
any Legal Proceeding that would prohibit such Seller from performing its
obligations under this Agreement or any Seller Transaction Agreement to which it
is a party.

     5.6 No Other Claims. With respect to each Seller, (i) such Seller does not
own or have any equity interest (or rights to any equity interests) in the
Targets, other than as set forth opposite its name on Exhibit A, and (ii) such
Seller does not have any Lien, cause of action or other claim or potential claim
against any Target.

     5.7 Not Foreign Person. No Seller is a "foreign person" as defined in
Section 1445(f)(3) of the Code.

     5.8 Investment. With respect to each Trust, the shares of Purchaser's
Common Stock, if any, to be acquired by it is being for investment purposes only
for such Trust's own account and not with a view to the resale or distribution
of any part thereof in violation of applicable securities Laws.

     5.9 Grantor Trusts. With respect to each Trust, such Trust is a grantor
trust established under the Laws of the State of California. With respect to the
Trusts, (i) Marc Laurence Greenberg has the full power, capacity and authority
necessary to (x) cause the Greenberg Trust to enter into and perform its
obligations under this Agreement and the other Seller Transaction Agreements to
which such Trust is a party, and (y) consummate the transactions contemplated
hereby and thereby; and (ii) Richard B. Goldberg has the full power, capacity
and authority necessary to (x) cause the Goldberg Trust to enter into and
perform its obligations under this Agreement and the other Seller Transaction
Agreements to which such Trust is a party, and (y) consummate the transactions
contemplated hereby and thereby.


                                       31


                                  ARTICLE VI.

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

     The Purchaser represents, warrants and covenants to each of Sellers as of
the date hereof and the Closing Date, with full knowledge that such
representations, warranties and covenants are a material consideration and
inducement to the execution of this Agreement by Sellers and the consummation of
the transactions contemplated hereunder, as follows:

     6.1 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, with the requisite corporate power and authority to conduct its
business, and to own, lease or operate its properties in the places where such
business is conducted and such properties are owned, leased or operated.

     6.2 Authority. Purchaser has full power and authority to execute, deliver
and perform its obligations under this Agreement and each of the Purchaser
Transaction Agreements to which it is a party, and consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by
Purchaser of this Agreement and each of the Purchaser Transaction Agreements to
which it is a party, has been duly and validly authorized and approved by all
necessary action on the part of Purchaser. This Agreement and each of the
Purchaser Transaction Agreements to which Purchaser is a party is the legal,
valid and binding obligation of Purchaser enforceable against Purchaser in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization and similar laws affecting creditors
generally and by the availability of equitable remedies.

     6.3 Investment. The Shares are being and will be acquired for investment
purposes only for Purchaser's own account and not with a view to the resale or
distribution of any part thereof in violation of applicable securities Laws.

     6.4 Brokers. Except as set forth on Schedule 6.4, Purchaser has not paid or
become obligated to pay any fee or commission to any broker, finder or
intermediary in connection with the transactions contemplated hereby. Purchaser
is solely responsible for paying any such fees or commissions listed on Schedule
6.4.

     6.5 Litigation. Purchaser is not a party to any Legal Proceeding that would
prohibit Purchaser from performing its obligations under this Agreement or the
Purchaser Transaction Agreements.

         6.6 Securities Filings. Schedule 6.6 identifies registration statements
and reports (collectively, the "Securities Filings") filed by Purchaser with the
Securities and Exchange Commission (the "SEC") since March 31, 2005, which have
been filed in accordance with the rules and regulations of the Act and the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"). Copies of
all of the Securities Filings are publicly available at www.sec.gov/edgar.
Seller has advised Purchaser to review the Securities Filings. As of their
respective filing dates, the Securities Filings did not contain any untrue
statements of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Since the date of the
latest Securities Filings, other than as relate to the transactions contemplated
by this Agreement, there have not been any events which individually or in the
aggregate would be required to be reported pursuant to the Act or the Exchange
Act. Notwithstanding anything in this Agreement to the contrary, this Section
6.6 shall apply only in the event Purchaser elects to pay the Alternative A
Purchase Price; in the event Purchaser elects to pay the Alternative B Purchase
Price, this Section 6.6 shall be null and void.


                                       32


     6.7 Purchaser's Common Stock. The shares of Purchaser's Common Stock to be
issued hereunder constitute valid and legally issued shares of the common stock
of Purchaser, and are fully paid and nonassessable. All Purchaser's Common Stock
issued pursuant to this Agreement shall, except for restrictions on resale or
transfer described herein or in the Registration Rights Agreement, have the same
rights as all of the other shares of outstanding Purchaser's Common Stock by
reason of the provisions of the Articles of Incorporation of Purchaser or as
otherwise provided by Colorado law. Notwithstanding anything in this Agreement
to the contrary, this Section 6.7 shall apply only in the event Purchaser elects
to pay the Alternative A Purchase Price; in the event Purchaser elects to pay
the Alternative B Purchase Price, this Section 6.7 shall be null and void ab
initio.

     6.8 Consents. Neither the execution and delivery by Purchaser of the Seller
Transaction Agreements to which Purchaser is a party, nor the consummation of
performance by Purchaser of the transactions contemplated by the Seller
Transaction Agreements to be consummated or performed by Purchaser, will
require, prior to Closing, any consent from, authorization, or approval, or
other action, by notice to or declaration, filing or registration with, any
Governmental Authority or any other third party which Purchaser has not already
obtained.

     6.9 No Violation. The execution and delivery by Purchaser of this Agreement
or any other Seller Transaction Agreements to which it is a party, the
consummation of the transactions contemplated hereby and thereby, and the
performance by Purchaser of this Agreement and each other Seller Transaction
Agreement to which it is a party in accordance with their respective terms and
conditions will not:

            (a) Conflict with the Organizational Documents of Purchaser;

            (b) Require Purchaser to make any filings with or give any notices
         to, any Governmental Authority other than filings required by
         securities Laws;

            (c) Violate any Law of any Governmental Authority applicable to
         Purchaser which violation would have a Material Adverse Effect;

            (d) Violate any Orders of any court or Governmental Authority
         applicable to Purchaser or its properties, assets or businesses;

            (e) Violate, conflict with or result in a breach of any of the terms
         and conditions of, result in a material modification of the effect of,
         otherwise cause the termination of or give any other contracting party
         the right to terminate, accelerate, cancel, impose any fees or
         penalties, or continue (or with notice or lapse of time or both
         constitute) a default under any contract, agreement, debt, note,
         license or result in the creation of any Lien upon any of the
         properties or assets of Purchaser or as would not reasonably be
         expected to have a Material Adverse Effect; or

                                       33


            (f) Violate or result in the loss of any right under, termination,
         revocation or suspension of any Permit except where such violation,
         loss, termination, revocation or suspension would not reasonably be
         expected to have a Material Adverse Effect.

                                  ARTICLE VII.

                            COVENANTS OF THE PARTIES

         7.1 Interim Conduct of Business by Targets. From the date hereof until
the Closing, Sellers shall cause each Target to operate its business as a going
concern consistent with past practice and in the ordinary course of business,
except as expressly permitted or required by this Agreement or as otherwise
expressly consented to by Purchaser in writing. Without limiting the generality
of the foregoing, from the date hereof until the Closing, except for
transactions contemplated by this Agreement or expressly approved in writing by
Purchaser, Sellers shall not permit any Target to:

            (a) Enter into or amend any employment, bonus, severance or
         retirement contract or arrangement, or increase any salary or other
         form of compensation payable or to become payable to any executive,
         employee or independent contractor other than in the ordinary course of
         business consistent with past practice;

            (b) Purchase, lease or otherwise acquire any real estate or any
         interest therein;

            (c) Except as set forth on Schedule 7.1, declare, set aside or pay,
         or permit the payment of, any dividend or make any other distribution
         with respect to any of the Shares or any other securities or equity
         interests in any Target;

            (d) Except as set forth on Schedule 7.1, pay or accrue any bonus,
         compensation, fee or commission to any employee, director or
         independent contractor of any Target other than amounts payable in the
         ordinary course of such Target's business and except for (i) bonus
         amounts to be paid to the Individual Sellers and other employees and
         independent contractors of MRG which were declared effective as of
         December 31, 2005 and which in the aggregate do not exceed $2,600,000,
         and (ii) distributions to the shareholders of Lifestyles which in the
         aggregate do not exceed $250,000;

            (e) Merge or consolidate with, or purchase or agree to purchase all
         or substantially all of the assets of, acquire securities of or
         otherwise acquire any Person;

            (f) Sell, lease or otherwise dispose of or agree to sell, lease or
         otherwise dispose of any of its assets, properties, rights or claims,
         whether tangible or intangible, except in the ordinary course of
         business consistent with prior practice;

            (g) Authorize for issuance, issue, sell or deliver any of its Shares
         or other securities or equity interests;

            (h) Split, combine or reclassify any class of the Shares or other
         securities or equity interests, or redeem or otherwise acquire,
         directly or indirectly, any of the Shares, or other securities or
         equity interests;


                                       34


            (i) Incur any Liability, guaranty or obligation (fixed or
         contingent) other than in the ordinary course of business consistent
         with past practice;

            (j) Place or permit to be placed any Lien on any of its assets or
         properties, other than Permitted Liens arising in the ordinary course
         of business;

            (k) Make or authorize any amendments or changes to its Charter,
         Articles of Incorporation, Bylaws or any other Organizational
         Documents;

            (l) Make any investment in excess of $25,000, whether singly or in
         the aggregate, in property, plant and equipment and other items of
         capital expenditure;

            (m) Accelerate receivables or delay or postpone payment of any
         accounts payable or other Liability, except in the ordinary course of
         business consistent with past practice;

            (n) Abandon any part of its business; or

            (o) Distribute to any Person any proceeds received by any Target in
         respect of the repayment of any amount of the Producer Advances. In the
         event either Seller or a Target receives repayment of a Producer
         Advance, Purchaser shall be notified in writing of the nature and
         amount of the payment prior to the Closing Date.

         7.2 Access to Information of Targets. Sellers shall, upon reasonable
notice to Sellers, cause each Target to provide Purchaser and its
representatives full and free access to all properties, assets, books,
contracts, commitments and records of such Target during reasonable business
hours and shall promptly furnish Purchaser with all financial and operating data
and other information as to the history, ownership, Affiliates, business,
operations, properties, assets, Liabilities, or condition (financial or
otherwise) of such Target as Purchaser may from time to time reasonably request.

         7.3 Opening Financial Statements. Prior to March 15, 2006, Sellers will
cause the preparation by Targets and delivery to Purchaser of an unaudited
consolidated balance sheet of the Targets as of the Closing Date (the "Opening
Balance Sheet"), together with related statements of operations and operating
cash flows for the period (i) beginning on the day immediately following the
Latest Balance Sheet and ending on December 31, 2005, and (ii) beginning on
January 1, 2006 and ending on the Closing Date (collectively, the "Opening
Financial Statements"). The Opening Financial Statements shall be accompanied by
a certificate in the form attached as Exhibit D executed by each of the
Individual Sellers attesting to the truth and accuracy of the information
contained therein. The Opening Financial Statements (A) shall be prepared from
the books and records of the Targets, (B) shall contain figures arising out of
bona fide licenses, sales and deliveries of goods, performance of services or
other bona fide business transactions, (C) shall be true, complete and correct
in all material respects, and (D) shall present fairly the financial position of
the Targets as of the date indicated thereon, and the results of their
operations and cash flows for the period to be presented, prepared in conformity
with GAAP, consistently applied. Purchaser's Outside Audit Firm will review and
verify the accuracy of the Opening Balance Sheet no later than March 15, 2006.
All underlying work papers and materials used by Sellers' accountants in the
preparation of the Opening Balance Sheet shall be made available to Purchaser's
Outside Audit Firm. Exhibit E sets forth each line item to be used by
Purchaser's Outside Audit Firm in connection with its review and verification of
the Opening Balance Sheet and the Opening Balance Sheet Working Capital Amount.
In addition to the foregoing, Sellers shall cause the preparation and delivery
to Purchaser at Closing an estimate of the Opening Balance Sheet of the Targets
signed by each of the Individual Sellers (the "Estimated Opening Balance
Sheet").


                                       35


         7.4 Notification of Changes. Between the date hereof and the Closing
Date, Sellers shall, subject to the actual knowledge of Purchaser, promptly
notify Purchaser in writing of any change in the business, affairs or financial
condition of each Target, any damage to or loss of any of its assets, or the
institution of or the threat of institution of any Legal Proceeding against any
Target, which, in each case, may reasonably be expected to have a Material
Adverse Effect on such Target, or any breach of a representation or warranty in
this Agreement.

         7.5 Consents. Sellers shall use commercially reasonable efforts to
obtain, prior to the Closing, all consents of third parties which, in the
reasonable judgment of Purchaser, are necessary or appropriate for the
consummation of the transactions contemplated by this Agreement. In any case
where a necessary consent or approval has not been obtained at or prior to the
Closing, Seller shall assist Purchaser, at Purchaser's request, after Closing in
taking commercially reasonable steps to obtain such consent or approval.

         7.6 Supplemental Disclosure. Sellers shall have the continuing
obligation up to and including the Closing Date to supplement promptly or amend
the Schedules with respect to any matter hereafter arising or discovered which,
if existing or known at the date of this Agreement, would have been required to
be set forth or listed in the Schedule. Any such supplement or amendment shall
be treated as if the information added or modified in such supplement or
amendment had been included in the Schedules as of the date of this Agreement.

         7.7 Governmental Filings. Purchaser and Sellers, to the extent legally
required, shall hereof promptly prepare, file, and diligently pursue the
resolution of all applications and filings required by Law in order to effect
the transactions contemplated by this Agreement.

         7.8 Payoff of Revolving Credit Facility. Purchaser shall cause the
Targets to pay all amounts owing under the Revolving Credit Facility
contemporaneously or promptly following the Closing.

         7.9 Seller Loans. After the Closing Date, Purchaser shall pay or shall
cause Targets to pay Sellers an aggregate principal sum of up to Two Hundred
Fifty Thousand Dollars ($250,000), without interest, in respect of loans made by
Sellers to the Targets ("Seller Loans") as identified on Schedule 7.9; provided,
however, the repayment of any portion of the amount of the Seller Loans, up to
$250,000, shall be subject to the existence of the Minimum Working Capital
Liquidity Threshold, as determined by Purchaser's Outside Audit Firm in
accordance with Section 7.3 (e.g., no payment shall be made until after the
review of the Opening Balance Sheet); and further provided, Sellers shall only
be entitled to that portion of the amount of the Seller Loans to the extent of
the excess amount, if any, of the Opening Balance Sheet Working Capital Amount
over the Minimum Working Capital Liquidity Threshold. To the extent that Sellers
and Purchaser agree prior to Closing that all or a portion of the Seller Loans
(the "Loan Shortfall") will not be repaid by Targets as a result of the
provisions of this Section 7.9 (i.e., the difference between $1,250,000 and the
Opening Balance Working Capital Amount), Sellers agree that an amount equal to
Sellers' estimate of the Loan Shortfall portion of the notes will be contributed
to Targets immediately prior to the Closing such that Targets shall have no
further obligations under the notes; provided, however, in the event Targets
ultimately are entitled to receive payments in respect of the Seller Loans
following the Closing in excess of the Loan Shortfall pursuant to this Section,
Purchaser agrees to pay such excess amount to Sellers, which amount shall be
considered to be part of and in addition to the Purchase Price. The parties
acknowledge that in such event the notes (or a portion thereof) are being
contributed, not that Sellers are contributing additional cash to Targets.


                                       36


     7.10 Sale by Sellers of Purchaser's Common Stock.

            (a) In the event Purchaser elects to pay the Alternative A Purchase
         Price, Sellers shall not sell any shares of Purchaser's Common Stock,
         except as follows:

                (i) beginning on the last day of the fifth quarter following the
            Closing Date and up until the second anniversary of the Closing
            Date, Sellers may sell, during each quarter, in the aggregate,
            one-eighth of the Purchaser's Common Stock shares acquired by them
            pursuant to Section 3.1(a); provided, however, that such right to
            sell per quarter shall not be cumulative; and

                (ii) beginning on the second anniversary of the Closing Date,
            Sellers may sell all of the shares of Purchaser's Common Stock
            acquired by them pursuant to Section 3.1(a).

            (b) All such shares of Purchaser's Common Stock shall be registered
         by the Purchaser subject to and in accordance with the terms and
         conditions of a Registration Rights Agreement to be entered into by
         Sellers and Purchaser, the form of which is attached as Exhibit F (the
         "Registration Rights Agreement").

     7.11 Certain Tax Matters.

            (a) Sellers shall, jointly and severally, be responsible for, will
         pay or cause to be paid, and will indemnify and hold harmless the
         Targets, Purchaser, and their Affiliates from and against any and all
         of the following Taxes, except to the extent that such Taxes are taken
         into account in determining the Minimum Working Capital Liquidity
         Threshold and are properly accrued on the Opening Balance Sheet:

                (i) all Taxes imposed on Sellers or any Target with respect to
            all taxable periods of Sellers or the Targets that end on or prior
            to the Closing Date;

                (ii) all Taxes imposed on the Targets under Treasury Regulation
            Section 1.1502-6 or any similar provision of state, local or foreign
            law as a result of the inclusion of the Targets in a Seller
            Consolidated Return on or prior to the Closing Date; and

                (iii) all Taxes allocated to Sellers pursuant to Section 7.11
            hereof.

            (b) For periods ending on or prior to the Closing Date, Sellers
         shall cause the Targets to prepare and timely file at Targets' expense,
         or cause to be prepared and timely filed, consistently with prior
         practices Tax Returns (including, without limitation, if applicable,
         all consolidated, unitary or combined Tax Returns) for periods ending
         on or prior to the Closing Date on which Sellers will include the
         operations of each Target (the "Pre-Closing Returns"), it being
         understood that Lifestyles is not a part of the consolidated Tax
         Returns of MRG. In connection therewith, Purchaser shall, and shall
         cause each Target to, (i) provide to Sellers and its accountants and
         other Tax-related consultants reasonable access to any books and
         records that Seller may reasonably request in connection with the
         preparation of the Pre-Closing Returns; (ii) cooperate with Sellers and
         their accountants and other Tax-related consultants as Sellers may
         reasonably need in preparing the Pre-Closing Returns; and (iii) if
         necessary, cause a duly elected and authorized officer of each Target
         (or its successor) (which may be Goldberg or Greenberg if so requested
         by Purchaser) to sign such Pre-Closing Returns as may require the
         signature of such an officer. Sellers shall give Purchaser a reasonable
         opportunity to review all Tax Returns prepared in accordance with this
         Section 7.11(b) and shall cooperate in good faith with Purchaser to
         reconcile any items identified by Purchaser in connection with its
         review and with regard to any necessary changes in order to file
         accurate Tax Returns. Following the Closing, Sellers shall cooperate
         with Purchaser and its accountants and other Tax-related consultants as
         Purchaser may reasonably need in transitioning any Tax records of the
         Targets and provide Purchaser with a list of all countries other than
         the United States in which the Targets have been subject to Taxes for
         the last two (2) years preceding the Closing.


                                       37


            (c) Any Tax allocation or sharing agreement or arrangement which,
         prior to the Closing Date, may have been entered into between a Target
         on the one hand, and any Seller or any of its Affiliates on the other
         hand, shall terminate with respect to such Target as of the Closing
         Date and Sellers shall be responsible for all amounts owing to any
         third party pursuant to any such sharing agreements or arrangements.

            (d) Any refunds of Taxes paid with respect to Tax periods or
         portions thereof ending on or before the Closing Date that are received
         by Purchaser or a Target, and any such amounts credited against Tax to
         which Purchaser or a Target become entitled, shall be the property of
         Targets, the benefit of which shall be in favor of Purchaser; provided,
         however, that to the extent that such Tax refunds have been properly
         accrued, Sellers shall receive the benefit for purposes of the
         calculation of the Opening Balance Sheet Working Capital Amount.
         Without limiting the foregoing, any refunds of sales or use Taxes
         recovered by a Target as a result of a filing made after the Closing
         Date by Purchaser or a Target with respect to Taxes paid related to
         periods prior to the Closing Date shall be for the benefit of the
         applicable Target or Purchaser and remain the sole property of such
         Target or Purchaser.

            (e) INTENTIONALLY OMITTED.

            (f) Each party hereto shall, and shall cause its Subsidiaries and
         Affiliates to, provide to each of the other parties hereto such
         cooperation and information as any of them reasonably may request in
         filing any Tax Return, amended Tax Return or claim for refund,
         determining a liability for Taxes or a right to refund of Taxes or in
         conducting any audit or other proceeding in respect of Taxes. Such
         cooperation and information shall include providing copies of all
         relevant portions of relevant Tax Returns, together with relevant
         accompanying schedules and relevant work papers, relevant documents
         relating to rulings or other determinations by Taxing authorities and
         relevant records concerning the ownership and Tax basis of property,
         which any such party may possess. Each party will retain all Tax
         Returns, schedules and work papers, and all material records and other
         documents relating to Tax matters, of each Target for its Tax period
         first ending after the Closing Date and for all prior Tax periods until
         the later of (i) the expiration of the statute of limitations for the
         Tax periods to which the Tax Returns and other documents relate; and
         (ii) eight years following the due date (without extension) for such
         Tax Returns. Thereafter, the party holding such Tax Returns or other
         documents may dispose of them; provided that such party shall give to
         the other party notice and an opportunity to take custody thereof prior
         to doing so. Each party shall make its employees reasonably available
         on a mutually convenient basis at its cost to provide explanation of
         any documents or information so provided.


                                       38


            (g) Sellers shall bear all Transfer Taxes arising out of or in
         connection with the transactions effected pursuant to this Agreement,
         and Sellers shall, jointly and severally, indemnify, defend and hold
         harmless each Purchaser with respect to such Transfer Taxes. Sellers
         shall file all necessary documentation and Tax Returns with respect to
         such Transfer Taxes, if any.

            (h) With respect to any Taxable Period of a Target that would
         (absent an election) include, but not end until after, the Closing Date
         (a "Straddle Period"), Purchaser and Sellers will, to the extent
         permitted by applicable Law, elect with the relevant Tax authority to
         close such Straddle Period as of the close of the Closing Date. As a
         result of such election, Taxes will be allocated to Sellers and
         Purchaser pursuant to the provisions of Section 7.11(a).

                (i) In any case where applicable Law does not permit a Target to
            close a Straddle Period as of the Closing Date, Sellers will be
            allocated any income Taxes imposed on the Targets or the applicable
            Subsidiary for the portion of the Straddle Period up to and
            including the Closing Date. For purposes of this Section 7.11(h),
            income Taxes for the portion of a Straddle Period up to and
            including the Closing Date will be determined based upon an interim
            closing of the books of the Targets, as the case may be, as of the
            close of the Closing Date based upon tax accounting practices and
            procedures used by each Target in preparing its Tax Returns.

                (ii) As to any Tax other than an income Tax (a "Non-Income
            Tax"), for any Straddle Period, Sellers will be allocated (i) for
            any Non-Income Tax that is determined based upon specific
            transactions (including, but not limited to, payroll, value added,
            sales and use Taxes), all Non-Income Taxes applicable to
            transactions which have occurred during the period through the
            Closing Date and (ii) for any Non-Income Tax that is not based upon
            specific transactions (including, but not limited to, license, real
            property, personal property, franchise and doing business Taxes),
            any Non-Income Tax equal to the full amount of such Non-Income Tax
            for the entire Straddle Period multiplied by a fraction, the
            numerator of which is the number of days in the Straddle Period
            ending on the Closing Date and the denominator of which is the
            number of days in the entire Straddle Period; provided, that
            Sellers' or Purchaser's allocation shall be adjusted appropriately
            to reflect the actual proportionate period of property ownership or
            the activity of the Targets during the Straddle Period, as
            applicable, for any such Non-Income Taxes imposed with respect to
            the ownership of specific items of property held by the Targets or
            the activity of the Targets, as applicable, during the Straddle
            Period.

                (iii) With respect to any Taxes due and owing by one party to
            the other in connection with any Straddle Period, such Taxes shall
            be paid by the owing party prior to the due date of the Tax Return
            for such Taxes.

            (i) After the Closing Date, Purchaser shall have the right to
         prepare and file any Tax Returns with any Governmental Authority that
         Purchaser reasonably believes should have been filed prior to the
         Closing Date (the "Delinquent Tax Returns") and to prepare and file any

                                       39


         amended Tax Returns with any Governmental Authority that Purchaser
         reasonably believes should be amended (the "Amended Tax Returns");
         provided, however that Purchaser shall not file any Delinquent Tax
         Returns or Amended Tax Returns unless (i) Purchaser determines in good
         faith that the filing is required to avoid a continuing material
         negative affect on Purchaser or the Targets following the Closing
         (including a loss of Tax refunds), (ii) such filings are required by a
         Governmental Authority; or (iii) the Audit Committee of the Board of
         Directors of Purchaser determines in good faith that such filings are
         required. Prior to making any such filings, Purchaser shall provide
         Sellers with a copy of the proposed filings and an opportunity to
         discuss any changes to prior returns. Purchaser shall have the right,
         in its sole discretion, to calculate the amounts of unpaid Tax
         (including any amounts of interest and penalties that may be due), to
         discuss any unpaid Tax, Delinquent Tax Return or Amended Tax Return
         with the applicable Governmental Authority and to pay any such amounts
         in connection with the filing of such Tax Returns or the settlement of
         a Tax Liability with the applicable Governmental Authority. To the
         extent of any Taxes (including any amounts of interest or penalties
         that may be due) related to Delinquent Tax Returns, Amended Tax Returns
         or the settlement of a Tax Liability with the applicable Governmental
         Authority, Sellers shall be, jointly and severally, liable for such
         Taxes to the extent such Taxes would be allocated to Sellers under
         Section 7.11(a). Notwithstanding the foregoing, Purchaser will not file
         any Delinquent Tax Returns or Amended Tax Returns pursuant to this
         Section 7.11(i) after the applicable statute of limitations has expired
         with respect to Taxes that would otherwise be the subject of such Tax
         Returns.

     7.12 Employee Benefit Plans.

            (a) The employees of Targets (and their covered dependents) shall
         continue to participate under the medical, dental, vision, employee
         assistance, life and long-term disability benefit coverages under the
         Benefit Plans through the Closing Date. As soon as the employees of
         Targets (and their covered dependents) shall cease active participation
         under the Benefit Plans maintained by the Targets, the employees shall
         be covered by the Purchaser's Benefit Plans, subject to the rules in
         effect regarding eligibility under the Purchaser's Benefit Plans.

            (b) Following the Closing Date, Purchaser shall, to the extent
         allowable under the post-Closing benefit plans of Targets, recognize
         Targets' employees' years of service through the Closing Date for
         purposes of eligibility and vesting under such post-Closing benefit
         plans and waive any pre-existing medical condition (to the extent
         waivable under such post-Closing benefit plans of Targets).

            (c) From and after the Closing, Sellers shall (i) remain solely
         responsible for, and shall reimburse and indemnify Purchaser for, any
         and all Liabilities arising prior to the Closing Date under each
         Benefit Plan maintained by or for the benefit of the current or former
         employees of the Targets or their ERISA Affiliates; and (ii) promptly
         pay, when due, all benefits and compensation payable out of such
         Benefit Plan or to be provided to all retired, current or former
         employees of each Target and such individual's beneficiaries and
         dependents in accordance with the terms of the applicable Benefit Plan
         to the extent of such employee's participation therein prior to or on
         the Closing Date.

            (d) To the extent requested by Purchaser after execution of this
         Agreement, Greenberg and Goldberg will provide reasonable cooperation
         and assistance in getting employees or independent contractors of
         Targets to execute documentation related to their engagement by Targets
         to be effective on or after the Closing (e.g., Proprietary Information
         and Confidentiality Agreements).

                                       40


     7.13 Releases of Seller's Guarantees. Purchaser shall use commercially
reasonable efforts to seek to obtain the release of Sellers from further
obligations or liabilities subsequent to the Closing Date under the guaranties
set forth on Schedule 7.13.

     7.14 Further Assurances. Sellers and Purchaser each agree to use their
reasonable best efforts to take all reasonable actions and to execute,
acknowledge, affirm and deliver any and all documents and instruments, prior to
and after the Closing, to effect and complete the transactions contemplated by
this Agreement.

                                 ARTICLE VIII.

                  CONDITIONS PRECEDENT TO OBLIGATIONS TO CLOSE

     8.1 Conditions Precedent to Obligation of Purchaser. The obligation of
Purchaser to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions all or any of which may be waived in writing, in whole or
in part, by Purchaser:

            (a) Representations and Warranties. All information required to be
         furnished or delivered by Sellers or Targets pursuant to this Agreement
         shall have been furnished or delivered as of the date hereof and as of
         the Closing Date, as required hereunder; the representations and
         warranties made by Sellers in ARTICLE IV and ARTICLE V shall be true
         and correct in all material respects on and as of the Closing Date, and
         with the same force and effect as though such representations and
         warranties had been made on and as of the Closing Date, and Purchaser
         shall have received a certificate dated as of the Closing Date,
         executed by an authorized officer or trustee of each Seller, to such
         effect.

            (b) Compliance by Sellers. Each Seller shall have duly performed in
         all material respects all of the covenants, agreements, and conditions
         contained in this Agreement and each of the other Seller Transaction
         Agreements to which it is a party, to be performed by such Seller on or
         prior to the Closing Date.

            (c) Certified Resolutions. Purchaser shall have received from each
         Target party to this Agreement or any other Seller Transaction
         Agreement a certificate executed by the Secretary or Assistant
         Secretary thereof, as applicable, containing true and correct copies of
         resolutions duly adopted by such Target's shareholders and its board of
         directors approving and authorizing this Agreement and each of the
         other Seller Transaction Agreements to which it is a party and each of
         the transactions contemplated hereby and thereby. The Secretary or
         Assistant Secretary of each Target, as applicable, shall also certify
         that such resolutions have not been rescinded, revoked, modified, or
         otherwise affected and remain in full force and effect.

            (d) No Injunction; Etc. No action, proceeding, investigation,
         regulation, or legislation shall be pending or threatened which seeks
         to enjoin, restrain, or prohibit any Seller, or to obtain damages from
         Purchaser, in respect of the consummation of the transactions
         contemplated hereby, or which seeks to enjoin the operation of any
         portion of the business conducted by any Target.


                                       41


            (e) No Change in Circumstances. There shall have been no event,
         occurrence or development of a state of circumstances or facts which
         has had or reasonably could be expected to have a Material Adverse
         Effect on the condition (financial or otherwise), business,
         capitalization, assets, Liabilities, results of operations or prospects
         of any Target.

            (f) Consents; Authorizations; Legal Matters. Purchaser shall have
         received a true and correct copy of each of the Required Consents.
         Purchaser shall have received a certificate dated as of the Closing
         Date, executed by Sellers and an officer of each Target, to the
         foregoing effect.

            (g) Satisfaction with Documents. The form and substance of all
         certificates, assignments, orders and other documents and instruments
         hereunder shall be reasonably satisfactory to Purchaser and its
         counsel.

            (h) Certified Documents, Good Standing. Purchaser shall have
         received (a) the Articles of Incorporation of each Target as amended,
         certified as of a recent date by a Governmental Authority (if such
         certification is customarily available) and a copy of the Bylaws of
         each Target, as amended, certified as of the Closing Date by the
         Secretary or an Assistant Secretary of each Target; and (b) a
         certificate of status, good standing or existence with respect to each
         Target the applicable Governmental Authority under the Laws of which
         such Target is incorporated, organized or registered, and of each other
         jurisdiction in which the Target is qualified or registered to do
         business, dated as of a recent date acceptable to Purchaser's counsel.

            (i) Opinion of Sellers' Counsel. Purchaser shall have received an
         Opinion of Sellers' Counsel dated the Closing Date in the form attached
         hereto as Exhibit G concerning the right and authority of the Trusts to
         enter into this Agreement and to sell their Shares to Purchaser under
         their respective Organizational Documents and in accordance with
         applicable Laws.

            (j) Release from Liens. Any and all Liens on the Shares or the
         assets, properties or business of any Target, including without
         limitation, any Liens of City National Bank, shall have been released
         and discharged to the satisfaction of counsel for Purchaser or in the
         case of City National Bank, such party will have committed to release
         such liens upon payment by Purchaser.

            (k) Completion of Audit of Latest Financial Statements. Purchaser
         shall have received a satisfactory completed audit of the Latest
         Financial Statements.

            (l) Estimated Opening Balance Sheet. Sellers shall deliver the
         Estimated Opening Balance Sheet to Purchaser.

            (m) Termination of Buy-Sell Agreement. Sellers shall have delivered
         an instrument, executed by all parties to that certain Buy-Sell
         Agreement dated as of June 1, 2005 (the "Buy-Sell Agreement"),
         evidencing all such parties' agreement to cancel the Buy-Sell
         Agreement.


                                       42


            (n) Bienstock Release. Marc Bienstock shall have executed shall have
         executed the Settlement and Release of Claims in substantially the form
         attached as Exhibit H prior to Closing.

            (o) Additional Items to be Delivered at Closing by Sellers. Sellers
         shall deliver or shall cause to be delivered the following items to the
         appropriate party at the Closing:

                (i) the Registration Rights Agreement, executed by Sellers;

                (ii) Employment Agreements and Noncompetition Agreements in the
            form of Exhibit I and Exhibit J, respectively (the "Seller
            Employment Agreements" and Seller Noncompetition Agreements"),
            executed by the Individual Sellers;

                (iii) the Earnout Agreement, executed by Sellers;

                (iv) the Escrow Agreement, executed by Sellers; and

                (v) such other instruments, documents and certificates as may be
            reasonably requested by Purchaser of any Seller or any Target,
            including original stock certificates representing (i) the Shares,
            duly endorsed in blank or accompanied by a proper instrument of
            assignment duly executed in blank and (ii) upon request, the minute
            books for the Targets together with any issued capital stock shares
            of any Subsidiary.

         8.2 Conditions Precedent to Obligation of Sellers. The obligation of
Sellers to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, on or before the Closing Date hereunder, of each of
the following conditions, all or any of which may be waived, in whole or in
part, by Sellers:

            (a) Certificate Regarding Representations and Warranties. The
         representations and warranties made by Purchaser in ARTICLE VI hereof
         shall be true and correct in all material respects on and as of the
         Closing Date with the same force and effect as though such
         representations and warranties had been made on and as of the Closing
         Date; and Sellers shall have received a certificate dated the Closing
         Date, executed by an authorized officer of Purchaser, to such effect.

            (b) Compliance by Purchaser. Purchaser shall have duly performed in
         all material respects all of the covenants, agreements, and conditions
         contained in this Agreement and each other Purchaser Transaction
         Agreements to which it is a party, to be performed by Purchaser on or
         before the Closing Date, and Sellers shall have received a certificate
         dated the Closing Date, executed by an authorized officer of Purchaser
         to such effect.

            (c) Certified Resolutions. Sellers shall have received from
         Purchaser certificates executed by the Secretary or Assistant Secretary
         thereof containing true and correct copies of resolutions duly adopted
         by Purchaser's board of directors approving and authorizing this
         Agreement and each of the other Purchaser Transaction Agreements to
         which it is a party and each of the transactions contemplated hereby
         and thereby. The Secretary or Assistant Secretary of Purchaser shall
         also certify that such resolutions have not been rescinded, revoked,
         modified, or otherwise affected and remain in full force and effect.


                                       43


            (d) No Injunction; Etc. No action, proceeding, investigation,
         regulation, or legislation shall be pending or threatened, which seeks
         to enjoin, restrain, or prohibit Sellers, or to obtain damages from
         Sellers, in respect of the consummation of the transactions
         contemplated hereby.

            (e) Legal Matters. All authorizations, orders, or approvals of any
         Governmental Authority required to consummate the transactions
         described in this Agreement shall have been obtained.

            (f) Satisfaction with Documents. The form and substance of all
         certificates, assignments, orders and other documents and instruments
         hereunder shall be reasonably satisfactory to Sellers and Sellers'
         counsel.

            (g) Good Standing. Seller shall have received certificates of
         status, good standing or existence from the Colorado Secretary of State
         with respect to Purchaser, dated as of a recent date acceptable to
         Sellers' counsel.

            (h) Election of Sellers' Designee to Board of Directors. In the
         event Purchaser elects to pay the Alternative A Purchase Price,
         Purchaser shall, simultaneously with the Closing, appoint an individual
         designated by Seller to be a member of Purchaser's board of directors
         ("Sellers' Board Designee") to fill the vacancy existing on Purchaser's
         board of directors as of the signing date of this Agreement, subject to
         the provisions of Purchaser's bylaws.

            (i) Additional Items to be Delivered at Closing by Purchaser.
         Purchaser shall deliver or shall cause to be delivered the following
         items to the appropriate party at the Closing:

                (i) the Alternative A Purchase Price or the Alternative B
            Purchase Price, whichever applies;

                (ii) the Registration Rights Agreement, executed by Purchaser;

                (iii) Sellers' Employment Agreements, executed by Purchaser;

                (iv) the Earnout Agreement, executed by Purchaser;

                (v) the Escrow Agreement, executed by Purchaser; and

                (vi) such other instruments, documents, and certificates as may
            be reasonably requested by Sellers of Purchaser.


                                       44


                                  ARTICLE IX.

                                 INDEMNIFICATION

         9.1 Purchaser Claims for Indemnification. Subject to the limitations
set forth in Section 9.2, Sellers, jointly and severally (except that with
respect to Section 9.1(c) or 9.1(f) below regarding which the indemnification
obligations shall be several not joint and several), agree to indemnify and hold
Purchaser and the officers, directors and Affiliates thereof (the "Purchaser
Indemnitees") harmless from and against any and all claims, judgments, causes of
action, liabilities, obligations, amounts paid in settlement, damages, losses,
deficiencies, costs, penalties, interest and expenses, including without
limitation, cost of investigation, preparation and defense, and reasonable
attorneys' fees and expenses, and in cases of claims by more than one
indemnitee, without duplication of damages payable by Sellers with respect to
any indemnifiable event, (collectively, "Losses"), arising out of, based upon,
attributable to or resulting from, directly or indirectly:

            (a) Any breach of any representation or warranty on the part of any
         Seller contained in ARTICLE IV;

            (b) Any pending or threatened Legal Proceeding (whether or not
         referred to in a Schedule to this Agreement) against any Target as of
         the Closing Date or any Legal Proceedings initiated against a Target
         after the Closing Date which arise out of any pre-Closing act or
         omission or any Target;

            (c) Any breach of any representation, warranty, agreement or
         covenant on the part of any Seller contained in or pursuant to this
         Agreement or any Seller Transaction Agreements; provided, any breach by
         a Seller under ARTICLE V or a Seller Transaction Agreement to which it
         is a party shall result in liability on a several and not joint and
         several basis; and;

            (d) Taxes imposed on any Target for any taxable year or period that
         ends on or before the Closing Date which is not properly accrued in
         accordance with Section 7.11(h);

            (e) Any Losses to Targets as a result of the failure by Sellers to
         cause the termination of the Bienstock Consulting Agreement or to
         execute the Settlement Agreement and Release of Claims effective as of
         a date prior to the Closing, including without limitation, (i) all
         amounts paid to Bienstock under the Bienstock Consulting Agreement on
         or after the Closing, (ii) Taxes payable by Targets as a result of any
         payments required to be made by Targets under the Bienstock Consulting
         Agreement, and/or (iii) Losses to Targets as a result of disallowed Tax
         deductions by virtue of payments required to be made under the
         Bienstock Consulting Agreement.

            (f) The fraud or intentional misrepresentation of any Seller in
         connection with any representation, warranty or covenant made by any
         Seller in this Agreement or in any way pertaining to the transactions
         contemplated herein or in any Seller Transaction Agreement to which
         such Seller is a party; provided, any fraudulent or intentional
         misrepresentation by a Seller under ARTICLE V or a Seller Transaction
         Agreement to which it is a party shall result in liability on a several
         and not joint and several basis.

     9.2 Limits on Purchaser Claims for Indemnification.

                                       45


            (a) Except as otherwise provided in this Section 9.2, the maximum
         amount of Losses recoverable by the Purchaser Indemnitees under Section
         9.1(a) through 9.1(c) shall not exceed (i) the Alternative A Escrow
         Amount in the event Purchaser elects to pay the Alternative A Purchase
         Price, or (ii) the Alternative B Escrow Amount in the event Purchaser
         elects to pay the Alternative B Purchase Price (the amount described in
         (i) and (ii), whichever applies, is hereinafter referred to as the
         "Purchaser's Indemnification Cap"). The Purchaser's Indemnification Cap
         shall not apply to indemnification claims for Losses ("Claims") (A)
         under Section 9.1(e), or 9.1(f) based on fraud or intentional
         misrepresentation, or (B) with respect to representations, warranties
         or covenants made under Section 4.1 (Capitalization; Legal Status;
         Qualification; Title to Shares), Section 4.4 (Ownership of Assets),
         Section 4.5 (Financial Statements), Section 7.3 (Opening Financial
         Statements), Section 4.11 (Environmental Laws), Section 4.12(e)
         (Intellectual Property and Information Technology) or any
         representation, warranty, covenant or agreement made by Sellers in any
         way pertaining to Taxes, the Bienstock Consulting Agreement (or
         termination thereof) or made in any Seller Noncompetition Agreement
         (collectively, the "Uncapped Sections").

            (b) Individual Claims which are less than $5,000 each shall not be
         payable by Sellers until the aggregate amount of such individual Claims
         exceeds $50,000 (the "Basket"). Thereafter, all Claims (including all
         Claims initially covered by the Basket) shall be paid dollar for
         dollar, subject to the provisions contained in Section 9.2(a).
         Notwithstanding the foregoing, (i) the Basket shall not apply to Claims
         under any Uncapped Section; and (ii) nor shall the Basket apply to any
         individual Claim in excess of $5,000, and such Claims described in (i)
         and (ii) of this sentence shall be paid dollar for dollar.

            (c) The representations and warranties contained in this Agreement
         shall survive the Closing notwithstanding any due diligence
         investigation or examination of Sellers or any Target by Purchaser.
         Claims under Section 9.1(a) through (c) may be asserted at any time
         prior to July 2, 2007, except that Claims under Section 9.1(d) with
         respect to Taxes, Section 9.1(e) with respect to the Bienstock
         Consulting Agreement, or Section 9.1(f) based on fraud or intentional
         misrepresentation or with respect to any Uncapped Section, shall
         survive until expiration of the applicable statute of limitations or
         the sixth anniversary of the Closing Date, whichever occurs first.

         9.3 Purchaser Indemnification. Purchaser hereby agrees to indemnify and
hold Sellers harmless from and against any and all Losses arising out of, based
upon, attributable to or resulting from:

            (a) Any breach of any representation, warranty, agreement or
         covenant on the part of Purchaser contained in or made pursuant to this
         Agreement or the Purchaser Transaction Agreements;

            (b) Any post-Closing Date act or omission of Purchaser or any
         Target; and

            (c) Fraud or any intentional misrepresentation of Purchaser in
         connection with the transactions contemplated hereby or in any
         Purchaser Transaction Agreement.


                                       46


         No Claims or series of Claims for Losses shall be payable by Purchaser
until the aggregate of the Losses claimed first exceeds the Basket. Thereafter,
all Claims (including all Claims initially covered by the Basket) shall be paid
dollar-for-dollar, up to a cap of (x) $1,000,000 in the event Purchaser pays the
Alternative A Purchase Price, or (y) $500,000 in the event Purchaser elects to
pay the Alternative B Purchase Price (either such cap, the "Sellers'
Indemnification Cap"). Notwithstanding the foregoing, neither the Basket nor
Sellers' Indemnification Cap shall apply to Claims under Section 9.3(b) or
9.3(c) based on fraud or intentional misrepresentation or based on Section 6.2
(Authority) and Section 6.6 (Securities Filings) and such Claims described in
this sentence shall be paid dollar-for-dollar. Claims under Section 9.3(a) and
Section 9.3(b) may be asserted at any time prior to July 2, 2007, except that
Claims under Section 9.3(c) based on fraud or intentional misrepresentation or
based on Section 6.2 or Section 6.6 shall survive until the expiration of the
applicable statute of limitations or the sixth anniversary of the Closing Date,
whichever occurs first.

     9.4 Assertion of Claims.

            (a) Claims must be asserted as promptly as practicable and within
         the time periods allowed by Sections 9.2 and 9.3. Each notice of a
         Claim must be given to Sellers or the Purchaser, as the case may be, as
         provided in Section 11.3 of this Agreement (Notices), set forth in
         reasonable detail the basis for the Claim, and cite the Section of this
         Agreement under which the Claim arises.

            (b) Within thirty (30) days after the receipt of a Claim, Sellers or
         Purchaser, as the case may be, must give the other party notice that
         such party either agrees with the Claim or disputes it. If no notice is
         given within that period, the other party shall be conclusively
         presumed to have agreed with the Claim. If the other party timely
         objects to the Claim, the parties shall negotiate in good faith to
         determine the amount, if any, of the Losses. If no resolution of the
         Claim has occurred within thirty (30) days after the receipt of the
         Claim, then a party may institute proceedings in a court of competent
         jurisdiction to resolve the Claim.

     9.5 Source of Recovery.

            (a) Claim Asserted by Purchaser Indemnitee. When a Claim asserted by
         a Purchaser Indemnitee under Section 9.1 has been Finally Resolved, the
         amount of the Claim, subject to any limitation contained in this
         Agreement, shall be paid first out of the Escrow Amount, provided that
         any such payment shall be made in accordance with the terms of the
         Escrow Agreement and, to the extent the Escrow Amount is insufficient
         to satisfy the amount of the Claim, shall, at Purchaser's election, be
         paid in cash by Sellers. Any payments out of the Escrow Amount or in
         cash shall be paid to Purchaser's Indemnitees within ten (10) business
         days after the amount of the Claim has been Finally Resolved and
         Purchaser has given notice making demand for such payment. Any amounts
         not paid within such period shall accrue interest until paid, at the
         rate of ten percent (10%) per annum.

            (b) Claim Asserted by Sellers. When a Claim asserted by Sellers
         under Section 9.3 has been Finally Resolved, Purchaser shall pay to
         Sellers in cash the amount of the Claim within ten (10) business days
         after the amount of the Claim has been Finally Resolved and Sellers
         have given notice making demand for such payment. Any amounts not paid
         within such period shall accrue interest until paid, at the rate of ten
         percent (10%) per annum.

     9.6 Third Party Claims.


                                       47


            (a) If any third party asserts any claim (a "Third Party Claim")
         against a party to this Agreement which, if successful, would entitle
         the party to indemnification under this ARTICLE IX (the "Indemnified
         Party"), the Indemnified Party shall give notice of such Third Party
         Claim to the party from whom the Indemnified Party intends to seek
         indemnification (the "Indemnifying Party"), and the Indemnifying Party
         shall have the right to assume the defense and, subject to Section
         9.6(b), settlement of such Third Party Claim at its expense by
         representatives of its own choosing acceptable to the Indemnified Party
         (which acceptance shall not be unreasonably withheld or delayed). Upon
         the reasonable request of the Indemnifying Party, the Indemnified Party
         shall cooperate with and provide information to the Indemnifying Party
         in connection with any Third Party Claim that the Indemnifying Party
         has elected to defend. The failure of the Indemnified Party to notify
         the Indemnifying Party of such Third Party Claim shall not relieve the
         Indemnifying Party of any liability that the Indemnifying Party may
         have with respect to such Third Party Claim, except to the extent that
         the defense is materially prejudiced by such failure. The Indemnified
         Party shall have the right to participate in the defense of such Third
         Party Claim at its own expense (which expense shall not be deemed to be
         a Loss), in which case the Indemnifying Party shall cooperate in
         providing information to and consulting with the Indemnified Party
         about the Third Party Claim. If the Indemnifying Party fails or does
         not assume the defense of any such Third Party Claim within thirty (30)
         days after written notice of such Third Party Claim has been given by
         the Indemnified Party to the Indemnifying Party, the Indemnified Party
         may defend against or, subject to Section 9.6(b), settle such Third
         Party Claim with counsel of its own choosing at the expense (to the
         extent reasonable under the circumstances) of the Indemnifying Party.

            (b) If the Indemnifying Party does not assume the defense of a Third
         Party Claim involving the asserted liability of the Indemnified Party
         under this ARTICLE IX, settlement of such Third Party Claim may be made
         by the Indemnified Party without the prior written consent of the
         Indemnifying Party. If the Indemnifying Party assumes the defense of
         such a Third Party Claim, (i) no settlement thereof may be effected by
         the Indemnifying Party without the Indemnified Party's consent, which
         consent shall not be unreasonably withheld or delayed, unless (A) the
         sole relief provided is monetary damages that have been paid or
         otherwise satisfied in full by the Indemnifying Party, and (B) the
         settlement includes, as an unconditional term thereof, the giving by
         the claimant or the plaintiff to the Indemnified Party of a release in
         form and substance reasonably satisfactory to the Indemnified Party,
         from all liability in respect of such Third Party Claim, and (ii) the
         Indemnified Party shall have no liability with respect to any
         compromise or settlement thereof effected without its consent.

                                   ARTICLE X.

                                   TERMINATION

     10.1 Termination of Agreement. This Agreement may be terminated as provided
below:

            (a) The Purchaser and Sellers may terminate the Agreement by mutual
         written consent at any time prior to the Closing.


                                       48


            (b) (i) The Purchaser may terminate this Agreement by written notice
         to Sellers if the Closing shall not have occurred on or before February
         10, 2006 (the "Drop Dead Date"); provided, however, the Purchaser shall
         have the right in its sole discretion to extend the Drop Dead Date to
         March 31, 2006 (the "Extended Drop Dead Date") upon written notice
         delivered to Sellers on or before February 10, 2006; and (ii) either
         Sellers or Purchaser may terminate this Agreement by written notice if
         the Closing shall not have occurred on or before the Extended Drop Dead
         Date (if extended by Purchaser). Notwithstanding the foregoing, if the
         Closing shall not have occurred on or before the Extended Drop Dead
         Date due to a material breach of this Agreement by Purchaser or
         Sellers, the breaching party may not terminate this Agreement pursuant
         to this Section 10.1(b).

            (c) The Purchaser may terminate this agreement upon written notice
         to Sellers if the Purchaser has previously provided Sellers written
         notice of any material inaccuracy in or material breach of any
         representation or warranty contained in ARTICLE IV or ARTICLE V, or a
         failure to perform or comply in any material respect with any covenant
         or obligation of Sellers contained in this Agreement, and Sellers have
         failed, within five (5) days after the date of such notice, to properly
         remedy such inaccuracy or to perform or comply with such covenant or
         obligation or provide reasonably adequate assurance as to Sellers'
         ability to promptly remedy such inaccuracy or perform or comply with
         such covenant; provided, however, that the Purchaser shall not have the
         right to terminate this Agreement under this Section 10.1(c) if (i) the
         Purchaser is then in material breach of this Agreement or (ii) the
         breach or breaches by Sellers would not result in the failure of the
         condition contained in Section 8.1(a) or 8.1(b) to be satisfied.

            (d) The Purchaser may terminate this agreement upon written notice
         to Sellers upon any event, occurrence or development of a state of
         circumstances or facts which has had or reasonably could be expected to
         have a Material Adverse Effect on the condition (financial or
         otherwise), business, capitalization, Assets, Liabilities, results of
         operations or prospects of any Target.

            (e) Sellers may terminate this agreement upon written notice to the
         Purchaser if Sellers have previously provided the Purchaser written
         notice of any material inaccuracy in or material breach of any
         representation or warranty contained in ARTICLE VI, or a failure to
         perform or comply in any material respect with any covenant or
         obligation of the Purchaser contained in this Agreement, and the
         Purchaser has failed, within five (5) days after the date of such
         notice, to properly remedy such inaccuracy or to perform or comply with
         such covenant or obligation or provide reasonably adequate assurance as
         to the Purchaser's ability to promptly remedy such inaccuracy or
         perform or comply with such covenant; provided, however, that the
         Seller shall not have the right to terminate this Agreement under this
         Section 10.1 if (i) any Seller is then in breach of this Agreement or
         (ii) the breach or breaches by the Purchaser would not result in the
         failure of the condition contained in Section 8.2(a) or 8.2(b) to be
         satisfied.

     10.2 Effect of Termination. If any party terminates this Agreement pursuant
to Section 10.1, all rights and obligations of the parties hereunder shall
terminate without any liability of any party to any other party (except for any
liability of any party then in breach).

                                       49


                                  ARTICLE XI.

                                    GENERAL

     11.1 Amendments. This Agreement may only be amended by an instrument in
writing executed by Purchaser and Sellers.

     11.2 Waivers. The observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) by the party entitled to enforce such term, but such waiver shall
be effective only if it is in a writing signed by the party entitled to enforce
such term and against which such waiver is to be asserted. Unless otherwise
expressly provided in this Agreement, no delay or omission on the part of any
party in exercising any right or privilege under this Agreement shall operate as
a waiver thereof, nor shall any waiver on the part of any party of any right or
privilege under this Agreement operate as a waiver of any other right or
privilege under this Agreement nor shall any single or partial exercise of any
right or privilege preclude any other or further exercise thereof or the
exercise of any other right or privilege under this Agreement.

     11.3 Notices. Any notices or other communications required or permitted
hereunder shall be in writing and shall be sufficiently given (and shall be
deemed to have been duly given upon receipt) if sent by overnight mail,
registered mail or certified mail, postage prepaid, or by hand, to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):

           If to Purchaser, to:

                    New Frontier Media, Inc.
                    7007 Winchester Circle, Suite 200
                    Attention:  Michael Weiner, Karyn Miller and George Sawicki
                    Boulder, CO 80301
                    Facsimile: (303) 444-0848


           With a copy (which shall not constitute effective notice) to:

                    E. Lee Reichert, Esq.
                    Kamlet Shepherd & Reichert, LLP
                    1515 Arapahoe Street, Tower 1, Suite 1600
                    Denver, Colorado 80202 Facsimile:
                    (303) 825-1185

           If to Greenberg or the Greenberg Trust:

                    c/o Marc Greenberg
                    4211 Roma Court
                    Marina del Rey, California  90292

                                       50


           With a copy (which shall not constitute effective notice) to:

                    Michael Wolf, Esq.
                    Wolf, Rifkin, Shapiro & Schulman, LLP
                    11400 West Olympic Blvd., 9th Floor
                    Los Angeles, California  90064-1582
                    Facsimile:  (310) 479-1422

           If to Goldberg or the Goldberg Trust

                    c/o Richard Goldberg
                    512 11th Street
                    Santa Monica, California  90402

           With a copy (which shall not constitute effective notice) to:

                    Michael Wolf, Esq.
                    Wolf, Rifkin, Shapiro & Schulman, LLP
                    11400 West Olympic Blvd., 9th Floor
                    Los Angeles, California  90064-1582
                    Facsimile:  (310) 479-1422

     11.4 Successors and Assigns; Parties in Interest. This Agreement shall be
binding upon and shall inure solely to the benefit of the parties hereto and
their respective successors, legal representatives and permitted assigns.
Neither this Agreement nor any rights or obligations hereunder may be assigned
without the written consent of the other parties except that Purchaser may
assign any or all of its rights, interest and obligations (except its
obligations with respect to payment of the Alternative A Stock Consideration)
hereunder to any of its wholly-owned Subsidiaries (provided that no such
assignment shall discharge Purchaser from any such obligations). Nothing in this
Agreement, express or implied, is intended to or shall confer upon any Person,
other than the parties hereto and their respective successors, legal
representatives and permitted assigns, any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement, and no Person shall be
deemed a third party beneficiary under or by reason of this Agreement.

     11.5 Severability. If any provision of this Agreement or the application of
any such provision to any Person or circumstance, shall be declared judicially
to be invalid, unenforceable or void, such decision shall not have the effect of
invalidating or voiding the remainder of this Agreement, it being the intent and
agreement of the parties that this Agreement shall be deemed amended by
modifying such provision to the extent necessary to render it valid, legal and
enforceable while preserving its intent or, if such modification is not
possible, by substituting therefor another provision that is valid, legal and
enforceable and that achieves the same objective.

     11.6 Entire Agreement. This Agreement and the other Transaction Agreements
(including the exhibits and schedules hereto, and the documents and instruments
executed and delivered in connection herewith) constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings, whether written or
oral, among the parties or any of them with respect to the subject matter
hereof, and there are no representations, understandings or agreements relating
to the subject matter hereof that are not fully expressed in this Agreement and
the documents and instruments executed and delivered in connection herewith. All
exhibits and schedules attached to this Agreement are expressly made a part of,
and incorporated by reference into, this Agreement.


                                       51


     11.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado, without giving effect to any
choice-of-law rules that may require the application of the laws of another
jurisdiction.

     11.8 Arbitration. Any action or proceeding seeking to enforce any provision
of, or based on any right arising out of, this Agreement (including any Claims
for indemnification under ARTICLE IX) that may be brought against any of the
parties shall be submitted to binding arbitration before the American
Arbitration Association ("AAA") or any other individual or organization on which
the parties agree or which a court may appoint. It is understood that both sides
are hereby waiving the right to a jury trial. The arbitration shall be initiated
in Boulder, Colorado and shall be administered by AAA under its commercial
arbitration rules before a single arbitrator that shall be mutually agreed upon
by the parties hereto. If the parties cannot agree on a single arbitrator, then
an arbitrator shall be selected in accordance with the rules of AAA. The
arbitration must be filed within six (6) months of a party's actual knowledge of
the occurrence of facts or circumstances which give rise to the claim. Each
party shall be entitled to take any discovery as is permitted by the arbitrator.
The arbitrator shall render an award which conforms to the facts, as supported
by competent evidence, and the law as it would be applied by a court sitting in
the State of Colorado. The cost of arbitration shall be advanced equally by the
parties; however, the arbitrator shall award the prevailing party all of the its
costs of arbitration and reasonable attorneys' fees. Any party may apply to a
court of competent jurisdiction for entry of judgment on the arbitration award.
Notwithstanding the foregoing, Sellers or Purchaser may file with an appropriate
state court sitting in the County of Boulder, State of Colorado, a claim for
injunctive relief in any case where the filing party seeks provisional
injunctive relief or where permanent injunctive relief is not available in
arbitration. The filing of such a claim for injunctive relief shall not allow
any party hereto to raise any other claim outside of arbitration.

     Except otherwise expressly provided herein, each party to this Agreement
shall bear its own expenses (including, without limitation, fees and
disbursements of counsel, accountants and other experts) incurred by it in
connection with the preparation, negotiation, execution, delivery and
performance of this Agreement, each of the other documents and instruments
executed in connection with or contemplated by this Agreement and the
consummation of the transactions contemplated hereby.

     11.9 Release of Information; Confidentiality. The parties shall cooperate
with each other in releasing information concerning this Agreement and the
transactions contemplated hereby. No press releases or other public
announcements, or any private disclosure to any third party of the price or any
other material term, concerning the transactions contemplated by this Agreement
shall be made by any party without prior consultation with, and agreement of,
the other parties, except for any legally required communication by any party
and then only with prior consultation and as much advance notice as is
practicable under the circumstances requiring any announcement, together with
copies of all drafts of the proposed text.

         11.10 Certain Construction Rules. The article and section headings and
the table of contents contained in this Agreement are for convenience of
reference only and shall in no way define, limit, extend or describe the scope
or intent of any provisions of this Agreement. Whenever the context may require,
any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa. In addition, as used in this Agreement,
unless otherwise provided to the contrary, (a) all references to days, months or
years shall be deemed references to calendar days, months or years and (b) any
reference to a "Section," "Article," or "Schedule" shall be deemed to refer to a
section or article of this Agreement or an exhibit or schedule attached to this
Agreement. The words "hereof", "herein", and "hereunder" and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Unless otherwise specifically
provided for herein, the term "or" shall not be deemed to be exclusive.


                                       52


     11.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one instrument binding on all the parties,
notwithstanding that all the parties are not signatories to the original or the
same counterpart.

     11.12 General Release. In consideration of this Agreement and full payment
of the Purchase Price, except for (i) MRG's continuing obligation to indemnify
Greenberg or Goldberg as required by applicable Law; and (ii) Targets'
obligations to repay to Sellers the amounts owing under the Seller Loans, if at
all (subject to and in accordance with Section 7.9), each Seller hereby
releases, acquits, and forever discharges the Targets, all Affiliates, and any
officer, manager, director, fiduciary, agent, employee, representative or
attorney of any Target or any Affiliate, and any successors and assigns of any
of the foregoing (collectively the "Released Parties"), from and against any and
all claims, liabilities, obligations, promises, agreements, controversies,
damages, suits, rights, demands, costs, losses, debts, expenses, or causes of
action of any kind whatsoever, based upon any theory of federal, state or local
statutory, regulatory or common law, and any and all claims and demands of
whatever kind or character, whether vicarious, derivative, or direct, whether
fixed, contingent or liquidated, or whether known or unknown, that may be or
could have been asserted, with respect to such Seller's investment in any
Target. Each Seller (a) makes this waiver and release with full knowledge that
it may be releasing presently unknown or unsuspected claims, (b) has had the
opportunity to be advised by its independent legal counsel with respect to, and
is familiar with Section 1542 of the California Civil Code, which provides as
follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR", and (c) expressly waives any and all rights which
it may have under Section 1542 of the California Civil Code, or any other state
or federal statute, regulation or common law principle of similar effect.


                  [Remainder of Page Intentionally Left Blank]


                                       53



         IN WITNESS WHEREOF, this Stock Purchase Agreement has been duly
executed as of the date first above written.

                                   PURCHASER:

                                   NEW FRONTIER MEDIA, INC.,
                                   a Colorado corporation



                                   By:   /s/ Michael Weiner
                                      ---------------------------
                                   Name: Michael Weiner
                                        -------------------------
                                   Its:  Chief Executive Officer
                                       --------------------------


                                   SELLERS:


                                   MARC LAURENCE GREENBERG TRUST



                                   By:   /s/ Marc Greenberg
                                      ---------------------------
                                   Name: Marc Greenberg
                                       --------------------------
                                   Its:  Trustee
                                      ---------------------------


                                   GOLDBERG FAMILY TRUST



                                   By:   /s/ Richard Goldberg
                                      ---------------------------
                                   Name: Richard Goldberg
                                        -------------------------
                                   Its:  Trustee
                                       --------------------------



                                   /s/ Marc Laurence Greenberg
                                   -------------------------------------
                                   Marc Laurence Greenberg, Individually



                                   /s/ Richard B. Goldberg
                                   ---------------------------------
                                   Richard B. Goldberg, Individually





                                       54

EX-10

                                                                    EXHIBIT 10.2

                                EARNOUT AGREEMENT

            THIS EARNOUT AGREEMENT (this "Agreement") dated as of February 10,
2006, is entered into by and among New Frontier Media, Inc, a Colorado
corporation (the "Company"), Marc Laurence Greenberg, an individual
("Greenberg"), Richard B. Goldberg, an individual ("Goldberg"), Marc Laurence
Greenberg Trust dated May 11, 2001, and Goldberg Family Trust dated June 15,
2001 (collectively, the "Trusts") (the Trusts are referred to herein from time
to time in the singular as a "Seller, and collectively as the "Sellers" and
Greenberg and Goldberg are referred to collectively as the "Employees").

                                    RECITALS

            WHEREAS, the Company, Employees, and Sellers are parties to that
certain Stock Purchase Agreement dated as of February 6, 2006 (the "Purchase
Agreement"); and

            WHEREAS, the Employees are parties to certain employment agreements
with the Company dated as of even date hereof (the "Employment Agreements"); and

            WHEREAS, the Company has agreed to purchase from the Sellers, and
the Sellers have agreed to sell to the Company, (i) 100% of the capital stock of
MRG Entertainment, Inc., a California corporation, and (ii) 100% of the capital
stock of Lifestyles Entertainment, Inc., a California corporation (collectively,
the "Shares"), on the terms and conditions set forth in the Purchase Agreement;
and

            WHEREAS, the Purchase Agreement provides for a purchase price of up
to Twenty-Two Million Dollars ($22,000,000) for the Shares, consisting of, among
other consideration, an aggregate cash amount of up to Two Million Dollars
($2,000,000) pursuant to a performance-based earnout (such earnout, up to
$2,000,000, the "Earnout"); and

         WHEREAS, the parties to the Purchase Agreement have agreed that the
determination of the amount and payment of the Earnout is to be in accordance
with the terms of this Agreement.

         NOW, THEREFORE, in consideration of the premises and of the respective
covenants and provisions herein contained, the parties hereto covenant and agree
as follows:



                                   SECTION 1.

                           CAPITALIZED UNDEFINED TERMS

         Undefined initially capitalized terms used in this Agreement shall have
the meanings ascribed to them in the Purchase Agreement.

                                   SECTION 2.

                                EARNOUT PAYMENTS
     2.1      Nature of Earnout Payments.

         (a) Subject to the terms and conditions of this Agreement, the Company
     shall pay to Sellers, in cash, up to an aggregate amount of $2,000,000
     (such earnout payments, up to $2,000,000, the "Earnout Payments"), to be
     paid, if at all, as follows:

            (i) in the event the EBITDA (as hereafter defined) of the Targets
         for the period between and including January 1, 2006 and December 31,
         2006 (the "2006 EBITDA") equals or exceeds $5,250,000, the Company
         shall make a one-time lump sum payment to Sellers in the amount of
         $666,667;

            (ii) in the event the EBITDA of the Targets for the period between
         and including January 1, 2007 and December 31, 2007 (the "2007 EBITDA)
         equals or exceeds $5,750,000, the Company shall make a one-time lump
         sum payment to Sellers in the amount of $666,667; and

            (iii) in the event the EBITDA of the Targets for the period between
         and including January 1, 2008 and December 31, 2008 (the "2008 EBITDA")
         equals or exceeds $6,000,000, the Company shall make a one-time lump
         sum payment to Sellers in the amount of $666,667.

         (b) The minimum threshold EBITDA amounts of the Targets described in
     Sections 2.1(a)(i), (ii) and (iii) (i.e., $5,250,000, $5,750,000 and
     $6,000,000 for 2006, 2007 and 2008, respectively) are each hereinafter
     referred to individually from time to time as a "Minimum EBITDA Threshold".

     2.2      Earnout Payments Partially Cumulative.

         (a) The Earnout Payments and the calculations of the bases therefor
     shall be partially cumulative, such that (i) in the event the Targets (A)
     do not achieve the Minimum EBITDA Threshold (an "EBITDA Shortfall") for
     2006 or 2007, as the case may be (a "Lookback Shortfall Period"), but (B)
     exceed the Minimum EBITDA Threshold for a measurement period following such
     Lookback Shortfall Period (an "Lookback Excess Period"), then Sellers, at

                                       2


     their option, may add the amount of the Excess EBITDA (as hereafter
     defined) achieved for the Lookback Excess Period to the EBITDA achieved for
     the preceding Lookback Shortfall Period, in order to enable Sellers to
     receive an EBITDA Payment for such Lookback Shortfall Period; and (ii) in
     the event the Targets (A) do not achieve the Minimum EBITDA Threshold for
     2008, but (B) achieve Excess EBITDA for 2007, then Sellers, at their
     option, may add the Excess EBITDA for 2007 to the 2008 EBITDA, in order to
     enable Sellers to achieve an EBITDA Payment for 2008. The sum of the amount
     of (1) the Excess EBITDA for the applicable Lookback Excess Period or for
     2007, as the case may be, and (2) EBITDA for the applicable Lookback
     Shortfall Period or the 2008 EBITDA, as the case may be, must equal or
     exceed the Minimum EBITDA Threshold for such Lookback Shortfall Period or
     2008, as the case may be, in order for Sellers to receive an Earnout
     Payment relating to the such Lookback Shortfall Period or 2008, as
     applicable. Notwithstanding the foregoing, (x) only the Excess EBITDA for
     one Excess Period may be applied to a Lookback Shortfall Period, not to be
     applied to more than one such Lookback Shortfall Period; and (y) Sellers
     may not add any portion of any Excess EBITDA achieved in 2006 to the 2007
     EBITDA or the 2008 EBITDA.


         (b) For purposes of this Agreement, "Excess EBITDA" means the amount of
     EBITDA in excess of the Minimum EBITDA Threshold for a measurement period
     identified in Section 2.1(a)(i), (ii) or (iii).

     2.3      Consideration of Other Revenues in Determining EBITDA.

         (a) For purposes of this Agreement, in the event the Targets generate
     revenues during a measurement period identified in Section 2.1(a)(i), (ii)
     or (iii) that (1) are not solely derived from the operations of the
     Targets, but (2) are nonetheless generated as a result of the direct
     assistance of one or more representatives of the Company ("Indirect Target
     Revenues"), the Company shall, for purposes of determining the existence or
     non-existence of the Minimum EBITDA Threshold for a particular measurement
     period, include the Indirect Target Revenues in calculating EBITDA for such
     measurement period; provided, however, it shall be a requirement that, any
     Indirect Target Revenues be substantially identifiable and quantifiable to
     the Company and its Auditors (as hereafter defined), in order for such
     Indirect Target Revenues to be included in the EBITDA calculation for the
     current measurement period; and further provided, any Indirect Target
     Revenues included in such EBITDA calculation shall be net of all related
     expenses in accordance with GAAP, and as otherwise determined in accordance
     with Section 3 of this Agreement.

         (b) In the event the Employees, in addition to performing their usual
     and customary duties under their Employment Agreements, originate or
     facilitate relationships, introductions, or other tangible or intangible
     items of material value to the Company in conducting its business
     activities (other than the business activities of the Targets)
     (collectively, "Additional Value Added Activities"), the compensation
     committee for the Company, to consist of a majority of independent

                                       3


     directors ("Compensation Committee"), shall take into consideration, in its
     discretion, such Additional Value Added Activities for purposes of
     determining whether or not to make an Earnout Payment if and to the extent
     that the Minimum EBITDA Threshold is not achieved for a particular
     measurement period. Notwithstanding the foregoing: (i) the Company shall
     not have any affirmative obligation to make any additional Earnout Payment
     not otherwise due and payable in accordance with this Agreement; and (ii)
     the existence and amount of value associated with any Additional Value
     Added Activities shall be as determined in the sole discretion of the
     Compensation Committee.

     2.4 Earnout Payment Date. Subject to Section 4.2, any Earnout Payment due
and owing hereunder to Sellers shall be paid within thirty (30) days after the
determination of EBITDA for the current measurement period has been made in
accordance with Section 3 of this Agreement (taking into account any time
required for the CFO or the Audit Committee to make any adjustment based on the
annual audit of the Company's financial statements).

     2.5 Pro Rata Payments. For purposes of this Agreement and with respect to
any Earnout Payment due and owing to the Sellers, each Seller shall be entitled,
subject to Section 4.1, to fifty percent (50%) (hereafter referred to as its
"Pro Rata" share) of the amount of each such Earnout Payment.

                                   SECTION 3.

                              COMPUTATION OF EBIDTA

     3.1 Additional Definitions Pertinent to Calculation of EBITDA.


         (a) "GAAP" shall mean the then applicable United States generally
     accepted accounting principles, consistently applied.

         (b) "EBITDA" shall mean, as determined in accordance with GAAP in a
     manner consistent with the past practice of the Company, the consolidated
     earnings of the operations of the Targets before interest, taxes based on
     income, depreciation and amortization, calculated as if the Targets were
     being operated as corporations separate and independent from the Company,
     for the twelve (12) month period ending on December 31; provided, that any
     payments made under this Agreement shall not be taken into account in
     determining EBITDA; but further provided, any allocation of expenses
     associated with the Targets, including, without limitation, expenses of
     employees, benefit plans, insurance policies, taxes, discretionary bonuses
     (including any bonuses awarded to Employees under their Employment
     Agreements) and any and all other costs and expenses attributable to
     Targets, shall be accounted for and applied against EBITDA in a consistent
     manner with other affiliates of the Company, all in accordance with the
     Company's past practices.

                                       4


     3.2 Determination of EBITDA. The 2006 EBITDA, 2007 EBITDA and 2008 EBITDA
shall be as determined by the Company's Chief Financial Officer ("CFO") and
approved by the Company's Audit Committee, which shall consist of a majority of
independent directors ("Audit Committee"), based on the consolidated financial
statements of the Targets for the applicable twelve (12) month period ending on
December 31, as prepared by the CFO. The Company shall deliver to the Sellers a
certified copy of the calculation of 2006 EBITDA, 2007 EBITDA and 2008 EBITDA,
as applicable, as determined above, within 120 days following January 1,
together with a written notice (the "Earnout Notice") showing the calculation of
the EBITDA for the applicable year and the corresponding Earnout Payment due and
owing to Sellers, if any. Notwithstanding anything contained in this Section 3.2
to the contrary, the CFO or the Audit Committee shall have the right to
designate and authorize the Company's firm of certified public accountants to
make the determination of 2006 EBITDA, 2007 EBITDA and/or 2008 EBITDA in
connection with the determination of the existence the Minimum EBITDA Threshold
for the corresponding year and shall have the right to adjust such determination
based on the annual audit of the Company's financial statements (the EBITDA
Calculation). The determination of the 2006 EBITDA, 2007 EBITDA and 2008 EBITDA
in accordance with this Section 3.2 shall be binding upon the Company and the
Sellers. Notwithstanding the foregoing, Sellers shall have the right to receive
a copy of the 2006 EBITDA, 2007 EBITDA and 2008 EBITDA at the same time it is
sent to the Audit Committee and shall be permitted to consult with Audit
Committee, if they so choose regarding such calculations.

                                   SECTION 4.

                                 OTHER COVENANTS

     4.1 Employment Agreements; Disassociating Event; Material Adverse Effect.

         (a) Notwithstanding anything contained in this Agreement to the
     contrary and except as expressly provided in Section 4.1(b), a Seller shall
     only be entitled to its Pro Rata share of any Earnout Payment if the
     Employee associated with such Seller (i) is employed by a Target for the
     entire measurement period for which such Earnout Payment relates, and (ii)
     is not in violation of any provision set forth in his Employment Agreement
     or the Seller Noncompetition Agreement with the Company, at the time an
     Earnout Payment is due and owing from the Company to Sellers.

         (b) Notwithstanding Section 4.1(a):


            (i) In the event an Employee (A) dies, (B) becomes Permanently
         Disabled, or (C) is terminated for Cause (as such capitalized terms in
         subclauses (B) and (C) are defined in his Employment Agreement) during
         the term of this Agreement, then the Seller associated with that
         Employee shall not be entitled to receive any portion of any Earnout
         Payment and the Company shall have no further obligations under this
         Agreement to such Seller.

                                       5


            (ii) Upon the occurrence of any of the events described in Section
         4.1(b)(i)(A) to (C), the Seller associated with the Employee that
         continues to be employed by the Company shall continue to be entitled
         to receive its Pro Rata share of any Earnout Payments subject to and in
         accordance with Sections 2 and 3 earned after the date of death,
         Permanent Disability, or termination of the other Employee pursuant to
         Section 4.1(b)(i)(C), if the Company determines in its sole discretion
         that the death, Permanent Disability or termination of such Employee
         has not or will not cause a Material Adverse Effect (as hereafter
         defined) on the Company or the Targets.

            (iii) In the event both Employees die, become Permanently Disabled
         or are no longer employees pursuant to Section 4.1(b)(i)(C) during the
         term of this Agreement (or upon the occurrence of any combination of
         the foregoing), then neither Seller shall be entitled to any portion of
         any Earnout Payment after the occurrence of such events and the Company
         shall have no further obligations under this Agreement.

            (iv) In the event an Employee (A) is terminated by the Company
         without Cause (as such term is defined in his Employment Agreement)
         during the term of this Agreement, or (B) resigns from his employment
         with the Company for Good Reason (as such term is defined in his
         Employment Agreement) during the term of this Agreement (a
         "Disassociated Employee", and either such event, a "Disassociating
         Event"), then the Seller associated with the Disassociated Employee and
         the Seller associated with the Employee that continues to be employed
         by the Company in accordance with his Employment Agreement each shall
         be entitled to its respective Pro Rata share of any Earnout Payments
         earned after the date of such Disassociating Event, subject to and in
         accordance with Sections 2 and 3.

            (v) In the event both Employees are terminated by the Company
         without Cause or resign from their employment with the Company for Good
         Reason during the term of this Agreement (or upon the occurrence of a
         combination of the foregoing), then each Seller shall be entitled to
         its Pro Rata share of the full amount of the Earnout (or the remainder
         of the unpaid balance of the Earnout) irrespective of whether the
         Company achieves the Minimum EBITDA Threshold for any EBITDA
         measurement period contemplated by this Agreement; provided, however,
         the Earnout Payments shall be paid prior to February 1st of the year
         following the EBITDA calculation. Notwithstanding the foregoing, any
         Earnout Payment due and owing pursuant to this Section 4.1(b)(iv) which
         is attributable to a past measurement period, shall be paid within
         thirty (30) days of the termination or resignation of employment
         (without Cause or for Good Reason, as applicable) by the second such
         Employee.

                                       6


            (vi) In the event either or both Employees resigns from his
         employment for any reason other than Good Reason, then the Company
         shall have no further obligations (payment or otherwise) under this
         Agreement to any Seller, including without limitation, any Seller
         associated with an Employee that continues to be employed by the
         Company, effective immediately from the date of termination pertaining
         to such Event.

         (c) For purposes of this Agreement, "Material Adverse Effect" shall
     mean any circumstances, change in, or effect on the Company or the Targets
     or their respective businesses that, when taken together with all other
     related circumstances, changes in or effects on the Company or the Targets
     or their respective businesses taken as a whole, that is materially adverse
     to the condition (financial or otherwise), business, prospects, results of
     operations, or assets of the Company or the Targets, taken as a whole.

     4.2 Offset Rights. To the extent that the Company is unable to recover
first from the Escrow Amount being held under the Escrow Agreement, the Company
shall have the right, subject to the limitations set forth in Article IX of the
Purchase Agreement to (i) offset and/or recover payment of any Earnout Payments
hereunder up to the full amount of Losses which are Finally Resolved in
accordance with the provisions of the Purchase Agreement; (ii) suspend payment
of any Earnout Payments hereunder in the event the Company obtains an interim
award of emergency relief in accordance with Section 3(c) of one or both of the
Seller Noncompetition Agreements for the duration in which such interim award
for relief remains in place; and/or (iii) offset and/or recover payment of any
Earnout Payments up to the full amount of any losses or damages sustained as a
result of any breach of one or both of the Seller Noncompetition Agreements, as
determined by a non-appealable order or judgment obtained pursuant to Section 3
of such Seller Noncompetition Agreement(s).

                                   SECTION 5.

                                  MISCELLANEOUS

     5.1 Binding Effect; Assignment. Except as otherwise provided herein, this
Agreement shall be binding upon and shall be enforceable by each party, its
successors and permitted assigns. No Seller may assign any of its rights or
obligations hereunder without the prior written approval of the Company, which
consent may be withheld in the Company's sole discretion.

     5.2 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Colorado, without regard to conflicts
of laws principles thereunder.

     5.3 Amendments. This Agreement and its provisions may be amended, changed,
waived, discharged or terminated only by a writing signed by each of the parties
hereto.


                                       7


     5.4 Notices. All notices, claims, certificates, requests, demands and other
communications under this Agreement shall be made in writing and shall be
delivered in accordance with Section 11.3 of the Purchase Agreement.

     5.5 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
any other party may reasonably request to give effect to the terms and intent of
this Agreement.

     5.6 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior written or oral understandings or agreements. In the event of any
inconsistency or conflict between any provision of this Agreement and one or
more provisions of the Purchase Agreement, the provision(s) of this Agreement
shall prevail and govern

     5.7 Severability. If any provision of this Agreement shall be held by any
court of competent jurisdiction to be invalid or unenforceable to any extent,
the remainder of this Agreement shall not be affected thereby and shall be
enforced to the maximum extent permitted by law.

     5.8 Remedies Cumulative. The rights and remedies available under this
Agreement or otherwise available shall be cumulative of all other rights and
remedies and may be exercised successively.

     5.9 Counterpart Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Fax signatures shall be
deemed to be originals for all purposes.

     5.10 No Third Party Beneficiary. Except as and to the extent expressly
stated otherwise herein, nothing in this Agreement is intended to confer upon
any person or entity other than the parties hereto and their respective
successors and permitted assigns any rights, benefits, or obligations hereunder.

     5.11 Attorneys Fees. In any action or arbitration between the parties
relating to this Agreement the enforcement of any of its terms, the prevailing
parties shall in addition to any other award of damage or other remedy be
entitled to its reasonable third party attorney's fees, costs and expenses as
may be fixed by the court or arbitrators.


         [The remainder of this page has been left intentionally blank]

                                       8





         IN WITNESS WHEREOF, this Earnout Agreement has been duly executed as of
the date first above written.

                                            THE COMPANY:
                                            ------------

                                            NEW FRONTIER MEDIA, INC.

                                            By: /s/ Michael Weiner
                                               ------------------------
                                            Name: Michael Weiner
                                                 ----------------------
                                            Title: CEO
                                                 ----------------------

                                            SELLERS:
                                            --------

                                            MARC LAURENCE GREENBERG
                                            TRUST DATED MAY 11, 2001


                                            By: /s/ Marc L. Greenberg
                                               ------------------------
                                               Marc L. Greenberg, Trustee


                                            GOLDBERG FAMILY TRUST
                                            DATED JUNE 15, 2001


                                            By: /s/ Richard Goldberg
                                               ------------------------
                                               Richard Goldberg, Trustee


ACKNOWLEDGED AND AGREED TO:

/s/ Marc L. Greenberg
- --------------------------------------
Marc Laurence Greenberg, an individual

/s/ Richard B. Goldberg
- ----------------------------------
Richard B. Goldberg, an individual


                                       9

EX-10

                                                                    Exhibit 10.3


                          REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION RIGHTS AGREEMENT, dated as of February 10, 2006 (this
"Agreement"), is entered into by and among New Frontier Media, Inc., a Colorado
corporation (the "Company"), Marc Laurence Greenberg Trust dated May 11, 2001,
Goldberg Family Trust dated June 15, 2001 (the Marc Laurence Greenberg Trust and
Goldberg Family Trust are hereinafter referred to in the singular as an
"Investor" and collectively as the "Investors" or the "Trusts"), Marc Laurence
Greenberg, an individual, and Richard Bruce Goldberg, an individual.

         WHEREAS, the Company and the Investors have entered into that certain
Stock Purchase Agreement dated as of February 6, 2006 (the "Purchase
Agreement"), pursuant to which the Company has agreed to purchase from the
Trusts, and the Trusts have agreed to sell to the Company, (i) one hundred
percent (100%) of the issued and outstanding capital stock of MRG Entertainment,
Inc., a California corporation, and (ii) one hundred percent (100%) of the
issued and outstanding capital stock of Lifestyles Entertainment, Inc., a
California corporation (collectively, the "Shares"), on the terms and conditions
set forth in the Purchase Agreement; and

         WHEREAS, the Purchase Agreement provides for a purchase price for the
Shares, consisting of, among other consideration, shares of Common Stock (as
hereafter defined); and

         WHEREAS, the parties to the Purchase Agreement have agreed that the
Investors' rights to sell the Investor Shares (as defined below), and certain
other rights pertaining thereto, shall be as set forth and limited by the terms
of this Agreement.

         WHEREAS, in order to induce the Investors to execute and deliver the
Purchase Agreement, the Company has agreed to provide each Investor with the
registration rights set forth in this Agreement.

         NOW, THEREFORE, in consideration of the premises and mutual covenants
and obligations herein set forth, the parties hereto agree as set forth below.

                                   ARTICLE I

                               CERTAIN DEFINITIONS

         As used in this Agreement:

         "Act" means the Securities Act of 1933, as amended, or any successor
statute.

         "Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

                                       1


         "Associated Individual" means in the case of a Holder that is a Trust,
the trustee of such Trust.

         "Closing Date" has the meaning set forth in the Purchase Agreement.

         "Common Stock" means the common stock of the Company issued pursuant to
the Purchase Agreement or any other shares of capital stock or other securities
of the Company into which such shares of common stock shall be reclassified or
changed, including, by reason of a merger, consolidation, reorganization or
recapitalization. If such common stock has been so reclassified or changed, or
if the Company pays a dividend or makes a distribution on such common stock in
shares of capital stock, or subdivides (or combines) its outstanding shares of
such common stock into a greater (or smaller) number of shares of such common
stock, a share of such common stock shall be deemed to be such number of shares
of stock and amount of other securities to which a holder of a share of such
common stock outstanding immediately prior to such change, reclassification,
exchange, dividend, distribution, subdivision or combination would be entitled.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute.

         "Holder" means, each person who owns Registrable Securities and is
either (i) named on the signature pages hereof as a Holder, or (ii) a person who
has agreed to be bound by the terms of this Agreement as if such person were a
Holder and is (A) a permitted transferee under Section 8.2 hereof, (B) upon the
death of any Holder that is an individual, the executor of the estate of such
Holder or any of such Holder's heirs, devisees, legatees or assigns or (C) upon
the disability of any Holder that is an individual, any guardian or conservator
of such Holder.

         "Initiating Holders" means any single Holder who holds, or group of
Holders who together hold, a number of shares of Registrable Securities equal to
the Share Threshold.

         "Investor Shares" means those shares of the Company's common stock
issued or otherwise delivered or paid to the Investors pursuant to the Purchase
Agreement.

         "New Shares" shall mean any additional shares issued to an Investor as
a result of the items described in the definition of Common Stock.

         "Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts (including business
and family trusts) and other organizations, whether or not legal entities.

         "Register", "Registered" and "Registration" refer to a registration
effected by preparing and filing, and causing to be effective, in accordance
with the Act a registration statement and the declaration or ordering of the
effectiveness of such registration statement in accordance with the Act.

         "Registration Statement" means any registration statement under the Act
of the Company that covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including all amendments and supplements to such
registration statement, including pre- and post-effective amendments, all
exhibits thereto and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.


                                       2


         "Registrable Securities" means shares of Common Stock unless (i) they
have been effectively registered under Section 5 of the Securities Act and
disposed of pursuant to an effective Registration Statement, (ii) such
securities can be freely sold and transferred without restriction under Rule 145
or any other restrictions under the Securities Act, or (iii) such securities
have been transferred pursuant to Rule 144 under the Securities Act or any
successor rule such that, after any such transfer referred to in such clause
(iii), such securities may be freely transferred without restriction under the
Securities Act.

         "SEC" means the United States Securities and Exchange Commission or any
other agency administering the Act.

         "Share Threshold" means that number of shares of Registrable Securities
equal to 1/2 of the number of Registrable Securities held by the Investors as of
the date of this Agreement.

                                   ARTICLE II

                         SALE OF REGISTRABLE SECURITIES

         2.1 Right to Sell Registrable Securities. Subject to the terms and
conditions of this Agreement:

            (a) Every three months during the period beginning on June 30, 2007
         (i.e., the last day of the fifth (5th) quarter following the Closing
         Date, such date being referred to as the "First Sale Date"), and ending
         on the second anniversary of the Closing Date, the Holders collectively
         may sell a number of Investor Shares equal to one-eighth of the total
         number of Investor Shares, plus all New Shares attributable to such
         number of Investor Shares, subject to increase pursuant to Section
         2.1(d). Notwithstanding the foregoing, the right of Holders to sell
         Registrable Securities in each three month period in accordance with
         this Section 2.1(a) shall not be cumulative except as set forth in
         Section 2.1(d).

            (b) Subject to applicable state and federal securities laws, (i)
         beginning on the day following the second (2nd) anniversary of the
         Closing Date, the Holders may sell any remaining Registrable Securities
         held by them; and (ii) notwithstanding Section 2.1(a), an Investor may
         sell any Registrable Securities held by such Investor if at any point
         such Investor, if an individual, or his Associated Individual, if such
         Investor is not an individual, is not employed by the Company or an
         Affiliate of the Company for a reason other than such Investor's or
         Associated Individual's (as applicable) voluntary termination of
         employment or his being terminated for Cause in accordance with the
         terms of his written employment agreement with the Company or its
         Affiliate.

            (c) Notwithstanding anything to the contrary contained in this
         Section 2.1, no Holder may sell or otherwise transfer any Registrable
         Securities unless such sale or transfer is made (i) in accordance with
         the registration requirements of the Act or an exemption from such
         registration and an opinion of counsel is delivered to the Company to
         such effect, and (ii) in compliance with the volume limitations imposed
         under Sections 2.1(a) or (b), as applicable.


                                       3


            (d) Subject to the provisions of Section 3.2, in the event that the
         Holders are unable during any quarterly period to sell Investor Shares
         on a registered basis as a result of (i) any uncured breach by the
         Company of the provisions of this Agreement or (ii) the existence of
         any Delay or Interruption Period, then the Holders shall have the right
         to sell, during any subsequent quarter, the number of Investor Shares
         permitted to be sold pursuant to Section 2.1(a) plus an additional
         number of Investor Shares equal to the difference between (x) the
         number of Investor Shares actually sold during the quarter in which the
         breach, Delay Period or Interruption Period occurred or continued and
         (b) the number actually sold during such quarter.

                                  ARTICLE III

                            REQUEST FOR REGISTRATION

         3.1   Request by Initiating Holders. In the event the Company shall
               receive from Initiating Holders a written request (a "Demand
               Notice") that the Company effect any Registration with respect to
               all or a part of the Registrable Securities which may be sold by
               the Holders in accordance with the terms of this Agreement, the
               Company shall:

               (a)  promptly give written notice of the proposed Registration to
                    all other Holders; and

               (b)  as soon as practicable, but in any event not later than
                    sixty (60) days following receipt of the Demand Notice,
                    prepare and file a Registration Statement on the appropriate
                    form for the registration and sale, in accordance with the
                    intended method or methods of distribution, of the total
                    number of Registrable Securities specified by the Holders in
                    such Demand Notice, together with all or such portion of the
                    Registrable Securities of any Holder or Holders joining in
                    such request as are specified in a written request given
                    within thirty (30) days after receipt of written notice from
                    the Company given pursuant to Section 3.1(a) (a "Demand
                    Registration"), which may, at the request of the Holders, be
                    a "shelf" registration (a "Shelf Registration") pursuant to
                    Rule 415 under the Securities Act to the extent that the
                    Company is at the time eligible to use Form S-3;

               (c)  use its best efforts to cause the Registration Statement to
                    be declared effective as promptly as practicable and to take
                    all other actions (including, without limitation, the
                    execution of an undertaking to file post-effective
                    amendments, appropriate qualifications under the applicable
                    blue sky or other state securities laws and appropriate
                    compliance with exemptive regulations issued under the Act
                    and any other governmental requirements or regulations) as
                    may be requested and as would permit or facilitate the sale
                    and distribution of all or such portion of such Holder's or
                    Holders' Registrable Securities as are specified in such
                    request; and

                                       4


               (d)  use commercially reasonable efforts to keep each
                    Registration Statement filed pursuant to this Section 3.1
                    continuously effective and usable for the resale of the
                    Registrable Securities covered thereby (i) in the case of a
                    Registration that is not a Shelf Registration, for a period
                    of 180 days from the date on which the SEC declares such
                    Registration Statement effective and (ii) in the case of a
                    Shelf Registration, for a period of two years from the date
                    on which the SEC declares such Registration Statement
                    effective, in either case (x) until such earlier date as all
                    of the Registrable Securities covered by such Registration
                    Statement have been sold pursuant to such Registration
                    Statement, and (y) as such period may be extended pursuant
                    to Section 3.2. The time period for which the Company is
                    required to maintain the effectiveness of any Registration
                    Statement shall be extended by the aggregate number of days
                    of all Delay Periods and all Interruption Periods occurring
                    with respect to such Registration and such period and any
                    extension thereof is hereinafter referred to as the
                    "Effectiveness Period."

         Notwithstanding the foregoing, the Company shall not be obligated to
take any action to effect such Registration pursuant to this Article III:

               (a)  at any time prior to the last day of the fifth (5th) full
                    quarter following the Closing Date;

               (b)  at any time during which the Company's common stock is not
                    listed for trading on the Nasdaq National Market System or
                    another recognized stock exchange;

               (c)  at any time during which the Holders may sell up to
                    one-eighth of the aggregate amount of the Registrable
                    Securities during a 90-day period pursuant to Rule 144 of
                    the Act or pursuant to an effective Shelf Registration
                    Statement.

          3.2  Right of Company to Delay Filings. The Company shall be entitled
               to postpone the filing of any Registration Statement otherwise
               required to be prepared and filed by the Company pursuant to
               Section 3.1, or suspend the use of any effective Registration
               Statement under this Section 3.2, for a reasonable period of
               time, but not in excess of 90 days (a "Delay Period"), if the
               Board of Directors of the Company determines that in the Board of
               Directors' reasonable judgment and good faith the registration
               and distribution of the Registrable Securities covered or to be
               covered by such Registration Statement would have a material
               adverse effect on the business of the Company or any transaction
               involving the Company or otherwise would materially interfere
               with any pending financing, acquisition or corporate
               reorganization or other corporate development involving the
               Company or any of its Affiliates or otherwise would require
               premature disclosure thereof and promptly gives the Holders
               written notice of such determination, containing a general
               statement of the reasons for such postponement and an
               approximation of the period of the anticipated delay; provided,
               however, that (i) the aggregate number of days included in all
               Delay Periods during any consecutive 12 months shall not exceed
               the aggregate of (x) 90 days minus (y) the number of days


                                       5


               occurring during all Interruption Periods during such consecutive
               12 months and (ii) a period of at least 90 days shall elapse
               between the termination of any Delay Period or Interruption
               Period and the commencement of the immediately succeeding Delay
               Period. If the Company shall so postpone the filing of a
               Registration Statement, the Holders of Registrable Securities to
               be registered shall have the right to withdraw the request for
               registration by giving written notice from the Holders of a
               majority of the Registrable Securities that were to be registered
               to the Company within 90 days after receipt of the notice of
               postponement or, if earlier, the termination of such Delay Period
               (and, in the event of such withdrawal, such request shall not be
               counted for purposes of determining the number of requests for
               registration to which the Holders of Registrable Securities are
               entitled pursuant to this Section 3.2). The Company shall not be
               entitled to initiate or continue a Delay Period unless it shall
               (A) concurrently prohibit sales by all other security holders
               under registration statements covering securities held by such
               other security holders and (B) in accordance with the Company's
               policies from time to time in effect, forbid purchases and sales
               in the open market by senior executives of the Company.

          3.3  Underwriting. If the Company in its sole discretion decides to
               employ the services of one or more underwriters in connection the
               Demand Request made by the Initiating Holder(s), the choice of
               such underwriter(s) shall be determined in the sole discretion of
               the Company. The Company shall (together with all Holders
               proposing to distribute their securities through such
               underwriting) enter into an underwriting agreement in customary
               form with the underwriter or underwriters selected for such
               underwriting by the Company. Notwithstanding any other provision
               of this Agreement, if the underwriter advises the Initiating
               Holders in writing that marketing factors require a limitation of
               the number of shares to be underwritten, the Initiating Holders
               shall so advise all Holders of Registrable Securities, and the
               number of shares of Registrable Securities that may be included
               in the offering and the underwriting shall be limited to the
               number advised by the underwriters and shall be allocated among
               all Holders thereof in proportion, as nearly as practicable, to
               the respective amounts of Registrable Securities held by such
               Holders (or in such other manner as may be agreed by the
               Holders). If any Holder of Registrable Securities disapproves of
               the terms of the underwriting, he may elect to withdraw therefrom
               by written notice to the Company, the underwriter and the
               Initiating Holders. Any Registrable Securities which are excluded
               from the underwriting by reason of the underwriter's marketing
               limitation or withdrawn from such underwriting shall be withdrawn
               from such Registration.

                                   ARTICLE IV

                              INTENTIONALLY OMITTED


                                   ARTICLE V

                EXPENSES OF REGISTRATION; REGISTRATION PROCEDURES


                                       6


         5.1 Expenses of Registration. All expenses incurred in connection with
     any Registration pursuant to this Agreement, including, without limitation,
     all Registration, filing and qualification fees, printing expenses, fees
     and disbursements of counsel for the Company and expenses of any special
     audits of the Company's financial statements incidental to or required by
     such Registration, shall be borne by the Company except as follows:

            (a) If the Company is not registering any shares for its own account
         pursuant to any Registration effected under Article III, then the
         selling Holders shall bear all expenses incurred in connection with any
         special audits of the Company's financial statements incidental to or
         required by such Registration (it being understood that customary
         comfort letters and SAS 72 reviews, including the procedures necessary
         to deliver such comfort letters and reviews, do not constitute special
         audits);

            (b) The Company shall not be required to pay for expenses of any
         Registration proceeding begun pursuant to Article III if the request
         for such Registration is subsequently withdrawn by the Initiating
         Holders, in which case such expenses shall be borne by the Holders
         requesting such withdrawal; provided, however, that, if such withdrawal
         was based on the Company's failure to comply in any material respect
         with its obligations hereunder; and

            (c) The Company shall not be required to pay fees of legal counsel
         of a Holder, or underwriters' fees, discounts or commissions which
         relate exclusively to the Registrable Securities of a Holder sold in
         connection with a Registration effected solely pursuant to Article III.

         5.2 Registration Procedures. In the case of each Registration effected
     by the Company pursuant to this Agreement, the Company will keep each
     Holder participating therein advised in writing as to the initiation of
     each Registration and as to the completion thereof. In addition, in
     connection with such Registration, the Company shall:

            (a) furnish such number of prospectuses and amendments thereto, and
         such other documents incident thereto, as a Holder from time to time
         may reasonably request;

            (b) without limiting the immediately preceding paragraph, furnish,
         at least five business days before filing a registration statement that
         registers such Registrable Securities, a prospectus relating thereto or
         any amendments or supplements relating to such a registration statement
         or prospectus, to the Holders, and copies of all such documents
         proposed to be filed;

            (c) prepare and file with the SEC such amendments and supplements to
         such registration statement and the prospectus used in connection
         therewith as may be necessary to keep such registration statement
         effective in the manner required by this Agreement and to comply with
         the provisions of the Act with respect to the sale or other disposition
         of such Registrable Securities;

            (d) notify in writing the Holders promptly (i) of the receipt by the
         Company of any notification with respect to any comments by the SEC
         with respect to such registration statement or prospectus or any
         amendment or supplement thereto or any request by the SEC for the
         amending or supplementing thereof or for additional information with
         respect thereto, (ii) of the receipt by the Company of any notification
         with respect to the issuance by the SEC of any stop order suspending
         the effectiveness of such registration statement or prospectus or any
         amendment or supplement thereto or the initiation or threatening of any
         proceeding for that purpose and (iii) of the receipt by the Company of
         any notification with respect to the suspension of the qualification of
         such Registrable Securities for sale in any jurisdiction or the
         initiation or threatening of any proceeding for such purposes;


                                       7


            (e) register or qualify such Registrable Securities under such other
         securities or blue sky laws of such jurisdictions as a Holder
         reasonably requests and do any and all other acts and things which may
         be reasonably necessary or advisable to enable the Holders to
         consummate the disposition in such jurisdictions of the Registrable
         Securities owned by the Holders;

            (f) furnish to the Holders such number of copies of a summary
         prospectus, if any, or other prospectus, including a preliminary
         prospectus, in conformity with the requirements of the Act, and such
         other documents as a Holder may reasonably request in order to
         facilitate the public sale or other disposition of such Registrable
         Securities;

            (g) notify the Holders on a timely basis at any time when a
         prospectus relating to such Registrable Securities is required to be
         delivered under the Act, of the happening of any event as a result of
         which the prospectus included in such registration statement, as then
         in effect, includes an untrue statement of a material fact or omits to
         state a material fact required to be stated therein or necessary to
         make the statements therein not misleading in light of the
         circumstances then existing and, at the request of a Holder, prepare
         and furnish to the Holders a reasonable number of copies of a
         supplement to or an amendment of such prospectus as may be necessary so
         that, as thereafter delivered to the offerees of such shares, such
         prospectus shall not include an untrue statement of a material fact or
         omit to state a material fact required to be stated therein or
         necessary to make the statements therein not misleading in light of the
         circumstances then existing;

            (h) use its best efforts to obtain from its counsel an opinion or
         opinions in customary form as reasonably required by the Holders;

            (i) provide a transfer agent and registrar (which may be the same
         entity and which may be the Company) for such Registrable Securities;

            (j) issue to any underwriter to which the Holders holding such
         Registrable Securities may sell shares in such offering certificates
         evidencing such Registrable Securities;

            (k) list such Registrable Securities on any national securities
         exchange on which any shares of the Company's common stock are listed
         or, if the Company's common stock is not listed on a national
         securities exchange, use its best efforts to qualify such Registrable
         Securities for inclusion on the automated quotation system of the
         National Association of Securities Dealers, Inc.;

            (l) use its best efforts to take all other steps necessary to effect
         the registration of such Registrable Securities contemplated hereby;

                                       8


            (m) if such offering is an underwritten offering, make available for
         inspection by any Holder of Registrable Securities included in such
         Registration Statement, any underwriter participating in any offering
         pursuant to such Registration Statement, and any attorney, accountant
         or other agent retained by any such Holder or underwriter
         (collectively, the "Inspectors"), all financial and other records and
         other information, pertinent corporate documents and properties of any
         of the Company and its subsidiaries and affiliates (collectively, the
         "Records"), as shall be reasonably necessary to enable them to exercise
         their due diligence responsibilities; provided, however, that the
         Records that the Company determines, in good faith, to be confidential
         and which it notifies the Inspectors in writing are confidential shall
         not be disclosed to any Inspector unless such Inspector signs a
         confidentiality agreement reasonably satisfactory to the Company (which
         shall permit the disclosure of such Records in such Registration
         Statement or the related Prospectus if necessary to avoid or correct a
         material misstatement in or material omission from such Registration
         Statement or Prospectus) or either (i) the disclosure of such Records
         is necessary to avoid or correct a misstatement or omission in such
         Registration Statement, or (ii) the release of such Records is ordered
         pursuant to a subpoena or other order from a court of competent
         jurisdiction; provided further, however, that (A) any decision
         regarding the disclosure of information pursuant to subclause (i) above
         shall be made only after consultation with counsel for the applicable
         Inspectors and the Company, and (B) with respect to any release of
         Records pursuant to subclause (ii) above, each Holder of Registrable
         Securities agrees that it shall, promptly after learning that
         disclosure of such Records is sought in a court having jurisdiction,
         give notice to the Company so that the Company, at the Company's
         expense, may undertake appropriate action to prevent disclosure of such
         Records; and

            (n) if such offering is an underwritten offering, enter into such
         agreements (including an underwriting agreement in form, scope and
         substance as is customary in underwritten offerings) and take all such
         other appropriate and reasonable actions requested by the Holders of a
         majority of the Registrable Securities being sold in connection
         therewith (including those reasonably requested by the managing
         underwriters) in order to expedite or facilitate the disposition of
         such Registrable Securities, and in such connection, (i) use
         commercially reasonable efforts to obtain opinions of counsel to the
         Company and updates thereof (which counsel and opinions (in form, scope
         and substance) shall be reasonably satisfactory to the managing
         underwriters and counsel to the Holders of the Registrable Securities
         being sold), addressed to each selling Holder of Registrable Securities
         covered by such Registration Statement and each of the underwriters as
         to the matters customarily covered in opinions requested in
         underwritten offerings and such other matters as may be reasonably
         requested by such counsel and underwriters, (ii) use commercially
         reasonable efforts to obtain "cold comfort" letters and updates thereof
         from the independent certified public accountants of the Company (and,
         if necessary, any other independent certified public accountants of any
         subsidiary of the Company or of any business acquired by the Company
         for which financial statements and financial data are, or are required
         to be, included in the Registration Statement), addressed to each
         selling holder of Registrable Securities covered by the Registration
         Statement (unless such accountants shall be prohibited from so
         addressing such letters by applicable standards of the accounting
         profession) and each of the underwriters, such letters to be in
         customary form and covering matters of the type customarily covered in
         "cold comfort" letters in connection with underwritten offerings, (iii)
         if requested and if an underwriting agreement is entered into, provide
         indemnification provisions and procedures customary for underwritten
         public offerings, but in any event no less favorable to the indemnified
         parties than the provisions set forth in Section 8 hereof. The above
         shall be done at each closing under such underwriting or similar
         agreement, or as and to the extent required thereunder.

                                       9


            (o) Each Holder of Registrable Securities covered by a Registration
         Statement agrees that, upon receipt of any notice from the Company of
         the happening of any event of the kind described in Section 5.2(e)(ii),
         5.2(e)(iii) or 5.2(g), that such Holder shall discontinue disposition
         of any Registrable Securities covered by such Registration Statement or
         the related prospectus until receipt of the copies of the supplemented
         or amended prospectus contemplated by Section 5(g) hereof, or until
         such Holder is advised in writing (the "Advice") by the Company that
         the use of the applicable prospectus may be resumed, and has received
         copies of any amended or supplemented prospectus or any additional or
         supplemental filings which are incorporated, or deemed to be
         incorporated, by reference in such prospectus (such period during which
         disposition is discontinued being an "Interruption Period") and, if
         requested by the Company, the Holder shall deliver to the Company (at
         the expense of the Company) all copies then in its possession, other
         than permanent file copies then in such holder's possession, of the
         prospectus covering such Registrable Securities at the time of receipt
         of such request.

                                       10


                                   ARTICLE VI

                                 INDEMNIFICATION

         6.1 To the extent permitted by applicable law, the Company will
     indemnify each Holder of Registrable Securities, each of its officers,
     directors and partners, and each person controlling such Holder, with
     respect to which such Registration has been effected pursuant to this
     Agreement, and each underwriter, if any, and each Person who controls any
     underwriter of the Registrable Securities held by or issuable to such
     Holder, against all claims, losses, expenses, damages and liabilities (or
     actions in respect thereto) arising out of or based on any untrue statement
     (or alleged untrue statement) of a material fact contained in any
     prospectus, offering circular or other document (including any related
     registration statement, notification or the like) incident to any such
     Registration, or based on any omission (or alleged omission) to state
     therein a material fact required to be stated therein or necessary to make
     the statements therein not misleading, or any violation by the Company of
     any rule or regulation promulgated under the Act or any state securities
     law applicable to the Company in connection with any such Registration, and
     will reimburse each such Holder, each of its officers, directors and
     partners, and each person controlling such Holder, each such underwriter
     and each Person who controls any such underwriter, for any reasonable legal
     and any other expenses incurred in connection with investigating, defending
     or settling any such claim, loss, damage, liability or action, provided
     that the indemnity contained in this Section 6.1 shall not apply to amounts
     paid in settlement of any such claim, loss, damage, liability or action if
     such settlement is effected without the consent of the Company (which
     consent will not be reasonably withheld, conditioned or delayed) and
     provided further that the Company will not be liable in any such case to
     the extent that any such claim, loss, damage or liability arises out of or
     is based on any untrue statement or omission based upon written information
     furnished to the Company (including any false or untrue representation or
     warranty made by any Investor in the Purchase Agreement) by such Holder or
     underwriter specifically for use therein.

         6.2 Each Holder (severally but not jointly with any other Holder or
     Holders) will, if Registrable Securities held by or issuable to such Holder
     are included in the securities as to which such Registration is being
     effected, indemnify the Company, each of its directors and officers, each
     legal counsel and independent accountants of the Company, each underwriter,
     if any, of the Company's securities covered by such a registration
     statement, each Person who controls the Company within the meaning of the
     Act, and each other such Holder, each of its officers, directors and
     partners and each Person controlling such Holder, against all claims,
     losses, expenses, damages and liabilities (or actions in respect thereof)
     arising out of or based on any untrue statement (or alleged untrue
     statement) of a material fact contained in any such registration statement,
     prospectus, offering circular or other document, or any omission (or
     alleged omission) to state therein a material fact required to be stated
     therein or necessary to make the statements therein not misleading, and
     will reimburse the Company, such Holders, such directors, officers,
     partners, Persons or underwriters for any reasonable investigating,
     defending, or settling any such claim, loss, damage, liability or action,
     in each case to the extent, but only to the extent, that such untrue
     statement (or alleged untrue statement) or omission (or alleged omission)
     is made in such registration statement, prospectus, offering circular or
     other document in reliance upon and in conformity with written information
     furnished to the Company by such Holder specifically for use therein;
     provided, however, that that the maximum amount of liability of any Holder
     in respect of indemnification and defense required by this Section 6.2
     shall be limited to an amount equal to the net proceeds actually received
     by such Holder from the sale of Registrable Securities effected pursuant to
     such Registration; and provided further that the indemnity contained in
     this Section 6.2 shall not apply to amounts paid in settlement of any such
     claim, loss, damage, liability or action if such settlement is effected
     without the consent of the Holder (which consent will not be unreasonably
     withheld, conditioned or delayed).

                                       11


         6.3 Each party entitled to indemnification under this Article VI (the
     "Indemnified Party") shall give notice to the party required to provide
     indemnification (the "Indemnifying Party") promptly after such Indemnified
     Party has actual knowledge of any claim as to which indemnity may be
     sought, and shall permit the Indemnifying Party to assume the defense of
     any such claim or any litigation resulting therefrom, provided that counsel
     for the Indemnifying Party, who shall conduct the defense of such claim or
     litigation, shall be approved by the Indemnified Party (whose approval
     shall not be unreasonably withheld, conditioned or delayed), and the
     Indemnified Party may participate in such defense at such party's expense,
     and provided further that the failure of any Indemnified Party to give
     notice as provided herein shall not relieve the Indemnifying Party of its
     obligations hereunder, unless, and to the extent, such failure resulted in
     actual detriment to the Indemnifying Party. No Indemnifying Party, in the
     defense of any such claim or litigation, shall, except with the consent of
     each Indemnified Party, consent to entry of any judgment or enter into any
     settlement which does not include as an unconditional term thereof the
     giving by the claimant or plaintiff to such Indemnified Party of a release
     from all liability in respect to such claim or litigation.

         6.4 If the indemnification provided for in Article VI is applicable in
     accordance with its terms but is legally unavailable to the Indemnified
     Party in respect of any losses set forth above, then each applicable
     Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
     contribute to the amount paid or payable by such Indemnified Party as a
     result of such losses, in such proportion as is appropriate to reflect the
     relative fault of the Indemnifying Party, on the one hand, and such
     Indemnified Party, on the other hand, in connection with the actions,
     statements or omissions that resulted in such losses as well as any other
     relevant equitable considerations. The relative fault of such Indemnifying
     Party, on the one hand, and such Indemnified Party, on the other hand,
     shall be determined by reference to, among other things, whether any action
     in question, including any untrue statement of a material fact or omission
     or alleged omission to state a material fact, has been taken by, or relates
     to information supplied by, such Indemnifying Party or Indemnified Party,
     and the parties' relative intent, knowledge, access to information and
     opportunity to correct or prevent any such action, statement or omission.
     The amount paid or payable by a party as a result of any such losses shall
     be deemed to include any legal or other fees or expenses incurred by such
     party in connection with any investigation or proceeding. The parties
     hereto agree that it would not be just and equitable if contribution
     pursuant to this Section 6.4 were determined by pro rata allocation or by
     any other method of allocation that does not take account of the equitable
     considerations referred to in the immediately preceding paragraph.
     Notwithstanding the provision of this Section 6.4, an Indemnifying Party
     that is a Holder shall not be required to contribute any amount which is in
     excess of the amount by which the total proceeds received by such Holder
     from the sale of the Registrable Securities sold by such Holder (net of all
     underwriting discounts and commissions) exceeds the amount of any damages
     that such Indemnifying Party has otherwise been required to pay by reason
     of such untrue or alleged untrue statement or omission or alleged omission.
     No person guilty of fraudulent misrepresentation (within the meaning of
     Section 11(f) of the Act) shall be entitled to contribution from any Person
     who was not guilty of such fraudulent misrepresentation.


                                       12


                                  ARTICLE VII

                              RULE 144 INFORMATION

         7.1 Rule 144 Information. With a view to making available the benefits
     of certain rules and regulations of the SEC which may at any time permit
     the sale of the Registrable Securities to the public without registration,
     the Company agrees to use its best efforts to:

            (a) Make and keep public information available, as those terms are
         understood and defined in Rule 144 under the Act, at all times after
         the effective date that the Company becomes subject to the reporting
         requirements of the Act or the Exchange Act, and for so long as the
         Company remains subject to the periodic reporting requirements under
         Section 13 or 15(d) of the Exchange Act.

            (b) File with the SEC in a timely manner all reports and other
         documents required of the Company under the Act and the Exchange Act
         (at any time after it has become subject to such reporting
         requirements).

            (c) Furnish to any Holder forthwith upon request a written statement
         by the Company as to its compliance with the reporting requirements of
         Rule 144 under the Act (at any time after 90 days after the effective
         date of the first registration statement filed by the Company for an
         offering of its securities to the general public), and of the Act and
         the Exchange Act (at any time after it has become subject to such
         reporting requirements), a copy of the most recent annual or quarterly
         report of the Company, and such other reports and documents of the
         Company and other information in as such Holder may reasonably request
         in availing itself of any rule or regulation of the SEC allowing such
         Holder to sell any such securities without Registration.

                                  ARTICLE VIII

                                  MISCELLANEOUS

         8.1 Information by Holder. The Holder or Holders of Registrable
     Securities included in any Registration shall promptly furnish to the
     Company such information regarding such Holder or Holders and the
     distribution proposed by such Holder or Holders as the Company may request
     in writing to the extent such information is required in order to effect
     such Registration in accordance with the Act.

         8.2 Assignment. Each Holder's registration rights under this Agreement
     may be assigned to or succeeded in favor of (voluntarily or not), to any
     transferee which (a) is an eligible transferee under all applicable federal
     and state securities laws, and such transfer is not expressly prohibited
     under agreements between or among such Holder and the Company; (b) executes
     a counterpart of this Agreement in place of the transferring Holder with
     the Company; (c) is an Associated Individual; and (d) to which all of the
     Holder's shares of Common Stock have been transferred.

         8.3 Delay of Registration. No Holder shall have any right to take any
     action to restrain, enjoin or otherwise delay any Registration as the
     result of any controversy that may arise with respect to the interpretation
     or implementation of any provisions of this Agreement.


                                       13


         8.4 Entire Agreement. This Agreement contains the entire agreement
     among the parties hereto with respect to the subject matter hereof and
     supersedes all prior and contemporaneous arrangements or understandings
     with respect thereto. In the event of any inconsistency or conflict between
     one or more provision of this Agreement and any provision of the Purchase
     Agreement, the provisions of this Agreement shall control and prevail.

         8.5 Notices. All notices, requests, consents and other communications
     hereunder to any party shall be deemed to be sufficient if contained in a
     written instrument delivered in person or sent by facsimile,
     nationally-recognized overnight courier (with guaranteed next business day
     delivery) or first class registered or certified mail, return receipt
     requested, postage prepaid, addressed to such party at the address set
     forth below or such other address as may hereafter be designated in writing
     by such party to the other parties:

         (a) if to the Company, to:

                    New Frontier Media, Inc.
                    7007 Winchester Circle, Suite 200
                    Boulder, CO 80301
                    Attention:  Michael Weiner, Karyn Miller and George Sawicki
                    Fax Number:  (303) 444-0848


           With a copy (which shall not constitute effective notice) to:

                    E. Lee Reichert, Esq.
                    Kamlet Shepherd & Reichert, LLP
                    1515 Arapahoe Street, Tower 1, Suite 1600
                    Denver, Colorado 80202
                    Facsimile: 303.825.1185

         (b) if to a Holder, to the Investors at their addresses set forth on
     the signature page hereof;

                     With a copy (which shall not constitute effective
notice) to:

                     Michael Wolf, Esq.
                     Wolf, Rifkin Shapiro & Schulman, LLP
                     11400 West Olympic Boulevard, Ninth Floor
                     Los Angeles, California  90067
                     Facsimile: 310.479.1422

         All such notices, requests, consents and other communications shall be
deemed to have been delivered (i) in the case of personal delivery or delivery
by facsimile, on the date of such delivery (to be confirmed by a transmission
page in the event of delivery by facsimile); (ii) in the case of dispatch by
nationally-recognized overnight courier, on the next business day following such
dispatch; and (iii) in the case of mailing, on the fifth business day after the
posting thereof.


                                       14


         8.6 Counterparts; Facsimile Signatures. This Agreement may be executed
     in any number of original or facsimile counterparts, and each such
     counterpart hereof shall be deemed to be an original instrument, but all
     such counterparts together shall constitute but one agreement. Any
     counterpart or other signature to this Agreement that is delivered by
     facsimile shall be deemed for all purposes as constituting good and valid
     execution and delivery by such party of this Agreement.

         8.7 Headings. The headings of the various sections of this Agreement
     have been inserted for convenience of reference only and shall not be
     deemed to be a part of this Agreement.

         8.8 Governing Law; Consent to Jurisdiction and Venue. This Agreement
     shall be governed by and interpreted in accordance with the laws of the
     State of Colorado. Each of the parties consents to the jurisdiction of the
     federal courts whose districts encompass any part of the City and County of
     Denver or the state courts of the State of Colorado sitting in the City and
     County of Boulder in connection with any dispute arising under this
     Agreement and hereby waives, to the maximum extent permitted by law, any
     objection, including any objection based on forum non conveniens, to the
     bringing of any such proceeding in such jurisdictions.

         8.9 Severability. It is the desire and intent of the parties that the
     provisions of this Agreement be enforced to the fullest extent permissible
     under the law and public policies applied in each jurisdiction in which
     enforcement is sought. Accordingly, in the event that any provision of this
     Agreement would be held in any jurisdiction to be invalid, prohibited or
     unenforceable for any reason, such provision, as to such jurisdiction,
     shall be ineffective, without invalidating the remaining provisions of this
     Agreement or affecting the validity or enforceability of such provision in
     any other 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 affecting the validity or enforceability of such provision in
     any other jurisdiction.

         8.10 Attorneys' Fees. If an action (including arbitration) is brought
     to interpret or enforce any of the terms of this Agreement, or because of a
     party's breach of any provision of this Agreement, the losing party shall
     pay the prevailing party's reasonable attorneys' fees, costs and expenses,
     court costs and other costs of action incurred in connection with the
     prosecution or defense of such action, whether or not the action is
     prosecuted to a final judgment. In addition to the foregoing award of
     attorneys' fees, the prevailing party shall be entitled to its reasonable
     attorneys' fees incurred in any post judgment proceeding to enforce any
     judgment in connection with this Agreement. This paragraph is separate and
     several and shall survive the merger of this paragraph into any judgment.

                          [SIGNATURE PAGE(S) TO FOLLOW]


                                       15





         IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement on the date first written above.



                                       THE COMPANY:
                                       ------------

                                       NEW FRONTIER MEDIA, INC.

                                       By: /s/ Michael Weiner
                                          ------------------------
                                       Name: Michael Weiner
                                            ----------------------
                                       Title: CEO
                                            ----------------------

                                       SELLERS:
                                       --------

                                       MARC LAURENCE GREENBERG
                                       TRUST DATED MAY 11, 2001


                                       By: /s/ Marc L. Greenberg
                                          ------------------------
                                          Marc L. Greenberg, Trustee


                                       GOLDBERG FAMILY TRUST
                                       DATED JUNE 15, 2001


                                       By: /s/ Richard Goldberg
                                          ------------------------
                                          Richard Goldberg, Trustee




ACKNOWLEDGED AND AGREED TO:

/s/ Marc Laurence Greenberg
- --------------------------------------
Marc Laurence Greenberg, an individual

/s/ Richard B. Goldberg
- --------------------------------------
Richard B. Goldberg, an individual


                                       16

EX-10

                                                                    Exhibit 10.4

                                ESCROW AGREEMENT

         THIS ESCROW AGREEMENT (this "Agreement") is executed and delivered to
be effective February 10, 2006, by and among NEW FRONTIER MEDIA, INC., a
Colorado corporation ("Purchaser"), MARC LAURENCE GREENBERG TRUST DATED MAY 11,
2001, GOLDBERG FAMILY TRUST DATED JUNE 15, 2001 (the Marc Laurence Greenberg
Trust and the Goldberg Family Trust are hereinafter referred to collectively as
the "the Trusts"), MARC LAURENCE GREENBERG, an individual ("Greenberg"), RICHARD
B. GOLDBERG, an individual ("Goldberg"), and First Community Bank, N.A. (the
"Escrow Agent").

                              W I T N E S S E T H:

         WHEREAS, the Trusts, Greenberg and Goldberg (collectively, the
"Sellers") have entered into a Stock Purchase Agreement with Purchaser dated
February 6, 2006 (the "Purchase Agreement"), pursuant to which Purchaser has
acquired from the Trusts (i) 100% of the capital stock of MRG Entertainment,
Inc., a California corporation, and (ii) 100% of the capital stock of Lifestyles
Entertainment, Inc., a California corporation; and

         WHEREAS, the Purchase Agreement provides that Purchaser shall deposit
Two Million Five Hundred and Fifty Thousand Dollars ($2,550,000) of the
Purchase Price with the Escrow Agent to be held in an escrow account (the
"Escrow Account") in accordance with the terms of this Agreement; and

         WHEREAS, Purchaser and Sellers desire the Escrow Agent to hold and
dispose of funds in the Escrow Account, and the Escrow Agent is willing to do
so, on the terms and conditions hereinafter set forth.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:

         1. Undefined Capitalized Terms. Undefined initially capitalized terms
used in this Agreement shall have the meanings ascribed to them in the Purchase
Agreement.

         2. Appointment of Escrow Agent. The Escrow Agent is hereby constituted
and appointed as escrow agent, and hereby accepts its appointment and agrees to
act as escrow agent pursuant to this Agreement.

         3. Escrow Fund. In connection with the closing of the transactions
contemplated by the Purchase Agreement, Purchaser shall deliver to and deposit
with the Escrow Agent an escrow amount consisting of Two Million Five Hundred
and Fifty Thousand Dollars ($2,550,000) in immediately available funds (the
"Initial Escrow Fund"). The Initial Escrow Fund, together with any Earned
Interest (as defined below) will be held by the Escrow Agent until utilized to
pay Purchaser or delivered to the Trusts pursuant to the terms hereof and is
referred to herein as the "Escrow Fund". The Escrow Agent shall acknowledge
receipt of the Initial Escrow Fund by written notice to Purchaser and the Trusts
and shall act with respect to the Escrow Fund and otherwise as hereinafter set
forth.

         4. Investment of Escrow Fund.




            (a) The Escrow Agent shall establish the Escrow Account and shall
         invest and reinvest the Escrow Fund in money market funds or, so long
         as the Escrow Agent shall not be prohibited from making any such
         investment or reinvestment (whether by statute, regulation or
         otherwise), upon receipt of joint written investment instructions
         received by the Escrow Agent and signed by Purchaser and the Trusts,
         the Escrow Agent shall invest the Escrow Fund in other investments in
         accordance with such instructions. The Escrow Fund shall be invested at
         all times during the term of this Agreement except when such
         investments are liquidated and cash is held by the Escrow Agent
         immediately pending payment of any amount from the Escrow Fund as
         provided in this Agreement. The Escrow Agent shall not be responsible
         or liable for any loss suffered in connection with any investment of
         the Escrow Fund made by it in accordance with this Section 4 or
         realized as a result of the liquidation of any such investment, absent
         willful misconduct or gross neglect.

            (b) All interest earned on the Escrow Fund, including any interest
         earned on such interest (collectively, "Earned Interest") shall be held
         by the Escrow Agent as part of the Escrow Fund. Purchaser and the
         Trusts acknowledge and agree that Earned Interest shall be disbursed
         with the final release of the Escrow Fund on a pro-rata basis as
         follows, except for disbursement under Section 6(b)(i). Purchaser shall
         be entitled to the percentage of the Earned Interest equal to the
         percentage of the amounts disbursed to Purchaser hereunder divided by
         the amount of the Initial Escrow Fund. By way of example, if the amount
         of the Initial Escrow Fund is $2,500,000 and the amount that is
         disbursed to Purchaser hereunder is $1,250,000, Purchaser shall be
         entitled to 50% of the Earned Interest and the Trusts collectively
         shall be entitled to 50% of the Earned Interest.

         5. Taxes on Escrow Fund from Investment or Reinvestment.

            (a) For income Tax purposes, the Escrow Fund, as well as all income
         earned from the investment or reinvestment of the Initial Escrow Fund
         and any Earned Interest in any Tax year, shall be treated in the manner
         described in proposed Treasury Regulations Section 1.468B-8. The Trusts
         or Purchaser, as the case may be, shall pay all income Taxes assessed
         with respect to any income earned on the Escrow Fund and paid to the
         Trusts or Purchaser and the Escrow Agent shall report such amounts to
         the Internal Revenue Service as amounts earned by the Trusts or
         Purchaser in accordance with proposed Treasury Regulations Section
         1.468B-8 at the end of each calendar year. To the extent income is
         earned on the Escrow Fund and not yet disbursed hereunder, the Trusts
         shall report and pay all income Taxes assessed with respect thereto;
         provided, however, that in the event that amounts under the Escrow Fund
         subsequently are disbursed to Purchaser, the parties shall instruct the
         Escrow Agent to issue amended form 1099s to the extent possible
         reflecting the proper allocation of interest, and if not possible,
         Purchaser shall reimburse the Trusts with regard to income Taxes
         previously paid by the Trusts such amounts following receipt of
         documentation thereof.

            (b) Purchaser and each of the Trusts shall provide the Escrow Agent
         with their Tax Identification Number (TIN) as assigned by the Internal
         Revenue Service. Exhibit B attached hereto sets forth each Trust's tax
         identification numbers and the percentage of the Escrow Fund
         attributable to each of the Trusts (the "Applicable Percentages"). In


                                       2


         addition, Purchaser and each of the Trusts shall provide to the Escrow
         Agent an appropriate Internal Revenue Service Form W-9 for tax
         identification number certification or an appropriate Internal Revenue
         Service Form W-8BEN form for non-resident alien certification and such
         other documents as the Escrow Agent may reasonably request to permit it
         to properly file information returns with the proper parties.

            (c) From time to time, Purchaser and each of the Trusts shall
         provide the Escrow Agent with a jointly executed notice advising the
         Escrow Agent the percentage of the interest that shall be allocated to
         each of the Purchaser and the Trusts for each year or so that the
         Escrow Agent can issue form 1099s or amended form 1099s as required
         hereunder. The Escrow Agent shall be responsible only for income tax
         information reporting with respect to interest earned on the Escrow
         Fund.

         6. Disbursements from Escrow Account.

            (a) General.

               (i) The Escrow Fund shall be available to pay, in accordance with
            the procedures set forth herein, any amounts for which Purchaser is
            entitled to indemnification pursuant to Article IX of the Purchase
            Agreement. All disbursements from the Escrow Fund hereunder shall be
            made by wire transfer or immediately available funds to bank
            account(s) designated by Purchaser or the Trusts, as the case may
            be, and any written notice delivered to the Escrow Agent, unless the
            Escrow Agent receives different disbursement instructions in writing
            from Purchaser and the Trusts specifically revoking or amending any
            part of disbursement instructions given to the Escrow Agent by such
            party. Notwithstanding the provisions herein to the contrary, if the
            amount of a Claim to be paid hereunder exceeds the amount of the
            Escrow Fund then held by the Escrow Agent, then Escrow Agent shall
            pay out the entire balance of the Escrow Fund to Purchaser in
            partial satisfaction of such Claim.

               (ii) In addition to any Earned Interest which shall be disbursed
            as described in Section 4, the Escrow Agent shall make the following
            disbursements to Purchaser from the Escrow Account (each a
            "Disbursement Event"):

                  (A) On each occasion on which Purchaser determines in good
            faith that it is entitled to payment of a claim for indemnification
            under Article IX of the Purchase Agreement, Purchaser shall deliver
            to the Escrow Agent and the Trusts a written notice (a "Claim
            Notice") which sets forth the amount or the method of computation of
            the amount of such claim, and a reference to the provision of the
            Purchase Agreement or any agreement, certificate or instrument
            executed pursuant hereto or in connection herewith upon which such
            claim is based; provided, that a Claim Notice in respect of any
            action at law or suit in equity by or against a third Person as to
            which indemnification will be sought shall be given promptly after
            the action or suit is commenced; and provided further, that failure
            to give a Claim Notice shall not relieve Sellers of their
            obligations under the Purchase Agreement.

                                       3


                  (B) If within thirty (30) days after the delivery of a Claim
            Notice pursuant to Section 6(a)(ii)(A), one of the Trusts does not
            notify the Escrow Agent in writing (with a copy to Purchaser) that
            the Trusts disagree in good faith with the amount or method of
            determination set forth in the Claim Notice (a "Dispute Notice"),
            which objection shall identify in reasonable detail the reasons for
            and include any relevant documentation in support of the objection,
            the Escrow Agent promptly shall disburse cash from the Escrow
            Account to Purchaser in the amount of set forth in such Claim
            Notice. The failure of either of the Trusts to provide a Dispute
            Notice as set forth in this Section 6(a)(ii)(B) shall be deemed an
            irrevocable acceptance of liability for any amount contained in the
            applicable Claim Notice. The Escrow Agent shall send a written
            confirmation of such payment to the Trusts within three (3) days
            after consummation of such payment. In the event that one of the
            Trusts delivers a Dispute Notice it shall be binding in all respects
            on the other Trust.

                  (C) If within thirty (30) days after the delivery of a Claim
            Notice pursuant to Section 6(a)(ii)(A) hereof either of the Trusts
            deliver to the Escrow Agent a Dispute Notice, the Escrow Agent shall
            not disburse, and shall continue to hold in the Escrow Account, the
            amount requested in the Claim Notice, or the disputed portion
            thereof, as the case may be, pending either (1) joint written
            instructions from Purchaser and the Trusts specifying the agreement
            of the parties as to the action to be taken with respect to such
            Claim Notice ("Payment Instructions") or (2) receipt by the Escrow
            Agent of a notice from Purchaser and the Trusts stating that such
            dispute has been submitted to a court of competent jurisdiction or
            regulatory agency for final judgment, and that a final judgment with
            respect to such matters has been rendered (a "Judgment Notice")
            which is accompanied by a copy of a final, non-appealable order of
            the court or regulatory agency ("Order"), pursuant to which such
            court or regulatory agency has determined whether and to what extent
            (i) Purchaser is entitled to the amount requested in such Claim
            Notice or (ii) in the case of Taxes, the liability of Targets with
            regard to such Taxes. Upon receipt of Payment Instructions or a
            Judgment Notice and Order, as applicable, the Escrow Agent shall
            thereafter act in accordance with Section 6(a)(ii)(E) below.

                  (D) The Escrow Agent promptly shall disburse cash from the
            Escrow Account to Purchaser for any undisputed amounts (i.e., the
            amount set forth in such Claim Notice less the amount set forth in
            the Dispute Notice).

                  (E) If the Escrow Agent has received Payment Instructions or a
            Judgment Notice and Order, and if such Payment Instructions or Order
            indicate that Purchaser is entitled to payment in respect of all or
            any portion of a Claim Notice, then the Escrow Agent shall release
            from the Escrow Account and pay to Purchaser an amount of cash from
            the Escrow Account in an amount equal to the amount due Purchaser,
            as indicated in such Payment Instructions or Order. Such payment
            will be made on or before the fifth (5th) business day following the

                                       4


            date on which the Escrow Agent received such Payment Instructions or
            Order. If such Payment Instructions or Order indicate that Purchaser
            is not entitled to all or any portion of the amount claimed in
            Purchaser's notice (a "Discharge Notice"), then the Escrow Agent
            shall hold the amount which Purchaser is determined not to be
            entitled in accordance with the terms of this Agreement until such
            amounts are to be disbursed (1) pursuant to Section 7 below, (2) to
            Purchaser in respect of another Claim Notice, or (3) upon the
            receipt of joint written instructions from Purchaser and the Trusts.


            (b) Disbursements Following IRS Audit. Purchaser, the Trusts and
         Escrow Agent acknowledge that the IRS currently is conducting an audit
         of the 2003 corporate income tax return of MRG Entertainment, Inc. to
         determine whether there is any liability for any Taxes (the "IRS
         Audit"). Following notification by the IRS of any potential liability
         of the Targets for Taxes, Purchaser may submit a Claim Notice under
         Section 6(a)(ii) hereof (each a "Tax Claim Notice") setting forth the
         amount of the asserted Tax liability (the "Tax Liability Amount").

               (i) in the event Tax Claim Notice(s) are delivered to the Escrow
            Agent prior to July 2, 2007 and the amount set forth in the Tax
            Claim Notice(s) is less than $100,000 in the aggregate (or the IRS
            has acknowledged in writing that the aggregate Tax Liability Amount
            is less than $100,000), the Escrow Agent shall disburse (i) the Tax
            Liability Amount to Purchaser in accordance with the provisions set
            forth above and upon evidence that such Tax Liability Amount has
            been paid to the IRS and (ii) to the Trusts the lesser of (x) the
            remaining Escrow Funds and (y) $1,000,000, plus the Earned Interest
            on such amount.

               (ii) in the event Tax Claim Notice(s) are delivered to the Escrow
            Agent prior to July 2, 2007, and the amount set forth in the Tax
            Claim Notice(s) equals or exceeds $100,000 but is less than
            $1,000,000 (or the IRS has acknowledged in writing that the
            aggregate Tax Liability Amount equals or exceeds $100,000 but is
            less than $1,000,000), the Escrow Agent shall disburse (i) the Tax
            Liability Amount to Purchaser in accordance with the provisions set
            forth above and upon evidence that such Tax Liability Amount has
            been paid to the IRS and (ii) to the Trusts the lesser of (x) the
            remaining Escrow Funds minus the Tax Liability Amount and (y)
            $1,000,000 minus the Tax Liability Amount.

               (iii) in the event Tax Claim Notices(s) are delivered to the
            Escrow Agent on or after July 2, 2007, the Escrow Agent shall follow
            the provisions of Section 6(a)(i) hereof with regard to such Tax
            Claim Notices.

            (c) Liability for Additional Losses. Notwithstanding anything
         contained in this Section 6(b) to the contrary, Sellers shall be liable
         to Purchaser in respect of any additional Losses incurred by Purchaser
         pertaining to Taxes (and any and all other Losses incurred by
         Purchaser) to the maximum extent provided herein and under Article IX
         of the Purchase Agreement.

                                       5


            (d) Prevailing Party Fees. In the event any action is commenced by
         either Purchaser or the Trusts in connection with a dispute arising
         pursuant to this Section 6, the prevailing party in such action or
         arbitration shall be entitled to recover its reasonable attorneys' fees
         and costs incurred in connection therewith.

         7. Release of Balance of Escrow Fund Fund.

            (a) Subject to Section 7(b) below, on July 2, 2007, the Escrow Agent
         shall deliver to the Trusts the balance of the Escrow Fund (net of all
         Earned Interest, which shall be disbursed in accordance with the
         provisions of Section 4) less the amount of any claims for
         indemnification which have been set forth in a written claim of
         Purchaser and delivered to the Escrow Agent and as to which there has
         been no Disbursement Event (such amounts are hereafter referred to as
         the "Release Excluded Amounts"). The Release Excluded Amounts shall
         remain in the Escrow Fund until the occurrence of a Disbursement Event.
         Upon the occurrence of such Disbursement Event, the Escrow Agent shall
         immediately disburse the amounts remaining in the Escrow Fund, if any,
         to the Trusts based on the Applicable Percentages.

            (b) Notwithstanding anything to the contrary contained in this
         Agreement, in the event the Tax Liability Amount has not been finalized
         for any reason as of July 2, 2007 (e.g., all or a portion of the Tax
         Liability Amount is being appealed, disputed or contested, the IRS has
         not completed the IRS Audit, or the IRS has not confirmed in writing
         the amount of the Tax Liability Amount), in addition to any other
         amounts being held in accordance with the terms of this Agreement, the
         Escrow Agent shall continue to hold the lesser of (i) the amounts being
         appealed, disputed or contested or (ii) $1,000,000, until such time as
         the Tax Liability Amount has been finalized and the Escrow Fund
         disbursed in accordance with Section 4 and Section 6.

         8. Termination. This Escrow Agreement shall terminate upon disbursement
     of the entire amount of the Escrow Account (including interest thereon) in
     accordance with the terms of this Agreement.

         9. Delivery of Escrow Fund. Purchaser and the Trusts will be entitled
     to delivery of the Escrow Fund solely in accordance with the terms hereof.
     Except as may otherwise be lawfully determined, no creditor of the Trusts
     or Purchaser will have any rights in or to the Escrow Fund so long as the
     Escrow Fund remains subject to the terms of this Escrow Agreement;
     provided, that the Escrow Fund is an asset of the Trusts subject to the
     terms of this Escrow Agreement.

         10. Duties of the Escrow Agent; Fees. The Escrow Agent has agreed to
     waive any fees for performing any services rendered by it hereunder. Any
     fees incurred by the Escrow Agent in connection with a dispute between
     Purchaser and the Trusts shall be borne equally by the parties. Acceptance
     by the Escrow Agent of its duties under this Escrow Agreement is subject to
     the following terms and conditions, which the parties to this Escrow
     Agreement hereby agree will govern and control the rights, duties and
     immunities of the Escrow Agent:


                                       6


            (a) The duties and obligations of the Escrow Agent shall be
         determined solely by the provisions of this Escrow Agreement and the
         Escrow Agent shall be responsible only for the performance of such
         duties and obligations as are specifically set out in this Escrow
         Agreement;

            (b) The Escrow Agent shall not be a party to, or bound by, any
         agreement between or among the Trusts and/or Purchaser other than this
         Agreement whether or not a copy and/or original of such agreement is
         provided to the Escrow Agent; and the Escrow Agent shall have no duty
         to know or inquire as to the performance or nonperformance of any
         provision of any such agreement between or among the Trusts and/or
         Purchaser;

            (c) The Escrow Agent shall be fully protected in acting on and
         relying upon any written instruction, certificate or notice or other
         paper or document which is received by the Escrow Agent from Purchaser
         or the Trusts;

            (d) The Escrow Agent shall not and will not rely or act upon any
         communication, written or otherwise, from the Trusts, unless such
         communication (i) is that of the Trusts; and (ii) has been delivered in
         a writing signed by both the Trusts to Escrow Agent in specific accord
         with the terms and conditions of this Agreement except with regard to
         the Claim Notice as described above;

            (e) The Escrow Agent shall not be liable for any mistake in fact or
         law or otherwise, absent willful misconduct, bad faith or gross
         neglect;

            (f) The Escrow Agent may seek the advice of independent legal
         counsel in the event of any dispute or question as to the construction
         of any of the provisions of this Escrow Agreement or its duties
         hereunder, and it shall incur no liability in respect of any reasonable
         action taken, omitted or suffered by it in accordance with the opinion
         of such counsel;

            (g) If the Escrow Agent shall in any instance after seeking the
         advice of legal counsel pursuant to the immediately proceeding clause,
         in good faith be uncertain as to its duties or rights hereunder, then
         the Escrow Agent shall notify Purchaser and the Trusts thereof in
         writing. After giving such notice, Escrow Agent shall be entitled to
         refrain from taking any action hereunder with respect to the matter as
         to which there is any such uncertainty and in such event it shall keep
         safely all funds and investments held in the Escrow until it shall be
         directed otherwise in a writing signed by Purchaser and the Trusts, or
         by final nonappealable order of a court of competent jurisdiction;
         provided, however, if the Escrow Agent has not received such written
         direction or court order within one hundred eighty (180) calendar days
         after requesting the same, then it shall have the right to interplead
         the Escrow Fund in any court of competent jurisdiction and request that
         such court determine its rights and duties hereunder.

            (h) Purchaser and each of the Trusts agrees to (jointly and
         severally) indemnify and hold harmless the Escrow Agent and any of its
         directors, officers, employees or agents on demand from and against any
         and all claims, losses, liabilities, taxes, obligations, damages,
         penalties, actions, judgments, suits, costs, expenses or disbursements
         of any kind or nature whatsoever that may be imposed on, incurred by or
         asserted against it in its capacity as the Escrow Agent or in any way
         relating to or arising out of this Agreement, and absent willful
         misconduct, bad faith or gross neglect of the Escrow Agent; and


                                       7


            (i) The Escrow Agent shall not be responsible to the other parties
         hereto for the due execution, genuineness, validity, enforceability or
         effectiveness of this Agreement.

         11. Resignation of Escrow Agent. The Escrow Agent and any successor
     escrow agent, as the case may be, may resign its duties and be discharged
     from all further duties and obligations hereunder at any time upon giving
     thirty (30) days' written notice to Purchaser and the Trusts. Purchaser and
     the Trusts shall thereupon jointly designate a successor escrow agent
     hereunder within said 30-day period, to whom the Escrow Agent shall,
     deliver the Escrow Fund. In the absence of such a joint designation of a
     successor escrow agent, the Escrow Agent shall, without further liability
     or responsibility, retain the Escrow Fund as custodian thereof until
     otherwise jointly directed by Purchaser and the Trusts.

         12. Notices. All notices, communications and deliveries under this
     Agreement shall be made in writing signed by the party making the same,
     shall specify the section of this Agreement pursuant to which it is given,
     and shall be deemed received (i) on the date delivered if delivered in
     person (or by a recognized overnight courier with all costs paid), or (ii)
     three days after being mailed, if mailed certified mail, return receipt
     requested (with postage prepaid), with a copy sent by regular mail or (iii)
     if given by facsimile (with the original sent by U.S. mail), on the date
     duly transmitted during usual business hours of the recipient on a business
     day, otherwise on the next business day. Such notice shall not be effective
     unless copies are provided contemporaneously as specified below. The time
     of giving notice to those to whom copies are to be given shall not control
     the date notice is given or received but the manner of delivery shall be
     the same. The addresses and requirements for copies are as follows:

            To Purchaser:

                     New Frontier Media, Inc.
                     7007 Winchester Circle, Suite 200
                     Boulder, CO 80301
                     Attention: Michael Weiner, Karyn Miller and George Sawicki
                     Fax Number:  (303) 444-0848

            with a copy to:

                     E. Lee Reichert, Esq.
                     Kamlet Shepherd & Reichert, LLP
                     1515 Arapahoe Street Tower 1, Suite 1600
                     Denver, Colorado 80202 Fax
                     Number: (303) 825-1185


                                        8


            To the Trusts:

                     Marc Laurence Greenberg Trust dated May 11, 2001
                     c/o Marc Greenberg
                     4211 Roma Court
                     Marina del Rey, California  90292
                     Email Address:  cpv33@aol.com

                     Goldberg Family Trust dated June 15, 2001
                     c/o Richard Goldberg
                     512 11th Street
                     Santa Monica, California  90402
                     Email Address:  rich@mainlinereleasing.com

            with a copy to:

                     Michael Wolf, Esq.
                     Wolf, Rifkin, Shapiro & Schulman, LLP
                     11400 W. Olympic Boulevard, 9th Floor
                     Los Angeles, California  90064-1582
                     Fax Number:  310-479-1422

            To Escrow Agent:

                     First Community Bank, N.A.
                     220 Josephine Street
                     Ste. 100
                     Denver CO 80206
                     Attention:  ________________
                     Fax Number:  ____-____-____

     or to such representative or to such other address as the parties
     hereto may furnish to the other parties in writing. If notice is given
     pursuant to this Section of a permitted successor or assign of a party to
     this Agreement, then notice shall be given as set forth above to such
     successor or assign of such party.

         13. Entire Agreement; Assignment. This Agreement (together with the
     other agreements and documents referred to herein) constitutes the entire
     understanding of the parties relating to the subject matter hereof and
     supersedes all prior and contemporaneous agreements and understandings,
     whether oral or written, relating to the subject matter hereof. In the
     event of any inconsistency or conflict between any provision of this
     Agreement and one or more provisions of the Purchase Agreement, this
     Agreement shall prevail and control. No amendment of modification of the
     terms of this Agreement shall be binding or effective unless expressed in
     writing and signed by each party. Neither of the Trusts may assign this
     Agreement unless it obtains the prior written consent of Purchaser, which
     consent may be withheld in Purchaser's sole discretion.


                                       9


         14. Governing Law. This Agreement shall be governed by and construed in
     accordance with the laws of the State of Colorado, without regard to
     conflicts of laws principles. The parties to this Agreement agree that any
     legal suit, action or proceeding arising out of or relating in any way to
     this Agreement, including but not limited to issues of specific performance
     and indemnity, may be instituted exclusively in a court in Colorado, and
     each party waives any objection whatsoever which it may have now or
     hereafter to the laying of the venue of any such suit, action or proceeding
     exclusively in a court in Colorado, and irrevocably submits to the
     exclusive jurisdiction of a court in Colorado, in any such suit, action or
     proceeding. In the event any legal suit, action or proceeding of any kind
     is commenced in or brought in any court other than in a court in Colorado,
     both parties agree to, and shall cause their respective subsidiaries and
     affiliates to, transfer and/or remove any such legal suit, action or
     proceeding to a court in Colorado, or to dismiss such legal suit, action or
     proceeding immediately.

         15. Counterparts. This Agreement may be executed in two or more
     counterparts, each of which shall be an original, and all of which together
     shall constitute one and the same instrument. Delivery of an executed
     counterpart of this Agreement by facsimile shall be equally as effective as
     delivery of the original counterpart of this Agreement.

         16. Successors and Assigns. This Agreement shall be binding upon and
     inure to the benefit of the parties hereto and their respective successors
     and permitted assigns.

         17. Captions; Definitions. The titles or captions of sections contained
     in this Agreement are inserted only as a matter of convenience and for
     reference and in no way define, limit, extend or describe the scope of this
     Agreement or the intent of any provision hereof. The parties agree to all
     definitions in the statement of parties to this Agreement and in the other
     introductory language to this Agreement.

         18. Miscellaneous. Any provision of this Agreement that is held by any
     court of competent jurisdiction to be prohibited or unenforceable in any
     jurisdiction shall, as to such jurisdiction, be ineffective to the extent
     of such prohibition or unenforceability without invalidating the remaining
     provisions hereof, and any such prohibition or unenforceability in any
     jurisdiction shall not invalidate or render unenforceable such provision in
     any other jurisdiction.

         19. Waiver of Personal Service. EACH OF THE PARTIES HERETO WAIVES
     PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
     SERVICE OF PROCESS BE MADE BY CERTIFIED MAIL DIRECTED TO IT AT THEIR
     RESPECTIVE ADDRESSES SET FORTH IN SECTION 11 ABOVE OR AS OTHERWISE PROVIDED
     UNDER THE LAWS OF THE STATE OF COLORADO. EACH OF THE PARTIES HERETO WAIVES
     ANY OBJECTION BASED ON FORUM NONCONVENIENS, AND ANY OBJECTION TO VENUE OF
     ANY ACTION INSTITUTED HEREUNDER, AND CONSENTS TO THE GRANTING OF SUCH LEGAL
     OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

                           [Signature Page Following]



                                       10



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

                                                     PURCHASER:

                     NEW FRONTIER MEDIA, INC.

                     By:    /s/ Michael Weiner
                        ------------------------------
                     Name:  Michael Weiner
                     Title: CEO


                     SELLERS:

                     MARC LAURENCE GREENBERG TRUST DATED MAY 11, 2001


                     By: /s/ Marc Greenberg
                        ------------------------------
                             Marc Greenberg, Trustee

                     GOLDBERG FAMILY TRUST
                     DATED JUNE 15, 2001


                     By: /s/ Richard Goldberg
                        ------------------------------
                             Richard Goldberg, Trustee


                     ESCROW AGENT:

                     FIRST COMMUNITY BANK, N.A.




                     By: /s/ Gregory P. Bosshelle
                        ------------------------------
                     Name: Gregory P. Bosshelle
                        ------------------------------
                     Title: Vice-President
                        ------------------------------



ACKNOWLEDGED AND AGREED TO:

/s/ Marc Laurence Greenberg
- --------------------------------------
Marc Laurence Greenberg, individually


/s/ Richard B. Goldberg
- --------------------------------------
Richard B. Goldberg, individually





                                       11




                                    EXHIBIT A


NAME                                 TIN                                %
- ------------------------------------------------------------------------------

MARC LAURENCE GREENBERG                                                50%
TRUST DATED MAY 11, 2001


GOLDBERG FAMILY TRUST                                                  50%
DATED JUNE 15, 2001

EX-10

                                                                    Exhibit 10.5


                              EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT (the "AGREEMENT"), dated as of February 10,
2006 (the "EFFECTIVE DATE"), is entered into by and between Richard Bruce
Goldberg, an individual residing at 512 11th Street, Santa Monica, California
90402 ("EXECUTIVE"), and MRG Entertainment, Inc., a California corporation,
located at 301 Arizona Avenue, Santa Monica, California 90401 ("COMPANY").

         WHEREAS, Executive possesses valuable knowledge and skills which are
relevant to the operation of Company's business; and

         WHEREAS, Company desires to provide for the employment of Executive,
and Executive is willing to serve as an executive of Company, on the terms and
conditions herein provided; and

         WHEREAS, New Frontier Media, Inc., a Colorado corporation ("NEW
FRONTIER"), Marc Lawrence Greenberg Trust dated May 11, 2001 ("GREENBERG
TRUST"), Goldberg Family Trust dated June 15, 2001 ("GOLDBERG TRUST"), Marc
Lawrence Greenberg ("GREENBERG") and Executive are parties to that certain Stock
Purchase Agreement dated February 6, 2006 (the "PURCHASE AGREEMENT"); and

         WHEREAS, the Greenberg Trust and the Goldberg Trust collectively own
one hundred percent (100%) of the issued and outstanding common stock shares of
Company and Lifestyles Entertainment, Inc., a California corporation
(collectively, the "BUSINESSES"); and

         WHEREAS, New Frontier is acquiring all of the stock and the goodwill of
the Businesses, which will continue to be engaged in (i) the entertainment,
production, marketing and distribution businesses, and (ii) producing, licensing
and selling motion pictures and television programs; and

         WHEREAS, pursuant to the Purchase Agreement, the Businesses shall
become wholly owned subsidiaries of New Frontier; and

         WHEREAS, Executive is a beneficiary of the Goldberg Trust and the
Co-President and Secretary of each of the Businesses and is benefiting
financially from the acquisition contemplated by the Purchase Agreement; and

         WHEREAS, Executive has had and will continue to have access to and
possession of various trade secrets and other proprietary and confidential
information of the Businesses which is material to the continued value of the
Businesses; and

         WHEREAS, the entering into this Agreement by Company and Executive is a
condition to the consummation of the closing contemplated by the Purchase
Agreement and a material inducement of New Frontier to enter into the Purchase
Agreement; and

         WHEREAS, Company desires to hire Executive, and Executive wishes to
accept such employment, upon the terms and conditions set forth in this
Agreement.


                                       1



         NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, Company and Executive agree as follows:

         1. EMPLOYMENT PERIOD. Executive shall be employed by Company, in
accordance with the terms and provisions of this Agreement, commencing on the
Effective Date and ending at midnight on February 9, 2009, unless sooner
terminated in accordance with the provisions of Sections 3 or 4 herein (the
"EMPLOYMENT PERIOD").

         2. TERMS OF EMPLOYMENT.

            A. POSITION AND DUTIES. During the Employment Period, Executive
shall be employed by Company as President or a Co-President (to the extent that
Greenberg remains employed by Company as Co-President), and Executive accepts
and agrees to such employment. During the Employment Period, Executive shall
perform all services and acts necessary and advisable to fulfill the duties and
responsibilities as are commensurate and consistent with Executive's position
and shall render such services on the terms set forth herein. During the
Employment Period, Executive shall report to the Chief Executive Officer (the
"CEO") of New Frontier (or the CEO's designee, so long as such designee is of
equal or greater rank than the CEO). Executive shall have such powers and duties
with respect to his position as Co-President as may reasonably be assigned to
Executive by the CEO, to the extent consistent with Executive's position and
status. Executive agrees to devote his full-time attention to the business and
affairs of Company. During the Employment Period, it shall not be a violation of
this Agreement for Executive to: (a) serve on corporate, civic, charitable, and
professional association boards or committees; (b) deliver lectures or fulfill
speaking engagements; and (c) manage personal investments, so long as such
activities do not result in more than de minimus interference with the
performance of Executive's responsibilities as Co-President of Company in
accordance with this Agreement or do not create any perceived or actual conflict
of interest with Company or New Frontier. The CEO reserves the right for
legitimate business reasons to require Executive to end or refrain from
participating in any such activities upon reasonable prior written notice to
Executive. Executive's employment with Company under this Agreement shall be
Executive's exclusive employment during the Employment Period.

            B. COMPENSATION.

                (i) Base Salary. During the Employment Period, Executive shall
receive a base salary ("BASE SALARY"), which shall be paid in equal installments
on a bi-weekly basis, at the rate of Three Hundred Fifty Thousand Dollars
($350,000) per annum, less standard state and federal tax-related deductions and
withholdings.

                (ii) Discretionary Bonus. In addition to Executive's Base
Salary, the Compensation Committee of the Board of Directors of New Frontier
(the "NEW FRONTIER BOARD") may, in its sole discretion, award cash bonuses
annually to Executive, if at all, in an aggregate amount of up to one hundred
percent (100%) of Executive's Base Salary, less standard state and federal
tax-related deductions and withholdings. Notwithstanding the foregoing,
Executive shall have the right, to be determined in his sole discretion, to
decline and waive any discretionary bonus amount approved by the New Frontier
Board and, in such event, such approved bonus amount shall not count against the
calculation of EBITDA under the Earnout Agreement entered into as of even date
herewith by and among New Frontier, Executive, Greenberg, the Greenberg Trust
and the Goldberg Trust (the "EARNOUT AGREEMENT"), provided that Executive
notifies the CEO in writing of such waiver by the later of (i) September 30th of
the year during which such bonus is accrued, or (ii) within ten (10) business
days after Executive is advised in writing of the accrued bonus amount. For
purposes of this Agreement, the term "EBITDA" shall have the meaning ascribed to
it in the Earnout Agreement.

                                       2


                (iii) Expenses. During the Employment Period, Company shall
reimburse Executive for all reasonable employment-related expenses incurred by
Executive in accordance with the policies, practices and procedures of Company
as in effect generally from time to time after the Effective Date.

                (iv) Vacation and Sick Leave. Executive acknowledges that
Company has no policy concerning vacation time or sick leave applicable to its
executive level employees and, by executing this Agreement, Executive
acknowledges and agrees that he shall not accrue any such vacation or sick leave
benefits during the Employment Period. Executive is authorized to take paid time
off provided he meets his professional and productivity obligations to Company
as determined by the CEO. Executive is to coordinate time off with the CEO.

                (v) Car Allowance. During the Employment Period, Executive shall
be entitled to a car allowance equal to Eight Hundred Fifty Dollars ($850) per
month (the "CAR ALLOWANCE"), to be paid in accordance with and subject to
Company's car allowance policy. The Car Allowance shall be paid bi-weekly, and
shall be taxable to Executive whether or not Executive has an actual car payment
(including any car lease payment).

                (vi) Savings and Retirement Plans. During the Employment Period,
Executive shall be entitled to participate in all savings and retirement plans
maintained by New Frontier, including any 401(k) plan, on the same terms as
executives of New Frontier or other subsidiaries of New Frontier of similar rank
to Executive are entitled to participate.

                (vii) Key Man Insurance. During the Employment Period, Company
may at its election obtain and maintain in full force and effect term life
insurance in such amounts as Company may elect in its sole discretion on the
life of Executive naming Company or New Frontier as beneficiary (the "KEY MAN
INSURANCE"). Executive shall cooperate with Company and New Frontier with
respect to any reasonable underwriting activities as may be required by New
Frontier's insurer(s) in connection with obtaining the Key Man Insurance,
including, without limitation, undertaking such medical examinations and
providing such documents and information as New Frontier or its insurer(s) may
reasonably request.

                (viii) Welfare Benefit Plans. During the Employment Period,
Executive shall be eligible to participate in all welfare benefit plans made
available by New Frontier to other executives of similar rank to Executive;
provided, however, nothing in this Section 2(B)(viii) shall operate to reduce or
impair New Frontier's right to alter, amend, or cancel any such plans, programs
or benefits at any time, upon reasonable advance notice to Executive.


                (ix) Stock Options. Executive shall be eligible to participate
in such Stock Option Plans of New Frontier that may be made available from time
to time to New Frontier executives of similar rank to Executive; provided,
however, the level, terms and conditions of such participation shall be
determined by and within the sole discretion of the New Frontier Board.

                                       3


                (x) Withholdings. All payments made to Executive hereunder shall
be subject to all applicable state and federal tax-related withholding
obligations, as required by applicable law.


         3. EARLY TERMINATION OF EMPLOYMENT.

            Executive and Company each acknowledge that either party has the
right to terminate Executive's employment with Company at any time for any
lawful reason whatsoever, with or without Cause (as defined herein) or advance
notice, pursuant to the following:

            A. FOR CAUSE. Company may terminate Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "CAUSE" shall
mean (i) the conviction of Executive for committing an act of fraud,
embezzlement, theft or other act constituting a crime or the guilty or nolo
contendere plea of Executive to any such crime; (ii) fraudulent conduct or an
act of dishonesty or breach of trust on the part of Executive in connection with
the business of Company or any of its affiliates or subsidiaries; (iii)
violation of any Company policy of which Executive is aware and is given a
period of ten (10) days' prior written notice and opportunity to cure during
such period; (iv) failure, neglect, or refusal by Executive to engage in
diligent efforts to properly discharge, perform or observe any or all of
Executive's job duties for any reason other than Company's material breach of
this Agreement or Executive's Permanent Disability (as defined herein), which
failure, neglect, or refusal continues after Company provides ten (10) days'
prior written notice to Executive; provided, however, Company shall not be
required to deliver any such notice under this subpart (iv) on more than one (1)
occasion for each year of the Employment Period; (v) breach of the
Non-Competition, Non-Solicitation and Trade Secret Agreement attached as Exhibit
J to the Purchase Agreement (the "NON-COMPETITION AGREEMENT"); (vi) any uncured
breach of the Employee Proprietary Information and Inventions Agreement which
results in damage to the Company, attached as Exhibit A to this Agreement (the
"PROPRIETARY INFORMATION AGREEMENT"); and (vii) any other breach or failure by
Executive to comply with any of the provisions of this Agreement applicable to
him and which is not remedied within ten (10) days after written notice thereof
from Company. The parties acknowledge that this definition of "CAUSE" is not
intended and does not apply to any aspect of the relationship between Company
and any of its employees, including Executive, beyond determining Executive's
eligibility for the Without Cause Severance Payments (as defined herein).

            B. WITHOUT CAUSE. Company may terminate Executive's employment
without Cause by providing Executive ten (10) business days advance notice of
such termination.

            C. UPON EXECUTIVE'S DEATH OR PERMANENT DISABILITY. Subject to
applicable state or federal law, Executive's employment shall terminate
automatically upon Executive's death or upon Executive's permanent disability
("PERMANENTLY DISABLED" or "PERMANENT DISABILITY"), meaning that Executive is
unable to perform the essential functions of his job, with or without reasonable
accommodation, for a total of ninety (90) days out of any six (6) month period.

         4. TERMINATION BY EXECUTIVE FOR GOOD REASON. Executive may terminate
his employment with Company for Good Reason. For purposes of this Agreement,
"GOOD REASON" shall mean, in the absence of the advance written consent of
Executive, a reasonable determination by Executive that any of the following has
occurred:


                                       4


            A. The assignment to Executive of any duties inconsistent in any
material respect with Executive's position (including titles and reporting
requirements, authority, duties or responsibilities as contemplated by Section
2(A) of this Agreement), or any other action by Company which results in a
material diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated and insubstantial action not taken in bad
faith and which is remedied by Company within ten (10) days after receipt of
written notice thereof given by Executive; or

            B. Any failure by Company to comply with any of the provisions of
this Agreement applicable to it, other than any isolated and insubstantial
failure not occurring in bad faith and which is remedied within ten (10) days
after receipt of written notice thereof given by Executive.

            C. Company's failure to obtain a written agreement from any
successor of Company to assume and perform Company's obligations under this
Agreement.

         Upon the occurrence of any of the events described in Sections 4(A),
4(B), or 4(C) above, Executive shall be deemed to have waived any right to
receive post termination benefits if he does not notify Company of his intention
to resign within ninety (90) days after the occurrence of such event.

         5. OBLIGATIONS OF COMPANY UPON EARLY TERMINATION.

            A. TERMINATION FOR CAUSE. In the event Executive is terminated by
Company for Cause, Company's obligation to make payments hereunder shall cease
as of the Date of Termination, as defined in Section 6, except Company shall pay
to Executive, on the Date of Termination, any accrued Base Salary and bonuses
that have been earned through the Date of Termination (the sum of these amounts
shall hereinafter be referred to as the "ACCRUED OBLIGATIONS"). Business
expenses reimbursable under Company policy will be paid within thirty (30) days
after the final submittal of outstanding business expenses, provided that
Executive submit any outstanding business expenses within thirty (30) days after
the Date of Termination. Vesting of any stock option under any applicable Stock
Option Plan shall cease vesting as of the Date of Termination.

            B. TERMINATION BY COMPANY WITHOUT CAUSE. In the event Executive is
terminated without Cause and upon the execution of a full general release by
Executive ("RELEASE"), releasing all claims known or unknown that Executive may
have under this Agreement against Company or New Frontier as of the date
Executive signs such Release, and upon the written acknowledgement of his
continuing obligations under the Proprietary Information Agreement and the
Non-competition Agreement, Company shall pay Executive associated termination
payments equal to Base Salary continuation through February 9, 2009, or six
(6) months of Base Salary, whichever is greater (the "WITHOUT CAUSE SEVERANCE
PAYMENTS"), plus the Accrued Obligations; provided, however, the Without Cause
Severance Payments shall be reduced in accordance with Section 5(G) (Mitigation
of Damages). The Without Cause Severance Payments will be paid in Company's
regular payroll cycle; provided, the Accrued Obligations shall be paid to
Executive on the Date of Termination. Business expenses reimbursable under
Company policy will be paid within ten (10) days after the final submittal of
outstanding business expenses, provided that Executive submits any outstanding
business expenses within ten (10) days after the Date of Termination. Vesting of
any stock options under any applicable Stock Option Plan shall cease vesting as
of the Date of Termination without Cause.

                                       5


            C. TERMINATION BY EXECUTIVE FOR GOOD REASON. In the event Executive
resigns his employment with Company for Good Reason and upon the execution of a
Release against Company and New Frontier, releasing all claims known or unknown
that Executive may have under this Agreement against Company or New Frontier as
of the date Executive signs such Release, and upon the written acknowledgement
of his continuing obligations under the Proprietary Information Agreement and
the Non-competition Agreement, Company shall pay Executive associated
termination payments equal to Base Salary continuation through February 9,
2009, or six (6) months of Base Salary, whichever is greater ("GOOD REASON
SEVERANCE PAYMENTS"), plus the Accrued Obligations; provided, however, the Good
Reason Severance Payments shall be reduced in accordance with Section 5(G)
(Mitigation of Damages). The Good Reason Severance Payments will be paid in
Company's regular payroll cycle; provided, the Accrued Obligations shall be paid
to Executive on the Date of Termination. Business expenses reimbursable under
Company policy will be paid within ten (10) days after the final submittal of
outstanding business expenses, provided that Executive submits any outstanding
business expenses within ten (10) days after the Date of Termination. Vesting of
any stock options under any applicable Stock Option Plan shall cease vesting as
of the Date of Termination for Good Reason.

            D. UPON DEATH. If Executive's employment is terminated by reason of
Executive's death during the Employment Period, this Agreement shall terminate
without further obligation to Executive's legal representatives under this
Agreement. Upon notice of Executive's death, Company shall pay to Executive's
estate all Accrued Obligations. Business expenses reimbursable under Company
policy will be paid with thirty (30) days after the final submittal of
outstanding business expenses, provided that Executive's estate submit any
outstanding business expenses within thirty (30) days after Executive's death.
Vesting of any stock options under any applicable Stock Option Plan shall be
governed by the terms of the Stock Option Plan and applicable Stock Option
grant.

            E. UPON PERMANENT DISABILITY. If Executive's employment is
terminated by reason of Executive's Permanent Disability (as determined pursuant
to Section 3(C) of this Agreement) during the Employment Period, this Agreement
shall terminate without further obligation to Company. Company shall pay to
Executive, on the Date of Termination, all Accrued Obligations. Business
expenses reimbursable under Company policy will be paid within thirty (30) days
after the final submittal of outstanding business expenses, provided Executive
submit any outstanding business expenses within thirty (30) days after the Date
of Termination. Vesting of any stock options under any applicable Stock Option
Plan shall be governed by the terms of the Stock Option Plan and applicable
Stock Option grant.

            F. APPLICATION OF SECTION 409A OF INTERNAL REVENUE CODE.
Notwithstanding anything contained in Section 5(B) or 5(C) to the contrary, to
the extent that (i) the parties' agreement regarding the Cause Severance
Payments or Good Reason Severance Payments, as applicable, to be made by Company
in accordance with this Agreement is treated as a "nonqualified deferred
compensation plan" within the meaning of Section 409A(d)(1) of the Internal
Revenue Code of 1986 (the "CODE"), (ii) the Executive is a "specified employee"
within the meaning of Section 409A(a)(2)(B)(i) of the Code, and (iii) Section
409A(a)(1)(A) of the Code would apply to any Cause Severance Payments or Good
Reason Severance Payments, as applicable, but for the application of Section
409A(a)(2)(A)(i) of the Code required to avoid the tax consequences of Section
409A of the Code, the first such severance payment under either scenario shall
cover all payments scheduled to be made to Executive during the first six (6)
months after the Date of Termination and such first payment shall be delayed
until the day after the six (6) month anniversary of the Date of Termination.

                                       6


            G. PARACHUTE TAX GROSS UP. Executive acknowledges that neither the
Company nor New Frontier presently has, nor shall it have any obligation to
consider or institute, a policy or procedure (a "GROSS UP POLICY") that requires
the Company/New Frontier to pay any of its employees (including senior officers)
a "gross-up amount" providing employees entitled to any acceleration payments
with a "net" (or increased) payment amount that takes into account any
associated golden parachute excise tax ("PARACHUTE TAX") under Section 4999(a)
of the Code. Notwithstanding the foregoing, in the event New Frontier or the
Company during the Employment Period institutes a Gross Up Policy applicable to
one or more executives similarly situated to Executive in connection with any
acceleration payments owing or which could be owing to such executive(s),
Executive shall thereafter be entitled to participate in such Gross Up Policy.

            H. MITIGATION OF DAMAGES. Executive shall not be obligated to seek
other employment to mitigate the amount of Without Cause Severance Payments or
the Good Reason Severance Payments payable to Executive hereunder; provided,
however, the amount of any Without Cause Severance Payments or Good Reason
Severance Payments shall be reduced, dollar for dollar, by an amount equal to
the gross amount that Executive earns (whether as an employee, contractor, or
director of any other business, trade, profession or occupation, and
irrespective of whether such form of compensation constitutes salary, bonus or
compensation) following (i) the termination of Executive without Cause, or (ii)
Executive's resignation for Good Reason, as applicable. Executive shall for so
long as any severance payments are due and owing to Executive, provide the
Company with contact information of any new employer of Executive (or such other
person or entity to whom Executive acts as a consultant or contractor) (each
referred to as a "THIRD PARTY EMPLOYER") following termination; Executive hereby
further authorizes Company to provide a copy of this Agreement to such Third
Party Employer and to obtain from such Third Party Employer, without Executive's
consent, all such information as may be reasonably requested by the Company to
ascertain the amount of compensation received by Executive from such Third Party
Employer, including without limitation, pay stubs, W-2's and/or Form 1099's
issued to Executive but only to the extent Executive does not first provide such
information to the Company within ten (10) days of written request.

         6. NOTICE AND DATE OF TERMINATION. Any termination (whether based on
Permanent Disability, Good Reason, with Cause or without Cause) shall be
communicated by a written "NOTICE OF TERMINATION" to the other party, and may be
sent via registered or certified mail, return receipt requested, postage prepaid
or by facsimile transmission, or by electronic mail or by hand delivery. "DATE
OF TERMINATION" shall mean: (i) the date of transmission of the Notice of
Termination by facsimile, e-mail or personal delivery; (ii) three (3) calendar
days after the date of mailing by first class mail; or (iii) if Executive's
employment is terminated by reason of Executive's death, the Date of Termination
shall be the date of Executive's death.

         7. PROPRIETARY AND OTHER OBLIGATIONS.


                                       7


            A. PROPRIETARY INFORMATION AGREEMENT. Executive acknowledges that
signing and complying with the Proprietary Information Agreement is a condition
of his employment by Company. Executive therefore agrees to sign and comply with
the Proprietary Information Agreement and acknowledges that by beginning
employment with Company, he will be deemed to have signed and agreed to the
provision of the Proprietary Information Agreement.

            B. EXCEPTIONS. Notwithstanding any contrary provisions in the
Proprietary Information Agreement to the contrary the parties agree as follows:
(i) the term "Proprietary Information", as defined in Section 1.2 of the
Proprietary Information Agreement, shall not include Executive's personal
address book; (ii) to the extent of any conflict between Section 2(A) of this
Agreement and the first sentence of paragraph 4 of the Proprietary Information
Agreement, Section 2(A) of this Agreement shall govern and control; (iii) the
last sentence of paragraph 7 of the Proprietary Information Agreement shall not
apply to Executive; (iv) a copy of all notices to be provided to Executive under
paragraph 9 of the Proprietary Information Agreement shall be delivered to
Michael Wolf, Esq., Wolf, Rifkin, Shapiro & Schulman, LLP, 11400 W. Olympic
Blvd., Ninth Floor, Los Angeles, California 90064; (v) promptly after providing
a notification described in paragraph 10 of the Proprietary Information
Agreement to any new employer of Executive, the Company will provide Executive
with a copy of the notice given to such new employer; and (vi) to the extent of
any conflict between any Section(s) of this Agreement and paragraph 11.5 of the
Proprietary Information Agreement, the Section(s) of this Agreement shall govern
and control.

         8. NON-COMPETITION; NON-SOLICITATION. This Agreement shall not alter or
amend any of the non-competition or non-solicitation terms (nor any other terms)
set forth in the Non-competition Agreement or the Proprietary Information
Agreement.

         9. ARBITRATION. To the fullest extent permitted by law, any controversy
or claim past, present, or future, arising out of or relating to the hiring of
Executive, Executive's employment, the termination of Executive's employment,
this Agreement and/or the breach or termination of this Agreement that Company
may have against Executive or that Executive may have against Company or against
its officers, directors, employees or agents in their capacity as such or the
breach hereof, shall be settled by a single arbitrator in arbitration conducted
in Los Angeles County, California, in accordance with the National Employment
Arbitration Rules of the American Arbitration Association ("AAA"). These rules
are posted on the AAA's website, . The arbitrators shall prepare a written award
and judgment upon the award may be entered in any court having jurisdiction
thereof. The arbitrator's decision shall be final and binding. The arbitrator
shall have the authority to settle such controversy or claim by finding that a
party should be enjoined from certain actions or be compelled to undertake
certain actions, and in such event such court may enter an order enjoining
and/or compelling such actions as found by that arbitrator. Each party shall pay
its own legal and other professional fees and costs in connection with the
arbitration and Company shall pay the arbitrator's fees; however, to the extent
permitted by law, the arbitrator may require the other party to pay the costs of
the arbitration and/or the legal and other professional fees and costs incurred
by the prevailing party in connection with such arbitration proceeding and any
necessary court action.

         The claims covered by this arbitration provision include, but are not
limited to, claims arising out of contract law, tort law, common law, defamation
law, fraud law (including, without limitation, fraud in the inducement of
contract), wrongful discharge law, privacy rights, statutory protections,
constitutional protections, wage and hour law, California Labor Code

                                       8


protections, the California Fair Employment and Housing Act (which includes
claims for discrimination or harassment on the basis of age, race, color,
ancestry, national origin, disability, medical condition, marital status,
religious creed, sexual orientation, pregnancy, and sex), any similar state
discrimination law, the Federal Civil Rights Act of 1964 and 1991, as amended,
the Age Discrimination in Employment Act, the Older Workers' Benefit Protection
Act, the Americans With Disabilities Act; claims for benefits (except claims
under an employee benefit plan that either (1) specifies that its claims
procedure shall culminate in an arbitration procedure different from this one,
or (2) is underwritten by a commercial insurer which decides claims); and claims
for violation of any federal, state, or other governmental law, statute,
regulation, or ordinance, except claims excluded in the following section.

         Notwithstanding the foregoing, the parties expressly agree that claims
Executive may have for workers' compensation, state unemployment compensation
benefits, and state disability insurance are not covered by this Agreement. The
parties also agree that a court of competent jurisdiction may enter a temporary
restraining order or an order enjoining a breach of this Agreement, including
Exhibit A (Confidentiality Agreement) hereto, pending a final award or further
order by the arbitrator. Such remedy, however, shall be cumulative and
nonexclusive, and shall be in addition to any other remedy to which the parties
may be entitled. The parties further expressly agree that this provision does
not apply to any matter in which the amount in controversy falls within the
jurisdiction of the Small Claims Division of the Municipal Courts of the State
of California. Should such matter fall within the jurisdiction of the Small
Claims Division of the Municipal Court of the State of California, then such
matter shall be, and may only be, submitted to a Small Claims Division of the
Courts of the State of California for Los Angeles County for determination.

         This Section 9 shall apply notwithstanding any provision to the
contrary which is set forth in the Purchase Agreement; provided however, Company
shall, in the event of any arbitration under this Section 9, continue to have
(and the arbitrator shall take into account in rendering any award hereunder)
all of its offset rights contained in applicable provisions of the Purchase
Agreement.

         10. NO CONFLICTING OBLIGATIONS OF EXECUTIVE. Executive represents and
warrants that he is not subject to any duties or restrictions under any prior
agreement with any previous employer or other person or entity other than
Company, and that he has no rights or obligations which may conflict with the
interests of Company or with the performance of Executive's duties and
obligations under this Agreement. Executive agrees to notify Company immediately
if any such conflicts occur in the future.

         11. DIRECTOR AND OFFICER INSURANCE AND INDEMNITY. To the extent that
New Frontier maintains Director and Office Insurance on similarly situated
executives of other subsidiaries, New Frontier shall obtain and pay the premiums
upon director and officer insurance and shall name Executive as an insured under
such policies. Company shall further indemnify and hold harmless Executive as
required under Company's articles of incorporation or bylaws and, without
limiting the generality of the foregoing, Company shall indemnify and hold
harmless Executive to the maximum extent required by California law.


         12. SUCCESSORS. This Agreement is personal to Executive and shall not
be assignable by Executive. This Agreement shall inure to the benefit of Company
and its successors and assigns. Upon written approval by Executive, Company may
assign this Agreement to any successor or affiliated entity, subsidiary or
parent company, but no such assignment shall relieve Company of its obligations
under this Agreement.


                                       9


         13. MISCELLANEOUS.

                  A. MODIFICATION/WAIVER. This Agreement may not be amended,
modified, superseded, canceled, renewed or expanded, or any terms or covenants
hereof waived, except by a writing executed by each of the parties hereto or, in
the case of a waiver, by the party waiving compliance. Failure of any party at
any time or times to require performance of any provision hereof shall in no
manner affect his or its right at a later time to enforce the same. No waiver by
a party of a breach of any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of agreement contained in the
Agreement.

                  B. TAXES. Executive agrees to be responsible for the payment
of any taxes due on any and all compensation, stock option, or benefit provided
by Company pursuant to this Agreement. Executive agrees to indemnify Company and
hold Company harmless from any and all claims or penalties asserted against
Company for any failure by Executive to pay taxes due on any compensation, stock
option, or benefit provided by Company pursuant to this Agreement. Executive
expressly acknowledges that Company has not made, nor herein makes, any
representation about the tax consequences of any consideration provided by
Company to Executive pursuant to this Agreement.

                  C. GOVERNING LAW; PERSONAL JURISDICTION. This Agreement and
all disputes relating to this Agreement shall be governed in all respects by the
laws of the State of California as such laws are applied to agreements between
California residents entered into and performed entirely in California. The
parties acknowledge that this Agreement constitutes the minimum contacts to
establish personal jurisdiction in California. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect.

                  D. NOTICES. All notices and other communications hereunder
(including any notices pursuant to Section 6) shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, or by facsimile, or by email, or by
hand delivery to such address as either party shall have furnished to the other
in writing in accordance herewith. Copies of all notices sent hereunder shall be
forwarded to Michael Wolf, Esq., Wolf, Rifkin, Shapiro & Schulman, LLP, 11400
West Olympic Boulevard, Ninth Floor, Los Angeles, California 90064 and to E. Lee
Reichert, Esq., Kamlet Shepherd & Reichert, LLP, 1515 Arapahoe Street, Ste.
1600, Denver, Colorado 80202.

                  E. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.

                  F. WITHHOLDINGS. Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.


                                       10


                  G. ENTIRE AGREEMENT. This Agreement, together with Exhibit A
attached hereto, set forth the entire agreement and understanding of the parties
hereto with regard to the employment of the Executive by Company and supersede
any and all prior agreements, arrangements and understandings, written or oral,
pertaining to the subject matter hereof. No representation, promise or
inducement relating to the subject matter hereof has been made to a party that
is not embodied in these Agreements, and no party shall be bound by or liable
for any alleged representation, promise or inducement not so set forth.
Notwithstanding this Section 13(G), nothing contained in this Agreement shall
alter, amend or effect in any way the terms and conditions of the Purchase
Agreement or the Non-competition Agreement.

                  H. WAIVER. The failure of either party to insist upon strict
compliance with any provision of this Agreement, or the failure to assert any
right either party may have hereunder, shall not be deemed to be a waiver of
such provision or right or any other provision or right of this Agreement.

         IN WITNESS WHEREOF, Executive has hereunto set Executive's hand, and
Company has caused these presents to be executed in its name on its behalf, all
as of the day and year first above written.


COMPANY:                                         EXECUTIVE:

MRG Entertainment, Inc.,
a California corporation

By:   /s/ Marc Laurence Greenberg           /s/ Richard Bruce Goldberg
- ---------------------------------           ---------------------------
Name: Marc Laurence Greenberg               Richard Bruce Goldberg
- ---------------------------------
Its:  Co-President
- ---------------------------------

                                       11

EX-10

                                                                    Exhibit 10.6


                              EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT (the "AGREEMENT"), dated as of February 10,
2006 (the "EFFECTIVE DATE"), is entered into by and between Marc Laurence
Greenberg, an individual residing at 4211 Roma Court, Marina del Rey, California
90292 ("EXECUTIVE"), and MRG Entertainment, Inc., a California corporation,
located at 301 Arizona Avenue, Santa Monica, California 90401 ("COMPANY").

         WHEREAS, Executive possesses valuable knowledge and skills which are
relevant to the operation of Company's business; and

         WHEREAS, Company desires to provide for the employment of Executive,
and Executive is willing to serve as an executive of Company, on the terms and
conditions herein provided; and

         WHEREAS, New Frontier Media, Inc., a Colorado corporation ("NEW
FRONTIER"), Marc Lawrence Greenberg Trust dated May 11, 2001 ("GREENBERG
TRUST"), Goldberg Family Trust dated June 15, 2001 ("GOLDBERG TRUST"), Richard
Bruce Goldberg ("GOLDBERG") and Executive are parties to that certain Stock
Purchase Agreement dated February 6, 2006 (the "PURCHASE AGREEMENT"); and

         WHEREAS, the Greenberg Trust and the Goldberg Trust collectively own
one hundred percent (100%) of the issued and outstanding common stock shares of
Company and Lifestyles Entertainment, Inc., a California corporation
(collectively, the "BUSINESSES"); and

         WHEREAS, New Frontier is acquiring all of the stock and the goodwill of
the Businesses, which will continue to be engaged in (i) the entertainment,
production, marketing and distribution businesses, and (ii) producing, licensing
and selling motion pictures and television programs; and

         WHEREAS, pursuant to the Purchase Agreement, the Businesses shall
become wholly owned subsidiaries of New Frontier; and

         WHEREAS, Executive is a beneficiary of the Greenberg Trust and the
Co-President and Secretary of each of the Businesses and is benefiting
financially from the acquisition contemplated by the Purchase Agreement; and

         WHEREAS, Executive has had and will continue to have access to and
possession of various trade secrets and other proprietary and confidential
information of the Businesses which is material to the continued value of the
Businesses; and

         WHEREAS, the entering into this Agreement by Company and Executive is a
condition to the consummation of the closing contemplated by the Purchase
Agreement and a material inducement of New Frontier to enter into the Purchase
Agreement; and

         WHEREAS, Company desires to hire Executive, and Executive wishes to
accept such employment, upon the terms and conditions set forth in this
Agreement.


                                       1


         NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, Company and Executive agree as follows:

         1. EMPLOYMENT PERIOD. Executive shall be employed by Company, in
accordance with the terms and provisions of this Agreement, commencing on the
Effective Date and ending at midnight on February 9, 2009, unless sooner
terminated in accordance with the provisions of Sections 3 or 4 herein (the
"EMPLOYMENT PERIOD").

         2. TERMS OF EMPLOYMENT.

            A. POSITION AND DUTIES. During the Employment Period, Executive
shall be employed by Company as President or a Co-President (to the extent that
Goldberg remains employed by Company as Co-President), and Executive accepts and
agrees to such employment. During the Employment Period, Executive shall perform
all services and acts necessary and advisable to fulfill the duties and
responsibilities as are commensurate and consistent with Executive's position
and shall render such services on the terms set forth herein. During the
Employment Period, Executive shall report to the Chief Executive Officer (the
"CEO") of New Frontier (or the CEO's designee, so long as such designee is of
equal or greater rank than the CEO). Executive shall have such powers and duties
with respect to his position as Co-President as may reasonably be assigned to
Executive by the CEO, to the extent consistent with Executive's position and
status. Executive agrees to devote his full-time attention to the business and
affairs of Company. During the Employment Period, it shall not be a violation of
this Agreement for Executive to: (a) serve on corporate, civic, charitable, and
professional association boards or committees; (b) deliver lectures or fulfill
speaking engagements; and (c) manage personal investments, so long as such
activities do not result in more than de minimus interference with the
performance of Executive's responsibilities as Co-President of Company in
accordance with this Agreement or do not create any perceived or actual conflict
of interest with Company or New Frontier. The CEO reserves the right for
legitimate business reasons to require Executive to end or refrain from
participating in any such activities upon reasonable prior written notice to
Executive. Executive's employment with Company under this Agreement shall be
Executive's exclusive employment during the Employment Period.

            B. COMPENSATION.

                (i) Base Salary. During the Employment Period, Executive shall
receive a base salary ("BASE SALARY"), which shall be paid in equal installments
on a bi-weekly basis, at the rate of Three Hundred Fifty Thousand Dollars
($350,000) per annum, less standard state and federal tax-related deductions and
withholdings.

                (ii) Discretionary Bonus. In addition to Executive's Base
Salary, the Compensation Committee of the Board of Directors of New Frontier
(the "NEW FRONTIER BOARD") may, in its sole discretion, award cash bonuses
annually to Executive, if at all, in an aggregate amount of up to one hundred
percent (100%) of Executive's Base Salary, less standard state and federal
tax-related deductions and withholdings. Notwithstanding the foregoing,
Executive shall have the right, to be determined in his sole discretion, to
decline and waive any discretionary bonus amount approved by the New Frontier
Board and, in such event, such approved bonus amount shall not count against the
calculation of EBITDA under the Earnout Agreement entered into as of even date
herewith by and among New Frontier, Executive, Goldberg, the Greenberg Trust and
the Goldberg Trust (the "EARNOUT AGREEMENT"), provided that Executive notifies
the CEO in writing of such waiver by the later of (i) September 30th of the year
during which such bonus is accrued, or (ii) within ten (10) business days after
Executive is advised in writing of the accrued bonus amount. For purposes of
this Agreement, the term "EBITDA" shall have the meaning ascribed to it in the
Earnout Agreement.


                                       2


                (iii) Expenses. During the Employment Period, Company shall
reimburse Executive for all reasonable employment-related expenses incurred by
Executive in accordance with the policies, practices and procedures of Company
as in effect generally from time to time after the Effective Date.

                (iv) Vacation and Sick Leave. Executive acknowledges that
Company has no policy concerning vacation time or sick leave applicable to its
executive level employees and, by executing this Agreement, Executive
acknowledges and agrees that he shall not accrue any such vacation or sick leave
benefits during the Employment Period. Executive is authorized to take paid time
off provided he meets his professional and productivity obligations to Company
as determined by the CEO. Executive is to coordinate time off with the CEO.

                (v) Car Allowance. During the Employment Period, Executive shall
be entitled to a car allowance equal to Eight Hundred Fifty Dollars ($850) per
month (the "CAR ALLOWANCE"), to be paid in accordance with and subject to
Company's car allowance policy. The Car Allowance shall be paid bi-weekly, and
shall be taxable to Executive whether or not Executive has an actual car payment
(including any car lease payment).

                (vi) Savings and Retirement Plans. During the Employment Period,
Executive shall be entitled to participate in all savings and retirement plans
maintained by New Frontier, including any 401(k) plan, on the same terms as
executives of New Frontier or other subsidiaries of New Frontier of similar rank
to Executive are entitled to participate.

                (vii) Key Man Insurance. During the Employment Period, Company
may at its election obtain and maintain in full force and effect term life
insurance in such amounts as Company may elect in its sole discretion on the
life of Executive naming Company or New Frontier as beneficiary (the "KEY MAN
INSURANCE"). Executive shall cooperate with Company and New Frontier with
respect to any reasonable underwriting activities as may be required by New
Frontier's insurer(s) in connection with obtaining the Key Man Insurance,
including, without limitation, undertaking such medical examinations and
providing such documents and information as New Frontier or its insurer(s) may
reasonably request.

                (viii) Welfare Benefit Plans. During the Employment Period,
Executive shall be eligible to participate in all welfare benefit plans made
available by New Frontier to other executives of similar rank to Executive;
provided, however, nothing in this Section 2(B)(viii) shall operate to reduce or
impair New Frontier's right to alter, amend, or cancel any such plans, programs
or benefits at any time, upon reasonable advance notice to Executive.

                (ix) Stock Options. Executive shall be eligible to participate
in such Stock Option Plans of New Frontier that may be made available from time
to time to New Frontier executives of similar rank to Executive; provided,
however, the level, terms and conditions of such participation shall be
determined by and within the sole discretion of the New Frontier Board.


                                       3


                (x) Withholdings. All payments made to Executive hereunder shall
be subject to all applicable state and federal tax-related withholding
obligations, as required by applicable law.


         3. EARLY TERMINATION OF EMPLOYMENT.

            Executive and Company each acknowledge that either party has the
right to terminate Executive's employment with Company at any time for any
lawful reason whatsoever, with or without Cause (as defined herein) or advance
notice, pursuant to the following:

            A. FOR CAUSE. Company may terminate Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "CAUSE" shall
mean (i) the conviction of Executive for committing an act of fraud,
embezzlement, theft or other act constituting a crime or the guilty or nolo
contendere plea of Executive to any such crime; (ii) fraudulent conduct or an
act of dishonesty or breach of trust on the part of Executive in connection with
the business of Company or any of its affiliates or subsidiaries; (iii)
violation of any Company policy of which Executive is aware and is given a
period of ten (10) days' prior written notice and opportunity to cure during
such period; (iv) failure, neglect, or refusal by Executive to engage in
diligent efforts to properly discharge, perform or observe any or all of
Executive's job duties for any reason other than Company's material breach of
this Agreement or Executive's Permanent Disability (as defined herein), which
failure, neglect, or refusal continues after Company provides ten (10) days'
prior written notice to Executive; provided, however, Company shall not be
required to deliver any such notice under this subpart (iv) on more than one (1)
occasion for each year of the Employment Period; (v) breach of the
Non-Competition, Non-Solicitation and Trade Secret Agreement attached as Exhibit
J to the Purchase Agreement (the "NON-COMPETITION AGREEMENT"); (vi) any uncured
breach of the Employee Proprietary Information and Inventions Agreement which
results in damage to the Company, attached as Exhibit A to this Agreement (the
"PROPRIETARY INFORMATION AGREEMENT"); and (vii) any other breach or failure by
Executive to comply with any of the provisions of this Agreement applicable to
him and which is not remedied within ten (10) days after written notice thereof
from Company. The parties acknowledge that this definition of "CAUSE" is not
intended and does not apply to any aspect of the relationship between Company
and any of its employees, including Executive, beyond determining Executive's
eligibility for the Without Cause Severance Payments (as defined herein).

            B. WITHOUT CAUSE. Company may terminate Executive's employment
without Cause by providing Executive ten (10) business days advance notice of
such termination.

            C. UPON EXECUTIVE'S DEATH OR PERMANENT DISABILITY. Subject to
applicable state or federal law, Executive's employment shall terminate
automatically upon Executive's death or upon Executive's permanent disability
("PERMANENTLY DISABLED" or "PERMANENT DISABILITY"), meaning that Executive is
unable to perform the essential functions of his job, with or without reasonable
accommodation, for a total of ninety (90) days out of any six (6) month period.

         4. TERMINATION BY EXECUTIVE FOR GOOD REASON. Executive may terminate
his employment with Company for Good Reason. For purposes of this Agreement,
"GOOD REASON" shall mean, in the absence of the advance written consent of
Executive, a reasonable determination by Executive that any of the following has
occurred:


                                       4


            A. The assignment to Executive of any duties inconsistent in any
material respect with Executive's position (including titles and reporting
requirements, authority, duties or responsibilities as contemplated by Section
2(A) of this Agreement), or any other action by Company which results in a
material diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated and insubstantial action not taken in bad
faith and which is remedied by Company within ten (10) days after receipt of
written notice thereof given by Executive; or

            B. Any failure by Company to comply with any of the provisions of
this Agreement applicable to it, other than any isolated and insubstantial
failure not occurring in bad faith and which is remedied within ten (10) days
after receipt of written notice thereof given by Executive.

            C. Company's failure to obtain a written agreement from any
successor of Company to assume and perform Company's obligations under this
Agreement.

            Upon the occurrence of any of the events described in Sections 4(A),
4(B), or 4(C) above, Executive shall be deemed to have waived any right to
receive post termination benefits if he does not notify Company of his intention
to resign within ninety (90) days after the occurrence of such event.

         5. OBLIGATIONS OF COMPANY UPON EARLY TERMINATION.

            A. TERMINATION FOR CAUSE. In the event Executive is terminated by
Company for Cause, Company's obligation to make payments hereunder shall cease
as of the Date of Termination, as defined in Section 6, except Company shall pay
to Executive, on the Date of Termination, any accrued Base Salary and bonuses
that have been earned through the Date of Termination (the sum of these amounts
shall hereinafter be referred to as the "ACCRUED OBLIGATIONS"). Business
expenses reimbursable under Company policy will be paid within thirty (30) days
after the final submittal of outstanding business expenses, provided that
Executive submit any outstanding business expenses within thirty (30) days after
the Date of Termination. Vesting of any stock option under any applicable Stock
Option Plan shall cease vesting as of the Date of Termination.

            B. TERMINATION BY COMPANY WITHOUT CAUSE. In the event Executive is
terminated without Cause and upon the execution of a full general release by
Executive ("RELEASE"), releasing all claims known or unknown that Executive may
have under this Agreement against Company or New Frontier as of the date
Executive signs such Release, and upon the written acknowledgement of his
continuing obligations under the Proprietary Information Agreement and the
Non-competition Agreement, Company shall pay Executive associated termination
payments equal to Base Salary continuation through February 9, 2009, or six
(6) months of Base Salary, whichever is greater (the "WITHOUT CAUSE SEVERANCE
PAYMENTS"), plus the Accrued Obligations; provided, however, the Without Cause
Severance Payments shall be reduced in accordance with Section 5(G) (Mitigation
of Damages). The Without Cause Severance Payments will be paid in Company's
regular payroll cycle; provided, the Accrued Obligations shall be paid to
Executive on the Date of Termination. Business expenses reimbursable under
Company policy will be paid within ten (10) days after the final submittal of
outstanding business expenses, provided that Executive submits any outstanding
business expenses within ten (10) days after the Date of Termination. Vesting of
any stock options under any applicable Stock Option Plan shall cease vesting as
of the Date of Termination without Cause.

                                       5



            C. TERMINATION BY EXECUTIVE FOR GOOD REASON. In the event Executive
resigns his employment with Company for Good Reason and upon the execution of a
Release against Company and New Frontier, releasing all claims known or unknown
that Executive may have under this Agreement against Company or New Frontier as
of the date Executive signs such Release, and upon the written acknowledgement
of his continuing obligations under the Proprietary Information Agreement and
the Non-competition Agreement, Company shall pay Executive associated
termination payments equal to Base Salary continuation through February 9,
2009, or six (6) months of Base Salary, whichever is greater ("GOOD REASON
SEVERANCE PAYMENTS"), plus the Accrued Obligations; provided, however, the Good
Reason Severance Payments shall be reduced in accordance with Section 5(G)
(Mitigation of Damages). The Good Reason Severance Payments will be paid in
Company's regular payroll cycle; provided, the Accrued Obligations shall be paid
to Executive on the Date of Termination. Business expenses reimbursable under
Company policy will be paid within ten (10) days after the final submittal of
outstanding business expenses, provided that Executive submits any outstanding
business expenses within ten (10) days after the Date of Termination. Vesting of
any stock options under any applicable Stock Option Plan shall cease vesting as
of the Date of Termination for Good Reason.

            D. UPON DEATH. If Executive's employment is terminated by reason of
Executive's death during the Employment Period, this Agreement shall terminate
without further obligation to Executive's legal representatives under this
Agreement. Upon notice of Executive's death, Company shall pay to Executive's
estate all Accrued Obligations. Business expenses reimbursable under Company
policy will be paid with thirty (30) days after the final submittal of
outstanding business expenses, provided that Executive's estate submit any
outstanding business expenses within thirty (30) days after Executive's death.
Vesting of any stock options under any applicable Stock Option Plan shall be
governed by the terms of the Stock Option Plan and applicable Stock Option
grant.

            E. UPON PERMANENT DISABILITY. If Executive's employment is
terminated by reason of Executive's Permanent Disability (as determined pursuant
to Section 3(C) of this Agreement) during the Employment Period, this Agreement
shall terminate without further obligation to Company. Company shall pay to
Executive, on the Date of Termination, all Accrued Obligations. Business
expenses reimbursable under Company policy will be paid within thirty (30) days
after the final submittal of outstanding business expenses, provided Executive
submit any outstanding business expenses within thirty (30) days after the Date
of Termination. Vesting of any stock options under any applicable Stock Option
Plan shall be governed by the terms of the Stock Option Plan and applicable
Stock Option grant.

            F. APPLICATION OF SECTION 409A OF INTERNAL REVENUE CODE.
Notwithstanding anything contained in Section 5(B) or 5(C) to the contrary, to
the extent that (i) the parties' agreement regarding the Cause Severance
Payments or Good Reason Severance Payments, as applicable, to be made by Company
in accordance with this Agreement is treated as a "nonqualified deferred
compensation plan" within the meaning of Section 409A(d)(1) of the Internal
Revenue Code of 1986 (the "CODE"), (ii) the Executive is a "specified employee"
within the meaning of Section 409A(a)(2)(B)(i) of the Code, and (iii) Section
409A(a)(1)(A) of the Code would apply to any Cause Severance Payments or Good
Reason Severance Payments, as applicable, but for the application of Section
409A(a)(2)(A)(i) of the Code required to avoid the tax consequences of Section
409A of the Code, the first such severance payment under either scenario shall
cover all payments scheduled to be made to Executive during the first six (6)
months after the Date of Termination and such first payment shall be delayed
until the day after the six (6) month anniversary of the Date of Termination.


                                       6


            G. PARACHUTE TAX GROSS UP. Executive acknowledges that neither the
Company nor New Frontier presently has, nor shall it have any obligation to
consider or institute, a policy or procedure (a "GROSS UP POLICY") that requires
the Company/New Frontier to pay any of its employees (including senior officers)
a "gross-up amount" providing employees entitled to any acceleration payments
with a "net" (or increased) payment amount that takes into account any
associated golden parachute excise tax ("PARACHUTE TAX") under Section 4999(a)
of the Code. Notwithstanding the foregoing, in the event New Frontier or the
Company during the Employment Period institutes a Gross Up Policy applicable to
one or more executives similarly situated to Executive in connection with any
acceleration payments owing or which could be owing to such executive(s),
Executive shall thereafter be entitled to participate in such Gross Up Policy.

            H. MITIGATION OF DAMAGES. Executive shall not be obligated to seek
other employment to mitigate the amount of Without Cause Severance Payments or
the Good Reason Severance Payments payable to Executive hereunder; provided,
however, the amount of any Without Cause Severance Payments or Good Reason
Severance Payments shall be reduced, dollar for dollar, by an amount equal to
the gross amount that Executive earns (whether as an employee, contractor, or
director of any other business, trade, profession or occupation, and
irrespective of whether such form of compensation constitutes salary, bonus or
compensation) following (i) the termination of Executive without Cause, or (ii)
Executive's resignation for Good Reason, as applicable. Executive shall for so
long as any severance payments are due and owing to Executive, provide the
Company with contact information of any new employer of Executive (or such other
person or entity to whom Executive acts as a consultant or contractor) (each
referred to as a "THIRD PARTY EMPLOYER") following termination; Executive hereby
further authorizes Company to provide a copy of this Agreement to such Third
Party Employer and to obtain from such Third Party Employer, without Executive's
consent, all such information as may be reasonably requested by the Company to
ascertain the amount of compensation received by Executive from such Third Party
Employer, including without limitation, pay stubs, W-2's and/or Form 1099's
issued to Executive but only to the extent Executive does not first provide such
information to the Company within ten (10) days of written request.

         6. NOTICE AND DATE OF TERMINATION. Any termination (whether based on
Permanent Disability, Good Reason, with Cause or without Cause) shall be
communicated by a written "NOTICE OF TERMINATION" to the other party, and may be
sent via registered or certified mail, return receipt requested, postage prepaid
or by facsimile transmission, or by electronic mail or by hand delivery. "DATE
OF TERMINATION" shall mean: (i) the date of transmission of the Notice of
Termination by facsimile, e-mail or personal delivery; (ii) three (3) calendar
days after the date of mailing by first class mail; or (iii) if Executive's
employment is terminated by reason of Executive's death, the Date of Termination
shall be the date of Executive's death.

         7. PROPRIETARY AND OTHER OBLIGATIONS.

                                       7


            A. PROPRIETARY INFORMATION AGREEMENT. Executive acknowledges that
signing and complying with the Proprietary Information Agreement is a condition
of his employment by Company. Executive therefore agrees to sign and comply with
the Proprietary Information Agreement and acknowledges that by beginning
employment with Company, he will be deemed to have signed and agreed to the
provision of the Proprietary Information Agreement.

            B. EXCEPTIONS. Notwithstanding any contrary provisions in the
Proprietary Information Agreement to the contrary the parties agree as follows:
(i) the term "Proprietary Information", as defined in Section 1.2 of the
Proprietary Information Agreement, shall not include Executive's personal
address book; (ii) to the extent of any conflict between Section 2(A) of this
Agreement and the first sentence of paragraph 4 of the Proprietary Information
Agreement, Section 2(A) of this Agreement shall govern and control; (iii) the
last sentence of paragraph 7 of the Proprietary Information Agreement shall not
apply to Executive; (iv) a copy of all notices to be provided to Executive under
paragraph 9 of the Proprietary Information Agreement shall be delivered to
Michael Wolf, Esq., Wolf, Rifkin, Shapiro & Schulman, LLP, 11400 W. Olympic
Blvd., Ninth Floor, Los Angeles, California 90064; (v) promptly after providing
a notification described in paragraph 10 of the Proprietary Information
Agreement to any new employer of Executive, the Company will provide Executive
with a copy of the notice given to such new employer; and (vi) to the extent of
any conflict between any Section(s) of this Agreement and paragraph 11.5 of the
Proprietary Information Agreement, the Section(s) of this Agreement shall govern
and control.

         8. NON-COMPETITION; NON-SOLICITATION. This Agreement shall not alter or
amend any of the non-competition or non-solicitation terms (nor any other terms)
set forth in the Non-competition Agreement or the Proprietary Information
Agreement.

         9. ARBITRATION. To the fullest extent permitted by law, any controversy
or claim past, present, or future, arising out of or relating to the hiring of
Executive, Executive's employment, the termination of Executive's employment,
this Agreement and/or the breach or termination of this Agreement that Company
may have against Executive or that Executive may have against Company or against
its officers, directors, employees or agents in their capacity as such or the
breach hereof, shall be settled by a single arbitrator in arbitration conducted
in Los Angeles County, California, in accordance with the National Employment
Arbitration Rules of the American Arbitration Association ("AAA"). These rules
are posted on the AAA's website, . The arbitrators shall prepare a written award
and judgment upon the award may be entered in any court having jurisdiction
thereof. The arbitrator's decision shall be final and binding. The arbitrator
shall have the authority to settle such controversy or claim by finding that a
party should be enjoined from certain actions or be compelled to undertake
certain actions, and in such event such court may enter an order enjoining
and/or compelling such actions as found by that arbitrator. Each party shall pay
its own legal and other professional fees and costs in connection with the
arbitration and Company shall pay the arbitrator's fees; however, to the extent
permitted by law, the arbitrator may require the other party to pay the costs of
the arbitration and/or the legal and other professional fees and costs incurred
by the prevailing party in connection with such arbitration proceeding and any
necessary court action.

         The claims covered by this arbitration provision include, but are not
limited to, claims arising out of contract law, tort law, common law, defamation
law, fraud law (including, without limitation, fraud in the inducement of
contract), wrongful discharge law, privacy rights, statutory protections,


                                       8


constitutional protections, wage and hour law, California Labor Code
protections, the California Fair Employment and Housing Act (which includes
claims for discrimination or harassment on the basis of age, race, color,
ancestry, national origin, disability, medical condition, marital status,
religious creed, sexual orientation, pregnancy, and sex), any similar state
discrimination law, the Federal Civil Rights Act of 1964 and 1991, as amended,
the Age Discrimination in Employment Act, the Older Workers' Benefit Protection
Act, the Americans With Disabilities Act; claims for benefits (except claims
under an employee benefit plan that either (1) specifies that its claims
procedure shall culminate in an arbitration procedure different from this one,
or (2) is underwritten by a commercial insurer which decides claims); and claims
for violation of any federal, state, or other governmental law, statute,
regulation, or ordinance, except claims excluded in the following section.

         Notwithstanding the foregoing, the parties expressly agree that claims
Executive may have for workers' compensation, state unemployment compensation
benefits, and state disability insurance are not covered by this Agreement. The
parties also agree that a court of competent jurisdiction may enter a temporary
restraining order or an order enjoining a breach of this Agreement, including
Exhibit A (Confidentiality Agreement) hereto, pending a final award or further
order by the arbitrator. Such remedy, however, shall be cumulative and
nonexclusive, and shall be in addition to any other remedy to which the parties
may be entitled. The parties further expressly agree that this provision does
not apply to any matter in which the amount in controversy falls within the
jurisdiction of the Small Claims Division of the Municipal Courts of the State
of California. Should such matter fall within the jurisdiction of the Small
Claims Division of the Municipal Court of the State of California, then such
matter shall be, and may only be, submitted to a Small Claims Division of the
Courts of the State of California for Los Angeles County for determination.

         This Section 9 shall apply notwithstanding any provision to the
contrary which is set forth in the Purchase Agreement; provided however, Company
shall, in the event of any arbitration under this Section 9, continue to have
(and the arbitrator shall take into account in rendering any award hereunder)
all of its offset rights contained in applicable provisions of the Purchase
Agreement.

         10. NO CONFLICTING OBLIGATIONS OF EXECUTIVE. Executive represents and
warrants that he is not subject to any duties or restrictions under any prior
agreement with any previous employer or other person or entity other than
Company, and that he has no rights or obligations which may conflict with the
interests of Company or with the performance of Executive's duties and
obligations under this Agreement. Executive agrees to notify Company immediately
if any such conflicts occur in the future.

         11. DIRECTOR AND OFFICER INSURANCE AND INDEMNITY. To the extent that
New Frontier maintains Director and Office Insurance on similarly situated
executives of other subsidiaries, New Frontier shall obtain and pay the premiums
upon director and officer insurance and shall name Executive as an insured under
such policies. Company shall further indemnify and hold harmless Executive as
required under Company's articles of incorporation or bylaws and, without
limiting the generality of the foregoing, Company shall indemnify and hold
harmless Executive to the maximum extent required by California law.


         12. SUCCESSORS. This Agreement is personal to Executive and shall not
be assignable by Executive. This Agreement shall inure to the benefit of Company
and its successors and assigns. Upon written approval by Executive, Company may
assign this Agreement to any successor or affiliated entity, subsidiary or
parent company, but no such assignment shall relieve Company of its obligations
under this Agreement.

                                       9



         13. MISCELLANEOUS.

            A. MODIFICATION/WAIVER. This Agreement may not be amended, modified,
superseded, canceled, renewed or expanded, or any terms or covenants hereof
waived, except by a writing executed by each of the parties hereto or, in the
case of a waiver, by the party waiving compliance. Failure of any party at any
time or times to require performance of any provision hereof shall in no manner
affect his or its right at a later time to enforce the same. No waiver by a
party of a breach of any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of agreement contained in the
Agreement.

            B. TAXES. Executive agrees to be responsible for the payment of any
taxes due on any and all compensation, stock option, or benefit provided by
Company pursuant to this Agreement. Executive agrees to indemnify Company and
hold Company harmless from any and all claims or penalties asserted against
Company for any failure by Executive to pay taxes due on any compensation, stock
option, or benefit provided by Company pursuant to this Agreement. Executive
expressly acknowledges that Company has not made, nor herein makes, any
representation about the tax consequences of any consideration provided by
Company to Executive pursuant to this Agreement.

            C. GOVERNING LAW; PERSONAL JURISDICTION. This Agreement and all
disputes relating to this Agreement shall be governed in all respects by the
laws of the State of California as such laws are applied to agreements between
California residents entered into and performed entirely in California. The
parties acknowledge that this Agreement constitutes the minimum contacts to
establish personal jurisdiction in California. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect.

            D. NOTICES. All notices and other communications hereunder
(including any notices pursuant to Section 6) shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, or by facsimile, or by email, or by
hand delivery to such address as either party shall have furnished to the other
in writing in accordance herewith. Copies of all notices sent hereunder shall be
forwarded to Michael Wolf, Esq., Wolf, Rifkin, Shapiro & Schulman, LLP, 11400
West Olympic Boulevard, Ninth Floor, Los Angeles, California 90064 and to E. Lee
Reichert, Esq., Kamlet Shepherd & Reichert, LLP, 1515 Arapahoe Street, Ste.
1600, Denver, Colorado 80202.

            E. SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

            F. WITHHOLDINGS. Company may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.

                                       10


            G. ENTIRE AGREEMENT. This Agreement, together with Exhibit A
attached hereto, set forth the entire agreement and understanding of the parties
hereto with regard to the employment of the Executive by Company and supersede
any and all prior agreements, arrangements and understandings, written or oral,
pertaining to the subject matter hereof. No representation, promise or
inducement relating to the subject matter hereof has been made to a party that
is not embodied in these Agreements, and no party shall be bound by or liable
for any alleged representation, promise or inducement not so set forth.
Notwithstanding this Section 13(G), nothing contained in this Agreement shall
alter, amend or effect in any way the terms and conditions of the Purchase
Agreement or the Non-competition Agreement.

            H. WAIVER. The failure of either party to insist upon strict
compliance with any provision of this Agreement, or the failure to assert any
right either party may have hereunder, shall not be deemed to be a waiver of
such provision or right or any other provision or right of this Agreement.

         IN WITNESS WHEREOF, Executive has hereunto set Executive's hand, and
Company has caused these presents to be executed in its name on its behalf, all
as of the day and year first above written.


COMPANY:                                             EXECUTIVE:

MRG Entertainment, Inc.,
a California corporation



By: /s/ Richard Bruce Goldberg              /s/ Marc Laurence Greenberg
- ------------------------------              ---------------------------
Name: Richard Bruce Goldberg                Marc Laurence Greenberg
- ------------------------------
Its:  Co-President
- ------------------------------

EX-10

                                                                    Exhibit 10.7

                      NON-COMPETITION, NON-SOLICITATION AND
                             TRADE SECRECY AGREEMENT

     THIS NON-COMPETITION, NON-SOLICITATION AND TRADE SECRECY AGREEMENT is made
to be effective as of the 10th day of February, 2006, and is entered into by
and among NEW FRONTIER MEDIA, INC., a Colorado corporation (the "Parent
Company"), MRG ENTERTAINMENT, INC., a California corporation (the "Company"),
and RICHARD BRUCE GOLDBERG ("Owner"). Capitalized terms not otherwise defined in
this Agreement shall have the meanings ascribed in the Purchase Agreement (as
defined below).

         WHEREAS, Owner is a trustor and beneficiary of the Goldberg Family
Trust dated June 15, 2001 (the "Goldberg Trust");

         WHEREAS, prior to the Closing, the Goldberg Trust owned (i) fifty
percent (50%) of the issued and outstanding shares of the Company (the "MRG
Shares"), and (ii) fifty percent (50%) of the issued and outstanding shares of
Lifestyles Entertainment, Inc., a California corporation (the "Lifestyle
Shares," and collectively with the MRG Shares, the "Shares");

         WHEREAS, after the Closing, the Company is a wholly-owned subsidiary of
the Parent Company;

         WHEREAS, the Parent Company, Owner, Marc Laurence Greenberg, the
Goldberg Trust and the Marc Laurence Greenberg Trust dated May 11, 2001
(together with the Goldberg Trust, the "Trusts") entered into that certain Stock
Purchase Agreement dated February 6, 2006 (the "Purchase Agreement"), pursuant
to which the Trusts sold, transferred and assigned to the Parent Company all of
the Shares and all of the goodwill of the Company, with the Parent Company
continuing to operate the Company's businesses;

         WHEREAS, prior to the date hereof, the Company and the Parent Company
were each engaged in the entertainment, production, marketing and distribution
businesses and in producing, licensing and selling motion pictures and
television programs (collectively, the "Products");

         WHEREAS, the Parent Company's and the Company's businesses, as
currently conducted and as will be conducted during the Term (as herein
defined), involve marketing and distributing the Products in every state in the
United States and various foreign countries (the "Business");

         WHEREAS, Owner has financially benefited directly from the purchase and
sale of the Shares and was Co-President and Secretary of the Company and will
remain the Co-President of the Company pursuant to the terms and conditions of
that certain Employment Agreement of even date herewith between Owner and the
Company ("Employment Agreement"); and

         WHEREAS, the parties intend for the non-competition and
non-solicitation covenants contained in this Agreement to be lawful pursuant to
California Business and Professions Code Section 16001 (Sale of Goodwill or
Corporate Shares); and



         WHEREAS, as a material inducement to, and a condition of, the Parent
Company's willingness to enter into the Purchase Agreement and to consummate the
transactions contemplated therein, Owner agreed to execute and deliver this
Agreement which restricts Owner's ability to disclose or use Proprietary
Information (as hereinafter defined), to engage in a Competitive Business (as
hereinafter defined), and to engage in other related activities, all as set
forth herein.


         NOW, THEREFORE, in consideration of the economic benefits received by
Owner pursuant to the Purchase Agreement and the premises herein contained and
for other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the Parent Company, the Company and Owner hereby
agree as follows:

         1. NON-COMPETITION; NON-SOLICITATION; PROPRIETARY INFORMATION.

            (a) OWNER COVENANTS. Owner agrees that during the Term (as herein
defined), he shall not in the Territory (as herein defined), directly or
indirectly:

                (i) engage, manage, operate, control, join, or participate in
any Competitive Business, whether such engagement shall be as an employer,
officer, director, owner, agent, employee, partner, investor, trustee,
consultant or other participant;

                (ii) sell, solicit, or accept business or orders from Customers
(as herein defined) of the Company with respect to products that are
substantially similar to the Products;

                (iii) sell or assist in the design, development, manufacture,
production, licensing, sale, marketing or support of any Products;

                (iv) interfere with, disrupt or attempt to disrupt
relationships, contractual or otherwise, between the Company and its employees,
contractors and Customers;

                (v) hire any employees of the Company, except for Owner's
personal assistant;

                (vi) interfere with any supplier, vendor or Customer or attempt
to disrupt relationships, contractual or otherwise, between the Company and any
supplier, vendor or Customer;

                (vii) solicit or submit orders with regard to any Products to
any supplier, vendor or Customer which is competitive with the Business; or

                (viii) disclose to any person or entity, or use for his own
benefit or for the benefit of any other person or entity, any Proprietary
Information; provided, however, that the foregoing prohibition against
disclosure of Proprietary Information shall not apply to Owner's disclosure of
Proprietary Information that (a) to any technical, financial or legal
professionals that Owner retains in connection with my affiliation with the
Company; provided that all such professionals agree to and do keep all such
information confidential, (b) that Owner is required to disclose pursuant to
judicial action or decree having jurisdiction over Owner or (c) that is
available to the general public through no fault of Owner.

                                       2


            (b) DEFINITIONS. The terms set forth below shall have the following
meanings:

                (i) "Affiliate" means, as to any Person, (a) any subsidiary of
such Person and (b) any other Person which, directly or indirectly, controls, is
controlled by, or is under common control with, such Person and includes, in the
case of a Person other than an individual, each officer or director, general
partner, member, trustee or beneficiary of such Person, and each Person who is
the beneficial owner of 10% or more of such Person's outstanding stock or other
equity interests having ordinary voting power of such Person. For the purposes
of this definition, "control" means the possession of the power to direct or
cause the direction of management and policies of such Person, whether through
the ownership of voting stock, by contract or otherwise.

                (ii) "Competitive Business" means a business or division of a
business engaged in the Business.

                (iii) "Customer" means any of the following who purchased
Products from the Company at any time during the period beginning twenty-four
(24) months prior to the effective date of this Agreement and ending on the date
of termination or expiration of this Agreement: (1) distributors of the
Products, and (2) producers of the Products.

                (iv) "Erotic Products" means those Products the substance or
content of which is of an adult-oriented nature (that is, those Products that
have as any material plot element either suggestive, erotic or sensual themes
and/or scenes).

                (v) "Non-Erotic Products" shall mean any Products of the Company
other than the Erotic Products, and shall specifically include any business
line, product line or content genre in which the Company or its Affiliates has
developed strategic plans or taken actual steps to compete or distribute
Products in such areas.

                (vi) "Person" means any natural person, corporation,
partnership, limited liability company, trust, unincorporated organization or
other entity.

                (vii) "Proprietary Information" shall mean any and all
confidential and/or proprietary knowledge, data or information of the Company.
By way of illustration but not limitation, "Proprietary Information" includes
(a) trade secrets, inventions, ideas, processes, formulas, source and object
codes, data, programs, other works of authorship, know-how, improvements,
discoveries, developments, designs and techniques; and (b) information regarding
plans for research, development, new products, projects, potential projects,
current projects, projects in development and future projects, forecasts, plans,
contracts, releases, marketing and selling, customer/client information,
customer/client lists, vendors, vendor lists, pricing information and costs,
corporation and personal business opportunities, Rolodex cards or other lists of
names, addresses or telephone numbers, other than Owner's personal address book,
Company-related information on computer disks or files, or any other electronic
information of any kind, and budgets and unpublished financial statements and
information, and licenses; and (c) information regarding the skills and
compensation of other employees of the Company. "Proprietary Information"
includes information developed by Owner in the course of Owner's services for
the Company, as well as other confidential information to which Owner may have
access in connection with Owner's services. "Proprietary Information" also
includes the confidential information of other individuals or entities with
which Company or any of its owners, predecessors, successors, subsidiaries,
affiliates, parents, or its shareholders, directors and officers has a business
relationship. Notwithstanding the foregoing, it is understood that, at all such
times, Owner is free to use information which is generally known in the trade or
industry, which is not gained as result of a breach of this Agreement, and
Owner's own skill, knowledge, know-how and experience to whatever extent and in
whichever way Owner wishes.

                                       3


                (viii) "Term" means the five (5) year period commencing on the
effective date of this Agreement (whether or not Owner is employed by Company
for such 5 year period).

                (ix) "Territory" means the United States of America and the
foreign jurisdictions in which the Company or the Parent Company conducts the
Business.

            (c) EXCEPTIONS.

                (i) Owner may own capital stock or other securities of any
corporation, the securities of which are publicly owned or regularly traded in
the over-the-counter market or on any securities exchange, provided that Owner
shall not acquire, in the aggregate, beneficial ownership (as determined under
Rule 13d-3 of the Securities Exchange Act of 1934) of more than five percent
(5%) of the issuer's outstanding securities of that class.

                (ii) After February __, 2009 until the expiration of the Term,
in the event that Owner is not then an employee of the Company or its
Affiliates, the parties agree that the restrictions in this Agreement shall not
be construed to prohibit Owner from developing or producing any individual
motion picture or television program which is not an Erotic Product, or
arranging for the distribution thereof by a third party where (x) the
development, or production of such individual motion picture(s) or television
program(s) does not adversely affect the revenues and profitability of the
Company or its Affiliates and (y) such individual motion picture(s) or
television program(s) is not a sequel to any Product developed, produced or
distributed by the Company and its Affiliates. The parties further acknowledge
that after February __, 2009 until the expiration of the Term with regard to
Non-Erotic Products, Owner shall have the right to seek the Company's consent to
engage in business activities on a case-by-case basis which activities otherwise
are prohibited by this Agreement, but which activities do not adversely affect
the revenues and profitability the Company or its Affiliates are generating from
any of its existing or projected business lines, product lines or content genre,
which consent shall not be unreasonably withheld or delayed. For purposes of
this Agreement, "Non-Erotic Products" shall mean any Products of the Company
other than the Erotic Products, and shall specifically include any business
line, product line or content genre in which the Company or its Affiliates has
developed strategic plans or taken actual steps to compete or distribute
Products in such areas.


                                       4


            (d) EXTENSION OF TIME; TERMINATION OF AGREEMENT. In the event that
Owner breaches any covenant, obligation or duty in this Agreement or its
subparts, any such duty, obligation, or covenants to which the parties agreed by
this Agreement and its subparts shall automatically toll from the date of the
first breach, and all subsequent breaches, until the resolution of the breach
through private settlement, judicial or other action, including all appeals. The
duration and length of Owner's duties and obligations as agreed by this
Agreement and its subparts shall continue upon the effective date of any such
settlement, or judicial or other resolution. This Agreement shall terminate and
be of no further force or effect in the event the Company and the Parent Company
cease to engage in the Business.

         2. ACKNOWLEDGEMENTS; WAIVER.

            (a) Valuable Consideration. Owner is entering into this Agreement in
consideration for, and as an inducement to his execution of the Purchase
Agreement and the consummation of the transactions contemplated thereby and the
commitment of the Parent Company to perform its obligations undertaken therein,
which Owner acknowledges is adequate, valid and legal consideration for his
execution of this Agreement.

            (b) Proprietary Information Agreement. Nothing in this Section
1(b)(vi) shall be construed to reduce or modify the length of the term of that
certain Employee Proprietary Information and Inventions Agreement of even date
herewith between Owner and the Company.

            (c) Reasonable. Owner agrees and acknowledges that the duration of
the Term and the geographic scope on the restrictions in this Agreement and its
subparts are reasonable. Owner also acknowledges and agrees that the limitation
in this Agreement and its subparts is reasonably necessary for the protection of
the Company, that through the Purchase Agreement, of which this Agreement is a
part, he shall receive adequate consideration for any loss of opportunity
associated with the provisions herein, and that these provisions provide a
reasonable way of protecting the Company's and the Parent Company's business
value and goodwill which was imparted to him.

            (d) Legal Representation. Owner acknowledges that he has had the
opportunity to consult with his own legal counsel regarding the terms of this
Agreement, including, without limitation, the breadth of its geographic scope,
the length of the Term and the Company's and Parent Company's remedies.

            (e) Waiver. Owner hereby waives any and all right to attack the
validity of the terms hereof on the grounds of the breadth of their geographic
scope or the length of the Term.

            (f) Fully Enforced. Owner and the Company hereby agree that this
Agreement shall be enforced as fully as possible under applicable law.

         3. ENFORCEMENT.

                                       5


            (a) Legal and Equitable Remedies. In view of the nature of the
rights in goodwill, employee relations, trade secrets, Proprietary Information,
and business reputation and prospects of the Company and Parent Company to be
protected under this Agreement, Owner understands and agrees that the Company or
the Parent Company could not be reasonably or adequately compensated in damages
in an action at law for Owner's breach of his obligations hereunder.
Accordingly, Owner specifically agrees that the Company and Parent Company shall
be entitled to temporary and permanent injunctive relief, specific performance,
and other equitable relief to enforce the provisions of this Agreement, and that
such relief may be granted without the necessity of proving actual damages, and
without bond. Owner acknowledges and agrees that the restrictive covenants
described in this Agreement are essential and material to this Agreement and the
Purchase Agreement, and that upon breach of this Agreement by him, the Company
or Parent Company is entitled to withhold providing payments or consideration
either under the Earnout Agreement (as herein defined), equitable relief to
prevent continued breach, to recover damages and to seek any other remedies
available to the Company or Parent Company. This provision with respect to
injunctive relief shall not, however, diminish the right of the Company or
Parent Company to claim and recover damages or other remedies in addition to
equitable relief. Notwithstanding the foregoing, neither Parent Company nor
Company, as applicable, shall withhold payments or consideration under the
Earnout Agreement unless Parent Company and/or Company has received an interim
award of relief granted pursuant to an application filed with AAA (as herein
defined) pursuant to Section 3(c) below or as ordered by a court of competent
jurisdiction. For purposes of this Agreement, the term "Earnout Agreement" means
that certain Earnout Agreement of even date herewith among the Parent Company,
the Trusts, Marc Laurence Greenberg and Owner.

            (b) Blue Pencil. If any covenant, word, clause, phrase, provision,
restriction, or section contained herein is held to be unenforceable because of
the scope of such covenant, word, clause, phrase, provision, restriction,
section, the length of the Term or the geographic scope (the Territory) covered
thereby, the undersigned agree that the court making such determination shall
have the power to reduce the scope, the length of the Term, and the geographic
scope (the Territory) or any such provisions and, in its reduced form, said
provision shall then be enforceable. Should any other portion of this Agreement
be declared invalid for any reason, said provision shall be severed and all
other provisions shall continue to be effective and binding. Moreover,
notwithstanding any judicial determination that any term, word, clause, phrase,
provision, restriction, or section of this Agreement is not specifically
enforceable, the parties intend that the Company shall nonetheless be entitled
to recover monetary damages as a result of any breach hereof.

            (c) Choice of Law; Jurisdiction; Venue. The parties hereto intend to
and hereby confer jurisdiction to enforce the covenants contained in Section 1
upon the courts of any state within the geographical scope of such covenants. In
the event that the courts of any one or more of such states shall hold such
covenants wholly unenforceable by reason of the breadth of their scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Company's right to the relief provided above in the
courts of any other state within the geographical scope of such covenants as to
breaches of such covenants in such other respective jurisdictions, the above
covenants as they relate to each state being, for this purpose, severable into
diverse and independent covenants. Notwithstanding the foregoing provisions of
this Section 3(c), the Company in its sole discretion may bring any enforcement
action hereunder in the jurisdiction where the alleged breach hereunder has
occurred, in California, in Colorado or in the jurisdiction where the Company

                                       6


conducts business and Owner hereby consents (to both personal jurisdiction and
venue) to such action, if any, being brought in such jurisdictions and venues.
Further notwithstanding anything contained in this Agreement to the contrary,
the parties agree the Company or the Parent Company, or both, may, in their sole
discretion, file an application with the American Arbitration Association
("AAA") pursuant to and in accordance with the Optional Rules for Emergency
Measures of Protection adopted by the AAA, as the same may be modified or
supplemented from time to time (the "Emergency AAA Rules"), to seek an interim
award of emergency relief to enjoin Owner from engaging in any activity in
violation of this Agreement. Any such interim arbitration shall be subject to
and conducted in strict accordance with the Emergency AAA Rules. Nothing in this
Section 3(c) shall (i) be construed to require the Company or Parent Company to
seek any form or relief by initiating any such emergency action with the AAA, or
(ii) reduce or impair the Company's right to bring an action at law or equity
under this Agreement in a court of competent jurisdiction located in California,
Colorado or such other jurisdiction where the Company or Parent Company conducts
business.


            (d) Prevailing Party Attorney's Fees and Costs. If any legal action
or other proceeding is brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default or misrepresentation in connection with
any provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees, court costs and all expenses
even if not taxable as court costs (including, without limitation, all such
fees, costs and expenses incident to appeals), incurred in that action or
proceeding, in addition to any other relief to which such party may be entitled.

         4. NOTICES. Any notices required or permitted hereunder shall be given
to the appropriate party at the address specified below or at such other address
as the party shall specify in writing, with a copy of all notices to Michael
Wolf, Esq., Wolf, Rifkin, Shapiro & Schulman, LLP, 11400 W. Olympic Blvd, Ninth
Floor, Los Angeles, California 90064 and to E. Lee Reichert, Esq., Kamlet
Shepherd & Reichert, LLP, 1515 Arapahoe Street, Ste. 1600, Denver, Colorado
80202 . Such notice shall be deemed given upon personal delivery to the
appropriate address or if sent by certified or registered mail, three (3) days
after the date of mailing.

         5. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, and their respective heirs,
legal representatives, successors and assigns. No assignment or transfer of
rights and obligations hereunder shall be made by Owner. The Company or the
Parent Company may assign or transfer any rights and obligations hereunder to
(i) any Affiliate of the Company and/or Parent Company, (ii) a third party that
acquires by merger, stock purchase or asset purchase (x) more than fifty percent
(50%) of the voting equity interests in the Company or the Parent Company, as
applicable, or (y) all or substantially all of the assets of the Company or the
Parent Company, as applicable.

         6. CAPTIONS; DEFINITIONS. The titles or captions of sections contained
in this Agreement are inserted only as a matter of convenience and for reference
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provision hereof. The parties agree to all definitions in the
statement of parties to this Agreement and in the other introductory language to
this Agreement.

                                       7


         7. CONTROLLING LAW; AMENDMENT; ENTIRE AGREEMENT; WAIVER. This Agreement
shall be construed in accordance with and governed by the laws of the
jurisdiction in which an enforcement action pursuant to Section 3 is brought,
without giving effect to the principles of conflict of laws thereof. No
provision of this Agreement or any related document shall be construed against
or interpreted to the disadvantage of any party hereto by any court or other
governmental or judicial authority by reason of such party's having or being
deemed to have structured or drafted such provision. This Agreement sets forth
the entire agreement and understanding of the parties hereto with regard to the
subject matter hereof and supersedes any and all prior agreements, arrangements
and understandings, written or oral, pertaining to the subject matter hereof. No
representation, promise or inducement relating to the subject matter hereof has
been made to a party that is not embodied in this Agreement, and no party shall
be bound by or liable for any alleged representation, promise or inducement not
so set forth. This Agreement may not be altered or amended except in writing
signed by the Company, the Parent Company and Owner. The failure of any party
hereto at any time to require performance of any provisions hereof shall in no
manner affect the right to enforce the same. No waiver by any party hereto of
any condition, or of the breach of any term, provision, warranty,
representation, agreement or covenant contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed or construed
as a further or continuing waiver of any such condition or breach or a waiver of
any other condition or of the breach of any other term, provision, warranty,
representation, agreement or covenant herein contained.

         8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument. This Agreement shall become effective
when one or more counterparts have been signed by each of the parties to this
Agreement and delivered to each of the other parties to this Agreement.

                          [SIGNATURE PAGE(S) TO FOLLOW]


                                       8





                  IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.

                                            THE PARENT COMPANY:

                                            New Frontier Media, Inc.,
                                            a Colorado corporation
Address for Notice:
New Frontier Media, Inc.                    By: /s/ Michael Weiner
7007 Winchester Circle                         --------------------
Suite 200                                   Name: Michael Weiner
Boulder, CO 80301                                ------------------
Facsimile: (303) 444-0848                   Title:CEO
                                                  -----------------
Attention:  Michael Weiner,
            Karyn Miller, and
            George Sawicki

                                  THE COMPANY:

                                            MRG Entertainment, Inc.,
                                            a California corporation

Address for Notice:
New Frontier Media, Inc.                    By: /s/ Karyn Miller
7007 Winchester Circle                         --------------------
Suite 200                                   Name: Karyn Miller
Boulder, CO 80301                                ------------------
Facsimile: (303) 444-0848                   Title:CFO
                                                  -----------------
Attention:  Michael Weiner,
            Karyn Miller, and
            George Sawicki

                                     OWNER:

Address for Notice:                 /s/ Richard Bruce Goldberg
- ------------------------            ------------------------------------
- ------------------------            Richard Bruce Goldberg
Phone No:
        ----------------
Facsimile No:
            ------------
Email:
     -------------------




                                       9

EX-10

                                                                    Exhibit 10.8


                     NON-COMPETITION, NON-SOLICITATION AND
                             TRADE SECRECY AGREEMENT

     THIS NON-COMPETITION, NON-SOLICITATION AND TRADE SECRECY AGREEMENT is made
to be effective as of the 10th day of February, 2006, and is entered into by
and among NEW FRONTIER MEDIA, INC., a Colorado corporation (the "Parent
Company"), MRG ENTERTAINMENT, INC., a California corporation (the "Company"),
and MARC LAURENCE GREENBERG ("Owner"). Capitalized terms not otherwise defined
in this Agreement shall have the meanings ascribed in the Purchase Agreement (as
defined below).

         WHEREAS, Owner is a trustor and beneficiary of the Marc Laurence
Greenberg Trust dated May 11, 2001 (the "Greenberg Trust");

         WHEREAS, prior to the Closing, the Greenberg Trust owned (i) fifty
percent (50%) of the issued and outstanding shares of the Company (the "MRG
Shares"), and (ii) fifty percent (50%) of the issued and outstanding shares of
Lifestyles Entertainment, Inc., a California corporation (the "Lifestyle
Shares," and collectively with the MRG Shares, the "Shares");

         WHEREAS, after the Closing, the Company is a wholly-owned subsidiary of
the Parent Company;

         WHEREAS, the Parent Company, Owner, Richard Bruce Goldberg, the
Greenberg Trust and the Goldberg Family Trust dated June 15, 2001 (together with
the Greenberg Trust, the "Trusts") entered into that certain Stock Purchase
Agreement dated February 6, 2006 (the "Purchase Agreement"), pursuant to which
the Trusts sold, transferred and assigned to the Parent Company all of the
Shares and all of the goodwill of the Company, with the Parent Company
continuing to operate the Company's businesses;

         WHEREAS, prior to the date hereof, the Company and the Parent Company
were each engaged in the entertainment, production, marketing and distribution
businesses and in producing, licensing and selling motion pictures and
television programs (collectively, the "Products");

         WHEREAS, the Parent Company's and the Company's businesses, as
currently conducted and as will be conducted during the Term (as herein
defined), involve marketing and distributing the Products in every state in the
United States and various foreign countries (the "Business");

         WHEREAS, Owner has financially benefited directly from the purchase and
sale of the Shares and was Co-President and Secretary of the Company and will
remain the Co-President of the Company pursuant to the terms and conditions of
that certain Employment Agreement of even date herewith between Owner and the
Company ("Employment Agreement"); and

         WHEREAS, the parties intend for the non-competition and
non-solicitation covenants contained in this Agreement to be lawful pursuant to
California Business and Professions Code Section 16001 (Sale of Goodwill or
Corporate Shares); and




         WHEREAS, as a material inducement to, and a condition of, the Parent
Company's willingness to enter into the Purchase Agreement and to consummate the
transactions contemplated therein, Owner agreed to execute and deliver this
Agreement which restricts Owner's ability to disclose or use Proprietary
Information (as hereinafter defined), to engage in a Competitive Business (as
hereinafter defined), and to engage in other related activities, all as set
forth herein.

         NOW, THEREFORE, in consideration of the economic benefits received by
Owner pursuant to the Purchase Agreement and the premises herein contained and
for other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the Parent Company, the Company and Owner hereby
agree as follows:

         1. NON-COMPETITION; NON-SOLICITATION; PROPRIETARY INFORMATION.

            (a) OWNER COVENANTS. Owner agrees that during the Term (as herein
defined), he shall not in the Territory (as herein defined), directly or
indirectly:

                (i) engage, manage, operate, control, join, or participate in
any Competitive Business, whether such engagement shall be as an employer,
officer, director, owner, agent, employee, partner, investor, trustee,
consultant or other participant;

                (ii) sell, solicit, or accept business or orders from Customers
(as herein defined) of the Company with respect to products that are
substantially similar to the Products;

                (iii) sell or assist in the design, development, manufacture,
production, licensing, sale, marketing or support of any Products;

                (iv) interfere with, disrupt or attempt to disrupt
relationships, contractual or otherwise, between the Company and its employees,
contractors and Customers;

                (v) hire any employees of the Company, except for Owner's
personal assistant;

                (vi) interfere with any supplier, vendor or Customer or attempt
to disrupt relationships, contractual or otherwise, between the Company and any
supplier, vendor or Customer;

                (vii) solicit or submit orders with regard to any Products to
any supplier, vendor or Customer which is competitive with the Business; or

                (viii) disclose to any person or entity, or use for his own
benefit or for the benefit of any other person or entity, any Proprietary
Information; provided, however, that the foregoing prohibition against
disclosure of Proprietary Information shall not apply to Owner's disclosure of
Proprietary Information that (a) to any technical, financial or legal
professionals that Owner retains in connection with my affiliation with the
Company; provided that all such professionals agree to and do keep all such
information confidential, (b) that Owner is required to disclose pursuant to
judicial action or decree having jurisdiction over Owner or (c) that is
available to the general public through no fault of Owner.


                                       2


            (b) DEFINITIONS. The terms set forth below shall have the following
meanings:

                (i) "Affiliate" means, as to any Person, (a) any subsidiary of
such Person and (b) any other Person which, directly or indirectly, controls, is
controlled by, or is under common control with, such Person and includes, in the
case of a Person other than an individual, each officer or director, general
partner, member, trustee or beneficiary of such Person, and each Person who is
the beneficial owner of 10% or more of such Person's outstanding stock or other
equity interests having ordinary voting power of such Person. For the purposes
of this definition, "control" means the possession of the power to direct or
cause the direction of management and policies of such Person, whether through
the ownership of voting stock, by contract or otherwise.

                (ii) "Competitive Business" means a business or division of a
business engaged in the Business.

                (iii) "Customer" means any of the following who purchased
Products from the Company at any time during the period beginning twenty-four
(24) months prior to the effective date of this Agreement and ending on the date
of termination or expiration of this Agreement: (1) distributors of the
Products, and (2) producers of the Products.

                (iv) "Erotic Products" means those Products the substance or
content of which is of an adult-oriented nature (that is, those Products that
have as any material plot element either suggestive, erotic or sensual themes
and/or scenes).

                (v) "Non-Erotic Products" shall mean any Products of the Company
other than the Erotic Products, and shall specifically include any business
line, product line or content genre in which the Company or its Affiliates has
developed strategic plans or taken actual steps to compete or distribute
Products in such areas.

                (vi) "Person" means any natural person, corporation,
partnership, limited liability company, trust, unincorporated organization or
other entity.

                (vii) "Proprietary Information" shall mean any and all
confidential and/or proprietary knowledge, data or information of the Company.
By way of illustration but not limitation, "Proprietary Information" includes
(a) trade secrets, inventions, ideas, processes, formulas, source and object
codes, data, programs, other works of authorship, know-how, improvements,
discoveries, developments, designs and techniques; and (b) information regarding
plans for research, development, new products, projects, potential projects,
current projects, projects in development and future projects, forecasts, plans,
contracts, releases, marketing and selling, customer/client information,
customer/client lists, vendors, vendor lists, pricing information and costs,
corporation and personal business opportunities, Rolodex cards or other lists of
names, addresses or telephone numbers, other than Owner's personal address book,
Company-related information on computer disks or files, or any other electronic


                                       3


information of any kind, and budgets and unpublished financial statements and
information, and licenses; and (c) information regarding the skills and
compensation of other employees of the Company. "Proprietary Information"
includes information developed by Owner in the course of Owner's services for
the Company, as well as other confidential information to which Owner may have
access in connection with Owner's services. "Proprietary Information" also
includes the confidential information of other individuals or entities with
which Company or any of its owners, predecessors, successors, subsidiaries,
affiliates, parents, or its shareholders, directors and officers has a business
relationship. Notwithstanding the foregoing, it is understood that, at all such
times, Owner is free to use information which is generally known in the trade or
industry, which is not gained as result of a breach of this Agreement, and
Owner's own skill, knowledge, know-how and experience to whatever extent and in
whichever way Owner wishes.

                (viii) "Term" means the five (5) year period commencing on the
effective date of this Agreement (whether or not Owner is employed by Company
for such 5 year period).

                (ix) "Territory" means the United States of America and the
foreign jurisdictions in which the Company or the Parent Company conducts the
Business.

            (c) EXCEPTIONS.

                (i) Owner may own capital stock or other securities of any
corporation, the securities of which are publicly owned or regularly traded in
the over-the-counter market or on any securities exchange, provided that Owner
shall not acquire, in the aggregate, beneficial ownership (as determined under
Rule 13d-3 of the Securities Exchange Act of 1934) of more than five percent
(5%) of the issuer's outstanding securities of that class.

                (ii) After February 9, 2009 until the expiration of the Term,
in the event that Owner is not then an employee of the Company or its
Affiliates, the parties agree that the restrictions in this Agreement shall not
be construed to prohibit Owner from developing or producing any individual
motion picture or television program which is not an Erotic Product, or
arranging for the distribution thereof by a third party where (x) the
development, or production of such individual motion picture(s) or television
program(s) does not adversely affect the revenues and profitability of the
Company or its Affiliates and (y) such individual motion picture(s) or
television program(s) is not a sequel to any Product developed, produced or
distributed by the Company and its Affiliates. The parties further acknowledge
that after February __, 2009 until the expiration of the Term with regard to
Non-Erotic Products, Owner shall have the right to seek the Company's consent to
engage in business activities on a case-by-case basis which activities otherwise
are prohibited by this Agreement, but which activities do not adversely affect
the revenues and profitability the Company or its Affiliates are generating from
any of its existing or projected business lines, product lines or content genre,
which consent shall not be unreasonably withheld or delayed. For purposes of
this Agreement, "Non-Erotic Products" shall mean any Products of the Company
other than the Erotic Products, and shall specifically include any business
line, product line or content genre in which the Company or its Affiliates has
developed strategic plans or taken actual steps to compete or distribute
Products in such areas.


                                       4


            (d) EXTENSION OF TIME; TERMINATION OF AGREEMENT. In the event that
Owner breaches any covenant, obligation or duty in this Agreement or its
subparts, any such duty, obligation, or covenants to which the parties agreed by
this Agreement and its subparts shall automatically toll from the date of the
first breach, and all subsequent breaches, until the resolution of the breach
through private settlement, judicial or other action, including all appeals. The
duration and length of Owner's duties and obligations as agreed by this
Agreement and its subparts shall continue upon the effective date of any such
settlement, or judicial or other resolution. This Agreement shall terminate and
be of no further force or effect in the event the Company and the Parent Company
cease to engage in the Business.

         2. ACKNOWLEDGEMENTS; WAIVER.

            (a) Valuable Consideration. Owner is entering into this Agreement in
consideration for, and as an inducement to his execution of the Purchase
Agreement and the consummation of the transactions contemplated thereby and the
commitment of the Parent Company to perform its obligations undertaken therein,
which Owner acknowledges is adequate, valid and legal consideration for his
execution of this Agreement.

            (b) Proprietary Information Agreement. Nothing in this Section
1(b)(vi) shall be construed to reduce or modify the length of the term of that
certain Employee Proprietary Information and Inventions Agreement of even date
herewith between Owner and the Company.

            (c) Reasonable. Owner agrees and acknowledges that the duration of
the Term and the geographic scope on the restrictions in this Agreement and its
subparts are reasonable. Owner also acknowledges and agrees that the limitation
in this Agreement and its subparts is reasonably necessary for the protection of
the Company, that through the Purchase Agreement, of which this Agreement is a
part, he shall receive adequate consideration for any loss of opportunity
associated with the provisions herein, and that these provisions provide a
reasonable way of protecting the Company's and the Parent Company's business
value and goodwill which was imparted to him.

            (d) Legal Representation. Owner acknowledges that he has had the
opportunity to consult with his own legal counsel regarding the terms of this
Agreement, including, without limitation, the breadth of its geographic scope,
the length of the Term and the Company's and Parent Company's remedies.

            (e) Waiver. Owner hereby waives any and all right to attack the
validity of the terms hereof on the grounds of the breadth of their geographic
scope or the length of the Term.

            (f) Fully Enforced. Owner and the Company hereby agree that this
Agreement shall be enforced as fully as possible under applicable law.

         3. ENFORCEMENT.

            (a) Legal and Equitable Remedies. In view of the nature of the
rights in goodwill, employee relations, trade secrets, Proprietary Information,
and business reputation and prospects of the Company and Parent Company to be


                                       5


protected under this Agreement, Owner understands and agrees that the Company or
the Parent Company could not be reasonably or adequately compensated in damages
in an action at law for Owner's breach of his obligations hereunder.
Accordingly, Owner specifically agrees that the Company and Parent Company shall
be entitled to temporary and permanent injunctive relief, specific performance,
and other equitable relief to enforce the provisions of this Agreement, and that
such relief may be granted without the necessity of proving actual damages, and
without bond. Owner acknowledges and agrees that the restrictive covenants
described in this Agreement are essential and material to this Agreement and the
Purchase Agreement, and that upon breach of this Agreement by him, the Company
or Parent Company is entitled to withhold providing payments or consideration
either under the Earnout Agreement (as herein defined), equitable relief to
prevent continued breach, to recover damages and to seek any other remedies
available to the Company or Parent Company. This provision with respect to
injunctive relief shall not, however, diminish the right of the Company or
Parent Company to claim and recover damages or other remedies in addition to
equitable relief. Notwithstanding the foregoing, neither Parent Company nor
Company, as applicable, shall withhold payments or consideration under the
Earnout Agreement unless Parent Company and/or Company has received an interim
award of relief granted pursuant to an application filed with AAA (as herein
defined) pursuant to Section 3(c) below or as ordered by a court of competent
jurisdiction. For purposes of this Agreement, the term "Earnout Agreement" means
that certain Earnout Agreement of even date herewith among the Parent Company,
the Trusts, Marc Laurence Greenberg and Owner.

            (b) Blue Pencil. If any covenant, word, clause, phrase, provision,
restriction, or section contained herein is held to be unenforceable because of
the scope of such covenant, word, clause, phrase, provision, restriction,
section, the length of the Term or the geographic scope (the Territory) covered
thereby, the undersigned agree that the court making such determination shall
have the power to reduce the scope, the length of the Term, and the geographic
scope (the Territory) or any such provisions and, in its reduced form, said
provision shall then be enforceable. Should any other portion of this Agreement
be declared invalid for any reason, said provision shall be severed and all
other provisions shall continue to be effective and binding. Moreover,
notwithstanding any judicial determination that any term, word, clause, phrase,
provision, restriction, or section of this Agreement is not specifically
enforceable, the parties intend that the Company shall nonetheless be entitled
to recover monetary damages as a result of any breach hereof.

            (c) Choice of Law; Jurisdiction; Venue. The parties hereto intend to
and hereby confer jurisdiction to enforce the covenants contained in Section 1
upon the courts of any state within the geographical scope of such covenants. In
the event that the courts of any one or more of such states shall hold such
covenants wholly unenforceable by reason of the breadth of their scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Company's right to the relief provided above in the
courts of any other state within the geographical scope of such covenants as to
breaches of such covenants in such other respective jurisdictions, the above
covenants as they relate to each state being, for this purpose, severable into
diverse and independent covenants. Notwithstanding the foregoing provisions of
this Section 3(c), the Company in its sole discretion may bring any enforcement
action hereunder in the jurisdiction where the alleged breach hereunder has
occurred, in California, in Colorado or in the jurisdiction where the Company


                                       6


conducts business and Owner hereby consents (to both personal jurisdiction and
venue) to such action, if any, being brought in such jurisdictions and venues.
Further notwithstanding anything contained in this Agreement to the contrary,
the parties agree the Company or the Parent Company, or both, may, in their sole
discretion, file an application with the American Arbitration Association
("AAA") pursuant to and in accordance with the Optional Rules for Emergency
Measures of Protection adopted by the AAA, as the same may be modified or
supplemented from time to time (the "Emergency AAA Rules"), to seek an interim
award of emergency relief to enjoin Owner from engaging in any activity in
violation of this Agreement. Any such interim arbitration shall be subject to
and conducted in strict accordance with the Emergency AAA Rules. Nothing in this
Section 3(c) shall (i) be construed to require the Company or Parent Company to
seek any form or relief by initiating any such emergency action with the AAA, or
(ii) reduce or impair the Company's right to bring an action at law or equity
under this Agreement in a court of competent jurisdiction located in California,
Colorado or such other jurisdiction where the Company or Parent Company conducts
business.

            (d) Prevailing Party Attorney's Fees and Costs. If any legal action
or other proceeding is brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default or misrepresentation in connection with
any provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees, court costs and all expenses
even if not taxable as court costs (including, without limitation, all such
fees, costs and expenses incident to appeals), incurred in that action or
proceeding, in addition to any other relief to which such party may be entitled.


                                       7


         4. NOTICES. Any notices required or permitted hereunder shall be given
to the appropriate party at the address specified below or at such other address
as the party shall specify in writing, with a copy of all notices to Michael
Wolf, Esq., Wolf, Rifkin, Shapiro & Schulman, LLP, 11400 W. Olympic Blvd, Ninth
Floor, Los Angeles, California 90064 and to E. Lee Reichert, Esq., Kamlet
Shepherd & Reichert, LLP, 1515 Arapahoe Street, Ste. 1600, Denver, Colorado
80202 . Such notice shall be deemed given upon personal delivery to the
appropriate address or if sent by certified or registered mail, three (3) days
after the date of mailing.

         5. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, and their respective heirs,
legal representatives, successors and assigns. No assignment or transfer of
rights and obligations hereunder shall be made by Owner. The Company or the
Parent Company may assign or transfer any rights and obligations hereunder to
(i) any Affiliate of the Company and/or Parent Company, (ii) a third party that
acquires by merger, stock purchase or asset purchase (x) more than fifty percent
(50%) of the voting equity interests in the Company or the Parent Company, as
applicable, or (y) all or substantially all of the assets of the Company or the
Parent Company, as applicable.

         6. CAPTIONS; DEFINITIONS. The titles or captions of sections contained
in this Agreement are inserted only as a matter of convenience and for reference
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provision hereof. The parties agree to all definitions in the
statement of parties to this Agreement and in the other introductory language to
this Agreement.

         7. CONTROLLING LAW; AMENDMENT; ENTIRE AGREEMENT; WAIVER. This Agreement
shall be construed in accordance with and governed by the laws of the
jurisdiction in which an enforcement action pursuant to Section 3 is brought,
without giving effect to the principles of conflict of laws thereof. No
provision of this Agreement or any related document shall be construed against
or interpreted to the disadvantage of any party hereto by any court or other
governmental or judicial authority by reason of such party's having or being
deemed to have structured or drafted such provision. This Agreement sets forth
the entire agreement and understanding of the parties hereto with regard to the
subject matter hereof and supersedes any and all prior agreements, arrangements
and understandings, written or oral, pertaining to the subject matter hereof. No
representation, promise or inducement relating to the subject matter hereof has
been made to a party that is not embodied in this Agreement, and no party shall
be bound by or liable for any alleged representation, promise or inducement not
so set forth. This Agreement may not be altered or amended except in writing
signed by the Company, the Parent Company and Owner. The failure of any party
hereto at any time to require performance of any provisions hereof shall in no
manner affect the right to enforce the same. No waiver by any party hereto of
any condition, or of the breach of any term, provision, warranty,
representation, agreement or covenant contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed or construed
as a further or continuing waiver of any such condition or breach or a waiver of
any other condition or of the breach of any other term, provision, warranty,
representation, agreement or covenant herein contained.

         8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument. This Agreement shall become effective
when one or more counterparts have been signed by each of the parties to this
Agreement and delivered to each of the other parties to this Agreement.

                          [SIGNATURE PAGE(S) TO FOLLOW]


                                       8





                  IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.

                                            THE PARENT COMPANY:

                                            New Frontier Media, Inc.,
                                            a Colorado corporation
Address for Notice:
New Frontier Media, Inc.                    By: /s/ Michael Weiner
7007 Winchester Circle                         --------------------
Suite 200                                   Name: Michael Weiner
Boulder, CO 80301                                ------------------
Facsimile: (303) 444-0848                   Title:CEO
                                                  -----------------
Attention:  Michael Weiner,
            Karyn Miller, and
            George Sawicki

                                  THE COMPANY:

                                            MRG Entertainment, Inc.,
                                            a California corporation

Address for Notice:
New Frontier Media, Inc.                    By: /s/ Karyn Miller
7007 Winchester Circle                         --------------------
Suite 200                                   Name: Karyn Miller
Boulder, CO 80301                                ------------------
Facsimile: (303) 444-0848                   Title:CFO
                                                  -----------------
Attention:  Michael Weiner,
            Karyn Miller, and
            George Sawicki

                                     OWNER:

Address for Notice:                  /s/ Marc Laurence Greenberg
- ------------------------             -----------------------------
- ------------------------             Marc Laurence Greenberg
Phone No:
         ---------------
Facsimile No:
             -----------
Email:
      ------------------

EX-99

 

For Immediate Release

Contact: Karyn Miller

(303)444-0900 x 102

kmiller@noof.com

New Frontier Announces Acquisition of

MRG Entertainment Inc.

BOULDER, COLORADO, February 7, 2006 – New Frontier Media, Inc. (Nasdaq: NOOF), a leader in the electronic distribution of adult entertainment, announced the acquisition of MRG Entertainment Inc. and its affiliated companies (“MRG Entertainment”). MRG Entertainment is a producer and distributor of mainstream films and soft erotic features and events. Its titles, which include a library of over 350 hours of content, are distributed on U.S. premium pay TV channels such as Showtime and Cinemax, as well as on pay-per-view channels across a range of cable and satellite distribution platforms. MRG Entertainment also distributes a full range of independently produced motion pictures to markets around the world.

“This acquisition expands New Frontier Media’s portfolio to the rapidly growing market for softer, erotic content, as well as to the market for erotic event-type content. The combination also gives us a strong, established beachhead in a range of international markets, and provides us a library of content that we can profitably monetize through our extensive distribution networks, ” said Michael Weiner, Chief Executive Officer of New Frontier Media. “This transaction will be accretive to New Frontier Media’s earnings from day one,” continued Mr. Weiner. In its most recent 12-month period, MRG Entertainment had revenue of $13.0 million and EBITDA of $4.8 million.

Under the terms of the deal, New Frontier Media will pay a total of $15 million in cash and $5 million of New Frontier Media common stock, as well as a three-year performance incentive of $2 million. The deal is expected to close by the end of the week.

The Company will be discussing this acquisition in more detail during its third quarter conference call being held today at 11:00 am Eastern Time. The participant phone number for the conference call is (800)-250-2351. To participate in the web cast please log on to www.noof.com and click on “Investor Relations” and then “Webcasts & Events”.

This news release contains forward-looking statements within the meaning of Section 27A of the

Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements are based on current expectations, estimates and projections made by management. The Company intends for the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements. Words such as "anticipates", "expects", "intends", "plans", "believes," "seeks", "estimates", or variations of such words are intended to identify such forward-looking statements. All statements in this release regarding the acquisition expanding New Frontier Media’s portfolio to the rapidly growing market for softer, erotic content, as well as to the market for erotic event- type content, the combination giving us a strong, established beachhead in a range of international markets, the acquisition providing us a library of content that we can profitably monetize through our extensive distribution networks,that this transaction will be accretive to New Frontier Media’s earnings from day one, andthe outcome of any contingencies are forward-looking statements. All forward-looking statements made in this press release are made as of the date hereof, and the company assumes no obligation to update the forward-looking statements included in this news release whether as a result of new information, future events, or otherwise. The forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth or implied by any forward- looking statements. Please refer to the Company's Form 10-K and other filings with the SEC for additional information regarding risks and uncertainties, including, but not limited to, the risk factors listed from time to time in such SEC reports.

Copies of these filings are available through the SEC's electronic data gathering analysis and retrieval system (EDGAR) at www.sec.gov .

ABOUT MRG ENTERTAINMENT

MRG Entertainment, founded in January 1997 by Marc Greenberg and Rich Goldberg, specializes in the production, distribution, sales and financing of feature films and television programming. As a full-service independent production and distribution company working within an ever-changing domestic and international marketplace, MRG Entertainment is dedicated to delivering quality film and television product that is highly marketable and profitable.

MRG Entertainment’s Mainline Releasing unit produces mainstream, erotic entertainment that airs on premium movie channels such as Showtime and Cinemax. Their movies and continuing series have included such titles as “Indecent Behavior”, “Kama Sutra”, and “Lady Chatterly Stories”.

MRG Entertainment’s Lightning Entertainment unit represents the work of a full range of independent U.S. film producers in markets in every corner of the globe. The Lightening portfolio consists of over 40 titles.

ABOUT NEW FRONTIER MEDIA, INC.

New Frontier Media, Inc. is a leading distributor of adult entertainment via electronic platforms. The Company delivers the most extensive lineup of quality programming over the broadest range of electronic means including cable, satellite, Broadband, wireless and video-on-demand.

The Erotic Networks™, the umbrella brand for the Company’s subscription and pay television subsidiary, provides pay-per-view, video-on-demand, and subscription TV networks and services to over 89 million cable, DBS (direct broadcast satellite) and C-band households throughout North America. The Erotic Networks™ include Pleasure™, TEN™, TEN*Clips™, TEN*Xtsy™, TEN*Blue™, TEN*Blox™, TEN*Max™ and TEN*On Demand™. These networks and services represent the widest variety of editing standards available and are programmed without duplication to offer the most extensive selection of adult network programming under a single corporate umbrella.

For more information contact Karyn Miller, Chief Financial Officer, at (303) 444-0900, extension 102, and please visit our web site at www.noof.com.