10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý   Quarterly report under Section 13 or 15(d) of the Securities and Exchange
Act of 1934.

For the quarterly period ended September 30, 2007

o   Transition Report under Section 13 or 15(d) of the Exchange Act.

For the transition period from                          to                         

0-23697
(Commission file number)

NEW FRONTIER MEDIA, INC.

(Exact name of registrant as specified in its charter)

Colorado	84-1084061
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification Number)

7007 Winchester Circle, Suite 200, Boulder, CO 80301
(Address of principal executive offices)

(303) 444-0900
(Issuer’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by checkmark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act). (Check one):

Large Accelerated Filer o      Accelerated Filer ý      Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No ý

As of October 31, 2007, 23,827,391 shares of Common Stock, par value $.0001, were outstanding.

Form 10-Q
NEW FRONTIER MEDIA, INC.
Index

		Page Number
Part I.	Financial Information
Item 1.	Financial Statements
	Consolidated Balance Sheets		3
	Consolidated Statements of Income		4
	Consolidated Statements of Cash Flows		5
	Consolidated Statements of Comprehensive Income		6
	Consolidated Statements of Changes in Shareholders’ Equity		7
	Notes to Consolidated Financial Statements		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		29
Item 4.	Controls and Procedures		30
Part II.	Other Information
Item 1A.	Risk Factors		30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		31
Item 4.	Submission of Matters to a Vote of Security Holders		31
Item 6.	Exhibits		32
SIGNATURES			33

2

PART I.   FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in thousands, except par values)

	(Unaudited) September 30, 2007			March 31, 2007
Assets
Current assets:
Cash and cash equivalents	$	12,205		$	17,345
Restricted cash		10			1,710
Marketable securities		3,845			8,681
Accounts receivable, net of allowance for doubtful accounts of $48 and $41, respectively		11,262			12,249
Deferred costs		2,106			—
Taxes receivable		834			986
Deferred tax asset		407			528
Prepaid and other assets		1,341			1,877
Total current assets		32,010			43,376
Equipment and furniture, net		4,722			4,534
Prepaid distribution rights, net		9,872			9,084
Marketable securities		583			587
Recoupable costs and producer advances		1,610			1,278
Film costs, net		8,213			6,991
Goodwill		18,608			18,608
Other identifiable intangible assets, net		2,390			2,771
Other assets		984			987
Total assets	$	78,992		$	88,216
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	2,137		$	1,942
Producer payable		638			1,049
Deferred revenue		1,131			889
Due to related party		92			647
Accrued compensation		1,751			3,298
Deferred producer liabilities		2,309			1,344
Accrued and other liabilities		857			3,664
Total current liabilities		8,915			12,833
Deferred tax liability		355			976
Taxes payable		1,849			1,726
Other long-term liabilities		962			982
Total liabilities		12,081			16,517
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $.10 par value, 4,999 shares authorized: no shares issued and outstanding		—			—
Common stock, $.0001 par value, 50,000 shares authorized, 23,827 and 24,302 shares issued and outstanding at September 30, 2007 and March 31, 2007, respectively		2			2
Additional paid-in capital		61,789			64,191
Retained earnings		5,136			7,536
Accumulated other comprehensive loss		(16	)		(30	)
Total shareholders’ equity		66,911			71,699
Total liabilities and shareholders’ equity	$	78,992		$	88,216

The accompanying notes are an integral part of the unaudited consolidated financial statements.

3

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)

	(Unaudited) Quarter Ended September 30,						(Unaudited) Six Months Ended September 30,
	2007			2006			2007			2006
Net sales	$	12,430		$	16,166		$	25,370		$	32,494
Cost of sales		3,459			5,195			7,256			10,524
Gross margin		8,971			10,971			18,114			21,970
Operating expenses:
Sales and marketing		1,640			1,266			3,708			2,983
General and administrative		3,989			4,066			8,652			7,857
Charge for asset disposition and impairment		90			—			363			—
Total operating expenses		5,719			5,332			12,723			10,840
Operating income		3,252			5,639			5,391			11,130
Other income (expense):
Interest income		215			322			469			560
Interest expense		(53	)		(28	)		(96	)		(57	)
Other income (loss), net		(13	)		4			12			(3	)
Total other income		149			298			385			500
Income before provision for income taxes		3,401			5,937			5,776			11,630
Provision for income taxes		(1,256	)		(2,283	)		(2,134	)		(4,427	)
Net income	$	2,145		$	3,654		$	3,642		$	7,203
Basic income per share	$	0.09		$	0.15		$	0.15		$	0.30
Diluted income per share	$	0.09		$	0.15		$	0.15		$	0.30
Dividends declared per common share	$	0.13		$	—		$	0.25		$	—

The accompanying notes are an integral part of the unaudited consolidated financial statements.

4

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	(Unaudited) Six Months Ended September 30,
	2007			2006
Cash flows from operating activities:
Net income	$	3,642		$	7,203
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,611			6,577
Tax benefit from option/warrant exercises		167			134
Share-based compensation		563			428
Charge for asset disposition and impairment		363			—
Changes in operating assets and liabilities
Accounts receivable		987			11
Accounts payable		195			(441	)
Prepaid distribution rights		(2,388	)		(2,468	)
Capitalized film costs		(2,152	)		(1,497	)
Deferred costs		(2,106	)		—
Deferred revenue, net		242			510
Producer payable		(411	)		58
Taxes receivable and payable, net		275			1,288
Deferred tax asset and liability, net		(508	)		(1,218	)
Accrued compensation		(1,547	)		(21	)
Other assets and liabilities, net		(45	)		247
Net cash provided by operating activities		888			10,811
Cash flows from investing activities:
Payment for business acquisitions		—			(18	)
Purchase of investments available-for-sale		(2,671	)		(12,571	)
Redemption of investments available-for-sale		7,532			2,753
Purchase of equipment and furniture		(1,160	)		(586	)
Payment of related party note arising from business acquisition		(555	)		(468	)
Net cash provided by (used in) investing activities		3,146			(10,890	)
Cash flows from financing activities:
Proceeds from exercise of stock options/warrants		512			636
Purchase of common stock		(3,618	)		(2,160	)
Payment of dividend		(6,042	)		—
Excess tax benefit from option/warrant exercise		(26	)		323
Net cash used in financing activities		(9,174	)		(1,201	)
Net decrease in cash and cash equivalents		(5,140	)		(1,280	)
Cash and cash equivalents, beginning of period		17,345			12,611
Cash and cash equivalents, end of period	$	12,205		$	11,331

The accompanying notes are an integral part of the unaudited consolidated financial statements.

5

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)

	(Unaudited) Quarter Ended September 30,				(Unaudited) Six Months Ended September 30,
	2007		2006		2007		2006
Net income	$	2,145	$	3,654	$	3,642	$	7,203
Other comprehensive income Unrealized gain on available-for-sale marketable securities, net of tax		14		27		14		41
Total comprehensive income	$	2,159	$	3,681	$	3,656	$	7,244

The accompanying notes are an integral part of the unaudited consolidated financial statements.

6

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS’ EQUITY
(in thousands)

	(Unaudited) Six Months Ended September 30,
	2007			2006
Common stock
Balance at beginning of period	$	2		$	2
Balance at end of period		2			2
Additional paid-in capital
Balance at beginning of period		64,191			61,488
Exercise of stock options/warrants		512			636
Tax benefit for stock option/warrant exercise		141			457
Purchase of common stock		(3,618	)		(2,160	)
Stock-based compensation		563			428
Balance at end of period		61,789			60,849
Retained earnings
Balance at beginning of period		7,536			9,829
Net income		3,642			7,203
Declared dividend		(6,042	)		—
Balance at end of period		5,136			17,032
Accumulated other comprehensive loss
Balance at beginning of period		(30	)		(74	)
Unrealized gain on available-for-sale securities		14			41
Balance at end of period		(16	)		(33	)
Total shareholders’ equity	$	66,911		$	77,850

The accompanying notes are an integral part of the unaudited consolidated financial statements.

7

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

New Frontier Media, Inc. is a publicly traded holding company for its operating subsidiaries which are reflected as the Pay TV, Film Production and Internet segments.

Pay TV

The Pay TV segment reflects the operating results of Colorado Satellite Broadcasting, Inc. (“CSB”), d/b/a The Erotic Networks ® (“TEN”). This segment is a leading provider of adult programming to multi-channel television providers and low-powered, direct-to-home households. Through its Video-On-Demand (“VOD”) service and its networks — Plz, TEN ®, TEN*Clips ®, Xtsy ®, TEN*Blue ®, TEN*Blox ®, and Real ® — the Pay TV segment is able to provide a variety of editing styles and programming mixes to a broad range of adult consumers. Ten Sales, Inc., which is also reflected within the operating results of the Pay TV segment, was formed in April 2003 and is responsible for selling the segment’s services.

Film Production

The Film Production segment includes the operating results of MRG Entertainment, Inc. and its subsidiaries. The Film Production segment derives revenue from two principal businesses: (1) the production and distribution of original motion pictures known as “erotic thrillers” and erotic, event styled content (“owned product”); and (2) the licensing of domestic third party films in international and domestic markets where it acts as a sales agent for the product (“repped product”).

Internet

The Internet segment includes the operating results of Interactive Gallery (“IGI”), a division of New Frontier Media, Inc., which aggregates and resells adult content over the internet. IGI sells content to monthly subscribers through its broadband site, www.ten.com, partners with third-party gatekeepers for the distribution of www.ten.com, wholesales pre-packaged content to various webmasters, and aggregates and resells adult content to wireless carriers in the United States and internationally.

Basis of Presentation

The accompanying financial statements of New Frontier Media, Inc. and its wholly owned subsidiaries (collectively hereinafter referred to as “New Frontier Media” or the “Company” or “we” and other similar pronouns) have been prepared without audit pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. Management believes these statements include all adjustments, which are of a normal and recurring nature, considered necessary for a fair presentation of New Frontier Media’s financial position and results of operations. The financial statements included herein should be read in conjunction with the financial statements and notes thereto included in New Frontier Media’s latest annual report on Form 10-K filed with the SEC on June 14, 2007.

The results of operations for the three or six month periods ended September 30, 2007 are not necessarily indicative of the results to be expected for the full year.

8

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of New Frontier Media. All significant intercompany accounts, transactions and profits have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates have been made by management in several areas, including, but not limited to, the collectibility of accounts receivable, recoupable producer costs and producer advances, the valuation of chargebacks and reserves, the forecast of anticipated revenues (“ultimate” revenues) which is used to amortize film costs, the expected useful life and valuation of prepaid distribution rights, the valuation of goodwill and intangibles, the useful lives of intangible assets, certain Pay TV segment pay-per-view and VOD revenue, and assumptions related to the application of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payments. Management bases its estimates and judgments on historical experience and on various other factors that are considered to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from these estimates.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

Producer-for-Hire Arrangements

The Company’s Film Production segment periodically acts as a producer-for-hire for certain customers. Through these arrangements, the Company provides services and incurs costs associated with the film production, and the Company earns a fee for its services once the film has been delivered and accepted by the customer. The Company maintains no ownership rights for the produced content. Revenue for these arrangements is recognized when persuasive evidence of an arrangement exists, the film has been delivered and accepted by the customer, the fee is fixed and determinable and collection is probable. The costs incurred for production in these arrangements are initially recorded as a deferred cost within the current assets section of the balance sheet, and the deferred costs are subsequently recorded as a cost of sales when the Company recognizes revenue for the related services. At September 30, 2007, the Company had $2.1 million of deferred costs recorded in connection with a producer-for-hire arrangement.

Recently Issued Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to choose to measure certain financial instruments and certain other items at fair value. The standard requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings. SFAS No. 159 is effective for the fiscal year beginning April 1, 2008 for the Company, although earlier adoption is permitted. The Company is currently evaluating the impact that SFAS No. 159 will have on its results of operations and financial position.

9

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are effective for the fiscal year beginning April 1, 2008 for the Company. The Company is currently evaluating the impact that SFAS No. 157 will have on its results of operations and financial position.

NOTE 2 — INCOME PER SHARE

The components of basic and diluted income per share are as follows (in thousands, except per share amounts):

	(Unaudited) Quarter Ended September 30,				(Unaudited) Six Months Ended September 30,
	2007		2006		2007		2006
Net income	$	2,145	$	3,654	$	3,642	$	7,203
Average outstanding shares of common stock		24,120		23,830		24,232		23,832
Dilutive effect of warrants/stock options		105		446		192		455
Common stock and common stock equivalents		24,225		24,276		24,424		24,287
Basic income per share	$	0.09	$	0.15	$	0.15	$	0.30
Diluted income per share	$	0.09	$	0.15	$	0.15	$	0.30

Options and warrants which were excluded from the calculation of diluted earnings per share because the exercise price of the options and warrants were greater than the average market price of the common shares, or because the impact on the calculation of certain options and warrants associated with unrecognized compensation and related tax benefits, were approximately 1.2 million and 1.0 million for the quarters ended September 30, 2007 and 2006, respectively and 0.6 million and 1.0 million for the six month periods ended September 30, 2007 and 2006, respectively. Inclusion of these options and warrants would be antidilutive.

NOTE 3 — EMPLOYEE EQUITY INCENTIVE PLANS

During the quarter ended September 30, 2007, the Company adopted the New Frontier Media, Inc. 2007 Stock Incentive Plan (the “2007 Plan”), which was approved by the Company’s shareholders. The 2007 Plan serves to replace the Company’s prior equity incentive plans, consisting of the New Frontier Media Inc. 1998 Incentive Stock Plan, the New Frontier Media Inc. 1999 Incentive Stock Plan, the New Frontier Media Inc. 2001 Incentive Stock Plan and the New Frontier Media Inc. Millennium Incentive Stock Option Plan. Under the 2007 Plan, various awards including stock options, stock appreciation rights, restricted stock, bonus stock and other awards as defined by the 2007 Plan may be granted to officers, employees and directors. There are 1,250,000 shares of the Company’s common stock issuable under the 2007 Plan and the maximum number of shares of common stock that may be subject to one or more awards granted to a participant during any calendar year is 350,000 shares. During the three month period ended September 30, 2007, 80,000 options were issued to an employee from the 2007 Plan.

Share-Based Compensation

In accordance with the provisions of SFAS No. 123(R), the Company accounts for employee and non-employee director stock options under the fair value method which requires the use of an option pricing model for estimating fair value. Accordingly, share-based compensation is measured at grant

10

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

date, based on the fair value of the award. The Company uses the straight-line attribution method to recognize share-based compensation costs over the requisite service period of the award.

Share-based compensation recognized in the 2008 and 2007 fiscal years in accordance with SFAS No. 123(R) is determined using the Black-Scholes option pricing model for estimating the fair value of options granted under the Company’s equity incentive plan. The Company uses certain assumptions in order to calculate the fair value of an option using the Black-Scholes option pricing model. The volatility assumptions are derived using historical volatility data. The expected term assumptions are stratified between officers and non-officers and are determined using the weighted average exercise behavior for these two groups of employees. The dividend yield assumption is based on the dividend declared by the Company’s Board of Directors. The weighted average estimated values of employee stock option grants and the weighted average assumptions that were used in calculating such values for the quarter and six months ended September 30, 2007 and 2006 were as follows:

	Quarter Ended September 30,						Six Months Ended September 30,
	2007			2006			2007			2006
Weighted average estimated values	$	2.02		$	4.25		$	2.02		$	4.25
Expected term (in years)		6			5			6			5
Risk free interest rate		4.1	%		4.8	%		4.1	%		4.8	%
Volatility		60	%		65	%		60	%		65	%
Dividend yield		7.6	%		0	%		7.6	%		0	%

Share-based compensation expense recognized in the consolidated statements of income during the quarter and six months ended September 30, 2007 and 2006 is based on awards ultimately expected to vest, reduced for estimated forfeitures. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience and are different for officers and non-officers. The estimated forfeitures used for the three months ended September 30, 2007 were 0% for officers and 16% for non-officers.

The following table summarizes the effects of share-based compensation resulting from the application of SFAS No. 123(R) to options granted under the Company’s equity incentive plans. This expense is included in cost of sales and selling, general and administrative expenses (in thousands, except per share amounts):

	Quarter Ended September 30,						Six Months Ended September 30,
	2007			2006			2007			2006
Share-based compensation expense before income taxes	$	288		$	226		$	563		$	428
Income tax benefit		(107	)		(86	)		(208	)		(164	)
Total share-based compensation expense after income taxes	$	181		$	140		$	355		$	264
Share-based compensation effects on basic earnings per common share	$	0.01		$	0.01		$	0.01		$	0.01
Share-based copmensation effects on diluted earnings per common share	$	0.01		$	0.01		$	0.01		$	0.01

11

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Stock option transactions during the six months ended September 30, 2007 are summarized as follows:

	Shares			Weighted Avg. Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value(1) (in thousands)
Outstanding at March 31, 2007		1,607,927		$	6.72
Granted		80,000		$	6.52
Exercised		(94,100	)	$	5.44			$	192
Forfeited/Cancelled		(68,400	)	$	6.50
Outstanding at September 30, 2007		1,525,427		$	6.80		7.0	$	1,812
Options Exercisable at September 30, 2007		1,081,677		$	6.65		6.3	$	1,383
Options Vested and Expected to Vest—Non-Officers		603,796		$	7.04		7.3	$	602
Options Vested and Expected to Vest—Officers		895,000		$	6.61		6.6	$	1,187

⁽¹⁾The aggregate intrinsic value represents the difference between the exercise price and the value of New Frontier Media, Inc. stock at the time of exercise or at the end of the period if unexercised.

Net cash proceeds from the exercise of stock options were $0.3 million and $0.1 million for the quarters ended September 30, 2007 and 2006, respectively, and $0.5 million and $0.6 million for the six months ended September 30, 2007 and 2006, respectively. The Company issued new shares of common stock upon exercise of these stock options. As of September 30, 2007, there was $0.4 million and $1.0 million of total unrecognized compensation costs for non-officers and officers, respectively, related to stock options granted under the Company’s equity incentive plans. The unrecognized compensation cost for non-officers and officers is expected to be recognized over a weighted average period of 1.8 years and 2.2 years, respectively. The excess tax benefits from the exercise of stock options that were classified as financing activities for each of the quarters ended September 30, 2007 and 2006 were immaterial. The excess tax benefit from the exercise of options classified as financing activities was immaterial for the six months ended September 30, 2007 and was $0.3 million for the six months ended September 30, 2006.

NOTE 4 — SEGMENT INFORMATION

The Company has adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which establishes reporting and disclosure standards for an enterprise’s operating segments. Operating segments are defined as components of an enterprise for which separate financial information is available and regularly reviewed by the Company’s senior management.

The Company has the following three reportable segments:

      •   Pay TV — distributes branded adult entertainment programming networks and VOD content through electronic distribution platforms including cable television, C-Band, and Direct Broadcast Satellite (“DBS”).

      •   Film Production — produces and distributes mainstream films and soft erotic features and events. These titles are distributed on U.S. and international premium channels and pay-per-view channels across a range of cable and satellite distribution platforms. The Film Production segment also distributes a full range of independently produced motion pictures to markets around the world.

12

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

      •   Internet — aggregates and resells adult content via the internet. The Internet segment sells content to monthly subscribers through its broadband site, www.ten.com, partners with third-party gatekeepers for the distribution of www.ten.com, wholesales pre-packaged content to various webmasters, and aggregates and resells adult content to wireless platforms in the United States and internationally.

Expenses related to Corporate Administration include all costs associated with the operation of the public holding company, New Frontier Media, Inc., that are not directly allocable to the Pay TV, Film Production or Internet segments. These costs include, but are not limited to, legal and accounting expenses, insurance, registration and filing fees with NASDAQ, executive employee costs and the SEC, investor relation costs, and printing costs associated with the Company’s public filings and shareholder communications.

The accounting policies of the reportable segments are the same as those described in the summary of accounting policies. Segment profit is based on income before income taxes. The reportable segments are distinct business units, separately managed with different distribution channels. The selected balance sheet information and operating results of the Company’s segments at the dates and during the periods presented below were as follows (in thousands):

	(Unaudited) Quarter Ended September 30,						(Unaudited) Six Months Ended September 30,
	2007			2006			2007			2006
NET SALES
Pay TV	$	9,995		$	12,221		$	20,362		$	24,808
Film Production		2,000			3,334			4,090			6,478
Internet		435			601			918			1,208
Total	$	12,430		$	16,166		$	25,370		$	32,494
SEGMENT PROFIT
Pay TV	$	5,096		$	7,843		$	10,175		$	15,538
Film Production		442			150			305			93
Internet		130			(56	)		144			(110	)
Corporate Aministration		(2,267	)		(2,000	)		(4,848	)		(3,891	)
Total	$	3,401		$	5,937		$	5,776		$	11,630
INTEREST INCOME
Pay TV	$	1		$	—		$	1		$	1
Film Production		1			—			1			—
Corporate Administration		213			322			467			559
Total	$	215		$	322		$	469		$	560
INTEREST EXPENSE
Internet	$	—		$	—		$	—		$	1
Corporate Administration		53			28			96			56
Total	$	53		$	28		$	96		$	57

13

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

	(Unaudited) Quarter Ended September 30,				(Unaudited) Six Months Ended September 30,
	2007		2006		2007		2006
DEPRECIATION AND AMORTIZATION BY SEGMENT
Pay TV	$	1,114	$	1,104	$	2,205	$	2,294
Film Production		577		2,047		1,363		4,112
Internet		21		84		37		165
Corporate Administration		3		3		6		6
Total	$	1,715	$	3,238	$	3,611	$	6,577

	(Unaudited) September 30, 2007			March 31, 2007
IDENTIFIABLE ASSETS BY SEGMENT
Pay TV	$	113,238		$	104,444
Film Production		33,234			30,520
Internet		16,445			16,462
Corporate Administration		47,515			56,268
Eliminations		(131,440	)		(119,478	)
Total	$	78,992		$	88,216

NOTE 5 — MAJOR CUSTOMERS

The Company’s major customers (customer revenue in excess of 10% of consolidated net sales) are Comcast Corporation (“Comcast”), EchoStar Communications Corporation (“EchoStar”), Time Warner, Inc. (“Time Warner”) and DirecTV, Inc. (“DirecTV”). All major customers are included in both the Pay TV and Film Production segments. Revenue from Comcast, Echostar’s DISH Network, Time Warner and DirecTV as a percentage of total revenue for each of the quarters and six month periods ended September 30 are as follows:

	(Unaudited) Quarter Ended September 30,				(Unaudited) Six Months Ended September 30,
	2007		2006		2007			2006
Comcast		21%		11%		19	%		11	%
EchoStar		16%		24%		17	%		25	%
Time Warner		15%		12%		15	%		12	%
DirecTV		13%		12%		13	%		12	%

The Company’s outstanding accounts receivable balance due from its major customers as of September 30, 2007 and March 31, 2007 are as follows (in thousands):

	(Unaudited) September 30, 2007		March 31, 2007
Comcast	$	1,684	$	1,919
EchoStar		2,150		2,174
Time Warner		914		1,374
DirecTV		934		1,088
Total	$	5,682	$	6,555

14

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 6 — MARKETABLE SECURITIES

Marketable securities are required to be categorized as either trading, available-for-sale or held-to-maturity. As of September 30, 2007 the Company had no trading or held-to-maturity securities. The marketable securities held by the Company at September 30, 2007 are categorized as available-for-sale and are reported at fair value. Marketable securities held by the Company at September 30, 2007 were as follows (in thousands):

			Gross Unrealized
	Gross Amortized Cost		Gains		Losses			Estimated Fair Value
Available-for-sale securities
Bank debt	$	97	$	—	$	—		$	97
Floating rate securities		1,450		—		—			1,450
Corporate debt securities		506		—		(8	)		498
Tax exempt municipal securities		2,383		—		—			2,383
Total available-for-sale securities	$	4,436	$	—	$	(8	)	$	4,428

The contractual maturities of these investments as of September 30, 2007, were as follows (in thousands):

	Available-for-Sale Securities
Year Ended March 31,	Gross Amortized Cost		Fair Value
2008	$	3,853	$	3,845
2009		583		583
Total available-for-sale securities	$	4,436	$	4,428

NOTE 7 — ACQUISITIONS

On February 10, 2006, the Company completed the acquisition of MRG Entertainment, Inc., its subsidiaries, and a related company, Lifestyles Entertainment, Inc. (collectively “MRG”) by acquiring all of the outstanding capital stock of MRG. MRG produces and distributes erotic thrillers which are distributed in both the U.S. and internationally on premium movie services and also produces and distributes adult, reality-based content that is distributed in the U.S. through both DBS providers and Multiple System Operators (“MSOs”). MRG is presented in the Company’s Film Production operating segment.

The aggregate purchase price for the Company’s acquisition of MRG was $21.1 million. Approximately $2.6 million of the cash acquisition price was initially held in escrow pending the resolution of certain contingencies and $1.0 million of the escrow funds was released during the prior fiscal year in connection with the settlement of certain liabilities related to the acquisition. The remaining $1.6 million balance was released in July 2007 in accordance with the purchase agreement.

NOTE 8 — LITIGATION

During the quarter ended March 31, 2007, the Company participated in mediation with TVN Entertainment Corporation (“TVN”) regarding a complaint that was originally filed by TVN in the Superior Court of the State of California for the County of Los Angeles in 2005. The original complaint related to a Licensing, Encoding and Transport agreement (the “Transport Agreement”) entered into by TVN and the Company’s Pay TV segment. The complaint alleged that under the

15

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Transport Agreement, TVN was entitled to certain fees for transport services even in those circumstances where TVN was not the party providing the transport services. The Company responded to the complaint with certain counterclaims and a general denial of the allegations. In July 2007, the Company and TVN resolved the dispute. In connection with the resolution of the dispute, the Company paid $500,000 in consideration of the dismissal and release of claims by TVN regarding past non-payment of fees which were accrued at March 31, 2007, and the Company agreed to pay TVN a quarterly fee of $125,000 (beginning with the quarter ended June 30, 2007) through the quarter ended March 31, 2010 for certain additional services provided by TVN.

In the normal course of business, the Company is subject to various lawsuits and claims. Management of the Company believes that the final outcome of these matters, either individually or in the aggregate, will not have a material effect on its financial statements.

NOTE 9 — REVENUE GUARANTEES AND CONTINGENCIES

The Company entered into an Affiliation Agreement with DirecTV, Inc. on April 4, 2006, whereby DirecTV had the non-exclusive right to distribute the national feeds of the 24-hour per day, 7-day per week programming services of two of the Pay TV segment’s networks for a two-year period from the date upon which DirecTV commenced the commercial distribution of these services. Under the terms of the agreement, if the Pay TV segment’s networks replaced competitive networks, the Company would guarantee that DirecTV would earn certain revenue targets from the performance of these services in each of Year 1 and Year 2 of the contract. If the revenue targets were not achieved, the shortfall would be paid to DirecTV in an amount that would not exceed the total license fee earned by the Pay TV segment in each of Year 1 and Year 2 of the contract. When the networks launched on the DirecTV platform, DirecTV did replace competitive services, thereby putting this contract term into force. The Company assessed the need to record a liability for the DirecTV performance guarantee during the term of the arrangement and deemed no liability should be recorded because the Company would likely exceed the revenue targets during the contract period and because the likelihood of not meeting the revenue guarantee was remote based on actual historical performance data.

On September 28, 2007, the Company entered into an Amended and Restated Affiliation Agreement for DTH Satellite Exhibition of Cable Network Programming (the “Amended Agreement”) with DirecTV. The Amended Agreement increased the number of services carried on the DirecTV platform from two to three and extended the term for each service provided through October 14, 2009 if the Company achieves certain revenue milestones for each service during the first year of the Amended Agreement. The Company retained the right to make up any revenue shortfall to DirecTV in order to ensure its option to cause DirecTV to continue carriage of each of the services through the extended term. If the Company chooses not to make up any shortfall, which is not expected, then DirecTV would have the right to terminate the related service. The Company expects to exceed the revenue targets for each service during the contract period based on actual historical performance data and forecasted performance data.

NOTE 10 — DIVIDENDS AND STOCK REPURCHASE

On September 6, 2007, the Company’s Board of Directors declared a quarterly cash dividend of $0.125 per share of common stock, payable on September 28, 2007, to shareholders of record on September 17, 2007. The Company paid approximately $3.0 million on September 28, 2007 to shareholders of record. The Board of Directors has approved a regular quarterly cash dividend of $0.125 per share of common stock. The payment of the dividend is at the discretion of the Board of Directors.

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NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

In December 2005, the Company’s Board of Directors approved a 2.0 million share repurchase plan to be executed over 30 months. During the quarter ended September 30, 2007, the Company repurchased approximately 0.6 million shares of common stock in accordance with this plan. The total purchase price for these shares was approximately $3.6 million.

NOTE 11 — INCOME TAXES

Effective at the beginning of the first fiscal quarter of 2008, the Company adopted the provisions of Financial Accounting Standards Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109. FIN No. 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109, Accounting for Income Taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

The adoption of FIN No. 48 did not affect the Company’s liability for unrecognized tax benefits as no new uncertain tax positions were recognized. The total amount of gross unrecognized tax benefits as of the date of adoption was $1.9 million and is classified as long-term income taxes payable. $0.4 million of these gross unrecognized tax benefits would affect the effective tax rate if realized.

The Company’s policy to include interest related to unrecognized tax benefits within interest expense and income tax penalties as income tax expense on the consolidated statements of income did not change as a result of implementing the provisions of FIN No. 48. As of the date of adoption of FIN No. 48, the Company had $0.2 million and $0 accrued for the payment of interest and penalties, respectively, relating to unrecognized tax benefits.

The Company files U.S. federal and state income tax returns. With few exceptions, the Company is no longer subject to examination of its federal and state income tax returns for years prior to fiscal 1999.

The Company does not believe it is reasonably possible that the unrecognized tax benefits would materially change in the next 12 months.

NOTE 12 — BORROWING ARRANGEMENTS

In July 2007, the Company obtained a $7.5 million line of credit from an outside financial institution. Amounts borrowed under the line of credit will be used to support the Company’s short-term working capital needs. The line of credit is secured by the Company’s trade accounts receivable and will mature in July 2008. The interest rate applied to borrowings under the line of credit is based on the current Prime Rate less 0.13%. The terms of the line of credit include certain defined negative and affirmative covenants customary for facilities of this type, and the Company is in compliance with these covenants at September 30, 2007. The Company has made no borrowings under the line of credit.

NOTE 13 — EMPLOYEE CONTRACT COMMITTMENTS

During the quarter ended September 30, 2007, the Company entered into a non-cancellable employment contract with a certain key employee. This employment contract expires in March 2010.

Future minimum payments under this contract as of September 30, 2007 are as follows (in thousands):

17

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Year Ended March 31,
2008	$175
2009	300
2010	300
Total payments	$775

The key employee associated with this contract resigned from the Company in October and as a result, the Company no longer has future minimum payment obligations under the employment contract.

NOTE 14 — DEPARTURE OF PRINCIPAL OFFICER

On October 16, 2007, Mr. Matthew T. Pullam, the Company’s Chief Financial Officer, informed the Company that he would be resigning. Mr. Pullam’s employment agreement with the Company terminated effective October 17, 2007, by mutual agreement and without payment of severance. Mr. Pullam has agreed to continue to serve in the capacity as the Company’s principal financial and accounting officer for a transition period that will end in March 2008.

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PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q includes forward-looking statements. These are subject to certain risks and uncertainties, including those identified below, which could cause actual results to differ materially from such statements. The words “believe”, “expect”, “anticipate”, “optimistic”, “intend”, “will”, “could”, and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, our ability to: 1) retain our four major customers that accounted for approximately 64% of our total revenue for the six month period ended September 30, 2007; 2) maintain the license fee structure currently in place with our customers; 3) compete effectively with our Pay TV segment’s major competitor or any other competitors that may distribute adult content to U.S. cable multiple system operators (“MSOs”) and direct broadcast satellite (“DBS”) providers; 4) retain our key executives; 5) produce film content that is well received by our Film Production segment’s major customers; 6) successfully manage our credit card chargeback and credit percentages in order to maintain our ability to accept credit cards as a form of payment for our products and services; and 7) attract market support for our stock. The foregoing list of factors is not exhaustive. For a more complete list, please refer to the “Risk Factors” section of our most recently filed Form 10-K, as updated by periodic and current reports that we may file from time to time with the SEC that amend or update such factors.

EXECUTIVE SUMMARY

We are a leading producer and distributor of adult themed television and general motion picture entertainment. Our key customers are large cable and satellite operators in the United States. Our products are sold to these operators who then distribute them to retail customers via pay-per-view and video-on-demand technology. We earn revenue through contractual percentage splits of the retail price. Our three principal businesses are reflected in the Pay TV, Film Production and Internet operating segments. Our most profitable business lines are the Pay TV and Film Production segments. Our Internet business has recently been operating at or near break-even as we update and redesign our ten.com website in an effort to increase traffic and the conversion rate of this traffic to paying members. The operations of each of our segments are described below.

PAY TV SEGMENT

Our Pay TV segment is focused on the distribution of its pay-per-view networks and its video-on-demand service to MSOs and DBS providers. We earn a percentage of revenue, or “split”, from our content for each pay-per-view, subscription, or video-on-demand transaction that is purchased on our customer’s platform. Revenue growth occurs as we launch our services to new cable MSOs or DBS providers, experience growth in the number of digital subscribers for systems where our services are currently distributed and when we launch additional services with existing cable/DBS partners. Revenue growth can also occur when we improve the buy rates for our products and as operators increase retail prices. Alternatively, our revenue could decline if we experienced lower buy rates or if the revenue splits we receive from our customers declined.

The decline in our Pay TV segment’s operating results during the first half of fiscal year 2008 as compared to the prior year period was primarily due to lower revenue from the second largest DBS platform in the U.S. During the quarter ended December 31, 2006, we finalized a new contract with

19

this customer for the continued distribution of three of our pay-per-view networks. The new contract provided for a lower revenue split as compared to prior periods. Additionally, this same customer added two incremental channels to the adult entertainment category which had an unfavorable impact on the segment’s revenue.

FILM PRODUCTION SEGMENT

Our Film Production segment derives its revenue from the following two principal activities: 1) the production and distribution of original motion pictures known as “erotic thrillers” and erotic, event-styled content (collectively, “owned product”); and 2) the licensing of domestic third party films in international markets where we act as a sales agent for the product (“repped product”). We generate revenue by licensing our content for a one-time fee to U.S. and international premium TV services and by licensing our content to U.S. and international cable operators and satellite providers on a revenue share basis. In addition, we earn a commission and marketing fee for licensing the international television, DVD and theatrical rights as well as the domestic television rights on behalf of the producers that we represent as a sales agent.

We have recently begun to distribute our event and erotic thriller content on the video-on-demand platforms of six U.S. cable MSOs. As of September 30, 2007, our content was distributed to over 25 million unique U.S. cable households. In addition, we have secured distribution with one Canadian DBS provider for the distribution of our event and erotic thriller content on its pay-per-view platform. This segment has also entered into an arrangement to act as a contract producer to a major Hollywood studio for a film production and we expect to complete this production during the second half of our current fiscal year. We may also pursue contract producer arrangements as a source for revenue in the future.

INTERNET SEGMENT

Our Internet segment generates revenue primarily by selling monthly memberships to our website, www.ten.com, by earning a percentage of revenue from third-party gatekeepers for the distribution of www.ten.com to their customer base, by selling pre-packaged video and photo content to webmasters for a monthly fee, and by distributing our content to wireless platforms both internationally and domestically. Nearly 80% of the revenue from the Internet segment is related to the sale of monthly memberships to www.ten.com. We are currently working to improve all aspects of our internet product in terms of site design, navigation, features, content and performance in an effort to increase traffic to the website and the conversion of that traffic into paying members.

CRITICAL ACCOUNTING POLICIES

The significant accounting policies set forth in Note 1 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2007 and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, appropriately represent, in all material respects, the current status of our critical accounting policies, and are incorporated herein by reference, other than set forth below.

Accounting for Uncertainty in Income Taxes

Effective at the beginning of the first fiscal quarter of 2008, we adopted the provisions of Financial Accounting Standards Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109. FIN No. 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109, Accounting for Income Taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

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The adoption of FIN No. 48 did not affect our liability for unrecognized tax benefits as no new uncertain tax positions were recognized. The total amount of gross unrecognized tax benefits as of the date of adoption was $1.9 million and is classified as long-term income taxes payable. $0.4 million of these gross unrecognized tax benefits would affect the effective tax rate if realized. Our policy to include interest related to unrecognized tax benefits within interest expense and income tax penalties as income tax expense on the consolidated statements of income did not change as a result of implementing the provisions of FIN No. 48. As of the date of adoption of FIN No. 48, we had $0.2 million and $0 accrued for the payment of interest and penalties, respectively, relating to unrecognized tax benefits.

We file U.S. federal and state income tax returns. With few exceptions, we are no longer subject to examination of our federal and state income tax returns for years prior to fiscal 1999.

We do not believe it is reasonably possible that the unrecognized tax benefits would materially change in the next 12 months.

Producer-for-Hire Arrangements

Our Film Production segment periodically acts as a producer-for-hire for certain customers. Through these arrangements, we provide services and incur costs associated with the film production, and we earn a fee for our services once the film has been delivered and accepted by the customer. We maintain no ownership rights for the produced content. Revenue for these arrangements is recognized when persuasive evidence of an arrangement exists, the film has been delivered and accepted by the customer, the fee is fixed and determinable and collection is probable. The costs incurred for production in these arrangements are initially recorded as a deferred cost within the current assets section of the balance sheet, and the deferred costs are subsequently recorded as a cost of sales when we recognize revenue for the related services. At September 30, 2007, we had $2.1 million of deferred costs recorded in connection with a producer-for-hire arrangement.

PAY TV SEGMENT

The following table outlines the current distribution environment and network households for each network and our video-on-demand service:

		Estimated Network Households(1)
		in thousands
Network	Distribution Method	As of September 30, 2007		As of September 30, 2006		Percent Change
Xtsy	Cable/DBS		14,300		12,900		11	%
TEN	Cable/DBS		48,900		38,300		28	%
TEN*Clips(2)	Cable/DBS		38,700		35,400		9	%
Video-On-Demand	Cable		28,700		23,200		24	%
TEN*Blue	Cable		4,700		4,000		18	%
TEN*Blox	Cable		9,000		8,200		10	%
Plz(3)	Cable		300		6,000		(95	)%
Real(3)	Cable		1,600		—		—
Total Network Households			146,200		128,000

(1) Reflects network household distribution. A household will be counted more than once when determining total network households if the home has access to more than one of the Pay TV segment’s services, since each network represents an incremental revenue stream. The Pay TV segment estimates its unique household distribution as 59.3 million and 53.0 million total network households as of September 30, 2007 and 2006, respectively. This represents 29.8 million and 25.5 million digital cable homes as of September 30, 2007 and 2006, respectively, and 29.5 million and 27.5 million DBS homes as of September 30, 2007 and 2006, respectively.

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(2) TEN* Max was renamed TEN*Clips during the fourth quarter of the prior fiscal year and is now programmed in two editing standards to better serve the DBS and cable markets.

(3) Real was launched in May 2007. This service is distributed to cable MSOs and DBS providers and will replace our Plz (formerly known as “Pleasure”) service in many markets. We anticipate that Plz will no longer be distributed by the end of our 2008 fiscal year.

The following table sets forth certain financial information for the Pay TV segment for the three and six month periods ended September 30, 2007 and 2006:

	(In Millions) Quarter Ended September 30,				Quarterly Percent Change			(In Millions) Year-to-Date September 30,				Year-to-Date Percent Change
	2007		2006		’07 vs’06			2007		2006		’07 vs’06
Net revenue
PPV - Cable/DBS	$	5.0	$	7.5		(33)	%	$	10.4	$	15.0		(31)	%
VOD - Cable/Hotel		4.7		4.2		12	%		9.3		8.8		6	%
C-Band		0.3		0.5		(40)	%		0.7		1.0		(30)	%
Total	$	10.0	$	12.2		(18)	%	$	20.4	$	24.8		(18)	%
Cost of sales	$	2.8	$	2.8		0	%	$	5.6	$	5.7		(2)	%
Gross profit	$	7.2	$	9.4		(23)	%	$	14.8	$	19.1		(23)	%
Gross margin		72%		77%					73%		77%
Operating expenses		2.1		1.6		31	%		4.6		3.6		28	%
Operating income	$	5.1	$	7.8		(35)	%	$	10.2	$	15.5		(34)	%

NET REVENUE

PPV — Cable/DBS

The decline in our PPV — Cable/DBS revenue during the three and six month periods ended September 30, 2007 was primarily a result of a decrease in revenue from the second largest DBS platform in the U.S. following the finalization of a new contract with this customer in October 2006. The new contract provided for a lower revenue split as compared to prior periods. Additionally, this same customer added two incremental channels to the adult entertainment category which had an unfavorable impact on the PPV — Cable/DBS revenue.

Revenue from the largest DBS platform in the U.S. was also slightly lower because the content we currently distribute on that platform is more edited than certain competitors’ content which we believe results in fewer buys. During the current quarter, we executed an amended contract with this customer which provides us with the ability to distribute less edited content through our already existing channels on that platform. The amended contract also expands the number of services carried on that platform from two channels to three channels.

VOD — Cable/Hotel

Revenue from our video-on-demand services increased during the three and six month periods as compared to the prior year periods as a result of higher revenue from the largest cable MSO in the U.S. This increase was primarily from an improvement in the performance of our services on that platform. This increase in revenue was partially offset by a decline in revenue related to the sale of Adelphia Communications Corporation systems to larger multi-channel operators, which resulted in a lower license fee for our video-on-demand content from those systems.

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C-BAND REVENUE

The decrease in our C-Band revenue during the three and six month periods ended September 30, 2007 as compared to the same periods in the prior year is a result of the continued decline of the C-Band market as consumers convert from C-Band “big dish” analog satellite systems to smaller, 18-inch digital DBS satellite systems. The C-Band market has declined 56% year-over-year to 45,000 subscribers at September 30, 2007 from 103,000 subscribers as of September 30, 2006.

Our C-Band market continued to be profitable for us during the current quarter. However, the profit from these services has continued to deteriorate as the number of subscribers decline and we expect that these services will not generate income in the near future. As a result, we plan to discontinue these services during the third quarter of fiscal year 2008. We do not expect to incur any material costs associated with discontinuing these services.

COST OF SALES

Our cost of sales consists of expenses associated with our digital broadcast center, satellite uplinking, satellite transponder leases, programming acquisitions, video-on-demand transport, amortization of content licenses, and in-house call center operations related to the C-Band business.

During the three and six month periods ended September 30, 2007, cost of sales declined due to lower transponder costs from the cancellation of a transponder used to distribute our Plz network and a decrease in our content amortization costs. These reductions in the cost of sales were offset by an increase in video-on-demand transport fees paid to our primary transport provider. Our network programming costs for employees and data analysis tools also increased in connection with our efforts to improve customer buy rates.

OPERATING EXPENSES

The 31% increase in operating expenses during the quarter ended September 30, 2007 was due to several factors including a) an increase in costs associated with promotion and marketing activities for anticipated new channel launches; b) an increase in costs related to improving our IT infrastructure; c) the impact from writing off $0.1 million in tenant improvements associated with a facility we abandoned; and d) additional marketing costs associated with proprietary market research. In addition to the items noted above, the 28% increase in operating expenses during the first half of fiscal year 2008 was also impacted by higher costs associated with a $0.2 million loss for the early disposition of equipment used within our digital broadcast center and an increase in advertising costs associated with efforts to improve buy rates on various distribution platforms.

FILM PRODUCTION SEGMENT

The following table sets forth certain financial information for the Film Production segment for the three and six month periods ended September 30, 2007 and 2006:

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	(In Millions) Quarter Ended September 30,				Quarterly Percent Change			(In Millions) Year-to-Date September 30,				Year-to-Date Percent Change
	2007		2006		’07 vs’06			2007		2006		’07 vs’06
Net revenue
Owned product	$	1.5	$	3.0		(50)	%	$	3.1	$	5.7		(46)	%
Repped product		0.5		0.3		66	%		1.0		0.7		43	%
Total	$	2.0	$	3.3		(39)	%	$	4.1	$	6.4		(36)	%
Cost of sales	$	0.5	$	2.1		(76)	%	$	1.3	$	4.2		(69)	%
Gross profit	$	1.5	$	1.2		25	%	$	2.8	$	2.2		27	%
Gross margin		75%		36%					68%		34%
Operating expenses		1.0		1.1		(9)	%		2.5		2.2		14	%
Operating income(1)	$	0.4	$	0.1		300	%	$	0.3	$	0.0		—	%

(1) Amounts may not sum due to rounding.

NET REVENUE

The decline in our Film Production segment revenue during the three and six month periods ended September 30, 2007, as compared to the same periods in 2006 is due to lower owned product revenue associated with different delivery schedules between years. During the three and six month prior year periods, we delivered and recognized revenue on four and thirteen episodes, respectively, of a thirteen episode series. We are currently completing a similar thirteen episodic series but we do not expect that it will be delivered until the third quarter of our current fiscal year. Our owned product revenue was also lower due to the delivery of fewer films during the current fiscal year and a decline in our revenue from the largest DBS platform in the U.S. due to a lower license fee structure and a change in the location of our content on this platform’s electronic programming guide. The declines in owned product revenue were partially offset by an increase in revenue from the delivery of our content on the video-on-demand platforms of four major U.S. cable MSOs and the distribution of several horror films to home video and video-on-demand platforms through our arrangement with a mainstream film distributor.

Repped product revenue includes revenue from the licensing of film titles which we represent (but do not own) under international sales agency relationships with various independent film producers. Our repped product revenue increased during the three month period ended September 30, 2007 as a result of the improved performance of five titles, which accounted for more than 50% of the total repped product revenue. The performance of six titles accounted for approximately 50% of the total repped product revenues during the six months ended September 30, 2007. We actively represent over 50 titles under both the Mainline Releasing and Lightning Entertainment labels.

COST OF SALES

Our cost of sales is primarily comprised of the amortization of our owned product film costs as well as delivery and distribution costs related to that content. There are no significant costs of sales related to the repped product business.

The 76% and 69% decrease in year-over-year quarterly and year to date cost of sales, respectively, is due to a decline in our owned content film cost amortization. Film cost amortization is based on the proportion of revenue recognized for a film during the period relative to the total estimated future ultimate revenue expected to be recognized for that film, multiplied by the total unamortized film costs. Film cost amortization represents 69% and 72% of the total cost of sales for the quarter and six month period ended September 30, 2007, respectively, as compared to 88% during each of the same periods in the prior year. Film cost amortization as a percentage of the related owned content revenue during the three and six month periods ended September 30, 2007 was 27% and 34%, respectively, as compared to 63% and 68% during the same periods in the prior year, respectively.

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The decrease in film cost amortization is primarily a result of the decline in our owned product revenue and our monetization of films that were produced after the acquisition of this segment in February 2006. As a result of the valuation assigned to the film library, amortization costs during the prior fiscal year were higher as compared to the amortization costs incurred in the current fiscal year for films produced subsequent to the acquisition. Additionally, our cost of sales declined due to the recognition of revenue in the current period from certain older titles whose film costs had been fully amortized in prior periods.

OPERATING EXPENSES

Operating expenses during the three months ended September 30, 2007 were consistent with the prior year quarter results. Operating expenses during the first half of fiscal year 2008 were higher than the prior year period due to a) a $0.1 million reserve established for potentially unrecoupable costs incurred on two older repped product titles; b) a $0.2 million bad debt write-off related to an uncollectible customer account; c) an increase in trade show exhibition costs; and d) an increase in outside services related to temporary labor and data analysis tools.

INTERNET SEGMENT

The following table sets forth certain financial information for the Internet segment for the three and six month periods ended September 30, 2007 and 2006:

	(In Millions) Quarter Ended September 30,					Quarterly Percent Change			(In Millions) Year-to-Date September 30,					Year-to-Date Percent Change
	2007		2006			’07 vs’06			2007		2006			’07 vs’06
Net revenue
Net Membership	$	0.3	$	0.5			(40)	%	$	0.7	$	1.0			(30)	%
Other		0.1		0.1			0	%		0.2		0.2			0	%
Total	$	0.4	$	0.6			(33)	%	$	0.9	$	1.2			(25)	%
Cost of sales	$	0.2	$	0.3			(33)	%	$	0.3	$	0.6			(50)	%
Gross profit(1)	$	0.3	$	0.3			0	%	$	0.6	$	0.6			0	%
Gross margin		75%		50%						67%		50%
Operating expenses		0.2		0.3			(33)	%		0.4		0.7			(43)	%
Operating income (loss)(1)	$	0.1	$	(0.0	)		—		$	0.1	$	(0.1	)		200	%

(1) Amounts may not sum due to rounding.

NET REVENUE

The Internet segment revenue declined during the three and six month periods ended September 30, 2007 as compared to the same periods in 2006 primarily due to a decline in traffic to our website and a corresponding decrease in new monthly memberships. We have reduced our marketing efforts in the current period for our ten.com website as we are undergoing site improvements and enhancements aimed at increasing the future rate of conversion of traffic into paying members. We launched the first redesign of the site at the end of the first fiscal 2008 quarter and we are completing the implementation of new affiliate marketing programs designed to create incentives for other websites that direct traffic to ten.com.

Other revenue during the three and six month periods ended September 30, 2007 was consistent and comparable with prior year results. This revenue primarily relates to the sale of content to other webmasters, the distribution of our website to the LodgeNet Entertainment Corporation customer base, and revenue from the distribution of our content through wireless platforms.

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COST OF SALES

Cost of sales consists of expenses associated with credit card processing, bandwidth, traffic acquisition, content and depreciation of assets.

The decline in the Internet segment’s cost of sales during the three and six month periods ended September 30, 2007 is primarily due to a decrease in amortization expense associated with the content library that was written off during the third quarter of our prior fiscal year. The decline was also due to lower wireless distribution expenses. We are no longer devoting resources to wireless activities as part of our strategic plan for this segment, and as a result, costs for distributing content through the wireless platform have declined.

OPERATING EXPENSES

The decrease in the Internet segment’s operating expenses during the three and six month periods ended September 30, 2007 is primarily due to a reduction in our employee costs associated with the segment’s wireless activities. We have devoted fewer resources to our wireless activities and as a result, the sales and operating expenses associated with these activities have declined. Operating expenses were also lower as a result of the reversal in the current period of a previous accrual associated with the early termination of a services agreement that is not expected to be paid. The decrease in our operating expenses was partially offset by an increase in costs incurred to update and improve our ten.com website.

CORPORATE ADMINISTRATION

The following table sets forth certain financial information for Corporate Administration expenses for the three and six month periods ended September 30, 2007 and 2006:

	(In Millions) Quarter Ended September 30,				Quarterly Percent Change		(In Millions) Year-to-Date September 30,				Year-to-Date Percent Change
	2007		2006		’07 vs’06		2007		2006		’07 vs’06
Operating expenses	$	2.4	$	2.3		4%	$	5.2	$	4.4		18%

Expenses related to Corporate Administration include all costs associated with the operation of the public holding company, New Frontier Media, Inc., which are not directly allocable to the Pay TV, Film Production, and Internet operating segments. These costs include, but are not limited to, legal and accounting expenses, human resources and training, insurance, registration and filing fees with NASDAQ, executive employee costs and the SEC, investor relations costs, and printing costs associated with our public filings and shareholder communications.

Corporate administration costs increased during the three and six months ended September 30, 2007 as compared to the same prior year periods due to an the increase in employee costs associated with a sales executive whose function is to sell products across all operating segments (this employee’s costs and services were previously associated with the wireless activities within the Internet segment) and an increase in costs associated with the hiring of a Chief Information Officer in February 2007. These increases were partially offset by a decrease in external legal fees. Accounting expenses during the current year quarter declined as compared to the same prior year period because we incurred additional costs in the prior year to ensure the Film Production segment was compliant with Section 404 of the Sarbanes-Oxley Act (“Section 404”); however, accounting expenses for the six months ended September 30, 2007 were higher as compared to the prior year due to fees attributable to the completion of the fiscal year 2007 audit in the first quarter of fiscal 2008.

LIQUIDITY AND CAPITAL RESOURCES

We believe that our current cash and marketable securities balances and expected cash flow from operations for the remainder of fiscal 2008 will be sufficient to satisfy our operating requirements, and we believe that any capital expenditures, content licensing or film production costs that may be

26

incurred can be financed through our cash flows from operations. If we were to lose our four major customers that accounted for 64% of our revenue during the six months ended September 30, 2007, our ability to finance our future operating requirements would be severely impaired.

SOURCES AND USES OF CASH
Cash Flows from Operating and Investing Activities:

Our cash flows from operating and investing activities are summarized as follows (in millions):

	Six Months Ended September 30,
	2007			2006
Net cash provided by operating activities:	$	0.9		$	10.8
Cash flows from investing activities:
Purchases of equipment and furniture		(1.2	)		(0.6	)
Purchase of available-for-sale securities		(2.7	)		(12.6	)
Redemption of available-for-sale securities		7.5			2.8
Related party note payable		(0.6	)		(0.5	)
Net cash provided by (used in) investing activities(1)	$	3.1		$	(10.9	)

(1) Amounts may not sum due to rounding.

The decrease in cash provided by operating activities during the first six months of fiscal year 2008 as compared to the same period in fiscal year 2007 is primarily related to:

      •   a $3.6 million decrease in net income;

      •   the $3.0 million impact on operating cash flows associated with the decline in depreciation and amortization expense from lower film amortization costs incurred by the Film Production segment;

      •   a $2.1 million increase in deferred costs primarily related to the Film Production segment’s cash disbursements for a producer-for-hire arrangement; and

      •   the impact on cash from the fiscal 2007 bonus payouts that were paid during the first half of fiscal year 2008.

The increase in cash provided by investing activities is primarily related to $7.5 million of cash received from the redemption of investments in order to pay our quarterly recurring shareholder dividend and for the purchase of approximately 569,000 shares of common stock at an average price of $6.38 per share through our stock repurchase program. Capital expenditures of $1.2 million for the current year quarter relate primarily to purchases of servers and editing equipment to maintain our digital broadcast center and computers. The related party note payable disbursements during each period presented were paid to the former principals of MRG Entertainment, Inc. from whom we acquired the Film Production segment.

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Cash Flows from Financing Activities:

Our cash flows from financing activities are as follows (in millions):

	Six Months Ended September 30,
	2007			2006
Cash flows from financing activities:
Repurchase of common stock	$	(3.6	)	$	(2.1	)
Payment of dividend		(6.0	)		—
Proceeds from stock option exercises		0.5			0.6
Excess tax benefit from stock option exercise		—			0.3
Net cash used in financing activities(1)	$	(9.2	)	$	(1.2	)

(1) Amounts may not sum due to rounding.

Net cash used in financing activities for the current year quarter reflects $6.0 million in payments for our quarterly cash dividends and $3.6 million for the purchase of our common stock through our stock repurchase plan. This use of cash was slightly offset by $0.5 million in proceeds from the exercise of stock options during the first half of fiscal year 2008. Tax benefits decreased to approximately $0 from $0.3 million in the prior year and relate to the tax deductions that we receive upon exercise of an option by an employee or non-employee director in excess of those anticipated at the time of the option grant.

STOCK REPURCHASE PLAN AND DIVIDENDS

In December 2005, our Board of Directors approved a stock repurchase plan to purchase up to 2.0 million shares of our stock over 30 months. To date, we have repurchased 0.8 million shares including the approximate 0.6 million shares that were purchased in the current quarter. At our current stock price, it would require approximately $7 million over the next nine months to complete this stock repurchase plan.

Our Board of Directors has approved a recurring quarterly dividend of $0.125 per share of common stock which is payable at the discretion of the Board of Directors. Based on the number of shares currently outstanding, this will require an annual use of cash of approximately $12 million.

BORROWING ARRANGEMENTS

In July 2007, we obtained a $7.5 million line of credit from an outside financial institution. Amounts borrowed under the line of credit will be used to support our short-term working capital needs. The line of credit is secured by our trade accounts receivable and will mature in July 2008. The interest rate applied to borrowings under the line of credit is based on the current Prime Rate less 0.13%. The terms of the line of credit include certain defined negative and affirmative covenants customary for facilities of this type, and we are in compliance with these covenants at September 30, 2007. We have made no borrowings under the line of credit.

CONTINGENCIES

As part of the MRG Entertainment, Inc. acquisition, we entered into an earn-out agreement which requires a $2.0 million payment over three calendar years if certain EBITDA targets are met. The 2006 calendar year earn-out target was achieved and the amount due to the principals was paid in May 2007. For the 2007 calendar year, we have accrued approximately $0.5 million of the total $0.7 million liability associated with our estimated payment of the earn-out.

In connection with our adoption of FIN 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109, we have a $1.9 million liability recorded for an unrecognized tax benefit at September 30, 2007. We cannot reasonably estimate when or if this liability will be paid.

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OFF BALANCE SHEET ARRANGEMENTS

We entered into an Affiliation Agreement with DirecTV, Inc. (“DirecTV”) on April 4, 2006, whereby DirecTV had the non-exclusive right to distribute the national feeds of the 24-hour per day, 7-day per week programming services of two of the Pay TV segment’s networks for a two-year period from the date upon which DirecTV commenced the commercial distribution of these services. Under the terms of the agreement, if the Pay TV segment’s networks replaced competitive networks, we would guarantee that DirecTV would earn certain revenue targets from the performance of these services in each of Year 1 and Year 2 of the contract. If the revenue targets were not achieved, the shortfall would be paid to DirecTV in an amount that would not exceed the total license fee earned by the Pay TV segment in each of Year 1 and Year 2 of the contract. When the networks launched on the DirecTV platform, DirecTV did replace competitive services, thereby putting this contract term into force. We assessed the need to record a liability for the DirecTV performance guarantee during the term of the arrangement and deemed no liability should be recorded because we would likely exceed the revenue targets during the contract period and because the likelihood of not meeting the revenue guarantee was remote based on actual historical performance data.

On September 28, 2007, we entered into an Amended and Restated Affiliation Agreement for DTH Satellite Exhibition of Cable Network Programming (the “Amended Agreement”) with DirecTV. The Amended Agreement increased the number of services carried on the DirecTV platform from two to three and extended the term for each service provided through October 14, 2009 if we achieve certain revenue milestones for each service during the first year of the Amended Agreement. We retained the right to make up any revenue shortfall to DirecTV in order to ensure our option to cause DirecTV to continue carriage of each of the services through the extended term. If we choose not to make up any shortfall, which is not expected, then DirecTV would have the right to terminate the related service. We expect to exceed the revenue targets for each service during the contract period based on actual historical performance data and forecasted performance data.

RECENT ACCOUNTING PRONOUNCEMENTS

In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to choose to measure certain financial instruments and certain other items at fair value. The standard requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings. SFAS No. 159 is effective for the fiscal year beginning April 1, 2008, although earlier adoption is permitted. We are currently evaluating the impact that SFAS No. 159 will have on our results of operations and financial position.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are effective for the fiscal year beginning April 1, 2008. We are currently evaluating the impact that SFAS No. 157 will have on our results of operations and financial position.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk. The Company’s exposure to market risk is principally confined to cash in the bank, money market accounts, and notes payable, which have short maturities and, therefore, minimal and immaterial market risk.

Interest Rate Sensitivity. As of November 1, 2007, the Company had cash in checking and money market accounts, certificates of deposits, and fixed income debt securities. Because of the short maturities of these instruments, a sudden change in market interest rates would not have a material impact on the fair value of these assets.

As of November 1, 2007, the Company had no borrowings under its line-of-credit and so a sudden change in the prime rate would not have a material impact on the Company’s results of operations.

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Foreign Currency Exchange Risk. The Company does not have any material foreign currency transactions.

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures. Our Company’s management, with the participation of our Chief Executive Officer and principal financial officer, evaluated the effectiveness of the design and operation of our Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and the principal financial officer concluded that, as of September 30, 2007, the Company’s disclosure controls and procedures were effective.

(b) Internal Controls. There were no changes in our internal control over financial reporting that occurred during our second fiscal quarter of 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2007, as such risks may be updated by the filing with the SEC of subsequent periodic and current reports from time to time, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or reporting results. The Risk Factors included in the Company’s Annual Report on Form 10-K for the year end March 31, 2007 have not materially changed except for the items noted below.

Failure to maintain our agreements with cable MSOs, DISH Network, and DirecTV on favorable terms could adversely affect our business, financial condition, or results of operations.

We currently have agreements with nine of the ten nation’s largest cable MSOs, DISH Network, and DirecTV. Our agreements with these operators may be terminated on relatively short notice without penalty. If one or more cable MSOs, DISH Network, or DirecTV (after the first year anniversary of the effective date of the recent amendment with DirecTV) terminates or does not renew our agreements, or does not renew the agreement on terms as favorable as those of our current agreements, our business, financial condition, or results of operations could be materially adversely affected.

Failure to meet our performance guarantee with DirecTV could adversely affect our business, financial condition, or results of operations.

Under the terms of our amended distribution agreement with DirecTV, if any of our three channels does not reach certain revenue targets during the first year of the agreement, we have the option of paying to DirecTV the revenue target shortfall or allowing DirecTV the right to terminate early its carriage of the applicable underperforming channel service. If one of our channels were to under-perform and we were to elect to pay DirecTV the shortfall amount to maintain the channel service with DirecTV, our margins and income from such services would be negatively impacted by the amount of such shortfall. If we were to elect not to pay the shortfall amount to DirecTV in respect of an underperforming channel, DirecTV would have the right during the second year of the amended agreement to cancel the channel. If it chose to do so, our revenue from that channel would be lost and our business, financial condition, or results of operations could be materially adversely affected.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On December 13, 2005, the Board of Directors of the Company approved the repurchase of two million shares of common stock to be implemented over 30 months. During the three months ended September 30, 2007, the Company purchased shares in connection with this plan.

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1-31, 2007		—		—		—		1,750,000
August 1-31, 2007		520,851	$	6.36		520,851		1,229,149
September 1-30, 2007		48,030	$	6.58		48,030		1,181,119
Total		568,881	$	6.38		568,881

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company’s annual meeting of its shareholders was held on August 24, 2007 in Boulder, Colorado. The matters submitted for a vote at the meeting and the related election results were as follows:

1. Election of six directors to the Board of Directors to serve for the following year and until their successor is elected:

	For		Withheld		Broker Non-Vote
Michael Weiner		16,811,479		3,190,796		0
Alan L. Isaacman		15,706,386		4,295,889		0
Hiram J. Woo		16,452,325		3,549,950		0
David Nicholas		16,814,981		3,187,294		0
Melissa Hubbard		16,813,581		3,188,694		0
Walter Timoshenko		19,584,131		418,144		0

2. Approval of the Company’s 2007 Stock Incentive Plan:

For		Against		Abstain		Broker Non-Vote
	9,756,263		3,358,660		28,408		6,858,944

3. Approval of the material terms for the payment of the Company’s annual executive incentive compensation:

For		Against		Abstain		Broker Non-Vote
	16,215,474		3,710,776		76,025		0

4. Ratification of the appointment of Grant Thornton LLP as the Company’s independent auditors for the fiscal year ending March 31, 2008:

For		Against		Abstain		Broker Non-Vote
	19,612,037		345,034		45,204		0

As a result, all of the matters submitted for a vote at the meeting were approved by the shareholders.

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ITEM 6. EXHIBITS

Exhibit No.			Exhibit Description
	10.01		Amendment to Employment Agreement between New Frontier Media, Inc. and Ken Boenish
	10.02		Amendment to Employment Agreement between New Frontier Media, Inc. and Michael Weiner
	10.03		Amendment to Employment Agreement between New Frontier Media, Inc. and Ira Bahr
	10.04		Employment Agreement between New Frontier Media, Inc. and Marc Callipari
	10.05	*	Amended and Restated Affiliation Agreement for DTH Satellite Exhibition of Cable Network Programming by and between Colorado Satellite Broadcasting, Inc. and DirecTV, Inc.
	10.06		New Frontier Media, Inc. 2007 Stock Incentive Plan (incorporated by reference to Appendix A to New Frontier Media, Inc’s definitive proxy statement filed under cover of Schedule 14A with the SEC on July 16, 2007 (File No. 000-23697))
	10.07		Form of Award Agreement under the 2007 Stock Incentive Plan (incorporated by reference to Exhibit No. 99.2 to New Frontier Media, Inc.’s Form 8-K filed with the SEC on August 24, 2007 (File No. 000-23697))
	10.08		Business Loan Agreement, as supplemented (including related promissory note and security agreement), dated July 1, 2007, between New Frontier Media, Inc. and First Community Bank
	10.09		Amended and Restated Independent Contractor Agreement, dated November 7, 2007, between New Frontier Media, Inc. and Matthew T. Pullam
	31.01		Certification by CEO Michael Weiner pursuant to Rule 13a-14(a)/15d-14(d)
	31.02		Certification by Principal Financial Officer Matthew T. Pullam pursuant to Rule 13a-14(a)/15d-14(d)
	32.01		Certification by CEO Michael Weiner pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32.02		Certification by Principal Financial Officer Matthew T. Pullam pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Confidential treatment has been requested as to portions of this exhibit. Such portions have been redacted and filed separately with the SEC.

32

SIGNATURES

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

	NEW FRONTIER MEDIA, INC.
Dated: November 9, 2007	By: /s/ Michael Weiner Name: Michael Weiner Title: Chief Executive Officer
Dated: November 9, 2007	/s/ Matthew T. Pullam Name: Matthew T. Pullam Title: Principal Financial Officer and Principal Accounting Officer

33

EXHIBIT INDEX

Exhibit No.			Exhibit Description
	10.01		Amendment to Employment Agreement between New Frontier Media, Inc. and Ken Boenish
	10.02		Amendment to Employment Agreement between New Frontier Media, Inc. and Michael Weiner
	10.03		Amendment to Employment Agreement between New Frontier Media, Inc. and Ira Bahr
	10.04		Employment Agreement between New Frontier Media, Inc. and Marc Callipari
	10.05	*	Amended and Restated Affiliation Agreement for DTH Satellite Exhibition of Cable Network Programming by and between Colorado Satellite Broadcasting, Inc. and DirecTV, Inc.
	10.06		New Frontier Media, Inc. 2007 Stock Incentive Plan (incorporated by reference to Appendix A to New Frontier Media, Inc’s definitive proxy statement filed under cover of Schedule 14A with the SEC on July 16, 2007 (File No. 000-23697))
	10.07		Form of Award Agreement under the 2007 Stock Incentive Plan (incorporated by reference to Exhibit No. 99.2 to New Frontier Media, Inc.’s Form 8-K filed with the SEC on August 24, 2007 (File No. 000-23697))
	10.08		Business Loan Agreement, as supplemented (including related promissory note and security agreement), dated July 1, 2007, between New Frontier Media, Inc. and First Community Bank
	10.09		Amended and Restated Independent Contractor Agreement, dated November 7, 2007, between New Frontier Media, Inc. and Matthew T. Pullam
	31.01		Certification by CEO Michael Weiner pursuant to Rule 13a-14(a)/15d-14(d)
	31.02		Certification by Principal Financial Officer Matthew T. Pullam pursuant to Rule 13a-14(a)/15d-14(d)
	32.01		Certification by CEO Michael Weiner pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32.02		Certification by Principal Financial Officer Matthew T. Pullam pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Confidential treatment has been requested as to portions of this exhibit. Such portions have been redacted and filed separately with the SEC.

EX-10

                                                                   Exhibit 10.01


                                  AMENDMENT TO
                              EMPLOYMENT AGREEMENT
                                     BETWEEN
                            NEW FRONTIER MEDIA, INC.
                                       AND
                                   KEN BOENISH
                                   (JULY 2007)

         This Amendment to Employment Agreement is dated as of July 11, 2007
(this "Amendment") and amends the Employment Agreement dated as of April 1,
2003, as amended by all amendments thereto (collectively, the "Employment
Agreement"), between New Frontier Media, Inc. ("NFM") and Ken Boenish
("Executive"). Unless otherwise defined in herein, all capitalized terms used
herein shall have the meaning ascribed to them in the Employment Agreement.

                                    Recitals

         Executive and NFM have agreed to amend the Employment Agreement as set
forth in this Amendment.

                                    Agreement

         NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, including Executive's continued employment with NFM, the
receipt and sufficiency of which are hereby acknowledged, Executive and NFM
hereby agree as follows:

         1. Section 4 of the Employment Agreement is amended by inserting a new
subsection (F) at the end thereof to read in its entirety as set forth below:

                  (F) If Executive is a "specified employee" within the meaning
         of Section 1.409A-1(i) of the Treasury Regulations promulgated under
         the Internal Revenue Code of 1986, as amended (the "Code"), as of the
         Date of Termination, then payments to Executive hereunder shall not be
         made before the date that is six months after the Date of Termination
         (or if earlier, the date of death of Executive); provided, however,
         that during such six-month period, NFM shall make any and all payments
         contemplated hereunder to the extent such payments do not exceed two
         times the lesser of (i) Executive's annualized compensation, based upon
         the annual rate of compensation for the calendar year preceding the
         year in which the Date of Termination occurs, or (ii) the maximum
         amount that may be taken into account under a qualified plan pursuant
         to Section 401(a)(17) of the Code for the year in which the Date of
         Termination occurs; and provided further that any amounts deferred
         hereunder shall be paid in a lump-sum amount at the expiration of such
         six-month period.



         2. Section 5(A)(iii) of the Employment Agreement is amended by
inserting immediately prior to the period at the end thereof the following
clause:

         to an unrelated party (as contemplated by Section 1
         .409A-3(i)(5)(vii)(3) of the Treasury Regulations promulgated under the
         Code).

         3. All other terms and conditions of the Employment Agreement shall
remain in full force and effect. This Amendment, together with the Employment
Agreement, contains all the terms and conditions agreed upon by the parties
hereto regarding the subject matter hereof and thereof. All prior agreements,
promises, negotiations and representations, either oral or written, relating to
the subject matter of this Amendment or the Employment Agreement not expressly
set forth in this Amendment or the Employment Agreement are of no force or
effect.

         4. Any waiver, alteration or modification of any of the terms of this
Amendment or the Employment Agreement shall be valid only if made in writing and
signed by the parties hereto.

         5. This Amendment shall be governed by and construed in accordance with
the internal laws of the State of Colorado applicable to agreements made and to
be performed entirely within the State, without regard to conflict of law
principles.

         6. This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.

         IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.

NEW FRONTIER MEDIA, INC.                                     EXECUTIVE

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

                                  2

EX-10

                                                                   Exhibit 10.02



                                  AMENDMENT TO
                              EMPLOYMENT AGREEMENT
                                     BETWEEN
                            NEW FRONTIER MEDIA, INC.
                                       AND
                                 MICHAEL WEINER
                                   (JULY 2007)

         This Amendment to Employment Agreement is dated as of July 11, 2007
(this "Amendment") and amends the Employment Agreement dated as of February 17,
2003, as amended by all amendments thereto (collectively, the "Employment
Agreement"), between New Frontier Media, Inc. ("NFM") and Michael Weiner
("Executive"). Unless otherwise defined in herein, all capitalized terms used
herein shall have the meaning ascribed to them in the Employment Agreement.
                                                    Recitals

         Executive and NFM have agreed to amend the Employment Agreement as set
forth in this Amendment.

                                    Agreement

         NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, including Executive's continued employment with NFM, the
receipt and sufficiency of which are hereby acknowledged, Executive and NFM
hereby agree as follows:

         1. Section 2(B)(ii) of the Employment Agreement is amended and restated
in its entirety to read as set forth below:

                  (ii)    Bonus.

                     (a) Bonus based on objective criteria: In addition to
         Executive's Base Salary, Executive shall be entitled to annual bonuses
         for the fiscal years ending March 31, 2008 and March 31, 2009, in
         amounts to be determined based on performance criteria established by
         the NFM compensation committee of the Board of Directors (the
         "Committee") in its sole discretion. The performance criteria for each
         fiscal year covered by this Agreement shall be set by the Committee to
         the extent reasonably practicable within 60 days of the commencement of
         such fiscal year and in any event no later than 75 days after the
         commencement of such fiscal year and shall be set in accordance with
         the following process: After the Committee receives a budget for such
         fiscal year, the Committee shall provide to Executive proposed
         performance criteria for Executive's comments. Following receipt of the
         proposed performance criteria,

                                        1



         Executive shall have two weeks to provide to the Committee Executive's
         comments concerning the proposed performance criteria. The Committee
         shall consider Executive's comments and shall thereafter provide to
         Executive the final performance criteria as set by the Committee for
         such fiscal year.

                  The bonus based on objective criteria shall be in an amount up
         to, but no greater than, an amount equal to one-third of Executive's
         Base Salary for the applicable fiscal year then ending.

                  (b) Discretionary bonus: In addition to Executive's Base
         Salary and any bonus based on objective criteria, the Committee may, in
         its sole discretion, award to Executive additional annual bonus(es).
         Any discretionary bonus shall be shall be set by the Committee in an
         amount up to, but no greater than, an amount equal to two-thirds of
         Executive's Base Salary for the applicable fiscal year then ending.

                  (c) All bonuses payable to Executive pursuant to subsections
         (a) and (b), above, shall be paid within two and one-half (2 1/2)
         months of the end of the fiscal year for which they are awarded. No
         discretionary bonus shall be payable to Executive in connection with a
         fiscal year if Executive's employment terminates for Cause prior to the
         end of the fiscal year. Discretionary bonuses following termination
         prior to the end of the fiscal year for reasons other than Cause may be
         paid depending upon the exercise of Committee discretion pursuant to
         Section 2(B)(ii)(b) above. No bonus based on objective criteria shall
         be payable to Executive if Executive's employment terminates for Cause
         prior to the achievement of the performance criteria set by the
         Committee. In the event of a termination for reasons other than Cause
         in the last quarter of a fiscal year, bonuses based on objective
         criteria shall be prorated based upon the number of months worked in
         the fiscal year if Executive has achieved, or is on track to achieve,
         the applicable criteria.

         2. Section 4 of the Employment Agreement is amended by inserting a new
subsection (F) at the end thereof to read in its entirety as set forth below:

                  (F) If Executive is a "specified employee" within the meaning
         of Section 1.409A-l(i) of the Treasury Regulations promulgated under
         the Internal Revenue Code of 1986, as amended (the "Code"), as of the
         Date of Termination, then payments to Executive hereunder shall not be
         made before the date that is six months after the Date of Termination
         (or if earlier, the date of death of Executive); provided, however,
         that during such six-month period, NFM shall make any and all payments
         contemplated hereunder to the extent such payments do not exceed two
         times the lesser of (i) Executive's annualized compensation, based upon
         the annual rate of compensation for the calendar year preceding the
         year in which the Date of Termination occurs, or (ii) the maximum
         amount that

                                        2



         may be taken into account under a qualified plan pursuant to Section
         401(a)(l 7) of the Code for the year in which the Date of Termination
         occurs; and provided further that any amounts deferred hereunder shall
         be paid in a lump-sum amount at the expiration of such six-month
         period.

         3. Section 5(A)(iii) of the Employment Agreement is amended by
inserting immediately prior to the period at the end thereof the following
clause:

         to an unrelated party (as contemplated by Section 1
         .409A-3(i)(5)(vii)(3) of the Treasury Regulations promulgated under the
         Code).

         4. All other terms and conditions of the Employment Agreement shall
remain in full force and effect. This Amendment, together with the Employment
Agreement, contains all the terms and conditions agreed upon by the parties
hereto regarding the subject matter hereof and thereof. All prior agreements,
promises, negotiations and representations, either oral or written, relating to
the subject matter of this Amendment or the Employment Agreement not expressly
set forth in this Amendment or the Employment Agreement are of no force or
effect.

         5. Any waiver, alteration or modification of any of the terms of this
Amendment or the Employment Agreement shall be valid only if made in writing and
signed by the parties hereto.

         6. This Amendment shall be governed by and construed in accordance with
the internal laws of the State of Colorado applicable to agreements made and to
be performed entirely within the State, without regard to conflict of law
principles.

         7. This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.

         IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.

           NEW FRONTIER MEDIA INC.                            EXECUTIVE

           By: /s/ Karyn Miller                               /s/ Michael Weiner
               -----------------                              ------------------
           Name: Karyn L. Miller                              Michael Weiner
                 ---------------
           Title: CFO
                  --------------

EX-10

                                                                   Exhibit 10.03


                                  AMENDMENT TO
                              EMPLOYMENT AGREEMENT
                                     BETWEEN
                            NEW FRONTIER MEDIA, INC.
                                       AND
                                    IRA BAHR
                                   (JULY 2007)

         This Amendment to Employment Agreement is dated as of July 11, 2007
(this "Amendment") and amends the Employment Agreement dated as of January 20,
2006 (the "Employment Agreement"), between New Frontier Media, Inc. ("NFM") and
Ira Bahr ("Executive"). Unless otherwise defined in herein, all capitalized
terms used herein shall have the meaning ascribed to them in the Employment
Agreement.

                                    Recitals

         Executive and NFM have agreed to amend the Employment Agreement as set
forth in this Amendment.

                                    Agreement

         NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, including Executive's continued employment with NFM, the
receipt and sufficiency of which are hereby acknowledged, Executive and NFM
hereby agree as follows:

         1. Section 2.B(vii) of the Employment Agreement is amended and restated
in its entirety to read as set forth below:

                  (vii) Bonus.

                           (a) Bonus based on objective criteria: In addition to
         Executive's Base Salary, Executive shall be entitled to an annual bonus
         for the fiscal year ending March 31, 2008, in amounts to be determined
         based on performance criteria established by the NFM compensation
         committee of the Board of Directors (the "Committee") in its sole
         discretion. The performance criteria for each fiscal year covered by
         this Agreement shall be set by the Committee to the extent reasonably
         practicable within 60 days of the commencement of such fiscal year and
         in any event no later than 75 days after the commencement of such
         fiscal year and shall be set in accordance with the following process:
         After the Committee receives a budget for such fiscal year, the
         Committee shall provide to Executive proposed performance criteria for
         Executive's comments. Following receipt of the proposed performance
         criteria, Executive shall have two weeks to provide to the Committee
         Executive's

                                         1



         comments concerning the proposed performance criteria. The Committee
         shall consider Executive's comments and shall thereafter provide to
         Executive the final performance criteria as set by the Committee for
         such fiscal year.

                          The bonus based on objective criteria shall be in an
         amount up to, but no greater than, an amount equal to one-quarter of
         Executive's Base Salary for the fiscal year then ending.

                  (b) Discretionary bonus: In addition to Executive's Base
         Salary and any bonus based on objective criteria, the Committee may, in
         its sole discretion, award to Executive additional annual bonus(es).
         Any discretionary bonus shall be shall be set by the Committee in an
         amount up to, but no greater than, an amount equal to three-quarters of
         Executive's Base Salary for the fiscal year then ending.

                  (c) All bonuses payable to Executive pursuant to subsections
         (a) and (b), above, shall be paid within two and one-half (2 1/2)
         months of the end of the fiscal year for which they are awarded. No
         discretionary bonus shall be payable to Executive in connection with a
         fiscal year if Executive's employment terminates for Cause prior to the
         end of the fiscal year. Discretionary bonuses following termination
         prior to the end of the fiscal year for reasons other than Cause may be
         paid depending upon the exercise of Committee discretion pursuant to
         Section 2.B(vii)(b) above. No bonus based on objective criteria shall
         be payable to Executive if Executive's employment terminates for Cause
         prior to the achievement of the performance criteria set by the
         Committee. In the event of a termination for reasons other than Cause
         in the last quarter of a fiscal year, bonuses based on objective
         criteria shall be prorated based upon the number of months worked in
         the fiscal year if Executive has achieved, or is on track to achieve,
         the applicable criteria.

         2. Section 4 of the Employment Agreement is amended by inserting a new
subsection F. at the end thereof to read in its entirety as set forth below:

                  F. If Executive is a "specified employee" within the meaning
 of Section 1.409A- 1(i) of the Treasury Regulations promulgated under the
 Internal Revenue Code of 1986, as amended (the "Code"), as of the Date of
 Termination, then payments to Executive hereunder shall not be made before the
 date that is six months after the Date of Termination (or if earlier, the date
 of death of Executive); provided, however, that during such six-month period,
 NFM shall make any and all payments contemplated hereunder to the extent such
 payments do not exceed two times the lesser of (i) Executive's annualized
 compensation, based upon the annual rate of compensation for the calendar year
 preceding the year in which the Date of Termination occurs, or (ii) the maximum
 amount that may be taken into account under a qualified plan pursuant to
 Section 401(a)(17)

                                        2



          of the Code for the year in which the Date of Termination occurs; and
          provided further that any amounts deferred hereunder shall be paid in
          a lump-sum amount at the expiration of such six-month period.

         3. Section 5C. of the Employment Agreement is amended by inserting
immediately prior to the period at the end thereof the following clause:

          to an unrelated party (as contemplated by Section
          l.409A-3(i)(5)(vii)(3) of the Treasury Regulations promulgated under
          the Code).

         4. All other terms and conditions of the Employment Agreement shall
remain in full force and effect. This Amendment, together with the Employment
Agreement, contains all the terms and conditions agreed upon by the parties
hereto regarding the subject matter hereof and thereof. All prior agreements,
promises, negotiations and representations, either oral or written, relating to
the subject matter of this Amendment or the Employment Agreement not expressly
set forth in this Amendment or the Employment Agreement are of no force or
effect.

         5. Any waiver, alteration or modification of any of the terms of this
Amendment or the Employment Agreement shall be valid only if made in writing and
signed by the parties hereto.

         6. This Amendment shall be governed by and construed in accordance with
the internal laws of the State of Colorado applicable to agreements made and to
be performed entirely within the State, without regard to conflict of law
principles.

         7. This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.

         IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.

NEW FRONTIER MEDIA, INC.                                     EXECUTIVE

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

EX-10

Exhibit 10.04

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”), dated as of March 23rd, 2007 and effective as of April 1, 2007 (the “Effective Date”) between Marc D. Callipari, an individual with a residence at 2862 Flint Ct, Superior, Colorado 80027 (the “Executive”), and New Frontier Media, Inc. (“NFM”), a Colorado corporation with offices at 7007 Winchester Circle, Suite 200, Boulder, Colorado 80301, recites and provides as follows:

WHEREAS, NFM desires to retain the services of Executive, and Executive desires to be employed by NFM, all on the terms and subject to the conditions set forth herein.

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

1.DEFINITION OF PARTIES. As used herein, the term “NFM” shall include NFM, its parent, affiliates and subsidiaries whether now in existence or formed in the future.

2.TERM. The Term of this Agreement shall begin as of April 1, 2007 (the “Effective Date”) and shall continue until September 30, 2009, or such date as the Agreement is terminated by either party as hereinafter provided (the “Term”).

3. TERMS OF EMPLOYMENT.

A. POSITION AND DUTIES.

(i)           During the Term, Executive shall perform such duties, and have such title, as NFM in its sole discretion, shall determine.

(ii)          During the Term, Executive agrees to devote his full-time attention to the business and affairs of NFM. Executive’s employment under this Agreement shall be Executive’s exclusive employment during the Term of this Agreement.

B. COMPENSATION.

(i)Base Salary. During the Term, Executive shall receive a base salary ("Base Salary"), which shall be paid in equal installments on a bi-weekly basis, at the rate of One Hundred Seventy Six Thousand Dollars ($176,000.00) per annum, which Base Salary may be reviewed and adjusted, but in no event decreased, annually. The Executive’s Base Salary shall be subject to all applicable federal, state and local withholding taxes and required withholdings under any NFM benefits plans Executive participates in. .

(ii)Discretionary Bonus. In addition to Executive’s Base Salary, Executive shall be eligible for an annual discretionary bonus (“Bonus”) which shall be awarded based upon factors and individual and/or company performance criteria established in the sole discretion of NFM.

(iii)Stock Options. Executive shall be eligible to receive stock options under the terms and conditions of any applicable Stock Option Plan approved by shareholders of NFM, on the terms and conditions set forth in such a plan. Stock Options shall be granted at the discretion of the Board of Directors and the Compensation Committee of NFM.

(iv)Expenses. During the Term, Executive shall be entitled to receive reimbursement for all employment-related expenses incurred by Executive in accordance with the policies, practices and procedures of NFM as in effect generally from time to time after the Effective Date with respect to other employees at Executive’s level within NFM.

(v)Vacation. During the Term, Executive shall be entitled to paid annual vacation, in accordance with the policies, programs and practices of NFM, which are in effect generally from time to time after the Effective Date with respect to other employees at Executive’s level within NFM.

(vi)Paid Time Off. During the Term, Executive shall be entitled to paid time off in accordance with the policies, programs and practices of NFM, which are in effect generally from time to time after the Effective Date with respect to other employees at Executive’s level within NFM.

(vii)Other Benefits. During the Term, Executive shall be entitled to such health insurance and other benefits, in accordance with the policies, programs and practices of NFM which are in effect from time to time after the Effective Date with respect to other employees at Executive’s level within NFM.

(viii)Relationship Subsequent to this Agreement. On or before the end of the Term, NFM and Executive shall address the subject of a new or extended employment agreement to take effect upon the expiration of this Agreement. If the parties do not execute a new written agreement upon the expiration of this Agreement, but the parties are negotiating a new agreement in good-faith, Executive shall be paid the base salary as outlined within this Agreement in regular bi-weekly installments.

4. TERMINATION OF EMPLOYMENT.

A.DEATH. If the Executive dies while employed by NFM, the Executive’s employment shall terminate on the date of death and NFM shall pay to the Executive’s executor, legal representative, administrator or designated beneficiary, as applicable, any amounts earned, accrued and owing but not yet paid under Section 3 above and any benefits accrued and due under any applicable benefit

Page 1 of 7

plans and programs of NFM, which amounts shall be paid within the time frames specified by Colorado state wage law. Otherwise, NFM shall have no further liability or obligation under this Agreement to the Executive’s executors, legal representatives, administrators, heirs or assigns or any other person claiming under or through the Executive.

B.DISABILITY. If the Executive incurs a Disability (as defined below) during the Term, the Executive’s employment shall terminate on the date of Disability. If the Executive’s employment terminates on account of his Disability, the Executive shall be entitled to receive any amounts earned, accrued and owing but not yet paid under Section 3 above and any benefits accrued and due under any applicable benefit plans and programs of NFM, which amounts shall be paid within the time frames specified by Colorado state wage law. For purposes of this Agreement, the term “Disability” shall have the same meaning as under NFM long-term disability plan, or if there is no such plan, if the Executive by virtue of ill health or other disability is unable to perform substantially and continuously the duties assigned to him (as determined by the Board in its sole discretion) for more than 90 consecutive or non-consecutive days out of any 6 consecutive month period.

C.CAUSE. NFM may terminate the Executive’s employment at any time for Cause (as defined below) upon written notice to the Executive (subject to the Executive’s opportunity to cure described below), in which event all payments under this Agreement shall cease, except for any amounts earned, accrued and owing but not yet paid under Section 3 above and any benefits accrued and due under any applicable benefit plans and programs of NFM, which amounts shall be paid within the time frames specified by Colorado state wage law. For purposes of this Agreement, “Cause” shall mean any of the grounds for termination of the Executive’s employment listed below:

(i)           The Executive’s conviction of, or plea of guilty or nolo contendere to, (i) a felony (other than traffic violations), (ii) a crime involving moral turpitude, or (iii) a criminal act which adversely affects the business or reputation of NFM, its parent or its subsidiaries;

(ii)          The Executive’s engagement in willful misconduct or willful or gross neglect in the performance of his duties hereunder, or commission of an act of fraud, embezzlement, theft, dishonesty, breach of trust or misappropriation of funds against NFM, its parent or its subsidiaries;

(iii) Material breach of this Agreement by the Executive;

(iv) Violation by Executive of any NFM’ personnel policies; or

(v) The Executive’s persistent and continuing failure to perform the Executive’s reasonable duties hereunder.

If there is an event or condition that constitutes Cause under (iii) (iv) or (v) above, the Executive shall have ten (10) days from the date NFM provides notice to the Executive of the event or condition constituting Cause to cure such event or condition (to the extent the event or condition is curable), and if the Executive does so fully cure such event or condition, such event or condition shall not constitute Cause hereunder.

D.WITHOUT CAUSE. If the Executive’s employment is terminated by the Company without “Cause” (as defined in Section 4(C)), or if NFM materially breaches this Agreement, this Section 4(D) shall apply.

(i)           NFM may terminate the Executive’s employment with NFM at any time without Cause. Upon such termination without Cause, Executive shall be under no obligation to render any additional services to NFM and shall be allowed to seek other employment, subject to the Restrictive Covenants set forth herein.

(ii)          Unless the Executive complies with the provisions of Section 4D(iii) below, upon termination without Cause, Executive shall be entitled to receive only any amounts earned, accrued and owing but not yet paid under Section 3 above and any benefits accrued and due under any applicable benefit plans and programs of NFM, which amounts shall be paid within the time frames specified by Colorado state wage law. No other payments or benefits shall be due under this Agreement to the Executive.

(iii)         Notwithstanding the provisions of Section 4D(ii), upon termination without Cause under Section 4D(i) above, if the Executive executes and does not revoke a written release, in a form reasonably acceptable to NFM,of any and all claims against NFM and all related parties with respect to all matters arising out of the Executive’s employment by NFM, or the termination thereof (other than claims for any entitlements under the terms of this Agreement or under any plans or programs of the Company under which the Executive has accrued and is due a benefit and to all indemnification and similar rights under the Company’s Certificate of Incorporation, Bylaws or otherwise) (the “Release”), the Executive shall be entitled to receive, in addition to all amounts earned, accrued and owing but not yet paid under Section 3 above and any benefits accrued and due under any applicable benefit plans and programs of NFM, the following:

An amount equal to Executive’s Base Salary (at the rate in effect immediately before the Executive’s termination or resignation, as applicable) for the remaining duration of the Term, which will be payable in accordance with NFM’s normal payroll practices in regular bi-weekly installments;

Payment of premiums on behalf of Executive to allow Executive to receive COBRA coverage for health, dental and vision benefits then being provided for Executive at the time Executive's employment is terminated, for the remainder of the Term, which benefit shall be provided subject to the applicable terms and conditions governing such COBRA coverage; provided, however that if Executive commences employment with another employer and is eligible to receive medical or other welfare benefits under another employer-provider plan, the medical and other welfare benefits to be provided by NFM as described herein shall terminate.

(iv)Application of Section 409A of Internal Revenue Code. Notwithstanding anything contained in Section 4D to the contrary, to the extent that (i) the parties’

Page 2 of 7

agreement regarding the severance payments to be made by NFM to Executive in accordance with this Agreement upon termination of Executive without Cause 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 severance payments to be made upon such termination, 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 applicable date of termination and such first payment shall be delayed until the day after the six (6) month anniversary of such date of termination. If the Executive dies during such six-month period, the severance payments shall be paid to the personal representative of the Executive’s estate as soon as practicable, but not later than 60 days, after the date of the Executive’s death. If payment is delayed pursuant to section 409A of the Code, the accumulated amounts withheld on account of section 409A of the Code shall be paid on the first business day after the end of the six-month period.

E.RESIGNATION. The Executive may voluntarily terminate his employment for any reason. In such event, after the effective date of such termination, no payments shall be due under this Agreement, except that the Executive shall be entitled to any amounts earned, accrued and owing but not yet paid under Section 3 above and any benefits accrued and due under any applicable benefit plans and programs of the Company, which amounts shall be paid within the time frames specified by Colorado state wage law.

F.NOTICE OF TERMINATION. Any termination (whether based on disability, with Cause or without Cause) shall be communicated by a written Notice of Termination to the other party, and may be sent via first class mail, facsimile transmission, email or personal delivery.

G.DATE OF TERMINATION. "Date of Termination" shall mean: (i) the date of transmission of the Notice of Termination by facsimile, email or personal delivery, or (ii) three calendar days after the date of mailing by first class mail, or (iii) date of death or disability (if applicable).

5. RESTRICTIVE COVENANTS

For good and valuable consideration, including but not limited to the increase in Base Salary effectuated by this Agreement, and the continued employment of Executive by NFM, Executive agrees to be bound to the following restrictive covenants:

A.COVENANT AGAINST COMPETITION. Executive agrees that he holds an executive level position with NFM, and Executive further agrees that by virtue of his position he has had access and will continue to have access to NFM’ Confidential Information and Trade Secrets (as those terms are defined below), and Executive further agrees that NFM has a legitimate business interest in preventing Executive from putting to a competitive use the information and relationships which pertain to NFM that Executive acquired in the course of his employment, and in protecting its customer base. Accordingly, Executive agrees to the following:

(i) The Executive acknowledges and agrees that the principal business of NFM is the sale, promotion and electronic distribution of adult themed programming and events, whether such adult themed programming and events are sold, promoted, or electronically distributed by means now known or hereafter discovered including but not limited to the Internet, satellite systems, cable systems, hotels, IPTV, mobile and/or stand alone systems (the “Business”).

(ii) In addition, the Executive acknowledges and agrees that (i) NFM is one of the limited number of companies who have developed the Business; (ii) the Executive’s work for NFM has given and will continue to give him access to the Confidential Information and Trade Secrets of the Company; (iii) the value of all goodwill resulting from the operation of the Business of NFM and its subsidiaries and other affiliates should properly belong to NFM; (iv) the covenants and agreements of the Executive in this Section are necessary to preserve the value of such goodwill for the benefit of NFM; (v) the proprietary technologies developed by NFM and its predecessors offer NFM a distinct competitive advantage, and (vi) NFM would not have entered into this Agreement but for the covenants and agreements set forth in this Section. Accordingly, the Executive covenants and agrees that:

(a) By and in consideration of the salary and benefits to be provided by NFM hereunder, including the severance arrangements set forth herein, and in consideration of the Executive’s executive position and exposure to the Confidential Information and Trade Secrets of NFM, the Executive covenants and agrees that, during the period commencing on the date hereof and ending one (1) year following the date upon which the Executive shall cease to be paid any compensation by NFM (the “Restricted Period”), he shall not anywhere in the Restricted Territory, directly or indirectly (i) engage in any element of the Business or otherwise compete with NFM, (ii) render any services to any person, corporation, partnership or other entity (other than NFM or its affiliates) primarily engaged in any element of the Business, or (iii) become interested in any such person, corporation, partnership or other entity (other than NFM or its affiliates) as a partner, shareholder, principal, agent, employee, consultant or in any other relationship or capacity; provided, however, that, notwithstanding the foregoing, the Executive may invest in securities of any entity, solely for investment purposes and without participating in the business thereof, if (A) such securities are traded on any national securities exchange or the National Association of Securities Dealers, Inc. Automated Quotation System, (B) the Executive is not a controlling person of, or a member of a group which controls, such entity and (C) the Executive does not, directly or indirectly, own 5% or more of any class of securities of such entity.

For purposes of this Agreement, “Restricted Territory” shall mean any state, county, or locality in the United States in which NFM conducts Business and any other country, city, state, jurisdiction, or territory in which NFM

Page 3 of 7

does Business while the Executive is an employee of NFM Media or any of its subsidiaries.

For purposes of this Agreement, “Trade Secret” means all non-public information whether tangible or intangible related to the products, services or business of NFM that (a) derives economic value, actual or potential, from not being generally known to or readily ascertainable by other persons who can obtain economic value from its disclosure or use; or (b) is the subject of efforts by NFM that are reasonable under the circumstances to maintain its secrecy, which might include, (i) marking any information reduced to tangible form clearly and conspicuously with a legend identifying its confidential or trade secret nature; (ii) identifying any oral communication as confidential or secret immediately before, during, or after such oral communication; or (iii) otherwise treating such information as confidential or secret. Assuming the criteria in clauses (a) or (b) above are met, Trade Secrets includes information, without regard to form, including, but not limited to, technical and nontechnical data, formulas, patterns, designs, compilations, computer programs and software, devices, inventions, methods, techniques, drawings, processes, financial data, financial plans, product plans, lists of actual or potential customers and suppliers which are not commonly known by or available to the public, research, development, and existing and future products.

(b)          Notwithstanding anything to the contrary in Section 5A(ii)(a) above, in the event of: (i) a material default by NFM of the performance of any of its material obligations hereunder, which default is not cured within ten (10) days after notice thereof, such Restricted Period shall terminate; or (ii) a termination of Executive without Cause, such Restricted Period shall terminate on the date of NFM’ last payment of severance benefits to Executive, as provided above.

B.NON-SOLICITATION. During the Restricted Period, Executive shall not, directly or indirectly, (i) solicit or encourage to leave the employment or other service of NFM any employee or independent contractor thereof; or (ii) hire (on behalf of Executive or any other person or entity) any employee or independent contractor who has left the employment or other service of NFM within the one-year period which follows the termination of such employer’s or independent contractor’s employment or other service with NFM. For purposes of the preceding sentence, the term “independent contractor” shall refer to independent contractors of NFM whose services relate directly to the conduct of the Business. During the Restricted Period, the Executive will not, whether for his own account or for the account of any other person, firm, corporation or other business organization, intentionally interfere with NFM’ relationship with, or endeavor to entice away from NFM any person who during the Term is or was a customer, client, supplier, licensee or other business relation of NFM.

C. CONFIDENTIALITY OBLIGATIONS

(i)CONFIDENTIAL INFORMATION. As used in this Agreement, "Confidential Information" includes, without limitation, design information, manufacturing information, business, financial, and technical information, sales and processing information, product information, customer lists, vendor information, vendor lists, pricing information, corporation and personal business opportunities, software, computer disks or files, or any other electronic information of any kind, Rolodex cards or other lists of names, addresses or telephone numbers, financial information, current projects, projects in development and future projects, forecasts, plans, contracts, releases, and other documents, materials, writings or information, including those which are prepared, developed or created by Executive, or which come into the possession of Executive by any means or manner, and which relate directly or indirectly to NFM (all of the above collectively referred to as "Confidential Information"). Confidential Information includes information developed by Executive in the course of Executive’s services for NFM, as well as other Confidential Information to which Executive may have access in connection with Executive’s services. Confidential Information also includes the confidential information of other individuals or entities with which NFM has a business relationship. Confidential Information shall not include any information (a) which is in the public domain or which enters the public domain through no act of omission of Executive or (b) which was in the possession of Executive prior to the commencement of his employment with NFM.

(ii)DUTY OF CONFIDENTIALITY. At all times during his employment and thereafter, Executive will maintain in strictest confidence and will not, directly or indirectly, disclose or use (or allow others working with or related to Executive to disclose or use) any Confidential Information belonging to NFM, whether in oral, written, electronic or permanent form, except solely to the extent necessary to perform services on behalf of NFM. Upon termination of this Agreement, or at the request of NFM prior to its termination, Executive shall deliver forthwith to NFM all Confidential Information (and all copies thereof) in Executive’s possession or control belonging to NFM and all tangible items embodying or containing Confidential Information.

(iii)DOCUMENTS, RECORDS, ETC. All documents, records, data, equipment and other physical property, whether or not pertaining to Confidential Information, which are furnished to Executive by NFM or are produced by Executive in connection with Executive’s services will be and remain the sole property of NFM. Executive will return to NFM forthwith all such materials and property upon the termination of this Agreement or sooner if requested by NFM.

D.ASSIGNMENT OF RIGHTS. Executive shall make full and prompt disclosure to NFM of any and all designs, intellectual property, software, inventions, discoveries, or improvements (individually and collectively, "Inventions") made by Executive as a result or product of his employment relationship with NFM. Executive hereby assigns to NFM without additional compensation the entire worldwide right, title and interest in and to such Inventions, and related intellectual property rights and without limitation all copyrights, copyright renewals or reversions, trademarks, trade names, trade dress rights, industrial design, industrial model, inventions, priority rights, patent rights, patent applications, patents, design patents and any other rights or protections in connection therewith or related thereto, for exploitation in

Page 4 of 7

any form or medium, of any kind or nature whatsoever, whether now known or hereafter devised. To the extent that any work created by Executive can be a work for hire pursuant to U.S. Copyright Law, the parties deem such work a work for hire and Executive should be considered the author thereof. Executive shall, at the request of NFM, without additional compensation from time to time execute, acknowledge and deliver to NFM such instruments and documents as NFM may require to perfect, transfer and vest in NFM the entire right, title and interest in and to such inventions. In the event that Executive does not timely perform such obligations, Executive hereby makes NFM and its officers his attorney in fact and gives them the power of attorney to perform such obligations and to execute such documents on Executive’s behalf. Executive shall cooperate with NFM upon NFM’s request and at NFM’s cost but without additional compensation in the preparation and prosecution of patent, trademark, industrial design and model, and copyright applications worldwide for protection of rights to any Inventions.

E.LEGAL AND EQUITABLE REMEDIES. Because the Executive’s services are personal and unique and the Executive has had and will continue to have access to and has become and will continue to become acquainted with the Confidential Information and Trade Secrets of NFM, and because any breach by the Executive of any of the confidentiality covenants and restrictive covenants contained in Section 5 would result in irreparable injury and damage for which money damages would not provide an adequate remedy, NFM shall have the right to enforce the restrictions set forth in Section 5 by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that NFM may have for a breach, or threatened breach, of the obligations described in Section 5. The Executive agrees that in any action in which NFM seeks injunction, specific performance or other equitable relief, the Executive will not assert or contend that any of the provisions of Section 5 are unreasonable or otherwise unenforceable.

F.SCOPE/BLUE PENCIL PROVISIONS. Executive agrees that the duration, scope and geographic area of the restrictions stated in this Section are reasonable and necessary given the nature of NFM’ Business. However, in the event that a court or arbitrator of competent jurisdiction shall hold that the duration, scope, geographic area or other restrictions stated herein are unreasonable and unenforceable under circumstances then existing, the parties agree that the maximum duration, scope, area or other restrictions reasonable under such circumstances shall be substituted for the stated duration, scope, area or other restrictions.

G.INDEPENDENT AGREEMENT. The covenants made in this Section 5 shall be construed as an agreement independent of any other provisions of this Agreement, and shall survive the termination of this Agreement. Moreover, the existence of any claim or cause of action of Executive against NFM, whether or not predicated upon the terms of this Agreement, shall not constitute a defense to the enforcement of these covenants. Notwithstanding anything to the contrary in this paragraph, Executive shall be released from his obligations under paragraph 5(A) of this Agreement [Covenant Against Competition] if NFM is in material breach of its obligations set forth in paragraph 3(B) of this Agreement [Compensation], provided such material breach remains uncured for more than thirty (30) days after written notice of said breach from Executive to NFM.

6.ARBITRATION. To the maximum extent permitted by law, all disputes, controversies, claims, or demands of any kind or nature arising between the parties in connection with this Agreement, whether at law or in equity or based upon common law or any federal or state statute, rule, or regulation, that cannot be resolved between the parties through NFM’ internal complaint resolution procedures, shall be submitted to binding arbitration by the American Arbitration Association; provided, however, that this arbitration requirement shall not apply to any action by NFM to obtain injunctive relief pursuant to Section 5 hereof to prevent any violation by Employee of the terms of this Agreement, which injunctive action may be brought in any court of competent jurisdiction.

Any arbitration commenced hereunder shall be initiated in Boulder, Colorado and shall be governed by the AAA National Rules for the Resolution of Employment Disputes. The arbitration shall occur 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 months of the act or omission which gives rise to the claim. Each party shall be entitled to take any discovery as is permitted by the applicable rules and the arbitrator. In determining the extent of discovery, the arbitrator shall exercise discretion, but shall consider the expense of the desired discovery and the importance of the discovery to a just adjudication.

The findings, conclusions, and award rendered in any arbitration shall be binding upon the parties and shall finally determine all questions of fact relating to the dispute. Judgment upon the arbitration award may be entered in the appropriate court, state or federal, having jurisdiction, and each party expressly waives any right to appeal any such judgment rendered by the court. Any party may apply to a court of competent jurisdiction for entry of judgment on the arbitration award.

The party instituting arbitration shall be responsible for paying any filing fee(s) required. Each party shall be responsible for paying their own attorney’s fees. NFM shall initially advance the costs of the arbitrator’s fee for services, whether arbitration is instituted by NFM or Executive. However, the Arbitrator shall have the power, in his or her discretion, to award some or all of the costs of arbitration and reasonable attorneys’ fees to the prevailing party. Any party may apply to a court of competent jurisdiction for entry of judgment on the arbitration award.

The parties agree that failure to comply with the provisions of this paragraph shall constitute grounds for the dismissal of any suit, action, or proceeding instituted in any federal,

Page 5 of 7

state, or local court or before any administrative tribunal with respect to any dispute which arises during the period of this Agreement and which is subject to this arbitration agreement. The arbitration provisions of this Agreement are specifically enforceable by each party to the Agreement and shall survive the termination or expiration of the Agreement.

THE EXECUTIVE UNDERSTANDS THAT THIS AGREEMENT TO ARBITRATE ALL ARBITRABLE DISPUTES MEANS THE EXECUTIVE IS AGREEING TO WAIVE TO THE MAXIMUM EXTENT PERMITTED BY LAW ANY RIGHT THE EXECUTIVE MAY HAVE TO ASK FOR A JURY OR COURT TRIAL IN ANY DISPUTE WITH THE COMPANY.

7.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, and that he has no rights or obligations which may conflict with the interests of NFM or with the performance of Executive’s duties and obligations under this Agreement. Executive agrees to notify NFM immediately if any such conflicts occur in the future.

8. SUCCESSORS.

A. This Agreement is personal to Executive and shall not be assignable by Executive.

B.          This Agreement shall inure to the benefit of NFM and its successors and assigns. Upon written notice to Executive, NFM may assign this Agreement to any successor or affiliated entity, subsidiary, sibling, or parent company.

9.LAW CHANGES. To the extent that any payment under this Agreement is deemed to be deferred compensation subject to the requirements of section 409A of the Code, this Agreement shall be administered so that such payments will be made in accordance with the requirements of section 409A of the Code.

10. MISCELLANEOUS

A.Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado, without reference to the principles of conflict of laws.

B.Captions/Headings. The captions and headings of this Agreement are not part of the provisions hereof and shall have no force or effect.

C.Entire Agreement. This Agreement contains the full and complete understanding between the parties hereto and supersedes all prior understandings, whether written or oral pertaining to the subject matter hereof.

D.Modifications of Agreement. This Agreement may not be amended or modified otherwise than by written agreement executed by Executive and by the designated representative of the Board. Notwithstanding anything to the contrary, NFM hereby reserves the right to unilaterally amend this Agreement as necessary to avoid the imposition of liability under or as a consequence of the application of the provisions of Section 409A of the Code.

E.Notices. All notices and other communications hereunder 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:

New Frontier Media, Inc.

7007 Winchester Circle, Suite 200

Boulder, CO 80301

Attn: Ken Boenish, President

Executive:

Marc D. Callipari

F.Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.

G.Withholdings. NFM shall withhold from any amounts payable under this Agreement such amounts as are required to be withheld pursuant to any applicable law or regulation, including without limitation amounts required to be withheld for Federal, State and local taxes, as well as garnishments and other required withholdings.

H.Remedies Cumulative; No Waiver. No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or hereafter existing at law or in equity. 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.

I.Counterparts. This Agreement may be executed in any number of counterparts (including facsimile counterparts), each of which shall be an original, but all of which together shall constitute one instrument.

Page 6 of 7

IN WITNESS WHEREOF, Executive has hereunto set Executive’s hand, and New Frontier Media, Inc. has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

NEW FRONTIER MEDIA, INC. EXECUTIVE

By: _/s/ Ira Bahr	By: _/s/ Marc D. Callipari
Name: Ira Bahr	Name: Marc D. Callipari

Title: Chief Operating Officer

Page 7 of 7

EX-10

                                                                   Exhibit 10.05

Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.

EXECUTION VERSION

                   AMENDED AND RESTATED AFFILIATION AGREEMENT
                          FOR DTH SATELLITE EXHIBITION
                          OF CABLE NETWORK PROGRAMMING

                                  DIRECTV, INC.

                                       and

                      COLORADO SATELLITE BROADCASTING, INC.




Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.

                   AMENDED AND RESTATED AFFILIATION AGREEMENT

                          FOR DTH SATELLITE EXHIBITION

                          OF CABLE NETWORK PROGRAMMING


         AGREEMENT, made as of this 24th day of September, 2007, by and between
COLORADO SATELLITE BROADCASTING, INC., a Colorado corporation ("Programmer"),
and DIRECTV, INC., a California corporation ("DIRECTV").

         WHEREAS:

                  A. DIRECTV and Programmer entered into a written agreement
entitled Affiliation Agreement for DTH Satellite Exhibition of Cable Network
Programming dated March 31, 2006 (the "Agreement") whereby Programmer granted
DIRECTV the right to distribute adult programming television networks owned and
operated by Programmer (individually the "Service," or collectively the
"Services", as defined in Section 1.2.1 below) via the DTH Distribution System
(as defined in Section 1.1.2 below) in the United States, its territories and
possessions, including Puerto Rico (the "Territory") as restricted herein; and

                  B. The parties desire to amend various terms of the Agreement
and herein restate the Agreement in its entirety.

         NOW, THEREFORE, IT IS MUTUALLY AGREED AS FOLLOWS:

         1.       Grant of Rights.

                  1.1      Distribution; Certain Definitions.

                           1.1.1 Programmer hereby grants to DIRECTV the
non-exclusive right to distribute the Services in the Territory via the DTH
Distribution System to DIRECTV Subscribers (as defined in Section 1.1.2 below)
during the Term (as defined in Section 6.1 below) hereof. DIRECTV shall have the
right to use the names, titles or logos of the Services or any of its programs,
or the names, voices, photographs, music, likenesses or biographies of any
individual participant or performer in, or contributor to, any program or any
variations thereof, subject to the warranties and restrictions set forth in this
Agreement.

                           1.1.2 The term "DTH Distribution System" shall mean
the distribution system for video and other programming services whereby the
programming satellite signal or feed is received from Programmer's Delivery
Source (as defined in Section 1.3.3 below) by a DIRECTV turnaround earth-station
facility which compresses and processes the signal or feed and then uplinks it
to a DTH communications satellite (a "DTH Satellite") for transmission to
DIRECTV Subscribers. DTH Distribution System shall also include any other method
of distribution that DIRECTV currently and/or subsequently uses to deliver the


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



Services feed to DIRECTV Subscribers, including, without limitation, MMDS and
terrestrial-based transmission infrastructures such as Internet protocol, fiber
optic, twisted pairs and coaxial cable, provided that in connection with such
delivery methods, DIRECTV complies with the following: (i) the end users to whom
DIRECTV distributes the Services are DIRECTV Subscribers; (ii) the branding and
packaging that is received by such DIRECTV Subscribers is substantially the same
as the branding and packaging received by DIRECTV Subscribers that receive the
Services via DIRECTV's direct to home satellites. "DIRECTV Subscribers" shall
mean those customers (both residential and non-residential) authorized by
DIRECTV to receive DTH service via the DTH Distribution System, excluding any
customer who to DIRECTV's knowledge: (A) charges an admission fee, cover charge,
minimum or the like; or (B) distributes all or any part of the Services to
viewers who are not located in the same residence, dwelling unit, store,
hospital room, hotel room or suite, motel room or suite, office or other
singular facility occupied, owned, leased or otherwise controlled by the
customer entitled to receive the Services.

                           1.1.3 If Programmer grants or has granted to any
other distributor that distributes a Service in the Territory the right to
receive and distribute such Service(s) and/or any Segments (as defined in
Section 1.2.1 below) of Service programming (as any such Segments appear on the
Service(s)) or Programmer or an Affiliated Company (as defined in Section 8.1
below) distributes the Service(s) (or any portion thereof) itself via a "New
Distribution Method" (as defined below), then Programmer will promptly notify
DIRECTV thereof and make available to DIRECTV the right to receive and
distribute such programming to DIRECTV Subscribers via such New Distribution
Method under the same terms and conditions such rights were made available such
other distributor directly in exchange for such rights, provided that if DIRECTV
cannot reasonably satisfy such terms and conditions, Programmer shall offer
DIRECTV comparable terms and conditions. "New Distribution Method" shall mean,
with respect to any other distributor of a Service in the Territory, any
distribution method, device, distribution technology or format (for example,
distribution to hand-held devices, streamlining to a web site); provided that,
in all events, the current distribution methods of cable television, telco
(e.g., via Internet protocol or traditional fiber lines), direct to home
satellite, SMATV and multipoint distribution service (all as currently utilized
in the multichannel video distribution business) shall not be considered a New
Distribution Method.

                           1.2 The Services.

                           1.2.1 The "Services" shall mean and consist of the
national feed (or, if Programmer uses multiple feeds for the Services, such
other of such multiple feeds designated by DIRECTV) of the following 24-hour per
day, 7-day per week programming services: (i) the programming service commonly
known as "TEN*Clips", which shall consist of thematically organized [***] scenes
which are sourced from various movies (each [***] minute segment shall contain
up to [***] individual [***] scenes and shall in no instance show less than
[***] scenes (collectively a "Segment")); (ii) the programming service commonly

                                       2


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



known as "Juicy", which shall consist of Segments of thematically organized
[***] scenes; and (iii) the programming service commonly known as "Real", which
shall consist of a minimum of [***] unique programs per [***] and [***] unique
programs per [***], including [***] channel premiers per [***] and [***] channel
premiers per [***]. No program shall repeat for a minimum of [***] after its
initial [***] run on Real or for a minimum of [***] after any subsequent [***]
run. Furthermore, no program on Real shall repeat more than [***] during any
given [***]. All programs on Real will employ a reality aspect or feel in which
[***] scenes simulate [***] situations. TEN*Clips and Juicy each shall contain a
minimum of [***] unique Segments per [***] ([***] unique Segments comprised of
[***] unique [***] scenes per [***]). While [***] of Segments will be created
during the Term, all Segments shall be [***] in that no Segment is ever [***]
with the [***] scenes in the [***]. No Segment will ever [***] after its initial
[***] run and no [***] scene will [***] for [***] after its initial [***] run or
for a minimum of [***] after any subsequent [***] run. Furthermore, no Segment
shall [***] more than [***] during any given [***]. Segments shall be no less
than [***] in duration. The daily start time for Real is [***] and the daily
start time for TEN*Clips and Juicy is [***]; provided that Programmer shall make
commercially reasonable efforts to accommodate any request by DIRECTV to modify
such start times. Notwithstanding the foregoing or the content limitations set
forth herein, in the event that, during the Term, DIRECTV authorizes the
exhibition via the DTH Distribution System of adult programming which contains
or depicts acts set forth only in the [***] of Schedule I to Exhibit A ("[***]
Programming"), then Programmer shall replace TEN*Clips with the programming
service commonly known as "Xtsy", which shall consist of a mix of quality [***]
adult feature programs (including [***],and [***]). Xtsy shall feature a minimum
of [***] unique programs per [***] and [***] unique programs per [***]. Among
the aforementioned unique programs, Xtsy shall feature [***] channel premiers
per [***] and [***] channel premiers per [***] and which may contain [***]
Programming. The start time for Xtsy is [***]. No program shall [***] for a
minimum of [***] after its initial [***] run on Xtsy or for a minimum of [***]
after any subsequent [***] run. Furthermore, no program on Xtsy shall [***] more
than [***] during any given [***]. The Services shall be comprised of [***]
adult programming depicting [***] and [***] situations and [***] among
consenting adults. [***] programming shall not be exhibited on more than one
Service during any [***] during the Term. Subject to the foregoing, the Services
shall at all times be [***] to (or [***] than) the degree of explicitness of
programming currently featured on competing adult services such as the services
currently known as [***] and [***] (subject to the description and limitations
in Exhibit A, as illustrated by the programming schedules in Exhibit C).

Notwithstanding the foregoing, upon [***] written notice to Programmer, DIRECTV
shall have the sole option at any time during the Term to replace any one of the
Services with any other programming service of the same edit standard (i.e.,
[***], or, as the case may be, [***]) distributed by Programmer in the Territory
and to distribute such other service under the terms hereof. Programmer
represents and warrants that the Services shall reflect adult content limited to
the [***] version, as described in Exhibit A and Schedule I thereto, and, except
as may be permitted in strict accordance herewith, shall not contain or depict


                                       3


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



any acts set forth in the [***] of Schedule I to Exhibit A, or otherwise
prohibited by Exhibit A. The Services shall not contain any paid programming,
including, without limitation, infomercials, home shopping programming,
fundraising or religious programming. Notwithstanding the foregoing, Programmer
shall have the right to include Programmer's brand or trademark identification
on the Services and to include promotional tags or spots solely for purposes of
promoting upcoming programs on the Services (no more than [***] in each [***]
segment of programming content); provided that in no case shall such tags or
spots promote any programming service other than the Services. The Services
shall be delivered to DIRECTV in their entirety, meaning that the programming on
the Services, as received by any Service Subscriber at a given point in time,
shall be the same as the programming that is received by all other subscribers
to the Services at such point in time. If Programmer or an Affiliated Company
(as defined in Section 8.1 hereof) distributes itself or provides (or offers)
any other programming rights, including, without limitation, DVR push down, high
definition, video-on-demand, interactive or gaming rights (including, without
limitation, data and informational enhancements to the programming contained in
or delivered along with the Services) to any other distributor of the Services
in the Territory, then Programmer shall promptly offer to DIRECTV such rights
upon terms and conditions that are no less favorable to DIRECTV than those
provided to the Other Distributor; provided, however, that if such terms and
conditions are not relevant to DIRECTV or DIRECTV is not reasonably capable of
complying with such terms and conditions taking into consideration DIRECTV's
business, including, without limitation, DIRECTV's technology and DIRECTV's
national platform, then the parties shall negotiate comparable obligations,
terms and conditions in good faith. The terms hereunder that cannot be reduced
to an economic value shall be no less favorable to DIRECTV than such terms that
are provided to Other Distributors.

                           1.2.2 All rights and title in and to the entire
contents of the Services, including, but not limited to, films and recordings
thereof, title or titles, names, trademarks, concepts, stories, plots,
incidents, ideas, formulas, formats, general content and any other literary,
musical, artistic, or other creative material included therein shall, as between
Programmer and DIRECTV, remain vested in Programmer.

                           1.2.3 DIRECTV is authorized to distribute the
Services using satellite master antenna television system (or similar system)
("SMATV") operators (including telephone companies and similar service
providers) that serve multiple dwelling locations, master planned communities,
multiple dwelling unit ("MDU") buildings or complexes or commercial or business
establishments with multiple television viewing sites via such SMATV systems
directly to end users within such buildings or establishments, subject to
Section 1.1.2 above.

                           1.2.4 Programmer shall not propose or impose upon
DIRECTV, nor shall DIRECTV be obligated to pay, any surcharge or other cost
(other than the License Fees provided for in Section 2 hereof) for receipt and
distribution of the Services.

                           1.3 Other Distribution Obligations. In addition, the
parties agree as follows:


                                       4


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



                           1.3.1 Subject to Programmer's obligations hereunder
and DIRECTV's rights under Section 17, DIRECTV shall distribute the Services on
a PPV basis as transmitted by Programmer, in its entirety, in the order and at
the time transmitted by Programmer without any intentional and willful editing,
delays, alterations, interruptions, deletions or additions (collectively, the
"Alterations") excepting: (i) DIRECTV's electronic guides (including without
limitation, any mosaic or similar guides), (ii) news bulletins and other public
announcements as may be required by emergencies or applicable law; and (iii) a
DIRECTV Subscriber's use of equipment, programming or other data supplied by
DIRECTV or any third party to make Alterations to the Signal as viewed on a
monitor/television screen. Programmer acknowledges that the DTH Distribution
System requires and applies digital compression and encryption processes prior
to transmission and decryption and decompression processes upon reception and
agrees that such processing does not constitute an alteration and/or other
modification of the Services. Programmer shall fully encrypt the satellite
signals of the Services utilizing encryption technology commonly used in the
satellite distribution industry.

                           1.3.2 Subject to the terms and conditions of this
Agreement, the terms and conditions upon which DIRECTV distributes the Services
to DIRECTV Subscribers, including, without limitation, Service packaging and
retail prices charged, shall be determined by DIRECTV in its sole discretion.
DIRECTV shall offer the Services to DIRECTV Subscribers [***] or [***] and/or in
a [***] (as defined in Section 3 of Exhibit B) on a [***] (each, a "PPV
Offering"), in blocks of at least [***] each (or such other period as the
parties shall agree), but not to exceed [***] each unless Programmer consents in
writing, which consent shall not be unreasonably withheld (any such block of
time, a "PPV Program").

                           1.3.3 Programmer shall, at its sole expense, deliver
the feeds of the Services from a U.S. domestic communications satellite in the
Territory commonly used for transmission of television programming (or, at
Programmer's option and expense, a fiber optic or other facility reasonably
acceptable to DIRECTV) (the "Delivery Source") to either or both (as designated
by DIRECTV) of DIRECTV's uplink and broadcast facilities currently located in
Castle Rock, Colorado and Los Angeles, California (collectively, the "Broadcast
Centers"). In connection with the foregoing, Programmer shall, at its sole cost
and expense, provide DIRECTV with [***] receivers and decoders for the Services
for each of the Broadcast Centers. Programmer shall have in place appropriate
back-up procedures and process, or shall reserve back-up fiber links between
Programmer's broadcast center and its satellite uplink center (VYVX), such that
in the event of a failure of the first satellite or fiber link, delivery of the
Services to DIRECTV shall be only minimally interrupted. The format of the
backup feeds shall be the same format as the primary feeds of the Services. As
of the Effective Date (defined in Section 6.1), the feeds of the Services shall
be delivered from [***], transponder [***]. The delivery of all feeds hereunder
shall be pursuant to the technical specifications set forth at Exhibit "C"
hereto.

                                       5


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



                           1.3.4 Programmer and DIRECTV shall use their
respective commercially reasonable efforts to maintain for the Services a high
quality of signal transmission in accordance with their respective technical
standards and procedures. Programmer agrees to include closed-captioning and/or
video description of the audio portion of the Services as delivered by
Programmer to DIRECTV in a manner sufficient to allow DIRECTV to comply with any
applicable closed-captioning and/or video description obligations as may be
imposed upon DIRECTV or Programmer the rules and regulations of the Federal
Communications Commission ("FCC") or other governmental body during the Term, as
modified from time to time, and Programmer shall provide DIRECTV certificates of
compliance in connection therewith with the above obligations on a [***] basis
during the Term. Other than as required pursuant to the immediately preceding
sentence, DIRECTV shall have no liability in connection with Programmer's
failure to prepare, insert or include closed-captioning and/or video description
in the Services as required by this Section 1.3.4. Accordingly Programmer shall
indemnify, defend and hold harmless DIRECTV, as provided in Section 8 hereof,
against and from any and all losses, liabilities, claims, costs (including
without limitation, any costs of preparing and including closed-captioning
and/or video description in the Services), damages and expenses, including
without limitation, fines, forfeitures, attorneys' fees, disbursements and court
or administrative costs, arising out of third party claims (including, without
limitation, the action of any Governmental Authority, as such term is defined in
Section 5.2.10 below) as a result of Programmer's breach of this Section 1.3.4.

                           1.4 Program Guide. During the Term, Programmer, at
its sole cost and expense, shall provide the daily programming schedule for the
Services to Tribune Media Service (or such other service designated by DIRECTV)
in order that DIRECTV may access the program schedule for purposes on the
on-screen program guide.

                           1.5 VBI. Programmer acknowledges that digitizing and
compressing of the signals of the Services (the "Signal") will result in changes
to the Signal. As a consequence, the DTH Distribution System does not currently
retransmit any data or information contained in the VBI of the Signals except
line 21, fields 1 and 2, and only carries a single mono secondary audio program
provided that such secondary audio is programmed twenty-four (24) hours per
day/seven (7) days per week ("SAP"). Accordingly, in no event shall DIRECTV be
obligated to transmit more than the primary video and a single stereo pair of
primary audio programs to be associated with the Signal, a single mono SAP
associated with the Signal, and line 21, fields 1 and 2 of the VBI. Programmer
reserves and retains all rights in and to all signal distribution capacity
contained within the bandwidth of the Signal, including without limitation, the
VBI and audio subcarriers from its transmission point to the point of reception
by DIRECTV. DIRECTV retains and reserves any and all rights in and to, and may
use in its sole discretion, all distribution capacity contained within the
bandwidth of the Signals, including, without limitation, the VBI and audio
subcarriers, from the point of reception by DIRECTV to the DIRECTV Subscribers
in the Territory. Programmer shall not have any rights to use any part of a
DIRECTV Subscriber's return path for any reason whatsoever.


                                       6


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



                           1.6 Change of Satellite. In the event Programmer
either (i) changes the satellite to which the Services are transmitted to a
satellite or other transmission medium not susceptible to viewing or utilization
by DIRECTV's then-existing earth station equipment without affecting the receipt
of the signals of any other programming or other services then received (or
committed to be received) by such DIRECTV, (ii) changes the technology used by
Programmer to encrypt the Services to a technology not compatible with DIRECTV's
then-existing descrambling equipment, or (iii) compresses, digitizes or
otherwise modifies the signal of the Services in such a manner that it cannot be
received or utilized by DIRECTV, then DIRECTV shall have the right to
discontinue carriage of the Services, immediately; provided that this right of
discontinuance and deletion shall not apply to DIRECTV if Programmer agrees to
promptly reimburse DIRECTV for (I) the cost to acquire and install equipment
necessary for DIRECTV to receive the signal of the Services from such new
satellite or other transmission medium, and/or (II) the cost to acquire and
install equipment necessary for DIRECTV to descramble and/or utilize the signal
of the Services; Programmer agrees to [***] provide DIRECTV with at least [***])
prior written notice of a satellite or technology change as set forth in
subsections (i) through (iii) above.

                           1.7 On-Screen Logos. It is understood and agreed that
DIRECTV may superimpose a logo or "bug" in a corner of the screen identifying
DIRECTV over the programming of the Services; provided however that DIRECTV's
bug shall appear only intermittently during any portion of the Services, and
provided further that DIRECTV shall not delete the Service's own promotion bug
or its on-screen graphics.

         2. Reports and Payments.

                           2.1 Reports; Payments; Audit Rights. Within [***]
after the end of each [***] during the Term, DIRECTV shall furnish Programmer
(i) a statement containing a report of (A) the total number of [***] as of the
last day of the relevant [***]; (B) the number of [***] (defined as the number
of [***] for the Services authorized by DIRECTV for reception by DIRECTV
Subscribers, net of any [***] and/or [***] subject to a [***] (as defined in
Paragraph 2 of Exhibit "B")) for the relevant [***]; and (C) the total amount of
[***] (as defined in Exhibit B, attached hereto, and made a part hereof) for the
relevant [***] and (ii) payment of the License Fees for the relevant [***],
calculated pursuant to Section 2.2 and Exhibit B. Programmer shall accord
confidential treatment to any information contained in the aforementioned
statement in accordance with Section 15. At Programmer's request, DIRECTV shall
permit Programmer's independent representatives to review, during the Term (no
more than [***]) and [***] after the end of the Term and on a one-time basis,
such DIRECTV Subscriber records as required for the sole purpose of verifying
such statements at reasonable times, upon reasonable advance written notice and
during normal business hours at DIRECTV's offices. Any third party auditors



                                       7


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



retained by Programmer shall be a certified public accountant and/or firm
specializing in media audits that has no conflict with DIRECTV (subject to
DIRECTV's reasonable approval). Such review shall be at Programmer's sole cost
and expense, unless such review reveals an underpayment of more than [***] of
License Fees due, in which case, DIRECTV shall reimburse Programmer the
reasonable cost of such audit and shall promptly make payment of any fees due
and owing, provided (I) DIRECTV does not have a bona fide dispute with the audit
findings; and (II) such audit costs shall not exceed such underpayment. Such
review shall be conducted during reasonable business hours and in such manner as
not to interfere with DIRECTV's normal business activities and shall not
continue for more than [***]. Programmer shall not have the right to examine or
inquire into any matters or items which are embraced by or contained in any such
statement after the expiration of [***] from and after the date of mailing of
such statement, and such statement shall be final and conclusive upon Programmer
upon the expiration of such [***] period notwithstanding that the matters or
items embraced by or contained therein may later be contained or referred to in
a cumulative statement pertaining to more than one accounting period. Such
cumulative statement shall not be subject to audit by Programmer to the extent
the material contained therein was first reflected on a statement submitted more
than [***] prior to the date of mailing of such cumulative statement. Programmer
shall be forever barred from maintaining or instituting any action or proceeding
based upon, or in anyway relating to, any matters that are embraced by or
reflected on any statement rendered hereunder, or the accuracy of any item
appearing therein, unless written objection thereto shall have been delivered by
Programmer to DIRECTV within [***] after the date of mailing of the statement on
which such transaction or items was first reflected and unless such action or
proceeding is commenced within [***] after delivery of such written objection.
Programmer may not commence a new audit until all prior audits have been closed
(i.e., after such closure is confirmed in writing by Programmer) and the results
have been presented to DIRECTV. If Programmer shall audit DIRECTV's books and
records, then Programmer shall, within [***] of the conclusion of such audit
(i.e., after the auditors conclude the audit at DIRECTV's offices), inform
DIRECTV in writing of any claim resulting therefrom (including a true copy of
any third party audit), and, except for the claims set forth in such notice, all
statements rendered by DIRECTV with respect to the period covered by such audit
shall be conclusive and binding on the parties and not subject to further audit.
The information derived from and the process of such review shall be subject to
the confidentiality provisions of Section 15, and any third party auditor shall
be required to acknowledge in writing its agreement to such confidentiality
provisions.

                           2.2 License Fees. As full and complete compensation
for DIRECTV's right to distribute the Services, DIRECTV shall pay to Programmer,
on a [***] basis, for each Service Subscriber receiving the Services from
DIRECTV for such [***], a "License Fee" determined pursuant to Programmer's rate
card for the Services set forth in Exhibit B hereto.

                           2.3 Late or Non-Payments. Any amounts that are not
subject to a bona fide dispute by DIRECTV and not paid by DIRECTV after (i) the
date payment is due pursuant to the first sentence of Section 2.1 and (ii)
[***]after DIRECTV's receipt of written notice from Programmer of such failure
by DIRECTV, shall accrue interest at the rate of [***] per [***] or the maximum
allowed by law, whichever shall be the lesser, from the date such amounts were
due until they are paid.

                                       8


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



                           2.4 Most Favored Nation.

                           2.4.1 Programmer agrees that if, at any time during
the Term (or any portion thereof), Programmer distributes or Programmer allows
(including, without limitation, by way of agreements that Programmer previously
entered into) or offers to allow any other distributor to distribute a Service
(or any Segment contained in a Service) in the Territory or in any portion
thereof by any technology whatsoever at a net effective rate per Service
subscriber that is lower than the net effective rate per "Service Subscriber"
(defined as a DIRECTV Subscriber authorized by Affiliate to receive the
Services) charged to DIRECTV hereunder ("Favored Fees"), then Programmer shall
promptly notify DIRECTV in writing of such Favored Fees and DIRECTV shall be
immediately entitled to incorporate into this Agreement the Favored Fees
effective as of the first day on which Programmer first allows or makes the
offer to allow such other distributor to distribute the Service(s) in exchange
for the Favored Fees (and for so long as such Favored Fees are available to such
other distributor). Nothing in the preceding sentence shall require DIRECTV to
incorporate the Favored Fees into this Agreement. Notwithstanding anything to
the contrary herein, if the Favored Fees contain such obligations, terms and
conditions that are not relevant to DIRECTV or DIRECTV is not reasonably capable
of complying with such terms and conditions taking into consideration DIRECTV's
business, including, without limitation, DIRECTV's technology and DIRECTV's
national platform, then Programmer shall provide DIRECTV with comparable
obligations, terms and conditions. In determining net effective rates, all
direct and indirect economic outlays in connection with or related to carriage
of the Service(s) shall be considered, whether embodied in an agreement relating
to the Service(s) or otherwise (e.g., side letters or commitments such as
advertising purchases), including, without limitation, discounts, credits,
commissions, rebates, revenue sharing, channel position fees, advertising
purchases, launch or marketing support, or other adjustments of any kind, or
other goods or services offered by such other distributor. In determining net
effective rates, actual numbers of Service Subscribers shall be used. In no
event shall DIRECTV be required to incorporate the following as a condition to
incorporating the Favored Fees: (i) the other distributor's term hereunder
(however, DIRECTV may, in its sole discretion, elect to have the same Term as
provided to the other distributor); (ii) less favorable penetration, packaging
or subscriber benchmark requirements; (iii) launch of additional services,
programs or networks; (iv) a requirement that is designed or intended to, or
that operates to, frustrate or interfere with, or otherwise have the effect of
discriminating against DIRECTV or frustrating or circumventing the application
of this Section 2.4 and DIRECTV's ability to receive any Favored Fees; or (v) a
condition that is not specifically conditioned and directly related and
indivisible from any Favored Fees.

                           2.4.2 At DIRECTV's election, Programmer shall (i)
permit DIRECTV's independent representatives to review, during the Term (no more
than [***]) and for[***], such Programmer records as required for the sole
purpose of verifying Programmer's compliance with the terms of Section 2.4, at
reasonable times, upon reasonable advance written notice and during normal
business hours at Programmer's offices, or (ii) provide to DIRECTV an annual
statement, certified by Programmer's chief financial officer, certifying



                                       9


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



compliance with the provisions of Section 2.4. Such review shall be at DIRECTV's
sole cost and expense, unless such review reveals an overpayment by DIRECTV of
more than [***], in which case, Programmer shall promptly reimburse DIRECTV for
the reasonable cost of such audit and shall promptly make payment of any monies
due and owing, provided (A) Programmer does not have a bona fide dispute with
the audit findings; and (B) such audit costs shall not exceed such overpayment.
The information derived from and the process of such review shall be subject to
the confidentiality provisions of Section 15, and any third party auditor shall
be required to acknowledge in writing its agreement to such confidentiality
provisions.

         3. Advertising.

         Subject to Section 1.2.1 above, Programmer hereby represents and
warrants that the Services shall not contain any advertising, direct sales or
infomercials during the Term; provided, however, that Programmer shall have the
right to include [***] on the Services [***] in [***]of programming; and
provided further that [***]of programming on the Services shall include [***]
separate [***]that may be covered by DIRECTV via the [***] (including, without
limitation, [***] for any or all [***] services distributed by DIRECTV) (such
available [***] defined as "Avails"). Subject to the foregoing, under no
circumstances may such [***] promote any form of [***], including but not
limited to: [***]. The Avails provided by Programmer to DIRECTV shall be no less
favorable (in terms of the [***] of the Avails and so forth) than those provided
to any other distributor of the Services. Programmer shall properly [***] all
Avails to enable DIRECTV to [***].

         4. Marketing and Promotion.

         In addition to other rights granted herein, Programmer hereby grants to
DIRECTV, during the Term and in the Territory only, the following rights, but
not the obligation, to be exercised by DIRECTV in its sole discretion with
respect to its marketing of the Services: (i) the right to use any and all
marketing materials reasonably requested from Programmer by DIRECTV (which
materials shall be provided at [***] to DIRECTV) for the purpose of marketing
the Services; (ii) the right to manufacture and produce its own marketing
materials, subject to the prior approval of Programmer, such approval not to be
unreasonably withheld or delayed; and (iii) the right to use the names, voices,
music, recordings, images, and likenesses of any and all performers in and other
persons related to the Services, and the right to use Programmer's name and logo
to market the Services without the [***] of [***] or of any [***] whatsoever.
Programmer shall promote DIRECTV's carriage of the Services [***] as it promotes



                                       10


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



the carriage of the Services by any other [***] (including, without limitation,
the [***] and [***]); provided, however, that Programmer shall provide DIRECTV
with prior written notification of any [***] of DIRECTV's [***] of the Services
by Programmer, and any such [***] shall be subject to DIRECTV's prior approval.
Notwithstanding the foregoing, DIRECTV may cease marketing and promoting the
Services if DIRECTV, in its absolute sole determination, reasonably believes
that marketing or promoting the Services may be politically harmful to DIRECTV
or its Affiliated Companies or adversely affect the corporate image that DIRECTV
or its Affiliated Companies desires to maintain at such time. In the event that
DIRECTV, in its sole discretion, elects to undertake a [***] on behalf of the
Services, DIRECTV shall furnish a [***] and [***] to Programmer, and Programmer
and DIRECTV shall work in good faith to jointly implement such plan.

         5. Representations, Warranties and Covenants.

                  5.1 By DIRECTV. DIRECTV warrants, represents and covenants to
Programmer that it:

                           5.1.1 is in compliance with and will comply with all
material Laws (as defined below) with respect to its rights and obligations
under this Agreement, including without limitation, all relevant provisions of
the Cable Television Consumer Protection and Competition Act of 1992 (as may be
amended and any successor, replacement or similar Law or statute) and any and
all regulations issued pursuant thereto (as used herein, "Law" shall mean any
FCC and any other governmental (whether international, federal, state, municipal
or otherwise) statute, law, rule, regulation, ordinance, code, directive or
order, including without limitation, any court order);

                           5.1.2 has the power and authority to enter into this
Agreement and to fully perform its obligations hereunder;

                           5.1.3 shall distribute the Services in the Territory
in accordance with and subject to the terms and conditions set forth in this
Agreement;

                           5.1.4 shall, except as otherwise set forth herein,
(A) arrange and pay for reception of the Services (excluding any authorization
fees) from the U.S. domestic communications satellite from time-to-time
designated by Programmer to DIRECTV with DIRECTV's approval of such designation;
and (B) acquire and maintain, at DIRECTV's sole expense, any equipment,
including, without limitation, backup or reserve descramblers, which may be
necessary to decode and unscramble the signal(s) for the Services;

                           5.1.5 shall not, without Programmer's consent,
knowingly authorize or cause or knowingly permit any portion of the Services to
be recorded, duplicated, cablecast, exhibited or otherwise used (except on a
videocassette recorder or other home or personal recording device for private,
noncommercial use) for any purpose other than for distribution by DIRECTV at the
time the same is made available;

                           5.1.6 shall not, without Programmer's prior written
approval, use the names, titles or logos of the Services or any of its programs,
or the names, voices, photographs, likenesses or biographies of any individual
participant or performer in, or contributor to, any program or any variations
thereof, for any purpose other than in material intended to advise DIRECTV


                                       11


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



Subscribers or potential DIRECTV Subscribers of the availability and scheduling
of the Services or as a channel identifier. The restrictions set forth in this
Section 5.1.6 shall apply only to the extent they are applied by Programmer
uniformly with respect to all of its distributors of the Services, and shall not
apply if DIRECTV has received a valid authorization from a third party for any
of the uses described in this Section 5.1.6;

                           5.1.7 has obtained, and shall maintain in full force
during the Term hereof, such federal, state and local authorizations as are
material and necessary to operate the business it is conducting in connection
with its rights and obligations under this Agreement; and

                           5.1.8 the obligations created by this Agreement, in
so far as they purport to be binding on DIRECTV, constitute legal, valid and
binding obligations of DIRECTV enforceable in accordance with their terms.

                  5.2 By Programmer. Programmer warrants, represents and
covenants to DIRECTV that:

                           5.2.1 to its best knowledge after diligent review and
receipt of advice of counsel with respect hereto, it is in compliance with and
will throughout the Term continue to comply with all Laws applicable to, or with
respect to, the Services and the provision of the Services to DIRECTV, and
Programmer's rights and obligations under this Agreement with respect to the
Services and Programmer's obligations hereunder, including without limitation,
FCC rules and regulations governing the Services, if any, all relevant
provisions of the Cable Television Consumer Protection and Competition Act of
1992, and the Communications Act of 1934, the effective portions of the
Communications Decency Act of 1996 (as any or all may be amended and any
successor, replacement or similar Laws) and any regulations promulgated under
any applicable law or any of the foregoing;

                           5.2.2 it has the power and authority to enter into
this Agreement and to fully perform its obligations hereunder and once executed
this Agreement shall constitute a valid and binding agreement of Programmer
enforceable in accordance with its terms;

                           5.2.3 the general quality and quantity of programming
on the Services shall not materially change from that existing as of the date of
this Agreement, and the genre of programming shall not materially change from
that described in Section 1.2.1 and existing on the date of this Agreement;

                           5.2.4 it has obtained, and shall maintain in full
force during the Term hereof, such federal, state and local authorizations as
are material and necessary to operate the business it is conducting in
connection with its rights and obligations under this Agreement;

                                       12


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



                           5.2.5 it has secured and shall maintain in full force
during the Term hereof all rights necessary for DIRECTV to use and enjoy its
rights in connection with its distribution of the Services and all programming
provided as part thereof, as a whole or in parts, as PPV Offerings in the
Territory, including, without limitation, obtaining or all necessary trademarks,
copyrights, licenses and any and all other proprietary intellectual property and
other use rights necessary in connection with, and for DIRECTV's distribution
of, the Services (including without limitation, the right to use the names,
titles or logos of the Services or any of its programs, the promotional
materials supplied or approved by Programmer, the names, voices, photographs,
music, likenesses or biographies of any individual participant or performer in,
or contributor to, any program or any variations thereof) and to perform its
obligations hereunder and grant the rights granted pursuant to Section 1;

                           5.2.6 it shall not, without DIRECTVs prior written
approval, use the name or logo for "DIRECTV" or any other works owned or
controlled by DIRECTV (and its related companies);

                           5.2.7 as of the date hereof, the programming on the
Services consists of and during the Term hereof such programming shall consist
of, that programming described in Section 1.2.1;

                           5.2.8 there are no (and it covenants that it shall
not enter into directly or indirectly, allow or otherwise permit any)
affiliation, distribution or any other agreements, whether written or oral,
granting to distributors and/or any other third party, person or entity any form
or type of exclusive or other rights that would limit or restrict in any way
DIRECTV's rights to distribute the Services in the Territory;

                           5.2.9 the obligations created by this Agreement, in
so far as they purport to be binding on Programmer constitute legal, valid and
binding obligations of Programmer enforceable in accordance with their terms;

                           5.2.10 it has not (and none of its principals or
Affiliated Companies have) been convicted for the criminal violation of, and/or
has not been found by the FCC or other federal, state or local governmental
authority with appropriate jurisdiction (collectively, the "Governmental
Authority") to have violated, any federal, state or local law or regulation as
applicable concerning illegal, indecent or obscene material or the transmission
thereof (the "Obscenity Laws"), and Programmer is not currently aware of any
pending investigation (including, without limitation, a grand jury
investigation) involving the Services (or any content included in the Services)
or any pending proceeding against Programmer (or any of its principals or
Affiliated Companies) for the violation of any Obscenity Laws;

                           5.2.11 it will notify DIRECTV as soon as possible,
but in no event later than the close of business on the same Business Day upon
which Programmer receives notice of, or becomes aware of, any pending
investigation by any Governmental Authority, or any pending criminal proceeding



                                       13


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



against Programmer (or any of its principals or Affiliated Companies), which
investigation or proceeding concerns distribution of the Services or programming
in the Services, including without limitation, investigations and/or proceedings
concerning potential violations of Obscenity Laws. For purposes of this Section
5(2)(11), Programmer shall be deemed to be aware of any such investigation or
proceeding if any of the directors, officers, outside attorneys or employees of
managerial status of Programmer or an Affiliated Company has received any
communication about or otherwise becomes aware of any such investigation or
proceeding;

                           5.2.12 the Services, and all programming provided as
part thereof, Programmer provides DIRECTV hereunder (A) is not intended to be
obscene and, to the best of Programmer's knowledge after diligent review, would
not be found to be obscene in any jurisdiction in the Territory, and (B)
complies with and, at all times that this Agreement is in effect, shall comply
with the description and associated restrictions set forth in the definition of
"Service" and "Services" in Section 1.2.1, Exhibit A and Schedule I thereto,
including, without limitation, Programmer represents and warrants that the
Services shall reflect adult content limited to the [***] type, as described in
Schedule I, and, except as may be expressly permitted in accordance herewith,
shall under no circumstances contain or depict any acts set forth in the [***]
thereof;

                           5.2.13 to its best knowledge after diligent review
and receipt of advice of legal counsel with experience in such matters, it is in
compliance with and will throughout the Term continue to comply with 18 USC 2257
or 28 CFR 75 or any successor legislation or code. Programmer has prepared,
maintained and executed, and at all times during the Term and for a period of
seven (7) years thereafter shall, prepare, maintain and execute any documents or
records, and provide Affiliate with copies of any documents or records which are
required by Title 18, U.S.C. ss. 2257, as amended, and/or the associated
regulations found at 28 C.F.R. 75.1 et. seq., as amended, and/or any successor
statute or regulation ("Section 2257"). Programmer warrants and represents that
it is in possession of such documents and records, and maintains them in
accordance with Section 2257. Programmer agrees to appoint a "record custodian"
as required under Section 2257, and will keep DIRECTV apprised of the physical
address where all required records are compiled and maintained pursuant to
Section 2257, along with the name of the records custodian. Programmer will
display a conspicuous disclosure statement on all depictions of `actual sexually
explicit conduct' contained in the Services as required by Section 2257, which
statement identifies the records custodian for the content and describes the
physical location where the records relating to the content may be inspected as
required under applicable law. If required by law, Programmer will be identified
as a "primary producer" in any and all disclosure statements associated with the
Services pursuant to Section 2257. Programmer further agrees to cooperate with
DIRECTV in connection with any inspections or government inquiries initiated
pursuant to Section 2257. DIRECTV shall have the right to inspect such documents
and records at any time during regular business hours at Programmer's location
for maintaining the records with five (5) business days' prior written notice
from DIRECTV; and


                                       14


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



                           5.2.14 as of date hereof, it is in compliance with
the most favored nations provision set forth in Section 2.4 hereof.

         6. Term; Termination.

                  6.1 Term; Extension. The term of this Agreement shall be for
the period commencing on October 15, 2007 (the "Effective Date") and continuing
through October 14, 2009 (the "Term"). [***]

                  6.2 Termination for Breach, Bankruptcy; Discontinuance of
Business. In addition to any other rights or remedies, in equity or at law, this
Agreement may be terminated by either party (the "Affected Party"), in its
discretion, at any time after any of the following occurrences, except as
provided in this Agreement, with respect to the other party (the "Other Party"):

                           6.2.1 the failure by the Other Party, its successors
or assigns to perform any material obligation hereunder which is not cured
within thirty (30) days after receipt of written notice thereof from the
Affected Party or as to which reasonable steps to cure have not been commenced
within such period (or are not thereafter diligently pursued and completed
within an additional thirty (30) days);

                           6.2.2 the filing of a petition in bankruptcy or for
reorganization by or against the Other Party under any bankruptcy act; the
assignment by the Other Party for the benefit of its creditors, or the
appointment of a receiver, trustee, liquidator or custodian for all or a
substantial part of the Other Party's property, and the order of appointment is
not vacated within thirty (30) days; or the assignment or encumbrance by the
Other Party of this Agreement contrary to the terms hereof; or

                           6.2.3 if DIRECTV discontinues operation of the DTH
Distribution System, or Programmer discontinues operation and distribution of
the Services. Neither party shall have any further liability to the other, other
than as set forth in Section 6.6 below, for the discontinuance of the DTH
Distribution System or the Services, as the case may be; provided that such
discontinuance is not in connection with, and does not arise from, DIRECTV's or
Programmer's breach of this Agreement.

                  6.3 Termination of Agreement by DIRECTV. In addition to any
other rights or remedies, in equity or at law, DIRECTV may terminate this
Agreement upon thirty (30) days' prior written notice to Programmer:

                           6.3.1 if at any time the general quality and quantity
of programming on the Services materially changes from that existing as of the
date of this Agreement, or the genre of programming materially changes from that
described in Section 1.2.1 and existing on the date of this Agreement, as
determined by DIRECTV in its sole discretion; [***];


                                       15


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



                           6.3.2 in the event of a Programmer Transfer (as
defined below) other than (A) with DIRECTV's prior written consent to the
assignment of this Agreement to a new entity, which consent shall not be
unreasonably withheld, (B) as the result of a merger into or sale or transfer
directly or indirectly to a wholly-owned subsidiary, (C) or a transfer of a
percentage of the assets or stock ownership of Programmer or the Services where
Programmer retains ownership of at least fifty percent (50%) of the assets or
stock thereof. "Programmer Transfer" shall mean a change in the ownership of
Programmer (or the parent of Programmer) or any transfer, conveyance, exclusive
license, transfer or disposition of all or substantially all of the assets or
business of Programmer (or the parent of Programmer), whether by operation of
law or otherwise, the result of which is that a new entity, person or group of
persons, directly or indirectly, has the ability (A) to elect or control the
votes of the majority of the board of directors or other governing body of
Programmer (or the parent of Programmer), (B) to control more than 50% of the
voting interests of Programmer (or the parent of Programmer), or (C) to direct
or cause the direction of the general management and policies of Programmer (or
the parent of Programmer).

                  6.4 Termination of Services by DIRECTV. [***] DIRECTV shall
have the right, in its sole discretion, to discontinue carriage of such
Service(s) in accordance with the following: if Programmer receives written
notice from DIRECTV [***]. If Programmer has not [***] within thirty (30) days
of receiving [***] Notice, DIRECTV shall thereafter have the right to
discontinue carriage of the applicable Service(s) upon thirty (30) days' written
notice to Programmer.

                  6.5 Offsets. Without limiting any other remedies available to
it under this Agreement, by law or at equity and, notwithstanding anything to
the contrary herein, DIRECTV shall have the right [***] to withhold and reserve
from any monies whatsoever payable to Programmer or its designee hereunder, sums
reasonably sufficient to secure DIRECTV from and against Programmer's material
breach of any of its obligations under this Agreement [***].

                  6.6 Force Majeure. Notwithstanding any other provision in this
Agreement, neither Programmer nor DIRECTV shall have any liability to the other
or any other person or entity with respect to any failure of Programmer or
DIRECTV, as the case may be, to transmit or distribute the Services or perform
its obligations hereunder if such failure is due to any failure or degradation
in performance of the Delivery Source or the DTH Satellite(s) or transponders on
such satellites (as applicable) or of the DTH Distribution System (in which
case, DIRECTV shall be excused from its distribution obligations under this
Agreement), or of any scrambling/descrambling equipment or any other equipment
owned or maintained by others (including, without limitation, DIRECTV's
automated billing and authorization system), any failure at the origination and
uplinking center used by Programmer or DIRECTV, any labor dispute, fire, flood,
riot, legal enactment, government regulation, Act of God, or any cause beyond
the reasonable control of Programmer or DIRECTV, as the case may be (a "Force
Majeure"), and such non-performance shall be excused for the period of time such



                                       16


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



failure(s) causes such non-performance; provided, however, that if DIRECTV
determines in its sole discretion that it is commercially or technically
unfeasible to cure a Force Majeure with respect to the DTH Distribution System
or DTH Satellite and so notifies Programmer, then either party may terminate
this Agreement effective upon written notice to the other party. The parties
acknowledge and agree that although the Services may at any given time be
uplinked to only one of several DTH Satellites, failure or degradation in any of
such DTH Satellites may require DIRECTV to reduce the number of programming
services available for allocation among all of the DTH Satellites, with such
reduction including, without limitation, curtailment or termination of the
distribution of the Services by DIRECTV, at DIRECTV's sole discretion.
Accordingly, Programmer further acknowledges and agrees that the provisions set
forth in the first sentence of this Section 6.6 shall apply and shall exculpate
DIRECTV and excuse the performance of DIRECTV hereunder in the event of a
failure or degradation of any of the DTH Satellites or the transponders on any
such satellites, regardless of whether the satellite to which the Services are
uplinked at the time of such failure or degradation is itself the subject of
such failure or degradation.

                  6.7 Survival. Termination of this Agreement pursuant to this
Section 6 shall not relieve either party of any of its liabilities or
obligations under this Agreement, including without limitation those set forth
below in Section 8, which shall have accrued on or prior to the date of such
termination.

         7. Separate Entities. No officer, employee, agent, servant or
independent contractor of either party hereto or their respective subsidiaries
or DIRECTVs shall at any time be deemed to be an employee, servant or agent of
the other party for any purpose whatsoever, and the parties shall use
commercially reasonable efforts to prevent any such misrepresentation. Nothing
in this Agreement shall be deemed to create any joint venture, partnership or
principal-agent relationship between Programmer and DIRECTV, and neither shall
hold itself out in its advertising or in any other manner which would indicate
any such relationship with the other.

         8. Indemnification; Limitation of Liability; Insurance.

                  8.1 By Programmer. Programmer shall indemnify, defend and hold
harmless each of DIRECTV, its Affiliated Companies (as defined below), DIRECTV's
contractors, subcontractors and authorized distributors and the directors,
officers, employees and agents of DIRECTV, such Affiliated Companies and such
contractors, subcontractors and distributors (collectively, the "DIRECTV
Indemnitees") from, against and with respect to any and all claims, damages,
liabilities, costs and expenses (including reasonable attorneys' and expert's
fees) incurred in connection with any third party claim (including, without
limitation, a claim by any Governmental Authority) against any of the DIRECTV
Indemnitees arising out of (i) Programmer's breach or alleged breach of any
provision of this Agreement, (ii) any content contained in the Services, (iii)
the distribution or cablecast of any programming of the Services which violates



                                       17


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



or requires payment for use or performance of any copyright, right of privacy or
literary, music performance or dramatic right, (iv) Programmer's advertising and
marketing of the Services, and/or (v) any other materials, including advertising
or promotional copy, supplied or permitted by Programmer. In addition,
Programmer shall pay and hold the DIRECTV Indemnitees harmless from any federal,
state, or local taxes or fees which are based upon revenues derived by, or the
operations of, Programmer. As used in this Agreement, "Affiliated Company(ies)"
shall mean, with respect to any person or entity, any other person or entity
directly or indirectly controlling, controlled by or under common control (i.e.,
the power to direct affairs by reason of ownership of voting stock, by contract
or otherwise) with such person or entity and any member, director, officer or
employee of such person or entity.

                  8.2 By DIRECTV. DIRECTV shall indemnify and hold harmless each
of Programmer, its Affiliated Companies, Programmer's contractors,
subcontractors and authorized distributors, each supplier to Programmer of any
portion of the Services hereunder and each participant therein and the
directors, officers, employees and agents of Programmer, such Affiliated
Companies, such contractors, subcontractors and distributors and such suppliers
and participants therein (collectively, the "Programmer Indemnitees") from,
against and with respect to any and all claims, damages, liabilities, costs and
expenses (including reasonable attorneys' and experts' fees) incurred in
connection with any third party claim (including, without limitation, a claim by
any Governmental Authority) against the Programmer Indemnitees arising out of
(i) DIRECTV's breach or alleged breach of any provision of this Agreement, (ii)
the distribution by DIRECTV of the Services (except with respect to claims
relating to the content of the Services for which Programmer is solely
responsible pursuant to Section 8.1(ii) and Section 8.1(iii)), (iii) DIRECTV's
advertising and marketing of the Services (except with respect to such
advertising and marketing materials or content supplied or approved by
Programmer), and (iv) any other materials, including advertising or promotional
copy, supplied by DIRECTV. In addition, DIRECTV shall pay and hold Programmer
harmless from any federal, state, or local taxes or fees, including any fees
payable to local franchising authorities, which are based upon revenues derived
by, or the operations of, DIRECTV.

                  8.3 Survival. Termination of this Agreement shall not affect
the continuing obligations of each of the parties hereto as indemnitors
hereunder. The party wishing to assert its rights set forth in this Section 8
shall promptly notify the other of any claim or legal proceeding with respect to
which such party is asserting such right. Upon the written request of an
indemnitee, the indemnitor will (1) assume the sole control of the defense and
settlement of any claim, demand or action against such indemnitee and/or (2)
allow the indemnitee to participate in the defense thereof, such participation
to be at the expense of the indemnitee. Settlement by the indemnitee without the
indemnitor's prior written consent shall release the indemnitor from the
indemnity as to the claim, demand or action so settled.

                  8.4 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT:

                                       18


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



                           8.4.1 IN NO EVENT SHALL ANY PARTY BE LIABLE FOR ANY
INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT, OCCASIONED BY
ANY FAILURE TO PERFORM OR THE BREACH OF ANY OBLIGATION UNDER THIS AGREEMENT FOR
ANY CAUSE WHATSOEVER, WHETHER BASED ON NEGLIGENCE.

                           8.4.2 IN NO EVENT SHALL ANY PROJECTIONS, FORECASTS,
ESTIMATIONS OF SALES AND/OR MARKET SHARE OR EXPECTED PROFITS, OR OTHER
ESTIMATIONS OR PROJECTIONS BY PROGRAMMER OR DIRECTV OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR AFFILIATES, REGARDING OR RELATED TO PROGRAMMER'S
OR DIRECTV'S DTH BUSINESS BE BINDING AS COMMITMENTS OR, IN ANY WAY, PROMISES BY
PROGRAMMER OR DIRECTV.

                  8.5. Insurance. Without limiting Programmer's representations,
warranties and indemnification obligations under this Agreement, Programmer
shall secure, at its sole cost and expense, the insurance policy (the
"Insurance" and/or the "Policy" set forth in this paragraph. Programmer shall
obtain a media/professional liability insurance policy covering Programmer's
distribution of the Services during the Term (including the distribution by
DIRECTV authorized under this Agreement) and for one (1) year thereafter in the
minimum amount of [***] dollars ([***]) per claim and [***] dollars ([***]) in
the aggregate, with a deductible of not greater than [***] dollars ([***]). The
Policy shall be in form and substance reasonably acceptable to DIRECTV, and
shall name DIRECTV (and those "Affiliates" (defined below) identified by
DIRECTV) as insureds thereon. The Insurance shall contain an endorsement that
negates the "other insurance" claims in the Policy, and shall contain a
statement that the insurance being provided therein is primary. For purposes of
this Agreement, "Affiliate" shall mean any corporation or other person or entity
controlling, or controlled by, or under common control with a party or third
person, as the case may be. Programmer shall provide DIRECTV and those
Affiliates identified by DIRECTV with a certificate evidencing the Insurance
required by this paragraph on or before the Services Commencement Date.
Programmer shall ensure that DIRECTV is notified in writing thirty (30) days in
advance of any actual or proposed change to such insurance, and no such change
(and no such Insurance, nor DIRECTV's failure to disapprove of or object to the
lack thereof) shall diminish Programmer's obligations under this Agreement.

         9. Notices. Except as set forth below, all notices hereunder shall be
in writing and delivered by hand or sent by certified mail, postage prepaid and
return receipt requested, fax, or by an overnight delivery service to the
receiving party at its address set forth above or as otherwise designated by
written notice. Notice to Programmer shall be provided as follows:

Colorado Satellite Broadcasting, Inc.
7007 Winchester Circle, Suite 200
Boulder, CO 80301


                                       19


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



Attention:  Ken Boenish, President
Fax:  (303) 527-2872
cc:  General Counsel
Fax: (303) 527-2872

Notice to DIRECTV shall be provided as follows:

DIRECTV, Inc.
2230 East Imperial Highway
El Segundo, California 90245
Attention:  Senior Vice President, Programming
Fax:  (310) 964-5416
cc:  Executive Vice President and General Counsel
Fax:  (310) 964-4991

Notice given by hand shall be considered to have been given on the date
delivered or, if delivery is refused, as of the date presented. Notice given by
mail shall be considered to have been given five (5) days after the date of
mailing, postage prepaid certified (return receipt requested). Notice given by
facsimile machine shall be considered to have been given on the date receipt
thereof is electronically acknowledged. Notice given by an overnight delivery
service shall be considered to have been given on the next business day.

         10. Waiver. The failure of any party to insist upon strict performance
of any provision of this Agreement shall not be construed as a waiver of any
subsequent breach of the same or similar nature. Subject to Section 8.4 above,
all rights and remedies reserved to either party shall be cumulative and shall
not be in limitation of any other right or remedy which such party may have at
law or in equity.

         11. Binding Agreement; Assignment. Subject to DIRECTV's rights under
Section 6.3.2, this Agreement shall be binding upon the parties hereto and their
respective successors and assigns, except that it may not be assigned by
transfer, by operation of law or otherwise, without the prior written consent of
the non-transferring party, which shall not be unreasonably withheld; provided,
however, that DIRECTV may assign its rights and obligations under this
Agreement, in whole or in part (including without limitation, DIRECTV's right to
distribute the Services) (i) to an Affiliated Company or to a successor entity
to DIRECTV's DTH business; (ii) to a third party as part of preparing to go or
going public or as part of a merger, consolidation or sale of all substantially
all of the assets of DIRECTV or (iii) to a third party, provided DIRECTV remains
primarily liable for the performance of such third party's obligations
hereunder.

         12. Laws of California. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts made and to be fully performed therein by residents of the State of
California, except to the extent that the parties' respective rights and
obligations are subject to mandatory local, State and Federal laws or


                                       20


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



regulations. The parties hereby agree that the jurisdiction of, or the venue of,
any action brought by either party shall be in a state or federal district court
sitting in the Los Angeles, California and both parties hereby agree to waive
any right to contest such jurisdiction and venue.

         13. Entire Agreement and Section Headings. This Agreement sets forth
the entire agreement and understanding of the parties relating to the subject
matter hereof, and supersedes all prior agreements, arrangements, or
understandings relating to the subject matter hereof. This Agreement shall not
be modified other than in a writing, signed by each of the parties hereto. The
section headings hereof are for the convenience of the parties only and shall
not be given any legal effect or otherwise affect the interpretation of this
Agreement.

         14. Severability. The parties agree that each provision of this
Agreement shall be construed as separable and divisible from every other
provision and that the enforceability of any one provision shall not limit the
enforceability, in whole or in part, of any other provision hereof. In the event
that a court of competent jurisdiction determines that a restriction contained
in this Agreement shall be unenforceable because of the extent of time or
geography, such restriction shall be deemed amended to conform to such extent of
time and/or geography as such court shall deem reasonable.

         15. Confidentiality.

                  15.1 The parties agree that they and their employees have
maintained and will maintain, in confidence, the terms and provisions of this
Agreement, as well as all data, summaries, reports, proprietary information,
trade secrets and information of all kinds, whether oral or written, acquired or
devised or developed in any manner from the other party's personnel or files
(the "Confidential Information"), and that they have not and will not reveal the
same to any persons not employed by the other party except: (i) (A) by mutual
agreement; (B) to the extent necessary to comply with the law (including SEC
reporting requirements) or the valid order of a court of competent jurisdiction,
in which event the disclosing party shall so notify the other party as promptly
as practicable (and, if possible, prior to making any disclosure) and shall seek
confidential treatment of such information, or in connection with any
arbitration proceeding; (C) as part of its normal reporting or review procedure
to its parent company, its auditors and its attorneys, and such parent company,
auditors and attorneys agree to be bound by the provisions of this Section 15;
(D) in order to enforce any of its rights pursuant to this Agreement; or (E) in
the case of DIRECTV, to the NRTC, potential investors, insurers, financing
entities or any entity engaged in DIRECTV's DBS business; provided, however,
that such person described above agrees to be bound by the provisions of this
Section 15; or (ii)(A) at the time of disclosure to the recipient the
Confidential Information is in the public domain; or (B) after disclosure to the
recipient the Confidential Information becomes part of the public domain by
written publication through no fault of the recipient. During the Term, neither
party shall issue an independent press release with respect to this Agreement or


                                       21


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



the transactions contemplated hereby without the prior written consent of the
other party. Breach of this last sentence shall be deemed a material breach of
this Agreement.

                  15.2 Notwithstanding Section 15.1, Programmer specifically
acknowledges and agrees that any lists of DIRECTV's customers or users, and all
information related to such customers and users, is confidential and proprietary
information of DIRECTV and cannot be disclosed by Programmer or used by
Programmer for any purpose or use whatsoever, other than for its review at
DIRECTV's offices as part of Programmer's audit rights hereunder to determine if
Programmer has been paid the License Fees due to it by DIRECTV. Also
notwithstanding Section 15.1, Programmer further acknowledges and agrees that
under no circumstances will it in any way: disclose information (whether
personally identifiable or not) to any third party regarding DIRECTV's customers
or users or engage in any direct mailing or telephone solicitation which
DIRECTV's customers or users do not previously and expressly approve (whether
orally or in writing) or previously and expressly request (whether orally or in
writing), or which DIRECTV does not previously and expressly approve in writing
in DIRECTV's sole discretion.


         16. Inadequacy of Money Damages. Programmer and DIRECTV hereby
acknowledge and agree that DIRECTV's distribution and marketing of the Services
pursuant to the terms and conditions contained herein are of the essence of this
Agreement. DIRECTV further acknowledges and agrees that such carriage and
marketing requirements, subject to Force Majeure and other conditions of this
Agreement, are special and unique, and that Programmer may not be adequately
compensated by the payment of money damages in the event that DIRECTV failed to
comply with any of such requirements. Programmer acknowledges and agrees that
the grant of rights to DIRECTV hereunder are special and unique, and that
DIRECTV may not be adequately compensated by the payment of money damages in the
event that Programmer failed to comply with any of its obligations under this
Agreement, including without limitation, providing access to any Service
programming to DIRECTV, as required hereunder.

         17. Cessation of Program Distribution. If DIRECTV in good faith
reasonably believes that DIRECTV's provision of any of the programming on the
Services either violates any Law or could be found by a court or administrative
agency to violate any Law (a "Law Violation" or "Potential Law Violation") or
reasonably believes in good faith at any time that any of the programming on the
Services is adversely affecting the corporate image that DIRECTV desires to
maintain at such time (an "Image Problem") then, notwithstanding anything to the
contrary in this Agreement, (i) immediately following written notice to
Programmer in the case of a Law Violation or Potential Law Violation, or (ii) no
sooner than [***] following written notice to Programmer in the case of an Image
Problem (if DIRECTV elects to terminate this Agreement as provided in this
Section 17): DIRECTV may terminate this Agreement, or DIRECTV may cease
distributing the offending programming or the Services (in any portion of the


                                       22


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



Territory, or the entire Territory, as DIRECTV shall determine in its sole
discretion based on the genesis of the Law Violation; Potential Law Violation or
Image Problem) until DIRECTV determines in DIRECTV's sole discretion that there
will be no Image Problem because the Service programming at that subsequent time
is consistent with the corporate image that DIRECTV then desires to maintain or
DIRECTV reasonably determines that a Law Violation or Potential Law Violation
will not again occur. Consistent with the foregoing, and without limiting
DIRECTV's rights hereunder, the parties understand and acknowledge that in the
event that a Service contains [***] Programming (and only as such is permitted
in strict accordance with the terms hereof), [***].

         18. Survival of Representations and Warranties. All representations and
warranties contained herein or made by the parties, and each of them, in
connection herewith shall survive any independent investigation made by either
party.



                                       23


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



         19. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all such
counterparts together shall constitute but one and the same instrument. The
parties also agree that this Agreement shall be binding upon the faxing by each
party of a signed signature page thereof to the other party. If such a faxing
occurs, the parties agree that they will each also immediately post, by Federal
Express, a fully executed original counterpart of the Agreement to the other
party.


         IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be executed by their duly authorized representatives as of the day and year
first above written.


                        DIRECTV, INC.


                        By:     /s/ Toby Berlin
                                -----------------------------------------------
                                Name: Toby Berlin
                                Title: Vice President, Programming Acquisitions
                                Date: 9/27/2007


                        COLORADO SATELLITE BROADCASTING, INC.


                        By:     /s/ Ken Boenish
                                -----------------------------------------------
                                Name: Ken Boenish
                                Title: President
                                Date: 9/28/2007



                                       24


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



                                    EXHIBIT A

                           DESCRIPTION OF THE SERVICE


The programming content of the Services shall comply strictly with the
provisions of this Exhibit A and the attached Schedule 1. In addition to the
definition set forth in Section 1.2.1 of the Agreement, the Services shall
adhere to the industry's strictest set of standards and practices (the
"Industry's Standards and Practices") for adult programming, which will not be
circumvented, and shall comply with the following standards and practices (the
"Standards and Practices") (which shall control if they conflict with the
Industry's Standards and Practices) (any act or portrayal which is prohibited
below or which the Industry's Standards and Practices prohibit to be presented
in audiovisual material shall be deemed a "Prohibited Act").

The Services shall offer tasteful [***] adult programming (feature films and
interstitials) substantially the same in content, quality and production values
as appears on the Services on the date hereof. It is understood and acknowledged
by Programmer that the Services may contain acts of the type listed on Schedule
I to this Exhibit A under the heading [***] Subject to the restrictions set
forth herein, the Services' programming shall consist primarily of [***]
activity between consenting adults, including [***] activity.

None of the programming or promotional materials of the Services shall condone
or present [***] in any form, nor contain any activity which equates [***] with
[***]. Additionally, under no circumstances shall any programming on the
Services contain any scenes of [***].

[***] and [***] situations may be presented on the Services as a matter of
course; however, except as expressly authorized hereunder, there shall be no
depiction of any [***] acts in the [***] of Schedule I hereof except such acts
as are also included in the [***].

The Services may include [***]; however, the Services shall not include
descriptive dialogue that is [***].



                                       25


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.





                             SCHEDULE I TO EXHIBIT A

                              PROGRAMMING STANDARDS

                [Programming Standards Rating Schedule Omitted.]


                                      [***]


                                       26



Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.





                                    EXHIBIT B

                             PROGRAMMER'S RATE CARD


     1.       DIRECTV shall pay a "License Fee" for the Services equal to a
              percentage of [***] generated from pay-per-view purchases of the
              Services as follows:

                 [Method for calculating License Fee redacted.]

                                      [***]

              For purposes of the above calculation, total [***] for each
              respective Service for each contract [***] shall include (i) all
              [***] in connection with any stand alone PPV Offering of such
              Service, (ii) all [***] (as defined below) in connection with the
              inclusion of such Service within a [***] and (iii) [***] of any
              [***] (as defined below). [***] per Service shall be equal to
              [***], where [***], [***] = the total number of all [***] offered
              in the [***] and [***] of the [***]. [***] shall mean all [***]
              received in connection with the Master Pay-Per-View License
              Agreement entered into as of December 21, 1998 between DIRECTV and
              MRG Entertainment (as the term [***] is defined in such Master
              Pay-Per-View License Agreement).

              [***]

              For carriage of the Services within a [***], DIRECTV shall pay
              Programmer an amount determined in accordance with Paragraph 4
              below.

              Notwithstanding the foregoing, DIRECTV shall have the right to
              include the Services within its [***] programming package
              currently branded as the [***], and DIRECTV shall not be obligated
              to pay any License Fee to Programmer for the distribution of such
              package [***]. In the event that DIRECTV obtains [***]to the
              [***], DIRECTV and Programmer will negotiate in good faith a
              reasonable monthly license fee to be paid [***].

     2.       For purposes of this Agreement, [***] are defined as (A) the [***]
              actually [***] by DIRECTV from Subscribers for the right to
              receive and view the Services, after deduction of (B) (i) [***] or
              other similar fees or charges (other than [***]) relating to the
              distribution of such Services hereunder, (ii) [***] (as defined
              below), (iii) any [***] made for [***] programming other than such
              Services or any general [***], or other [***] made to DIRECTV


                                       27


              Subscribers on a [***] basis, and (iv) [***] in the amount of
              [***] of [***]. Upon [***] written request, but in no event more
              than [***] during any contract [***], [***] shall provide [***]
              applied in the [***] in a form and in such detail as may be [***].
              For purposes of this Agreement, a [***] shall mean DIRECTV's [***]
              or [***] to any Subscriber all or any portion of a [***] by a
              Subscriber in connection with the Services as a direct result of a
              [***] (e.g., without limitation, in cases where the Services are
              [***] by the DIRECTV Subscriber).

     3.       To the extent that a Subscriber [***] any portion of [***] owed
              solely in connection with DIRECTV's distribution of the Services
              as a PPV Offering, then the [***] shall be included in the [***]
              for the [***] in which such [***] was received.

     4.       DIRECTV may, in its sole discretion, elect to offer a packaged
              [***] offering (or offerings) of adult services in the [***],
              [***], [***] and/or [***] Programming Standards (the [***]). In
              each month that DIRECTV offers a [***] including the Services
              together with another [***] service (or services), DIRECTV shall
              determine the corresponding License Fee payable to Programmer per
              each Service by use of the following formula:

              [***]
                  where

                  [***] All [***] to the Programmer in connection with the [***]

                  [***] the [***]

                  [***] the [***] of all programming services offered in the
                  [***]

                  [***] [***] of the [***]

                  [***]


                                       28


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.




                                    EXHIBIT C

                              PROGRAMMING SCHEDULE

                                 (see attached)

                [Programming Schedule by Title and Time Omitted]

                                      [***]


                                       29


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.



                                    EXHIBIT D

                             DELIVERY SPECIFICATIONS

1.       A fully integrated broadcast quality NTSC program feed (in 4:3 aspect
         ratio) must be delivered to the DIRECTV Broadcast Center. All feeds
         must be delivered via satellite or fiber optic transmission. All costs
         associated with delivery to the broadcast center to be borne solely by
         Provider.

2.       Should Programmer elect to deliver via satellite, Programmer must use
         an encrypted C or Ku-band feed delivered via a geostationary satellite
         typically used for television program delivery and located in the US
         domestic arc (defined here to be 70 degrees WL to 139 degrees WL).

3.       Should Programmer elect fiber optic delivery to the DIRECTV broadcast
         centers, Programmer must use dedicated facilities providing [***]
         end-end connectivity. Programmer to be named customer of record with
         all associated telecom service providers thereby assuming all
         operational, troubleshooting and preventative maintenance
         responsibilities associated with supporting the program feed. DIRECTV
         may, upon [***], require Programmer (at Programmer's sole expense) to
         re-terminate a fiber optic feed to an alternate DIRECTV broadcast
         center or an alternate location within a DIRECTV broadcast center.

4.       Programmer must supply [***] sets of such receivers, decoders, codecs,
         delay units and all other equipment as required to produce both a main
         and a back-up program feed to the DIRECTV Broadcast Center ([***] sets
         total). All required equipment must arrive at least [***] prior to
         start of testing ([***] prior to start of service).

5.       The technical quality of all supplied signals must be within applicable
         RS-250 and SMPTE specifications and must be consistently maintained
         throughout the testing and on-going operations periods. Video noise
         must not be apparent when viewed on a broadcast quality television
         monitor. Audio must be delivered distortion free with at least [***] of
         headroom. All audio channels must be phase aligned and in lip sync with
         the video as measured at the output of provider's supplied equipment.

6.       Prior to start of testing, Programmer must furnish to DIRECTV complete
         service specific technical details for the proposed transmission path
         between Programmer and DIRECTV's broadcast centers. Such information to
         include all transmission service providers, satellites and coordinates,
         transponders, encryption methods, fiber circuit numbers, DTMF tone
         formats, 24x7 telephone contacts and such other information as needed
         to completely detail the path sufficient to facilitate immediate outage
         recovery in the event of a loss of continuity.

                                       30


Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act. Omitted information, marked "[***]" in this
exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.




7.       Programmer to support a complete end-to-end thread test between the
         program origination point and DIRECTV's broadcast centers using the
         actual transmission path, configuration and equipment to be used in
         on-going operations. Start of testing to begin at least [***] prior to
         the start of Service. Tests must be encrypted. Programmer to schedule
         and fully support such additional tests and all other work as required
         to ensure a successful DIRECTV start of Service.






                                       31

EX-10

                                                                   Exhibit 10.08

                                PROMISSORY NOTE
- --------------------------------------------------------------------------------
Principal        Loan      Maturity     Loan     Call   Account Officer Initials
                 Date                    No.     /Coll
$7,500,000.00  07-01-2007  07-01-2008  281001273                 GPB
- --------------------------------------------------------------------------------

  References in the shaded area are for Lender's use only and do not limit the
         applicability of this document to any particular loan or item.
             Any item above containing "***" has been omitted due to
                            text length limitations.
- --------------------------------------------------------------------------------
 Borrower: NEW FRONTIER MEDIA, INC.         Lender: First Community Bank
           7007 WINCHESTER CIR. STE 200              Denver Tech Consumer
           BOULDER, CO 80301                          Servicing Center
                                                    4582 South Ulster Street,
                                                      Suite 650
                                                    Denver, CO 80237
                                                    (303) 729-3502

================================================================================
Principal Amount:                 Initial Rate:             Date of Note:
 $7,500,000.00                        8.120%                July 1, 2007

PROMISE TO PAY. NEW FRONTIER MEDIA, INC. ("Borrower") promises to pay to First
Community Bank ("Lender"), or order, in lawful money of the United States of
America, the principal amount of Seven Million Five Hundred Thousand & 00/100
Dollars ($7,500,000.00) or so much as may be outstanding, together with
interest on the unpaid outstanding principal balance of each advance. Interest
shall be calculated from the date of each advance until repayment of each
advance.

PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on July 1, 2008. In addition, Borrower will pay
regular monthly payments of all accrued unpaid interest due as of each payment
date, beginning August 1, 2007, with all subsequent interest payments to be due
on the same day of each month after that. Unless otherwise agreed or required by
applicable law, payments will be applied first to any accrued unpaid interest;
then to principal; then to any late charges; and then to any unpaid collection
costs. The annual interest rate for this Note is computed on a 365/360 basis;
that is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the The Prime
Rate as quoted in the Money Section of the Wall Street Journal, when a range of
rates is published the highest rate will be applied (the "Index"). The Index is
not necessarily the lowest rate charged by Lender on its loans. If the Index
becomes unavailable during the term of this loan, Lender may designate a
substitute index after notifying Borrower. Lender will tell Borrower the current
Index rate upon Borrower's request. The interest rate change will not occur more
often than each day. Borrower understands that Lender may make loans based on
other rates as well. The Index currently is 8.250% per annum. The interest rate
to be applied to the unpaid principal balance during this Note will be at a rate
of 0.130 percentage points under the Index, resulting in an initial rate of
8.120% per annum. NOTICE: Under no circumstances will the interest rate on this
Note be more than the maximum rate allowed by applicable law.

PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even upon
full prepayment of this Note, Borrower understands that Lender is entitled to a
minimum interest charge of $25.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments of accrued unpaid interest. Rather, early payments will reduce
the principal balance due. Borrower agrees not to send Lender payments marked
"paid in full", "without recourse", or similar language. If Borrower sends such
a payment, Lender may accept it without losing any of Lender's rights under this
Note, and Borrower will remain obligated to pay any further amount owed to
Lender. All written communications concerning disputed amounts, including any
check or other payment instrument that indicates that the payment constitutes
"payment in full" of the amount awed or that is tendered with other conditions
or limitations or as full satisfaction of a disputed amount must be mailed or
delivered to: First Community Bank, Loan Administration Service Center, PO Box
3017 Albuquerque, NM 87190.

LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment or $10.00,
whichever is greater.

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, the Interest rate on this Note shall be increased by adding a 3.000
percentage point margin ("Default Rate Margin"). The Default Rate Margin shall
also apply to each succeeding interest rate change that would have applied had
there been no default. However, in no event will the interest rate exceed the
maximum interest rate limitations under applicable law.

DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:


     Payment Default. Borrower fails to make any payment when due under this
     Note.

     Other Defaults. Borrower fails to comply with or to perform any other term,
     obligation, covenant or condition contained in this Note or in any of the
     related documents or to comply with or to perform any term, obligation,
     covenant or condition contained in any other agreement between Lender and
     Borrower.

     Default in Favor of Third Parties. Borrower or any Grantor defaults under
     any loan, extension of credit, security agreement, purchase or sales
     agreement or any other agreement, in favor of any other creditor or person
     that may materially affect any of Borrower's property or Borrower's ability
     to repay this Note or perform Borrower's obligations under this Note or any
     of the related documents.

     False Statements. Any warranty, representation or statement made or
     furnished to Lender by Borrower or an Borrower's behalf under this Note or
     the related documents is false or misleading in any materiel respect,
     either now or at the time made or furnished or becomes false or misleading
     at any time thereafter.

     Insolvency. The dissolution or termination of Borrower's existence as a
     going business, the insolvency of Borrower, the appointment of a receiver
     for any part of Borrower's property, any assignment for the benefit of
     creditors, any type of creditor workout, or the commencement of any
     proceeding under any bankruptcy or insolvency laws by or against Borrower.

     Creditor or Forfeiture Proceedings. Commencement of foreclosure or
     forfeiture proceedings, whether by judicial proceeding, self-help
     repossession or any other method, by any creditor of Borrower or by any
     governmental agency against any collateral securing the loan. This includes
     a garnishment of any of Borrower's accounts, including deposit accounts,
     with Lender. However, This Event of Default shall not apply if there is a
     good faith dispute by Borrower as to the validity or reasonableness of the
     claim which is the basis of the creditor or forfeiture proceeding and if
     Borrower gives Lender written notice of the creditor or forfeiture
     proceeding and deposits with Lender monies or a surety bond for the
     creditor or forfeiture proceeding, in an amount determined by Lender, in
     its sole discretion, as being an adequate reserve or bond for the dispute.

     Events Affecting Guarantor. Any of the preceding events occurs with respect
     to any guarantor, endorser, surety, or accommodation party of any of the
     indebtedness or any guarantor, endorser. surety, or accommodation party
     dies or becomes incompetent, or revokes or disputes the validity of, or
     liability under, any guaranty of the indebtedness evidenced by this Note.

     Change In Ownership. Any change in ownership of twenty-five percent (25%)
     or more of the common stock of Borrower.

     Adverse Change. A material adverse change occurs in Borrower's financial
     condition, or Lender believes the prospect of payment or performance of
     this Note is impaired.

     Insecurity. Lender in good faith believes itself insecure.

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance under this Note and all accrued unpaid interest immediately due, and
then Borrower will pay that amount.

ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender the reasonable
costs of such collection. This includes, subject to any limits under applicable
law, Lender's attorneys' fees and Lender's legal expenses, whether or not there
is a lawsuit, including without limitation attorneys' fees and legal expenses
for bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction, and appeals. If not prohibited by applicable law, Borrower
also will pay any court costs, in addition to all other sums provided by law. /

GOVERNING LAW. This Note will be governed by federal law applicable to Lender
and, to the extent not preempted by federal law, the laws of the State of
Colorado without regard to its conflicts of law provisions. This Note has been
accepted by Lender in the State of Colorado.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of Denver County. State of Colorado.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether chocking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any



                                 PROMISSORY NOTE
 Loan No: 281001273                (Continued)                           Page 2


and all such accounts, and, at Lender's option, to administratively freeze all
such accounts to allow Lender to protect Lender's charge and setoff rights
provided in this paragraph.

COLLATERAL Borrower acknowledges this Note is secured by ALL CHATTEL PAPER,
ACCOUNTS AND GENERAL INTANGIBLES AS MORE COMPLETELY DESCRIBED IN THE COMMERCIAL
SECURITY AGREEMENT OF EVEN DATE HEREWITH TOGETHER WITH ALL MODIFICATIONS OF,
CONSOLIDATIONS OF, ADDITIONS OF, REPLACEMENTS OF AND SUBSTITUTIONS OF THE
COLLATERAL.

LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested either orally or in writing by Borrower or as
provided in this paragraph. Lender may, but need not, require that all oral
requests be confirmed in writing. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender's
office shown above. The following person currently is authorized to request
advances and authorize payments under the line of credit until Lender receives
from Borrower, at Lender's address shown above, written notice of revocation of
his or her authority: MICHAEL WEINER, CEO of NEW FRONTIER MEDIA. INC. Borrower
agrees to be liable for all sums either: (A) advanced in accordance with the
instructions of an authorized person or (B) credited to any of Borrower's
accounts with Lender. The unpaid principal balance owing on this Note at any
time may be evidenced by endorsements on this Note or by Lender's internal
records, including daily computer print-outs. Lender will have no obligation to
advance funds under this Note if: (A) Borrower or any guarantor is in default
under the terms of this Note or any agreement that Borrower or any guarantor has
with Lender, including any agreement made in connection with the signing of this
Note; (B) Borrower or any guarantor ceases doing business or is insolvent; (C)
any guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such guarantor's guarantee of this Note or any other loan with Lender; (D)
Borrower has applied funds provided pursuant to this Note for purposes other
than those authorized by Lender; or (E) Lender in good faith believes itself
insecure.

CONSENT TO LOAN PARTICIPATION AND CONSENT TO RELEASE OF INFORMATION TO
PURCHASERS AND POTENTIAL PURCHASERS. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation interests
in the loan to one or more purchasers, whether related or unrelated to Lender.
Lender may provide, without any limitation whatsoever, to any one or more
purchasers, or potential purchasers, any information or knowledge Lender may
have about Borrower or about any other matter relating to the Loan, and Borrower
hereby waives any rights to privacy Borrower may have with respect to such
matters. Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any repurchase of such
participation interests. Borrower also agrees that the purchasers of any such
participation interests will be considered as absolute owners of such interests
in the loan and will have all rights granted under the participation agreement
or agreements governing the sale of such participation interests. Borrower
further waives all rights of offset or counterclaim that it may have now or
later against Lender or against any purchaser of such participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loan irrespective of the failure or insolvency
of any holder of any interest in the Loan. Borrower further agrees that the
purchaser of any such participation interest may enforce its interest
irrespective of any personal claims or defenses that the Borrower may have
against the Lender.

CERTIFICATION OF FINANCIAL INFORMATION. Borrower certifies that all financial
statements supplied to Lender are true, complete and correct and fairly present
the financial condition of the Borrower as of such dates for the periods covered
by such statements, and there has been no materiel adverse change in the
condition (financial or otherwise), business or operations of the Borrower.
There are no liabilities of the Borrower, fixed or contingent, which are
material but are not reflected in the financial statements or in the notes
thereto. No information, exhibit, or report furnished by the Borrower to Lender
in connection with the Note and Related Documents contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statement contained therein not materially misleading. Borrower
warrants and represents that financial statements and other information
furnished to Lender in the future in connection with Borrower's obligations
under the Note and Related Documents shall meet the foregoing standards of
correctness, completeness and accuracy.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and he successors and assigns.

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Lender may delay or forgo enforcing any of its
rights or remedies under this Note without losing them. Borrower and any other
person who signs, guarantees or endorses this Note, to the extent allowed by
law, waive presentment, demand for payment, and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly) and for any length of
time) this loan or release any party or guarantor or collateral; or impair, fail
to realize upon or perfect Lender's security interest in the collateral; and
take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom the
modification is made. The obligations under this Note are joint and several.

PRIOR TO SIGNING THIS NOTE. BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE. BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS
PROMISSORY NOTE.

BORROWER:
NEW FRONTIER MEDIA, INC.

By: /s/ Michael Weiner
- ---------------------------
MICHAEL WEINER, CEO of NEW FRONTIER MEDIA, INC.




                      BUSINESS LOAN AGREEMENT (ASSET BASED)

- --------------------------------------------------------------------------------
Principal        Loan      Maturity     Loan     Call   Account Officer Initials
                 Date                    No.     /Coll
$7,500,000.00  07-01-2007  07-01-2008  281001273                 GPB
- --------------------------------------------------------------------------------

  References in the shaded area are for Lender's use only and do not limit the
         applicability of this document to any particular loan or item.
             Any item above containing "***" has been omitted due to
                            text length limitations.
- --------------------------------------------------------------------------------
 Borrower: NEW FRONTIER MEDIA, INC.         Lender: First Community Bank
           7007 WINCHESTER CIR. STE 200              Denver Tech Consumer
           BOULDER, CO 80301                          Servicing Center
                                                    4582 South Ulster Street,
                                                      Suite 650
                                                    Denver, CO 80237
                                                    (303) 729-3502

================================================================================


THIS BUSINESS LOAN AGREEMENT (ASSET BASED) dated July 1, 2007, is made and
executed between NEW FRONTIER MEDIA. INC. ("Borrower") and First Community Bank
("Lender") on the following terms and conditions. Borrower has received prior
commercial loans from Lender or has applied to Lender for a commercial loan or
loans or other financial accommodations, including those which may be described
on any exhibit or schedule attached to this Agreement ("Loan"). Borrower
understands and agrees that: (A) in granting, renewing, or extending any Loan,
Lender is relying upon Borrower's representations, warranties, and agreements as
set forth in this Agreement; (B) the granting, renewing, or extending of any
Loan by Lender at all times shall be subject to Lender's sole judgment and
discretion; and (C) all such Loans shall be and remain subject to the terms and
conditions of this Agreement.

TERM. This Agreement shall be effective as of July 1, 2007, and shall continue
in full force and effect until such time as all of Borrower's Loans in favor of
Lender have been paid in full, including principal, interest, costs, expenses,
attorneys' fees, and other fees and charges, or until such time as the parties
may agree in writing to terminate this Agreement.

LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advances outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows:

     Conditions Precedent to each Advance. Lender's obligation to make any
     Advance to or for the account of Borrower under this Agreement is subject
     to the following conditions precedent, with all documents, instruments,
     opinions, reports, and other items required under this Agreement to be in
     form and substance satisfactory to Lender:

          (1) Lender shall have received evidence that this Agreement and all
          Related Documents have been duly authorized, executed, and delivered
          by Borrower to Lender.

          (2) Lender shall have received such opinions of counsel, supplemental
          opinions, and documents as Lender may request

          (3) The security interests in the Collateral shall have been duly
          authorized, created, and perfected with first lien priority and shall
          be in full force and effect.

          (4) All guaranties required by Lender for the credit facility(ies)
          shall have been executed by each Guarantor, delivered to Lender, and
          be in full force and effect.

          (5) Lender, at its option and for its own benefit, shall have
          conducted an audit of Borrower's Accounts, books, records, and
          operations, and Lender shall be satisfied as to their condition.

          (6) Borrower shall have paid to Lender all fees, costs, and expenses
          specified in this Agreement and the Related Documents as are then due
          and payable.

          (7) There shall not exist at the time of any Advance a condition which
          would constitute an Event of Default under this Agreement, and
          Borrower shall have delivered to Lender the compliance certificate
          called for in the paragraph below titled "Compliance Certificate."

     Making Loan Advances. Advances under this credit facility, as well as
     directions for payment from Borrower's accounts, may be requested orally or
     in writing by authorized persons. Lender may, but need not, require that
     all oral requests be confirmed in writing. Each Advance shall be
     conclusively deemed to have been made at the request of and for the benefit
     of Borrower (1) when credited to any deposit account of Borrower maintained
     with Lender or (2) when advanced in accordance with the instructions of an
     authorized person. Lender, at its option, may set a cutoff time, after
     which all requests for Advances will be treated as having been requested on
     the next succeeding Business Day.

     Mandatory Loan Repayments. If at any time the aggregate principal amount of
     the outstanding Advances shall exceed the applicable Borrowing Base,
     Borrower, immediately upon written or oral notice from Lender, shall pay to
     Lender an amount equal to the difference between the outstanding principal
     balance of the Advances and the Borrowing Base. On the Expiration Date.
     Borrower shall pay to Lender in full the aggregate, unpaid principal amount
     of all Advances then outstanding and all accrued unpaid interest, together
     with all other applicable fees, costs and charges, if any, not yet paid.

     Loan Account. Lender shall maintain on its books a record of account in
     which Lender shall make entries for each Advance and such ether debits and
     credits as shall be appropriate in connection with the credit facility.
     Lender shall provide Borrower with periodic statements of Borrower's
     account, which statements shall be considered to be correct and
     conclusively binding on Borrower unless Borrower notifies Lender to the
     contrary within thirty (30) days after Borrower's receipt of any such
     statement which Borrower deems to be incorrect

COLLATERAL. To secure payment of the Primary Credit Facility and performance of
all other Loans, obligations and duties owed by Borrower to Lender, Borrower
land others, if required, shall grant to Lender Security Interests in such
property and assets as Lender may require. Lender's Security Interests in the
Collateral shall be continuing liens and shall include the proceeds and products
of the Collateral, including without limitation the proceeds of any insurance.
With respect to the Collateral, Borrower agrees and represents and warrants to
Lender:

     Perfection of Security Interests. Borrower agrees to execute all documents
     perfecting Lender's Security Interest and to take whatever actions are
     requested by Lender to perfect and continue Lender's Security Interests in
     the Collateral. Upon request of Lender, Borrower will deliver to Lender any
     and all of the documents evidencing or constituting the Collateral, and
     Borrower will note Lender's interest upon any and all chattel paper and
     instruments if not delivered to Lender for possession by Lender.
     Contemporaneous with the execution of this Agreement Borrower will execute
     one or more UCC financing statements and any similar statements as may be
     required by applicable law, and Lender will file such financing statements
     and all such similar statements in the appropriate location or locations.
     Borrower hereby appoints Lender as its irrevocable attorney-in-fact for the
     purpose of executing any documents necessary to perfect or to continue any
     Security Interest. Lender may at any time, and without further
     authorization from Borrower, file a carbon, photograph, facsimile, or other
     reproduction of any financing statement for use as a financing statement.
     Borrower will reimburse Lender for all expenses for the perfection,
     termination, and the continuation of the perfection of Lender's security
     interest in the Collateral. Borrower promptly will notify Lender before any
     change in Borrower's name including any change to the assumed business
     names of Borrower. Borrower also promptly will notify Lender before any
     change in Borrower's Social Security Number or Employer Identification
     Number. Borrower further agrees to notify Lender in writing prior to any
     change in address or location of Borrower's principal governance office or
     should Borrower merge or consolidate with any other entity.

     Collateral Records. Borrower does now, and at all times hereafter shall,
     keep correct and accurate records of the Collateral, all of which records
     shall be available to Lender or Lender's representative upon demand for
     inspection and copying at any reasonable time. With respect to the
     Accounts, Borrower agrees to keep and maintain such records as Lender may
     require, including without limitation information concerning Eligible
     Accounts and Account balances and agings. Records related to Accounts
     (Receivables) are or will be located at 7007 Winchester Circle, Suite 200,
     Boulder, CO 80301. The above is an accurate and complete list of all
     locations at which Borrower keeps or maintains business records concerning
     Borrower's collateral.

     Collateral Schedules. Concurrently with the execution and delivery of this
     Agreement, Borrower shall execute and deliver to Lender schedules of
     Accounts and schedules of Eligible Accounts in form and substance
     satisfactory to the Lender. Thereafter supplemental schedules shall be
     delivered according to the following schedule:

     Representations and Warranties Concerning Accounts. With respect to the
     Accounts, Borrower represents and warrants to Lender: (1) Each Account
     represented by Borrower to be an Eligible Account for purposes of this
     Agreement conforms to the requirements of the definition of an Eligible
     Account; (2) All Account information listed on schedules delivered to
     Lender will be true and correct, subject to immaterial variance; and (3)
     Lender, its assigns, or agents shall have the right at any time and at
     Borrower's expense to inspect, examine, and audit Borrower's records and to
     confirm with Account Debtors the accuracy of such Accounts.

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender's satisfaction of all of the conditions sat forth in this
Agreement and in the Related Documents.

     Loan Documents. Borrower shall provide to Lender the following documents
     for the Loan: (1) the Note; (2) Security Agreements




                      BUSINESS LOAN AGREEMENT (ASSET BASED)
Loan No: 281001273                 (Continued)                          Page 2
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     granting to Lender security interests in the Collateral; (3) financing
     statements and all other documents perfecting Lender's Security Interests;
     (4) evidence of insurance as required below; (5) together with all such
     Related Documents as Lender may require for the Loan; all in form and
     substance satisfactory to Lender and Lender's counsel.

     Borrower's Authorization. Borrower shall have provided in form and
     substance satisfactory to Lender properly certified resolutions, duly
     authorizing the execution and delivery of this Agreement, the Note and the
     Related Documents. In addition, Borrower shall have provided such other
     resolutions, authorizations, documents and instruments as Lender or its
     counsel, may require.

     Fees and Expenses Under This Agreement. Borrower shall have paid to Lender
     all fees, costs, and expenses specified in this Agreement and the Related
     Documents as are then due and payable,

     Representations and Warranties. The representations and warranties set
     forth in this Agreement, in the Related Documents, and in any document or
     certificate delivered to Lender under this Agreement as true and correct.

     No Event of Default. There shall not exist at the time of any Advance a
     condition which would constitute an Event of Default under this Agreement
     or under any Related Document.

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:

     Organization. Borrower is a corporation for profit which is, and at all
     times shall be, duly organized, validly existing, and in good standing
     under and by virtue of the laws of the State of Colorado. Borrower is duly
     authorized to transact business in all other states in which Borrower is
     doing business, having obtained all necessary filings, governmental
     licenses and approvals for each state in which Borrower is doing business.
     Specifically, Borrower is, and at all times shall be, duly qualified as a
     foreign corporation in all states in which the failure to so qualify would
     have a material adverse effect on its business or financial condition.
     Borrower has the full power and authority to own its properties and to
     transact the business in which it is presently engaged or presently
     proposes to engage. Borrower maintains its principal office at 7007
     WINCHESTER CIR, STE 200, BOULDER, CO 80301. Unless Borrower has designated
     otherwise in writing, this is the principal office at which Borrower keeps
     its books and records including its records concerning the Collateral.
     Borrower will notify Lender prior to any change in the location of
     Borrower's state of organization or any change in Borrower's name. Borrower
     shall do all things necessary to preserve and to keep in full force and
     effect its existence, rights and privileges, and shall comply with all
     regulations, rules, ordinances, statutes, orders and decrees of any
     governmental or quasi-governmental authority or court applicable to
     Borrower and Borrower's business activities.

     Assumed Business Names. Borrower has filed or recorded all documents or
     filings required by law relating to all assumed business names used by
     Borrower. Excluding the name of Borrower, the following is a complete list
     of all assumed business names under which Borrower does business: None.

     Authorization. Borrower's execution, delivery, and performance of this
     Agreement and all the Related Documents have been duly authorized by all
     necessary action by Borrower and do not conflict with, result in a
     violation of, or constitute a default under (1) any provision of (a)
     Borrower's articles of incorporation or organization, or bylaws, or (b) any
     agreement or other instrument binding upon Borrower or (2) any law,
     governmental regulation, court decree, or order applicable to Borrower or
     to Borrower's properties.

     Financial Information. Each of Borrower's financial statements supplied to
     Lender truly and completely disclosed Borrower's financial condition as of
     the date of the statement, and there has been no material adverse change in
     Borrower's financial condition subsequent to the date of the most recent
     financial statement supplied to Lender. Borrower has no material contingent
     obligations except as disclosed in such financial statements.

     Legal Effect. This Agreement constitutes, and any instrument or agreement
     Borrower is required to give under this Agreement when delivered will
     constitute legal, valid, and binding obligations of Borrower enforceable
     against Borrower in accordance with their respective terms.

     Properties. Except as contemplated by this Agreement or as previously
     disclosed In Borrower's financial statements or in writing to Lender and as
     accepted by Lender, and except for property tax liens for taxes not
     presently due and payable, Borrower owns and has good title to all of
     Borrower's properties free and clear of all Security Interests, and has not
     executed any security documents or financing statements relating to such
     properties. All of Borrower's properties are titled In Borrower's legal
     name, and Borrower has not used or filed a financing statement under any
     other name for at least the last five (5) years.

     Hazardous Substances. Except as disclosed to and acknowledged by Lender in
     writing, Borrower represents and warrants that: (1) During the period of
     Borrower's ownership of the Collateral, there has been no use, generation,
     manufacture, storage, treatment, disposal, release or threatened release of
     any Hazardous Substance by any person on, under, about or from any of the
     Collateral. (2) Borrower has no knowledge of, or reason to believe that
     there has been (a) any breach or violation of any Environmental Laws; (b)
     any use, generation, manufacture, storage, treatment, disposal, release or
     threatened release of any Hazardous Substance on, under, about or from the
     Collateral by any prior owners or occupants of any of the Collateral: or
     (c) any actual or threatened litigation or claims of any kind by any person
     relating to such matters. (3) Neither Borrower nor any tenant, contractor,
     agent or other authorized user of any of the Collateral shall use,
     generate, manufacture, store, treat, dispose of or release any Hazardous
     Substance on, under, about or from any of the Collateral; and any such
     activity shall be conducted in compliance with all applicable federal,
     state, and local laws, regulations, and ordinances, including without
     limitation all Environmental Laws. Borrower authorizes Lender and its
     agents to enter upon the Collateral to make such Inspections and tests as
     Lender may deem appropriate to determine compliance of the Collateral with
     this section of the Agreement. Any inspections or tests made by Lender
     shall be at Borrower's expense and for Lender's purposes only and shall not
     be construed to create any responsibility or liability on the part of
     Lender to Borrower or to any other person. The representations and
     warranties contained herein are based on Borrower's due diligence in
     investigating the Collateral for hazardous waste and Hazardous Substances.
     Borrower hereby (1) releases and waives any future claims against Lender
     for indemnity or contribution in the event Borrower becomes liable for
     cleanup or other costs under any such laws, and (2) agrees to indemnify,
     defend, and hold harmless Lender against any and all claims, losses,
     liabilities, damages, penalties, and expenses which Lender may directly or
     indirectly sustain or suffer resulting from a breach of this section of the
     Agreement or as a consequence of any use, generation, manufacture, storage,
     disposal, release or threatened release of a hazardous waste or substance
     on the Collateral. The provisions of this section of the Agreement,
     including the obligation to indemnity and defend, shall survive the payment
     of the Indebtedness and the termination, expiration or satisfaction of this
     Agreement and shall not be affected by Lender's acquisition of any interest
     in any of the Collateral, whether by foreclosure or otherwise.

     Litigation and Claims. No litigation, claim, investigation, administrative
     proceeding or similar action including those for unpaid taxes against
     Borrower is pending or threatened, and no other event has occurred which
     may materially adversely affect Borrower's financial condition or
     properties, other than litigation, claims, or other events, if any, that
     have been disclosed to and acknowledged by Lender in writing.

     Taxes. To the best of Borrower's knowledge, all of Borrower's tax returns
     and reports that are or were required to be filed, have been filed, and all
     taxes, assessments and other governmental charges have been paid in full,
     except those presently being or to be contested by Borrower in good faith
     in the ordinary course of business and for which adequate reserves have
     been provided.

     Lien Priority. Unless otherwise previously disclosed to Lender in writing,
     Borrower has not entered into or granted any Security Agreements, or
     permitted the filing or attachment of any Security Interests on or
     affecting any of the Collateral directly or indirectly securing repayment
     of Borrower's Loan and Note, that would be prior or that may in any way be
     superior to Lender's Security Interests and rights in and to such
     Collateral.

     Binding Effect. This Agreement, the Note, all Security Agreements (if any),
     and all Related Documents are binding upon the signers thereof, as well as
     upon their successors, representatives and assigns, and are legally
     enforceable in accordance with their respective terms.

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect, Borrower will:

     Notices of Claims and Litigation. Promptly inform Lender in writing of (1)
     all material adverse changes in Borrower's financial condition, and (2) all
     existing and all threatened litigation, claims, investigations,
     administrative proceedings or similar actions affecting Borrower or any
     Guarantor which could materially affect the financial condition of Borrower
     or the financial condition of any Guarantor.

     Financial Records. Maintain its books and records in accordance with CAAP,
     applied on a consistent basis, and permit Lender to examine and audit
     Borrower's books and records at all reasonable times,

     Financial Statements. Furnish Lender with the following:

          Annual Statements. As soon as available, but in no event later than
          ninety (90) days after the end of each fiscal year, Borrower's balance
          sheet and income statement for the year ended, audited by a certified
          public accountant satisfactory to Lender.

          Interim Statements. As soon as available, but in no event later than
          thirty (30) days after the end of each fiscal quarter, Borrower's




                      BUSINESS LOAN AGREEMENT (ASSET BASED)
Loan No: 281001273                 (Continued)                          Page 3
================================================================================

          balance sheet and profit and loss statement for the period ended,
          prepared by Borrower.

     All financial reports required to be provided under this Agreement shall be
     prepared in accordance with GAAP, applied on a consistent basis, and
     certified by Borrower as being true and correct

     Additional Information. Furnish such additional information and statements,
     as Lender may request from time to time.

     Financial Covenants and Ratios. Comply with the following covenants and
     ratios:

          Working Capital Requirements. Borrower shall comply with the following
          working capital ratio requirements:

               Current Ratio. Maintain a Current Ratio in excess of 1.250 to
               1.000. The term "Current Ratio" means Borrower's total Current
               Assets divided by Borrower's total Current Liabilities.

          Tangible Net Worth Requirements. Other Net Worth requirements are as
          follows: Total Liabilities to Tangible Net Worth. Customer's "Leverage
          Ratio" shall not at any time exceed 1.0 to 1.0. For purposes hereof,
          "Leverage Ratio" shall mean the ratio of (i) Customer's total
          liabilities less any subordinated debt of customer, to (ii) the sum of
          Customer's Tangible Net Worth plus any subordinated debt of customer.
          The term "Tangible Net Worth" shall mean Customer's net worth as shown
          as Customer's regular financial statements prepared in accordance with
          GAAP, including net prepaid distribution rights, but excluding an
          amount equal to: (i) any Intangible Assets, and (ii) any amounts now
          or hereafter directly or indirectly owing to Customer by officers,
          shareholders or affiliates of Customer. "Intangible Assets" shall mean
          the total amount of goodwill, patents, trade names, trade or service
          marks, copyrights, experimental expense, organization expense,
          un-amortized debt discount and expense, the excess of cost of shares
          acquired over book value of related assets, and such other assets as
          are properly classified as "intangible assets" of the Customer
          determined in accordance with GAAP. Subordinated debt shall mean any
          debt of Customer for borrowed money which is subordinated in right of
          payment and is payable on terms and conditions junior to First
          Community Bank. and in a form and manner acceptable to First Community
          Bank..

          Other Requirements. Fixed Charge Coverage. Customer's "Fixed Charge
          Coverage Ratio" shall be equal to or exceed 2.Ox at all times, to be
          measured on a quarterly basis. For purposes hereof, "Fixed Charge
          Coverage Ratio" shall mean the ratio of: (a) income before interest
          (including payments in the nature of interest under capital leases),
          taxes, depreciation, amortization, and other non-cash charges, to (b)
          the sum of the aggregate principal and interest paid or accrued, the
          aggregate rental under capital leases paid or accrued, all as
          determined on a as set forth in customer's regular quarter end
          financial statements prepared in accordance with GAAP.

          Except as provided above, all computations made to determine
          compliance with the requirements contained in this paragraph shall be
          made in accordance with generally accepted accounting principles,
          applied on a consistent basis, and certified by Borrower as being true
          and correct.

     Insurance. Maintain fire and other risk insurance, public liability
     insurance, and such ether insurance as Lender may require with respect to
     Borrower's properties and operations, in form, amounts, coverages and with
     insurance companies acceptable to Lender. Borrower, upon request of Lender,
     will deliver to Lender from time to time the policies or certificates of
     insurance in form satisfactory to Lender, including stipulations that
     coverages will not be cancelled or diminished without at least fifteen (15)
     days prior written notice to Lender. Each insurance policy also shall
     include an endorsement providing that coverage in favor of Lender will not
     be impaired in any way by any act, omission or default of Borrower or any
     other person. In connection with all policies covering assets in which
     Lender holds or is offered a security interest for the Loans, Borrower
     will provide Lender with such Lender's loss payable or other endorsements
     as Lender may require.

     Insurance Reports. Furnish to Lender, upon request of Lender, reports on
     each existing insurance policy showing such information as Lender may
     reasonably request, including without limitation the following: (1) the
     name of the insurer; (2) the risks insured; (3) the amount of the policy;
     (4) the properties insured; (5) the then current property values on the
     basis of which insurance has bean obtained, and the manner of determining
     those values; and (6) the expiration date of the policy. In addition, upon
     request of Lender (however not more often than annually), Borrower will
     have an independent appraiser satisfactory to Lender determine, as
     applicable, the actual cash value or replacement cost of any Collateral.
     The cost of such appraisal shall be paid by Borrower.

     Other Agreements. Comply with all terms and conditions of all other
     agreements, whether now or hereafter existing, between Borrower and any
     other party and notify Lender immediately in writing of any default in
     connection with any other such agreements.

     Loan Proceeds. Use all Loan proceeds solely for Borrower's business
     operations, unless specifically consented to the contrary by Lender in
     writing.

     Taxes, Charges and Liens. Pay and discharge when due all of its
     indebtedness and obligations, including without limitation all assessments,
     taxes, governmental charges, levies and liens, of every kind and nature,
     imposed upon Borrower or its properties, income, or profits, prior to the
     date on which penalties would attach, and all lawful claims that, if
     unpaid, might become a lien or charge upon any of Borrower's properties,
     income, or profits.

     Performance. Perform and comply, in a timely manner, with all terms,
     conditions, and provisions set forth in this Agreement, in the Related
     Documents, and in all other instruments and agreements between Borrower and
     Lender. Borrower shall notify Lender immediately in writing of any default
     in connection with any agreement.

     Operations. Maintain executive and management personnel with substantially
     the same qualifications and experience as the present executive and
     management personnel; provide written notice to Lender of any change in
     executive and management personnel; conduct its business affairs in a
     reasonable and prudent manner.

     Environmental Studies. Promptly conduct and complete, at Borrower's
     expense, all such investigations, studies, samplings and testings as may be
     requested by Lender or any governmental authority relative to any
     substance, or any waste or by-product of any substance defined as toxic or
     a hazardous substance under applicable federal, state, or local law, rule,
     regulation, order or directive, at or effecting any property or any
     facility owned, leased or used by Borrower.

     Compliance with Governmental Requirements. Comply with all laws,
     ordinances, and regulations, now or hereafter in effect, of all
     governmental authorities applicable to the conduct of Borrower's
     properties, businesses and operations, and to the use or occupancy of the
     Collateral, including without limitation, the Americans With Disabilities
     Act. Borrower may contest in good faith any such law, ordinance, or
     regulation and withhold compliance during any proceeding, including
     appropriate appeals, so long as Borrower has notified Lender in writing
     prior to doing so and so long as, in Lender's sole opinion, Lender's
     interests in the Collateral are not jeopardized. Lender may require
     Borrower to post adequate security or a surety bond, reasonably
     satisfactory to Lender, to protect Lenders interest.

     Inspection. Permit employees or agents of Lender at any reasonable time to
     inspect any and all Collateral for the Loan or Loans and Borrower's other
     properties and to examine or audit Borrower's books, accounts, and records
     and to make copies and memoranda of Borrower's books, accounts, and
     records. If Borrower now or at any time hereafter maintains any records
     (including without limitation computer generated records and computer
     software programs for the generation of such records in the possession of a
     third party, Borrower, upon request of Lender, shall notify such party to
     permit Lender free access to such records at all reasonable times and to
     provide Lender with copies of any records it may request, all at Borrower's
     expense.

     Compliance Certificates. Unless waived In writing by Lender, provide Lender
     at least annually, with a certificate executed by Borrower's chief
     financial officer, or other officer or person acceptable to Lender,
     certifying that the representations and warranties set forth in this
     Agreement are true and correct as of the date of the certificate and
     further certifying that, as of the date of the certificate, no Event of
     Default exists under this Agreement.

     Environmental Compliance and Reports. Borrower shall comply in all respects
     with any and all Environmental Laws; not cause or permit to exist, as a
     result of an intentional or unintentional action or omission on Borrower's
     part or on the part of any third party, on property owned and/or occupied
     by Borrower, any environmental activity where damage may result to the
     environment unless such environmental activity is pursuant to and in
     compliance with the conditions of a permit issued by the appropriate
     federal, state or local governmental authorities; shall furnish to Lender
     promptly and in any event within thirty (30) days after receipt thereof a
     copy of any notice, summons, lien, citation, directive, letter or other
     communication from any governmental agency or instrumentality concerning
     any intentional or unintentional action or omission on Borrower's part in
     connection with any environmental activity whether or not there is damage
     to the environment and/or other natural resources.

     Additional Assurances. Make, execute and deliver to Lender such promissory
     notes, mortgages, deeds of trust, security agreements, assignments,
     financing statements, instruments, documents and other agreements as Lender
     or its attorneys may reasonably request to evidence and secure the Loans
     and to perfect all Security Interests.

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower's failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or



                      BUSINESS LOAN AGREEMENT (ASSET BASED)
Loan No: 281001273                 (Continued)                          Page 4
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paying all taxes, liens, security interests, encumbrances and other claims, at
any time levied or placed on any Collateral and paying all costs for insuring,
maintaining and preserving any Collateral. All such expenditures incurred or
paid by Lender for such purposes will then bear interest at the rate charged
under the Note from the date incurred or paid by Lender to the date of repayment
by Borrower. All such expenses will become a part of the Indebtedness and, at
Lenders option, will (A) be payable on demand; (B) be added to the balance of
the Note and be apportioned among and be payable with any installment payments
to become due during either (1) the term of any applicable insurance policy; or
(2) the remaining term of the Note; or (C) be treated as a balloon payment which
will be due and payable at the Note's maturity.

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:

     Indebtedness and Liens. (1) Except for trade debt incurred in the normal
     course of business and indebtedness to Lender contemplated by this
     Agreement, create, incur or assume indebtedness for borrowed money,
     including capital leases, (2) sell, transfer, mortgage, assign, pledge,
     lease, grant a security interest in, or encumber any of Borrower's assets
     (except as allowed as Permitted Liens), or (3) sell with recourse any of
     Borrower's accounts, except to Lender.

     Continuity of Operations. (1) Engage in any business activities
     substantially different than those in which Borrower is presently engaged,
     (2) cease operations, liquidate, merge, transfer, acquire or consolidate
     with any other entity, change its name, dissolve or transfer or sell
     Collateral out of the ordinary course of business, or (3) pay any dividends
     on Borrower's stock (other than dividends payable in its stock), provided,
     however that notwithstanding the foregoing, but only so long as no Event of
     Default has occurred and is continuing or would result from the payment of
     dividends, if Borrower is a "Subchapter S Corporation" (as defined in the
     Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends
     on its stock to its shareholders from time to time in amounts necessary to
     enable the shareholders to pay income taxes and make estimated income tax
     payments to satisfy their liabilities under federal and state law which
     arise solely from their status as Shareholders of a Subchapter S
     Corporation because of their ownership of shares of Borrower's stock, or
     purchase or retire any of Borrower's outstanding shares or alter or amend
     Borrower's capital structure.

     Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or
     assets to any other person, enterprise or entity, (2) purchase, create or
     acquire any interest in any other enterprise or entity, or (3) incur any
     obligation as surety or guarantor other than in the ordinary course of
     business.

     Agreements. Borrower will not enter into any agreement containing any
     provisions which would be violated or breached by the performance of
     Borrower's obligations under this Agreement or in connection herewith.

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes
incompetent or becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse
change in Borrower's financial condition, in the financial condition of any
Guarantor; or in the value of any Collateral securing any Loan; or (D) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender; or (E) Lender in
good faith deems itself insecure, even though no Event of Default shall have
occurred.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts, and, at Lender's Option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.

DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement;

     Payment Default. Borrower fails to make any payment when due under the
     Loan.

     Other Defaults. Borrower fails to comply with or to perform any other term,
     obligation, covenant or condition contained in this Agreement or in any of
     the Related Documents or to comply with or to perform any term, obligation,
     covenant or condition contained in any other agreement between Lender and
     Borrower.

     Default in Favor of Third Parties. Borrower or any Grantor defaults under
     any loan, extension of credit, security agreement, purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that may materially affect any of Borrower's or any Grantor's property or
     Borrower's or any Grantor's ability to repay the Loans or perform their
     respective obligations under this Agreement or any of the Related
     Documents.

     False Statements. Any warranty, representation or statement made or
     furnished to Lender by Borrower or on Borrower's behalf under this
     Agreement or the Related Documents is false or misleading in any materiel
     respect, either now or at the time made or furnished or becomes false or
     misleading at any time thereafter.

     Insolvency. The dissolution or termination of Borrower's existence as a
     going business, the insolvency of Borrower, the appointment of a receiver
     for any part of Borrower's property, any assignment for the benefit of
     creditors, any type of creditor workout, or the commencement of any
     proceeding under any bankruptcy or insolvency laws by or against Borrower.

     Defective Collateralization. This Agreement or any of the Related Documents
     ceases to be in full force and effect (including failure of any collateral
     document to create a valid and perfected security interest or lien) at any
     time and for any reason.

     Creditor or Forfeiture Proceedings. Commencement of foreclosure or
     forfeiture proceedings, whether by judicial proceeding, self-help,
     repossession or any other method, by any creditor of Borrower or by any
     governmental agency against any collateral securing the Loan. This includes
     a garnishment of any of Borrower's accounts, including deposit accounts,
     with Lender. However, this Event of Default shall not apply if there is a
     good faith dispute by Borrower as to the validity or reasonableness of the
     claim which is the basis of the creditor or forfeiture proceeding and if
     Borrower gives Lender written notice of the creditor or forfeiture
     proceeding and deposits with Lender monies or a surety bond for the
     creditor or forfeiture proceeding, in an amount determined by Lender, in
     its sole discretion, as being an adequate reserve or bond for the dispute.

     Events Affecting Guarantor. Any of the preceding events occurs with respect
     to any Guarantor of any of the Indebtedness or any Guarantor dies or
     becomes incompetent, or revokes or disputes the validity of, or liability
     under, any Guaranty of the Indebtedness.

     Change in Ownership. Any change in ownership of twenty-five percent (25%)
     or more of the common stock of Borrower.

     Adverse Change. A material adverse change occurs in Borrower's financial
     condition, or Lender believes the prospect of payment or performance of the
     Loan is impaired.

     Insecurity. Lender in good faith believes itself insecure.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies.

NO PURCHASE OF SECURITIES. Borrower agrees the proceeds of the credit facility
may not be used to purchase or carry securities.

ACQUISITION. In the event the borrower or any of the subsidiaries are acquired
or purchased by a third party, the facility will be due and payable.

LOANS TO AFFILIATED PERSONS AND ENTITIES. Borrower agrees, without prior written
consent of First Community bank, no loans or advances directly or indirectly
made by Customer to affiliated person or entities.

MATERIAL CHANGE IN CLIENT BASE. Borrower agrees, no adverse, material change in
the current client base as it related to the Borrowers largest clients, i.e.
EchoStar Communications and Time Warner Broadcasting.

CONTINUITY. Customer will continue to maintain its business, existence,
ownership and good standing.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

     Amendments. This Agreement, together with any Related Documents,
     constitutes the entire understanding and agreement of the parties




                      BUSINESS LOAN AGREEMENT (ASSET BASED)
Loan No: 281001273                 (Continued)                          Page 5
================================================================================

     as to the matters set forth in this Agreement. No alteration of or
     amendment to this Agreement shall be effective unless given in writing and
     signed by the party or parties sought to be charged or bound by the
     alteration or amendment.

     Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of
     Lender's reasonable costs and expenses, including Lender's attorneys' fees
     and Lender's legal expenses, incurred in connection with the enforcement of
     this Agreement. Lender may hire or pay someone else to help enforce this
     Agreement, and Borrower shall pay the reasonable costs and expenses of such
     enforcement. Costs and expenses include Lender's attorneys' fees and legal
     expenses whether or not there is a lawsuit, including attorneys' fees and
     legal expenses for bankruptcy proceedings (including efforts to modify or
     vacate any automatic stay or injunction), appeals, and any anticipated
     post-judgment collection services, Borrower also shall pay all court costs
     and such additional fees as may be directed by the court.

     Caption Headings. Caption headings in this Agreement are for convenience
     purposes only and are not to be used to interpret or define the provisions
     of this Agreement.

     Consent to Loan Participation. Borrower agrees and consents to Lender's
     sale or transfer, whether now or later, of one or more participation
     interests in the Loan to one or more purchasers, whether related or
     unrelated to Lender. Lender may provide, without any limitation whatsoever,
     to any one or more purchasers, or potential purchasers, any information or
     knowledge Lender may have about Borrower or about any other matter relating
     to the Loan, and Borrower hereby waives any rights to privacy Borrower may
     have with respect to such matters. Borrower additionally waives any and all
     notices of sale of participation interests, as well as all notices of any
     repurchase of such participation interests. Borrower also agrees that the
     purchasers of any such participation interests will be considered as the
     absolute owners of such interests in the Loan and will have all the rights
     granted under the participation agreement or agreements governing the sale
     of such participation interests. Borrower further waives all rights of
     offset or counterclaim that it may have now or later against Lender or
     against any purchaser of such a participation interest and unconditionally
     agrees that either Lender or such purchaser may enforce Borrower's
     obligation under the Loan irrespective of the failure or insolvency of any
     holder of the interest in the Loan. Borrower further agrees that the
     purchaser of any such participation interests may enforce its interests
     irrespective of any personal claims or defenses that Borrower may have
     against Lender.

     Governing Law. This Agreement will be governed by federal law applicable to
     Lender and, to the extent not preempted by federal law, the laws of the
     State of Colorado without regard to its conflicts of law provisions. This
     Agreement has been accepted by Lender in the State of Colorado.

     Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender's
     request to submit to the jurisdiction of the courts of Denver County, State
     of Colorado.

     No Waiver by Lender. Lender shall not be deemed to have waived any rights
     under this Agreement unless such waiver it given in writing and signed by
     Lender. No delay or omission on the part of Lender in exercising any right
     shall operate as a waiver of such right or any other right. A waiver by
     Lender of a provision of this Agreement shall not prejudice or constitute a
     waiver of Lender's right otherwise to demand strict compliance with that
     provision or any other provision of this Agreement. No prior waiver by
     Lender, nor any course of dealing between Lender and Borrower, or between
     Lender and any Grantor, shall constitute a waiver of any of Lender's rights
     or of any of Borrower's or any Grantor's obligations as to any future
     transaction. Whenever the consent of Lender is required under this
     Agreement, the granting of such consent by Lender in any instance shall not
     constitute continuing consent to subsequent instances where such consent is
     required and in all cases such consent may be granted or withheld in the
     sole discretion of Lender.

     Notices. Any notice required to be given under this Agreement shall be
     given in writing, and shall be effective when actually delivered, when
     actually received by telefacsimile (unless otherwise required by law), when
     deposited with a nationally recognized overnight courier, or, if mailed,
     when deposited in the United States mail, as first class, certified or
     registered mail postage prepaid, directed to the addresses shown near the
     beginning of this Agreement. Any party may change its address for notices
     under this Agreement by giving formal written notice to the other parties,
     specifying that the purpose of the notice is to change the party's address.
     For notice purposes, Borrower agrees to keep Lender informed at all times
     of Borrower's current address. Unless otherwise provided or required by
     law, if there is more than one Borrower, any notice given by Lender to any
     Borrower is deemed to be notice given to all Borrowers.

     Severability. If a court of competent jurisdiction finds any provision of
     this Agreement to be illegal, invalid, or unenforceable as to any
     circumstance, that finding shall hot make the offending provision illegal,
     invalid, or unenforceable as to any other circumstance. If feasible, the
     offending provision shall be considered modified so that it becomes legal,
     valid and enforceable, If the offending provision cannot be so modified, it
     shall be considered deleted from this Agreement. Unless otherwise required
     by law, the illegality, invalidity, or unenforceability of any provision of
     this Agreement shall not affect the legality, validity or enforceability of
     any other provision of this Agreement.

     Subsidiaries and Affiliates of Borrower. To the extent the context of any
     provisions of this Agreement makes it appropriate, including without
     limitation any representation, warranty or covenant, the word "Borrower" as
     used in this Agreement shall include all of Borrower's subsidiaries and
     affiliates. Notwithstanding the foregoing however, under no circumstances
     shall this Agreement be construed to require Lender to make any Loan or
     other financial accommodation to any of Borrower's subsidiaries or
     affiliates.

     Successors and Assigns. All covenants and agreements by or on behalf of
     Borrower contained in this Agreement or any Related Documents shall bind
     Borrower's successors and assigns and shall inure to the benefit of Lender
     and its successors and assigns. Borrower shall not, however, have the right
     to assign Borrower's rights under this Agreement or any interest therein,
     without the prior written consent of Lender.

     Survival of Representations and Warranties. Borrower understands and agrees
     that in extending Loan Advances, Lender is relying on all representations,
     warranties, and covenants made by Borrower in this Agreement or in any
     certificate or other instrument delivered by Borrower to Lender under this
     Agreement or the Related Documents. Borrower further agrees that regardless
     of any investigation made by Lender, all such representations, warranties
     and covenants will survive the extension of Loan Advances and delivery to
     Lender of the Related Documents, shall be continuing in nature, shall be
     deemed made and redated by Borrower at the time each Loan Advance is made,
     and shall remain in full force and effect until such time as Borrower's
     Indebtedness shall be paid in full, or until this Agreement shall be
     terminated in the manner provided above, whichever is the last to occur.

     Time is of the Essence, Time is of the essence in the performance of this
     Agreement.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code, Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this Agreement:

     Account. The word "Account" means a trade account, account receivable,
     other receivable, or other right to payment for goods sold or services
     rendered owing to Borrower (or to a third party grantor acceptable to
     Lender).

     Account Debtor. The words "Account Debtor" means the person or entity
     obligated upon an Account.

     Advance. The word "Advance" means a disbursement of Loan funds made, or to
     be made, to Borrower or on Borrower's behalf under the terms and conditions
     of this Agreement.

     Agreement. The word "Agreement" means this Business Loan Agreement (Asset
     Based), as this Business Loan Agreement (Asset Based) may be amended or
     modified from time to time, together with all exhibits and schedules
     attached to this Business Loan Agreement (Asset Based) from time to time.

     Borrower. The word "Borrower" means NEW FRONTIER MEDIA, INC. and includes
     all co-signers and co-makers signing the Note and all their successors and
     assigns.

     Borrowing Base. The words "Borrowing Base" mean Borrowing Base and
     Compliance Certificate- submission of the company's borrowing base and
     compliance certificate, to be submitted with 30 days of each fiscal quarter
     and while the line of credit is not in use, and monthly when the line of
     credit is being utilized.

     Business Day. The words "Business Day" mean a day on which commercial banks
     are open in the State of Colorado.

     Collateral. The word "Collateral" means all property and assets granted as
     collateral security for a Loan, whether real or personal property, whether
     granted directly or indirectly, whether granted now or in the future, and
     whether granted in the form of a security interest, mortgage, collateral
     mortgage, deed of trust, assignment pledge, crop pledge, chattel mortgage,
     collateral chattel mortgage, chattel trust factor's lien, equipment trust,
     conditional sale, trust receipt, lien, charge, lien or title retention
     contract, lease or consignment intended as a security device, or any other
     security or lien interest whatsoever, whether created by law, contract, or
     otherwise. The word Collateral also includes without limitation all
     collateral described in the Collateral section of this Agreement.

     Eligible Accounts. The words "Eligible Accounts" mean at any time, all of
     Borrower's Accounts which contain selling terms and conditions acceptable
     to Lender. The net amount of any Eligible Account against which Borrower
     may borrow shall exclude all returns, discounts,



                      BUSINESS LOAN AGREEMENT (ASSET BASED)
Loan No: 281001273                 (Continued)                          Page 6
================================================================================

     credits, and offsets of any nature, Unless otherwise agreed to by Lender in
     writing, Eligible Accounts do not include:

          (1) Accounts with respect to which the Account Debtor is employee or
          agent of Borrower.

          (2) Accounts with respect to which the Account Debtor is a subsidiary
          of, or affiliated with Borrower or its shareholders, officers, or
          directors.

          (3) Accounts with respect to which goods are placed on consignment,
          guaranteed sale, or other terms by reason of which the payment by the
          Account Debtor may be conditional.

          (4) Accounts with respect to which Borrower is or may become liable to
          the Account Debtor for goods sold or services rendered by the Account
          Debtor to Borrower.

          (5) Accounts which are subject to dispute, counterclaim, or setoff.

          (6) Accounts with respect to which the goods have not been shipped or
          delivered, or the services have not been rendered, to the Account
          Debtor.

          (7) Accounts with respect to which Lender, in its sole discretion,
          deems the creditworthiness or financial condition of the Account
          Debtor to be unsatisfactory.

          (8) Accounts of any Account Debtor who has flied or has had filed
          against it a petition in bankruptcy or an application for relief under
          any provision of any state or federal bankruptcy, insolvency, or
          debtor-in-relief acts: or who has had appointed a trustee, custodian,
          or receiver for the assets of such Account Debtor; or who has made an
          assignment for the benefit of creditors or has become insolvent or
          fails generally to pay its debts (including its payrolls) as such
          debts become due.

     Environmental Laws. The words "Environmental Laws" mean any and all state,
     federal and local statutes, regulations and ordinances relating to the
     protection of human health or the environment, including without limitation
     the Comprehensive Environmental Response, Compensation, and Liability Act
     of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the
     Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
     ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section
     1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
     Section 6901, et seq., or other applicable state or federal laws, rules, or
     regulations adopted pursuant thereto.

     Event of Default. The words "Event of Default" mean any of the events of
     default set forth in this Agreement in the default section of this
     Agreement.

     Expiration Date. The words "Expiration Date" mean the date of termination
     of Lender's commitment to lend under this Agreement

     GAAP. The word "GAAP" means generally accepted accounting principles.

     Grantor. The word "Grantor" means each and all of the persons or entities
     granting a Security Interest in any Collateral for the Loan, including
     without limitation all Borrowers granting such a Security Interest.

     Guarantor. The word "Guarantor" means any guarantor, surety, or
     accommodation party of any or all of the Loan.

     Guaranty. The word "Guaranty" means the guaranty from Guarantor to Lender,
     including without limitation a guaranty of all or part of the Note.

     Hazardous Substances. The words "Hazardous Substances" mean materials that,
     because of their quantity, concentration or physical, chemical or
     infectious characteristics, may cause or pose a present or potential hazard
     to human health or the environment when improperly used, treated, stored,
     disposed of, generated, manufactured, transported or otherwise handled. The
     words "Hazardous Substances" are used in their very broadest sense and
     include without limitation any and all hazardous or toxic substances,
     materials or waste as defined by or listed under the Environmental Laws.
     The term "Hazardous Substances" also includes, without limitation,
     petroleum and petroleum by-products or any fraction thereof and asbestos.

     Indebtedness. The word "Indebtedness" means the indebtedness evidenced by
     the Note or Related Documents, including all principal and interest
     together with all other indebtedness and costs and expenses for which
     Borrower is responsible under this Agreement or under any of the Related
     Documents.

     Lender. The word "Lender" means First Community Bank, its successors and
     assigns;

     Loan. The word "Loan" means any and all loans and financial accommodations
     from Lender to Borrower whether now or hereafter existing, and however
     evidenced, including without limitation those loans and financial
     accommodations described herein or described on any exhibit or schedule
     attached to this Agreement from time to time.

     Note. The word "Note" means the Promissory Note or Agreement dated July 1,
     2007 in the original principal amount of $7,500,000.00 from
     Borrower/Grantor to Lender together with all renewals of, extensions of,
     modifications of, refinancings of, consolidations of, additions of and
     substitutions for the Promissory Note or Agreement.

     Permitted Liens. The words "Permitted Liens" mean (1) liens and security
     interests securing Indebtedness owed by Borrower to Lender: (2) liens for
     taxes, assessments, or similar charges either not yet due or being
     contested in good faith; (3) liens of materialmen, mechanics, warehousemen,
     or carriers, or other like liens arising in the ordinary course of business
     and securing obligations which are not yet delinquent; (4) purchase money
     liens or purchase money security interests upon or in any property acquired
     or held by Borrower in the ordinary course of business to secure
     indebtedness outstanding on the data of this Agreement or permitted to be
     incurred under the paragraph of this Agreement titled "Indebtedness and
     Liens"; (5) liens and security interests which, as of the date of this
     Agreement, have been disclosed to and approved by the Lender in writing;
     and (6) those liens and security interests which in the aggregate
     constitute an immaterial and insignificant monetary amount with respect to
     the net value of Borrower's assets.

     Primary Credit Facility. The words "Primary Credit Facility" mean the
     credit facility described in the Line of Credit section of this Agreement.

     Related Documents. The words "Related Documents" mean all promissory notes,
     credit agreements, loan agreements, environmental agreements, guaranties,
     security agreements, mortgages, deeds of trust, security deeds, collateral
     mortgages, and all other instruments, agreements and documents, whether now
     or hereafter existing, executed in connection with the Loan.

     Security Agreement. The words "Security Agreement" mean and include without
     limitation any agreements, promises, covenants, arrangements,
     understandings or other agreements, whether created by law, contract, or
     otherwise, evidencing, governing, representing, or creating a Security
     Interest.

     Security Interest. The words "Security Interest" mean, without limitation,
     any and all types of collateral security, present and future, whether in
     the form of a lien, charge, encumbrance, mortgage, deed of trust, security
     deed, assignment, pledge, crop pledge, chattel mortgage, collateral
     chattel mortgage, chattel trust, factor's lien, equipment trust,
     conditional sale, trust receipt, lien or title retention contract, lease or
     consignment intended as a security device, or any other security or lien
     interest whatsoever whether created by law, contract, or otherwise.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT (ASSET BASED) AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN
AGREEMENT (ASSET BASED) IS DATED JULY 1, 2007,

BORROWER:

NEW FRONTIER MEDIA, INC.

By: /s/ Michael Weiner
   -----------------------------
MICHAEL WEINER, CEO of NEW FRONTIER MEDIA, INC.




                      BUSINESS LOAN AGREEMENT (ASSET BASED)
Loan No: 281001273                 (Continued)                          Page 7
================================================================================


LENDER:

FIRST COMMUNITY BANK

By: /s/ Gregory P. Boushelle
   -----------------------------
    Authorized Signer




                          COMMERCIAL SECURITY AGREEMENT
- --------------------------------------------------------------------------------
Principal        Loan      Maturity     Loan     Call   Account Officer Initials
                 Date                    No.     /Coll
$7,500,000.00  07-01-2007  07-01-2008  281001273                 GPB
- --------------------------------------------------------------------------------

  References in the shaded area are for Lender's use only and do not limit the
         applicability of this document to any particular loan or item.
             Any item above containing "***" has been omitted due to
                            text length limitations.
- --------------------------------------------------------------------------------
 Borrower: NEW FRONTIER MEDIA, INC.         Lender: First Community Bank
           7007 WINCHESTER CIR, STE 200              Denver Tech Consumer
           BOULDER, CO 80301                          Servicing Center
                                                    4582 South Ulster Street,
                                                      Suite 650
                                                    Denver, CO 80237
                                                    (303) 729-3502

================================================================================


THIS COMMERCIAL SECURITY AGREEMENT dated, July 1, 2007, is made and executed
between NEW FRONTIER MEDIA, INC. ("Grantor") and First Community Bank
("Lender").

GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender
a security interest in the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.

COLLATERAL DESCRIPTION. The word "Collateral as used in this Agreement means the
following described property, whether now owned or hereafter acquired, whether
now existing or hereafter arising, and wherever located, in which Grantor is
giving to Lender a security interest for the payment of the Indebtedness and
performance of all other obligations under the Note and this Agreement:

     Accounts

In addition, the word "Collateral" also includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:

     (A) All accessions, attachments, accessories, replacements of and additions
     to any of the collateral described herein, whether added now or later.

     (B) All products and produce of any of the property described in this
     Collateral section.

     (C) All accounts, general intangibles, instruments, rents, monies,
     payments, and all other rights, arising out of a sale, lease, consignment
     or other disposition of any of the property described in this Collateral
     section,

     (D) All proceeds (including insurance proceeds from the sale, destruction,
     loss, or other disposition of any of the property described in this
     Collateral section, and sums due from a third party who has damaged or
     destroyed the Collateral or from that party's insurer, whether due to
     judgment, settlement or other process.

     (E) All records and data relating to any of the property described in this
     Collateral section, whether in the form of a writing, photograph,
     microfilm, microfiche, or electronic media, together with all of Grantor's
     right, title, and interest in and to all computer software required to
     utilize, create, maintain, and process any such records or data on
     electronic media.


RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh account, or any trust accounts
for which setoff would be prohibited by law. Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.

GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and promises to Lender that:

     Perfection of Security Interest. Grantor agrees to take whatever actions
     are requested by Lender to perfect and continue Lender's security interest
     in the Collateral Upon request of Lender, Grantor will deliver to Lender
     any and all of the documents evidencing or constituting the Collateral, and
     Grantor will note Lender's interest upon any and all chattel paper and
     instruments if not delivered to Lender for possession by Lender. This is a
     continuing Security Agreement and will continue in effect even though all
     or any part of the Indebtedness is paid in full and even though for a
     period of time Grantor may not be indebted to Lender.

     Notices to Lender. Grantor will promptly notify Lender in writing at
     Lender's address shown above (or such other addresses as Lender may
     designate from time to time) prior to any (1) change in Grantor's name; (2)
     change in Grantor's assumed business name(s); (3) change in the management
     of the Corporation Grantor; (4) change in the authorized signer(s); (5)
     change in Grantor's principal office address; (6) change in Grantor's state
     of organization; (7) conversion of Grantor to a new or different type of
     business entity or (8) change in any other aspect of Grantor that directly
     or indirectly relates to any agreements between Grantor and Lender. No
     change in Grantor's name or state of organization will take effect until
     after Lender has received notice.

     No Violation. The execution and delivery of this Agreement will not violate
     any law or agreement governing Grantor or to which Grantor is a party, and
     its certificate or articles of incorporation and bylaws do not prohibit any
     term or condition of this Agreement.

     Enforceability of Collateral. To the extent the Collateral consists of
     accounts, chattel paper, or general intangibles, as defined by the Uniform
     Commercial Code, the Collateral is enforceable in accordance with its
     terms, is genuine, and fully complies with all applicable laws and
     regulations concerning form, content and manner of preparation and
     execution, and all persons appearing to be obligated on the Collateral have
     authority and capacity to contract and are in fact obligated as they appear
     to be on the Collateral. At the time any account becomes subject to a
     security interest in favor of Lender, the account shall be a good and valid
     account representing an undisputed, bone fide indebtedness incurred by the
     account debtor, for merchandise held subject to delivery instructions or
     previously shipped or delivered pursuant to a contract of sale, or for
     services previously performed by Grantor with or for the account debtor. So
     long as this Agreement remains in effect, Grantor shall not, without
     Lender's prior written consent, compromise, settle, adjust, or extend
     payment under or with regard to any such Accounts. There shall be no
     setoffs or counterclaims against any of the Collateral, and no agreement
     shall have been made under which any deductions or discounts may be claimed
     concerning the Collateral except those disclosed to Lender in writing.

     Location of the Collateral. Except in the ordinary course of Grantor's
     business, Grantor agrees to keep the Collateral (or to the extent the
     Collateral consists of intangible property such as accounts or general
     intangibles, the records concerning the Collateral) at Grantor's address
     shown above or at such other locations as are acceptable to Lender. Upon
     Lender's request, Granter will deliver to Lender in form satisfactory to
     Lender a schedule of reel properties and Collateral locations relating to
     Grantor's operations, including without limitation the following: (1) all
     reel property Grantor owns or is purchasing; (2) all real property Grantor
     is renting or leasing; (3) all storage facilities Grantor owns, rents,
     leases, or uses; and 141 all other properties which Collateral is or may be
     located.

     Removal of the Collateral. Except in the ordinary course of Grantor's
     business, Grantor shall not remove the Collateral from its existing
     location without Lender's prior written consent, Grantor shall, whenever
     requested, advise Lender of the exact location of the Collateral.

     Transactions Involving Collateral. Except for inventory sold or accounts
     collected in the ordinary course of Grantor's business, or as otherwise
     provided for in this Agreement, Grantor shall not sell, offer to sell, or
     otherwise transfer or dispose of the Collateral. Grantor shall not pledge,
     mortgage, encumber or otherwise permit the Collateral to be subject to any
     lien, security interest, encumbrance, or charge, other than the security
     interest provided for in this Agreement without the prior written consent
     of Lender. This includes security interests even if junior in right to the
     security interests granted under this Agreement. Unless waived by Lender,
     all proceeds from any disposition of the Collateral (for whatever reason)
     shall be held in trust for Lender and shall not be commingled with any
     other funds; provided however, this requirement shall not constitute
     consent by Lender to any sale or other disposition. Upon receipt, Grantor
     shall Immediately deliver any such proceeds to Lender.

     Title. Grantor represents and warrants to Lender that Grantor holds good
     and marketable title to the Collateral, free and clear of all liens and
     encumbrances except for the lien of this Agreement. No financing statement
     covering any of the Collateral is on file in any public office other than
     those which reflect the security interest created by this Agreement or to
     which Lender has specifically consented. Grantor shall defend Lender's
     rights in the Collateral against the claims and demands of all other
     persons.

     Repairs and Maintenance. Grantor agrees to keep and maintain, and to cause
     others to keep and maintain, the Collateral in good order, repair and
     condition at all times while this Agreement remains in effect. Grantor
     further agrees to pay when due all claims for work done on, or services
     rendered or materiel furnished in connection with the Collateral so that no
     lien or encumbrance may ever attach to or be filed against the Collateral.

     Inspection of Collateral. Lender and Lender's designated representatives
     and agents shall have the right at all reasonable times to examine



                          COMMERCIAL SECURITY AGREEMENT
Loan No: 281001273                 (Continued)                          Page 2
================================================================================


     and inspect the Collateral wherever located.

     Taxes. Assessments and Liens. Grantor will pay when due all taxes,
     assessments and liens upon the Collateral, its use or operation, upon this
     Agreement, upon any promissory note or notes evidencing the Indebtedness,
     or upon any of the other Related Documents. Grantor may withhold any such
     payment or may elect to contest any lien if Grantor is in good faith
     conducting an appropriate proceeding to contest the obligation to pay and
     so long as Lender's interest in the Collateral is not jeopardized in
     Lender's sole opinion. If the Collateral is subjected to a lien which is
     not discharged within fifteen (15) days, Grantor shall deposit with Lender
     cash, a sufficient corporate surety bond or other security satisfactory to
     Lender in an amount adequate to provide for the discharge of the lien plus
     any interest costs, attorneys' fees or other charges that could accrue as a
     result of foreclosure or sale of the Collateral. In any contest Grantor
     shall defend itself and Lender and shall satisfy any final adverse judgment
     before enforcement against the Collateral. Grantor shall name Lender so an
     additional obligee under any surety bond furnished in the contest
     proceedings. Grantor further agrees to furnish Lender with evidence that
     such taxes, assessments, and governmental and other charges have been paid
     in full and in a timely manner. Grantor may withhold any such payment or
     may elect to contest any lien if Grantor is in good faith conducting an
     appropriate proceeding to contest the obligation to pay and so long as
     Lender's interest in the Collateral is not jeopardized.

     Compliance with Governmental Requirements. Grantor shall comply promptly
     with all laws, ordinances, rules and regulations of all governmental
     authorities, now or hereafter in effect, applicable to the ownership,
     production, disposition, or use of the Collateral, including all laws or
     regulations relating to the undue erosion of highly-erodible land or
     relating to the conversion of wetlands for the production of an
     agricultural product or commodity. Grantor may contest in good faith any
     such law, ordinance or regulation and withhold compliance during any
     proceeding, including appropriate appeals, so long as Lender's interest in
     the Collateral, in Lender's opinion, is not jeopardized.

     Hazardous Substances. Grantor represents and warrants that the Collateral
     never has been, and never will be so long as this Agreement remains a lien
     on the Collateral, used in violation of any Environmental Laws or for the
     generation, manufacture, storage, transportation, treatment, disposal,
     release or threatened release of any Hazardous Substance, The
     representations and warranties contained herein are based on Grantor's due
     diligence in investigating the Collateral for Hazardous Substances. Grantor
     hereby (1) releases and waives any future claims against Lender for
     indemnity or contribution in the event Grantor becomes liable for cleanup
     or other costs under any Environmental Laws, and (2) agrees to indemnify,
     defend, and hold harmless Lender against any and all claims and losses
     resulting from a breach of this provision of this Agreement. This
     obligation to indemnify and defend shall survive the payment of the
     Indebtedness and the satisfaction of this Agreement.

     Maintenance of Casualty Insurance. Grantor shall procure and maintain all
     risks insurance, including without limitation fire, theft and liability
     coverage together with such other insurance as Lender may require with
     respect to the Collateral, in form, amounts, coverages and basis reasonably
     acceptable to Lender and issued by a company or companies reasonably
     acceptable to Lender. Grantor, upon request of Lender, will deliver to
     Lender from time to time the policies or certificates of insurance in form
     satisfactory to Lender, including stipulations that coverages will not be
     cancelled or diminished without at least fifteen (15) days' prior written
     notice to Lender and not including any disclaimer of the insurer's
     liability for failure to give such a notice, Each insurance policy also
     shall include an endorsement providing that coverage in favor of Lender
     will not be impaired in any way by any act, omission or default of Grantor
     or any other person. In connection with all policies covering assets in
     which Lender holds or is offered a security interest, Grantor will provide
     Lender with such loss payable or other endorsements as Lender may require.
     If Grantor at any time fails to obtain or maintain any insurance as
     required under this Agreement Lender may (but shall not be obligated to)
     obtain such insurance as Lender deems appropriate, including if Lender so
     chooses "single interest Insurance," which will cover only Lender's
     interest in the Collateral.

     Application of Insurance Proceeds. Grantor shall promptly notify Lender of
     any loss or damage to the Collateral if the estimated cost of repair or
     replacement exceeds $5,000.00, whether or not such casualty or loss is
     covered by insurance. Lender may make proof of loss if Grantor fails to do
     so within fifteen (15) days of the casualty. All proceeds of any insurance
     on the Collateral, including accrued proceeds thereon, shall be held by
     Lender as part of the Collateral. If Lender consents to repair or
     replacement of the damaged or destroyed Collateral, Lender shall, upon
     satisfactory proof of expenditure, pay or reimburse Grantor from the
     proceeds for the reasonable cost of repair or restoration. If Lender does
     not consent to repair or replacement of the Collateral, Lender shall retain
     a sufficient amount of the proceeds to pay all of the Indebtedness, and
     shall pay the balance to Grantor. Any proceeds which have not bean
     disbursed within six (6) months after their receipt and which Grantor has
     not committed to the repair or restoration of the Collateral shall be used
     to prepay the Indebtedness.

     Insurance Reserves. Lender may require Grantor to maintain with Lender
     reserves for payment of insurance premiums, which reserves shall be created
     by monthly payments from Grantor of a sum estimated by Lender to be
     sufficient to produce, at least fifteen (15) days before the premium due
     date, amount at least equal to the insurance premiums to be paid. If
     fifteen (15) days before payment is due, the reserve funds are
     insufficient, Grantor shall upon demand pay any deficiency to Lender. The
     reserve funds shall be held by Lender as a general deposit and shall
     constitute a non-interest-bearing account which Lender may satisfy by
     payment of the insurance premiums required to be paid by Grantor as they
     become due. Lender does not hold the reserve funds in trust for Grantor,
     and Leader is not the agent of Grantor for payment of the insurance
     premiums required to be paid by Grantor. The responsibility for the payment
     of premiums shall remain Grantor's sole responsibility.

     Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
     reports on each existing policy of insurance showing such information as
     Lender may reasonably request including the following: (1) the name of the
     insurer; (2) the risks insured; (3) the amount of the policy; (4) the
     property insured; (5) the then current value on the basis of which
     insurance has been obtained and the manner of determining that value; and
     (6) the expiration date of the policy. In addition, Granter shall upon
     request by Lender (however not more often than annually) have an
     independent appraiser satisfactory to Lender determine, as applicable, the
     cash value or replacement cost of the Collateral.

     Financing Statements. Grantor authorizes Lender to file a UCC financing
     statement, or alternatively. a copy of this Agreement to perfect Lender's
     security interest. At Lender's request, Grantor additionally agrees to sign
     all other documents that are necessary to perfect, protect, and continue
     Lender's security interest in the Property. Grantor will pay all filing
     fees, title transfer fees, and other fees and costs involved unless
     prohibited by law or unless Lender is required by law to pay such fees and
     costs. Grantor irrevocably appoints Lender to execute documents necessary
     to transfer title if there is a default. Lender may file a copy of this
     Agreement as a financing statement. If Grantor changes Grantor's name or
     address, or the name or address of any person granting a security interest
     under this Agreement changes, Grantor will promptly notify the Lender of
     such change.

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.

LENDER'S EXPENDITURES, If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral. All such
expenditures incurred or paid by Lender for such purposes will than bear
interest at the rate charged under the Note from the data incurred or paid by
Lender to the date of repayment by Grantor. All such expenses will become a part
of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B)
be added to the balance of the Note and be apportioned among and be payable with
any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable "at the Note's
maturity. The Agreement also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default.

DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:

     Payment Default. Grantor fails to make any payment when due under the
     Indebtedness.

     Other Defaults. Grantor fails to comply with or to perform any other term,
     obligation, covenant or condition contained in this Agreement or in any of
     the Related Documents or to comply with or to perform any term, obligation,
     covenant or condition contained in any other agreement between Lender and
     Grantor.




                          COMMERCIAL SECURITY AGREEMENT
Loan No: 281001273                 (Continued)                          Page 3
================================================================================


     Default in Favor of Third Parties. Should Borrower or any Grantor default
     under any loan, extension of credit, security agreement, purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that may materially affect any of Grantor's property or Grantor's or any
     Grantor's ability to repay the Indebtedness or perform their respective
     obligations under this Agreement or any of the Related Documents.

     False Statements. Any warranty, representation or statement made or
     furnished to Lender by Grantor or on Grantor's behalf under this Agreement
     or the Related Documents is false or misleading in any material respect,
     either now or at the time made or furnished or becomes false or misleading
     at any time thereafter.

     Defective Collateralization. This Agreement or any of the Related Documents
     ceases to be in full force and effect (including failure of any collateral
     document to create a valid and perfected security interest or lien) at any
     time and for any reason.

     Insolvency. The dissolution or termination of Grantor's existence as a
     going business, the insolvency of Grantor, The appointment of a receiver
     for any part of Grantor's property, any assignment for the benefit of
     creditors, any type of creditor workout, or the commencement of any
     proceeding under any bankruptcy or insolvency laws by or against Grantor.

     Creditor or Forfeiture Proceedings. Commencement of foreclosure or
     forfeiture proceedings, whether by judicial proceeding, self-help,
     repossession or any other method, by any creditor of Grantor or by any
     governmental agency against any collateral securing the Indebtedness. This
     includes a garnishment of any of Grantor's accounts, including deposit
     accounts, with Lender. However, this Event of Default shall not apply if
     there is a good faith dispute by Grantor as to the validity or
     reasonableness of the claim which is the basis of the creditor or
     forfeiture proceeding and if Grantor gives Lender written notice of the
     creditor or forfeiture proceeding and deposits with Lender monies or a
     surety bond for the creditor or forfeiture proceeding, in an amount
     determined by Lender, in its sole discretion, as being an adequate reserve
     or bond for the dispute.

     Events Affecting Guarantor. Any of the preceding events occurs with respect
     to any guarantor, endorser, surety, or accommodation party of any of the
     Indebtedness or guarantor, endorser, surety, or accommodation party dies or
     becomes incompetent or revokes or disputes the validity of, or liability
     under, any Guaranty of the Indebtedness.

     Adverse Change. A materiel adverse change occurs in Grantor's financial
     condition, or Lender believes the prospect of payment or performance of the
     Indebtedness is impaired.

     Insecurity. Lender in good faith believes itself insecure.


RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement at any time thereafter, Lender shall have all the rights of a secured
party under the Colorado Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:

     Accelerate Indebtedness. Lender may declare the entire Indebtedness,
     including any prepayment penalty which Grantor would be required to pay,
     immediately due and payable, without notice of any kind to Grantor.

     Assemble Collateral. Lender may require Granter to deliver to Lender all or
     any portion of the Collateral and any and all certificates of title and
     other documents relating to the Collateral. Lender may require Grantor to
     assemble the Collateral and make it available to Lender at a place to be
     designated by Lender. Lender also shall have full power to enter upon the
     property of Grantor to take possession of and remove the Collateral, If the
     Collateral contains other goods not covered by this Agreement at the time
     of repossession, Grantor agrees Lender may take such other goods, provided
     that Lender makes reasonable efforts to return them to Grantor after
     repossession.

     Sell the Collateral. Lender shall have full power to sell, lease, transfer,
     or otherwise deal with the Collateral or proceeds thereof in Lender's own
     name or that of Grantor. Lender may sell the Collateral at public auction
     or private sale. Unless the Collateral threatens to decline speedily in
     value or is of a type customarily sold on a recognized market, Lender will
     give Grantor, and other persons as required by law, reasonable notice of
     the time and place of any public sale, or the time after which any private
     sale or any other disposition of the Collateral is to be made. However, no
     notice need be provided to any person who, after Event of Default occurs,
     enters into and authenticates an agreement waiving that person's right to
     notification of sale. The requirements of reasonable notice shall be met if
     such notice is given at least ten (10) days before the time of the sale or
     disposition. All expenses relating to the disposition of the Collateral,
     including without limitation the expenses of retaking, holding, insuring,
     preparing for sale and selling the Collateral, shall become a part of the
     Indebtedness secured by this Agreement and shall be payable on demand, with
     interest at the Note rate from date of expenditure until repaid.

     Appoint Receiver. Lender shall have the right to have a receiver appointed
     to take possession of all or any part of the Collateral, with the power to
     protect and preserve the Collateral, to operate the Collateral preceding
     foreclosure or sale, and to collect the Rents front the Collateral and
     apply the proceeds, over and above the cost of the receivership, against
     the Indebtedness. The receiver may serve without bond if permitted by law.
     Lender's right to the appointment of a receiver shall exist whether or not
     the apparent value of the Collateral exceeds the Indebtedness by a
     substantial amount. Employment by Lender shall not disqualify a person from
     serving as a receiver. Receiver may be appointed by a court of competent
     jurisdiction upon ex parte application and without notice, notice being
     expressly waived.

     Collect Revenues, Apply Accounts. Lender, either itself or through a
     receiver, may collect the payments, rents, income, and revenues from the
     Collateral. Lender may at any time in Lender's discretion transfer any
     Collateral into Lender's own name or that of Lender's nominee and receive
     the payments, rents, income, and revenues therefrom and hold the same as
     security for the Indebtedness or apply it to payment of the Indebtedness in
     such order of preference as Lender may determine. Insofar as the Collateral
     consists of accounts, general intangibles, insurance policies, instruments,
     chattel paper, choses in action, or similar property, Lender may demand,
     collect, receipt for, settle, compromise, adjust, sue for, foreclose, or
     realize on the Collateral as Lender may determine, whether or not
     Indebtedness or Collateral is then due. For these purposes, Lender may, on
     behalf of and in the name of Grantor, receive, open and dispose of mail
     addressed to Grantor; change any address to which mail and payments are to
     be sent; and endorse notes, checks, drafts, money orders, documents of
     title, instruments and items pertaining to payment, shipment or storage of
     any Collateral. To facilitate collection, Lender may notify account debtors
     and obligation on any Collateral to make payments directly to Lender.

     Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
     Lender may obtain a judgment against Grantor for any deficiency remaining
     on the Indebtedness due to Lender after application of all amounts received
     from the exercise of the rights provided in this Agreement. Grantor shall
     be liable for a deficiency even if the transaction described in this
     subsection is a sale of accounts or chattel paper.

     Other Rights and Remedies. Lender shall have all the rights and remedies of
     a secured creditor under the provisions of the Uniform Commercial Code, as
     may be amended from time to time. In addition, Lender shall have and may
     exercise any or all other rights and remedies it may have available at law,
     in equity, or otherwise.

     Election of Remedies. Except as may be prohibited by applicable law, all of
     Lender's rights and remedies, whether evidenced by this Agreement, the
     Related Documents, or by any other writing, shall be cumulative and may be
     exercised singularly or concurrently. Election by Lender to pursue any
     remedy shall not exclude pursuit of any other remedy, and an election to
     make expenditures or to take action to perform on obligation of Grantor
     under this Agreement, after Grantor's failure to perform, shall not affect
     Lender's right to declare a default and exercise its remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

     Amendments. This Agreement, together with any Related Documents,
     constitutes the entire understanding and agreement of the parties as to the
     matters set forth in this Agreement. No alteration of or amendment to this
     Agreement shall be effective unless given in writing and signed by the
     party or parties sought to be charged or bound by the alteration or
     amendment,

     Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of
     Lender's reasonable costs and expenses, including Lender's attorneys' fees
     and Lender's legal expenses, incurred in connection with the enforcement of
     this Agreement. Lender may hire or pay someone else to help enforce this
     Agreement, and Grantor shall pay the reasonable costs and expenses of such
     enforcement. Costs and expenses include Lender's attorneys' fees and legal
     expenses whether or not there is a lawsuit, including attorneys' fees and
     legal expenses for bankruptcy proceedings (including efforts to modify or
     vacate any automatic stay or injunction), appeals, and any anticipated
     post-judgment collection services. Grantor also shall pay all court costs
     and such additional fees as may be directed by the court.

     Caption Headings. Caption headings in this Agreement are for convenience
     purposes only and are not to be used to interpret or define the provisions
     of this Agreement.

     Governing Law. This Agreement will be governed by federal law applicable to
     Lender and, to the extent not preempted by federal law, the laws of the
     State of Colorado without regard to its conflicts of law provisions. This
     Agreement has been accepted by Lender in the State of Colorado.

     Choice of Venue. If there is a lawsuit, Grantor agrees upon Lender's
     request to submit to the jurisdiction of the courts of Denver County, State
     of Colorado.

     No Waiver by Lender. Lender shall not be deemed to have waived any rights
     under this Agreement unless such waiver is given in writing



                          COMMERCIAL SECURITY AGREEMENT
Loan No: 281001273                 (Continued)                          Page 4
================================================================================

     and signed by Lender. No delay or omission on the part of Lender in
     exercising any right shall operate as a waiver of such right or any other
     right. A waiver by Lender of a provision of this Agreement shall not
     prejudice or constitute a waiver of Lender's right otherwise to demand
     strict compliance with that provision or any other provision of this
     Agreement. No prior waiver by Lender, nor any course of dealing between
     Lender and Grantor, shall constitute a waiver of any of Lender's rights or
     of any of Grantor's obligations as to any future transactions, Whenever the
     consent of Lender is required under this Agreement, the granting of such
     consent by Lender in any instance shall not constitute continuing consent
     to subsequent instances where such consent is required and in all cases
     such consent may be granted or withheld in the sole discretion of Lender.

     Notices. Any notice required to be given under this Agreement shall be
     given in writing, and shall be effective when actually delivered, when
     actually received by telefacsimile (unless otherwise required by law), when
     deposited with a nationally recognized overnight courier, or, if mailed,
     when deposited in the United States mail, as first class, certified or
     registered mail postage prepaid, directed to the addresses shown near the
     beginning of this Agreement. Any party may change its address for notices
     under this Agreement by giving formal written notice to the other parties,
     specifying that the purpose of the notice is to change the party's address.
     For notice purposes, Grantor agrees to keep Lender informed at all times of
     Grantor's current address. Unless otherwise provided or required by law, if
     there is more than one Grantor, any notice given by Lender to any Grantor
     is deemed to be notice given to all Grantors.

     Power of Attorney. Grantor hereby appoints Lender as Grantor's irrevocable
     attorney-in-fact for the purpose of executing any documents necessary to
     perfect, amend, or to continue the security interest granted in this
     Agreement or to demand termination of filings of other secured parties.
     Lender may at any time, and without further authorization from Grantor,
     file a carbon, photographic or other reproduction of any financing
     statement or of this Agreement for use as a financing statement. Grantor
     will reimburse Lender for all expenses for the perfection and the
     continuation of the perfection of Lender's security interest in the
     Collateral.

     Severability. If a court of competent jurisdiction finds any provision of
     this Agreement to be illegal, invalid, or unenforceable as to any
     circumstance, that finding shall not make the offending provision illegal,
     invalid, or unenforceable as to any other circumstance. If feasible, the
     offending provision shall be considered modified so that it becomes legal,
     valid and enforceable, If the offending provision cannot be so modified, it
     shall be considered deleted from this Agreement. Unless otherwise required
     by law, the illegality, invalidity, or unenforceability of any provision of
     this Agreement shall not affect the legality, validity or enforceability of
     any other provision of this Agreement.

     Successors and Assigns. Subject to any limitations stated in this Agreement
     on transfer of Grantor's interest, this Agreement shall be binding upon and
     inure to the benefit of the parties, their successors and assigns. If
     ownership of the Collateral becomes vested in a person other then Grantor,
     Lender, without notice to Grantor, may deal with Grantor's successors with
     reference to this Agreement and the Indebtedness by way of forbearance or
     extension without releasing Grantor from the obligations of this Agreement
     or liability under the Indebtedness,

     Survival of Representations and Warranties. All representations,
     warranties, and agreements made by Grantor in this Agreement shall survive
     the execution and delivery of this Agreement, shall be continuing in
     nature, and shall remain in full force and effect until such time as
     Grantor's Indebtedness shall be paid in full.

     Time is of the Essence. Time is of the essence in the performance of this
     Agreement.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code;

     Agreement. The word "Agreement" means this Commercial Security Agreement,
     as this Commercial Security Agreement may be amended or modified from time
     to time, together with all exhibits and schedules attached to this
     Commercial Security Agreement from time to time.

     Borrower. The word "Borrower" means NEW FRONTIER MEDIA, INC. and includes
     all co-signers and co-makers signing the Note and all their successors and
     assigns.

     Collateral. The word "Collateral" means all of Grantor's right, title and
     Interest in and to all the Collateral as described in the Collateral
     Description section of this Agreement.

     Default. The word "Default" means the Default set forth in this Agreement
     in the section titled "Default".

     Environmental Laws. The Words "Environmental Laws" mean any and all state,
     federal and local statutes, regulations and ordinances relating to the
     protection of human health or the environment, including without limitation
     the Comprehensive Environmental Response, Compensation, and Liability Act
     of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the
     Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
     ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section
     1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
     Section 6901, et seq., or other applicable state or federal laws, rules, or
     regulations adopted pursuant thereto.

     Event of Default. The words "Event of Default" mean any of the events of
     default set forth in this Agreement in the default section of this
     Agreement.

     Grantor. The word "Grantor" means NEW FRONTIER MEDIA, INC..

     Guaranty. The word "Guaranty" means the guaranty from guarantor, endorser,
     surety, or accommodation party to Lender, including without limitation a
     guaranty of all or part of the Note.

     Hazardous Substances. The words "Hazardous Substances" mean materials that,
     because of their quantity, concentration or physical, chemical or
     infectious characteristics, may cause or pose a present or potential hazard
     to human health or the environment when improperly used, treated, stored,
     disposed of, generated, manufactured, transported or otherwise handled. The
     words "Hazardous Substances" are used in their very broadest sense and
     include without limitation any and all hazardous or toxic substances,
     materials or waste as defined by or listed under the Environmental Laws.
     The term "Hazardous Substances" also includes, without limitation,
     petroleum and petroleum by-products or any fraction thereof and asbestos.

     Indebtedness. The word "Indebtedness" means the indebtedness evidenced by
     the Note or Related Documents, including all principal and interest
     together with all other indebtedness and costs and expenses for which
     Grantor is responsible under this Agreement or under any of the Related
     Documents,

     Lender. The word "Lender" means First Community Bank, its successors and
     assigns.

     Note. The word "Note" means the Promissory Note or Agreement dated July 1.
     2007 in the original principal amount of $7,500,000.OO from
     Borrower/Grantor to Lender together with all renewals of, extensions of,
     modifications of, refinancings of, consolidations of, additions of and
     substitutions for the Promissory Note or Agreement.

     Property. The word "Property" means all of Grantor's right title and
     interest in and to all the Property as described in the "Collateral
     Description" section of this Agreement.

     Related Documents. The words "Related Documents" mean all promissory notes,
     credit agreements, loan agreements, environmental agreements, guaranties,
     security agreements, mortgages, deeds of trust, security deeds, collateral
     mortgages, and all other instruments, agreements and documents, whether now
     or hereafter existing, executed in connection with the Indebtedness.

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JULY 1, 2007.

GRANTOR:

NEW FRONTIER MEDIA, INC.


By: /s/ Michael Weiner
   -----------------------------
   MICHAEL WEINER, CEO of NEW FRONTIER MEDIA, INC.



                             Supplemental Agreement
                                  July 1, 2007


           RE: $7,500,000.00 loan to New Frontier Media, Inc. (Loan).


This Supplemental Agreement is effective this 1 day of July, 2007, to amend,
supplement and revise certain of the "Related Loan Documents", as defined in the
Business Loan Agreement between New Frontier Media, Inc. and First Community
Bank.

Detailed herein are revisions to certain of the related documents ("Documents")
that evidence, govern and secure a Loan from First Community Bank. (Lender) to
New Frontier Media, Inc. (Borrower). The Documents revised are following:

                *  Promissory Note
*               *  Business Loan Agreement (Asset Based)

The revisions contained herein supplement, amend and supersede the terms of
their counterpart articles and paragraphs in the Documents referred to below:


                             REVISIONS TO DOCUMENTS

1.0 Promissory Note

     1.1 Page 1, Paragraph "DEFAULT.", sub paragraph -- " Change in Ownership."
     is deemed deleted in its entirety.

2.0 Business Loan Agreement (Asset Based)

     2.0 Page 4, Paragraph -- "NEGATIVE COVENANTS.", sub paragraph --
     "Indebtedness and Liens". The entire paragraph is deemed deleted.

     2.1 Page 4, Paragraph -- "NEGATIVE COVENANTS.", sub paragraph --
     "Continuity of Operations.", item "2" of this paragraph is deemed deleted
     in its entirety and replaced with the following:

     (2) cease operations, liquidate, merge, transfer, or consolidate with any
     other entity, change its name, dissolve or transfer or sell collateral out
     of the ordinary course of business, or

     2.2 Page 4, Paragraph -- "NEGATIVE COVENANTS.", sub paragraph --
     "Continuity of Operations.", the entirety of item "3" of this paragraph is
     deemed deleted.

     2.3 Page 4, -- "DEFAULT.", sub paragraph -- "Change in Ownership. " is
     deemed deleted in its entirety.

FIRST COMMUNITY BANK.

BY: /S/ GREGORY P. BOUSHELLE
    -----------------------------
   Gregory P. Boushelle
   Senior Vice President


                                   ACCEPTANCE

The above outlined terms and conditions are hereby accepted this 29th day
June, in the year 2007.


Borrower:
New Frontier Media, Inc.
BY: /s/ Michael Weiner
   ------------------------
Michael Weiner, C.E.O. of
New Frontier Media

EX-10

Exhibit 10.09

AMENDED AND RESTATED

INDEPENDENT CONTRACTOR AGREEMENT

This Amended and Restated Independent Contractor Agreement (the “Agreement”) is entered into this as of this 7 day of November, 2007, by and between NEW FRONTIER MEDIA, INC., a Colorado corporation (“Company”), with its principal place of business at 7007 Winchester Circle, Suite 200, Boulder, CO 80301, and MATTHEW PULLAM (“Contractor”), whose address is 13806 Lexington Place, Broomfield, CO 80023 and amends and replaces the Independent Contractor Agreement dated October 16, 2007 by and between the parties hereto. Company and Contractor hereby agree as follows:

1.         Contracting Period. Unless earlier terminated as provided herein, this Agreement shall commence on November 8, 2007 and end on March 15, 2008, unless either party provides thirty (30) days prior written notice of termination to the other party.

2. Contracting Services and Relationship.

(a)        Services. During the Contracting Period, Contractor shall provide to Company the services set forth on the Scope of Work, which is attached hereto as Exhibit A and incorporate herein by this reference, as well any related responsibilities and duties as may be assigned by Company and agreed to by Contractor (collectively, the “Services”). It is expected that Contractor shall be available to provide the Services to Company at such times as may be reasonably requested by Company and mutually agreed to by Contractor. Contractor shall use his best efforts to perform faithfully and efficiently the Services assigned under this Agreement.

(b)        Relationship. Contractor shall be an independent contractor, and not an employee of Company, within the meaning of all federal, state and local laws and regulations governing employment insurance, workers' compensation, industrial accident, labor and taxes. Company shall not be liable for employment or withholding taxes respecting Contractor. Contractor shall not, by reason of this Agreement, acquire any benefits, privileges or rights under any benefit plan operated by Company or its subsidiaries or affiliates for the benefit of their employees, including, without limitation, (i) any pension or profit-sharing plans or (ii) any plans, coverages or benefits providing worker’s compensation, medical, dental, disability or life insurance protection. Notwithstanding the foregoing, Company shall obtain an endorsement to its D&O Insurance Policy to specifically add Contractor in his capacity as Company’s independent financial consultant. Contractor agrees and acknowledges that Contractor is not authorized to enter into any contract or assume any obligation on behalf of Company without the prior written consent of Company. All of the acknowledgements and restrictions set forth in this Section 2(b) shall equally apply to anyone Contractor has engaged to perform any portion of the Services.

3.         Compensation. In consideration for Contractor’s full and timely performance of the Services throughout the Contracting Period, Company shall pay Contractor pursuant to the payment terms set forth in the Scope of Work. Such amount shall be payable no more frequently than bi-weekly in arrears upon Contractor’s submission of an invoice to the Company’s Accounts

Payable Department. Each such invoice shall include: Contractor’s name and address, the Services provided and the dates and hours worked. Contractor agrees to complete and return to Company a W-9 as a condition of receiving timely payment. In addition to the foregoing, Company shall reimburse Contractor for Contractor’s reasonable expenses actually incurred in performing the Services so long as such expenses were pre-approved in writing by Company.

4. Events of Termination.

(a)        Cessation/Death/Incapacity. This Agreement shall terminate automatically upon the cessation of business of Contractor or upon the death or incapacity of Contractor.

(b) Notice. This Agreement may be terminated without cause by Company upon three (3) days advance written notice to Contractor.

(c)        Breach. This Agreement may be terminated by either party upon a breach of a material term or condition of this Agreement which breach is not cured within five (5) days from written notice from the non-breaching party.

5.         Obligations upon Termination. Upon termination of this Agreement pursuant to Section 4: (i) neither Contractor nor Company shall have any further obligations under this Agreement, except for the obligation to pay Contractor for any unpaid Services rendered and any approved and unpaid expenses incurred prior to the termination, as well as any obligations under Sections 5 through 10 of this Agreement; (ii) Contractor shall return all Company equipment, Work Product and Confidential Information within five (5) days at Company’s expense.

6.         Ownership. "Work Product"shall mean all deliverables and all intermediate and partial versions thereof, and all documentation, analysis, flowcharts, notes, outlines, formulas, processes, algorithms, ideas, inventions, know-how or techniques, and any other information, or materials generated by Contractor in the performance of the Services. Contractor acknowledges that all Work Product is work made for hire and is the property of Company, including any copyrights, trademarks, patents, or other intellectual property rights pertaining thereto. If it is determined that any such works are not works made for hire, Contractor hereby assigns to Company all of Contractor's right, title, and interest, including all rights of copyright, patent, and other intellectual property rights, to or in such Work Product.

7.         Confidential Information. Contractor agrees to keep secret and to not disclose any of the terms of this Agreement to any third parties, with the limited exception of disclosures to Contractor’s accountant or legal counsel who are required to have such confidential Company information in connection with the performance of the services they provide to Contractor. Additionally, it is mutually recognized that the business of Company and the nature of the Services Contractor will perform will permit Contractor access to confidential information of Company and persons and entities with whom Company conducts business or from whom Company obtains information. As used in this Agreement, "information" shall mean any information or knowledge, including matters of a technical nature such as studies, research projects, development plans and matter of a business nature, such as lists, customer requirements and other data not available to the public. During and after the Contracting Period, Contractor shall not disclose or appropriate

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any information for Contractor’s own use or for the use of any third parties.

8.         Non-Solicitation. Contractor agrees, for a period of twelve (12) months following the execution date hereof, directly or indirectly not to: (i) recruit, solicit, induce, or influence any employee of Company to cease being an employee of Company or to accept employment with, or to become a contractor, consultant or service provider for any entity other than Company; (ii) hire or participate (with another company or third party) in the process of hiring any person who is then or was at any time in the prior six (6) months an employee of Company, or to provide names or other information about employees of Company to any person or business under circumstances which could lead to the use of that information for purposes of recruiting or hiring; (iii) interfere with the relationship of Company with any of its employees, agents, or representatives; or (iv) otherwise interfere with, disrupt or attempt to interfere with or disrupt, the relationship, contractual or otherwise, between Company and any of its contractors, consultants or employees.

9. Successors.

(a)        This Agreement is personal to Contractor and shall not be assignable by Contractor without the prior written consent of Company which consent may be withheld in Company’s sole discretion.

(b)        This Agreement may be transferred or assigned by Company, to a parent, subsidiary, successor, or affiliate entity without Contractor’s consent.

(c)         This Agreement shall inure to the benefit of Company and its successors or assigns.

10. Miscellaneous.

(a)        This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado, without reference to principles of conflict of laws. Any litigation under this Agreement shall be filed and pursued in a court of proper venue in the State of Colorado. Both parties expressly consent to the jurisdiction of such courts.

(b)        This Agreement and any Scope of Work attached hereto may not be amended or modified otherwise than by a written agreement executed by the parties hereto.

(c)        All notices and other communications hereunder 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, addressed and sent to the party’s address as set forth in the first paragraph of this Agreement or to such other address as either party shall have furnished to the other in accordance herewith. Notices and communications shall be effective when actually received by the addressee.

(d)        The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. This Agreement may be executed in counterparts that together shall constitute a single agreement.

(e)        The failure of Company at any time to enforce performance by Contractor of any provisions of this Agreement shall in no way affect Company's rights thereafter to enforce the same, nor shall the waiver by Company of any breach of any provision hereof be held to be a waiver of any other breach of the same or any other provision.

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(f)        Contractor shall indemnify, defend and hold harmless Company and its officers, directors, agents and employees, from and against any and all claims, demands, causes of action, losses, damages, costs and expenses (including reasonable attorneys’ fees) arising out of or relating to Contractor's performance of his obligations hereunder, including, but not limited to acts or omissions of Contractor or anyone Contractor has engaged to perform any portion of the Services, or any claim for withholding or other taxes that might arise or be imposed due to this Agreement or the performance of Services hereunder.

(g)        Company shall indemnify, defend and hold harmless Contractor and his heirs and successors from and against any and all claims, demands, causes of action, losses, damages, costs and expenses (including reasonable attorneys’ fees) that might arise or be imposed due to Company’s breach of its obligations under this Agreement or that is a result of Company’s negligent or willful conduct.

(h)        The language in all parts of this Agreement shall in all cases be construed simply, as a whole and in accordance with its fair meaning and not strictly for or against any party. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. The parties acknowledge and agree that this Agreement has been negotiated by the parties, that each party has been given the opportunity to independently review this Agreement with legal counsel, and that each party has the requisite experience and sophistication to understand, interpret and agree to the particular language of the provisions hereof. Accordingly, in the event of an ambiguity in or dispute regarding the interpretation of this Agreement, this Agreement shall not be interpreted or construed against the party preparing it.

(i)        Contractor acknowledges and agrees that during the performance of the Services, he will not violate any of Company’s work rules and policies. Contractor agrees that he will not harm Company’s equipment, property or inventory (other than ordinary wear and tear), and shall not interfere with Company’s business operations.

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Independent Contractor Agreement as of the date set forth in the first paragraph above.

NEW FRONTIER MEDIA, INC. CONTRACTOR

By: /s/ Michael Weiner___________ By: /s/ Matthew Pullam_______________

Name: Michael Weiner __________ Name: Matthew Pullam _______________

Title: CEO __________ Title: Contractor_______________

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EXHIBIT A

SCOPE OF WORK

This Scope of Work is entered into as of this 7 day of November, 2007, by and between NEW FRONTIER MEDIA, INC., a Colorado corporation (“Company”), with its principal place of business at 7007 Winchester Circle, Suite 200, Boulder, CO 80301, and MATTHEW PULLAM (“Contractor”), whose address is 13806 Lexington Place, Broomfield, CO 80023. This Scope of Work is subject to and governed by the Amended and Restated Independent Contractor Agreement dated November 7, 2007.

1. SERVICES

Contractor shall perform the following services which shall be on an as-needed basis at the sole discretion of the Company, provided Contractor is given reasonable notice to perform such duties and is available to perform the requested services by the Company in a timely manner. If the Contractor is unavailable due to personal reasons or other commitments, the Contractor shall notify the Company of such in a timely manner (within 72 hours). Notwithstanding the foregoing, Contractor agrees to use good faith efforts to make himself available to the Company fifty (50) hours per month during the Term.

At a minimum, the services to be provided will include:

The Contractor will conduct a weekly teleconference or in-person meeting with the Corporate Controller to review the status of the monthly closes, any financial reporting issues that may arise or have arisen, review the progress of SOX 404 testing and the external auditor interim and year-end testing procedures, as well as any other issues the Controller wishes to discuss. The Contractor and Corporate Controller will work together to schedule and conduct such conferences in a timely and mutually convenient manner unless otherwise agreed to by the Corporate Controller that such meeting(s) may not be required in certain weeks as determined by the Controller. Other services that may be agreed to include, but are not limited to:

Review drafts of certain SEC filings and execute the same, be available for any auditor issues/questions, review key financials, review key estimates, review 404 SOX work to date, respond to questions from the Corporate Controller and assist him in preparing for Audit Committee meetings, interview CFO candidates, participate in M&A due diligence, and answer any other internal questions that may arise.

2. COMPENSATION

In consideration of the Contractor executing this extension and to compel the Contractor to dedicate his available work efforts to support the Company exclusively during this transition period while a search for a full-time CFO replacement is conducted, the Company shall pay the Contractor a monthly retainer in advance of Seven Thousand, Five Hundred Dollars ($7,500). The Contractor shall submit invoices to the Company as specified at a rate of $150.00 per hour to be applied against the monthly retainer amount. If in any given calendar month, the Contractor does not perform services at his hourly billing rate that meet or exceed the amount of the monthly retainer, the Contractor is not obligated to reimburse the Company for any shortfall. If

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Contractor performs services in excess of the monthly retainer amount, the Contractor will be reimbursed for any amounts exceeding the monthly retainer at the specified hourly billing rate.

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Scope of Work as of the date set forth in the first paragraph above.

NEW FRONTIER MEDIA, INC. CONTRACTOR

By: /s/ Michael Weiner___________ By: /s/ Matthew Pullam_______________

Name: Michael Weiner __________ Name: Matthew Pullam _______________

Title: CEO __________ Title: Contractor_______________

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EX-31

                                                                   EXHIBIT 31.01

                          CHIEF EXECUTIVE CERTIFICATION

I, Michael Weiner, Chief Executive Officer of New Frontier Media, Inc., certify
that:

1. I have reviewed this Quarterly Report on Form 10-Q of New Frontier Media,
Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and




5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Dated: November 9, 2007



                                                         /s/ Michael Weiner

                                                         Michael Weiner
                                                         Chief Executive Officer

EX-31

                                                                   EXHIBIT 31.02

                      PRINCIPAL FINANCIAL OFFICER CERTIFICATION

I, Matthew T. Pullam, principal financial officer of New Frontier Media, Inc.,
certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of New Frontier Media,
Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and




5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Dated: November 9, 2007

                                                  /s/ Matthew T. Pullam


                                                  Matthew T. Pullam
                                                  Principal Financial Officer

EX-32

                                                                   EXHIBIT 32.01

                  WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICER
                                   PURSUANT TO
     SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Section 1350)

The undersigned, the Chief Executive Officer of New Frontier Media, Inc., a
Colorado company (the "Company"), hereby certifies that, to his knowledge on the
date hereof:

(a) the Form 10-Q of the Company for the fiscal quarter ended September 30,
2007, filed on the date hereof with the Securities and Exchange Commission (the
"Report") fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and

(b) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.


                                                        /s/ Michael Weiner
                                                        Michael Weiner
                                                        Chief Executive Officer

November 9, 2007

EX-32

                                                                   EXHIBIT 32.02
                WRITTEN STATEMENT OF PRINCIPAL FINANCIAL OFFICER
                                   PURSUANT TO
     SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Section 1350)

The undersigned, the principal financial officer of New Frontier Media, Inc., a
Colorado company (the "Company"), hereby certifies that, to his knowledge on the
date hereof:

(a) the Form 10-Q of the Company for the fiscal quarter ended September 30,
2007, filed on the date hereof with the Securities and Exchange Commission (the
"Report") fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and

(b) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.

                                                     /s/ Matthew T. Pullam

                                                     Matthew T. Pullam
                                                     Principal Financial Officer
Dated: November 9, 2007