10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

xQuarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended December 31, 2010

oTransition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from               to              

000-23697

(Commission file number)

NEW FRONTIER MEDIA, INC.

(Exact name of registrant as specified in its charter)

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

7007 Winchester Circle, Suite 200, Boulder, CO 80301

(Address of principal executive offices)

(303) 444-0900

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

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

As of February 1, 2011, 19,201,018 shares of Common Stock, par value $.0001, were outstanding.

Form 10-Q

NEW FRONTIER MEDIA, INC.

FOR THE FISCAL QUARTER ENDED DECEMBER 31, 2010

Table of Contents

		Page Number
Part I.	Financial Information
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Comprehensive Income	6
	Condensed Consolidated Statements of Total Equity	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31
Part II.	Other Information	31
Item 1A.	Risk Factors	31
Item 5.	Other Information	32
Item 6.	Exhibits	33
SIGNATURES		33

2

PART I.   FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS.

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par values)

	(Unaudited)
	December 31,			March 31,
	2010			2010
Assets
Current assets:
Cash and cash equivalents	$	14,729		$	17,187
Restricted cash	112			112
Accounts receivable, net of allowance for doubtful accounts of $173 and $253, at December 31, 2010 and March 31, 2010, respectively	12,092			10,112
Deferred producer-for-hire costs	—			625
Taxes receivable	1,298			944
Prepaid and other assets	2,428			1,749
Total current assets	30,659			30,729
Equipment and furniture, net	6,483			4,557
Content and distribution rights, net	11,889			11,316
Recoupable costs and producer advances, net	3,586			3,421
Film costs, net	4,098			5,705
Goodwill	3,743			3,743
Other identifiable intangible assets, net	144			673
Deferred tax assets	378			349
Other assets	1,176			1,320
Total assets	$	62,156		$	61,813
Liabilities and equity
Current liabilities:
Accounts payable	$	613		$	1,103
Producers payable	1,035			951
Deferred revenue	776			685
Accrued compensation	2,078			1,802
Deferred producer liabilities	1,615			1,377
Short-term debt	1,000			1,000
Deferred tax liabilities	84			107
Accrued and other liabilities	1,709			1,823
Total current liabilities	8,910			8,848
Taxes payable	116			309
Other long-term liabilities	321			528
Total liabilities	9,347			9,685
Commitments and contingencies
Equity:
Preferred stock, $.10 par value, 4,999 shares authorized, no shares issued and outstanding	—			—
Common stock, $.0001 par value, 50,000 shares authorized, 19,201 and 19,432 shares issued and outstanding at December 31, 2010 and March 31, 2010, respectively	2			2
Additional paid-in capital	55,041			54,929
Accumulated deficit	(2,140		)	(2,735		)
Accumulated other comprehensive loss	(73		)	(68		)
Total New Frontier Media, Inc. shareholders’ equity	52,830			52,128
Noncontrolling interests	(21		)	—
Total equity	52,809			52,128
Total liabilities and equity	$	62,156		$	61,813

Refer to Notes to Condensed Consolidated Financial Statements.

3

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	(Unaudited) Three Months Ended December 31,						(Unaudited) Nine Months Ended December 31,
	2010			2009			2010			2009
Net revenue	$	14,173		$	11,479		$	37,789		$	35,341
Cost of sales	7,244			4,003			16,571			12,458
Gross margin	6,929			7,476			21,218			22,883
Operating expenses:
Sales and marketing	2,137			2,043			5,993			5,907
General and administrative	4,550			4,089			13,714			12,139
Charge for asset impairments	—			—			624			—
Total operating expenses	6,687			6,132			20,331			18,046
Operating income	242			1,344			887			4,837
Other income (expense):
Interest income	8			10			36			36
Interest expense	(23		)	(75		)	(69		)	(213		)
Reversal of interest expense for uncertain tax positions	35			—			35			—
Other income, net	6			7			10			8
Total other income (expense)	26			(58		)	12			(169		)
Income from continuing operations before income tax benefit (expense)	268			1,286			899			4,668
Income tax benefit (expense)	(43		)	285			(313		)	(972		)
Income from continuing operations	225			1,571			586			3,696
Loss from discontinued operations, net of income tax benefit of $4, $80, $10, and $242, respectively	(5		)	(66		)	(12		)	(358		)
Net income	220			1,505			574			3,338
Add: Net loss attributable to noncontrolling interests	21			—			21			—
Net income attributable to New Frontier Media, Inc. shareholders	$	241		$	1,505		$	595		$	3,338
Amounts attributable to New Frontier Media, Inc. shareholders:
Income from continuing operations	$	246		$	1,571		$	607		$	3,696
Loss from discontinued operations, net of income tax benefit of $4, $80, $10, and $242, respectively	(5		)	(66		)	(12		)	(358		)
Net income	$	241		$	1,505		$	595		$	3,338
Per share information attributable to New Frontier Media, Inc. shareholders:
Basic income (loss) per share:
Continuing operations	$	0.01		$	0.08		$	0.03		$	0.19
Discontinued operations	(0.00		)	(0.00		)	(0.00		)	(0.02		)
Net basic income per share	$	0.01		$	0.08		$	0.03		$	0.17
Diluted income (loss) per share:
Continuing operations	$	0.01		$	0.08		$	0.03		$	0.19
Discontinued operations	(0.00		)	(0.00		)	(0.00		)	(0.02		)
Net diluted income per share	$	0.01		$	0.08		$	0.03		$	0.17

Refer to Notes to Condensed Consolidated Financial Statements.

4

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	(Unaudited) Nine Months Ended December 31,
	2010			2009
Cash flows from operating activities:
Net income	$	574		$	3,338
Add: Loss from discontinued operations	12			358
Income from continuing operations	586			3,696
Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations:
Depreciation and amortization	7,140			6,705
Share-based compensation	470			377
Deferred taxes	(51		)	(285		)
Charge for asset impairments	624			—
Change in operating assets and liabilities:
Accounts receivable	(1,682		)	491
Accounts payable	(482		)	(647		)
Content and distribution rights	(3,772		)	(2,872		)
Film costs	(820		)	(2,283		)
Deferred producer-for-hire costs	625			(3,598		)
Deferred producer liabilities	238			(177		)
Deferred revenue	111			(106		)
Producers payable	85			229
Taxes receivable and payable	(536		)	(236		)
Accrued compensation	275			757
Recoupable costs and producer advances	(166		)	119
Other assets and liabilities	(1,123		)	(702		)
Net cash provided by operating activities of continuing operations	1,522			1,468
Net cash used in operating activities of discontinued operations	(34		)	(863		)
Net cash provided by operating activities	1,488			605
Cash flows from investing activities:
Purchases of investments	—			(1,000		)
Redemptions of investments	—			590
Purchases of equipment and furniture	(3,485		)	(834		)
Purchase of intangible assets	(2		)	(90		)
Net cash used in investing activities of continuing operations	(3,487		)	(1,334		)
Net cash provided by investing activities of discontinued operations	—			9
Net cash used in investing activities	(3,487		)	(1,325		)
Cash flows from financing activities:
Purchases of common stock	(363		)	(56		)
Payments on short-term debt	—			(4,000		)
Proceeds from short-term debt	—			3,000
Payments on long-term seller financing	(96		)	(75		)
Net cash used in financing activities of continuing operations	(459		)	(1,131		)
Net cash provided by (used in) financing activities of discontinued operations	—			—
Net cash used in financing activities	(459		)	(1,131		)
Net decrease in cash and cash equivalents	(2,458		)	(1,851		)
Effect of exchange rate changes on cash and cash equivalents	—			2
Cash and cash equivalents, beginning of period	17,187			16,049
Cash and cash equivalents, end of period	$	14,729		$	14,200

Refer to Notes to Condensed Consolidated Financial Statements.

5

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	(Unaudited) Three Months Ended December 31,						(Unaudited) Nine Months Ended December 31,
	2010			2009			2010			2009
Net income	$	220		$	1,505		$	574		$	3,338
Other comprehensive income:
Currency translation adjustment	(1		)	(4		)	(5		)	79
Total comprehensive income	219			1,501			569			3,417
Add: Comprehensive loss attributable to noncontrolling interests	21			—			21			—
Total comprehensive income attributable to New Frontier Media, Inc. shareholders	$	240		$	1,501		$	590		$	3,417

Refer to Notes to Condensed Consolidated Financial Statements.

6

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF TOTAL EQUITY

(in thousands)

	(Unaudited) Nine Months Ended December 31,
	2010			2009
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	54,929			54,702
Reversal of tax benefit for stock option forfeitures/cancellations	(2		)	(72		)
Purchases of common stock	(363		)	(56		)
Share-based compensation	477			384
Balance at end of period	55,041			54,958
Retained earnings (accumulated deficit)
Balance at beginning of period	(2,735		)	(997		)
Net income attributable to New Frontier Media, Inc. shareholders	595			3,338
Balance at end of period	(2,140		)	2,341
Accumulated other comprehensive loss
Balance at beginning of period	(68		)	(132		)
Currency translation adjustment	(5		)	79
Balance at end of period	(73		)	(53		)
Total New Frontier Media, Inc. shareholders’ equity	52,830			57,248
Noncontrolling interests
Balance at beginning of period	—			—
Net loss	(21		)	—
Balance at end of period	(21		)	—
Total equity	$	52,809		$	57,248

Refer to Notes to Condensed Consolidated Financial Statements.

7

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements of New Frontier Media, Inc. and its wholly owned and majority controlled subsidiaries (collectively hereinafter referred to as “New Frontier Media,” the “Company,” “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 generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The Company believes these statements include all adjustments, which are of a normal and recurring nature, considered nec essary 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 annual report on Form 10-K filed with the SEC on June 11, 2010.  The results of operations for the nine month period ended December 31, 2010 are not necessarily indicative of the results to be expected for the full year.

Principles of Consolidation

The accompanying Condensed Consolidated Financial Statements include the accounts of New Frontier Media.  All intercompany accounts and transactions have been eliminated in consolidation.

Noncontrolling Interests

During the three month period ended December 31, 2010, the Company entered into an agreement to create an entity within the Transactional TV segment to develop new channel services.   The Company controls a majority of the entity’s common stock, and the Company’s condensed consolidated financial statements include the accounts of the entity. The net loss applicable to the noncontrolling interests of the entity are presented as net loss attributable to noncontrolling interests in the condensed consolidated statements of operations, and the portion of the equity applicable to the noncontrolling interests of the entity are presented as noncontrolling interests in the condensed consolidated balance sheets and condensed consolidated statements of  total equity.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates have been made by the Company in several areas, including, but not limited to, estimated revenue for certain Transactional TV segment pay-per-view (“PPV”) and video-on-demand (“VOD”) services; the recognition and measurement of income tax expenses, assets and liabilities (including the measurement of uncertain tax positions and the valuation allowances for deferred tax assets); the recoverability of recoupable costs and producer advances; the assessment of film costs and the forecast of anticipated revenue (“ultimate” revenue), which is used to amortize film costs; the amortization methodology and valuation of content and distribution rights; the valuation of goodwill, in tangible and other long-lived assets; and the valuation and recognition of share-based compensation.

The Company bases its estimates and judgments on historical experience and on various other factors that are considered reasonable under the circumstances, the results of which form the basis for making judgments that are not readily apparent from other sources. Actual results could differ materially from these estimates.

8

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Reclassifications

The prior year period results have been reclassified to conform to the current year presentation of discontinued operations and the charge for asset impairments.  Adjustments to the Company’s allowance for unrecoverable recoupable costs and producer advances are reflected in the general and administrative line item within operating expenses.  The adjustments were immaterial in prior year periods and were reflected in the charge for asset impairments.

NOTE 2 — RECENT ACCOUNTING PRONOUNCEMENTS

From time to time, new accounting pronouncements are issued that are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s results of operations or financial position.

NOTE 3 — INCOME PER SHARE

The components of basic and diluted income per share from continuing operations attributable to New Frontier Media, Inc. shareholders are as follows (in thousands, except per share amounts):

	Three Months Ended December 31,				Nine Months Ended December 31,
	2010		2009		2010		2009
Income from continuing operations attributable to New Frontier Media, Inc. shareholders	$	246	$	1,571	$	607	$	3,696
Average outstanding shares of common stock	19,201		19,481		19,320		19,490
Dilutive effect of warrants/stock options	—		—		—		2
Common stock and common stock equivalents	19,201		19,481		19,320		19,492
Basic income per share from continuing operations attributable to New Frontier Media, Inc. shareholders	$	0.01	$	0.08	$	0.03	$	0.19
Diluted income per share from continuing operations attributable to New Frontier Media, Inc. shareholders	$	0.01	$	0.08	$	0.03	$	0.19

The Company computed basic income per share from continuing operations attributable to New Frontier Media Inc. shareholders using income from continuing operations and the weighted average number of common shares outstanding during the period. The Company computed diluted income per share from continuing operations attributable to New Frontier Media, Inc. shareholders using  income from continuing operations and the weighted average number of common shares outstanding plus potentially dilutive common shares outstanding during the period.  The Company excluded 2.2 million options from the calculation of diluted income per share from continuing operations attributable to New Frontier Media, Inc. shareholders for each of the three and nine month periods ended December 31, 2010, and 1.9 million options and warrants for each of the three and nine month periods ended December 31, 2009.  Inclusion of these options and warrants would be antidilutive.

NOTE 4 — EMPLOYEE EQUITY INCENTIVE PLANS

The Company adopted the New Frontier Media, Inc. 2010 Stock Incentive Plan (the “2010 Plan”) in August 2010. The 2010 Plan replaces the New Frontier Media, Inc. 2007 Stock Incentive Plan.   The 2010 Plan was approved by the Company’s shareholders, and the purpose of the 2010 Plan is to encourage the further growth and development of the Company by providing equity and related awards to selected directors and employees. The 2010 Plan is also intended to assist the Company in attracting and retaining employees and directors, to optimize profitability and to promote teamwork.  Under the 2010 Plan, employees and directors of the Company may be granted incentive stock options, restricted stock, bonus stock and other awards, or any combination thereof. There were 1,250,000 shares of the Company’s common stock originally authorized for issuance under the 2010 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 312,500 shares. Awards granted under the 2010 Plan that are subsequently forfeited or cancelled may be reissued

9

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

under the provisions of the 2010 Plan. Awards may be granted to employees and non-employee directors of New Frontier Media with exercise prices equal to, or in excess of, the fair market value of the underlying common stock at the date of grant. Generally, the stock options vest ratably over a four-year period and expire ten years from the date of grant. As of December 31, 2010, no awards had been granted under the 2010 Plan.

Share-Based Compensation

The Company accounts for employee and non-employee 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 date based on the estimated 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 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 e stimated weighted average exercise behavior for these two groups of employees. The dividend yield assumption is based on dividends declared by the Company’s Board of Directors and estimates of dividends to be declared in the future.

The weighted average estimated fair value of stock option grants and the weighted average assumptions that were used in calculating such values for the three and nine month periods ended December 31, 2010 and 2009 are reflected below:

	Three Months Ended December 31,					Nine Months Ended December 31,
	2010		2009			2010		2009
Weighted average estimated fair value per award	(1	)	$	0.93		(1	)	$	0.93
Expected term (in years)	(1	)	6			(1	)	6
Risk free interest rate	(1	)	2.7		%	(1	)	2.7		%
Volatility	(1	)	53		%	(1	)	53		%
Dividend yield	(1	)	—		%	(1	)	—		%

(1)  No options were granted during the three or nine month periods ended December 31, 2010.

Share-based compensation expense recognized in the condensed consolidated statements of operations is based on awards ultimately expected to vest, which considers estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.  The Company recognizes the effect of adjusting the estimated forfeiture rate for all expense amortization in the period that the Company changes the forfeiture estimate.  The effect of forfeiture adjustments was $0.1 million for each of the three and nine month periods ended December 31, 2010. The effect of forfeiture adjustments was $0.1 million and $0.3 million for the three and nine month periods ended December 31, 2009, respectively.

The following table summarizes the effects of share-based compensation resulting from options granted under the Company’s equity incentive plans. This expense from continuing operations is included in cost of sales, sales and marketing, and general and administrative expenses (in thousands, except per share amounts):

	Three Months Ended December 31,						Nine Months Ended December 31,
	2010			2009			2010			2009
Share-based compensation expense before income taxes	$	98		$	49		$	470		$	377
Income tax benefit	(28		)	(11		)	(187		)	(132		)
Total share-based compensation expense after income taxes	$	70		$	38		$	283		$	245
Share-based compensation effect on basic and diluted income per common share	$	—		$	—		$	0.01		$	0.01

10

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Stock option transactions during the nine month period ended December 31, 2010 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, 2010	2,228,902		$	5.11
Forfeited/Expired	(125,225	)	$	2.25
Outstanding at December 31, 2010	2,103,677		$	5.28	6.3	$	—
Options exercisable at December 31, 2010	1,461,552		$	6.10	5.5	$	—
Options vested and expected to vest—Non-Officers	866,652		$	5.98	5.7	$	—
Options vested and expected to vest—Officers	1,194,085		$	4.84	6.7	$	—

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

As of December 31, 2010, there was $0.1 million and $0.6 million of total unrecognized compensation costs for non-officers and officers, respectively, related to stock options granted under the Company’s equity incentive plan. The unrecognized compensation cost for each of the non-officers and officers is expected to be recognized over a weighted average period of one year.

NOTE 5 — SEGMENT INFORMATION

Operating segments are defined as components of an enterprise for which separate financial information is available and regularly reviewed by the Company’s chief operating decision maker.  The Company has the following reportable operating segments:

· Transactional TV—distributes branded adult entertainment PPV networks and VOD content through electronic distribution platforms including cable television and direct broadcast satellite (“DBS”) operators.

· Film Production—produces and distributes mainstream films and erotic features and events. These titles are distributed on U.S. and international premium channels, PPV channels and VOD platforms. The Film Production segment also distributes a full range of independently produced motion pictures to markets around the world. Additionally, this segment periodically provides producer-for-hire services to major Hollywood studios.

· Direct-to-Consumer—aggregates and resells adult content via the internet. The Direct-to-Consumer segment sells content to subscribers primarily through its consumer websites.

· Corporate Administration—includes all costs associated with the operation of the public holding company, New Frontier Media, Inc., that are not directly allocable to the Transactional TV, Film Production, or Direct-to-Consumer segments. These costs include, but are not limited to, legal expenses, accounting expenses, human resource department costs, insurance expenses, registration and filing fees with NASDAQ, executive employee costs, and costs associated with the public company filings and shareholder communications.

11

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The accounting policies of the reportable segments are the same as those described in the summary of accounting policies. Segment profit (loss) is based on income from continuing operations before income tax benefit (expense). The reportable segments are distinct business units, separately managed with different distribution channels. The selected operating results of the Company’s segments during each of the three and nine month periods ended December 31 are as follows (in thousands):

	Three Months Ended December 31,						Nine Months Ended December 31,
	2010			2009			2010			2009
Net revenue
Transactional TV	$	8,787		$	9,118		$	26,842		$	28,077
Film Production	5,180			2,167			10,344			6,444
Direct-to-Consumer	206			194			603			820
Total	$	14,173		$	11,479		$	37,789		$	35,341
Segment profit (loss)
Transactional TV	$	2,606		$	3,536		$	9,257		$	11,657
Film Production	266			394			(168		)	827
Direct-to-Consumer	(224		)	(165		)	(699		)	(469		)
Corporate Administration	(2,380		)	(2,479		)	(7,491		)	(7,347		)
Total	$	268		$	1,286		$	899		$	4,668
Interest income
Film Production	$	2		$	2		$	14		$	2
Corporate Administration	6			8			22			34
Total	$	8		$	10		$	36		$	36
Interest expense
Direct-to-Consumer	$	2		$	—		$	6		$	—
Corporate Administration	21			75			63			213
Total	$	23		$	75		$	69		$	213
Reversal of interest expense for uncertain tax positions
Corporate Administration	$	35		$	—		$	35		$	—
Depreciation and amortization
Transactional TV	$	1,679		$	1,301		$	4,529		$	3,886
Film Production	722			770			2,461			2,590
Direct-to-Consumer	37			58			114			193
Corporate Administration	11			12			36			36
Total	$	2,449		$	2,141		$	7,140		$	6,705

The Company’s total identifiable assets by operating segment as of the dates presented are as follows (in thousands):

	December 31, 2010		March 31, 2010
Identifiable Assets
Transactional TV	$	29,166	$	26,474
Film Production	15,995		15,490
Direct-to-Consumer	756		775
Corporate Administration	16,234		18,850
Total continuing operations assets	62,151		61,589
Total discontinued operations assets	5		224
Total assets	$	62,156	$	61,813

Approximately $0.1 million of the Company’s total assets are located in Europe as of December 31, 2010. All other assets are located in the U.S.

12

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Net revenue, classified by geographic billing location of the customer, during the three and nine month periods ended December 31 is as follows (in thousands):

	Three Months Ended December 31,				Nine Months Ended December 31,
	2010		2009		2010		2009
Domestic net revenue	$	11,936	$	10,173	$	32,042	$	31,540
International net revenue:
Europe, Middle East and Africa	462		365		1,281		1,131
Latin America	975		482		2,213		1,351
Canada	732		417		2,037		1,149
Other	68		42		216		170
Total international net revenue	2,237		1,306		5,747		3,801
Total net revenue	$	14,173	$	11,479	$	37,789	$	35,341

NOTE 6 — MAJOR CUSTOMERS

The Company’s major customers (customers with revenue in excess of 10% of total net revenue during a presented period) are Comcast Corporation (“Comcast”), Time Warner, Inc. (“Time Warner”), DISH Network Corporation (“DISH”), and DirecTV, Inc. (“DirecTV”). Revenue from these customers is included in the Transactional TV and Film Production segments. Net revenue from these customers as a percentage of total net revenue for each of the three and nine month periods ended December 31 is as follows:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2010		2009		2010		2009
Comcast	13	%	18	%	16	%	18	%
Time Warner	9	%	14	%	10	%	13	%
DISH	8	%	12	%	10	%	12	%
DirecTV	7	%	14	%	9	%	14	%

The Company’s outstanding accounts receivable balances due from its major customers as of the dates presented are as follows (in thousands):

	December 31, 2010		March 31, 2010
Comcast	$	1,220	$	1,221
DISH	752		1,810
DirecTV	628		699
Time Warner	391		448

The Company also recognized revenue from one Film Production segment customer that represented approximately 23% of the total net revenue during the three month period ended December 31, 2010. The Company’s outstanding accounts receivable balance due from this customer as of December 31, 2010 was approximately $3.3 million.

The loss of any of the Company’s major customers would have a material adverse effect on the Company’s results of operations and financial condition.

13

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 7 — INCOME TAXES

Uncertain Tax Positions

The Company accounts for uncertain tax positions using a two-step approach. 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 effective settlement.  As of December 31, 2010, the Company had total unrecognized tax benefits of approximately $0.1 million that are not expected to be settled within one year and have been classified within long-term taxes payable. If the Company was to prevail or the uncertainties were settled in favor of the Company on all uncertain tax positions, the net effect is estimated to be a benefit to the Company’s tax expense of ap proximately $0.1 million.

During the three month period ended December 31, 2010, the statute of limitations expired on approximately $0.2 million of uncertain tax positions resulting in a decline in the uncertain tax position balance as reflected in long-term taxes payable and a reduction in the Company’s income tax expense.  The reduction in the uncertain tax position balance also resulted in the reversal of approximately $35,000 in interest expense.  The aggregate change in the balance of the uncertain tax position balance during the nine month period ended December 31, 2010 is as follows (in thousands):

Beginning balance at April 1, 2010	$	309
Expiration of statute of limitations in the current fiscal year	(193		)
Ending balance at December 31, 2010	$	116

Research and Development Tax Credits

During the three month period ended December 31, 2009, the Company performed a research and development tax credit study.  The study considered fiscal years for which amended or current tax returns could be filed. The Company concluded that it was eligible for research and development tax credits that would result in a reduction in the income tax expense for the noted fiscal years as follows (in thousands):

March 31,
2009	$	217
2008	169
2007	129
2006	86
Total	$	601

The Company filed amended and current tax returns during the three month period ended December 31, 2009 for each of the fiscal years noted above and included the research and development tax credits identified in the study.  As a result of the filings, the Company recorded a reduction in the income tax expense of $0.6 million during the three month period ended December 31, 2009.

The Company utilized research and development tax credits during the year ended March 31, 2010 of approximately $0.1 million based on a research and development tax study completed in fiscal year 2011.  For fiscal year 2011, the Company estimates that it will utilize research and development tax credits of approximately $0.1 million.

Other

The Company files U.S. federal, state and foreign income tax returns. With few exceptions, the Company is no longer subject to examination of its federal income tax returns for years prior to fiscal year 2008, and the Company is no longer subject to examination of its state income tax returns for years prior to fiscal year 2007.

14

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 8 — FILM COST IMPAIRMENT

Film costs are reviewed for impairment on a title-by-title basis when events or circumstances indicate an assessment is warranted. The Company records an impairment charge when the fair value of the assessed title is less than the unamortized cost. Examples of events or circumstances that could result in an assessment and impairment charge for film costs include (a) an unexpected less favorable performance of a film title or event on a cable platform or (b) a downward adjustment in the estimated future performance of a film title or event due to an adverse change to the general business climate.  In September 2010, the Company adjusted downward the estimated future revenue for several films due to a continuation of lower than expected performance.  As a result, the Company performed an assessment of certain films and determined the estimated fair value of the films was less than the unamortized f ilm costs and incurred an impairment charge of $0.6 million related to the films. The impairment charge is recorded in the charge for asset impairments within the Film Production segment.  The Company did not incur any additional film cost impairment charges during the nine month period ended December 31, 2010.

NOTE 9 — BORROWING ARRANGEMENTS

On December 15, 2010, the Company’s former line of credit matured and the Company renewed the line of credit through December 15, 2011.  The line of credit is secured by certain trade accounts and accounts receivable and bears interest at the greater of (a) the current prime rate less 0.125 percentage points per annum or (b) 5.75% per annum.  The remainder of the line of credit may be drawn from time to time to support the Company’s operations and short-term working capital needs, if any.  A loan origination fee of 0.5% of the available line was paid by the Company upon the execution of the line of credit.  The line of credit includes a maximum borrowing base equal to the lesser of 75% of the trade accounts and accounts receivable securing the line of credit or $5.0 million, and the maximum borrowing base at December 31, 2010 was $5.0 million.

The line of credit contains both conditions precedent that must be satisfied prior to any borrowing and affirmative and negative covenants customary for facilities of this type, including, without limitation, (a) a requirement to maintain a current asset to current liability ratio of at least 1.5 to 1.0, (b) a requirement to maintain a total liability to tangible net worth ratio not to exceed 1.0 to 1.0, (c) prohibitions on additional borrowing, lending, investing or fundamental corporate changes without prior consent, (d) a prohibition on declaring without consent any dividends, other than dividends payable in the Company’s stock, and (e) a requirement that there be no material adverse change in the Company’s current client base as it relates to its largest clients.  The line of credit provides that an event of default will exist in certain circumstances, including without li mitation, the Company’s failure to make payment of principal or interest on borrowed amounts when required, failure to perform certain obligations under the line of credit and related documents, defaults in certain other indebtedness, the Company’s insolvency, a change in control of the Company, any material adverse change in the Company’s financial condition and certain other events customary for facilities of this type.  As of December 31, 2010, the Company’s outstanding principal balance under the line of credit was $1.0 million, and the Company was in compliance with the related covenants.

NOTE 10 — COMMITMENTS AND CONTINGENCIES

Operating Lease Obligations

In July 2010, the Company executed a five-year license agreement to rebrand and distribute up to three new international linear PPV channels.  The satellite footprint for the channels covers all of Europe, the Middle East, and areas of Northern Africa. The new channels will primarily target cable, internet protocol television, digital terrestrial and satellite platforms in Europe.  As a result of the execution of the license agreement, the Company has future contractual cash obligations of $0.1 million, $0.2 million, $0.2 million, $0.2 million, $0.2 million and $0.1 million for the years ending March 31, 2011, 2012, 2013, 2014, 2015 and thereafter, respectively.

In October 2010, the Company entered into an operating lease agreement to rent an approximately 50,000 square feet facility with occupancy scheduled for June 2011.  The Company expects that the leased facility will be primarily used by the Transactional TV, Direct-to-Consumer and Corporate Administration segments, and the new facility will replace the Company’s digital broadcast and corporate facilities.  The landlord of the new facility will assume the Company’s current digital broadcast facility lease in connection with the new operating lease agreement. The initial term of the agreement expires in January 2022 and provides for options to extend the term of the lease if

15

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

agreed upon by the landlord and the Company.  Upon execution of the operating lease agreement, the Company paid a security deposit of approximately $0.1 million of which 50% is non-refundable.  The Company also agreed to pay for the first $1.0 million of tenant improvements for the facility. Additionally, the landlord agreed to provide a tenant improvement allowance of approximately $1.7 million, which is available for any tenant improvement costs in excess of the initial $1.0 million in costs.  The Company’s future contractual cash obligations under the lease are as follows (in thousands):

Year Ending March 31,
2012	$	315
2013	472
2014	629
2015	634
2016	653
Thereafter	4,150
Total minimum payments	$	6,853

Vendor Obligations

In October 2010, the Company renewed an existing agreement related to uplinking services for an additional term of three years.  The impact of the renewal of this agreement was an increase in the Company’s future contractual cash obligations of $0.2 million, $0.7 million, $0.7 million and $0.4 million for the years ending March 31, 2011, 2012, 2013 and 2014, respectively.

Employment Contracts

In September 2010, an employee’s contract term was extended effective April 1, 2011. The extension results in an increase in the Company’s commitments under the obligation of $0.3 million for each of the years ending March 31, 2012 and 2013.

In September 2010, the employment of a Co-President of the Film Production segment was involuntarily terminated under the provisions of his employment agreement effective September 2010.  As a result, the Company recorded a $0.2 million severance expense within the Film Production segment during the three month period ended September 30, 2010 associated with the departure.

In October 2010, the employment of the remaining President of the Film Production segment was involuntarily terminated under the provisions of his employment agreement effective December 2010.  As a result, the Company recorded a $0.1 million severance expense within the Film Production segment during the three month period that ended December 31, 2010 associated with the departure.

Other Contingencies

The Film Production segment has distributed eight repped content horror films through a large video rental retailer (the “Retailer”).  The Company incurred recoupable costs and producer advances associated with the films distributed to the Retailer. The Retailer filed for bankruptcy in late September 2010.  The Company currently expects that it will be successful in collecting amounts owed to it through the distribution arrangement.  If the Company is unable to collect amounts owed to it related to its distribution of films through the Retailer, the Company expects that it will be unable to recover the recoupable costs and producer advances incurred for the related films. The Company estimates that it would incur a maximum increase in the allowance for unrecoverable recoupable costs and producer advances of approximately $0.4 million if it is unable to collect amounts due from the distribution agreement with the Retailer.

16

NEW FRONTIER MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Legal Proceedings

In the normal course of business, the Company is subject to various lawsuits and claims. 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 11 — GUARANTEES

The Film Production segment completed producer-for-hire services during the three month period ended December 31, 2010 related to a movie production in the state of Georgia.  Based on the location of the production and other factors, the Company received certain transferable production tax credits in the state of Georgia. Subsequent to the completion of the production, the Company entered into an agreement to sell the tax credits for a net purchase price of approximately $0.8 million. If the tax credits are recaptured, forfeited, recovered or otherwise become invalid within a four year period subsequent to the Company’s sale of the tax credits, the Company agreed to reimburse the buyer for the value of the invalid tax credits as well as any interest, penalties or other fees incurred in connection with the loss of the tax credits. The Company believes the tax credits are valid and does not ex pect that it will be required to reimburse the buyer.

NOTE 12 — DISCONTINUED OPERATIONS

The Direct-to-Consumer segment acquired certain intangible assets in late fiscal year 2008 in an effort to expand the product lines that are delivered directly to consumers. The acquired intangible assets primarily related to intellectual property rights technology that allowed the Company to manufacture a set-top box through which consumers could obtain content directly through the internet and view the content on television. During the fourth quarter of fiscal year 2010, the Company implemented a plan to discontinue the operations of the internet protocol television (“IPTV”) set-top box business based primarily on lower than expected performance of the IPTV set-top box business. Cash flows associated with the IPTV set-top box business have been materially eliminated from the ongoing operations of the Company, and the Company does not have any significant continuing involvement in the operations of t he IPTV set-top box business.

The discontinued operations generated immaterial net revenue during each of the three and nine month periods ended December 31, 2010 and $0.1 million of net revenue during each of the three and nine month periods ended December 31, 2009.  The pre-tax loss was immaterial during each of the three and nine month periods ended December 31, 2010, and the pre-tax loss during the three and nine month periods ended December 31, 2009 was $0.1 million and $0.6 million, respectively.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q of New Frontier Media, Inc. and its consolidated subsidiaries, or the Company or the Registrant, and the information incorporated by reference includes forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding trend analysis and the Company’s expected financial position and operating results, its business strategy, its financing plans and the outcome of contingencies are forward-looking statements. Forward-looking statements are also identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “could,” “wil l,” “would,” and similar expressions. The forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth or implied by any forward looking statements. 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 update or revise publicly 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 Transactional TV segment customers that accounted for approximately 45% of our total revenue during the nine month period ended December 31, 2010; 2) maintain the license fee structures and distribution market share currently in place with our customers; 3) maintain our pay-per-

17

view (“PPV”) and video-on-demand (“VOD”) shelf space with existing customers; 4) compete effectively with our current competitors and potential future competitors that distribute adult content to U.S. and international cable multiple system operators (“MSOs”) and direct broadcast satellite (“DBS”) providers; 5) retain our key executives; 6) produce film content that is well received by our Film Production segment’s customers; 7) comply with future regulatory developments; and 8) successfully compete against other forms of entertainment such as pay and free adult oriented internet sites as well as adult oriented premium channel content. The foregoing list of factors is not exhaustive. For a more complete list of factors that may cause results to differ materially from projections, please refer to the Risk Factors section of our most recently filed Annual Report on Form 10-K, as amended, and as updated by periodic and current reports that we may file from time to time with the United States Securities and Exchange Commission (“SEC”) that amend or update such factors.  Some of these risks are detailed in Part II, Item 1A, Risk Factors, herein and elsewhere in this Form 10-Q.

Executive Summary

We are a leader in transactional television and the distribution of general motion picture entertainment. Our key customers include large cable and satellite operators, premium movie channel providers and major Hollywood studios. We distribute content worldwide. Our three principal businesses are reflected in the Transactional TV, Film Production and Direct-to-Consumer operating segments. Our Transactional TV segment distributes adult content to cable and satellite operators who then distribute the content to retail customers via PPV and VOD technology. We earn revenue through contractual percentage splits of the retail price. The Transactional TV segment has historically been our most profitable segment. The Film Production segment primarily generates revenue through the distribution of mainstream content to large cable and satellite operators, premium movie channel providers and other international content di stributors. This segment also periodically provides contract film production services to major Hollywood studios (“producer-for-hire” arrangements). The Film Production segment incurred operating losses during the nine month period ended December 31, 2010 as well as in fiscal years 2010 and 2009 primarily due to large non-cash impairment charges and increases in the allowance for unrecoverable recoupable costs and producer advances. Our Direct-to-Consumer segment primarily generates revenue from membership fees earned through the distribution of adult content to consumer websites. The Direct-to-Consumer segment has historically incurred operating losses and is expected to continue to incur operating losses for the foreseeable future; however, we have focused our activities on improving the segment results through efforts described below. Our Corporate Administration segment includes all costs associated with the operation of the public holding company, New Frontier Media, Inc.

The business models of each of our segments are summarized below.

Transactional TV Segment

Our Transactional TV segment is focused on the distribution of its PPV and VOD services to MSOs and DBS providers worldwide. We earn a percentage of revenue, or “split”, from our content for each VOD, PPV or subscription that is purchased on our customers’ platforms. Revenue growth can occur when we launch our services to new cable MSOs or DBS providers, when we experience growth in the number of digital subscribers for systems where our services are currently distributed, when we launch additional services or replace our competitors’ services on existing customer cable and DBS platforms, and when our proportional buy rates improve relative to our competitors. Alternatively, our revenue could decline if we were to experience lower consumer buy rates as has been the case with the general economic downturn, if customers migrate to other forms of entertainment such as pay and free adult oriente d internet sites which we believe may also be occurring as a result of the economic downturn, if the revenue splits we receive from our customers decline, if additional competitive channels are added to our customers’ platforms or if our existing customers remove or replace our services on their platform.

Film Production Segment

The Film Production segment has historically derived the majority of its revenue from two principal businesses: (1) the production and distribution of original motion pictures such as erotic thrillers, horror movies, and erotic, event-styled content (“owned content”); and (2) the licensing of mainstream third party films in international and domestic markets where we act as a sales agent for the product (“repped content”). This segment also periodically provides contract film production services to certain major Hollywood studios. This segment has incurred non-cash

18

impairment charges and increases in its allowance for unrecoverable recoupable costs and producer advances resulting in operating losses during the nine month period ended December 31, 2010 as well as in fiscal years 2010 and 2009.  If the owned and repped content we distribute underperforms relative to our expectations, we may incur additional impairment charges and increases in our allowances in the future.

Direct-to-Consumer Segment

Our Direct-to-Consumer segment generates revenue primarily by selling memberships to our adult consumer websites. During the nine month period ended December 31, 2010 and the fiscal years 2010 and 2009, we experienced a decline in the Direct-to-Consumer segment revenue which we believe was due to a decline in consumer spending as a result of the unfavorable economic conditions as well as the availability of free and low-cost internet content. We expect this segment will continue to incur operating losses for the foreseeable future; however, we recently launched additional niche consumer websites during fiscal years 2010 and 2011 as well as a dating website and are optimistic that these efforts will result in improved performance in the future.  The Direct-to-Consumer segment also operated an internet protocol television (“IPTV”) set-top box business beginning in late fiscal year 2008. In the fourth quarter of fiscal year 2010, we discontinued the operations of the IPTV business as a result of underperformance in fiscal year 2010.

Corporate Administration Segment

The Corporate Administration segment reflects all costs associated with the operation of the public holding company, New Frontier Media, Inc., that are not directly allocable to the Transactional TV, Film Production, or Direct-to-Consumer operating segments. These costs include, but are not limited to, legal expenses, accounting expenses, human resource department costs, insurance expenses, registration and filing fees with NASDAQ, executive employee costs, and costs associated with our public company filings and shareholder communications. Our focus for this operating segment is balancing cost containment with the need for administrative support for the growth of the Company.

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, 2010, as amended, and as updated by Note 1 to the Unaudited Condensed Consolidated Financial Statements included herein, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2010, as amended, appropriately represent, in all material respects, the current status of our critical accounting policies, the disclosure with respect to which is incorporated herein by reference.

19

Transactional TV Segment

The following table sets forth certain financial information for the Transactional TV segment for each of the periods presented (amounts in table may not sum due to rounding):

	Three Months Ended December 31,								Nine Months Ended December 31,
(dollars in millions)	2010			2009			% change		2010			2009			% change
Net revenue
VOD	$	5.3		$	4.9		8	%	$	16.2		$	15.0		8	%
PPV	3.4			4.0			(15	)%	10.3			12.6			(18	)%
Other	0.1			0.2			(50	)%	0.3			0.6			(50	)%
Total	8.8			9.1			(3	)%	26.8			28.1			(5	)%
Cost of sales	3.2			3.0			7	%	9.5			8.9			7	%
Gross profit	5.6			6.1			(8	)%	17.3			19.2			(10	)%
Gross profit percentage	64		%	67		%			65		%	68		%
Operating expenses	3.0			2.6			15	%	8.1			7.6			7	%
Operating income	$	2.6		$	3.5		(26	)%	$	9.3		$	11.6		(20	)%

Net Revenue

VOD

During each of the three and nine month periods ended December 31, 2010, international VOD revenue increased by approximately $0.5 million and $1.4 million, respectively. International revenue was higher primarily as a result of new customer launches, an increase in the quantity of content distributed to existing customers, an improvement in our content performance with existing customers, and adjustments to customer menu structures.  Domestic VOD revenue experienced a minimal decline during each of the three and nine month periods ended December 31, 2010.  The domestic VOD performance appears to have stabilized based on our results in the second and third quarters of fiscal year 2011, and we believe the stabilization was due to adjustments we have made to our programming mix as well as new content packages we launched.  However, if the current economic conditions including high unemplo yment and lower consumer discretionary spending persist or worsen, our domestic VOD performance could be materially adversely impacted.

PPV

PPV revenue was lower during each of the three and nine month periods ended December 31, 2010 primarily due to a decline in revenue of $0.6 million and $1.7 million, respectively, from the loss of a channel on a domestic DBS platform in November 2009.  Revenue was also lower due to a decline in domestic revenue from DBS and top 10 cable MSO customers. We believe consumers that have historically purchased our content with discretionary income have reduced their spending on our content, eliminated their acquisition of our content, or are viewing content through less expensive alternatives such as low-cost and free internet sites, which has resulted in a decline in our domestic PPV revenue.  Although we have made adjustments on domestic VOD platforms in order to stabilize that revenue, we do not have flexibility to make similar adjustments on domestic PPV platforms due to the linear nature of P PV distribution.  As a result, the decline in consumer spending has had a larger unfavorable impact on our domestic PPV revenue as compared to our domestic VOD revenue.  Partially offsetting the decline in revenue was a $0.2 million and $0.5 million increase in international PPV revenue during the three and nine month periods ended December 31, 2010, respectively, primarily from new channel launches in Latin America.

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Other

Other revenue primarily includes revenue from advertising on our PPV channels and from distribution fees. Other revenue declined during the three and nine month periods ended December 31, 2010 due to a general decline in advertising and distribution activity.  We believe customers are reducing or eliminating their spending on these services as a method to decrease expenses in response to the challenging economic conditions.

Cost of Sales

Our cost of sales consists of expenses associated with our digital broadcast center, satellite uplinking, satellite transponder leases, programming acquisitions, VOD transport, amortization of content and distribution rights, depreciation of equipment, and related employee costs.

The increase in cost of sales during the three month period ended December 31, 2010 was primarily due to (a) a $0.1 million increase in transponder costs associated with PPV channels we launched in Latin America and Europe, (b) a $0.1 million increase in content and distribution rights amortization primarily from acquiring and distributing a larger proportion of the annual content acquisitions during the first half of the fiscal year and from a general increase in acquisitions and the development of new and unique content in an effort to improve customer buy rates, and (c) a $0.1 million increase in costs from accelerating depreciation expense for certain tenant improvement assets.  We shortened the estimated lives of the related tenant improvement assets in anticipation of vacating our current corporate and digital broadcast facilities prior to the end of the lease terms and moving to a new building in fiscal year 2012.  The increase in costs was partially offset by a decline in transport expenses from executing a new transport agreement that includes more favorable financial terms.

Cost of sales increased during the nine month period ended December 31, 2010 primarily due to (a) a $0.3 million increase in transponder costs associated with the PPV channels we launched in Latin America and Europe, (b) a $0.3 million increase in content and distribution rights amortization primarily from acquiring and distributing a larger proportion of the annual content acquisitions during the first half of the fiscal year and from a general increase in acquisitions and the development of new and unique content in an effort to improve customer buy rates, (c) a $0.2 million increase in employee costs to support content programming analysis, and (d) a $0.1 million increase in costs from accelerating depreciation expense for certain tenant improvement assets. The increases in costs were partially offset by a decline in transport expenses from executing a new transport agreement that co ntained more favorable financial terms.

Operating Expenses and Operating Income

The increase in operating expenses during the three month period ended December 31, 2010 was primarily due to (a) a $0.2 million increase in employee costs to support the development of new content packages, (b) a $0.1 million increase in depreciation expenses from purchasing storage equipment to support our international growth and the increase in domestic content distribution, and (c) a $0.1 million increase in costs from accelerating depreciation expense for certain tenant improvement assets.  As discussed above, we shortened the estimated lives of the related tenant improvement assets in anticipation of vacating our current corporate and digital broadcast facilities prior to the end of the lease terms and moving to a new building in fiscal year 2012. Tenant improvement depreciation is reflected in both the cost of sales and operating expense line items because we have employee depar tments that are classified in both line items, and the tenant improvement depreciation costs are allocated among the related employee departments. Operating income for the three month periods ended December 31, 2010 and 2009 was $2.6 million and $3.5 million, respectively.

The increase in operating expenses during the nine month period ended December 31, 2010 was primarily due to (a) a $0.3 million increase in employee costs to support the development of new content packages, (b) a $0.1 million increase in depreciation expenses from purchasing storage equipment to support our international growth and the increase in domestic content distribution, (c) a $0.1 million increase in costs from accelerating depreciation expense for certain tenant improvement assets, (d) a $0.1 million increase in business development consulting costs incurred in an effort to grow our international revenue, and (e) a $0.1 million increase in costs because the same prior year period included a gain from a vendor settlement that did not recur during the nine month period ended December 31, 2010.  Partially offsetting the increase in costs was a $0.2 million decline i n promotion and advertising expenses due to certain promotional events that occurred in the first nine months of the prior fiscal year

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but did not recur during the same period in the current fiscal year. Operating income for the nine month periods ended December 31, 2010 and 2009 was $9.3 million and $11.6 million, respectively.

Operating Lease for New Facility

In connection with our leasing of the new facility as described in detail below within the Operating Lease Obligations discussion of the Commitments and Contingencies section, we reduced the remaining estimated useful lives of certain tenant improvements related to the corporate and digital broadcast facilities we currently occupy because we expect to vacate the buildings prior to the conclusion of the original lease agreements.  As a result, we incurred an increase in depreciation expense in each of the Transactional TV segment’s cost of sales and operating expenses of approximately $0.1 million during the three month period ended December 31, 2010.  We expect to incur a similar increase in depreciation expense in each of the fourth quarter of fiscal year 2011 and the first quarter of fiscal year 2012.  We also expect to incur a charge in the first quarter of fiscal year 2012 within th e Transaction TV segment’s operating expenses of approximately $0.6 million associated with vacating our digital broadcast facility and assigning the remaining lease obligations to the landlord of the new facility. The total remaining lease obligation assumed by the new facility landlord will be reflected as a reduction in our rental expense on a straight-line basis over the term of the new facility lease.Additionally, we expect to incur a $0.3 million charge in the first quarter of fiscal year 2012 from vacating our current corporate facility prior to the end of the lease term, and the charge is expected to be included in the operating expenses of our segments with the majority of the charge being reflected within the Transactional TV segment.

Film Production Segment

The following table sets forth certain financial information for the Film Production segment for each of the periods presented (amounts in table may not sum due to rounding):

	Three Months Ended December 31,								Nine Months Ended December 31,
(dollars in millions)	2010			2009			% change		2010			2009			% change
Net revenue
Owned content	$	1.1		$	1.3		(15	)%	$	4.2		$	4.5		(7	)%
Repped content	0.7			0.8			(13	)%	2.0			1.7			18	%
Producer-for-hire and other	3.3			0.1			#		4.2			0.2			#
Total	5.2			2.2			#		10.3			6.4			61	%
Cost of sales	3.7			0.7			#		6.1			2.6			#
Gross profit	1.5			1.4			7	%	4.3			3.9			10	%
Gross profit percentage	29		%	64		%			42		%	61		%
Operating expenses	1.2			1.0			20	%	4.5			3.1			45	%
Operating income (loss)	$	0.3		$	0.4		(25	)%	$	(0.2	)	$	0.8		#

# Change is in excess of 100%.

Net Revenue

Owned Content

The decrease in revenue during the three month period ended December 31, 2010 was primarily due to a $0.4 million decline in the revenue we generate from the distribution of owned content to VOD platforms.  We believe the decline was primarily due to the continuation of lower consumer spending as a result of the challenging economic conditions. The decline in revenue was partially offset by an increase in one-time domestic and international distribution revenue associated with a slight increase in customer demand.

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The decrease in revenue during the nine month period ended December 31, 2010 was primarily due to a $0.6 million decline in owned content VOD revenue due to lower consumer spending as discussed above.  Revenue also declined because the same prior year period results included approximately $0.4 million in revenue from the delivery of a horror title to a pay television customer, and no similar revenue recurred during the nine month period ended December 31, 2010.  The declines in revenue were partially offset by a $0.7 million increase in owned content revenue from the delivery of the fourth installment of an episodic series, whereas only a partial delivery of titles from the third installment of an episodic series occurred in the same prior year period.

Repped Content

Repped content revenue includes amounts from the licensing of mainstream film titles that we represent (but do not own) under sales agency relationships with various independent film producers. Repped content revenue increased during each of the three and nine month periods ended December 31, 2010 primarily due to a $0.1 million and $0.3 million increase, respectively, from the distribution of repped content on domestic VOD platforms.  Revenue also increased by approximately $0.2 million and $0.3 million during the three and nine month periods ended December 31, 2010, respectively, due to additional revenue from the distribution of content to home video, retail DVD and other markets through our arrangements with mainstream film distributors.  The increases in revenue were offset by a reduction in one-time repped distribution revenue, and we believe the decline is due to a reduction in spendi ng by our customers in response to the continuation of the challenging film market conditions.

Producer-for-Hire and Other

Producer-for-hire and other revenue relates to amounts earned through producer-for-hire arrangements, music royalty fees and the delivery of other miscellaneous film materials to distributors.  The increase in other revenue during the three month period ended December 31, 2010 was due to the completion of a producer-for-hire arrangement, which resulted in revenue of approximately $3.3 million. The increase in revenue during the nine month period ended December 31, 2010 was primarily due to the completion of the above mentioned producer-for-hire arrangement during the third quarter of fiscal year 2011 as well as the completion of another producer-for-hire arrangement during the first quarter of fiscal year 2011.

The production services related to the producer-for-hire arrangement that was completed in the third quarter of fiscal year 2011 occurred in the state of Georgia.  We realized certain transferable tax credits in the state of Georgia associated with the production, and we sold the tax credits for approximately $0.8 million resulting in a decline in the net producer-for-hire production costs. In connection with the sale of the tax credits, we agreed to reimburse the buyer if the tax credits are recaptured, forfeited, recovered or otherwise become invalid in the next four years. If we are required to make payments under our guarantee of those tax credits, our financial position and results of operation would be adversely impacted. We believe the tax credits are valid and do not expect that we will be required to reimburse the buyer.

Cost of Sales

Our cost of sales is comprised of the amortization of our owned content film costs as well as delivery and distribution costs related to that content. The expenses also include the costs we incur to provide producer-for-hire services.  Deferred producer-for-hire costs are recognized as cost of sales upon completion of the production.

The increase in cost of sales during the three month period ended December 31, 2010 was primarily due to approximately $3.0 million in production costs from the completion of a producer-for-hire arrangement.  Film cost amortization as a percentage of the related owned content revenue during the three month periods ended December 31, 2010 and 2009 was 47% and 46%, respectively.

Cost of sales increased during the nine month period ended December 31, 2010 primarily as a result of a $3.7 million increase in production costs associated with producer-for-hire arrangements that were completed in the first quarter and third quarter of fiscal year 2011.  The increase in costs was partially offset by a decline in film cost amortization consistent with the decline in owned content revenue.  Film cost amortization as a percentage of the related owned content revenue during the nine month periods ended December 31, 2010 and 2009 was 46% and 45%, respectively.

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Operating Expenses and Operating Income (Loss)

The increase in operating expenses during the three month period ended December 31, 2010 was primarily due to a $0.1 million increase in expenses associated with certain strategic consulting services and a $0.1 million increase in the allowance for unrecoverable recoupable costs and producer advances associated with the underperformance of certain repped content films. The Film Production segment operating income during the three month periods ended December 31, 2010 and 2009 was $0.3 million and $0.4 million, respectively.

The increase in operating expenses during the nine month period ended December 31, 2010 was due to (a) a $0.6 million film cost impairment charge discussed in more detail below, (b) a $0.5 million increase in the allowance for unrecoverable recoupable costs and producer advances associated with the underperformance of certain repped content films, (c) a $0.3 million increase in employee costs primarily from severance expenses associated with the departure of the Film Production segment’s Co-Presidents, and (d) a $0.1 million increase in costs associated with certain strategic consulting services. We may incur additional film cost impairments and increases in our allowance for unrecoverable recoupable costs and producer advances in the future if the owned and repped content we distribute underperforms relative to our expectations.  The Film Production segment incurred an operat ing loss of $0.2 million during the nine month period ended December 31, 2010 as compared to operating income of $0.8 million during the nine month period ended December 31, 2009.

Film Cost Impairment Charge

In September 2010, we recorded a non-cash impairment charge of approximately $0.6 million associated with certain owned content films. As part of our quarterly film performance analysis, we adjusted downward the expected performance for films based on a continuation of underperformance as compared to expectations.  As a result of the downward adjustments in expected performance, we performed further assessments on certain films and determined the fair value of the films was less than the unamortized cost of the films, and the difference was recorded as an impairment charge.  The impairment charge was recorded in the charge for asset impairments within the Film Production segment.  The fair value of the films was estimated by discounting the films’ expected future cash flow by the weighted average cost of capital.  We did not incur any additional film cost impairment charges during the n ine month period ended December 31, 2010.

Direct-to-Consumer Segment

The following table sets forth certain financial information for the Direct-to-Consumer segment for each of the periods presented (amounts in table may not sum due to rounding):

	Three Months Ended December 31,								Nine Months Ended December 31,
(dollars in millions)	2010			2009			% change		2010			2009			% change
Net revenue
Net membership	$	0.2		$	0.2		0	%	$	0.6		$	0.7		(14	)%
Other	—			—			0	%	—			0.1			#
Total	0.2			0.2			0	%	0.6			0.8			(25	)%
Cost of sales	0.3			0.3			0	%	1.0			1.0			0	%
Gross loss	(0.1		)	(0.1		)	0	%	(0.4		)	(0.2		)	#
Operating expenses	0.1			0.1			0	%	0.3			0.3			0	%
Operating loss	$	(0.2	)	$	(0.2	)	0	%	$	(0.7	)	$	(0.5	)	(40	)%

# Change is in excess of 100%.

Net Revenue

Revenue from our Direct-to-Consumer segment primarily consists of amounts earned through the provision of internet subscriptions to customers.  Net membership revenue was flat during the three month period ended

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December 31, 2010 as compared to the same prior year period.  Revenue during the nine month period ended December 31, 2010 declined primarily due to a reduction in memberships, and we believe the reduction in memberships was due to the economic downturn and a related reduction in consumer spending.

Other revenue primarily relates to the sale of content to other webmasters and amounts are generally consistent and comparable with the same prior year periods.

Cost of Sales

Cost of sales consists of expenses associated with credit card processing, bandwidth, traffic acquisition, content amortization, depreciation of equipment, and related employee costs.  Cost of sales during the three and nine month periods ended December 31, 2010 was generally consistent with the same prior year period results.

Operating Expenses and Operating Loss

Operating expenses were generally consistent and comparable with the same prior year periods.  We incurred operating losses of $0.2 million and $0.7 million during the three and nine month periods ended December 31, 2010, respectively, as compared to operating losses of $0.2 million and $0.5 million during the three and nine month periods ended December 31, 2009, respectively.

Corporate Administration Segment

The following table sets forth certain financial information for the Corporate Administration segment for each of the periods presented:

	Three Months Ended December 31,						Nine Months Ended December 31,
(dollars in millions)	2010		2009		% change		2010		2009		% change
Operating expenses	$	2.4	$	2.4	0	%	$	7.5	$	7.2	4	%

Corporate administration segment expenses during the three month period ended December 31, 2010 were generally consistent with the same prior year period results.  The increase in corporate administration segment expenses during the nine month period ended December 31, 2010 was primarily due to a $0.2 million increase in employee costs from stock option expenses related to awards issued in the third and fourth quarters of fiscal year 2010 as well as certain annual salary increases.  Corporate administration expenses were also higher due to an increase in legal expenses associated with ordinary course litigation matters.

Other Income (Expense) and Income Tax Benefit (Expense)

Other Income (Expense)

Amounts included in other income (expense) primarily relate to interest expense on our line of credit borrowings; interest expense on our uncertain tax positions; and interest income from our cash, cash equivalents and investments.  The change in other income (expense) during the three and nine month periods ended December 31, 2010 as compared to the same prior year periods was primarily due to a decline in interest expense on our line of credit borrowings because we reduced the outstanding principal balance throughout fiscal year 2010.  Also contributing to the change was the reversal of approximately $35,000 of interest expense associated with the reversal of uncertain tax position liabilities due to the expiration of the statute of limitations during the three month period ended December 31, 2010.  There was no similar reversal of interest expense during the three and nine month peri ods ended December 31, 2009.

Income Tax Benefit (Expense)

During the three month period ended December 31, 2010, the statute of limitations expired on approximately $0.2 million of uncertain tax position liabilities.  As a result, we recorded a reduction in our income tax expense of $0.2 million.  Additionally, we increased our income tax expense during the three month period ended December 31, 2010 by approximately $0.1 million associated with changes in certain estimates related to permanent tax differences

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between our tax expense for financial reporting purposes and the amount used for income tax purposes.  No other discreet items had a material impact on our tax rate during the three or nine month periods ended December 31, 2010.

During the three month period ended December 31, 2009, we performed a research and development tax credit study.  The study considered fiscal years for which amended or current tax returns could be filed. We concluded that we were eligible for research and development tax credits that would result in a reduction in the income tax expense for the noted fiscal years as follows (in thousands):

March 31,
2009	$	217
2008	169
2007	129
2006	86
Total	$	601

We filed amended and current tax returns during the three month period ended December 31, 2009 for each of the fiscal years noted above and included the research and development tax credits identified in the study.  As a result of the filings, we recorded a reduction in the income tax expense of $0.6 million during the three month period ended December 31, 2009.  Based on the research and development tax credit study performed during the three month period ended December 31, 2009, we also estimated that we would utilize research and development tax credits during the year ended March 31, 2010 of between $0.1 million and $0.2 million.  No other discreet items had a material impact on our tax rate during the three or nine month periods ended December 31, 2009.

Discontinued Operations

The Direct-to-Consumer segment acquired certain intangible assets in late fiscal year 2008 in an effort to expand the product lines that are delivered directly to consumers. The acquired intangible assets primarily related to intellectual property rights technology that allow us to manufacture a set-top box through which consumers can obtain content directly through the internet and view the content on television. During the fourth quarter of fiscal year 2010, we implemented a plan to discontinue the operations of the IPTV set-top box business based primarily on lower than expected performance of the IPTV set-top box business. Cash flows associated with the IPTV set-top box business have been materially eliminated from the ongoing operations, and we do not have any significant continuing involvement in the operations of the IPTV set-top box business.

The discontinued operations generated immaterial net revenue during each of the three and nine month periods ended December 31, 2010 and $0.1 million of net revenue during each of the three and nine month periods ended December 31, 2009. The pre-tax loss was immaterial during each of the three and nine month periods ended December 31, 2010, and the pre-tax loss during the three and nine month periods ended December 31, 2009 was $0.1 million and $0.6 million, respectively.

Liquidity and Capital Resources

Our current priorities for the use of our cash and cash equivalents are:

· investments in processes intended to improve the quality and marketability of our products;

· funding our operating and capital requirements; and

· funding, from time to time, opportunities to enhance shareholder value, whether in the form of repurchase of shares of our common stock, cash dividends or other strategic transactions.

We anticipate that our existing cash, cash equivalents and cash flows from operations will be sufficient during the next 12 months to satisfy our operating requirements. We also anticipate that we will be able to fund our estimated outlay for capital expenditures, repayment of outstanding debt, film production costs and other related purchases that may occur during the next 12 months through our available cash, cash equivalents, and our expected cash flows from operations during that period.

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Sources and Uses of Cash

Cash Flows from Operating and Investing Activities of Continuing Operations

Our cash flows from operating and investing activities of continuing operations are summarized as follows (amounts in table may not sum due to rounding):

	Nine Months Ended December 31,
(in millions)	2010			2009
Net cash provided by operating activities of continuing operations	$	1.5		$	1.5
Cash flows from investing activities:
Purchases of investments	—			(1.0		)
Redemptions of investments	—			0.6
Purchases of equipment and furniture	(3.5		)	(0.8		)
Purchase of intangible assets	—			(0.1		)
Net cash used in investing activities of continuing operations	$	(3.5	)	$	(1.3	)

Operating Cash Flow Activities of Continuing Operations

The cash provided by operating activities of continuing operations during the nine month period ended December 31, 2010 as compared to the same prior year period was primarily impacted by the following:

·   a decline in operating income primarily associated with the Transactional TV and Film Production segment performances;

·   a comparable decrease in content and distribution rights cash flows from acquiring a larger proportion of content during the first half of fiscal year 2011 and from a general increase in cash disbursements to acquire and develop new and unique content in an effort to improve customer buy rates;

·   a comparable increase in cash flows from reducing our film cost spending primarily because the same prior year period included disbursements for our production of an episodic series; and

·   an increase in cash flows from producer-for-hire arrangements that were completed in fiscal year 2010,  and the outstanding receivables were collected in fiscal year 2011.  The increase in cash flows was reflected in the net change in the deferred producer-for-hire and accounts receivable balances.

As of December 31, 2010, we had approximately $3.3 million in producer-for-hire outstanding accounts receivable and $0.8 million in production tax credit receivables as reflected in the prepaid and other assets line item within current assets, and we expect to collect these outstanding amounts during the fourth quarter of fiscal year 2011.

Investing Cash Flow Activities of Continuing Operations

Cash from investing activities of continuing operations during the nine month period ended December 31, 2010 included $3.5 million of cash used primarily to purchase storage, transponder receiver, and other broadcast and distribution equipment.  The storage and other broadcast and distribution equipment was purchased to support the Transactional TV segment’s international growth and expanded domestic content distribution. The transponder receiver equipment was purchased to supplement a change in the Transactional TV segment’s transponder services, which is expected to stabilize or reduce domestic transponder costs in the future.

In October 2010, we entered into an operating lease agreement to rent an approximately 50,000 square feet facility, with occupancy scheduled to be completed in June 2011.  The operating lease agreement is described in more detail below within the Operating Lease Obligations discussion of the Commitments and Contingencies section.  In connection with the leasing of the new facility, we currently expect to incur approximately $1.0 million in net tenant improvement cash outflows and approximately $2.0 million in equipment capital expenditure cash outflows.  We expect that the total $3.0 million in total net cash outflows will occur during the fourth quarter of fiscal year 2011 and the first quarter of fiscal year

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2012.  We are continuing to review and may modify our relocation plans in the future, and modifications to our relocation plans could result in a material change to the expected cash outflows associated with the relocation.

Cash Flows from Financing Activities of Continuing Operations

Our cash flows from financing activities of continuing operations are summarized as follows (amounts in table may not sum due to rounding):

	Nine Months Ended December 31,
(in millions)	2010			2009
Cash flows from financing activities:
Purchases of common stock	$	(0.4	)	$	(0.1	)
Payments on short-term debt	—			(4.0		)
Proceeds from short-term debt	—			3.0
Payments on long-term seller financing	(0.1		)	(0.1		)
Net cash used in financing activities of continuing operations	$	(0.5	)	$	(1.1	)

Net cash used in financing activities of continuing operations during the nine month period ended December 31, 2010 consists of $0.4 million of cash used to repurchase approximately 0.2 million shares of common stock at an average purchase price of $1.57 per share as well as $0.1 million in payments for long-term seller financing related to our purchase of a patent in fiscal year 2008.

Borrowing Arrangements

On December 15, 2010, our former line of credit matured and we renewed the line of credit from a financial institution.  The line of credit is secured by certain trade accounts and accounts receivable, is scheduled to mature on December 15, 2011, and bears interest at the greater of (a) the current prime rate less 0.125 percentage points per annum, or (b) 5.75% per annum.  The remainder of the line of credit may be drawn from time to time to support our operations and short-term working capital needs, if any.  A loan origination fee of 0.5% of the available line was paid upon the execution of the line of credit.  The line of credit includes a maximum borrowing base equal to the lesser of 75% of the trade accounts and accounts receivable securing the line of credit or $5.0 million, and the maximum borrowing base at December 31, 2010 was $5.0 million.

The line of credit contains both conditions precedent that must be satisfied prior to any borrowing and affirmative and negative covenants customary for facilities of this type, including, without limitation, (a) a requirement to maintain a current asset to current liability ratio of at least 1.5 to 1.0, (b) a requirement to maintain a total liability to tangible net worth ratio not to exceed 1.0 to 1.0, (c) prohibitions on additional borrowing, lending, investing or fundamental corporate changes without prior consent, (d) a prohibition on declaring without consent any dividends, other than dividends payable in our stock, and (e) a requirement that there be no material adverse change in our current client base as it relates to our largest clients.  The line of credit provides that an event of default will exist in certain circumstances, including without limitation, our failure to make payment of principal or interest on borrowed amounts when required, failure to perform certain obligations under the line of credit and related documents, defaults in certain other indebtedness, our insolvency, a change in control, any material adverse change in our financial condition and certain other events customary for facilities of this type.  As of December 31, 2010, our outstanding principal balance under the line of credit was $1.0 million, and we were in compliance with the related covenants.

Guarantees

Our Film Production segment completed producer-for-hire services during the three month period ended December 31, 2010 related to a movie production in the state of Georgia.  Based on the location of the production and other factors, we received certain transferable production tax credits in the state of Georgia.  Subsequent to the completion of the production, we entered into an agreement to sell the tax credits for a net purchase price of approximately $0.8 million. If the tax credits are recaptured, forfeited, recovered or otherwise become invalid within a four year period

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subsequent to our sale of the tax credits, we have agreed to reimburse the buyer for the value of the invalid tax credits as well as any interest, penalties or other fees incurred in connection with the loss of the tax credits. We believe the tax credits are valid and do not expect that we will be required to reimburse the buyer.

Commitments and Contingencies

Employment Contracts

In September 2010, an employee’s contract term was extended effective April 1, 2011. The extension results in an increase in our commitments under the obligation of $0.3 million for each of the years ending March 31, 2012 and 2013.

In September 2010, the employment of a Co-President of the Film Production segment was involuntarily terminated under the provisions of his employment agreement effective September 2010.  As a result, we recorded a $0.2 million severance expense within the Film Production segment during the second quarter of fiscal year 2011 associated with the departure.

In October 2010, the employment of the remaining President of the Film Production segment was involuntarily terminated under the provisions of his employment agreement effective December 2010.  As a result, we recorded a $0.1 million severance expense within the Film Production segment in the third quarter of fiscal year 2011 associated with the departure.

Vendor Obligations

In October 2010, we renewed an existing agreement related to uplinking services for an additional term of three years.  The impact of the renewal of this agreement was an increase in our future contractual cash obligations of $0.2 million, $0.7 million, $0.7 million and $0.4 million for the years ending March 31, 2011, 2012, 2013 and 2014, respectively.

Operating Lease Obligations

In July 2010, we executed a five-year license agreement to rebrand and distribute up to three new international linear PPV channels. The satellite footprint for the channels covers all of Europe, the Middle East, and areas of Northern Africa. The new channels will primarily target cable, IPTV, digital terrestrial and satellite platforms in Europe.  As a result of the execution of the license agreement, we have future contractual cash obligations of $0.1 million, $0.2 million, $0.2 million, $0.2 million, $0.2 million and $0.1 million for the years ending March 31, 2011, 2012, 2013, 2014, 2015 and thereafter, respectively.

In October 2010, we entered into an operating lease agreement to rent an approximately 50,000 square feet facility, with occupancy scheduled to be completed in June 2011.  We expect that the leased facility will be primarily used by the Transactional TV, Direct-to-Consumer and Corporate Administration segments, and the new facility will replace our digital broadcast and corporate facilities.  The landlord of the new facility will assume our current digital broadcast facility lease in connection with the new operating lease agreement. The initial term of the agreement expires in January 2022 and provides for options to extend the term of the lease if agreed upon by the landlord and us.  Upon execution of the operating lease agreement, we paid a security deposit of approximately $0.1 million of which 50% is non-refundable.  We also agreed to pay for the first $1.0 million of ten ant improvements for the facility. Additionally, the landlord agreed to provide a tenant improvement allowance of approximately $1.7 million, which is available for any tenant improvement costs in excess of the initial $1.0 million in costs.  Our future contractual cash obligations under the lease are as follows (in millions):

Year Ending March 31,
2012	$	0.3
2013	0.5
2014	0.6
2015	0.6
2016	0.7
Thereafter	4.2
Total minimum payments	$	6.9

Legal Proceedings

In the normal course of business, we are subject to various lawsuits and claims. We believe that the final outcome of these matters, either individually or in aggregate, will not have a material effect on our financial statements.

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Income Taxes

Deferred Taxes

Deferred income tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. We establish valuation allowances when, based on an evaluation of objective evidence, there is a likelihood that some portion or all of the deferred tax assets will not be realized. As of December 31, 2010, we determined that it was more likely than not that deferred tax assets associated with international operating losses would not be realized and recorded a valuation allowance for the full operating loss deferred tax asset of $0.2 million. We expect all other deferred tax assets will be realizable based on our history of earning taxable income and based on our internal projections of future taxable income.

Uncertain Tax Positions

We account for uncertain tax positions using a two-step approach. 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 effective settlement.  As of December 31, 2010, we had total unrecognized tax benefits of approximately $0.1 million that are not expected to be settled within one year and have been classified within long-term taxes payable. If we were to prevail or the uncertainties were settled in our favor for all uncertain tax positions, the net effect is estimated to be a benefit to our tax expense of approximately $0.1 million.

During the three month period ended December 31, 2010, the statute of limitations expired on approximately $0.2 million of uncertain tax positions resulting in a decline in the uncertain tax position balance as reflected in long-term taxes payable and a reduction in our income tax expense.  The reduction in the uncertain tax position balance also resulted in the reversal of approximately $35,000 in interest expense.  The aggregate change in the uncertain tax position balance during the nine month period ended December 31, 2010 was as follows (in thousands):

Beginning balance at April 1, 2010	$	309
Expiration of statute of limitations in the current fiscal year	(193		)
Ending balance at December 31, 2010	$	116

Other Contingencies

Our Film Production segment has distributed eight repped content horror films through a large video rental retailer (the “Retailer”).  We incurred recoupable costs and producer advances associated with the films distributed to the Retailer. The Retailer filed for bankruptcy in late September 2010.  We currently expect that we will be successful in collecting amounts owed to us through the distribution arrangement.  If we are unable to collect amounts owed to us related to our distribution of films through the Retailer, we expect that we will be unable to recover the recoupable costs and producer advances incurred for the related films. We estimate that we would incur a maximum increase in the allowance for unrecoverable recoupable costs and producer advances of approximately $0.4 million if we are unable to collect amounts due from the distribution agreement with the Retailer.

Recent Accounting Pronouncements

For a discussion of the recent accounting pronouncements related to our operations, please refer to the related information provided under Note 2 — Recent Accounting Pronouncements to the accompanying Condensed Consolidated Financial Statements, which information is incorporated herein by reference.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

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Interest Rate Sensitivity.    Changes in interest rates could impact our anticipated interest income on cash and cash equivalents. An adverse change in interest rates in effect as of December 31, 2010 would not have a material impact on the Company’s net income or cash flows.

Changes in interest rates could also impact the amount of interest we pay on borrowings under our line of credit. A 10% adverse change in the interest rates on borrowings under our line of credit would not have a material impact on the Company’s interest expense.

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 Chief 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 of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2010, 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 third quarter of fiscal year 2011 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.

If we are required to make payments under our guarantee of the state of Georgia producer-for-hire production tax credits that we sold during fiscal year 2011, our financial position and results of operations could be materially adversely impacted.

Our Film Production segment completed producer-for-hire services related to a movie production in the state of Georgia during the three month period ended December 31, 2010.  We realized certain transferable production tax credits in the state of Georgia associated with the production, and we sold the tax credits to a third-party resulting in a reduction in the net cost of the production of approximately $0.8 million. In connection with the sale of the tax credits, we agreed to reimburse the buyer if the tax credits are recaptured, forfeited, recovered or otherwise become invalid in the next four years.  If we are required to make payments under our guarantee of the tax credits, our financial position and results of operations could be materially adversely impacted.

We rely on third party service providers to deliver our content to our customers via transport services. If these services were disrupted, it could cause us to lose VOD revenue and cause a material adverse impact on our financial position and results of operations.

Our transport provider services are critical to the distribution of VOD content to our customers.  We recently executed a new transport agreement with TVN Entertainment Corporation (“TVN”) that provides for the Transactional TV segment’s exclusive use of the TVN services in the United States. Effective October 2010, all Transactional TV segment domestic transport services are provided by TVN. If TVN fails to provide the contracted services, our programming operations would in all likelihood be suspended resulting in a materially adverse impact on our financial position and results of operations.

We currently represent horror films that are distributed through a large video rental retailer and are owed money from the related distribution.  The retailer recently filed for bankruptcy and if we do not receive payments related to the distribution, our financial position and results of operations could be materially adversely impacted.

Our Film Production segment has distributed eight repped content horror films through a large video rental retailer (the “Retailer”).  We incurred recoupable costs and producer advances associated with the films. The Retailer filed

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for bankruptcy in late September 2010.  If we are unable to collect amounts owed to us related to our distribution of films through the Retailer, we expect that we will be unable to recover the recoupable costs and producer advances incurred for the related films. We estimate that we would incur a maximum increase in the allowance for unrecoverable recoupable costs and producer advances of approximately $0.4 million if we are unable to collect amounts due from the distribution agreement with the Retailer, which would have a materially adverse impact on our financial position and results of operations.

Assessments arising from tax examination audits may have an adverse impact on our financial position and results of operations.

We filed amended and current tax returns that reflect a tax benefit associated with research and development tax credits. For the amended and current tax returns related to fiscal year 2008 and subsequent fiscal years, we are subject to examination of the amended and current tax returns and our determination of the research and development tax credits. If the Internal Revenue Service disallows some or all of the research and development tax credits, our financial position and results of operations could be materially adversely affected.

We are relocating our corporate and digital broadcast facilities into a new, combined leased facility.  If we are unable to execute the relocation, we experience delays in the relocation, we incur costs in excess of expectations from the relocation, or we experience other issues associated with the relocation, our financial position and results of operations could be materially adversely impacted.

We are in the process of relocating our corporate and digital broadcast facilities to a new, combined leased facility.  Our corporate facility is used as our corporate headquarters and is also used by our Direct-to-Consumer segment’s web production department and our Transactional TV segment’s marketing, sales, branding, promotions and conforming departments.  Our digital broadcast facility is used by our Transactional TV segment for key operations activities including broadcasting, encoding and technical operations, content screening, and quality control functions.  We are responsible for completing the tenant finishes in the new facility and furnishing the new facility, and we are also responsible for the relocation of our equipment, furniture, and related assets from our corporate and digital broadcast facilities to the new combined facility. If we are unable to execute the relocatio n, we experience delays in the relocation, we incur costs in excess of expectations from the relocation, or we experience other issues associated with the relocation, our financial position and results of operations could be materially adversely impacted.

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 fiscal year ended March 31, 2010, as amended, as such risk factors have been updated by the filing with the SEC of subsequent periodic and current reports from time to time, which factors could materially affect our business, financial condition, or future results. Such risks, however, 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 operating results.

ITEM 5. OTHER INFORMATION.

On February 2, 2011, pursuant to Article 12 of the Company’s Amended and Restated Bylaws (the “Bylaws”), the Board of Directors of the Company (the “Board”) unanimously approved amendments to Article 2 of the Bylaws providing for or clarifying, among other things, (1) the advance notice requirements for shareholders desiring to nominate directors for election to the Board, or to bring other business before the shareholders, at an annual or special meeting of shareholders, and (2) that the chairman of the Board may adjourn meetings of the shareholders from time to time in appropriate circumstances. Because the Board also approved other minor conforming changes to other provisions contained in the Bylaws, the Board approved that the amendments be included in further Amended and Restated Bylaws. The Amended and Restated Bylaws became effective on February 2, 2 011. The foregoing summary is qualified in its entirety by reference by the Amended and Restated Bylaws, clean and marked versions (marked to show the changes made to the former version of the Bylaws) of which are attached as exhibits to this Quarterly Report on Form 10-Q and incorporated herein by reference.

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ITEM 6. EXHIBITS.

Exhibit No.	Exhibit Description
3.01	Amended and Restated Bylaws of the Company, marked to show amendments
3.02	Amended and Restated Bylaws of the Company
10.01#	Business Loan Agreement, as supplemented (including Change in Terms Agreement), dated December 15, 2010, between New Frontier Media, Inc. and Great Western Bank
10.02	Confidential Separation Agreement and General Release, dated October 6, 2010, between MRG Entertainment, Inc. and Marc Laurence Greenberg
10.03	Confidential Separation Agreement and General Release, dated October 26, 2010, between MRG Entertainment, Inc. and Richard B. Goldberg
10.04	Lease Agreement Office and Industrial Space (including Assignment and Assumption of Lease), dated October 6, 2010, between New Frontier Media, Inc. and 6060 Partnership, LLP
31.01	Certification by CEO Michael Weiner pursuant to Rule 13a-14(a)/15d-14(d)
31.02	Certification by CFO Grant Williams 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 CFO Grant Williams 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.

SIGNATURES

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

	NEW FRONTIER MEDIA, INC.
Dated: February 4, 2011	By:	/s/ Michael Weiner
	Name:	Michael Weiner
	Title:	Chief Executive Officer
Dated: February 4, 2011		/s/ Grant Williams
	Name:	Grant Williams
	Title:	Chief Financial Officer

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Exhibit No.	Exhibit Description
3.01	Amended and Restated Bylaws of the Company, marked to show amendments
3.02	Amended and Restated Bylaws of the Company
10.01#	Business Loan Agreement, as supplemented (including Change in Terms Agreement), dated December 15, 2010, between New Frontier Media, Inc. and Great Western Bank
10.02	Confidential Separation Agreement and General Release, dated October 6, 2010, between MRG Entertainment, Inc. and Marc Laurence Greenberg
10.03	Confidential Separation Agreement and General Release, dated October 26, 2010, between MRG Entertainment, Inc. and Richard B. Goldberg
10.04	Lease Agreement Office and Industrial Space (including Assignment and Assumption of Lease), dated October 6, 2010, between New Frontier Media, Inc. and 6060 Partnership, LLP
31.01	Certification by CEO Michael Weiner pursuant to Rule 13a-14(a)/15d-14(d)
31.02	Certification by CFO Grant Williams 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 CFO Grant Williams 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.

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EX-3.01

Exhibit 3.01

AMENDED AND RESTATED BYLAWS

OF

NEW FRONTIER MEDIA, INC.

A Colorado Corporation

INDEX TO
AMENDED AND RESTATED BYLAWS OF
NEW FRONTIER MEDIA, INC.

	PAGE
ARTICLE 1 OFFICES	1
SECTION 1.1 PRINCIPAL OFFICE	1
SECTION 1.2 REGISTERED OFFICE	1
ARTICLE 2 SHAREHOLDERS	1
SECTION 2.1 ANNUAL MEETING	1
SECTION 2.2 SPECIAL MEETINGS	1
SECTION 2.3 PLACE OF MEETINGS	2
SECTION 2.4 NOTICE OF MEETING; ADJOURNMENT	2
SECTION 2.5 MEETING OF ALL SHAREHOLDERS	33
SECTION 2.6 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE	33
SECTION 2.7 VOTING REQUIREDSHAREHOLDER RECORDS	3
SECTION 2.8 QUORUM	44
SECTION 2.9 MANNER OF ACTING	4
SECTION 2.10 PROXIES	4
SECTION 2.11 VOTING OF SHARES	4
SECTION 2.12 VOTING OF SHARES BY CERTAIN SHAREHOLDERS	5
SECTION 2.13 INFORMAL ACTION BY SHAREHOLDERS	5
SECTION 2.14 VOTING BY BALLOT	5
SECTION 2.15 CUMULATIVE VOTING	6
SECTION 2.16 NOTICE OF BUSINESS TO BE BROUGHT BEFORE AN ANNUAL MEETING	6
SECTION 2.17 NOTICE OF NOMINATIONS FOR ELECTION TO THE BOARD OF DIRECTORS	9
SECTION 2.18 SPECIAL MEETING PROCEDURES	12
ARTICLE 3 BOARD OF DIRECTORS	515
SECTION 3.1 GENERAL POWERS	515
SECTION 3.2 PERFORMANCE OF DUTIES	615
SECTION 3.3 NUMBER, TENURE AND QUALIFICATIONS	616
SECTION 3.4 REGULAR MEETINGS	616
SECTION 3.5 SPECIAL MEETINGS	716
SECTION 3.6 NOTICE	717
SECTION 3.7 QUORUM	717
SECTION 3.8 MANNER OF ACTING	717
SECTION 3.9 INFORMAL ACTION BY DIRECTORS	817
SECTION 3.10 PARTICIPATION BY ELECTRONIC MEANS	818
SECTION 3.11 VACANCIES	818

SECTION 3.12 RESIGNATION	818
SECTION 3.13 REMOVAL	818
SECTION 3.14 COMMITTEES	818
SECTION 3.15 COMPENSATION	918
SECTION 3.16 PRESUMPTION OF ASSENT	919
SECTION 3.17 LIMITATIONS ON LIABILITY	919
ARTICLE 4 OFFICERS	919
SECTION 4.1 NUMBER	919
SECTION 4.2 ELECTION AND TERM OF OFFICE	1019
SECTION 4.3 REMOVAL	1020
SECTION 4.4 VACANCIES	1020
SECTION 4.5 CHIEF EXECUTIVE OFFICER	1020
SECTION 4.6 PRESIDENT	1020
SECTION 4.7 VICE PRESIDENT	1120
SECTION 4.8 SECRETARY	1121
SECTION 4.9 TREASURER	1121
SECTION 4.10 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS	1121
SECTION 4.11 BONDS	1221
SECTION 4.12 SALARIES	1222
ARTICLE 5 CONTRACTS, LOANS, CHECKS AND DEPOSITS	1222
SECTION 5.1 CONTRACTS	1222
SECTION 5.2 LOANS	1222
SECTION 5.3 CHECKS, DRAFTS, ETC.	1222
SECTION 5.4 DEPOSITS	1222
ARTICLE 6 SHARES, CERTIFICATES FOR SHARES AND TRANSFER OF SHARES	1322
SECTION 6.1 REGULATION	1322
SECTION 6.2 CERTIFICATES FOR STOCK	1322
SECTION 6.3 CANCELLATION OF CERTIFICATES	1323
SECTION 6.4 LOST, STOLEN OR DESTROYED CERTIFICATES	1423
SECTION 6.5 TRANSFER OF SHARES	1424
ARTICLE 7 INDEMNIFICATION	1524
SECTION 7.1 INDEMNIFICATION	1524
SECTION 7.2 RIGHT TO INDEMNIFICATION	1625
SECTION 7.3 EFFECT OF TERMINATION OF ACTION	1625
SECTION 7.4 GROUPS AUTHORIZED TO MAKE INDEMNIFICATION DETERMINATION	1626
SECTION 7.5 COURT—ORDERED INDEMNIFICATION	1726
SECTION 7.6 ADVANCE OF EXPENSES	1727

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SECTION 7.7 ADDITIONAL INDEMNIFICATION TO CERTAIN PERSONS OTHER THAN DIRECTORS	1727
SECTION 7.8 WITNESS EXPENSES	1727
SECTION 7.9 REPORT TO SHAREHOLDERS	1827
SECTION 7.10 PROVISION OF INSURANCE	1827
ARTICLE 8 FISCAL YEAR	1828
ARTICLE 9 DIVIDENDS	1828
ARTICLE 10 CORPORATE SEAL	1828
ARTICLE 11 WAIVER OF NOTICE	1928
ARTICLE 12 AMENDMENTS	1928
ARTICLE 13 EXECUTIVE COMMITTEE	1929
SECTION 13.1 APPOINTMENT	1929
SECTION 13.2 AUTHORITY	1929
SECTION 13.3 TENURE AND QUALIFICATIONS	1929
SECTION 13.4 MEETINGS	2029
SECTION 13.5 QUORUM	2029
SECTION 13.6 INFORMAL ACTION BY EXECUTIVE COMMITTEE	2030
SECTION 13.7 VACANCIES	2030
SECTION 13.8 RESIGNATIONS AND REMOVAL	2030
SECTION 13.9 PROCEDURE	2030
ARTICLE 14 EMERGENCY BYLAWS	2130

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AMENDED AND RESTATED BYLAWS

OF

NEW FRONTIER MEDIA, INC.

A Colorado Corporation

ARTICLE 1
OFFICES

SECTION 1.1 PRINCIPAL OFFICE.

The principal office of the corporation in the state of Colorado shall be located in the city of Boulder, county of Boulder. The corporation may have such other offices, either within or outside of the State of Colorado as the board of directors may designate, or as the business of the corporation may require from time to time.

SECTION 1.2 REGISTERED OFFICE.

The registered office of the corporation, required by the Colorado Business Corporation Act, as amended, to be maintained in the State of Colorado, may be, but need not be, identical with the principal office in the State of Colorado, and the address of the registered office may be changed from time to time by the board of directors.

ARTICLE 2
SHAREHOLDERS

SECTION 2.1 ANNUAL MEETING.

The annual meeting of the shareholders shall be held each year at such time on such day as shall be fixed by the board of directors for the purpose of electing directors and for the transaction of such other business as may properly come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of Colorado, such meeting shall be held on the next succeeding business day. If the election of directors shall not be held on the day designated herein for any annual meeting of the shareholders, or at any adjournment thereof, the board of directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as may be convenient.

SECTION 2.2 SPECIAL MEETINGS.

The corporation shall hold a special meeting of shareholders (i) on call of its chief executive officer, president, or board of directors, or (ii) if, subject to the procedures set forth below in this Section 2.2,2.2 and Section 2.18, the corporation receives one or more written demands for the meeting, stating the purpose or purposes for which it is to be held, signed and dated by the holders of shares representing at least ten percent of all the votes entitled to be cast on

any issue proposed to be considered at the meeting.  The corporation’s board of directors shall establish a record date for determining the shareholders entitled to demand in writing a special meeting of shareholders not later than 30 days after the date the corporation confirms that it has received written notice, sent by registered mail to the chair of the board of directors at the corporation’s principal address, from a then existing shareholder that such shareholder intends to make a written demand for a special shareholder meeting and that states the purposes for which it is to be held.  Upon receipt within 70 days of the record date so chosen of one or more written demands for the meeting, stating the purpose or purposes for which it is to be held, signed and dated by the holders of shares representing as of such record date at least ten percent of all the votes entitled to be cast on any issue proposed to be considered at the meeting, the board of directors shall establish pursuant to Section 2.6 hereof a future record date for determining the shareholders entitled to be given notice of and to vote at the special meeting for such purpose or purposes, which record date shall be not more than seventy days and not less than ten days prior to the date on which the action requiring such determination of shareholders is to be taken.  Notwithstanding the foregoing, the corporation’s board of directors shall not be required to establish a record date for determining the shareholders entitled to demand a special meeting of shareholders that is a date within 90 days of the most recently completed annual meeting of shareholders if any of the proposed purposes of the special meeting is to consider or vote upon a matter or issue that was considered at the most recently completed annual meeting of shareholders, or within 75 days of the next regularly scheduled annual meeting of shareholders if any of the proposed purposes of the special meeting will be considered at the next regularly scheduled annual meeting of shareholders.      business to be conducted at the special meeting shall be limited to the purpose or purposes stated in the demand. Except in accordance with this Article 2, shareholders shall not be permitted to propose business to be brought before a special meeting of the shareholders.

SECTION 2.3 PLACE OF MEETINGS.

The board of directors may designate any place, either within or outside of the State of Colorado, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal office of the corporation in the State of Colorado.

SECTION 2.4 NOTICE OF MEETING; ADJOURNMENT.

Written notice stating the place, day and hour of the meeting of shareholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall, unless otherwise prescribed by statute, be delivered not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the chief executive officer, the president, or the secretary, or the officer or other persons calling the meeting, to each shareholder of record entitled to vote at such meeting; provided, however, that if the authorized shares of the corporation are to be increased, at least thirty days’ notice shall be given, and if sale of all or substantially all assets are to be voted upon, at least twenty days’ notice shall be given. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his or her address as it appears on the stock transfer books of the corporation, with postage thereon prepaid.

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Any meeting of shareholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares entitled to vote and represented in person or by proxy at the meeting (even if then less than a quorum), excluding abstentions. At the adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed.  Subject to the next sentence, when a meeting is adjourned to another date, time or place, notice need not be given of the new date, time, or place if the new date, time or place is announced at the meeting before adjournment.  If the adjournment is for more than one hundred twenty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a new notice of the adjourned meeting shall b e given to each shareholder of record as of the new record date then entitled to vote at the meeting.

SECTION 2.5 MEETING OF ALL SHAREHOLDERS.

If all of the shareholders shall meet at any time and place, either within or outside of the State of Colorado, and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice, and at such meeting any corporate action may be taken.

SECTION 2.6 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.

For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose, the board of directors of the corporation may provide that the share transfer books shall be closed for a stated period but not to exceed, in any case, fifty days. If the share transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the share transfer books, the board of directors may fix in advance a date as the record date for any such determination of shareholders (other than one involving a purchase, redemption, or other acquisition of the o f the corporation’s shares), such date in any case to be not more than seventy days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the share transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section, such determination shall apply to any adjournment thereof unless otherwise required by law, the Articles of Incorporation or these bylaws.

SECTION 2.7 VOTING REQUIRED.SHAREHOLDER RECORDS.

The officer or agent having charge of the stock transfer books for shares of the corporation shall make, beginning the earlier of ten days before such meeting of shareholders or two business days after notice of the meeting is given and continuing through the meeting, a complete record of the shareholders entitled to vote at each meeting of shareholders or any adjournment thereof,

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arranged in alphabetical order, with the address of and the number of shares held by each. The record, for such required period, shall be kept on file at the principal office of the corporation, whether within or outside of the State of Colorado, and shall be subject to inspection by any shareholder for any purpose germane to the meeting at any time during usual business hours during such period. Such record shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof.

The original stock transfer books shall be the prima facie evidence as to who are the shareholders entitled to examine the record or transfer books or to vote at any meeting of shareholders.

SECTION 2.8 QUORUM.

One-third of the issued and outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, except as otherwise provided by the Colorado Business Corporation Act, as amended, and the Articles of Incorporation. In the absence of a quorum at any such meeting, a majority of the shares so represented may adjourn the meeting from time to time for a period not to exceed sixty days without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal during such meeting of that number of shareholders whose absence would cause there to b e less than a quorum.

SECTION 2.9 MANNER OF ACTING.

If a quorum is present, action on any matter at a meeting other than the election of directors is approved if a majority of the shares represented at the meeting and entitled to vote on the subject matter approve the action, unless the vote of a greater proportion or number or voting by classes is otherwise required by statute or by the Articles of Incorporation or these bylaws.  If a quorum is present and the matter presented at the meeting is an election of directors, that number of candidates equaling the number of directors to be elected, having the highest number of votes cast in favor of their election, are elected to the board of directors.

SECTION 2.10 PROXIES.

At all meetings of shareholders a shareholder may vote in person or by proxy executed in writing by the shareholder or by a duly authorized attorney-in-fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of the execution, unless otherwise provided in the proxy.

SECTION 2.11 VOTING OF SHARES.

Unless otherwise provided by these bylaws or the Articles of Incorporation, each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to vote at a meeting of shareholders, and each fractional share shall be entitled to a corresponding fractional vote on each such matter.

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SECTION 2.12 VOTING OF SHARES BY CERTAIN SHAREHOLDERS.

Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such other corporation may determine.

Shares standing in the name of a deceased person, a minor ward or an incompetent person, may be voted by an administrator, executor, court appointed guardian or conservator, either in person or by proxy without a transfer of such shares into the name of such administrator, executor, court appointed guardian or conservator. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name.

Shares standing in the name of a receiver may be voted by such receiver and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into the trustee name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed.

A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

Neither shares of its own stock belonging to this corporation, nor shares of its own stock held by it in a fiduciary capacity, nor shares of its own stock held by another corporation if the majority of shares entitled to vote for the election of directors of such corporation is held by this corporation may be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time.

Redeemable shares which have been called for redemption shall not be entitled to vote on any matter and shall not be deemed outstanding shares on and after the date on which written notice of redemption has been mailed to shareholders and a sum sufficient to redeem such shares has been deposited with a bank or trust company with irrevocable instruction and authority to pay the redemption price to the holders of the shares upon surrender of certificates therefor, if certificates have been issued in respect thereof, or confirmation of a notation of cancellation of such shares on the books and records of the corporation, if uncertificated.

SECTION 2.13 INFORMAL ACTION BY SHAREHOLDERS.

Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof.

SECTION 2.14 VOTING BY BALLOT.

Voting on any question or in any election may be by voice vote unless the presiding officer shall order or any shareholder shall demand that voting be by ballot.

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SECTION 2.15 CUMULATIVE VOTING.

Cumulative voting shall not be allowed.

SECTION 2.16 NOTICE OF BUSINESS TO BE BROUGHT BEFORE AN ANNUAL MEETING.

A.At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) brought before the meeting by the corporation and specified in the notice of meeting given by or at the direction of the board of directors, (ii) brought before the meeting by or at the direction of the chief executive officer, president, or board of directors, or (iii) otherwise properly brought before the meeting by a shareholder who (a) was a shareholder of record (and, with respect to any beneficial owner, if different, on whose behalf such business is proposed, only if such beneficial owner was the beneficial owner of shares of the corporation) both at the time of giving the notice provided for in this Section 2.16 and at the time of the meeting, (b) is entitled to vote at the meeting, and (c) has complied with this Section 2.16 as to such business. Except for proposals properly made in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (as so amended and inclusive of such rules and regulations, the “Exchange Act”), and included in the notice of meeting given by or at the direction of the board of directors, the foregoing clause (iii) shall be the exclusive means for a shareholder to propose business to be brought before an annual meeting of the shareholders. Shareholders seeking to nom inate persons for election to the board of directors must comply with Section 2.17 and this Section 2.16 shall not be applicable to nominations except as expressly provided in Section 2.17.

B.Without qualification, for business to be properly brought before an annual meeting by a shareholder, the shareholder must (i) provide Timely Notice (as defined below) thereof in writing and in proper form to the secretary of the corporation at the principal office of the corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.16. To be timely, a shareholder’s notice must be delivered to, or mailed and received at, the principal office of the corporation not les s than one hundred twenty days nor more than one hundred fifty days prior to the one-year anniversary of the preceding year’s annual meeting; provided, however, that if the date of the annual meeting is more than thirty days before or more than sixty days after such anniversary date, notice by the shareholder to be timely must be so delivered, or mailed and received, not later than ninety days prior to such annual meeting or, if later, the date that is ten days after the day on which public disclosure of the date of such annual meeting was first made (such notice within such time periods, “Timely Notice”). In no event shall any adjournment of an annual meeting or the announcement thereof commence a new time period for the giving of Timely Notice as described above.

C.To be in proper form for purposes of this Section 2.16, a shareholder’s notice to the secretary of the corporation shall set forth:

(i)As to each Proposing Person (as defined below), (a) the name and address of such Proposing Person (including, if applicable, the name and address that appear on the corporation’s books and records); and (b) the class or series and number of shares of the

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corporation that are, directly or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such Proposing Persons, except that such Proposing Person shall in all events be deemed to beneficially own any shares of any class or series of the corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future (the disclosures to be made pursuant to the foregoing clauses (a) and (b) are referred to as “Shareholder Information”);

(ii)As to each Proposing Person, (a) any derivative, swap or other transaction or series of transactions engaged in, directly or indirectly, by such Proposing Person, the purpose or effect of which is to give such Proposing Person economic risk similar to ownership of shares of any class or series of the corporation, including due to the fact that the value of such derivative, swap or other transactions are determined by reference to the price, value or volatility of any shares of any class or series of the corporation, or which derivative, swap or other t ransactions provide, directly or indirectly, the opportunity to profit from any increase in the price or value of shares of any class or series of the corporation (“Synthetic Equity Interests”), which Synthetic Equity Interests shall be disclosed without regard to whether (1) the derivative, swap or other transactions convey any voting rights in such shares to such Proposing Person, (2) the derivative, swap or other transactions are required to be, or are capable of being, settled through delivery of such shares or (3) such Proposing Person may have entered into other transactions that hedge or mitigate the economic effect of such derivative, swap or other transactions, (b) any proxy (other than a revocable proxy or consent given in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a solicitation statement filed on Schedule 14A), agreement, arrangement, understanding or relationship pursuant to which such Proposing Person has or shares a right to vote any shares of any class or series of the corporation, (c) any agreement, arrangement, understanding or relationship, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, engaged in, directly or indirectly, by such Proposing Person, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of shares of any class or series of the corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such Proposing Person with respect to the shares of any class or series of the corporation, or which provides, directly or indirectly, the opportunity to profit from any decrease in the price or value of the shares of any class or series of the corporation (“Short Interests”), (d) any performance related fees (other than an asset based fee) that such Proposing Person is entitled to based on any increase or d ecrease in the price or value of shares of any class or series of the corporation, or any Synthetic Equity Interests or Short Interests, if any, (e)(1) if such Proposing Person is not a natural person, the identity of the natural person or persons associated with such Proposing Person responsible for the formulation of and decision to propose the business to be brought before the meeting (such person or persons, the “Responsible Person”), the manner in which such Responsible Person was selected, any fiduciary duties owed by such Responsible Person to the equity holders or other beneficiaries of such Proposing Person, the qualifications and background of such Responsible Person and any material interests or relationships of such Responsible Person that are not shared generally by any other record or beneficial holder of the shares of any class or series of the corporation and that reasonably could have influenced the decision of such Proposing Person to propose such

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business to be brought before the meeting, and (2) if such Proposing Person is a natural person, the qualifications and background of such natural person and any material interests or relationships of such natural person that are not shared generally by any other record or beneficial holder of the shares of any class or series of the corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting, and (f) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (a) through (f) are referred to as “Disclosable Interests”); provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the shareholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner; and

(iii)As to each item of business that the shareholder proposes to bring before the annual meeting, (a) a reasonably brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of each Proposing Person, (b) the text of the proposal or business (including the text of any resolutions proposed for consideration), and (c) a reasonably detailed description of all agreements, arrangements and understandings (1) between or among any of the Proposing Persons or (2)  between or among any Proposing Person and any other person or entity (including their names) in connection with the proposal of such business by such shareholder.

For purposes of this Section 2.16, the term “Proposing Person” shall mean (i) the shareholder providing the notice of business proposed to be brought before an annual meeting, (ii) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the business proposed to be brought before the annual meeting is made, (iii) any affiliate or associate (each within the meaning of Rule 12b-2 under the Exchange Act for purposes of these bylaws) of such shareholder or beneficial owner, and (iv) any other person with whom such shareholder or beneficial owner (or any of their respective affiliates or associates) is Acting in Concert (as defined below).

A person shall be deemed to be “Acting in Concert” with another person for purposes of these bylaws if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert with, or towards a common goal relating to the management, governance or control of the corporation in parallel with, such other person where (i) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making processes and (ii) at least one additional factor suggests that such persons intend to act in concert or in parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately), attending meetings, conducting discussions, or making or soliciting invitations to act in concert or in parallel; provided, that a person shall not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies or consents from such other person in

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response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a proxy or consent solicitation statement filed on Schedule 14A. A person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person.

D.A shareholder providing notice of business proposed to be brought before an annual meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.16 shall be true and correct as of the record date for the meeting and as of the date that is ten business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the secretary at the principal office of the corporatio n not later than five business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date), and not later than eight business days prior to the date for the meeting, if practicable (or, if not practicable, on the first practicable date prior to the date for the meeting), or any adjournment or postponement thereof (in the case of the update and supplement required to be made as of ten business days prior to the meeting or any adjournment or postponement thereof).

E.Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with this Section 2.16. The chairman or presiding officer of the meeting shall, if the facts warrant, determine that the business was not properly brought before the meeting in accordance with this Section 2.16, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

F.This Section 2.16 is expressly intended to apply to any business proposed to be brought before an annual meeting of shareholders other than any proposal made pursuant to Rule 14a-8 under the Exchange Act. In addition to the requirements of this Section 2.16 with respect to any business proposed to be brought before an annual meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such business. Nothing in this Section 2.16 shall be deemed to affect the rights of shareh olders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

G.For purposes of these bylaws, “public disclosure” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

SECTION 2.17 NOTICE OF NOMINATIONS FOR ELECTION TO THE BOARD OF DIRECTORS.

A.Nominations of any person for election to the board of directors at an annual meeting or at a special meeting (but only if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting) may be made at such meeting only (i) by or at the direction of the board of directors, including by any committee or persons appointed by the board of directors, or (ii) by a shareholder who (a) was a

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shareholder of record (and, with respect to any beneficial owner, if different, on whose behalf such nomination is proposed to be made, only if such beneficial owner was the beneficial owner of shares of the corporation) both at the time of giving the notice provided for in this Section 2.17 and at the time of the meeting, (b) is entitled to vote at the meeting, and (c) has complied with this Section 2.17 as to such nomination. The foregoing clause (ii) shall be the exclusive means for a shareholder to make any nomination of a person or persons for election to the board of directors at an annual meeting or special meeting.

B.Without qualification, for a shareholder to make any nomination of a person or persons for election to the board of directors at an annual meeting, the shareholder must (i) provide Timely Notice (as defined in Section 2.16) thereof in writing and in proper form to the secretary of the corporation at the principal office of the corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.17.  Without qualification, if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting, then for a shareholder to make any nomination of a person or persons for election to the board of directors at a special meeting, the shareholder must (i) provide timely notice thereof in writing and in proper form to the secretary of the corporation at the principal office of the corporation, and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.17 To be timely, a shareholder’s notice for nominations to be made at a special meeting must be delivered to, or mailed and received at, the principal office of the corporation not earlier than the date that is one hundred fifty days prior to such special meeting and not later than the date that is one hundred twenty days prior to such special meeting or, if later, the tenth day following the day on which public disclosure (as defined in Section 2.16) of the date of such special meeting was first made. In no event shall any adjournment of an annual meeting or special meeting or the announcement thereof commence a new time period for the giving of a shareholder’s notice as described above.

C.To be in proper form for purposes of this Section 2.17, a shareholder’s notice to the secretary shall set forth:

(i)As to each Nominating Person (as defined below), the Shareholder Information (as defined in Section 2.16(C)(i), except that for purposes of this Section 2.17 the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.16(C)(i));

(ii)As to each Nominating Person, any Disclosable Interests (as defined in Section 2.16(C)(ii), except that for purposes of this Section 2.17 the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.16(C)(ii) and the disclosure in clause (f) of Section 2.16(C)(ii) shall be made with respect to the election of directors at the meeting);

(iii)As to each person whom a Nominating Person proposes to nominate for election as a director, (a) all information with respect to such proposed nominee that would be required to be set forth in a shareholder’s notice pursuant to this Section 2.17 if such proposed nominee were a Nominating Person, (b) all information relating to such proposed nominee that is required to be disclosed in a proxy statement or other filings required to be

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made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14(a) under the Exchange Act (including such proposed nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (c) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among any Nominating Person, on the one hand, and each proposed nominee, his or her respective affiliates and associates and any other persons with whom such proposed nominee (or any of his or her respective affiliates and associates) is Acting in Concert (as defined in Section 2.16(C)), on the other hand, including, without limitation, all information that would be required to be disclos ed pursuant to Item 404 under Regulation S-K (or any successor regulations) if such Nominating Person were the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant, and (d) a completed and signed questionnaire, representation and agreement as provided in Section 2.17(F); and

(iv)The corporation may require any proposed nominee to furnish such other information (a) as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director of the corporation in accordance with the corporation’s Corporate Governance Guidelines or (b) that could be material to a reasonable shareholder’s understanding of the independence or lack of independence of such proposed nominee.

For purposes of this Section 2.17, the term “Nominating Person” shall mean (i) the shareholder providing the notice of the nomination proposed to be made at the meeting, (ii) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the nomination proposed to be made at the meeting is made, (iii) any affiliate or associate of such shareholder or beneficial owner, and (iv) any other person with whom such shareholder or such beneficial owner (or any of their respective affiliates or associates) is Acting in Concert.

D.A shareholder providing notice of any nomination proposed to be made at a meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.17 shall be true and correct as of the record date for the meeting and as of the date that is ten business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the secretary at the principal office of the corporation not later than five business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date), and not later than eight business days prior to the date for the meeting, if practicable (or, if not practicable, on the first practicable date prior to the date for the meeting), or any adjournment or postponement thereof (in the case of the update and supplement required to be made as of ten business days prior to the meeting or any adjournment or postponement thereof).

E.Notwithstanding anything in these bylaws to the contrary, no person shall be eligible for election as a director of the corporation unless nominated in accordance with this Section 2.17. The presiding officer at the meeting shall, if the facts warrant, determine that a nomination was not properly made in accordance with this Section 2.17, and if he or she should so

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determine, he or she shall so declare such determination to the meeting and the defective nomination shall be disregarded.

F.To be eligible to be a nominee for election as a director of the corporation, the proposed nominee must deliver (in accordance with the time periods prescribed for delivery of notice under this Section 2.17) to the secretary at the principal office of the corporation a written questionnaire with respect to the background and qualification of such proposed nominee (which questionnaire shall be provided by the secretary upon written request) and a written representation and agreement (in form provided by the secretary upon written reques t) that such proposed nominee satisfies the Applicable Qualification Criteria (as defined below) and (i) is not and will not become a party to (a) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such proposed nominee, if elected as a director of the corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the corporation or (b) any Voting Commitment that could limit or interfere with such proposed nominee’s ability to comply, if elected as a director of the corporation, with such proposed nominee’s fiduciary duties under applicable law, (ii) is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed to the corporation and (iii) in such proposed nominee’s individual capacity and on behalf of the shareholder (or the beneficial owner, if different) on whose behalf the nomination is made, would be in compliance, if elected as a director of the corporation, and will comply with applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the corporation.

For purposes of this Section 2.17, the term “Applicable Qualification Criteria” shall mean that the proposed nominee (i) is capable of demonstrating to the reasonable satisfaction of board of directors or a committee thereof, in its sole discretion, an understanding basic financial statements, (ii) is over 21 years of age, (iii) has relevant business experience (taking into account the business experience of the other directors) and high moral character, in each case as determined by the board of directors or a committee thereof, in its sole discretion, and (iv) satisfies such other criteria for service on the board of directors as may be publicly disclosed from time to time by the corporation.

G.In addition to the requirements of this Section 2.17 with respect to any nomination proposed to be made at a meeting, each Nominating Person shall comply with all applicable requirements of the Exchange Act with respect to any such nominations.

SECTION 2.18 SPECIAL MEETING PROCEDURES.

A.No shareholder may demand that the corporation call a special meeting of the shareholders pursuant to Section 2.2 unless a shareholder of record has first submitted a request in writing that the board of directors fix a record date for the purpose of determining the shareholders entitled to demand that the corporation call such special meeting, which request shall be in proper form and delivered to, or mailed and received by, the secretary of the corporation at the principal office of the corporation.

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B.            To be in proper form for purposes of this Section 2.18, a request by a shareholder for the board of directors to fix a record date shall set forth:

(i)            As to each Requesting Person (as defined below), the Shareholder Information (as defined in Section 2.16(C)(i), except that for purposes of this Section 2.18 the term “Requesting Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.16(C)(i));

(ii)           As to each Requesting Person, any Disclosable Interests (as defined in Section 2.16(C)(ii), except that for purposes of this Section 2.18 the term “Requesting Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.16(C)(ii) and the disclosure in clause (f) of Section 2.16(C)(ii) shall be made with respect to the business proposed to be conducted at the special meeting); and

(iii)          As to the purpose or purposes of the special meeting, (a) a reasonably brief description of the purpose or purposes of the special meeting and the business proposed to be conducted at the special meeting, the reasons for conducting such business at the special meeting and any material interest in such business of each Requesting Person, and (b) a reasonably detailed description of all agreements, arrangements and understandings (1) between or among any of the Requesting Persons or (2) between or among any Requesting Person and any other person or entity (including their names) in connection with the request for the special meeting or the business proposed to be conducted at the special meeting.

For purposes of this Section 2.18(B), the term “Requesting Person” shall mean (i) the shareholder making the request to fix a record date for the purpose of determining the shareholders entitled to demand that the a special meeting be called, (ii) the beneficial owner or beneficial owners, if different, on whose behalf such request is made, (iii) any affiliate or associate of such shareholder or beneficial owner, and (iv) any other person with whom such shareholder or beneficial owner (or any of their respective affiliates or associates) is Acting in Concert (as defined in Section 2.16(C)).

C.            Within thirty days after receipt of a request to fix a record date in proper form and otherwise in compliance with this Section 2.18 from any shareholder of record, the board of directors may adopt a resolution fixing a record date for the purpose of determining the shareholders entitled to demand that the corporation call a special meeting, which date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors. Notwithstanding anything in this Section 2.18 to the contrary, no record date shall be fixed if the board of directors determines that the demand or demands that would otherwise be submitted following such record date could not comply with the requirements set forth in clauses (ii), (iv), (v) or (vi) of Section 2.18(E).

D.            Without qualification, a special meeting of the shareholders shall not be called pursuant to Section 2.2 unless shareholders of record as of the record date fixed in accordance with Section 2.18(C) who hold, in the aggregate, more than ten percent of the voting power of the outstanding shares of the corporation (the “Requisite Percentage”) timely provide one or more

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demands to call such special meeting in writing and in proper form to the secretary of the corporation at the principal office of the corporation. Only shareholders of record on the record date shall be entitled to demand that the corporation call a special meeting of the shareholders pursuant to Section 2.2. To be timely, a shareholder’s demand to call a special meeting must be delivered to, or mailed and received at, the principal office of the corporation not later than the seventieth day following the record date fixed in accordance with Section 2.18(C). To be in proper form for purposes of this Section 2.18, a demand to call a special meeting shall set forth (i) the business proposed to be conducted at the special meeting, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration), and (iii) with respect to any sharehol der or shareholders submitting a demand to call a special meeting (except for any shareholder that has provided such demand in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a solicitation statement filed on Schedule 14A) (a “Solicited Shareholder”) the information required to be provided pursuant to this Section 2.18 of a Requesting Person. A shareholder may revoke a demand to call a special meeting by written revocation delivered to the secretary at any time prior to the special meeting. If any such revocation(s) are received by the secretary after the secretary’s receipt of written demands from the holders of the Requisite Percentage of shareholders, and as a result of such revocation(s), there no longer are unrevoked demands from the Requisite Percentage of shareholders to call a special meeting, the board of directors shall have the discretion to determine whether or not to proceed with th e special meeting.

F.             The secretary shall not accept, and shall consider ineffective, a written demand from a shareholder to call a special meeting (i) that does not comply with this Section 2.18, (ii) that relates to an item of business to be transacted at such meeting that is not a proper subject for shareholder action under applicable law, (iii) that includes an item of business to be transacted at such meeting that did not appear on the written request that resulted in the determination of the record date (the “Current Record Date”) to determine the shareholders entitled to submit such written demand, (iv) that relates to an item of business (other than the election of directors) that is identical or substantially similar to an item of business (a “Similar Item”) for which a re cord date (other than the Current Record Date) was previously fixed and such demand is delivered between the time beginning on the day after such previous record date and ending on the one-year anniversary of such previous record date, (v) if a Similar Item will be submitted for shareholder approval at any shareholder meeting to be held on or before the date that is one hundred twenty days after the secretary receives such demand, or (vi) if a Similar Item has been presented at the most recent annual meeting or at any special meeting held within one year prior to receipt by the secretary of such demand to call a special meeting.

G.            After receipt within seventy days of the record date so chosen of one or more written demands in proper form and in accordance with this Section 2.18 from a shareholder or shareholders holding the Requisite Percentage, the board of directors shall duly call, and determine the place, date and time of, a special meeting of shareholders for the purpose or purposes and to conduct the business specified in the demands received by the corporation. Notwithstanding anything in these bylaws to the contrary, the board of directors may submit its own proposal or proposals for consideration at such a special meeting. The record date for determining the shareholders entitled to be given notice of and to vote at such a special meeting shall be fixed in

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accordance with Section 2.6 of these bylaws. The board of directors shall provide written notice of such special meeting to the shareholders in accordance with Section 2.4 of these bylaws.

H.            In connection with a special meeting called in accordance with Section 2.2 and this Section 2.18, the shareholder or shareholders (except for any Solicited Shareholder) who requested that the board of directors fix a record date in accordance with this Section 2.18 or who delivered a demand to call a special meeting to the secretary shall further update and supplement the information previously provided to the corporation in connection with such request or demand, if necessary, so that the information provided or required to be provided in such request or demand pursuant to this Section 2.18 shall be true and correct as of the record date for the special meeting and as of the date that is ten business days prior to the meeting or any adjournment or postponement thereof, and such up date and supplement shall be delivered to, or mailed and received by, the secretary at the principal office of the corporation not later than five business days after the record date for the special meeting (in the case of the update and supplement required to be made as of the record date), and not later than eight business days prior to the date for the meeting, if practicable (or, if not practicable, the first practicable date prior to the date for the meeting), or any adjournment or postponement thereof (in the case of the update and supplement required to be made as of ten business days prior to the special meeting or any adjournment or postponement thereof).

I.              Notwithstanding anything in these bylaws to the contrary, the secretary shall not be required to call a special meeting pursuant to Section 2.2 or this Section 2.18 except in accordance with this Section 2.18. If the board of directors shall determine that any request to fix a record date or demand to call and hold a special meeting was not properly made in accordance with this Section 2.18, or shall determine that the shareholder or shareholders requesting that the board of directors fix such record date or submitting a demand to call the special meeting have not otherwise complied with this Section 2.18, then the board of directors shall not be required to fix a record date or to call and hold the special meeting. In addition to the requirements of this Section 2.18, each R equesting Person shall comply with all requirements of applicable law, including all requirements of the Exchange Act, with respect to any request to fix a record date or demand to call a special meeting.

ARTICLE 3
BOARD OF DIRECTORS

SECTION 3.1 GENERAL POWERS.

The business and affairs of the corporation shall be managed by its board of directors.

SECTION 3.2 PERFORMANCE OF DUTIES.

A director of the corporation shall perform his or her duties as a director, including his or her duties as a member of any committee of the board upon which he or she may serve, in good faith, in a manner he or she reasonably believes to be in the best interests of the corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. In performing his or her duties, a director shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, in each

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case prepared or presented by persons and groups listed in paragraphs (A), (B), and (C) of this Section 3.2; but he or she shall not be considered to be acting in good faith if he or she has knowledge concerning the matter in question that would cause such reliance to be unwarranted. A person who so performs his or her duties shall not have any liability by reason of being or having been a director of the corporation. Those persons and groups on whose information, opinions, reports, and statements a director is entitled to rely upon are:

A.            One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matter presented;

B.            Counsel, public accountants, or other persons as to matters which the director reasonably believes to be within such persons’ professional or expert competence; or

C.            A committee of the board upon which he or she does not serve, duly designated in accordance with the provision of the articles of incorporation or the bylaws, as to matters within its designated authority, which committee the director reasonably believes to merit confidence.

SECTION 3.3 NUMBER, TENURE AND QUALIFICATIONS.

The number of directors of the corporation shall not be less than three (3) nor more than seven (7). The number of directors of the corporation shall be fixed from time to time by resolution of the board of directors, but in no instance shall there be less than three (3) directors unless there are fewer than three (3) shareholders, in which event the number of directors may be the same as the number of shareholders. Each director shall hold office until the next annual meeting of shareholders or until his or her successor shall have been elected and qualified. Directors need not be residents of the state of Colorado or shareholders of the corporation.

There shall be a chairman of the board, who shall be elected from among the directors. He or she shall preside at all meetings of the shareholders and of the board of directors unless unavailable. He or she shall have such other powers and duties as may be prescribed by the board of directors.

SECTION 3.4 REGULAR MEETINGS.

A regular meeting of the board of directors shall be held without other notice than this bylaw immediately after, and at the same place as, the annual meeting of shareholders. The board of directors may provide, by resolution, the time and place, either within or without the state of Colorado, for the holding of additional regular meetings without other notice than such resolution.

SECTION 3.5 SPECIAL MEETINGS.

Special meetings of the board of directors may be called by or at the request of the chief executive officer, the president or any two directors. The person or persons authorized to call special meetings of the board of directors may fix any place, either within or without the state of Colorado, as the place for holding any special meeting of the board of directors called by them.

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SECTION 3.6 NOTICE.

Written notice of any special meeting of directors shall be given as follows:

By mail to each director at his or her business address at least three days prior to the meeting;

By personal delivery or telegram at least twenty-four hours prior to the meeting to the business address of each director, or in the event such notice is given on a Saturday, Sunday or holiday, to the residence address of each director; or

By any other method in writing permitted under Section 177-101-402 of the Colorado Business Corporation Act, as amended.

If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. If another permitted method is used, such notice shall be effective as provided in Section 7-101-402 of the Colorado Business Corporation Act, as amended.

Any director may waive notice of any meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.

SECTION 3.7 QUORUM.

A majority of the number of directors fixed by or pursuant to Section 3.2 of this Article 3 shall constitute a quorum for the transaction of business at any meeting of the board of directors, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice.

SECTION 3.8 MANNER OF ACTING.

Except as otherwise required by law or by the Articles of Incorporation, the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors.

SECTION 3.9 INFORMAL ACTION BY DIRECTORS.

Any action required or permitted to be taken by the board of directors or by a committee thereof at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors or all of the committee members entitled to vote with respect to the subject matter thereof.

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SECTION 3.10 PARTICIPATION BY ELECTRONIC MEANS.

Any members of the board of directors or any committee designated by such board may participate in a meeting of the board of directors or committee by means of telephone conference or similar communications equipment by which all persons participating in the meeting can hear each other at the same time. Such participation shall constitute presence in person at the meeting.

SECTION 3.11 VACANCIES.

Any vacancy occurring in the board of directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office. Any directorship to be filled by reason of an increase in the number of directors may be filled by election by the board of directors for a term of office continuing only until the next election of directors by the shareholders.

SECTION 3.12 RESIGNATION.

Any director of the corporation may resign at any time by giving written notice to the president or the secretary of the corporation. The resignation of any director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. When one or more directors shall resign from the board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.

SECTION 3.13 REMOVAL.

Any director or directors of the corporation may be removed at any time, with or without cause, in the manner provided in the Colorado Business Corporation Act, as amended.

SECTION 3.14 COMMITTEES.

By resolution adopted by a majority of the board of directors, the directors may designate two or more directors to constitute a committee, any of which shall have such authority in the management of the corporation as the board of directors shall designate and as shall be prescribed by the Colorado Business Corporation Act, as amended.

SECTION 3.15 COMPENSATION.

By resolution of the board of directors and irrespective of any personal interest of any of the members, each director may be paid his or her expenses, if any, of attendance at each meeting of the board of directors, and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the board of directors or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.

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SECTION 3.16 PRESUMPTION OF ASSENT.

A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent shall be entered in the minutes of the meeting or unless he or she shall file his or her written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.

SECTION 3.17 LIMITATIONS ON LIABILITY.

To the fullest extent permitted by the Colorado Business Corporation Act, as amended, a director of the corporation shall not be liable to the corporation or its shareholders for monetary damages for any action taken or any failure to take any action as a director. Notwithstanding the foregoing, a director will have liability for monetary damages for a breach or failure which involves: (i) a violation of criminal law; (ii) a transaction from which the director derived an improper personal benefit, either directly or indirectly; (iii) distributions in violation of the Colorado Business Corporation Act, as amended, or the Articles of Incorporation of the corporation (but only to the extent provided by law); (iv) willful misconduct or disregard for the best interests of the corporation concerning any acts or omissions concerning any proceeding other than in the right of the cor poration or a shareholder; or (v) reckless, malicious or wanton acts or omissions concerning any proceeding other than in the right of the corporation or of a shareholder. No repeal, amendment or modification of this Article, whether direct or indirect, shall eliminate or reduce its effect with respect to any act or omission of a director of the corporation occurring prior to such repeal, amendment or modification.

ARTICLE 4
OFFICERS

SECTION 4.1 NUMBER.

The officers of the corporation shall be a chief executive officer, a president, a secretary, and a treasurer, each of whom shall be elected by the board of directors. Such other officers as may be deemed necessary may be elected or appointed by the board of directors. Any two or more offices may be held by the same person.

SECTION 4.2 ELECTION AND TERM OF OFFICE.

The officers of the corporation to be elected by the board of directors shall be elected annually by the board of directors at the first meeting of the board of directors held after the annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as practicable. Each officer shall hold office until his or her successor shall have been duly elected and shall have qualified or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided.

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SECTION 4.3 REMOVAL.

Any officer or agent may be removed by the board of directors whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights.

SECTION 4.4 VACANCIES.

A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term.

SECTION 4.5 CHIEF EXECUTIVE OFFICER

The chief executive officer (the “CEO”) shall be the chief executive officer of the corporation, shall have overall responsibility and authority for management of the operations of the corporation (subject to the authority of the board of directors), shall preside at all meetings of the shareholders if the chairman of the board of directors is unavailable, unless unavailable.  He or she may sign, with the secretary or any other proper officer of the corporation thereunto authorized by the board of directors, certificates for shares of the corporation and deeds, mortgages, bonds, contracts, or other instruments which the board of directors has authorized to be executed, excepted in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed.

SECTION 4.6 PRESIDENT.

The president shall, subject to the control of the board of directors and the CEO, in general supervise the business and affairs of the corporation. He or she shall, when present, and in the absence of a chairman of the board and CEO, preside at all meetings of the shareholders and of the board of directors.  HerHe or she shall, in the absence of the CEO or in the event of the CEO’s death, inability or refusal to act, perform all duties of the CEO, and when so acting, shall have all the powers of and be subject to all of the restrictions on the CEO.  He or she may sign, with the secretary or any other proper officer of the corporation thereunto authorized by the board of directors, certificates for shares of the corporation and deeds, mortgages, bonds, contracts, or other instruments which the board of directors has authorized to be executed, excepted in c ases where the signing and execution thereof shall be expressly delegated by the board of directors or by these bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the board of directors from time to time.

SECTION 4.7 VICE PRESIDENT.

If elected or appointed by the board of directors or any senior officer, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or appointment, or in the absence of any designation, then in the order of their election or appointment) shall, in the absence of the president or in the event of his or her death, inability or refusal to act, perform all duties of the president, and when so acting, shall have all the

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powers of and be subject to all the restrictions upon the president. Any vice president may sign, with the treasurer or an assistant treasurer or the secretary or an assistant secretary, certificates for shares of the corporation; and shall perform such other duties as from time to time may be assigned to him or her by the CEO, the president or by the board of directors.

SECTION 4.8 SECRETARY.

The secretary shall: (a) keep the minutes of the proceedings of the shareholders and of the board of directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all documents the execution of which on behalf of the corporation under its seal is duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder; (e) sign with the chairman or vice chairman of the board of directors, or the CEO, the president, or a vice president, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the board of direc tors; (f) have general charge of the stock transfer books of the corporation; and (g) in general perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him or her by the CEO, the president or by the board of directors.

SECTION 4.9 TREASURER.

The treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article 5 of these bylaws; and (c) in general perform all of the duties incident to the office of treasurer and such other duties as from time to time may be assigned to him or her by the CEO, the president or by the board of directors.

SECTION 4.10 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.

The assistant secretaries, when authorized by the board of directors, may sign with the chairman or vice chairman of the board of directors or the CEO, the president or a vice president certificates for shares of the corporation the issuance of which shall have been authorized by a resolution of the board of directors. The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or the treasurer, respectively, or by the CEO, the president or the board of directors.

SECTION 4.11 BONDS.

If the board of directors by resolution shall so require, any officer or agent of the corporation shall give bond to the corporation in such amount and with such surety as the board of directors may deem sufficient, conditioned upon the faithful performance of their respective duties and offices.

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SECTION 4.12 SALARIES.

The salaries of the officers shall be fixed from time to time by the board of directors or its designee and no officer shall be prevented from receiving such salary by reason of the fact that he or she is also a director of the corporation.

ARTICLE 5
CONTRACTS, LOANS, CHECKS AND DEPOSITS

SECTION 5.1 CONTRACTS.

The board of directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.

SECTION 5.2 LOANS.

No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the board of directors. Such authority may be general or confined to specific instances.

SECTION 5.3 CHECKS, DRAFTS, ETC.

All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the board of directors.

SECTION 5.4 DEPOSITS.

All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may select.

ARTICLE 6
SHARES, CERTIFICATES FOR SHARES AND TRANSFER OF SHARES

SECTION 6.1 REGULATION.

The board of directors may make such rules and regulations as it may deem appropriate concerning the issuance, transfer and registration of certificates for shares of the corporation, including the appointment of transfer agents and registrars.

SECTION 6.2 CERTIFICATES FOR STOCK.

The shares of the corporation’s stock may be certificated or uncertificated, as provided under Colorado law, and shall be entered in the books of the corporation and registered as they are issued.  Any certificates issued to any shareholder of the corporation shall be respectively

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numbered serially for each class of shares, or series thereof, as they are issued, shall be impressed with the corporate seal or a facsimile thereof, if applicable, and shall be signed by the chairman or vice-chairman of the board of directors or by the president or a vice president and by the treasurer or an assistant treasurer or by the secretary or an assistant secretary; provided that such signatures may be facsimile if the certificate is counter-signed by a transfer agent, or registered by a registrar other than the corporation itself or its employee.  Each certificate shall state the name of the corporation, the fact that the corporation is organized or incorporated under the laws of the State of Colorado, the name of the person to whom issued, the date of issue, the class (or series of any class), the number of shares represented thereby and the par value of the shares represented thereby or a state ment that such shares are without par value.  A statement of the designations, preferences, qualifications, limitations, restrictions and special or relative rights of the shares of each class shall be set forth in full or summarized on the face or back of the certificates which the corporation shall issue, or in lieu thereof, the certificate may set forth that such a statement or summary will be furnished to any shareholder upon request without charge.  Each certificate shall be otherwise in such form as may be prescribed by the board of directors and as shall conform to the rules of any stock exchange on which the shares may be listed.

Within a reasonable time after the issuance or transfer of uncertificated shares, the corporation shall send to the registered owner thereof a written statement that shall set forth all of the information required by the Colorado Business Corporation Act, as amended, and these bylaws to be provided to holders of uncertificated shares, and any restrictions on the transfer or registration of such shares imposed by the corporation’s then-effective articles of incorporation, bylaws and any agreement among shareholders or any agreement between shareholders and the corporation.

The corporation shall not issue certificates representing fractional shares and shall not be obligated to make any transfers creating a fractional interest in a share.  The corporation may, but shall not be obligated to, issue scrip in lieu of any fractional shares, such scrip to have terms and conditions specified by the board of directors.

SECTION 6.3 CANCELLATION OF CERTIFICATES.

All certificates surrendered to the corporation for transfer shall be canceled and no new certificates shall be issued in lieu thereof until the former certificate for a like number of shares shall have been surrendered and canceled, except as herein provided with respect to lost, stolen or destroyed certificates.

SECTION 6.4 LOST, STOLEN OR DESTROYED CERTIFICATES.

Any shareholder claiming that his or her certificate for shares is lost, stolen or destroyed may make an affidavit or affirmation of that fact and lodge the same with the secretary of the corporation, accompanied by a signed application for a new certificate.  Thereupon, and upon the giving of a satisfactory bond of indemnity to the corporation not exceeding an amount double the value of the shares as represented by such certificate (the necessity for such bond and the amount required to be determined by the president and treasurer of the corporation), the corporation may issue (i) a new certificate of the same tenor and representing the same number, class and series of shares as were represented by the certificate alleged to be lost, stolen or destroyed; or (ii) 

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uncertificated shares in place of the certificate previously issued by the corporation alleged to have been lost, stolen or destroyed.

SECTION 6.5 TRANSFER OF SHARES.

Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, and evidence of compliance with applicable securities laws and other restrictions, it shall be the duty of the corporation to issue a new certificate or evidence of the issuance of uncertificated shares to the shareholder entitled thereto, cancel the old certificate and record the transaction upon the corporation’s books. Upon the surrender of any certificate for transfer, such certificate shall at once be conspicuously marked on its face “Cancelled” and filed with the permanent stock records of the corporation.

Upon the receipt of proper transfer instructions from the registered owner of uncertificated shares, such uncertificated shares shall be cancelled, issuance of new equivalent uncertificated shares or certificated shares shall be made to the shareholder entitled thereto and the transaction shall be recorded upon the books of the corporation.  If the corporation has a transfer agent or registrar acting on its behalf, the signature of any officer or representative thereof may be in facsimile.

The board of directors may appoint a transfer agent and one or more co-transfer agents and a registrar and one or more co-registrars and may make or authorize such agent to make all such rules and regulations deemed expedient concerning the issue, transfer and registration of shares of stock.

As against the corporation, a transfer of shares can be made only on the books of the corporation and in the manner hereinabove provided, and the corporation shall be entitled to treat the holder of record of any share as the owner thereof and shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the statutes of the State of Colorado.

ARTICLE 7
INDEMNIFICATION

SECTION 7.1 INDEMNIFICATION.

For purposes of this Article 7, a “Proper Person” means any person (including the estate or personal representative of a director) who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether formal or informal, by reason of the fact that such individual is or was a director, officer, employee, fiduciary or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, fiduciary or agent of any foreign or domestic profit or nonprofit corporation or of any partnership, joint venture, trust, profit or nonprofit unincorporated association, limited liability company, or other enterprise or employee benefit plan.  The corporation shall indemnify any Proper Person against reasonably incurred expenses (including attorneys’ fees), judgments, penalties, fines (including

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any excise tax assessed with respect to an employee benefit plan) and amounts paid in settlement reasonably incurred by such Proper Person in connection with such action, suit or proceeding if it is determined by the groups set forth in Section 7.4 of this Article 7 that such Proper Person conducted himself in good faith and reasonably believed (i) in the case of conduct in the official capacity of such Proper Person with the corporation, that the conduct of such Proper Person was in the corporation’s best interests; or (ii) in all other cases (except criminal cases), that the conduct of such Proper Person was at least not opposed to the corporation’s best interests; or (iii) in the case of any criminal proceeding, that the Proper Person had no reasonable cause to believe such conduct was unlawful.  Official capacity means, when used with respect to a director, the office of director and, when used with respect to any other Proper Person, the office in a corporation held by the officer or the employment, fiduciary or agency relationship undertaken by the employee, fiduciary, or agent on behalf of the corporation.  Official capacity does not include service for any other domestic or foreign corporation or other person or employee benefit plan.

A director’s conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the participants in or beneficiaries of the plan is conduct that satisfies the requirement in (ii) of this Section 7.1.  A director’s conduct with respect to an employee benefit plan for a purpose that the director did not reasonably believe to be in the interests of the participants in or beneficiaries of the plan shall be deemed not to satisfy the requirement of this Section 7.1 that a director acted in good faith.

No indemnification shall be made under this Article 7 to a Proper Person with respect to any claim, issue or matter in connection with a proceeding by or in the right of a corporation in which the Proper Person was adjudged liable to the corporation or in connection with any proceeding charging that the Proper Person derived an improper personal benefit, whether or not involving action in an official capacity, in which such Proper Person was adjudged liable on the basis that such Proper Person derived an improper personal benefit.  Further, indemnification under this Section 7.1 in connection with a proceeding brought by or in the right of the corporation shall be limited to reasonable expenses, including attorneys’ fees, incurred in connection with the proceeding.

SECTION 7.2 RIGHT TO INDEMNIFICATION.

The corporation shall indemnify any Proper Person who was wholly successful, on the merits or otherwise, in defense of any action, suit, or proceeding as to which such Proper Person was entitled to indemnification under Section 7.l of this Article 7 against expenses (including attorneys’ fees) reasonably incurred by such Proper Person in connection with the proceeding without the necessity of any action by the corporation other than the determination in good faith that the defense has been wholly successful.

SECTION 7.3 EFFECT OF TERMINATION OF ACTION.

The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the person seeking indemnification did not meet the standards of conduct described in Section 7.1 of this Article 7.  Entry of a judgment by consent as part of a settlement shall not be deemed an adjudication of liability, as described in Section 7.2 of this Article 7.

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SECTION 7.4 GROUPS AUTHORIZED TO MAKE INDEMNIFICATION DETERMINATION.

Except where there is a right to indemnification as set forth in Sections 7.1 or 7.2 of this Article 7 or where indemnification is ordered by a court in Section 7.5 of this Article 7, any indemnification shall be made by the corporation only as determined in the specific case by a proper group that indemnification of the Proper Person is permissible under the circumstances because the Proper Person has met the applicable standards of conduct set forth in Section 7.1 of this Article 7.  This determination shall be made by the board of directors by a majority vote of those present at a meeting at which a Quorum, as defined hereunder, is present.  For purposes of this Article 7, a “Quorum” shall consist of all directors not party to the proceeding.  If a Quorum cannot be obtained, the determination shall be made by a majority vote of a committee of the board of directors designated by the board of directors, which committee shall consist of two or more directors not parties to the proceeding, except that directors who are parties to the proceeding may participate in the designation of directors for the committee.  If a Quorum of the board of directors cannot be obtained and the committee cannot be established, or even if a Quorum is obtained or the committee is designated and a majority of the directors constituting such Quorum or committee so directs, the determination shall be made by (i) independent legal counsel selected by a vote of the board of directors or the committee in the manner specified in this Section 7.4 or, if a Quorum of the full board of directors cannot be obtained and a committee cannot be established, by independent legal counsel selected by a majority vote of the full board of directors (including directors who are parties to the action) or (ii) a vote of the shareholders.

Authorization of indemnification and advance of expenses shall be made in the same manner as the determination that indemnification or advance of expenses is permissible except that, if the determination that indemnification or advance of expenses is permissible is made by independent legal counsel, authorization of indemnification and advance of expenses shall be made by the body that selected such counsel.

SECTION 7.5 COURT—ORDERED INDEMNIFICATION.

Any Proper Person may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction for mandatory indemnification under Section 7.2 of this Article 7, including indemnification for reasonable expenses incurred to obtain court-ordered indemnification.  If a court determines that the Proper Person is entitled to indemnification under Section 7.2 of this Article 7, the court shall order indemnification, including the Proper Person’s reasonable expenses incurred to obtain court-ordered indemnification.  If the court determines that such Proper Person is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not such Proper Person met the standards of conduct set forth in Section 7.1 of this Article 7 or was adjudged liable in the proceeding, the court may or der such indemnification as the court deems proper except that if the Proper Person has been adjudged liable, indemnification shall be limited to reasonable expenses incurred in connection with the proceeding and reasonable expenses incurred to obtain court-ordered indemnification.

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SECTION 7.6 ADVANCE OF EXPENSES.

Reasonable expenses (including attorneys’ fees) incurred in defending an action, suit or proceeding as described in Section 7.1 of this Article 7 may be paid by the corporation to any Proper Person in advance of the final disposition of such action, suit or proceeding upon receipt of (i) a written affirmation of such Proper Person’s good faith belief that such Proper Person has met the standards of conduct prescribed by Section 7.1 of this Article 7; (ii) a written undertaking, executed personally or on the Proper Person’s behalf, to repay such advances if it is ultimately determined that such Proper Person did not meet the prescribed standards of conduct (the undertaking shall be an unlimited general obligation of the Proper Person but need not be secured and may be accepted without reference to financial ability to make repayment); and (iii) a determination is made by the proper group (as described in Section 7.4 of this Article 7) that the facts as then known to the group would not preclude indemnification.  Determination and authorization of payments shall be made in the same manner specified in Section 7.4 of this Article 7.

SECTION 7.7 ADDITIONAL INDEMNIFICATION TO CERTAIN PERSONS OTHER THAN DIRECTORS.

In addition to the indemnification provided to officers, employees, fiduciaries or agents because of their status as Proper Persons under this Article 7, the corporation may also indemnify and advance expenses to them if they are not directors of the corporation to a greater extent than is provided in these bylaws, if not inconsistent with public policy, and if provided for by general or specific action of its board of directors or shareholders or by contract.

SECTION 7.8 WITNESS EXPENSES.

The sections of this Article 7 do not limit the corporation’s authority to pay or reimburse expenses incurred by a director in connection with an appearance as a witness in a proceeding at a time when such individual has not been made a named as a defendant or respondent in the proceeding.

SECTION 7.9 REPORT TO SHAREHOLDERS.

Any indemnification of or advance of expenses to a director in accordance with this Article 7, if arising out of a proceeding by or on behalf of the corporation, shall be reported in writing to the shareholders with or before the notice of the next shareholders’ meeting.  If the next shareholder action is taken without a meeting at the instigation of the board of directors, such notice shall be given to the shareholders at or before the time the first shareholder signs a writing consenting to such action.

SECTION 7.10 PROVISION OF INSURANCE.

By action of the board of directors, notwithstanding any interest of the directors in the action, the corporation may purchase and maintain insurance, in such scope and amounts as the board of directors deems appropriate, on behalf of any person who is or was a director, officer, employee, fiduciary or agent of the corporation, or who, while a director, officer, employee, fiduciary or agent of the corporation, is or was serving at the request of the corporation as a

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director, officer, partner, trustee, employee, fiduciary or agent of any other foreign or domestic profit or nonprofit corporation or of any partnership, joint venture, trust, profit or nonprofit unincorporated association, limited liability company, other enterprise or employee benefit plan, against any liability asserted against, or incurred by, such individual in that capacity or arising out of such individual’s status as such, whether or not the corporation would have the power to indemnify such individual against such liability under the provisions of Article 7 of these bylaws or applicable law.  Any such insurance may be procured from any insurance company designated by the board of directors of the corporation, whether such insurance company is formed under the laws of Colorado or any other jurisdiction of the United States or elsewhere, including any insurance company in which the corpora tion has an equity interest or any other interest, through stock ownership or otherwise.

ARTICLE 8
FISCAL YEAR

The fiscal year of the corporation shall end on the last day of March each year.

ARTICLE 9
DIVIDENDS

The board of directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Articles of Incorporation.

ARTICLE 10
CORPORATE SEAL

The board of directors may provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the corporation and the state of incorporation and the words “CORPORATE SEAL.”

ARTICLE 11
WAIVER OF NOTICE

Whenever any notice is required to be given under the provisions of these bylaws or under the provisions of the Articles of Incorporation or under the provisions of the Colorado Business Corporation Act, as amended, or otherwise, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the event or other circumstance requiring such notice, shall be deemed equivalent to the giving of such notice.

ARTICLE 12
AMENDMENTS

These bylaws may be altered, amended or repealed and new bylaws may be adopted by a majority of the directors present at any meeting of the board of directors of the corporation at which a quorum is present, or by unanimous written consent of the board of directors as provided in Section 3.9 hereof.

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ARTICLE 13
EXECUTIVE COMMITTEE

SECTION 13.1 APPOINTMENT.

The board of directors by resolution adopted by a majority of the full board of directors, may designate two or more of its members to constitute an executive committee. The designation of such committee and the delegation thereto of authority shall not operate to relieve the board of directors, or any member thereof, of any responsibility imposed by law.

SECTION 13.2 AUTHORITY.

The executive committee, when the board of directors is not in session, shall have and may exercise all of the authority of the board of directors except to the extent, if any, that such authority shall be limited by the resolution appointing the executive committee and except also that the executive committee shall not have the authority of the board of directors in reference to amending the Articles of Incorporation, adopting a plan of merger or consolidation, recommending to the shareholders the sale, lease or other disposition of all or substantially all of the property and assets of the corporation otherwise than in the usual and regular course of its business, recommending to the shareholders a voluntary dissolution of the corporation or a revocation thereof, or amending the bylaws of the corporation.

SECTION 13.3 TENURE AND QUALIFICATIONS.

Each member of the executive committee shall hold office until the next regular annual meeting of the board of directors following his or her designation and until his or her successor is designated as a member of the executive committee and is elected and qualified.

SECTION 13.4 MEETINGS.

Regular meetings of the executive committee may be held without notice at such time and places as the executive committee may fix from time to time by resolution. Special meetings of the executive committee may be called by any member thereof upon not less than one day’s notice stating the place, date and hour of the meeting, which notice may be written or oral, and if mailed, shall be deemed to be delivered when deposited in the United States mail addressed to the member of the executive committee at his or her business address. Any member of the executive committee may waive notice of any meeting and no notice of any meeting need be given to any member thereof who attends in person. The notice of a meeting of the executive committee need not state the business proposed to be transacted at the meeting.

SECTION 13.5 QUORUM.

A majority of the members of the executive committee shall constitute a quorum for the transaction of business at any meeting thereof, and action of the executive committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present.

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SECTION 13.6 INFORMAL ACTION BY EXECUTIVE COMMITTEE.

Any action required or permitted to be taken by the executive committee at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof.

SECTION 13.7 VACANCIES.

Any vacancy in the executive committee may be filled by a resolution adopted by a majority of the full board of directors.

SECTION 13.8 RESIGNATIONS AND REMOVAL.

Any member of the executive committee may be removed at any time with or without cause by resolution adopted by a majority of the full board of directors. Any member of the executive committee may resign from the executive committee at any time by giving written notice to the president or secretary of the corporation, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 13.9 PROCEDURE.

The executive committee shall elect a presiding officer from its members and may fix its own rules of procedure which shall not be inconsistent with these bylaws. It shall keep regular minutes of its proceedings and report the same to the board of directors for its information at the meeting thereof held next after the proceedings shall have been taken.

ARTICLE 14
EMERGENCY BYLAWS

The emergency bylaws provided in this Article 14 shall be operative during any emergency (as defined in Section 7-102-107(4) of the Colorado Business Corporation Act, as amended) in the conduct of the business of the corporation, notwithstanding any different provision in the preceding bylaws. To the extent not inconsistent with the provisions of this Article 14, the bylaws provided in the preceding articles shall remain in effect during such emergency and upon its termination the emergency bylaws shall cease to be operative.

During any such emergency:

A.            A meeting of the board of directors may be called by any officer or director of the corporation. Notice of the time and place of the meeting shall be given by the person calling the meeting to such of the directors as it may be feasible to reach by any available means of communication. Such notice shall be given at such time in advance of the meeting as circumstances permit in the judgment of the person calling the meeting.

B.            At any such meeting of the board of directors, a quorum shall consist of the number of directors in attendance at such meeting.

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C.            The board of directors, either before or during any such emergency, may, effective in the emergency, change the principal office or designate several alternative principal offices or regional offices, or authorize the officers so to do.

D.            The board of directors, either before or during any such emergency, may provide, and from time to time modify, lines of succession in the event that during an emergency any or all officers or agents of the corporation shall for any reason be rendered incapable of discharging their duties.

E.             No officer, director or employee acting in accordance with these emergency bylaws shall be liable except for willful misconduct.

F.             These emergency bylaws shall be subject to repeal or change by further action of the board of directors or by action of the shareholders, but no such repeal or change shall modify any action taken prior to the time of such repeal or change. Any amendment of these emergency bylaws may make any further or different provision that may be practical and necessary for the circumstances of the emergency.

*     *     *     *     *

These Amended and Restated Bylaws are effective as of July 28, 2008,February 2, 2011, and amend, restate and replace in their entirety theall previously effective Third Amended and Restated Bylawsversions of the Bylaws, as amended, restated or otherwise, of New Frontier Media, Inc.

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EX-3.02

Exhibit 3.02

AMENDED AND RESTATED BYLAWS

OF

NEW FRONTIER MEDIA, INC.

A Colorado Corporation

INDEX TO

AMENDED AND RESTATED BYLAWS OF

NEW FRONTIER MEDIA, INC.

	PAGE
ARTICLE 1 OFFICES	1
SECTION 1.1 PRINCIPAL OFFICE	1
SECTION 1.2 REGISTERED OFFICE	1
ARTICLE 2 SHAREHOLDERS	1
SECTION 2.1 ANNUAL MEETING	1
SECTION 2.2 SPECIAL MEETINGS	1
SECTION 2.3 PLACE OF MEETINGS	2
SECTION 2.4 NOTICE OF MEETING; ADJOURNMENT	2
SECTION 2.5 MEETING OF ALL SHAREHOLDERS	2
SECTION 2.6 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE	2
SECTION 2.7 SHAREHOLDER RECORDS	3
SECTION 2.8 QUORUM	3
SECTION 2.9 MANNER OF ACTING	4
SECTION 2.10 PROXIES	4
SECTION 2.11 VOTING OF SHARES	4
SECTION 2.12 VOTING OF SHARES BY CERTAIN SHAREHOLDERS	4
SECTION 2.13 INFORMAL ACTION BY SHAREHOLDERS	5
SECTION 2.14 VOTING BY BALLOT	5
SECTION 2.15 CUMULATIVE VOTING	5
SECTION 2.16 NOTICE OF BUSINESS TO BE BROUGHT BEFORE AN ANNUAL MEETING	5
SECTION 2.17 NOTICE OF NOMINATIONS FOR ELECTION TO THE BOARD OF DIRECTORS	9
SECTION 2.18 SPECIAL MEETING PROCEDURES	12
ARTICLE 3 BOARD OF DIRECTORS	15
SECTION 3.1 GENERAL POWERS	15
SECTION 3.2 PERFORMANCE OF DUTIES	15
SECTION 3.3 NUMBER, TENURE AND QUALIFICATIONS	16
SECTION 3.4 REGULAR MEETINGS	16
SECTION 3.5 SPECIAL MEETINGS	16
SECTION 3.6 NOTICE	16
SECTION 3.7 QUORUM	17
SECTION 3.8 MANNER OF ACTING	17
SECTION 3.9 INFORMAL ACTION BY DIRECTORS	17
SECTION 3.10 PARTICIPATION BY ELECTRONIC MEANS	17
SECTION 3.11 VACANCIES	17

SECTION 3.12 RESIGNATION	18
SECTION 3.13 REMOVAL	18
SECTION 3.14 COMMITTEES	18
SECTION 3.15 COMPENSATION	18
SECTION 3.16 PRESUMPTION OF ASSENT	18
SECTION 3.17 LIMITATIONS ON LIABILITY	18
ARTICLE 4 OFFICERS	19
SECTION 4.1 NUMBER	19
SECTION 4.2 ELECTION AND TERM OF OFFICE	19
SECTION 4.3 REMOVAL	19
SECTION 4.4 VACANCIES	19
SECTION 4.5 CHIEF EXECUTIVE OFFICER	19
SECTION 4.6 PRESIDENT	20
SECTION 4.7 VICE PRESIDENT	20
SECTION 4.8 SECRETARY	20
SECTION 4.9 TREASURER	21
SECTION 4.10 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS	21
SECTION 4.11 BONDS	21
SECTION 4.12 SALARIES	21
ARTICLE 5 CONTRACTS, LOANS, CHECKS AND DEPOSITS	21
SECTION 5.1 CONTRACTS	21
SECTION 5.2 LOANS	22
SECTION 5.3 CHECKS, DRAFTS, ETC.	22
SECTION 5.4 DEPOSITS	22
ARTICLE 6 SHARES, CERTIFICATES FOR SHARES AND TRANSFER OF SHARES	22
SECTION 6.1 REGULATION	22
SECTION 6.2 CERTIFICATES FOR STOCK	22
SECTION 6.3 CANCELLATION OF CERTIFICATES	23
SECTION 6.4 LOST, STOLEN OR DESTROYED CERTIFICATES	23
SECTION 6.5 TRANSFER OF SHARES	23
ARTICLE 7 INDEMNIFICATION	24
SECTION 7.1 INDEMNIFICATION	24
SECTION 7.2 RIGHT TO INDEMNIFICATION	25
SECTION 7.3 EFFECT OF TERMINATION OF ACTION	25
SECTION 7.4 GROUPS AUTHORIZED TO MAKE INDEMNIFICATION DETERMINATION	25
SECTION 7.5 COURT–ORDERED INDEMNIFICATION	26
SECTION 7.6 ADVANCE OF EXPENSES	26

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SECTION 7.7 ADDITIONAL INDEMNIFICATION TO CERTAIN PERSONS OTHER THAN DIRECTORS	27
SECTION 7.8 WITNESS EXPENSES	27
SECTION 7.9 REPORT TO SHAREHOLDERS	27
SECTION 7.10 PROVISION OF INSURANCE	27
ARTICLE 8 FISCAL YEAR	28
ARTICLE 9 DIVIDENDS	28
ARTICLE 10 CORPORATE SEAL	28
ARTICLE 11 WAIVER OF NOTICE	28
ARTICLE 12 AMENDMENTS	28
ARTICLE 13 EXECUTIVE COMMITTEE	28
SECTION 13.1 APPOINTMENT	28
SECTION 13.2 AUTHORITY	29
SECTION 13.3 TENURE AND QUALIFICATIONS	29
SECTION 13.4 MEETINGS	29
SECTION 13.5 QUORUM	29
SECTION 13.6 INFORMAL ACTION BY EXECUTIVE COMMITTEE	29
SECTION 13.7 VACANCIES	29
SECTION 13.8 RESIGNATIONS AND REMOVAL	30
SECTION 13.9 PROCEDURE	30
ARTICLE 14 EMERGENCY BYLAWS	30

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AMENDED AND RESTATED BYLAWS

OF

NEW FRONTIER MEDIA, INC.

A Colorado Corporation

ARTICLE 1

OFFICES

SECTION 1.1 PRINCIPAL OFFICE.

The principal office of the corporation in the state of Colorado shall be located in the city of Boulder, county of Boulder. The corporation may have such other offices, either within or outside of the State of Colorado as the board of directors may designate, or as the business of the corporation may require from time to time.

SECTION 1.2 REGISTERED OFFICE.

The registered office of the corporation, required by the Colorado Business Corporation Act, as amended, to be maintained in the State of Colorado, may be, but need not be, identical with the principal office in the State of Colorado, and the address of the registered office may be changed from time to time by the board of directors.

ARTICLE 2

SHAREHOLDERS

SECTION 2.1 ANNUAL MEETING.

The annual meeting of the shareholders shall be held each year at such time on such day as shall be fixed by the board of directors for the purpose of electing directors and for the transaction of such other business as may properly come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of Colorado, such meeting shall be held on the next succeeding business day.

SECTION 2.2 SPECIAL MEETINGS.

The corporation shall hold a special meeting of shareholders (i) on call of its chief executive officer, president, or board of directors, or (ii) if, subject to the procedures set forth below in this Section 2.2 and Section 2.18, the corporation receives one or more written demands for the meeting, stating the purpose or purposes for which it is to be held, signed and dated by the holders of shares representing at least ten percent of all the votes entitled to be cast on any issue proposed to be considered at the meeting. The business to be conducted at the special meeting shall be limited to the purpose or purposes stated in the demand. Except in accordance

with this Article 2, shareholders shall not be permitted to propose business to be brought before a special meeting of the shareholders.

SECTION 2.3 PLACE OF MEETINGS.

The board of directors may designate any place, either within or outside of the State of Colorado, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal office of the corporation in the State of Colorado.

SECTION 2.4 NOTICE OF MEETING; ADJOURNMENT.

Written notice stating the place, day and hour of the meeting of shareholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall, unless otherwise prescribed by statute, be delivered not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the chief executive officer, the president, or the secretary, or the officer or other persons calling the meeting, to each shareholder of record entitled to vote at such meeting; provided, however, that if the authorized shares of the corporation are to be increased, at least thirty days’ notice shall be given, and if sale of all or substantially all assets are to be voted upon, at least twenty days’ notice shall be given. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his or her address as it appears on the stock transfer books of the corporation, with postage thereon prepaid.

Any meeting of shareholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares entitled to vote and represented in person or by proxy at the meeting(even if then less than a quorum), excluding abstentions. At the adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. Subject to the next sentence, when a meeting is adjourned to another date, time or place, notice need not be given of the new date, time, or place if the new date, time or place is announced at the meeting before adjournment. If the adjournment is for more than one hundred twenty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a new notice of the adjourned meeting shall be given to each shareholder of record as of the new record date then entitled to vote at the meeting.

SECTION 2.5 MEETING OF ALL SHAREHOLDERS.

If all of the shareholders shall meet at any time and place, either within or outside of the State of Colorado, and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice, and at such meeting any corporate action may be taken.

SECTION 2.6 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.

For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose, the board of directors of the corporation may provide that the share transfer books shall be closed for

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a stated period but not to exceed, in any case, fifty days. If the share transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the share transfer books, the board of directors may fix in advance a date as the record date for any such determination of shareholders (other than one involving a purchase, redemption, or other acquisition of the of the corporation’s shares), such date in any case to be not more than seventy days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the share transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notic e of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section, such determination shall apply to any adjournment thereof unless otherwise required by law, the Articles of Incorporation or these bylaws.

SECTION 2.7 SHAREHOLDER RECORDS.

The officer or agent having charge of the stock transfer books for shares of the corporation shall make, beginning the earlier of ten days before such meeting of shareholders or two business days after notice of the meeting is given and continuing through the meeting, a complete record of the shareholders entitled to vote at each meeting of shareholders or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each. The record, for such required period, shall be kept on file at the principal office of the corporation, whether within or outside of the State of Colorado, and shall be subject to inspection by any shareholder for any purpose germane to the meeting at any time during usual business hours during such period. Such record shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof.

The original stock transfer books shall be the prima facie evidence as to who are the shareholders entitled to examine the record or transfer books or to vote at any meeting of shareholders.

SECTION 2.8 QUORUM.

One-third of the issued and outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, except as otherwise provided by the Colorado Business Corporation Act, as amended, and the Articles of Incorporation. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal during such meeting of that number of shareholders whose absence would cause there to be less than a quorum.

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SECTION 2.9 MANNER OF ACTING.

If a quorum is present, action on any matter at a meeting other than the election of directors is approved if a majority of the shares represented at the meeting and entitled to vote on the subject matter approve the action, unless the vote of a greater proportion or number or voting by classes is otherwise required by statute or by the Articles of Incorporation or these bylaws. If a quorum is present and the matter presented at the meeting is an election of directors, that number of candidates equaling the number of directors to be elected, having the highest number of votes cast in favor of their election, are elected to the board of directors.

SECTION 2.10 PROXIES.

At all meetings of shareholders a shareholder may vote in person or by proxy executed in writing by the shareholder or by a duly authorized attorney-in-fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of the execution, unless otherwise provided in the proxy.

SECTION 2.11 VOTING OF SHARES.

Unless otherwise provided by these bylaws or the Articles of Incorporation, each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to vote at a meeting of shareholders, and each fractional share shall be entitled to a corresponding fractional vote on each such matter.

SECTION 2.12 VOTING OF SHARES BY CERTAIN SHAREHOLDERS.

Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such other corporation may determine.

Shares standing in the name of a deceased person, a minor ward or an incompetent person, may be voted by an administrator, executor, court appointed guardian or conservator, either in person or by proxy without a transfer of such shares into the name of such administrator, executor, court appointed guardian or conservator. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name.

Shares standing in the name of a receiver may be voted by such receiver and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into the trustee name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed.

A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

Neither shares of its own stock belonging to this corporation, nor shares of its own stock held by it in a fiduciary capacity, nor shares of its own stock held by another corporation if the

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majority of shares entitled to vote for the election of directors of such corporation is held by this corporation may be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time.

Redeemable shares which have been called for redemption shall not be entitled to vote on any matter and shall not be deemed outstanding shares on and after the date on which written notice of redemption has been mailed to shareholders and a sum sufficient to redeem such shares has been deposited with a bank or trust company with irrevocable instruction and authority to pay the redemption price to the holders of the shares upon surrender of certificates therefor, if certificates have been issued in respect thereof, or confirmation of a notation of cancellation of such shares on the books and records of the corporation, if uncertificated.

SECTION 2.13 INFORMAL ACTION BY SHAREHOLDERS.

Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof.

SECTION 2.14 VOTING BY BALLOT.

Voting on any question or in any election may be by voice vote unless the presiding officer shall order or any shareholder shall demand that voting be by ballot.

SECTION 2.15 CUMULATIVE VOTING.

Cumulative voting shall not be allowed.

SECTION 2.16 NOTICE OF BUSINESS TO BE BROUGHT BEFORE AN ANNUAL MEETING.

A.            At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) brought before the meeting by the corporation and specified in the notice of meeting given by or at the direction of the board of directors, (ii) brought before the meeting by or at the direction of the chief executive officer, president, or board of directors, or (iii) otherwise properly brought before the meeting by a shareholder who (a) was a shareholder of record (and, with respect to any beneficial owner, if different, on whose behalf such business is proposed, only if such beneficial owner was the beneficial owner of shares of the corporation) both at the time of giving the notice provided for in th is Section 2.16 and at the time of the meeting, (b) is entitled to vote at the meeting, and (c) has complied with this Section 2.16 as to such business. Except for proposals properly made in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (as so amended and inclusive of such rules and regulations, the “Exchange Act”), and included in the notice of meeting given by or at the direction of the board of directors, the foregoing clause (iii) shall be the exclusive means for a shareholder to propose business to be brought before an annual meeting of the shareholders. Shareholders seeking to nominate persons for election to the board of directors must comply with Section 2.17 and this Section 2.16 shall not be applicable to nominations except as expressly provided in Section 2.17.

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B.            Without qualification, for business to be properly brought before an annual meeting by a shareholder, the shareholder must (i) provide Timely Notice (as defined below) thereof in writing and in proper form to the secretary of the corporation at the principal office of the corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.16. To be timely, a shareholder’s notice must be delivered to, or mailed and received at, the principal office of the corporation not less than one hundred twenty days nor more than one hundred fifty days prior to the one-year anniversary of the preceding year’s annual meeting; provided, however, that if the date of the annual meeting is more than thirty days before or more than sixty days after such a nniversary date, notice by the shareholder to be timely must be so delivered, or mailed and received, not later than ninety days prior to such annual meeting or, if later, the date that is ten days after the day on which public disclosure of the date of such annual meeting was first made (such notice within such time periods, “Timely Notice”). In no event shall any adjournment of an annual meeting or the announcement thereof commence a new time period for the giving of Timely Notice as described above.

C.            To be in proper form for purposes of this Section 2.16, a shareholder’s notice to the secretary of the corporation shall set forth:

(i)            As to each Proposing Person (as defined below), (a) the name and address of such Proposing Person (including, if applicable, the name and address that appear on the corporation’s books and records); and (b) the class or series and number of shares of the corporation that are, directly or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such Proposing Persons, except that such Proposing Person shall in all events be deemed to beneficially own any shares of any class or series of the corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future (the disclosures to be made pursuant to the foregoing clauses (a) and (b) are referred to as “Shareholder Information”);

(ii)           As to each Proposing Person, (a) any derivative, swap or other transaction or series of transactions engaged in, directly or indirectly, by such Proposing Person, the purpose or effect of which is to give such Proposing Person economic risk similar to ownership of shares of any class or series of the corporation, including due to the fact that the value of such derivative, swap or other transactions are determined by reference to the price, value or volatility of any shares of any class or series of the corporation, or which derivative, swap or other transactions provide, directly or indirectly, the opportunity to profit from any increase in the price or value of shares of any class or series of the corporation (“Synthetic Equity Interests”), which Synthetic Equity Interests shall be disclosed without re gard to whether (1) the derivative, swap or other transactions convey any voting rights in such shares to such Proposing Person, (2) the derivative, swap or other transactions are required to be, or are capable of being, settled through delivery of such shares or (3) such Proposing Person may have entered into other transactions that hedge or mitigate the economic effect of such derivative, swap or other transactions, (b) any proxy (other than a revocable proxy or consent given in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a

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solicitation statement filed on Schedule 14A), agreement, arrangement, understanding or relationship pursuant to which such Proposing Person has or shares a right to vote any shares of any class or series of the corporation, (c) any agreement, arrangement, understanding or relationship, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, engaged in, directly or indirectly, by such Proposing Person, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of shares of any class or series of the corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such Proposing Person with respect to the shares of any class or series of the corporation, or which provides, directly or indirectly, the opportunity to profit from any decrease in the price or value of the sha res of any class or series of the corporation (“Short Interests”), (d) any performance related fees (other than an asset based fee) that such Proposing Person is entitled to based on any increase or decrease in the price or value of shares of any class or series of the corporation, or any Synthetic Equity Interests or Short Interests, if any, (e)(1) if such Proposing Person is not a natural person, the identity of the natural person or persons associated with such Proposing Person responsible for the formulation of and decision to propose the business to be brought before the meeting (such person or persons, the “Responsible Person”), the manner in which such Responsible Person was selected, any fiduciary duties owed by such Responsible Person to the equity holders or other beneficiaries of such Proposing Person, the qualifications and background of such Responsible Person and any material interests or relationships of such Responsible Person that are not shared ge nerally by any other record or beneficial holder of the shares of any class or series of the corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting, and (2) if such Proposing Person is a natural person, the qualifications and background of such natural person and any material interests or relationships of such natural person that are not shared generally by any other record or beneficial holder of the shares of any class or series of the corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting, and (f) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Sec tion 14(a) of the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (a) through (f) are referred to as “Disclosable Interests”); provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the shareholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner; and

(iii)          As to each item of business that the shareholder proposes to bring before the annual meeting, (a) a reasonably brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of each Proposing Person, (b) the text of the proposal or business (including the text of any resolutions proposed for

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consideration), and (c) a reasonably detailed description of all agreements, arrangements and understandings (1) between or among any of the Proposing Persons or (2) between or among any Proposing Person and any other person or entity (including their names) in connection with the proposal of such business by such shareholder.

For purposes of this Section 2.16, the term “Proposing Person” shall mean (i) the shareholder providing the notice of business proposed to be brought before an annual meeting, (ii) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the business proposed to be brought before the annual meeting is made, (iii) any affiliate or associate (each within the meaning of Rule 12b-2 under the Exchange Act for purposes of these bylaws) of such shareholder or beneficial owner, and (iv) any other person with whom such shareholder or beneficial owner (or any of their respective affiliates or associates) is Acting in Concert (as defined below).

A person shall be deemed to be “Acting in Concert” with another person for purposes of these bylaws if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert with, or towards a common goal relating to the management, governance or control of the corporation in parallel with, such other person where (i) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making processes and (ii) at least one additional factor suggests that such persons intend to act in concert or in parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately), attending meetings, conducting discussions, or making or soliciting invitations to act in concert or in parallel; provided, that a person sha ll not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies or consents from such other person in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a proxy or consent solicitation statement filed on Schedule 14A. A person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person.

D.            A shareholder providing notice of business proposed to be brought before an annual meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.16 shall be true and correct as of the record date for the meeting and as of the date that is ten business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the secretary at the principal office of the corporation not later than five business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date), and not later than eight business days prior to the date for the meeting, if practicable (or, if not pra cticable, on the first practicable date prior to the date for the meeting), or any adjournment or postponement thereof (in the case of the update and supplement required to be made as of ten business days prior to the meeting or any adjournment or postponement thereof).

E.             Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with this Section 2.16. The chairman or presiding officer of the meeting shall, if the facts warrant, determine that the business was not

8

properly brought before the meeting in accordance with this Section 2.16, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

F.             This Section 2.16 is expressly intended to apply to any business proposed to be brought before an annual meeting of shareholders other than any proposal made pursuant to Rule 14a-8 under the Exchange Act. In addition to the requirements of this Section 2.16 with respect to any business proposed to be brought before an annual meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such business. Nothing in this Section 2.16 shall be deemed to affect the rights of shareholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

G.            For purposes of these bylaws, “public disclosure” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

SECTION 2.17 NOTICE OF NOMINATIONS FOR ELECTION TO THE BOARD OF DIRECTORS.

A.            Nominations of any person for election to the board of directors at an annual meeting or at a special meeting (but only if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting) may be made at such meeting only (i) by or at the direction of the board of directors, including by any committee or persons appointed by the board of directors, or (ii) by a shareholder who (a) was a shareholder of record (and, with respect to any beneficial owner, if different, on whose behalf such nomination is proposed to be made, only if such beneficial owner was the beneficial owner of shares of the corporation) both at the time of giving the notice provided for in this Section 2.17 and at the time of the meeting, (b) is entitled to vote at the meeting, and (c) has complied with this Section 2.17 as to such nomination. The foregoing clause (ii) shall be the exclusive means for a shareholder to make any nomination of a person or persons for election to the board of directors at an annual meeting or special meeting.

B.            Without qualification, for a shareholder to make any nomination of a person or persons for election to the board of directors at an annual meeting, the shareholder must (i) provide Timely Notice (as defined in Section 2.16) thereof in writing and in proper form to the secretary of the corporation at the principal office of the corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.17. Without qualification, if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting, then for a shareholder to make any nomination of a person or persons for election to the board of directors at a special meeting, the shareholder must (i) provide timely notice thereof in writing and in proper form to the secretary of the corporation at the principal office of the corporation, and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.17 To be timely, a shareholder’s notice for nominations to be made at a special meeting must be delivered to, or mailed and received at, the principal office of the corporation not earlier than the

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date that is one hundred fifty days prior to such special meeting and not later than the date that is one hundred twenty days prior to such special meeting or, if later, the tenth day following the day on which public disclosure (as defined in Section 2.16) of the date of such special meeting was first made. In no event shall any adjournment of an annual meeting or special meeting or the announcement thereof commence a new time period for the giving of a shareholder’s notice as described above.

C.            To be in proper form for purposes of this Section 2.17, a shareholder’s notice to the secretary shall set forth:

(i)            As to each Nominating Person (as defined below), the Shareholder Information (as defined in Section 2.16(C)(i), except that for purposes of this Section 2.17 the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.16(C)(i));

(ii)           As to each Nominating Person, any Disclosable Interests (as defined in Section 2.16(C)(ii), except that for purposes of this Section 2.17 the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.16(C)(ii) and the disclosure in clause (f) of Section 2.16(C)(ii) shall be made with respect to the election of directors at the meeting);

(iii)          As to each person whom a Nominating Person proposes to nominate for election as a director, (a) all information with respect to such proposed nominee that would be required to be set forth in a shareholder’s notice pursuant to this Section 2.17 if such proposed nominee were a Nominating Person, (b) all information relating to such proposed nominee that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14(a) under the Exchange Act (including such proposed nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (c) a description of all direct and indirect compensation and other materi al monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among any Nominating Person, on the one hand, and each proposed nominee, his or her respective affiliates and associates and any other persons with whom such proposed nominee (or any of his or her respective affiliates and associates) is Acting in Concert (as defined in Section 2.16(C)), on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K (or any successor regulations) if such Nominating Person were the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant, and (d) a completed and signed questionnaire, representation and agreement as provided in Section 2.17(F); and

(iv)          The corporation may require any proposed nominee to furnish such other information (a) as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director of the corporation in accordance with the corporation’s Corporate Governance Guidelines or

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(b) that could be material to a reasonable shareholder’s understanding of the independence or lack of independence of such proposed nominee.

For purposes of this Section 2.17, the term “Nominating Person” shall mean (i) the shareholder providing the notice of the nomination proposed to be made at the meeting, (ii) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the nomination proposed to be made at the meeting is made, (iii) any affiliate or associate of such shareholder or beneficial owner, and (iv) any other person with whom such shareholder or such beneficial owner (or any of their respective affiliates or associates) is Acting in Concert.

D.            A shareholder providing notice of any nomination proposed to be made at a meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.17 shall be true and correct as of the record date for the meeting and as of the date that is ten business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the secretary at the principal office of the corporation not later than five business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date), and not later than eight business days prior to the date for the meeting, if practicable (or, if not practicable, on the first practicable date prior to the date for the meeting), or any adjournment or postponement thereof (in the case of the update and supplement required to be made as of ten business days prior to the meeting or any adjournment or postponement thereof).

E.             Notwithstanding anything in these bylaws to the contrary, no person shall be eligible for election as a director of the corporation unless nominated in accordance with this Section 2.17. The presiding officer at the meeting shall, if the facts warrant, determine that a nomination was not properly made in accordance with this Section 2.17, and if he or she should so determine, he or she shall so declare such determination to the meeting and the defective nomination shall be disregarded.

F.             To be eligible to be a nominee for election as a director of the corporation, the proposed nominee must deliver (in accordance with the time periods prescribed for delivery of notice under this Section 2.17) to the secretary at the principal office of the corporation a written questionnaire with respect to the background and qualification of such proposed nominee (which questionnaire shall be provided by the secretary upon written request) and a written representation and agreement (in form provided by the secretary upon written request) that such proposed nominee satisfies the Applicable Qualification Criteria (as defined below) and (i) is not and will not become a party to (a) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to ho w such proposed nominee, if elected as a director of the corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the corporation or (b) any Voting Commitment that could limit or interfere with such proposed nominee’s ability to comply, if elected as a director of the corporation, with such proposed nominee’s fiduciary duties under applicable law, (ii) is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as

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a director that has not been disclosed to the corporation and (iii) in such proposed nominee’s individual capacity and on behalf of the shareholder (or the beneficial owner, if different) on whose behalf the nomination is made, would be in compliance, if elected as a director of the corporation, and will comply with applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the corporation.

For purposes of this Section 2.17, the term “Applicable Qualification Criteria” shall mean that the proposed nominee (i) is capable of demonstrating to the reasonable satisfaction of board of directors or a committee thereof, in its sole discretion, an understanding basic financial statements, (ii) is over 21 years of age, (iii) has relevant business experience (taking into account the business experience of the other directors) and high moral character, in each case as determined by the board of directors or a committee thereof, in its sole discretion, and (iv) satisfies such other criteria for service on the board of directors as may be publicly disclosed from time to time by the corporation.

G.            In addition to the requirements of this Section 2.17 with respect to any nomination proposed to be made at a meeting, each Nominating Person shall comply with all applicable requirements of the Exchange Act with respect to any such nominations.

SECTION 2.18 SPECIAL MEETING PROCEDURES.

A.            No shareholder may demand that the corporation call a special meeting of the shareholders pursuant to Section 2.2 unless a shareholder of record has first submitted a request in writing that the board of directors fix a record date for the purpose of determining the shareholders entitled to demand that the corporation call such special meeting, which request shall be in proper form and delivered to, or mailed and received by, the secretary of the corporation at the principal office of the corporation.

B.            To be in proper form for purposes of this Section 2.18, a request by a shareholder for the board of directors to fix a record date shall set forth:

(i)            As to each Requesting Person (as defined below), the Shareholder Information (as defined in Section 2.16(C)(i), except that for purposes of this Section 2.18 the term “Requesting Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.16(C)(i));

(ii)           As to each Requesting Person, any Disclosable Interests (as defined in Section 2.16(C)(ii), except that for purposes of this Section 2.18 the term “Requesting Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.16(C)(ii) and the disclosure in clause (f) of Section 2.16(C)(ii) shall be made with respect to the business proposed to be conducted at the special meeting); and

(iii)          As to the purpose or purposes of the special meeting, (a) a reasonably brief description of the purpose or purposes of the special meeting and the business proposed to be conducted at the special meeting, the reasons for conducting such business at the special meeting and any material interest in such business of each Requesting Person, and

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(b) a reasonably detailed description of all agreements, arrangements and understandings (1) between or among any of the Requesting Persons or (2) between or among any Requesting Person and any other person or entity (including their names) in connection with the request for the special meeting or the business proposed to be conducted at the special meeting.

For purposes of this Section 2.18(B), the term “Requesting Person” shall mean (i) the shareholder making the request to fix a record date for the purpose of determining the shareholders entitled to demand that the a special meeting be called, (ii) the beneficial owner or beneficial owners, if different, on whose behalf such request is made, (iii) any affiliate or associate of such shareholder or beneficial owner, and (iv) any other person with whom such shareholder or beneficial owner (or any of their respective affiliates or associates) is Acting in Concert (as defined in Section 2.16(C)) .

C.            Within thirty days after receipt of a request to fix a record date in proper form and otherwise in compliance with this Section 2.18 from any shareholder of record, the board of directors may adopt a resolution fixing a record date for the purpose of determining the shareholders entitled to demand that the corporation call a special meeting, which date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors. Notwithstanding anything in this Section 2.18 to the contrary, no record date shall be fixed if the board of directors determines that the demand or demands that would otherwise be submitted following such record date could not comply with the requirements set forth in clauses (ii), (iv), (v) or (vi) of Section 2.18(E) .

D.            Without qualification, a special meeting of the shareholders shall not be called pursuant to Section 2.2 unless shareholders of record as of the record date fixed in accordance with Section 2.18(C) who hold, in the aggregate, more than ten percent of the voting power of the outstanding shares of the corporation (the “Requisite Percentage”) timely provide one or more demands to call such special meeting in writing and in proper form to the secretary of the corporation at the principal office of the corporation. Only shareholders of record on the record date shall be entitled to demand that the corporation call a special meeting of the shareholders pursuant to Section 2.2. To be timely, a shareholder’s demand to call a special meeting must be delivered to, or mailed and received at, the principal office of the corporation not later than the seventieth day following the record date fixed in accordance with Section 2.18(C). To be in proper form for purposes of this Section 2.18, a demand to call a special meeting shall set forth (i) the business proposed to be conducted at the special meeting, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration), and (iii) with respect to any shareholder or shareholders submitting a demand to call a special meeting (except for any shareholder that has provided such demand in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a solicitation statement filed on Schedule 14A) (a “Solicited Shareholder”) the information required to be provided pursuant to this Section 2.18 of a Requesting Person. A shareholder may revoke a demand to call a special meeting by written revocation delivered to th e secretary at any time prior to the special meeting. If any such revocation(s) are received by the secretary after the secretary’s receipt of written demands from the holders of the Requisite Percentage of shareholders, and as a result of such revocation(s), there no longer are unrevoked demands from the Requisite Percentage of

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shareholders to call a special meeting, the board of directors shall have the discretion to determine whether or not to proceed with the special meeting.

F.             The secretary shall not accept, and shall consider ineffective, a written demand from a shareholder to call a special meeting (i) that does not comply with this Section 2.18, (ii) that relates to an item of business to be transacted at such meeting that is not a proper subject for shareholder action under applicable law, (iii) that includes an item of business to be transacted at such meeting that did not appear on the written request that resulted in the determination of the record date (the “Current Record Date”) to determine the shareholders entitled to submit such written demand, (iv) that relates to an item of business (other than the election of directors) that is identical or substantially similar to an item of business (a “Similar Item”) for which a record dat e (other than the Current Record Date) was previously fixed and such demand is delivered between the time beginning on the day after such previous record date and ending on the one-year anniversary of such previous record date, (v) if a Similar Item will be submitted for shareholder approval at any shareholder meeting to be held on or before the date that is one hundred twenty days after the secretary receives such demand, or (vi) if a Similar Item has been presented at the most recent annual meeting or at any special meeting held within one year prior to receipt by the secretary of such demand to call a special meeting.

G.            After receipt within seventy days of the record date so chosen of one or more written demands in proper form and in accordance with this Section 2.18 from a shareholder or shareholders holding the Requisite Percentage, the board of directors shall duly call, and determine the place, date and time of, a special meeting of shareholders for the purpose or purposes and to conduct the business specified in the demands received by the corporation. Notwithstanding anything in these bylaws to the contrary, the board of directors may submit its own proposal or proposals for consideration at such a special meeting. The record date for determining the shareholders entitled to be given notice of and to vote at such a special meeting shall be fixed in accordance with Section 2.6 of these bylaws. The board of directors shall provi de written notice of such special meeting to the shareholders in accordance with Section 2.4 of these bylaws.

H.            In connection with a special meeting called in accordance with Section 2.2 and this Section 2.18, the shareholder or shareholders (except for any Solicited Shareholder) who requested that the board of directors fix a record date in accordance with this Section 2.18 or who delivered a demand to call a special meeting to the secretary shall further update and supplement the information previously provided to the corporation in connection with such request or demand, if necessary, so that the information provided or required to be provided in such request or demand pursuant to this Section 2.18 shall be true and correct as of the record date for the special meeting and as of the date that is ten business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the secretary at the principal office of the corporation not later than five business days after the record date for the special meeting (in the case of the update and supplement required to be made as of the record date), and not later than eight business days prior to the date for the meeting, if practicable (or, if not practicable, the first practicable date prior to the date for the meeting), or any adjournment or postponement thereof (in the case of the update and supplement required to be made as of ten business days prior to the special meeting or any adjournment or postponement thereof).

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I.              Notwithstanding anything in these bylaws to the contrary, the secretary shall not be required to call a special meeting pursuant to Section 2.2 or this Section 2.18 except in accordance with this Section 2.18. If the board of directors shall determine that any request to fix a record date or demand to call and hold a special meeting was not properly made in accordance with this Section 2.18, or shall determine that the shareholder or shareholders requesting that the board of directors fix such record date or submitting a demand to call the special meeting have not otherwise complied with this Section 2.18, then the board of directors shall not be required to fix a record date or to call and hold the special meeting. In addition to the requirements of this Section 2.18, each Requesting Person shall comply with all requirements of applicable law, including all requirements of the Exchange Act, with respect to any request to fix a record date or demand to call a special meeting.

ARTICLE 3

BOARD OF DIRECTORS

SECTION 3.1 GENERAL POWERS.

The business and affairs of the corporation shall be managed by its board of directors.

SECTION 3.2 PERFORMANCE OF DUTIES.

A director of the corporation shall perform his or her duties as a director, including his or her duties as a member of any committee of the board upon which he or she may serve, in good faith, in a manner he or she reasonably believes to be in the best interests of the corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. In performing his or her duties, a director shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, in each case prepared or presented by persons and groups listed in paragraphs (A), (B), and (C) of this Section 3.2; but he or she shall not be considered to be acting in good faith if he or she has knowledge concerning the matter in question that would cause such reliance to be unwarranted. A person who so performs his or he r duties shall not have any liability by reason of being or having been a director of the corporation. Those persons and groups on whose information, opinions, reports, and statements a director is entitled to rely upon are:

A.            One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matter presented;

B.            Counsel, public accountants, or other persons as to matters which the director reasonably believes to be within such persons’ professional or expert competence; or

C.            A committee of the board upon which he or she does not serve, duly designated in accordance with the provision of the articles of incorporation or the bylaws, as to matters within its designated authority, which committee the director reasonably believes to merit confidence.

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SECTION 3.3 NUMBER, TENURE AND QUALIFICATIONS.

The number of directors of the corporation shall not be less than three (3) nor more than seven (7). The number of directors of the corporation shall be fixed from time to time by resolution of the board of directors, but in no instance shall there be less than three (3) directors unless there are fewer than three (3) shareholders, in which event the number of directors may be the same as the number of shareholders. Each director shall hold office until the next annual meeting of shareholders or until his or her successor shall have been elected and qualified. Directors need not be residents of the state of Colorado or shareholders of the corporation.

There shall be a chairman of the board, who shall be elected from among the directors. He or she shall preside at all meetings of the shareholders and of the board of directors unless unavailable. He or she shall have such other powers and duties as may be prescribed by the board of directors.

SECTION 3.4 REGULAR MEETINGS.

A regular meeting of the board of directors shall be held without other notice than this bylaw immediately after, and at the same place as, the annual meeting of shareholders. The board of directors may provide, by resolution, the time and place, either within or without the state of Colorado, for the holding of additional regular meetings without other notice than such resolution.

SECTION 3.5 SPECIAL MEETINGS.

Special meetings of the board of directors may be called by or at the request of the chief executive officer, the president or any two directors. The person or persons authorized to call special meetings of the board of directors may fix any place, either within or without the state of Colorado, as the place for holding any special meeting of the board of directors called by them.

SECTION 3.6 NOTICE.

Written notice of any special meeting of directors shall be given as follows:

By mail to each director at his or her business address at least three days prior to the meeting;

By personal delivery or telegram at least twenty-four hours prior to the meeting to the business address of each director, or in the event such notice is given on a Saturday, Sunday or holiday, to the residence address of each director; or

By any other method in writing permitted under Section 7-101-402 of the Colorado Business Corporation Act, as amended.

If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company.

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If another permitted method is used, such notice shall be effective as provided in Section 7-101-402 of the Colorado Business Corporation Act, as amended.

Any director may waive notice of any meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.

SECTION 3.7 QUORUM.

A majority of the number of directors fixed by or pursuant to Section 3.2 of this Article 3 shall constitute a quorum for the transaction of business at any meeting of the board of directors, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice.

SECTION 3.8 MANNER OF ACTING.

Except as otherwise required by law or by the Articles of Incorporation, the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors.

SECTION 3.9 INFORMAL ACTION BY DIRECTORS.

Any action required or permitted to be taken by the board of directors or by a committee thereof at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors or all of the committee members entitled to vote with respect to the subject matter thereof.

SECTION 3.10 PARTICIPATION BY ELECTRONIC MEANS.

Any members of the board of directors or any committee designated by such board may participate in a meeting of the board of directors or committee by means of telephone conference or similar communications equipment by which all persons participating in the meeting can hear each other at the same time. Such participation shall constitute presence in person at the meeting.

SECTION 3.11 VACANCIES.

Any vacancy occurring in the board of directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office. Any directorship to be filled by reason of an increase in the number of directors may be filled by election by the board of directors for a term of office continuing only until the next election of directors by the shareholders.

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SECTION 3.12 RESIGNATION.

Any director of the corporation may resign at any time by giving written notice to the president or the secretary of the corporation. The resignation of any director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. When one or more directors shall resign from the board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.

SECTION 3.13 REMOVAL.

Any director or directors of the corporation may be removed at any time, with or without cause, in the manner provided in the Colorado Business Corporation Act, as amended.

SECTION 3.14 COMMITTEES.

By resolution adopted by a majority of the board of directors, the directors may designate two or more directors to constitute a committee, any of which shall have such authority in the management of the corporation as the board of directors shall designate and as shall be prescribed by the Colorado Business Corporation Act, as amended.

SECTION 3.15 COMPENSATION.

By resolution of the board of directors and irrespective of any personal interest of any of the members, each director may be paid his or her expenses, if any, of attendance at each meeting of the board of directors, and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the board of directors or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.

SECTION 3.16 PRESUMPTION OF ASSENT.

A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent shall be entered in the minutes of the meeting or unless he or she shall file his or her written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.

SECTION 3.17 LIMITATIONS ON LIABILITY.

To the fullest extent permitted by the Colorado Business Corporation Act, as amended, a director of the corporation shall not be liable to the corporation or its shareholders for monetary damages for any action taken or any failure to take any action as a director. Notwithstanding the foregoing, a director will have liability for monetary damages for a breach or failure which

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involves: (i) a violation of criminal law; (ii) a transaction from which the director derived an improper personal benefit, either directly or indirectly; (iii) distributions in violation of the Colorado Business Corporation Act, as amended, or the Articles of Incorporation of the corporation (but only to the extent provided by law); (iv) willful misconduct or disregard for the best interests of the corporation concerning any acts or omissions concerning any proceeding other than in the right of the corporation or a shareholder; or (v) reckless, malicious or wanton acts or omissions concerning any proceeding other than in the right of the corporation or of a shareholder. No repeal, amendment or modification of this Article, whether direct or indirect, shall eliminate or reduce its effect with respect to any act or omission of a director of the corporation occurring prior to such repeal, amendment or modification.

ARTICLE 4

OFFICERS

SECTION 4.1 NUMBER.

The officers of the corporation shall be a chief executive officer, a president, a secretary, and a treasurer, each of whom shall be elected by the board of directors. Such other officers as may be deemed necessary may be elected or appointed by the board of directors. Any two or more offices may be held by the same person.

SECTION 4.2 ELECTION AND TERM OF OFFICE.

The officers of the corporation to be elected by the board of directors shall be elected annually by the board of directors at the first meeting of the board of directors held after the annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as practicable. Each officer shall hold office until his or her successor shall have been duly elected and shall have qualified or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided.

SECTION 4.3 REMOVAL.

Any officer or agent may be removed by the board of directors whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights.

SECTION 4.4 VACANCIES.

A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term.

SECTION 4.5 CHIEF EXECUTIVE OFFICER

The chief executive officer (the “CEO”) shall be the chief executive officer of the corporation, shall have overall responsibility and authority for management of the operations of the corporation (subject to the authority of the board of directors), shall preside at all meetings of the shareholders if the chairman of the board of directors is unavailable, unless unavailable. He

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or she may sign, with the secretary or any other proper officer of the corporation thereunto authorized by the board of directors, certificates for shares of the corporation and deeds, mortgages, bonds, contracts, or other instruments which the board of directors has authorized to be executed, excepted in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed.

SECTION 4.6 PRESIDENT.

The president shall, subject to the control of the board of directors and the CEO, in general supervise the business and affairs of the corporation. He or she shall, when present, and in the absence of a chairman of the board and CEO, preside at all meetings of the shareholders and of the board of directors. He or she shall, in the absence of the CEO or in the event of the CEO’s death, inability or refusal to act, perform all duties of the CEO, and when so acting, shall have all the powers of and be subject to all of the restrictions on the CEO. He or she may sign, with the secretary or any other proper officer of the corporation thereunto authorized by the board of directors, certificates for shares of the corporation and deeds, mortgages, bonds, contracts, or other instruments which the board of directors has authorized to be executed, excepted in cases where the signing and execution th ereof shall be expressly delegated by the board of directors or by these bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the board of directors from time to time.

SECTION 4.7 VICE PRESIDENT.

If elected or appointed by the board of directors or any senior officer, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or appointment, or in the absence of any designation, then in the order of their election or appointment) shall, in the absence of the president or in the event of his or her death, inability or refusal to act, perform all duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. Any vice president may sign, with the treasurer or an assistant treasurer or the secretary or an assistant secretary, certificates for shares of the corporation; and shall perform such other duties as from time to time may be assigned to him or her by the CEO, the president or by the board of directors.

SECTION 4.8 SECRETARY.

The secretary shall: (a) keep the minutes of the proceedings of the shareholders and of the board of directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all documents the execution of which on behalf of the corporation under its seal is duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder; (e) sign with the chairman or vice chairman of the board of directors, or the CEO, the president, or a vice president, certificates for

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shares of the corporation, the issuance of which shall have been authorized by resolution of the board of directors; (f) have general charge of the stock transfer books of the corporation; and (g) in general perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him or her by the CEO, the president or by the board of directors.

SECTION 4.9 TREASURER.

The treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article 5 of these bylaws; and (c) in general perform all of the duties incident to the office of treasurer and such other duties as from time to time may be assigned to him or her by the CEO, the president or by the board of directors.

SECTION 4.10 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.

The assistant secretaries, when authorized by the board of directors, may sign with the chairman or vice chairman of the board of directors or the CEO, the president or a vice president certificates for shares of the corporation the issuance of which shall have been authorized by a resolution of the board of directors. The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or the treasurer, respectively, or by the CEO, the president or the board of directors.

SECTION 4.11 BONDS.

If the board of directors by resolution shall so require, any officer or agent of the corporation shall give bond to the corporation in such amount and with such surety as the board of directors may deem sufficient, conditioned upon the faithful performance of their respective duties and offices.

SECTION 4.12 SALARIES.

The salaries of the officers shall be fixed from time to time by the board of directors or its designee and no officer shall be prevented from receiving such salary by reason of the fact that he or she is also a director of the corporation.

ARTICLE 5

CONTRACTS, LOANS, CHECKS AND DEPOSITS

SECTION 5.1 CONTRACTS.

The board of directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.

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SECTION 5.2 LOANS.

No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the board of directors. Such authority may be general or confined to specific instances.

SECTION 5.3 CHECKS, DRAFTS, ETC.

All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the board of directors.

SECTION 5.4 DEPOSITS.

All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may select.

ARTICLE 6

SHARES, CERTIFICATES FOR SHARES AND TRANSFER OF SHARES

SECTION 6.1 REGULATION.

The board of directors may make such rules and regulations as it may deem appropriate concerning the issuance, transfer and registration of certificates for shares of the corporation, including the appointment of transfer agents and registrars.

SECTION 6.2 CERTIFICATES FOR STOCK.

The shares of the corporation’s stock may be certificated or uncertificated, as provided under Colorado law, and shall be entered in the books of the corporation and registered as they are issued. Any certificates issued to any shareholder of the corporation shall be respectively numbered serially for each class of shares, or series thereof, as they are issued, shall be impressed with the corporate seal or a facsimile thereof, if applicable, and shall be signed by the chairman or vice-chairman of the board of directors or by the president or a vice president and by the treasurer or an assistant treasurer or by the secretary or an assistant secretary; provided that such signatures may be facsimile if the certificate is counter-signed by a transfer agent, or registered by a registrar other than the corporation itself or its employee. Each certificate shall state the name of the corporation, the fact that the corporation is organized or incorporated under the laws of the State of Colorado, the name of the person to whom issued, the date of issue, the class (or series of any class), the number of shares represented thereby and the par value of the shares represented thereby or a statement that such shares are without par value. A statement of the designations, preferences, qualifications, limitations, restrictions and special or relative rights of the shares of each class shall be set forth in full or summarized on the face or back of the certificates which the corporation shall issue, or in lieu thereof, the certificate may set forth that such a statement or summary will be furnished to any shareholder upon request without charge.

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Each certificate shall be otherwise in such form as may be prescribed by the board of directors and as shall conform to the rules of any stock exchange on which the shares may be listed.

Within a reasonable time after the issuance or transfer of uncertificated shares, the corporation shall send to the registered owner thereof a written statement that shall set forth all of the information required by the Colorado Business Corporation Act, as amended, and these bylaws to be provided to holders of uncertificated shares, and any restrictions on the transfer or registration of such shares imposed by the corporation’s then-effective articles of incorporation, bylaws and any agreement among shareholders or any agreement between shareholders and the corporation.

The corporation shall not issue certificates representing fractional shares and shall not be obligated to make any transfers creating a fractional interest in a share. The corporation may, but shall not be obligated to, issue scrip in lieu of any fractional shares, such scrip to have terms and conditions specified by the board of directors.

SECTION 6.3 CANCELLATION OF CERTIFICATES.

All certificates surrendered to the corporation for transfer shall be canceled and no new certificates shall be issued in lieu thereof until the former certificate for a like number of shares shall have been surrendered and canceled, except as herein provided with respect to lost, stolen or destroyed certificates.

SECTION 6.4 LOST, STOLEN OR DESTROYED CERTIFICATES.

Any shareholder claiming that his or her certificate for shares is lost, stolen or destroyed may make an affidavit or affirmation of that fact and lodge the same with the secretary of the corporation, accompanied by a signed application for a new certificate. Thereupon, and upon the giving of a satisfactory bond of indemnity to the corporation not exceeding an amount double the value of the shares as represented by such certificate (the necessity for such bond and the amount required to be determined by the president and treasurer of the corporation), the corporation may issue (i) a new certificate of the same tenor and representing the same number, class and series of shares as were represented by the certificate alleged to be lost, stolen or destroyed; or (ii) uncertificated shares in place of the certificate previously issued by the corporation alleged to have been lost, stolen or destroyed.

SECTION 6.5 TRANSFER OF SHARES.

Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, and evidence of compliance with applicable securities laws and other restrictions, it shall be the duty of the corporation to issue a new certificate or evidence of the issuance of uncertificated shares to the shareholder entitled thereto, cancel the old certificate and record the transaction upon the corporation’s books. Upon the surrender of any certificate for transfer, such certificate shall at once be conspicuously marked on its face “Cancelled” and filed with the permanent stock records of the corporation.

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Upon the receipt of proper transfer instructions from the registered owner of uncertificated shares, such uncertificated shares shall be cancelled, issuance of new equivalent uncertificated shares or certificated shares shall be made to the shareholder entitled thereto and the transaction shall be recorded upon the books of the corporation. If the corporation has a transfer agent or registrar acting on its behalf, the signature of any officer or representative thereof may be in facsimile.

The board of directors may appoint a transfer agent and one or more co-transfer agents and a registrar and one or more co-registrars and may make or authorize such agent to make all such rules and regulations deemed expedient concerning the issue, transfer and registration of shares of stock.

As against the corporation, a transfer of shares can be made only on the books of the corporation and in the manner hereinabove provided, and the corporation shall be entitled to treat the holder of record of any share as the owner thereof and shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the statutes of the State of Colorado.

ARTICLE 7

INDEMNIFICATION

SECTION 7.1 INDEMNIFICATION.

For purposes of this Article 7, a “Proper Person” means any person (including the estate or personal representative of a director) who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether formal or informal, by reason of the fact that such individual is or was a director, officer, employee, fiduciary or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, fiduciary or agent of any foreign or domestic profit or nonprofit corporation or of any partnership, joint venture, trust, profit or nonprofit unincorporated association, limited liability company, or other enterprise or employee benefit plan. The corporation shall indemnify any Proper Person against reaso nably incurred expenses (including attorneys’ fees), judgments, penalties, fines (including any excise tax assessed with respect to an employee benefit plan) and amounts paid in settlement reasonably incurred by such Proper Person in connection with such action, suit or proceeding if it is determined by the groups set forth in Section 7.4 of this Article 7 that such Proper Person conducted himself in good faith and reasonably believed (i) in the case of conduct in the official capacity of such Proper Person with the corporation, that the conduct of such Proper Person was in the corporation’s best interests; or (ii) in all other cases (except criminal cases), that the conduct of such Proper Person was at least not opposed to the corporation’s best interests; or (iii) in the case of any criminal proceeding, that the Proper Person had no reasonable cause to believe such conduct was unlawful. Official capacity means, when used with respect to a director, the office of dire ctor and, when used with respect to any other Proper Person, the office in a corporation held by the officer or the employment, fiduciary or agency relationship undertaken by the employee, fiduciary, or agent on behalf of the corporation.

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Official capacity does not include service for any other domestic or foreign corporation or other person or employee benefit plan.

A director’s conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the participants in or beneficiaries of the plan is conduct that satisfies the requirement in (ii) of this Section 7.1. A director’s conduct with respect to an employee benefit plan for a purpose that the director did not reasonably believe to be in the interests of the participants in or beneficiaries of the plan shall be deemed not to satisfy the requirement of this Section 7.1 that a director acted in good faith.

No indemnification shall be made under this Article 7 to a Proper Person with respect to any claim, issue or matter in connection with a proceeding by or in the right of a corporation in which the Proper Person was adjudged liable to the corporation or in connection with any proceeding charging that the Proper Person derived an improper personal benefit, whether or not involving action in an official capacity, in which such Proper Person was adjudged liable on the basis that such Proper Person derived an improper personal benefit. Further, indemnification under this Section 7.1 in connection with a proceeding brought by or in the right of the corporation shall be limited to reasonable expenses, including attorneys’ fees, incurred in connection with the proceeding.

SECTION 7.2 RIGHT TO INDEMNIFICATION.

The corporation shall indemnify any Proper Person who was wholly successful, on the merits or otherwise, in defense of any action, suit, or proceeding as to which such Proper Person was entitled to indemnification under Section 7.l of this Article 7 against expenses (including attorneys’ fees) reasonably incurred by such Proper Person in connection with the proceeding without the necessity of any action by the corporation other than the determination in good faith that the defense has been wholly successful.

SECTION 7.3 EFFECT OF TERMINATION OF ACTION.

The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the person seeking indemnification did not meet the standards of conduct described in Section 7.1 of this Article 7. Entry of a judgment by consent as part of a settlement shall not be deemed an adjudication of liability, as described in Section 7.2 of this Article 7.

SECTION 7.4 GROUPS AUTHORIZED TO MAKE INDEMNIFICATION DETERMINATION.

Except where there is a right to indemnification as set forth in Sections 7.1 or 7.2 of this Article 7 or where indemnification is ordered by a court in Section 7.5 of this Article 7, any indemnification shall be made by the corporation only as determined in the specific case by a proper group that indemnification of the Proper Person is permissible under the circumstances because the Proper Person has met the applicable standards of conduct set forth in Section 7.1 of this Article 7. This determination shall be made by the board of directors by a majority vote of those present at a meeting at which a Quorum, as defined hereunder, is present. For purposes of this Article 7, a “Quorum” shall consist of all directors not party to the proceeding. If a Quorum

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cannot be obtained, the determination shall be made by a majority vote of a committee of the board of directors designated by the board of directors, which committee shall consist of two or more directors not parties to the proceeding, except that directors who are parties to the proceeding may participate in the designation of directors for the committee. If a Quorum of the board of directors cannot be obtained and the committee cannot be established, or even if a Quorum is obtained or the committee is designated and a majority of the directors constituting such Quorum or committee so directs, the determination shall be made by (i) independent legal counsel selected by a vote of the board of directors or the committee in the manner specified in this Section 7.4 or, if a Quorum of the full board of directors cannot be obtained and a committee cannot be established, by independent legal counsel selecte d by a majority vote of the full board of directors (including directors who are parties to the action) or (ii) a vote of the shareholders.

Authorization of indemnification and advance of expenses shall be made in the same manner as the determination that indemnification or advance of expenses is permissible except that, if the determination that indemnification or advance of expenses is permissible is made by independent legal counsel, authorization of indemnification and advance of expenses shall be made by the body that selected such counsel.

SECTION 7.5 COURT–ORDERED INDEMNIFICATION.

Any Proper Person may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction for mandatory indemnification under Section 7.2 of this Article 7, including indemnification for reasonable expenses incurred to obtain court-ordered indemnification. If a court determines that the Proper Person is entitled to indemnification under Section 7.2 of this Article 7, the court shall order indemnification, including the Proper Person’s reasonable expenses incurred to obtain court-ordered indemnification. If the court determines that such Proper Person is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not such Proper Person met the standards of conduct set forth in Section 7.1 of this Article 7 or was adjudged liable in the proceeding, the court may order such indemnif ication as the court deems proper except that if the Proper Person has been adjudged liable, indemnification shall be limited to reasonable expenses incurred in connection with the proceeding and reasonable expenses incurred to obtain court-ordered indemnification.

SECTION 7.6 ADVANCE OF EXPENSES.

Reasonable expenses (including attorneys’ fees) incurred in defending an action, suit or proceeding as described in Section 7.1 of this Article 7 may be paid by the corporation to any Proper Person in advance of the final disposition of such action, suit or proceeding upon receipt of (i) a written affirmation of such Proper Person’s good faith belief that such Proper Person has met the standards of conduct prescribed by Section 7.1 of this Article 7; (ii) a written undertaking, executed personally or on the Proper Person’s behalf, to repay such advances if it is ultimately determined that such Proper Person did not meet the prescribed standards of conduct (the undertaking shall be an unlimited general obligation of the Proper Person but need not be secured and may be accepted without reference to financial ability to make repayment); and (iii) a determination is made by the proper group (as described in Section 7.4 of this Article 7) that the facts as then known to the group would not preclude indemnification. Determination and

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authorization of payments shall be made in the same manner specified in Section 7.4 of this Article 7.

SECTION 7.7 ADDITIONAL INDEMNIFICATION TO CERTAIN PERSONS OTHER THAN DIRECTORS.

In addition to the indemnification provided to officers, employees, fiduciaries or agents because of their status as Proper Persons under this Article 7, the corporation may also indemnify and advance expenses to them if they are not directors of the corporation to a greater extent than is provided in these bylaws, if not inconsistent with public policy, and if provided for by general or specific action of its board of directors or shareholders or by contract.

SECTION 7.8 WITNESS EXPENSES.

The sections of this Article 7 do not limit the corporation’s authority to pay or reimburse expenses incurred by a director in connection with an appearance as a witness in a proceeding at a time when such individual has not been made a named as a defendant or respondent in the proceeding.

SECTION 7.9 REPORT TO SHAREHOLDERS.

Any indemnification of or advance of expenses to a director in accordance with this Article 7, if arising out of a proceeding by or on behalf of the corporation, shall be reported in writing to the shareholders with or before the notice of the next shareholders’ meeting. If the next shareholder action is taken without a meeting at the instigation of the board of directors, such notice shall be given to the shareholders at or before the time the first shareholder signs a writing consenting to such action.

SECTION 7.10 PROVISION OF INSURANCE.

By action of the board of directors, notwithstanding any interest of the directors in the action, the corporation may purchase and maintain insurance, in such scope and amounts as the board of directors deems appropriate, on behalf of any person who is or was a director, officer, employee, fiduciary or agent of the corporation, or who, while a director, officer, employee, fiduciary or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, fiduciary or agent of any other foreign or domestic profit or nonprofit corporation or of any partnership, joint venture, trust, profit or nonprofit unincorporated association, limited liability company, other enterprise or employee benefit plan, against any liability asserted against, or incurred by, such individual in that capacity or arising out of such individual’s status as su ch, whether or not the corporation would have the power to indemnify such individual against such liability under the provisions of Article 7 of these bylaws or applicable law. Any such insurance may be procured from any insurance company designated by the board of directors of the corporation, whether such insurance company is formed under the laws of Colorado or any other jurisdiction of the United States or elsewhere, including any insurance company in which the corporation has an equity interest or any other interest, through stock ownership or otherwise.

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ARTICLE 8

FISCAL YEAR

The fiscal year of the corporation shall end on the last day of March each year.

ARTICLE 9

DIVIDENDS

The board of directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Articles of Incorporation.

ARTICLE 10

CORPORATE SEAL

The board of directors may provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the corporation and the state of incorporation and the words “CORPORATE SEAL.”

ARTICLE 11

WAIVER OF NOTICE

Whenever any notice is required to be given under the provisions of these bylaws or under the provisions of the Articles of Incorporation or under the provisions of the Colorado Business Corporation Act, as amended, or otherwise, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the event or other circumstance requiring such notice, shall be deemed equivalent to the giving of such notice.

ARTICLE 12

AMENDMENTS

These bylaws may be altered, amended or repealed and new bylaws may be adopted by a majority of the directors present at any meeting of the board of directors of the corporation at which a quorum is present, or by unanimous written consent of the board of directors as provided in Section 3.9 hereof.

ARTICLE 13

EXECUTIVE COMMITTEE

SECTION 13.1 APPOINTMENT.

The board of directors by resolution adopted by a majority of the full board of directors, may designate two or more of its members to constitute an executive committee. The designation of such committee and the delegation thereto of authority shall not operate to relieve the board of directors, or any member thereof, of any responsibility imposed by law.

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SECTION 13.2 AUTHORITY.

The executive committee, when the board of directors is not in session, shall have and may exercise all of the authority of the board of directors except to the extent, if any, that such authority shall be limited by the resolution appointing the executive committee and except also that the executive committee shall not have the authority of the board of directors in reference to amending the Articles of Incorporation, adopting a plan of merger or consolidation, recommending to the shareholders the sale, lease or other disposition of all or substantially all of the property and assets of the corporation otherwise than in the usual and regular course of its business, recommending to the shareholders a voluntary dissolution of the corporation or a revocation thereof, or amending the bylaws of the corporation.

SECTION 13.3 TENURE AND QUALIFICATIONS.

Each member of the executive committee shall hold office until the next regular annual meeting of the board of directors following his or her designation and until his or her successor is designated as a member of the executive committee and is elected and qualified.

SECTION 13.4 MEETINGS.

Regular meetings of the executive committee may be held without notice at such time and places as the executive committee may fix from time to time by resolution. Special meetings of the executive committee may be called by any member thereof upon not less than one day’s notice stating the place, date and hour of the meeting, which notice may be written or oral, and if mailed, shall be deemed to be delivered when deposited in the United States mail addressed to the member of the executive committee at his or her business address. Any member of the executive committee may waive notice of any meeting and no notice of any meeting need be given to any member thereof who attends in person. The notice of a meeting of the executive committee need not state the business proposed to be transacted at the meeting.

SECTION 13.5 QUORUM.

A majority of the members of the executive committee shall constitute a quorum for the transaction of business at any meeting thereof, and action of the executive committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present.

SECTION 13.6 INFORMAL ACTION BY EXECUTIVE COMMITTEE.

Any action required or permitted to be taken by the executive committee at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof.

SECTION 13.7 VACANCIES.

Any vacancy in the executive committee may be filled by a resolution adopted by a majority of the full board of directors.

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SECTION 13.8 RESIGNATIONS AND REMOVAL.

Any member of the executive committee may be removed at any time with or without cause by resolution adopted by a majority of the full board of directors. Any member of the executive committee may resign from the executive committee at any time by giving written notice to the president or secretary of the corporation, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 13.9 PROCEDURE.

The executive committee shall elect a presiding officer from its members and may fix its own rules of procedure which shall not be inconsistent with these bylaws. It shall keep regular minutes of its proceedings and report the same to the board of directors for its information at the meeting thereof held next after the proceedings shall have been taken.

ARTICLE 14

EMERGENCY BYLAWS

The emergency bylaws provided in this Article 14 shall be operative during any emergency (as defined in Section 7-102-107(4) of the Colorado Business Corporation Act, as amended) in the conduct of the business of the corporation, notwithstanding any different provision in the preceding bylaws. To the extent not inconsistent with the provisions of this Article 14, the bylaws provided in the preceding articles shall remain in effect during such emergency and upon its termination the emergency bylaws shall cease to be operative.

During any such emergency:

A.            A meeting of the board of directors may be called by any officer or director of the corporation. Notice of the time and place of the meeting shall be given by the person calling the meeting to such of the directors as it may be feasible to reach by any available means of communication. Such notice shall be given at such time in advance of the meeting as circumstances permit in the judgment of the person calling the meeting.

B.            At any such meeting of the board of directors, a quorum shall consist of the number of directors in attendance at such meeting.

C.            The board of directors, either before or during any such emergency, may, effective in the emergency, change the principal office or designate several alternative principal offices or regional offices, or authorize the officers so to do.

D.            The board of directors, either before or during any such emergency, may provide, and from time to time modify, lines of succession in the event that during an emergency any or all officers or agents of the corporation shall for any reason be rendered incapable of discharging their duties.

E.             No officer, director or employee acting in accordance with these emergency bylaws shall be liable except for willful misconduct.

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F.             These emergency bylaws shall be subject to repeal or change by further action of the board of directors or by action of the shareholders, but no such repeal or change shall modify any action taken prior to the time of such repeal or change. Any amendment of these emergency bylaws may make any further or different provision that may be practical and necessary for the circumstances of the emergency.

*   *   *   *   *

These Amended and Restated Bylaws are effective as of February 2, 2011, and amend, restate and replace in their entirety all previously effective versions of the Bylaws, as amended, restated or otherwise, of New Frontier Media, Inc.

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EX-10.01

Exhibit 10.01

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.

BUSINESS LOAN AGREEMENT (ASSET BASED)

Principal
$5,000,000.00 Loan Date
12-15-2010 Maturity
12-15-2011 Loan No.
15525121115 Call / Coll
1C1 / 599 Account Officer
BORES Initials

References in the boxes above 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:	GREAT WESTERN BANK
	7007 Winchester Circle, Suite 200		Lakewood
	Boulder, CO 80301		215 Union Blvd.
			Suite 150
			Lakewood, CO 80228

THIS BUSINESS LOAN AGREEMENT (ASSET BASED) dated December 15, 2010, is made and executed between New Frontier Media Inc (“Borrower”) and GREAT WESTERN 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.  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; an d (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 December 15, 2010, 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 December 15, 2011.

ADVANCE AUTHORITY.  The following person or persons are 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 such authority:  Michael Weiner, CEO of New Frontier Media Inc; and Grant Williams, CFO of New Frontier Media Inc.

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 sole 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 other 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 (and 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

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.

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 .  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 set 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 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 are 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 e ngaged or presently proposes to engage.  Borrower maintains an office at 7007 Winchester Circle, Suite 200, Boulder, CO 80301.  Unless Borrower has designated otherwise in writing, the principal office is the 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.

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.

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 lit igation 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 cont ained 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 indemnify 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 an y 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 GAAP, 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.

Additional Requirements.  Annual Financial Statements.  Annual audited financial statements (10Q) prepared by an independent third party, to be submitted within 90 days of the company’s fiscal year end.

Interim Financial Statements.  Internally prepared interim financials (form 10Q), to be submitted not less than quarterly, to include balance sheet, income statement, accounts receivable aging schedule, .

Borrowing Base and Compliance Certificate.  Submission of the company’s borrowing base and compliance certificate, to be submitted withint 30 days of each month end.  The BB certificate will be signed by CEO, Michael Weiner to certify compliance.

Other Information.  Such other information as GWB may from time to time reasonably request relating to Customer.

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.

Additional Requirements.  All covenants are required to be certified on the monthly borrowing base certificate that is submitted monthly. The financial calculations for the covenants are based on the most recent quarterly financials submitted.

No Purchase of Securities.  The proceeds of the credit facilities may not be used to purchase or carry securities; however GWB would allow them to repurchase their own company stock.

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

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

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 Ration” shall mean the ratio of total liabilities to tangible net worth. The term “Tangible Net Worth” shall mean Customer’s net worth as shown on Customer’s regular financial statements prepared in accordance with GAAP, including net prepaid distribution rights, but excluding an amount to 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, experi mental 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.

Current Ratio.  Borrower to maintain a current ratio of not less than 1.50 to 1.00. Current ratio is defined as a) current assets as defined by gap less employee or related party receivables, to b) current liabilities; as set forth in Customer’s regular quarter financial statements prepared in accordance with GAAP.

Loans to Affiliated Persons and Entities.  Without the prior written consent of Great Western Bank, no loans or advances may be made directly or indirectly made by the borrower to any affiliated person or entities.

Material Changes in Client Base.  No adverse, material change in the current client base as it relates to the Borrower’s largest clients, [***].

Additional Outside Debt.  No additional debt in excess of $1 MM will be allowed without prior Great Western Bank approval.

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.

Insurance.  Maintain fire and other risk insurance, public liability insurance, and such other 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 ten (10) 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 poli cies 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 been 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 Borrowe r.

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.  Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings, and (2) Borrower shall have established on Borrower’s books adequate reserves with respect to such con tested assessment, tax, charge, levy, lien, or claim in accordance with GAAP.

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 affecting 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 Lender’s 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 within thirty (30) days after the end of each month, 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 instrumentali ty 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.

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.

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 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 expend itures 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 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.

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.  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 o r 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.

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.

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 material 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.

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.

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.

Right to Cure.  If any default, other than a default on Indebtedness, is curable and if Borrower or Grantor, as the case may be, has not been given a notice of a similar default within the preceding twelve (12) months, it may be cured if Borrower or Grantor, as the case may be, after Lender sends written notice to Borrower or Grantor, as the case may be, demanding cure of such default:  (1) cure the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiate steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continue and complete all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

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 ot herwise.  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.

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.  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 c osts 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 participat ion 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 any 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 Jefferson 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 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 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, Borrower agrees to keep Lender informed at all times of Borrower’s current address. 0; 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 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.

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

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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.

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” mean 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, as determined by Lender from time to time, the lesser of (1) $5,000,000.00 or (2) 75.000% of the aggregate amount of Eligible Accounts.

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 Coll ateral 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, 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 filed 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.

(9)  Accounts which have not been paid in full within Less than 90 days from the invoice date.

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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.

(10)  Any one client that compromises an excess of 35% of the total borrowing base at any one time would be excluded from the borrowing base.  The exception to this would be a “producer for hire” invoice which would be noted in the borrowing base.

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 GREAT WESTERN 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 Note executed by New Frontier Media Inc in the principal amount of $5,000,000.00 dated December 15, 2009, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit 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 date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled “Indebtedness and Liens”; (5) liens and security interests whi ch, 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 DECEMBER 15, 2010.

BORROWER:
NEW FRONTIER MEDIA INC.
By:	/s/ Michael Weiner	By:	/s/ Grant Williams
	Michael Weiner, CEO of New Frontier Media Inc		Grant Williams, CFO of New Frontier Media Inc

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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.

LENDER:

GREAT WESTERN BANK

X /s/ Samantha Borelli

Authorized Signer

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CHANGE IN TERMS AGREEMENT

Principal	Loan Date	Maturity	Loan No.	Call / Coll	Account	Officer	Initials
$5,000,000.00	12-15-2010	12-15-2011	15525121115	1C1 / 599		BORES	/s/ SDB

References in the boxes above 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:	GREAT WESTERN BANK
	7007 Winchester Circle, Suite 200		Lakewood
	Boulder, CO  80301		215 Union Blvd.
			Suite 150
			Lakewood, CO  80228
Principal Amount:  $5,000,000.00			Date of Agreement:  December 15, 2010

DESCRIPTION OF EXISTING INDEBTEDNESS.  PROMISSORY NOTE FROM NEW FRONTIER MEDIA INC. TO GREAT WESTERN BANK DATED DECEMBER 15, 2009.

DESCRIPTION OF COLLATERAL.  COMMERCIAL SECURITY AGREEMENT FROM NEW FRONTIER MEDIA INC. TO GREAT WESTERN BANK DATED DECEMBER 15, 2009.

DESCRIPTION OF CHANGE IN TERMS.  EXTEND THE MATURITY DATE OF THE LOAN TO DECEMBER 15, 2011.  EXTEND THE REVOLVING LINE OF CREDIT FEATURE TO DECEMBER 15, 2011.  CONTINUE WITH MONTHLY INTEREST ONLY PAYMENTS STARTING JANUARY 15, 2011.

CONTINUING VALIDITY.  Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all Agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect.  Consent by Lender to this Agreement does not waive Lender’s right to strict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms.  Nothing in this Agreement will constitute a satisfaction of the obligation(s).  It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), including accommodation parties, unless a party is expressly released by Lender in writing.  Any maker or endorser, including accommodation makers, will not be released by virtue of this Agreement.  If any person who signed the original obligation does not sign the Agreement below, then all persons signing below acknowledge that the Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisions of this Agreement or otherwise will not be released by it.  This waiver applies not only to any initial extension, modification or release, but also to all such subsequent actions.

PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.  BORROWER AGREES TO THE TERMS OF THE AGREEMENT.

BORROWER:

NEW FRONTIER MEDIA, INC.

By:	/s/ Michael Weiner	By:	/s/ Grant Williams
	Michael Weiner, CEO of New Frontier Media, Inc.		Grant Williams, CFO of New Frontier Media, Inc.

EX-10.02

EXHIBIT 10.02

CONFIDENTIAL SEPARATION AGREEMENT

AND GENERAL RELEASE

This Confidential Separation Agreement and General Release (“Agreement”) is entered into by and between Marc Laurence Greenberg (“Employee”) and MRG Entertainment, Inc. (“Company”).

WHEREAS, Employee’s employment with Company has been involuntarily terminated by Company without Cause effective on October 8, 2010 pursuant to Section 3B of the Employment Agreement between the parties dated February 10, 2006, as subsequently amended (collectively, the “Employment Agreement”); and

WHEREAS, without admission of liability or fault, Company and Employee have agreed to compromise and resolve any differences and to settle and extinguish all claims Employee may have against Company and that Company may have against Employee, including but not limited to claims which arise from Employee’s employment with Company or Employee’s separation from employment.

NOW THEREFORE, for and in consideration of the monetary consideration described below and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Employee voluntarily and knowingly enters into the following Agreement and agrees as follows:

1.             If Employee signs and does not revoke this Agreement, upon the expiration of the seven (7) day revocation period set forth in Paragraph 10, Company shall pay to Employee termination payments equal to his current base salary for a period of six (6) months through April 7, 2011 (the “Severance Payments”).  Such obligation may be reduced or eliminated pursuant to Section 5H of the Employment Agreement which grants Company the right to reduce on a dollar for dollar basis, the Severance Payments by an amount equal to the gross amount that Employee earns (whether as an employee, contractor, or director of any business, trade, profession or occupation, and irrespective of whether such form of compensation constitutes salary, bonus or compensation) for the period of October 8, 2010 through April 7, 20 11.  In addition to the foregoing, Company shall pay Employee’s COBRA premiums for “employee only” medical, dental and vision coverage and pay Employee’s car allowance through April 7, 2011.  Business expenses reimbursable under Company policy will be paid within ten (10) days after the final submission of outstanding business expenses, provided that Employee submit any outstanding business expenses within ten (10) days from the Effective Date of this Agreement.

2.             Excluding the compensation set forth in Paragraph 1, Employee acknowledges that he has received full payment of all wages and compensation due to him in connection with his employment with Company.  Except as specifically provided herein, this Agreement shall expressly and unconditionally supersede and render void any and all claims, rights, title or interest in or with respect to any employee compensation or benefit to which Employee may have been entitled by virtue of his employment with Company, excluding claims relating to social security, workers’ compensation, disability or unemployment insurance benefits.  As of the effective date of this Agreement, Employee will not be entitled to additional vesting in any of the

Company’s stock option plans or other benefit plans. Employee will not be eligible for any additional awards under the Company’s stock option plans.  Employee understands that any vested stock options not exercised within the applicable exercise periods shall expire.

3.             Employee hereby, on behalf of himself, his heirs, legal representatives, successors and assigns, acknowledges full and complete satisfaction of, and does hereby waive his right to damages from and releases and discharges Company, its directors, officers, stockholders, representatives, insurers, employees, attorneys, agents and successors, past and present, and each of them, (collectively and individually, the “Releasees”) of and from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, complaints, wages, obligations, debts, expenses, damages, judgments, orders, demands and liabilities of whatever kind or nature in law, equity or otherwise, whether known or unknown, suspected or unsuspected, which he holds or at any time heretofore owned or held against said Releasees, including specifically but not exclusively, without limiting the generality of the foregoing, (1) any and all claims arising out of or in any way connected with Employee’s employment by Company; (2) any and all claims arising out of or in any way connected with the termination of Employee’s employment with Company; (3) any and all claims that could arise under common (including civil tort) law and/or state or federal statutes, including but not limited to any and all claims of breach of express or implied contract, promissory estoppel, detrimental reliance, wrongful discharge, infliction of emotional distress, claims under the Employee Retirement Income Security Act of 1974 or the Family and Medical Leave Act of 1993, as amended, the WARN Act, or claims of discrimination under the Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended, the Americans with Disabilities Act of 1990, The Sarbanes Oxley Act of 2002, the Internal Revenue Code, or any other local, state or federal law or regulation, as of the date of this Agreement.  Employee specifically agrees and covenants not to sue Company, or file any administrative claim for, or related to any of the above-mentioned claims or any other claims related to his employment.  Company and Employee intend for the release set forth in this Paragraph 3 to have the broadest effect possible.

4.             Company and its affiliates and their respective directors, officers, stockholders, representatives, insurers, employees, attorneys, agents and successors, past and present, and each of them hereby acknowledge full and complete satisfaction of, and do hereby waive their rights to damages from and release and discharge Employee, his heirs, legal representatives, successors and assigns (collectively and individually, the “Employee Releasees”) of and from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, complaints, wages, obligations, debts, expenses, damages, judgments, orders, demands and liabilities of whatever kind or nature in law, equity or otherwise, whether known or unknown, suspected or unsuspected, which they hold or at any time heretofore owned or held against said E mployee Releasees, including specifically but not exclusively, without limiting the generality of the foregoing, (1) any and all claims arising out of or in any way connected with Employee’s employment by Company; (2) any and all claims arising out of or in any way connected with the termination of Employee’s employment with Company; (3) any and all claims that could arise under common (including civil tort) law and/or state or federal statutes.

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5.             Each party expressly waives all rights either party has or may have under Section 1542 of the Civil Code of California which provides as follows:

SECTION 1542.  GENERAL RELEASE; EXTENT:  A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER, MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

6.             For the avoidance of doubt, Employee further understands, intends and agrees that, by this Agreement he is waiving any claims he may have under the Age Discrimination in Employment Act of 1967 (ADEA), as amended, and represents and agrees that he has, personally or through his attorney, considered all aspects of this Agreement and is fully advised of his right to discuss any and all aspects of this matter with an attorney of his choice; that he has carefully read and fully understands all of the provisions of this Agreement; and that he has voluntarily entered into this Agreement.

7.             This Agreement will not in any way be construed as an admission by either Party of a violation of any federal, state or local law or ordinance, or any enforceable right of Employee or Company and each party specifically denies any wrongdoing on its part, or on the part of its directors, employees or agents.

8.             Employee acknowledges that Releasees have not made and do not make any representations regarding the tax consequences of this Agreement or the Severance Payments paid or to be paid pursuant to Paragraph 1. Employee further agrees to indemnify, defend and hold Releasees harmless from any and all of Employee’s tax liability, interest, and/or penalties that may be or may become due thereon.

9.             Employee understands that he has been given a period of twenty-one (21) calendar days to review and consider this Agreement before signing it.  Employee further understands that he may use as much of this 21-day period as he wishes prior to signing.

10.           Employee understands that this Agreement can be revoked within seven (7) calendar days of his signing it.  Revocation can only be made by delivering written notice of revocation to Company at the following address: 7007 Winchester Circle, Suite 200, Boulder, Colorado 80301, and only to the attention of: Marc Callipari, General Counsel.  For this revocation to be effective, written notice must be received by Company no later than the close of business on the seventh day after Employee signs this Agreement.  If Employee revokes this Agreement, it shall not be effective or enforceable and Employee will not receive the benefits described in this Agreement.

11.           Neither Party will engage in any conduct and make any statements that are derogatory about or detrimental to the other Party or any of the Releasees identified in Paragraph 3 or any Employee Releasees identified in Paragraph 4.

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12.           Employee further agrees that he will not, without the express written consent of Company, pursue, apply for, or seek employment with Company.  Should Employee do so in violation of this Paragraph 12, Company shall have no obligation to hire him.

13.           Each party agrees that the terms of this Agreement, and the proposal of and discussions relating to this Agreement, are and shall remain confidential as between the parties, unless, and to the extent, disclosure is required by law or to secure advice from a legal or tax advisor. Notwithstanding the foregoing, either party may disclose that the Employee was terminated by Company without Cause.

14.           Employee affirms that he has returned or will promptly return to Company all Company equipment and materials and that he will promptly destroy all Company related electronic data that may be stored on Employee’s personal computer hard drive and that he will not at any time, except as authorized by the President of Company, for his own benefit or the benefit of any other person or entity, disclose or cause to be disclosed any information, materials, systems, procedures, processes, manuals, forms, customer or employee lists, business plans or other trade secrets or confidential information regarding Company. Employee further acknowledges and agrees that he continues to be bound by the Company’s Employee Proprietary Information and Inventions Agreement executed in February 10, 2006. Notwithstanding the foregoing, in accordance with Sect ion 7B of the Employment Agreement, Employee shall be entitled to retain Employee’s personal address book.

15.           Employee acknowledges and agrees that he continues to be bound by the terms of the Non-Competition, Non-Solicitation and Trade Secret Agreement dated February 10, 2006 through the end of its term on February 9. 2011.

16.           The parties agree further that if either breaches or acts in a manner inconsistent with the terms of this Agreement, either party may bring an action in a court of competent jurisdiction and the prevailing party shall be entitled to recover costs and reasonable outside attorney’s fees, and any other available remedy.

17.           Notwithstanding anything to the contrary contained herein, the obligations of Company under Paragraph 11 of the Employment Agreement relating to the indemnification of Employee shall survive the execution of this Agreement and remain an enforceable obligation of the Company.

18.           This Agreement sets forth the entire agreement between Employee and Company. Employee hereby acknowledges that Company has made no representations or promises to him other than those contained in this Agreement.

19.           This Agreement may not be amended, modified, superseded, canceled, renewed or expanded, or any terms or covenants hereof waived, except by a writing executed by each of the parties hereto or, in the case of a waiver, by the party waiving compliance.  Failure of any party at any time or times to require performance of any provision hereof shall in no manner affect his or

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its right at a later time to enforce the same. No waiver by a party of a breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed to be or construed as a further or continuing waiver of agreement contained in the Agreement.

20.The terms of this Agreement are contractual and not a mere recital. Should any provision, part of any provision, or application thereof be held invalid or unenforceable, the invalidity shall not affect other provisions or applications of the Agreement which can be given effect without the invalid provision or application, and to this end, the provisions of this Release are declared to be severable.

21.Company and Employee agree that this Agreement shall be interpreted in accordance with the plain meaning of its terms and not strictly for or against any party.  The terms of this Agreement shall be enforced pursuant to California law.  Paragraph 9 of the Employment Agreement relating to the arbitration of disputes shall be applicable to this Agreement.

22.This Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, successors and assigns.

Employee acknowledges voluntarily entering into this Agreement on the date written below, with full knowledge of the rights that he may be waiving.

DATED this 6 day of October, 2010.

/s/ Marc Greenberg
Employee
MRG ENTERTAINMENT, INC
By:	/s/ Michael Weiner
Name:	Michael Weiner
Title:	CEO

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EX-10.03

EXHIBIT 10.03

CONFIDENTIAL SEPARATION AGREEMENT

AND GENERAL RELEASE

This Confidential Separation Agreement and General Release (“Agreement”) is entered into by and between Richard B. Goldberg (“Employee”) and MRG Entertainment, Inc. (“Company”).

WHEREAS, Employee and Company are parties to an Employment Agreement dated February 10, 2006, as subsequently amended (“collectively, the Employment Agreement”) that is set to expire by its terms at midnight on March 31, 2011 (the “Employment Agreement Termination Date”);

WHEREAS, Company has notified Employee that it does not intend to renew the Employment Agreement after the Employment Agreement Termination Date and, as a result, the parties have agreed that Employee’s employment with Company will be terminated without Cause effective on December 1, 2010 pursuant to Section 3B of the Employment Agreement (“Effective Date”); and

WHEREAS, without admission of liability or fault, Company and Employee have agreed to compromise and resolve any differences and to settle and extinguish all claims Employee may have against Company and that Company may have against Employee, including but not limited to claims which arise from Employee’s employment with Company or Employee’s separation from employment.

NOW THEREFORE, for and in consideration of the monetary consideration described below and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Employee voluntarily and knowingly enters into the following Agreement and agrees as follows:

1.             Notwithstanding any other terms set forth in the Employment Agreement, if Employee signs and does not revoke this Agreement, upon the expiration of the seven (7) day revocation period set forth in Paragraph 10, Company shall pay to Employee termination payments equal to his current base salary until the Employment Agreement Termination Date (the “Severance Payments”).  Such obligation may be reduced or eliminated pursuant to Section 5H of the Employment Agreement which grants Company the right to reduce on a dollar for dollar basis, the Severance Payments by an amount equal to the gross amount that Employee earns (whether as an employee, contractor, or director of any business, trade, profession or occupation, and irrespective of whether such form of compensation constitutes salary, bonus or compensation) for the period of December 2, 2010 through the Employment Agreement Termination Date.  In addition to the foregoing, Company shall pay Employee’s COBRA premiums for “employee only” medical, dental and vision coverage and pay Employee’s car allowance through the Employment Agreement Termination Date.  Business expenses reimbursable under Company policy will be paid within ten (10) days after the final submission of outstanding business expenses, provided that Employee submit any outstanding business expenses within ten (10) days from the Effective Date of this Agreement.

2.             Excluding the compensation set forth in Paragraph 1, Employee acknowledges that he has

received full payment of all wages and compensation due to him in connection with his employment with Company.  Except as specifically provided herein, this Agreement shall expressly and unconditionally supersede and render void any and all claims, rights, title or interest in or with respect to any employee compensation or benefit to which Employee may have been entitled by virtue of his employment with Company, excluding claims relating to social security, workers’ compensation, disability or unemployment insurance benefits.  As of the Effective Date of this Agreement, Employee will not be entitled to additional vesting in any of the Company’s stock option plans or other benefit plans.  Employee will not be eligible for any additional awards under the Company’s stock option plans.  Employee understands that any vested stock options not exercised within the applicable exercis e periods shall expire.

3.             Employee hereby, on behalf of himself, his heirs, legal representatives, successors and assigns, acknowledges full and complete satisfaction of, and does hereby waive his right to damages from and releases and discharges Company, its directors, officers, stockholders, representatives, insurers, employees, attorneys, agents and successors, past and present, and each of them, (collectively and individually, the “Releasees”) of and from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, complaints, wages, obligations, debts, expenses, damages, judgments, orders, demands and liabilities of whatever kind or nature in law, equity or otherwise, whether known or unknown, suspected or unsuspected, which he holds or at any time heretofore owned or held against said Releasees, including specifically but not exclusively, without limiting the generality of the foregoing, (1) any and all claims arising out of or in any way connected with Employee’s employment by Company; (2) any and all claims arising out of or in any way connected with the termination of Employee’s employment with Company; (3) any and all claims that could arise under common (including civil tort) law and/or state or federal statutes, including but not limited to any and all claims of breach of express or implied contract, promissory estoppel, detrimental reliance, wrongful discharge, infliction of emotional distress, claims under the Employee Retirement Income Security Act of 1974 or the Family and Medical Leave Act of 1993, as amended, the WARN Act, or claims of discrimination under the Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended, the Americans with Disabilities Act of 1990, The Sarbanes Oxley Act of 2002, the Internal Revenue Code, or any other local, state or federal law or regulation, as of the date of this Agreement.  Employee specifically agrees and covenants not to sue Company, or file any administrative claim for, or related to any of the above-mentioned claims or any other claims related to his employment.  Company and Employee intend for the release set forth in this Paragraph 3 to have the broadest effect possible.

4.             Company and its affiliates and their respective directors, officers, stockholders, representatives, insurers, employees, attorneys, agents and successors, past and present, and each of them hereby acknowledge full and complete satisfaction of, and do hereby waive their rights to damages from and release and discharge Employee, his heirs, legal representatives, successors and assigns (collectively and individually, the “Employee Releasees”) of and from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, complaints, wages, obligations, debts, expenses, damages, judgments, orders, demands and liabilities of whatever kind or nature in law, equity or otherwise, whether known or unknown,

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suspected or unsuspected, which they hold or at any time heretofore owned or held against said Employee Releasees, including specifically but not exclusively, without limiting the generality of the foregoing, (1) any and all claims arising out of or in any way connected with Employee’s employment by Company; (2) any and all claims arising out of or in any way connected with the termination of Employee’s employment with Company; (3) any and all claims that could arise under common (including civil tort) law and/or state or federal statutes.

5.             Each party expressly waives all rights either party has or may have under Section 1542 of the Civil Code of California which provides as follows:

SECTION 1542.  GENERAL RELEASE; EXTENT:  A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER, MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

6.             For the avoidance of doubt, Employee further understands, intends and agrees that, by this Agreement he is waiving any claims he may have under the Age Discrimination in Employment Act of 1967 (ADEA), as amended, and represents and agrees that he has, personally or through his attorney, considered all aspects of this Agreement and is fully advised of his right to discuss any and all aspects of this matter with an attorney of his choice; that he has carefully read and fully understands all of the provisions of this Agreement; and that he has voluntarily entered into this Agreement.

7.             This Agreement will not in any way be construed as an admission by either Party of a violation of any federal, state or local law or ordinance, or any enforceable right of Employee or Company and each party specifically denies any wrongdoing on its part, or on the part of its directors, employees or agents.

8.             Employee acknowledges that Releasees have not made and do not make any representations regarding the tax consequences of this Agreement or the Severance Payments paid or to be paid pursuant to Paragraph 1. Employee further agrees to indemnify, defend and hold Releasees harmless from any and all of Employee’s tax liability, interest, and/or penalties that may be or may become due thereon.

9.             Employee understands that he has been given a period of twenty-one (21) calendar days to review and consider this Agreement before signing it.  Employee further understands that he may use as much of this 21-day period as he wishes prior to signing.

10.           Employee understands that this Agreement can be revoked within seven (7) calendar days of his signing it.  Revocation can only be made by delivering written notice of revocation to Company at the following address: 7007 Winchester Circle, Suite 200, Boulder, Colorado 80301, and only to the attention of: Marc Callipari, General Counsel.  For this revocation to be effective,

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written notice must be received by Company no later than the close of business on the seventh day after Employee signs this Agreement. If Employee revokes this Agreement, it shall not be effective or enforceable and Employee will not receive the benefits described in this Agreement.

11.           Neither Party will engage in any conduct and make any statements that are derogatory about or detrimental to the other Party or any of the Releasees identified in Paragraph 3 or any Employee Releasees identified in Paragraph 4.

12.           Employee further agrees that he will not, without the express written consent of Company, pursue, apply for, or seek employment with Company.  Should Employee do so in violation of this Paragraph 12, Company shall have no obligation to hire him.

13.           Each party agrees that the terms of this Agreement, and the proposal of and discussions relating to this Agreement, are and shall remain confidential as between the parties, unless, and to the extent, disclosure is required by law or to secure advice from a legal or tax advisor.  Notwithstanding the foregoing, either party may disclose that the Employee was terminated by Company without Cause.

14.           Employee affirms that he has returned or will promptly return to Company all Company equipment and materials and that he will promptly destroy all Company related electronic data that may be stored on Employee’s personal computer hard drive and that he will not at any time, except as authorized by the President of Company, for his own benefit or the benefit of any other person or entity, disclose or cause to be disclosed any information, materials, systems, procedures, processes, manuals, forms, customer or employee lists, business plans or other trade secrets or confidential information regarding Company.  Employee further acknowledges and agrees that he continues to be bound by the Company’s Employee Proprietary Information and Inventions Agreement executed in February 10, 2006.  Notwithstanding the foregoing, in accordan ce with Section 7B of the Employment Agreement, Employee shall be entitled to retain Employee’s personal address book.

15.           Employee acknowledges and agrees that he continues to be bound by the terms of the Non-Competition, Non-Solicitation and Trade Secret Agreement dated February 10, 2006 through the end of its term on February 9. 2011.

16.           The parties agree further that if either breaches or acts in a manner inconsistent with the terms of this Agreement, either party may bring an action in a court of competent jurisdiction and the prevailing party shall be entitled to recover costs and reasonable outside attorney’s fees, and any other available remedy.

17.           Notwithstanding anything to the contrary contained herein, the obligations of Company under Paragraph 11 of the Employment Agreement relating to the indemnification of Employee shall survive the execution of this Agreement and remain an enforceable obligation of the Company.

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18.This Agreement sets forth the entire agreement between Employee and Company.  Employee hereby acknowledges that Company has made no representations or promises to him other than those contained in this Agreement.

19.This Agreement may not be amended, modified, superseded, canceled, renewed or expanded, or any terms or covenants hereof waived, except by a writing executed by each of the parties hereto or, in the case of a waiver, by the party waiving compliance.  Failure of any party at any time or times to require performance of any provision hereof shall in no manner affect his or its right at a later time to enforce the same. No waiver by a party of a breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed to be or construed as a further or continuing waiver of agreement contained in the Agreement.

20.The terms of this Agreement are contractual and not a mere recital. Should any provision, part of any provision, or application thereof be held invalid or unenforceable, the invalidity shall not affect other provisions or applications of the Agreement which can be given effect without the invalid provision or application, and to this end, the provisions of this Release are declared to be severable.

21.Company and Employee agree that this Agreement shall be interpreted in accordance with the plain meaning of its terms and not strictly for or against any party.  The terms of this Agreement shall be enforced pursuant to California law.  Paragraph 9 of the Employment Agreement relating to the arbitration of disputes shall be applicable to this Agreement.

22.This Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, successors and assigns.

Employee acknowledges voluntarily entering into this Agreement on the date written below, with full knowledge of the rights that he may be waiving.

DATED this 26 day of October, 2010.

/s/ Rich Goldberg
Employee
MRG ENTERTAINMENT, INC
By:	/s/ Michael Weiner
Name:	Michael Weiner
Title:	CEO

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EX-10.04

EXHIBIT 10.04

LEASE AGREEMENT

OFFICE AND INDUSTRIAL SPACE

This Lease Agreement is made and entered into as of the 6th day of October, 2010, by and between 6060 Partnership, LLP. (“Landlord”), whose address is 1800 Broadway, Suite 210, Boulder, CO 80302, and New Frontier Media, Inc. (“Tenant”), whose address is 6000 Spine Road, Suite 100, Boulder, CO 80301.

In consideration of the covenants, terms, conditions, agreements and payments as herein set forth, the Landlord and Tenant hereby enter into the following Lease:

1.Definitions.  Whenever the following words or phrases are used in this Lease, said words or phrases shall have the following meaning:

a.“Area” shall mean the parcel of land commonly known and referred to as 6000 Spine Road, Boulder, Colorado.  The Area includes the Leased Premises and one or more buildings.  The Area may include Common Areas.

b. “Building” shall mean a building located in the Area.

c. “Common Areas” shall mean all entrances, exits, driveways, curbs, walkways, hallways, parking areas, landscaped areas, restrooms, loading and service areas, and like areas or facilities which are located in the Area and which are designated by the Landlord as areas or facilities available for the nonexclusive use in common by persons designated by the Landlord.

d. “Leased Premises” shall mean the premises herein leased to the Tenant by the Landlord.

e.“Tenant’s Prorata Share” as to the Building in which the Leased Premises are located shall mean an amount (expressed as a percentage) equal to the number of square feet included in the Leased Premises divided by the total number of leasable square feet included in said Building.  The Tenant’s Prorata Share as to Common Areas shall mean an amount (expressed as a percentage) equal to the number of square feet included in the Leased Premises divided by the total number of leasable square feet included in all Buildings located in the Area.  The Tenant’s Prorata Share for Common Areas may change from time to time as the leasable square footage in all Buildings located in the Area is increased or decreased.

2. Leased Premises.  The Landlord hereby leases unto the Tenant, and the Tenant hereby leases from the Landlord, the following described premises:

Space 100 in Building 6000

consisting of 48,582 square feet

3. Base Term.  The term of this Lease shall commence at 12:00 noon on June 1, 2011, and, unless sooner terminated as herein provided for, shall end at 12:00 noon on January 1, 2022 (“Lease Term”).  Except as specifically provided to the contrary herein, the Leased Premises shall, upon the termination of this Lease, by virtue of the expiration of the Lease Term or otherwise, be returned to the Landlord by the Tenant in as good or better condition than when entered upon by the Tenant, ordinary wear and tear excepted.

4. Rent.  Tenant shall pay the following rent for the Leased Premises:

a. Base Monthly Rent.  Tenant shall pay to Landlord, without notice and without setoff, at the address of Landlord as herein set forth, the following Base Monthly Rent (“Base Monthly Rent”), said Base Monthly Rent to be paid in advance on the first day of each month during the term hereof.  In the event that this Lease commences on a date other than the first day of a month, the Base Monthly Rent for the first month of the Lease Term shall be prorated for said partial month.  Below is a schedule of Base Monthly Rental payments as agreed upon:

During Lease Term

For Period	To Period	A Base Monthly
Starting	Ending	Rent of
June 1, 2011	July 1, 2011	$314,568.45 (reflects 6 months of rent)
July 1, 2011	July 1, 2012	$0.00
July 1, 2012	January 1, 2015	$52,428.08
January 1, 2015	January 1, 2016	$54,006.99
January 1, 2016	January 1, 2017	$55,626.39
January 1, 2017	January 1, 2018	$57,286.28
January 1, 2018	January 1, 2019	$59,027.13
January 1, 2019	January 1, 2020	$60,767.99
January 1, 2020	January 1, 2021	$62,589.81
January 1, 2021	January 1, 2022	$64,492.61

b. Lease Term Adjustment.  If, for any reason, other than delays caused by the Tenant, the Leased Premises are not ready for Tenant’s occupancy on June 1, 2011, the Tenant’s rental obligation and other monetary expenses (i.e. taxes, utilities, etc.) shall be abated in direct proportion to the number of days of delay.  It is hereby agreed that the premises shall be deemed ready for occupancy on the day the Landlord receives a T.C.O. or C.O. or the appropriate letter of completion from a governing authority, or on the day the Landlord gives Tenant the keys to the Leased Premises if a building permit has not been applied for and/or is not required by the appropriate authority.

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c. Total Net Lease.  The Tenant understands and agrees that this Lease is a total net lease (a “net, net, net lease”), whereby the Tenant has the obligation to reimburse the Landlord for a share of all costs and expenses based upon Tenant’s Prorata Share (taxes, assessments, other charges, insurance, trash removal, Common Area operation and maintenance and like costs and expenses), incurred by the Landlord as a result of the Landlord’s ownership and operation of the Area.  All costs and expenses shall commence June 1, 2011.

5. Security Deposit.  Landlord acknowledges receipt from the Tenant of the sum of One Hundred Four Thousand Eight Hundred Fifty Six Dollars and Fifteen Cents ($104,856.15) to be retained by Landlord without responsibility for payment of interest thereon, as security for performance of all the terms and conditions of this Lease Agreement to be performed by Tenant, including payment of all rent due under the terms hereof.  Deductions may be made by Landlord from the amount so retained for the reasonable cost of repairs to the Leased Premises (ordinary wear and tear excepted), for any rent delinquent under the terms hereof and/or for any sum used in any manner to cure any default of Tenant under the terms of this Lease.  In the event deductions are so made, the Tenant shall, upon notice from the Landlord, redeposit with the Landlord such amounts so expended so as to maintain the deposit in the amount as herein provided for, and failure to so redeposit shall be deemed a failure to pay rent under the terms hereof.  Nothing herein contained shall limit the liability of Tenant as to any damage to the Leased Premises, and Tenant shall be responsible for the total amount of any damage and/or loss occasioned by actions of Tenant.  Landlord may deliver the funds deposited hereunder by Tenant to any purchaser of Landlord’s interest in the Leased Premises in the event such interest shall be sold, and thereupon Landlord shall be discharged from any further liability with respect to such deposit. If Tenant is not in default after the completion of year five of the Base Term, Landlord shall return to Tenant Fifty Two Thousand Four Hundred Twenty Eight Dollars and Eight Cents ($52,428.80) of the Security Deposit not later than July 31, 2016.

6. Use of Premises.  Tenant shall use the Leased Premises only for any lawful use so long as it is acceptable under the City of Boulder zoning codes and regulations and for no other purpose whatsoever except with the written consent of Landlord.  Tenant shall not allow any accumulation of trash or debris on the Leased Premises or within any portion of the Area.  All receiving and delivery of goods and merchandise and all removal of garbage and refuse shall be made only by way of the rear and/or other service door provided therefore.  In the event the Leased Premises shall have no such door, then these matters shall be handled in a manner satisfactory to Landlord.  No storage of any material outside of the Leased Premises shall be allowed unless first approved by Landlord in writing, and then in only such areas as are designated by Landlord.  Tenant shall not commit or suffer any waste on the Leased Premises nor shall Tenant permit any nuisance to be maintained on the Leased Premises or permit any disorderly conduct or other activity having a tendency to annoy or disturb any occupants of any part of the Area and/or any adjoining property.

7. Laws and Regulations. — Tenant Responsibility.  The Tenant shall, at its sole cost and expense, comply with all laws and regulations of any governmental entity, board, commission or agency having jurisdiction over the Leased Premises.  Tenant agrees not to install any electrical equipment that overloads any electrical paneling, circuitry or wiring and further agrees to comply with the requirements of the insurance underwriter or any governmental authorities having jurisdiction thereof.

8. Landlord’s Rules and Regulations.  Landlord reserves the right to adopt and promulgate reasonable rules and regulations applicable to the Leased Premises and from time to time amend or supplement said rules or regulations.  Notice of such rules and regulations and amendments and supplements thereto shall be given to Tenant at least thirty (30) days before the effective date of the same, and Tenant agrees to comply with and observe such rules and regulations and amendments and supplements thereto provided that the same apply uniformly to all Tenants of the Landlord in the Area.

9. Parking.  If the Landlord provides off street parking for the common use of Tenants, employees and customers of the Area, the Tenant shall park all vehicles of whatever type used by Tenant and/or Tenant’s employees only in such areas thereof as are designated by Landlord for this purpose, and Tenant accepts the responsibility of seeing that Tenant’s employees park only in the areas so designated.  Tenant shall, upon the request of the Landlord, provide to the Landlord license numbers of the Tenant’s vehicles and the vehicles of Tenant’s employees.  Parking spaces shall be provided to Tenant at no charge, unreserved and the number of parking spaces shall be based on Tenant’s Prorata Share multiplied by the total number of onsite parking spaces.

10. Control of Common Areas. — Exclusive control of the Landlord.  All Common Areas shall at all times be subject to the

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exclusive control and management of Landlord, notwithstanding that Tenant and/or Tenant’s employees and/or customers may have a nonexclusive right to the use thereof.  Landlord shall have the right from time to time to establish, modify and enforce reasonable rules and regulations with respect to the use of said facilities and Common Areas.

11. Taxes.

a. Real Property Taxes and Assessments.  The Tenant shall pay to the Landlord on the first day of each month, as additional rent, the Tenant’s Prorata Share of all real estate taxes and special assessments levied and assessed against the Building in which the Leased Premises are located and the Common Areas.  If the first and last years of the Lease Term are not calendar years, the obligations of the Tenant hereunder shall be prorated for the number of days during the calendar year that this Lease is in effect.  The monthly payments for such taxes and assessments shall be $9,878.34 until the Landlord receives the first tax statement for the referred to properties.  Thereafter, the monthly payments shall be based upon 1/12th of the prior year’s taxes and assessments.  Once each year the Landlord shall determine the actual Tenant’s Prorata Sh are of taxes and assessments for the prior year and if the Tenant has paid less than the Tenant’s Prorata Share for the prior year the Tenant shall pay the deficiency to the Landlord with the next payment of Base Monthly Rent, or, if the Tenant has paid in excess of the Tenant’s Prorata Share for the prior year the Landlord shall forthwith refund said excess to the Tenant.  Additionally, upon Lease expiration or termination Landlord shall also determine Tenant’s Prorata Share of taxes and assessments for the calendar year in which the Lease expires or terminates based on the most recent valuation and estimate of taxes provided by Boulder County.  If the Tenant has paid less than the Tenant’s prorated Prorata Share for the current year the Tenant shall pay the deficiency, or, if the Tenant has paid in excess of the Tenant’s prorated Prorata Share for the current year the Landlord shall forthwith refund the excess to the Tenant within thirty (30) days of such determination.

b. Personal Property Taxes.  Tenant shall be responsible for, and shall pay promptly when due, any and all taxes and/or assessments levied and/or assessed against any furniture, fixtures, equipment and items of a similar nature installed and/or located in or about the Leased Premises by Tenant.

c. Rent Tax.  If a special tax, charge or assessment is imposed or levied upon the rents paid or payable hereunder or upon the right of the Landlord to receive rents hereunder (other than to the extent that such rents are included as a part of the Landlord’s income for the purpose of an income tax), the Tenant shall reimburse the Landlord for the amount of such tax within fifteen (15) days after demand therefore is made upon the Tenant by the Landlord.

d. Other Taxes, Fees and Charges. Tenant shall pay to Landlord, on the first day of each month, as additional rent, Tenant’s Pro Rata Share of any “Other Charges” (as hereinafter defined) levied, assessed, charged or imposed against the Area, as a whole. Unless paid directly by Tenant to the authority levying, assessing, charging or imposing same, Tenant shall also pay to Landlord, on the first day of the month following payment of same by Landlord, the entire costs of any such “Other Charges” levied, assessed, charged or imposed against the Leased Premises, Tenant’s use of same, or Tenant’s conduct of business thereon.  For purposes of this provision, “Other Charges” shall mean and refer to any and all taxes, assessments, impositions, user fees, impact fees, utility fees, transportation fees, alternative transportation fees and passes, infrastructure fees, system fees, license fees, and any other charge or assessment imposed by any governmental authority or applicable subdivision on the Area, the Leased Premises or the ownership or use of the Area or Leased Premises, or the business conducted thereon, whether or not formally denominated as a tax, assessment, charge or other nominal description, whether now in effect or hereafter enacted or imposed (excluding, however, Landlord’s income taxes).

e. Should Landlord protest and win a reduction in the real estate taxes for the Building and Area, Tenant shall be obligated to pay its Prorata Share of the cost of such protest, if the protest is handled by a party other than the Landlord.

12. Insurance.

a. Landlord’s Insurance.  Landlord shall obtain and maintain such fire and casualty insurance on the core and shell of the Building in which the Leased Premises are located and the Common Areas, as well as such loss of rents, business interruption, liability or any other insurance, as it deems appropriate, with such companies and on such terms and conditions as Landlord deems acceptable.  Such insurance shall not be required to cover any of Tenant’s inventory, furniture, furnishings, fixtures, equipment or tenant improvements (whether or not installed on the Leased Premises by or for Tenant and whether or not included within the tenant finish provided by Landlord), and Landlord shall not be obligated to repair any damage thereto or replace any of same, and Tenant shall have no interest in any proceeds of Landlord’s insurance.

b. Tenant’s Insurance.  Tenant shall, at its sole cost and expense, obtain and maintain throughout the term of this Lease, on a full replacement cost basis, “all risk” insurance covering all of Tenant’s inventory, furniture, furnishings, fixtures, equipment and all tenant improvements or tenant finish (whether or not installed by Landlord) and betterments located on or within the Leased Premises.  In addition, Tenant shall obtain and maintain, at its sole cost and expense, comprehensive general public liability insurance providing coverage from and against any loss or damage occasioned by an accident or casualty on, about or adjacent to the Leased Premises, including protection against death, personal injury and property damage.  Such liability coverage shall be written on an “occurrence” basis, with limits of not less than $1,000,000.00 comb ined single limit coverage.

All policies of insurance required to be carried by Tenant hereunder shall be written by an insurance company licensed to do business in the State of Colorado, and shall name Landlord and the management company as an additional named insured and/or loss payee, as Landlord may direct.  Each such policy shall provide that same shall not be changed or modified without at least thirty (30) days’ prior written notice to Landlord and any mortgagee of Landlord.  Certificates evidencing the extent and effectiveness of all Tenant’s insurance shall be delivered to Landlord and the management company.  The limits of such insurance shall not, under any circumstances, limit the liability of Tenant under this Lease.

In the event that Tenant fails to maintain any of the insurance required of it pursuant to this provision, Landlord shall have the right (but not the obligation) at Landlord’s election, to pay Tenant’s premiums or to arrange substitute insurance with an insurance company of Landlord’s choosing, in which event any premiums advanced by Landlord shall constitute additional rent payable under this Lease and shall be payable by Tenant to Landlord immediately upon demand for same.  Landlord shall also have the right, but no the obligation, whether or not Tenant maintains coverage to carry any such insurance as Landlord may elect in order to provide coverage in the event Tenant fails to properly maintain such insurance.

The rights of Landlord hereunder shall be in addition to, and not in lieu of, of any other rights or remedies available to Landlord under this Lease or provided by law or in equity.  Without limiting the foregoing, in the event that coverage of any risk for which Tenant is responsible pursuant to this Section 12 is ultimately provided by coverage maintained by Landlord, whether due to Tenant’s failure to provided or maintain such insurance or otherwise, Tenant

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shall promptly reimburse Landlord for an amount equal to any deductible incurred, immediately upon demand for same.

c. Tenant’s High Pressure Steam Boiler Insurance.  If Tenant makes use of any kind of steam or other high pressure boiler or other apparatus which presents a risk of damage to the Leased Premises or to the Building or other improvements of which the Leased Premises are a part or to the life or limb of persons within such premises, Tenant shall secure and maintain appropriate boiler insurance in an amount satisfactory to Landlord.  The Landlord shall be named insured in any such policy or policies.  Certificates for such insurance shall be delivered to Landlord and shall provide that said insurance shall not be changed, modified, reduced or canceled without thirty (30) days prior written notice thereof being given to Landlord.

d. Tenant’s Share of Landlord Insurance.  Tenant shall pay the Landlord as additional rent Tenant’s Prorata Share of the insurance secured by the Landlord pursuant to “12A” above.  Payment shall be made on the first day of each month as additional rent.  The monthly payments for such insurance shall be $283.40 until changed by Landlord as a result of an increase or decrease in the cost of such insurance.

e. Mutual Subrogation Waiver.  Landlord and Tenant hereby grant to each other, on behalf of any insurer providing fire and extended coverage to either of them covering the Leased Premises, Buildings or other improvements thereon or contents thereof, a waiver of any right of subrogation any such insurer of one party may acquire against the other or as against the Landlord or Tenant by virtue of payments of any loss under such insurance.  Such a waiver shall be effective so long as the Landlord and Tenant are empowered to grant such waiver under the terms of their respective insurance policy or policies and such waiver shall stand mutually terminated as of the date either Landlord or Tenant gives notice to the other that the power to grant such waiver has been so terminated.

13.Utilities.

a. Tenant shall be solely responsible for and promptly pay all charges for heat, water, gas, electric, sewer service and any other utility service used or consumed on the Leased Premises.  For all utility services used or consumed on the Leased Premises which are included in utility services to an area larger than the Leased Premises, Tenant shall pay monthly, commencing with the first month of the Lease Term, as additional rent due under the terms hereof, a sum equal to Tenant’s Prorata Share of the estimated costs for said twelve (12) month period, divided by 12.  The estimated initial monthly costs are $N/A for water and $N/A for gas and/or electric.  Once each year the Landlord shall determine the actual costs of the foregoing expenses for the prior year and if the actual costs are greater than the estimated costs, the Tenant shall pay its Tenant’s Pr orata Share of the difference between the estimated costs and the actual costs to the Landlord with the next payment of Base Monthly Rent, or, if the actual costs are less than the estimated costs, the Landlord shall forthwith refund the amount of the Tenant’s excess payment to the Tenant. Additionally, upon Lease expiration or termination Landlord shall also determine Tenant’s Prorata Share of the annualized actual costs of the foregoing expenses for the number of days the Lease is in effect during the calendar year in which the Lease expires or terminates.  If the annualized actual costs are greater than the estimated costs, the Tenant shall pay its Tenant’s Prorata Share of the difference between the estimated costs and the annualized actual costs to the Landlord, or, if the annualized actual costs are less than the estimated costs, the Landlord shall forthwith refund the excess payment to the Tenant.  For purposes of calculating Tenant’s share of expenses under this paragrap h, annualized actual costs shall be the sum of actual costs for the year at the time of reconciliation plus the total estimated costs prorated for the number of days from the date the last actual cost was paid to the end of the year.  For all utility services used or consumed on the Leased Premises in which the utility service is used solely on the Leased Premises, the Tenant shall forthwith upon taking occupancy of the Leased Premises make arrangements with Xcel Energy, Qwest or other appropriate utility company to pay the utilities used on the Leased Premises and to have the same billed to the Tenant at the address designated by the Tenant.  Should there be a time where the Landlord remains responsible for utilities supplied to the Leased Premises, the Landlord shall bill the Tenant therefore and the Tenant shall promptly reimburse the Landlord therefore.  In no event shall Landlord be liable for any interruption or failure in the supply of any such utility to the Leased Premises.

In the event the utility company supplying water and/or sewer to the Leased Premises determines that an additional service fee, impact fee, and/or assessment, or any other type of payment or penalty is necessary due to Tenant’s use and occupancy of the Building, nature of operation and/or consumption of utilities, said expense shall be borne solely by the Tenant.  Said expense shall be paid promptly and any repairs requested by the utility company shall be performed by Tenant immediately and without any delay.

b. Landlord Controls Selection.  Landlord has advised Tenant that presently Xcel Energy (“Utility Service Provider”) is the utility company selected by Landlord to provide electricity and gas service for the Building.  Notwithstanding the foregoing, if permitted by Law, Landlord shall have the right at any time and from time to time during the Lease Term to either contract for service from a different company or companies providing electricity and/or gas service (each such company shall hereinafter be referred to as an (“Alternative Service Provider”) or continue to contract for service from the Utility Service Provider.

c. Tenant Shall Give Landlord Access.  Tenant shall cooperate with Landlord, Utility Service Provider, and any Alternative Service Provider at all times and, as reasonably necessary, shall allow Landlord, Utility Service Provider, and any Alternative Service Provider reasonable access to the Building’s electric lines, feeders, risers, wiring, gas lines, and any other machinery within the Premises.

d. Landlord Not Responsible for Interruption of Service.  Landlord shall in no way be liable or responsible for any loss, damage, or expense that Tenant may sustain or incur by reason of any change, failure, interference, disruption, or defect in the supply or character of the electrical and/or gas energy furnished to the Premises, or if the quantity or character of the electric and/or gas energy supplied by the Utility Service Provider or any Alternate Service Provider is no longer available or suitable for Tenant’s requirements, and no such change, failure, defect, unavailability, or unsuitability shall constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under the Lease.

14. Maintenance Obligations of Landlord.  Except as herein otherwise specifically provided for, Landlord shall keep and maintain the roof, foundation and exterior walls of the Building of which the Leased Premises are a part in good repair and condition.  Tenant shall repair and pay for any damage to roof, foundation and external walls caused by Tenant’s negligence, intentional acts or willful misconduct.

15. Maintenance Obligations of the Tenant.  Subject only to the maintenance obligations of the Landlord as herein provided for, the Tenant shall, during the entire Lease Term, including all extensions thereof, at the Tenant’s sole cost and expense, keep and maintain the Leased Premises in good condition and repair, including specifically the following within the Leases Premises:

        a. Electrical Systems.  Tenant agrees to maintain in good working order and to make all required repairs and replacements to the electrical systems for the Leased Premises.  Tenant upon signing this Lease acknowledges that Tenant has inspected the existing electrical systems and all such systems are in good repair and working order.

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b. Plumbing Systems.  Tenant agrees to maintain in good working order and to make all required repairs or replacements to the plumbing systems for the Leased Premises.  Tenant upon signing this Lease acknowledges that Tenant has inspected the existing plumbing systems and all such systems are in good repair and working order.

c. Inspections and Service.  Upon termination of Lease Agreement and only if requested by Landlord, Tenant agrees, before vacating premises, to employ at Tenant’s sole cost and expense, a licensed contractor to inspect, service and write a written report on the systems referred to in “A” and “B” of this Paragraph.  Landlord shall have the right to order such an inspection if Tenant fails to provide evidence of such inspection, and, to follow the recommendations of such reports and to charge the expense thereof to the Tenant.

d. Tenant’s Responsibility for Building and Area Repairs.  Tenant shall be responsible for any repairs required for any part of the Building or Area of which the Leased Premises are a part if such repairs are necessitated by the Tenant’s negligence, intentional acts or willful misconduct.

e. Cutting Roof.  Tenant must obtain in writing the Landlord’s approval which shall not be unreasonably withheld prior to making any roof penetrations.  Failure by Tenant to obtain written permission to penetrate a roof shall relieve Landlord of any roof repair obligations as set forth in Paragraph “14” hereof.  Tenant further agrees to repair, at its sole cost and expense, all roof penetrations made by the Tenant and to use, if so requested by Landlord, a licensed contractor selected by the Landlord to make such penetrations and repairs.

f. Glass and Doors.  The repair and replacement of all glass and doors on the Leased Premises shall be the responsibility of the Tenant.  Any such replacements or repairs shall be promptly completed at the expense of the Tenant.

g. Liability for Overload.  Tenant shall be responsible for the repair or replacement of any damage to the Leased Premises, the Building or the Area which result from the Tenant’s movement of heavy articles therein or thereon.  Tenant shall not overload the floors of any part of the Leased Premises.

h. Liability for Overuse and Overload of Operating Systems.  Tenant shall be responsible for the repair, upgrade, modification, and/or replacement of any operating systems servicing the Leased Premises and/or all or part of the Building which is necessitated by Tenant’s change or increase in use of or non-disclosed use of all or a part of the Leased Premises.  Operating systems include, but are not limited to, electrical systems; plumbing systems (both water and natural gas); heating, ventilating, and air conditioning systems; telecommunications systems; computer and network systems; lighting systems, fire sprinkler systems; security systems; and building control systems, if any.

i. Inspection of Leased Premises-“As Is” Conditions.  Tenant has inspected the Leased Premises and accepts the Leased Premises in the condition that they exist as of the date of this Lease, including, but not limited to, all mechanical, plumbing and electrical systems.

j. Failure of Tenant to Maintain Premises.  Should Tenant neglect to keep and maintain the Leased Premises as required herein, the Landlord shall have the right, but not the obligation, to have the work done and any reasonable costs plus a ten percent (10%) overhead charge therefore shall be charged to Tenant as additional rental and shall become payable by Tenant with the payment of the rental next due.

16. Common Area Maintenance.  Tenant shall be responsible for Tenant’s Prorata share of the total costs incurred for the operation, maintenance and repair of the Common Areas, including, but not limited to, the costs and expenses incurred for the operation, maintenance and repair of parking areas (including restriping and repaving); removal of snow; janitorial for common areas; trash removal; the cost of securing the Area, common entrances, exits, and lobbies of the Building; all common utilities, including water to maintain landscaping; replanting in order to maintain a smart appearance of landscape areas; supplies; depreciation on the machinery and equipment used in such operation, maintenance and repair; the cost of personnel to implement such services; the cost of maintaining in good working condition the HVAC system(s) for the Leased premises and/or Building; the cost of maintaining i n good working condition the elevator(s) for the Leased Premises and/or Building, if applicable; and costs to cover Landlord’s management fees paid for the management of the property.  These costs shall be estimated on an annual basis by the Landlord and shall be adjusted upwards or downwards depending on the actual costs for the preceding twelve months.  Tenant shall pay monthly, commencing with the first month of the Lease Term, as additional rent due under the terms hereof, a sum equal to Tenant’s Prorata Share of the estimated costs for said twelve (12) month period, divided by 12.  The estimated initial monthly costs are $6,680.03.  Once each year the Landlord shall determine the actual costs of the foregoing expenses for the prior year and if the actual costs are greater than the estimated costs, the Tenant shall pay its Tenant’s Prorata Share of the difference between the estimated costs and the actual costs to the Landlord with the next payment of Base M onthly Rent, or, if the actual costs are less than the estimated costs, the Landlord shall forthwith refund the amount of the Tenant’s excess payment to the Tenant.

Additionally, upon Lease expiration or termination Landlord shall also determine Tenant’s prorated Prorata Share of the annualized actual costs of the foregoing expenses for the number of days the Lease is in effect during the calendar year in which the Lease expires or terminates.  If the annualized actual costs are greater than the estimated costs, the Tenant shall pay its prorated Tenant’s Prorata Share of the difference between the estimated costs and the annualized actual costs to the Landlord, or, if the annualized actual costs are less than the estimated costs, the Landlord shall forthwith refund the excess to the Tenant.  For purposes of calculating Tenant’s share of expenses under this paragraph, annualized actual costs shall be the sum of actual costs for the year at the time of reconciliation plus the total estimated costs prorated for the number of days from the date the las t actual cost was paid to the end of the year.

17. Inspection of and Right of Entry to Leased Premises—Regular, Emergency, Reletting.  Landlord and/or Landlord’s agents and employees, shall have the right to enter the Leased Premises at all times during regular business hours with reasonable notice and, at all times during emergencies, to examine the Leased Premises, to make such repairs, alterations, improvements or additions as Landlord deems necessary, and Landlord shall be allowed to take all materials into and upon said Leased Premises that may be required therefore without the same constituting an eviction of Tenant in whole or in part, and the rent reserved shall in no way abate while such repairs, alterations, improvements or additions are being made, by reason of loss or interruption of business of Tenant or otherwise.

18. Alteration-Changes and Additions-Responsibility.  Unless the Landlord’s reasonable approval is first secured in writing, the Tenant shall not install or erect inside partitions, add to existing electric power service, add telephone outlets, add light fixtures, install additional heating and/or air conditioning or make any other changes or alterations to the interior or exterior of the Leased Premises.  Any such changes or alterations shall be made at the sole cost and expense of the Tenant.  At the end of this Lease, all such fixtures and Tenant Improvements, changes and/or alterations (except trade fixtures installed by Tenant) shall be and remain the property of Landlord; provided, however, Landlord shall have the option to require Tenant to remove any or all such fixtures, equipment, additions and/or alterations and restore the Leased Premises to the condition existing immediat ely prior to such change and/or installation, normal wear and tear excepted, all at Tenant’s cost and expense.  All such work shall be done in a good and workmanlike manner and shall

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consist of new materials unless agreed to otherwise by Landlord.  Any and all repairs, changes and/or modifications thereto shall be the responsibility of, and at the cost of, Tenant.  Landlord may require adequate and reasonable security from Tenant assuring no mechanics’ liens on account of work done on the Leased Premises by Tenant and may post the Leased Premises, or take such other action as is then permitted by law, to protect the Landlord and the Leased Premises against mechanics’ liens.  Landlord may also require adequate and reasonable security to assure Landlord that the Leased Premises will be restored to their original condition upon termination of this Lease.

19. Sign Approval.  Except for signs which are located inside of the Leased Premises and which are not attached to any part of the Leased Premises, the Landlord must reasonably approve in writing any sign to be placed in or on the interior or exterior of the Leased Premises, regardless of size or value.  Specifically, signs attached to windows of the Leased Premises must be so approved by the Landlord. Notwithstanding the foregoing, Tenant, at Tenant’s sole cost shall be permitted to install one sign on the exterior of the building and one monument sign on the Area subject to Landlord review and approval which shall not be unreasonably withheld,  the City of Boulder zoning codes and regulations and the Gunbarrel Business Park Association.  As a condition to the granting of such approval, Landlord shall have the right to require Tenant to furnish a bond or other security acceptabl e to Landlord sufficient to insure completion of and payment for any such sign work to be so performed.  Tenant shall, during the entire Lease Term, maintain Tenant’s signs in good condition and repair at Tenant’s sole cost and expense.  Tenant shall, remove all signs at the termination of this Lease, at Tenant’s sole risk and expense and shall in a workmanlike manner properly repair any damage and close any holes caused by the installation and/or removal of Tenant’s signs.  Tenant shall give Landlord prior notice of such removal so that a representative of Landlord shall have the opportunity of being present when the signage is removed, or shall pre-approve the manner and materials used to repair damage and close the holes caused by removal.  Signage for leasing by Landlord shall be limited to reasonable size and location with it being agreed that Landlord shall not affix any banners or signs on the exterior of the Building.

20. Right of Landlord to Make Changes and Additions.  Landlord reserves the right at any time to make reasonable alterations or additions to the Building or Area of which the Leased Premises are a part.  Landlord also reserves the right to construct other buildings and/or improvements in the Area and to make alterations or additions thereto, all as Landlord shall reasonably determine.  Easements for light and air are not included in the leasing of the Leased Premises to Tenant.  Landlord further reserves the exclusive right to the roof of the Building of which the Leased Premises are a part.  Notwithstanding, Tenant shall have the nonexclusive use to its Prorata Share of the roof for equipment required by Tenant’s business subject to Landlord review and approval which shall not be unreasonably withheld and the City of Boulder zoning codes and regulations.  Landl ord also reserves the right at any time to relocate, vary and adjust the size of any of the improvements or Common Areas located in the Area, provided, however, that all such changes shall be in compliance with the requirements of governmental authorities having jurisdiction over the Area and such changes do not materially interfere with Tenant’s occupancy and use of the Leased Premises for a period of time longer than commercially reasonable.

21. Damage or Destruction of Leased Premises.  In the event the Leased Premises and/or the Building of which the Leased Premises are a part shall be totally destroyed by fire or other casualty or so badly damaged that, in the reasonable opinion of Landlord, it is not feasible to repair or rebuild same, Landlord or Tenant shall have the right to terminate this Lease upon written notice to Landlord or Tenant.  If the Leased Premises are partially damaged by fire or other casualty, except if caused by Tenant’s negligence, and said Leased Premises are not rendered untenable thereby, as reasonably determined by Landlord, an appropriate reduction of the rent shall be allowed for the unoccupied portion of the Leased Premises until repair thereof shall be substantially completed, time being of the essence.  If the Landlord or Tenant elects to exercise the right herein vested in it to terminat e this Lease as a result of damage to or destruction of the Leased Premises or the Building in which the Leased Premises are located, said election shall be made by giving notice thereof to the Landlord or Tenant within thirty (30) days after the date of said damage or destruction.

22. Governmental Acquisition of Property.  The parties agree that Landlord shall have complete freedom of negotiation and settlement of all matters pertaining to the acquisition of the Leased Premises, the Building, the Area, or any part thereof, by any governmental body or other person or entity via the exercise of the power of eminent domain, it being understood and agreed that any financial settlement made or compensation paid respecting said land or improvements to be so taken, whether resulting from negotiation and agreement or legal proceedings, shall be the exclusive property of Landlord, there being no sharing whatsoever between Landlord and Tenant of any sum so paid.  In the event of any such taking, Landlord shall have the right to terminate this Lease on the date possession is delivered to the condemning person or authority.  Such taking of the property shall not be a breach of this Lease by Landlord nor give rise to any claims in Tenant for damages or compensation from Landlord.  Nothing herein contained shall be construed as depriving the Tenant of the right to retain as its sole property any compensation paid for any tangible personal property owned by the Tenant which is taken in any such condemnation proceeding.  Notwithstanding, if such eminent domain shall occur, Tenant shall have the right to terminate this Lease if the remaining portion of the Area being of such size or configuration that such remaining portion of the Area is unusable, uneconomical or materially interferes with Tenant’s occupancy and use of the Leased Premises.

23. Assignment or Subletting.  Tenant may not assign this Lease, or sublet the Leased Premises or any part thereof, without the reasonable written consent of Landlord.  No such assignment or subletting if approved by the Landlord shall relieve Tenant of any of its obligations hereunder, and, the performance or nonperformance of any of the covenants herein contained by subtenants shall be considered as the performance or the nonperformance by the Tenant.  Notwithstanding, Tenant may assign this Lease or sublet the Lease Premises or any portion thereof, without Landlord’s consent, to any partnership, corporation or other entity which controls, is controlled by, or is under common control with Tenant so long as assignee has a liquid net worth equal to or greater than Ten Million Dollars ($10,000,000). The following shall be deemed an assignment of Tenant’s interest in this Lease: (i ) any dissolution, merger, consolidation, or other reorganization of Tenant; and (ii) a transfer of any ownership interest in Tenant (whether by stock, partnership interest, membership interest, or otherwise).

24. Warranty of Title.  Subject to the provisions of the following three (3) paragraphs hereof, Landlord covenants it has good right to lease the Leased Premises in the manner described herein and that Tenant shall peaceably and quietly have, hold, occupy and enjoy the Leased Premises during the term of the Lease.

25. Access.  Landlord shall provide Tenant nonexclusive access to the Leased Premises through and across land and/or other improvements owned by Landlord.  Landlord shall have the right, during the term of this Lease, to designate, and to change, such nonexclusive access.

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26. Subordination.  Tenant agrees that this Lease shall be subordinate to any mortgages, trust deeds or ground leases that may now exist or which may hereafter be placed upon said Leased Premises and to any and all advances to be made thereunder, and to the interest thereon, and all renewals, replacements and extensions thereof.  Tenant shall execute and deliver whatever instruments may be required for the above purposes.  Tenant shall in the event of the sale or assignment of Landlord’s interest in the Area or in the Building of which the Leased Premises form a part, or in the event of any proceedings brought for the foreclosure of or in the event of exercise of the power of sale under any mortgage made by Landlord covering the Leased Premises, attorn to the purchaser and recognize such purchaser as Landlord under this Lease.

27. Easements.  The Landlord shall have the right to grant any easement on, over, under and above the Area for such purposes as Landlord determines, provided that such easements do not materially interfere with Tenant’s occupancy and use of the Leased Premises.

28. Indemnification and Waiver  Except in the case of a breach or default in the performance of any obligation under this Lease, each party shall indemnify, defend and hold harmless the other party and nothing in this Lease shall be construed as imposing any liability on them for any loss, costs, expense (including reasonable attorney’s fees), or any claims, suits, actions or damages arising from the ownership, use, control or occupancy of any portion of the Project including the Building, Common Areas and Premises unless such loss, cost, expense, claim, suit or action is a result of or caused by the negligent acts or omissions of such other party or its agents, servants, employees, contractors, or invitees.

Tenant shall not indemnify Landlord for acts or failure to observe or comply with any of the rules by any other Tenant or occupant of the Building or Project that adversely affect Tenant’s use and occupancy in which Landlord has been put on notice of such adverse impact to Tenant.

29. Acts or Omission of Others.  The Landlord, or its employees or agents, or any of them, shall not be responsible or liable to the Tenant or to the Tenant’s guests, invitees, employees, agents or any other person or entity, for any loss or damage that may be caused by the acts or omissions of other tenants, their guests or invitees, occupying any other part of the Area or by persons who are trespassers on or in the Area, or for any loss or damage caused or resulting from the bursting, stoppage, backing up or leaking of water, gas, electricity or sewers or caused in any other manner whatsoever, unless such loss or damage is caused by or results from the negligent acts of the Landlord, its agents or contractors.

30. Interest on Past Due Obligations.  Any amount due to Landlord not paid when due shall bear interest at two (2%) percent per month from due date until paid.  Payment of such interest shall not excuse or cure any default by Tenant under this Lease.

31. Holding Over-Double Last Month’s Rent.  If Tenant shall remain in possession of the Leased Premises after the termination of this Lease, whether by expiration of the Lease Term or otherwise, without a written agreement as to such possession, then Tenant shall be deemed a month-to-month Tenant.  The rent rate during such holdover tenancy shall be equivalent to 150% the monthly rent paid for the last full month of tenancy under this Lease, excluding any free rent concessions which may have been made for the last full month of the Lease.  No holding over by Tenant shall operate to renew or extend this Lease without the written consent of Landlord to such renewal or extension having been first obtained.  Tenant shall indemnify Landlord against loss or liability resulting from the delay by Tenant in surrendering possession of the Leased Premises including, without limitation, any claims made with regard to any succeeding occupancy bounded by such holdover period.

32. Modification or Extensions.  No modification or extension of this Lease shall be binding upon the parties hereto unless in writing and unless signed by the parties hereto.

33. Notice Procedure.  All notices, demands and requests which may be or are required to be given by either party to the other shall be in writing and such that are to be given to Tenant shall be deemed to have been properly given if served on Tenant or an employee of Tenant or sent to Tenant by any reputable overnight or same-day courier or United States registered or certified mail, return receipt requested, properly sealed, stamped and addressed to Tenant at 6000 Spine Road, Suite 100, Boulder, CO 80301 or at such other place as Tenant may from time to time designate in a written notice to Landlord; and, such as are to be given to Landlord shall be deemed to have been properly given if personally served on Landlord or if sent to Landlord, by any reputable overnight or same-day courier or United States registered or certified mail, return receipt requested, properly sealed, stamped and addressed to Landlord at 1800 Broadway, Suite 210, Boulder, CO 80302 or at such other place as Landlord may from time to time designate in a written notice to Tenant.  Any notice given by mailing shall be effective as of the date of mailing.

34. Memorandum of Lease-Notice to Mortgagee.  The Landlord and Tenant agree not to place this Lease of record, but upon the request of either party to execute and acknowledge so the same may be recorded a short form lease indicating the names and respective addresses of the Landlord and Tenant, the Leased Premises, the Lease Term, the dates of the commencement and termination of the Lease Term and options for renewal, if any, but omitting rent and other terms of this Lease.  Tenant agrees to an assignment by Landlord of rents and of the Landlord’s interest in this Lease to a mortgagee, if the same be made by Landlord.  Tenant further agrees if requested to do so by the Landlord that it will give to said mortgagee a copy of any request for performance by Landlord or notice of default by Landlord; and in the event Landlord fails to cure such default, the Tenant will give said mortgagee a sixty (60) day period in which to cure the same. Said period shall begin with the last day on which Landlord could cure such default before Tenant has the right to exercise any remedy by reason of such default.  All notices to the mortgagee shall be sent by United States registered or certified mail, postage prepaid, return receipt requested.

35. Controlling Law.  The Lease, and all terms hereunder shall be construed consistent with the laws of the State of Colorado.  Any dispute resulting in litigation hereunder shall be resolved in court proceedings instituted in Boulder County and in no other jurisdiction.

36. Landlord Not a Partner With the Tenant.  Nothing contained in this Lease shall be deemed, held or construed as creating Landlord as a partner, agent, associate of or in joint venture with Tenant in the conduct of Tenant’s business, it being expressly understood and agreed that the relationship between the parties hereto is and shall at all times remain that of Landlord and Tenant.

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37. Partial Invalidity.  If any term, covenant or condition of this Lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease or the application of such term, covenant or condition to persons and circumstances other than those to which it has been held invalid or unenforceable, shall not be affected thereby, and each term, covenant and condition of this Lease shall be valid and shall be enforced to the fullest extent permitted by law.

38. Default-Remedies of Landlord.

a. The occurrence of any of the following events shall constitute a default by Tenant under this Lease:

i. Failure to make due and punctual payment of rent or any other charges, assessments or amounts due or payable or required to be paid under this Lease; or

ii. Neglect or failure by Tenant to perform or observe, or any other breach of, any other term, covenant or condition of this Lease; or

iii. Adjudication of Tenant as bankrupt or insolvent, or filing by or against Tenant of any petition in bankruptcy or for reorganization or for the adoption of any arrangement under the Bankruptcy Code; application is made for the appointment of receiver or conservator for Tenant’s business or property; or assignment by Tenant is made of its property for the benefit of its creditors; or Tenant’s interest in this Lease or any substantial amount of Tenant’s other real or personal property is levied or executed upon by process of law; or

iv. Petition or other proceeding is made by or against Tenant for its dissolution or liquidation; or voluntary dissolution or liquidation of Tenant; or

v. Abandonment of the Leased Premises and Tenant stops paying Rent or net charges, or any part thereof, by Tenant for a period of time in excess of thirty (30) consecutive days.

b. If Tenant shall default in the payment of rent or in the keeping of any of the terms, covenants or conditions of this Lease to be kept and/or performed by Tenant or shall otherwise commit any event of default as defined above, Landlord may upon the expiration of any applicable cure, immediately, or at any time thereafter, reenter the Leased Premises, remove all persons and property therefrom, without being liable to indictment, prosecution for damage therefore, or for forcible entry and detainer and repossess and enjoy the Leased Premises, together with all additions thereto or alterations and improvements thereof.  Landlord may, at its option, at any time and from time to time thereafter, relet the Leased Premises or any part thereof for the account of Tenant or otherwise, and receive and collect the rents therefore and apply the same first to the payment of such expenses as Landlord may have incurred in recovering possession and for putting the same in good order and condition for rerental, and expense, commissions and charges paid by Landlord in reletting the Leased Premises.  Any such reletting may be for the remainder of the term of this Lease or for a longer or shorter period.  In lieu of reletting such Leased Premises, Landlord may occupy the same or cause the same to be occupied by others.  Whether or not the Leased Premises or any part thereof be relet, Tenant shall pay the Landlord the rent and all other charges required to be paid by Tenant up to the time of the expiration of this Lease or such recovered possession, as the case may be and thereafter, Tenant, if required by Landlord, shall pay to Landlord until the end of the term of this Lease, the equivalent of the amount of all rent reserved herein and all other charges required to be paid by Tenant, less the net amount received by Landlord for such reletting, if any, unless waived by written notice from Landlo rd to Tenant.  No action by Landlord to obtain possession of the Leased Premises and/or to recover any amount due to Landlord hereunder shall be taken as a waiver of Landlord’s right to require full and complete performance by Tenant of all terms hereof, including payment of all amounts due hereunder or as an election on the part of Landlord to terminate this Lease Agreement.  If the Leased Premises shall be reoccupied by Landlord, then, from and after the date of repossession, Tenant shall be discharged of any obligations to Landlord under the provisions hereof for the payment of rent.  If the Leased Premises are reoccupied by the Landlord pursuant hereto, and regardless of whether the Leased Premises shall be relet or possessed by Landlord, all fixtures, additions, furniture, and the like then on the Leased Premises may be retained by Landlord.  In the event Tenant is in default under the terms hereof and, by the sole determination of Landlord, has abandoned the Leased Premises, La ndlord shall have the right to remove all the Tenant’s property from the Leased Premises and dispose of said property in such a manner as determined best by Landlord, at the sole cost and expense of Tenant and without liability of Landlord for the actions so taken.

c. In the event an assignment of Tenant’s business or property shall be made for the benefit of creditors, or, if the Tenant’s leasehold interest under the terms of this Lease Agreement shall be levied upon by execution or seized by virtue of any writ of any court of law, or, if application be made for the appointment of a receiver for the business or property of Tenant, or, if a petition in bankruptcy shall be filed by or against Tenant, then and in any such case, at Landlord’s option, with or without notice, Landlord may terminate this Lease and immediately retake possession of the Leased Premises without the same working any forfeiture of the obligations of Tenant hereunder.

d. To the extent not already securitized by others and unless such security interest would cause a default or breach in a financial covenant, Tenant hereby grants to the Landlord a security interest in and to any and all of Tenant’s property located in, on or adjacent to the Leased Premises as security for Tenant’s full and complete performance of the terms and conditions of this Lease, which security interest is enforceable by Landlord as provided by the laws of the State of Colorado.

e. In addition to all rights and remedies granted to Landlord by the terms hereof, Landlord shall have available any and all rights and remedies available at law or in equity, or under the statutes of the State of Colorado.  No remedy herein or otherwise conferred upon or reserved to Landlord shall be considered exclusive of any other remedy but shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute.  Further, all powers and remedies given by this Lease to Landlord may be exercised, from time to time, and as often as occasion may arise or as may be deemed expedient.  No delay or omission of Landlord to exercise any right or power arising from any default shall impair any such right or power or shall be considered to be a waiver of any such default or acquiescence thereof.  The accepta nce of rent by Landlord shall not be deemed to be a waiver of any breach of any of the covenants herein contained or of any of the rights of Landlord to any remedies herein given.

f. If Tenant shall, for any reason, vacate the Leased Premises and stop paying Rent or net charges before the current expiration date, landlord shall have the right to accelerate rental payments and any and all future rent payments due during the course of the Lease Term shall become immediately payable in full to the Landlord.

39. Legal Proceedings-Responsibilities.  In the event of proceeding at law or in equity by either party hereto, the defaulting party shall pay all costs and expenses, including all reasonable attorney’s fees incurred by the non-defaulting party in pursuing such remedy, if such non-defaulting party is awarded substantially the relief requested.

40. Administrative Charges.  In the event any check, bank draft or negotiable instrument given for any money payment hereunder shall be dishonored at any time and from time to time, for any reason whatsoever not attributable to Landlord, Landlord shall be entitled, in addition to any other remedy that may be available, (1) to make an administrative charge of $100.00 or three times the face value of the check, bank draft or negotiable instrument, whichever is smaller, and (2) at Landlord’s sole option, to require Tenant to make all future rental payments in cash or cashiers check.

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41. Hazardous Materials and Environmental Considerations.

a. Tenant covenants and agrees that Tenant and its agents, employees, contractors and invitees shall comply with all Hazardous Materials Laws (as hereinafter defined).  Without limiting the foregoing, Tenant covenants and agrees that it will not use, generate, store or dispose of, nor permit the use, generation, storage or disposal of Hazardous Materials (as hereinafter defined) on, under or about the Leased Premises, nor will it transport or permit the transportation of Hazardous Materials to or from the Leased Premises, except in full compliance with any applicable Hazardous Materials Laws.  Any Hazardous Materials located on the Leased Premises shall be handled in an appropriately controlled environment which shall include the use of such equipment (at Tenant’s expense) as is necessary to meet or exceed standards imposed by any Hazardous Materials Laws and in such a way as no t to interfere with any other tenant’s use of its premises.  Upon breach of any covenant contained herein, Tenant shall, at Tenant’s sole expense, cure such breach by taking all action prescribed by any applicable Hazardous Materials Laws or by any governmental authority with jurisdiction over such matters.

b. Tenant shall inform Landlord at any time of (I) any Hazardous Materials it intends to use, generate, handle, store or dispose of, on or about or transport from, the Leased Premises and (ii) of Tenant’s discovery of any event or condition which constitutes a violation of any applicable Hazardous Materials Laws.  Tenant shall provide to Landlord copies of all communications to or from any governmental authority or any other party relating to Hazardous Materials affecting the Leased Premises.

c. Tenant shall indemnify and hold Landlord harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities, expenses or losses (including, without limitation, diminution on value of the Leased Premises, damages for loss or restriction on use of all or part of the Leased Premises, sums paid in settlement of claims, investigation of site conditions, or any cleanup, removal or restoration work required by any federal, state or local governmental agency, attorney’s fees, consultant fees, and expert fees) which arise as a result of or in connection with any breach of the foregoing covenants or any other violation of any Hazardous Materials laws by Tenant.  The indemnification contained herein shall also accrue to the benefit of the employees, agents, officers, directors and/or partners of Landlord.

d. Upon termination of this Lease and/or vacation of the Leased Premises, Tenant shall properly remove all Hazardous Materials and shall then provide to Landlord an environmental audit report, prepared by a professional consultant satisfactory to Landlord and at Tenant’s sole expense, certifying that the Leased Premises have not been subjected to environmental harm caused by Tenant’s use and occupancy of the Leased Premises.  Landlord shall grant to Tenant and its agents or contractors such access to the Leased Premises as is necessary to accomplish such removal and prepare such report.

e. “Hazardous Materials” shall mean (a) any chemical, material, substance or pollutant which poses a hazard to the Leased Premises or to persons on or about the Leased Premises or would cause a violation of or is regulated by any Hazardous Materials Laws, and (b) any chemical, material or substance defined as or included in the definitions of “hazardous substances”, “hazardous wastes”, “extremely hazardous waste”, “restricted hazardous waste”, “toxic substances”, “regulated substance”, or words of similar import under any applicable federal, state or local law or under the regulations adopted or publications promulgated pursuant thereto, including, but not limited to, the Comprehensive Environmental Response,  Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sec. 9601, et seq.; the Hazardou s Materials Transportation Act, as amended, 49 U.S.C. Sec. 1801, et seq.; the Resource Conservation and Recovery Act as amended, 42 U.S.C. Sec 6901, et seq.; the Solid Waste Disposal Act, 42 U.S.C. Sec. 6991 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Sec. 1251, et seq.; and Sections 25-15-101, et seq., 25-16-101, et seq., 25-7-101, et seq., and 25-8-101, et seq., of the Colorado Revised Statutes.  “Hazardous Materials Laws” shall mean any federal state or local laws, ordinances, rules, regulations, or policies (including, but not limited to, those laws specified above) relating to the environment, health and safety or the use, handling, transportation, production, disposal, discharge or storage of Hazardous Materials, or to industrial hygiene or the environmental conditions on, under or about the Leased Premises.  Said term shall be deemed to include all such laws as are now in effect or as hereafter amen ded and all other such laws as may hereafter be enacted or adopted during the term of this Lease.

f. All obligations of Tenant hereunder shall survive and continue after the expiration of this Lease or its earlier termination for any reason.

g. Tenant further covenants and agrees that it shall not install any storage tank (whether above or below the ground) on the Leased Premises without obtaining the prior written consent of the Landlord, which consent may be conditioned upon further requirements imposed by Landlord with respect to, among other things, compliance by Tenant with any applicable laws, rules, regulations or ordinances and safety measures or financial responsibility requirements.

h. Should any local governmental entity having jurisdiction over the Leased Premises require any type of environmental audit or report prior to or during the occupancy of the Leased Premises by the Tenant, such cost of the audit or report shall be the sole responsibility of the Tenant.

i.Notwithstanding this Section 21, Tenant shall be entitled to install generator(s), fuel storage tank(s) and necessary mechanical and electrical systems to support such generator(s) and fuel tank(s) on the Area as reasonably approved by Landlord subject to the City of Boulder zoning codes and regulations.

42. Entire Agreement.  It is expressly understood and agree by and between the parties hereto that this Lease sets forth all the promises, agreements, conditions, and understandings between Landlord and/or its agents and Tenant relative to the Leased Premises and that there are no promises, agreements, conditions, or understandings either oral or written, between them other than that are herein set forth.

43. Estoppel Certificates.  Within no more than 10 days after receipt of written request, the Tenant shall furnish to the owner a certificate, duly acknowledged, certifying, to the extent true:

A.  That this Lease is in full force and effect.

B.  That the Tenant knows of no default hereunder on the part of the owner, or if it has reason to believe that such a default exists, the nature thereof in reasonable detail.

C.  The amount of the rent being paid and the last date to which rent has been paid.

D.  That this Lease has not been modified, or if it has been modified, the terms and dates of such modifications.

E.  That the term of this Lease has commenced.

F.  The commencement and expiration dates.

G.  Whether all work to be performed by the owner has been completed.

H.  Whether the renewal term option has been exercised if applicable.

I.  Whether there exist any claims or deductions from, or defenses to, the payment of rent.

J.  Such other matters as may be reasonably requested by owner.

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44. Financial Statements.  Only if requested by the Landlord and not more than once per calendar year or in the case of Default as defined under this lease, Tenant shall provide copies of its most recent financial statements and shall also provide Landlord with up to three (3) prior years of financial statements, if so requested.

45. Showings.  During the twelve months prior to the expiration of the term of this Lease or any renewal thereof, Landlord may exhibit the Leased Premises to prospective tenants and/or purchasers and during the six months prior to such expiration Landlord may place upon the Leased Premises the usual notices indicating that the Leased Premises are for lease and/or sale.

46. Brokers.  Tenant represents and warrants that it has dealt only with Grubb-Ellis Company (the “Broker”) in the negotiation of this Lease.  Landlord shall make payment of the commission according to the terms of a separate agreement with the Broker.  Tenant hereby agrees to indemnify and hold Landlord harmless of and from any and all loss, costs, damages or expenses (including, without limitation, all attorney’s fees and disbursements) by reason of any claim of, or liability to, any other broker or person claiming through Tenant and arising out of this Lease.  Additionally, Tenant acknowledges and agrees that Landlord shall have no obligation for payment of any brokerage fee or similar compensation to any person with whom Tenant has dealt or may deal with in the future with respect to leasing of any additional or expansion space in the Building or any renewals or ext ensions of this Lease unless specifically provided for by separate written agreement with Landlord.  In the event any claim shall be made against Landlord by any other broker who shall claim to have negotiated this Lease on behalf of Tenant or to have introduced Tenant to the Building or to Landlord, Tenant hereby indemnifies Landlord, and Tenant shall be liable for the payment of all reasonable attorney’s fees, costs, and expenses incurred by Landlord in defending against the same, and in the event such broker shall be successful in any such action, Tenant shall, upon demand, make payment to such broker.

47. Lease Exhibits Attached.  This Lease includes the following Lease Exhibits which are incorporated herein and made a part of this Lease Agreement:

Exhibit “A” — Area Plan

Exhibit “B” — Depiction of Leased Premises

Exhibit “C” - Landlord and Tenant’s Construction Obligations

Exhibit “D” - Sign Code Obligations

Exhibit “E” - Additional Terms and Conditions

48. Miscellaneous.  All marginal notations and paragraph headings are for purposes of reference and shall not affect the true meaning and intent of the terms hereof.  Throughout this Lease, wherever the words “Landlord” and “Tenant” are used they shall include and imply to the singular, plural, persons both male and female, companies, partnerships and corporations, and in reading said Lease, the necessary grammatical changes required to make the provisions hereof mean and apply as aforesaid shall be made in the same manner as though originally included in said Lease.

IN WITNESS WHEREOF, the parties have executed this Lease as of the date hereof.

LANDLORD:			6060 Partnership, LLP.
By:	/s/ William Reynolds
	William Reynolds
TENANT:		New Frontier Media, Inc.
By:	/s/ Michael Weiner
	Michael Weiner

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Exhibit “A”

Area Plan

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Exhibit “B”

Depiction of Leased Premises

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Exhibit “C”

Landlord and Tenant Construction Obligations

1.TENANT IMPROVEMENTS.  As used in this Lease, the term “Tenant Improvements” means those items of general tenant improvement construction shown on the Construction Drawings (defined below).  Notwithstanding anything contained in this Lease to the contrary, in the event that the Construction Drawings and Work Cost Estimate are not fully agreed to between Landlord and Tenant on or before June 1, 2011, or in the event that the City of Boulder has not approved the Construction Drawings and issued a building permit therefore on or before June 1, 2011, Landlord shall have the option to terminate this Lease by written notice to Tenant.

2.TENANT IMPROVEMENT PLANS.

a.Preparation of Space Plans.  Tenant has selected and hired, and Landlord has approved Architect (“Space Planner”) to prepare the architectural drawings for the Leased Premises.  Irrespective of Landlord’s approval of the Space Planner, Landlord shall have no obligation or liability to assure that the design of the Leased Premises is satisfactory for Tenant and for Tenant’s use.  Landlord and Tenant will approve the preliminary space plans for the Leased Premises prepared by the Space Planner on or before February 1, 2011 (“Space Plans”).

b.Preparation of Construction Drawings.  Based on the approved Space Plans, Tenant will cause Space Planner to prepare complete architectural and finish plans, drawings and specifications and complete engineered mechanical, plumbing, structural (if required) and electrical working drawings for all of the Tenant Improvements for the Leased Premises (collectively, the “Construction Drawings”).  Tenant agrees, at Tenant’s expense, to use Landlord’s consultants and engineers for mechanical, plumbing and structural.  The Construction Drawings are to be completed on or before March 31, 2011.  The Construction Drawing s will be submitted to Landlord and Tenant for signature to confirm that they are consistent with the Space Plans and meet necessary electrical and mechanical requirements of Tenant and Landlord within five (5) days of submission.

c.Submittal of Construction Drawings.  Once the Construction Drawings are approved by Landlord and Tenant, Tenant shall cause general contractor (“Contractor”) to submit the Construction Drawings to the appropriate governmental agencies for plan checking and the issuance of a building permit.  Space Planner, with the approval of Landlord and Tenant, will make any changes to the Construction Drawings which are requested by the applicable governmental authorities to obtain the building permit.  After approval of the Construction Drawings no further changes may be made without the prior written approval of both Landlord and Ten ant (which approvals shall not be unreasonably withheld, conditioned or delayed).

d.Work Cost Estimate and Statement.  Tenant will cause Contractor to submit to Landlord and Tenant a written estimate of the cost to complete the Tenant Improvements pursuant to the Construction Drawings (“Work Cost Estimate”).  Tenant will either approve the Work Cost Estimate or disapprove specific items and submit to Landlord revisions to the Construction Drawings to reflect deletions of and/or substitutions for such disapproved items, and delays attributable to such changes shall be Tenant Delays.

e.Changes in Work Cost Estimate may be based upon a draft of the Construction Drawings and changes to those documents may be required due to modifications to the Construction Drawings required by the City, County, Fire Department, Architectural Control Committee, or any other applicable governmental authority or to obtain the required governmental or other necessary approvals.  In such event, the changes to the Work Cost Estimate related to such changes shall be reasonably determined by Landlord and Tenant.  Tenant shall revise the Work Cost Estimate accordingly and appropriate adjustments and payments by Landlord or Tenant, as the case may be, w ill be made within five (5) business days thereafter.

3.PAYMENT FOR THE TENANT IMPROVEMENTS.

a.Allowance.  Landlord hereby grants to Tenant a tenant improvement allowance of thirty five dollars ($35.00) per rentable square foot of the Leased Premises, for a total of $1,700,370 (the “Allowance”).  The Allowance may be used to pay for the hard and soft costs of the Tenant Improvements as well as generator, cooling and power supply systems.

b.Tenant’s Contribution.  Tenant, at Tenant’s sole cost and expense, agrees to pay for the first one million dollars ($1,000,000.00) of Tenant Improvement costs in the Leased Premises.  Once the first one million dollars of improvement costs has been reached, Tenant shall be allowed to use its Allowance for any costs in excess of one million dollars up to a maximum of thirty five ($35.00) per rentable square foot as outlined above (“Tenant’s Contribution”).

c.Excess Costs.  The cost of each item of the Tenant Improvements shall be charged against the Allowance after the first one million ($1,000,000) dollars has been reached.  To the extent that the actual Work Cost exceeds the Allowance and Tenant’s Contribution, then Tenant shall be responsible for payment of such excess costs.

d.Payment.  Payment will be made to Tenant or directly to Tenant’s vendors within thirty (30) days of presentation of actual invoice(s) by Tenant to Landlord for such work.  Invoices must be presented for payment no later than thirty (30) days from the date of the invoice.  Upon submission of invoices, Tenant will also provide Landlord lien waivers from all contractors, suppliers, and tradesmen seeking payment from Tenant.

4.CONSTRUCTION OF TENANT IMPROVEMENTS.  Tenant will cause Contractor to commence and diligently proceed with the construction of the Tenant Improvements, subject to Tenant Delays (as described in Paragraph 6 below) and Force Majeure Delays (as described in Paragraph 7 below).  The Tenant Improvements shall be constructed in a good and workmanlike manner, substantially in accordance with the Construction Drawings and the Work Cost Estimate and in compliance with all applicable laws.

5.COMMENCEMENT DATE AND SUBSTANTIAL COMPLETION.

a.Commencement Date.  No Tenant Delay of any kind shall cause an extension of the Commencement Date as set forth in the Lease.

b.Substantial Completion; Punch-List.  The Tenant Improvements will be deemed to be substantially completed (“Substantial Completion”) when the Tenant Improvements have been substantially completed, other than minor “punch-list” type items and adjustments which do not materially interfere with the occupation of the Leased Premises by Tenant and that: (i) Landlord is able to provide Tenant with reasonable access to the Leased Premises; (ii) Contractor has substantially completed all of the Landlord Improvements and Tenant Improvements required to be performed by Landlord under this

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Work Letter, other than minor “punch-list” type items and adjustments which do not materially interfere with Tenant’s access to or use of the Premises (“Punch List Items”); and (iii) Contractor has obtained a temporary certificate of occupancy or other required equivalent approval from the local governmental authority permitting occupancy of the Leased Premises.  Five (5) days prior to Substantial Completion, Tenant will conduct a walk-through inspection of the Premises with Landlord, Landlord’s Representative, Tenant’s Representative and Contractor, and the parties will jointly prepare a written punch list (“Punch List”) specifying those Punch List Items which require completion, which items Tenant will cause Contractor to thereafter diligently complete, subject to Force Majeure Delays.  Tenant may not take occupancy prior to preparation of the Punch List.  If Tenant takes occupancy prior to completion of the Punch List, it shall take possession subject to all terms and conditions of this Lease and in no event may Tenant interfere with or delay the completion of the Punch List Items.

6.TENANT DELAYS.  For purposes of this Exhibit C, “Tenant Delays” means any delay in the completion of the Tenant Improvements resulting from any or all of the following:  (a) Tenant’s failure to timely perform any of its obligations pursuant to this Work Letter, provided Landlord notifies Tenant within a reasonable time that Tenant’s failure to act will delay the completion of the Tenant Improvements; (b) Tenant’s changes to Space Plans or Construction Drawings after Landlord’s approval thereof; or (c) any other act, delay or failure to act caused directly by Tenant, Tenant’s employees, agen ts, architects, contractors, independent contractors, consultants and/or any other person performing or required to perform services on behalf of Tenant, provided Landlord notifies Tenant, to the extent possible and within a reasonable time, that such failure to act will delay the completion of the Tenant Improvements.  These items will only amount to Tenant Delays if such events actually delay the Commencement Date of this Lease.  Landlord agrees to use reasonable efforts to promptly notify Tenant of circumstances constituting Tenant Delays.

7.FORCE MAJEURE DELAYS.  For purposes of this Exhibit C, “Force Majeure Delays” means any actual delay in the construction of the Tenant Improvements (other than Tenant Delays) resulting from events beyond the reasonable control of Landlord, including but not limited to, delays caused or contributed to by governmental or quasi-governmental entities, lenders, and acts of God.

TENANT AND LANDLORD APPROVALS.  Anything submitted to Landlord by Tenant shall be deemed to have the prior approval of Tenant.  Furthermore, anything submitted to Tenant or Landlord for approval which is not disapproved within ten (10) business days following receipt of the submission shall be deemed approved in all respects.  The ten (10) business day response period does not extend the dates set forth in a work schedule for such approvals.

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Exhibit “D”

Sign Code Obligations

None

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Exhibit “E”

Additional Terms and Conditions

1.Expansion Option.  Upon Tenant’s notification to Landlord of Tenant’s desire to expand, Landlord will provide Tenant a list of available qualifying spaces (“Additional Space”) in the Building.  Attached to such list provided by Landlord shall be a notice which advises Tenant of Landlord’s terms for leasing the Additional Space to Tenant, shall describe the amount and location of the space that is available (and attach a floor plan showing the location of such space within the Building), shall state the rental rate for the space, shall state the date on which the space will be available and the term of the proposed lease, and s hall set forth any tenant finish allowance or other special conditions, concessions or provisions pursuant to which Landlord intends to lease the Additional Space.  Tenant’s request and Landlord’s subsequent offer, if any, shall be subject to the following terms and conditions:

a.The rental rate for the Additional Space will be at fair market value.

b.The term of the lease for the Additional Space will be at least three years or conterminous with the expiration of the Lease whichever is longer.

c.Any space included on the list must not be subject to a First Right of Vacancy or First Right of Refusal by any other tenant.

d.Any space included on the list may not be new construction, but rather, existing space in the Building.

e.Tenant’s rights under this section shall not prevent Landlord from negotiating with, or executing leases with, other prospective tenants for any of the spaces on the list.

f.Landlord must have a controlling interest in the above referenced properties at the time of Tenant’s notification.

g.Tenant shall be fully responsible for all remaining obligations under this Lease and Landlord will not be deemed in default of any terms of this Lease in the event Tenant notifies Landlord of its desire to expand and no Additional Space is then available in the Building.

If Tenant delivers to Landlord written notice of Tenant’s desire to lease the Additional Space on said terms and conditions within five (5) days following receipt of such notice, such Additional Space shall be leased to Tenant on the same terms and conditions as set forth in this Lease (subject only to modification to reflect the terms specifically set forth in the notice of offer). If Tenant declines or fails to exercise such right as provided herein, or Tenant fails to execute the lease or amendment presented by Landlord (or fails to meet any other conditions of this Section), Tenant’s right to lease the Additional Space shall be null and void.

If Tenant exercises its right to accept the Additional Space, the lease of such Additional Space shall, at Landlord’s election, be evidenced by a new lease incorporating the appropriate terms and conditions, or by amendment of this Lease, incorporating the appropriate terms and conditions, or by memorandum of lease setting forth the terms of the notice of offer and otherwise incorporating the terms and conditions of this Lease.  Any such document may be attached to Landlord’s written notice and must be executed by Tenant and returned to Landlord within five (5) days following receipt of such notice by Tenant.

In no event shall Landlord be required to lease the Additional Space to Tenant if this Lease is not then in full force and effect, or if Tenant is in default under the terms of this Lease, either at the time of exercise of the right or at the time of commencement of the lease of the Additional Space.  Additionally, Tenant’s rights under this section are expressly conditioned upon Landlord’s review and approval of Tenant’s most recent financial statement, provided, however, that such approval by Landlord shall not be unreasonably withheld.

2.Right of First Refusal.

a.Provided that at any time during the Lease Term, the space contiguous to the Leased Premises (“Refusal Space”) becomes available for lease by Landlord and Landlord receives from a prospective tenant a bona fide offer to lease the Refusal Space at a rent and upon other terms acceptable to Landlord, or Landlord makes a bona fide proposal to lease the Refusal Space to a prospective tenant, and if at the time this Lease is in effect and Tenant is not in default under this Lease beyond any applicable grace period, then Landlord shall give Tenant written notice (the “Refusal Notice”) of the offer or proposal specifying the rent and other terms of the offer or proposal and Tenant shall then have the p rior option to lease the Refusal Space at a rental rate and on terms equal to the rent and the other terms offered by or to the new prospective tenant. Space shall not be considered “available for lease” if any type of expansion right is contained in a lease entered into after the date of this Lease for space as to which Tenant did not elect to exercise its rights under this article.

b.If Tenant does not exercise its option to lease the Refusal Space within ten (10) days after the Refusal Notice has been given to Tenant, this option shall expire and be of no further force and effect. The option once exercised is irrevocable.

c.If option is exercised, Landlord and Tenant shall enter into an amendment to the Lease reflecting the expansion of the Lease Premises on the terms of this article.  The rights granted in this article shall be subject to the satisfaction of the following conditions: (i) no more than twenty five percent (25%) of the Leased Premises is sublet to anyone (other than to affiliates) at the time Landlord would otherwise notify Tenant of the availability of the Refusal Space; or (ii) this Lease has not been assigned to anyone (other than to affiliates) at the time Landlord would otherwise notify Tenant of the availability of the Refusal Space.

3.Option to Extend

a.First Option to Extend.  The Tenant shall have the option to extend this Lease Agreement from 12:00 noon on January 1, 2022, to 12:00 noon on January 1, 2027.  In the event the Tenant desires to exercise said option, Tenant shall give written notice of such exercise to Landlord no later than April 1, 2021.

See below for Option Term Rent.  In the event of such exercise, this Lease Agreement shall be automatically extended for the additional term.  Notwithstanding the foregoing, this option shall be void and of no force or effect if the Tenant is in default hereunder either as of the date of the Tenant’s exercise of said option or as of the date of the commencement of the option or additional term.

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b.Second Option to Extend.  In the event Tenant exercises its First Option to Extend above, Tenant shall have the option to extend this Lease Agreement from 12:00 noon on January 1, 2027 to 12:00 noon on January 1, 2032.  In the event the Tenant desires to exercise said option, Tenant shall give written notice of such exercise to Landlord no later than April 1, 2026.

See below for Option Term Rent.  In the event of such exercise, this Lease Agreement shall be automatically extended for the additional term.  Notwithstanding the foregoing, this option shall be void and of no force or effect if the Tenant is in default hereunder either as of the date of the Tenant’s exercise of said option or as of the date of the commencement of the option or additional term.

c.Rent.  Tenant shall pay the following rent for the Leased Premises:

Landlord and Tenant will attempt to agree upon a Fair Market Rental Value of the Leased Premises satisfactory to both parties within thirty (30) days of Tenant’s exercise of its option.  If no agreement can be reached by the parties during that period, then the Base Monthly Rental for the Option Term shall be determined by the Fair Market Rental Value of the Leased Premises as determined by comparison to premises of similar size located in or near the City of Boulder, Colorado, having comparable development, use and density capability and such other characteristics as may be deemed relevant by a subject appraiser whose selection is outlined herein.

Landlord shall select an independent MAI real estate appraiser with at least ten (10) years’ experience in appraising commercial real property in the City of Boulder, Colorado (a “Qualified Appraiser”).  The Qualified Appraiser selected by the Landlord shall be referred to as the “Landlord’s Appraiser”.  Within thirty (30) days of being selected by the Landlord, the Landlord’s Appraiser shall determine the Fair Market Rental Value of the Leased Premises in accordance with the appraisal standards set forth above and shall immediately give the Landlord and the Tenant written notification of his determination.

If the Tenant agrees with the Landlord’s Appraiser’s determination of the Fair Market Rental Value, the new Base Monthly Rental shall become effective beginning with the first month of the Option Term.  If the Tenant does not agree with the Landlord’s Appraiser’s determination of Fair Market Rental Value, the Tenant shall have the right to select its own Qualified Appraiser to determine the Fair Market Rental Value.  If the Tenant does elect to appoint a Qualified Appraiser (the “Tenant’s Appraiser”), the Tenant shall select the Tenant’s Appraiser within thirty (30) business days after receiving the Landlord’s Appraiser’s determination of the Fair Market Rental Value.  The Tenant’s Appraiser shall make his own determination of the Fair Market Rental Value in accordance with the provisions set forth above, within thirty (30) business day s of being selected by the Tenant and shall immediately give the Landlord and the Tenant written notice of his determination.

If the Fair Market Rental Values as determined by the Landlord’s Appraiser and the Tenant’s Appraiser, respectively, differ by an amount which is equal to or less than 5% of the Fair Market Rental Value determined by the Landlord’s Appraiser, then the arithmetic mean of the two Fair Market Rental Values shall constitute the Fair Market Rental Value used to calculate the new Base Monthly Rental which will be in effect for the Option Term.  If the Fair Market Rental Value determined by the Landlord’s Appraiser and the Tenant’s Appraiser, respectively, differ by an amount which is greater than 5%, then, within ten (10) business days after Tenant’s Appraiser’s written notification of his determination of the Fair Market Rental Value, the Landlord’s Appraiser and the Tenant’s Appraiser shall agree upon and select a third Qualified Appraiser who shall be in dependent of and have no prior or existing affiliation or relationship with either the Landlord or the Tenant (the “Independent Appraiser”).  Within ten (10) business days of being appointed, the Independent Appraiser shall, after exercising his best professional judgment, choose either the Landlord’s Appraiser’s or the Tenant’s Appraiser’s determination of Fair Market Rental Value which the Independent Appraiser believes, in his best professional judgement, best represents the Fair Market Rental Value at that point in time.  Upon making such a selection, the Independent Appraiser shall immediately give the Landlord and the Tenant written notice of this selection of the Fair Market Rental Value.  The Fair Market Rental Value selected by the Independent Appraiser shall be used to calculate the new Base Monthly Rental which will be in effect during the Extension Option, and such selection by the Independent Appraiser shall be binding and conclusive upon the Lan dlord and the Tenant.

All appraisal fees required hereunder shall be shared equally by the Landlord and the Tenant.

17

ASSIGNMENT AND ASSUMPTION OF LEASE

THIS ASSIGNMENT AND ASSUMPTION OF LEASE (referred to subsequently as this (“Agreement”) is made on October 6th, 2010, by NEW FRONTIER MEDIA, INC. (“Assignor”), and 6060 PARTNERSHIP, LLP, a Colorado limited liability partnership (“Assignee”).

Lakecentre Plaza, Ltd., LLLP, as landlord, and Assignor, as tenant, entered into a Lease dated August 12, 1998 (as amended and modified from time to time), with regard to the premises known as 5445 Airport Boulevard, Suite 100, Boulder, Colorado (the “Premises”).  Said Lease and amendments are attached hereto as Exhibit A and incorporated herein by this reference, and are collectively referred to in this Agreement as the “Lease.”  Assignor wishes to assign the Lease to Assignee, and Assignee wishes to accept such assignment and assume the obligations of tenant under the Lease, upon and subject to the terms and conditions set forth in this Agreement.  Accordingly, Assignor and Assignee agree as follows:

1.Assignment and Delivery of Possession.  Effective 6/1/2011 (the “Effective Date”), Assignor hereby assigns, transfers and conveys to Assignee all of Assignor’s right, title and interest in and to the Lease, including, but not limited to, all of Assignor’s right, title and interest in and to (a) the security deposit paid by Assignor under the Lease, and (b) the rent prepaid under the Lease. Assignor will deliver possession of the Premises to Assignee on the Effective Date, in the same conditio n in which the Premises exist on the date of Assignee’s signature on this Agreement.

2.Assumption and Acceptance of Premises.  Subject to the provisions of paragraph 3, below, Assignee hereby accepts the foregoing assignment and assumes and agrees to pay all rent and other charges and perform and observe all covenants, conditions, obligations and agreements of the tenant under the Lease to be paid, performed or observed on or after the Effective Date of this Agreement Assignee hereby accepts the Premises in the condition existing on the date of Assignee’s signature on this Agreement.

3.Conditional Assumption.  Assignor acknowledges and agrees that Assignee has agreed to take this assignment and assume the obligations of Assignor under the Lease in connection with and in consideration of the execution and performance by Assignor herein of that certain Lease Agreement dated as of October 6th, 2010, between Assignee herein as Landlord and Assignor herein as Tenant, pertaining to premises located at 6000 Spine Road, Boulder, Colorado (the “Spine Road Lease”).  Assignee’s assumption of the obligations of Assignor under the Lease are subject to and conditioned upon the full and timely performance by Assignor of all of its obligations to pay rent and other charges and perform and observe all other covenants, conditions, obligations and agreements of tenant under the Spine Road Lease.  In the event of default by Assignor herein, as tenant under the Spine Road Lease (and failure to timely cure same if and to the extent any right to cure exists), the obligations of Assignee herein shall cease and terminate, and Assignee thereafter shall have no further obligation or liability with respect to the Lease.  After any such default, if Assignee so elects, Assignee shall have the right to reassign the Lease to Assignor at any time, without representation or warranty.  Assignor acknowledges and agrees that, as contemplated by Section 23 of the Lease and, wit hout regard to any such reassignment, Assignor herein is not relieved, released or discharged of any of its obligations under the Lease.

In addition, in the event of any such default and reassignment, Assignor herein shall be obligated and liable to pay to Assignee herein a sum equal to any amounts theretofore paid by Assignee pursuant to the foregoing assumption of the Lease between the date hereof and the date of such reassignment.

4.Assignor’s Representations and Warranties. Assignor represents and warrants to Assignee that as of the date hereof and as of the Effective Date: (a) the Lease is in full force and effect, and unmodified, (b) Assignor’s interest in the Lease is free and clear of any liens, encumbrances, or adverse interests of third parties, (c) Assignor has full and lawful authority to assign its interest in the Lease, (d) there exists no default under the Lease by Assignor nor any circumstances which, with the pa ssage of time or the giving of notice, or both, would be a default under the Lease, (e) to the best of

1

Assignor’s knowledge, there exists no default under the Lease by Landlord nor any circumstances which, with the passage of time or the giving of notice, or both, would be a default under the Lease, (f) no part of the security deposit under the Lease has been used by Landlord, and (g) Assignor is not aware of any defects in the Premises not previously disclosed to Assignee in writing.

5.Indemnification.  Assignee shall not be responsible, to the Landlord, to Assignor, or to any other party, for the discharge or performance of any duties or obligations to be performed by the tenant under the Lease prior to the Effective Date of this Agreement, and Assignor agrees to and shall indemnify and hold Assignee harmless from and against any and all actions, claims, demands, losses, liabilities, damages and expenses (including reasonable attorneys’ fees) (a) arising out of or relating to any breach or fa ilure to perform any duties or obligations under the Lease to be performed by the tenant thereunder prior to the Effective Date of this Agreement, or (b) resulting from a breach of any representation, warranty, covenant or agreement made by Assignor in this Agreement.  Subject to the provisions of paragraph 3, above, Assignee agrees to and shall indemnify and hold Assignor harmless from and against any and all actions, claims, demands, losses, liabilities, damages and expenses (including reasonable attorneys’ fees) (c) arising out of or relating to any breach or failure to perform any duties or obligations under the Lease to be performed by the tenant thereunder from and after the Effective Date of this Agreement, or (d) resulting from a breach of any covenant or agreement made by Assignee in this Agreement.

6.Modification of Lease.  Assignor agrees that Assignee and Landlord may amend the Lease in any way after the Effective Date of this Agreement, without notice to or consent of Assignor, and without in any manner releasing or relieving Assignor from liability under the Lease as is exists on the Effective Date of this Agreement, and Assignor shall remain liable under all the terms, covenants, conditions, obligations and agreements of the Lease as they exist on the Effective Date of this Agreement.

7.Miscellaneous.  This Agreement contains the entire agreement of Assignor and Assignee regarding the subject matter hereof, and this Agreement may be modified only by a written instrument signed by both Assignor and Assignee. This Agreement shall be binding upon Assignor and Assignee and their respective heirs, personal representatives, successors and assigns. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Colorado. In the event of any dispute or litigation aris ing out of or relating to this Agreement, the prevailing party shall be awarded and paid its expenses, including reasonable attorneys’ fees, from the non-prevailing party.

Assignor and Assignee have executed this Agreement on the day and year first written above.

		NEW FRONTIER MEDIA, INC.,
Date:	Oct, 2010	By:	/s/ Michael Weiner
			Michael Weiner	,
		“Assignor”
		6060 PARTNERSHIP, LLP,
		a Colorado limited liability partnership
Date:	10-06-2010	By:	/s/ William Reynolds
				,

2

EX-31.01

Exhibit 31.01

CERTIFICATION

I, Michael Weiner, 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 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 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: February 4, 2011
	/s/ MICHAEL WEINER
	Michael Weiner
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.02

Exhibit 31.02

CERTIFICATION

I, Grant Williams, 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 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 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: February 4, 2011
	/s/ GRANT WILLIAMS
	Grant Williams
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.01

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 December 31, 2010, 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

February 4, 2011

EX-32.02

Exhibit 32.02

WRITTEN STATEMENT OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Section 1350)

The undersigned, the Chief 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 December 31, 2010, 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/ GRANT WILLIAMS

Grant Williams

Chief Financial Officer

February 4, 2011