SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
New Frontier Media, Inc.
.................................................................
(Name of Registrant as Specified In Its Charter
New Frontier Media, Inc.
.................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.............................................................
2) Aggregate number of securities to which transaction applies:
.............................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
4) Proposed maximum aggregate value of transaction:
.............................................................
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
..............................................................
2) Form, Schedule or Registration Statement No.:
..............................................................
3) Filing Party:
..............................................................
4) Date Filed:
..............................................................
<PAGE>
NEW FRONTIER MEDIA, INC.
1050 WALNUT STREET, SUITE 301
BOULDER, COLORADO 80302
(303) 444-0632
August 7, 1998
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
New Frontier Media, Inc. ("the Company"), to be held at 10:00 a.m., Mountain
Daylight Time, on September 11, 1998, at 313 Sodergreen Road, Laramie, Wyoming
82070.
Your Board of Directors urges you to read the accompanying Notice of Annual
Meeting and Proxy Statement and recommends that you vote for the election of the
six directors nominated, for approval of the Company's 1998 Incentive Stock
Option Plan and for ratification of the Board's appointment of Spicer, Jefferies
& Co. as the Company's independent auditors for the 1998 fiscal year.
The vote of every stockholder is important. Whether or not you plan to
attend the meeting, it is important that your shares be represented.
Accordingly, we urge you to sign, date, and mail the enclosed proxy in the
envelope provided at your earliest convenience.
Thank you for your cooperation.
Very truly yours,
Mark H. Kreloff
Chairman of the Board and
Chief Executive Officer
<PAGE>
NEW FRONTIER MEDIA, INC.
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
New Frontier Media, Inc.
The Annual Meeting of Shareholders of New Frontier Media, Inc.(the
"Company") will be held on September 11, 1998, at 10:00 a.m., Mountain Daylight
Time, at 313 Sodergreen Road, Laramie, Wyoming 82070 for the following purposes:
1. To elect six directors to serve for the ensuing year and until their
successors are elected;
2. To approve the Company's 1998 Incentive Stock Option Plan;
3. To ratify the appointment of Spicer, Jefferies & Co. as the Company's
independent auditors for the fiscal year ending March 31, 1999; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on August 3, 1998,
as the record date for determination of those shareholders who will be entitled
to notice of and to vote at the meeting and any adjournment thereof.
If you plan to attend the meeting, please mark the appropriate box on your
proxy card. Upon receipt of the card, an admission ticket will be sent to you.
Whether or not you expect to attend, SHAREHOLDERS ARE REQUESTED TO SIGN,
DATE AND RETURN THE ENCLOSED FORM OF PROXY IN THE ENVELOPE PROVIDED. No postage
is required if mailed in the United States.
By Order of the Board of Directors
Michael Weiner
Secretary
Boulder, Colorado
August 7, 1998
<PAGE>
NEW FRONTIER MEDIA, INC.
1050 WALNUT STREET, SUITE 301
BOULDER, COLORADO 80302
------------------------
PROXY STATEMENT
------------------------
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement is furnished to the holders of the Common Stock,
$.0001 par value per share ("Common Stock"), of New Frontier Media, Inc. ("the
Company") in connection with the solicitation of proxies on behalf of the Board
of Directors of the Company for use at the Annual Meeting of Shareholders to be
held on September 11, 1998 at 10:00 a.m. (Mountain Daylight Time), at 313
Sodergreen Road, Laramie, Wyoming 82070, and at any adjournment thereof. The
purposes of the meeting and the matters to be acted upon are set forth in the
accompanying Notice of Annual Meeting of Shareholders. At present, the Board of
Directors knows of no other business which will come before the meeting.
The Notice of Annual Meeting, Proxy Statement, and form of proxy will be
mailed to stockholders on or about August 7, 1998. The Company will bear the
cost of its solicitation of proxies. In addition to the use of the mails,
proxies may be solicited by personal interview, telephone, telegram, and telefax
by the directors, officers and employees of the Company. Arrangements will also
be made with brokerage houses and other custodians, nominees and fiduciaries for
the forwarding of solicitation material to the beneficial owners of stock held
by such persons, and the Company may reimburse such custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred by them in connection
therewith.
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the meeting and a return envelope for the proxy
are enclosed. Shareholders may revoke the authority granted by their execution
of proxies at any time before their effective exercise by filing with the
Secretary of the Company a written revocation or duly executed proxy bearing a
later date or by voting in person at the meeting. Shares of Common Stock
represented by executed and unrevoked proxies will be voted in accordance with
the instructions specified thereon. If no instructions are given, the proxies
will be voted FOR the election of management's six nominees for election as
directors, FOR the adoption of the Company's 1998 Incentive Stock Option Plan
and FOR ratification of the appointment of Spicer, Jefferies & Co. as the
Company's independent auditor for the fiscal year ending March 31, 1999.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record at the close of business on August 3, 1998 are
entitled to notice of and to vote at the meeting or any adjournment thereof. On
August 3, 1998, the Company had outstanding 6,542,000 shares of Common Stock,
each of which is entitled to one vote upon matters presented at the meeting.
Votes cast at the meeting will be tabulated by persons appointed as
inspectors of election of the meeting. The inspectors of election will treat
shares of Common Stock represented by a properly signed and returned proxy as
"present" at the meeting for purposes of determining a quorum, without regard to
whether the proxy is marked as casting a vote or abstaining. Likewise, the
inspectors of election will treat shares of Common Stock represented by "broker
non-votes" as present for purposes of determining a quorum.
The nominees for election to the Board of Directors receiving the greatest
number of affirmative votes cast by the holders of Common Stock, up to the
number of directors to be elected, will be elected as
<PAGE>
directors. Accordingly, abstentions or broker non-votes as to the election of
directors will have no effect on the election of directors.
The affirmative vote of the holders of a majority of the shares of Common
Stock represented at the meeting in person or by proxy and entitled to vote
thereat will be required to ratify the selection of independent public
accountants and to approve the 1998 Incentive Stock Option Plan. In determining
whether such proposals have received the requisite number of affirmative votes,
abstentions and broker non-votes will have the same effect as votes against the
proposal.
ANNUAL REPORT
The Company's Annual Report on Form 10-KSB for the fiscal year ended March
31, 1998 is being mailed with this proxy statement.
SHARE OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as the beneficial
ownership of the Company's Common Stock as of June 30, 1998, by persons known by
the Company to own or deemed to own, beneficially 5% or more of the Company's
Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
------------------------------------------------- ------------------- ----------------
<S> <C> <C>
Maxim Corporation(1) ............................ 475,000 7.26%
1035 Pearl Street
Boulder, CO 80302
<FN>
- ---------------
(1) 195,000 Common Shares owned by Stephen P. Cherner; 80,000 Common Shares
owned by Maxim Profit Sharing Plan; 200,000 Common Shares owned by Maxim
Corporation. Mr. Cherner is the owner of Maxim Corporation.
</FN>
</TABLE>
BOARD AND MANAGEMENT OWNERSHIP
The following table sets forth certain information as to the beneficial
ownership of the Company's Common Stock as of June 30, 1998 for (i) each
director and nominee for election as a director, including Mark H. Kreloff, the
Chairman and Chief Executive Officer, and Michael Weiner. the Executive
President and Secretary, (ii) the two most highly compensated executive officers
other than Messrs. Kreloff and Weiner, and (iii) all directors, nominees for
director and executive officers as a group (10 persons).
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED(1) CLASS
------------------------------------------------ ---------------------- ---------------
<S> <C> <C>
Mark H. Kreloff ................................ 1,014,000(2) 15.50%
1050 Walnut Street, Suite 301
Boulder, CO 80302
Michael Weiner ................................. 595,400 9.10%
1050 Walnut Street, Suite 301
Boulder, CO 80302
Andrew V. Brandt ............................... 224,500 3.43%
1050 Walnut Street, Suite 301
Boulder, CO 80302
Scott Wussow ................................... 10,000 *
1050 Walnut Street, Suite 301
Boulder, CO 80302
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED(1) CLASS
------------------------------------------------ --------------------- ----------
<S> <C> <C>
Clive Ng ....................................... 0 *
1050 Walnut Street, Suite 301
Boulder, CO 80302
Koung Y. Wong .................................. 0 *
1050 Walnut Street, Suite 301
Boulder, CO 80302
Stuart K. Duncan(3) ............................ 810,000 11.0%
2500 Don Reid Drive
Ottawa, Ontario
K1H 8P5
All officers and directors as a group (10
persons)........................................ 2,666,400 36.27%
<FN>
- ---------------
* Represents less than .1% of the outstanding Common Stock
(1) Each of the parties listed has sole voting and investment power with respect
to all shares of Common Stock indicated. Beneficial ownership is calculated
in accordance with Rule 13-d-3(d) under the Exchange Act.
(2) Indirectly owned through Calan Investments LLC, a limited liability company.
(3) Includes 405,000 shares which are issuable upon the exercise of 405,000
warrants to purchase common stock which are beneficially owned by Mr.
Duncan, a nominee for Director.
</FN>
</TABLE>
ITEM 1 - ELECTION OF DIRECTORS
NOMINEES
It is proposed that the six persons named below will be elected as
Directors of the Company at the meeting. Unless otherwise specified, the
enclosed proxy will be voted for the election of, Mark H. Kreloff, Michael
Weiner, Andrew V. Brandt, Stuart K. Duncan, Clive Ng and Koung Y. Wong to serve
as directors until the next Annual Meeting of Shareholders and until their
successors shall have been duly elected and qualified. Each of the nominees now
serves as a director of the Company. In the event that any of these nominees
shall be unable to serve as a director, discretionary authority is reserved to
vote for a substitute. The Board of Directors has no reason to believe that any
of these nominees will be unable to serve.
Set forth below are the names and ages of the nominees, the principal
occupation of each, the year in which first elected a director of the Company,
the business experience of each for at least the past five years and certain
other information concerning each of the nominees.
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NOMINEE AGE SINCE DURING THE PAST FIVE YEARS
- ------------------------- ---- ------- ---------------------------------------------------
<S> <C> <C> <C>
Mark H. Kreloff (1)(2)... 36 1995 Mr. Kreloff has held the title Chairman and Chief
Executive Officer of New Frontier Media, Inc. since
the Company's inception in September, 1995. Mr.
Kreloff has been actively involved in the cable
television, entertainment and computer software
industries since 1977. During the four years
immediately preceding his founding of the Company,
he was the President and Chairman of the Board for
LEI Partners, L.P., a LaserDisc publishing com-
pany; Elmfield IV, Inc., an entertainment
production and distribution company, and California
Software Partners, L.P., a computer software
development and publishing
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NOMINEE AGE SINCE DURING THE PAST FIVE YEARS
- ------------------------- ---- -------- ---------------------------------------------------
<S> <C> <C> <C>
company. Previously, Mr. Kreloff held the title
Vice President, Mergers and Acquisitions, with
Kidder Peabody & Co. and Drexel Burnham Lambert.
Michael Weiner........... 56 1995 Mr. Weiner has been the Executive Vice President
and a director of New Frontier Media, Inc. since
the Company's inception. Prior to founding the
Company, Mr. Weiner was actively involved as a
principal and director in a variety of publishing
businesses, including a fine art poster company.
Mr. Weiner has been actively involved in creative
businesses for the past 25 years. His background
includes 15 years in real estate development and
syndication as well as ownership in various
publishing companies. Mr. Weiner is a partner in
the investment firm Maxim Financial Corporation, a
private portfolio management company based in
Boulder, Colorado. From June, 1995 to the present,
Mr. Weiner has been Executive Vice President of the
Company. For the 15 years prior to June, 1995, Mr.
Weiner was self-employed as a real estate and
business consultant.
Andrew V. Brandt......... 29 1998 Mr. Brandt has held the title of Senior Vice
President of New Frontier Media since the Company's
inception. Mr. Brandt has extensive experience in
software company management, 3-D computer graphics,
user interface design, and software engineering.
Prior to joining New Frontier Media, Inc., Mr.
Brandt spent two years developing numerous 3-D
graphics libraries and graphical user interfaces
for a variety of platforms. Mr. Brandt developed a
system for medical applications utilizing
real-time, three-dimensional ultrasound acquisition
and a video see-through head-mounted display. He
also helped prototype the first digital video
interactive system and led the port of Pixar's
RenderMan to a supercomputer. Mr. Brandt grad-
uated Magna Cum Laude from the University of
California, San Diego with a B.S. in Computer
Engineering and holds an M.S. in Computer Science
from the University of North Carolina at Chapel
Hill.
Clive Ng(1)(2)........... 36 1995 Mr. Ng is Deputy Chairman of Pacific Media PLC, a
publicly-listed UK company. Pacific Media PLC owns
the United Artists Theaters Asia with United
Artists Theaters of the US and with TVB of
Hongkong, the Chinese Channel in Europe. Mr. Ng
co-founded UIH Asia Holdings, a regional
partnership to develop Asian cable television
markets, as well as Spectradyne Asia, then the
leader in the TV settop box business for hotels. In
1995 he led Pacific Media's purchase of a key share
in one of Hongkong's leading ISP's, Hongkong
Supernet. Mr. Ng earned a Bachelor of Arts degree
from Syracuse University's School of Management in
1983, and earned a Master's Degree in Business
Administration from New York University in 1985.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NOMINEE AGE SINCE DURING THE PAST FIVE YEARS
- ------------------------- ---- -------- ---------------------------------------------------
<S> <C> <C> <C>
Koung Y. Wong(1)(2)...... 45 1995 Mr. Wong was born in Canton, China in 1952 and
immigrated to the United States in 1969 with his
family. He earned a Bachelor of Arts degree from
City College of San Francisco in 1975, and studied
Architecture at the University of California at
Berkeley for one year. In 1976, Mr. Wong opened a
stereo store, Wong's Hi-Fi, in San Francisco. For
the last 21 years, Mr. Wong has been the president
and sole shareholder of Wong's Audio-Visual, Inc. a
leading commerce electronics hardware and software
distribution company based in South San Francisco,
California. Wong's Audio-Visual, Inc. includes a
20,000 square-foot corporate headquarters and
distribution center and an 8,500 square-foot retail
superstore in San Francisco.
Stuart K. Duncan......... 41 Nominee Mr. Duncan has been the President and CEO of Fifth
for Dimension Communications Holdings, Inc., Fifth
Director Dimension Fibrecom, Inc., Fifth Dimension
Communications (1996), Inc. and Fifth Dimension
Satcom, Inc. since 1993. At Fifth Dimension, Mr.
Duncan was responsible, among other things, for the
founding of the Extasy Networks, which adult C-band
broadcast channels were subsequently acquired by
the Company in February 1998. Mr. Duncan is also a
director of Applied Carbon Technology, Inc., a
publicly traded company listed on the Toronto Stock
Exchange and the OTC Bulletin Board.
<FN>
- ---------------
(1) Member Compensation Committee
(2) Member Audit Committee
</FN>
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES LISTED
ABOVE.
MEETING OF THE BOARD OF DIRECTORS
During the Company's fiscal year ended March 31, 1998, the Board of
Directors held two meetings and acted five times by unanimous written consent.
Each Director attended more than seventy-five percent (75%) of the Board
meetings and meetings of the Board committees on which he served. The Company
does not have a standing nominating committee, the functions of which are
performed by the entire Board.
During the Company's fiscal year ended March 31, 1998, the Compensation
Committee of the Board met once and acted once upon unanimous written consent.
The Compensation Committee has the power to prescribe, amend and rescind rules
relating to the Company's 1998 Stock Option Plan, to grant options and other
awards under the Plan and to interpret the Plan.
During the Company's fiscal year ended March 31, 1998, the Audit Committee
of the Board met twice and acted once upon unanimous written consent. The Audit
Committee has the responsibility of recommending the firm to be chosen as
independent auditors, overseeing and reviewing the audit results and monitoring
the effectiveness of internal audit functions. The Audit Committee has
recommended the selection of Spicer, Jefferies & Co. as independent auditors for
the year ended March 31, 1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During the fiscal year ended March 31, 1998, Messrs. Kreloff, Weiner and
Brandt each inadvertently failed to file on a timely basis a Form 4 Report with
respect to private gift transactions effected in March
5
<PAGE>
1998. With respect to Mr. Kreloff, the late filing related to one (1) gift
transaction, with respect to Mr. Weiner, the late filing related to three (3)
gift transactions, and with respect to Mr. Brandt, the late filing related to
four (4) gift transactions. In none of the above transactions did any of such
executive officers receive any compensation for the disposed shares.
DIRECTOR COMPENSATION
None of the Company's directors received any compensation during the most
recent fiscal year for serving in his position as a director.
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation paid to executive
officers of the Company for three fiscal years ended March 31, 1998.
<TABLE>
<CAPTION>
NAME AND OTHER ANNUAL RESTRICTED OPTIONS/ LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION STOCK AWARDS SARS PAYOUTS COMPENSATION
- --------------------- ------- --------- -------- ------------ ------------ -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mark H. Kreloff, CEO,
COO, Pres., and
Chairman........... 1998 39,167 75,000 0 0 0 0 3,053
1997 0 15,000 0 0 0 0 36,028
1996 33,000 0 0 0 0 0 0
Michael Weiner, Sr.
V.P., Sec.-Treas.
and Director....... 1998 39,167 75,000 0 0 0 0 6,229
1997 0 15,828 0 0 0 0 0
1996 31,250 0 0 0 0 0 0
Andrew V. Brandt, Sr.
V.P. and
Director........... 1998 80,627 0 0 0 0 0 6,511
1997 75,695 3,125 0 0 0 0 5,053
1996 50,000 23,841 0 0 0 0 0
Scott D. Wussow,
CFO................ 1998 55,108 0 0 0 0 0 0
1997 46,333 2,083 0 0 0 0 0
1996 N/A N/A N/A N/A N/A N/A N/A
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Mr. Brandt. Such agreement
will continue through August, 2000, unless earlier terminated for cause, and
provides for annual compensation of $75,695.
LIMITS ON LIABILITY AND INDEMNIFICATION
The Company's Articles of Incorporation eliminate the personal liability of
its directors to the Company and its shareholders for monetary damages for
breach of the directors' fiduciary duties in certain circumstances. The Articles
of Incorporation further provide that the Company will indemnify its officers
and directors to the fullest extent permitted by law. The Company believes that
such indemnification covers at least negligence and gross negligence on the part
of the indemnified parties. Insofar as indemnification for liabilities under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Company pursuant to the foregoing provisions or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
CERTAIN TRANSACTIONS
As of March 31, 1998, the Company has notes payable to officers and
shareholders bearing interest at 8.5%, unsecured and due on demand anytime after
December 31, 1996 in the amount of $106,465.
On March 2, 1998, the Company loaned an entity owned by two major
shareholders of the Company $100,000 in the form of a promissory note
receivable. The note bears interest at 8% per annum, is due on demand and is
secured by common stock of the Company.
6
<PAGE>
The Company had an agreement with an entity related to a major shareholder
to sell, package, handle, replicate and his adult video disc titles at the
Company's expense for a management fee of $35,000 per month through May 31, 1996
and $40,000 per month through July 1, 1997. As of July 1, 1997 this agreement
was terminated and the Company assumed all responsibilities associated with the
titles. During the years ended March 31, 1998 and 1997 this related entity
withheld from sales of $353,293 and $2,236,143. Replicating costs of $286,361
and $1,646,364 and management fees of $120,000 and $470,000, respectively.
Included in accounts payable at March 31, 1998 is $22,332 due to the related
entity. In June, 1995, the Company issued a three year note receivable to one of
its officers in the amount of $38,000. The note requires interest only payments
at a rate of 6.1%, payable on a quarterly basis with the principal due on August
31, 1998. Interest earned on this note for the years ended March 31, 1998 and
1997 was $2,318 and $2,318.
The Company leases certain equipment and office space through entities
controlled by an officer and shareholder on a month to month basis. During the
years ended March 31, 1998 and 1997 the Company paid $87,033 and $116,549 to
these entities relating to these leases.
Any ongoing or future transactions between the Company and its officers,
directors, principal shareholders, or other affiliates will be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties
on an arms-length basis and will be approved by a majority of the Company's
independent and disinterested directors. Any future loans to officers,
directors, principal shareholders, or affiliates will be made for a bonafide
business purpose, on terms no less favorable than could be obtained from
unaffiliated third parties and will be approved by a majority of the Company's
independent and disinterested directors.
ITEM 2 - APPROVAL OF THE COMPANY'S 1998 INCENTIVE STOCK OPTION PLAN
On July 21, 1998, the Board of Directors adopted the New Frontier Media,
Inc. 1998 Incentive Stock Plan (the "Plan") for officers and key employees of
the Company and its subsidiaries. The principal features of the Plan, as
amended, are summarized below, but such summary is qualified in its entirety by
reference to the full text of the Plan, which is attached hereto as Exhibit A.
Under the Plan, up to an aggregate of 750,000 shares of the Company's
Common Stock may be issued pursuant to stock options, subject to adjustment in
the case of certain corporate transactions.
The options may be either options intended to qualify as "incentive stock
options", as that term is defined in the Internal Revenue Code of 1986, as
amended (the "Code"), on non-statutory options. The per share exercise price of
options granted under the Plan may not be less than 100% of the Fair Market
Value (as defined below) of a share of the Company's Common Stock on the date of
grant. Shares of Common Stock acquired under the Plan may be treasury shares;
including shares purchased in the open market for use in the Plan, newly issued
shares, or a combination thereof. Fair Market Value, as of any date, means the
closing sales price of a share of Common Stock as reported by the National
Association of Securities Dealers, Inc.
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote is required for the Plan to be effective.
The Board of Directors unanimously recommends that stockholders vote FOR
approval of the Plan.
1998 INCENTIVE STOCK PLAN
The Company has adopted the New Frontier 1998 Incentive Stock Plan to
promote the long-term growth and profitability of the Company by (i) providing
key directors, officers and employees of the Company and its subsidiaries with
incentives to improve shareholder value and contribute to the growth and
financial success of the Company and (ii) enabling the Company to attract,
retain and reward the best available persons for positions of substantial
responsibility. As described more fully below, the Plan provides for grants of
options to purchase specified numbers of shares of Common Stock at predetermined
prices.
7
<PAGE>
The following discussion represents only a summary of certain of the Plan
terms and is qualified in its entirety by reference to the complete Plan, a copy
of which is annexed hereto as Exhibit "A".
Shares Available; Maximum Awards; Participants. A total of 750,000 shares
of the Company's Common Stock has been reserved for issuance pursuant to options
granted pursuant to the Plan. The Plan allows the Company to grant options to
employees, officers and directors of the Company and its subsidiaries; provided
that only employees of the Company and its subsidiaries may receive incentive
stock options under the Plan. As of the date of this proxy statement, the
Company has not granted any options.
Stock Option Features. Under the Plan, options to purchase the Company's
Common Stock may take the form of incentive stock options ("ISOs") under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code") or
non-qualified stock options ("NQSOs"). As required by Section 422 of the Code,
the aggregate fair market value (as defined in the Plan) of shares of Common
Stock (determined as of the date of grant of the ISO) with respect to which ISOs
granted to an employee are exercisable for the first time in any calendar year
may not exceed $100,000. The foregoing limitation does not apply to NQSOs.
Initially, each option will be exercisable over a period, determined by the
Board of Directors or the Compensation Committee of the Board of Directors of
the Company, in its discretion, of up to ten years from the date of grant.
Options may be exercisable during the option period at such time, in such
amounts, and in accordance with such terms and conditions and subject to such
restrictions as are determined by the Board or the Compensation Committee and
set forth in option agreements evidencing the grant of such options; provided
that no option may be exercisable less than one year from its date of grant.
The exercise price of options granted pursuant to the Plan is determined by
the Board or the Compensation Committee, in its discretion; provided that the
exercise price of an ISO may not be less than 100% of the fair market value (as
defined in the Plan) of the shares of the Company Common Stock on the date of
grant. The exercise price of options granted pursuant to the Plan is subject to
adjustment as provided in the Plan to reflect stock dividends, splits, other
recapitalizations or reclassifications or changes in the market value of the
Company Common Stock. In addition, the Plan provides that, in the event of a
proposed change in control of the Company (as defined in the Plan), the Board or
the Compensation Committee is to take such actions as it deems appropriate to
effectuate the purposes of the Plan and to protect the grantees of options,
which action may include (i) acceleration or change of the exercise dates of any
option; (ii) arrangements with grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any option; and
(iii) in any case where equity securities other than Common Stock are proposed
to be delivered in exchange for or with respect to Common Stock, arrangements
providing that any option shall become one or more options with respect to such
other equity securities. Further, in the event the Company dissolves and
liquidates (other than pursuant to a plan of merger or reorganization), then
notwithstanding any restrictions on exercise set forth in the Plan or any grant
agreement pursuant thereto (i) each grantee shall have the right to exercise his
option at any time up to ten days prior to the effective date of such
liquidation and dissolution; and (ii) the Board or the Compensation Committee
may make arrangements with the grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any option that is
so canceled or surrendered at any time up to ten days prior to the effective
date of such liquidation and dissolution. The Board or the Compensation
Committee also may establish a different period (and different conditions) for
such exercise, cancellation, or surrender to avoid subjecting the grantee to
liability under Section 16(b) of the Exchange Act.
The shares purchased upon the exercise of an option are to be paid for by
the optionee in cash or cash equivalents acceptable to the Compensation
Committee.
Except as permitted pursuant to Rule 16b-3 under the Exchange Act, and in
any event in the case of an ISO, an option is not transferable except by will or
the laws of descent and distribution. In no case may the options be exercised
later than the expiration date specified in the option agreement.
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Plan Administration. The Plan initially will be administered by the
Compensation Committee of the Board of Directors, consisting of at least two
directors who are "non-employee directors" within the meaning of Rule 16b-3, and
"outside directors" within the meaning of Section 162(m) of the Code.
The Compensation Committee will decide when and to whom to make grants, the
number of shares to be covered by the grants, the vesting schedule, the type of
awards and the terms and provisions relating to the exercise of the awards. The
Compensation Committee may interpret the Plan and may at any time adopt such
rules and regulations for the Plan as it deems advisable. The Board of Directors
may at any time amend or terminate the Plan and change its terms and conditions,
except that, without shareholder approval, no such amendment may (i) materially
increase the maximum number of shares as to which awards may be granted under
the Plan; (ii) materially increase the benefits accruing to Plan participants;
or (iii) materially change the requirements as to eligibility for participation
in the Plan.
Accounting Effects. Under current accounting rules, neither the grant of
options at an exercise price not less than the current fair market value of the
underlying Common Stock, nor the exercise of options under the Plan, is expected
to result in any charge to the earnings of the Company.
Certain Federal Income Tax Consequences. The following is a brief summary
of certain Federal income tax aspects of awards under the Plan based upon the
Federal income tax laws in effect on the date hereof. This summary is not
intended to be exhaustive and does not describe state or local tax consequences.
Incentive Stock Options. An optionee will not realize taxable income upon
the grant of an ISO. In addition, an optionee will not realize taxable income
upon the exercise of an ISO, provided that such exercise occurs no later than
three months after the optionee's termination of employment with the Company
(one year in the event of a termination on account of disability). However, an
optionee's alternative minimum taxable income will be increased by the amount
that the fair market value of the shares acquired upon exercise of an ISO,
generally determined as of the date of exercise, exceeds the exercise price of
the option. If an optionee sells the shares of Common Stock acquired upon
exercise of an ISO, the tax consequences of the disposition depend upon whether
the disposition is qualifying or disqualifying. The disposition of the shares is
qualifying if made more than two years after the date the ISO was granted and
more than one year after the date the ISO was exercised. If the disposition of
the shares is qualifying, any excess of the sale price of the shares over the
exercise price of the ISO would be treated as long-term capital gain taxable to
the option holder at the time of the sale. If the disposition is not qualifying,
i.e., a disqualifying disposition, the excess of the fair market value of the
shares on the date the ISO was exercised over the exercise price would be
compensation income taxable to the optionee at the time of the disposition, and
any excess of the sale price of the shares over the fair market value of the
shares on the date the ISO was exercised would be capital gain.
Unless an optionee engages in a disqualifying disposition, the Company will
not be entitled to a deduction with respect to an ISO. However, if an optionee
engages in a disqualifying disposition, the Company generally will be entitled
to a deduction equal to the amount of compensation income taxable to the
optionee.
Non-qualified Stock Options. An optionee will not realize taxable income
upon the grant of an NQSO. However, when the optionee exercises the NQSO, the
difference between the exercise price of the NQSO and the fair market value of
the shares acquired upon exercise of the NQSO on the date of exercise is
compensation income taxable to the optionee. The Company generally will be
entitled to a deduction equal to the amount of compensation income taxable to
the optionee.
ITEM 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Although the By-Laws of the Company do not require the submission of the
selection of independent auditors to the stockholders for approval, the Board of
Directors considers it desirable that its appointment of independent auditors be
ratified by the stockholders. Spicer, Jefferies & Co. has been the independent
public accountants for the Company since its inception and has been appointed to
serve that capacity for the 1998 fiscal year. The Board of Directors will ask
the stockholders to ratify the appointment of this firm as independent auditors
for the Company at the Annual Meeting.
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A representative of Spicer, Jefferies & Co. will be present at the Annual
Meeting and will be available to respond to appropriate questions from
shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPOINTMENT OF SPICER,
JEFFERIES & CO. AS THE COMPANY'S INDEPENDENT AUDITORS.
SHAREHOLDER PROPOSALS
All shareholder proposals which are intended to be presented at the 1999
Annual Meeting of Shareholders of the Company must be received by the Company no
later than April 11, 1999, for inclusion in the Board of Directors' proxy
statement and form of proxy relating to the meeting.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at the
meeting. However, if any other business properly comes before the meeting, it is
the intention of the persons named in the enclosed proxy to vote on such matters
in accordance with their best judgment.
The prompt return of the proxy will be appreciated and helpful in obtaining
the necessary vote. Therefore, whether or not you expect to attend the meeting,
please sign the proxy and return it in the enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
Michael Weiner
Secretary
Dated: August 7, 1998.
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EXHIBIT "A"
NEW FRONTIER MEDIA, INC.
1998 INCENTIVE STOCK PLAN
1. ESTABLISHMENT, PURPOSE AND TYPES OF AWARDS
New Frontier Media, Inc. hereby establishes the NEW FRONTIER MEDIA, INC.
1998 INCENTIVE STOCK PLAN (the "Plan"). The purpose of the Plan is to promote
the long-term growth and profitability of New Frontier Media, Inc. (the
"Corporation") by (i) providing key people with incentives to improve
stockholder value and to contribute to the growth and financial success of the
Corporation and (ii) enabling the Corporation to attract, retain and reward the
best available persons for positions of substantial responsibility.
The Plan permits the granting of stock options, including non-qualified
stock options and incentive stock options qualifying under Section 422 of the
Code, in any combination (collectively, "Options").
2. DEFINITIONS
Under this Plan, except where the context otherwise indicates, the following
definitions apply:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Change in Control" shall mean (i) any sale, exchange or other
disposition of substantially all of the Corporation's assets; or (ii) any
merger, share exchange, consolidation or other reorganization or business
combination in which the Corporation is not the surviving or continuing
corporation, or in which the Corporation's stockholders become entitled to
receive cash, securities of the Corporation other than voting common stock, or
securities of another issuer.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
any regulations issued thereunder.
(d) "Committee" shall mean the Board or committee of Board members
appointed pursuant to Section 3 of the Plan to administer the Plan.
(e) "Common Stock" shall mean shares of the Corporation's common stock,
$.0001 par value.
(f) "Fair Market Value" of a share of the Corporation's Common Stock for
any purpose on a particular date shall be the last reported sale price per share
of Common Stock, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on a national securities exchange or
included for quotation on a system established by the National Association of
Securities Dealers, Inc. ("Nasdaq System"), or if the Common Stock is not so
listed or admitted to trading or included for quotation, the last quoted price,
or if the Common Stock is not so quoted, the average of the high bid and low
asked prices, regular way, in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System or,
if such system is no longer in use, the principal other automated quotations
system that may then be in use or, if the Common Stock is not quoted by any such
organization, the average of the closing bid and asked prices, regular way, as
furnished by a professional market maker making a market in the Common Stock as
selected in good faith by the Committee or by such other source or sources as
shall be selected in good faith by the Committee; and, provided further, that in
the case of incentive stock options, the determination of Fair Market Value
shall be made by the Committee in good faith in conformance with the Treasury
Regulations under Section 422 of the Code. If, as the case may be, the relevant
date is not a trading day, the determination shall be made as of the next
preceding trading day. As used herein, the term "trading day" shall mean a day
on which public trading of securities occurs and is reported in the principal
consolidated reporting system referred to above, or if the Common Stock is not
listed or admitted to trading on a national securities exchange or included for
quotation on the Nasdaq System,
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any day other than a Saturday, a Sunday or a day in which banking institutions
in the State of New York are closed.
(g) "Grant Agreement" shall mean a written agreement between the
Corporation and a grantee memorializing the terms and conditions of an Option
granted pursuant to the Plan.
(h) "Grant Date" shall mean the date on which the Committee formally acts
to grant an Option to a grantee or such other date as the Committee shall so
designate at the time of taking such formal action.
(i) "Parent" shall mean a corporation, whether now or hereafter existing,
within the meaning of the definition of "parent corporation" provided in Section
424(e) of the Code, or any successor thereto of similar import.
(j) "Rule 16b-3" shall mean Rule 16b-3 as in effect under the Exchange Act
on the effective date of the Plan, or any successor provision prescribing
conditions necessary to exempt the issuance of securities under the Plan (and
further transactions in such securities) from Section 16(b) of the Exchange Act.
(k) "Subsidiary" and "Subsidiaries" shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning of the
definition of "subsidiary corporation" provided in Section 424(f) of the Code,
or any successor thereto of similar import.
3. ADMINISTRATION
(a) Procedure. The Plan shall be administered by the Board. In the
alternative, the Board may appoint a Committee consisting of not less than two
(2) members of the Board to administer the Plan on behalf of the Board, subject
to such terms and conditions as the Board may prescribe. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board. From
time to time, the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and, thereafter, directly administer the Plan. In
the event that the Board is the administrator of the Plan in lieu of a
Committee, the term "Committee" as used herein shall be deemed to mean the
Board.
Members of the Board or Committee who are either eligible for Options or
have been granted Options may vote on any matters affecting the administration
of the Plan or the grant of Options pursuant to the Plan, except that no such
member shall act upon the granting of an Option to himself or herself, but any
such member may be counted in determining the existence of a quorum at any
meeting of the Board or the Committee during which action is taken with respect
to the granting of an Option to him or her.
The Committee shall meet at such times and places and upon such notice as
it may determine. A majority of the Committee shall constitute a quorum. Any
acts by the Committee may be taken at any meeting at which a quorum is present
and shall be by majority vote of those members entitled to vote. Additionally,
any acts reduced to writing or approved in writing by all of the members of the
Committee shall be valid acts of the Committee.
(b) Rule 16b-3 Requirements. The members of the Committee shall be both
"non-employee directors" within the meaning of Rule 16b-3, and "outside
directors" within the meaning of Section 162(m) of the Code. The Board shall
take all action necessary to cause the Plan to be administered in accordance
with the then effective provisions of Rule 16b-3, provided that any amendment to
the Plan required for compliance with such provisions shall be made in
accordance with Section 10 of the Plan.
(c) Powers of the Committee. The Committee shall have all the powers vested
in it by the terms of the Plan, such powers to include authority, in its sole
and absolute discretion, to grant Options under the Plan, prescribe Grant
Agreements evidencing such Options and establish programs for granting Options.
The Committee shall have full power and authority to take all other actions
necessary to carry out the purpose and intent of the Plan, including, but not
limited to, the authority to:
(i) determine the eligible persons to whom, and the time or times at
which Options shall be granted,
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(ii) determine the types of Options to be granted,
(iii) determine the number of shares to be covered by each Option,
(iv) impose such terms, limitations, restrictions and conditions upon
any such Option as the Committee shall deem appropriate,
(v) modify, extend or renew outstanding Options, accept the surrender
of outstanding Options and substitute new Options, provided that no such
action shall be taken with respect to any outstanding Option which would
adversely affect the grantee without the grantee's consent, and
(vi) accelerate or otherwise change the time in which an Option may be
exercised, in whole or in part, including, but not limited to, any
restriction or condition with respect to the vesting or exercisability of
an Option following termination of any grantee's employment.
The Committee shall have full power and authority to administer and
interpret the Plan and to adopt such rules, regulations, agreements, guidelines
and instruments for the administration of the Plan and for the conduct of its
business as the Committee deems necessary or advisable and to interpret same,
all within the Committee's sole and absolute discretion.
(d) Limited Liability. To the maximum extent permitted by law, no member of
the Committee shall be liable for any action taken or decision made in good
faith relating to the Plan or any Option thereunder.
(e) Indemnification. To the maximum extent permitted by law, the members of
the Committee shall be indemnified by the Corporation in respect of all their
activities under the Plan.
(f) Effect of Committee's Decision. All actions taken and decisions and
determinations made by the Committee on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Committee's sole
and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its stockholders, any participants in the
Plan and any other employee of the Corporation, and their respective successors
in interest.
4. SHARES AVAILABLE FOR THE PLAN: MAXIMUM AWARDS
Subject to adjustments as provided in Section 9 of the Plan, the shares of
stock that may be delivered or purchased under the Plan, including with respect
to incentive stock options intended to qualify under Section 422 of the Code,
shall not exceed an aggregate of 750,000 shares of Common Stock of the
Corporation. The Corporation shall reserve said number of shares for Options to
be awarded under the Plan, subject to adjustments as provided in Section 9 of
the Plan. If any Option, or portion of an Option, under the Plan expires or
terminates unexercised, becomes unexercisable or is forfeited or otherwise
terminated, surrendered or canceled as to any shares, the shares subject to such
Option shall thereafter be available for further Options under the Plan unless
such shares would not be deemed available for future Options pursuant to Section
16 of the Exchange Act.
The maximum number of shares of Common Stock subject to Options of any
combination that may be granted during any 12 consecutive month period to any
one individual shall be limited to 250,000 shares. To the extent required by
Section 162(m) of the Code, shares of Common Stock subject to the foregoing
limit with respect to which the related Option is terminated, surrendered or
canceled shall not again be available for grant under this limit.
5. PARTICIPATION
Participation in the Plan shall be open to all employees, officers and
directors of the Corporation, or of any Parent or Subsidiary of the Corporation,
as may be selected by the Committee from time to time. Notwithstanding the
foregoing, participation in the Plan with respect to awards of incentive stock
options shall be limited to employees of the Corporation or of any Parent or
Subsidiary of the Corporation. To the extent necessary to comply with Rule 16b-3
or to constitute an "outside director" within the meaning of Section 162(m) of
the Code, and only in the event that Rule 16b-3 or Section 162(m) of the Code is
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applicable to the Plan or an Option awarded thereunder, Committee members shall
not be eligible to participate in the Plan while members of the Committee.
Options may be granted to such eligible persons and for or with respect to
such number of shares of Common Stock as the Committee shall determine, subject
to the limitations in Section 4 of the Plan. A grant of any type of Option made
in any one year to an eligible person shall neither guarantee nor preclude a
further grant of that or any other type of Option to such person in that year or
subsequent years.
6. STOCK OPTIONS
Subject to the other applicable provisions of the Plan, the Committee may
from time to time grant to eligible participants non-qualified stock options or
incentive stock options as that term is defined in Section 422 of the Code. The
Options granted shall be subject to the following terms and conditions.
(a) Grant of Option. The grant of an Option shall be evidenced by a Grant
Agreement, executed by the Corporation and the grantee, stating the number of
shares of Common Stock subject to the Option evidenced thereby and the terms and
conditions of such Option, in such form as the Committee may from time to time
determine.
(b) Price. The price per share payable upon the exercise of each Option
("exercise price") shall be determined by the Committee; provided, however, that
in the case of incentive stock options, the exercise price shall not be less
than 100% of the Fair Market Value of the shares on the date the Option is
granted.
(c) Payment. Options may be exercised in whole or in part by payment of the
exercise price of the shares to be acquired in accordance with the provisions of
the Grant Agreement, and/or such rules and regulations as the Committee may have
prescribed, and/or such determinations, orders, or decisions as the Committee
may have made. Payment of the exercise price shall be made in cash (or cash
equivalents acceptable to the Committee) or by such other means as the Committee
may prescribe. The Corporation may make or guarantee loans to grantees to assist
grantees in exercising Options.
The Committee, subject to such limitations as it may determine, may
authorize payment of the exercise price, in whole or in part, by delivery of a
properly executed exercise notice, together with irrevocable instructions, to:
(i) a brokerage firm designated by the Corporation to deliver promptly to the
Corporation the aggregate amount of sale or loan proceeds to pay the exercise
price and any withholding tax obligations that may arise in connection with the
exercise, and (ii) the Corporation to deliver the certificates for such
purchased shares directly to such brokerage firm.
(d) Terms of Options. The term during which each Option may be exercised
shall be determined by the Committee. In no event shall an Option be exercisable
less than six months nor more than ten years from the date it is granted. Prior
to the exercise of the Option and delivery of the shares certificates
represented thereby, the grantee shall have none of the rights of a stockholder
with respect to any shares represented by an outstanding Option.
(e) Restrictions on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the Grant Date) of shares of Common Stock with respect
to which all incentive stock options first become exercisable by any grantee in
any calendar year under this or another plan of the Corporation and its Parent
and Subsidiary corporations may not exceed $100,000 or such other amount as may
be permitted from time to time under Section 422 of the Code. To the extent that
such aggregate Fair Market Value shall exceed $100,000, or other applicable
amount, such Options (taking Options into account in the order in which they
were granted) shall be treated as non-qualified stock options. In such case, the
Corporation may designate the shares of Common Stock that are to be treated as
stock acquired pursuant to the exercise of an incentive stock option by issuing
a separate certificate for such shares and identifying the certificate as
incentive stock option shares in the stock transfer records of the Corporation.
The exercise price of any incentive stock option granted to a grantee who
owns (within the meaning of Section 422(b)(6) of the Code, after the application
of the attribution rules in Section 424(d) of the Code) more than 10% of the
total combined voting power of all classes of shares of the Corporation or its
Parent or Subsidiary corporations (within the meaning of Sections 422 and 424 of
the Code) shall be not
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less than 110% of the Fair Market Value of the Common Stock on the grant date
and the term of such Option shall not exceed five years.
Incentive stock options shall only be issued to employees of the
Corporation or of a Parent or Subsidiary of the Corporation.
(f) Other Terms and Conditions. Options may contain such other provisions,
not inconsistent with the provisions of the Plan, as the Committee shall
determine appropriate from time to time. No Option shall be an incentive stock
option unless so designated by the Committee at the time of grant or in the
Grant Agreement evidencing such Option.
7. WITHHOLDING OF TAXES
The Corporation may require, as a condition to any exercise of an Option
under the Plan or a Grant Agreement (hereinafter referred to as a "taxable
event"), that the grantee pay to the Corporation, in cash, any federal, state or
local taxes of any kind required by law to be withheld with respect to any
taxable event under the Plan. The Corporation, to the extent permitted or
required by law, shall have the right to deduct from any payment of any kind
(including salary or bonus) otherwise due to a grantee any federal, state or
local taxes of any kind required by law to be withheld with respect to any
taxable event under the Plan, or to retain or sell without notice a sufficient
number of the shares to be issued to such grantee to cover any such taxes.
8. TRANSFERABILITY
To the extent required to comply with Rule 16b-3, and in any event in the
case of an incentive stock option, no Option granted under the Plan shall be
transferable by a grantee otherwise than by will or the laws of descent and
distribution. Unless otherwise determined by the Committee in accord with the
provisions of the immediately preceding sentence, an Option may be exercised
during the lifetime of the grantee, only by the grantee or, during the period
the grantee is under a legal disability, by the grantee's guardian or legal
representative.
9. ADJUSTMENTS; BUSINESS COMBINATIONS
In the event of a reclassification, recapitalization, stock split, stock
dividend, combination of shares, or other similar event, the maximum number and
kind of shares reserved for issuance or with respect to which Options may be
granted under the Plan as provided in Section 4 shall be adjusted to reflect
such event, and the Committee shall make such adjustments as it deems
appropriate and equitable in the number, kind and price of shares covered by
outstanding Options made under the Plan, and in any other matters which relate
to Options and which are affected by the changes in the Common Stock referred to
above.
In the event of any proposed Change in Control, the Committee shall take
such action as it deems appropriate to effectuate the purposes of this Plan and
to protect the grantees of Options, which action may include, but without
limitation, any one or more of the following: (i) acceleration or change of the
exercise dates of any Option; (ii) arrangements with grantees for the payment of
appropriate consideration to them for the cancellation and surrender of any
Option; and (iii) in any case where equity securities other than Common Stock of
the Corporation are proposed to be delivered in exchange for or with respect to
Common Stock of the Corporation, arrangements providing that any Option shall
become one or more Options with respect to such other equity securities.
In the event the Corporation dissolves and liquidates (other than pursuant
to a plan of merger or reorganization), then notwithstanding any restrictions on
exercise set forth in this Plan or any Grant Agreement (i) each grantee shall
have the right to exercise his Option at any time up to ten (10) days prior to
the effective date of such liquidation and dissolution; and (ii) the Committee
may make arrangements with the grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any Option that is
so canceled or surrendered at any time up to ten (10) days prior to the
effective date of such liquidation and dissolution. The Committee may establish
a different period (and different conditions) for such exercise, cancellation,
or surrender to avoid subjecting the grantee to
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liability under Section 16(b) of the Exchange Act. Any Option not so exercised,
canceled, or surrendered shall terminate on the last day for exercise prior to
such effective date.
10. TERMINATION AND MODIFICATION OF THE PLAN
The Board, without further approval of the stockholders, may modify or
terminate the Plan, except that no modification shall become effective without
prior approval of the stockholders of the Corporation if stockholder approval
would be required for continued compliance with Rule 16b-3.
The Committee shall be authorized to make minor or administrative
modifications to the Plan as well as modifications to the Plan that may be
dictated by requirements of federal or state laws applicable to the Corporation
or that may be authorized or made desirable by such laws. The Committee may
amend or modify the grant of any outstanding Option in any manner to the extent
that the Committee would have had the authority to make such Option as so
modified or amended. No modification may be made that would materially adversely
affect any Option previously made under the Plan without the approval of the
grantee.
11. NON-GUARANTEE OF EMPLOYMENT
Nothing in the Plan or in any Grant Agreement thereunder shall confer any
right on an employee to continue in the employ of the Corporation or shall
interfere in any way with the right of the Corporation to terminate an employee
at any time.
12. TERMINATION OF EMPLOYMENT
For purposes of maintaining a grantee's continuous status as an employee
and accrual of rights under any Options, transfer of an employee among the
Corporation and the Corporation's Parent or Subsidiaries shall not be considered
a termination of employment. Nor shall it be considered a termination of
employment for such purposes if an employee is placed on military or sick leave
or such other leave of absence which is considered as continuing intact the
employment relationship; in such a case, the employment relationship shall be
continued until the date when an employee's right to reemployment shall no
longer be guaranteed either by law or contract.
13. WRITTEN AGREEMENT
Each Grant Agreement entered into between the Corporation and a grantee
with respect to an Option granted under the Plan shall incorporate the terms of
this Plan and shall contain such provisions, consistent with the provisions of
the Plan, as may be established by the Committee.
14. NON-UNIFORM DETERMINATIONS
The Committee's determinations under the Plan (including, without
limitation, determinations of the persons to receive Options, the form, amount
and timing of such Options, the terms and provisions of such Options and the
agreements evidencing same) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Options under
the Plan, whether or not such persons are similarly situated.
15. LIMITATION ON BENEFITS
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent any provision of the Plan or action by
the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
16. LISTING AND REGISTRATION
If the Corporation determines that the listing, registration or
qualification upon any securities exchange or upon any Nasdaq system or under
any law, of shares subject to any Option is necessary or desirable as a
condition of, or in connection with, the granting of same or the issue or
purchase of shares
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thereunder, no such Option may be exercised in whole or in part and no
restrictions on such Option shall lapse, unless such listing, registration or
qualification is effected free of any conditions not acceptable to the
Corporation.
17. COMPLIANCE WITH SECURITIES LAWS
The Corporation may require that a grantee, as a condition to exercise of
an Option, and as a condition to the delivery of any share certificate, provide
to the Corporation, at the time of each such exercise and each such delivery, a
written representation that the shares of Common Stock being acquired shall be
acquired by the grantee solely for investment and will not be sold or
transferred without registration or the availability of an exemption from
registration under the Securities Act and applicable state securities laws. The
Corporation may also require that a grantee submit other written representations
which will permit the Corporation to comply with federal and applicable state
securities laws in connection with the issuance of the Common Stock, including
representations as to the knowledge and experience in financial and business
matters of the grantee and the grantee's ability to bear the economic risk of
the grantee's investment. The Corporation may require that the grantee obtain a
"purchaser representative" as, that term is defined in applicable federal and
state securities laws. The stock certificates for any shares of Common Stock
issued pursuant to this Plan may bear a legend restricting transferability of
the shares of Common Stock unless such shares are registered or an exemption
from registration is available under the Securities Act and applicable state
securities laws. The Corporation may notify its transfer agent to stop any
transfer of shares of Common Stock not made in compliance with these
restrictions. Common Stock shall not be issued with respect to an Option granted
under the Plan unless the exercise of such Option and the issuance and delivery
of share certificates for such Common Stock pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act, the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any national securities exchange or Nasdaq system upon which the
Common Stock may then be listed or quoted, and shall be further subject to the
approval of counsel for the Corporation with respect to such compliance to the
extent such approval is sought by the Committee.
18. GOVERNING LAW
The validity, construction and effect of the Plan, of Grant Agreements
entered into pursuant to the Plan, and of any rules, regulations, determinations
or decisions made by the Board or Committee relating to the Plan or such Grant
Agreements, and the rights of any and all persons having or claiming to have any
interest therein or thereunder, shall be determined exclusively in accordance
with applicable federal laws and the laws of the State of Colorado, without
regard to its conflict of laws rules and principles.
19. PLAN SUBJECT TO CERTIFICATE OF INCORPORATION AND BY-LAWS
This Plan is subject to the Articles of Incorporation and By-Laws of the
Corporation, as they may be amended from time to time.
20. EFFECTIVE DATE; TERMINATION DATE
The Plan is effective as of July 21, 1998, the date on which the Plan was
adopted by the Board, subject to approval of the stockholders within twelve
months of such date. Unless previously terminated, the Plan shall terminate on
the close of business on July 21, 2008, ten years from the effective date.
Subject to other applicable provisions of the Plan, all Options granted under
the Plan prior to termination of the Plan shall remain in effect until such
Options have been satisfied or terminated in accordance with the Plan and the
terms of such Options.
A-7
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P R O X Y
NEW FRONTIER MEDIA, INC.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, hereby constitutes and
appoints Mark Kreloff and Michael Weiner, and each of them, proxies with full
power of substitution to vote for the undersigned all shares of Common Stock of
New Frontier Media, Inc. which the undersigned would be entitled to vote if
personally present at the Annual Meeting of the Stockholders to be held on
September 11, 1998, at 313 Sodergreen Road, Laramie, Wyoming 82070, at 10:00
a.m., Mountain Daylight Time, and at any adjournment thereof, upon the matters
described in the accompanying Proxy Statement and upon any other business that
may properly come before the meeting or any adjournment thereof. Said proxies
are directed to vote or refrain from voting as checked on the reverse side upon
the matters listed on the reverse side, and otherwise in their discretion.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
<PAGE>
<TABLE>
<S> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1 AND "FOR" ITEM 2 AND ITEM 3. The I plan to attend
shares represented by this proxy will be voted as directed by the stockholder. If no direction is given the meeting
when the duly executed proxy is returned, such shares will be voted "FOR ALL Nominees" in Item 1 and / /
"FOR" Item 2 and Item 3.
</TABLE>
<TABLE>
<S> <C>
ITEM 1--Election of six (6) Directors Withheld for the following only:
Nominees: Mark H. Kreloff, Michael Weiner, Andrew V. Brandt, (Write the name(s) of the Nominee(s) in the space below)
Clive Ng, Koung Y. Wong, Stuart K. Duncan --------------------------------------------------------
FOR ALL NOMINEES WITHHOLD AUTHORITY
with exceptions noted FOR ALL NOMINEES
/ / / /
ITEM 2--Approval of 1998 Incentive Stock Option Plan.
FOR AGAINST ABSTAIN
/ / / / / /
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ITEM 3--Ratification of appointment of Spicer, Jefferies & Co. as Independent
auditors for the 1998 fiscal year.
FOR AGAINST ABSTAIN
/ / / / / /
If you plan to attend the Annual Meeting check the box above.
DATED: ------------------------------------------------------------------, 1998
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SIGNATURE(S) OF STOCKHOLDER(S)
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TITLE
Please mark, date and sign exactly as your name appears above and return in the
enclosed envelope. If acting as executor, administrator, trustee, guardian,
etc., you should so indicate when signing. If the signer is a corporation,
please sign the full corporate name, by duly authorized officer. If shares are
held jointly, each stockholder named should sign.
Please mark your choice like this / / in blue or black ink.
