<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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 Rule 14a-11(c) or Rule 14a-12
/ / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
NEW FRONTIER MEDIA, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Common
Stock, par value $.0001 per share
(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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / 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.
5435 AIRPORT BLVD., SUITE 100
BOULDER, COLORADO 80301
(303) 786-8700
August 28, 2000
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 26, 2000, at the Omni Interlocken Resort, 500
Interlocken Boulevard, Broomfield, CO 80021.
At this meeting, you will be asked to consider and vote, in person or by
proxy, on the following matters: (i) the election of six directors to serve on
the Board of Directors of the Company; (ii) the approval of the Company's
Millennium Incentive Stock Option Plan; (iii) the ratification of the
appointment of Spicer, Jeffries & Co. as the Company's independent accountants;
and (iv) any other business as may properly come before the meeting or any
adjournments thereof. The official Notice of Meeting, Proxy Statement and form
of proxy are included with this letter. The matters listed in the Notice of
Meeting are described in detail in the accompanying Proxy Statement.
Regardless of your plans for attending in person, it is important that your
shares be represented and voted at the Meeting. Accordingly, you are urged to
complete, sign and mail the enclosed proxy card as soon as possible.
Very truly yours,
/s/ Mark H. Kreloff
Mark H. Kreloff
Chairman of the Board
<PAGE>
NEW FRONTIER MEDIA, INC.
5435 AIRPORT BLVD., SUITE 100
BOULDER, COLORADO 80301
(303) 786-8700
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Stockholders of New Frontier Media, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of New
Frontier Media, Inc. (the "Company") will be held on September 26, 2000, at
10:00 a.m., Mountain Daylight Time, at the Omni Interlocken Resort, 500
Interlocken Boulevard, Broomfield, CO 80021 for the following purposes:
1. To elect six directors to serve on the Board of Directors for the
ensuing year and until their successors are duly elected.
2. To approve the Company's Millennium 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, 2001; and
4. To transact such other business as may properly come before the meeting
and any adjournment thereof.
The Board of Directors has fixed the close of business on August 25, 2000,
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
/s/ Michael Weiner
Michael Weiner
Secretary
Boulder, Colorado
August 28, 2000
<PAGE>
NEW FRONTIER MEDIA, INC.
5435 AIRPORT BLVD., SUITE 100
BOULDER, COLORADO 80301
------------------
PROXY STATEMENT
------------------
GENERAL INFORMATION
INFORMATION ABOUT 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 26, 2000 at 10:00 a.m. (Mountain Daylight Time), at the Omni
Interlocken Resort, 500 Interlocken Boulevard, Broomfield, CO 80021, 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 28, 2000. The Company will bear the
cost of its solicitation of proxies. The original solicitation of proxies by
mail may be supplemented 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 their proxies at any time before being
voted. 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 Millennium 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, 2001.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record at the close of business on August 25, 2000 are
entitled to notice of and to vote at the meeting or any adjournment thereof. On
August 25, 2000, the Company had outstanding 20,781,762 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 directors. Accordingly,
abstentions or broker non-votes as to the election of directors will have no
effect on the election of directors.
<PAGE>
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 approve the Millennium Incentive Stock Option Plan,
and to ratify the selection of independent public accountants. 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.
A list of stockholders entitled to vote at the Annual Meeting will be
available at the Company's office, 5435 Airport Blvd., Suite 100, Boulder,
Colorado 80301, during business hours, for a period of 10 days prior to the
Annual Meeting for examination by any stockholder. Such list will also be
available at the annual meeting.
QUORUM
The presence, either in person or by proxy, of the holders of a majority of
the shares of common stock outstanding on August 25, 2000 is necessary to
constitute a quorum at the Annual Meeting.
ACTIONS TO BE TAKEN AT ANNUAL MEETING
PROPOSAL ONE
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, Koung Y. Wong, Edward J. Bonn, Alan L. Isaacman and Bradley A. Weber 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 and the year in which first elected a director of the
Company.
<TABLE>
<CAPTION>
POSITION WITH THE DIRECTOR
NAME AGE COMPANY SINCE
---- --- ----------------- --------
<S> <C> <C> <C>
Mark H. Kreloff.............. 38 Chairman of the Board and Chief Executive Officer of 1995
New Frontier Media, Inc. and Colorado Satellite
Broadcasting, Inc.
Michael Weiner............... 59 Executive Vice President/Corporate Development, 1995
Secretary and Director, New Frontier Media, Inc. and
Colorado Satellite Broadcasting, Inc.
Koung Y. Wong (1)(2)(3)...... 47 Director 1995
Edward J. Bonn (1)(2)(3)..... 48 President of New Frontier Media, Inc., Director and 1999
Chief Executive Operating Officer, Interactive
Telecom Network, Inc. and Card Transactions, Inc.
Alan L. Isaacman (1)(2)(3)... 57 Director 1999
Bradley A. Weber............. 40 Executive Vice President and Treasurer of New 1999
Frontier Media, Inc., Director and Chief Operating
Officer, Interactive Telecom Network, Inc. and Card
Transactions, Inc.
</TABLE>
---------------
(1) Member Compensation Committee
(2) Member Audit Committee
(3) Member Nasdaq Compliance Committee
2
<PAGE>
BIOGRAPHICAL INFORMATION ABOUT NOMINEES
MARK H. KRELOFF. 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. Prior to founding the
Company and during the four years immediately preceding his employment with the
Company, he was the President of LaserDisc Entertainment, a video disc
distribution company; Elmfield IV, Inc., an entertainment production and
distribution company, and California Software Partners, L.P., a computer
software development and publishing company. Previously, Mr. Kreloff held the
title Vice President, Mergers and Acquisitions, with Kidder Peabody & Co. and
Drexel Burnham Lambert. From 1983 through 1986, Mr. Kreloff was employed by
Butcher & Singer, Inc., a Philadelphia-based investment bank, in a variety of
departments including the Cable Television and Broadcast Media Group. From 1977
through 1983, Mr. Kreloff held a variety of positions, including Marketing
Director, in his family's cable television system based in New Jersey. Mr.
Kreloff is an honors graduate of Syracuse University and holds B.S. degrees in
Finance and Public Communications.
MICHAEL WEINER. Mr. Weiner has been Executive Vice President/Corporate
Development 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. His background includes 20 years in real estate development
and syndication.
KOUNG Y. WONG. 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. For the past 23 years, Mr.
Wong has been the president and sole shareholder of WAV Entertainment, Inc., a
leading electronics hardware and software distribution company based in South
San Francisco, California. WAV Entertainment, Inc. includes a 20,000 square-foot
corporate headquarters and distribution center and an 8,500 square-foot retail
superstore in San Francisco, California. Mr. Wong has been a director of New
Frontier Media since the Company's inception in September, 1995.
EDWARD J. BONN. Mr. Bonn is the founder and CEO of Interactive Telecom
Network, Inc. ("ITN") and Card Transactions, Inc. ("CTI"). He became a director
of New Frontier Media in June 1999. ITN is a leading Internet technology company
that provides turn-key e-commerce solutions, Internet software engineering,
bandwith, hosting and credit card processing systems. Mr. Bonn was formerly the
Chairman of the Board of Independent Entertainment Group, a California-based,
publicly traded, service bureau and information provider. He was also a founder
and President of ICOM Group, Inc., an audio text service bureau that specialized
in automated credit card processing and fraud control procedures, and is the
founder and President of Response Telemedia, Inc., a privately held company
offering a variety of 800/900 information and entertainment. Mr. Bonn attended
the University of Oregon from 1969-1972 with a focus in International Studies
and attended business and accounting classes at UCLA from 1980-1982.
ALAN ISAACMAN. Mr. Isaacman joined the Company as a Director in November
1999. Mr. Isaacman is a Senior Partner of Isaacman, Kaufman & Painter, Inc. Mr.
Isaacman is a renowned litigation attorney based in Los Angeles representing
general corporate clients, as well as clients from the media and entertainment
industries. He is considered an expert on First Amendment rights and has
experience in areas of copyright, antitrust, securities, right to privacy and
general entertainment law. Mr. Isaacman has successfully defended clients on
First Amendment cases throughout the judicial system up to and including the
Supreme Court of the United States. Mr. Isaacman received his undergraduate at
Penn State University and received his law degree from Harvard University Law
School. He is a Fellow of the American College of Trial Lawyers and is included
in the Best Lawyers in America.
BRADLEY WEBER. Mr Weber is President and Chief Operating Officer of ITN and
CTI. He joined ITN in 1995 as Executive Vice President and became Chief
Operating Officer in January 1998. He became a director of New Frontier Media in
October 1999. ITN is a leading Internet technology
3
<PAGE>
company that provides turn-key e-commerce solutions, Internet software
engineering, bandwidth, hosting, and credit card processing systems. Mr. Weber
was formerly Director of Interactive Audiotext Services, Inc., an audio text
service bureau and information provider. He was also a founder and CEO of the
ICOM Group, Inc., and audit text service bureau that specializes in automated
credit card processing and fraud control procedures. Mr. Weber received his
undergraduate degree in Economics at Occidental College and received his Masters
in Business Administration from California Lutheran University.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES LISTED
ABOVE.
INFORMATION ABOUT THE BOARD OF DIRECTORS, COMMITTEES OF THE
BOARD AND EXECUTIVE OFFICERS.
During the Company's fiscal year ended March 31, 2000, the Board of
Directors held two meetings and acted seven 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, 2000, the Compensation
Committee of the Board met once. The Compensation Committee has the power to
prescribe, amend and rescind rules relating to the Company's 1999 and 1998
Incentive Stock Option Plans, to grant options and other awards under the Plans
and to interpret the Plans.
During the Company's fiscal year ended March 31, 2000, the Audit Committee
of the Board met once. The Audit Committee has the responsibility of
recommending the engagement of independent auditors and reviewing and
considering actions of management in matters relating to audit functions. The
Committee reviews, with independent auditors, the scope and results of its audit
engagement, the system of internal controls and procedures and reviews the
effectiveness of procedures intended to prevent violations of laws. The Board of
Directors has adopted a written charter for the Audit Committee, which is
attached hereto as Exhibit "A". The Audit Committee has recommended the
selection of Spicer, Jefferies & Co. as independent auditors for the year ended
March 31, 2001.
During the Company's fiscal year ended March 31, 2000, the Nasdaq
Compliance Committee of the Board met two times. The Nasdaq Compliance Committee
has the responsibility of ensuring that the Company complies with the Nasdaq
Stock Market Marketplace Rules.
No director or executive officer of the Company is related to any other
director or executive officer. None of the Company's officers or directors hold
any directorships in any other public company. There are currently two outside
directors on the Company's Board of Directors. The Company's compensation
committee is comprised of Messrs. Isaacman, Bonn, and Wong. The Company's audit
committee is comprised of Messrs. Isaacman, Bonn and Wong. The Company's Nasdaq
compliance committee is comprised of Messrs. Isaacman, Bonn and Wong.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16 of the Exchange Act, the Company's Directors and
executive officers and beneficial owners of more than 10% of the Company's
Common Stock are required to file certain reports, within specified time
periods, indicating their holdings of and transactions in the Common Stock and
derivative securities. Based solely on a review of such reports provided to the
Company and written representations from such persons regarding the necessity to
file such reports, the Company is not aware of any failures to file reports or
report transactions in a timely manner during the Company's fiscal year ended
March 31, 2000, except that: (i) Mr. Nyiri, Mr. Bonn, Ms. Miller, Mr. Weber, Mr.
Howard, Mr. Schalin, Mr. Dumas, Mr. Boenish, Mr. Isaacman and Mr. Wong each
filed one late Form 3; (ii) Mr. Weber, Mr, Bonn, Mr. Weiner and Mr. Kreloff each
filed one late Form 4 regarding one transaction; and (iii) Mr. Kreloff, Mr.
Weiner, Mr. Weber, Mr. Bonn, Mr. Dumas and Mr. Issaacman each filed one late
Form 5 regarding one transaction.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation paid to the Chief
Executive Officer and four other most highly compensated executive officers of
the Company for the three fiscal years ended March 31, 2000, 1999 and 1998.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------------
ANNUAL COMPENSATION SECURITIES
--------------------------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND YEAR COMPENSATION OPTIONS/ COMPENSATION
PRINCIPAL POSITION COMPENSATION SALARY ($) BONUS ($) ($)(1) SARS (#) ($)(2)
------------------ ------------ ---------- --------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mark H. Kreloff, ............ 2000 117,134 37,212 -- 275,000 730
CEO and Chairman 1999 103,750 -- -- 269,000 730
1998 39,167 75,000 -- -- --
Jerry Howard, ............... 2000 100,228 134,970 -- 75,000 9,764
CFO of ITN, IGallery, CTI 1999 99,057 67,468 -- -- 11,307
1998 76,327 34,520 -- -- 611
Brad Weber, ................. 2000 152,500 27,500 -- 25,000 15,533
President and COO of ITN and 1999 180,000 -- -- -- 9,764
CTI 1998 180,000 -- -- -- 99
Gregory Dumas, .............. 2000 89,985 111,000 -- 125,000 8,273
President of IGallery 1999 72,000 117,313 -- -- 16,107
1998 66,000 74,119 -- -- 800
Scott Schalin, .............. 2000 108,077 111,000 -- 50,000 8,954
COO of IGallery 1999 80,000 103,374 -- -- 15,312
1998 80,000 36,613 -- -- 915
</TABLE>
---------------
(1) While each executive officer enjoys certain other perquisites, such
perquisites do not exceed the lesser of either $50,000 or 10% of each
Executive Officer's salary and bonus.
(2) The amount shown for Mr. Kreloff is related to premiums paid for life
insurance. All other compensation for Executive Officer includes amounts
contributed to the ITN 401(k) Plan on behalf of the officers.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF ASSUMED ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM (5)
OPTIONS GRANTED TO EMPLOYEES BASE PRICE ($/ EXPIRATION -----------------------------
NAME (# OF SHARES) IN 3/31/00 SH) DATE 5% 10%
---- --------------- --------------- -------------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Mark Kreloff.......... 250,000(1) 14% $ 4.00 12/30/09 630,000 1,592,500
Mark Kreloff.......... 25,000(2) 1% $ 5.00 1/7/10 78,500 199,250
Jerry Howard.......... 75,000(3) 4% $ 4.14 12/30/09 195,000 495,000
Brad Weber............ 25,000(2) 1% $ 5.00 1/7/10 78,500 199,250
Gregory Dumas......... 50,000(3) 3% $ 4.14 12/30/09 130,000 330,000
Gregory Dumas......... 25,000(4) 1% $ 5.50 10/27/03 29,750 63,750
Gregory Dumas......... 25,000(4) 1% $ 7.00 10/27/03 37,750 81,250
Gregory Dumas......... 25,000(4) 1% $10.00 10/27/03 54,000 116,000
Scott Schalin......... 50,000(3) 3% $ 4.14 12/30/09 130,000 330,000
</TABLE>
---------------
(1) On December 30, 1999, the Company granted options to Mr. Kreloff and other
executive officers and key employees to purchase common stock of the Company
under the Company's 1999 Incentive Stock Option Plan. Mr. Kreloff's options
vest at a rate of 50% per year, commencing December 30, 2000 and expire ten
years from the grant date, subject to early termination in certain
circumstances.
5
<PAGE>
(2) On January 7, 2000, the Company granted options to Mr. Kreloff, Mr. Weber
and other executive officers to purchase common stock of the Company under
the Company's 1999 Incentive Stock Option Plan. Mr. Kreloff's and Mr.
Weber's options vest at a rate of 50% per year, commencing January 7, 2001
and expire ten years from the grant date, subject to early termination in
certain circumstances.
(3) On December 30, 1999, the Company granted options to Mr. Howard, Mr. Dumas,
Mr. Schalin and other executive officers and key employees to purchase
common stock of the Company under the Company's 1999 Incentive Stock Option
Plan. Mr. Howard's, Mr. Dumas', and Mr. Schalin's options vest at a rate of
33% per year, commencing December 30, 2000 and expire ten years from the
grant date, subject to early termination in certain circumstances.
(4) On October 27, 1999, the Company granted warrants to Mr. Dumas to purchase
common stock of the Company. Mr. Dumas' warrants vest at a rate of 33% per
year, commencing October 27, 2000 and expire four years from the grant date,
subject to early termination in certain circumstances.
(5) The potential realizable value illustrates value that might be realized upon
exercise of the options immediately prior to the expiration of their terms,
assuming the specified compounded rates of appreciation of the market price
per share from the date of grant to the end of the option term. Actual
gains, if any, on stock option exercise are dependent upon a number of
factors, including the future performance of the Common Stock and the timing
of the option exercises, as well as the optionee's continued employment
through the vesting period. There can be no assurance that the amounts
reflected in this table will be achieved.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN THE
SHARES AT FY-END (#) MONEY OPTIONS AT FY-END ($)(1)
ACQUIRED ON VALUE ------------------------------- -------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark Kreloff........... -- -- 223,000 321,000 $2,369,375 $2,560,625
Jerry Howard........... -- -- -- 75,000 -- $ 561,525
Brad Weber............. -- -- -- 25,000 -- $ 165,625
Gregory Dumas.......... -- -- -- 125,000 -- $ 683,725
Scott Schalin.......... -- -- -- 50,000 -- $ 374,350
</TABLE>
---------------
(1) The dollar value of each exercisable and unexercisable option was calculated
by multiplying the number of shares of common stock underlying the option by
the difference between the exercise price of the option and the closing
price of the Company's common stock on March 31, 2000 ($11.625).
COMPENSATION OF DIRECTORS
The Company only compensates its outside Board of Director members for
their services. The Company paid Alan Isaacman $10,000 for his services.
Additionally, the Company issued 25,000 options to purchase stock to Alan
Isaacman and Koung Wong each for their services.
EMPLOYMENT AGREEMENTS
The Company has an Employment Agreement with Mark Kreloff which ends on
December 31, 2001. The Agreement provides for the payment of an annual base
salary of $115,000 for calendar year 1999, $130,000 for calendar year 2000 and
$150,000 for calendar year 2001. The Agreement also provides for an annual
incentive bonus equal to: (a) 30% of his annual base salary if the Company's
annual earnings before income taxes, depreciation and amortization ("EBITDA") is
at least $1 million; (b) 50% of his annual base salary if the Company's EBITDA
is at least $2 million, or (c) 100% of his annual base salary if the Company's
EBITDA is at least $4 million. The Agreement provides for the one-time issuance
of 150,000 nonstatutory options to Mr. Kreloff at the fair market value of the
common stock on the date of grant. The options vest over three years, except
upon a
6
<PAGE>
change of control of the Company, as defined in the Agreement, or upon the death
or disability of Mr. Kreloff, the discharge of Mr. Kreloff without cause or the
resignation of Mr. Kreloff for "good reason", as defined in the Agreement. The
Agreement further provides for the payment to Mr. Kreloff upon the occurrence of
any of the above events of a lump sum equal to his annual base salary and bonus.
The Company has an Employment Agreement with Michael Weiner which ends on
December 31, 2001. The Agreement provides for the payment of an annual base
salary of $115,000 for calendar year 1999, $130,000 for calendar year 2000 and
$150,000 for calendar year 2001. The Agreement also provides for an annual
incentive bonus equal to: (a) 30% of his annual base salary if the Company's
EBITDA is at least $1 million; (b) 50% of his annual base salary if the
Company's EBITDA is at least $2 million, or (c) 100% of his annual base salary
if the Company's EBITDA is at least $4 million. The Agreement provides for the
one-time issuance of 150,000 nonstatutory options to Mr. Weiner at the fair
market value of the common stock on the date of grant. The options vest over
three years, except upon a change of control of the Company, as defined in the
Agreement, or upon the death or disability of Mr. Weiner, the discharge of Mr.
Weiner without cause or the resignation of Mr. Weiner for "good reason", as
defined in the Agreement. The Agreement further provides for the payment to Mr.
Weiner upon the occurrence of any of the above events of a lump sum equal to his
annual base salary and bonus.
The Company has an Employment Agreement with Jerry D. Howard which ends on
March 31, 2003. The Agreement provides for the payment of an annual base salary
of not less than $100,000. The Agreement also provides for an annual incentive
bonus equal to .62% of the amount by which IGallery's annual gross revenue
exceed $20,000,000, but less than $40,000,000. The Agreement provides for the
one-time issuance of 75,000 non-statutory stock options to Mr. Howard at the
fair market value on the date of grant. The options vest over three years,
except upon change of control of the Company, as defined in the Agreement or
upon the death or disability of Mr. Howard, the discharge of Mr. Howard without
cause or the resignation of Mr. Howard for "good reason", as defined in the
Agreement. The Agreement further provides for the payment to Mr. Howard upon the
occurrence of any of the above events of a lump sum equal to his annual base
salary and bonus. In addition, if the terminating event occurs on or before
September 30, 2000, the Company is to pay Mr. Howard an additional $100,000.
The Company has an Employment Agreement with Bradley A. Weber which ends on
March 31, 2003. The Agreement provides for the payment of an annual base salary
of not less than $115,000, and will not be less than the base salary paid to any
other executive of ITN or New Frontier Media during the term of his Agreement.
The Agreement also provides for an annual incentive bonus equal to: (a) 30% of
his annual base salary if New Frontier Media's EBITDA is at least $1 million;
(b) 50% of his annual base salary if New Frontier Media's EBITDA is at least $2
million; or (c) 100% of his annual base salary if New Frontier Media's EBITDA is
at least $4 million. The Agreement also provides for a monthly commission equal
to .3% of the first $22 million of revenues earned by IGI, which is applied
against and reduced on a dollar-for-dollar basis on any bonus received by Mr.
Weber under the annual incentive bonus scheme above. The Agreement provides for
long-term incentive plans and programs applicable generally to other peer
executives of ITN and/or New Frontier Media. The Agreement further provides for
the payment to Mr. Weber upon the change of control of the Company, as defined
in the Agreement or upon the death or disability of Mr. Weber, the discharge of
Mr. Weber without cause or the resignation of Mr. Weber for "good reason", as
defined in the Agreement, a lump sum equal to his annual base salary and bonus.
In addition, if the terminating event occurs on or before September 30, 2000,
the Company is to pay Mr. Weber an additional $100,000.
The Company has an Employment Agreement with Gregory Dumas which ends on
March 31, 2003. The Agreement provides for the payment of an annual base salary
of not less than $110,000. The Agreement also provides for an annual incentive
bonus equal to .62% of the amount by which IGallery's annual gross revenue
exceed $20 million, but less than $40 million, and 1% of the amount
7
<PAGE>
of IGallery's annual gross revenues that exceed $40 million. The Agreement
provides for the one-time issuance of 50,000 non-statutory stock options to Mr.
Dumas at the fair market value on the date of grant. The options vest over three
years, except upon change of control of the Company, as defined in the Agreement
or upon the death or disability of Mr. Dumas, the discharge of Mr. Dumas without
cause or the resignation of Mr. Dumas for "good reason", as defined in the
Agreement. The Agreement further provides for the payment to Mr. Dumas upon the
occurrence of any of the above events of a lump sum equal to his annual base
salary and bonus. In addition, if the terminating event occurs on or before
September 30, 2000, the Company is to pay Mr. Dumas an additional $100,000.
The Company has an Employment Agreement with Scott Schalin which ends on
March 31, 2003. The Agreement provides for the payment of an annual base salary
of not less than $110,000. The Agreement also provides for an annual incentive
bonus equal to .62% of the amount by which IGallery's annual gross revenue
exceed $20 million, but less than $40 million, and 1% of the amount of
IGallery's annual gross revenues that exceed $40 million. The Agreement provides
for the one-time issuance of 50,000 non-statutory stock options to Mr. Schalin
at the fair market value on the date of grant. The options vest over three
years, except upon change of control of the Company, as defined in the Agreement
or upon the death or disability of Mr. Schalin, the discharge of Mr. Schalin
without cause or the resignation of Mr. Schalin for "good reason", as defined in
the Agreement. The Agreement further provides for the payment to Mr. Schalin
upon the occurrence of any of the above events of a lump sum equal to his annual
base salary and bonus. In addition, if the terminating event occurs on or before
September 30, 2000, the Company is to pay Mr. Schalin an additional $100,000.
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
Members of the Compensation Committee, with the exception of Edward Bonn
who is the Chief Executive Operating Officer of Interactive Telecom Network,
Inc. and Card Transactions, Inc., have never served as our officers or employees
or officers and employees of any of our subsidiaries. During the last fiscal
year, none of our executive officers served on the Board of Directors or
Compensation Committee of any other entity whose officers served either on our
Board of Directors or Compensation Committee.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION.
Executive Compensation Philosophy. Our executive compensation philosophy
emphasizes three guiding principles. First, providing a competitive executive
compensation package that enables us to attract, motivate and retain talented
executives. Second, basing a major portion of each executive's annual cash
compensation on our annual profitability or the annual profitability of the
group or unit for which the executive is primarily responsible. Third, aligning
the financial interests of executives with long-term total shareholder return,
particularly through stock options.
Our executive compensation program has three major components: base
salaries, annual incentives, and long-term incentives.
Base Salaries. Our executive officers receive base salaries as compensation
for their job performance, abilities, knowledge, and experience. The base
salaries of our executive officers are
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determined under the terms of their respective employment contracts with us.
Apart from any contractual commitments, the Compensation Committee intends to
maintain base salaries at competitive levels in the marketplace for comparable
executive ability and experience and to place more emphasis on the incentive
portion of executive compensation, thereby correlating compensation to
performance. The Committee reviews base salaries annually and determines
increases based upon an executive officer's contribution to corporate
performance and competitive market conditions.
Annual Incentive Compensation. Our executive officers also receive annual
incentive compensation that is tied to corporate performance criteria. The
measurements vary for each executive officer but are based on annual gross
revenues and/or earnings before income taxes, depreciation and amortization
("EBITDA") of the Company or one of its subsidiaries.
Long-Term Incentives. For 2000 and the future, the Committee and the Board
approved, and the Board of Directors is recommending shareholders approve, the
New Frontier Media, Inc. Millennium Stock Option Plan. The Committee believes
that once fully implemented, this plan will provide an excellent vehicle for
rewarding performance by Company executives and retaining their services for the
future.
Submitted August 28, 2000 by the members of the Compensation Committee.
Koung Y. Wong
Edward J. Bonn
Alan Isaacman
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 28, 2000, the number and
percentage of shares of outstanding Common Stock owned by each person owning at
least 5% of the Company's Common Stock, each officer and director owning stock,
and all officers and directors as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT
------------------- ------------------ -------
<S> <C> <C>
Mark H. Kreloff .......................................... 1,310,023(1) 6%
5435 Airport Blvd., Suite 100
Boulder, CO 80301
Michael Weiner ........................................... 598,116(2) 3%
5435 Airport Blvd., Suite 100
Boulder, CO 80301
Koung Y. Wong ............................................ 58,500 *
168 Beacon St.
S. San Francisco, CA 94080
Edward Bonn .............................................. 4,041,873 19%
15303 Ventura Blvd., Suite 675
Sherman Oaks, CA 91403
Brad Weber ............................................... 1,659,222 8%
15303 Ventura Blvd., Suite 675
Sherman Oaks, CA 91403
Jerry Howard ............................................. 4,337 *
15303 Ventura Blvd., Suite 675
Sherman Oaks, CA 91403
SAC Capital .............................................. 1,211,600 6%
777 Long Ridge Road
Stamford, CT 06902
All officers and directors as a group (6 persons)......... 7,672,071 37%
--------- --
TOTAL..................................................... 8,883,671 43%
========= ==
</TABLE>
---------------
* Less than 1%.
(1) Includes the right to acquire 223,000 shares of common stock within 60 days
upon the exercise of employee stock options and warrants.
(2) Includes the right to acquire 190,000 shares of common stock within 60 days
upon the exercise of employee stock options and warrants.
9
<PAGE>
PERFORMANCE GRAPH
The following graph compares on a cumulative basis the yearly percentage
change, assuming dividend reinvestment, over the last five fiscal years in (a)
the total shareholder return on our common stock with (b) the total return on
the Standard & Poors SmallCap 600 Index and (c) the total return on a peer group
index. The Standard & Poors SmallCap 600 index includes companies with an
average market capitalization of approximately $615,551,000 with the largest
company having a capitalization of approximately $3,398,289,000. The peer group
is an index weighted by the relative market capitalization of the two following
companies which were selected for being in industries related to ours (provider
of adult content), for having revenues between $20,260,000 and $347,817,000 in
their most recently reported fiscal years and for having five year compound
annual revenue growth of at least 10%. The two are: Playboy Enterprises, Inc.
and Private Media Group, Inc.
The following graph assumes that $100 had been invested in each of the
Company, the Standard & Poors Small Cap 600 Index and the two member Peer Group
on September 15, 1995.
5-YEAR CUMULATIVE TOTAL RETURN COMPARISON AMONG
NEW FRONTIER MEDIA, INC., S&P SMALLCAP 600 INDEX AND PEER GROUP INDEX
NEW S&P SMALLCAP PEER GROUP
DATE FRONTIER 600 INDEX INDEX
15-9-95 100 100 100
Mar 97 100 105.85 119.12
Mar 96 125 114.73 180.88
Mar 98 81.25 169.43 205.88
Mar 99 107.8 137.02 264.71
Mar 00 290.63 179.08 315.76
ASSUMES $100 INVESTED ON SEPTEMBER 15, 1995
ASSUMES DIVIDED REINVESTMENT
The preceding sections entitled "Executive Compensation" and "Performance
Graph" do not constitute soliciting material for purposes of SEC Rule 14a-9,
will not be deemed to have been filed with the SEC for purposes of Section 18 of
the Securities Exchange Act of 1934, and are not to be incorporated by reference
into any other filing that we make with the SEC.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company's subsidiary, IGallery, purchased several vanity domain names
from an entity controlled by Mr. Edward Bonn prior to the Company's acquisition
of IGallery. This purchase was
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<PAGE>
financed through a note payable. This note payable has a balance due of $59,000
as of the date hereof. The note and related interest is payable in 2001.
Interest is calculated at prime rate.
The Company owes Messrs. Brad Weber and Edward Bonn $471,828 as of the date
hereof for amounts earned by them prior to the acquisition date of October 27,
1999. These amounts are non-interest bearing and are payable on demand.
The Company owed Mr. Bonn $700,000 as an unsecured note payable as of March
31, 1999. The note bore interest at 4% per annum and had no stated maturity
date. The Company paid the note in full during the fiscal year ended March 31,
2000.
The Company loaned Mr. Nyiri $87,000 in fiscal 1999. This amount was repaid
during the fiscal year ended March 31, 2000. The loan was non-interest bearing.
The Company paid $72,000 to Isaacman, Kaufman, & Painter during the fiscal
year ended March 31, 2000 for legal services provided by Mr. Isaacman and his
associates.
PROPOSAL TWO
APPROVAL OF THE COMPANY'S MILLENNIUM INCENTIVE STOCK OPTION PLAN
On July 13, 2000, the Board of Directors adopted the New Frontier Media,
Inc. Millennium Incentive Stock Option 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 2,500,000 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"), or 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 Company has adopted the New Frontier Media, Inc. Millennium 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.
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 attached hereto as Exhibit "B".
Shares Available; Maximum Awards; Participants. A total of 2,500,000 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 under the Plan.
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
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<PAGE>
(determined as of the date of grant of the ISO) with respect to which ISOs
granted to an employee may not exceed $100,000 in any calendar year. 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.
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.
12
<PAGE>
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.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
COMPANY'S MILLENNIUM INCENTIVE STOCK OPTION PLAN.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Spicer, Jefferies & Co. has been the independent public accountants for the
Company since its inception and has been appointed by the Board, subject to
stockholder ratification, to serve that capacity for the 2001 fiscal year. They
have no financial interest, either direct or indirect, in us. A representative
of Spicer, Jefferies & Co. will be present at the Annual Meeting, will have the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF SPICER, JEFFERIES & CO. AS THE COMPANY'S INDEPENDENT AUDITORS.
13
<PAGE>
SHAREHOLDER PROPOSALS
All shareholder proposals which are intended to be presented at the 2001
Annual Meeting of Shareholders of the Company must be received by the Company no
later than May 5, 2001, 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 28, 2000
14
<PAGE>
EXHIBIT A
NEW FRONTIER MEDIA, INC.
AUDIT COMMITTEE CHARTER
OVERVIEW
The Audit Committee of the Board of Directors assists the full Board in
fulfilling its oversight responsibilities with respect to assuring the company
maintains (1) appropriate and independent advice from its Independent
Accountants, (2) appropriate financial accounting and management controls, and
(3) sound financial reporting practices.
The Audit Committee independently oversees the internal and external audit
functions to ensure adequate audit coverage is achieved. Specifically, the audit
function is designed to ensure:
O a system of internal controls is maintained throughout the Company which
protects the assets of the Company, provides the proper authorization and
recording of transactions, and ensure that the financial information is
reliable and materially accurate; and
O financial statements fairly present, in all material respects, the
financial condition and results of operations of the Company in
accordance with generally accepted accounting principles.
Although the Audit Committee has the responsibilities and powers set forth
in this Charter, it is the responsibility of management throughout the company
to ensure that overall controls are adequate to meet operating, financial and
compliance objectives, and it is the responsibility of management and the
Independent Accountants to plan and conduct audits, and to determine that the
Company's financial statements are complete and accurate and are in accordance
with generally accepted accounting principles.
MEMBERSHIP
The Board of Directors shall appoint the Audit Committee members, all of
whom shall be Directors, but none of whom may be officers or employees of the
Company. All Audit Committee members shall meet the independence and experience
requirements of the National Association of Securities Dealers, Inc., and at
least one member of the Audit Committee must have the level of financial
sophistication required under the rules of the National Association of
Securities Dealers, Inc., resulting from past employment experience in finance
or accounting, requisite professional certification in accounting, or other
comparable experience or background, including service as a chief executive
officer, chief financial officer, or other senior officer with financial
oversight responsibilities.
The Audit Committee shall consist of not less than three members, including
a Chairperson. A majority of the members of the Committee shall constitute a
quorum. The Committee shall meet four times within the year or at whatever
interval is considered necessary by the Committee in fulfilling its
responsibilities.
RESPONSIBILITIES
The Audit Committee will meet with representatives (both as a group and, as
appropriate, individually) from the independent accountants, the head of
internal audit, the corporate controller, Chief Financial Officer, Chief
Executive Officer, and others, as necessary, to perform the following:
Charter Review
The Audit Committee shall reassess the adequacy of its Charter at least
annually and recommend any proposed changes to the Board for approval.
A-1
<PAGE>
Nomination of Independent Accountants
The Audit Committee shall have the responsibility to recommend to the Board
of Directors for its action the selection, retention or termination or the
Company's independent accountants.
Auditor Evaluation
The Independent Accountants shall have ultimate accountability to the Audit
Committee and the Board of Directors. The Audit Committee shall have
responsibility to evaluate the Independent Accountants.
The Audit Committee shall:
O Receive and review information from the Independent Accountants on a
periodic basis, including a formal written statement, pertaining to the
Independent Accountants' independence, including matters required by
Independence Standards Board Standard No. 1; discuss such information
with the Independent Accounts; and, if so determined by the Audit
Committee, recommend that the Board take appropriate action to satisfy
itself of such independence.
O Review, in consultation with management, the terms of the engagement of
the Independent Accountants, including the scope of their audit, proposed
fees and personnel qualifications.
O Discuss with the Independent Accountants the matters required to be
discussed by Statement on Auditing Standards No. 61, relating to the
conduct of the audit.
O Receive required communications from the Independent Accountants.
Matters Pertaining to Filings with Government Agencies
The Audit Committee shall:
O Review with the Independent Accountants and management the audited
financial statements to be included in the Company's Form 10-K prior to
filing with the Securities and Exchange Commission and, if satisfied,
recommend its approval to the Board.
O Prepare the Audit Committee Report required by the Rules of the
Securities and Exchange Commission to be included in the Company's annual
proxy statement.
O Review the results of each quarterly review with the Independent
Accountants before filing with the Securities and Exchange Commission.
Financial Reporting
O Review, in connection with its review of the annual financial statements,
an analysis prepared by management and the independent auditor of
significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements.
O Review with the Independent Accountants and management the results of the
Independent Accountants' year-end audit, reviewing areas of significant
disagreement, if any, between management and the Independent Accountants.
Controls
The Audit Committee shall:
O Review with management and the Independent Accountants their separate
opinions as to the adequacy and effectiveness of the Company's system of
internal accounting controls, and review with them the Independent
Accountants' Annual Report on Internal Controls and management's response
thereto.
A-2
<PAGE>
O Review the Company's procedures with respect to accounting and financial
controls, including changes in auditing and accounting principles,
practices and procedures.
O Review with management the Company's major financial risk exposures and
the steps management has taken to monitor and control such exposures.
Fraud and Illegal Acts
The Audit Committee shall:
O Receive and review reports regarding fraud involving senior management
and any fraud that causes a material misstatement of the financial
statements.
O Review reports of illegal acts that are not `clearly inconsequential`
that have come to the Independent Accountant's attention in the course of
their audits, and ensure, in such cases, that management has taken timely
and appropriate actions regarding reported illegal acts that could have a
material effect on the financial statements.
Other Responsibilities
O Review with the Company's General Counsel legal matters that may have a
material impact on the financial statements, any material reports or
inquiries received from regulators or governmental agencies, and other
legal matters as appropriate.
General Powers
The Audit Committee shall conduct or authorize investigations into any
matters within the scope of the Committee's responsibilities.
To carry out and effectuate the purposes of the foregoing resolutions, the
Audit Committee shall have authority it deems necessary to confer with the
Company's Independent Accountants, Head of Internal Audit and Officers and to
conduct or authorize investigations. The Audit Committee shall have the
authority to retain independent legal, accounting or other consultants to advise
the Committee.
A-3
<PAGE>
EXHIBIT B
NEW FRONTIER MEDIA, INC.
MILLENNIUM INCENTIVE STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TYPES OF AWARDS
New Frontier Media, Inc. hereby establishes the NEW FRONTIER MEDIA, INC.
MILLENNIUM INCENTIVE STOCK OPTION 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) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "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
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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, any day other than a Saturday, a Sunday or a day
in which banking institutions in the State of New York are closed.
(h) "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.
(i) "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.
(j) "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.
(k) "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.
(l) "Securities Act" shall mean the Securities Act of 1933, as amended.
(m) "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.
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(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,
(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 2,500,000 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.
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
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time. 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 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
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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 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.
(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
vent"), 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
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Agreement (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 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
Committee 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. 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.
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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 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 ARTICLES 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.
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20. EFFECTIVE DATE; TERMINATION DATE
The Plan is effective as of July 13, 2000, 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 13, 2010, 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.
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NEW FRONTIER MEDIA, INC.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
P
R
O
X
Y
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 26, 2000 at the Omni Interlocken Resort, 500 Interlocken Boulevard,
Broomfield, CO 80021, 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.
<TABLE>
<S> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" I plan to attend
IN ITEM 1 AND "FOR" ITEMS 2 AND 3. The shares represented by the meeting
this proxy will be voted as directed by the stockholder. If / /
no direction is given when the duly executed proxy is
returned, such shares will be voted "FOR ALL Nominees" in
Item 2 and "FOR" Items 1 and 3.
</TABLE>
ITEM 1 -- Election of six (6) Directors
Nominees: Mark H. Kreloff, Michael Weiner, Koung Y. Wong, Edward J. Bonn,
Alan L. Isaacman, Bradley A. Weber.
<TABLE>
<C> <C> <S>
FOR ALL NOMINEES WITHHOLD AUTHORITY Withheld for the following only:
with exceptions noted FOR ALL NOMINEES (Write the name(s) of the Nominee(s) in the space below)
/ / / / -------------------------------------------------
</TABLE>
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
<PAGE>
<TABLE>
<S> <C> <C> <C>
ITEM 2 -- Approval of The Company's Millennium FOR AGAINST ABSTAIN
Incentive Stock Option Plan. / / / / / /
ITEM 3 -- Ratification of appointment of Spicer, FOR AGAINST ABSTAIN
Jefferies & Co. as Independent auditors for / / / / / /
the 2001 fiscal year.
</TABLE>
If you plan to attend the Annual Meeting check the box above.
DATED: ___________________________________________________________________, 2000
--------------------------------------------------------------------------------
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 /X/ in blue or black ink.
