New Frontier Media Inc. Contracts
Sample Business Contracts
Asset Purchase Agreement - New Frontier Media Inc., Colorado Satellite Broadcasting Inc., Fifth Dimension Communications (Barbados) Inc. and Merlin Sierra Inc.
Asset Purchase Forms
ASSET PURCHASE AGREEMENT This Asset Purchase Agreement (the "Agreement") is made to be effective September 5, 1997 (the "Effective Date"), among NEW FRONTIER MEDIA, INC., a Colorado corporation, COLORADO SATELLITE BROADCASTING, INC. ("Buyer"), a wholly owned subsidiary of New Frontier Media, Inc., and FIFTH DIMENSION COMMUNICATIONS (BARBADOS) INC., a Barbados corporation, and MERLIN SIERRA, INC., a California corporation. New Frontier Media, Inc. and Buyer are collectively referred to in this Agreement as "Buyers." Fifth Dimension Communications (Barbados) Inc. and Merlin Sierra, Inc. are each referred to in this Agreement as "Seller" and collectively referred to as "Sellers". This Agreement sets forth the terms and conditions upon which Buyers agree to purchase from Sellers, and Sellers agree to sell to Buyers, certain properties and assets of Sellers ("Subject Assets") relating to the "Adult Movies Business" of Sellers. NOW THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained in this Agreement, the parties agree as follows: DEFINITIONS "104 Agreement" means the asset purchase agreement made on the same date as this Agreement among the Buyers and 1043133 Ontario Inc. "124 Agreement" means the asset purchase agreement made on the same date as this Agreement among the Buyers and 1248663 Ontario Inc., wherein the Buyers agreed to purchase certain satellite uplinking and playback equipment and certain call center equipment and related assets from 1248663 Ontario Inc. and Merlin Sierra, Inc. "5DBC" means Fifth Dimension Communications (Barbados) Inc. "Adult Movies Business" means any and all present or contemplated satellite broadcast services on television or any other medium, including cable television and the Internet, which broadcasts, replays, and/or otherwise exploits feature length adult programming and all related promotional content and other programming of a non-rated or X-rated nature and whose main theme embodies nudity and/or sexually explicit material between consenting adults and such other related business assets as are necessary for the operation thereof. "adverse or adversely", when used alone or in conjunction with other terms (including without limitation "affect," "change" and "effect"), means any event discovered by either party after the date hereof which is reasonably likely in the respective business judgment of either Buyers or Sellers, as the case may be, to be expected to (a) adversely affect the validity or enforceability of this Agreement, or (b) adversely affect the business, operation, management or properties of Sellers taken as a whole or Buyers, or (c) impair Sellers or Buyers, or (d) adversely affect the respective aggregate rights and remedies of either party under this Agreement. Notwithstanding 1 <PAGE> the foregoing no event affecting the adult movie industry generally shall be deemed to constitute an adverse change, have an adverse effect or to adversely affect or effect. "Agreement" means this Agreement as originally in effect, including unless the context otherwise specifically requires, all schedules and all exhibits hereto, and as any of the same may from time to time be supplemented, amended, modified or restated in the manner herein or therein provided. "Applicable Law" shall mean any Law of any Authority, whether domestic or foreign, including without limitation all federal and state securities and environmental laws, to which a person or entity is subject or by which it or any of its business or operations is subject or any of its property or assets is bound. "Authority" means any governmental or quasi-governmental authority, whether administrative, executive, judicial, legislative or other, or any combination thereof, including without limitation, any federal, provincial, state, territorial, county, municipal or other government or governmental or quasi-governmental agency, arbitrator, authority, board, body, branch, bureau, central bank or comparable agency, or Entity, commission, corporation, court, department, instrumentality, master, mediator, panel, referee, system, or other political unit or subdivision or other Entity of any of the foregoing whether domestic or foreign. "Buyers' Disclosure Schedule" means the schedule attached as SCHEDULE 8.2(a). "Closing" means the closing of the transactions contemplated herein and "Closing Date" means the date on which the closing takes place. "Collateral Agreements" means agreements and other documents executed or required to be executed pursuant to the terms of this Agreement. "Entity" means any corporation, firm, unincorporated organization, association, partnership, limited liability company, trust (inter vivos or testamentary), estate of a deceased, individual, business trust, joint stock company, joint venture or other organization, entity or business, whether acting in an individual, fiduciary or other capacity, or any Authority. "Governmental Authorizations" means all approvals, concessions, consents, franchises, licenses, permits, and other authorizations of all applicable Authorities. "material, materially or materiality", unless specifically stated otherwise, shall be determined without regard to the fact that various provisions of this Agreement set forth specific dollar amounts. "Merlin" means Merlin Sierra, Inc. "New Frontier" means New Frontier Media, Inc. "Private Authorizations" means all approvals, concessions, consents, franchises, licenses, permits, and other authorizations of all persons (other that Authorities) including without 2 <PAGE> limitation those with respect to copyrights, computer software programs, patents, service marks, trademarks, trade names, technology and know-how. "Subject Assets" means: (a) any and all trademarks, proprietary rights and other intellectual property rights owned by Sellers and associated with the Adult Movies Business. These include but are not necessarily limited to the trade names, trademarks and/or service marks listed on SCHEDULE 1(a), "Trademarks List," and any goodwill associated with such trade names, trademarks and/or service marks; (b) any and all rights Sellers may have in adult programming in any format (including master tapes) of feature length films and other films and programming, interstitial or otherwise, that contain motion picture material that is non-rated or X-rated and whose main theme embodies nudity and/or sexually explicit material between consenting adults, and all promotional materials and programming related thereto as set forth in SCHEDULE 1(b), "Programming List." No representation or warranty is made with respect to the nature and extent of the rights Sellers may have in such programming; (c) all subscriptions for the Adult Movies Business services as of the Date of Closing, including all subscriber lists, past and present, and any other marketing data related thereto, in the possession of Sellers, as described in SCHEDULE 1(c), "Subscribers List" (and it is understood that the subscriber lists shall be delivered on disk(s) in electronic form only because of the length of such lists); (d) a complete list of all advertisers, marketing partners and vendors used by Sellers in relations to the Adult Movies business and related services, with contact names, mailing addresses, and phone and fax numbers; as set forth in SCHEDULE 1(d) "Vendors List"; (e) all rights, title and interest Sellers may have in 1-800 phone numbers used for the Adult Movies Business and related services and in any World Wide Web address and websites used in the Adult Movies Business; (f) upon request of Buyers, Sellers shall provide copies of all papers, computerized databases, and records in Sellers' custody or control relating to any or all of the above described assets and the operation of Sellers' Adult Movies Business, including but not limited to all sales and subscription records, maintenance and production records, and plans and designs of all structures, fixtures and equipment, but excluding accounting and financial records and personnel and labor relations records; (g) all rights, title and interests in any permits, licenses, franchises, consents or authorizations issued by, and all registrations and filings with, any government agency solely in connection with Adult Movies Business of Sellers, whenever 3 <PAGE> issued or filed, (including but not limited to any permits or licenses from the Canadian Radio-Television and Telecommunications Commission and any permits or licenses from the Federal Communications Commission) excepting only those which by law are non-transferable or those which have expired; (h) any tort or insurance proceeds arising out of any damages or destruction of any of the Subject Assets herein between the date of this Agreement and the Closing Date to the extent required to repair or replace any subject asset being acquired hereunder; and (i) all other assets to be transferred from Sellers to Buyer under SECTION 1 of this Agreement. "Transactions" means the transactions contemplated by this Agreement and all Collateral Agreements. ARTICLE 1. TRANSFER OF ASSETS Subject to the terms and conditions set forth in this Agreement, Sellers agree to sell, convey, transfer, assign and deliver to Buyer, and Buyers agree to purchase from Sellers at the Closing described in ARTICLE 3, all of the Subject Assets, whether tangible, intangible, real, personal or mixed, and wherever located, including those assets set forth in the lists of SCHEDULES 1(a) through (d) and as further described in this ARTICLE 1. 1.1 TRANSPONDER SUBLEASES. Pursuant to SCHEDULE 1.1, the Transponder Sublease Agreements, 5DBC and its successors or assigns agree to sublease to Buyer, all rights, title and interests 5DBC may have in and pursuant to the Agreement between 5DBC and AT&T Corp. concerning Skynet Transponder Service dated November 21, 1996, and the Agreement between 5DBC and Loral Skynet concerning Skynet Transponder service dated April 29, 1997 ("Skynet Transponder Agreements"). The terms and conditions of the Subleases to Buyer shall be the substantially identical to the terms and conditions of the Skynet Transponder Agreements. Buyer shall have the right to upgrade, if available, the rights and interest under the Transponder Sublease Agreements (for example, to a "Silver Service") at Buyers' expense. For each Transponder Sublease Agreement, Buyer shall furnish and maintain throughout the terms of the Skynet Transponder Agreements, to the lessors under the Skynet Transponder Agreements, a security deposit in an amount equal to one month of the monthly rate to be paid by 5DBC for the service provided under the applicable Skynet Transponder Agreement. The deposit may be in the form of cash or its equivalent or an acceptable letter of credit. Payments under the Transponder Sublease Agreements shall be due five (5) working days before the date on which payments by 5DBC are due pursuant to the applicable Skynet Transponder Agreements. Ml payments under the Transponder Sublease Agreements by Buyer shall be applied directly to 5DBC's obligations under the Skynet Transponder Agreements. The Buyer shall be entitled to any renewal rights 5DBC may have pursuant to the Skynet Transponder Agreements. New Frontier shall guarantee the obligations Buyer will have under the Transponder Sublease Agreements. If 5DBC is in default of or cannot otherwise perform its obligations under the Skynet Transponder Agreements 4 <PAGE> (which reasons shall include the insolvency or bankruptcy of 5DBC), 5DBC agrees to assign, according to the to the terms of those agreements and contingent upon acceptance and approval of the assignments by the lessors thereto, its interests in the Skynet Transponder Agreements to Buyers. 1.2 FUTURE SATELLITE RIGHTS. Buyers shall have a right of first refusal to obtain satellite transponder service rights on Nahuel, AsiaSat and IntelSat satellites to the extent 5DBC may have such rights in such satellites and desires to sublease those transponder service rights to third parties for use in Adult Movies Programming. ARTICLE 2. PURCHASE PRICE 2.1 PAYMENT OF PURCHASE PRICE. In consideration for the transfer and assignment of the Subject Assets and in consideration of the representations, warranties and covenants of Sellers set forth herein, Buyers on the conditions set forth herein: (a) shall pay, subject to ARTICLE 5, an earnest money deposit in the amount of US$85,000.00; (b) shall deliver to Sellers at the Closing (as hereinafter defined) US$2,339,828.00 plus taxes as provided in ARTICLE 6, payable in cash as more fully described in SECTION 3.2; (c) shall deliver at the Closing a promissory note in the amount of US$814,289.00 executed by Buyer and payable to Sellers in the form substantially similar to that set forth in SCHEDULE 2.1(c). Buyer's performance under the promissory note shall be guaranteed by New Frontier. Additionally, in order to secure Buyer's obligations pursuant to the promissory note, at the Closing Buyer shall execute and deliver to Sellers a security agreement in the form attached as Exhibit A to SCHEDULE 2.1(c) pursuant to which Buyer shall grant to Sellers a security interest/lien in all of its furniture, fixtures, equipment and inventory, ranking first in priority over all other security interests/lienholders, except the interests of Buyers' chief financial institutions which shall have a first priority up to an amount of US$2,000,000.00; (d) shall deliver to Sellers at the Closing Date, a certificate for 840,000 shares of common stock of New Frontier, such shares to be "restricted" from transfer as that term is defined by Rule 144 promulgated under the Securities Act of 1933, as amended, duly registered in the name of Sellers (or such other parties as Sellers may direct) equivalent in value to US$3,402,000.00, the value of which is agreed to be US$4.05 per share, and which was determined by allowing a 19% discount of the closing bid price on New Frontier's "free-trading" common stock on April 14, 1997; (e) shall deliver to Sellers (or to such other parties as Sellers may direct) at the 5 <PAGE> Closing Date and subject to SCHEDULE 2.1(e), the "Warrant Purchase Agreement," a total of 400,000 warrants for New Frontier common stock exerciseable at US$5.00 per share; (f) shall pay to Sellers any and all "Formula Profits" exceeding US$2,000,000.00 in the first twelve months of operations of the business by Buyer after the Closing Date. "Formula Profits" shall equal the total revenue derived from operations less the actual operating costs of Buyer, provided that for the purposes of calculating Formula Profits the amount attributed to operating costs shall not exceed 125% of the projected costs as set forth in SCHEDULE 2.1(f), the "Valuation of the Adult Business Companies as of March 31, 1997." Formula Profits shall be payable by Buyer to Sellers within three months after the completion of the first twelve months of operation of the business by Buyer. If Formula Profits are not paid within such three month period, Buyer shall pay to Sellers interest on the outstanding balance of Formula Profits, such interest to be calculated at 24% per annum from the last day of such three month period, compounded daily, and payable on the last day of every calendar month. New Frontier hereby guarantees Buyer's obligations under this SECTION 2.1(f); and (g) shall assume and discharge, and shall indemnify Sellers against, liabilities and obligations of Sellers under the leases, contracts or other agreements, if any, specified on SCHEDULE 4 but only to the extent that such liabilities or obligations accrue on or after the Closing Date. 2.2 ALLOCATION OF THE PURCHASE PRICE. The parties agree that the Purchase Price (defined as the sum of the amounts specified in SECTIONS 2.1 (b) and (c) above and the transfer of the stocks and warrants as referred to in SECTIONS 2.1 (d) and (e) above) shall be allocated as set forth in SCHEDULE 2.2 and that such allocation will be used by the parties in reporting the transaction contemplated by this Agreement for tax purposes. ARTICLE 3. THE CLOSING The closing of the purchase and sale of the Subject Assets by Sellers to Buyers (the "Closing") shall take place at 2500 Don Reid Drive, Ottawa, Ontario, sixty-four (64) days after the date of this Agreement or at such other place and/or time as the parties may agree in writing (the "Closing Date"). In the event that the conditions specified in this Agreement have not be fulfilled by such date, either Sellers or Buyers may extend the Closing Date for a period or periods not exceeding an aggregate of thirty (30) days by written notice to the other parties. 3.1 SELLERS' OBLIGATIONS AT CLOSING. (a) At the Closing Sellers shall deliver or cause to be delivered to Buyer: (i) assignment and assumption agreements for personal property leases, all contracts and agreements of Sellers to be assumed in connection herewith, 6 <PAGE> in form and substance reasonably satisfactory to Buyers' counsel, and accompanied by all consents required by this Agreement and the personal property leases, contracts and agreements being assigned; (ii) instruments of assignment and transfer (including a bill of sale) of all the Subject Assets in form and substance reasonably satisfactory to Buyers' counsel; and (iii) such other documents as shall be reasonably requested by Buyers or Buyers' counsel (for example, a BULK SALES ACT affidavit). (b) Simultaneously, with the consummation of the transfer, Sellers, through its officers, agents and employees, shall put Buyer into full possession and enjoyment of all the Subject Assets to be sold, conveyed, transferred, assigned and delivered by this Agreement. (c) Sellers, at any time before or after the Closing Date shall execute, acknowledge, and deliver any further deeds, assignments, conveyances and other assurances, documents and instruments of transfer, reasonably requested by Buyers and shall take any other action consistent with the terms of this Agreement that may be reasonably requested by Buyers for the purpose of assigning, transferring, granting, conveying and confirming to Buyers, or reducing to possession, any or all property and assets to be conveyed or transferred by this Agreement. If requested by Buyers, Sellers further agrees to prosecute or otherwise enforce in their own names for the benefit of Buyers any claims, rights, or benefits that are transferred to Buyers by this Agreement and that require prosecution or enforcement in any of Sellers' names. Any prosecution or enforcement of claims, rights, or benefits under this Section shall be solely at Buyer's expense, unless the prosecution or enforcement is made necessary by a breach of this Agreement by Sellers. 3.2 BUYER'S OBLIGATIONS AT CLOSING. At the Closing Buyers shall deliver to Sellers against delivery of the items specified in SECTION 2.1, a certified bank or cashier's check, or a wire transfer of immediately available funds, in the amount of US$2,339,828.00 plus taxes pursuant to ARTICLE 6 payable to Sellers and the promissory note payable to Sellers in the amount of US$814,289.00. Sellers shall notify Buyers within five (5) days of the Closing Date whether the amount payable at Closing shall be delivered by certified bank or cashier's check, or by wire transfer. At closing, Buyers shall deliver to Sellers such documents that shall be reasonably requested by Sellers or Sellers' counsel. ARTICLE 4. ASSUMPTION OF LIABILITIES Buyers are not assuming any debt, liability or obligation of Sellers, whether known or unknown, fixed or contingent, except as herein specifically otherwise provided. Sellers agree to indemnify and hold Buyers harmless against all debts, claims, liabilities and obligations of Sellers not 7 <PAGE> expressly assumed by Buyers hereunder, and to pay any and all attorneys' fees and legal costs incurred by Buyers, its successors and assigns in connection therewith. Buyers shall have the benefit of and shall perform and assume all leases, contracts and agreements, if any, specifically listed on SCHEDULE 4, in accordance with the terms and conditions thereof, except to the extent modifications are specifically set forth in SCHEDULE 4 and except to the extent set forth in the assignments or assignment and assumption agreements for such leases, contract and agreements. ARTICLE 5. RETURN OF DEPOSIT Upon execution of this Agreement, Buyers shall pay to Sellers an earnest money deposit of US$21,250.00. Upon parties' final acceptance of the form and content of the schedules to this Agreement, Buyers shall pay to Sellers a further earnest money deposit of US$63,750.00. Such deposits shall be returned to Buyers if the Transactions are not closed due to: (a) the failure of any conditions set forth in ARTICLE 11 to be met at or before the Closing as a result of any act or omission by Sellers; or (b) the occurrence of any default by Sellers described in SECTION 17.3. If the Transactions are not closed for any other reason, the deposit shall be retained by Sellers. Upon Closing, the deposit shall be applied towards the payment due to Sellers under SECTION 2.1(b). ARTICLE 6. TAXES Buyers shall pay all sales, use and transfer taxes arising out of the transfer of the Subject Assets, including any foreign transfer taxes and shall pay its portion, prorated as of the Closing Date, of state, provincial, and local real and personal property taxes of the business being sold hereunder; to a maximum of the amount such taxes that would have been payable if the sale of the Subject Assets had been made by a company located in the Province of Ontario, Canada. Buyers shall not be responsible for any business, occupation, withholding or similar tax, or for any income, sales, use, value-added or similar taxes related to any period, or transaction occurring during any period, before the Closing Date. ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF SELLERS Sellers, jointly and severally, hereby represent and warrant to Buyers that the following facts and circumstances are and will be at all times up to the Closing Date, except as contemplated hereby, true and correct, and hereby acknowledge that such facts and circumstances constitute the basis upon which Buyers are induced to enter into and perform this Agreement. Each warranty set forth in this ARTICLE 7 shall survive eighteen (18) months past the Closing Date and any investigation made by or on behalf of Buyers. Buyers shall conduct their own due diligence investigation and that investigation shall include an investigation into whether Sellers is or has operated in accordance with the warranties and representations of Sellers. If prior to the closing date, Buyers believe they have discovered any breach of the representations and warranties of Sellers, they shall forthwith advise Sellers in writing of such breach. If Sellers does not or cannot cure such breach prior to the Closing Date, Buyers may elect to close (in which case the 8 <PAGE> breach shall be deemed non-material) or not close provided such breach is material. If Buyers fail to give such notice then the breach will be deemed non-material. 7.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each Seller is a corporation organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation. Each Seller has all necessary corporate powers to own its properties and to carry on its business as now owned and operated by it, and is duly qualified to transact any business and is in good standing in all jurisdictions in which the nature of its business or its properties makes such qualification necessary. 7.2 FINANCIAL STATEMENTS. SCHEDULE 7.2(a) is the Combined Financial Statements for the years ending March 31, 1997 and 1996 for Sellers and 1043133 Ontario Inc., certified by Ernst & Young, chartered accountants, whose opinions with respect to such financial statements are included into this Agreement. SCHEDULE 7.2(b) sets forth unaudited combined balance sheets of Sellers and others as of June 30, 1997 (the "Stub Period Date"), together with related unaudited combined statements of changes in financial positions and unaudited combined statements of income and retained earnings for the three (3) month period then ending, as prepared by Sellers. These financial statements in SCHEDULES 7.2(a) and (b) are referred to as the "Financial Statements." The Financial Statements have been prepared in accordance with generally accepted accounting principles ("GAAP") consistently followed by Sellers throughout the periods indicated, are complete and correct in all material respects and accurately and fairly depict the present financial position of Sellers as of the respective dates of the balance sheets included in the Financial Statements, and the results of their operations for the respective periods indicated. Sellers have no liabilities or obligations of any nature (known or unknown, absolute, accrued, contingent or otherwise) of the type required to be reflected or disclosed in a balance sheet (or notes thereto) prepared in accordance with GAAP that were not frilly reflected or reserved against in the Financial Statements. The Audited Financial Statements being provided by Sellers shall contain in footnotes or otherwise information concerning adjustments and add-back payments as reflected on page 7 of the Letter of Understanding dated April 14, 1997 Sellers from New Frontier, which is attached as SCHEDULE 7.2(c). The Financial Statements accurately reflect the revenues and expenses of Sellers' Adult Movies Business. 7.3 ABSENCE OF SPECIFIED CHANGES. Since March 31, 1997, there has not been any: (a) adverse material changes in the financial condition, liabilities, assets, business, operating results or prospects of Sellers with respect to their Adult Movies Business; (b) destruction, damage to, or loss of any of the Subject Assets (whether or not covered by insurance) that materially and adversely effects the assets, financial condition, business, assets or prospects of Sellers with respect to their Adult Movies Business; (c) labor trouble or other event or condition of any character materially and adversely effecting the financial condition, business, assets or prospects of Sellers; 9 <PAGE> (d) revaluation by Sellers of any of the Subject Assets in a manner that would be materially adverse to Buyers; (e) execution, creation, amendment, nonrenewal or termination of any material contract, agreement or license to which Sellers are a party, except in the ordinary course of business or except as can be terminated prior to the Closing Date without materially adversely effecting the Subject Assets; (f) creation or assumption by Sellers of any mortgage, pledge, security interest or lien or other encumbrance on any material asset of Sellers related to their Adult Movies Business, except as set forth in SCHEDULE 7.3(f); (g) receipt by Sellers of notice of any loss of, or material order cancellation by, any major customers of Sellers, except as set forth in SCHEDULE 7.3(g); (h) other event or condition of any character of which Sellers have knowledge that has or might reasonably have a material adverse effect on the financial condition, business, assets, operating results or prospects of their Adult Movies Business, except as set forth in SCHEDULE 7.3(h); or (i) agreement by Sellers to do any of the things described in the preceding clauses (a) through (h). 7.4 SUBJECT ASSETS SUFFICIENT FOR OPERATIONS. The Subject Assets, together with the "Subject Assets" described in the 124 Agreement and in the 5DBC Agreement, constitute all assets of Sellers (except premises) which are necessary for the continued uninterrupted operation by Sellers of its Adult Movies Business as now conducted. Except as stated in SCHEDULE 4, none of the Subject Assets are held under any lease, security agreement, conditional sales, contract, or other title of retention or security agreement, or are in the possession of anyone other than Sellers. 7.5 TRADE NAMES, TRADEMARKS AND COPYRIGHTS. Except as set forth SCHEDULE IN 7.5, Sellers do not use or own any trademark, service mark, trade name, trade secret, or brand name in their Adult Movies Business. To the actual knowledge of Sellers, no person has made any outstanding claims against Sellers in respect of any trademark, trademark registration or application, service mark, trade name, copyright, copyright registration or application or brand name, the use of which is necessary or contemplated in connection with the performance of any contract to which Sellers are a party. 7.6 TRADE SECRETS. Sellers are not aware of any trade secrets owned by, used in or necessary for the operation of its Adult Movies Business. 7.7 TITLE TO ASSETS. To the best of Sellers' knowledge, Sellers have good and marketable title to all the Subject Assets free and clear of mortgages, liens, pledges, charges, encumbrances, equities, claims, easements, rights of way, covenants, conditions, or restrictions, except for (i) those disclosed in Sellers' balance sheet as of the Stub Period Date, included in the Financial 10 <PAGE> Statements, or in the Schedules to this Agreement; (ii) the lien of current taxes not yet due and payable; and (iii) possible minor matters that, in the aggregate, are not substantial in amount and do not materially detract from or interfere with the present or intended use of any of these assets, nor materially impair the operations of the Adult Movies Business. All the Subject Assets are in good operating condition and repair, ordinary wear and tear excepted. Sellers are in possession of all premises leased to it from others and used in connection with their Adult Movies Business. 7.8 DEALERS AND DISTRIBUTORS. SCHEDULE 7.8 to this Agreement is a correct and current list of all dealers and distributors of Sellers together with summaries of the sales made to each customer during the most recent fiscal year. Except as indicated in SCHEDULE 7.8, Sellers have no information and are not aware of any facts indicating that any dealers or distributors of the services offered by their Adult Movies Business intend to cease doing business with Sellers or alter the amount of the business that they are presently doing with Sellers where such cessation or alteration would have a material adverse effect on their Adult Movies Business. 7.9 INSURANCE POLICIES. SCHEDULE 7.9 to this Agreement is a description of all insurance policies held by Sellers concerning the Subject Assets. All these policies are in the respective principal amounts set forth in SCHEDULE 7.9. Sellers have maintained and now maintain (a) insurance on all the Subject Assets of a type customarily insured, covering property damage by fire or other casualty, and (b) adequate insurance protection against all liabilities, claims, and risks against which it is customary to insure. Such insurance coverage will be cancelled as of Closing. 7.10 OTHER CONTRACTS. Copies of all contracts which will be assigned to or assumed by Buyers under this Agreement are attached as part of SCHEDULE 4. Except as set forth in SCHEDULE 4 and to the best of Sellers' knowledge, the Subject Assets will not at Closing or thereafter (as a result of actions or conduct of Sellers) be bound or potentially bound by, any distributor's or manufacturer's representative or agency agreement, any output or requirements agreement, any agreement not entered into in the ordinary course of business, any indenture, mortgage, deed of trust, lease or any other agreement that is unusual in nature, duration or amount (including, without limitation, any agreement requiring the performance by Sellers of any obligation for a period of time extending beyond one year from Closing Date or calling for consideration of more than US$10,000.00 or requiring purchases at prices in excess of, or sales at prices lower than, prevailing market prices). To the best of Sellers' knowledge, there is no default or event that with notice or lapse of time, or both, would constitute a default by any party to any of the agreements listed in SCHEDULE 4 and such contracts remain in full force and effect. Sellers have not received notice that any party to any of the agreements listed in SCHEDULE 4 intends to cancel or terminate any of these agreements or to exercise or not exercise any options under any of these agreements. Sellers are not parties to, nor are Sellers or the Subject Assets bound by, any agreement that is materially adverse to the business, assets, property, operating results, prospects or financial condition of Sellers. 7.11 COMPLIANCE WITH LAWS. Sellers have received no notice of any violation of any statutes, laws or regulations (including, without limitation any applicable obscenity, environmental, health, building, zoning, or other law, ordinance or regulations) from any Authority the violation of which may materially adversely affect the Adult Movies Business. Sellers are not in violation of or default under any provisions of their Articles of Incorporation or Bylaws, both as amended. 11 <PAGE> The execution, delivery and performance of the Agreement and the consummation of the Transactions will not result in any such violation or default, or be in conflict with or constitute, with or without the passage of time or the giving of notice or both, a default under Sellers' Articles of Incorporation or Bylaws, both as amended. To the best of Sellers' actual knowledge, all licenses, permits, approvals, registrations, qualifications, certificates and other authorizations necessary for the conduct of Sellers' Adult Movies Business as presently conducted (the "Licenses") have been duly obtained, are in full force and effect, and there are no proceedings pending or threatened which may result in the revocation, cancellation, suspension or modification of any of such Licenses. 7.12 LITIGATION. There is no suit, action, arbitration or legal, administrative or other proceeding, or governmental investigation ("Actions") pending or, to the best knowledge of Sellers, threatened, against or affecting Sellers, or any of its business, assets or financial condition, or against any officer, director or employee of Sellers in connection with such officer's, director's or employee's relationship with or actions taken on behalf of Sellers. Sellers are not party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality, and there are no actions or claims by Sellers currently pending or, to which Sellers intend to initiate. To the best knowledge of Sellers, there has not occurred any event nor does there exist any condition on the basis of which any litigation, proceeding or investigation is likely to be instituted by or against Sellers. Sellers are not in default with respect to any order, writ, injunction or decree of any federal, state, local or foreign court, department, agency or instrumentality. 7.13 AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION. Neither the entry into this Agreement nor the consummation of the transactions contemplated hereby will result in or constitute any of the following events where the occurrence of such event would render Sellers materially unable to comply with this Agreement: (a) a default or an event that, with notice or lapse of time or both, would be a default, breach or violation of any lease, license, promissory note, conditional sales contract, commitment, indenture, mortgage, deed of trust or other agreement, instrument or arrangement; (b) an event that would permit any party to terminate any agreement or to accelerate the maturity of any indebtedness or other obligation; (c) the creation or imposition of any lien, charge or encumbrance on any of the Subject Assets; or (d) the violation of any law, regulation, ordinance, judgment, order or decree. 7.14 AUTHORITY AND CONSENTS. Except as set forth in SCHEDULE 7.14, Sellers has the right, power, legal capacity and authority to enter into, and perform its obligations under this Agreement, and no approvals or consents of any persons other than the shareholders of Sellers are necessary in connection with it. The execution and delivery of this Agreement and the consummation of this transaction by Sellers have been, or prior to the Closing will have been, duly authorized by all necessary corporate action of Sellers (including any necessary action by Sellers' security holders). This Agreement constitutes a legal, valid and binding obligation of Sellers enforceable in accordance with its terms except as limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally. 7.15 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as set forth in SCHEDULE 7.15 or as contemplated by a Collateral Agreement, neither Sellers nor any officer or director or 12 <PAGE> shareholder of Sellers, nor any spouse or child of any of them has any direct or indirect interest in any competitor, supplier or customer of Sellers or in any person with whom Sellers are doing business. 7.16 DOCUMENTS DELIVERED. Each copy or original of any agreement, contract or other instrument which is identified in any exhibit or schedule delivered by Sellers or its counsel to Buyers (or their counsel or representatives), whether before or after the execution hereof, is in fact what it is purported to be by Sellers and has not been amended, canceled or otherwise modified. 7.17 FULL DISCLOSURE. None of the representations and warranties made by Sellers or made in any letter, certificate or memorandum furnished or to be furnished by Sellers or on their behalf, contains or will contain any untrue statement of a material fact, or omits any material fact the omission of which would make the statements made misleading and materially adverse to Buyers. Except matters of general knowledge within the Adult Movies industry and other matters generally available to the public, there is no fact known to Sellers which materially adversely affects the condition, assets, liabilities, business, or operations of the Sellers' Adult Movies Business that has not been set forth herein or heretofore communicated to Buyer in writing. 7.18 TRANSPONDER LEASE AGREEMENTS. 5DBC specifically represents and warrants that it is not in default or otherwise been notified of any potential material default or breach regarding the Skynet Transponder leases, except as disclosed in SCHEDULE 7.18. To the extent necessary, 5DBC shall cooperate with Buyers in obtaining any consents required with respect to Buyer's sublease of the Skynet Transponders. 7.19 SOLVENCY. As of the execution and delivery of this Agreement, and, after giving effect to the consummation of the Transactions, Sellers will be solvent. 7.20 TAX MATTERS. Sellers shall continue to be responsible for and will discharge all obligations and liabilities in respect to taxes pertaining to their Adult Movies Business and the Subject Assets which arise or accrue for all periods ending on or before the Closing Date (but excluding the taxes referred to in ARTICLE 6). Sellers will indemnify and hold harmless Buyers against any and all claims and demands incurred by Buyers that directly or indirectly arise out of such obligations or liabilities. Without limiting the foregoing, Sellers will be responsible for all federal, state, provincial, local, foreign and other net income, gross income, gross receipts, alternative or add on minimum, profits, sales, use, occupation, value-added, ad valorem, transfer, franchise, license, lease, service use, withholding, payroll, employment, excise, severance, premium, property, windfall profits, customs, duties, or other taxes, fees assessments, or charges of any kind whatsoever, together with any interest, penalties or additions to tax imposed with respect thereto, or any obligations to any agreements or arrangements with respect to and taxes described above. 7.21 EMPLOYMENT MATTERS. Buyer shall be under no obligation to offer employment to any of Sellers' employees employed in connection with the Adult Movies Business ("affected employees"), except as otherwise stated in this Agreement. Buyer may, however, choose to 13 <PAGE> retain the services of or to offer employment to one or more of the affected employees, should it wish to do so, subject to SECTION 13.4. Sellers will continue to be responsible for and will discharge all obligations and liabilities in respect of the affected employees which arise or accrue prior to, on or after the Closing Date. Sellers will indemnify and save harmless Buyers against any and all claims and demands incurred by Buyers that directly or indirectly pertain to or arise out of such obligations or liabilities. Without limiting the forgoing, Sellers will be responsible for and will bear and discharge any and all obligations and liabilities for wages, severance pay, termination pay, notice of termination of employment or pay in lieu of such notice, damages for wrongful discharge or other employee benefits or claims, including vacation pay, which may arise in connection with the employment or dismissal of any of the affected employees, including any interest, award, judgment or penalty relating thereto and any costs or expenses incurred by Buyers in defending against any claim or demand relating to such obligation or liabilities. 7.22 124 AGREEMENT. (a) The equipment (including without limitation essential spares and replacement parts) and software technology, furniture, machinery, appliances, and other tangible personal property and technology as specifically set forth in SCHEDULE 1(a) of the 124 Agreement is substantially similar to the equipment and technology used by Sellers in connection with or historically allocated to their Adult Movies Business carried on by the Sellers as of July 31, 1997 at the Uplink Facility. (b) The uplink facility to be operated, maintained, managed and sustained under SECTION 1.1 of the 124 Agreement shall be of a substantially similar nature and quality as those services currently being provided by Sellers to their present subscribers. (c) The "Subject Assets" described in the 124 Agreement constitute all assets (other than premises) necessary for the continued uninterrupted operation by 1248663 Ontario Inc. of the call center and uplink facility as now conducted on behalf of the Sellers in respect of their Adult Movies Business. (d) SCHEDULE 1(b) of the 124 Agreement contains a complete list of the hardware, equipment, furniture, machinery, appliances, software and other tangible personal property now used at the Ottawa Call Center. 14 <PAGE> ARTICLE 8. BUYERS' REPRESENTATIONS AND WARRANTIES Buyers represents, warrants, and covenants to, and agrees with Sellers as follows: 8.1 ORGANIZATION AND BUSINESS: POWER AND AUTHORITY: EFFECT OF TRANSACTION. (a) Each Buyer (i) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; (ii) has all requisite power and authority to own or hold under lease its properties and to conduct its business as now conducted and as presently proposed to be conducted, and has in full force and effect all Governmental Authorizations and Private Authorizations and has made all governmental filings, to the extent required for such ownership and lease of its property and conduct of its business and is in good standing in such jurisdictions in which the failure to be in good standing would have a material adverse effect upon its property or the nature of its business or operations. (b) Each Buyer has all requisite power and authority (corporate and other) and has in full force and effect all Governmental Authorizations and Private Authorizations in order to enable it to execute and deliver, and to perform its obligations under, this Agreement and each Collateral Agreement executed or required to be executed pursuant hereto or thereto or to consummate the Transactions and the Collateral Agreements; and the execution, delivery and performance of this Agreement and each Collateral Agreement has been duly authorized by all requisite corporate or other action. No further action or approval on the part of Buyers' stockholders is required in connection with the execution, delivery and performance of this Agreement or each Collateral Agreement or the consummation of the Transactions. This Agreement has been duly executed and delivered by each Buyer and constitutes, and each Collateral Agreement executed or required to be executed pursuant hereto or thereto or to consummate the Transactions when executed and delivered by Buyers will constitute, legal, valid and binding obligations of Buyers enforceable in accordance with their respective terms. (c) Neither the execution and delivery of this Agreement or any Collateral Agreement, nor the consummation of the Transactions, nor compliance with the terms, conditions and provisions hereof or thereof by Buyers: (i) will conflict with, or result in a material breach or violation of; or constitute a material default under, any Applicable Law on the part of Buyers or will conflict with, or result in a material breach or violation of; or constitute a material default under, or permit the acceleration of any obligation or liability in, or but for any requirement of giving notice or passage of time or both would constitute such a conflict with, material breach or violation of, or material default under, or permit any such acceleration in, any contractual obligation of Buyers; 15 <PAGE> (ii) will require any Governmental Authorization or Private Authorization, except for filing requirements under Applicable Law in connection with the issuance of Buyers' shares to Sellers. 8.2 FINANCIAL AND OTHER INFORMATION (a) Buyers have heretofore furnished to Sellers copies of the consolidated financial statements of New Frontier and all of its subsidiaries ("Buyers' Financial Statements"). Buyers' Financial Statements, including in each case the notes thereto, have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, except as otherwise noted therein or as set forth in SCHEDULE 8.2(a) (Buyers' Disclosure Schedule), and are true, accurate and complete, do not contain any untrue statement of material fact or omit to state a material fact required by GAAP to be stated therein or necessary in order to make the statements contained therein not misleading, and fairly present the financial condition and the results of operations of Buyers, on the bases therein stated, as of the respective dates thereof, and for the respective periods covered thereby subject, in the case of unaudited financial statements, to normal year-end audit adjustments and accruals. (b) Neither Buyers' Disclosure Schedule, Buyers' Financial Statements, this Agreement, any Collateral Agreement, or any data, information or statement furnished or to be furnished by or on behalf of Buyers pursuant to this Agreement or any Collateral Agreement or required to consummate the Transactions, contains or will contain any untrue statement of material fact or omits or will omit to state a material fact required to be stated herein or therein or necessary in order to make statements contained herein or therein not misleading and all Collateral Agreements, data, information or statements are and will be true, accurate and complete. 8.3 CHANGES IN CONDITION. Since the date of the most recent financial statements forming part of Buyers' Financial Statements, there has been no material adverse change in Buyers taken as a whole or individually. Except matters of general applicability to Buyers' industries, there is no event known to Buyers which materially adversely affects Buyers taken as a whole or individually, or the ability of Buyers to perform any of the obligations set forth in this Agreement or any Collateral Agreement or to consummate the Transactions. 8.4 COMPLIANCE WITH PRIVATE AUTHORIZATIONS. Each Buyer has obtained all Private Authorizations which are necessary for the ownership by such Buyer of its properties and the conduct of its business as now conducted or as presently proposed to be conducted or which, if not obtained and maintained, could, singly or in the aggregate, materially adversely affect such Buyer. Neither Buyer is in breach or violation of, or is in default in the performance, observance or fulfillment of, any Private Authorization, and no event exists or has occurred, which constitutes, or but for any requirement of giving of notice or passage of time or both would constitute, such a breach, violation or default, under any contractual obligation of such Buyer or 16 <PAGE> Private Authorization, except for such defaults, breaches or violations, as do not and will not have in the aggregate any material adverse affect on such Buyer or the ability of such Buyer to perform any of its obligations set fourth in this Agreement or any Collateral Agreement or to consummate the Transactions. No Private Authorization is the subject of any pending or, to Buyers' knowledge, information or belief, threatened attack, revocation or termination. 8.5 COMPLIANCE WITH GOVERNMENTAL AUTHORIZATIONS AND APPLICABLE LAW. (a) Each Buyer has obtained all other Governmental Authorizations which are necessary for the ownership or uses of its properties and the conduct of its business as now conducted or as presently proposed to be conducted and which, if not obtained and maintained, would singly or in the aggregate, have any material adverse affect on such Buyer and its subsidiaries taken as a whole. No other Governmental Authorization is subject of any pending or, to Buyers' knowledge, information and belief, threatened challenge or proceeding to revoke or terminate any such Governmental Authorization. Buyers' have no reason to believe that any other Governmental Authorization would not be renewed in the name of Buyer by the granting Authority in the ordinary course. (b) Neither Buyers nor any officer or director (in connection with the business, operations and properties of such Buyer) is in or is charged with or, to such Buyer's knowledge, information and belief, at any time since its organization has been in or has been charged with, or is threatened or under investigation with respect to, breach or violation of, or default in the performance, observance or fulfillment of, any Governmental Authorization or any Applicable Law, and no event exists or has occurred, which constitutes, or but for any requirement of giving notice or passage of time or both would constitute, such a breach, violation or default, under: (i) any Governmental Authorization or any Applicable Law, except for such breaches, violations or defaults as do not and will not have in the aggregate any material adverse affect on Buyers taken as a whole or the ability of Buyers to perform any of the obligations set forth in this Agreement or any Collateral Agreement or to consummate the Transactions, or (ii) any requirement of any insurance carrier, applicable to its business, operations or properties. 8.6 AUTHORIZED AND OUTSTANDING STOCK. (a) The authorized and outstanding capital stock of New Frontier is as set forth below: 17 <PAGE> DESCRIPTION AUTHORIZED ISSUED AND OUTSTANDING Common 50,000,000 4,192,511 Preferred 5,000,000 none (b) The warrants for New Frontier common stock issued and outstanding as of July 28, 1997 is as follows: HOLDER WARRANT(S) TO PURCHASE EXPIRATION DATE EXERCISE PRICE Original Private Placement 189,000 12/31/97 $ 5.50 National Securities 20,000 10/12/98 4.00 New Frontier Employees 146,666 10/15/99 6.00 Quarto 400,000(i) 9/20/2001 6.00(ii) (i) Subject to upward adjustment pursuant to the terms of the Quarto Warrant Agreement. (ii) Subject to downward adjustment pursuant to the terms of the Quarto Warrant Agreement. Buyers represent and warrant that: (i) Colorado Satellite Broadcasting, Inc. is a wholly owned subsidiary of New Frontier; (ii) except as set forth above in this SECTION 8.6, there are no options, warrants, commitments or other rights to purchase shares or other securities of the Buyers; (iii) except as set forth above in this SECTION 8.6, no securities or obligations convertible into or exchangeable for shares or other securities of the Buyers have been authorized or agreed to be issued or are outstanding; (iv) there are no shareholders agreements or similar agreements (including agreements that contain voting arrangements) with respect to any or all of the shares of either Buyer; and (v) SCHEDULE 8.6 is a list of all persons who own 5% or more of the issued and outstanding shares of any class of shares of New Frontier. 8.7 DISCLOSURE. None of the representations and warranties made by Buyers or made in any letter, certificate or memorandum furnished or to be furnished by Buyers or on their behalf, contains or will contain any untrue statement of a material fact, or omits any material fact the omission of which would make the statements made misleading and materially adverse to Sellers. 8.8 CONTINUING REPRESENTATION AND WARRANTY. Except for those representations and warranties which speak as of a specific date, all of the representations and warranties of Buyers set forth in this Article shall be true and correct on the Closing Date with the same force and effect as though 18 <PAGE> made on and as of that date and those, if any which speak as of a specific date shall be true and correct on the Closing Date. 8.9 SOLVENCY. As of the execution and delivery of this Agreement, and, after giving effect to the consummation of the transactions contemplated herein, Buyers taken as a whole and individually will be solvent. 8.10 INTERPRETATION. For the purposes of this ARTICLE 8, New Frontier and Colorado Satellite Broadcasting, Inc. are each considered to be a "Buyer". ARTICLE 9. SELLERS' OBLIGATIONS BEFORE CLOSING Sellers covenant that, except as otherwise agreed in writing by Buyer, from the date of this Agreement until the Closing: 9.1 BUYERS' ACCESS TO PREMISES AND INFORMATION. Buyers and its counsel, accountants and other representatives shall be entitled to have full access during normal business hours to all Sellers' properties, books, accounts, records, contracts and documents of or relating to the Subject Assets. Sellers shall furnish or cause to be furnished to Buyers and their representatives all data and information concerning the Subject Assets and Adult Movies Business that may reasonably be requested. 9.2 CONDUCT OF BUSINESS IN NORMAL COURSE. Each Seller shall carry on its business and activities diligently and in substantially the same manner as they previously have been carried on, and shall not make or institute any unusual or novel methods of purchase, sale, lease, management, accounting or operation that will vary materially from the methods used by Seller as of the date of this Agreement if it would have a material adverse affect on the Sellers' Adult Movies Business. 9.3 PRESERVATION OF BUSINESS AND RELATIONSHIPS. Each Seller shall use its best efforts, without making any commitments on behalf of Buyers, to preserve the Sellers' Adult Movies Business intact, to keep available to each Seller, its present officers and employees, and to preserve its present relationships with suppliers, customers and others having business relationships with it. 9.4 MAINTENANCE OF INSURANCE. Each Seller shall continue to carry its existing insurance, subject to variations in amounts required by the ordinary operations of their businesses. At the request of Buyers and at Buyers' sole expense, the amount of insurance against fire and other casualties which, at the date of this Agreement, Sellers carry on any of the Subject Assets or in respect of their operations shall be increased by such amount or amounts as Buyers shall specify. 9.5 NEW TRANSACTIONS. Sellers shall not do or agree to enter into any contract, commitment or transaction which would materially adversely effect the ability of Sellers to perform any obligation set forth in this Agreement of any Collateral Agreement. 9.6 EXISTING AGREEMENTS. Except in ordinary course of business, Sellers shall not modify, 19 <PAGE> amend, cancel or terminate any of its existing contracts or agreements, or agree to do any of those acts without the consent of Buyers, if doing so would materially adversely affect the Adult Movies Business. 9.7 CONSENT OF OTHERS. As soon as reasonably practical after the execution and delivery of this Agreement, and in any event on or before the Closing Date, Sellers shall obtain the written consent of the persons described in SCHEDULE 7.14 in form and substance satisfactory to Buyers and will furnish to Buyers executed copies of those consents. 9.8 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Each Seller shall use its reasonable commercial efforts to assure that all representations and warranties of Sellers set forth in this Agreement and in any written statements delivered to Buyers by Sellers under this Agreement will also be true and correct as of the Closing Date as if made on that date and that all conditions precedent to Closing shall have been met. Sellers shall promptly disclose to Buyers any information contained in the Schedules to this Agreement which, because of an event occurring after the date hereof, is incomplete or is no longer correct as of all times after the date hereof until the Closing Date; provided, however, that none of such disclosures shall be deemed to modify, amend or supplement the representations and warranties of Sellers or the schedules hereto for the purposes of ARTICLE 11, unless Buyer shall have consented thereto in writing. 9.9 STATUTORY FILINGS. Sellers shall cooperate fully with Buyers in preparing and filing all information and documents required under any statutes or governmental rules or regulations pertaining to the Transactions, including but not limited to, any licenses required by Industry Canada and the rules promulgated thereunder. ARTICLE 10. BUYERS' OBLIGATIONS BEFORE CLOSING 10.1 GENERAL OBLIGATIONS AND CONFIDENTIALITY. Prior to the Closing Date (or, in the event the Closing does not occur, for a period of two years following the date of this Agreement) Buyers shall use their best efforts to preserve the confidentiality of any commercial information which is confidential and which Sellers identify in writing as confidential which is disclosed to Buyers or to their representatives by Sellers; provided that Buyers at all times shall not be materially restricted in their investigation of the assets or matters relating thereto. The above provisions of this Section shall not apply to any information which (i) is already known to Buyers at the time of disclosure by Sellers, (ii) is published or through no fault of Buyers becomes published or (iii) is lawfully disclosed to Buyer by a third party. Whether or not the Closing shall take place, Sellers waive any cause of action, right or claim arising out of the access of Buyers or their representatives to any trade secrets or other confidential business information of Sellers from the date of this Agreement until the Closing Date, except for the intentional competitive misuse by Buyers or its representatives of such trade secrets or other confidential business information (identified as confidential as required by this Article) if the Closing does not take place. 10.2 SELLERS' ACCESS TO PREMISES AND INFORMATION. Each Seller and its counsel, accountants and other representatives shall be entitled to have full access during normal business hours to all Buyers' properties, books, accounts, records, contracts and documents. The Buyers shall furnish 20 <PAGE> or cause to be furnished to each Seller and its representatives all data and information concerning Buyers that may reasonably be requested. ARTICLE 11. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE The obligation of Buyers to purchase the Subject Assets under this Agreement are subject to the satisfaction, at or before the Closing, of all the conditions set out below in this Article. Buyers may waive any or all of these conditions; provided, however, that no such waiver of a condition shall constitute a waiver by Buyers of any of its other rights or remedies, at law or in equity, if Sellers shall be in default of any of their representations, warranties or covenants under this Agreement. 11.1 ACCURACY'S OF SELLERS' REPRESENTATIONS AND WARRANTIES. All representations and warranties by Sellers contained in this Agreement or in any Collateral Agreement or in any written statement delivered by Sellers thereunder shall be true on and as of the Closing as though such representations and warranties were made on and as of that date. Buyers shall have received a certificate, dated the Closing Date, signed by Sellers' Presidents certifying, in such detail as Buyers and their counsel may reasonably request, that the representations and warranties set out herein are true and correct as of the Closing Date. 11.2 SELLERS' PERFORMANCE. Sellers shall have performed, satisfied, and complied with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by Sellers on or before the Closing Date. 11.3 CERTIFICATION BY SELLERS. Buyers shall have received a certificate, dated the Closing Date, signed by Sellers' Presidents certifying, in such detail as Buyer and its counsel may reasonably request, that the representations and warranties set out herein are true and correct as of the Closing Date. 11.4 OPINION OF SELLERS' COUNSEL. Buyers shall have received from counsel for Sellers, opinions dated the Closing Date, in form and substance reasonably satisfactory to Buyers and their counsel, stating that: (a) each Seller is a corporation duly organized, validly existing and in good standing under the applicable laws of the jurisdiction of their incorporation and have all necessary corporate power to own their properties as now owned and operate their businesses as now operated; (b) all corporate proceedings required by law or by the provisions of this Agreement to be taken by each Seller on or before the Closing Date in connection with the execution and delivery of this Agreement and the consummation of the Transactions have been duly and validly taken; (c) this Agreement has been duly and validly authorized and, when executed and delivered by each Seller will be valid and binding on such Seller and enforceable 21 <PAGE> in accordance with its terms, except as limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally; and (d) neither the execution nor delivery of this Agreement nor the consummation of the Transactions will constitute a default, or an event that would with notice or lapse of time or both constitute a default under, or violation or breach of Seller's articles of incorporation or bylaws. In rendering their opinions, counsel for each Seller may rely on certificates of governmental authorities, certificates of Seller's officers, directors or shareholders, and on opinions of associate counsel. 11.5 ABSENCE OF LITIGATION. No action, suit or proceeding before any court or any governmental body or authority, pertaining to the Transactions or their consummation shall have been instituted or threatened on or before the Closing Date. 11.6 CORPORATE APPROVAL. The execution and delivery of this Agreement by Sellers, and the performance of their covenants and obligations under it, shall have been duly authorized by all necessary corporate action, and Buyer shall have received copies of all resolutions pertaining to that authorization, certified by the secretaries of Sellers. 11.7 CONSENTS. All necessary agreements and consents of any parties (other than Buyers, their shareholders or directors, and Authorities in the United States of America) to the consummation of the Transaction, or otherwise pertaining to the matters covered by this Agreement, shall have been obtained. 11.8 APPROVAL OF DOCUMENTATION. The form and substance of all certificates, instruments, opinions and other documents delivered to Buyers under this Agreement shall be satisfactory in all reasonable respects to Buyers and their counsel. 11.9 CONSULTING AGREEMENT. Buyers and the Shareholders identified in SCHEDULE 11.9 shall enter into a consulting agreement substantially in the form of SCHEDULE 11.9. 11.10 CONDITION OF ASSETS. The Subject Assets shall not have been materially or adversely affected in any way as a result of any fire, accident, storm or other casualty or labor or civil disturbance or act of God or the public enemy. 11.11 NON-COMPETITION AGREEMENT. The shareholders of Sellers shall each have duly executed and delivered to Buyers a Non-competition Agreement substantially in the form of SCHEDULE 11.11. 11.12 AGREEMENT ON SCHEDULES. At the date of execution of this Agreement by the parties, the form and content of the schedules to this Agreement had not be settled by the parties and it is a condition precedent to Buyers' performance under this Agreement that such schedules be settled prior to Closing. 22 <PAGE> ARTICLE 12. CONDITIONS PRECEDENT TO SELLERS' PERFORMANCE The obligations of Sellers to sell and transfer the Subject Assets under this Agreement are subject to the satisfaction, at or before the Closing, of all the following conditions: 12.1 ACCURACY OF BUYERS' REPRESENTATIONS AND WARRANTIES. All representations and warranties by Buyers contained in this Agreement or in any Collateral Agreement or in any written statement delivered by Buyers thereunder shall be true on and as of the Closing as though such representations and warranties were made on and as of that date. Sellers shall have received a certificate, dated the Closing Date, signed by Buyers' Presidents certifying, in such detail as Sellers and their counsel may reasonably request, that the representations and warranties set out herein are true and correct as of the Closing Date. 12.2 BUYERS' PERFORMANCE. Buyers shall have performed and complied with all covenants and agreements, and satisfied all conditions that it is required by this Agreement to perform, comply with, or satisfy, before or at the Closing. 12.3 OPINION OF BUYERS' COUNSEL. Buyers shall have furnished Sellers with an opinion from counsel for Buyers, dated the Closing Date, satisfactory to Sellers and their counsel, stating that: (a) Buyers are corporations duly organized, validly existing and in good standing under the laws of the State of Colorado and have all requisite corporate power to perform their obligations under this Agreement; (b) all corporate proceedings required by law or by the provisions of this Agreement to be taken by Buyers on or before the Closing Date in connection with the execution and delivery of this Agreement and the consummation of the Transactions shall have been duly and validly taken; (c) this Agreement has been duly and validly authorized and, when executed and delivered by Buyers will be valid and binding on Buyers and enforceable in accordance with its terms, except as limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally; (d) neither the execution nor delivery of this Agreement nor the consummation of the Transactions will constitute a default, or an event that would with notice or lapse of time or both constitute a default under, or violation or breach of Buyers' articles of incorporation or bylaws; (e) the shares described in SECTION 2.1(d) and the Warrants described in SECTION 2.1(e) have been duly authorized and, when issued and delivered pursuant the this Agreement, will have been validly issued, and will be fully paid and nonassessable; the stockholders of New Frontier will have no preemptive rights or other rights with respect to such shares or warrants; when such warrants are exercised in accordance with their terms, the New Frontier shares that are due 23 <PAGE> Sellers upon such exercise will have been validly issued, and will be fully paid and non-assessable; the stockholders of New Frontier will have no preemptive rights with respect to the shares issued upon the exercise of such warrants; and (f) to the best of such counsel's knowledge, there is no legal action pending or threatened against either of Buyers which could have a material adverse affect on Buyers. In rendering its opinion, counsel for Buyers may rely on certificates of governmental authorities and on opinions of associate counsel. 12.4 BUYERS' CORPORATE APPROVAL. Buyers shall have received corporate authorization and approval for the execution and delivery of this Agreement and all corporate action necessary or proper to fulfill the obligations of Buyers to be performed under this Agreement on or before the Closing Date. 12.5 BOARD OF DIRECTORS APPOINTMENT. 5DBC shall have the right to appoint at least one director to the Board of Directors of New Frontier and 5DBC shall be entitled to have one additional nonvoting representative whom shall enjoy all the rights and privileges of board members of New Frontier except for the right to vote and whose expenses (traveling and lodging) shall be paid by New Frontier. With respect to the right to appoint at least one director, at such time after the Closing Date as 5DBC shall request, one designee of 5DBC shall be appointed as a member of the Board of Directors of New Frontier, to hold office until the next annual meeting of stockholders of New Frontier and until such designee's successor shall have been elected and qualified (or the earlier resignation or removal of such designee). Thereafter, so long as 5DBC (and its affiliates) continue to own not less than 300,000 (as presently constituted) shares of New Frontier, 5DBC shall, subject to the conditions hereinafter set forth, be entitled to designate one management nominee for election as a member of the Board of Directors of New Frontier. Notwithstanding the foregoing, 5DBC shall not have the right to designate a nominee for election as a member of the Board of Directors, or if such right of designation shall have been exercised, such designee shall not have the right to continue to serve as a member if his/her so serving would cause New Frontier to violate any statute or regulation applicable to New Frontier. 12.6 CONSULTANT CONTRACT - DANIEL BENDER. Buyer shall enter into a Consultant Agreement with Daniel Bender, provided Daniel Bender is prepared to enter into such agreement, for a period of one year following the Closing Date and in the amount of US$100,000.00 in a form substantially similar to SCHEDULE 12.6, which shall be executed and delivered by Buyer on the Closing Date. 12.7 AUDIO/VISUAL PRODUCTION AGREEMENT. Buyer shall enter into an Audio/Visual Production Agreement with Diorio Productions Inc., provided Diorio Productions Inc. is prepared to enter into such agreement, in a form substantially similar to SCHEDULE 12.7, whereby Buyer agrees to purchase Cdn$30,000.00 of interstitial programming per month for the acquired Adult Movies Business for a period of nine (9) months following the Closing Date, which agreement shall be executed and delivered by Buyer on the Closing Date. 12.8 AGREEMENT ON SCHEDULES. At the date of execution of this Agreement by the parties, the 24 <PAGE> form and content of the schedules to this Agreement had not be settled by the parties and it is a condition precedent to Sellers' performance under this Agreement that such schedules be settled prior to Closing and shall be initialled by the signing officers of the parties. 12.9 CAPITALIZATION OF BUYERS. Prior to the Closing Date, the Buyers shall have raised and received the net proceeds from a share offering of New Frontier stock of not less than US$7,000,000 gross. ARTICLE 13. SELLERS' OBLIGATIONS AFTER THE CLOSING. 13.1 PRESERVATION OF GOODWILL. Following the Closing, Sellers will restrict their activities so that Buyers' reasonable expectations with respect to the goodwill, business reputation, employee relations and prospects connected with the Subject Assets will not be materially impaired. In furtherance but not in limitation of this general obligation, Sellers agree that, for the period of two (2) years following the Closing Date, or as long as Buyers or its assigns or successors in interest carry on a like business in the counties or areas specified, whichever is shorter: (a) Sellers and their shareholders will not engage in any business or activity which is substantially the same as, any business or activity presently conducted by Sellers if such business or activity extends to any of the geographic areas set forth in SCHEDULE 11.11 in which Sellers have heretofore engaged in business or otherwise established its goodwill, business reputation, or any customer relations. The parties intend that the covenant contained herein shall be construed as a series of separate covenants, one for each geographic area specified in SCHEDULE 11.11. Except for geographic coverage, each separate covenant shall be deemed identical in terms to the covenant set forth above. If, in any judicial proceeding, a court shall refuse to enforce any of the separate covenants deemed included in this Section, then this unenforceable covenant shall be deemed eliminated from these provisions for the purpose of those proceedings to the extent necessary to permit the remaining separate covenants to be enforced. (b) Sellers and their shareholders will not disclose to any person or use for their own benefit any price lists, pricing data, customer lists or similar matters possessed by them relating to the Subject Assets or the business transferred to Buyer unless they first clearly demonstrate to Buyer that such matters are at the time of the proposed disclosure or use of common knowledge within the trade. 13.2 SELLERS' INDEMNITIES. Sellers shall indemnify, defend and hold harmless Buyers against and in respect of any and all claims, demands, losses, costs, expenses, obligations, liabilities, damages, recoveries and deficiencies, including interest, penalties and reasonable attorneys' fees, that Buyers shall incur or suffer, which arise, result from or relate to any breach of, or failure by Sellers to perform, any of their representations, warranties, covenants or agreements in this Agreement or in any schedule, certificate, exhibit or other instrument furnished or to be furnished by Sellers under this Agreement. Notwithstanding any other provision of this Agreement, Sellers shall not be liable to Buyer on any warranty, representation or covenant made 25 <PAGE> by Sellers in this Agreement, or under any of their indemnities in this Agreement, regarding any single claim, loss, expense, obligation or other liability that does not exceed US$2,500.00; provided, however, that when the aggregate amount of all such claims, losses, expenses, obligations and liabilities not exceeding US$2,500.00 each reaches US$25,000.00, Sellers shall thereafter be liable in full for all such breaches and indemnities and regarding all those claims, losses, expenses, obligations, and liabilities. 13.3 ACCESS TO RECORDS. From and after the Closing, Sellers shall allow Buyers, and their counsel, accountants and other representatives, such access to records which after the Closing are in the custody or control of Sellers as Buyers reasonably require in order to comply with its obligations under the law or under contracts assumed by Buyers pursuant to this Agreement. 13.4 NONSOLICITATION OF EMPLOYEES. Except with the prior written consent of Sellers, Buyers shall not, prior to the first anniversary of the Closing, solicit any employee of Sellers or of any affiliate of Sellers to leave such employment if such employee was at any time between the date hereof and the Closing an employee of Seller. 13.5 RISK OF LOSS. (a) Until the Closing Date the Subject Assets will remain at the risk of Sellers. Sellers will maintain all risk insurance in respect of loss or damage to or any other casualty in respect of the Subject Assets which provides for loss settlement on a replacement cost basis if the Subject Assets are repaired or replaced and on an actual cash value basis if the Subject Assets are not repaired or replaced. In the event of any loss, damage or claim, in respect of any risk for which insurance is to be carried as aforesaid arising before the Closing Date, Buyers, as an additional condition of closing, will be entitled to be satisfied that the insurers have accepted the claim of Sellers for payment in accordance with the terms of the policies. If any destruction or damage occurs to the Subject Assets on or before the Closing Date or if any or all of the Subject Assets are appropriated, expropriated or seized by governmental or other lawful authority on or before the Closing Date, Sellers will forthwith give notice thereof to Buyers and Buyers will have the option, exercisable by notice to Sellers on or before the Closing Date: (i) to reduce the Purchase Price by an amount equal to the cost of repair or, if destroyed or damaged beyond repair or if appropriated, expropriated or seized, by an amount equal to the replacement cost of the assets forming the part of the Subject Assets so damaged or destroyed or appropriated, expropriated or seized and to complete the purchase; (ii) to complete the purchase without reduction of the Purchase Price, in which event all proceeds of insurance or compensation for the destruction or damage or appropriation, expropriation or seizure will be payable to Buyers and all right and claim of Sellers to any such amounts not paid by the Closing Date will be assigned to Buyers; or 26 <PAGE> (iii) to rescind this Agreement and not complete the purchase if, in the opinion of Buyers, such destruction, damage, appropriation, expropriation or seizure is material and in such event Sellers and Buyers will be released from all obligations hereunder and the deposit referred to in SECTION 2.1(a) shall be returned to Buyers. (b) If Buyers elect to reduce the Purchase Price pursuant to SECTION 13.5(a)(i), Sellers and Buyers will at the Closing Date determine the amount of the reduction to the extent that it is then determinable and will undertake to adjust such amount after the Closing Date, if necessary. ARTICLE 14. COSTS 14.1 FINDER'S OR BROKER'S FEES. Each party shall be responsible for its on costs or for any commission or finder's fee incurred on behalf of that party in connection with the Transactions. 14.2 EXPENSES. Each of the parties shall pay all costs and expenses, including, but not limited to attorneys' fees, incurred or to be incurred by it in negotiating and preparing this Agreement and in closing and carrying the Transactions. ARTICLE 15. FORM OF AGREEMENT 15.1 HEADINGS. The subject headings of the Articles and Sections of this Agreement are included for purposes of convenience only and shall not affect the construction or interpretation of any of its provisions. 15.2 ENTIRE AGREEMENT; MODIFICATION; WAIVER. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by all the parties. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. 15.3 COUNTERPARTS. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. ARTICLE 16. PARTIES 16.1 PARTIES IN INTEREST. Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the 27 <PAGE> parties to it and their respective successors and permitted assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third persons any right of subrogation or action over against any party to this Agreement. 16.2 ASSIGNMENT. No party can assign this Agreement without the express written consent of the other parties. This Agreement shall be binding on and shall inure to the benefit of the parties to it and their respective heirs or legal representatives, and their respective successors and permitted assigns. ARTICLE 17. REMEDIES 17.1 RECOVERY OF LITIGATION COSTS. If any legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled. 17.2 CONDITIONS PERMITTING TERMINATION. Subject to the provisions of ARTICLE 3 relating to the postponement of the Closing Date, either party may on the Closing Date terminate this Agreement by written notice to the other, without liability to the other, if any bona fide action or proceeding shall be pending against either party on the Closing Date that could result in a materially adverse judgment, decree or order that would prevent or make unlawful the carrying out of this Agreement. 17.3 DEFAULTS PERMITTING TERMINATION. If a Buyer or Seller materially defaults in the due and timely performance of any of its material warranties, covenants, or agreements under this Agreement, the 124 Agreement or the 104 Agreement, the non-defaulting party or parties may on the Closing Date give notice of termination of this Agreement, in the manner provided in ARTICLE 19. The notice shall specify with particularity the default or defaults on which the notice is based. The termination shall be on the first to occur of the 10th day after such notice or the Closing Date, unless the specified default or defaults have been cured by such time. ARTICLE 18. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES All representations, warranties, covenants and agreements of the parties contained in this Agreement, or in any instrument, certificate, opinion or other writing provided for in it, shall survive the Closing. 28 <PAGE> ARTICLE 19. NOTICES All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given on the date of service if served personally on the party to whom notice is to be given, or on the third day after mailing if mailed to the party to whom notice is to be given, by first class mail registered or certified, postage prepaid, and properly addressed as follows: Sellers: Douglas Duncan 2500 Don Reid Drive Ontario, Canada K1H 8P5 Stuart Duncan 2500 Don Reid Drive Ontario, Canada K1H 8P5 Daniel Bender 27357 Valley Center Road Valley Center, California 92082 with copy to: Jamie Wyllie, Esq. Yegendorf, Brazeau, Seller, Prehogan & Wyllie 55 Metcalfe Street, Suite 750 Ontario, Canada K1H 6L5 Buyers: New Frontier Media, Inc. 1050 Walnut Street, Suite 301 Boulder, CO 80302 Attn.: Mark H. Kreloff with copy to: The Law Office of Mark L. Driver, P.C. 3300 East First Ave. Suite 600 Denver, CO 80206 Attn.: Mark L. Driver Any party may change its address for purposes of this Article by giving the other parties written notice of the new address in the manner set forth above. 29 <PAGE> ARTICLE 20. GOVERNING LAW This Agreement shall be construed in accordance with, and governed by, the laws of the State of Colorado. ARTICLE 21. MISCELLANEOUS 21.1 ANNOUNCEMENTS. Sellers will not make any announcements to the public concerning this Agreement or the Transactions without the prior approval of Buyers, which will not be unreasonably withheld. Notwithstanding any failure of Buyers to approve it, Sellers may make an announcement of substantially the same information as therefore announced to the public by Buyers, or any announcement required by applicable law, but Sellers shall in either case notify Buyers of the contents thereof reasonably promptly in advance of its issuance. 21.2 REFERENCES. Unless otherwise specified, references to Sections or Articles are to sections or articles in this Agreement. 30 <PAGE> 21.3 RELATED TRANSACTIONS. It is a condition of the obligations of the parties to close the Transactions that on the Closing Date the transactions referred to in the 104 Agreement and the 124 Agreement also close on the Closing Date. IN WITNESS WHEREOF, the parties to this Agreement have duly executed it as of the day and year first above written. BUYERS: New Frontier Media, Inc. By: /s/ MARK H. KRELOFF ------------------------------- Its: President ------------------------------ Colorado Satellite Broadcasting, Inc. By: /s/ MICHAEL WEINER ------------------------------- Its: President ------------------------------ SELLERS: Fifth Dimension Communications (Barbados) Inc. By: /s/ DOUGLAS DUNCAN ------------------------------- Its authorized signing officer Merlin Sierra, Inc. By: /s/ DOUGLAS DUNCAN ------------------------------- Its authorized signing officer 31