EXHIBIT 99.1
Motion Media Technology Inc.
c/o Motion Media Technology Limited
Horton Hall, Horton
Bristol BS37 6Qn
United Kingdom
Mr. Paul H Albritton
President and CEO
C-Phone Video Communications Systems
6714 Netherlands Drive
Wilmington
NC 28405
December 29, 2000
LETTER OF INTENT
Dear Paul,
PURCHASE OF CERTAIN ASSETS AND THE BUSINESS UNDERTAKING OF
C-PHONE CORPORATION BY MOTION MEDIA
Thank you for hosting our visit to C-Phone on Friday 8th December which we
enjoyed and found most useful.
We believe that Motion Media Technology Inc. ("Motion Media") acquiring the
assets of the video conferencing business (the "Business") of C-Phone
Corporation ("C-Phone") would offer the best prospects of its continuation and
thereby be in the best interests of your customers and staff.
We are therefore prepared to offer US $1m for the assets of the Business,
subject to the detailed considerations below:
1. The purchase is of the Business, only, and does not involve the
purchase of any common stock or other securities of C-Phone
Corporation, the NASDAQ listed entity.
2. The purchase price includes IPR, goodwill, the inventories, property
and equipment, and all other things needed to continue the Business.
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3. C-Phone will retain the cash assets and accounts receivable of the
Business, and will be responsible for the payment of all unpaid items
relating to the inventories and other assets included as part of the
sale.
4. Based on the information provided to Motion Media as at 30th November
2000, the $1m offer is broken down approximately as follows:
Inventories - maximum of $660k
Property and Equipment $75k
IPR/Goodwill $265k
In the event that C-Phone makes sales between now and completion of
this transaction, C-Phone will be entitled to retain the proceeds from
the sale but, if these sales cause the value of the inventory to
decrease below the figure set out above, the purchase price to Motion
Media will be adjusted accordingly.
5. It is recognised that the completion of the whole transaction will
require approval of C-Phone's shareholders at a shareholders meeting
called to consider the sale of the Business to Motion Media (the
"C-Phone Shareholders Meeting"), which could take approximately 3
months after the final agreements contemplated by clause 12 are entered
into. It is also recognised that it is in neither party's interest for
the Business to close or discontinue to support its customers during
this period. The following, therefore, has been agreed as a way
forward:
5.1 Upon C-Phone's acceptance of this letter of intent and the
agreement of members of staff as identified in clauses 5.3 and
5.4 to transfer to Motion Media employment, Motion Media will
purchase a non-exclusive license to C-Phone's "Nano" design
for $150,000 (the "Nano Design License"), which Motion Media
considers to be a fair value and an adequate consideration.
This will be subject to the following conditions:
a) No other technology licenses with respect to the
Business will be offered or sold by C-Phone to any
third party prior to the earliest to occur of: (i)
the date of completion of the transaction with Motion
Media as contemplated in this letter of intent; (ii)
the date on which the shareholders of C-Phone reject
the sale of the Business to Motion Media; (iii) the
date on which the C-Phone Shareholders Meeting is
cancelled; or (iv) 4 months after the final
agreements contemplated by clause 12 are entered
into.
b) The Nano Design License becomes exclusive to Motion
Media in the event that C-Phone's shareholders at the
C-Phone Shareholders Meeting do not approve the
transaction as described in this letter of intent.
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5.2 Upon C-Phone's acceptance of this letter of intent, Motion
Media will purchase 3000 AVP IIIs, free of liens and
encumbrances, for $150,000, which Motion Media considers to be
a fair value and an adequate consideration. In the event that
C-Phone requires AVP IIIs for any manufacturing, C-Phone will
use the AVP IIIs sold to Motion Media before using any other
AVP IIIs and financial adjustments will be made to take this
into account. Upon payment, Motion Media will take possession
of these devices; however, if requested by Motion Media,
C-Phone will store these devices on behalf of Motion Media at
C-Phone's facility at no cost to Motion Media. Motion Media
may require the execution of a bailment agreement and
applicable UCC filing.
5.3 Motion Media will offer employment to 5 members of C-Phone's
engineering staff (Chris Bonser, Yuli Starodubtsev, Mark
White, Brandon Dodge and Bob Beucker) effective January 1st on
terms at least commensurate with their present terms. C-Phone
will withdraw any contractual conditions it has placed which
might otherwise restrict these employees when working for
Motion Media.
5.4 Motion Media will offer employment agreements to Stuart Ross
and David Powell on terms at least commensurate with their
present terms, to become effective on the day next following
the date of the C-Phone Shareholders Meeting.
5.5 Motion Media will pay C-Phone $50,000 per month during the
period from January 1st 2001 until the C-Phone Shareholders
Meeting, such amount to be paid on or prior to the fifteenth
day of each such month. This will cover the services of Stuart
Ross, David Powell and other current employees of C-Phone
necessary to progress the Nano board based products and all
such other reasonable engineering services required by Motion
Media. It will also cover administrative support and a
contribution to C-Phone's overheads allowing the support of
Motion Media employees based at C-Phone. In the event this
transaction is not completed as contemplated, this monthly
amount shall be prorated on a daily basis.
5.6 C-Phone will use best endeavours to arrange the C-Phone
Shareholders Meeting and make all appropriate SEC filings as
soon as is reasonably practicable. In the event that the
C-Phone Shareholders Meeting does not take place within 75
days after the execution of the final agreements contemplated
by clause 12 or the C-Phone Shareholders Meeting is cancelled
before such date, the provisions within this letter of intent
shall apply as if the transaction was not approved by
shareholders unless otherwise agreed with Motion Media.
C-Phone will permit the reasonable review of its proxy
materials and other SEC filings by Motion Media in this
interim period, provided that such review does not
unreasonably delay the proposed timetable.
5.7 For the avoidance of doubt, Motion Media is not to be regarded
as a successor of C-Phone in any event.
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5.8 All of the funding outlined in this section, with the
exception of the salaries of those employees working for
Motion Media, form part of the overall $1m offer and is being
provided at an early stage in order to allow the continued
operation of the Business. Such funding, once paid, shall be
non-refundable.
6. In the event that C-Phone receives an order requiring products to be
produced but for which no internal funding is available, Motion Media,
at its sole discretion, may accept the order and fund the order by
contracting with C-Phone for the manufacture of the product(s). In the
event that the sale of the Business to Motion Media did not proceed,
the order will be transferred to C-Phone, at C-Phone's option, and, in
such event, C-Phone would reimburse Motion Media for any such funding
not recovered by Motion Media from the sales under the order and Motion
Media will transfer title to C-Phone of any remaining inventory or
receivables generated pursuant to the order. In the event that C-Phone
does not opt to transfer the order, Motion Media will complete the sale
of the product(s) and C-Phone will use its best endeavours at Motion
Media's expense to support its completion.
7. The sale will include all IPR developed by C-Phone's Business (whether
or not the subject of patents, design registration and copyright), the
transfer of all applicable product approvals and certifications, and,
in so far as it is within C-Phone's ability to grant it without having
to expend funds to defend against third parties, the right to use the
C-Phone brand and the C-Phone web site.
8. Motion Media intends to develop the Business and it is therefore
imperative that the Business is transferred in a condition where this
is possible. C-Phone will use its commercially reasonable best
endeavours, in co-operation with Motion Media, to retain its existing
and potential customers during the period prior to the completion of
the sale. In the event that changes occur which, in the opinion of
Motion Media, significantly compromises the ability of the Business to
continue as reasonably envisaged, Motion Media reserves the right to
promptly withdraw from this transaction but to keep the Nano Design
License on a non-exclusive basis.
9. In accepting this letter of intent, C-Phone agrees to withdraw from,
and not undertake, discussions with any other party concerning the sale
of its video communications business. In the event that C-Phone is
required by law or regulation or through the actions of any third party
to sell any or all of the assets of the Business other than to Motion
Media, C-Phone agrees to reimburse Motion Media for all reasonably
incurred out-of-pocket expenses and costs associated with the proposed
transaction and any payments made under the provisions of clause 5.5.
10. C-Phone and Motion Media agree to provide each other, in advance, any
proposed public announcements related to this transaction and agree to
take into account any comments made and to co-ordinate the timing of
any such announcements to the extent permitted under applicable law. In
addition, C-Phone agrees to provide to Motion Media, in advance, any
other proposed public announcements
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11. Motion Media reserves the right to have the asset values appraised on a
going concern basis which are subject to this transaction..
12. The transaction will require the drawing up of suitable legal
agreements which may include additional provisions and the completion
of a due diligence process. C-Phone and Motion Media will, without
undue delay, undertake the necessary actions to ensure a swift
completion of the finalising of such documents and the sale. Motion
Media has the present intent to take over the lease of C-Phone's
facility, but this present intent may be changed after Motion Media
completes its due diligence and negotiates with the landlord.
Notwithstanding the foregoing, the monetary obligations of Motion Media
set forth in clauses 5.1, 5.2 and 5.5 are binding obligations
enforceable against Motion Media and not dependent on the execution of
other agreements or the completion of due diligence. Motion Media
agrees to pay C-Phone $150,000 pursuant to clause 5.2 by wire transfer
of immediately available US funds no later than January 5, 2001,
subject to inspection and the receipt of proof of ownership, a warranty
from C-Phone as to the fitness of the devices, an acceptable bailment
agreement and UCC filings. Motion Media agrees to pay C-Phone $200,000
pursuant to clauses 5.1 and 5.5 by wire transfer of immediately
available US funds as soon as a mutually agreed Nano Design License has
been signed and agreements with members of staff pursuant to clauses
5.3 and 5.4 are reached but, which both parties agree should be no
later than January 16, 2001.
Except as expressly assumed by Motion Media pursuant to a definitive
acquisition agreement, all liabilities and obligations with respect to
C-Phone's business and assets shall be retained by C-Phone and shall
not become the obligations or liabilities of Motion Media or its
affiliates under any circumstances. We wish to make it clear (and by
signing this letter below, you acknowledge) that Motion Media is not an
affiliate of C-Phone and that Motion Media has negotiated the terms of
this letter with C-Phone at arms length. Under no circumstances shall
the purchase by Motion Media of the assets referred to in clauses 5.1
and 5.2 of this letter be construed as an implicit or explicit
assumption by Motion Media of all of the obligations and liabilities of
the business as conducted by C-Phone and its affiliates.
I trust the above accurately reflects our mutual intentions and will enable
rapid progress. Please sign this document signalling your agreement to proceed
on the above basis.
/s/ K Burgin
Ken Burgin - on behalf of Motion Media Technology Inc.
/s/ Paul Albritton
Paul Albritton - on behalf of C-Phone Corporation
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