MEMORANDUM AGREEMENT
THIS
MEMORANDUM AGREEMENT ("Agreement"),
dated
this 2nd
day of
June, 2006, is by and among Oxford Media, Inc., a Nevada corporation
("Oxford"),
SVI
Systems, Inc., an Illinois corporation ("SVI")
and the
owner of all the outstanding equity of SVI Hotel Corporation; an Illinois
corporation ("SVI
Hotel").
A. SVI
is
engaged in the business of utilizing its assets (including all accrued but
not
yet payable assets) and software to provide video-on-demand movie systems,
free-to-guest satellite systems and high-speed Internet solutions to hotels
(the
"Hotel
Business").
SVI is
also engaged in the business of utilizing its assets (including all accrued
but
not yet payable assets) and software to provide video-on-demand education and
diet office software to hospitals (the "Healthcare
Business")
(collectively, the "SVI
Business").
B. Oxford
is
in the business of providing solutions for distribution of digital video content
to hotels and multiple dwelling units (the "Oxford
Business").
C. SVI
desires to sell and Oxford desires to purchase all of the outstanding shares
of
SVI Hotel, which simultaneous with the "Closing" will own and operate the Hotel
Business with its normal operating liabilities for the Hotel Business
(specifically excluding all bank/institutional and shareholder indebtedness)
(the "Transaction").
D. At
or
prior to the Closing of the Transaction, SVI shall only own the Healthcare
Business, with the Hotel Business having been assigned or otherwise transferred
to SVI Hotel in a separate transaction (the "Split
Off").
In
consideration of the foregoing, and the mutual promises set forth below, the
parties agree as follows:
1. Purchase
of Shares. Oxford
shall acquire and SVI shall sell one hundred percent (100%) of the outstanding
equity, which consists of only common stock, of SVI Hotel which will own only
the Hotel Business (the "SVI
Shares")
for the
purchase price set forth in Section 2 below.
2. Purchase
Price.
In
consideration of the SVI Shares, Oxford shall pay SVI as follows:
a. Cash
Payment.
Oxford
shall pay SVI, or its designees, an aggregate amount in cash equal to Five
Million and No/100 Dollars ($5,000,000.00) at Closing.
b. Convertible
Notes.
Oxford
shall deliver to SVI or its designees at Closing two convertible balloon notes
(Collectively, the "Convertible
Notes")
in the
aggregate face amount of the Three Million Five Hundred Thousand and No/100
Dollars ($3,500,000.00) in the following amounts and under the terms listed
therein:
i. Two
Million and No/100 Dollars ($2,000,000.00) face amount convertible balloon
note,
due July 15, 2008 with interest, at prime plus one and one half percent (prime
+
1.5%), interest measured and paid quarterly. The note is convertible into Oxford
common stock at Two and 25/100 Dollars ($2.25) per share upon fifteen (15)
calendar days notice ("$2
Million Convertible Note").
ii. One
Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00) face amount
convertible balloon note, due July 15, 2009 with interest, at prime plus two
percent (Prime + 2%), interest measured and paid quarterly. The note is
convertible into Oxford common stock at Two and 50/1000 Dollars ($2.50) per
share upon fifteen (15) calendar days notice ("1.5
Million Convertible Note").
iii. Each
of
the Convertible Notes shall be secured by the assets acquired in the
Transaction, but subordinated to any "Certain Money Indebtedness" incurred
in
conjunction with the purchase of the Hotel Business. Certain Money Indebtedness
is defined to be limited to: (a) all principal and interest on note indebtedness
of Oxford for money borrowed for the Transaction (to a maximum of Five Million
Dollars ($5,000,000.00) being the debt portion of Oxford's current "capital
raise"; and (b) up to Two Million Dollars ($2,000,000) working capital bank
line
of credit. SVI will enter into an intercreditor agreement with the these
lender(s) containing these terms as well as the terms set forth in subparagraph
2b, (iv) below.
iv. If
Oxford
sells any of the assets of the Hotel Business owned as of the Closing (other
than individual asset sales made in the ordinary course of business) a minimum
of fifty percent (50%) of the net proceeds ("50%
Net")
of such
sales shall be applied to prepay the outstanding Convertible Notes. The holder
of the Convertible Notes, in its sole discretion, may during the fifteen day
period, elect either to accept the prepayment or exercise its right to convert
any amount of the principal of the Convertible Note which is to be prepaid.
If
the holder of the Convertible Notes elects to accept any prepayment, such
proceeds shall first be applied to the $2 Million Convertible Note and next
to
the $1.5 Million Convertible Note. Payment of the 50% Net shall be senior to
any
Certain Money Indebtedness.
c. Stock
at Closing.
At
closing, Oxford shall issue to SVI or its designee, One Million Five Hundred
Thousand and No/100 Dollars ($1,500,000.00) worth of Oxford common stock (the
"Shares").
Shares
shall be valued on the average of the closing price, if any, on the ten (10)
trading days prior to the date of the public announcement of the Transaction.
The
Shares shall be restricted pursuant to Rule 144, and SVI shall reasonably
cooperate with Oxford if Oxford reasonably believes it requires representations
from SVI that it is an accredited investor.
d. Warrants.
Oxford
shall issue a total of one million warrants to purchase Shares (the "Warrants")
to SVI
or its designees in the following amounts and under the terms listed
therein.
i. Five
Hundred Thousand (500,000) Warrants exercisable at Two and N0/100 Dollars
($2.00) per share, and expiring five (5) years from the Closing;
ii. Five
Hundred Thousand (500,000) Warrants exercisable at Two and 25/100 Dollars
($2.25) per share, and expiring five years (5) years from the
Closing;
iii. Notwithstanding
the above, the Warrants will not expire upon a sale of substantially all of
the
assets of Oxford, a merger, or a sale or similar acquisitive transaction of
substantially all of the issued and outstanding stock of Oxford.
e. Additional
Purchase Price.
Oxford
shall pay SVI monthly an additional purchase price based upon any digital
conversion of Hotel Business properties. A mutually acceptable graduated
schedule of digital conversions will be developed by Xxxxx Xxxxx (the
"Additional
Purchase Price").
The
projected payout for the conversion of a one hundred (100) room facility shall
be Four Thousand and No/100 Dollars. The schedule of additional payout payments
shall be based upon a hotel grid (50-75; 76-100; 101-150; 151-200 and over
200
room hotels). The total of the Additional Purchase Price shall not exceed Four
Million and No/100 Dollars ($4,000,000.00).
3. Registration
Rights.
a. Convertible
Notes and Warrants.
Oxford
shall register, at its expense, with the Securities and Exchange Commission
the
number of shares of Oxford stock into which shares of the Convertible Notes
and
Warrants are convertible in the next registration initiated by Oxford or any
other Oxford shareholder, but in no event shall such registration be filed
more
than one hundred eighty (180) days of the Closing.
b. Shares
at Closing.
Shares
issued in accordance with Section 2(c) shall be granted "piggyback rights"
to be
included in the next registration initiated by Oxford or any other Oxford
shareholder, but otherwise will be subject to a lock-up for a period of one
year
from Closing.
4. Employment
Agreements.
Oxford
may enter into mutually acceptable employment agreements with five (5) of the
Hotel Business key employees, one of whom shall be Xxxxxxxxx Xxxxxx The key
employees shall mean Xxxxxxxxx Xxxxxx (President), Xxxx Xxxxxx (CFO), Xx Xxxxxxx
(IT Services), Xx Xxxxxxx (Senior Vice President of Sales), and Xxxx Xxxxx
(Vice
President of Operations). Essential terms of the employment agreements (the
"Employment
Agreements"),
are
as follows:
a. Selected
Employees.
Within
fourteen (14) days of the date of this Agreement, Oxford agrees to notify SVI
of
its selection of which of the above five employees with whom it desires to
enter
into an Employment Agreement ("Selected Employees").
b. Term
of Employment of a Selected Employee.
The term
of the Employment Agreements of any of the following who are Selected Employees
shall be as follows: (i) in the case of Xxxxxxxxx Xxxxxx, at a term not to
exceed eighteen (18) months; (ii) in the case of Xxxx Xxxxxx, at a term not
less
than one hundred and eighty (180) days; (iii) in the case of Xx Xxxxxxx, at
a
term not to exceed one (1) year; (iv) in the case of Xx Xxxxxxx, at a term
not
to exceed eighteen (18) months; and (v) in the case of Xxxx Xxxxx, at a term
not
to exceed twenty-four (24) months.
c. Terms
and Conditions.
The
terms and conditions of compensation packages offered to Selected Employees
shall be no less favorable than that of the respective Selected Employee's
existing compensation package.
5. Board
of Directors Participation.
SVI
shall be granted the right for three (3) years to appoint two (2)
ex-officios/invitees ("SVI
Board Observers")
to the
Oxford board of directors, subject to the reasonable approval of Oxford. The
SVI
Board Observers shall have full rights of participation in all meetings of
Oxford's board of directors, other than voting rights; provided, however, that
Oxford reserves the right to withhold participation of SVI Board Observers
in
the event that confidentially dictates that such SVI Board Observers shall
not
be a prerequisite to Oxford convening any board meeting.
6. Divestiture
of Healthcare Business.
Prior to
the Closing, SVI shall take all action necessary and execute all documents
required to effectuate the Split Off through the separation and/or divestiture
of the Healthcare Business from SVI Hotels. The Healthcare Business shall assume
all liabilities of SVI other than an amount of SVI Hotel's normal operating
liabilities (including, but not counting, accrued but not presently payable
normal operating liabilities) equal to the SVI Hotels current assets (including,
but not counting, accrued but not presently payable assets). SVI shall indemnify
Oxford for and against all liability for, related to, and arising out of the
following:
a. The
Split
Off, including all tax liabilities, if any;
b. The
Healthcare Business, both before and after the Closing; and
c. The
Hotel
Business arising prior to the Closing.
7. Closing.
The
consummation of the Transaction, which shall be effective as of July 1, 2006,
shall occur promptly following approval by SVI and governmental authorities
which SVI shall attempt to seek no later than June 26, 2006. The parties seek
to
close the Transaction on July 14, 2006 (the "Closing
Date").
8. Continued
Operations of the Hotel Business.
From the
date of this Agreement to the Closing, SVI shall operate the Hotel Business
in
substantially the same manner as currently operated and maintained in the
ordinary course of its business with the express exception of the Split
Off.
9. Hotel
Business Balance Sheet. SVI
agrees that the balance sheet of the SVI Hotel on the Closing Date shall reflect
the assets and liabilities of the Hotel Business as reported on the March 31,
2006 financial statement ("March
31st
Statement"),
subject only to normal operating changes as occur in the ordinary course of
its
business and as reflected in Section 6 above (none of which shall be materially
adverse to the Hotel Business considered as a whole). Oxford shall complete
a
post closing audit within forty-five (45) days of the Closing, with SVI having
the right to participate in the physical audit of inventory and equipment.
To
the extent that there is an agreed upon reduction or increase in assets or
liabilities, respectively, reported (which is inconsistent with the requirements
of Section 6, above) there shall be an equal reduction or increase in the
Purchase Price by an equal reduction or increase in the $2 Million Convertible
Note. In the event there is an adjustment in excess of $2MM, then the Purchase
Price shall be further reduced by such amount in the manner agreed uponby the
parties.
10.
Oxford's
Obligation to Consummate the Transaction. Oxford's
obligation to consummate the transaction is subject only to: (a) Oxford's
inability to secure a financial commitment for the Transaction on or before
June
16, 2006; (b) Oxford's satisfaction, in its sole discretion, with the results
of
its due diligence review of SVI and the Hotel Business, which due diligence
shall be completed no later than June 16, 2006; (c) Oxfords' inability to secure
its board of directors approval, on or before June 16, 2006; to consummate
the
Transaction; (d) no material adverse change (considered as a whole) having
occurred in the Hotel Business up to or at the Closing; (e) no material and
uncured breach of the purchase agreement by SVI; (f) if necessary, an inability
to assign or renegotiate any material content agreement or any other material
agreement of the Hotel Business which would have a material adverse affect
on
the Hotel Business (considered as a whole); (g) the Selected Employees failure
to enter into the requisite Employment Agreements and (h) a failure by SVI
to
enter into mutually acceptable service agreement, as further discussed below
in
Section 11. If Oxford fails to notify SVI of any occurrence listed in this
Section 10(a), (b) or (c) on or before June 16, 2006, and Oxford fails to close
the Transaction, except for the reasons set forth in Sections 10(d), (e), (f),
(g), or (h), Oxford shall promptly pay to SVI a cash payment of Six Hundred
Fifty Thousand and No/100 Dollars ($650,000.00).
11.
Subsequent
Services Agreements. SVI
and
Oxford will enter into one or more mutually satisfactory service agreements,
on
reasonable terms and conditions, between them with respect to the technical
support, human resources assistance and other post-operational closing support
to their respective businesses. After Closing, SVI and Oxford will provide
one
another reasonable access at a reasonable price to its technology personnel
and
service.
12. No
Third Party Negotiations.
Prior to
the Closing Date: (a) SVI and its affiliates, shareholders, directors, officers
and employees shall not enter into or continue to engage in any negotiations
or
discussions with other parties relating to the Transaction, however effectuated,
nor disclose the existence or substance of this Agreement, except to persons
within SVI's organization who must be so informed, or to SVI's professional
advisor; and (b) Oxford and its respective current affiliates, shareholders,
directors, officers and employees shall not enter into, or continue to engage
in
any negotiations or discussion with other parties relating to transactions
similar to the Transaction, however effectuated, nor disclose the existence
or
substance of this Agreement, except to persons within Oxford's organization
who
must be so informed, or to Oxfords' professional advisors, which shall
specifically include but not be limited to persons from whom Oxford is directly
or indirectly seeking financing.
13. Representations
and Warranties.
Oxford
represents and warrants that (a) the reports and filings they have made under
the Securities Act of 1933 and the Securities and Exchange Act of 1934 are
true
and correct and no material changes have occurred since the date of the last
report or filing made, of which SVI has not been advised; and (b) Oxford and
SVI
each request that they have the power and authority to enter into and consummate
this Agreement subject to approval by their respective board of
directors.
14. Binding
Agreement.
The
parties anticipate that this Agreement shall be superseded by more extensive
agreements among the parties containing representations, warranties, covenants
and other provisions which are standard in this type of transaction, including
the joint and several indemnification by SVI and the Hospital Business entity
from any undisclosed and unknown liabilities other than those to be specifically
retained by SVI ("More
Extensive Agreements").
However the parties agree and acknowledge that this Agreement is binding on
and
enforceable by and against the parties, their successors, legal representatives
and assigns.
15. Definitive
Arbitration.
If the
parties are unable to agree on terms and conditions of the More Extensive
Agreements (including the service agreement of Section 11 hereof), the parties
shall submit to arbitration in accordance with this Section
15.
a. Election
to Arbitrate.
In the
event of the inability to conclude the More Extensive Agreements (the
"Dispute"),
the
parties agree to arbitration by an arbitrator selected from three persons
submitted to them by the American Arbitration Association located in Denver,
Colorado ("AAA").
b. Arbitrator
Selection. If the parties cannot mutually agree upon an arbitrator within a
week
of the receipt of the initial three person list, a second three person list
shall immediately be requested from AAA. If the parties cannot mutually agree
upon an arbitrator from the second list within forty-eight (48) hours of receipt
thereof, then the parties shall instruct AAA to select an arbitrator from the
second list.
c. Location
and Costs. The arbitration shall take place in Denver, Colorado within fourteen
days following the selection of an arbitrator and the cost of the arbitration
shall be split equally.
d. Authority.
The arbitrator shall have full, final binding and non-appealable authority
to
settle and set the unresolved or disputed terms, conditions, representations,
warranties and covenants and agreements of each of the More Extensive
Agreements.
16.
Confidentiality.
SVI,
and Oxford agree to retain in confidence, and to require their respective
employees, consultants, professional representatives and agents to retain in
confidence, all information transmitted to it by the others, and neither SVI
nor
Oxford will use or disclose to others, or permit the use of or disclosure of,
any such information obtained from or revealed by the others, other than in
connection with this Agreement. In the event the Transaction is not consummated
for any reason, each party shall forthwith deliver to the other (without
retaining copies thereof) any and all documents or other information, whether
written or stored in any medium whatsoever, including but not limited to, floppy
disks, removable drives, file servers, hard drives or obtained from the
others.
17.
Publicity.
Upon
execution of this Agreement, SVI and Oxford anticipate issuing a public
announcement which announcement shall be reasonably approved by the other prior
to its issuance. Other than such issuance, prior to the Closing, neither SVI
or
Oxford shall, without the prior written consent of the other (except as required
by law) make any statement, public announcement or any release to trade
publications or to the press with respect to the Transaction, except as may
otherwise be required under applicable law.
18.
Brokers'
Fees/Expenses.
Each
party will indemnify and hold harmless the other from any claims for brokerage
or finder's fees arising out of the Transaction contemplated hereunder by any
person claiming to have been engaged by the other such party. Each party hereto
shall bear its own expenses in connection with this Agreement and the
Transaction contemplated hereunder.
19.
Applicable
Law.
This
Agreement shall be governed by the laws of the State of Delaware.
Agreed
to
by each of the undersigned as of the date first noted above.
Oxford:
a
Nevada corporation
By:
__________________________________
Name:
_______________________________
Its:
__________________________________
|
SVI:
SVI
Systems, Inc.
an
Illinois corporation
By:
_________________________________
Xxx
X. Xxxxxx
Chairman
|