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Motion Media PLC (SCO)

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Tuesday 06 July, 2004

Motion Media PLC

Circ re. Acquisition

Motion Media PLC
06 July 2004



6 July 2004 

      Proposed acquisition of SCOTTY Tele-Transport Corporation Radio- und
                               Videoelektronik AG
                  Proposed change of name to SCOTTY Group plc
                         Change of year end to 31 July
          Placing of up to 114,475,000 Ordinary Shares at 4p per share
         Open Offer of up to 50,000,000 Ordinary Shares at 4p per share
           Admission of the Enlarged Share Capital to Trading on AIM
                    Notice of Extraordinary General Meeting

1 Introduction

On 22 April 2004 the Company announced that it had conditionally agreed to
acquire approximately 82.7 per cent. of the share capital of SCOTTY, prior to
which, the Existing Ordinary Shares had been, in accordance with AIM Rules,
suspended from trading on AIM. On 21 June 2004 the Board announced that the
terms of the Acquisition had been revised. Motion Media has conditionally
agreed, pursuant to the SCOTTY Agreement, to acquire 183,095 SCOTTY Shares,
representing approximately 98.45 per cent. of the share capital of SCOTTY and
has offered to acquire from the Remaining SCOTTY Shareholders those SCOTTY
Shares not comprised within the SCOTTY Agreement. The terms of the Offer are
identical to the terms upon which SCOTTY Shares are to be acquired pursuant to
the SCOTTY Agreement.

Assuming full acceptance of the Offer, Motion Media will acquire the entire
issued share capital of SCOTTY for an Initial Consideration of £10,500,000 to be
satisfied by the issue of 262,500,000 Initial Consideration Shares at the
Placing Price of 4p per share and, depending upon the audited results of SCOTTY
for the financial year ending 31 December 2004, a Deferred Consideration of up
to £38,500,000 (as calculated by reference to the SCOTTY Agreement), which may
be satisfied at Motion Media's sole discretion either in cash or by the issue of
Deferred Consideration Shares at the higher of 11p per share or the Closing
Price.

Following Admission, Rex Thorne will continue as Chairman but in a non-executive
capacity and the following SCOTTY directors, will join the Board in the
following capacities: Kurt Kerschat (Chief Executive Officer); Georg Weber
(Finance Director), Peter Sauerzopf (Non-executive Director) and Ernst Wustinger
(Non-executive Director). Garey De Angelis and Alan MacKenzie will continue to
serve as Global Sales and Marketing Director and Non-executive Director,
respectively.

It is further proposed that the Company change its name to SCOTTY Group plc in
order to benefit from the strong brand reputation established by SCOTTY in its
markets. The Company also intends to change its accounting year end to 31 July
in order to take account of the reorganisation which will occur as a consequence
of the merger and demonstrate to Shareholders the benefits of the merger at the
earliest opportunity.

Due to the size of SCOTTY, the Acquisition is deemed a reverse takeover for the
purposes of the AIM Rules. Accordingly, the Proposals are conditional, inter
alia, upon the approval of Shareholders at the EGM. Trading in the Ordinary
Shares will remain suspended until further notice. However, because the
Acquisition is a reverse takeover under AIM Rules, in the event that the EGM
Resolutions are duly passed, trading in the Existing Ordinary Shares will be
cancelled and application will be made to the London Stock Exchange for the
Existing Ordinary Shares to be re-admitted, and for the New Ordinary Shares to
be admitted, to trading on AIM with effect from 29 July 2004.

2 Background

Motion Media, which is based near Bristol, was formed in January 1993 by a team
of engineers which had specialised in the design of image processing
semiconductors at Inmos (now part of ST Microelectronics).

Since 1993 the Company has become recognised as one of the world leaders in the
design, development and supply of video telephony technology and products. The
Group's products have now been sold into more than 40 countries worldwide. These
products centre on three main markets: Video Conferencing, Telehealth, and
Security and Surveillance.

In May 2000 the Company's shares were admitted to the Official List and in
January 2003, in conjunction with a placing of new shares to raise approximately
£3.45 million, the Company transferred from the Official List to AIM. In
December 2003 another £1 million of working capital was raised by way of a
further placing of new shares.

Over the last four years Motion Media has continued the development of its
visual communication product base and core technology platforms, with particular
emphasis on its CareStation(R) for telehealth products and new IP based desktop
and security codecs.

The Directors believe that the acquisition of SCOTTY represents an exciting
opportunity to bring together two highly complementary businesses operating in
similar but non-competing markets, with the prospect of sharing technology,
achieving greater market penetration for a more broadly based product offering
in each of the markets served by the two groups, and significant economies of
scale.

Products

i) Video Telecommunications

Motion Media's videotelephony range includes the following products:

mm745 IP Browser videophone: this product represents a new generation of IP
based multi-media platforms which enables an 'always-on' system to deliver high
quality real time video calls at up to 2Mbps.The mm745 features a laptop sized
screen and has additional features such as multipoint call compatibility and web
browsing.

mm156 videophone: the mm156 operates over both IP and PSTN networks and supports
broadband IP connections through two 10/100 Ethernet ports. Individual calls can
be dialled, and adaptively scaled to any bandwidth between 32 and 384 kbps,
working in synergy with the variable bandwidth available from broadband (cable
or ADSL) and corporate inter-network links. The mm156 features two different IP
video protocols. Motion Media's own Packet BuddyTM protocol enables
communication through non H.323-ready firewalls and routers and over non QoS
networks, such as the public Internet. The H.323 protocol is implemented to
allow IP calls to other H.323 videophones, personal systems and group
conferencing systems. The mm156 contains a regular analogue telephone line
connection capable of supporting audio and video calls over PSTN. The phone can
be plugged into the line, or a PBX with an appropriate interface, and can simply
dial out. The telephone line connection also gives the flexibility to call
devices that do not support IP such as telephones, mobile phones, and H.324 only
videophones.

mm145/6 videophones: the mm145 was the Company's first videophone to operate
over an IP network for business or home communication. The mm145 was replaced by
the mm146 in 2003. The mm146 has an image transmission rate of up to 15 frames
per second at 384 Kbps; it uses the Packet BuddyTM and H.323 video
communications protocol, incorporating the H.263 video compression standard, as
well as incorporating echo-cancelling technology.

mm225 videophone: this is a fully integrated ISDN desktop videophone with video
conferencing functionality such as far end camera control and MCU compatibility.
The mm225 uses established international standards for videotelephony. Once
connected to an ISDN line the mm225 can make calls to both H.320 and H.324,
systems such as PC terminals and group video conferencing systems.

ii) Telehealth

The Group has specifically targeted the tele-home care sector of the telehealth
market. Tele-home care is the remote provision of care to patients in their
homes enabling care providers to make video visits rather than physical visits
and to collect patient vital sign data remotely. Importantly, in the main the
healthcare providers, and not the patients, fund these solutions. The
CareStation solution is shown to substantially reduce the cost of care, improve
the quality of care and ease the burden of care for both provider and patient.
It can be applied to the monitoring and management of patients with disorders
like diabetes, asthma, congestive heart failure and psychological impediments as
well as wound care, high risk pregnancies and many others. The CareStation(R)
range of products interoperates with a broad range of medical devices that
enable remote contact and monitoring of a patient by a medical professional. The
range supports medical devices to monitor blood pressure, pulse rate, heart,
lung, bowel and foetal sounds, blood oximetry, blood glucose, weight and
temperature. These products are relevant in medical situations where regular
outpatient monitoring is required but where frequent home or hospital visits are
costly or impractical. In addition, they are suited to the needs of the elderly
where immediate round the clock help or contact with a doctor or other medical
professional may be required. The CareStation 126s and CareStation 156s are, at
present, the only videoconferencing products with FDA certification.

CareStation(R) 126s: this videophone connects over a standard telephone line
(PSTN) and has a dial-up keypad, speed dial and hands-free operation. Digital
stethoscopy and pulse oximetry has been integrated into the design of the
CareStation. The stethoscope ear piece and chest piece connect directly to the
care provider and patient videophones, respectively. Using visual information,
the care provider guides the patient in accurate placement of the chest piece
then listens to heart and lung sounds through the ear piece to make a rapid
assessment of the patient's condition.

CareStation 156s: this videophone is identical to the CareStation 126s but
operates over both broadband IP and PSTN networks. It uses two protocols: H.323
which delivers interoperability with other standards based conferencing
equipment, and Motion Media's PacketBuddyTM protocol which permits use over the
most basic broadband networks including the Internet.

CareStation 110: this set top unit connects via a standard telephone line (PSTN)
and contains a built-in colour camera and microphone. Video is displayed on any
standard television with an external input jackwhilst a simple remote control
includes a configurable one-touch button allowing simple connection to the
providers' call centre. The CareStation110 provides plug-in compatibility to a
wide variety of medical and vital signs devices.

CareStation for Windows(R): this Windows-based software application provides
simple to use, peripheral device management and patient record keeping to the
CareStation range of videophones. Accurate information on a patient's weight,
pulse, blood pressure, blood glucose, temperature, blood oxygen etc. is brought
to the care provider. It is an ideal solution for in-home patient monitoring and
management. It provides accurate, fast and secure storage and retrieval of vital
signs data collected via CareStation 156s, 126s, 125 and 110 models. Patient
records can be saved locally for stand alone operation and/or sent directly to
secure server for client-server operation.

iii) Security & Surveillance

The eyesite(R) 110, 140, 300, and 400 are stand alone remote video surveillance
products, which provide superior quality real time transmission of video from
remote locations and operate over PSTN, IP or ISDN. Eyesite devices use standard
RS232 data ports to connect external devices switches, DVR's, security cameras,
sensors or motion detectors. eyesite for Windows PRO is a comprehensive software
application that supports both IP and PSTN connections. It provides digital
video recording, multiple site viewing and a host of other features such as:
simultaneous full colour motion video from multiple remote sites; live video
footage; streaming video to hard disk; e-mail notification of events and many
others.

Technology
Motion Media's core areas of technological expertise include video compression,
audio compression, software development, and a fundamental understanding of real
time systems design. The Group's IPR is incorporated into products providing
high levels of reliability, meeting demanding standards requiring continuous
two-way real time transmission of both video and audio (as distinct from video
streaming which involves one-way transmission, often with significant delays).

Of particular interest to telephone and cable operators is Motion Media's Packet
BuddyTM communications protocol. It is Motion Media's proprietary protocol for
delivering high quality video over non-QoS managed networks. It utilises the
best aspects of the H.323 IP standard but eliminates some of the complexity and
overhead of H.323. Packet BuddyTM dynamically adjusts for varying network
conditions and automatically corrects for packet jitter, packet loss, or packet
mis-ordering and unlike H.323 moves the audio and video information together
within a single UDP stream. Along with the dynamic benefits of Packet BuddyTM,
it also is able to tunnel through fire-walls and routers using a single UDP port
and thus is much simpler to configure for use over a variety of networks. Packet
BuddyTM yields the highest benefits when used on networks that are bandwidth
challenged, especially at around 128 Kbps or less as is found with Broadband
(for example, xDSL or cable modems) connections.

3 Information on SCOTTY

SCOTTY was founded in 1995 by a team that was involved in setting up the
videoconferencing system for the MIR Space Station. It is headquartered near
Graz, Austria, with operations based in Norcross near Atlanta, Georgia (US),
Manchester, New Hampshire (US), Manila (Philippines) and Wokingham (UK). It
develops and supplies ruggedised videoconferencing systems that enable real-time
audio, video and data communication between two or more geographically remote
sites via the Inmarsat satellite network and other broadband networks.

SCOTTY has extensive expertise in terrestrial/satellite networks, encryption and
videoconferencing technologies and has built up a strong niche position in the
provision of mobile communication systems to the military and defence related
satellite communications market. SCOTTY also supplies products for a diverse
range of applications including news reporting, broadcasting, maritime, disaster
relief and aviation.

SCOTTY currently supplies to customers in Europe, the Middle East and Asia,
North America and Australasia, which include the German Army, the Austrian Army,
the Turkish Army, the Royal Navy, and in the US, the Army, Navy, Air Force,
Marine Corps and various government agencies and organisations.

SCOTTY Products
SCOTTY manufactures equipment which enables communication to any location in the
world where terrestrial or satellite networks are available. These products are
predominantly PC-based and aimed towards military use meeting the most stringent
military requirements. The SCOTTY Mobile, ProMax, I-Adapters, COMMANDER and
APL-B are the company's main military products, whilst the Warp 2, ClassMate and
codecs are mainly aimed at commercial markets.

SCOTTY products include:
SCOTTY Mobile Video-Communication Unit: a deployable system designed to provide
comprehensive communication in the field. The unit features an industrial PC, a
high speed data transfer system, digital video recording, videoconferencing and
data conferencing in a robust, waterproof and military tested shock resistant
format. It operates through satellite phone, VSAT, ISDN, and IP. The unit
features multiplestandard network interfacing, high resolution camera, speaker,
microphone, echo cancellation and DC power supply. All transmissions can be
encrypted by the addition of various encryption devices and the unit enables
troops deployed in the field to download battlefield maps and other information
in real time.

SCOTTY ProMax Video-Communication System: a 19inch rack-mounted unit for
offices, business and operational headquarters and onboard maritime
installations. ProMax offers communications solutions over Satcom, ISDN, leased
lines and IP.

SCOTTY I-Adapters: these provide an interface between ISDN systems and various
encryption or Inmarsat setups.

SCOTTY COMMANDER: a portable unit, designed for armed forces as a means to
connect various kinds of end-devices to various types of network. Typically the
SCOTTY Commander is used as a base station to communicate with and coordinate
the activities of units in the field equipped with SCOTTY Mobiles.

SCOTTY APL-B: a portable, multi-functional office/communication centre designed
for secure speech, data and video communication over Inmarsat to standard NATO
encryption, in peace-keeping applications.

SCOTTY Warp 2: a multi-tasking PC and videoconferencing unit designed for
multi-national commerce.

SCOTTY ClassMate: a roll-about unit for tele-training, containing audio, video
and data communications, video projector, speakers and retractable camera arm.

Zydacron Video Codecs and Comboards: for systems integrators, this hardware is
used in communications boards, group/room systems and mobile videoconferencing
systems developed by SCOTTY and takes analogue signals, digitises and compresses
them and transmits them via a network to distant locations. Zydacron has
developed a new generation H264 Video Codec, intended to be released in July
this year, that will allow SCOTTY to stream TV quality video through its SCOTTY
Mobile unit.

SCOTTY's military products are both portable and compatible with portable
satellite terminals and NATO standard encryption. Certifications include:
Certified Solutions Provider: Inmarsat Organization (satellite fleet owner and
manager)
Certified Solutions Provider: NERA Satcom A/S (manufacturer of satcom equipment)
Certified Solutions Provider: Thrane & Thrane A/S (manufacturer of satcom
equipment)
Member: Mobile Satellite User's Association
Researcher: European Space Agency
US Government Services Administration (GSA) schedule number GSF-03F-0024K
NATO stock number 58 95 17 113 5503
National Security Administration (NSA) tested.

Sales and Marketing
SCOTTY sells its products directly and through a worldwide network of 32
distributors located in more than 30 countries. SCOTTY's products are also
featured in the NATO approved products list.

SCOTTY maintains a close working relationship with its resellers and complements
its marketing efforts with regular participation at trade shows and similar
public relations activities. In addition, several NATO military organisations,
particularly the German and US armed forces, promote SCOTTY products at
international military 'interoperability demonstrations'. Currently 9 people are
engaged in sales and marketing and business development, four of which are
assigned to Europe, Middle East and Africa, two to the North American market,
two to Asia and Australasia and one to the UK.

Research and Development
SCOTTY's research and development activity is conducted in-house and integration
of its sales and marketing teams with its research and development activities
has led to customer-led product innovation. Together these teams assess product
life cycles, utilisation and future applications for SCOTTY's current
technology. Additionally, SCOTTY continuously analyses the defence and
intelligence markets to anticipate the needs of its existing customers so as to
be able to continue to enhance existing products and develop new products that
maintain technological competitiveness.

Competition
The market for commercial videoconferencing is competitive. However, there is
only a small number of suppliers who meet the rigorous requirements of military,
defence and government agencies. Military and governmental contracts require
extensive experience in satellite, encryption and videoconferencing
technologies. Penetrating military procurement lists is very challenging and,
typically entry costs to these markets are high and present a significant
barrier for new entrants.

SCOTTY has successfully established its niche position in its niche markets but
nevertheless faces direct competition from domestic and foreign companies such
as Tandberg ASA (Norway/US); 7E Communications (UK); Aethra s.r.l (Italy); GCS
Inc. (US) and VCON Limited (Israel).

4 Financial Information on SCOTTY

The following table summarises the financial record of SCOTTY for the three
years ended 31 December 2003.

                                                  2001        2002        2003
                                                 €'000       €'000       €'000
Turnover                                         2,850      11,476      10,204
Operating profit                                   125       2,435         777
Profit on ordinary activities before taxation      104       2,476         720
Extraordinary items                                  7      (2,114)          -
Profit/(loss) for the financial period              97         132         360
Net assets (as at the end of the period)         1,000       1,145       1,566

SCOTTY has not been required to prepare consolidated accounts for the periods
above, however accounts for 2003 and comparisons for 2002 were compiled to
International Financial Reporting Standards. The consolidated figures for 2001
are prepared from SCOTTY management accounts.

5 The Acquisition

Under the terms of the SCOTTY Agreement Motion Media has agreed to acquire from
the Vendors 183,095 SCOTTY Shares, representing approximately 98.45 per cent. of
the issued share capital of SCOTTY for an Initial Consideration of £56.46 per
SCOTTY Share to be satisfied by the issue to the Vendors, in aggregate, of
258,423,821 Initial Consideration Shares at Completion at the Placing Price of
4p per share.

Under the terms of the Offer Motion Media has offered to acquire 2,888 SCOTTY
Shares (being those SCOTTY Shares not comprised within the SCOTTY Agreement)
from the Remaining SCOTTY Shareholders. The initial consideration payable under
the Offer is also £56.46 per SCOTTY Share. In the event of full acceptance of
the Offer the aggregate Initial Consideration payable by Motion Media for the
entire issued share capital of SCOTTY will be £10,500,000, which will be
satisfied by the issue to the Vendors and the Remaining SCOTTY Shareholders of
an aggregate of 262,500,000 New Ordinary Shares.

Depending upon the audited results of SCOTTY for the 12 months ending 31
December 2004, Deferred Consideration will also be payable by Motion Media to
the Vendors and those Remaining SCOTTY Shareholders who accept the Offer.
Assuming full acceptance of the Offer the maximum amount of Deferred
Consideration payable will be £38,500,000, which may be satisfied at Motion
Media's sole discretion either in cash or by the issue of Deferred Consideration
Shares at the higher of 11p per share or the Closing Price.

The Deferred Consideration shall be calculated in accordance with the provisions
set out in the SCOTTY Agreement, based on Deferred Consideration Profit, as
follows:

a)where the Deferred Consideration Profit is equal to or below £1.428 million:

the Deferred Consideration will equate to a multiple of 12.25 times the Deferred
Consideration Profit less the Initial Consideration; or

b)where the Deferred Consideration Profit exceeds £1.428 million:

the Deferred Consideration will equate to a multiple of 14 times the Deferred
Consideration Profit less the Initial Consideration, subject to a maximum of
£38.5 million.

Accordingly, should the Deferred Consideration Profit be below £857,143 no
Deferred Consideration would be payable. The maximum Deferred Consideration of
£38.5 million would be payable if Deferred Consideration Profit is £3.5 million
or more.

In the event that the maximum Deferred Consideration becomes payable and
assuming full acceptance of the Offer, the total consideration for SCOTTY would
amount to £49 million.

In the event that not all SCOTTY Shares held by Remaining SCOTTY Shareholders
are acquired by Motion Media pursuant to the Offer any Deferred Consideration
payable in accordance with the formula set out above will be reduced pro rata.

For the purposes of calculating the Deferred Consideration Profit the prevailing
exchange rate as at 31 December 2004 will be applied.

The Initial Consideration Shares and the Deferred Consideration Shares (if any)
will on issue rank pari passu with the Existing Ordinary Shares, including the
right to receive all dividends and other distributions declared or made after
the date of their issue. Application will be made for the Existing Ordinary
Shares, the Initial Consideration Shares, and any Deferred Consideration Shares,
to be admitted to trading on AIM.

6 The Placing

The Placing and Open Offer
The Placing and Open Offer consists of a Placing of 114,475,000 New Ordinary
Shares and the Open Offer of up to 50,000,000 New Ordinary Shares. Pursuant to
the terms of the Placing Agreement, Charles Stanley and ARM have jointly
conditionally agreed, as agents for the Company, to use their respective
reasonable endeavours to place 100,000,000 of the Placing Shares firm with
institutional and other investors at the Placing Price. These Placing Shares are
not available for subscription under the Open Offer.

14,475,000 of the Placing Shares have been conditionally placed with
institutional and other investors at the Placing Price, subject to a right of
recall to the extent required to satisfy valid applications under the Open
Offer.

Neither the Placing nor the Open Offer has been underwritten.

The Open Offer
The Open Offer comprises 50,000,000 Open Offer Shares. Of these, 10,525,000 Open
Offer Shares are being made available by the Company at the Placing Price to
meet applications from Qualifying Shareholders under the Open Offer and the
proceeds will be utilised to provide up to £421,000 of additional working
capital for the New Group.

To the extent that applications from Qualifying Shareholders exceed 10,525,000
Open Offer Shares, the Company has agreed to make available up to 25,000,000
Initial Consideration Shares at the Placing Price on behalf of certain of the
Vendors to meet further applications under the Open Offer. To the extent that
valid applications under the Open Offer are received for more than 32,525,000
Open Offer Shares, valid applications from Qualifying Shareholders will be
satisfied by those Placing Shares placed subject to the right of recall as
described above.

The Placing Price of the New Ordinary Shares represents a discount of 69 per
cent. to the closing mid-market price of 12.75 pence per Existing Ordinary Share
as derived from the AIM Appendix of the Daily Official List of the London Stock
Exchange on 26 March 2004, being the date when the Company's shares were
suspended from dealings on AIM.

7 Open Offer

The Company will invite Qualifying Shareholders to apply, on and subject to the
terms and conditions set out in the Circular and in the Application Form, for
Open Offer Shares at the Placing Price, free of all expenses, payable in full in
cash on application on the following basis:

(a) 1 Open Offer Share for every 4.5213787 Existing Ordinary Shares held by such
Qualifying Shareholders and registered in their names on the Record Date, and so
in proportion for any other number of Existing Ordinary Shares then held (the '
Basic Entitlement'); and

(b) further Open Offer Shares in excess of their Basic Entitlement (although
such Open Offer Shares will only be allotted to the extent that not all
Qualifying Shareholders apply for their Basic Entitlement).

Qualifying Shareholders who so wish, may apply for Open Offer Shares in excess
of their Basic Entitlement. Applications in excess of the Basic Entitlement will
only be satisfied to the extent that applications by other Qualifying
Shareholders are made for less than their Basic Entitlements and may therefore
be scaled down. However, allocation of Open Offer Shares in respect of these
excess applications will be entirely at the absolute discretion of the
Directors.

The Open Offer Shares will be allotted and credited as fully paid and will rank
pari passu in all respects with the Existing Ordinary Shares in issue including
the right to receive all dividends and other distributions declared, made or
paid thereon following Admission.

8 Reasons for the Proposals

The Directors believe that the acquisition of SCOTTY represents an exciting
opportunity to bring together two highly complementary businesses operating in
similar but non-competing markets, with the prospect of sharing technology,
achieving greater market penetration for a more broadly based product offering
in each of the markets served by the two groups, and significant economies of
scale. The Directors believe that these factors, coupled with new opportunities
which, together with Proposed Directors, they have identified for the New Group,
represent an opportunity to enhance shareholder value significantly in the
future.

9 The effects of the Acquisition, the Placing and the Open Offer on
shareholdings in Motion Media

Due to the size of SCOTTY, and the number of Consideration Shares to be issued,
the Acquisition is classed as a reverse takeover for the purposes of the AIM
Rules. Accordingly, the Proposals are conditional upon, inter alia, the approval
of Shareholders, which is being sought at the EGM, notice of which is set out in
the Circular.

Under the terms of the Placing, the Open Offer, the SCOTTY Agreement and the
Offer, the Proposed Directors and certain other SCOTTY shareholders, who are
deemed to be acting in concert in relation to Motion Media for the purposes of
the City Code, will acquire more than 30 per cent. of the issued share capital
of the New Group following completion of the Acquisition, the Offer, Placing and
Open Offer. The Panel has been consulted with a view to it granting a waiver of
the provisions of Rule 9 of the City Code, under which, in the absence of such
waiver, the Concert Party would be obliged to make a mandatory cash offer to all
other holders of Ordinary Shares.

The Panel has agreed, subject to Resolution 1 being passed on a poll of
Shareholders at the EGM, to waive the obligation on the Concert Party to make a
general offer to Shareholders under Rule 9 of the City Code ('Rule 9') which
would otherwise arise as a result of the issue of the Initial Consideration
Shares and any further new Ordinary Shares in satisfaction of any of Deferred
Consideration. If any member of the Concert Party has any shares in the Company
at the time of the EGM they will not be entitled to vote on this resolution.

10 Current trading and prospects

The Directors and the Proposed Directors, having regard to the performance of
Motion Media and SCOTTY respectively, consider that the prospects for the New
Group for the future are very attractive.

Turnover for the first quarter at SCOTTY is close to budget though some slippage
of deliveries has occurred from the second quarter into the third quarter.
Nonetheless, new order prospects for the year as a whole appear good. The first
five months of sales at Motion Media are below budget, as are the operating
costs, resulting in a net loss below budget. The Directors remain optimistic,
particularly in regard to prospects in the Telehealth market, the potential for
the Company's range of IP videophones and for sales of security products in the
US which appear good as a major competitor has recently withdrawn one of its
directly competing products. The Telehealth market continues to offer growth
opportunities evidenced by some significant proposals which have been indicated
in recent months and where Motion Media's CareStation videophones have an
advantage in being the only videophones with FDA certification.

Accordingly, the Directors and the Proposed Directors view the future growth
prospects for the New Group with confidence.

11 Benefits of the Acquisition

Motion Media's acquisition of SCOTTY will enable a significant reduction in
costs to occur as the combined group currently maintains four engineering
centres. The two companies have a common technological background having
developed their products based upon the Agere AVP III audio video processor,
they have utilised the same audio codecs and IP drivers. There is therefore a
significant commonality of knowledge of each other's technologies. SCOTTY's
subsidiary, Zydacron, has come to the end of a major development programme as
its new generation Z470, H.264 based, codec is now intended for launch in July
and Motion Media's Bristol engineering group has come to the end of the major
development of the mm745. As a consequence, both sites would in any case require
a significant adjustment in the nature of their engineering teams which, with
the merger, provides an opportunity to rationalise the engineering functions to
a greater degree and thereby concentrate application development in Austria and
platform development in Wilmington, US with little or no loss in the engineering
capability required for the future development of the New Group.

SCOTTY's development of its new H.264 codec based on the TI processor provides
an excellent opportunity for Motion Media to adopt this new platform for its
future products and save significant development cost. SCOTTY also brings its
experience in satellite communications to Motion Media whilst Motion Media's
expertise in PSTN and IP (particularly with its Packet BuddyTM protocol) and its
echo cancellation techniques, has application in SCOTTY products.

No significant product overlap exists between the two companies and it is
envisaged that all products will continue to be supported. In certain areas the
opportunity to offer customers solution packages will be enhanced, such as in
telehealth where Motion Media's patient orientated Carestation products can be
augmented by SCOTTY's PC-based systems which can be targeted at the hospital or
call station end of the system. SCOTTY has identified target customers amongst
service providers in mainland Europe for the mm745 and has already supplied
mm745s to its existing military customers for soldiers on duty abroad to be able
to communicate with their families back home. The Directors and Proposed
Directors believe that as well as cross-selling opportunities SCOTTY's
reputation with government defence departments should lead to additional
opportunities for identifying government related sales for Motion Media
products, particularly in the health sector.

The Directors and Proposed Directors estimate that the New Group can achieve a
combined cost reduction of about 30%. It is anticipated that a proportion of the
savings to be made in engineering and other common overheads will be allocated
to building a stronger sales and marketing team, refocusing what have in the
past been predominantly engineering led companies into an international sales
driven group. The annualised net savings even after this proposed increase in
sales and marketing overhead is estimated at £1 million.

In particular, Motion Media is likely to be able to reach profitability far more
quickly on the much lower cost base now anticipated. However the New Group is
budgeting for a significant increase in sales, with SCOTTY still expected to
contribute about three-quarters to the total, which will naturally lead to
additional overhead requirement as those sales are realised - margins and cash
flow are anticipated to remain good.

The New Group aims to become the third force in video conferencing, after the
market leaders, Polycom and Tandberg, however it is not the intention to try and
compete with those companies in the market area in which they dominate (group
conferencing) but to target niche growth markets in military, telehealth and
security where the New Group can dominate areas where demand for videotelephony
is already evident, in a way that has made SCOTTY already successful. The
general market for desktop videotelephony has still not yet developed, however
Motion Media will remain well positioned to take advantage when it does. In
addition, the New Group will seek to acquire businesses which can provide added
growth in niche areas or add to the group's strengths.

12 Proposed Directors' Service Agreements

Conditional upon Admission:

(i) Kurt Kerschat will be appointed on Admission as Chief Executive Officer and
Georg Weber will be appointed on Admission as Finance Director pursuant to the
terms of their respective service agreements both dated 6 July 2004, the
principal terms of which are summarised below:

(A) a salary of €155,000 per annum payable in 14 instalments.

(B) a review by the Company of salary annually, the first review taking place on
29 July 2005.

(C) each of the service agreements will continue unless and until terminated by
not less than 12 months written notice by either party.

(D) entitlement to 25 days' holiday in addition to bank holidays.

(E) entitlement to full salary for the first 12 weeks' absence through sickness
or injury in any period of 12 months.

(F) a requirement to work for the Company on a full time basis, with an
estimated 40 per cent. of time spent at the Company's office in Austria.

(G) contributions to the Austrian State Basic Pension Scheme are made
automatically through social security contributions in respect of Mr. Kerschat
and Mr. Weber.

(H) life assurance cover equal to four times salary.

(I) the service agreements include clauses on confidentiality and restrictive
covenants. Mr. Kerschat and Mr. Weber are restricted from being concerned in any
other undertaking without the prior sanction of the board, and restricted from
competing with the company and from soliciting customers or particular staff for
12 months after termination of their employment.

(ii) Peter Sauerzopf will be appointed as a non-executive director of the
Company. He will receive £20,000 per annum in respect of his services, which he
is contracted to provide for a minimum of 12 days per year. He is entitled to
additional remuneration in the event that he is called upon to provide any
special duties or responsibilities outside of his ordinary duties as a director.
The appointment is terminable on three months written notice from either party.

(iii) Ernst Wustinger will be appointed as a non-executive director of the
Company. He will receive £20,000 per annum in respect of his services, which he
is contracted to provide for a minimum of 12 days per year. He is entitled to
additional remuneration in the event that he is called upon to provide any
special duties or responsibilities outside of his ordinary duties as a director.
The appointment is terminable on three months written notice from either party.

13 Extraordinary General Meeting

The Circular contains a notice convening an Extraordinary General Meeting of the
Company to be held at 2.30 p.m. (or, if later, as soon as practicable after the
AGM has been concluded or adjourned) on 28 July 2004 for the purpose of
considering the EGM Resolutions to implement the Proposals.

14 Pricing of the Placing

When the Company's shares were suspended on 26 March 2004, following the
announcement of the proposed acquisition of SCOTTY, the share price on AIM was
12.75p. In the last few weeks the Board, in conjunction with ARM and Charles
Stanley, has undertaken a broadly based test marketing with a number of
institutional and other investors to gauge the level of support for the Placing
and to establish the basis for pricing it successfully.

It has become clear that in order to raise £4.1 million, being the minimum
amount, net of expenses, required to meet the working capital requirements of
the New Group, the placing price would have to represent a significant discount
to the suspension price. From marketing feedback the Board has found it
necessary to fix the Placing Price at 4p to ensure the success of the Placing.
The Board believes that the trading and financial merits of the Proposals
provide the commercial justification for this.

15 Importance of the Proposals

The Placing would, on becoming unconditional in all respects, raise sufficient
additional working capital for the New Group's projected requirements for at
least the next 12 months. However, to the extent that the Placing is
conditional, inter alia, on the passing of the EGM Resolutions, the Proposals
would not proceed as envisaged if Shareholders do not approve any of the EGM
Resolutions. In these circumstances the Company would have to seek further
funding. Accordingly, the Board strongly urges Shareholders to vote in favour of
the EGM Resolutions.

16 Recommendation

The Directors, who have been so advised by ARM, consider that the Proposals and
the waiver of Rule 9 in respect of the Concert Party are in the best interests
of the Company and its Shareholders as a whole.

Accordingly, the Directors unanimously recommend Shareholders to vote in favour
of each of the EGM Resolutions and each of the resolutions to be proposed at the
EGM as they have irrevocably undertaken to do in respect of their own beneficial
shareholdings amounting to 2,820,658 Existing Ordinary Shares, representing 1.03
per cent. of the existing issued ordinary share capital of the Company.

Enquiries:

Rex Thorne, Executive
Chairman                Motion Media PLC                +44 (0)1454 635400
Jim McGeever            ARM Corporate Finance Ltd       +44 (0)20 7512 0191
Nick Denton / Georgina
Briscoe                 Hogarth Partnership             +44 (0)20 7357 9477

                                  DEFINITIONS

The following definitions apply throughout this announcement unless the context
requires otherwise:

'Acquisition' the proposed acquisition by Motion Media of the entire issued
share capital of SCOTTY pursuant to the SCOTTY Agreement and the Offer

'Admission' the re-admission of the Existing Ordinary Shares and the admission
of the Placing Shares (including the Open Offer Shares) and the Initial
Consideration Shares to trading on AIM becoming effective in accordance with
Rule 6 of the AIM Rules

'AGM' the Annual General Meeting of the Company to be held at the Motion Media
Technology Centre, Severn Bridge, Aust, Bristol BS35 4BL at 2.00 p.m. on
Wednesday, 28 July 2004

'AIM' the AIM Market of the London Stock Exchange

'AIM Rules' the rules published by the London Stock Exchange governing admission
to and the operation of AIM

'ARM' ARM Corporate Finance Limited

'Charles Stanley' Charles Stanley & Co. Limited

'Circular' the prospectus dated 6 July 2004 and issued by the Company in
relation to the Proposals

'City Code' the City Code on Takeovers and Mergers

'Closing Price' the average closing middle market quotation of an Ordinary Share
(as derived from the Daily Official List) over the calendar month ending on 31
January 2005

'Company' or Motion Media PLC
'Motion Media'

'Completion' completion of the SCOTTY Agreement in accordance with its terms

'Concert Party' the Proposed Directors and certain other SCOTTY Shareholders,
further details of which are set out in the Circular

'Consideration Shares' the Initial Consideration Shares and the Deferred
Consideration Shares

'Daily Official List' the Daily Official List of the London Stock Exchange

'Deferred Consideration' the consideration which, in accordance with the
provisions of the SCOTTY Agreement, may be payable by Motion Media to the
Vendors and such Remaining SCOTTY Shareholders whose SCOTTY Shares are acquired
by Motion Media pursuant to the Offer, calculated by reference to the Deferred
Consideration Profit

'Deferred Consideration Profit' the pre-tax profit of SCOTTY for the 12 month
period ending on 31 December 2004, as calculated in accordance with the
provisions set out in the SCOTTY Agreement

'Deferred Consideration Shares' up to 350,000,000 new Ordinary Shares which may
be issued in satisfaction of the Deferred Consideration

'Directors' or 'Board' the directors of the Company as at the date of this
announcement

'EGM' the Extraordinary General Meeting of the Company to be held at 2.30 p.m.
(or, if later, as soon as practicable after the AGM has been concluded or
adjourned) on 28 July 2004, notice of which is set out in the Circular

'EGM Resolutions' the resolutions contained in the Notice of Extraordinary
General Meeting

'Existing Group' the Company and its subsidiaries as at the date of this
announcement

'Existing Ordinary Shares' the issued Ordinary Shares as at the date of this
announcement

'Group' Motion Media and its existing subsidiaries

'Initial Consideration' the consideration payable to the Vendors and those
remaining SCOTTY shareholders whose SCOTTY Shares are acquired by Motion Media
pursuant to the Offer, in each case to be satisfied by the issue of the Initial
Consideration Shares

'Initial Consideration Shares' up to 262,500,000 New Ordinary Shares to be
issued credited as fully paid to the Vendors at Completion

'London Stock Exchange' London Stock Exchange plc

'New Group' the Company and its subsidiaries immediately following Admission

'New Ordinary Shares' together the Initial Consideration Shares, the Placing
Shares and the Open Offer Shares

'Offer' the offer made by the Company to acquire all of the SCOTTY Shares held
by the Remaining SCOTTY Shareholders

'Open Offer Shares' 50,000,000 Ordinary Shares being 14,475,000 of the Placing
Shares, the subject of the Open Offer, 10,525,000 New Ordinary Shares and
25,000,000 Initial Consideration Shares, the subject of the Vendor Consideration
Shares Agreement

'Open Offer' the invitation by the Company to Qualifying Shareholders to
subscribe for the Open Offer Shares at the Placing Price
'Ordinary Shares' ordinary shares of 1p each in the capital of the Company

'Panel' the Panel on Takeovers and Mergers

'Placing' the conditional placing by Charles Stanley and ARM of the Placing
Shares at the Placing Price in accordance with the Placing Agreement

'Placing Agreement' the conditional agreement dated 6 July 2004 between Motion
Media, the Directors, the Proposed Directors, Charles Stanley and ARM

'Placing Price' 4p per Placing Share

'Placing Shares' up to 114,475,000 New Ordinary Shares to be subscribed pursuant
to the Placing and the Open Offer

'Proposals' the Acquisition, the Placing, the Open Offer and the proposed change
of the Company's name

'Proposed Directors' Kurt Kerschat, Georg Weber, Peter Sauerzopf and Ernst
Wustinger

'Qualifying Shareholders' Shareholders whose names appear on the register of
members of the Company on the Record Date (save in relation to certain overseas
Shareholders)

'Record Date' the record date for the Open Offer, being the close of business on
1 July 2004

'Remaining SCOTTY Shareholders' the shareholders of SCOTTY other than the
Vendors

'Shareholders' holders of Ordinary Shares

'SCOTTY' SCOTTY Tele-Transport Corporation Radio- und Videoelektronik
Aktiengesellschaft

'SCOTTY Agreement' the conditional agreement dated 6 July 2004 between the
Vendors and Motion Media

'SCOTTY Group' SCOTTY and its subsidiaries

'SCOTTY Shareholders' the Vendors and the Remaining SCOTTY Shareholders

'SCOTTY Shares' up to 185,983 shares in SCOTTY to be acquired by Motion Media
pursuant to the SCOTTY Agreement and the Offer, representing the entire issued
share capital of SCOTTY

'Vendors' the vendors of SCOTTY Shares pursuant to the SCOTTY Agreement

'Vendor Consideration the agreement dated 6 July 2004 between the
Shares Agreement' Company and certain of the Vendors

'Zydacron' Zydacron Inc., the SCOTTY subsidiary based in Manchester, New
Hampshire (US)




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