EXHIBIT A
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PLAN OF REORGANIZATION
AND
AGREEMENT OF MERGER
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OAK TECHNOLOGY, INC.,
PIXEL MAGIC, INC.
XEROGRAPHIC LASER IMAGES CORPORATION
AND
OTI ACQUISITION CORPORATION
JANUARY 29, 1998
TABLE OF CONTENTS
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SECTION NO. PAGE NO.
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1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 "Xxxxx". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 "Base Amount". . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 "Certificates" . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "Class A Warrants" . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 "Closing Balance Sheet". . . . . . . . . . . . . . . . . . . . . 2
1.7 "COBRA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 "Consideration". . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 "Contingent Cash". . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 "Contingent Cash Adjustment" . . . . . . . . . . . . . . . . . . 2
1.12 "X'Xxxxxx" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 "Digital Modulator Feature IC" . . . . . . . . . . . . . . . . . 2
1.14 "Dissenting Stockholder" . . . . . . . . . . . . . . . . . . . . 2
1.15 "Effective Date" . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 "Effective Time" . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 "Employment Agreements". . . . . . . . . . . . . . . . . . . . . 3
1.18 "End User" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 "ERISA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 "Escrow Agent" . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 "Escrow Agreement" . . . . . . . . . . . . . . . . . . . . . . . 3
1.22 "Exchange Act" . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23 "Exchange Agent" . . . . . . . . . . . . . . . . . . . . . . . . 3
1.24 "Exchange Agreement" . . . . . . . . . . . . . . . . . . . . . . 3
1.25 "Existing Xxxxxx Agreement". . . . . . . . . . . . . . . . . . . 3
1.26 "Gross XLI Product Revenue". . . . . . . . . . . . . . . . . . . 3
1.27 "Indemnifying Stockholders". . . . . . . . . . . . . . . . . . . 3
1.28 "Initial Distribution Amount". . . . . . . . . . . . . . . . . . 3
1.29 "IPO Warrants" . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.30 "Irrevocable Proxy". . . . . . . . . . . . . . . . . . . . . . . 3
1.31 "Loss" or "Losses" . . . . . . . . . . . . . . . . . . . . . . . 3
1.32 "Merger" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.33 "Merger Cash". . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.34 "Multiple Feature IC". . . . . . . . . . . . . . . . . . . . . . 4
1.35 "Net Deficit". . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.36 "Oak SEC Reports". . . . . . . . . . . . . . . . . . . . . . . . 4
1.37 "Oak Subsidiaries" . . . . . . . . . . . . . . . . . . . . . . . 4
1.38 "OEM". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.39 "Party Stockholders" . . . . . . . . . . . . . . . . . . . . . . 4
1.40 "Permitted XLI Contact". . . . . . . . . . . . . . . . . . . . . 4
1.41 "Pixel ASIC" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.42 "Post-Closing Audit" . . . . . . . . . . . . . . . . . . . . . . 4
1.43 "Private 1995 Warrants". . . . . . . . . . . . . . . . . . . . . 4
1.44 "Private 1996 Warrants". . . . . . . . . . . . . . . . . . . . . 4
1.45 "Private Warrants" . . . . . . . . . . . . . . . . . . . . . . . 4
1.46 "Related Party". . . . . . . . . . . . . . . . . . . . . . . . . 4
1.47 "Representative's Warrant" . . . . . . . . . . . . . . . . . . . 4
1.48 "SEC". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.49 "Securities Act" . . . . . . . . . . . . . . . . . . . . . . . . 4
i
SECTION NO. PAGE NO.
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1.50 "Statutory Certificate of Merger". . . . . . . . . . . . . . . . 5
1.51 "Stockholder Representatives". . . . . . . . . . . . . . . . . . 5
1.52 "Sub Stock". . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.53 "Super Chip" . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.54 "Superior XLI Proposal". . . . . . . . . . . . . . . . . . . . . 5
1.55 "Technology License and Supply Agreement". . . . . . . . . . . . 5
1.56 "Termination Fee". . . . . . . . . . . . . . . . . . . . . . . . 5
1.57 "Threshold Amount" . . . . . . . . . . . . . . . . . . . . . . . 5
1.58 "Underwriter". . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.59 "Underwriter's Warrant". . . . . . . . . . . . . . . . . . . . . 5
1.60 "Unexpired Private Warrant". . . . . . . . . . . . . . . . . . . 5
1.61 "XLI Certificate of Objections". . . . . . . . . . . . . . . . . 5
1.62 "XLI Common Stock" . . . . . . . . . . . . . . . . . . . . . . . 5
1.63 "XLI Employee Benefit Plan". . . . . . . . . . . . . . . . . . . 5
1.64 "XLI Intellectual Property Rights" . . . . . . . . . . . . . . . 5
1.65 "XLI Material Contracts" . . . . . . . . . . . . . . . . . . . . 6
1.66 "XLI Pension Plans". . . . . . . . . . . . . . . . . . . . . . . 6
1.67 "XLI Preferred Stock". . . . . . . . . . . . . . . . . . . . . . 6
1.68 "XLI Products" . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.69 "XLI SEC Reports". . . . . . . . . . . . . . . . . . . . . . . . 6
1.70 "XLI Special Meeting". . . . . . . . . . . . . . . . . . . . . . 6
1.71 "XLI Stock". . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.72 "XLI Stockholders" . . . . . . . . . . . . . . . . . . . . . . . 6
1.73 "XLI Subordinated Notes" . . . . . . . . . . . . . . . . . . . . 6
1.74 "XLI Subsidiaries" . . . . . . . . . . . . . . . . . . . . . . . 6
1.75 "XLI Transaction Proposal" . . . . . . . . . . . . . . . . . . . 6
1.76 "XLI Warrants" . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 MERGER.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS. . . . . . . . . . . . . 6
2.3 DIRECTORS AND OFFICERS.. . . . . . . . . . . . . . . . . . . . . 7
2.4 EFFECT OF MERGER ON OUTSTANDING SECURITIES.. . . . . . . . . . . 7
2.4.1 SUB STOCK. . . . . . . . . . . . . . . . . . . . . . . . 7
2.4.2 XLI STOCK AND XLI WARRANTS.. . . . . . . . . . . . . . . 7
2.4.3 MERGER CASH. . . . . . . . . . . . . . . . . . . . . . . 8
2.4.4 CONTINGENT CASH. . . . . . . . . . . . . . . . . . . . . 8
2.4.5 BASE AMOUNT. . . . . . . . . . . . . . . . . . . . . . . 9
2.5 EXCHANGE OF CERTIFICATES; PAYMENT OF MERGER CASH . . . . . . . . 10
2.5.1 EXCHANGE AGENT . . . . . . . . . . . . . . . . . . . . . 10
2.5.2 OAK TO PROVIDE CASH. . . . . . . . . . . . . . . . . . . 10
2.5.3 EXCHANGE PROCEDURES. . . . . . . . . . . . . . . . . . . 10
2.5.4 NO FURTHER OWNERSHIP RIGHTS IN XLI STOCK . . . . . . . . 11
2.5.5 LOST, STOLEN OR DESTROYED CERTIFICATES.. . . . . . . . . 11
2.5.6 NO LIABILITY . . . . . . . . . . . . . . . . . . . . . . 11
2.6 PAYMENT OF CONTINGENT CASH . . . . . . . . . . . . . . . . . . . 12
2.6.1 TIME AND PAYMENT PROCEDURES. . . . . . . . . . . . . . . 12
2.6.2 SET-OFF AND INDEMNITY HOLD BACK. . . . . . . . . . . . . 13
2.6.3 AUDIT RIGHTS . . . . . . . . . . . . . . . . . . . . . . 13
ii
SECTION NO. PAGE NO.
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2.7 DISTRIBUTIONS FROM ESCROW. . . . . . . . . . . . . . . . . . . . 14
2.7.1 INITIAL ESCROW DISTRIBUTION. . . . . . . . . . . . . . . 14
2.7.2 UPON EXERCISE OF XLI WARRANTS. . . . . . . . . . . . . . 14
2.7.3 UPON TERMINATION OF THE ESCROW AGREEMENT . . . . . . . . 15
2.7.4 ALLOCATION OF XLI WARRANT EXERCISE AMOUNTS . . . . . . . 15
2.8 EFFECTIVE DATE.. . . . . . . . . . . . . . . . . . . . . . . . . 15
3. REPRESENTATIONS AND WARRANTIES OF OAK. . . . . . . . . . . . . . . . . . 15
3.1 ORGANIZATION AND GOOD STANDING.. . . . . . . . . . . . . . . . . 16
3.2 AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.3 OAK SEC FILINGS; FINANCIAL STATEMENTS. . . . . . . . . . . . . . 16
3.4 COMPLIANCE WITH OTHER INSTRUMENTS. . . . . . . . . . . . . . . . 17
3.5 GOVERNMENT CONSENTS. . . . . . . . . . . . . . . . . . . . . . . 17
4. REPRESENTATIONS AND WARRANTIES OF XLI. . . . . . . . . . . . . . . . . . 17
4.1 ORGANIZATION AND GOOD STANDING.. . . . . . . . . . . . . . . . . 17
4.2 CAPITALIZATION.. . . . . . . . . . . . . . . . . . . . . . . . . 18
4.3 AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.4 XLI SEC FILINGS; FINANCIAL STATEMENTS. . . . . . . . . . . . . . 19
4.5 OWNERSHIP OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . 20
4.6 LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.7 INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.8 RAW MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.9 SALES CONTRACTS AND BIDS . . . . . . . . . . . . . . . . . . . . 21
4.10 QUALITY AND CONFORMANCE OF PRODUCTS. . . . . . . . . . . . . . . 21
4.11 ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . . . . . . 21
4.12 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.13 FIRPTA STATUS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.14 CUSTOMER LIST. . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.15 VENDORS LIST . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.16 BUSINESS CHANGES.. . . . . . . . . . . . . . . . . . . . . . . . 22
4.17 XLI INTELLECTUAL PROPERTY RIGHTS . . . . . . . . . . . . . . . . 25
4.18 COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . . 25
4.19 HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS.. . . . . . . . . . . 25
4.20 ERISA AND RELATED MATTERS. . . . . . . . . . . . . . . . . . . . 26
4.21 EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.22 LITIGATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.23 MATERIAL CONTRACTS.. . . . . . . . . . . . . . . . . . . . . . . 28
4.24 COMPLIANCE WITH OTHER INSTRUMENTS. . . . . . . . . . . . . . . . 28
4.25 GOVERNMENT CONSENTS. . . . . . . . . . . . . . . . . . . . . . . 29
4.26 CERTAIN TRANSACTIONS.. . . . . . . . . . . . . . . . . . . . . . 29
4.27 BROKERS OR FINDERS.. . . . . . . . . . . . . . . . . . . . . . . 29
4.28 ADDITIONAL DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . 29
4.29 COMPLETE DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . 32
4.30 MATERIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5. REPRESENTATIONS AND WARRANTIES OF PARTY STOCKHOLDERS . . . . . . . . . . 32
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SECTION NO. PAGE NO.
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6. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.1 XLI COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.1.1 SPECIAL MEETING; PROXY STATEMENT.. . . . . . . . . . . . 32
6.1.2 APPRAISAL MATTERS. . . . . . . . . . . . . . . . . . . . 33
6.1.3 AMENDMENT OF XLI CERTIFICATE OF INCORPORATION. . . . . . 33
6.1.4 NOTICE OF DEFAULT OR CLAIM . . . . . . . . . . . . . . . 33
6.1.5 NO SOLICITATION. . . . . . . . . . . . . . . . . . . . . 33
6.1.6 ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.1.7 CONDUCT OF BUSINESS OF XLI PENDING THE MERGER. . . . . . 34
6.1.8 NOTICE DELIVERY REQUIREMENTS . . . . . . . . . . . . . . 35
6.1.9 COOPERATION OF XLI . . . . . . . . . . . . . . . . . . . 35
6.2 OAK, PIXEL AND SUB COVENANTS.. . . . . . . . . . . . . . . . . . 35
6.2.1 SUB AUTHORIZATION. . . . . . . . . . . . . . . . . . . . 35
6.2.2 MAINTENANCE OF XLI OPERATIONS. . . . . . . . . . . . . . 35
6.2.3 PAYMENT BY OAK OF CERTAIN XLI ACCOUNTS PAYABLE . . . . . 35
6.2.4 OAK OPTIONS. . . . . . . . . . . . . . . . . . . . . . . 36
7. CONDITIONS TO MERGER.. . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.1.1 STOCKHOLDER APPROVAL . . . . . . . . . . . . . . . . . . 36
7.1.2 GOVERNMENT APPROVAL. . . . . . . . . . . . . . . . . . . 36
7.1.3 LEGAL ACTION . . . . . . . . . . . . . . . . . . . . . . 36
7.1.4 STATUTES . . . . . . . . . . . . . . . . . . . . . . . . 36
7.1.5 XXXXXX CORPORATION . . . . . . . . . . . . . . . . . . . 36
7.2 CONDITIONS TO OAK'S, PIXEL'S AND SUB'S OBLIGATIONS.. . . . . . . 37
7.2.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 37
7.2.2 PERFORMANCE OF OBLIGATIONS OF XLI. . . . . . . . . . . . 37
7.2.3 OPINION OF XLI'S COUNSEL . . . . . . . . . . . . . . . . 37
7.2.4 NON-COMPETE AND CONFIDENTIALITY AGREEMENTS . . . . . . . 37
7.2.5 SATISFACTORY FORM OF LEGAL AND ACCOUNTING MATTERS. . . . 37
7.2.6 NO MATERIAL ADVERSE CHANGES. . . . . . . . . . . . . . . 37
7.2.7 CONDITIONS FULFILLED . . . . . . . . . . . . . . . . . . 37
7.2.8 BOARD AND STOCKHOLDER RESOLUTIONS. . . . . . . . . . . . 37
7.2.10 THIRD-PARTY APPROVALS. . . . . . . . . . . . . . . . . . 38
7.2.11 XLI STOCK AND SHARE EQUIVALENTS. . . . . . . . . . . . . 38
7.2.12 RESIGNATION OF XLI DIRECTORS AND OFFICERS. . . . . . . . 38
7.2.13 BANK ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . 38
7.2.14 EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . 38
7.2.15 XLI SUBORDINATED NOTES . . . . . . . . . . . . . . . . . 38
7.2.16 EXERCISE OF PRIVATE WARRANTS . . . . . . . . . . . . . . 39
7.3 CONDITIONS TO XLI'S OBLIGATIONS. . . . . . . . . . . . . . . . . 39
7.3.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 39
7.3.2 PERFORMANCE OF OBLIGATIONS OF OAK AND PIXEL. . . . . . . 39
7.3.3 OPINION OF OAK'S COUNSEL . . . . . . . . . . . . . . . . 39
7.3.4 SATISFACTORY FORM OF LEGAL MATTERS . . . . . . . . . . . 39
7.3.5 CONDITIONS FULFILLED . . . . . . . . . . . . . . . . . . 39
7.3.6 BOARD AND STOCKHOLDERS RESOLUTIONS . . . . . . . . . . . 39
7.3.7 EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . 39
iv
SECTION NO. PAGE NO.
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8. TERMINATION; AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . . . . . 39
8.1 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.2 EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . 41
8.3 AMENDMENT AND WAIVER.. . . . . . . . . . . . . . . . . . . . . . 41
9. POST-CLOSING ADJUSTMENT. . . . . . . . . . . . . . . . . . . . . . . . . 41
9.1 POST-CLOSING AUDIT.. . . . . . . . . . . . . . . . . . . . . . . 41
9.2 CONTINGENT CASH ADJUSTMENT . . . . . . . . . . . . . . . . . . . 41
10. NON-RECOURSE INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . 41
10.1 INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.2 THRESHOLD. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3 DEFENSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.4 TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.5 NON-RECOURSE INDEMNITY . . . . . . . . . . . . . . . . . . . . . 42
11. PROVISIONS RELATING TO THE STOCKHOLDER REPRESENTATIVES. . . . . . . . . 43
11.1 APPOINTMENT OF STOCKHOLDER REPRESENTATIVES . . . . . . . . . . . 43
11.2 ACTIONS AND INSTRUCTIONS OF STOCKHOLDER REPRESENTATIVES. . . . . 43
12. MISCELLANEOUS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.1 GOVERNING LAWS . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.2 BINDING UPON SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . 44
12.3 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.4 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 44
12.5 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.6 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.7 OTHER REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.8 SURVIVAL OF AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 44
12.9 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.10 CONSTRUCTION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . 46
12.11 PRONOUNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.12 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . 46
12.13 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. . . . . . . . . . . . 46
12.14 OBLIGATIONS TO EMPLOYEES . . . . . . . . . . . . . . . . . . . . 46
v
LIST OF EXHIBITS
EXHIBIT TITLE
------- -----
"A-1" Form of X'Xxxxxx Employment Agreement
"A-2" Form of Xxxxx Employment Agreement
"B" Form of Escrow Agreement
"C" Form of Exchange Agreement
"D" Form of Irrevocable Proxy
"E" Form of Statutory Certificate of Merger
"F" Exceptions to Representations and Warranties of Oak
Technology, Inc.
"G" Exceptions to Representations and Warranties of
Xerographic Laser Images Corporation
"H" XLI Disclosure Schedules
"I" Schedule of Payments by Oak of Certain XLI Accounts
Payable
"J" Form of Warner & Xxxxxxxxx LLP Legal Opinion
"K" Form of Non-Compete Agreement
"L" Form of Confidentiality Agreement
"M" Form of Xxxxxxxxx Xxxxx Morosoli & Maser LLP Legal
Opinion
vi
OAK TECHNOLOGY, INC.,
PIXEL MAGIC, INC.
PLAN OF REORGANIZATION
AND AGREEMENT OF MERGER OF
OTI ACQUISITION CORPORATION
WITH AND INTO
XEROGRAPHIC LASER IMAGES CORPORATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("AGREEMENT") is dated January
29, 1998, by and among Oak Technology, Inc., a Delaware corporation ("OAK"),
Pixel Magic, Inc., a Massachusetts corporation ("PIXEL"), OTI Acquisition
Corporation, a Delaware corporation ("SUB"), and Xerographic Laser Images
Corporation, a Delaware corporation ("XLI" or "SURVIVING CORPORATION") and
certain stockholders of XLI set forth on the signature pages hereto (the "PARTY
STOCKHOLDERS").
R E C I T A L S
A. Oak is a corporation organized and existing under the laws of the
State of Delaware.
B. Pixel, a wholly-owned subsidiary of Oak, is a corporation organized
and existing under the laws of the Commonwealth of Massachusetts.
C. Sub, a wholly-owned subsidiary of Pixel, is a corporation organized
and existing under the laws of the State of Delaware.
D. XLI is a corporation organized and existing under the laws of the
State of Delaware.
E. The Boards of Directors of Oak, Pixel, Sub and XLI deem it advisable
for the welfare and best interests of said corporations and for the best
interests of the respective stockholders of said corporations that Sub be merged
with and into XLI, with XLI being the surviving corporation, on the terms and
conditions hereinafter set forth and in accordance with the applicable
provisions of the Delaware General Corporation Law which permit such a merger.
F. The Party Stockholders have delivered to Pixel irrevocable proxies
to vote in favor of the adoption of this Agreement, the approval of the merger
transaction described herein and the appointment of representatives of the
holders of the capital stock of XLI.
A G R E E M E N T
NOW, THEREFORE, in reliance on the foregoing recitals and in consideration
of the mutual covenants and agreements contained herein, the parties hereto,
subject to the approval of the stockholders of Sub and XLI as required by law,
and the satisfaction or waiver of the other conditions contained herein, do
hereby agree that Sub shall be merged with and into XLI pursuant to the law of
the State of Delaware, and do hereby agree, prescribe and set forth the terms
and conditions of the merger of Sub with and into XLI, the mode of carrying the
same into effect and the manner of converting shares of XLI and share
equivalents of XLI into cash and a contingent right to receive future cash
payments.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 2
SECTION 1. DEFINITIONS.
The following terms shall have the meanings set forth herein:
1.1 "XXXXX" shall mean Xxxxxx X. Xxxxx.
1.2 "BASE AMOUNT" shall have the meaning set forth in Section 2.4
(Effect of Merger on Outstanding Securities).
1.3 "XXXXXX TECHNOLOGY" AND "XXXXXX RIGHTS" shall have the meanings
assigned to such terms in the license agreements to be entered into by and
between Xxxxxx Corporation and Pixel pursuant to Section 7.1.5 (Xxxxxx
Corporation).
1.4 "CERTIFICATES" shall have the meaning set forth in Section 2.5.3
(Exchange Procedures).
1.5 "CLASS A WARRANTS" shall mean the warrants issued by XLI in
connection with its offering of Series A Preferred Stock in 1994 and currently
held by the public and the Underwriter.
1.6 "CLOSING BALANCE SHEET" shall mean XLI's consolidated balance sheet
prepared for the end of the month immediately preceding the Effective Date or if
the Effective Date is the end of the month, the Effective Date.
1.7 "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
1.8 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.9 "CONSIDERATION" shall have the meaning set forth in Section 2.4.2
(XLI Stock and XLI Warrants).
1.10 "CONTINGENT CASH" shall mean an amount per share of XLI Common Stock
as calculated in Section 2.4 (Effect of Merger on Outstanding Securities).
1.11 "CONTINGENT CASH ADJUSTMENT" shall have the meaning set forth in
Section 9.2 (Contingent Cash Adjustment).
1.12 "X'XXXXXX" shall mean Xxxxxxx X. X'Xxxxxx.
1.13 "DIGITAL MODULATOR FEATURE IC" shall have the meaning set forth in
the Technology License and Supply Agreement.
1.14 "DISSENTING STOCKHOLDER" shall mean any XLI stockholder exercising
his, her or its rights under Section 262 of the Delaware General Corporation
Law.
1.15 "EFFECTIVE DATE" shall mean the date on which the Statutory
Certificate of Merger is filed with the Secretary of State of the State of
Delaware.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 3
1.16 "EFFECTIVE TIME" shall mean the Delaware local time at which the
Statutory Certificate of Merger is filed with the Secretary of State of the
State of Delaware and is effective.
1.17 "EMPLOYMENT AGREEMENTS" shall mean the agreements substantially in
the forms of Exhibit "A-1" and "A-2" hereto entered into by Pixel with X'Xxxxxx
and Xxxxx, respectively.
1.18 "END USER" shall mean a person or entity who acquires a Digital
Modular Feature IC or a Multiple Feature IC directly or indirectly from Oak or
Pixel or their Related Parties, agents or distributors, solely for personal or
internal use and not for resale.
1.19 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.20 "ESCROW AGENT" shall mean State Street Bank and Trust Company.
1.21 "ESCROW AGREEMENT" shall mean the agreement substantially in the
form of Exhibit "B" hereto among Oak, the Stockholder Representatives and the
Escrow Agent.
1.22 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
1.23 "EXCHANGE AGENT" shall mean State Street Bank and Trust Company.
1.24 "EXCHANGE AGREEMENT" shall mean the agreement substantially in the
form of Exhibit "C" hereto among Oak, the Stockholder Representatives and the
Exchange Agent.
1.25 "EXISTING XXXXXX AGREEMENT" shall have the meaning set forth in
Section 7.1.5 (Xxxxxx Corporation).
1.26 "GROSS XLI PRODUCT REVENUE" shall mean gross revenue from the sale
or license of XLI Products, less any product returns and less any delivery costs
and sales or transfer taxes incurred but not otherwise payable by an End User or
OEM, plus gross revenue from nonrecurring engineering fees, calibration fees and
fees for any other services performed by XLI.
1.27 "INDEMNIFYING STOCKHOLDERS" shall have the meaning set forth in
Section 10.1 (Indemnity).
1.28 "INITIAL DISTRIBUTION AMOUNT" shall have the meaning set forth in
Section 2.7.1 (Initial Escrow Distribution).
1.29 "IPO WARRANTS" shall mean the warrants issued by XLI in connection
with its initial public offering in 1993 and currently held by the public and
the Underwriter.
1.30 "IRREVOCABLE PROXY" shall mean the agreement in the form of Exhibit
"D" hereto between Oak and each Party Stockholder.
1.31 "LOSS" OR "LOSSES" shall have the meaning set forth in Section 10.1
(Indemnity).
1.32 "MERGER" shall mean the merger of Sub with and into XLI.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 4
1.33 "MERGER CASH" shall mean an amount per share of XLI Common Stock
calculated as set forth in Section 2.4 (Effect of Merger on Outstanding
Securities).
1.34 "MULTIPLE FEATURE IC" shall have the meaning set forth in the
Technology License and Supply Agreement.
1.35 "NET DEFICIT" shall mean a negative shareholder's equity, as
calculated in accordance with generally accepted accounting principles and
consistently applied using the accounting treatment historically used by XLI.
1.36 "OAK SEC REPORTS" shall have the meaning set forth in Section 3.3.1
(Oak SEC Filings; Financial Statements).
1.37 "OAK SUBSIDIARIES" shall mean any subsidiary of Oak.
1.38 "OEM" shall mean an original equipment manufacturer who acquires a
Digital Modulator Feature IC or Multiple Feature IC directly or indirectly from
Oak or Pixel for incorporation into its product for resale.
1.39 "PARTY STOCKHOLDERS" shall have the meaning set forth in the
preamble to this Agreement.
1.40 "PERMITTED XLI CONTACT" shall have the meaning set forth in Section
6.1.5 (No Solicitation).
1.41 "PIXEL ASIC" shall mean an application-specific integrated circuit
designed and/or offered for sale by Pixel for use in digital printers, scanners,
copiers and multi-function devices.
1.42 "POST-CLOSING AUDIT" shall have the meaning set forth in Section 9.1
(Post-Closing Audit).
1.43 "PRIVATE 1995 WARRANTS" shall mean the warrants issued by XLI in
1995 to individual private lenders.
1.44 "PRIVATE 1996 WARRANTS" shall mean the warrants issued by XLI in
1996 to individual private lenders.
1.45 "PRIVATE WARRANTS" shall mean any Private 1995 Warrant or Private
0000 Xxxxxxx.
1.46 "RELATED PARTY" shall mean any entity which is a member of a
"controlled group of corporations" with, or is under "common control" with, a
party as defined in Section 414(b) or (c) of the Code.
1.47 "REPRESENTATIVE'S WARRANT" shall have the meaning set forth in
Section 4.2 (Capitalization).
1.48 "SEC" shall mean the United States Securities and Exchange
Commission.
1.49 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 5
1.50 "STATUTORY CERTIFICATE OF MERGER" shall mean the fully executed
certificate of merger substantially in the form of Exhibit "E" hereto.
1.51 "STOCKHOLDER REPRESENTATIVES" shall mean Xxxxx, Xxxx X. Xxxxxx,
X'Xxxxxx, Xxxxxx X. Xxxx and Xxxxxxx X. Xxxxx.
1.52 "SUB STOCK" shall mean the Common Stock of Sub.
1.53 "SUPER CHIP" shall mean any XLI proprietary chip or chip set that
meets the chip specifications set forth in Exhibit "B" to the Technology License
and Supply Agreement.
1.54 "SUPERIOR XLI PROPOSAL" shall have the meaning set forth in Section
6.1.5 (No Solicitation).
1.55 "TECHNOLOGY LICENSE AND SUPPLY AGREEMENT" shall mean that certain
Technology License and Supply Agreement entered into on October 14, 1997 by and
between Pixel and XLI.
1.56 "TERMINATION FEE" shall mean an amount equal to Four Hundred Fifty
Thousand Dollars ($450,000).
1.57 "THRESHOLD AMOUNT" shall have the meaning set forth in Section 2.4.5
(Base Amount).
1.58 "UNDERWRITER" shall mean Xxxxxx Xxxxx & Co.
1.59 "UNDERWRITER'S WARRANT" shall have the meaning set forth in Section
4.2 (Capitalization).
1.60 "UNEXPIRED PRIVATE WARRANT" shall have the meaning set forth in
Section 2.7.1 (Initial Escrow Distribution).
1.61 "XLI CERTIFICATE OF OBJECTIONS" shall have the meaning set forth in
Section 6.1.2 (Appraisal Matters).
1.62 "XLI COMMON STOCK" shall mean the Common Stock of XLI.
1.63 "XLI EMPLOYEE BENEFIT PLAN" shall mean all "employee benefit plans,"
as defined by Section 3(3) of ERISA, and any other employee benefit arrangements
or payroll practices including, without limitation, sick leave, vacation pay,
salary continuation for disability, consulting or other compensation
arrangements (whether funded or unfunded), retirement, deferred or incentive
compensation, bonuses, stock purchase, hospitalization, medical insurance,
severance, life insurance and scholarship programs maintained or made available
by XLI or any Related Party.
1.64 "XLI INTELLECTUAL PROPERTY RIGHTS" shall mean all patents,
copyrights, trademarks, trade names, service marks and any applications
therefor, utility models, devices, designs, mask-works, net lists and all rights
under documentation related thereto, trade secrets, drawings, schematics,
technology, microcode, know-how, computer software programs or applications, any
tangible or intangible proprietary information, and all other rights with
respect thereto, in whatever form throughout the world, owned or licensed by
XLI, including, but not limited to, the Xxxxxx Corporation technology and Xxxxxx
Corporation rights licensed from Xxxxxx Corporation by XLI pursuant to the
Existing Xxxxxx Agreement.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 6
1.65 "XLI MATERIAL CONTRACTS" shall have the meaning set forth in Section
4.28 (Additional Disclosure).
1.66 "XLI PENSION PLANS" shall mean all "employee pension plans" as
defined in Section 3(2) of ERISA maintained or made available by XLI to any
current or former employee of XLI.
1.67 "XLI PREFERRED STOCK" shall mean the Series A Preferred Stock of
XLI.
1.68 "XLI PRODUCTS" shall mean Super Chips, any VHDL (virtual hardware
design logic) of the aforementioned product, and any future product designed and
developed exclusively by XLI.
1.69 "XLI SEC REPORTS" shall have the meaning set forth in Section 4.4.1
(XLI SEC Filings; Financial Statements).
1.70 "XLI SPECIAL MEETING" shall have the meaning set forth in Section
6.1.1 (Special Meeting; Proxy Statement).
1.71 "XLI STOCK" shall mean the Common and Preferred Stock of XLI.
1.72 "XLI STOCKHOLDERS" shall mean the holders of XLI Stock and any
holder of XLI Warrants who exercises his, her or its XLI Warrants subject to and
in accordance with this Agreement.
1.73 "XLI SUBORDINATED NOTES" shall mean those certain subordinated
nonrecourse promissory notes delivered to individual private lenders in 1996.
1.74 "XLI SUBSIDIARIES" shall mean any subsidiary of XLI.
1.75 "XLI TRANSACTION PROPOSAL" shall have the meaning set forth in
Section 6.1.5 (No Solicitation).
1.76 "XLI WARRANTS" shall mean any IPO Warrant, Representative's Warrant,
Class A Warrant, Underwriter's Warrant, Private 1995 Warrant or Private 1996
Warrant that shall not have been exercised prior to the Effective Time and by
its terms does not terminate at or prior to the Effective Time.
SECTION 2. MERGER.
2.1 MERGER. On the Effective Date: Sub shall merge with and into XLI;
the corporate existence of XLI shall continue until such time as XLI is merged
with and into Pixel; and the separate corporate existence of Sub shall cease.
The corporate identity, existence, name, purposes, franchises, powers, rights
and immunities of Sub shall be merged into XLI which shall be fully vested
therewith. XLI shall be subject to all of the debts and liabilities of Sub as
if XLI had itself incurred them and all rights of creditors and all liens upon
the property of each of Sub and XLI shall be preserved unimpaired, provided that
such liens, if any, upon the property of Sub shall be limited to the property
affected thereby immediately prior to the Effective Date.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation and Bylaws of Sub, as in effect at the Effective Time, shall be
the Certificate of Incorporation and Bylaws of XLI until
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 7
changed in accordance with applicable law, except that the name of the surviving
corporation as provided in such Certificate of Incorporation shall be
Xerographic Laser Images Corporation.
2.3 DIRECTORS AND OFFICERS. The directors and officers of XLI (until
changed in accordance with applicable law and the Certificate of Incorporation
and Bylaws of XLI) as of the Effective Time shall be:
Name Office
---- -----
Xxxxx X. Xxxxx President, Secretary and Director
Xxxxxxx X. X'Xxxxxx General Manager
Xxxxxx X. Xxxxxxxx Treasurer, Chief Financial Officer and
Director
2.4 EFFECT OF MERGER ON OUTSTANDING SECURITIES. At the Effective Time
of the Merger:
2.4.1 SUB STOCK. Each then outstanding share of the Sub Stock
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into one share of XLI Common Stock.
2.4.2 XLI STOCK AND XLI WARRANTS. The then outstanding shares of
XLI Stock shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into Merger Cash and the right to receive
Contingent Cash as set forth below, and the XLI Warrants shall be converted into
the right to receive Merger Cash and Contingent Cash as set forth below (Merger
Cash and Contingent Cash are hereafter collectively referred to as the
"CONSIDERATION").
2.4.2.1 XLI STOCK. Each share of XLI Common Stock shall be
converted into Merger Cash and the right to receive Contingent Cash. Each share
of XLI Preferred Stock shall be converted into an amount equal to Merger Cash
multiplied by the number of shares of XLI Common Stock into which each share of
XLI Preferred Stock is convertible, and the right to receive an amount equal to
Contingent Cash multiplied by the number of shares of XLI Common Stock into
which each such share of Preferred Stock is convertible.
2.4.2.2 XLI WARRANTS. Each XLI Warrant shall be converted into
the right to receive Merger Cash and Contingent Cash, upon exercise of the XLI
Warrant by the holder thereof and delivery to the Exchange Agent of the exercise
price therefor. Upon the exercise of any XLI Warrant and delivery to the
Exchange Agent of the exercise price therefor, such XLI Warrant shall be
converted into an amount equal to Merger Cash multiplied by the number of shares
of XLI Common Stock (on an as converted basis in the case of any exercise of an
XLI Warrant for shares of XLI Preferred Stock) for which the exercise price has
been paid to the Exchange Agent under the XLI Warrant, and the right to receive
an amount equal to Contingent Cash multiplied by the number of shares of XLI
Common Stock (on an as converted basis in the case of any exercise of an XLI
Warrant for shares of XLI Preferred Stock) for which the exercise price has been
paid to the Exchange Agent under the XLI Warrant. In the event of any dispute
regarding the number of shares of XLI Common Stock (on an as converted basis in
the case of any exercise of an XLI Warrant for shares of XLI Preferred Stock)
purchasable under an XLI Warrant at the Effective Time, or the exercise price
per share payable therefor, the written instructions of the Stockholder
Representatives concerning such calculations, as delivered to the Escrow Agent
and the Exchange Agent by the Stockholder Representatives, shall control. No
XLI Warrant shall be exercisable for shares of the
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 8
capital stock of XLI or of Oak or any Oak Subsidiary subsequent to the Effective
Time, and no adjustments in the number of shares of XLI Stock originally
purchasable under the XLI Warrant or in the exercise price of such XLI Warrant
shall be made subsequent to the Effective Time. Notwithstanding anything to the
contrary contained in this Agreement, including, without limitation, this
Section 2.4.2.2 (XLI Warrants), any XLI Warrant that is not exercised in
accordance with the provisions hereof, and prior to the date of termination or
other expiration of such XLI Warrant, shall terminate and be of no further force
and effect.
2.4.2.3 XLI COMMON STOCK EQUIVALENTS. Any warrant (other than an
XLI Warrant), option, convertible note, convertible security or other right to
acquire shares of XLI Common Stock that is not exercised immediately prior to or
in connection with the Merger shall terminate and be of no further force and
effect, effective as of the Effective Time.
2.4.3 MERGER CASH. Merger Cash shall be an amount calculated
according to the following formula:
MC = $3,675,000
------------
CS + PS + PW
WHERE
MC = Merger Cash
CS = Total Number of Shares of XLI Common Stock Outstanding
at the Effective Time
PS = Total Number of Shares of XLI Common Stock into which
the Issued and Outstanding Shares of XLI Preferred
Stock are Convertible at the Effective Time
PW = Total Number of Shares of XLI Common Stock Purchasable
Under any Private Warrants Outstanding at the Effective
Time
2.4.4 CONTINGENT CASH. Contingent Cash shall be an amount
calculated pursuant to the following formula:
CC = BA - $3,675,000 - SA
--------------------
CS + PS + WS
WHERE
CC = Contingent Cash
BA = Base Amount as Calculated in Section 2.4.5 (Base
Amount)
SA = Set Off Amounts Due Oak or Pixel Under Section 9
(Post-Closing Adjustment) and Under Section 10
(Non-Recourse Indemnification)
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 9
CS = Total Number of Shares of XLI Common Stock Issued and
Outstanding at the Effective Time, plus Total Number of
Shares of XLI Common Stock Issued and Outstanding as a
Result of the Exercise of XLI Warrants Exercised after
the Effective Time (Including any Shares of XLI Common
Stock into which Shares of XLI Preferred Stock were
Converted in Connection with any such XLI Warrant
Exercise)
PS = The meaning set forth in Section 2.4.3 (Merger Cash)
WS = Total Number of Shares of XLI Common Stock (Including
Any Shares of XLI Common Stock into which Shares of
Preferred Stock, that were issuable upon exercise of
the Underwriter's Warrant, were Convertible)
Purchasable Under the XLI Warrants Outstanding at the
Effective Time, Less Total Number of Shares of XLI
Common Stock Covered by XLI Warrants Exercised after
the Effective Time (Including any Shares of XLI Common
Stock into which Shares of XLI Preferred Stock were
Converted in Connection with any such XLI Warrant
Exercise), and Less Total Number of Shares of XLI
Common Stock Covered by XLI Warrants that Lapsed
Unexercised After the Effective Time and Prior to any
Calculation Pursuant to Section 2.6.1 (Time and Payment
Procedures)
The maximum aggregate amount of Base Amount shall be Fifteen Million
Dollars ($15,000,000). At such time as Base Amount in the amount of Fifteen
Million ($15,000,000) is accrued, no further Contingent Cash shall be accrued or
payable.
2.4.5 BASE AMOUNT. For purposes of Section 2.4 (Effect of Merger
on Outstanding Securities), Base Amount, until such time as Base Amount in the
aggregate equals Three Million Six Hundred Seventy-Five Thousand Dollars
($3,675,000) (the "THRESHOLD AMOUNT"), shall be equal to the sum of: (i)
fifty-six percent (56%) of Gross XLI Product Revenue; and (ii) One Dollar
($1.00) for each Digital Modulator Feature IC sold by Oak or Pixel or their
Related Parties, agents or distributors to an End User or an OEM; and (iii) Two
Dollars ($2.00) for each Multiple Feature IC sold by Oak or Pixel or their
Related Parties, agents or distributors to an End User or an OEM; in the case of
each of clauses (ii) and (iii) above, net of product returns. At such time as
Base Amount in the aggregate is equal to the Threshold Amount, then Base Amount
thereafter shall be equal to the sum of (i) thirty-two percent (32%) of Gross
XLI Product Revenue; and (ii) One Dollar ($1.00) for each Digital Modulator
Feature IC sold by Oak or Pixel or their Related Parties, agents or distributors
to an End User or an OEM; and (iii) Two Dollars ($2.00) for each Multiple
Feature IC sold by Oak or Pixel or their Related Parties, agents or distributors
to an End User or an OEM; in the case of each of clauses (ii) and (iii) above,
net of product returns. If Oak or Pixel sells XLI Products bundled with other
products, for purposes of calculating Base Amount, Base Amount, until such time
as Base Amount is equal to the Threshold Amount, shall include fifty-six percent
(56%) of an amount equal to Pixel's standard sales price for the XLI Product
included in the bundled
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 10
product at similar volumes; at such time as Base Amount is equal to the
Threshold Amount, then Base Amount thereafter shall include thirty-two percent
(32%) of an amount equal to Pixel's standard sales price for the XLI Product
included in the bundled product at similar volumes. Gross XLI Product Revenue
from the sale of XLI Products shall be as determined for financial reporting
purposes using generally acceptable accounting principles consistently applied.
Samples and demonstration copies of Digital Modulator Feature ICs and Multiple
Feature ICs provided free of charge shall not be considered sold. Base Amount
shall be calculated for each calendar quarter during the period commencing
January 1, 1998 and ending December 31, 2000; Base Amount for such calendar
quarter shall be added to the aggregate amount of Base Amount accrued for the
calendar quarters ended prior to such calendar quarter; provided, however, that
in no event shall the maximum aggregate amount of Base Amount exceed Fifteen
Million Dollars ($15,000,000).
2.5 EXCHANGE OF CERTIFICATES; PAYMENT OF MERGER CASH.
2.5.1 EXCHANGE AGENT. Prior to the Effective Date, Oak shall
appoint the Exchange Agent to act as exchange agent in the Merger.
2.5.2 OAK TO PROVIDE CASH. Promptly after the Effective Date of
the Merger (but in no event later than one business day thereafter), Oak shall
make available to the Exchange Agent for exchange in accordance with this
Agreement, through such reasonable procedures as Oak may adopt, Three Million
Six Hundred Seventy-Five Thousand Dollars ($3,675,000), less amounts held in
reserve under this Section 2.5.2, to be made available for payment of Merger
Cash in accordance with Section 2.5 (Exchange of Certificates; Payment of Merger
Cash).
2.5.2.1 EXCHANGE OF MERGER CASH FOR XLI STOCK. An amount equal
to Merger Cash multiplied by the sum of (i) the total number of shares of XLI
Common Stock outstanding at the Effective Time, plus (ii) the total number of
shares of XLI Common Stock into which outstanding shares of XLI Preferred Stock
are convertible at the Effective Time, shall be made available in exchange for
outstanding shares of XLI Stock in accordance with the terms of this Agreement.
Oak shall deduct from such amount, an amount equal to Merger Cash multiplied by
the total number of shares of XLI Stock (on an as converted basis) held by
Dissenting Stockholders, such amount to be retained by Oak. Any Dissenting
Stockholder that does not perfect its rights to dissent shall be paid its
allowable Merger Cash directly by Oak.
2.5.2.2 ESCROW OF MERGER CASH FOR PRIVATE WARRANTS. An amount
equal to Merger Cash multiplied by the total number of shares of XLI Common
Stock purchasable under the Private Warrants outstanding at the Effective Time
shall be delivered by Oak to the Escrow Agent to be held in escrow by the Escrow
Agent and disbursed by the Escrow Agent in accordance with Section 2.7
(Distributions from Escrow) and the terms of the Escrow Agreement.
2.5.3 EXCHANGE PROCEDURES. As soon as practicable after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time of the Merger represented outstanding shares of XLI Stock (the
"CERTIFICATES") whose shares are being converted into the Consideration, (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Oak may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Consideration.
Upon surrender of a Certificate for cancellation to the
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 11
Exchange Agent or to such other agent or agents as may be appointed by Oak,
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor the Consideration
which the holder of XLI Stock is entitled pursuant to Section 2.4 (Effect of
Merger on Outstanding Securities) and are represented by the Certificates so
surrendered. The Certificates so surrendered shall forthwith be canceled. In
the event of a transfer of ownership of XLI Stock which is not registered in the
transfer records of XLI, the appropriate amount of Consideration may be
delivered to a transferee if the Certificate representing such XLI Stock is
presented to the Exchange Agent and accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 2 (Merger), each Certificate shall be deemed at any time after the
Effective Time of the Merger to represent the right to receive upon such
surrender the amount of Consideration as provided by this Section 2 (Merger) and
the provisions of the Delaware General Corporation Law. Notwithstanding
anything to the contrary contained in this Section 2.5.3 (Exchange Procedures),
no letter of transmittal or instructions for use in effecting the surrender of
Certificates for the Consideration shall be mailed by the Exchange Agent to any
Dissenting Stockholder, nor shall the Exchange Agent accept surrender of a
Certificate held by a Dissenting Stockholder or pay the Consideration to such
Dissenting Stockholder. Any Certificates or other correspondence received from
Dissenting Stockholders shall be promptly forwarded to Oak by the Exchange
Agent.
2.5.4 NO FURTHER OWNERSHIP RIGHTS IN XLI STOCK. All XLI Stock
delivered upon the surrender for exchange into the Consideration in accordance
with the terms hereof shall be deemed to have been delivered in full
satisfaction of all rights pertaining to such shares of XLI Stock. There shall
be no further registration of transfers on the stock transfer books of XLI of
the shares of XLI Stock which were outstanding immediately prior to the
Effective Time of the Merger. If, after the Effective Time of the Merger,
Certificates, other than Certificates held by Dissenting Stockholders, are
presented to XLI for any reason, they shall be canceled and exchanged as
provided in this Section 2 (Merger).
2.5.5 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of any
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by Oak or the Exchange Agent, a bond in
such sum as Oak or the Exchange Agent may reasonably direct as indemnity against
any claim that may be made against Oak or the Exchange Agent with respect to the
Certificate alleged to have been lost, the Exchange Agent will issue the
Consideration as provided in this Section 2.5 (Exchange of Certificates; Payment
of Merger Cash) in exchange for such lost, stolen or destroyed Certificate.
2.5.6 NO LIABILITY. Notwithstanding anything to the contrary
contained in this Section 2.5 (Exchange of Certificates; Payment of Merger Cash)
or elsewhere in this Agreement, none of the Exchange Agent, the Escrow Agent,
Oak, Pixel, XLI or any other party hereto shall be liable to any holder of XLI
Stock (including any Dissenting Stockholder or any holder of an XLI Warrant who
exercises such XLI Warrant) for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 12
2.6 PAYMENT OF CONTINGENT CASH.
2.6.1 TIME AND PAYMENT PROCEDURES. Within thirty (30) days after
the end of each calendar quarter commencing with the quarter ending March 31,
1998 and ending with the quarter ending December 31, 2000, Pixel shall prepare
and deliver to the Stockholder Representatives a certificate calculating the
Base Amount as set forth in Section 2.4.5 (Base Amount) and the amount of
Contingent Cash as set forth in Section 2.4.4 (Contingent Cash). Subject to
Section 2.4 (Effect of Merger on Outstanding Securities) and this Section 2.6
(Payment of Contingent Cash), at such time as the amount of Contingent Cash is a
positive amount, it shall be delivered by Oak to the Escrow Agent or the
Exchange Agent, as the case may be, as provided in this Section 2.6 (Payment of
Contingent Cash). Amounts due as payments of Contingent Cash shall be net of
prior payments of Contingent Cash under this Section 2.6 (Payment of Contingent
Cash).
2.6.1.1 PAYMENT OF CONTINGENT CASH TO XLI STOCKHOLDERS. The
amount, if any, of Contingent Cash payable by Oak for any calendar quarter
ending prior to June 30, 1999 shall be delivered by Oak to the Escrow Agent as
provided in Section 2.6.1.2 (Escrow of Contingent Cash). Commencing with the
calendar quarter ending June 30, 1999, until such time as the Escrow Agreement
shall terminate in accordance with its terms, the amount, if any, of Contingent
Cash payable by Oak for a calendar quarter shall be delivered by Oak to the
Exchange Agent in accordance with this Section 2.6.1.1 (Payment of Contingent
Cash to XLI Stockholders), LESS any amount required to be delivered by Oak to
the Escrow Agent under Section 2.6.1.2 below (Escrow of Contingent Cash), and
LESS any amount representing shares formerly held by Dissenting Stockholders,
which amount shall be retained by Oak. Upon termination of the Escrow Agreement
in accordance with its terms, the amount, if any of Contingent Cash payable by
Oak for any calendar quarter thereafter shall be delivered by Oak to the
Exchange Agent in accordance with this Section 2.6.1.1 (Payment of Contingent
Cash to XLI Stockholders), LESS any amount representing shares formerly held by
Dissenting Stockholders, which amount shall be retained by Oak. Quarterly
amounts, if any, payable by Oak to the Exchange Agent pursuant to this Section
2.6.1.1 (Payment of Contingent Cash to XLI Stockholders) shall be delivered by
Oak to the Exchange Agent at least five (5) business days prior to any
distribution required to be made to the XLI Stockholders by the Exchange Agent
under this Section 2.6.1.1 (Payment of Contingent Cash to XLI Stockholders),
together with written instructions regarding calculation of the amount payable
by Oak hereunder for any calendar quarter. Any such amount delivered to the
Exchange Agent by Oak hereunder, or to the Exchange Agent by the Escrow Agent
pursuant to Section 2.7 (Distributions from Escrow) and the terms of the Escrow
Agreement, shall be allocated by the Exchange Agent PRO RATA (a) to all
outstanding shares of XLI Common Stock held by XLI Stockholders at the Effective
Time (excluding any shares of XLI Common Stock into which shares of XLI
Preferred Stock were convertible at the Effective Time), (b) all shares of XLI
Preferred Stock held by XLI Stockholders at the Effective Time, on an as
converted basis, and (c) all shares of XLI Common Stock (including shares of XLI
Common Stock into which shares of XLI Preferred Stock, that were issued upon
exercise of the Underwriter's Warrant, were converted) attributable to XLI
Warrants exercised after the Effective Time and prior to the end of the calendar
quarter for which such payment is being made. Any such amount due to the XLI
Stockholders as described in the immediately preceding sentence, including,
without limitation, the Initial Distribution Amount, shall be deposited by the
Exchange Agent in the United States mail, not later than forty-five (45) days
after the close of the calendar quarter to which the distribution relates, first
class postage prepaid, to the addresses as set forth in the stock and warrant
records of XLI; provided that amount allocated to shares formerly held by
Dissenting Stockholders shall be paid to Oak. The Stockholder Representatives
shall deliver, or cause to be delivered, to the Exchange Agent and the Escrow
Agent, not later than one business day following the Effective Date,
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 13
and from time to time thereafter, such information as is requested by the
Exchange Agent or the Escrow Agent to effect such distributions, including,
without limitation, that information which XLI is delivering to Oak pursuant to
Section 7.2.11 (XLI Stock and Share Equivalents). Any Dissenting Stockholder
that does not perfect its rights to dissent shall be paid its allowable
Contingent Cash directly by Oak.
2.6.1.2 ESCROW OF CONTINGENT CASH. Commencing with the calendar
quarter ending March 31, 1998 and terminating with the calendar quarter ending
March 31, 1999, the amount, if any, of Contingent Cash payable by Oak for a
calendar quarter shall be delivered by Oak to the Escrow Agent. Thereafter,
until such time as the Escrow Agreement terminates in accordance with its terms,
Oak shall deliver to the Escrow Agent an amount equal to the amount of
Contingent Cash due by Oak hereunder for any calendar quarter, multiplied by the
total number of shares of XLI Common Stock purchasable under the Private
Warrants outstanding at the end of such calendar quarter. The Contingent Cash
amount for any calendar quarter shall be delivered by Oak to the Escrow Agent
within forty-five (45) days after the end of such calendar quarter, provided,
however, that the Contingent Cash amount, if any, due for the calendar quarter
ended March 31, 1999 shall be delivered by Oak to the Escrow Agent within thirty
(30) days after the end of such calendar quarter. All such Contingent Cash
amounts shall be held in escrow by the Escrow Agent and disbursed by the Escrow
Agent in accordance with Section 2.7 (Distributions from Escrow) and the terms
of the Escrow Agreement. Written instructions regarding calculation of the
amount, if any, payable by Oak hereunder for any calendar quarter shall be
delivered to the Escrow Agent concurrent with payment to the Escrow Agent of any
amount due hereunder. As soon as practicable after the Effective Time of the
Merger, the Exchange Agent shall mail to each holder of an XLI Warrant
instructions for use in effecting the exercise of any XLI Warrant.
2.6.2 SET-OFF AND INDEMNITY HOLD BACK.
2.6.2.1 SET-OFF. In the event of any Contingent Cash Adjustment
under Section 9 (Post-Closing Adjustment), then the amounts otherwise payable
under Section 2.6.1 (Time and Payment Procedures) shall be reduced by the amount
of the Contingent Cash Adjustment until such time as the amount of the
Contingent Cash Adjustment shall have been satisfied in full.
2.6.2.2 INDEMNITY HOLD BACK. In the event that Oak or Pixel has
made a claim under Section 10 (Non-Recourse Indemnification) which has not been
liquidated or has not been agreed to by the Stockholder Representatives, then
Oak shall hold back from amounts otherwise payable under Section 2.6.1 (Time and
Payment Procedures) the amount of such claim as specified in the notice to the
Stockholder Representatives delivered by Oak or Pixel pursuant to Section 10
(Non-Recourse Indemnification) until such time as the Oak or Pixel claim is
resolved. Immediately after such resolution, any amounts payable by Oak
pursuant to Section 2.6.1 (Time and Payment Procedures) shall be paid by Oak
within thirty (30) days of such resolution, together with interest at the rate
of eight percent (8%) per annum from the date payment was otherwise due.
2.6.3 AUDIT RIGHTS. The Stockholder Representatives shall have
the right, at their sole cost and expense, to have an independent certified
public accountant conduct, during normal business hours and not more frequently
than quarterly, an audit of the calculation of Base Amount and Contingent Cash.
If such amounts are found to be different than those reported by Pixel, any
additional Contingent Cash shall be payable, together with an eight percent (8%)
per annum late payment charge, within thirty (30) days of notice of such
discrepancy from the Stockholder Representatives. If the discrepancy in
Contingent Cash to
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 14
date reported by the Stockholder Representatives is greater than five percent
(5%) of the Contingent Cash reported to date by Pixel, then Oak will pay the
reasonable costs and expenses associated with such audit.
2.7 DISTRIBUTIONS FROM ESCROW. Distributions shall be made from the
escrow by the Escrow Agent in accordance with the Escrow Agreement. The Escrow
Agreement shall provide for distributions as follows:
2.7.1 INITIAL ESCROW DISTRIBUTION. Not later than fifteen (15)
calendar days following delivery to the Escrow Agent of the amount, if any, of
Contingent Cash payable by Oak for the calendar quarter ended March 31, 1999,
the Escrow Agent shall deliver to the Exchange Agent, for distribution to the
XLI Stockholders, all funds, if any, held in escrow by the Escrow Agent, LESS
the sum of (i) Merger Cash paid into escrow by Oak pursuant to Section 2.5.2.2
(Escrow of Merger Cash for Private Warrants) with respect to any Private Warrant
that has not been exercised prior to March 31, 1999 and has not otherwise
terminated ("UNEXPIRED PRIVATE WARRANT"), (ii) Contingent Cash paid into escrow
by Oak pursuant to Section 2.6.1.2 (Escrow of Contingent Cash) with respect to
any Unexpired Private Warrant and (iii) the net exercise price, if any, paid
into escrow with respect to any XLI Warrant exercised after the Effective Time
(the "INITIAL DISTRIBUTION AMOUNT"). The Initial Distribution Amount shall be
allocated PRO RATA to all shares of XLI Stock outstanding prior to March 31,
1999, including shares of XLI Stock attributable to XLI Warrant exercises
occurring prior to March 31, 1999, subject to and in accordance with the
provisions of Section 2.6.1.1 (Payment of Contingent Cash to XLI Stockholders).
The net exercise price, if any, paid into escrow with respect to any XLI Warrant
exercised after the Effective Time, to the extent not previously delivered to
Oak, shall be delivered to Oak, subject to and in accordance with Section 2.7.4
(Allocation of XLI Warrant Exercise Amounts).
2.7.2 UPON EXERCISE OF XLI WARRANTS. Upon the exercise of any XLI
Warrant in accordance with the provisions of this Agreement and the Escrow
Agreement, and delivery to the Exchange Agent of the exercise price per share
therefor, such XLI Warrant shall be converted into Merger Cash and a right to
receive Contingent Cash, subject to and in accordance with Section 2.4.2.2 (XLI
Warrants), this Section 2.7 (Distributions from Escrow), including, without
limitation, Section 2.7.1 (Initial Escrow Distribution), and the Escrow
Agreement. Merger Cash payable to the holder of any Private Warrant under this
Section 2.7.2 (Upon Exercise of XLI Warrants) shall be paid to the holder of
such Private Warrant from the escrow proceeds delivered by Oak to the Escrow
Agent pursuant to Section 2.5.2.2 (Escrow of Merger Cash for Private Warrants).
Merger Cash payable to the holder of any XLI Warrant, other than a Private
Warrant, under this Section 2.7.2 (Upon Exercise of XLI Warrants) shall be paid
by the Exchange Agent to the holder of such XLI Warrant from the proceeds
received by the Exchange Agent upon delivery to the Exchange Agent by the holder
of such XLI Warrant of the exercise price per share due upon exercise of the XLI
Warrant. (Net exercises of XLI Warrants, including any Private Warrants, shall
be prohibited.) Contingent Cash payable to the holder of any XLI Warrant
(including any Private Warrant) under this Section 2.7.2 (Upon Exercise of XLI
Warrants), who exercises such XLI Warrant (including any Private Warrant) prior
to March 31, 1999, shall be paid by the Escrow Agent, for the period commencing
on January 1, 1998 and ending on March 31, 1999, in accordance with the
provisions of Section 2.7.1 (Initial Escrow Distribution) and the terms of the
Escrow Agreement. Contingent Cash payable to the holder of any Private Warrant
under this Section 2.7.2 (Upon Exercise of XLI Warrants), who exercises such
Private Warrant subsequent to March 31, 1999, shall be paid to the holder of
such Private Warrant from the escrow proceeds delivered by Oak to the Escrow
Agent with respect to such Private Warrant pursuant to Section 2.6.1.2 (Escrow
of Contingent Cash) prior to exercise of such Private Warrant. Following
exercise of such Private Warrant, any Contingent Cash amount payable to the
holder
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 14
of such Private Warrant thereafter shall be paid to such Private Warrant holder
by the Exchange Agent pursuant to Section 2.6.1.1 (Payment of Contingent Cash to
XLI Stockholders).
2.7.3 UPON TERMINATION OF THE ESCROW AGREEMENT. Upon termination
of the Escrow Agreement (which shall occur upon expiration or exercise of all
rights to purchase XLI Common Stock under the XLI Warrants), all funds, if any,
remaining in escrow upon termination of the Escrow Agreement, less any exercise
price amounts required to be delivered to Oak pursuant to Section 2.7.4
(Allocation of XLI Warrant Exercise Amounts), shall be paid out following the
termination of the Escrow Agreement. Such amount shall be promptly delivered by
the Escrow Agent to the Exchange Agent for distribution to the XLI Stockholders,
and shall be allocated and distributed by the Exchange Agent subject to and in
accordance with Section 2.6.1.1 (Payment of Contingent Cash to XLI
Stockholders); provided, however, that such amount shall be paid out within
fifteen (15) business days following delivery of the amount to the Exchange
Agent.
2.7.4 ALLOCATION OF XLI WARRANT EXERCISE AMOUNTS. All amounts
received by the Escrow Agent or the Exchange Agent in connection with the
exercise of any XLI Warrants, net of the Merger Cash amounts payable under the
terms of the Escrow Agreement from the proceeds of any XLI Warrant exercises
other than Private Warrant exercises, shall be delivered to Oak pursuant to the
provisions of the Escrow Agreement. If, upon expiration of the term of the
Escrow Agreement, the aggregate exercise price paid to Oak in connection with
any exercise of XLI Warrants, net of amounts, if any, of Merger Cash payable
with respect to any XLI Warrant (other than a Private Warrant) upon exercise of
such XLI Warrant, exceeds the aggregate costs and expenses incurred by Oak in
connection with the Escrow Agreement and the Exchange Agreement, including all
costs and expenses that Oak reasonably expects to incur prior to and in
connection with termination of the Exchange Agreement, then the amount
representing such difference shall be promptly delivered by Oak to the Exchange
Agent for distribution to the XLI Stockholders of record at the Effective Time
(which shall include any XLI Stockholders who exercised their XLI Warrants prior
to termination of the Escrow Agreement). Any such amount due to the XLI
Stockholders shall be allocated and distributed to the XLI Stockholders subject
to and in accordance with Section 2.6.1.1 (Payment of Contingent Cash to XLI
Stockholders); provided, however, that such amount shall be paid out within
thirty (30) business days following delivery of the amount to the Exchange
Agent.
2.8 EFFECTIVE DATE. Pixel, Sub and XLI shall each take or cause to be
taken all such actions, or do or cause to be done, all such things as are
necessary, proper or advisable under the laws of the State of Delaware to make
effective the Merger, subject, however, to receipt of any required approval by
outstanding shares of any of them in accordance with Delaware law and subject,
also, to compliance with all other applicable laws. Upon compliance with
applicable laws and upon receipt of any required approval of the outstanding
shares of every party, a copy of the statutory Certificate of Merger as required
by Section 251(c) of the Delaware General Corporation Law shall be filed in the
office of the Delaware Secretary of State. The Merger shall become effective
upon such filing.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF OAK.
Except as disclosed by Oak in Exhibit "F" to this Agreement, Oak represents
and warrants to XLI that:
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 16
3.1 ORGANIZATION AND GOOD STANDING. Each of Oak and Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite corporate power and authority to carry
on its business as now conducted and as proposed to be conducted, and is duly
qualified as a foreign corporation and is in good standing in all other
jurisdictions in which such qualification is required; provided, however, that
neither Oak nor Sub shall be required to be qualified in any jurisdiction in
which its failure to qualify would not have a material and adverse effect on its
operations or financial condition. Pixel is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts, and has all requisite corporate power and authority to carry on
its business as now conducted and as proposed to be conducted, and is duly
qualified as a foreign corporation and is in good standing in all other
jurisdictions in which such qualification is required; provided, however, that
Pixel may not be qualified in jurisdictions in which its failure to qualify
would not have a material and adverse effect on its operations or financial
condition. Sub is a wholly-owned subsidiary of Pixel and Pixel is a wholly-
owned subsidiary of Oak. Sub does not own, lease or operate any property.
3.2 AUTHORIZATION. All corporate action on the part of Oak, Pixel and Sub
and their respective officers, directors and stockholders necessary for the
authorization, execution, delivery and performance of all obligations of Oak,
Pixel and Sub under this Agreement will be taken prior to the Effective Date.
This Agreement, when executed and delivered, will constitute a valid and legally
binding obligation of Oak, Pixel and Sub.
3.3 OAK SEC FILINGS; FINANCIAL STATEMENTS.
3.3.1 Oak has filed all forms, reports and documents required to
be filed with the SEC since March 1, 1995, and has made available to XLI
complete and correct copies of (i) its Annual Report on Form 10-K for the fiscal
year ended June 30, 1997, (ii) its Quarterly Report on Form 10-Q for the period
ended September 30, 1997, (iii) all proxy statements relating to Oak's meetings
of stockholders (whether annual or special) held since January 1, 1997, (iv) all
other reports or registration statements (other than Reports on Form 10-Q not
referred to in clause (ii) above and Reports on Form SR) filed by Oak with the
SEC since January 1, 1997 and (iv) all amendments and supplements to all such
reports and registration statements filed by Oak with the SEC (collectively, the
"OAK SEC REPORTS"). The Oak SEC Reports (i) were prepared in accordance with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and (ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of the Oak Subsidiaries is required to file any forms, reports
or other documents with the SEC.
3.3.2 Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Oak SEC Reports was
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto) and each fairly presented the consolidated financial
position of Oak and the Oak Subsidiaries as at the respective dates thereof and
the consolidated results of Oak's operations and cash flows for the periods
indicated.
3.3.3 Oak has heretofore furnished to XLI a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 17
filed, to agreements, documents or other instruments which previously had been
filed by Oak with the SEC pursuant to the Securities Act or the Exchange Act.
3.4 COMPLIANCE WITH OTHER INSTRUMENTS. Oak is not in violation of any
provisions of its Certificate of Incorporation or Bylaws as amended and in
effect on the date of this Agreement; Pixel is not in violation of any
provisions of its Articles of Organization or Bylaws as amended and in effect on
the date of this Agreement. Neither Oak nor Pixel is in violation in any
material respect of any provisions of any material instrument or contract to
which it is a party, or, to the best of Oak's knowledge, of any provision of any
federal or state judgment, writ, decree, order, statute, rule or governmental
regulation applicable to Oak or Pixel. The execution, delivery and performance
of this Agreement will not result in any such violation or be in conflict with
or constitute a default under any material contract or agreement to which Oak or
Pixel is a party, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the property or assets of Oak pursuant to any
such provision, except as otherwise contemplated by this Agreement.
3.5 GOVERNMENT CONSENTS. All consents, approvals, orders or
authorizations of, or registrations, qualifications, designations, declarations
or filings with, any federal or state governmental authority on the part of Oak,
Pixel or Sub required in connection with the consummation of the transactions
contemplated by this Agreement shall have been obtained prior to, and be
effective as of, the Effective Time.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF XLI.
For purposes of this Section 4, all references to XLI shall include the XLI
Subsidiaries and all such representations and warranties shall apply to the XLI
Subsidiaries except where the context makes such reference inapplicable. Except
as disclosed by XLI in Exhibit "G" to this Agreement, XLI warrants and
represents to Oak, Pixel and Sub that:
4.1 ORGANIZATION AND GOOD STANDING.
4.1.1 XLI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to carry on its business as now conducted and as
proposed to be conducted, and is duly qualified as a foreign corporation and is
in good standing in all other jurisdictions in which such qualification is
required; provided, however, that XLI may not be qualified in jurisdictions in
which its failure to qualify would not have a material and adverse effect on its
operations or financial condition.
4.1.2 The XLI Subsidiaries are corporations duly organized,
validly existing and in good standing under the laws of the country or state of
their incorporation, and have all requisite corporate power and authority to
carry on their businesses as now conducted and as proposed to be conducted, and
are duly qualified as foreign corporations and are in good standing in all other
jurisdictions in which such qualification is required; provided, however, that
any XLI Subsidiary may not be qualified in a jurisdiction in which such failure
to qualify would not have a material and adverse effect on its operations or
financial condition.
4.1.3 Other than the XLI Subsidiaries, XLI does not presently own
or control, directly or indirectly, any other corporation, association, or other
business entity.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 18
4.2 CAPITALIZATION.
4.2.1 The authorized capital stock of XLI consists of Thirty
Million (30,000,000) ($0.01 par value) shares of Common Stock, of which Two
Million Thirty-Nine Thousand Three Hundred Ten (2,039,310) ($0.01 par value)
shares are validly issued and outstanding, fully paid and non-assessable; and
One Million (1,000,000) ($0.01 par value) shares of Preferred Stock, of which
Eight Hundred Fifty Thousand (850,000) ($0.01 par value) shares are designated
Series A Preferred Stock, of which Three Hundred Fifteen Thousand Two Hundred
Thirty-Eight (315,238) ($0.01 par value) shares are validly issued and
outstanding, fully paid and non-assessable, and of which Eighty-Five Thousand
(85,000) shares are reserved for issuance upon exercise of the Underwriter's
Warrant. The shares of Series A Preferred Stock of XLI issued and outstanding
as of the date of this Agreement are convertible into Seven Hundred Eighty-Four
Thousand Four Hundred Twenty-Nine (784,429) shares of XLI Common Stock in
connection with the Merger, and the shares of XLI Preferred Stock reserved for
issuance upon exercise of the Underwriter's Warrant are convertible into Two
Hundred Fifty-Four Thousand Seven Hundred Sixty Five (254,765) shares of XLI
Common Stock.
4.2.2 XLI has adopted a 1990 Stock Option Plan and a 1992 Stock
Option Plan under which options to purchase up to Two Hundred Ninety-Nine
Thousand Nine Hundred Forty-Two (299,942) and One Fifty Thousand (150,000)
shares of XLI Common Stock, respectively, may be granted to key employees,
directors and consultants. Options to purchase Two Hundred Twenty-Nine Thousand
Six Hundred Sixty-Eight (229,668) shares of XLI Common Stock and One Hundred
Fifty Thousand (150,000) shares of XLI Common Stock are presently outstanding
under the 1990 Stock Option Plan and the 1992 Stock Option Plan, respectively.
No options to purchase shares of XLI Common Stock will be outstanding as of the
Effective Time.
4.2.3 Except as described below in this Section 4.2.3, no warrants
or convertible notes to purchase shares of XLI Stock will be outstanding as of
the Effective Time. Any such warrants or convertible notes outstanding at the
Effective Time shall be exercisable only in exchange for the Consideration. The
agreements governing the exercise of such warrants or convertible notes do not
permit adjustments to be made in the number of shares of XLI Common Stock
purchasable under such warrants or convertible notes or in the exercise prices
of such warrants or convertible notes, at any time at or after the Effective
Time.
4.2.3.1 IPO Warrants to purchase Eight Hundred Forty-Five
Thousand Three Hundred Twenty-Nine (845,329) shares of XLI Common Stock, at an
exercise price of $6.4176 per share, are presently issued and outstanding. In
addition, a warrant to purchase up to One Hundred Fifty Thousand Eight Hundred
One (150,801) shares of XLI Common Stock and Eighty-Four Thousand Five Hundred
Thirty-Two (84,532) IPO Warrants (the "REPRESENTATIVE'S WARRANT") was issued to
the Underwriter in connection with XLI's initial public offering on January 12,
1993, and is presently outstanding. The exercise price of the Representative's
Warrant is Six Hundred Fifty-Four Thousand Eight Hundred Seventy-Five Dollars
($654,875) (or $4.3426 per share of XLI Common Stock included in the
Representative's Warrant) and the exercise price of the IPO Warrants included in
the Representative's Warrant is $6.4176 per share. All IPO Warrants, including
any IPO Warrants underlying the Representative's Warrant, expire on January 12,
1998. The Representative's Warrant expires on January 20, 1998.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 19
4.2.3.2 Class A Warrants to purchase Four Hundred Twenty-Seven
Thousand Seven Hundred Fifty-Eight (427,758) shares of XLI Common Stock, at an
exercise price of $2.608 per share, are presently issued and outstanding. In
addition, a warrant to purchase Eighty-Five Thousand (85,000) units, at an
exercise price of $4.80 per unit (the "UNDERWRITER'S WARRANT") was issued to the
Underwriter in connection with XLI's public offering in February 1994, for a
total exercise price of Four Hundred Eight Thousand Dollars ($408,000), and is
presently outstanding. The units consist of up to Forty-Two Thousand Seven
Hundred Seventy-Seven (42,777) Class A Warrants, having an exercise price of
$2.608 per share, and Eighty-Five Thousand (85,000) shares of XLI Preferred
Stock. The shares of XLI Preferred Stock underlying the Underwriter's Warrant
are convertible into Two Hundred Fifty-Four Thousand Seven Hundred Sixty-Five
shares of XLI Common Stock. All Class A Warrants, including any Class A
Warrants underlying the Underwriter's Warrant, expire on February 11, 1999. The
Underwriter's Warrant expires on February 22, 1999.
4.2.3.3 Private 1995 Warrants to purchase Six Hundred Eight
Thousand (608,000) shares of XLI Common Stock, at an exercise price ranging from
$0.03125 to $0.10 per share, are presently issued and outstanding. All Private
1995 Warrants will have expired by no later than December 31, 2000.
4.2.3.4 Private 1996 Warrants to purchase Five Hundred Ninety-
Three Thousand Four Hundred Sixty-Two (593,462) shares of XLI Common Stock, at
an exercise price of $0.01 per share, are presently issued and outstanding. All
Private 1996 Warrants will have expired by no later than May 31, 2001.
4.2.4 XLI has reserved sufficient shares of XLI Common Stock for
issuance upon conversion of any issued and outstanding shares of XLI Preferred
Stock and upon exercise of any options, warrants, convertible notes, convertible
securities or other rights presently outstanding.
4.2.5 All outstanding securities of XLI were issued in compliance
with applicable federal and state securities laws.
4.2.6 There are no other options, warrants, convertible notes,
convertible securities or other rights presently outstanding to purchase any of
the authorized but unissued capital stock of XLI or the XLI Subsidiaries.
4.3 AUTHORIZATION. All corporate action on the part of XLI and its
officers, directors and stockholders necessary for the authorization, execution,
delivery and performance of all obligations of XLI under this Agreement will be
taken prior to the Effective Date. This Agreement, when executed and delivered,
will constitute a valid and legally binding obligation of XLI.
4.4 XLI SEC FILINGS; FINANCIAL STATEMENTS.
4.4.1 XLI has filed all forms, reports and documents required to
be filed with the SEC since January 1, 1993, and has made available to Oak and
Pixel complete and correct copies of (i) its Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1996, (ii) its Quarterly Reports on Form 10-
QSB for the periods ended March 31, 1997, June 30, 1997 and September 30, 1997,
(iii) all proxy statements relating to XLI's meetings of stockholders (whether
annual or special) held since January 1, 1993, (iv) all other reports or
registration statements (other than Reports on Form 10-QSB not referred to in
clause (ii) above and Reports on Form SR) filed by XLI with the SEC since
January 1, 1993
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 20
and (iv) all amendments and supplements to all such reports and registration
statements filed by XLI with the SEC (collectively, the "XLI SEC REPORTS"). The
XLI SEC Reports (i) were prepared in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. None of the XLI
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
4.4.2 Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the XLI SEC Reports was
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto) and each fairly presented the consolidated financial
position of XLI and the XLI Subsidiaries as at the respective dates thereof and
the consolidated results of XLI's operations and cash flows for the periods
indicated.
4.4.3 XLI has heretofore furnished to Oak and Pixel a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by XLI with the SEC pursuant
to the Securities Act or the Exchange Act.
4.5 OWNERSHIP OF PROPERTY.
4.5.1 Except (a) as reflected in the XLI SEC Reports or in the notes
thereto, (b) for liens for current taxes not yet delinquent, (c) for liens
imposed by law and incurred in the ordinary course of business for obligations
not yet due to carriers, warehousemen, laborers, materialmen and the like, (d)
for liens in respect of pledges or deposits under workers' compensation laws or
similar legislation, or (e) for minor defects in title, none of which,
individually or in the aggregate, materially interferes with the use of such
property, XLI owns its property free and clear of all mortgages, liens, loans
and encumbrances. With respect to the property it leases, XLI is in compliance
with such leases and, to the best of its knowledge, holds a valid leasehold
interest free of any liens, claims and encumbrances, subject to clauses (b)
through (e) above.
4.5.2 All leases described in the list delivered pursuant to
Section 4.28(xii) (Additional Disclosure) are in full force and effect, and
there are no material defaults by either party thereunder. XLI owns no real
property and will not acquire any real property before the Effective Date.
4.5.3 The personal property described in the list delivered
pursuant to Section 4.28(xiii) (Additional Disclosure) is not held under any
lease, security agreement, conditional sales contract, or other title retention
or security arrangement, nor is such property located other than in the
possession of XLI. There will be no material and adverse changes in the amount
and type of tangible personal property in the possession of, or used by, XLI
during the period from September 30, 1997 to and including the Effective Date.
4.5.4 All personal property owned by XLI, taken as a whole, is in
good condition and repair, subject to normal wear and tear, and its use in the
business of XLI is in compliance with all material, applicable, governmental
regulations.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 21
4.6 LIABILITIES. XLI has no material liabilities except as disclosed
herein and in the XLI SEC Reports.
4.7 INVENTORIES. The inventories of XLI, whether finished goods, work
in process or raw materials, shown on the XLI SEC Reports or thereafter
acquired, are all items of a quality usable or saleable in the ordinary and
usual course of the business of XLI, except for inventory items which are
obsolete or not usable or saleable in the ordinary course of business which have
been written down to an amount not in excess of realizable market value or for
which adequate reserves or allowances have been provided in the XLI SEC Reports.
The values at which inventories are carried reflect the inventory valuation
policy of XLI which is consistent with its past practice and in accordance with
generally accepted accounting principles applied on a consistent basis.
4.8 RAW MATERIALS. All raw materials and finished goods purchased by XLI
and placed in inventory were done so in the ordinary course of XLI's business
and are presently available on reasonable terms and conditions from the vendors
listed on the vendors list provided pursuant to Section 4.28(ix) (Additional
Disclosure). There are no sole source providers of raw materials or finished
goods material to XLI's business.
4.9 SALES CONTRACTS AND BIDS. All cost and pricing data stated in the
bids, proposals, quotations, sales contracts and other commitments described on
the list provided pursuant to Section 4.28(xv) (Additional Disclosure) were when
made, accurate, complete and current in all material respects. To the best of
XLI's knowledge, each such sales contract and other commitment is a valid
agreement pursuant to which no default of any material nature exists or is
contemplated thereunder, and no notice of cancellation thereof has been received
by XLI nor is XLI aware of any contemplated cancellation thereof by the customer
thereunder. To the best of XLI's knowledge, none of such documents (i) contains
terms, conditions or requirements which exceed the current capacity or
capabilities of XLI or calls for performance unattainable within XLI's current
capabilities, (ii) is the subject of any change or adjustment yet to be
negotiated with the customer thereunder, (iii) is subject to any dispute or (iv)
provided Oak and Pixel make no material changes in XLI's performance standards
or operating procedures or levels, will result upon completion of performance
either in a total cost of performance which is in excess of the contract or bid
price, or a cost to complete performance in excess of the remaining unbilled
portion of the contract price. To the best of XLI's knowledge, no sales
contract or other commitment of XLI completed or under performance is or will be
the subject of any claim against XLI for reduction in the purchase price, return
of excess profits or violation of any government regulations or contracting
procedures.
4.10 QUALITY AND CONFORMANCE OF PRODUCTS. XLI's products and all
components thereof, whether actually delivered or currently being produced,
packaged or manufactured by XLI, have met or meet the specifications set forth
in the sales contracts or purchase orders relating to such products and any
applicable governmental minimum quality standards. To the best of XLI's
knowledge, each such product and component is free from any defect in quality,
materials or packaging standards that would subject XLI to any contract claim,
product liability or other liability of any nature whatsoever, whether asserted
by the purchaser thereof or any third party.
4.11 ACCOUNTS RECEIVABLE. All of the accounts receivable of XLI shown on
the XLI SEC Reports or thereafter acquired arose and are collectible in the
ordinary and usual course of XLI's business, except that the value of any
account receivable, the collection of which is doubtful or which is subject to a
defense or set-off, has been written down to an amount not in excess of
realizable market value or adequate
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 22
reserves or allowances therefor have been provided in the XLI SEC Reports. The
values at which accounts receivable are carried reflect the accounts receivable
valuation policy of XLI which is consistent with its past practice and in
accordance with generally accepted accounting principles applied on a consistent
basis.
4.12 TAXES. XLI and the XLI Subsidiaries have prepared and filed all
state, local, United States and other applicable domestic or foreign
jurisdictions corporate income, real and personal property, withholding, sales
and other tax returns that are required to be filed by them and have paid or
made provision for the payment of all taxes that have become due pursuant to
such returns or are otherwise due. The tax returns of XLI and the XLI
Subsidiaries have not been audited by the Internal Revenue Service or any other
governmental agency. No deficiency, assessment or proposed adjustment of XLI's
or any XLI Subsidiary's taxes is pending and XLI has no knowledge of any
proposed liability for any tax to be imposed upon its or any XLI Subsidiary's
properties or assets. XLI has not made an election under Section 341(f) of the
Code. XLI has not made or agreed (or been required) to make any adjustment or
change in accounting method. No material special charges, penalties, fines,
liens or similar encumbrances have been asserted against XLI or the XLI
Subsidiaries with respect to the payment or failure to pay any taxes which have
not been paid or received without further liability to XLI or the XLI
Subsidiaries. Proper and accurate amounts have been withheld by XLI and the XLI
Subsidiaries from their employees for all periods in compliance with the
withholding provisions of applicable law. No payments by XLI to its officers,
directors, employees or consultants under any contact, plan or agreement,
including but not limited to this Agreement, or payments contemplated by this
Agreement, constitute parachute payments within the meaning of Section 280G of
the Code.
4.13 FIRPTA STATUS. XLI is not, and has not been at any time during the
five year period preceding the date hereof, a "United States real property
holding corporation" as defined in Section 897 of the Code and the regulations
promulgated thereunder.
4.14 CUSTOMER LIST. It is understood and agreed by the parties hereto that
no representation is being made hereunder that the customers listed on the
customer list provided pursuant to Section 4.28(viii) (Additional Disclosure)
will become or remain customers of XLI subsequent to the Effective Date.
4.15 VENDORS LIST. XLI is not aware of any vendor appearing on the vendors
list provided pursuant to Section 4.28(ix) (Additional Disclosure) that has
refused to (or threatened to refuse to) continue to do business with XLI or has
threatened to refuse to do business with XLI after the Merger on the same terms
and conditions as XLI did business with such vendors prior to the Effective Date
and in no event on terms and conditions less favorable to Oak and Pixel than
customary terms and conditions in XLI's industry. To the best knowledge of XLI,
no vendor appearing on the vendors list provided pursuant to Section 4.28(ix)
(Additional Disclosure) has the right to terminate any agreement entered into
with XLI.
4.16 BUSINESS CHANGES. Since September 30, 1997, except as otherwise
contemplated by this Agreement, XLI has conducted its business only in the
ordinary and usual course and, without limiting the generality of the foregoing:
4.16.1 XLI has not sustained any damage, destruction or loss, by
reason of fire, explosion, earthquake, casualty, labor trouble, requisition or
taking of property by any government or agent thereof, windstorm, embargo, riot,
act of God or public enemy, flood, accident, revocation of license or right to
do business, total or partial termination, suspension, default or modification
of contracts, governmental
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 23
restriction or regulation, other calamity or other event (whether or not covered
by insurance) materially and adversely affecting the financial condition,
business, assets or operations of XLI.
4.16.2 There have been no changes in the financial condition,
business, assets, operations, obligations or liabilities (fixed or contingent)
of XLI which, in the aggregate, have had or may be reasonably expected to have
(whether before or after the Effective Time of the Merger) a materially adverse
effect on the financial condition, business, assets or operations of XLI.
4.16.3 XLI has not issued, or authorized for issuance, any equity
security, bond, warrant, note, convertible security or other security of XLI,
except for shares of XLI Stock issued upon the exercise of the outstanding stock
options or the outstanding warrants referenced in Sections 4.2.2 and 4.3.3
(Capitalization), respectively, or accelerated the vesting of any employee stock
benefits (including vesting under stock purchase agreements or exercisability of
stock options) and XLI has not granted, or entered into, any commitment or
obligation to issue or sell any such equity security, bond, warrant, note,
convertible security or other security of XLI, whether pursuant to offers, stock
option agreements, stock bonus agreements, stock purchase plans, incentive
compensation plans, warrants, calls, conversion rights or otherwise, except for
shares of XLI Stock issuable upon the exercise of the outstanding stock options
and the outstanding warrants referenced in Sections 4.2.2 and 4.3.3
(Capitalization), respectively.
4.16.4 XLI has not incurred additional debt for borrowed money, nor
incurred any obligation or liability (fixed or contingent), except in the
ordinary and usual course of the business of XLI and consistent with past
practice.
4.16.5 XLI has not paid any obligation or liability (fixed or
contingent), or discharged or satisfied any lien or encumbrance, or settled any
liability, claim, dispute, proceeding, suit or appeal, pending or threatened
against it or any of its assets or properties, except for current liabilities
included in the XLI SEC Reports and current liabilities incurred since the date
of the XLI SEC Reports in the ordinary and usual course of the business of XLI
and consistent with past practice.
4.16.6 XLI has not declared or made any dividend, payment or other
distribution on or with respect to any share of capital stock of XLI, and is not
required to declare or accrue any dividend, payment or other distribution with
respect to any share of capital stock of XLI.
4.16.7 XLI has not split, combined or reclassified its capital
stock or issued or authorized or proposed the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital stock.
XLI has not purchased, redeemed or otherwise acquired or committed itself to
acquire, directly or indirectly, any share or shares of capital stock of XLI.
4.16.8 XLI has not mortgaged, pledged, otherwise encumbered or
subjected to lien any of its assets or properties, tangible or intangible, nor
has it committed itself to do any of the foregoing, except for liens for current
taxes which are not yet due and payable and purchase-money liens arising out of
the purchase or sale of products or services made in the ordinary and usual
course of business.
4.16.9 XLI has not disposed of, or agreed to dispose of, any asset
or property, tangible or intangible, except in the ordinary and usual course of
business, and in each case for consideration at least equal to the fair value of
such asset or property, nor has XLI leased or licensed to others (including
officers and directors), or agreed so to lease or license, any asset or
property, except in the ordinary course
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 24
of business, nor has XLI discontinued any product line or the production, sale
or other disposition of any of its products or services.
4.16.10 XLI has not purchased or agreed to purchase or otherwise
acquire any debt or equity securities of any corporation, partnership, joint
venture, firm or other entity; XLI has not made any expenditure or commitment
for the purchase, acquisition, construction or improvement of a capital asset,
except in the ordinary and usual course of business, and no commitment has been
made which includes obligations of XLI extending beyond March 31, 1998.
4.16.11 XLI has not entered into any transaction or contract, or
made any commitment to do the same, except in the ordinary and usual course of
business, nor has XLI waived any right of substantial value or canceled any
debts or claims or voluntarily suffered any extraordinary losses which
individually or in the aggregate would have a materially and adverse effect on
the business of XLI.
4.16.12 XLI has not sold, assigned, transferred or conveyed, or
committed itself to sell, assign, transfer or convey, any XLI Intellectual
Property Rights, except in the ordinary course of business and XLI has not
amended or modified any existing agreements with respect to the XLI Intellectual
Property Rights.
4.16.13 XLI has not effected or agreed to effect any amendment or
supplement to any employee profit sharing, stock option, stock purchase,
pension, bonus, incentive, retirement, medical reimbursement, life insurance,
deferred compensation or any other employee benefit plan or arrangement.
4.16.14 Except for (i) the increases in wages, salaries and benefits
reflected on the employee list provided pursuant to Section 4.28(xvi)
(Additional Disclosure) at the rates shown thereon and (ii) normal merit wage,
salary and benefit increases for non-senior management employees consistent with
XLI's established practices, XLI has not paid or committed itself to pay to or
for the benefit of any of its directors, officers, employees or stockholders any
compensation of any kind other than wages, salaries and benefits at times and
rates in effect prior to September 30, 1997.
4.16.15 XLI has not effected or agreed to effect any change in its
directors or executive management.
4.16.16 Except as set forth in Section 6.1.3 (Amendment of XLI
Certificate of Incorporation), XLI has not effected or committed itself to
effect any amendment or modification to its Certificate of Incorporation or
Bylaws.
4.16.17 To the knowledge of XLI, no statute has been enacted nor has
any rule or regulation been adopted (whether before or after September 30, 1997)
which may reasonably be expected to have a material and adverse effect on the
financial condition, business, assets or operations of XLI.
4.16.18 XLI has not effected any change in accounting methods or
practices (including, without limitation, any change in depreciation or
amortization policies or rates).
4.16.19 XLI has not revalued any of its assets.
4.16.20 XLI has not made any loan to any person or entity.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 25
4.16.21 XLI has not granted any exclusive or royalty free licenses
to make, use or sell any XLI Intellectual Property Rights or products since
September 30, 1997.
4.16.22 XLI has not taken or agreed to take, and will not take or
agree to take, any of the actions described in Sections 4.16.1 to 4.16.21 above,
or any action which would make any of the representations or warranties of XLI
contained in this Agreement untrue or incorrect on the Effective Date, or
prevent XLI from performing or cause XLI not to perform its covenants hereunder,
or result in any of the conditions to the Merger set forth herein not being
satisfied.
4.17 XLI INTELLECTUAL PROPERTY RIGHTS. XLI owns, or is otherwise licensed
or has sufficient rights to use, all XLI Intellectual Property Rights used in
the business of XLI, and the same are sufficient to conduct its business as it
has been and is now being conducted. All patents, registered trademarks and
copyrights held by XLI are valid. There are no claims, disputes, actions,
proceedings, suits or appeals pending against XLI or Xxxxxx Corporation with
respect to any XLI Intellectual Property Rights, and, to the knowledge of XLI,
none have been threatened against XLI or Xxxxxx Corporation . To the knowledge
of XLI, there are no facts or circumstances which would reasonably serve as a
basis for any claim (i) that the manufacture, sale or use of any product, or any
licensing of XLI Intellectual Property Rights, infringes on any patent,
copyright or trade secret, (ii) against the use by XLI of any XLI Intellectual
Property Rights or (iii) challenging the ownership or validity of any XLI
Intellectual Property Rights. To the knowledge of XLI, there is no unauthorized
use, infringement or misappropriation of any XLI Intellectual Property Rights by
any third party, including Xxxx Xxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx Corporation or
any employee or consultant, or former employee or consultant, of XLI. Neither
XLI nor Xxxxxx Corporation has been sued or charged in writing as a defendant in
any claim, suit, action or proceeding which involves a claim of infringement of
trade secrets, patents, trademarks, service marks or copyrights, which has not
been finally terminated prior to the date hereof nor does XLI have knowledge of
any infringement liability with respect to, or infringement by, XLI or Xxxxxx
Corporation of any trade secret, patent, trademark, service xxxx or copyright of
another. XLI maintains a trade secret protection program pursuant to which its
officers, employees and consultants have been requested to sign a Development
and Confidential Information Agreement. Since January 1, 1993 and thereafter,
each of the XLI's officers, employees and consultants with access to technical
data of XLI has signed such an agreement and each such an agreement remains in
full force and effect. To the knowledge of XLI, none of its officers, employees
or consultants is in violation of such agreements.
4.18 COMPLIANCE WITH LAW. Except for possible minor exceptions, the curing
or non-curing of which would not have a material effect on the financial
condition, business, assets or operations of XLI, the business of XLI has been
conducted in accordance with all applicable laws, regulations, orders and other
requirements of governmental authorities, including, without limiting the
generality of the foregoing, ERISA and all other laws, regulations and orders
relating to employment practices and procedures and the health and safety of
employees. XLI has not received any notice of alleged violations of the
foregoing.
4.19 HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS. XLI and the XLI
Subsidiaries to the best of XLI's knowledge (i) have obtained all applicable
permits, licenses and other authorizations which are required under Federal,
state or local laws relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic materials or wastes
into ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by XLI or the XLI Subsidiaries (or
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 26
their respective agents); (ii) are in compliance with all terms and conditions
of such required permits, licenses and authorizations, and also are in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
such laws or contained in any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder;
(iii) as of the date hereof, are not aware of nor have received notice of any
event, condition, circumstance, activity, practice, incident, action or plan
which is reasonably likely to interfere with or prevent continued compliance or
which would give rise to any common law or statutory liability, or otherwise
form the basis of any claim, action, suit or proceeding, based on or resulting
from XLI's or any of XLI's Subsidiaries (or any of their respective agents)
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge or release into the
environment, of any pollutant, contaminant, or hazardous or toxic material or
waste; and (iv) have taken all actions necessary under applicable requirements
of Federal, state or local laws, rules or regulations to register any products
or materials required to be registered by XLI or the XLI Subsidiaries (or any of
their respective agents) thereunder.
4.20 ERISA AND RELATED MATTERS.
4.20.1 The XLI Pension Plans are qualified under Section 401 of the
Code and the trusts maintained pursuant thereto are exempt from federal income
taxation under Section 501 of the Code, and nothing has occurred with respect to
the operation of the XLI Pension Plans which could cause the loss of such
qualification or exemption or the imposition of any liability or tax under ERISA
or the Code.
4.20.2 Neither XLI nor any Related Party maintains or has ever
maintained a pension plan subject to Title IV of ERISA.
4.20.3 There is no material violation of ERISA or the Code with
respect to the filing of applicable statements, reports, documents and notices
with the Secretary of Labor or the Secretary of the Treasury or the furnishing
of statements, reports, documents and notices to the participants or
beneficiaries with respect to the XLI Employee Benefit Plans.
4.20.4 True, correct and complete copies of the following documents
for each XLI Employee Benefit Plan have been made available to Oak or its
counsel by XLI: (i) all plan documents and related trust documents, insurance
contracts and other documents pursuant to which benefits under such Plans are
funded or paid, including all amendments, modifications and supplements thereto,
(ii) Forms 5500, financial statements and actuarial reports, if any, for the
last three Plan years and any estimates of projected future liabilities, (iii)
the last Internal Revenue Service determination letter, (iv) the most recent
summary Plan descriptions, (v) all written communications given to all or any
specific group of employees and (vi) written descriptions of all oral agreements
relating to the Employee Benefit Plans.
4.20.5 There are no pending claims or lawsuits which have been
asserted or instituted against any XLI Employee Benefit Plan, the assets of any
of the trusts under such Plans, XLI or a Related Party or against any fiduciary
of any Employee Benefit Plan with respect to the operation of such Plans, nor
does XLI have knowledge of facts which could form the basis for any such claim
or lawsuit.
4.20.6 All amendments and actions required to have been taken prior
to the date hereof to bring the XLI Employee Benefit Plans and the XLI Pension
Plans into conformity in all material respects with all of the applicable
provisions of ERISA and all other applicable laws have been made or taken.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 27
4.20.7 Any bonding required with respect to the XLI Pension Plans
in accordance with applicable provisions of ERISA has been obtained, and will be
in full force and effect until the Effective Time.
4.20.8 Each XLI Employee Benefit Plan has been maintained, in all
material respects, in accordance with its terms and with all provisions of ERISA
(including rules and regulations thereunder) and other applicable law, and
neither XLI (or a Related Party) nor any "party in interest" or "disqualified
person" with respect to any such Employee Benefit Plan has engaged in a
"prohibited transaction" within the meaning of Section 4975 of the Code or Title
I, Part 4 of ERISA for which no statutory or administrative exemption exists.
4.20.9 None of the XLI Employee Benefit Plans which are "welfare
benefit plans" within the meaning of Section 3(1) of ERISA provides for
continuing benefits or coverage for any participant or any beneficiary of a
participant after such participant's termination of employment except as may be
required under COBRA or at the expense of the participant or the participant's
beneficiary. XLI and each Related Party has complied in all material respects
with the notice and continuation requirements of COBRA. There are no
commitments, whether contractual in nature or based upon any representation,
warranty or other undertaking by XLI which would preclude Oak or Pixel from
increasing the cost charged individuals for participating in any continuing
medical benefit coverage.
4.20.10 Neither XLI nor any Related Party has withdrawn in a
complete or partial withdrawal from any multi-employer plan within the meaning
of Section 4001(a)(3) of ERISA prior to the Effective Time. Neither XLI nor any
Related Party has contributed to or been obligated to contribute to any multi-
employer plan within the meaning of Section 4001(a)(3) of ERISA.
4.20.11 Nothing expressed or implied in this Agreement shall confer
upon any employee of XLI or a Related Party, any beneficiary or dependent of
such employee, or upon any legal representative or collective bargaining agent
of such employee, or upon any other person not a party to this Agreement any
rights or remedies, of any nature or kind whatsoever, under or by reason of this
Agreement, including without limitation any right to employment or to continued
employment for any specified period or any right to participation or to
continued participation in any XLI Employee Benefit Plan or in any compatible
arrangement for current or deferred compensation.
4.20.12 XLI has no arrangements covering employees maintained
outside the United States which would be Employee Benefit Plans if they were
maintained inside the United States.
4.21 EMPLOYEES.
4.21.1 The officers and directors of XLI are, and except to the
extent, if any, that Oak shall be notified of changes, will be immediately prior
to the Effective Time, as set forth on the employee list delivered pursuant to
Section 4.28(xvi) (Additional Disclosure); such list also sets forth:
4.21.1.1 The names of all full-time present employees and their
annual compensation from XLI (including, without limitation, salaries, bonuses,
overrides and commissions) for the present fiscal year (at their present or
presently anticipated rates, including bonuses, overrides and commissions);
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 28
4.21.1.2 A list of all employment contracts, bonus, stock option,
profit sharing and other agreements, plans, arrangements or authorizations
providing for employee remuneration or benefits to which XLI is a party or by
which it is bound;
4.21.1.3 A list of all material consulting, agency and
distribution relationships and agreements to which XLI is a party or by where it
is bound; and
4.21.1.4 The names of all persons, if any, holding
powers-of-attorney from XLI and a summary statement of the terms thereof. XLI
has delivered to Oak copies of all powers-of-attorney set forth in such list.
4.21.2 Except as they may be modified by judicial doctrines in the
Commonwealth of Massachusetts, all of XLI's employment contracts and consulting
agreements are terminable at will.
4.21.3 XLI has not, since December 31, 1996, paid any bonuses,
premiums or other unusual payments to its officers, directors, employees or
other persons, except as set forth in such employee list.
4.21.4 Except as disclosed on such employee list, XLI has not made
any loans or advances to any employee, officer, director or agent of XLI, except
in the ordinary course of business.
4.21.5 XLI has no contract with, or commitment or liability to, any
labor organization or association of employees, or pending or contemplated
negotiation with any such organization or association, and no attempt, plan or
threat to organize the employees of XLI is pending or, to the best of XLI's
knowledge, is threatened or contemplated.
4.22 LITIGATION. There is no action, proceeding or investigation pending
or, to the best knowledge of XLI, threatened against XLI before any court or
administrative agency that might result, either individually or in the
aggregate, in any material liability on the part of XLI or in any material and
adverse change in the business of XLI or in XLI's ability to carry on its
businesses or which questions the validity of this Agreement or any actions
taken or to be taken in connection therewith.
4.23 MATERIAL CONTRACTS. All XLI Material Contracts are in full force and
effect and are legal, binding and enforceable by XLI. XLI is not in material
default under any of such contracts and, to the best of XLI's knowledge, no
other party to any such contract is in material default thereunder.
4.24 COMPLIANCE WITH OTHER INSTRUMENTS. XLI is not in violation of any
provisions of its Certificate of Incorporation or Bylaws as amended and in
effect on the date of this Agreement. XLI is not in violation in any material
respect of any provisions of any material instrument or contract to which it is
a party, or, to the best of its knowledge, of any provision of any federal or
state judgment, writ, decree, order, statute, rule or governmental regulation
applicable to XLI. The execution, delivery, and performance of this Agreement
will not result in any such violation or be in conflict with or constitute a
default under any material contract or agreement to which XLI is a party, or
result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the property or assets of XLI pursuant to any such provision.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 29
4.25 GOVERNMENT CONSENTS. All consents, approvals, orders or
authorizations of, or registrations, qualifications, designation, declarations
or filings with any federal or state governmental authority on the part of XLI
required in connection with the consummation of the transactions contemplated by
this Agreement shall have been obtained prior to, and be effective as of, the
Effective Time.
4.26 CERTAIN TRANSACTIONS. XLI is not indebted, either directly or
indirectly, to any of its officers, directors or stockholders, or their
respective spouses or children, in any amount whatsoever, other than for payment
of salary for services rendered and reasonable expenses; none of said officers,
directors, stockholders, or to the best of XLI's knowledge, any members of their
immediate families, are indebted to XLI or have any direct or indirect ownership
interest in any firm or corporation (except with respect to any interest in less
than five percent (5%) of the stock of any corporation whose stock is publicly
traded): (a) with which XLI is affiliated; (b) with which XLI has a business
relationship; or (c) or any firm or corporation which competes with XLI. No
such officer, director or stockholder, or to the best of XLI's knowledge, any
members of their immediate families, is, directly or indirectly, interested in
any material contract with XLI excluding options granted under the 1990 Stock
Option Plan or the 1992 Stock Option Plan and excluding outstanding warrants.
XLI is not a guarantor or indemnitor of any indebtedness of any other person,
firm or entity.
4.27 BROKERS OR FINDERS. XLI has not incurred and will not incur, directly
or indirectly, any liability for any brokerage or finders' fees or agents
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
4.28 ADDITIONAL DISCLOSURE. XLI has delivered or made available to Oak or
its counsel true and complete copies of:
(i) the currently effective Certificate of Incorporation and Bylaws
of XLI.
(ii) a complete list of all agreements entered into by XLI, if any,
providing for the acquisition of its present business or any portions thereof.
(iii) a complete list of all federal and other tax returns filed
by XLI and any XLI Subsidiary for each of the most recent three (3) fiscal years
ended December 31.
(iv) a list showing (A) the names and addresses of the holders of XLI
Common Stock, XLI Preferred Stock, IPO Warrants, Class A Warrants, Private 1995
Warrants, Private 1996 Warrants, the XLI Subordinated Notes, the
Representative's Warrant, the Underwriter's Warrant and all outstanding stock
options (including designation of any XLI option which is an incentive stock
option under Section 422A of the Code), (B) the number of shares of XLI Stock
held by, or subject to warrants, convertible notes, convertible securities,
options or other rights granted or issued to the holders thereof, (including any
IPO Warrants, Class A Warrants, Private 1995 Warrants, Private 1996 Warrants,
XLI Subordinated Notes, Representative's Warrant or Underwriter's Warrant),
including all adjustments to the number of such shares or shares underlying such
warrants, convertible notes, convertible securities, options or other rights
(including any IPO Warrants, Class A Warrants, Private 1995 Warrants, Private
1996 Warrants, XLI Subordinated Notes, Representative's Warrant or Underwriter's
Warrant), (C) the manner in which such shares, warrants, convertible notes,
convertible securities, options or other rights are so held (including any IPO
Warrants, Class A Warrants, Private 1995 Warrants, Private 1996 Warrants, XLI
Subordinated Notes, Representative's Warrant or Underwriter's Warrant),
including copies of any XLI stock option or similar
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 30
plans and a copy of each outstanding warrant agreement, convertible note
agreement, convertible security agreement and stock option agreement, and (D)
the price payable by each holder thereof in connection with the exercise of any
such warrant, convertible note, convertible security, option or other right to
purchase shares of XLI Stock (including any IPO Warrants, Class A Warrants,
Private 1995 Warrants, Private 1996 Warrants, XLI Subordinated Notes,
Representative's Warrant or Underwriter's Warrant).
(v) a list (including titles) of the current directors and officers
of XLI and the XLI Subsidiaries.
(vi) a list of all jurisdictions in which XLI and any XLI Subsidiary
is qualified as a foreign corporation or is licensed to do business, and a
complete list of all jurisdictions in which XLI and any XLI Subsidiary is
conducting, or has conducted, any business during the last two (2) years.
(vii) a complete list of all licenses, permits, certificates or
other evidences of authority of XLI or any XLI Subsidiary to conduct its
business or any part thereof.
(viii) a customer list.
(ix) a list of all vendors of design tools, raw materials, finished
goods and other products placed in inventory by XLI.
(x) an aged list of all accounts receivable as of December 31, 1997.
(xi) an aged list of all accounts payable and all other short-term
liabilities as of December 31, 1997.
(xii) a list of all real property in which it has a leasehold
interest or other interest, the uses thereof by it, and any material lien,
security interest, charge or encumbrance thereon (which list of real property
shall include the addresses and (if known) square footage of all properties and,
if applicable, the aggregate monthly rental or other fee payable under any
lease).
(xiii) a list setting forth by location all furniture, equipment,
automobiles, supplies and other tangible personal property owned by, in the
possession of or used by it in connection with its business which has a book
value in excess of One Thousand Dollars ($1,000).
(xiv) a list containing the names of each bank, savings
institution or mutual fund in which XLI or any XLI Subsidiary has an account or
safe deposit box and the names of all persons authorized to draw thereon or who
have access thereto.
(xv) a list of all outstanding bids, proposals, quotations, sales
contracts and other commitments for the sale or license of its products.
(xvi) a list of all employees of XLI or any XLI Subsidiary
including a description of their wages, salaries and benefits, their salary
review dates, accrued vacation, accrued sick leave and similar items.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
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(xvii) a list of all patents, copyrights, trademarks, trade names,
service marks, and any applications therefor, utility models, devices, designs,
mask-works, net lists, trade secrets, drawings, schematics, technology,
microcode, computer software programs and any and all documentation related to
the foregoing list. The list should specify the jurisdictions in which each XLI
Intellectual Property Right has issued or been registered or in which an
application for such issuance or registration has been filed, including the
respective registrations and application numbers.
(xviii) a list of all Employee Benefit Plans including the XLI
Pension Plans.
(xix) a list of all fire and casualty, property, and directors'
and officers' insurance policies maintained by it.
(xx) a list of all written contracts, personal property leases and
other agreements under which XLI or any XLI Subsidiary is bound to pay Fifty
Thousand Dollars ($50,000) or more in the aggregate on an annual basis together
with the amount of such annual payment (the "XLI MATERIAL CONTRACTS").
(xxi) a complete list of all investments of XLI or any XLI
Subsidiary in securities (whether debt or equity), if any, including investments
in subsidiaries.
(xxii) a complete list of any consents or approvals required to be
obtained from third parties by XLI or any XLI Subsidiary in order to consummate
the Merger, as well as the subsequent merger of XLI with and into Pixel,
including any required consents or approvals relating to contracts, licenses,
leases and other instruments material to the business of XLI.
(xxiii) a list of all notes payable and all other long-term
liabilities as of December 31, 1997, including, without limitation, all XLI
Subordinated Notes.
(xxiv) a list of all agreements, setting forth the parties, dates
of execution and expiration dates, which relate to the XLI Intellectual Property
Rights, to which XLI or any XLI Subsidiary is a party or to which any of the XLI
Intellectual Property Rights are subject.
(xxv) a list of all consultants employed by XLI or any XLI
Subsidiary since January 1, 1993.
(xxvi) a list of all liens, encumbrances and security interests
encumbering any assets of XLI or any XLI Subsidiary.
All items delivered as described above in this Section 4.28 are identified
by the Section numbers as set forth above and attached hereto as Exhibit "H."
XLI has made available its Minute Books for inspection by Oak and its
counsel. Copies of any documents listed or described in any of the lists,
schedules or exhibits referenced in this Section 4.28 (Additional Disclosure)
have, if requested by Oak, been furnished to Oak or its counsel. All such
documents furnished to Oak are correct and complete copies, and there are no
amendments or modifications thereto, except as expressly noted in such list,
schedule or exhibit in which such document is referenced. The Minute Books of
XLI made available to Oak and its counsel for inspection contain full,
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 32
complete and accurate records of all meetings and other corporate actions taken
by the directors and stockholders of XLI. Any approval or consent of the
directors or stockholders of XLI required to be obtained by XLI in connection
with any action taken by XLI prior to the date of this Agreement was obtained by
XLI in accordance with its Certificate of Incorporation and Bylaws then in
effect and the requirements of applicable law. The lists, schedules and
exhibits delivered pursuant to this Section 4.28 (Additional Disclosure) are
correct and complete on the date of their delivery.
4.29 COMPLETE DISCLOSURE. To the best of XLI's knowledge, neither this
Agreement nor any of the documents delivered to Oak or Pixel by XLI in
connection herewith contains any untrue statement of a material fact or omits a
statement of any material fact necessary in order to make the statements
contained herein and therein not misleading in light of the circumstances under
which such statements were made.
4.30 MATERIALITY. Representations and warranties in this Section 4 limited
to "material" items mean items material to XLI on a consolidated basis.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF PARTY STOCKHOLDERS
Each Party Stockholder represents and warrants to Oak, Pixel and Sub that
it has the capacity and authority to enter into this Agreement and to execute
and deliver to Oak its Irrevocable Proxy to vote in favor of
the adoption of this Agreement, the approval of the Merger and the appointment
of the Stockholder Representatives. Each Stockholder Party further represents
and warrants to Oak and Pixel that this Agreement and the Irrevocable Proxy,
when executed and delivered, will constitute valid and legally binding
obligations of such Stockholder Party.
SECTION 6. COVENANTS.
6.1 XLI COVENANTS. XLI covenants with Oak, Pixel and Sub, as an
inducement to Oak, Pixel and Sub to enter into this Agreement, that:
6.1.1 SPECIAL MEETING; PROXY STATEMENT.
6.1.1.1 XLI shall prepare, in cooperation with Oak and Pixel, and
XLI shall file with the SEC under the Exchange Act preliminary proxy materials
for the purpose of soliciting proxies from XLI Stockholders to vote in favor of
the adoption of this Agreement, the approval of the Merger and the appointment
of the Stockholder Representatives at a special meeting of XLI Stockholders to
be called and held for such purpose (the "XLI SPECIAL MEETING"). XLI, with the
assistance of Oak and Pixel, shall promptly respond to any SEC comments on the
proxy materials and shall otherwise use its best efforts to resolve as promptly
as practicable all SEC comments to the satisfaction of the SEC. XLI agrees to
provide to Oak and Pixel copies of any proxy materials or correspondence related
thereto prior to any filing of such proxy materials or correspondence with the
SEC.
6.1.1.2 Promptly following the resolution to the satisfaction of
the SEC of all SEC comments on the proxy statement (or the expiration of the
ten-day period under Rule 14a-6(a) under the Exchange Act, if no SEC comments
are received by such date), XLI shall distribute the proxy statement to the XLI
Stockholders and, pursuant thereto, shall call the XLI Special Meeting in
accordance with the Delaware General Corporation Law and shall solicit proxies
from the XLI Stockholders to vote in favor of
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 33
the adoption of this Agreement, the approval of the Merger and the
appointment of the Stockholder Representatives at the XLI Special Meeting.
6.1.1.3 XLI shall comply with all applicable provisions of the
Delaware General Corporation Law in the preparation, filing and distribution of
the proxy statement, the solicitation of proxies thereunder, and the calling and
holding of the XLI Special Meeting. Without limiting the foregoing, XLI shall
ensure that the proxy statement does not, as of the date on which it is
distributed to XLI Stockholders, and as of the date of the XLI Special Meeting,
contain any untrue statement of a material fact, or omit to state a material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading (provided that XLI
shall only be responsible for the accuracy and completeness of information
relating to XLI or furnished by XLI in writing for inclusion in the proxy
statement).
6.1.1.4 XLI, acting through its Board of Directors, shall include
in the proxy statement the recommendation of its Board of Directors that the XLI
Stockholders vote in favor of the adoption of this Agreement, the approval of
the Merger and the appointment of the Stockholder Representatives, and shall
otherwise use its best efforts to obtain the requisite stockholder approval.
6.1.1.5 The proxy statement shall comply with the notice
provisions of Section 262(d) of the Delaware General Corporation Law.
6.1.2 APPRAISAL MATTERS. Upon such approval of this Agreement,
the Merger and the appointment of the Stockholder Representatives by the XLI
Stockholders, XLI shall, within ten (10) days after the Effective Date, mail to
each stockholder entitled thereto under Section 262(d)(1) of the Delaware
General Corporation Law a notice of that the Merger has become effective. XLI
shall deliver to Oak and Pixel, on the first business day after the XLI Special
Meeting, a certificate of the Secretary of XLI (the "XLI CERTIFICATE OF
OBJECTIONS") stating the number of shares of XLI Stock as to which written
demands for appraisal were filed in accordance with the Delaware General
Corporation Law. The XLI Certificate of Objections shall include the names and
mailing addresses of the XLI Stockholders who shall have filed written demands
for appraisal.
6.1.3 AMENDMENT OF XLI CERTIFICATE OF INCORPORATION. XLI agrees
to solicit from the XLI Stockholders waivers of certain provisions of the XLI
Certificate of Incorporation as requested by Oak or Pixel, including without
limitation waivers of the dividend and liquidation provisions set forth therein
in exchange for the Consideration set forth in this Agreement.
6.1.4 NOTICE OF DEFAULT OR CLAIM. XLI will give prompt written
notice to Oak and Pixel of any notice of default received by it subsequent to
the date of this Agreement and prior to the Effective Time of the Merger under
any instrument or agreement to which XLI is a party or by which it is bound, and
of the assertion of any claim which, if upheld, would render inaccurate any
representation of XLI herein.
6.1.5 NO SOLICITATION. Subject to this Section 6.1.5, XLI and the
Party Stockholders shall not, and XLI shall use its best efforts to cause its
Related Parties and each of its officers, directors, employees, representatives
and agents not to, directly or indirectly, (a) solicit, initiate or knowingly
encourage discussions or negotiations with any person or entity (other than Oak
or Pixel) concerning any merger, consolidation, sale of material assets, tender
offer (including a self-tender offer), recapitalization,
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 34
accumulation of XLI Stock, proxy solicitation or other business combination
involving XLI, any XLI Subsidiary or any division of XLI or of any XLI
Subsidiary ("XLI TRANSACTION PROPOSAL") or (b) provide any non-public
information concerning the business, properties or assets of XLI or any XLI
Subsidiary to any person or entity (other than Oak or Pixel). Notwithstanding
anything to the contrary contained in the immediately preceding sentence, XLI
shall not be prohibited from (x) furnishing information pursuant to a written
confidentiality agreement to a third party who has initiated contact with XLI
regarding a BONA FIDE unsolicited XLI Transaction Proposal under circumstances
not constituting a breach of the provisions of clause (a) of this Section 6.1.5
(a "PERMITTED XLI CONTACT"), (y) engaging in discussions or negotiations with a
third party who has initiated a Permitted XLI Contact regarding an XLI
Transaction Proposal or (z) following receipt of an XLI Transaction Proposal
taking and disclosing to its stockholders a position contemplated by Rule 14e-
2(a) under the Exchange Act or otherwise make disclosure to its stockholders,
but in each case referred to in the foregoing clauses (x) through (z) only to
the extent that the Board of Directors of XLI shall have concluded in good faith
in the exercise of its fiduciary duties, after consultation with its outside
counsel and financial advisor, that such actions are more likely than not to
result in a BONA FIDE XLI Transaction Proposal, the terms of which would be more
favorable to XLI Stockholders than the Merger (a "SUPERIOR XLI PROPOSAL"). XLI
shall immediately notify Oak and Pixel of and shall disclose to Oak and Pixel
all details of, any inquiries, discussions or negotiations of the notice
described in this Section 6.1.5, and if XLI receives an XLI Transaction
Proposal, XLI shall within one business day of its receipt of such proposal
inform Oak and Pixel of the terms and conditions of such proposal and identity
of the person making it. Immediately from and after the date of this Agreement,
XLI shall cease and cause to be terminated any existing activities, discussions
or negotiations with any parties conducted heretofore with respect to any XLI
Transaction Proposal. Any confidentiality agreement entered into with any
person or entity (other than Oak or Pixel) in accordance with the provisions of
this Section 6.1.5 shall require that any non-public information concerning the
business, properties or assets of XLI or any XLI Subsidiary shall be kept
confidential by the recipient of such information, shall not be used by the
recipient of such information other than for purposes of conducting a due
diligence investigation of XLI, and shall be returned to XLI upon consummation
of the Merger pursuant to this Agreement.
6.1.6 ACCESS. XLI shall, between the date hereof and the
Effective Date, give Oak's and Pixel's representatives full access, during
normal business hours and upon reasonable notice, to all of XLI's assets,
properties, books, records, agreements and commitments, and furnish Oak's and
Pixel's representatives during such period with all such information concerning
XLI affairs as Oak and Pixel may reasonably request; provided, however, that Oak
and Pixel and their Related Parties and agents will hold in strict confidence
all documents and information concerning XLI so furnished, and, if the
transactions contemplated in this Agreement shall not be consummated, such
confidence shall be maintained and all such documents shall immediately
thereafter be returned to XLI.
6.1.7 CONDUCT OF BUSINESS OF XLI PENDING THE MERGER. XLI
covenants and agrees that, between the date of this Agreement and the Effective
Time, XLI shall, and XLI shall cause the business of any XLI Subsidiary to be
conducted only in, and XLI and the XLI Subsidiaries shall not take any action
except in, the ordinary course of business and in a manner consistent with past
practice, and XLI shall use all reasonable efforts to preserve substantially
intact the business organization of XLI and the XLI Subsidiaries, to keep
available the services of the present officers, employees and consultants of XLI
and the XLI Subsidiaries, and to preserve the present relationships of XLI and
the XLI Subsidiaries with customers, suppliers and other persons with which XLI
or any XLI Subsidiary has significant business relations. XLI and the Party
Stockholders further consent and agree that XLI shall refrain from taking any
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 35
action prior to the Effective Time that would result in a breach by XLI of any
representation or warranty contained in Section 4.16 (Business Changes).
6.1.8 NOTICE DELIVERY REQUIREMENTS. XLI shall timely provide any
notices required to be delivered by XLI to holders of XLI Stock or outstanding
stock options, warrants, convertible notes, convertible securities or other
rights with respect to the transactions described herein (including, without
limitation, any notices required to be given to holders of outstanding IPO
Warrants, Class A Warrants, Private 1995 Warrants, Private 1996 Warrants or XLI
Notes), under the terms of the agreements governing the same.
6.1.9 COOPERATION OF XLI. XLI shall cooperate with Pixel in
obtaining any consents or approvals of third parties relating to contracts,
licenses, leases and other instruments material to the business of XLI,
including any consents or approvals required in connection with the merger of
XLI into Pixel. XLI further covenants and agrees to execute and deliver or
cause to be executed and delivered all deeds and instruments of assignment
requested by Oak or Pixel, including instruments of assignment for any patent,
trademark or copyright of XLI, and to take or cause to be taken such further or
other action as Oak or Pixel may deem necessary or desirable in order to vest in
and confirm to Pixel title to and possession of any property of XLI acquired or
to be acquired by Pixel in connection with the merger of XLI with and into
Pixel, and otherwise to carry out the intent and purpose of such merger.
6.2 OAK, PIXEL AND SUB COVENANTS. Oak, Pixel and Sub covenant with XLI,
as an inducement to enter into this Agreement, that:
6.2.1 SUB AUTHORIZATION. Prior to the Effective Date, Pixel, as
sole stockholder of Sub, will take all action necessary or advisable for the
consummation of the Merger by Sub and the carrying out by Sub of the
transactions contemplated hereby.
6.2.2 MAINTENANCE OF XLI OPERATIONS. Until the earlier of
December 31, 2000 or payment in full by Oak of the amount of Contingent Cash due
to the XLI Stockholders under Section 2.4.4 (Contingent Cash), XLI shall be
maintained as a subsidiary or a separate division of Pixel. In addition, Oak
and Pixel agree that until such time as Oak's obligations under Section 2.6
(Payment of Contingent Cash) have terminated, separate income statement and
financial ledgers will be maintained with respect to the operations of XLI and
the calculation of Gross XLI Product Revenues. During the term of the
employment of X'Xxxxxx pursuant to the Employment Agreement to be entered into
by and between Pixel and X'Xxxxxx, X'Xxxxxx shall submit to the President of
Pixel for the review and approval of Pixel, prior to any funding of XLI
operations by Pixel, an operating budget for XLI for each calendar quarter of
XLI; provided, however, that nothing contained in this Section 6.2.2
(Maintenance of XLI Operations) or in any such operating budget shall obligate
Pixel to fund the operations of XLI.
6.2.3 PAYMENT BY OAK OF CERTAIN XLI ACCOUNTS PAYABLE. Subject to
Section 9 (Post-Closing Adjustment), Oak covenants and agrees to pay within
thirty (30) days following the Effective Date those accounts payable of XLI set
forth on Exhibit "I" hereto; provided, however, that Oak shall have no
obligation to pay any amounts due with respect to the XLI Subordinated Notes,
unless XLI shall have entered into written agreements with the holders of such
XLI Subordinated Notes, prior to the Effective Date, providing for payment to
such XLI Subordinated Note holders solely of amounts of principal due with
respect to such XLI Subordinated Notes, and acknowledging forgiveness of any
interest due on the
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 36
principal amount of such XLI Subordinated Notes or any penalties due under the
terms of such Subordinated Notes.
6.2.4 OAK OPTIONS. On the first business day of the first month
after the Effective Date Oak shall submit to the Compensation Committee of its
Board of Directors a request that Oak grant XLI's eligible employees options to
purchase Oak Common Stock under the Oak 1994 Stock Option Plan in accordance
with the guidelines adopted by such Committee for the granting of stock options.
SECTION 7. CONDITIONS TO MERGER.
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE TRANSACTION. The
respective obligations of each party to effect the transaction shall be subject
to the satisfaction on or prior to the Effective Date of the following
conditions:
7.1.1 STOCKHOLDER APPROVAL. The transaction shall have been
approved and adopted by the required affirmative vote or written consent of the
stockholders of Sub and XLI, and, if outstanding, any other voting securities of
Sub and XLI required to vote on the transaction.
7.1.2 GOVERNMENT APPROVAL. All authorizations, consents, orders
or approvals of, or declarations or filings with, or expiration of waiting
periods imposed by, any governmental entity necessary for the consummation of
the transactions contemplated by this Agreement shall have been filed, occurred
or been obtained.
7.1.3 LEGAL ACTION. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the transaction shall have been issued by any federal or state court and remain
in effect, and no litigation seeking the issuance of such an order or
injunction, or seeking the imposition against XLI, Oak or Pixel of substantial
damages if the transaction is consummated, shall be pending which, in the good
faith judgment of XLI's, Oak's or Pixel's Board of Directors (acting upon advice
of their respective outside counsel) has a reasonable probability of resulting
in such order, injunction or damages. In the event any such order or injunction
shall have been issued, each party agrees to use its reasonable efforts to have
any such order or injunction lifted.
7.1.4 STATUTES. No statute, rule or regulation shall have been
enacted by the government of the United States or any state or agency thereof
which would make the consummation of the transaction illegal.
7.1.5 XXXXXX CORPORATION. The parties shall have agreed on a
mutually acceptable satisfaction of XLI's obligations to Xxxxxx Corporation
pursuant to that certain Agreement dated January 15, 1990 between Xxxxxx
Corporation and XLI, as amended by the First, Second, Third, Fourth and Fifth
Agreement Amendments thereto (the "EXISTING XXXXXX AGREEMENT"), and Pixel shall
have entered into an agreement with Xxxxxx Corporation, the terms of which are
satisfactory to Oak and Pixel in their sole discretion. Pixel shall pay Five
Hundred Thousand Dollars ($500,000) of XLI's obligations to Xxxxxx Corporation
provided that the royalty rates specified in Section 4 of the Fifth Agreement
Amendment are reduced from fifteen percent (15%) to eleven percent (11%) as of
the Effective Time.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 37
7.2 CONDITIONS TO OAK'S, PIXEL'S AND SUB'S OBLIGATIONS. The obligations
of Oak, Pixel and Sub under this Agreement are subject to the fulfillment on or
before the Effective Date of each of the following conditions:
7.2.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of XLI contained in Section 4 (Representations and Warranties of XLI)
shall be true on and as of the Effective Date with the same force and effect as
if they had been made at the Effective Date.
7.2.2 PERFORMANCE OF OBLIGATIONS OF XLI. XLI shall have performed
in all material respects all obligations required to be performed by it prior to
the Effective Date, and Oak and Pixel shall have received a certificate signed
by the President and by the Chief Financial Officer of XLI to such effect. Such
certificate shall attach or reference all of the lists and schedules delivered
by XLI to Oak pursuant to Section 4.28 (Additional Disclosure) and shall
describe any amendments or changes to such lists or schedules after the date of
their delivery.
7.2.3 OPINION OF XLI'S COUNSEL. Oak and Pixel shall have received
an opinion dated the Effective Date of Warner & Xxxxxxxxx LLP, counsel to XLI,
substantially in the form of Exhibit "J" attached hereto.
7.2.4 NON-COMPETE AND CONFIDENTIALITY AGREEMENTS. Each Party
Stockholder, and any employee of XLI who holds, or will hold immediately prior
to the Effective Time, any shares of the capital stock of XLI, shall have
executed and delivered to Oak and Pixel Non-Compete Agreements, substantially in
the form of Exhibit "K" attached hereto, and any employees of XLI who become
employees of Pixel shall have executed and delivered to Oak Confidentiality
Agreements, substantially in the form of Exhibit "L" attached hereto.
7.2.5 SATISFACTORY FORM OF LEGAL AND ACCOUNTING MATTERS. The
form, scope and substance of all legal and accounting matters contemplated
hereby and all closing documents and other papers delivered hereunder shall be
reasonably acceptable to Oak's and Pixel's counsel.
7.2.6 NO MATERIAL ADVERSE CHANGES. The business, properties or
operations of XLI shall not have been adversely affected in any material way as
a result of any fire, accident or other casualty or any labor disturbance or act
of God. There shall not have occurred any material adverse change since
September 30, 1997 in the business, properties, results of operations or
business or financial condition or prospects of XLI. The consequences of any
action or of actions not taken by XLI at the specific written request of Oak or
Pixel, which otherwise would not have been in the usual and ordinary course of
business of XLI, shall not be deemed to be a material adverse event of XLI.
7.2.7 CONDITIONS FULFILLED. Oak and Pixel shall have received a
certificate of the President of XLI to the effect that all conditions in this
Section 7.2 (Conditions to Oak's, Pixel's and Sub's obligations) to Oak's,
Pixel's and Sub's obligations under this Agreement have been satisfied or waived
by Oak, Pixel and Sub.
7.2.8 BOARD AND STOCKHOLDER RESOLUTIONS. Oak and Pixel shall have
received resolutions of the Board of Directors of XLI approving this Agreement
and the transactions contemplated herein and resolutions of XLI's Stockholders
approving this Agreement, the Merger and appointing the Stockholder
Representatives, certified by the Secretary of XLI.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 38
7.2.9 APPRAISAL RIGHTS. The holders of no more than two percent
(2%) of all shares of the capital stock of XLI shall have requested appraisal of
their shares under Section 262 of the Delaware General Corporation Law.
7.2.10 THIRD-PARTY APPROVALS. Any and all consents or approvals
required from third parties relating to contracts, licenses, leases and other
instruments, material to the business of XLI shall have been obtained, including
consents and approvals required to be obtained in connection with the merger of
XLI with and into Pixel.
7.2.11 XLI STOCK AND SHARE EQUIVALENTS. Oak and Pixel shall have
received a certificate signed by the President and by the Chief Financial
Officer of XLI to the effect that there are no options, warrants, convertible
notes, convertible securities or other rights to acquire shares of the capital
stock of XLI outstanding as of the Effective Time, other than the XLI Warrants.
Such certificate shall attach a list of the names and addresses of the holders
of XLI Warrants, the number of shares of XLI Common Stock (including any shares
of XLI Common Stock into which shares of XLI Preferred Stock are convertible)
purchasable under the XLI Warrants held by each holder immediately prior to the
Effective Time, the exercise price payable by each holder of XLI Warrants
immediately prior to the Effective Time and the date of expiration of each XLI
Warrant. Such certificate shall also attest to the number of shares of XLI
Common Stock outstanding immediately prior to the Effective Time, including the
number of shares of XLI Common Stock into which the shares of XLI Preferred
Stock are convertible at the Effective Time, and shall include a list of such
holders of XLI Common Stock and XLI Preferred Stock, their addresses of record
and the number of shares of XLI Common Stock held by such holders, including
holders of shares of XLI Preferred Stock that are convertible into shares of XLI
Common Stock at the Effective Time.
7.2.12 RESIGNATION OF XLI DIRECTORS AND OFFICERS. Oak and Pixel
shall have received written resignations from the XLI directors and officers,
stating that such directors' and officers' resignations shall be effective as of
the Effective Time.
7.2.13 BANK ACCOUNTS. The persons authorized to draw on the
accounts maintained by XLI or any XLI Subsidiary at any bank, savings
institution or mutual fund shall have been approved by Oak and Pixel, and all
documentation required to effect any change in such authorization shall have
been completed to Oak's and Pixel's reasonable satisfaction.
7.2.14 EMPLOYMENT AGREEMENTS. Each of X'Xxxxxx and Xxxxx shall
have executed and delivered to Pixel his Employment Agreement, and any
employment agreement entered into by and between X'Xxxxxx and XLI or Xxxxx and
XLI prior to the Effective Date shall have been terminated and be of no further
force or effect; provided, further, that, except as set forth in Exhibit "I" to
this Agreement, no amounts payable with respect to bonus, severance or other
similar amounts under the terms of any employment agreement entered into by and
between X'Xxxxxx and XLI or Xxxxx and XLI prior to the Effective Date shall be
paid to X'Xxxxxx or Xxxxx in connection with the termination of any such
employment agreement.
7.2.15 XLI SUBORDINATED NOTES. The XLI Subordinated Notes shall
have been amended to provide for the elimination of all interest due on the
principal amounts outstanding under the XLI Subordinated Notes and the
elimination of all prepayment penalties due in connection with the payment in
full of the XLI Subordinated Notes.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 39
7.2.16 EXERCISE OF PRIVATE WARRANTS. All Private Warrants shall
have been exercised on or prior to the Effective Date; provided, however, that
the exercise of any Private Warrant may be conditioned upon closing of the
Merger pursuant to this Agreement.
7.3 CONDITIONS TO XLI'S OBLIGATIONS. The obligations of XLI under this
Agreement are subject to the fulfillment on or before the Effective Date of each
of the following conditions:
7.3.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Oak contained in Section 3 (Representations and Warranties of Oak)
shall be true on and as of the Effective Date with the same force and effect as
if they had been made at the Effective Date.
7.3.2 PERFORMANCE OF OBLIGATIONS OF OAK AND PIXEL. Oak and Pixel
shall have performed all obligations required to be performed by them prior to
the Effective Date, and XLI shall have received a certificate signed by the
President or the Chief Financial Officer of Oak or Pixel to such effect.
7.3.3 OPINION OF OAK'S COUNSEL. XLI shall have received an
opinion dated the Effective Date of Xxxxxxxxx Xxxxx Morosoli & Maser LLP,
counsel to Oak and Pixel, substantially in the form of Exhibit "M" attached
hereto.
7.3.4 SATISFACTORY FORM OF LEGAL MATTERS. The form, scope and
substance of all legal matters contemplated hereby and all closing documents and
other papers delivered hereunder shall be reasonably acceptable to counsel to
XLI.
7.3.5 CONDITIONS FULFILLED. XLI shall have received a certificate
signed by the President or the Chief Financial Officer of Oak or Pixel to the
effect that all conditions in this Section 7.3 (Conditions to XLI's obligations)
to XLI's obligations under this Agreement have been satisfied or waived by XLI.
7.3.6 BOARD AND STOCKHOLDERS RESOLUTIONS. XLI shall have received
resolutions of the Oak and Pixel Boards of Directors approving this Agreement
and the transactions contemplated herein certified by their respective
Secretaries and resolutions of Sub's stockholder approving the Merger, certified
by the Secretary of Sub.
7.3.7 EMPLOYMENT AGREEMENTS. Pixel shall have executed and
delivered to X'Xxxxxx and Xxxxx the Employment Agreements.
SECTION 8. TERMINATION; AMENDMENT AND WAIVER.
8.1 TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger abandoned at
any time prior to the Effective Date (whether before or after approval of the
stockholders of Sub or XLI or both):
8.1.1 by mutual consent of the respective Boards of Directors of
Oak, Pixel, Sub and XLI.
8.1.2 by Oak, Pixel and Sub if any of the conditions set forth in
Section 7.1 (Conditions to Each Party's Obligations to Effect the Transaction)
or 7.2 (Conditions to Oak's, Pixel's and Sub's
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 40
Obligations) hereof shall not have been fulfilled on or prior to the date
specified for fulfillment thereof, or shall have become incapable of
fulfillment, and shall not have been waived on or before March 31, 1998.
8.1.3 by XLI if any of the conditions set forth in Section 7.1
(Conditions to Each Party's Obligations to Effect the Transaction) or 7.3
(Conditions to XLI's Obligations) hereof shall not have been fulfilled on or
prior to the date specified for fulfillment thereof, or shall have become
incapable of fulfillment, and shall not have been waived on or before March 31,
1998.
8.1.4 by any of Oak, Pixel, Sub or XLI if any action or proceeding
before any court or other governmental body or agency shall have been instituted
or threatened to restrain, modify or prohibit the Merger.
8.1.5 by Oak, Pixel or Sub if, in the opinion of the Board of
Directors of Oak, Pixel or Sub evidenced by a certified copy of resolutions of
such Board filed with the other parties to this Agreement, the Merger is
impractical or undesirable by reason of the fact that demands of Dissenting
Stockholders of XLI to this Agreement for purchase of their shares are so great
in amount as to render the Merger inadvisable.
8.1.6 by Oak, Pixel, Sub or XLI if the Statutory Certificate of
Merger shall not have been filed with the Secretary of State of the State of
Delaware and if the Merger shall not have become effective, on or before March
31, 1998 (or such other later date as of the Boards of Directors of Oak, Pixel,
Sub and XLI shall mutually approve).
8.1.7 by XLI if prior to the consummation of the Merger (i) XLI
receives a BONA FIDE written XLI Transaction Proposal from a third party, (ii)
the Board of Directors of XLI determines in good faith pursuant to Section 6.1.5
(No Solicitation) that such XLI Transaction Proposal is a Superior XLI Proposal
and (iii) XLI has provided Oak and Pixel with at least five (5) business days'
prior written notice of such XLI Transaction Proposal, including a copy thereof,
and of the determination of its Board of Directors referred to in clause (ii)
above; provided, however, that a condition to the effectiveness of the
termination of this Agreement and the abandonment of the Merger pursuant to this
subsection 8.1.7 is the payment to Oak, as liquidated damages, the amount of the
Termination Fee in same day funds. Such payment shall be made by wire transfer
to an account designated by Oak. At Oak's sole option and upon written notice
to XLI, the amount of the Termination Fee payable by XLI to Oak may be reduced
by the amount of any royalties or other payments due to XLI by Oak or Pixel
under the Technology License and Supply Agreement entered into between Pixel and
XLI. The parties agree that the Termination Fee is a reasonable sum considering
all the circumstances existing on the date of this Agreement, including the
relationship of the sum to the range of harm to Oak and Pixel that reasonably
could be anticipated and the anticipation that proof of actual damages would be
costly or incorrect.
8.1.8 by Oak for any reason, other than as provided in Sections
8.1.1, 8.1.2, 8.1.4, 8.1.5 or 8.1.6 above, upon payment to XLI, as liquidated
damages, the amount of the Termination Fee in same day funds. The parties agree
that the Termination Fee is a reasonable sum considering all the circumstances
existing as of the date of this Agreement, including the relationship of the sum
to the range of damage to XLI that reasonably could be anticipated and the
anticipation that proof of actual damages would be costly or incorrect.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 41
8.2 EFFECT OF TERMINATION. In the event that this Agreement is terminated
and the Merger herein abandoned as described above, this Agreement (except
Sections 1 (Definitions), 6.1.6 (Confidentiality), 8 (Termination; Amendment and
Waiver) and 12 (Miscellaneous) hereof) shall become void and of no force and
effect, without any liability on the part of any of the parties hereto (or their
respective stockholders, directors, officers or attorneys) under this Agreement;
provided that such termination shall not affect any existing agreement between
any of the parties hereto, including, without limitation, the Technology License
and Supply Agreement between Pixel and XLI, except as provided in Sections 8.1.7
and 8.1.8 above.
8.3 AMENDMENT AND WAIVER.
8.3.1 Oak, Pixel, Sub and XLI may, by written agreement among them
authorized by their respective Boards of Directors, amend this Agreement or the
Statutory Certificate of Merger at any time prior to the Effective Date,
provided that, after the earlier of the Sub or XLI stockholders consents, no
amendment shall be made that changes the terms of this Agreement or the
Statutory Certificate of Merger in a way that is materially adverse to the
stockholders who have approved the transactions, unless such amendment is
approved by such stockholders. Any amendment to this Agreement entered into
subsequent to the Effective Date shall be approved by the Stockholder
Representatives instead of by XLI or the stockholders of XLI.
8.3.2 Any condition to the performance of Oak, Pixel, Sub or XLI
which may legally be waived at or prior to the Effective Date may be waived at
any time by the party entitled to the benefit thereof by action taken or
authorized by the Board of Directors of the waiving party.
SECTION 9. POST-CLOSING ADJUSTMENT.
9.1 POST-CLOSING AUDIT. Oak shall have thirty (30) days following the
Effective Date to conduct an audit ("POST CLOSING AUDIT") of the Closing Balance
Sheet of XLI. At Oak's sole option, Oak may consult with KPMG Peat Marwick, or
such other accountants as are acceptable to Oak, in performing such Post-Closing
Audit. Such Post-Closing Audit shall be conducted in accordance with generally
accepted accounting principles applied on a consistent basis as of the date of
XLI's Closing Balance Sheet.
9.2 CONTINGENT CASH ADJUSTMENT. If the audit performed pursuant to
Section 9.1 (Post-Closing Audit) establishes that the Net Deficit of XLI as of
the date of the Closing Balance Sheet is greater than Eight Hundred Twenty-Five
Thousand Dollars ($825,000) then the amounts otherwise payable under Section 2.6
above (Payment of Contingent Cash) shall be reduced by the amount of such
shortfall (a "CONTINGENT CASH ADJUSTMENT"). Written notice of any Contingent
Cash Adjustment shall be provided to the Stockholder Representatives promptly
following Oak's receipt of the Post-Closing Audit.
SECTION 10. NON-RECOURSE INDEMNIFICATION.
10.1 INDEMNITY. All XLI Stockholders, effective on the Effective date,
and, in the case of any holders of XLI Warrants who become XLI Stockholders (as
such term is defined in Section 1.72 hereof), effective as of the date such
holders of XLI Warrants become XLI Stockholders (collectively referred to
hereafter as the "INDEMNIFYING STOCKHOLDERS"), agree, jointly and severally, to
indemnify and hold Oak and Pixel harmless against all claims, losses,
liabilities, damages, deficiencies, costs, interest, penalties and expenses,
including reasonable attorneys' fees and expenses of investigation (hereafter
individually a "LOSS" and collectively "LOSSES") incurred by Pixel or Oak as a
result of (i) any inaccuracy of a representation or
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 42
breach of any warranty contained herein or in any schedule, exhibit or other
document delivered pursuant hereto by XLI or the Stockholder Representatives,
(ii) any failure of XLI or the Stockholder Representatives to perform or comply
with any covenant contained herein or in any schedule, exhibit or other document
delivered pursuant hereto, or (iii) any inaccuracy in any certificate or other
information delivered by XLI or the Stockholder Representatives pursuant to
Section 7.2.11 of this Agreement (XLI Stock and Share Equivalents), Section
4.4.2 of the Escrow Agreement or Section 4 of the Exchange Agreement. In
addition, the Indemnifying Stockholders agree, jointly and severally, to
indemnify and hold Oak and Pixel harmless against all losses which may be
sustained or incurred by Pixel, its subsidiaries, affiliates, sublicensees or
customers as a result of any claim or claims that any Xxxxxx Technology, any
documentation, any product (to the extent of the Xxxxxx Technology or
documentation contained therein or practiced thereby) or any Xxxxxx Right
infringes or violates any patent, copyright, trade secret or other proprietary
right of any third party. Payments with respect to XLI Dissenting Stockholders
shall not constitute a "Loss" hereunder. The term "Loss" shall not include any
changes to the financial statements (including balance sheet valuations) of XLI
caused by a change in accounting methods used after the Effective Time of the
Merger as opposed to those used by XLI before the Effective Time of the Merger.
This limitation of the definition of Loss shall not apply to Losses caused as a
result of XLI's failure to prepare the financial statements of XLI in accordance
with generally accepted accounting principles consistently applied.
10.2 THRESHOLD. Notwithstanding anything herein to the contrary, the
Indemnifying Stockholders shall be liable and shall be obligated with respect to
the indemnity provided herein only to the extent that claims individually or in
the aggregate exceed Fifty Thousand Dollars ($50,000), provided that once such
claims exceed Fifty Thousand Dollars ($50,000), the Indemnifying Stockholders
shall be responsible for the first Fifty Thousand Dollars ($50,000) of such
claims.
10.3 DEFENSE. Oak and Pixel agree to give the XLI Stockholder
Representatives written notice of any claim or assertion of which they have
knowledge concerning any liability as to which they may request indemnification
hereunder. Each party will cooperate with the other in determining the validity
of any such claim or assertion. Upon obtaining knowledge of the institution of
any action, proceeding or other event which could give rise to a claim of
indemnity pursuant to this Section 10, Oak or Pixel shall promptly give written
notice to the XLI Stockholder Representatives. If such claim or demand relates
to a claim or demand asserted by a third party, the XLI Stockholder
Representatives shall have the right at their expense to employ counsel to
defend such claim or demand and Oak and Pixel shall have the right, but not the
obligation, to participate in the defense of any such claim or demand. So long
as the XLI Stockholder Representatives are defending such claim or demand in
good faith, Oak and Pixel will not settle such claim or demand without the
consent of the XLI Stockholder Representatives, which consent shall not be
unreasonably withheld. Oak and Pixel shall make available to the XLI
Stockholder Representatives all records and other materials reasonably required
by them in contesting a claim or demand asserted by a third party against Oak or
Pixel and shall cooperate in the defense thereof.
10.4 TERM. The indemnity obligations of the Indemnifying Stockholders
shall survive the Effective Date and shall remain in effect until the later of
March 31, 2001 or the date on which the final payment of any Contingent Cash is
payable pursuant to Section 2.6 (Payment of Contingent Cash).
10.5 NON-RECOURSE INDEMNITY. With respect to amounts due under this
Section 10 (Non-Recourse Indemnification), Oak and Pixel shall have no recourse
against the XLI Stockholders personally and Oak and Pixel shall be entitled
solely to a right of set-off against amounts otherwise payable under Section 2.6
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 43
(Payment of Contingent Cash). It is the intent of the parties that the sole
recourse of Oak and Pixel with respect to amounts due under this Section 10
(Non-Recourse Indemnification) shall be to withhold payments otherwise due to
the XLI Stockholders as part of the Contingent Cash payments under Section 2.6
(Payment of Contingent Cash). Oak and Pixel shall not have recourse to amounts
already paid to the XLI Stockholders under Section 2.6 (Payment of Contingent
Cash), but shall be entitled to withhold payments otherwise due to the XLI
Stockholders in the future as Contingent Cash under Section 2.6 (Payment of
Contingent Cash).
SECTION 11. PROVISIONS RELATING TO THE STOCKHOLDER REPRESENTATIVES.
11.1 APPOINTMENT OF STOCKHOLDER REPRESENTATIVES. By virtue of the
affirmative vote approving the Merger and this Agreement, the XLI Stockholders
shall irrevocably appoint the Stockholder Representatives to act as attorneys-
in-fact of the XLI Stockholders with authority to make all decisions on behalf
of the Stockholders with respect to any matters upon which the Stockholder
Representatives are authorized to act under this Agreement, including without
limitation, any payments to be made under Section 2.6 (Payment of Contingent
Cash), any adjustments thereto under this Agreement, any claims for
indemnification under Section 10 (Non-Recourse Indemnification) and any
amendments to this Agreement under Section 8.3.1 hereof, and any decisions of
the Stockholder Representatives with respect to any of such matters shall be
final and binding on the XLI Stockholders as if expressly confirmed in writing
by each of them.
11.2 ACTIONS AND INSTRUCTIONS OF STOCKHOLDER REPRESENTATIVES. Any action
required to be taken, or notice or instructions required to be given, to Oak,
the Escrow Agent or the Exchange Agent under this Agreement, the Escrow
Agreement or the Exchange Agreement may be taken or given by a majority of the
Stockholder Representatives; provided, however, that less than a majority of the
Stockholder Representatives may take such action or give such notice or
instructions upon delivery to Oak, the Escrow Agent or the Exchange Agent, as
the case may be, of a notice signed by a majority of the Stockholder
Representatives stating that any action may be taken and any notice or
instructions may be given to Oak, the Escrow Agent or the Exchange Agent, as the
case may be, by the number of Stockholder Representatives specified in such
notice. If for any reason there is only one Stockholder Representative at any
time, then Oak, the Escrow Agent and the Exchange Agent, as the case may be,
shall be entitled to rely on any action taken by, or notice or instructions
given by, such Stockholder Representative. Written notice of any resignation or
removal of a Stockholder Representative, or any appointment of a successor
Stockholder Representative, shall be promptly provided to Oak, the Escrow Agent
and the Exchange Agent.
SECTION 12. MISCELLANEOUS.
12.1 GOVERNING LAWS. IT IS THE INTENTION OF THE PARTIES HERETO THAT THE
INTERNAL LAWS OF THE STATE OF DELAWARE, U.S.A. (IRRESPECTIVE OF ITS CHOICE OF
LAW PRINCIPLES) SHALL GOVERN THE VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION OF
ITS TERMS, AND THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF
THE PARTIES HERETO. THE PARTIES HEREBY EXCLUDE THE UNITED NATIONS CONVENTION ON
CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS FROM THIS AGREEMENT.
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 44
12.2 BINDING UPON SUCCESSORS AND ASSIGNS. Subject to, and unless otherwise
provided in, this Agreement, each and all of the covenants, terms, provisions,
and agreements contained herein shall be binding upon, and inure to the benefit
of, the permitted successors, executors, heirs, representatives, administrators
and assigns of the parties hereto. This Agreement shall not be assigned by any
party without the prior written consent of the other parties hereto.
12.3 SEVERABILITY. If any provision of this Agreement, or the application
thereof, shall for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances shall be interpreted so as best to reasonably effect the intent
of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
which will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
12.4 ENTIRE AGREEMENT. This Agreement and the Technology License and
Supply Agreement, the exhibits and schedules hereto and thereto, the documents
referenced herein and therein, and the exhibits and schedules thereto,
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and thereof and supersede all prior and
contemporaneous agreements or understandings, inducements or conditions, express
or implied, written or oral, between the parties with respect hereto and
thereto. The express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of the terms hereof.
12.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of which together shall constitute one and the
same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as signatories.
12.6 EXPENSES. Except as provided to the contrary herein, each party shall
pay all of its own costs and expenses incurred with respect to the negotiation,
execution and delivery of this Agreement and the exhibits hereto, including
without limitation fees to investment bankers, lawyers, accountants and
appraisers. Such expenses will have been accrued, but not necessarily paid, by
XLI, by the date of the Closing Balance Sheet.
12.7 OTHER REMEDIES. Any and all remedies herein expressly conferred upon
a party shall be deemed cumulative with and not exclusive of any other remedy
conferred hereby or by law on such party, and the exercise of any one remedy
shall not preclude the exercise of any other.
12.8 SURVIVAL OF AGREEMENTS. All covenants, agreements, representations
and warranties made herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
12.9 NOTICES. Whenever any party hereto desires or is required to give any
notice, demand or request with respect to this agreement, each such
communication shall be in writing and shall be given or made by, telecopy,
telegraph, cable, mail or other delivery and telecopied, telegraphed, cabled,
mailed or delivered to the intended recipient at the addresses specified below:
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 45
XLI: Xerographic Laser Images Corporation
000 Xxxxxxxxx Xxxxxx
0 Xxxxxxxxx Xxxx
Xxxxx Xxxxxxxxx, XX 00000
Attn: Xx. Xxxxxxx X. X'Xxxxxx
Telecopier: (000) 000-0000
If to XLI, with a copy to: Warner & Xxxxxxxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000
Party Stockholders: To the addresses set forth on the
signature pages hereto.
Stockholder
Representatives: c/o Xerographic Laser Images
000 Xxxxxxxxx Xxxxxx
0 Xxxxxxxxx Xxxx
Xxxxx Xxxxxxxxx, XX 00000
Attn: Xx. Xxxxxxx X. X'Xxxxxx
Telecopier: (000) 000-0000
Oak, Pixel or Sub: Oak Technology, Inc.
000 Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx,
General Counsel
Telecopier: (000) 000-0000
If to Oak, Pixel or Sub,
with a copy to: Xxxxxxxxx Xxxxx Morosoli & Maser, LLP
000 Xxxx Xxxx Xxxx, Xxxxxx Xxxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxxx, Esq.
Telecopier: (000) 000-0000
Except as may be otherwise provided elsewhere in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier with verified receipt by the receiving telecopier, when delivered to
the telegraph or cable office, when personally delivered, or in the case of a
mailed notice, five (5) days after being deposited in the United States
certified or registered mail, postage prepaid. Any party may change its address
for such communications by giving notice thereof to the other parties in
conformance with this Section 12.9 (Notices).
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 46
12.10 CONSTRUCTION OF AGREEMENT. This Agreement has been negotiated by
the respective parties hereto and their attorneys and the language hereof shall
not be construed for or against any party. A reference in this Agreement to any
Section shall include a reference to every Section the number of which begins
with the number of the Sections to which reference is specifically made (E.G., a
reference to Section 5.8 shall include a reference to Sections 5.8.1 and
5.8.2.1). The titles and headings herein are for reference purposes only and
shall not in any manner limit the construction of this Agreement which shall be
considered as a whole.
12.11 PRONOUNS. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
12.12 FURTHER ASSURANCES. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by any other party, to better evidence and reflect the transactions
described herein and contemplated hereby, and to carry into effect the intents
and purposes of this Agreement.
12.13 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions of this
Agreement are intended nor shall be interpreted to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder, partner or Related Party of any party hereto
or any other person; unless specifically provided otherwise herein, and, except
as so provided, all provisions hereof shall be personal solely between the
parties to this Agreement.
12.14 OBLIGATIONS TO EMPLOYEES. XLI, Pixel and Oak hereby acknowledge
that none of such parties will, on the Effective Date, have any employment
obligations to any officer, director or employee of any of them extending beyond
the Effective Date except as set forth in a writing signed by an officer of the
party to be bound.
[INTENTIONALLY LEFT BLANK]
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 47
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the dates set forth below and this Agreement shall be effective as of the date
first hereinabove written.
OAK TECHNOLOGY, INC.
Date: January 29, 1998 By: /s/ Xxxxx Xxxxx
-------------------------------
Xxxxx Xxxxx
Chief Executive Officer
OTI ACQUISITION CORPORATION
Date: January 29, 1998 By: /s/ Xxxxx X. Xxxxx
-------------------------------
Xxxxx X. Xxxxx
President
PIXEL MAGIC, INC.
Date: January 29, 1998 By: /s/ Xxxxx X. Xxxxx
-------------------------------
Xxxxx X. Xxxxx
President
XEROGRAPHIC LASER IMAGES
CORPORATION
Date: January 29, 1998 By: /s/ Xxxxxxx X. X'Xxxxxx
-------------------------------
Xxxxxxx X. X'Xxxxxx
Chief Executive Officer
[SIGNATURES CONTINUED ON NEXT PAGE]
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 48
PARTY STOCKHOLDERS
Date: January 29, 1998 /s/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx
Address:
Date: January 29, 1998 /s/ Xxxx X. Xxxxxx
-------------------------------
Xxxx X. Xxxxxx
Address:
Date: January 29, 1998 /s/ Xxxxxxx X. X'Xxxxxx
-------------------------------
Xxxxxxx X. X'Xxxxxx
Address:
Date: January 29, 1998 /s/ Xxxxxx X. Xxxx
-------------------------------
Xxxxxx X. Xxxx
Address:
RESEARCH INVESTMENT TRUST
Date: January 29, 1998 By: /s/ Xxxxxx X. Xxxx
-------------------------------
Xxxxxx X. Xxxx, Trustee
Address:
Date: January 29, 1998 /s/ Xxxxx X. Xxxxxx
-------------------------------
Xxxxx X. Xxxxxx
Address:
Date: January 29, 1998 /s/ Xxxxx X. Xxxxxxx
-------------------------------
Xxxxx X. Xxxxxxx
Address:
[SIGNATURES CONTINUED ON NEXT PAGE]
Oak Technology, Inc.
Pixel Magic / XLI
Plan of Reorganization and Agreement of Merger
Page 49
PARTY STOCKHOLDERS
(CONTINUED)
Date: January 29, 1998 /s/ Xxxxxxx X. Xxxxx
-------------------------------
Xxxxxxx X. Xxxxx
Address:
ACKNOWLEDGED AND AGREED:
STOCKHOLDER REPRESENTATIVES
Date: January 29, 1998 /s/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx
Address:
Date: January 29, 1998 /s/ Xxxx X. Xxxxxx
-------------------------------
Xxxx X. Xxxxxx
Address:
Date: January 29, 1998 /s/ Xxxxxxx X. X'Xxxxxx
-------------------------------
Xxxxxxx X. X'Xxxxxx
Address:
Date: January 29, 1998 /s/ Xxxxxx X. Xxxx
-------------------------------
Xxxxxx X. Xxxx
Address:
Date: January 29, 1998 /s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
Address:
