SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report: January 30, 1998
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XEROGRAPHIC LASER IMAGES CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 1-11236 51-0319174
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
101 Billerica Avenue, 5 Billerica Park, North Billerica, MA 01862
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(Address of principal executive offices) (Zip Code)
(978) 670-5999
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(Registrant's telephone number, including area code)
Information to Be Included in the Report
Item 1 Changes in Control of Registrant
Not Applicable
Item 2 Acquisition or Disposition of Assets
Not Applicable
Item 3 Bankruptcy or Receivership
Not Applicable
Item 4 Changes in Registrant's Certifying Accountant
Not Applicable
Item 5 Other Events
Exhibit No. Dexcription of Exhibit
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10.46.i Oak Technology, Inc., Pixel Magic, Inc.
Plan of Reorganization and Agreement of
Merger of OTI Acquisition Corporation
with and into Xerographic Laser Images
Corporation
10.46.ii Form of Escrow Agreement
10.46.iii Form of Exchange Agreement
10.46.iv News Release dated January 30, 1998
Item 6 Resignations of Registrant's Directors
Not Applicable
Item 7 Financial Statements and Exhibits
Not Applicable
Item 8 Change in Fiscal Year
Not Applicable
Signatures
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Xerographic Laser Images Corporation
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(Registrant)
Date: February 2, 1998 By: /s/ James L. Salerno
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James L. Salerno, Chief Financial Officer
(Principal Financial and Accounting Officer)
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.
SECTION 1. DEFINITIONS.
The following terms shall have the meanings set forth herein:
1.1 "Allen" shall mean Daniel J. Allen.
1.2 "Base Amount" shall have the meaning set forth in Section
2.4 (Effect of Merger on Outstanding Securities).
1.3 "Carley Technology" and "Carley Rights" shall have the
meanings assigned to such terms in the license agreements to be
entered into by and between Carley Corporation and Pixel pursuant to
Section 7.1.5 (Carley 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 "D'Amelio" shall mean Anthony D. D'Amelio.
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.
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 D'Amelio and Allen, 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 Carley Agreement" shall have the meaning set forth
in Section 7.1.5 (Carley 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.
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 1996 Warrant.
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.
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 Allen, Adam L.
Carley, D'Amelio, Joseph L. Katz and Vincent J. Spoto.
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 Thomas James & 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 Carley Corporation technology
and Carley Corporation rights licensed from Carley Corporation by XLI
pursuant to the Existing Carley Agreement.
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
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
Peter D. Besen President, Secretary and Director
Anthony D. D'Amelio General Manager
Sidney S. Faulkner 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 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
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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)
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 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 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.
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, 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 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 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:
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 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.
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.
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 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.
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 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 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 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.
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 Carley Corporation with
respect to any XLI Intellectual Property Rights, and, to the
knowledge of XLI, none have been threatened against XLI or Carley
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 Adam Carley, Leonard Weisberg, Carley Corporation or
any employee or consultant, or former employee or consultant, of XLI.
Neither XLI nor Carley 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 Carley Corporation of any trade secret, patent, trademark, service
mark 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 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.
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);
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.
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 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.
(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,
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 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, 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
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 D'Amelio pursuant to the Employment
Agreement to be entered into by and between Pixel and D'Amelio,
D'Amelio 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 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 Carley Corporation. The parties shall have agreed on
a mutually acceptable satisfaction of XLI's obligations to Carley
Corporation pursuant to that certain Agreement dated January 15, 1990
between Carley Corporation and XLI, as amended by the First, Second,
Third, Fourth and Fifth Agreement Amendments thereto (the "Existing
Carley Agreement"), and Pixel shall have entered into an agreement
with Carley 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 Carley
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.
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 & Stackpole
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.
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 D'Amelio and Allen
shall have executed and delivered to Pixel his Employment Agreement,
and any employment agreement entered into by and between D'Amelio and
XLI or Allen 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 D'Amelio and XLI or Allen and XLI prior to the Effective
Date shall be paid to D'Amelio or Allen 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.
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 Tomlinson Zisko 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 D'Amelio and Allen 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 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.
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 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
Carley Technology, any documentation, any product (to the extent of
the Carley Technology or documentation contained therein or practiced
thereby) or any Carley 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 (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.
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:
XLI: Xerographic Laser Images Corporation
101 Billerica Avenue
5 Billerica Park
North Billerica, MA 01862
Attn: Mr. Anthony D. D'Amelio
Telecopier: (978) 670-8835
If to XLI, with a copy to: Warner & Stackpole LLP
75 State Street
Boston, MA 02109
Attn: Michael A. Hickey, Esq.
Telecopier: (617) 951-9151
Party Stockholders: To the addresses set forth on the
signature pages hereto.
Stockholder
Representatives: c/o Xerographic Laser Images
101 Billerica Avenue
5 Billerica Park
North Billerica, MA 01862
Attn: Mr. Anthony D. D'Amelio
Telecopier: (978) 670-8835
Oak, Pixel or Sub: Oak Technology, Inc.
139 Kifer Court
Sunnyvale, CA 94086
Attn: Shawn M. Soderberg, General Counsel
Telecopier: (408) 774-5337
If to Oak, Pixel or Sub,
with a copy to: Tomlinson Zisko Morosoli & Maser, LLP
200 Page Mill Road, Second Floor
Palo Alto, CA 94306
Attn: Timothy Tomlinson, Esq.
Telecopier: (650) 324-1808
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).
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]
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: /David Tsang/
--------------------- -----------------------
David Tsang
Chief Executive Officer
OTI ACQUISITION CORPORATION
Date: January 29, 1998 By: /Peter D. Besen/
--------------------- -----------------------
Peter D. Besen
President
PIXEL MAGIC, INC.
Date: January 29, 1998 By: /Peter D. Besen/
--------------------- ----------------------
Peter D. Besen
President
XEROGRAPHIC LASER IMAGES
CORPORATION
Date: January 29, 1998 By: /Anthony D. D'Amelio/
--------------------- -----------------------
Anthony D. D'Amelio
Chief Executive Officer
[SIGNATURES CONTINUED ON NEXT PAGE]
PARTY STOCKHOLDERS
Date: January 21, 1998 /Anthony D. D'Amelio/
--------------------- --------------------------
Mr. Anthony D. D'Amelio
Address: 25 Cleek Court
N. Reading, MA 01864
Date: January 22, 1998 /Daniel J. Allen/
--------------------- --------------------------
Mr. Daniel J. Allen
Address: 35 Frost Road
Derry, NH 03038
Date: January 21, 1998 /Adam L. Carley/
--------------------- ---------------------------
Dr. Adam L. Carley
Address: 6 Hillside Road
Windham, NH 03038
Date: January 21, 1998 /Joseph L. Katz/
--------------------- ---------------------------
RESEARCH INVESTMENT TRUST
Dr. Joseph L. Katz
Address: 9 Mitchell Grant Way
Bedford, MA 01730
Date: January 21, 1998 /Roger F. Salava/
--------------------- ---------------------------
Mr. Roger F. Salava
Address: 74 Concord Street
Seabrook, NH 03874
Date: January 21, 1998 /James L. Salerno/
--------------------- ----------------------------
Mr. James L. Salerno
Address: 13 Cardinal Lane
Andover, MA 01810
Date: January 21, 1998 /Vincent J. Spoto/
--------------------- ----------------------------
Mr. Vincent J. Spoto
Addresss: 50 Cypress Road
Wellesley, MA 02181
ACKNOWLEDGED AND AGREED:
STOCKHOLDER REPRESENTATIVES
Date: January 22, 1998 /Daniel J. Allen/
--------------------- ----------------------------
Mr. Daniel J. Allen
Address: 35 Frost Road
Derry, NH 03038
Date: January 21, 1998 /Adam L. Carley/
--------------------- ----------------------------
Dr. Adam L. Carley
Address: 6 Hillside Road
Windham, NH 03087
Date: January 21, 1998 /Anthony D. D'Amelio/
--------------------- -----------------------------
Mr. Anthony D. D'Amelio
Address: 25 Cleek Court
N. Reading, MA 01864
Date: January 21, 1998 /Joseph L. Katz/
--------------------- -----------------------------
Dr. Joseph L. Katz
Address: 9 Mitchell Grant Way
Bedford, MA 01730
Date: January 21, 1998 /Vincent J. Spoto/
--------------------- -----------------------------
Mr. Vincent J. Spoto
Address: 50 Cypress Road
Wellesley, MA 02181
EXHIBIT "A-1"
FORM OF D'AMELIO EMPLOYMENT AGREEMENT
EXHIBIT "A-2"
FORM OF ALLEN EMPLOYMENT AGREEMENT
EXHIBIT "B"
FORM OF ESCROW AGREEMENT
EXHIBIT "C"
FORM OF EXCHANGE AGREEMENT
EXHIBIT "D"
FORM OF IRREVOCABLE PROXY
EXHIBIT "E"
FORM OF STATUTORY CERTIFICATE OF MERGER
EXHIBIT "F"
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
OF OAK TECHNOLOGY, INC.
Section 3.3 Oak has disclosed in a report on Form 8-K the
information disseminated in its press release issued on
January 22, 1998, a copy of which is attached to this
Exhibit "F."
EXHIBIT "G"
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
OF XEROGRAPHIC LASER IMAGES CORPORATION
EXHIBIT "H"
XLI DISCLOSURE SCHEDULES
EXHIBIT "I"
SCHEDULE OF PAYMENTS BY OAK OF CERTAIN XLI ACCOUNTS PAYABLE
EXHIBIT "J"
FORM OF WARNER & STACKPOLE LLP
LEGAL OPINION
EXHIBIT "K"
FORM OF NON-COMPETE AGREEMENT
EXHIBIT "L"
FORM OF CONFIDENTIALITY AGREEMENT
EXHIBIT "M"
FORM OF TOMLINSON ZISKO MOROSOLI & MASER LLP
LEGAL OPINION
TABLE OF CONTENTS
SECTION NO. PAGE NO.
1. DEFINITIONS 2
1.1 "Allen" 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 "D'Amelio" 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 Carley 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
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
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
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 Carley 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
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
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
LIST OF EXHIBITS
EXHIBIT TITLE
"A-1" Form of D'Amelio Employment Agreement
"A-2" Form of Allen 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 & Stackpole LLP Legal
Opinion
"K" Form of Non-Compete Agreement
"L" Form of Confidentiality Agreement
"M" Form of Tomlinson Zisko Morosoli & Maser
LLP Legal Opinion
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") is made and entered into
effective as of this _____ day of __________, 1998, by and among OAK
TECHNOLOGY, INC. ("Oak"), DANIEL J. ALLEN, ADAM L. CARLEY, ANTHONY D.
D'AMELIO, JOSEPH L. KATZ and VINCENT J. SPOTO (each a "Stockholder
Representative" and collectively, the "Stockholder Representatives") and
STATE STREET BANK AND TRUST COMPANY (the "Escrow Agent"), and the Exchange
Agent, with respect to the duties of the Exchange Agent described in
Section 4 of this Escrow Agreement.
R E C I T A L S
This Escrow Agreement is being entered into in accordance with the
provisions of that certain Plan of Reorganization and Agreement of Merger
dated as of January ____, 1998 (the "Plan of Reorganization"), by and among
Oak, Pixel Magic, Inc., OTI Acquisition Corporation, Xerographic Laser
Images Corporation ("XLI") and certain stockholders of XLI. Capitalized
terms used but not defined herein shall have the respective meanings
assigned to such terms in the Plan of Reorganization.
NOW, THEREFORE, in consideration of the mutual agreements set forth
below and in the Plan of Reorganization, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
A G R E E M E N T
1. Appointment of Stockholder Representatives. XLI, with the
approval of the required affirmative vote of the stockholders of XLI
entitled to vote on the Plan of Reorganization, irrevocably nominated,
constituted and appointed the Stockholder Representatives, and each of
them, as the agent and true and lawful attorney-in-fact of the stockholders
of XLI, to act in the name, place and stead of the stockholders of XLI and
any holders of options, warrants or other rights to acquire the capital
stock of XLI (collectively, the "XLI Stockholders") for purposes of
executing any documents and taking any actions that said Stockholder
Representatives may in their sole discretion determine to be necessary or
desirable in connection with this Escrow Agreement or any of the
transactions contemplated hereby, and each of said Stockholder
Representatives has accepted said appointment. Pursuant to the Plan of
Reorganization, the Stockholder Representatives are granted full authority
to execute, deliver, acknowledge, certify and file on behalf of the XLI
Stockholders (in the name of any or all of the XLI Stockholders or
otherwise) any and all documents which the Stockholder Representatives may
in their sole discretion determine to be necessary, desirable or
appropriate, in such forms and containing such provisions as the
Stockholder Representatives may in their sole discretion determine to be
appropriate, including without limitation amendments to this Escrow
Agreement, amendments to any agreements, instruments or other documents
executed in connection with this Escrow Agreement, documents relating to
this Escrow Agreement (including escrow instructions) and other documents
which may be required to be executed, delivered, acknowledged or certified
in connection with any of the foregoing documents. Oak, the Escrow Agent
and the Exchange Agent shall be entitled to deal exclusively with the
Stockholder Representatives on all matters relating to this Escrow
Agreement, including without limitation any notice to, or any consent,
approval or action to be given or taken by, any XLI Stockholder, and any
amount to be distributed or paid to any XLI Stockholder or any holder of an
XLI Warrant. Oak, the Escrow Agent and the Exchange Agent shall be
entitled to rely on any action taken by the Stockholder Representatives
with respect to this Escrow Agreement or any of the transactions
contemplated hereby as being fully binding on the XLI Stockholders, and any
action of the Stockholder Representatives shall fully bind the XLI
Stockholders provided that such action is taken in accordance with the
provisions of Section 6 of this Agreement. The agency and power of
attorney granted in this Section 1 shall not be affected by the subsequent
incapacity of any XLI Stockholder. If for any reason there is only one
Stockholder Representative at any time, then, so long as there is only one
Stockholder Representative, such references herein to the Stockholder
Representatives shall mean such Stockholder Representative.
2. Plan of Reorganization. The Escrow Agent hereby acknowledges receipt
of a copy of the Plan of Reorganization, but except for reference thereto
for definitions of certain words or terms not defined herein, the Escrow
Agent is not charged with any duties or responsibilities with respect to
the Plan of Reorganization.
3. Funds Placed Into Escrow.
3.1 Merger Cash Funds. Pursuant to the Plan of Reorganization,
including Section 2.5.2.2 thereof, Oak shall deliver to the Escrow Agent
not later than one business day following the Effective Date, by wire
transfer of funds, 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, which aggregate amount together with
interest earned thereon (collectively, the "Merger Cash Funds") is to be
held by the Escrow Agent and released in accordance with the provisions of
this Escrow Agreement.
3.2 Contingent Cash Funds. Commencing with the calendar quarter
ending March 31, 1998 and terminating with the calendar quarter ending
March 31, 1999, Oak shall deliver to the Escrow Agent an amount equal to
the amount of Contingent Cash, if any, due by Oak for each such calendar
quarter under Section 2 of the Plan of Reorganization (subject to any
adjustments provided for in Sections 9 and 10 of the Plan of Reorganization).
Thereafter, pursuant to the Plan of Reorganization, including Section 2.6.1.2
thereof, Oak shall deliver to the Escrow Agent an amount equal to the amount
of Contingent Cash, if any, due by Oak for any calendar quarter under
Section 2 of the Plan of Reorganization, 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 Agent5) 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
delivered to the Escrow Agent pursuant to this Section 3.2, together with
interest earned thereon (collectively, the "Contingent Cash Funds"),
shall be held by the Escrow Agent and released in accordance with the
provisions of this Escrow Agreement.
3.3 Escrow Account; Investment of Escrowed Funds. The Escrow Agent
shall open an account in the name of "Oak Technology, Inc./Xerographic Laser
Images Escrow Fund" (the "Account"), and, pending disposition of the Merger
Cash Funds and the Contingent Cash Funds (collectively, the "Escrowed Funds")
in accordance with this Escrow Agreement, the Escrow Agent shall invest the
Escrowed Funds as the Stockholder Representatives shall direct. The Escrowed
Funds may, at the direction of the Stockholder Representatives, be invested
by the Escrow Agent in (a) any obligation issued or guaranteed by, or
backed by the full faith and credit of, the United States of America
(including any certificates or any other evidence of an ownership interest in
any such obligation or in specified portions thereof, which may consist of
specified portions of the principal thereof or the interest thereon),
(b) certificates of deposit secured at all times by direct obligations of the
United States of America or obligations the principal of and interest on
which are unconditionally guaranteed by the United States of America,
(c) deposit accounts in, money market deposits or certificates of deposit
issued by, and bankers' acceptances of, any bank, trust company or
national banking association which is a member of the Federal Reserve
System (which may include the Escrow Agent and which may include an
SSgA money market account), having capital stock and surplus aggregating
not less than Fifty Million Dollars ($50,000,000), which are fully insured
by the Federal Deposit Insurance Corporation, (d) obligations issued or
guaranteed by any person controlled or supervised by and acting as an
instrumentality of the United States of America pursuant to the authority
granted by the Congress of the United States, (e) commercial paper rated
Prime-1 or A-1 by Moody's or Standard & Poors ("S&P"), or (f) obligations
rated not less than "A" or equivalent by Moody's or S&P issued or guaranteed
by any state of the United States or the District of Columbia, or any
political subdivision of any such state or District, or obligations of a
public housing authority fully secured by contracts with the United States.
In no event shall Oak or the Escrow Agent have any liability under this
Escrow Agreement for investment losses incurred on any investment or
reinvestment made in accordance with the terms of this Escrow Agreement.
3.4 Tax Reporting; Withholding. The parties hereto agree that, for
tax reporting purposes, all interest or other income earned from the
investment of the Escrowed Funds shall be allocable to Oak. Oak agrees to
provide the Escrow Agent with a certified tax identification number by
signing and returning a Form W-9 (or Form W-8, in case of non-U.S. persons)
to the Escrow Agent prior to the date on which any income earned on the
investment of the Escrowed Funds is credited to such Escrowed Funds. The
parties hereto understand that, in the event Oak's tax identification number
is not certified to the Escrow Agent, the Internal Revenue Code, as amended
from time to time, may require withholding of a portion of any interest or
other income earned on the investment of the Escrowed Funds. Oak hereby
agrees to assume any and all obligations imposed now or hereafter by any
applicable tax law with respect to the payment of Escrowed Funds under this
Escrow Agreement, and to indemnify and hold the Escrow Agent harmless from
and against any taxes, additions for late payment, interest, penalties,
governmental charges and other expenses (including reasonable legal fees
and expenses) that may be assessed against or may be incurred by the Escrow
Agent in connection with the making of any such payments. Oak and the
Stockholder Representatives undertake to instruct the Escrow Agent in
writing with respect to the Escrow Agent's responsibility for withholding
and other taxes, assessments or other governmental charges, certifications
and governmental reporting in connection with its acting as Escrow Agent
under this Escrow Agreement; provided, however, that instructions with
respect to the matters addressed by this Section 3.4 shall be required only
in the event of a change in the terms set forth in this Section 3.4.
3.5 Indemnity of Escrow Agent. Oak covenants and agrees to indemnify
the Escrow Agent and hold it harmless without limitation from and against
any loss, liability or expense of any nature incurred by the Escrow Agent
arising out of or in connection with this Escrow Agreement or with the
administration of its duties hereunder, including but not limited to
reasonable legal fees and other costs and expenses of defending or preparing
to defend against any such claim or liability, unless such loss, liability
or expense shall be caused by the Escrow Agent's gross negligence, bad faith
or willful misconduct. Except in the case of the Escrow Agent's gross
negligence, bad faith or willful misconduct, the Escrow Agent shall not be
liable for indirect, punitive, special or consequential damages. The Escrow
Agent shall have no more or less responsibility or liability on account of
any action or omission of any book entry depository employed by the Escrow
Agent than any such book entry depository has to the Escrow Agent, provided
such book entry depository is liable in the case of such book entry
depository's gross negligence, bad faith or willful misconduct, except to
the extent that such action or omission of any book entry depository was
caused by the Escrow Agent's own gross negligence, bad faith or willful
misconduct.
4. Release of Escrowed Funds. The Escrow Agent shall release the Escrowed
Funds as described in this Section 4, subject to the terms and conditions of
this Escrow Agreement. Determinations by the Escrow Agent or the Exchange
Agent of the Exercise Price Amount (which term is defined in Section 4.2
below) due in connection with any XLI Warrant exercise pursuant to
Section 4.2 of this Escrow Agreement, and determinations by the Escrow
Agent of the per share amount of Merger Cash and the per share amount of
Contingent Cash payable by the Escrow Holder under this Escrow Agreement,
shall be based on the information provided to the Escrow Agent by the
Stockholder Representatives and Oak, respectively, pursuant to Section 4.4 of
this Escrow Agreement. Determinations by the Escrow Agent of the XLI
Stockholders (including any holders of XLI Warrants who exercised such XLI
Warrants pursuant to Section 4.2 of this Escrow Agreement) entitled to
distributions of Escrowed Funds under this Escrow Agreement shall be based
on the information provided to the Escrow Agent by the Exchange Agent.
The Escrow Agent agrees to provide at least ten (10) days prior written
notice to the Exchange Agent, the Stockholder Representatives and Oak of
any release of Escrowed Funds pursuant to Sections 4.1, 4.2 or 4.3 of
this Escrow Agreement, which notice shall include a description of the
calculations and allocations made by the Escrow Agent in connection
with such release of Escrowed Funds. Any objection by Oak or the
Stockholder Representatives to such calculations or allocations must
be delivered in writing to the Escrow Agent, with a copy to the other
party or parties hereto, within five (5) days following delivery by
the Escrow Agent of such notice.
4.1 Initial Escrow Distribution. Subject to the provisions of the
immediately preceding paragraph, 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, the Escrowed Funds then held by the Escrow Agent, less
the sum of (i) Merger Cash Funds held in escrow 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
Funds held in escrow with respect to any Unexpired Private Warrant and
(iii) any Exercise Price Amount then held in escrow under Section 4.2 below
(the "Initial Distribution Amount"). For purposes of calculating the
amount to be withheld from the Initial Distribution Amount, the Escrow
Agent may rely upon written instructions furnished to the Escrow Agent by
the Exchange Agent, by no later than April 5, 1999, identifying the
Unexpired Private Warrants outstanding at March 31, 1999, and the amounts
of Merger Cash and Contingent Cash payable with respect to such Unexpired
Private Warrants. Any interest earned on the Escrowed Funds that is
otherwise allocable to the funds required to be retained in escrow by the
Escrow Agent under this Section 4.1 shall be distributed to the XLI
Stockholders of record at March 31, 1999 (including any holders of XLI
Warrants who exercised such XLI Warrants prior to March 31, 1999) as part
of the Initial Distribution Amount. The Initial Distribution Amount shall
be distributed by the Exchange Agent in accordance with the provisions of
the Exchange Agreement and shall be allocated pro rata to (a) all
outstanding shares of XLI Common Stock held by XLI Stockholders at the
Effective Time (excluding any shares of XLI Common Stock into which
outstanding shares of XLI Preferred Stock were convertible at the Effective
Time), (b) all outstanding 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 March 31, 1999.
4.2 Upon Exercise of XLI Warrants. Promptly following delivery
to the Exchange Agent of documentation evidencing exercise of any XLI
Warrant, in form and substance reasonably acceptable to the Exchange Agent,
and receipt by the Exchange Agent of the exercise price per share payable
in connection with the exercise of such XLI Warrant (the "Exercise Price
Amount"), the Exchange Agent shall deliver to the holder of such XLI
Warrant the sum of Merger Cash and Contingent Cash per share of XLI
Common Stock (including shares of XLI Common Stock into which shares of
XLI Preferred Stock have been converted) for which the Exercise Price
Amount has been paid to the Exchange Agent. Merger Cash payable to the
holder of a Private Warrant under this Section 4.2 shall be paid to the
holder of such Private Warrant from the Merger Cash Funds delivered to
the Escrow Agent by Oak pursuant to Section 3.1 of this Escrow Agreement,
which funds shall be delivered to the Exchange Agent by the Escrow Agent.
Merger Cash payable to the holder of any XLI Warrant, other than a
Private Warrant, shall be paid by the Exchange Agent to the holder of
such XLI Warrant from the Exercise Price Amount delivered by the holder of
such XLI Warrant to the Exchange Agent pursuant to this Section 4.2.
Contingent Cash payable to the holder of any XLI Warrant (including any
Private Warrant), 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 4.1 of this Escrow Agreement.
Contingent Cash payable to the holder of any Private Warrant, who exercises
such Private Warrant subsequent to March 31, 1999, shall be paid to the
holder of such Private Warrant from the Contingent Cash Funds retained in
escrow by the Escrow Agent pursuant to Section 4.1 of this Escrow Agreement
and Contingent Cash Funds delivered by Oak to the Escrow Agent pursuant to
Section 3.2 of the Escrow Agreement subsequent to June 30, 1999 and prior
to delivery by Oak to the Exchange Agent of any Contingent Cash Funds due
for the calendar quarter in which the exercise of such Private Warrant
occurs. Any Contingent Cash Funds payable by the Escrow Agent pursuant
to the immediately preceding sentence shall be delivered by the Escrow
Agent to the Exchange Agent for distribution to such holders of Private
Warrants. Net exercises of XLI Warrants shall not be permitted, and
no XLI Warrant shall be exercisable for shares of the capital stock
of XLI or of Oak or any Oak Subsidiary, including, without limitation,
Pixel Magic, Inc. Within five (5) business days following receipt by
the Exchange Agent of the Exercise Price Amount, the Exchange Agent shall
deliver to Oak the Exercise Price Amount, net of any amount of Merger
Cash paid by the Exchange Agent to the holder of an XLI Warrant, other
than a Private Warrant, from such Exercise Price Amount in accordance
with the provisions of this Section 4.2. The Exchange Agent shall provide
written notice to Oak and to the Stockholder Representatives of any
exercise of an XLI Warrant, including the number of shares of XLI Common
Stock (including shares of XLI Common Stock into which shares of XLI
Preferred Stock were converted), date of exercise of such XLI Warrant,
the Exercise Price Amount covered by such XLI Warrant exercise and the
amount of the Exercise Price Amount, if any, utilized to pay Merger Cash
pursuant to this Section 4.2. Such notice shall also indicate whether
any shares of XLI Stock remain available for purchase under such
XLI Warrant.
4.3 Upon Termination of Escrow Agreement. Upon termination of this
Escrow Agreement (which shall occur upon expiration or exercise of all
rights to purchase shares of XLI Stock under the XLI Warrants, including
the Private Warrants), all Escrowed Funds, if any, remaining in escrow
upon termination of this Escrow Agreement shall be paid out within
fifteen (15) business days following the termination of this Escrow
Agreement. Such amount shall be delivered by the Escrow Agent to the
Exchange Agent for distribution to the XLI Stockholders, and shall be
allocated in accordance with Section 4.1 of this Agreement as though it
were an Initial Escrow Distribution.
4.4 Delivery of Information to Escrow Agent.
4.4.1 Determination of Merger Cash and Contingent Cash Amounts.
Within one business day following the Effective Date, Oak and the
Stockholder Representatives shall provide joint written notice to the
Escrow Agent of the date which is the Effective Date and the per share
determination of Merger Cash, as calculated in accordance with the
provisions of Section 2.4.3 of the Plan of Reorganization. Within
forty-five (45) days after the close of each calendar quarter, Oak and
the Stockholder Representatives shall provide joint written notice to
the Escrow Agent of the per share determination of Contingent Cash as of
the end of such calendar quarter, calculated in accordance with the
provisions of Section 2.4.4 of the Plan of Reorganization. Oak and the
Stockholder Representatives agree to provide to the Escrow Agent such
other Merger Cash and Contingent Cash calculations as are required by the
Escrow Agent in order to fulfill its duties hereunder.
4.4.2 List of XLI Stockholders and Holders of XLI Warrants.
Within one business day following the Effective Date, the Stockholder
Representatives shall deliver or cause to be delivered to the Escrow Agent,
with a copy to Oak: (i) a list of the names, addresses and number of
shares of XLI Stock held by all XLI Stockholders at the Effective Time,
which list shall include the names of Dissenting Stockholders and the
number of shares of XLI Stock held by any Dissenting Stockholder, and
shall also include for each holder of XLI Preferred Stock the number of
shares of XLI Common Stock into which shares of XLI Preferred Stock were
convertible at the Effective Time, including shares of XLI Preferred
Stock held by any Dissenting Stockholder; and (ii) a list of the names and
addresses of all holders of XLI Warrants outstanding at the Effective
Time, which list shall include the number of shares of XLI Common Stock
into which each such XLI Warrant is convertible upon exercise of such XLI
Warrant, including shares of XLI Common Stock into which shares of XLI
Preferred Stock are convertible, the Exercise Price Amount payable by
the holder of such XLI Warrant and the date of expiration of such XLI
Warrant. Without limiting the generality of the foregoing, the list of
XLI Warrants outstanding at the Effective Time shall indicate by
individual holder the type or types of XLI Warrants held by such holder,
with the information required by clause (ii) above presented separately
for each XLI Warrant. The Stockholder Representatives agree to provide
to the Escrow Agent, with a copy to Oak, such other information regarding
the capital stock of XLI, including any XLI Warrants, issued and
outstanding, at the Effective Time.
4.4.3 Notice of Expiration of XLI Warrants. Within ten (10)
business days prior to the expiration of all rights to purchase shares of
XLI Stock under the Class A Warrants, or the Underwriter's Warrant, or
the Private 1995 Warrants or the Private 1996 Warrants, the Stockholder
Representatives shall deliver notice of same to the Escrow Agent, the
Exchange Agent and Oak.
4.5 Delivery of Information by Exchange Agent.
4.5.1 Letter of Instruction. 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. Oak and the Stockholder Representatives shall
cooperate with the Exchange Agent in furnishing such instructions.
4.5.2 Notice of Exercise of XLI Warrant. Within five (5)
business days following the exercise of any XLI Warrant and payment of the
Exercise Price Amount therefor, pursuant to and in accordance with the
provisions of this Escrow Agreement, the Exchange Agent shall provide
written notice to the Escrow Agent of the name and address of any holder
of XLI Warrants who exercised XLI Warrants subsequent to the Effective
Time of the Merger, which list shall include the number of shares of XLI
Common Stock (including shares of XLI Common Stock into which shares of
XLI Preferred Stock were converted) covered by the exercise of such XLI
Warrant. Written notice of any such XLI Warrant exercise shall be
delivered by the Exchange Agent to Oak and the Stockholder Representatives
pursuant to and in accordance with Section 4.2 of this Escrow Agreement.
4.6 Lost, Stolen or Destroyed XLI Warrants. In the event any XLI
Warrant shall have been lost, stolen or destroyed, upon the making of any
affidavit of that fact by the person claiming such XLI Warrant to be lost,
stolen or destroyed, and upon delivery of a bond in such sum as the
Exchange Agent may reasonably direct, as indemnity against any claim that
may be made against the Exchange Agent with respect to the XLI Warrant
alleged to have been lost, the Exchange Agent or the Escrow Agent, as
the case may be, will issue, upon receipt by the Exchange Agent of the
Exercise Price Amount payable in connection with the exercise of such
XLI Warrant, the consideration as provided in this Section 4 in exchange
for such lost, stolen or destroyed XLI Warrant.
4.7 Abandoned Property. Notwithstanding anything to the contrary
contained in this Section 4 or elsewhere in this Escrow Agreement, neither
the Escrow Agent nor any other party to this Escrow Agreement shall be
liable to any holder of the capital stock of XLI, including any holder of
an XLI Warrant who has exercised all or a portion of such XLI Warrant, for
any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
5. Duties of the Escrow Agent. It is agreed that the duties of the
Escrow Agent are only those specifically provided herein, which are purely
ministerial in nature. The Escrow Agent shall have no responsibility with
respect to the Escrowed Funds other than to follow the instructions
contained herein. The Escrow Agent shall incur no liability in connection
with this Escrow Agreement except for gross negligence, misconduct or bad
faith in the performance of its duties hereunder. The Escrow Agent shall
not be required to defend any legal proceedings which may be instituted
against the Escrow Agent with respect to the subject matter of this Escrow
Agreement unless requested to do so by one or more of the parties hereto
and indemnified by the requesting party to the Escrow Agent's satisfaction.
If any action is threatened or instituted against the Escrow Agent, the
Escrow Agent may interplead the parties hereto and may deposit the subject
matter of this Escrow Agreement into court, and in such event the Escrow
Agent shall be relieved of and discharged from any and all obligations and
liabilities under this Escrow Agreement. The Escrow Agent may rely on and
shall be protected in acting or refraining from acting upon any written
notice, instruction, instrument, statement, request or document
furnished to it hereunder and believed by it to be genuine and to
have been signed or presented by the proper person, and shall have no
responsibility for determining the accuracy thereof. The Escrow
Agent may also consult counsel satisfactory to it, including in-house
counsel, and may reasonably rely on the advice of such counsel,
provided the Escrow Agent acts in good faith and in accordance with
the advice of such counsel, and provided further that the Escrow has
no independent knowledge of any material error or omission in such
advice. The Escrow Agent shall not be required to institute legal
proceedings of any kind. Without limiting the generality of the
preceding sentence, if there is any controversy in connection with
the Escrowed Funds or any question as to the construction of this
Escrow Agreement or any action to be taken by the Escrow Agent, the
Escrow Agent shall not be required to resolve the controversy or take
any action in connection therewith and may await the settlement of
any such controversy by final legal proceedings or otherwise as the
Escrow Agent may require. The Escrow Agent may resign and be
discharged from its duties hereunder by giving not less than forty-
five (45) days prior written notice of such resignation to Oak and
the Stockholder Representatives, which notice shall specify the date
when such resignation of such Escrow Agent shall take effect. Prior
to the effective date of the resignation as specified in such notice,
Oak will issue to the Escrow Agent a written instruction authorizing
redelivery of the Escrowed Funds to a bank or trust company that it
selects as successor to the Escrow Agent hereunder, subject to the
reasonable consent of the Stockholder Representatives. If, however,
Oak shall fail to name such a successor escrow agent within thirty
(30) days after the notice of resignation from the Escrow Agent, the
Stockholder Representatives shall be entitled to name such successor
escrow agent. If no successor escrow agent is named by Oak or the
Stockholder Representatives, the Escrow Agent may apply to a court of
competent jurisdiction for appointment of a successor escrow agent.
Any successor escrow agent appointed in accordance with the foregoing
procedures shall succeed as the Escrow Agent hereunder and Oak and
the Stockholder Representatives hereby consent to and approve such
successor.
6. Actions and Instructions of Stockholder Representatives. Any
action required to be taken, or notice or instructions required
to be given, to the Escrow Agent, the Exchange Agent or Oak under
this Escrow 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 the Escrow Agent,
the Exchange Agent and Oak 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 the Escrow Agent, the
Exchange Agent and Oak by the number of Stockholder Representatives
specified in such notice. If for any reason there is only one
Stockholder Representative at any time, then the Escrow Agent, the
Exchange Agent and Oak 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 the Escrow
Agent, the Exchange Agent and Oak.
7. Miscellaneous.
7.1 Governing Laws. It is the intention of the parties
hereto that the internal laws of the Commonwealth of Massachusetts
(irrespective of its choice of law principles) shall govern the
validity of this Escrow Agreement, the construction of its terms, and
the interpretation and enforcement of the rights and duties of the
parties hereto. The parties hereto hereby absolutely and irrevocably
consent and submit to the jurisdiction of the court in the
Commonwealth of Massachusetts and of any Federal court located in
said Commonwealth in connection with any actions or proceedings
brought against them by the Escrow Agent arising out of or relating
to this Escrow Agreement. In any such action or proceeding, the
parties hereto hereby absolutely and irrevocably waive personal
service of any summons, complaint, declaration or other process and
hereby absolutely and irrevocably agree that the service thereof may
be made by certified or registered first-class mail directed to such
parties at their respective addresses in accordance with the
provisions hereof.
7.2 Other Provisions. This Escrow Agreement is binding
upon and inures to the benefit of the successors and assigns of the
parties hereto. This Escrow Agreement and the Plan of
Reorganization, the exhibits and schedules hereto and thereto,
including the Exchange Agreement, and the documents referenced herein
and therein 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 hereto and thereto. This Escrow
Agreement may only be amended or observance of any terms of this
Escrow Agreement may be waived only by a writing signed by the party
to be bound thereby.
7.3 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:
If to Oak: Oak Technology, Inc.
139 Kifer Court
Sunnyvale, CA 94086
Attn: Shawn M. Soderberg, General Counsel
Telecopier: (408) 774-5337
With a copy to: Tomlinson Zisko Morosoli & Maser LLP
200 Page Mill Road, Second Floor
Palo Alto, CA 94306
Attn: Timothy Tomlinson, Esq.
Telecopier: (650) 324-1808
If to the Stockholder c/o Xerographic Laser Images
Representatives: 101 Billerica Avenue
5 Billerica Park
North Billerica, MA 01862
Attn: Mr. Anthony D. D'Amelio
Telecopier: (978) 670-8835
With a copy to: Warner & Stackpole LLP
75 State Street
Boston, MA 02109
Attn: Michael A. Hickey, Esq.
Telecopier: (617) 951-9151
If to the Escrow Agent: State Street Bank and Trust Company
Two International Place
Boston, MA 02110
Attn: Corporate Trust Division
Mr. Scott Knox
Telecopier: (617) 664-5365
If to the Exchange Agent: State Street Bank and Trust Company
150 Royal Street
Mail Stop 45-02-71
Canton, MA 02021
Attn: Mr. Joe McDavitt
Telecopier: (617) 575-2500
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 7.3 (Notices).
7.4 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 Escrow Agreement.
7.5 Severability. If any provision of this Escrow Agreement, or
the application thereof, shall for any reason and to any extent be invalid
or unenforceable, the remainder of this Escrow 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 Escrow 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.
7.6 Remedies Cumulative. All rights and remedies of the parties
under this Escrow Agreement are cumulative and are in addition to and
shall not be deemed to exclude any other right or remedy allowed by law
and all rights and remedies may be exercised concurrently.
7.7 Non-Waiver. No condoning, excusing or waiver by any party of
any default, breach or non-observance by any other party at any time or
times in respect of any provision contained in this Escrow Agreement shall
operate as a waiver of that party's rights under this Escrow Agreement in
respect of any continuing or subsequent default, breach or non-observance,
or so as to defeat or affect in any way the rights of that party in respect
of any such continuing or subsequent default, breach or non-observance,
and no waiver shall be inferred from or implied by anything done or omitted
to be done by the party having those rights.
7.8 Counterparts. This Escrow Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of
which together shall constitute one and the same instrument.
7.9 Attorneys' Fees. Should suit be brought to enforce or interpret
any part of this Escrow Agreement, the prevailing party shall be entitled
to recover, as an element of the costs of suit and not as damages,
reasonable attorneys' fees to be fixed by the court (including without
limitation, costs, expenses and fees on any appeal). The prevailing party
shall be the party entitled to recover its costs of suit, regardless of
whether such suit proceeds to final judgment. A party not entitled to
recover its costs shall not be entitled to recover attorneys' fees. No
sum for attorneys' fees shall be counted in calculating the amount of a
judgment for purposes of determining if a party is entitled to recover
costs or attorneys' fees.
7.10 Construction of Agreement. This Escrow 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. The
recital to this Escrow Agreement shall be deemed to be a part of this
Escrow Agreement. The titles and headings herein are for reference
purposes only and shall not in any manner limit the construction of
this Escrow Agreement, which shall be considered as a whole. Whenever
required by the context hereof, the singular number shall include the
plural, and vice versa, the masculine gender shall include the feminine
and neuter genders, and the neuter gender shall include the masculine
and feminine genders.
7.11 Fees. Oak agrees to pay or reimburse the Escrow Agent for
reasonable legal fees incurred in connection with the preparation of
this Escrow Agreement and to pay the Escrow Agent's reasonable
compensation for its normal services hereunder in accordance with the
attached fee schedule, which may be subject to change hereafter on an
annual basis. The Escrow Agent shall be entitled to reimbursement on
demand for all reasonable expenses incurred in connection with the
administration of this Escrow Agreement or the escrow created hereby
which are in excess of its compensation for normal services hereunder,
including without limitation, payment of any reasonable legal fees and
expenses incurred by the Escrow Agent in connection with resolution of any
claim by any party hereunder.
7.12 Succession. Any Stockholder Representative, or any successor
to any of them hereafter appointed, may resign and shall be discharged of
his duties. In case of such resignation, or the death or inability to act
of any Stockholder Representative, a successor or successors shall be
named by the remaining Stockholder Representatives or, if only one
Stockholder Representative remains, by such Stockholder Representative.
Each such successor Stockholder Representative shall have all the power,
authority, rights and privileges hereby conferred upon the original
Stockholder Representatives, and the Stockholder Representatives as used
herein shall be deemed to include such successor(s).
7.13 Force Majeure. The Escrow Agent shall not be responsible for
delays or failures in performance resulting from acts beyond its control.
Such acts shall include but not be limited to acts of God, strikes,
lockouts, riots, acts of war, epidemics, governmental regulations
superimposed after the fact, fire communication line failures, computer
viruses, power failures, earthquakes or other disasters.
7.14 Reproduction of Documents. This Escrow Agreement and all
documents relating thereto, including, without limitation, (a) consents,
waivers and modifications which may hereafter be executed, and
(b) instructions, certificates and other information previously or
hereafter furnished, may be reproduced by any photographic, photostatic,
microfilm, optical disk, micro-card, miniature photographic or other
similar process. The parties agree that any such reproduction shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in existence,
and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
[INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the date first hereinabove written.
STATE STREET BANK AND TRUST OAK TECHNOLOGY, INC.
COMPANY
By:___________________________ By:___________________________
Its:_________________________ Its:__________________________
STOCKHOLDER REPRESENTATIVES:
____________________________ _____________________________
Daniel J. Allen Joseph L. Katz
____________________________ _____________________________
Adam Carley Vincent J. Spoto
____________________________
Anthony D. D'Amelio
Acknowledged and Agreed with respect
to the duties of the Exchange Agent
under Section 4 of the Escrow Agreement.
EXCHANGE AGENT
STATE STREET BANK AND TRUST COMPANY
By:_______________________________
Its:______________________________
EXCHANGE AGENT AGREEMENT
THIS EXCHANGE AGREEMENT (the "Exchange Agreement") is made and
entered into effective as of this ____ day of ___________, 1998, by
and among OAK TECHNOLOGY, INC. ("Oak"), DANIEL J. ALLEN, ADAM L.
CARLEY, ANTHONY D. D'AMELIO, JOSEPH L. KATZ and VINCENT J. SPOTO
(each a "Stockholder Representative" and collectively, the
"Stockholder Representatives"), and STATE STREET BANK AND TRUST
COMPANY (the "Exchange Agent").
R E C I T A L S
This Exchange Agreement is being entered into in accordance with
the provisions of that certain Plan of Reorganization and Agreement
of Merger dated as of January ___, 1998 (the "Plan of Reorganization"),
by and among Oak, Pixel Magic, Inc., OTI Acquisition Corporation,
Xerographic Laser Images Corporation ("XLI") and certain stockholders
of XLI. Capitalized terms used but not defined herein shall have the
respective meanings assigned to such terms in the Plan of Reorganization,
a copy of which is appended hereto.
Oak desires the Exchange Agent to act as Exchange Agent pursuant
to the Plan of Reorganization, and the Exchange Agent has indicated
its willingness to do so.
NOW, THEREFORE, in consideration of the mutual agreements set
forth below and in the Plan of Reorganization, and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
A G R E E M E N T
1. Appointment of Exchange Agent. Oak hereby confirms the
appointment of State Street Bank & Trust Co as Exchange Agent, and
State Street Bank & Trust Co hereby agrees to serve as such, upon the
terms and conditions set forth herein.
2. Plan of Reorganization. The Exchange Agent hereby
acknowledges receipt of the copy of the Plan of Reorganization
appended hereto, but except for reference thereto for definitions of
certain words or terms not defined herein, or as otherwise provided
in this Exchange Agreement, the Exchange Agent is not charged with
any duties or responsibilities with respect to the Plan of
Reorganization.
3. Exchange Procedures. Upon delivery to the Exchange Agent
of a certificate from Oak that the Merger has become effective, the
Exchange Agent shall as promptly as practicable, mail, by first class
mail, postage prepaid 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"): (i) a letter of transmittal; and (ii) instructions
for use in effecting the surrender of the Certificates in exchange
for the Consideration, including an envelope addressed to the
Exchange Agent for use by such XLI Stockholder in exchanging his, her
or its Certificates. Notwithstanding anything to the contrary
contained in this Section 3, 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.
4. Lists of XLI Stockholders and Holders of XLI Warrants.
Within one business day following the Effective Date, the Stockholder
Representatives shall deliver or cause to be delivered to the
Exchange Agent, with a copy to Oak: (i) a list of the names,
addresses and number of shares of XLI Stock held by all XLI
Stockholders at the Effective Time, which list shall include the
names of Dissenting Stockholders and the number of shares of XLI
Stock held by any Dissenting Stockholder, and shall also include for
each holder of XLI Preferred Stock the number of shares of XLI Common
Stock into which outstanding shares of XLI Preferred Stock were
convertible at the Effective Time, including shares of XLI Preferred
Stock held by any Dissenting Stockholder; and (ii) a list of the
names and addresses of all holders of XLI Warrants outstanding at the
Effective Time, which list shall include the number of shares XLI
Common Stock into which each such XLI Warrant is convertible upon
exercise of such XLI Warrant, including shares of XLI Common Stock
into which shares of XLI Preferred Stock are convertible, the
exercise price per share payable in connection with the exercise of
any XLI Warrant and the date of expiration of such XLI Warrant.
Without limiting the generality of the foregoing, the list of XLI
Warrants outstanding at the Effective Time shall indicate by
individual holder the type or types of XLI Warrants held by such
holder, with the information required by clause (ii) above presented
separately for each XLI Warrant. The lists provided to the Exchange
Agent pursuant to clause (i) above shall also reflect the certificate
numbers of the Certificates, and include appropriate identification
of all Certificates alleged to have been lost, stolen or destroyed,
all Certificates the transfer of which is restricted and all "stops"
notations in effect with respect to such Certificates. All such
lists when delivered to the Exchange Agent shall be certified as true
and correct.
5. Delivery of Funds to Exchange Agent.
5.1 Merger Cash Funds. Pursuant to the Plan of
Reorganization, including Section 2.5.2.1 thereof, Oak shall deliver
to the Exchange Agent not later than one business day following the
Effective Date, by wire transfer of funds, 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 were convertible at the Effective Time. 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.
5.2 Initial Distribution Amount. Pursuant to the Plan
of Reorganization, including Section 2.6 and 2.7 thereof, the Escrow
Agent shall deliver to the Exchange Agent, not later than fifteen
(15) calendar days following delivery to the Escrow Agent by Oak of
the Contingent Cash payable by Oak for the calendar quarter ended
March 31, 1999, 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 of the Plan of Reorganization with
respect to any Private Warrant that has not been exercised and has
not otherwise terminated ("Unexpired Private Warrant"), (ii)
Contingent Cash paid into escrow by Oak pursuant to Section 2.6.1.2
of the Plan of Reorganization with respect to any Unexpired Private
Warrant and (iii) any exercise price amounts held in escrow and
required to be delivered to Oak pursuant to the Escrow Agreement.
5.3 Contingent Cash Funds. Pursuant to the Plan of
Reorganization, including Section 2.6 thereof, Oak shall deliver to
the Exchange Agent, commencing with the calendar quarter ended June
30, 1999, an amount equal to the amount of Contingent Cash, if any,
due by Oak for such calendar quarter in accordance with Section 2 of
the Plan of Reorganization, subject to any adjustments provided for
in Sections 9 and 10 of the Plan of Reorganization, and less any
amount required to be delivered to the Escrow Agent by Oak pursuant
to Section 2.6.1.2 of the Plan of Reorganization. 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.
Quarterly amounts, if any, payable by Oak to the Exchange Agent
pursuant to the Plan of Reorganization and this Section 5.3 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 Exchange Agreement.
5.4 Final Escrow Funds. Pursuant to the Plan of
Reorganization, including Section 2.7.3 thereof, and Section 4.3 of
the Escrow Agreement, the Escrow Agent shall deliver to the Exchange
Agent, promptly following termination of the Escrow Agreement, 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 the Escrow Agreement.
5.5 Excess Exercise Price Amounts. Pursuant to the Plan
of Reorganization, including Section 2.7.4 thereof, Oak shall deliver
to the Exchange Agent, promptly following termination of the Escrow
Agreement, the amount, if any, by which the aggregate exercise price
paid to Oak in connection with any exercise of XLI Warrants under the
Escrow Agreement, 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.
6. Determination of Merger Cash and Contingent Cash Amounts.
Within one business day following the Effective Date, Oak and the
Stockholder Representatives shall provide joint written notice to the
Exchange Agent of the per share determination of Merger Cash, as
calculated in accordance with the provisions of Section 2.4.3 of the
Plan of Reorganization. Within forty-five (45) days after the close
of each calendar quarter, Oak and the Stockholder Representatives
shall provide joint written notice to the Exchange Agent of the per
share determination of Contingent Cash as of the end of such calendar
quarter, calculated in accordance with the provisions of Section
2.4.4 of the Plan of Reorganization. Oak and the Stockholder
Representatives agree to provide to the Exchange Agent such other
Merger Cash and Contingent Cash calculations as are reasonably
requested by the Exchange Agent in order to fulfill its duties
hereunder.
7. Payment for Shares of XLI Stock.
7.1 Distribution of Merger Cash Funds. The Exchange
Agent, upon receipt of Certificates, accompanied by duly executed
letters of transmittal, shall make payments of Merger Cash in respect
of such shares (on an as converted basis in the case of any shares of
XLI Preferred Stock outstanding at the Effective Time) by issuance of
its check. The Exchange Agent agrees to pay on presentment all
checks so issued by it until the expiration of this Exchange
Agreement.
7.2 Distribution of Funds Other Than Merger Cash Funds.
Funds delivered to the Exchange Agent by Oak or the Escrow Agent
pursuant to Sections 5.2, 5.3, 5.4 or 5.5 of this Exchange 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 amount
delivered to the Exchange Agent pursuant to Sections 5.2 or 5.3 shall
be distributed by the Exchange Agent to the XLI Stockholders not
later than forty-five (45) days after the close of the calendar
quarter to which the distribution relates; any amount delivered to
the Exchange Agent pursuant to Section 5.4 shall be distributed by
the Exchange Agent to the XLI Stockholders not later than fifteen
(15) business days following delivery of such amount to the Exchange
Agent; any amount delivered pursuant to the Exchange Agent pursuant
to Section 5.5 shall be distributed by the Exchange Agent to the XLI
Stockholders not later than thirty (30) business days following
delivery of such amount to the Exchange Agent. Any amounts payable
by the Exchange Agent to the XLI Stockholders pursuant to this
Exchange Agreement shall be deposited by the Exchange Agent in the
United States mail, first class postage prepaid, to the addresses as
set forth in the stock and warrant records of XLI delivered to the
Exchange Agent pursuant to Sections 4 and 6.1 of this Exchange
Agreement. The Exchange Agent shall make payments of the amounts
provided for in this Section 7.2 by issuance of its check. The
Exchange Agent agrees to pay on presentment all checks so issued by
it until the expiration of this Exchange Agreement.
7.3 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 upon delivery of a
bond in such sum as the Exchange Agent may reasonably direct, as
indemnity against any claim that may be made against 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 7 in exchange for such lost, stolen or destroyed Certificate.
7.4 Abandoned Property. Notwithstanding anything to the
contrary contained in this Section 7 or elsewhere is this Exchange
Agreement, neither the Exchange Agent nor any other party to this
Exchange Agreement shall be liable to any holder of the capital stock
of XLI, including any holder of an XLI Warrant who has exercised all
or a portion of such XLI Warrant, for any amount properly paid to a
public official pursuant to any applicable abandoned property,
escheat or similar law.
8. Actions and Instructions of Stockholder Representatives.
Any action required to be taken, or notice or instructions required
to be given, to the Exchange Agent or Oak under this 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 the Exchange Agent and Oak 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 the Exchange Agent and Oak by the number of
Stockholder Representatives specified in such notice. If for any
reason there is only one Stockholder Representative at any time, then
the Exchange Agent and Oak 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 the
Exchange Agent and Oak.
9. Indemnification. The Exchange Agent shall be indemnified
and held harmless by Oak from and against any and all reasonable
expenses, including reasonable counsel fees and disbursements, or
losses suffered by the Exchange Agent hereunder, provided, however,
that the Exchange Agent shall not be indemnified and held harmless
with respect to such expenses or losses which result from or arise
out of the Exchange Agent's gross negligence, misconduct or bad
faith. Promptly after the receipt by the Exchange Agent of notice of
any demand or claim or the commencement of any action, suit,
proceeding or investigation, the Exchange Agent shall, if a claim in
respect thereof is to be made against Oak, notify Oak in writing.
Oak shall be entitled to participate in the defense of any such claim
or legal action or proceeding, and, if it so elects at any time after
receipt of such notice, it may assume the defense of any suit brought
to enforce any such claim or of any other legal action or proceeding.
For the purposes hereof, the term "expense or loss" means any amount
paid or payable to satisfy any claim, demand, action, suit or
proceeding settled with the express written consent of Oak, and all
reasonable costs and expenses, including, but not limited to,
reasonable counsel fees and disbursements, paid or incurred in
investigating or defending against any such claim, demand, action,
suit, proceeding or investigation.
10. Compensation of Exchange Agent. The Exchange Agent shall
be entitled to a fee which shall be paid by Oak on presentation of
monthly invoices for all services rendered by it hereunder as
referenced in Exhibit "A" hereto. The Exchange Agent shall also be
entitled to reimbursement from Oak for all reasonable expenses paid
or incurred by it in the administration of its duties hereunder,
including, but not limited to, all reasonable services rendered in
performing this Exchange Agreement.
11. Further Assurance. From time-to-time and after the date
hereof, Oak and the Stockholder Representatives shall deliver or
cause to be delivered to the Exchange Agent such further documents
and instruments and shall do and cause to be done such further acts
as the Exchange Agent shall reasonably request (it being understood
that the Exchange Agent shall have no obligation to make any such
request) to carry out more effectively the provisions and purposes of
this Exchange Agreement, to evidence compliance herewith or to assure
itself that it is protected in acting hereunder.
12. Consents to Service of Process. Each of the parties
hereto hereby irrevocably consents to the jurisdiction of the courts
of the Commonwealth of Massachusetts and of any Federal Court located
in such Commonwealth, each as may have competent jurisdiction, in
connection with any action, suit or other proceeding arising out of
or relating to this Exchange Agreement or any action taken or omitted
hereunder and waives personal service of any summons, complaint or
other process and agrees that the service thereof may be made by
certified or registered mail directed to such person at such person's
address for purposes of notice hereunder.
13. Term. The term of this Exchange Agreement shall be until
the first to occur of (a) the payment of all amounts required to be
distributed under Section 7 of this Exchange Agreement or (b) the
termination of the Exchange Agent's appointment by written notice
from Oak to the Exchange Agent or from the Exchange Agent to Oak
subject to the review time set forth in Exhibit "A". Notwithstanding
anything to the contrary contained in this Exchange Agreement, this
Exchange Agreement shall terminate no later than June 30, 2001.
14. Counterparts. This Exchange Agreement may be executed in
one or more counterparts, each one of which shall be deemed an
original, and all of which together shall constitute one and the same
instrument.
15. Applicable Law. This Exchange Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
16. Miscellaneous. All amounts referred to herein are
expressed in United States Dollars and all payments by the Exchange
Agent hereunder shall be made in such dollars. This Exchange
Agreement and the rights and obligations hereunder may not be
assigned by the Exchange Agent without Oak's prior written consent.
This Exchange Agreement shall be binding upon and inure to the
benefit of each party's respective successors, heirs and permitted
assigns. No other person shall acquire or have any rights under or
by virtue of this Exchange Agreement. This Exchange Agreement may
not be changed orally or modified, amended or supplemented without an
express written agreement executed by Oak and the Exchange Agent;
provided, however, that any modification, amendment or supplement to
this Exchange Agreement that affects the rights or obligations of the
Stockholder Representatives under this Exchange Agreement shall
require the express written agreement of the Stockholder
Representatives or such lesser number of Stockholder Representatives
as is permitted under Section 8 of this Exchange Agreement. This
Exchange Agreement is intended to be for the sole benefit of the
parties hereto, and their respective successors, heirs and permitted
assigns, and none of the provisions of this Exchange Agreement are
intended to be, nor shall they be construed to be, for the benefit of
any third person.
17. Concerning the Exchange Agent.
17.1 In the event that the Exchange Agent should at any
time be confronted with inconsistent claims or demands by the parties
hereto, the Exchange Agent shall have the right to interplead said
parties in any court of competent jurisdiction and request that such
court determine such respective rights of the parties with respect to
this Exchange Agreement and upon doing so, the Exchange Agent
automatically shall be released from any obligations or liability as
a consequence of any such claims or demands.
17.2 The Exchange Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either
directly or by or through its agents or attorneys. The Exchange
Agent shall not be responsible for, and shall not be under a duty to,
examine into or pass upon the validity, binding effect, execution or
sufficiency of this Exchange Agreement or of any agreement amendatory
or supplemental hereto.
17.3 The Exchange Agent may act upon any instrument or
other writing believed by it in good faith to be genuine and to have
been signed or presented by the proper person and shall not be liable
to any party hereto in connection with the performance of its duties
hereunder except for its own gross negligence, misconduct or bad
faith. The Exchange Agent's duties shall be determined only with
reference to this Exchange Agreement and applicable laws and the
Exchange Agent is not charged with knowledge of or any duties or
responsibilities in connection with any other document or agreement
except as otherwise provided in this Exchange Agreement, including,
without limitation, Section 2 hereof, or in the Escrow Agreement. If
in doubt as to its duties and responsibilities hereunder, the
Exchange Agent may consult with counsel if its choice and shall be
protected in any action taken or omitted in connection with the
advice or opinion of such counsel.
17.4 The Exchange Agent shall have the right at any time
to resign hereunder by giving written notice of its resignation to
the parties hereto at the addresses set forth herein or at such other
address as the parties shall provide, at least ten (10) business days
prior to the date specified for such resignation to take effect.
Upon the effective date of any such resignation, all cash and other
payments and all other property then held by the Exchange Agent
hereunder shall be delivered by it to such successor agent or as
otherwise shall be designated in writing by the parties hereto.
18. 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:
If to Oak: Oak Technology, Inc.
139 Kifer Court
Sunnyvale, CA 94086
Attn: Shawn M. Soderberg, General Counsel
Telecopier: (408) 774-5337
With a copy to: Tomlinson Zisko Morosoli & Maser LLP
200 Page Mill Road, Second Floor
Palo Alto, CA 94306
Attn: Timothy Tomlinson, Esq.
Telecopier: (650) 324-1808
If to the Stockholder c/o Xerographic Laser Images
Representatives: 101 Billerica Avenue
5 Billerica Avenue
North Billerica, MA 01862
Attn: Mr. Anthony D. D'Amelio
Telecopier: (978) 670-8835
With a copy to: Warner & Stackpole LLP
75 State Street
Boston, MA 02109
Attn: Michael A. Hickey, Esq.
Telecopier: (617) 951-9151
If to the Exchange Agent: State Street Bank and Trust Company
150 Royal Street
Mail Stop 45-02-71
Canton, MA 02021
Attn: Mr. Joe McDavitt
Telecopier: (617) 575-2500
Except as may be otherwise provided elsewhere in this Exchange
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 18 (Notices).
19. XLI Warrant Exercises. The Exchange Agent hereby acknowledges
and agrees that its duties with respect to the exercise of any XLI
Warrants after the Effective Date shall be governed by the terms of
Section 4 of the Escrow Agreement. Subject to the provisions set
forth in the Escrow Agreement, the Exchange Agent further agrees to
promptly distribute to any holder of an XLI Warrant who exercises
such XLI Warrant any Merger Cash or Contingent Cash funds received by
the Exchange Agent in connection with such XLI Warrant exercise.
IN WITNESS WHEREOF, the parties hereto have caused this Exchange
Agreement to be executed by their respective officers, hereunto duly
authorized, as of the day and year first above written.
OAK TECHNOLOGY, INC. STATE STREET BANK AND TRUST COMPANY
By:__________________________ By:________________________________
Its:_________________________ Its:_______________________________
STOCKHOLDER REPRESENTATIVES:
_____________________________ ___________________________
DANIEL J. ALLEN JOSEPH L. KATZ
____________________________ ___________________________
ADAM L. CARLEY VINCENT J. SPOTO
____________________________
ANTHONY D. D'AMELIO
PRESS RELEASE
Editorial Contacts:
Don Shulsinger
Pixel Magic
(978) 470-8830 x236
shulsinger @pixelmagic.com
James L. Salerno
Xerographic Laser Images
(978) 670-5999 x252
Pixel Magic and Xerographic Laser Images Corporation
Sign Plan of Reorganization and Agreement
Of Merger
BILLERICA, MA, January 29, 1998 - Xerographic Laser Images
Corporation ("XLI"), a developer of resolution enhanced
technology, and Pixel Magic, Inc. ("Pixel Magic"), a leading
provider of advanced image processing semiconductors which enable
digital office peripherals, have signed a Plan of Reorganization
and Agreement of Merger pursuant to which XLI will become a
wholly-owned subsidiary of Pixel Magic.
The aggregate amount of consideration to be paid to the holders
of common stock and its equivalents of XLI, ranges from a minimum
amount of $3,675,000 to be paid upon effectiveness of the
transaction, to a maximum amount of $15,000,000, to be paid
during the period commencing with the quarter ending March 31,
1999 and ending December 31, 2000. The payments are contingent
upon XLI achieving certain milestones for the three (3) year
period commencing January 1, 1998 and ending December 31, 2000.
Located in North Billerica, Massachusetts, XLI develops products
that produce enhanced resolution output from printers, digital
copiers, scanners, fax systems and multifunction peripherals.
Founded in 1991, Pixel Magic provides advanced image processing
chip technology to original equipment manufacturers and
technology partners in the digital office equipment market
worldwide. Located in Andover, Massachusetts, Pixel Magic is a
wholly-owned subsidiary of Oak Technology, Inc, a provider of
multimedia semiconductors and related software OEMs worldwide who
serve the optical storage, consumer electronics and digital
office equipment markets.
This acquisition is subject to approval of XLI's shareholders.
Pixel Magic is a trademark of Oak Technology, Inc. All other
product names or company names are mentioned for identification
purposes only, and may be trademarks of their respective owners.
###
