Oct. 10, 2002 – Sunnyvale, CA – Oak Technology Inc. has entered into an agreement to acquire TeraLogic Inc., Mountain View, CA, a developer of video/audio processing hardware and software for digital home entertainment platforms.

TeraLogic is a privately held fabless semiconductor company with expertise in advanced video/audio and display processing technology for digital TV, HDTV, and personal digital video recorders. Prior to the acquisition, strategic investors in TeraLogic included Sony, Samsung, and Mitsubishi.

Each company’s board of directors has unanimously approved the acquisition agreement. The acquisition will be accomplished through a merger pursuant to which TeraLogic’s stockholders will receive a cash payment of $38 million.

Following the merger, TeraLogic will become a subsidiary of Oak and as a result Oak will become responsible for TeraLogic’s debts and obligations including approximately $12 million of prior debt financings and employee obligations. In addition, Oak will reserve 2.2 million shares of the

company’s common stock for future issuance to the employees of TeraLogic pursuant to options granted to them upon closing the transaction.

Further terms of the agreement were not disclosed.

TeraLogic will comprise Oak’s new TeraLogic Group.

Oak anticipates completing the transaction in the company’s 2Q ending December 31. The company expects that the acquisition will become accretive in 2H03, and will thereby not delay the company’s forecasted return to profitability.