Exhibit 12 to
Debtors' Joint Reorganization Plan
TPG Tax Agreement
TAX AGREEMENT
This TAX AGREEMENT (this "Agreement") is entered into as
of January 28, 2002, by and between ZiLOG, Inc., a Delaware corporation
("ZiLOG"), and TPG Partners II, L.P., a Delaware limited partnership
("TPG"). Capitalized terms used but not otherwise defined in this Agreement
shall have the meanings ascribed to them in the Plan (as defined herein).
RECITALS:
A. ZiLOG and ZiLOG-MOD III, Inc., a Delaware corporation
and currently wholly-owned subsidiary of ZiLOG (together with ZiLOG, the
"Companies"), intend to effect a restructuring through filing a joint plan
of reorganization (the "Plan") with United States Bankruptcy Court for the
Northern District of California. A copy of the Plan is attached hereto as
Exhibit A.
B. As a condition for the effectiveness of the Plan, TPG
Partners II, L.P. and ZiLOG are entering into this Agreement.
NOW, THEREFORE, for valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree
as follows:
Section 1. Worthless Tax Deduction. TPG shall not, and
shall cause its Affiliates (as defined herein) not to, treat any shares of
capital stock of ZiLOG held by TPG or its Affiliates as becoming worthless,
for United States federal income tax or other purposes, during or for any
taxable year ending on or before December 31, 2001.
Section 2. Returns. TPG shall, and shall cause its
Affiliates, to file all Federal and state income tax returns (including
information returns, such as Form 1065), in compliance with Section 1
hereof.
Section 3. Sale and Transfer. TPG shall not, and shall
cause its Affiliates not to sell, transfer, or otherwise dispose of any
shares of capital stock of ZiLOG held by TPG or its Affiliates on or prior
to December 15, 2002.
Section 4. TPG Representations and Warranties. TPG
represents and warrants to ZiLOG as follows:
(a) the taxable year 2001 for TPG and its
Affiliates which own ZiLOG capital stock ended on December 31, 2001;
(b) the taxable year 2002 for TPG and its
Affiliates will end on December 31, 2002;
(c) none of TPG and its Affiliates has applied for
a change in the taxable year end that would cause their taxable year 2002
to end before December 31, 2002; and
(d) TPG and its Affiliates have (i) beneficially
owned and have continuously beneficially owned for the three year period
ending December 31, 2001, in the aggregate: (A) 242,343 shares of Series A
Cumulative Preferred Stock; (B) 9,693,620 shares of Class A Non-Voting
Common Stock; and (C) 26,172,770 shares of Common Stock and (ii) each have
not sold, transferred or otherwise disposed of any such shares for the
three-year period ending December 31, 2001, and continued to hold such
shares to and including the date hereof.
Section 5. ZiLOG Representation and Warranty. ZiLOG
represents and warrants that, as of December 31, 2001, the only shares of
capital stock issued and outstanding were: (a) 250,000 shares of Series A
Cumulative Preferred Stock; (b) 10,000,000 shares of Class A Non-Voting
Common Stock; and (c) 32,017,222 shares of Common Stock.
Section 6. Covenant. TPG covenants that none of TPG nor
any of its Affiliates which own ZiLOG capital stock will apply for a change
in the taxable year end that would cause their taxable year 2002 to end
before December 31, 2002.
Section 7. Termination of Agreement. TPG Partners II,
L.P. may terminate this Agreement by written notice to ZiLOG:
(a) any time after March 31, 2002, if a plan of
reorganization, which includes (w) the provisions (the "Provisions") of
paragraph 8 of the ZiLOG, Inc. Restructuring Term Sheet dated November 16,
2001, a copy of which is attached hereto as Exhibit B (the "Term Sheet"),
(x) an agreement by ZiLOG (of which agreement each TPG Related Party shall
be a stated third-party beneficiary) that neither of the Companies will
assert a claim for preference, fraudulent conveyance or the like against
Xxxxxx X. Xxxxxxxx, or his successors or assigns, to the extent that the
assertion of that claim gives rise to a claim by Xx. Xxxxxxxx, or his
successors or assigns, as the case may be, against any one or more of the
TPG Related Parties, (y) a provision that, if Xx. Xxxxxxxx, or his
successors or assigns, if appropriate, offers to execute a mutual release
of the type called for in the Provisions, such mutual release will include
each TPG Related Party as a third-party beneficiary, and (z) payments of
cash to shareholders of ZiLOG on substantially the terms outlined in the
Plan (together with an appropriate disclosure statement, a plan with such
terms in subsections (w) through (z) above, a "Conforming Plan"), is not
filed with the United States Bankruptcy Court on or before March 31, 2002,
provided that ZiLOG and the Informal Committee may agree in writing to
extend such deadline for an additional thirty days;
(b) any time after June 9, 2002, if the effective
date under a Conforming Plan has not occurred on or before June 9, 2002; or
(c) at any time after the filing of a plan of
reorganization with the United States Bankruptcy Court, if either ZiLOG or
more than 50% of the outstanding principal amount of Senior Notes fail to
support a Conforming Plan (by voting against, or withdrawing their
respective acceptance of, that plan).
Section 8. Definitions. For the purposes of this
Agreement:
1. "Affiliate" shall mean any corporation, general partnership, limited
partnership, limited liability partnership, trust, company (including,
without limitation any limited liability company or joint stock company) or
other organization that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with
TPG Partners II, L.P. For purposes hereof, control of any entity by any
party shall be deemed to exist only if that party owns more than 50% of the
voting securities or other interests of that entity or otherwise has the
power to elect or appoint more than 50% of the governing body of that
entity.
(a) "TPG Related Parties" shall have the meaning
set forth in the Mutual Release between ZiLOG, ZiLOG-MOD III, Inc. and TPG
Partners II, L.P. dated the date hereof.
Section 9. Notices. Any and all notices, demands or other
communications required or desired to be given hereunder by any party shall
be in writing and shall be validly given or made to another party if served
personally, sent via overnight courier (fare prepaid), sent via facsimile,
or if deposited in the United States mail, certified or registered, postage
prepaid, return receipt requested, and delivered to a party hereto as
follows (or to such other address as a party hereto shall identify to the
other in a like notice):
(a) If to ZiLOG, at:
ZiLOG, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
(b) If to TPG, at:
Texas Pacific Group
000 Xxxxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx
With a copy to:
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
1251 Avenue of the Americas
New York, New York 1020
Attention: Xxxxx Xxxxxx
Section 10. Entire Agreement. This Agreement contains the
entire understanding of the parties; there are no representations,
covenants or undertakings other than those expressly set forth in this
Agreement. Each party acknowledges that no other party or any agent or
attorney of any other party has made any promise, representation or
warranty whatsoever, express, implied or statutory, not contained in this
Agreement concerning its subject matter, to induce them to execute this
Agreement. The parties acknowledge that they have not executed this
Agreement in reliance upon any such promise, representation or warranty not
specifically contained in this Agreement.
Section 11. Binding On Successors. This Agreement and the
covenants and conditions contained in it shall apply to, be binding upon
and inure to the benefit of the respective heirs, administrators,
executors, legal representatives, assigns, successors and agents of each of
the parties.
Section 12. No Third Party Beneficiaries. This Agreement
is solely for the benefit of the parties, and has no third party
beneficiaries.
Section 13. Severability. The provisions of this
Agreement are severable; should any provision for any reason be held to be
unenforceable, the remaining provision shall nonetheless be of full force
and effect.
Section 14. Governing Law. This Agreement shall in all
respects be governed by and construed in accordance with the laws of the
State of California, without reference to its internal conflicts of law.
Section 15. Joint Preparation. This Agreement is to be
deemed to have been jointly prepared by the parties, and any uncertainty or
ambiguity in it shall not be interpreted against any of the parties, but
according to the application of the rules of interpretation of contracts.
Section 16. Attorneys' Fees. In the event that any party
hereto shall institute any action or proceeding to enforce any rights
granted hereunder, the prevailing party in such action or proceeding shall
be entitled, in addition to any other relief granted by the court or other
applicable judicial body, to such reasonable attorneys fees as may be
awarded.
Section 17. Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
ZiLOG, INC.
By: /s/
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Name:
Title:
ZILOG-MOD III, INC.
By: /s/
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Name:
Title:
TPG PARTNERS II, L.P.
By: TPG GENPAR II, L.P.
By: TPG ADVISORS II, INC.
By: /s/
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Name:
Title:
Signature Page For Tax Agreement
