Exhibit 10.6
SERVICES AGREEMENT
This SERVICES AGREEMENT (this "Agreement") is entered
into as of May 13, 2002, by and between ZiLOG, Inc., a Delaware corporation
("ZiLOG"), and ZiLOG-MOD III, Inc., a Delaware corporation ("MOD III
Subsidiary"). Capitalized terms used but not otherwis defined in this
Agreement shall have the meanings ascribed to them in MOD III Subsidiary's
Certificate of Incorporation, as in effect as of the date hereof (the "MOD
III Certificate").
WHEREAS, on April 30, 2002, the United States Bankruptcy
Court for the Northern District of California entered an order confirming
the joint plan of reorganization (the "Plan") filed by ZiLOG and MOD III
Subsidiary;
WHEREAS, as a condition to the effectiveness of the Plan
and immediately prior to the execution of this Agreement, ZiLOG and MOD III
Subsidiary executed a Contribution Agreement, pursuant to which ZiLOG
contributed all of its right, title and interest in and to all of the
Non-Operating Assets (as defined in the Contribution Agreement) to MOD III
Subsidiary; and
WHEREAS, also as a condition to the effectiveness of the
Plan, ZiLOG and MOD III Subsidiary are entering into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
covenants and agreements set forth herein, the parties hereto agree as
follows:
Section 1. Management Services. Effective as of the date
hereof, and on the terms and subject to the conditions set forth herein,
ZiLOG shall manage, without any servicing or management fee except as
otherwise set forth herein, the operations of MOD III Subsidiary, including
a Liquidation or lease of the Non-Operating Assets.
Section 2. Liquidation of Non-Operating Assets. Subject
to the provisions set forth in the MOD III Certificate, ZiLOG shall cause
MOD III Subsidiary to effect a Liquidation as and when ZiLOG's board of
directors and MOD III Subsidiary's board of directors deem appropriate.
Section 3. Lease of Non-Operating Assets.
(a) ZiLOG may lease the Non-Operating Assets
solely on a triple net lease basis unless the Informal Committee Designee
approves the lease on some other basis.
(b) Subject to subsection (a) above, ZiLOG may
lease the Non-Operating Assets in any way that does not interfere with or
compromise the intended sale of the Non-Operating Assets except in an
immaterial respect.
(c) In the event that the Non-Operating Assets
are leased pursuant to this Section 3, ZiLOG shall be entitled to a
management fee equal to 10% of the first $5,000,000 in proceeds, net of
amounts reimbursable under Section 4(b), from such lease and 15% of amounts
in excess of that. The remaining 90% of the first $5,000,000 in proceeds,
net of amounts reimbursable under Sections 4(a) and 4(b) below, from such
lease and 85% of amounts in excess of that shall be used (i) first, to pay
accrued but unpaid dividends on MOD III Subsidiary's Series A Preferred
Stock and (ii) second, to redeem MOD III Subsidiary's Series A Preferred
Stock at the Series A Liquidation Preference plus accrued and unpaid
dividends. ZiLOG shall cause these net lease proceeds to accumulate in an
interest bearing account of MOD III Subsidiary until, in each instance,
they total $1,000,000, and no such management fees shall be required to be
paid to ZiLOG pursuant to this Section 3 until that amount has been
reached.
Section 4. Costs and Expenses.
(a) In the event of a Liquidation pursuant to
Section 2, MOD III Subsidiary shall reimburse ZiLOG for: (i) the reasonable
costs of the Liquidation, including outside professional fees incurred in
connection with such Liquidation and reasonably necessary environmental
clean-up costs incurred as a result of the discontinuance of operations of
the Non-Operating Assets and such Liquidation; (ii) any United States
federal, state, local, and foreign income, franchise, sales, and other
taxes required to be paid by either of ZiLOG or MOD III Subsidiary
primarily as a result of the Liquidation; and (iii) any costs incurred
during any period, including the period from January 30, 2002 to the date
hereof, in which operations of the Non-Operating Assets are discontinued,
to maintain the facilities in a saleable condition. Any expenses that ZiLOG
incurs in connection with a Liquidation for which it is entitled to obtain
reimbursement shall be reimbursed by MOD III Subsidiary as funds are
received by MOD III Subsidiary from such Liquidation.
(b) In the event of a lease of the
Non-Operating Assets pursuant to Section 3, MOD III Subsidiary shall
reimburse ZiLOG for all reasonable costs and expenses incurred by ZiLOG in
connection with such lease. Any such costs and expenses shall be reimbursed
by MOD III Subsidiary solely out of lease proceeds as such proceeds are
received by MOD III Subsidiary.
(c) After the consummation of a Liquidation or
receipt of proceeds from a lease of the Non-Operating Assets, and prior to
any reimbursement, ZiLOG shall prepare an invoice that specifies its
reimbursable costs and expenses and provide such invoice to MOD III
Subsidiary.
(d) Any costs or expenses not expressly
reimbursable by MOD III Subsidiary pursuant to subsection (a) or (b) above
shall be borne by and the sole responsibility of ZiLOG.
Section 5. Term and Termination. The term of this
Agreement shall commence as of the date hereof and shall terminate upon the
sale of all or substantially all of the Non-Operating Assets, whether in
one or multiple transactions.
Section 6. Covenant. During the term of this Agreement,
ZiLOG covenants and agrees to provide funds and services to MOD III
Subsidiary that the ZiLOG Board of Directors determines are reasonably
necessary to maintain the Non-Operating Assets in a saleable condition and
MOD III Subsidiary agrees to reimburse ZiLOG pursuant to Section 4 above.
Section 7. Limitation on Liability. Neither ZiLOG nor any
of its directors, officers, employees or agents shall be under any
liability to MOD III Subsidiary except as expressly provided in this
Agreement, for any action taken or for refraining from the taking of any
action pursuant to this Agreement or for errors in judgment; provided,
however, that this provision shall not protect ZiLOG or any of its
directors, officers, employees or agents against any liability that would
otherwise be imposed by reason of willful misconduct, bad faith or gross
negligence in the performance of duties provided for hereunder.
Section 8. No Breach. No breach of this Agreement shall
be deemed to have occurred until the non-breaching party delivers written
notice of the breach to the other party and the breach has not been cured
within 30 days of receipt of such notice.
Section 9. Notices. All notices or other communications
required or desired to be given hereunder by any party shall be in writing
and shall be validly given or made 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:
(a) If to ZiLOG, at:
ZiLOG, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Facsimile: 000-000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Facsimile: 000-000-0000
(b) If to MOD III Subsidiary, at:
ZiLOG-MOD III, Inc.
c/o ZiLOG, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Facsimile: 000-000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Facsimile: 000-000-0000
Section 10. Assignment. Neither party shall assign or
transfer or permit the assignment or transfer of this Agreement without the
prior written consent of the other party.
Section 11. Successors and Assigns. This Agreement shall
be binding upon, inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns.
Section 12. Governing Law. This Agreement shall be
governed by, enforced under and construed in accordance with the laws of
the State of California, without giving effect to any choice or conflict of
law provision or rule thereof.
Section 13. Counterparts. This Agreement may be executed
in one or more counterparts each of which shall be deemed to be an original
and all of which together constitute a single document.
Section 14. Amendments. This Agreement may be changed,
modified or terminated only by an instrument in writing signed by each of
the parties hereto, and in a manner consistent with the MOD III
Certificate.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
ZiLOG, Inc.
By: /s/ Xxxxx Xxxxx
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Name: Xxxxx Xxxxx
Title: Vice President and Chief Financial
Officer
ZiLOG-MOD III, Inc.
By: /s/ Xxxxxx X. Xxxxxxxxxx
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Name: Xxxxxx X. Xxxxxxxxxx
Title: Secretary
