Document:

ex10-1.htm

    EXHIBIT
10.1

     

    
       

      SETTLEMENT
AGREEMENT

       

       

      THIS
SETTLEMENT AGREEMENT (this "Agreement"), dated as of August 8, 2008, is made by
and among ZiLOG, Inc., a Delaware corporation (the "Company"), and the other
persons and entities that are signatories hereto (collectively, the "Riley
Group," and each, individually, a "member" of the Riley Group) which presently
are or may be deemed to be members of a "group" with respect to the common stock
of the Company, $0.01 par value per share (the "Common Stock"), pursuant to Rule 13d-5 promulgated by the Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").  The Company and the Riley Group are
each sometimes referred to herein as a "Party."

       

       

      RECITALS

       

       

      WHEREAS,
the Riley Group is the beneficial owner of 1,408,907 shares of Common Stock and
in addition possesses shared voting and dispositive power over 24,148 shares of
Common Stock, over which beneficial ownership is disclaimed;

       

       

      WHEREAS,
on July 3, 2008, the Riley Investment Partners Master Fund L.P. delivered to the
Company a letter (the "Nomination Letter") regarding the nomination of directors
for election to the Company's board of directors (the "Board") at the 2008
annual meeting of stockholders of the Company (the "2008 Annual Meeting") and
proposals to amend the Company's bylaws and concurrently filed a Schedule 14A
with the SEC announcing its intent to solicit proxies for the election of its
own opposition slate of nominees (the "Proxy Solicitation") for election to the
Board at the 2008 Annual Meeting; and

       

       

      WHEREAS,
the Company and the members of the Riley Group have determined that the
interests of the Company and its stockholders would be best served at this time
by, among other things, avoiding the Proxy Solicitation and the expense and
disruption that may result therefrom.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      
        

         

        AGREEMENT

         

         

        NOW,
THEREFORE, in consideration of the foregoing premises and the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, hereby, agree as follows:

         

         

        1.           REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.  The Company hereby represents and
warrants to the Riley Group that:

         

         

        (a)           this
Agreement has been duly authorized, executed and delivered by the Company, and
is a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws generally affecting the rights of
creditors and subject to general equity principles;

         

         

        (b)           neither
the execution of this Agreement nor the consummation of any of the transactions
contemplated hereby nor the fulfillment of the terms hereof, in each case in
accordance with the terms hereof, will conflict with, or result in a breach or
violation of, or result in the imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its subsidiaries
pursuant to the terms of, any indenture, contract, lease, mortgage, deed of
trust, note agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which the Company or any of its subsidiaries is a
party or bound or to which its or their property is subject;

         

         

        (c)           the
execution and delivery by the Company of this Agreement and the performance by
the Company of its obligations hereunder do not and will not violate the
Certificate of Incorporation, Bylaws or any policy, procedure, charter or code
of the Company, each as amended to date; and

         

         

        (d)           the
execution and delivery by the Company of this Agreement and the performance by
the Company of its obligations hereunder do not and will not violate in any
material respect any law, rule, regulation or order of any court or other agency
of government that is applicable to the Company.

         

         

        2.           REPRESENTATIONS
AND WARRANTIES OF THE RILEY GROUP.  Each member of the Riley Group
represents and warrants to the Company that:

         

         

        (a)           this
Agreement has been duly authorized, executed and delivered by each member of the
Riley Group, and is a valid and binding obligation of each such member,
enforceable against each such member in accordance with its terms, except as
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws generally
affecting the rights of creditors and subject to general equity
principles;

         

         

        (b)           the
execution and delivery by each member of the Riley Group of this Agreement and
the performance by each such member of its obligations hereunder do not and will
not violate, any governing partnership agreement, membership agreement and/or
any other 

         

         

        
          
            
            

          

          
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        governing
instruments of such member, or any policy, procedure, charter or code of such
member, each as amended to date;

         

         

        (c)           the
execution and delivery by each member of the Riley Group of this Agreement and
the performance by each such member of its obligations hereunder do not and will
not violate in any material respect any law, rule, regulation or order of any
court or other agency of government that is applicable to such
member;

         

         

        (d)           Eric
Singer, (the "Riley Director") is "independent" as "independence" is defined by
the listing standards of The NASDAQ Stock Market LLC; and

         

         

        (e)           the
Riley Group is the beneficial owner of, in the aggregate, more than five percent
(5%) of the outstanding Common Stock, as of the date hereof, and such ownership
is set forth on Exhibit A hereto.

         

         

        3.           COVENANTS
OF THE COMPANY.

         

         

        (a)           Promptly
after execution of this Agreement, the authorized size of the Board shall be
increased to six (6) directors divided evenly into the three classes of
directors, and the Riley Director shall be elected to the Board as a Class III
director of the Company.

         

         

        (b)           Upon
his election, the Board shall appoint the Riley Director to the Compensation
Committee of the Board for the duration of his service on the Board; provided
the Riley Director is then qualified to serve on the Compensation Committee
under applicable legal requirements and listing standards.  If at such
time as the Riley Director is not so qualified, he may be removed from the
Compensation Committee by the Board.  Based solely upon information
provided by, and representations from, Mr. Singer, the Company believes that Mr.
Singer is currently qualified to serve on the Compensation Committee under
applicable legal requirements and listing standards.  The Company has
no reasonable basis to presently believe that Mr. Singer is not qualified to
serve on the Compensation Committee under applicable legal requirements and
listing standards.

         

         

        (c)           The
Company shall include the Riley Director in the Board's slate of nominees for
election as a Class III director of the Company at the 2008 Annual Meeting and
use its reasonable best efforts to cause the election of the Riley Director at
the 2008 Annual Meeting, including, without limitation, recommending that the
Company's stockholders vote in favor of the election of the Riley Director at
the 2008 Annual Meeting and voting the shares of Common Stock represented by all
proxies granted by stockholders in connection with the solicitation of proxies
by the Board in connection with the 2008 Annual Meeting in favor of the Riley
Director, except for such proxies that specifically indicate a vote to withhold
authority with respect to the Riley Director.  Neither the Board nor
the Company shall take any position, make any statements or take any action
inconsistent with such recommendation.  Based solely upon information
provided by, and representations from Mr. Singer (excluding Section 2(d)
hereof), the Company believes that Mr. Singer is currently "independent" as
defined by the listing standards of The NASDAQ Stock Market LLC.

         

         

        (d)           The
Riley Director, upon appointment and election to the Board, will serve as a full
member of the Board and be governed by the same protections and obligations

         

         

        
          
            
            

          

          
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        regarding
confidentiality, conflicts of interests, fiduciary duties, trading and
disclosure policies and other governance guidelines as are applicable to all
directors of the Company, and shall have the same rights and benefits as are
applicable to all independent directors of the Company, including (but not
limited to) insurance, indemnification, compensation and fees.

         

         

        (e)           In
the event the Riley Director shall resign prior to the expiration of the term
for which he is elected to serve on the Board, then the Riley Group shall have
the right to nominate for election by the Board a replacement solely to serve
the remainder of such Riley Director's term on the Board, provided that the
Riley Group beneficially owns at least 846,300 shares of Common Stock (as
adjusted for reverse stock splits, stock splits and stock
dividends).  The Riley Group hereby agrees that such nominee shall be
"independent" as "independence" is defined by the listing standards of The
NASDAQ Stock Market LLC and that such nominee shall not be Bryant
Riley.  In addition, such nominee shall provide all information
required of shareholder nominees as set forth in the Company's proxy statements
filed with the SEC and such further information as reasonably requested by
the Nominating and Corporate Governance Committee to determine the
qualifications and independence of such nominee.  The appointment of
such nominee shall be subject to the approval of the Board.  All
references in this Agreement to the Riley Director shall also be deemed to mean
such persons as may be appointed a member of the Board pursuant to this Section
3(e).

         

         

        4.           COVENANTS
OF THE RILEY GROUP.

         

         

        (a)           Subject
to the inclusion of Mr. Singer in the Board's slate of nominees for election as
a Class III director of the Company at the 2008 Annual Meeting, the Riley Group
agrees to vote in favor of the Board's slate of nominees for election as
directors of the Company at the 2008 and 2009 Annual Meetings; provided that the
Riley Group is not otherwise specifically instructed by their client(s) to vote
in another manner.

         

         

        (b)           Immediately
prior to the issuance of the press release contemplated in Section 7 hereof, the
Riley Group shall, subject to Section 20 hereof: (i) irrevocably withdraw the
Nomination Letter and shall take all action necessary or appropriate to
terminate the Proxy Solicitation and (ii) file a Schedule 13D/A notifying the
SEC of the termination of the Proxy Solicitation.  The Riley Group
shall make all other necessary filings with the SEC to accomplish such
withdrawal and termination and at its own expense.

         

         

        (c)           Within
5 business days of the Riley Group beneficially owning less than 846,300 shares
of Common Stock (as adjusted for reverse stock splits, stock splits and stock
dividends), the Riley Group shall cause the Riley Director to promptly tender
his resignation from the Board and any committee of the Board on which he then
sits.  In furtherance of this Section 4(c), the Riley Director, upon
his appointment to the Board, shall execute an irrevocable resignation as
director in the form attached hereto as Exhibit B.

         

         

        5.           STANDSTILL
PERIOD.

         

         

        (a)           Each
member of the Riley Group agrees that until the first day following the earlier
of (x) the date of the 2009 annual meeting of stockholders of the Company and
(y) October 10, 2009 (such period, the "Standstill Period"), without the prior
written consent of the 

         

         

        
          
            
            

          

          
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        Board
specifically expressed in a written resolution adopted by a majority vote of the
entire Board, neither it nor any of its Affiliates (as such term is defined
below) under its control or direction will, directly or indirectly, or in
conjunction with any other person or entity:

         

         

        (i)           effect
or seek to effect (including, without limitation, by entering into any
discussions, negotiations, agreements or understandings), offer or propose
(whether publicly or otherwise) to effect, or cause or participate in, or in way
knowingly assist or facilitate any other person to effect or seek, offer or
propose to effect any (x) tender offer or exchange offer, merger,
acquisition or other business combination involving the Company or any of its
subsidiaries; (y) any form of business combination or acquisition or other
transaction relating to a material amount of assets or securities of the Company
or any of its subsidiaries or (z) any form of restructuring, recapitalization or
similar transaction with respect to the Company or any of its
subsidiaries;

         

         

        (ii)           acquire,
offer or propose to acquire any voting securities (or beneficial ownership
thereof), or rights or options to acquire any voting securities (or beneficial
ownership thereof) of the Company if after any such case, immediately after the
taking of such action the Riley Group, together with its respective Affiliates,
would in the aggregate, beneficially own more than 13% of the then outstanding
Common Stock;

         

         

        (iii)           engage
in any solicitation of proxies or consents to vote any voting securities of the
Company in opposition to the recommendation of the Board with respect to any
matter, including the election of directors;

         

         

        (iv)           knowingly
seek to influence any person with respect to the voting of any securities of the
Company in opposition to the recommendation of the Board with respect to any
matter, including but not limited to the election of members of the Board,
unless requested to do so by the Company;

         

         

        (v)           otherwise
act, alone or in concert with others, to knowingly seek to control or influence
the Board or the management or policies of the Company;

         

         

        (vi)           otherwise
act, alone or in concert with others, to seek to control the Board or initiate
or take any action to obtain representation on the Board, or seek the removal of
any director from the Board, except as permitted expressly by this
Agreement;

         

         

        (vii)           take
any action to seek to amend any provision of the Company's Certificate of
Incorporation or Bylaws except as may be approved by the Board;

         

         

        (viii)          grant
any proxy rights with respect to the Common Stock to any person not designated
by the Company, except for Riley Investment Management LLC and only where it
shares voting power pursuant to arrangements that exist on the date of this
Agreement or agreements substantially similar to such existing
arrangements;

         

         

        (ix)           call
or seek to have called any meeting of the stockholders of the
Company;

         

         

        
          
            
            

          

          
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        (x)           propose
any matter for submission to a vote of the stockholders of the
Company;

         

         

        (xi)           execute
any written consents, waiver or demand with respect to the Common
Stock;

         

         

        (xii)           unless
required by law, make or issue or cause to be made or issued any public
disclosure, announcement or statement (including without limitation the filing
of any document with the SEC or any other governmental agency or any disclosure
to any journalist, member of the media or securities analyst) (x) in support of
any proxy solicitation other than a proxy solicitation by the Company, (y)
concerning any matter described in (i) through (x) above, or (z) negatively
commenting upon the Company, including the Company's management, the Board and
the Company's strategy, business, or corporate activities;

         

         

        (xiii)           enter
into any agreements with any third party with respect to any of the foregoing or
take any action which might force the Company to make a public announcement
regarding any of the foregoing, except, in each case, as contemplated by this
Agreement; or

         

         

        (xiv)           form,
join or in any way participate in a "group" (as defined in Section 13(d)(3) of
the Exchange Act) for or in connection with any of the foregoing
purposes.

         

         

        The
provisions of this Section 5 shall not limit in any respect: (1) the actions of
any Riley Director solely in his capacity as a director of the Company,
recognizing that such actions are subject to such Riley Director's fiduciary
duties to the Company and its stockholders; (2) non-public discussions between
the Riley Director and the Riley Group; (3) statements that may be made in
research reports of B. Riley & Co., LLC that address the Company's industry
in general or that are specific to the Company and related client
communications, so long as the Riley Director has not directed, prepared,
reviewed or otherwise participated in the preparation of such research report;
or (4) B. Riley & Co, LLC’s representation of Universal Electronics Inc. in
connection with a potential transaction with the Company, including discussions
with the Company with respect such transaction, so long as any such actions
taken with respect to the foregoing representation are
non-public.  The provisions of this Section 5 shall not limit in any
respect the ability of Mr. Riley to (i) instruct or advise the investment
clients over which he possesses sole or shared voting power solely to take the
action of voting against the recommendation of the Board to the stockholders or
(ii) subject to and without prejudice to Section 4(a) hereof, the ability of any
member of the Riley Group or any Affiliate thereof solely to vote as a
stockholder on any matter submitted by the Board or any stockholder other than a
member of the Riley Group or any Affiliate thereof at any meeting of the
Stockholders of the Company; provided, in each case, no member of the Riley
Group or any Affiliate thereof makes or issues or causes to be made or issued
any public disclosure, announcement or statement in connection with such
instruction, advice or vote.

         

         

        (b)           As
used in this Agreement, the term "Affiliate" shall have the respective meanings
set forth in Rule 12b-2 promulgated by the SEC under the Exchange Act; the terms
"beneficial owner" and "beneficial ownership" shall have the respective meanings
as set forth in Rule 13d-3 promulgated by the SEC under the Exchange Act; and
the terms "person" or 

         

         

        
          
            
            

          

          
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        "persons"
shall mean any individual, corporation (including not-for-profit), general or
limited partnership, limited liability company, joint venture, estate, trust,
association, organization or other entity of any kind or nature.

         

         

        6.           VOLUNTARY
AGREEMENT.  By signing below, the undersigned representatives of the
Parties agree and acknowledge they have read and understand the binding nature
of this Agreement, that it represents a final and binding settlement according
to its terms, and that they are entering into the Agreement voluntarily and with
full knowledge of its significance and legal effect.

         

         

        7.           PUBLIC
ANNOUNCEMENT.  The Riley Group and the Company shall announce this
Agreement and the material terms hereof within two (2) business days of the date
hereof by means of a press release in the form attached as Exhibit C
hereto.

         

         

        8.           DISCLOSURE.  The
Riley Group acknowledges that this Agreement shall be filed with the SEC within
four (4) business days of execution on a Current Report on Form
8-K.  The Company shall provide the Riley Group with a copy of such
Current Report in advance of such filing for review.  The Company
shall also provide the Riley Group with a copy of the proposed proxy statement
for the 2008 Annual Meeting in advance of the filing of the proxy statement with
the SEC.  Such proxy statement will also contain a description of this
Agreement.

         

         

        9.           SPECIFIC
PERFORMANCE.  Each member of the Riley Group, on the one hand, and the
Company, on the other hand, acknowledges and agrees that irreparable injury to
the other Party would occur in the event any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached and that such injury would not be adequately compensable in
damages.  It is accordingly agreed that the members of the Riley Group
or any of them, on the one hand, and the Company, on the other hand (the "Moving
Party"), shall each be entitled to specific enforcement of, and injunctive
relief to prevent any violation of, the terms hereof, and the other Party will
not take action, directly or indirectly, in opposition to the Moving Party
seeking such relief on the grounds that any other remedy or relief is available
at law or in equity.

         

         

        10.           JURISDICTION;
APPLICABLE LAW.  Each of the parties hereto:

         

         

        (a)           consents
to submit itself to the personal jurisdiction of federal or state courts of the
State of California in the event any dispute arises out of this Agreement or the
transactions contemplated by this Agreement,

         

         

        (b)           agrees
that it shall not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court,

         

         

        (c)           agrees
that it shall not bring any action relating to this Agreement or the
transactions contemplated by this Agreement in any court other than federal or
state courts of the State of California,

         

         

        (d)           agrees
to waive any bonding requirement under any applicable law, in the case the other
Party seeks to enforce the terms by way of equitable relief and

         

         

        
          
            
            

          

          
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        (e)           irrevocably
consents to service of process by first class certified mail, return receipt
requested, postage prepaid, to the address of such Party's principal place of
business or as otherwise provided by applicable law.  THIS AGREEMENT
SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND
EFFECT, BY THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS EXECUTED
AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE WITHOUT GIVING EFFECT TO THE CHOICE
OF LAW PRINCIPLES OF SUCH STATE.

         

         

        11.           NO
ADMISSION OF LIABILITY.  The parties to this Agreement agree that
nothing in this Agreement is intended or shall be construed as an admission of
liability.

         

         

        12.           NO
CONSTRUCTION AGAINST DRAFTER.  For purposes of any action arising out
of the application, interpretation, or alleged breach of this Agreement, each
Party waives any statutory or common law principle, and any judicial
interpretation of this Agreement, which would create a presumption against the
other Party as a result of its having drafted any provision of this
Agreement.  Counsel for the respective parties have reviewed and
revised this Agreement, and there shall not be applied any rule construing
ambiguities against the drafting party.

         

         

        13.           ADDITIONAL
DOCUMENTS.  Each Party agrees that it will execute and provide, at the
request of the other Party, any and all such other documents or other written
instruments as may be reasonably necessary to effectuate the purposes of the
Agreement.

         

         

        14.           THIRD
PARTY BENEFICIARIES.  Nothing contained in this Agreement shall create
any rights in, or be deemed to have been executed for the benefit of any person
or entity that is not a party hereto or a successor or permitted assignee of
such party.

         

         

        15.           ENTIRE
AGREEMENT; AMENDMENT AND WAIVER.  This Agreement contains the entire
understanding of the parties hereto with respect to its subject
matter.  There are no restrictions, agreements, promises,
representations, warranties, covenants or undertakings between the parties other
than those expressly set forth herein.  This Agreement may be amended
only by a written instrument duly executed by the parties hereto, or their
respective successors or assigns.  No failure on the part of any Party
to exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
such right, power or remedy by such Party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law.

         

         

        16.           SUCCESSORS
AND ASSIGNS.  The terms and conditions of this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the parties hereto
and their respective successors, heirs, executors, legal representatives, and
assigns; provided, however, that no Party may assign, delegate or otherwise
transfer any of its obligations under this Agreement without the prior written
consent of the other Party hereto.

         

         

        17.           NOTICES.  All
notices, consents, requests, instructions, approvals and other communications
provided for herein and all legal process in regard hereto shall be in writing
and delivered by overnight courier or facsimile or electronic mail and shall be
deemed duly given on 

         

         

        
          
            
            

          

          
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        the date
of delivery.  All notices hereunder shall be delivered as set forth
below, or pursuant to such other instructions as may be designated in writing by
the Party to receive such notice:

         

         

        (a)           If
to the Company:

         

        
          	 
      	
                  ZiLOG,
      Inc.

                  6800
      Santa Teresa Boulevard

                  San
      Jose, CA  95119

                  Attention:   Darin
      Billerbeck

                
	 
      	 
      
	 
      	
                  With
      a copy to (which shall not constitute notice):

                
	 
      	 
      
	 
      	
                  Skadden,
      Arps, Slate, Meagher & Flom LLP

                  525
      University Avenue

                  Suite
      1100

                  Palo
      Alto, CA  94301

                  Attention:   Thomas
      Ivey

                

        

         

        (b)           If
to the Riley Group:

         

        
          	 
      	
                  c/o
      Riley Investment Management LLC

                  11100
      Santa Monica Boulevard, Suite 810

                  Los
      Angeles, CA  90025

                  Attention:    Bryant
      R. Riley

                
	 
      	 
      

        

         

        18.           SEVERABILITY.  If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated and the parties shall use their best efforts to agree upon and
substitute a valid and enforceable term, provision, covenant or restriction for
any of such that is held invalid, void or unenforceable by a court of competent
jurisdiction.

         

         

        19.           COUNTERPARTS.  This
Agreement may be executed in two or more counterparts, which together shall
constitute a single agreement.

         

         

        20.           TERMINATION.  The
provisions of this Agreement may be terminated by the non-breaching Party in the
event of a material breach by the other Party of any of the terms of this
Agreement; provided, however, that the non-breaching Party shall first provide
written notice to the breaching Party of the facts and circumstances giving rise
to such breach, after which the breaching Party shall have five (5) business
days from receipt of such notice to fully cure such breach.  If the
Company's definitive proxy statement is not filed with the SEC on or prior to
August 31, 2008 with Mr. Singer as a nominee and the 2008 Annual Meeting is not
held by October 10, 2008, then this Agreement shall be terminated and the
Nomination Letter shall be deemed to have not been withdrawn.  Any
termination of this Agreement as provided herein will 

         

         

        
          
            
            

          

          
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        be
without prejudice to the rights of any Party arising out of the breach by the
other Party of any provision of this Agreement.  Sections 1, 2 and 8
through 20 shall survive any such termination.

         

        [REMAINDER
OF THIS PAGE LEFT BLANK INTENTIONALLY]

         

         

        
          
            
            

          

          
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        IN
WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly
authorized signatories of the parties as of the date hereof.

         

        
          	
                  ZILOG,
      INC.

                	
                  RILEY
      INVESTMENT PARTNERS MASTER FUND, L.P.

                
	 
      	 
      
	
                  
                    /s/
      Darin G. Billerbeck

                  

                	 
      
	
                  Darin
      G. Billerbeck

                  President
      and Chief Executive Officer

                	
                  By:

                	
                  Riley
      Investment Management LLC,

                  its
      General Partner

                
	 
      	 
      
	 
      	
                  
                    /s/
      Bryant R. Riley

                  

                
	 
      	
                  Bryant
      R. Riley, Managing Member

                
	 
      	 
      
	 
      	
                  RILEY
      INVESTMENT MANAGEMENT LLC

                
	 
      	 
      
	 
      	 
      
	 
      	
                  
                    /s/
      Bryant R. Riley

                  

                
	 
      	
                  Bryant
      R. Riley, Managing Member

                
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
                  B.
      RILEY & CO., LLC

                
	 
      	 
      
	 
      	 
      
	 
      	
                  
                    /s/
      Bryant R. Riley

                  

                
	 
      	
                  Bryant
      R. Riley, Chairman

                
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
                  BRYANT
      R. RILEY

                
	 
      	 
      
	 
      	 
      
	 
      	
                  
                    /s/
      Bryant R. Riley

                  

                
	 
      	
                  Bryant
      R. Riley

                
	 
      	 
      

        

        

        

        [SIGNATURE
PAGE TO SETTLEMENT AGREEMENT]

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        

        EXHIBIT
A

         

        BENEFICIAL
OWNERSHIP OF THE RILEY GROUP

         

        

        
          	 
      	
                  
                    Shares
      Beneficially Held

                  

                
	
                  Riley
      Investment Partners Master Fund, L.P.

                	
                  400,126

                
	
                  Riley
      Investment Management LLC

                	
                  1,324,607

                
	
                  B.
      Riley & Co., LLC

                	
                  84,300

                
	 
      	 
      
	
                  Bryant
      Riley

                	
                  1,408,907

                

        

        _____________________

        
          	
                  *

                	
                  Excludes
      24,148 shares held by an investment advisory account of Riley Investment
      Management LLC, with 

                  respect
      to which beneficial ownership is
disclaimed.

                

        

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        EXHIBIT B 

         

        

          [Form
of Irrevocable Resignation]

August 8,
2008

         

        
          Attention:
Chairman of the Board of Directors

        

        

        Reference
is made to the Agreement, dated as of August 8, 2008 (the “Agreement”), by and
among ZiLOG, Inc. (the “Company”) and the Riley Group (as defined
therein).  Capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Agreement.

        

        In
accordance with Section 4(c) of the Agreement, at the time the Riley Group fails
to beneficially own at least 846,300 shares of Common Stock (as adjusted for
reverse stock splits, stock splits and stock dividends), I hereby tender my
conditional resignation as a director of the Board, provided that this
resignation shall be effective upon the Board’s acceptance of this
resignation.  I hereby acknowledge that this conditional resignation
as a director of the Board is as a result of the terms and conditions of the
Agreement.

        
           

          This
resignation may not be withdrawn by me at any time during which it is
effective.  This letter shall terminate once the resignation has
become effective.

           

        

        

        
          	
                   
      

                	
                  Very
      truly yours,

                

        

         

         

        
          	 	 	 
	
                   
      

                	
                  Eric
      Singer 

                    Director

                  

                

        

        
        

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

         

        
          	
                   
      

                	
                  EXHIBIT
      C

                

        

        

        
          	
                  ZiLOG,
      Inc.

                	 
      
	 
      	 
      
	
                  Contacts:

                	
                  Investors:

                
	
                  Stewart
      Chalmers

                	
                  Kristine
      Mozes

                
	
                  Positio
      Public Relations

                	
                  Mozes
      Communications LLC

                
	
                  (408)
      454-6086

                	
                  (781)
      652-8875

                

        

        

        

         

        ZILOG  ANNOUNCES
AGREEMENT WITH

        RILEY
INVESTMENT MANAGEMENT LLC

         

         

        SANTA
CLARA, CA. - August 8, 2008 – ZiLOG, Inc. (NASDAQ: ZILG) today announced that it
has entered into a settlement agreement and release with the entities and
persons affiliated with Riley Investment Management LLC, resolving all proxy
matters and other issues relating to ZiLOG.  The agreement provides,
among other things, for the following:

         

        
          	
                   
      

                	
                  ·

                	
                  ZiLOG
      will promptly increase the total number of directors on its Board of
      Directors from five to six, divided evenly among its three
      Classes.

                

        

         

        
          	
                   
      

                	
                  ·

                	
                  ZiLOG's
      Board of Directors will promptly appoint Eric Singer to join the Board as
      a director in Class III and appoint him to its Compensation
      Committee.

                

        

         

        
          	
                   
      

                	
                  ·

                	
                  ZiLOG
      will include Mr. Singer in its proxy materials as a nominee for election
      to the Board of Directors as a director in Class III and use its
      reasonable best efforts to cause Mr. Singer's election to the Board at its
      2008 annual meeting, which  is expected to be held on October 6,
      2008.

                

        

         

        
          	
                   
      

                	
                  ·

                	
                  The
      Riley entities will vote their shares in favor of ZiLOG's slate of
      nominees for election to the Board of Directors at the company's 2008 and
      2009 annual meetings, and will not solicit proxies in connection with
      those meetings, including with respect to the proposed bylaw
      amendments.

                

        

         

        
          	
                   
      

                	
                  ·

                	
                  The
      Riley entities will abide by certain confidentiality and standstill
      obligations through the completion of ZiLOG's 2009 annual meeting,
      including an agreement not to acquire an aggregate beneficial ownership
      position of more than 13% of ZiLOG's outstanding common
      stock.  The Riley entities and their clients currently own
      approximately 1,433,055 shares of ZiLOG common stock, representing
      approximately 8.5 percent of ZiLOG's outstanding
  shares.

                

        

         

        "We are
pleased to have achieved this agreement with the Riley Group and believe that it
best serves the interests of ZiLOG and its shareholders," said Darin Billerbeck,
president and CEO of ZiLOG.  "Through this agreement, ZiLOG and RIM
will avoid a costly and disruptive proxy contest at a time when the company is
exploring a full range of strategic alternatives to enhance shareholder
value.  We look forward to working with Mr. Singer."

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

         

        ERIC
SINGER (Age 34)

         

        Mr.
Singer’s principal occupation or employment is Senior Investment Analyst at
Riley Investment Management LLC since July 2007.  Riley Investment
Management LLC is an investment adviser, which provides investment management
services and is the general partner of Riley Investment Partners Master Fund,
L.P.  Mr. Singer began his career at WisdomTree Capital Management in
New York from 1995 to 2000 and was affiliated with Singer Capital Management
from 2001 to 2003.  Most recently, from 2003 to June 2007 Mr. Singer
managed private portfolios for Alpine Resources LLC and its related
entities.  Mr. Singer is a 1995 graduate of Brandeis
University.

         

        "We look
forward to working with the ZiLOG Board to enhance shareholder value," said
Bryant Riley, Managing Member of Riley Investment Management LLC.

         

        About
Zilog, Inc.

        

        ZiLOG is
a global supplier of application specific, embedded system-on-chip (SoC)
solutions for secured transactions, consumer electronics and industrial
application and an industry leader in remote control and universal IR database
solutions.  From its roots as an award-winning architect in the
microprocessor and microcontroller industry, ZiLOG has evolved to become a
leader in production-ready and custom-built SoC solution sets.  ZiLOG
is headquartered in San Jose, California, and employs approximately 500 people
around the world, with sales offices in Asia, Europe, and North
America.  For more information about ZiLOG and its products, visit
http://www.zilog.com/.

        

        Cautionary
Statements

        

        This
release contains forward-looking statements relating to expectations, plans or
prospects for ZiLOG, Inc. that are based upon the current expectations and
beliefs of ZiLOG's management and are subject to certain risks and uncertainties
that could cause actual results to differ materially from those described in the
forward-looking statements.  These statements include those relating
to the ZiLOG's evaluation of a course of action that will increase value for
ZiLOG stockholders.  The risks related to any action to increase
shareholder value are detailed in the company's filings with the U.S. Securities
and Exchange Commission ("SEC").  ZiLOG does not expect to, and
disclaims any obligation to update such statements until release of its next
quarterly earnings announcement or in any other manner.  ZiLOG,
however, reserves the right to update such statement, or any portion thereof, at
any time for any reason.

        

        For a
detailed discussion of these and other cautionary statements, please refer to
the risk factors discussed in filings with the SEC, including but not limited
to, the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
2008, and any subsequently filed reports.  All documents also are
available through the SEC's Electronic Data Gathering Analysis and Retrieval
system (EDGAR) at http://www.sec.gov or from the Company's website at
www.zilog.com.Filed by Bowne Pure Compliance

Exhibit 10.1

August 6, 2008

Consolidated Communications Holdings, Inc.

      (on behalf of itself and the Borrowers party to the Credit Agreement referred to below)

121 South 17th Street

Mattoon, Illinois 61938

Attention: Steve Childers

Re: CREDIT AGREEMENT (as amended, amended and restated, supplemented or otherwise modified
from time to time, this “Agreement”) dated as of December 31, 2007, among
CONSOLIDATED COMMUNICATIONS HOLDINGS, INC., a Delaware corporation (“Holdings”),
CONSOLIDATED COMMUNICATIONS, INC., an Illinois corporation (the “CCI Borrower”),
CONSOLIDATED COMMUNICATIONS ACQUISITION TEXAS, INC., a Delaware corporation (the “TXU
Borrower”), NORTH PITTSBURGH SYSTEMS, INC. (formerly known as Fort Pitt Acquisition Sub
Inc.), a Pennsylvania corporation (the “Merger Sub” and, together with the CCI
Borrower and the TXU Borrower, the “Borrowers”), the financial institutions holding
Loans or Commitments hereunder from time to time (the “Lenders”), WACHOVIA BANK,
NATIONAL ASSOCIATION, as administrative agent (in such capacity, the “Administrative
Agent”) for the Lenders, CoBank, ACB, as Syndication Agent, General Electric Capital
Corporation, as Co-Documentation Agent, The Royal Bank of Scotland plc, as Co-Documentation
Agent and WACHOVIA CAPITAL MARKETS, LLC, as sole lead arranger and sole bookrunner.

Ladies and Gentlemen:

Holdings and the Borrowers have previously informed the Lenders that in connection with the
Scheduled Redemption (as defined in the consent letter by and among the parties hereto dated as of
March 31, 2008) of all of its outstanding Senior Notes, Holdings paid approximately $6.4 million in
cash redemption premiums (the “Redemption Premium”). Due to a change in accounting
treatment for such payments, the Redemption Premium would not be permitted as an add-back to
Consolidated EBITDA. Accordingly, Holdings and the Borrowers have requested the ability to add
back the Redemption Premium to Consolidated EBITDA for the applicable fiscal period.

Based upon the foregoing, the Lenders hereby agree that, to the extent deducted from
Consolidated Net Income, Holdings and the Borrowers shall be permitted to add back the actual
amount of the Redemption Premium (not to exceed $6.4 million) to Consolidated EBITDA for the
applicable fiscal period.

Except as expressly provided above in this letter, the Credit Agreement and the other Loan
Documents shall remain unmodified and in full force and effect.

[Signature Pages Follow]

 

 

 

This letter shall constitute a Loan Document under the Credit Agreement. Capitalized terms
used in this letter and not otherwise defined shall have the meaning assigned thereto in the Credit
Agreement.

	 	 	 	 	 
	 	 	WACHOVIA BANK, NATIONAL ASSOCIATION,

   as Administrative Agent, Issuing Bank, Swingline

   Lender and a Lender, at the request of the Lenders

   constituting Required Lenders under the

   Credit Agreement
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Russ Lyons
	 

	 	 	 	 
	 

	 	 	 	Name: Russ Lyons

Title: Director

[Signature Pages Continue]

 

 

 

	 	 	 	 	 
	AGREED TO AND ACKNOWLEDGED:
	 
	 	 	 	 
	CONSOLIDATED COMMUNICATIONS ACQUISITION TEXAS, INC.,

     as Co-Borrower
	 

	 	 	 	 
	By:

	 	/s/ David J. Doedtman	 	 
	 

	 	 	 	 
	Name:

	 	David J. Doedtman	 	 
	Title:

	 	Treasurer	 	 
	 
	 	 	 	 
	CONSOLIDATED COMMUNICATIONS INC.,

     as Co-Borrower
	 
	 	 	 	 
	By:

	 	/s/ David J. Doedtman	 	 
	 

	 	 	 	 
	Name:

	 	David J. Doedtman	 	 
	Title:

	 	Treasurer	 	 
	 
	 	 	 	 
	NORTH PITTSBURGH SYSTEMS, INC.

(formerly known as Fort Pitt Acquisition Sub Inc.),

     as Co-Borrower
	 
	 	 	 	 
	By:

	 	/s/ David J. Doedtman	 	 
	 

	 	 	 	 
	Name:

	 	David J. Doedtman	 	 
	Title:

	 	Treasurer	 	 
	 
	 	 	 	 
	CONSOLIDATED COMMUNICATIONS HOLDINGS, INC.
	 
	 	 	 	 
	By:

	 	/s/ David J. Doedtman	 	 
	 

	 	 	 	 
	Name:

	 	David J. Doedtman	 	 
	Title:

	 	Treasurer

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