ZILOG INC, PRER14A, 1997-03-25

ZILOG INC
PRER14A, 1997-03-25
SEMICONDUCTORS & RELATED DEVICES

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<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12

ZILOG, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

RICHARD R. PICKARD, SECRETARY
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:

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(4) Proposed maximum aggregate value of transaction:

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Set forth the amount on which the filing fee is calculated and state how
it was determined.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE> 2

ZILOG, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 21, 1997

The Annual Meeting of the Shareholders of Zilog, Inc. (the "Company") will
be held at 210 East Hacienda Avenue, Campbell, CA 95008 on Wednesday, May 21,
1997 at 3:00 p.m. local time for the following purposes:

1. To elect six directors to serve for the ensuing year as set forth in the
attached Proxy Statement.

2. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the 1997 fiscal year.

3. To authorize the Board of Directors and Officers of the Company to
change the state of incorporation of the Company from California to
Delaware.

4. To transact such other business as may properly come before the meeting
and any adjournment or postponement thereof.

The Board of Directors has fixed the close of business on March 25, 1997 as
the record date for determining the shareholders entitled to notice of and to
vote at the Annual Meeting and any adjournment thereof. A complete list of
shareholders entitled to notice of and to vote at the meeting will be available
at the Company's executive offices, 210 East Hacienda Avenue, Campbell, CA 95008
for ten days prior to the meeting.

TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN,
DATE AND RETURN THE ENCLOSED PROXY PROMPTLY.

Richard R. Pickard
Secretary

April 4, 1997
<PAGE> 3

ZILOG, INC.
210 EAST HACIENDA AVENUE
CAMPBELL, CA 95008

PROXY STATEMENT

This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Zilog, Inc., a California corporation (the "Company"),
of proxies in the accompanying form to be used at the Annual Meeting of
Shareholders to be held on May 21, 1997, and any adjournment or postponement
thereof. It is expected that this Proxy Statement and the accompanying Notice of
Annual Meeting of Shareholders and form of proxy will be mailed to shareholders
on or about April 4, 1997.

Proxies may be revoked at any time before they are voted by filing with the
Secretary of the Company a written notice of revocation or by duly executing a
proxy bearing a later date. A proxy may also be revoked by any shareholder
present at the Annual Meeting who expresses a desire to vote his or her shares
in person. Subject to any such revocation, all shares represented by properly
executed proxies will be voted in accordance with specifications on the enclosed
proxy. If no choice is so specified, the shares will be voted FOR the election
of the six nominees for director listed in this Proxy Statement, FOR the
ratification of the selection of Ernst & Young LLP as the Company's independent
auditors for the 1997 fiscal year, FOR the granting of authority to the Board of
Directors and Officers of the Company to change the state of incorporation of
the Company from California to Delaware, and at the proxy holders' discretion,
upon management's direction, on such other matters, if any, that may properly
come before the Annual Meeting (including any proposal to postpone or adjourn
the Annual Meeting).

Only holders of stock of record at the close of business on March 25, 1997
(the "Record Date") will be entitled to notice of and to vote at the Meeting. On
such date, the Company had 20,159,646 shares of Common Stock (the "Common
Stock") outstanding and entitled to vote. Each outstanding share of Common Stock
is entitled to one vote on all matters including the election of directors whose
names have been placed in nomination. With respect to the election of directors,
each shareholder, if he or she so chooses, may cumulate his or her votes equal
to the number of directors to be elected multiplied by the number of votes to
which shares are entitled or may distribute his or her votes on the same
principle among as many nominees as he or she chooses. No shareholder is
entitled to cumulate votes unless the candidates' names have been placed in
nomination before commencement of the voting and the shareholder has given
notice before commencement of the voting of the shareholder's intention to
cumulate votes. The proxy holders reserve the right to cumulate votes for the
election of directors and cast all of such votes for any one or more of the
nominees, to the exclusion of others and in such order of preference as the
proxy holders determine in their discretion. Voting on all other matters to be
considered at this Meeting is non-cumulative. The nominees with the highest
number of votes shall be elected to the Board of Directors. Approval of all
other matters requires an affirmative vote of the holders of a majority of the
voting power of the shares of Common Stock represented and voting at the Meeting
if a quorum is present. Shares held of record by brokers, banks or other
fiduciaries on behalf of their clients, in nominee name or otherwise, which are
not voted, will not be counted as shares that are represented and voting at the
meeting. Abstensions will have the same effect as negative votes, in that shares
which abstain will be regarded as shares that are represented and voting at the
meeting, but are not affirmatively voted in favor of a proposal.

A copy of the Company's 1996 Annual Report to Shareholders containing
financial statements for the fiscal year ended December 31, 1996 accompanies
this Proxy Statement.

A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996 MAY BE OBTAINED BY ANY SHAREHOLDER OF THE COMPANY, WITHOUT
CHARGE, BY WRITING TO INVESTOR RELATIONS, ATTENTION: JILL SULLIVAN, AT ZILOG,
INC., 210 EAST HACIENDA AVENUE, CAMPBELL, CA 95008.

The expense of printing and mailing proxy material will be borne by the
Company. The Company will reimburse brokers and nominees for their reasonable
out-of-pocket expenses in forwarding soliciting material to beneficial owners of
shares held of record by such brokers and nominees. In addition to the
solicitation of proxies by mail, solicitation may be made by certain directors,
officers and other employees of the Company by personal interview, telephone or
telegraph; no additional compensation will be paid for such solicitation.
<PAGE> 4

PROPOSAL NUMBER 1

ELECTION OF DIRECTORS

At present, the Company's Bylaws provide for five to seven directors. Six
directors are to be elected to serve until the next Annual Meeting of
Shareholders and until their respective successors are duly elected. All of the
nominees named below are presently directors of the Company.

In the event that any such nominee becomes unable or declines to serve for
any reason, proxies may be voted for the election of the balance of those
nominees named and for such other person or persons as the proxy holders or the
present Board of Directors (the "Board") may select, or the size of the Board
may be reduced in accordance with the Bylaws of the Company. The Board has no
reason to believe that any of the nominees named will be unable or unwilling to
serve.

INFORMATION WITH RESPECT TO NOMINEES AND DIRECTORS

Set forth below are the names and ages as of December 31, 1996 of the
nominees for director, their principal occupations at present and for the past
five years, certain directorships held by each and the year in which each became
a director of the Company.

<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION AT PRESENT AND DIRECTOR
FOR THE PAST FIVE YEARS; DIRECTORSHIPS SINCE AGE
- --------------------------------------------------------------------------- -------- ---
<S> <C> <C>
Edgar A. Sack, Ph.D........................................................ 1989 66
Dr. Sack, a founder of the Company, has served as President, Chief
Executive Officer and a director since its inception in June 1989. Dr.
Sack was elected Chairman of the Board of the Company in November 1990.
Previously, Dr. Sack was employed for over 15 years by General Instrument
Corporation, where he held the positions of Vice President of the
Integrated Circuits Division, Vice President and General Manager of the
Microelectronics Group and Senior Vice President. Dr. Sack was among the
first to identify the potential for large scale integrated circuits in
electronic systems and contributed to the early technology on
non-volatile memory devices. He is the originator of the Forward
Controllership(R) business management concept and is the author of a
private text on the subject. Dr. Sack holds B.S., M.S. and Ph.D. degrees
in electrical engineering from Carnegie Mellon University.
Thomas J. Connors.......................................................... 1989 67
Mr. Connors has been a director of the Company since June 1989. For over
16 years, Mr. Connors has been the principal of TJC Investments, an
independent consulting firm which works primarily with companies in the
semiconductor and semiconductor related industries. In addition, Mr.
Connors serves as a director of Level One Communications, Inc., SGS
Thomson Microelectronics, Inc., OpenVision Technologies, Inc., and
several privately held companies which are engaged in various aspects of
the semiconductor or software industries.

William H. Janeway......................................................... 1989 53
Mr. Janeway has served as a director of the Company since its formation
in June 1989. He has been a Managing Director of E.M. Warburg, Pincus &
Co., Inc. since July, 1988. Mr. Janeway serves as a director of Maxis,
Inc., OpenVision Technologies, Vanstar Corp., ECsoft, N.V., IMI Corp, and
several other privately-held high technology companies.

Henry Kressel, Ph.D........................................................ 1989 63
Dr. Kressel has served as a director of the Company since its inception
in June 1989. Since 1985, Dr. Kressel has been a Managing Director of
E.M. Warburg, Pincus & Co., Inc. Dr. Kressel spent 20 years at RCA
Laboratories, where he become a Staff Vice President. Dr. Kressel is a
director of Level One Communications, Inc., Maxis, Inc., Trescom, Inc.
and several other privately held companies.
</TABLE>

2
<PAGE> 5

<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION AT PRESENT AND DIRECTOR
FOR THE PAST FIVE YEARS; DIRECTORSHIPS SINCE AGE
- --------------------------------------------------------------------------- -------- ---
<S> <C> <C>
Larry W. Wangberg.......................................................... -- 54
Mr. Wangberg was elected to the Company's Board of Directors in April
1996. He joined StarSight Telecast, Inc. as president and chief operating
officer in February 1995 and is currently Chairman of their Board. Before
joining StarSight Telecast, Mr. Wangberg served for 11 years as president
and CEO of Times Mirror Cable Television, a provider of broadband based
network and cable services. He simultaneously served as senior vice
president of the parent The Times Mirror Company, a major information
provider in Los Angeles. Mr. Wangberg is a director and the past chairman
of the National Cable Television Association. Mr. Wangberg is also a
director of USCS International, Inc.
Robert M. White, Ph.D...................................................... 1995 58
Dr. White has been a director of the Company since November 1995. He has
been a Professor and Head of the Electrical and Computer Engineering
Department at Carnegie Mellon University since January 1993 and a
Professor of Engineering and Public Policy at the same institution since
1994. Prior to these positions, Dr. White was Undersecretary of Commerce
for Technology during the Bush Administration. From 1986 until 1989, he
was the Chief Technical Officer for Control Data Corporation and from
1971 until 1984 he was a principal scientist at Xerox PARC. Dr. White is
a director of Ontrack Data International and SGS-Thomson
Microelectronics.
</TABLE>

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES
NAMED.

BOARD OF DIRECTORS MEETINGS AND COMMITTEES

The Company's Board held 12 meetings during fiscal year 1996. Each director
attended at least 75% of the aggregate of the total number of meetings of the
Board of Directors and of all committees of the Board on which he served.

The Board of Directors has an Executive Compensation Committee, an Audit
Committee and a Stock Option Committee. There is no Nominating Committee.

The Executive Compensation Committee held two meetings in fiscal year 1996.
Its function is to determine or review and pass upon management's
recommendations with respect to executive compensation and incentive bonuses.
The members of the Executive Compensation Committee during fiscal year 1996 were
Mr. Connors, Dr. Kressel, Dr. Sack and Mr. Wangberg. Dr. Sack does not
participate in matters that pertain to his own compensation.

The Audit Committee held two meetings in fiscal year 1996. Its functions
are to monitor the effectiveness of the audit effort, to supervise the Company's
financial and accounting organization and financial reporting and to select a
firm of independent public accountants whose duty it is to audit the financial
statements of the Company. The members of the Audit Committee were Mr. Connors,
Mr. Wangberg and Dr. White.

The Stock Option Committee met 12 times in the fiscal year 1996. Its
functions are to supervise and manage the Company's Employee Stock Purchase
Plan, the 1989 Stock Option Plan, the 1990 Stock Option Plan and the 1994
Long-Term Stock Incentive Plan. The members of the Stock Option Committee during
fiscal year 1996 were Dr. Kressel and Mr. Janeway.

3
<PAGE> 6

COMPENSATION OF DIRECTORS

During 1996, Mr. Connors, Mr. Wangberg and Dr. White were each compensated
at the rate of $2,000.00 for each full day spent performing business for the
Board of Directors or for any committee of the Board of Directors and were
reimbursed for travel expenses. Such compensation was not paid pursuant to
consulting contracts. The Company's other directors currently do not receive any
compensation for service on the Board of Directors. There are no family
relationships between any directors or executive officers of the Company.

The 1994 Long-Term Stock Incentive Plan, which shareholders approved and
adopted at the 1994 Annual Meeting, provides for the annual grant of an option
of 3,000 shares of the Company's Common Stock to certain directors who are not
employees following their election at the Annual Meeting and at each annual
meeting thereafter while they serve on the Board of Directors. The grant price
shall be the fair market value of the shares on the date of each respective
grant. This provision of the 1994 Long-Term Stock Incentive Plan will be enacted
when the Board of Directors determines it to be effective. Currently, no
directors receive grants under this provision of the 1994 Long-Term Stock
Incentive Plan.

INFORMATION ABOUT CERTAIN OF THE COMPANY'S
EXECUTIVE OFFICERS

Certain executive officers of the Company and their respective ages as of
December 31, 1996 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- -------------------- --- ---------------------------------------------
<S> <C> <C>
Edgar A. Sack 66 President and Chief Executive Officer
Michael J. Bradshaw 47 Senior Vice President, Operations
Richard L. Moore 62 Senior Vice President, Technology
Robert E. Collins 50 Vice President and Chief Financial Officer
Richard R. Pickard 43 Vice President, General Counsel and Secretary
Sally M. Baumwell 52 Vice President, Human Resources and
Administration
J. James Magill 50 Vice President and General Manager, Data
Communications Division
Alan Secor 63 Vice President and General Manager, Consumer
Products Division
</TABLE>

For Dr. Sack's biographical information, see "Election of
Directors -- Information with Respect to Nominees and Directors."

Mr. Bradshaw, a founder of the Company, became Senior Vice President,
Operations in March 1992. Previously he served as Vice President, Operations
since the Company's inception in June 1989 and served as the head of the
Operations Group of the Company's predecessor since March 1985. Before joining
the Company, Mr. Bradshaw was employed by Texas Instruments and Mostek
Corporation, where he served as Director of Worldwide Planning. Immediately
prior to his employment by the Company's predecessor, he was the Vice President,
Operations Planning and Control of General Instrument Microelectronics. He holds
a B.S. degree in Engineering Mathematics, with concentration in electrical
engineering, from the Missouri School of Mines, and Masters degrees in business
administration and science administration from the University of Houston.

Mr. Moore became Senior Vice President, Technology in June 1996. From May
1995 to May 1996, he served as Vice President, Technology. Prior to joining
Zilog, Mr. Moore served as President and Chief Executive Officer of Cromemco,
Inc., a client/server computer manufacturer from October 1988 to May 1995. Mr.
Moore has worked in various other managerial and executive capacities in the
computer and semiconductor industries for the past 35 years. Mr. Moore received
a B.S. in Electrical Engineering from the University of Texas (El Paso) and an
M.B.A. from Saint Mary's College (Moraga, California).

4
<PAGE> 7

Mr. Collins joined Zilog in January 1996 as Vice President and Corporate
Controller. He was promoted to Chief Financial Officer in June 1996. Previously,
he was employed as Senior Vice President and Chief Financial Officer of Chem
Trak, Inc. in Sunnyvale, CA. Prior to that, Mr. Collins spent 14 years with
Syntex Corporation of Palo Alto, CA, where he held a number of senior financial
positions, including Vice President and Treasurer. Mr. Collins holds a B.S. in
Business Administration from Adelphi University, New York and an MBA in Finance
from California State University at Hayward.

Mr. Pickard became Vice President, General Counsel and Secretary in March
1992. From June 1989 to March 1992, he served as General Counsel and Secretary.
Mr. Pickard was General Counsel and Secretary of the predecessor company from
1987 through June 1989. Before joining the Company, he was corporate counsel at
NEC Electronics, Inc. and in private practice. Mr. Pickard holds a B.A. in
American Civilization from Williams College and a J.D. from the College of
William and Mary.

Ms. Baumwell became Vice President, Human Resources and Administration in
June 1996. From March 1992 to June 1996, she served as Vice President and from
June 1989 to March 1992 served as Director of Human Resources. Ms. Baumwell held
various positions in the Human Resources Department of the predecessor company
from 1978 through June 1989. Ms. Baumwell holds a B.A. in Sociology from U.C.
Davis.

Mr. Magill joined Zilog in February 1987 as Product Marketing Manager.
Since August 1993 he has been Vice President and General Manager of the
Company's Data Communications Division. Prior to joining Zilog, Mr. Magill was
employed by Signetics, Inc. where he held several management positions in
Operations and marketing. Mr. Magill holds a BSc. in Electrical Engineering from
Queen's University in Belfast and an MSc. in Operations from City University in
London. He is also a Member of the Institute of Electrical Engineers and a
Chartered Engineer in the United Kingdom.

Mr. Secor became Vice President and General Manager of the Consumer
Products Division in March 1995. From April 1992 to March 1995, he served as
Vice President, Consumer Business Unit and from September 1991 to April 1992 as
Director, Consumer Business Unit. Prior to joining Zilog, Mr. Secor was a
consultant and operated his own company, Avant Technology, Inc. a technical
consulting business, from April 1982 to September 1991. From January 1979 to
April 1982, Mr. Secor served as Vice President of Engineering and Operations at
Mattel Electronics, Inc. Mr. Secor received a B.S. and an M.S. in Electrical
Engineering from Iowa State University and is a Registered Professional Quality
Engineer in the State of California.

Officers serve at the discretion of the Board of Directors. There are no
family relationships among any directors or executive officers of the Company.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS

The Company has entered into employment agreements with each of the five
executive officers named in the Summary Compensation Table which terminate on
February 28, 1998 for Dr. Sack, and on November 5, 1998 for Messrs. Bradshaw,
Magill, Moore and Secor. Each of the agreements provides for payment of a base
salary and specified benefits. Each base salary and certain plan benefits are
set forth in the compensation tables. The agreements also respectively provide
that if the Company terminates a person's employment without cause, or such
person voluntarily resigns for reasons specified in the agreement (including
various changes in his duties with the Company, a reduction in his base salary
or benefits, a change in his principal work location or a material uncured
breach of the agreement by the Company), such person is entitled to continue to
receive base salary and certain other benefits to which he would have otherwise
been entitled from the date of such termination or resignation through the
expiration date of the agreement.

5
<PAGE> 8

PRINCIPAL SHAREHOLDERS

The following table sets forth, as of March 25, 1997, the number of shares
of Common Stock beneficially owned by the directors and nominees named above,
each of the executive officers named in the Summary Compensation Table ("Named
Executive Officers"), all directors and executive officers of the Company as a
group, and each person known to the Company to own beneficially more than five
percent of the Common Stock. Except as otherwise indicated and subject to
community property laws where applicable, each person has sole investment and
voting power with respect to the shares shown. Ownership information is based
upon information furnished by the respective individuals and entities.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF
COMMON STOCK
----------------------
NUMBER PERCENT
NAME OF BENEFICIAL OWNER OF SHARES OF CLASS
- ------------------------------------------------------------------------ --------- --------
<S> <C> <C>
Warburg, Pincus Capital Company, L.P., and related affiliates(1)(2)..... 5,477,504 27.3
466 Lexington Avenue
New York, New York 10017
FMR Corporation......................................................... 1,984,900 9.89
82 Devonshire Street
Boston, MA 02109-3614
Trimark Financial Corporation........................................... 1,575,700 7.9
One First Canadian Place, Suite 5600
PO Box 487, Toronto, ON, M5X 1E5
Robert Fleming Inc. .................................................... 1,251,050 6.4
320 Park Avenue, 11th Floor
New York, New York 10022
Wilke/Thompson Capital Management, Inc. ................................ 1,028,170 5.12
3800 Norwest Center, 90 S. 7th Street
Minneapolis, MN 55402
Edgar A. Sack(3)........................................................ 805,686 4.0
Thomas J. Connors(4).................................................... 48,000 *
William H. Janeway(5)................................................... 5,487,704 27.3
Henry Kressel(5)........................................................ 5,480,504 27.3
Michael J. Bradshaw(6).................................................. 243,468 1.2
J. James Magill(7)...................................................... 69,101 *
Alan Secor(8)........................................................... 79,509 *
Richard L. Moore........................................................ 0 *
Larry W. Wangberg....................................................... 5,000 *
Robert M. White......................................................... 5,000 *
All executive officers and directors as a group (15 persons)(2)(9)...... 1,500,409 7.4
</TABLE>

- ---------------
* Less than 1%.

<TABLE>
<C> <S> <C> <C>
(1) Warburg, Pincus Capital Company, L.P. .............................. 5,378,004
Warburg, Pincus & Co................................................ 99,500
---------
5,477,504
=========
</TABLE>

(2) The sole general partner of Warburg, Pincus Capital Company, L.P. ("WPCC")
is Warburg, Pincus & Co., LLC, a New York general partnership ("WP"), E.M.
Warburg, Pincus & Co., LLC, a New York limited liability company ("EMW
LLC"), manages WPCC. The members of EMW LLC are substantially the same as
the partners of WP. Lionel L. Pincus is the managing partner of WP and the
managing member of EMW LLC and may be deemed to control both WP and EMW LLC.
WP, as the sole general partner of WPCC, has a 20% interest in the profits
of WPCC. William H. Janeway and Henry Kressel, directors of the Company, are
Managing Directors and members of EMW LLC and general partners of WP. As
such, Mr. Janeway and Dr. Kressel may be deemed to have an indirect
pecuniary interest (within the meaning of Rule 16a-1 under the Securities
Exchange Act of 1934) in an indeterminate portion of the shares beneficially
owned by WPCC and WP.

(Footnotes continued on following page.)

6
<PAGE> 9

EXECUTIVE COMPENSATION

COMPENSATION COMMITTEE REPORT

The Executive Compensation Committee is composed of four members of the
Board of Directors. Three Executive Compensation Committee Members are
non-employee directors -- Henry Kressel and Thomas J. Connors and Larry W.
Wangberg. The Executive Compensation Committee Chairman is the President and CEO
of the Company, Edgar A. Sack. Dr. Sack does not participate in the
deliberations over his own compensation.

The Executive Compensation Committee's compensation policies set the
standard for all levels within the Company and are designed to provide
competitive levels of compensation that integrate pay with the Company's annual
and long-term performance goals, reward above-average corporate performance,
recognize individual initiative and achievements and assist the Company in
attracting and retaining qualified employees.

The Company has a number of types of compensation, including base salary,
performance awards, stock option plans, a Tax-Deferred 401(k) Investment Plan
and a Deferred Compensation Plan. Employees may be eligible for these programs
depending on their position within the Company.

Base Salary

The base salary of executives is determined similarly to all other exempt
employees in the Company. Base salary is determined following evaluation of
competitive data obtained through industry surveys, and individual performance
within Company guidelines. These industry surveys are available through
consulting companies and are not specifically prepared for the Company. The
Company subscribes to such services and does not make any determination as to
the inclusion or exclusion of data from such surveys. The industry surveys
evaluated by the Company in determining base salaries may have some overlap
with, but do not specifically address the same set of companies included in the
S&P High Technology Composite Index, whose performance is cumulated in the Stock
Price Performance Graph on page 14 of the Proxy Statement. The base salaries
paid by the Company are generally targeted to be above the 50th percentile of
the base salaries paid by the companies surveyed. For both base salary increases
and bonus analysis of individual performance, the Company utilizes a system of
"management by objectives" (MBOs) whereby at the beginning of each evaluation
period the employee and his supervisor agree upon a set of objectives to be
accomplished during that period. These are documented and serve as a basis for
examining the employee's performance. Other individual performance criteria
examined by the Executive Compensation Committee include but are not limited to
compliance with Company policy, effectiveness in performing regular job
description duties, initiative, honesty, accuracy, safety, constructive attitude
and actions, courtesy, respect, teamwork, and the creation of value for the
Company and its shareholders. Each Executive Officer's performance is rated, and
this rating serves as a basis for proposed base salary increases.

Performance Awards

Performance Awards are provided to eligible employees under Employee
Performance Incentive Plans ("EPIP Plans"). All United States regular full-time
employees and certain international employees are eligible to participate in the
EPIP Plans. Awards under the EPIP Plans are based on the Company's overall
performance and on specified overall financial objectives for the period for
which the award is to be made, and are allocated among eligible employees based
upon a number of factors relating to classification or grade level,

- --------------------------------------------------------------------------------

(Footnotes continued from previous page.)

(3) Includes 393,125 shares subject to options exercisable within 60 days of
March 25, 1997.
(4) Includes 48,000 shares subject to options exercisable within 60 days of
March 25, 1997.
(5) Of the 5,487,704 shares indicated above, 10,200 are owned directly by Mr.
Janeway. Of the 5,480,504 shares indicated above, 3,000 are owned directly
by Dr. Kressel. The remaining 5,477,504 shares are owned directly by WPCC
and WP and are included because of Mr. Janeway and Dr. Kressel's affiliation
with WPCC. Mr. Janeway and Dr. Kressel disclaim "beneficial ownership" of
these shares within the meaning of Rule 13d-3 under the Securities Exchange
Act of 1934.
(6) Includes 121,488 shares subject to options exercisable within 60 days of
March 25, 1997.
(7) Includes 68,250 shares subject to options exercisable within 60 days of
March 25, 1997.
(8) Includes 75,825 shares subject to options exercisable within 60 days of
March 25, 1997.
(9) Includes 882,322 shares subject to options exercisable within 60 days of
March 25, 1997, excludes 5,477,504 shares owned by WPCC as to which Mr.
Janeway and Dr. Kressel disclaim beneficial ownership.

7
<PAGE> 10

base salary on January 1 of the EPIP Plan year, individual performance, and
Company performance. The individual performance component of EPIP is measured on
similar criteria as individual performance in base salary increase
determinations. Company performance is generally measured by comparison against
the Company's plan, which plan is agreed upon by the executive officers with the
Board of Directors before the start of the fiscal year. Company performance can
emphasize different criteria from year to year depending upon the Company's
goals. In 1996, Company performance was measured 50% by revenue performance
against plan and 50% by pre-tax profit against plan. The same Company
performance criteria are in use in the 1997 EPIP Plan. The available pool for
awards under the 1996 EPIP Plan did not exceed 7.5% of pre-tax profit. The
available pool for awards to be made under the 1997 EPIP Plan will not exceed
7.5% of 1997 pre-tax profit. Award distributions are made in the first quarter
of the year following the EPIP Plan year.

Employees in certain senior classification or grade levels within the
Company also qualify for an EPIP Executive Bonus Plan in which an additional
80%-100% of the EPIP Award is deferred to be paid in two equal annual
installments of 40%-50% of the EPIP Award each commencing in the second year
following the year for which the EPIP Award was granted.

In January 1997, the Executive Compensation Committee awarded a bonus to
the CEO in the aggregate amount of $455,400 for the 1996 EPIP Plan year under
the 1996 EPIP Plan and the 1996 EPIP Executive Bonus Plan. Of this amount,
$253,000 was paid in cash in 1997. The remainder will be paid one half in 1998
and one half in 1999 if the CEO remains employed by the Company. An additional
$35,976 was earned as a dividend on prior EPIP Awards. Dr. Sack's bonus amount
is reflective of the Company's financial performance, his overall management of
the Company, and performance of his other regular duties as President, Chief
Executive Officer and Chairman of the Board.

The Company's Executive Officers received EPIP Awards in January 1997 in
the aggregate amount of $750,600. Fifty-six percent of the EPIP Plan and EPIP
Executive Bonus Plan Awards were paid in 1997, with the remainder to be paid one
half in 1998 and one half in 1999 if each such officer remains employed by the
Company.

Under the 1996 EPIP Plan and the 1996 EPIP Executive Bonus Plan, a total of
$2,642,650 was awarded to employees other than the Executive Officers. The
Executive Compensation Committee and the Board of Directors believe strongly
that bonuses should be available to exempt employees to reward performance based
on similar criteria to that used to reward performance of the Executive
Officers.

Stock Option Plans

Under the 1990 Employee Common Share Option Plan ("1990 Option Plan"),
which governed options granted from 1990-1993, stock options were granted to
eligible employees including the CEO and the Executive Officers primarily on the
basis of their ability to enhance the performance of the Company, to be
competitive with other companies and to encourage these employees to remain
loyal to the Company. Options vest 25% per year over a four-year period. They
were typically awarded at their fair market value. They must be exercised within
ten (10) years from the date of grant.

Under the 1994 Long-Term Stock Incentive Plan ("1994 LTIP"), the Company is
permitted to issue awards in the form of restricted shares, stock units, options
or SAR's or any combination thereof to eligible employees, directors,
consultants and advisors, including but not limited to the Executive Officers
for the same reasons as the 1990 Option Plan. As of March 25, 1997,
approximately 1,500 employees and six directors were eligible to participate in
the 1994 LTIP. As of March 25, 1997, the Company has made no grants to
consultants or advisors. The 1994 LTIP replaces the 1990 Option Plan on a
prospective basis and provides certain tax advantages to awardees that are not
available under the 1990 Option Plan. Since each award under the 1994 LTIP
increases if the price of the Company's stock increases, the Executive
Compensation Committee believes that the 1994 LTIP provides strong incentive to
achieve excellent results and that all shareholders should therefore benefit
from the program.

For the year ending December 31, 1996, options for a total of 836,050
shares at exercise prices ranging from $17.125 to $38.00 were granted to
employees other than the Executive Officers and Directors. In addition,
2,096,677 shares were granted as a result of the repricing and reissue of shares
upon cancellation of the corresponding original option grants. The Executive
Compensation Committee believes that the use of stock options at appropriate
levels throughout the Company can effectively reward employees for long-term
individual and Company performance improvements.

8
<PAGE> 11

Option Repricing

In November 1996, the Board of Directors agreed that additional incentives
were needed since many of the Company's key employees held stock options with
grants priced significantly higher than the fair market value of the stock. The
Company therefore implemented a program whereby employees could exchange higher
priced 1994 LTIP option shares for the same number of lower priced option
shares. The new shares were issued on November 6, 1996 at the then fair market
value of $20.00 per share. The repriced shares have a one year freeze on
exercise, and may not be exercised prior to November 5, 1997. Employees must
remain active on the Company's payroll to exercise their new shares. All
employee option holders other than Dr. Sack were eligible to participate in this
program. Data for executive officers who elected to reprice shares is shown in
the table entitled, "Ten Year Option Repricing" on pages 12 and 13.

Deferred Compensation

Under the Company's Tax-Deferred 401(k) Investment Plan (the "401(k)
Plan"), each eligible employee may participate by making a salary deferral
contribution in certain fixed amounts of between 1% and 15% of the employee's
compensation, subject to specified statutory limitations. The Company may make
matching contributions on behalf of each participating employee in an amount
equal to 100% of the participant's deferral contribution, up to 1.5% of the
participant's total cash compensation on an annual basis. The Company may also
make additional discretionary contributions to the 401(k) Plan up to a limit set
by federal tax law. The discretionary contribution is awarded to all employees
who participate in the 401(k) Plan including the Executive Officers. The
performance of the Company determines the amount of the additional discretionary
contributions to the 401(k) Plan. The Executive Compensation Committee believes
that all employees are thereby encouraged to improve the Company's performance.

The Company's Deferred Compensation Plan which went into effect January 1,
1994, allows certain executives to defer receipt of base and bonus compensation
to which the executives would otherwise be entitled. It also supplements the
benefits provided under the 401(k) Plan by contributing a percentage of
compensation equal to the 401(k) Company contribution, for compensation above
the 401(k) statutory limitations, to equal the amount that would have been
contributed by the Company to the 401(k) Plan had Internal Revenue Code ("Code")
Section 401(a)(17) not been amended by the Omnibus Reconciliation Act of 1993.

Other

In 1993, the Code was amended to add Section 162(m). Section 162(m) places
a limit of $1,000,000 on the amount of compensation excluding performance based
compensation that may be deducted by the Company in any year with respect to
certain of the Company's highest paid executives. The Company intends generally
to qualify compensation paid to executive officers for deductibility under the
Code, including new Section 162(m). Accordingly, in 1994 the shareholders
approved the 1994 LTIP to maximize the tax deductibility of awards under such
plan. However, the Company may from time to time in the future pay compensation
to its executive officers that may not be deductible.

The Executive Compensation Committee believes that the foregoing programs
provide competitive levels of compensation, encourage long term performance, and
promote management retention while further aligning shareholders' and
management's interests in the performance of the Company and the Company's
Common Stock.

<TABLE>
<S> <C>
Edgar A. Sack, Henry Kressel, Member
Chairman, Executive Thomas J. Connors, Member
Compensation Committee Larry W. Wangberg, Member
</TABLE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS

The Board of Directors' Executive Compensation Committee consists of Drs.
Kressel and Sack, Mr. Connors and Mr. Wangberg. There are no Compensation
Committee Interlocks as that term is defined under Item 402(j) of Regulation S-K
as promulgated under the Securities Exchange Act of 1934, as amended, among the
committee members. Dr. Sack is an executive officer of the Company serving as
President and Chief Executive Officer. Dr Sack does not participate in the
deliberations concerning his own compensation.

9
<PAGE> 12

The following table sets forth the annual compensation, long-term
compensation and other compensation paid to each of the Company's Named
Executive Officers during the years ended December 31, 1994, 1995 and 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION(1)
---------------
AWARDS
---------------
SECURITIES
ANNUAL COMPENSATION(1) UNDERLYING ALL OTHER
NAME AND ---------------------- OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SAR(#)(2) ($)(3)
- ------------------------------------- ---- --------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
E.A. Sack............................ 1996 $ 511,750 $491,376 60,700 $ 16,869
President and CEO 1995 467,866 445,050 75,000 16,557
1994 418,337 443,719 31,500 20,592

M.J. Bradshaw........................ 1996 212,116 87,588 83,275(4) 16,869
Senior Vice President, Operations 1995 206,157 94,650 25,100 16,557
1994 189,169 125,419 16,400 20,592

R.L. Moore........................... 1996 195,185 75,120 116,400(5) 15,008
Senior Vice President, Technology 1995(6) 99,692 54,000 45,000 5,641
1994(6) -- -- -- --

A. Secor............................. 1996 215,615 79,358 52,150(7) 16,869
Vice President and General Manager 1995 214,854 85,913 20,000 16,557
Consumer Products Division 1994 202,951 58,880 11,400 20,592

J.J. Magill.......................... 1996 159,617 78,175 42,100(8) 16,361
Vice President and General Manager 1995 150,975 87,536 20,000 11,998
Datacom Products Division 1994 144,396 52,875 11,400 11,826
</TABLE>

- ---------------

(1) No "Other Annual Compensation," "Restricted Stock Award(s)" or "LTIP
Payouts" were made to the Executive Officers during 1994, 1995 or 1996.

(2) Securities underlying Option/SAR share numbers reflect the effect of a
3-for-2 stock split to shareholders of record on February 1, 1993, paid on
February 15, 1993.

(3) Amounts represent the Company's matching and discretionary contributions to
the Zilog, Inc. Tax-Deferred 401(k) Investment Plan, and the Company's
contribution to the Non-Qualified Deferred Compensation Plan.

(4) Includes options granted on November 6, 1996 for 11,250 shares upon
cancellation of a previous option granted on June 1, 1994, 525 shares upon
cancellation of a previous option granted on December 15, 1994, 100 shares
upon cancellation of a previous option granted on March 23, 1995, 25,000
shares upon cancellation of a previous option granted on April 6, 1995, 700
shares upon cancellation of a previous option granted on January 17, 1996,
and 20,000 shares upon cancellation of a previous option granted on February
21, 1996.

(5) Includes options granted on November 6, 1996 for 40,000 shares upon
cancellation of a previous option granted on June 14, 1995, 5,000 shares
upon cancellation of a previous option granted on November 16, 1995, 700
shares upon cancellation of a previous option granted on January 17, 1996,
20,000 shares upon cancellation of a previous option granted on February 21,
1996, 10,000 shares upon cancellation of a previous option granted on May
16, 1996, and 5,000 shares upon cancellation of a previous option granted on
July 16, 1996.

(6) Mr. Moore joined the Company in May 1995.

(7) Includes options granted on November 6, 1996 for 10,000 shares upon
cancellation of a previous option granted on June 1, 1994, 700 shares upon
cancellation of a previous option granted on December 15, 1994, 20,000
shares upon cancellation of a previous option granted on April 6, 1995, 700
shares upon cancellation of a previous option granted on January 17, 1996,
and 10,000 shares upon cancellation of a previous option granted on July 16,
1996.

(8) Includes options granted on November 6, 1996 for 10,000 shares upon
cancellation of a previous option granted on June 1, 1994, 700 shares upon
cancellation of a previous option granted on December 15, 1994, 20,000
shares upon cancellation of a previous option granted on April 6, 1995, and
700 shares upon cancellation of a previous option granted on January 17,
1996.

10
<PAGE> 13

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL
------------------------------------------------------------ POTENTIAL REALIZABLE
% OF TOTAL VALUE AT
OPTIONS/SARS ASSUMED ANNUAL RATES OF
GRANTED TO STOCK PRICE APPRECIATION
EMPLOYEES EXERCISE OR FOR OPTION TERM
OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION -------------------------
NAME GRANTED YEAR ($/SH) DATE 5% ($) 10% ($)
- --------------------- ------------ ------------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
E.A. Sack(1)......... 700 .0917 $ 30.13 1/16/06 $ 16,177 $ 41,075
30,000 .8430 $ 38.28 2/20/06 $794,973 $2,093,454
5,000 .1405 $ 21.88 7/15/06 $ 77,693 $ 202,685
25,000 .7025 $ 28.75 12/17/06 $436,747 $1,121,186
M.J. Bradshaw........ 700 .0197 $ 30.13 1/16/06 $ 16,177 $ 41,075
20,000 .5620 $ 38.28 2/20/06 $529,982 $1,395,636
5,000 .1405 $ 21.88 7/15/06 $ 77,693 $ 202,685
11,250(2) .3161 $ 20.00 5/31/04 $ 98,446 $ 234,921
525(2) .0148 $ 20.00 12/14/04 $ 4,995 $ 12,090
100(2) .0028 $ 20.00 3/22/05 $ 990 $ 2,414
25,000(2) .7025 $ 20.00 4/5/05 $248,978 $ 607,642
700(2) .0197 $ 20.00 1/16/06 $ 8,881 $ 22,770
20,000(2) .5620 $ 20.00 2/20/06 $256,813 $ 660,226
R.L. Moore........... 700 .0197 $ 30.13 1/16/06 $ 16,177 $ 41,075
20,000 .5620 $ 38.28 2/20/06 $529,982 $1,395,636
10,000 .2810 $ 38.00 5/15/06 $269,842 $ 703,901
5,000 .1405 $ 21.88 7/15/06 $ 77,693 $ 202,685
5,000(2) .1405 $ 20.00 11/15/05 $ 54,349 $ 134,872
700(2) .0197 $ 20.00 1/16/06 $ 8,881 $ 22,770
20,000(2) .5620 $ 20.00 2/20/06 $256,813 $ 660,226
10,000(2) .2810 $ 20.00 5/15/06 $132,070 $ 341,727
40,000(2) 1.1240 $ 20.00 6/13/05 $409,632 $1,004,919
5,000(2) .1405 $ 20.00 7/15/06 $ 67,417 $ 175,285
A. Secor............. 700 .0197 $ 30.13 1/16/06 $ 16,177 $ 41,075
10,000 .2810 $ 21.88 7/15/06 $155,387 $ 405,369
50(2) .0014 $ 17.13 9/17/06 $ 559 $ 1,397
10,000(2) .2810 $ 20.00 5/31/04 $ 87,508 $ 208,819
700(2) .0197 $ 20.00 12/14/04 $ 6,660 $ 16,120
20,000(2) .5620 $ 20.00 4/5/05 $199,183 $ 486,113
700(2) .0197 $ 20.00 1/16/06 $ 8,881 $ 22,770
10,000(2) .2810 $ 20.00 7/15/06 $134,834 $ 350,569
J.J. Magill.......... 700 .0197 $ 30.13 1/16/06 $ 16,177 $ 41,075
10,000 .2810 $ 21.88 7/15/06 $155,387 $ 405,369
10,000(2) .2810 $ 20.00 5/31/04 $ 87,508 $ 208,819
700(2) .0197 $ 20.00 12/14/04 $ 6,660 $ 16,120
20,000(2) .5620 $ 20.00 4/5/05 $199,183 $ 486,113
700(2) .0197 $ 20.00 1/16/06 $ 8,881 $ 22,770
</TABLE>

- ---------------

(1) In the event of a change of ownership of the Company, Dr. Sack's unvested
options that remain outstanding shall vest. They shall be subject to
exercise on the same terms as all other vested options.

(2) Options granted on November 6, 1996 upon cancellation of previously granted
options for the same number of shares; see Ten Year Option Repricing Table
on pages 12 and 13.

11
<PAGE> 14

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES

The following table provides information with respect to the aggregate
option exercises and fiscal year-end option values for each of the Company's
Named Executive Officers for the year ended December 31, 1996.

<TABLE>
<CAPTION>
VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE MONEY
UNEXERCISED OPTIONS/SARS
OPTIONS/SARS AT FISCAL
AT FISCAL YEAR-END(#) YEAR-END($)
SHARES --------------------- --------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
- ------------------------------- -------------- ----------- --------------------- --------------------
<S> <C> <C> <C> <C>
E. A. Sack..................... 0 $ 0 366,525/132,700 $4,165,463/$ 23,125
M. J. Bradshaw................. 28,987 $ 736,707 131,513/ 52,725 $ 775,034/$331,062
R. L. Moore.................... 0 $ 0 11,250/ 69,450 $ 73,125/$451,425
A. Secor....................... 0 $ 0 86,000/ 31,450 $ 643,450/$202,223
J. J. Magill................... 0 $ 0 78,425/ 31,400 $ 534,137/$183,075
</TABLE>

- ---------------

(1) These amounts represent the difference between the exercise price of the
stock options and the closing price of the Company's Common Stock on
December 31, 1996, for options held by each Named Executive Officer.

TEN YEAR OPTION REPRICING TABLE

Repricings of Stock Options

As indicated in the Compensation Committee Report on executive
compensation, in November 1996 the Company offered all non-director option
holders under the 1994 LTIP the opportunity to exchange their options for new
options at the November 6, 1996 fair market value of $20.00 per share. The
options retain their original vesting schedule and expiration date. However, the
repriced shares may not be exercised until November 5, 1997. The following table
sets forth the repricing of options held by the Named Executive Officers and any
other executive officers during the past ten completed fiscal years.

TEN-YEAR OPTION REPRICINGS

12
<PAGE> 15

<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES MARKET PRICE OPTION
UNDERLYING NUMBER OF OF STOCK AT TERM REMAINING
OPTIONS NEW TIME OF EXERCISE NEW AT DATE OF
REPRICED OPTIONS REPRICING OR PRICE AT TIME EXERCISE REPRICING
NAME AND POSITION DATE OR AMENDED GRANTED AMENDMENT($) OF REPRICING($) PRICE($) (IN YEARS)
- -------------------------- ------- ---------- --------- ------------ --------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS (CONT.)
Alan Secor................ 11/6/96 10,000 10,000 19.875 31.750 20.000 7.6
Vice President and 11/6/96 700 700 19.875 27.750 20.000 8.1
General Manager, 11/6/96 20,000 20,000 19.875 34.625 20.000 8.4
Consumer Products 11/6/96 700 700 19.875 30.125 20.000 9.2
Division 11/6/96 10,000 10,000 19.875 21.875 20.000 9.7
J. James Magill........... 11/6/96 10,000 10,000 19.875 31.750 20.000 7.6
Vice President and 11/6/96 700 700 19.875 27.750 20.000 8.1
General Manager, 11/6/96 20,000 20,000 19.875 34.625 20.000 8.4
Datacom Division 11/6/96 700 700 19.875 30.125 20.000 9.2
Sally M. Baumwell......... 11/6/96 10,000 10,000 19.875 31.750 20.000 7.6
Vice President, 11/6/96 700 700 19.875 27.750 20.000 8.1
Human Resources 11/6/96 20,000 20,000 19.875 34.625 20.000 8.4
and Administration 11/6/96 700 700 19.875 30.125 20.000 9.2
Robert E. Collins......... 11/6/96 20,000 20,000 19.875 30.125 20.000 9.2
Vice President and 11/6/96 10,000 10,000 19.875 26.000 20.000 9.6
Chief Financial Officer
Richard R. Pickard........ 11/6/96 10,000 10,000 19.875 31.750 20.000 7.6
Vice President, 11/6/96 700 700 19.875 27.750 20.000 8.1
General Counsel 11/6/96 20,000 20,000 19.875 34.625 20.000 8.4
and Secretary 11/6/96 700 700 19.875 30.125 20.000 9.2
Anthony S. Yano........... 11/6/96 3,000 3,000 19.875 31.750 20.000 7.6
Vice President 11/6/96 700 700 19.875 27.750 20.000 8.1
and Controller 11/6/96 8,000 8,000 19.875 41.250 20.000 8.6
11/6/96 700 700 19.875 30.125 20.000 9.2
FORMER EXECUTIVE OFFICER
Thomas C. Carson.......... 11/6/96 15,000 15,000 19.875 31.750 20.000 7.6
Senior Vice President, 11/6/96 700 700 19.875 27.750 20.000 8.1
Strategic Accounts 11/6/96 25,000 25,000 19.875 34.625 20.000 8.4
11/6/96 700 700 19.875 30.125 20.000 9.2
11/6/96 20,000 20,000 19.875 38.280 20.000 9.3
</TABLE>

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities and Exchange Act of 1934 (the "Exchange
Act") and the rules of the Securities and Exchange Commission (the "Commission")
thereunder require the Company's directors and executive officers to file
reports of their ownership and changes in ownership of Common Stock with the
Commission. Based solely upon a review of such reports, the Company believes
that all reports required by Section 16(a) of the Exchange Act to be filed by
its directors and executive officers during the last fiscal year were filed on
time.

13
<PAGE> 16

STOCK PRICE PERFORMANCE GRAPH

The regulations of the Securities and Exchange Commission require that the
Company include in its proxy statement a line graph presentation comparing
cumulative, five-year shareholder returns on an indexed basis with the S & P 500
Stock Index and either a nationally recognized industry standard or an index of
peer companies selected by the Company. Accordingly, the following graph
compares the Company's cumulative shareholder returns since December 31, 1991
with the S & P 500 Index and the S & P High Technology Composite Index.

<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Zilog Inc. S&P 500 Stock Index S&P High Tech
<S> <C> <C> <C>
12/31/91 100.00 100.00 100.00
12/31/92 169.14 104.47 106.25
12/31/93 225.93 111.83 129.55
12/31/94 218.52 110.11 148.07
12/31/95 271.30 147.67 213.53
12/31/96 193.52 177.60 302.30
</TABLE>

PROPOSAL NUMBER 2

RATIFICATION OF INDEPENDENT AUDITORS

The Board has selected Ernst & Young LLP to serve as the Company's
independent auditors for fiscal year 1997. While it is not required to do so,
the Board is submitting to the shareholders the selection of that firm for
ratification in order to ascertain the shareholders' views. If such selection is
not ratified by the affirmative vote of a majority of the shares of Common Stock
present at the meeting and entitled to vote, the Board will reconsider its
selection.

Representatives of Ernst & Young LLP are expected to be present at the
meeting and available to respond to appropriate questions. Such representatives
will have the opportunity to make a statement if they desire to do so.

THE BOARD OF DIRECTORS RECOMMENDS RATIFICATION OF THE APPOINTMENT OF ERNST
& YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR FISCAL YEAR 1997.

PROPOSAL NUMBER 3

TO APPROVE THE REINCORPORATION OF THE COMPANY
FROM CALIFORNIA TO DELAWARE

With the unanimous recommendation of the Board of Directors, the Board is
submitting to shareholders for their approval a proposal to reincorporate the
Company in Delaware (the "Reincorporation"). The

14
<PAGE> 17

following discussion summarizes certain aspects of the Reincorporation. This
summary is not intended to be complete and is subject to, and qualified in its
entirety by, the Agreement and Plan of Merger, in substantially the form
attached hereto as Annex A (the "Merger Agreement"), and the Certificate of
Incorporation (the "Delaware Certificate") of Zilog, Inc. ("Zilog Delaware"), a
copy of which is attached hereto as Annex B. Copies of the Amended and Restated
Articles of Incorporation and the Bylaws, as amended to date, of the Company
(the "California Articles" and the "California Bylaws," respectively) as well as
the bylaws of ZiIog Delaware (the "Delaware Bylaws") are available for
inspection at the principal office of the Company and copies will be sent to
shareholders on written request.

REINCORPORATION OF THE COMPANY

The Reincorporation will be effected by merger (the "Merger") of the
Company with and into Zilog Delaware, a corporation formed by the Company in
preparation for the Reincorporation, as a wholly-owned subsidiary of the
Company. Upon completion of the Merger, the Company will cease to exist and
Zilog Delaware will continue to operate the business of the Company under the
name "Zilog, Inc." Shareholders of the Company will automatically become
stockholders of Zilog Delaware and their rights will be governed by Delaware
law, the Delaware Certificate and the Delaware Bylaws rather than by California
law, the California Articles and the California Bylaws. If approved by the
shareholders of the Company and if certain other conditions set forth in the
Merger Agreement are satisfied, the Reincorporation will become effective upon
the filing of the Merger Agreement and related documentation with the Secretary
of State of each of Delaware and California (the "Effective Date"). The
Reincorporation is intended to be consummated as soon as practicable following
the Annual Meeting. However, pursuant to the Merger Agreement, the
Reincorporation may be abandoned or the Merger Agreement may be amended by the
Board of Directors (except that the principal terms may not be amended without
shareholder approval) either before or after shareholders' approval has been
obtained and prior to the Effective Date if, in the opinion of the Board of
Directors, circumstances arise which make such action advisable.

Pursuant to the Merger Agreement, on the Effective Date, each outstanding
share of Common Stock of the Company, no par value ("Company Common Stock"),
will automatically be converted into one share of Common Stock of Zilog
Delaware, $.01 par value ("Zilog Delaware Common Stock") (the adoption of a $.01
par value is primarily to reduce certain filing fees applicable under Delaware
law). There are no differences in the rights, preferences or privileges of the
Zilog Delaware Common Stock from those of the Company Common Stock. Each stock
certificate representing issued and outstanding shares of the Company Common
Stock will continue to represent the same number of shares of Zilog Delaware
Common Stock. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR
EXISTING STOCK CERTIFICATES FOR STOCK CERTIFICATES OF ZILOG DELAWARE COMMON
STOCK. However, shareholders may exchange their certificates if they so choose.
Shares of Zilog Delaware Common Stock will continue to be quoted on the New York
Stock Exchange ("NYSE") under the symbol "ZLG" without interruption, as shares
of the Company Common Stock are now quoted and traded, and delivery of existing
Company Common Stock certificates will constitute "good delivery" of shares of
Zilog Delaware Common Stock.

Under California law, the affirmative vote of a majority of the outstanding
shares of the Company Common Stock is required for approval of the Merger
Agreement and the other terms of the Reincorporation. See "Board Recommendation
and Vote Required." The Reincorporation has been approved by the Company's Board
of Directors, which unanimously recommends a vote in favor of the
Reincorporation Proposal.

Except as set forth above, no federal or state regulatory requirements must
be complied with nor must approvals be obtained in connection with the
Reincorporation, except under federal securities laws applicable to proxy
solicitations.

Shareholders of the Company will have no dissenters' rights of appraisal
with respect to the Reincorporation. See "Other Significant Differences Between
the Corporation Laws of California and Delaware -- Appraisal Rights in Mergers."

15
<PAGE> 18

APPROVAL OF THE PROPOSED REINCORPORATION BY SHAREHOLDERS WILL CONSTITUTE
APPROVAL OF THE MERGER AGREEMENT, THE DELAWARE CERTIFICATE AND THE DELAWARE
BYLAWS.

PRINCIPAL REASONS FOR THE REINCORPORATION

Delaware Corporation Law. For many years Delaware has followed a policy of
encouraging incorporation in that state and, in furtherance of that policy, has
long been a leader in adopting, construing and implementing comprehensive and
flexible corporate laws which are periodically revised and updated in response
to the legal and business needs of corporations organized under its laws. Many
corporations have initially chosen Delaware for their state of incorporation or
have subsequently changed their corporate domicile to Delaware in a manner
similar to that proposed by the Company. Because of Delaware's prominence as the
state of incorporation for many major corporations, both its legislature and
courts have demonstrated an ability and a willingness to act quickly and
effectively to meet changing business needs. The Delaware courts have acquired
considerable expertise in dealing with corporate issues and a substantial body
of case law has been developed construing Delaware law and establishing public
policies with respect to corporate legal affairs, thus providing greater
predictability and guidance in the conduct of corporate legal affairs of
Delaware corporations.

Attraction and Retention of Qualified Directors. Both California and
Delaware law permit a corporation to include a provision in its articles or
certificate of incorporation which reduces or limits the monetary liability of
directors for breaches of fiduciary duty in certain circumstances. The
increasing frequency of claims and litigation directed against directors and
officers has greatly expanded the risks facing directors and officers of
corporations in exercise of their respective duties. The amount of time and
money required to respond to such claims and to defend such litigation can be
substantial. It is the Company's desire to reduce such risks to its directors
and officers and to limit situations in which monetary damages can be recovered
against directors so that the Company may continue to attract and retain
qualified directors who might otherwise be unwilling to serve because of the
increased risks involved.

In accordance with current California law, the California Articles include
a provision which limits director's liability in certain circumstances. In
general, however, the ability to limit liability is broader under Delaware law,
and Delaware case law is also more developed to provide guidance in this regard.
It should be noted, however, that neither California nor Delaware law permits a
corporation to limit or eliminate the liability of its directors for intentional
misconduct, conduct undertaken in bad faith or any transaction from which the
director derives an improper personal benefit, or for violations of federal
laws, such as securities laws.

Reduced Vulnerability to Unilateral Takeover Attempts. The Board of
Directors believes the changes resulting from the Reincorporation will
discourage certain types of transactions which involve actual or threatened
changes of control of the Company and enhance the Board of Directors' ability to
negotiate effectively in connection with an unsolicited takeover proposal.
Accordingly, the Board of Directors has recommended the Reincorporation in order
to enable the Company to take advantage of certain provisions of the Delaware
General Corporation Law ("Delaware GCL") which the Board believes are in the
best interests of the shareholders and which are not provided for under the
California General Corporation Law (the "California GCL"). By means of example,
these provisions allow Delaware corporations to (i) institute a classified
board, (ii) eliminate cumulative voting, (iii) provide that directors may be
removed only for cause, (iv) eliminate the right of shareholders to call special
meetings or to act by written consent, (v) grant authority to the Board (without
stockholder approval) to establish the authorized number of directors, (vi)
adopt supermajority voting provisions, and (vii) require advance notice of
business to be brought before, or of nominations for the election of directors
at, a stockholder meeting by a stockholder.

After the Reincorporation, these provisions, together with the general
acceptance of the Delaware anti-takeover statute (see "Certain Significant
Differences in Corporate Governance -- Delaware Business Combination Law"), are
expected to make certain changes in control of Zilog Delaware more difficult and
time consuming without the prior consent of the Board of Directors, and to have
the effect of encouraging

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hostile acquirers or persons who acquire substantial blocks of Zilog Delaware
Common Stock to negotiate with the Board of Directors acting on behalf of all
shareholders, thereby reducing the Company's vulnerability to an unsolicited
proposal for the takeover of the Company, particularly a proposal which does not
contemplate the acquisition of all of the Company's outstanding shares, or a
proposal for the restructuring or sale of all or part of the Company.

There has been a trend in recent years towards the accumulation of
substantial stock positions in public companies by third parties as a prelude to
proposing a takeover, restructuring or sale of all or part of a company or other
similar extraordinary corporation actions. Such actions are often undertaken by
a purchaser without advance notice to or consultation with the board of
directors of the target company. The Company believes that takeover attempts in
which the Board of Directors does not have the opportunity to negotiate in the
interests of all shareholders may result in certain coercive tactics, disruption
of business and unfairness to shareholders. For example, certain non-negotiated
takeover bids or accumulations of large blocks of stock may be timed to take
advantage of temporarily depressed stock prices, may be designed to foreclose or
minimize the possibility of competing bids and may involve the acquisition of
only a controlling interest in the Company's stock without affording all
shareholders the opportunity to receive the same economic benefits.

It is also the Company's view that the existence of anti-takeover measures,
although having the effect of making hostile takeovers more difficult, will not
necessarily ensure that bidders will only propose a merger or other transaction
at a price reflective of the true value of the Company and which is in the best
interests of all shareholders. Management, however, is not aware of any such
proposal or any effort to obtain control of the Company. See "Certain
Significant Differences in Corporate Governance."

As of February 21, 1997, Warburg, Pincus Capital Company, L.P. ("Warburg")
owned approximately 27% of the outstanding shares of the Company's voting Common
Stock. While Warburg does not have majority control of the Company, it is the
largest shareholder and has significant influence with respect to election of
directors and approval or disapproval of fundamental corporate decisions.

Possible Disadvantages. Despite the unanimous belief of the Board of
Directors that the Reincorporation is in the best interests of the Company and
its shareholders, it should be noted that some commentators are of the view that
Delaware law does not afford minority shareholders the same substantial rights
and protections as are available in a number of other states, including
California. The Delaware Certificate and Delaware Bylaws contain provisions that
are expected to have the overall effect of rendering more difficult the
accomplishment of unsolicited tender offers or mergers and proxy contests, or
the assumption of control by the holder of a large block of shares, and thus
make more difficult the removal of incumbent management, even if such a change
in control is desired by holders of a majority of the shares.

The Reincorporation, if adopted, could also have the effect of discouraging
a third party from attempting to obtain control of the Company, even though such
an attempt may be beneficial to the Company and its shareholders. By
discouraging certain tender Offers, Mergers and accumulations of large blocks of
stock, it may also tend to reduce temporary upward fluctuations in the market
price of the Zilog Delaware Common Stock, thereby depriving its stockholders of
opportunities which might otherwise exist in the absence of the Reincorporation
to sell their stock at a premium to current market prices. However, the Company
believes that certain non-negotiated takeover bids or large block accumulations
may be timed to take advantage of temporarily depressed stock prices and,
therefore, may not take account of underlying and long-term values of the
Company's assets and prospects for favorable developments in the Company's
business and, in addition, may not ensure equal treatment of all shareholders.
See "Certain Significant Differences in Corporate Governance."

No Change in the Business, Management and Location of the Company. The
Reincorporation will effect a change in the legal domicile of the Company from
California to Delaware and will produce only those changes resulting from the
difference between California and Delaware law and between the charters and
bylaws of the Company and Zilog Delaware, and other changes of a legal nature,
certain of which are described in this Proxy Statement. The Reincorporation will
not result in any change in the name, business, management, fiscal year,
location of the principal facilities, assets, liabilities or net worth of the
Company and will have no material accounting implications. All benefit plans of
the Company will be continued by Zilog

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<PAGE> 20

Delaware, and each stock right or option issued pursuant to such plans will
automatically be converted into an option or right to purchase the same number
of shares of Zilog Delaware Common Stock at the same price per share, upon the
same terms and subject to the same conditions as set forth in such plans. The
Company's other employee benefit arrangements will be continued by Zilog
Delaware upon the terms and subject to the conditions then currently in effect.
The Reincorporation Proposal and the changes affected thereby are permitted and
consistent with the rules of the NYSE, on which the issued shares of the Company
Common Stock are currently quoted and treated. Moreover, as noted above, after
the Reincorporation, the shares of Zilog Delaware Common Stock will be quoted
and treated, as applicable, without interruption, on the NYSE under the same
symbols as the shares of the Company Common Stock were quoted and traded prior
to the Reincorporation.

CERTAIN SIGNIFICANT DIFFERENCES IN CORPORATE GOVERNANCE

The most significant differences between the corporate governance
provisions of the charter documents of Zilog Delaware and the Company, and the
reasons for and certain possible effects of these provisions, are described
below.

Delaware Business Combination Law. Section 203 of the Delaware GCL was
adopted by Delaware's legislature to encourage potential acquirers to negotiate
with a target company's board of directors and, in the absence of successful (or
any) negotiations, to provide minority stockholders with protections against
certain takeover-related abuses. Because the Delaware Certificate and the
Delaware Bylaws are silent with respect to the application of Section 203, Zilog
Delaware will be subject to the provisions of Section 203.

Section 203 regulates certain transactions incident to or following large
accumulations of shares, including those made by tender offers. Section 203 may
have the effect of significantly delaying a purchaser's ability to acquire the
entire interest sought if such acquisition is not approved by a corporation's
board of directors. In general, Section 203 prevents an "Interested Stockholder"
(defined generally as a person with 15% or more of a corporation's outstanding
voting stock) from engaging in a "Business Combination" (defined below) with a
Delaware corporation for three years following the date such person became an
Interested Stockholder. For purposes of Section 203, the term "Business
Combination" includes, without limitation: (a) mergers with the Interested
Stockholder; (b) sales or other dispositions to the Interested Stockholder
(except proportionately with the corporation's other stockholders) of assets of
the corporation or a subsidiary having a market value equal to 10% or more of
the aggregate market value or the corporation's consolidated assets or its
outstanding stock; (c) the issuance or transfer by the corporation or a
subsidiary of stock of the corporation or such subsidiary to the Interested
Stockholder (except for certain transfers in a conversion or exchange or a pro
rata dividend or distribution, none of which increase the Interested
Stockholder's proportionate ownership of any class or series of the
corporation's or such subsidiary's stock, or certain other transactions); (d)
any transaction involving the corporation or a subsidiary which has the effect
of increasing the proportionate share of the stock of any class or series, or
securities convertible into the stock of any class or series, of the corporation
or of any such subsidiary which is owned by the Interested Stockholder, except
as a result of immaterial changes due to fractional share adjustments or as a
result of any purchase or redemption of any shares of stock not caused by the
Indirect Stockholder; or (e) receipt by the Interested Stockholder (except
proportionately as a stockholder), directly or indirectly, of any loans,
advances, guarantees, pledges or other financial benefits provided by or through
the corporation or a subsidiary.

The three-year moratorium imposed on Business Combinations by Section 203
does not apply if, among other things: (a) prior to the date on which such
stockholder becomes an Interested Stockholder, the board of directors approves
either the Business Combination or the transaction which resulted in the person
becoming an Interested Stockholder; (b) the Interested Stockholder owns 85% of
the corporation's voting stock upon consummation of the transaction which made
the person an Interested Stockholder (excluding from the 85% calculation shares
owned by directors who are also officers of the target corporation and shares
held by employee stock plans which do not permit employees to decide
"confidentially" (e.g., by giving confidential instructions to a plan's trustee)
whether to accept a tender or exchange offer); or (c) on or after the date such
person becomes an Interested Stockholder, the board approves the Business
Combination and it is also

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<PAGE> 21

approved at a stockholder meeting by holders of two-thirds (66 2/3%) of the
voting stock not owned by the Interested Stockholder.

Under Section 203, the restrictions described above do not apply if, among
other things, the corporation's original certificate of incorporation contains a
provision expressly electing not to be governed by Section 203. The Delaware
Certificate does not contain such a provision. Zilog Delaware could, at its
option, exclude itself from the coverage of Section 203 by amending the Delaware
Certificate or the Delaware Bylaws (with stockholder approval) at any time to
exempt itself from coverage; but an amendment will not become effective for a
period of twelve months after the amendment is adopted and will not apply to an
Interested Stockholder who became such prior to the amendment.

The Company believes that Section 203 will encourage any potential acquiror
to negotiate with Zilog Delaware's Board of Directors prior to effecting any
takeover attempt. Section 203 also should have the effect of (i) limiting the
ability of a potential acquiror to make a two-tiered bid in which all
stockholders would not be treated equally and (ii) otherwise discouraging
certain potential acquirors unwilling to comply with its provisions.
Shareholders should note that the application of Section 203 to Zilog Delaware
will confer upon its Board of Directors the power to reject a proposed Business
Combination, even though the potential acquiror may be offering a substantial
premium for Zilog Delaware's shares over the then current market price.

The California GCL does not contain a provision similar to Section 203.
Section 1101 of the California GCL provides that if an acquiring corporation has
previously acquired more than 50% but less than 90% of the stock of a California
corporation, the acquiring corporation is prohibited from cashing out the
remaining shareholders in the target corporation in a cash merger without
unanimous consent of the affected class. There are similar prohibitions covering
asset acquisitions. Unless certain conditions are met, the acquiring corporation
must, in any asset acquisition or merger, issue non-redeemable common stock of
the acquiring corporation to the remaining shareholders of the target
corporation. California also regulates certain tender offers or proposals for
reorganization made by "interested parties." See "Proposals for Reorganization"
below.

Limitations on Ability of Stockholders to Call Meetings. The California
Bylaws provide, in accordance with the California GCL, that a special meeting of
the shareholders of the Company may be called by the Board of Directors, the
Chairman of the Board, the President, or the holders of shares entitled to cast
not less than 10% of the votes at such meeting. Under the Delaware GCL, special
meetings of stockholders may be called by a corporation's board of directors or
by any other person authorized to do so by the certificate of incorporation or
bylaws of the corporation. Since the Delaware Certificate and the Delaware
Bylaws do not contain provisions permitting any person to call a special
stockholder meeting, only the Board of Directors or the President of Zilog
Delaware will have this ability.

By not providing for the right of stockholders to call special meetings, it
may be more difficult for the stockholders of Zilog Delaware to initiate action
opposed by the Board of Directors other than at the annual meeting of
stockholders. However, it will not impair the right of stockholders to elect the
full Board of Directors at an annual meeting or to take action on other issues
at that time.

Limitations on Actions by Written Consent of Stockholders and Advance
Notice Requirements for Stockholder Meetings. Both the Delaware GCL and the
California GCL permit stockholders, unless specifically prohibited by the
certificate or articles of incorporation, to take action without a meeting by
the written consent of the holders of at least the number of shares necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. The California Articles do not restrict
stockholder action by written consent. Action by written consent may, in some
circumstances, permit the taking of stockholder action opposed by the Board of
Directors more rapidly than would be possible if a meeting of stockholders were
required. In connection with its evaluation of the Reincorporation, the Board of
Directors has determined that it is important that it be able to give advance
notice of and consideration to any action to be voted on by stockholders, and
that all stockholders be able to discuss at a meeting matters which may affect
their rights. Accordingly, the Delaware Certificate eliminates actions by
written consent of stockholders unless the Board waives the prohibition in a
particular circumstance.

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<PAGE> 22

To enhance the Board's ability to give advance notice of, and consideration
to, matters to be acted on by stockholders, the Delaware Certificate also
contains a minimum twenty days' notice requirement for any stockholder meeting,
and restricts the business to be conducted at such meeting to that which has
been stated in the notice sent by Zilog Delaware to each stockholder entitled to
vote at the meeting (although this requirement, like the limitation on
stockholder action by written consent, may be waived in any particular
circumstance). The requirement for advance notice will permit the Board to
analyze any stockholder proposals and to present that analysis to all
stockholders in an effective manner. The Board believes that, like the other
provisions in the Delaware Certificate, elimination of stockholder action by
written consent and the advance notice requirement for stockholder meetings will
enhance the Board's ability to consider all appropriate courses of action for
the benefit of all stockholders and to negotiate effectively on their behalf in
the context of a takeover attempt.

Number of Directors. Under the California GCL, although a change in the
number of directors must in general be approved by the shareholders, the board
of directors may fix the exact number of directors within a stated range set
forth in either the articles of incorporation or bylaws, if that stated range
has been approved by the shareholders. Any change outside of the established
range or a change in the established range must be approved by the shareholders.
The Delaware GCL permits the board of directors alone to change the authorized
number of directors by amendment to the bylaws or in the manner provided in the
bylaws, unless the certificate of incorporation fixes the number of directors
(in which case a change in the number of directors may be made only by an
amendment of such certificate).

The California Bylaws establish a range of five (5) to seven (7) directors
and this number is presently fixed by the Board of Directors at six (6). The
Delaware Certificate is silent on the number of directors; however, the Delaware
Bylaws provide that the number of directors shall be six (6) until such time as
the Board of Directors modifies such authorized number of directors by amendment
to the Delaware Bylaws (and, given their ability to amend the Delaware Bylaws, a
majority of the stockholders of Zilog Delaware also could effect a change in the
number of directors). The Board of Directors has no present intention to change
the current number of directors; however, the Board believes that the
flexibility provided to it in this regard will be beneficial should the need
arise to provide for an increase in the number of directors beyond the Company's
current range, or to eliminate vacancies below such range for which suitable
candidates are not available.

OTHER SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND
DELAWARE

In addition to the provisions of the California GCL and the Delaware GCL
which are discussed above in the context of distinctions between the charter
documents of the Company and Zilog Delaware, other provisions of the California
GCL and the Delaware GCL differ in many respects, and consequently it is not
practical to summarize all differences. However, a summary of certain
significant differences which may affect the rights and interests of
stockholders in Zilog Delaware is set forth below.

Cumulative Voting. Under cumulative voting, each share of stock entitled
to vote in an election of directors has such number of votes as is equal to the
number of directors to be elected. A shareholder may then cast all of his or her
votes for a single candidate or may allocate them among as many candidates as
the shareholder may choose. As a result, shareholders holding a significant
minority percentage of the outstanding shares entitled to vote in an election of
directors may be able to effect the election of one or more directors. If
cumulative voting is available, then it is mandatory upon timely notice given by
any shareholder at a meeting at which directors are to be elected.

The California GCL generally provides for cumulative voting; however,
cumulative voting may be eliminated by corporations with outstanding securities
listed on the NYSE or the American Stock Exchange or with securities designated
for trading as a National Market System security on the National Association of
Security Dealers Automatic Quotation System ("NASDAQ") and having at least 800
stockholders (including record and beneficial owners) (collectively, "Listed
Corporations"). The Company believes it is a Listed Corporation. The California
Articles do not provide for the elimination of cumulative voting.

Under the Delaware GCL, cumulative voting is not available unless it is
provided for in a corporation's certificate of incorporation. The Delaware
Certificate does not provide for cumulative voting. As a result, the

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holder or holders of shares representing a majority of the votes entitled to be
cast in an election of directors for Zilog Delaware will be able to elect all
directors then being elected. The absence of cumulative voting could have the
effect of preventing representation of minority stockholders on the Board of
Directors of Zilog Delaware. However, the Board believes that, in general, and
especially in publicly-held corporations, each director should represent the
interests of all stockholders rather than the interests of a special
constituency, and that the presence on the Board of one or more directors
representing such a constituency could disrupt and impair the efficient
management of Zilog Delaware.

Indemnification and Limitation of Liability. California and Delaware have
similar laws respecting indemnification by a corporation of its officers,
directors, employees and other agents. The laws of both states also permit
corporations to adopt a provision in their articles or certificate of
incorporation eliminating the liability of a director to the corporation or its
securityholders for monetary damages for breach of a director's fiduciary duty
of care. There are nonetheless certain differences between the laws of the two
states respecting indemnification and limitation of liability.

California law permits indemnification of expenses incurred in derivative
or third-party actions, except that with respect to derivative actions: (a) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless a court determines such person is
fairly and reasonably entitled to indemnity for expenses, and then such
indemnification may be made only to the extent that such court shall determine,
and (b) no indemnification may be made without court approval in respect of
amounts paid or expenses incurred in settling or otherwise disposing of a
threatened or pending action or amounts incurred in defending a pending action
which is settled or otherwise disposed of without court approval.
Indemnification is permitted only for acts taken in good faith and believed to
be in the best interests of the corporation and its shareholders, as determined
by a majority vote of a disinterested quorum of the directors, independent legal
counsel (if a quorum of independent directors is not obtainable), a majority
vote of a quorum of the shareholders (excluding shares owned by the indemnified
party), or the court handling the action. The California GCL requires
indemnification when the individual has successfully defended the action on the
merits (as opposed to Delaware law which requires indemnification relating to
the successful defense on the merits or otherwise).

Delaware law generally permits indemnification of expenses incurred in the
defense or settlement of a derivative or third-party action, provided there is a
determination by a disinterested quorum of the directors, by independent legal
counsel (if a quorum of independent directors is not obtainable) or by a
majority vote of a quorum of the stockholders that a person seeking
indemnification acted in good faith and in a manner reasonably believed to be in
or (in contrast to California law) not opposed to the best interests of the
corporation. Without court approval, however, no indemnification may be made in
respect of any derivative action in which such person is adjudged liable for
negligence or misconduct in the performance of his or her duty to the
corporation. Delaware law requires indemnification of expenses when the
individual being indemnified has successfully defended the action on the merits
or otherwise.

California corporations may include in their articles of incorporation a
provision which extends the scope of indemnification through agreements, bylaws
or other corporate action beyond that specifically authorized by statute. The
Delaware GCL provides that indemnification permitted by statute shall not be
deemed exclusive of any other rights under any bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.

Both the California Articles and the Delaware Certificate provide for the
elimination of monetary liability of the corporation's directors to the fullest
extent permissible under applicable law. The Delaware Certificate provision is
potentially more expansive in that it incorporates future amendments to Delaware
law with respect to elimination of such liability. Moreover, while the
California Articles and the California Bylaws permit the Company to indemnify
its directors, officer and agents to the fullest extent allowed under California
law, the Delaware Certificate requires Zilog Delaware to indemnify its
directors, officers and agents to the fullest extent permitted under Delaware
law.

Currently, there are no actions pending or threatened against officers or
directors of the Company in their capacities as such. The indemnification and
limitation of liability provisions of California law, and not

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<PAGE> 24

Delaware law, will apply to actions of the directors and officers of the Company
made prior to the Reincorporation.

Proposals for Reorganization. Section 1203 of the California GCL ("Section
1203") provides that if a proposal for a merger or other reorganization
(including a share-exchange tender offer) or for certain sale of assets
transactions (a "Proposal") is made by a party controlling, either directly or
indirectly, the target corporation or that is controlled, directly or
indirectly, by an officer or director of the target corporation or that is an
entity in which a material financial interest is held by an executive officer or
director of the target corporation, an affirmative opinion of an independent
appraiser as to the fairness of the consideration to the stockholders of the
target corporation must be delivered. The fairness opinion requirement does not
apply to short-form mergers between a parent company and its 90%-owned
subsidiaries, or if the target company does not have shares held of record by
100 or more persons or if the transaction has been qualified under California
securities laws. If any other proposal for reorganization (the "Later Offer") is
received while the Proposal is pending, the directors must transmit the Later
Offer and any accompanying documents to the shareholders of the target
corporation and the target corporation's shareholders must be afforded a
reasonable opportunity to withdraw any vote, consent or proxy previously given
before the vote or written consent on the Proposal becomes effective, or a
reasonable time to withdraw any tendered shares before the purchase of shares
pursuant to the Proposal. The Delaware GCL does not contain a provision similar
to Section 1203. However, unlike many other states, California has not adopted
special laws (such as Section 203 of the Delaware GCL described above) designed
to make certain kinds of corporate takeovers, or other transactions with
significant shareholders more difficult.

Vote Required for Certain Mergers and Consolidations. Delaware law
relating to mergers and other corporate reorganizations differs from California
law in a number of respects. Generally, California law requires a shareholder
vote in more situations than does Delaware law. Both California and Delaware law
provide for securityholder votes (except as indicated below and for certain
mergers between a parent company and a subsidiary which is at least 90% owned by
the parent company) of both the acquiring and acquired corporation to approve
mergers, and of the selling corporation for the sale of substantially all of its
assets. In addition to the foregoing, subject to the exceptions described below,
California law requires the affirmative vote of a majority of the outstanding
shares of (i) an acquiring corporation in a share-for-share exchange or a
share-exchange tender offer, (ii) the acquiring and acquired corporations in a
sale-of-assets reorganization, and (iii) any parent corporation whose equity
securities are being issued or transferred in connection with a corporate
reorganization.

Delaware law does not require a stockholder vote of the surviving
corporation in a merger if (i) the merger agreement does not amend the existing
certificate of incorporation, (ii) each outstanding or treasury share of the
surviving corporation before the merger is unchanged after the merger, and (iii)
either no shares of common stock of the surviving corporation and no shares,
securities or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the number of shares to be issued by the
surviving corporation in the merger does not exceed 20% of the shares
outstanding immediately prior to the merger. California law contains an
exception to its voting requirements for reorganizations where any corporation
or its shareholders immediately before the reorganization own (immediately,
after the reorganization) more than five-sixths of the voting power of the
surviving or acquiring corporation (or its parent); provided, however, that such
exception is not available if (a) any amendments to the articles of the
surviving corporation are made which would otherwise require shareholder
approval or (b) if the holders of a disappearing corporation receive shares of
the surviving corporation having different rights, preferences. privileges or
restrictions than the shares surrendered.

Class Vote for Certain Reorganizations. With certain exceptions, the
California GCL requires that a merger or reorganization and certain sale of
assets or similar transactions be approved by a majority vote of each class of
shares outstanding, and provides for separate series votes in certain
circumstances. By contrast, the Delaware GCL generally does not require such
class voting, except in circumstances where the transaction involves an
amendment to a corporation's certificate of incorporation which would increase
or decrease the aggregate number of authorized shares of such class, increase or
decrease the par value of the shares of such

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<PAGE> 25

class, or alter or change the powers, preferences or special rights of the
shares of such class so as to affect them adversely.

Dissolution. Under the California GCL, shareholders holding 50% or more of
the total voting power may authorize a corporation's dissolution, with or
without the approval of the board of directors, and this right may not be
modified by the articles of incorporation. Under the Delaware GCL, unless the
board of directors approves the proposal to dissolve, the dissolution must be
approved by stockholders holding 100% of the total voting power of the
corporation. Only if the dissolution is initiated by the board of directors may
it be approved by a simple majority of the corporations's stockholders under the
Delaware GCL.

Appraisal Rights in Mergers. Under both California and Delaware law, a
dissenting securityholder of a corporation participating in certain transactions
may, under varying circumstances, receive cash in the amount of the fair value
of his or her shares (as determined by a court), in lieu of the consideration
that he or she would otherwise receive in any such transaction. Under Delaware
law, such appraisal rights are not available with respect to (i) a sale, lease
or exchange of substantially all the assets of a corporation; (ii) a merger or
consolidation by a corporation, the shares of which are either listed on a
national securities exchange (or designated as a NASDAQ National Market System
security) or widely-held (by more than 2,000 stockholders), if such stockholders
receive shares of the surviving corporation or shares of any other corporation
which are either listed on a national securities exchange (or designated as a
NASDAQ National Market System security) or held of record by more than 2,000
stockholders; or (iii) stockholders of a corporation surviving a merger if no
vote of the stockholders of the surviving corporation is required to approve the
merger. Under the Delaware GCL, no vote of the stockholders of the surviving
corporation is required if the number of shares to be issued in the merger does
not exceed 20% of the shares of the surviving corporation outstanding
immediately prior to the merger and certain other conditions are met. See "Vote
Required for Certain Mergers and Consolidations" above.

In general, California law affords dissenters' rights (appraisal rights are
referred to as "dissenters' rights" in California) (a) in any reorganization for
which shareholder approval is required and (b) to the shareholders of a
subsidiary corporation in a short-form merger, and the exclusions from
dissenters' rights in mergers are somewhat different from those in Delaware. For
example, in the case of a corporation whose shares are listed on a national
securities exchange or on a list of over-the-counter margin stocks issued by the
Board of Governors of the Federal Reserve System, dissenters' rights generally
are not available unless the holders of five percent or more of such class claim
dissenters' rights. Also, under California law, shareholders of a corporation
involved in a reorganization are not entitled to dissenters' rights if the
corporation, or its shareholders immediately before the reorganization, or both,
will own immediately after the reorganization more than five-sixths of the
voting power of the surviving or acquiring corporation or its parent entity (as
will be the case in the proposed Reincorporation).

Appraisal or dissenters' rights are, therefore, not available to
shareholders of the Company with respect to the Reincorporation.

Voting and Appraisal Rights in Certain Other Transactions. The Delaware
GCL does not provide stockholders of a corporation with voting rights or
appraisal rights when the corporation acquires another business through the
issuance of its stock either (i) in exchange for the assets of the business to
be acquired, (ii) in exchange for the outstanding stock of the business to be
acquired, or (iii) in a merger of the corporation to be acquired with a
subsidiary of the corporation. In contrast, the California GCL treats these
kinds of acquisitions in the same manner as the merger of the corporation
directly with the business to be acquired.

Dividends. The California GCL provides that a corporation may not make any
distribution (including dividends, whether in cash or property, and repurchases
or redemptions, of its shares for cash or property) unless (i) the corporation's
retained earnings immediately prior to the proposed distribution equal or exceed
the amount of the proposed distribution, or (ii) immediately after giving effect
to such distribution, the corporation's assets (exclusive of goodwill,
capitalized research and development expenses and deferred charges) would be at
least equal to 125% of its liabilities (not including deferred taxes, deferred
income and other deferred credits) and the corporation's current assets would be
at least equal to its current liabilities (or 125% of its current liabilities if
the average pretax and preinterest earnings for the preceding two fiscal years

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<PAGE> 26

were less than average interest expense for such years). In addition, the
California GCL provides that a corporation may not make any such distribution
if, as a result, the excess of the corporation's assets over its liabilities
would be less than the liquidation preference of all shares having a preference
on liquidation over the class or series to which the distribution is made. Such
tests are applied to California corporations on a consolidated basis.

The Delaware GCL provides that a corporation may, unless otherwise
restricted by its certificate of incorporation, declare and pay dividends out of
surplus, or if no surplus exists, out of net profits for the fiscal year in
which the dividend is declared and/or the preceding fiscal year (provided that
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of all classes having a preference upon the
distribution of assets). Like the California Articles, the Delaware Certificate
does not place any restrictions on the declaration or payment of dividends. The
Delaware GCL also provides that a corporation may redeem or repurchase its
shares only out of surplus. The ability of a Delaware corporation to pay
dividends on, or to make repurchases or redemptions of, its shares is dependent
on the financial status of the corporation standing alone and not on a
consolidated basis.

While the Company presently qualifies under the tests of both California
and Delaware for the payment of dividends, it is the present policy of the Board
of Directors to retain earnings for use in the Company's business. However, in
the event that the present policy of the Board changes in the future, Delaware
generally provides a broader ability for companies to pay dividends.

Interested Director Transactions. Under both the California GCL and the
Delaware GCL, certain contracts or transactions in which one or more of a
corporation's directors has an interest are not void or voidable because of such
interest provided that certain conditions, such as obtaining the required
approval and fulfilling the requirements of good faith and full disclosure, are
met. With certain exceptions, the conditions are similar under California and
Delaware law. Under the California GCL and the Delaware GCL, (a) either the
securityholders or the board of directors must approve any such contract or
transaction after full disclosure of the material facts, and in the case of
board approval the contract or transaction must also be "just and reasonable"
(in California) or "fair" (in Delaware) to the corporation, or (b) the contract
or transaction must have been just and reasonable or fair as to the corporation
at the time it was approved. In the latter case, California law explicitly
places the burden of proof on the interested director. Under California law, if
shareholder approval is sought, the interested director is not entitled to vote
his or her shares at a shareholder meeting with respect to any action regarding
such contract or transaction. If board approval is sought, the contract or
transaction must be approved by a majority vote of a quorum of the directors,
without counting the vote of any interested directors (except that interested
directors may be counted for purposes of establishing a quorum).

Under Delaware law, if board approval is sought, the contract or
transaction must be approved by a majority of the disinterested directors (even
though less than a majority of a quorum). Therefore, certain transactions that
the Board of the Company would lack the authority to approve, because of the
number of interested directors, could be approved by a majority of the
disinterested directors of Zilog Delaware representing less than a majority of a
quorum. The Company is not aware of any plans to propose any transaction
involving interested directors of the Company which the Board would lack the
authority to approve under California law but could approve under Delaware law.

Shareholder Derivative Suits. California law provides that a shareholder
bringing a derivative action on behalf of a corporation need not have been a
shareholder at the time of the transaction in question, provided that certain
tests are met. Under Delaware law, a stockholder may only bring a derivative
action on behalf of the corporation if he or she was a stockholder of the
corporation at the time of the transaction in question or his or her stock
thereafter devolved upon him or her by operation of law. California law also
provides that the corporation or the defendant in a derivative suit may make a
motion to the court for an order requiring the plaintiff shareholder to furnish
a security bond. Delaware does not have a similar bonding requirement.

Inspection of Securityholder Lists. The California GCL provides for an
absolute right of inspection of the shareholder list for any shareholder holding
five percent or more of a corporation's outstanding voting

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<PAGE> 27

shares or any shareholder holding one percent or more of a corporation's
outstanding voting shares who is involved in an election contest. The California
GCL also provides a right of inspection of the shareholder list to any
shareholder for any purpose reasonably related to such holder's interest as
shareholder. The California GCL purports to apply the foregoing provisions to
any foreign corporation (such as Zilog Delaware) if its principal executive
office is in California or if it customarily holds meetings of its board of
directors in California. The Delaware GCL does not provide any similar absolute
right of inspection, but does permit any stockholder of record to inspect the
stockholder list for any purpose reasonably related to such holder's interest as
a stockholder and, for a ten-day period preceding a stockholder meeting, for any
purpose germane to such meeting. Restricted access to stockholder records, even
though unrelated to a stockholder's interests as a stockholder, could result in
impairment of the stockholders' ability to coordinate opposition to management
proposals, including proposals with respect to a change, in control of the
Company. However, the Delaware GCL provisions regarding access to a company's
stockholder list have been broadly construed by Delaware courts. Moreover,
stockholders in Zilog Delaware will be able to avail themselves of provisions of
the federal proxy rules which provide stockholders, in certain circumstances,
with the right either to obtain access to the stockholder list or to have the
company mail stockholder proxy materials to the company's other stockholders of
record.

Staggered Board of Directors. Under the California GCL, a "Listed
Corporation" (as defined above) may, by amendment to its certificate of
incorporation, divide its board into two or three classes. The California GCL
restricts, however, the minimum number of directors which a corporation may have
in the event it divides its board and, effectively, the minimum number of
directors which can be elected at any annual meeting. The Delaware GCL has no
comparable restrictions on staggered boards. The Delaware GCL permits, but does
not require, a board of directors with staggered terms. The California Articles
do not provide for a staggered board. Similarly, the proposed structure of Zilog
Delaware will not include a staggered board. Although the Board does not
presently have an intention to propose a staggered board to shareholders, there
can be no assurance that the Board will not determine otherwise in the future.

Removal of Directors. Under the California GCL, a director or the entire
board of directors may be removed with or without cause by the affirmative vote
of the holders of a majority of shares then entitled to vote; provided, however,
that if less than the entire board of directors is to be removed, no director
may be removed without cause if the shares voted against such removal (or not
consenting in writing to such removal) would be sufficient to elect the director
or directors in an election of the full authorized number of directors involving
cumulative voting by shareholders. Under the California GCL, a director may also
be removed for cause by the superior court in a suit by shareholders holding at
least 10% of the outstanding shares.

Similarly, under the Delaware GCL one or more directors of a corporation
without a staggered board of directors can be removed with or without cause by
the holders of a majority of shares then entitled to vote in an election of
directors; provided, however, that if cumulative voting is available, if less
than the entire board of directors is to be removed, no director may be removed
without cause if the shares voted against such removal would be sufficient to
elect the director or directors in an election of the full authorized number of
directors involving cumulative voting by stockholders. In the instance of a
staggered board, the Delaware GCL provides that, unless otherwise provided in
the certificate of incorporation, directors of a corporation may be removed only
for cause by the holders of a majority of the shares then entitled to vote in an
election of directors. The term "cause" is not defined in the Delaware GCL or in
the Delaware Certificate. Consequently, in the event that Zilog Delaware elects,
in the future, to have a staggered board and an issue arises regarding the
removal of directors, questions concerning the legal standard for "cause" may
have to be judicially determined.

Loans to Officers and Employees. Under the Delaware GCL, a corporation may
make loans to, or guarantee the obligations of, or otherwise assist, its
officers or other employees and those of its subsidiaries (including any officer
or employee who is a director of the corporation or its subsidiary) when such
action, in the judgment of the corporation's board of directors, may reasonably
be expected to benefit the corporation. In contrast, the California GCL provides
that, subject to certain exceptions, a corporation may not make any such loan or
guarantee to or for the benefit of any officer or director of a corporation or
its parent, unless approved by a majority of its shareholders or, in the case of
companies having outstanding shares held of

25
<PAGE> 28

record by 100 or more persons, unless a bylaw provision adopted by the
affirmative vote of the majority of the outstanding shares entitled to vote
thereon authorizes the disinterested directors alone to approve such loan or
guarantee and such directors determine that such loan or guarantee may
reasonably be expected to benefit the corporation. The Company is not aware of
any plans for activities in this regard which the Board would lack the authority
to approve under California law but could approve under Delaware law.

Voting by Ballot. California law grants to each shareholder the right to
require a vote by written ballot for the election of directors at a shareholder
meeting. Under Delaware law this right may be restricted if so provided in the
certificate of incorporation. The Delaware Certificate does not place any
restriction on the right of stockholders to require a vote by written ballot.

APPLICATION OF THE CALIFORNIA GCL TO DELAWARE CORPORATIONS

Under Section 2115 of the California GCL ("Section 2115"), certain foreign
corporations (i.e., corporations not organized under California law) are placed
in a special category if they have characteristics of ownership and operation
which indicate that they have significant contacts with California. So long as a
Delaware or other foreign corporation is in this special category, and it does
not qualify for one of the statutory exemptions, Section 2115 purports to
subject it to a number of key provisions of the California GCL applicable to
corporations incorporated in California. Among the more important provisions are
those relating to the election and removal of directors, cumulative voting,
restrictions relating to classified boards of directors, standards of liability
and indemnification of directors, distributions, dividends and repurchases of
shares, shareholder meetings, approval of certain corporate transactions,
dissenters' and appraisal rights and inspection of corporate records. See
"Certain Significant Differences in Corporate Governance" and "Other Significant
Differences Between the Corporation Laws of California and Delaware" above.

Saliently, an exemption from Section 2115 is provided for "Listed
Corporations" (as defined above). Following the Reincorporation, the
stockholders of the Company will automatically become stockholders of Zilog
Delaware and the Zilog Delaware Common Stock will likely be traded without
interruption on the NYSE. Accordingly, the Board of Directors believes that
Zilog Delaware will be exempt from Section 2115.

FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION

The following is a summary of certain of the material anticipated federal
income tax consequences under current law relating to the merger of the Company
into Zilog Delaware (the "Merger"). The following discussion does not purport to
deal with all aspects of federal income taxation that may be applicable to
specific shareholders.

EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISORS TO
DETERMINE THE PARTICULAR FEDERAL TAX CONSEQUENCES TO SUCH SHAREHOLDER OF THE
MERGER, AS WELL AS THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND
OTHER LAWS.

The Company believes that, for federal income tax purposes, the Merger will
constitute a tax-free reorganization under Section 368(a)(1)(F) of the Internal
Revenue Code of 1986, as amended. Accordingly, the Company believes that the
Merger and the conversion of shares of the Company's Common Stock into shares of
Zilog Delaware Common Stock will not be a taxable transaction to the
shareholders, the Company or Zilog Delaware. Each shareholder's tax basis in his
or her shares of the Zilog Delaware Common Stock received in the Merger will be
equal to such shareholder's tax basis in the shares of the Company's Common
Stock held immediately prior to the effectiveness of the Merger; and his or her
holding period of such shares of Zilog Delaware Common Stock will include the
holding period of such shares of the Company's Common Stock, provided such
shares were held as a capital asset at the time of the effectiveness of the
Merger.

BOARD RECOMMENDATION AND VOTE REQUIRED

The affirmative vote of a majority of the outstanding shares of the
Company's Common Stock is required for approval of the Reincorporation. A vote
for the Reincorporation will constitute specific approval of the

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<PAGE> 29

Merger Agreement and all other transactions and proceedings related to the
Reincorporation, including the assumption by Zilog Delaware of all leases, stock
options, warrants, employment agreements and other obligations of the Company.

TIRE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
REINCORPORATION. An abstention or the failure of a broker or other nominee to
vote shares held of record will have the same effect as a vote against the
proposal.

SHAREHOLDER PROPOSALS

To be considered for presentation at the 1998 Annual Meeting of
Shareholders, a shareholder proposal must be received at the offices of the
Company not later than December 4, 1997.

OTHER MATTERS

Management knows of no other business which will be presented for
consideration at the meeting. If any other business is properly brought before
the meeting, it is intended that proxies in the enclosed form will be voted in
respect thereof at the proxy holders' discretion, upon management's direction.

Whether or not you intend to be present at this meeting, you are urged to
return your proxy promptly.

By order of the Board of Directors,

Richard R. Pickard
Secretary

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<PAGE> 30

ANNEX A

AGREEMENT OF MERGER AND PLAN OF REORGANIZATION

THIS AGREEMENT OF MERGER AND PLAN OF REORGANIZATION ("Agreement") dated as
of March , 1997 by and between ZILOG, INC., a California corporation (the
"California Company") and ZILOG, INC., a Delaware corporation (the "Delaware
Company"),

WITNESSETH:

WHEREAS, the California Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of California and, on
the date of this Agreement, has authority to issue Seventy-Five Million
(75,000,000) shares of Common Stock, without par value, of which
( ) shares are issued and outstanding and One Hundred Ninety (190,000)
shares of Preferred Stock, without par value, of which ( )
shares are issued and outstanding; and

WHEREAS, the Delaware Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and, on
the date of this Agreement, has authority to issue Seventy-Five Million
(75,000,000) shares of Common Stock, $.01 par value, of which
( ) shares are issued and outstanding and One Hundred Ninety (190,000)
shares of Preferred Stock, $.01 par value, of which ( )
shares are issued and outstanding; and

WHEREAS, upon the effectiveness of the Merger, all of the outstanding
Common Stock of the California Company will be converted into Common Stock of
the Delaware Company; and

WHEREAS, the respective Boards of Directors of the California Company and
the Delaware Company have determined that it is advisable and in the best
interests of each of such corporations that the California Company merge into
the Delaware Company under and pursuant to the General Corporation Laws of
Delaware and California and upon the terms and subject to the conditions
provided in this Agreement for the purpose of effecting a reincorporation of the
California Company in the State of Delaware in a transaction qualifying as a
reorganization within the meaning of Section 368(a)(1)(F) of the Internal
Revenue Code and have, by resolutions duly adopted, approved this Agreement and
directed that it be submitted to a vote of their respective shareholders and
executed by the undersigned officers:

NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby promise and agree that
California Company shall merger with and into Delaware Company Acquisition on
the following terms, conditions and other provisions:

ARTICLE 1

DEFINITIONS

When used in this Agreement (and any Exhibit in which such terms are not
otherwise defined) the following terms shall have the following meanings,
respectively:

1.1 "California Common Stock" shall mean shares of Common Stock, without
par value, of the California Company.

1.2 "California GCL" shall mean the California General Corporation Law.

1.3 "Delaware Common Stock" shall mean shares of Common Stock, par value
$.01 per share, of the Delaware Company.

1.4 "Delaware GCL" shall mean the Delaware General Corporation Law.

1.5 "Effective Time" shall mean the date and time when the Merger shall
become effective, in accordance with Section 2.1.

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1.6 "Merger" shall mean the merger of the California Company into the
Delaware Company.

1.7 "Surviving Corporation" shall mean the Delaware Company from and after
the Effective Time.

ARTICLE 2

MERGER

2.1 Filings and Effectiveness. The Merger shall become effective when the
following actions shall have been completed:

(i) This Agreement and the Merger shall have been adopted and approved
(a) in accordance with the California GCL by the shareholders of the
California Company and (b) in accordance with the Delaware GCL by the
California Company, as the sole stockholder of the Delaware Company and;

(ii) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof;

(iii) An executed Certificate of Merger or an executed counterpart of
this Agreement shall have been filed with the Secretary of State of the
State of Delaware; and

(iv) An executed Certificate of Merger or an executed counterpart of
this Agreement meeting the requirements of the California GCL shall have
been submitted for filing with the Secretary of State of the State of
California.

2.2 Merger. At the Effective Time, the Merger shall become effective under
Section 252 of the Delaware GCL and Section 1108(d) of the California GCL, and
the California Company shall merge into the Delaware Company, the separate
existence of the California Company shall cease, and the Delaware Company shall
continue in existence under the Delaware GCL.

2.3 Effects. At the Effective Time:

(i) the separate existence of the California Company shall cease and
the California Company shall be merged into the Delaware Company;

(ii) the Certificate of Incorporation of the Delaware Company shall
continue as the Certificate of Incorporation of the Surviving Corporation
until changed or amended as provided by law;

(iii) the bylaws of the Delaware Company shall continue as the bylaws
of the Surviving Corporation until amended as provided therein;

(iv) the directors of the California Company in office on the
Effective Date shall be and continue as directors of the Surviving
Corporation until their successors are elected in accordance with the
Certificate of Incorporation and the bylaws of the Surviving Corporation
and are duly qualified;

(v) each officer of the California Company in office on the Effective
Date shall be and continue as an officer of the Surviving Corporation and,
until their successors are elected or appointed in accordance with the
bylaws of the Surviving Corporation and are duly qualified, such officers
shall hold the office in the same capacity of the Surviving Corporation
which they held before the Merger;

(vi) each share of California Common Stock outstanding immediately
prior to the Effective Time shall be converted into one share of Delaware
Common Stock pursuant to Article 3 below; and

(vii) without further transfer, act or deed, the separate existence of
the California Company shall cease and the Surviving Corporation shall
possess all the rights, privileges, powers and franchises of a public as
well as of a private nature, and shall be subject to all the restrictions,
disabilities and duties of the California Company; and each and all of the
rights, privileges, immunities, powers and franchises of the California
Company, and all property, real, personal and mixed, and all debts due to
the California Company on whatever account, stock subscriptions and other
things in action or belonging to the California Company shall be vested in
the Surviving Corporation; and all property, rights, privileges,

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powers and franchises, and each and every other interest of the California
Company shall be thereafter as effectually the property of the Surviving
Corporation as they were of the California Company; and the title to any
real estate vested by deed or otherwise, under the laws of the States of
Delaware or California or of any other jurisdiction, in the California
Company shall not revert or be in any way impaired by reason of the Merger;
but all rights of creditors of the California Company and all liens upon
any property of the California Company shall be preserved unimpaired and
all debts, liabilities and duties of the California Company shall
thenceforth attach to the Surviving Corporation and may be enforced against
it to the same extent as if such debts, liabilities and duties had been
incurred or contracted by it.

2.4 Further Assurances. The California Company agrees that if, at any
time, or from time to time, after the Effective Time, the Surviving Corporation
shall consider or be advised that any further deeds, assignments or assurances
are necessary or desirable to vest, perfect or confirm in the Surviving
Corporation title to any property, rights, privileges, immunities, powers or
franchises of the California Company, the Surviving Corporation and its proper
officers and directors may execute and deliver all such proper deeds,
assignments and assurances and do all other things necessary or desirable to
vest, perfect or confirm title to such property, rights, privileges, immunities,
powers or franchises in the Surviving Corporation and otherwise to carry out the
purposes of this Agreement, in the name of the California Company or otherwise.

ARTICLE 3

CONVERSION OF SHARES

3.1 Conversion of Shares. At the Effective Time, the California Common
Stock shall be converted into Delaware Common Stock as follows:

(i) each share of California Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into one
share of Delaware Common Stock;

(ii) each share of Delaware Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger, be
retired and cease to exist and certificates representing such shares shall
be canceled and no shares shall be issued in the Merger in respect thereof;
and

(iii) each share of Delaware Common Stock will continue to be quoted
on the New York Stock Exchange ("NYSE") under the symbol "ZLG" without
interruption, as shares of the California Common Stock now quoted and
traded.

3.2 Stock Certificates. At and after the Effective Time, all of the
outstanding certificates which immediately prior to the Effective Time represent
shares of California Common Stock shall be deemed for all purposes to evidence
ownership of, and to represent, shares of Delaware Common Stock into which the
shares of California Common Stock formerly represented by such certificates have
been converted as provided in this Agreement. The registered owner on the books
and records of the Delaware Company or its transfer agents of any such
outstanding stock certificate shall, until such certificate shall have been
surrendered for transfer or otherwise accounted for to the Delaware Company or
its transfer agents, have and be entitled to exercise any voting and other
rights with respect to, and to receive any dividends and other distributions
upon, the shares of Delaware Common Stock evidenced by such outstanding
certificate as above provided.

3.3 Stock Options. Each right or option to purchase or acquire shares of
California Common Stock granted under the California Company's Stock
Plan (the "Plan") which is outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become a right or option to purchase or acquire
the same number of shares of Delaware Common Stock at the same option price per
share, and upon the same terms and subject to the same conditions as set forth
in the Plan, as in effect at the Effective Time. The same number of shares of
Delaware Common Stock shall be reserved for purposes of the Plan as is equal to
the number of shares of California Common Stock so reserved as of the Effective
Time. As of the Effective Time, the Delaware

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<PAGE> 33

Company hereby assumes the Plan and all obligations of the California Company
under the Plan including the outstanding options and rights granted pursuant to
the Plan.

3.4 Validity of Delaware Common Stock. All shares of Delaware Common Stock
into which California Common Stock are to be converted pursuant to the Merger
shall not be subject to any statutory or contractual preemptive rights, shall be
validly issued, fully paid and nonassessable and shall be issued in full
satisfaction of all rights pertaining to such California Common Stock.

3.5 Rights of Former Holders. From and after the Effective Time, no holder
of certificates which evidenced California Common Stock immediately prior to the
Effective Time shall have any rights with respect to the shares formerly
evidenced by those certificates, other than to receive the shares of Delaware
Common Stock into which such California Common Stock shall have been converted
pursuant to the Merger.

ARTICLE 4

COVENANTS TO BE PERFORMED PRIOR TO CLOSING DATE

4.1 Consents. Each of the California Company and the Delaware Company
shall use its best efforts to obtain the consent and approval of each person
(other than shareholders of the California Company in their capacities as such)
whose consent or approval shall be required in order to permit consummation of
the Merger.

4.2 Governmental Authorizations. Each of the California Company and the
Delaware Company shall cooperate in filing any necessary reports or other
documents with any federal, state, local or foreign authorities having
jurisdiction with respect to the Merger.

ARTICLE 5

CONDITIONS

The obligations of the California Company and the Delaware Company to
consummate the Merger are subject to satisfaction of the following conditions:

5.1 Authorization. The holders of a majority of the voting power of the
California Company shall have approved and adopted this Agreement and the Merger
at a meeting of the shareholders. All necessary action shall have been taken to
authorize the execution, delivery and performance of this Agreement by the
California Company and the Delaware Company. The California Company and the
Delaware Company shall have full power and authority to consummate the Merger.

5.2 Consents and Approvals. All authorizations, consents and approvals
(contractual or otherwise) of any state, federal, local or foreign government
agency, regulatory body or official or any person (other than the California
Company or the Delaware Company) necessary for the valid consummation of the
Merger in accordance with this Agreement shall have been obtained and shall be
in full force and effect.

ARTICLE 6

MISCELLANEOUS

6.1 Waiver and Amendment. This Agreement may be amended by action of the
respective Boards of Directors of the California Company and the Delaware
Company without action by the shareholders or stockholders of the parties,
except that any amendment altering any terms of this Agreement if such
alteration would adversely affect the holders of any class or series of the
capital stock of the California Company or the Delaware Company must be approved
by a majority of the voting power of the California Company.

6.2 Termination. This Agreement may be terminated and the Merger and other
transactions provided for by this Agreement abandoned at any time prior to the
Effective Time, whether before or after adoption and approval of this Agreement
by the shareholders of the California Company, by action of the Board of

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Directors of the California Company if the Board determines that the
consummation of the transactions contemplated by this Agreement would not, for
any reason, be in the best interests of the California Company and its
shareholders.

6.3 No Waiver. No waiver by any party of any condition, or the breach of
any term or covenant contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be a further or
continuing waiver of any such condition or breach or a waiver of any other
condition or breach of any other term or covenant contained in this Agreement.

6.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts
entered into and to be performed wholly within the State of California, except
to the extent that the laws of the State of Delaware are mandatorily applicable
to the Merger.

6.5 Approval of the California Company as the Sole Stockholder of the
Delaware Company. By its execution and delivery of this Agreement, the
California Company, as the sole stockholder of the Delaware Company, consents
to, approves and adopts this Agreement and approves the Merger, subject to the
approval and adoption of this Agreement by the holders of a majority of the
voting power of the California Company pursuant to Section 5.1. The California
Company agrees to execute such instruments as may be necessary or desirable to
evidence its approval and adoption of this Agreement and the Merger as the sole
stockholder of the Delaware Company.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.

CALIFORNIA COMPANY: ZILOG, INC., a California corporation

By:
------------------------------------
Its:
------------------------------------
Attest:

======================================================

DELAWARE COMPANY: ZILOG, INC., a Delaware corporation

By:
------------------------------------
Its:
------------------------------------
Attest:

======================================================

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<PAGE> 35

ANNEX B

CERTIFICATE OF INCORPORATION

ZILOG, INC.

The name of the Corporation is Zilog, Inc.

II.

The address of the registered office of the Corporation in the State of
Delaware is located at 30 The Green, in the City of Dover, Delaware, Kent
County. The name of the registered agent of the Corporation at such address is
The Corporation Trust Company.

III.

The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware as
the same exists or hereafter may be amended.

IV.

1. The Corporation is authorized to issue two classes of stock to be
designated Common Stock ("Common Stock") and Preferred Stock ("Preferred
Stock"), respectively. The total number of shares which the Corporation is
authorized to issue is Seventy-Five Million One Hundred and Ninety Thousand
(75,190,000). The number of shares of Common Stock authorized to be issued is
Seventy-Five Million (75,000,000), $0.01 par value. The number of shares of
Preferred Stock authorized to be issued is One Hundred Ninety Thousand
(190,000), $0.01 par value.

2. The Board of Directors is expressly authorized to provide for the issue,
in one or more series, of all or any shares of the Preferred Stock and, in the
resolution or resolutions providing for such issue, to establish for each such
series

(a) the number of its shares, which may thereafter (unless forbidden
in the resolution or resolutions providing for such issue) be increased or
decreased (but not below the number of shares of the series then
outstanding) pursuant to a subsequent resolution of the Board of Directors,

(b) the voting powers, full or limited, of the shares of such series,
or that such shares shall have no voting powers, and

(c) the designations, preferences and relative, participating,
optional or other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof.

3. In furtherance of the foregoing authority and not in limitation of it,
the Board of Directors is expressly authorized, in the resolution or resolutions
providing for the issue of a series of Preferred Stock,

(a) to subject the shares of such series, without the consent of the
holders of such shares, to being converted into or exchanged for shares of
another class or classes of stock of the Corporation, or to being redeemed
for cash, property or rights, including securities, all on such conditions
and on such terms as may be stated in such resolution or resolutions, and

B-1

<PAGE> 36

(b) to make any of the voting powers, designations, preferences,
rights and qualifications, limitations or restrictions of the shares of the
series dependent upon facts ascertainable outside this Certificate of
Incorporation.

4. Whenever the Board of Directors shall have adopted a resolution or
resolutions to provide for

(a) the issue of a series of Preferred Stock,

(b) a change in the number of authorized shares of a series of
Preferred Stock, or

(c) the elimination from this Certificate of Incorporation of all
references to a previously authorized series of Preferred Stock by stating
that none of the authorized shares of a series of Preferred Stock are
outstanding and that none will be issued,

The officers of the Corporation shall cause a certificate, setting
forth a copy of such resolution or resolutions and, if applicable, the
number of shares of stock of such series, to be executed, acknowledged,
filed and recorded, in order that the certificate may become effective in
accordance with the provisions of the General Corporation Law of the State
of Delaware, as from time to time amended. When any such certificate
becomes effective, it shall have the effect of amending this Certificate of
Incorporation, and whenever such term is used in this certificate, it shall
be deemed to include the effect of the provisions of any such certificate.

5. As used in this Article IV, the term "Board of Directors" shall include,
to the extent permitted by the General Corporation Law of the State of
Delaware, any duly authorized committee of the Board of Directors.

6. Holders of shares of Common Stock shall be entitled to receive such
dividends or distributions as are lawfully declared on the Common Stock;
to have notice of any authorized meeting of stockholders; to one vote
for each share of Common Stock on all matters which are properly
submitted to a vote of such stockholders; and, upon dissolution of the
Corporation, to share ratably in the assets thereof that may be
available for distribution after satisfaction of creditors and of the
preferences, if any, of any shares of Preferred Stock.

The name and mailing address of the incorporator are as follows:

Richard R. Pickard, Esq.
Zilog, Inc.
210 East Hacienda Avenue
Campbell, California 95008-6600

VI.

The number of Directors which constitute the whole Board of Directors of
the Corporation shall be as specified in the Bylaws of the Corporation.

VII.

In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, amend, rescind or repeal
the Bylaws of the Corporation.

VIII.

Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws of the Corporation may provide. The books of the
Corporation may be kept (subject to any provision contained in the General
Corporation Law of the State of Delaware) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of Directors
or in the Bylaws of the Corporation.

B-2

<PAGE> 37

IX.

1. Not less than twenty days' prior notice of any meeting of stockholders
of the Corporation and of any business to be conducted at such meeting, together
with the description of any action of stockholders to be taken at such meeting
and the recommendations of the several Directors with respect thereto, shall be
given in writing by the Corporation to each stockholder entitled to vote at such
meeting, and no business shall be conducted at such meeting except that which
has been set forth in the notice of such meeting.

2. Any action which may be taken by stockholders of the Corporation at an
annual or special meeting and which requires the approval of at least a majority
of

(a) the voting power of the securities of the Corporation present at
such meeting and entitled to vote on such action, or

(b) the shares of the Common Stock of the Corporation present at such
meeting,

may not be effected except at such an annual or special meeting by the vote
required for the taking of such action.

3. Any of the provisions of paragraph 1 or 2 of this Article IX may be
waived by the Board of Directors of the Corporation.

1. A Director's liability to the Corporation for breach of duty to the
Corporation or its stockholders shall be limited to the fullest extent permitted
by the laws of the State of Delaware as now in effect or hereafter amended. In
particular, no Director shall be liable to the Corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a Director,
except for liability (i) for any breach of the Director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware, as the same
exists or hereafter may be amended, or (iv) for any transaction from which the
Director derived an improper personal benefit.

2. Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director existing at the time of such repeal or modification.

3. If the General Corporation Law of the State of Delaware is amended to
authorize corporate action further eliminating or limiting the liability of
directors, then a Director, in addition to the circumstances in which he or she
is not now liable, shall be free of liability to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended.

XI.

This Corporation shall indemnify its officers, Directors, employees and
agents to the maximum extent permitted by the General Corporation Law of the
State of Delaware, which power to indemnify shall include, without limitation,
the power to enter into indemnification agreements and amendments thereto upon
such terms as the Board of Directors shall deem advisable.

B-3

<PAGE> 38

The undersigned, being the Incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, do make this certificate, hereby declaring and certifying under
penalties of perjury, under the laws of the State of Delaware, that this is my
act and deed and the facts herein stated are true, and accordingly have hereunto
set my hand this day of March, 1997.

--------------------------------------
Richard R. Pickard
Incorporator

B-4

<PAGE> 39
ZILOG, INC.

210 EAST HACIENDA AVENUE
CAMPBELL, CALIFORNIA 95008

Dear Shareholder: April 4, 1997

We cordially invite you to attend the Annual Meeting of Shareholders of
Zilog, Inc. to be held at 3:00 p.m. on May 21, 1997 at the Company headquarters
listed above.

At the Annual Meeting you are being asked to elect the members of the
Board of Directors, to confirm Ernst & Young LLP as the auditors for 1996 and
to authorize the Board of Directors and Officers of the Company to change the
State of Incorporation of the Company from California to Delaware. Please read
the proxy statement, which describes these proposals and presents other
important information. Please complete, sign and return your proxy promptly in
the enclosed envelope.

Whether or not you plan to attend the Annual Meeting, please return
your signed proxy as soon as possible.

Sincerely,

RICHARD R. PICKARD
Secretary

Please mark
[X] votes as in
this example.

<TABLE>
<CAPTION>
This Proxy when executed will be voted in the manner directed herein. If no direction is made this Proxy will
be voted FOR the election of Directors and FOR Proposal 2.
- --------------------------------------------------------------------------------------------------------------
The Board of Directors recommend a vote FOR Proposals 1 and 2.
- --------------------------------------------------------------------------------------------------------------
<S> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Selection of Independent Auditors. [ ] [ ] [ ]
Directors (See
reverse). FOR AGAINST ABSTAIN
3. Authorize Board of Directors and [ ] [ ] [ ]
Officers to change the state of
[ ]___________________________________ incorporation of the Company from
For all nominees except as noted above California to Delaware.
- --------------------------------------------------------------------------------------------------------------

MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT

Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as
such.

Signature: Date: Signature: Date:
----------------------------- ----------- ----------------------------- --------
</TABLE>
<PAGE> 40
[ZILOG LOGO]

COMPANY HIGHLIGHTS DURING 1996

* 1996 was an exciting year for Zilog, marked by expansion of revenues,
manufacturing facilities, geographic markets and products.

* Our success in understanding the "technology of the application"
positions Zilog as an expert partner for our customers.

* New opportunities for Zilog abound in the internet appliance
marketplace.

* Production yields at our manufacturing plants are the highest in the
Company history.

ZILOG, INC.

The undersigned, revoking previous proxies relating to these
shares, hereby acknowledges receipt of the Notice and Proxy Statement
dated April 4, 1997 in connection with the Annual Meeting to be held at
P 3:00 p.m. on May 21, 1997 at Zilog, Inc., 210 E. Hacienda Avenue,
Campbell, CA 95008 and hereby appoints Richard R. Pickard, Jill
R Sullivan, Theresa Hedger, and each of them (with full power to act
alone), the attorneys and proxies of the undersigned, with power of
O substitution to each, to vote all shares of the Common Stock of Zilog,
Inc. registered in the name provided herein which the undersigned is
X entitled to vote at the 1997 Annual Meeting of Shareholders, and at any
adjournment or adjournments thereof, with all the powers the undersigned
Y would have if personally present. Without limiting the general
authorization hereby given, said proxies are, and each of them is,
instructed to vote or act as follows on the proposals set forth in said
Proxy Statement.

Election of all 6 Directors (of if any nominee is
not available for election, such substitute as the
Board of Directors may designate). Nominees:

E.A. Sack, T.J. Connors, W.H. Janeway, H. Kressel,
L. Wangberg, R.M. White

SEE REVERSE SIDE. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS, JUST SIGN ON THE REVERSE SIDE. YOU NEED NOT
MARK ANY BOXES.

-----------
SEE REVERSE
SIDE
-----------