ZILOG INC
EXHIBIT 10.9
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<TYPE>EX-10
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<FILENAME>ex81361.txt
<DESCRIPTION>EXHIBIT 10.9
<TEXT>

                                                                Exhibit 10.9

                            EMPLOYMENT AGREEMENT


         This Employment Agreement ("Agreement") is entered into as of May
14, 2002 (the "Execution Date"), by and between Norman G. Sheridan
("Executive") and ZILOG, INC. (the "Company"), a Delaware corporation,
based on the following:


         WHEREAS, the Company desires to employ Executive to provide
personal services to the Company, and wishes to provide Executive with
certain compensation and benefits in return for his services;


         WHEREAS, Executive wishes to be employed by the Company and to
provide personal services to the Company in return for certain compensation
and benefits;

         NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, it is hereby agreed by and between the parties
hereto as follows:

         1.   EMPLOYMENT BY THE COMPANY.

              1.1 Title and Responsibilities. Subject to the terms set
forth herein, the Company agrees to employ Executive in the position of
Senior Vice President, System Development, and Executive hereby accepts
such employment effective on the date hereof (the "Effective Date"). During
his employment with the Company, Executive will devote his full time and
attention to the business of the Company, except as otherwise provided
herein, and shall do and perform all acts and things necessary to perform
his duties.

              1.2 Company Employment Policies. The employment relationship
between the parties shall be governed by the general employment policies
and procedures of the Company, including those relating to the protection
of confidential information and assignment of inventions, except that when
the terms of this Agreement differ from or are in conflict with the
Company's general employment policies or procedures, this Agreement shall
control.

         2.   COMPENSATION.

              2.1 Salary. Executive shall receive for services to be
rendered hereunder a base salary at an annualized rate of $210,000.00 (the
"Base Salary"), payable commencing on the Effective Date and in accordance
with the Company's customary payroll practices. The CEO will review
Executive's Base Salary on an annual basis.

              2.2 Incentive Bonus. Executive shall be eligible for a cash
bonus (the "Incentive Bonus") to be paid within 45 days after the end of
each fiscal year of the Company (or if the external auditors have not yet
delivered audited financials for the prior year, then within 5 days after
such delivery). All bonuses under this section will be calculated based on
straight-line increments between each of the EBITDA (as generally
determined by the Company) milestones. The milestones for the first two
years of this Agreement are as follows:

                  0% of annual salary will be paid for less than $18
                    million annual EBITDA
                  20% of annual salary will be paid on $18 million
                    annual EBITDA
                  60% of annual salary will be paid on $34 million or
                    higher annual EBITDA

After the first two years of this Agreement, the milestones shall be as set
by the Board of Directors in their sole discretion.

              2.3 Stock Purchase.

                  (a) Stock purchase upon employment. On or about the
effective date of the Plan of Reorganization (the "Plan Effective Date"),
the Company will grant Executive 50,000 shares of Restricted Stock subject
to the terms and conditions and pursuant to the ZiLOG, Inc. 2002 Omnibus
Stock Incentive Plan attached hereto as Exhibit A (the "Omnibus Plan") and
any applicable Award Agreement (as defined in the Omnibus Plan). Executive
shall receive 100% of such stock on the Effective Date (or as soon
thereafter as determined by the Company, the "Grant Date"). The
restrictions on the Restricted Stock shall lapse on 25% of such stock on
the Grant Date and on an additional 25% of such stock on each of the first
three anniversaries of the Effective Date.

                  (b) EBITDA linked stock options. On or about the Plan
Effective Date, the Company will grant Executive options to purchase 30,000
shares of Common Stock exercisable at $2.76 subject to the terms and
conditions and pursuant to the Omnibus Plan and any applicable Award
Agreements.

                  (c) Stock options. The Company will grant Executive
options to purchase 17,000 shares of Common Stock exercisable at $2.76
subject to the terms and conditions and pursuant to the Omnibus Plan and
any applicable Award Agreements.

                  (d) Restrictions on Stock and Stock Options. Any stock
granted to Executive under (a), (b) or (c) above is subject to the
restrictions contained in the Omnibus Plan and any applicable Award
Agreement.

              2.4 Company Benefits.

                  (a) Standard Benefits. Executive shall be entitled to all
rights and benefits for which he is eligible under the terms and conditions
of the standard Company benefits and compensation plans which may be in
effect from time to time and provided by the Company to its executives.

                  (b) Vacation. Executive will be entitled to three (3)
weeks' vacation per year at such times as may be mutually agreed by
Executive and the Company. In no event shall Executive be eligible to
accrue any more than four weeks' vacation time at any point in time.

                  (c) Business Expenses. The Company will reimburse
Executive for all reasonable business expenses actually incurred by
Executive. Executive shall provide appropriate supporting documentation of
all such expenses in a form reasonably acceptable to the Company.

         3.   CONFIDENTIAL INFORMATION. Executive shall sign and abide by the
Company's Employee Proprietary Rights and Non-Disclosure Agreement (the
"Confidentiality Agreement") and the Company's Policy Statement on
Conflicts of Interest (the "Policy Statement").

         4.   TERMINATION OF EMPLOYMENT.

              4.1 Termination With or Without Cause.

                  (a) Term of Employment. Subject to Section 1.1, the
initial period of employment shall be two years commencing on the Effective
Date and shall be automatically renewed for additional terms of one year
unless the Company or Executive provides written notice of no less than six
months prior to the end of the relevant term of its intent not to renew.
Notwithstanding the foregoing, the Company shall have the right to
terminate Executive's employment with the Company at any time with or
without Cause (as defined below), and Executive shall have the right to
terminate his employment with the Company for or without Good Reason (as
defined below), subject to the following limitations.

                      (i) Definition of Cause. For purposes of this
Agreement, "Cause" shall mean one or more of the following: (a) Executive's
material breach of this Agreement; (b) Executive's failure to reasonably
and substantially perform his duties under this Agreement; (c) Executive's
willful misconduct or gross negligence which materially injures the
Company; (d) Executive's conviction or plea of nolo contendere to (i) a
felony, or (ii) other serious crime involving moral turpitude. In all of
the foregoing cases, the Company shall provide written notice to Executive
indicating in reasonable detail the event or circumstances that constitute
Cause under this Agreement, and, if such breach or failure is reasonably
susceptible to cure, the Company will provide Executive with thirty days to
cure such breach or failure prior to termination for Cause.

                      (ii) Definition of Good Reason. For purposes of this
Agreement, "Good Reason" shall mean a material diminution in Executive's
duties and responsibilities under this Agreement. Executive shall provide
written notice to Company indicating in reasonable detail the event or
circumstances that constitute Good Reason under this Agreement, and
Executive will provide the Company with thirty days to cure such diminution
prior to termination for Good Reason.

                      (iii) Termination for Death or Disability. The
Company may terminate Executive's employment due to Executive's death or
"Disability." For purposes of this Agreement, "Disability" shall mean any
illness, disability or other incapacity renders Executive physically or
mentally unable regularly to perform his duties hereunder for a period in
excess of sixty (60) consecutive days or more than ninety (90) days in any
consecutive twelve (12) month period. The Board shall make a good faith
determination of whether Executive is physically or mentally unable to
regularly perform his duties, subject to its review and consideration of
any physical and/or mental health information provided to it by Executive
as determined by a physician reasonably acceptable to the Company.

                  (b) Termination for Cause. If the Company terminates
Executive's employment at any time for Cause or as a result of Executive's
death or Disability, Executive's salary shall cease on the date of
termination or Executive resigns without Good Cause, Executive will not be
entitled to severance pay, pay in lieu of notice or any other such
compensation, other than payment of accrued Base Salary and such other
benefits as expressly required in such event by applicable law or the terms
of any applicable Company benefit plans. All stock options and other stock
awards held by Executive shall cease vesting as of the date of termination,
and shall be exercisable thereafter only pursuant to the terms of the
applicable stock option plans and agreements.

                  (c) Termination without Cause or Resignation for Good
Reason. If the Company terminates Executive's employment at any time
without Cause, or Executive resigns at any time for Good Reason, the
Company shall pay to Executive, as sole and complete compensation100% of
Executive's then current Base Salary. The Company shall make such payments
to Executive within 30 days after such termination (including any cure
periods if Executive has resigned for Good Reason). The Company also shall
continue to provide medical benefits comparable to the benefits Executive
received while employed by Company for one year; provided, however, that
the Company's obligation to provide such medical benefits shall cease if
Executive becomes eligible for coverage under another employer's medical
benefits.

         5.   CHANGE OF CONTROL.

              5.1 Definition. For purposes of this Agreement, Change of
Control means the occurrence of any of the following: (i) a dissolution,
liquidation or sale of all or substantially all of the assets of the
Company; (ii) the consummation of a merger or consolidation of the Company
or any direct or indirect subsidiary of the Company with any other
corporation or other entity, other than a merger or consolidation that
results in the voting securities of the Company outstanding immediately
prior to such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with the ownership
of any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any subsidiary of the Company, at least 50%
of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such
merger or consolidation; (iii) from and after the Listing Date (as defined
in the Omnibus Plan), the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, or any comparable successor provisions (excluding any employee
benefit plan, or related trust, sponsored or maintained by the Company or
any affiliate of the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, or comparable successor rule) of securities of the Company
representing at least 50% of the combined voting power entitled to vote in
the election of directors. Notwithstanding the foregoing, prior to the Plan
Effective Date, issuance of stock to the holders of Senior Notes (as
defined in the Reorganization Plan) pursuant to the Reorganization Plan or
any other transaction which is consummated without the approval of the
holders of Senior Notes shall not be deemed to constitute, for purposes of
this Agreement, a Change of Control.

              5.2 Change of Control Termination. In the event Executive
decides to terminate his employment with the Company, with or without Good
Reason, within thirty days following a Change of Control, the Company shall
pay Executive, within 30 days after such termination, an amount equal to
his then current annual Base Salary. The Company also shall continue to
provide medical benefits comparable to the benefits Executive received
while employed by the Company for one year, provided, however, that the
Company's obligation to provide such medical benefits shall cease if
Executive becomes eligible for coverage under another employer's medical
benefits. The Company also shall accelerate the vesting on all stock, stock
options and other stock awards held by Executive so that Executive is fully
vested.

         6.   NONSOLICITATION. In the event Executive's employment with the
Company is terminated by the Company or the Executive, with or without
Cause or Good Reason, then for eighteen (18) months immediately following
the termination date, Executive shall not, without first obtaining the
prior written approval of the Company, directly or indirectly solicit,
induce, persuade or entice, or attempt to do so, or otherwise cause, or
attempt to cause (i) any employee or independent contractor of the Company
to terminate his or her employment or contracting relationship in order to
become an employee, or independent contractor to or for any person or
entity, or (ii) any actual customer at the time of employment termination
to discontinue or otherwise alter its relationship with the Company.

         7.   CONFIDENTIALITY. Executive shall keep the existence and terms
of this Agreement confidential, provided that he may discuss this Agreement
with his family members, counsel and, financial advisors, or disclose it as
required by law.

         8.   GENERAL PROVISIONS.

              8.1 Notices. Any notices provided hereunder must be in
writing and shall be deemed effective upon the earlier of personal delivery
(including, personal delivery by facsimile transmission), delivery by
express delivery service (e.g. Federal Express), or the third day after
mailing by first class mail, to the Company at its primary office location
and to Executive at his address as listed on the Company payroll (which
address may be changed by written notice).

              8.2 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other
jurisdiction, but such invalid, illegal or unenforceable provision will be
reformed, construed and enforced in such jurisdiction so as to render it
valid, legal, and enforceable consistent with the intent of the parties
insofar as possible.

              8.3 Waiver. If either party should waive any breach of any
provisions of this Agreement, he or it shall not thereby be deemed to have
waived any preceding or succeeding breach of the same or any other
provision of this Agreement.

              8.4 Entire Agreement. This Agreement, the Omnibus Plan, the
Confidentiality Agreement, and the Policy Statement constitute the entire
agreement between Executive and the Company regarding the subject matter
hereof and it supersedes any prior agreement, promise, representation,
written or otherwise, between Executive and the Company with regard to this
subject matter. It is entered into without reliance on any agreement, or
promise, or representation, other than those expressly contained or
incorporated herein, and it cannot be modified or amended except in a
writing signed by Executive and a duly authorized officer of the Company.

              8.5 Counterparts. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement. Signatures transmitted via facsimile shall be deemed the
equivalent of originals.

              8.6 Headings and Construction. The headings of the sections
hereof are inserted for convenience only and shall not be deemed to
constitute a part hereof or to affect the meaning thereof. For purposes of
construction of this Agreement, any ambiguities shall not be construed
against either party as the drafter.

              8.7 Successors and Assigns. This Agreement is intended to
bind and inure to the benefit of and be enforceable by Executive, the
Company and their respective successors, assigns, heirs, executors and
administrators, except that Executive may not assign any of his duties
hereunder and he may not assign any of his rights hereunder without the
written consent of the Company.

              8.8 Attorneys' Fees. If either party hereto brings any
action, suit or other proceeding to interpret this Agreement or to
determine or enforce his or its rights hereunder, the prevailing party in
any such action shall be entitled to recover his or its reasonable
attorneys' fees (including in-house counsel fees) and costs incurred in
connection with such action to the extent that a party prevails.

              8.9 Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement shall be governed by the law
of the State of California as applied to contracts made and to be performed
entirely within California.

              8.10 Injunctive Relief; Specific Performance. Executive
hereby expressly agrees and acknowledges that an actual or threatened
breach by Executive of any of Executive's obligations under Sections 3, 6
and 7 hereof would result in severe and irreparable injury to the Company,
which injury could not be adequately compensated by an award of money
damages, and Executive therefore agrees and acknowledges that the Company
shall be entitled to injunctive relief in the event of any such breach of
this Agreement, or to enjoin or prevent such a breach, notwithstanding
Section 8.11,and that such injunctive relief may be sought from any court
or tribunal of competent jurisdiction.

              8.11 Mutual Agreement to Arbitrate. Except for an action
exclusively seeking injunctive relief, Executive and the Company each
hereby agree to use final and binding arbitration to resolve any and all
disputes (each, an "Arbitrable Dispute"), which they may have with one
another or with any affiliate of one another. Except as set forth in
Section 8.10, this arbitration agreement applies to all matters relating to
this Agreement, Executive's employment with and/or termination from the
Company, and any claims or controversies arising out of or relating to
Executive's employment, including, but not limited to, disputes about the
validity, interpretation or effect of this Agreement, or alleged violations
of it, and further including all claims arising out of any alleged
discrimination, harassment, retaliation or breach of any state or federal
equal employment opportunity laws, including, but not limited to, those
claims covered by the California Fair Employment and Housing Act, Title
VII, 42 U.S.C. Section 2000e et seq., the Federal Age Discrimination in
Employment Act, the Fair Labor Standards Act and the Americans with
Disabilities Act.

              The arbitration will take place in San Francisco, California
(unless the parties mutually agree to an alternative venue), before a
single experienced employment arbitrator licensed to practice law in
California and selected in accordance with the then-current arbitration
rules and procedures for employment disputes governing arbitrations
administered by the Judicial Arbitration and Mediation Service (the
"Rules"). The arbitration shall allow for discovery sufficient to
adequately arbitrate any statutory claims, including access to essential
documents and witnesses, and provided, further, that the Rules shall be
modified by the arbitrator as to the extent necessary to be consistent with
applicable law. The arbitration will be conducted in accordance with such
Rules, and, to the extent required by California law, the Company shall pay
the administrative costs and arbitrator's fees associated with certain
claims that are the subject of arbitration. Subject to Section 8.8 hereof,
it is understood, however, that Executive shall bear his own attorney's,
expert, witness and other fees associated with the arbitration.

              The arbitrator may not modify or change this Agreement in any
way, unless any provision is found to be unenforceable, in which case the
arbitrator may sever it in accordance with the terms of Section 8.2. The
remedies available in arbitration shall be identical to those allowed at
law. The arbitrator shall be allowed to award attorneys' fees pursuant to
Section 8.8 and in accordance with applicable law.

              The parties understand and agree that the arbitrator's
decision shall be in writing with sufficient explanation to allow for such
meaningful judicial review as may be permitted by law, and that such
decision shall be final and binding. The arbitrator shall be required to
follow applicable law. Executive and the Company understand that, by
entering into this Agreement, they each are waiving their respective rights
to have an Arbitrable Dispute adjudicated by a court or by a jury.
Executive hereby acknowledges by initialing this provision that Executive
has read and understood, and that Executive expressly agrees to be bound
by, the terms of this Section 8.11. __________ (Initials)

              8.12 Assistance in Litigation. At all times during and after
the term of this Agreement, Executive will render assistance, advice and
counsel to the Company at its request regarding any matter, dispute or
controversy with which the Company may become involved and of which
Executive has or may have reason to have knowledge, information or
expertise. Such services will be without additional compensation. The
Company will reimburse Executive for his actual, reasonable travel
expenditures and other costs incurred in connection with such assistance,
upon submission of documentation in a form acceptable to the Company.

              8.13 Effective Date. This Agreement is subject to the
approval of the Board of Directors and shall be terminated immediately if
the currently contemplated plan of reorganization is not confirmed.




         IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the Effective Date above written.

ZILOG, INC.

By:   /s/ Gerald J. Corvino
   -----------------------------------------
Print Name: Gerald J. Corvino
Title: Executive Vice President, COO & CIO




/s/ Norman G. Sheridan
--------------------------------------------
Norman G. Sheridan

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