Exhibit 10.26
                                                                   -------------


                             2002 BONUS AGREEMENT


           This 2002 Bonus Agreement ("Agreement") is entered into as of
         February 7, 2003 (the "Execution Date"), by and between Perry Grace
("Executive") and ZILOG, INC. (the "Company"), a Delaware corporation, based
on the following:


         WHEREAS, under the terms of the Employment Agreement between the
Company and Executive dated May 14, 2002, the Executive has earned a bonus of
$64,755.00 for calendar year 2002 (the "2002 Bonus");


         WHEREAS, due to the current economic environment, the Company and
Executive wish to modify the terms relating solely to the payment of the 2002
Bonus;

         WHEREAS, the Compensation Committee of the Company has approved such
modification as reflected in this Agreement;

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

         5. 2002 BONUS PAYMENT.

                  1.1 Partial Payment. The Company shall pay one half of the
2002 Bonus, $32,377.50, to Executive no later than February 17, 2003.

                  1.2 Success Payment. If the Company achieves a minimum of
$32 million of net sales for any quarter in calendar year 2003 (the first such
quarter, the "Bonus Quarter"), then the Company shall pay to Executive within
4 weeks of the end of such quarter an amount equal to the sum of (a) the
second half of the 2002 Bonus, $32,377.50 (the "Second Half Bonus") and (b) an
amount equal to one quarter of the 2002 Bonus, $16,188.75 (in the aggregate,
the "Success Bonus Payment"). Subject to Section 1.3, if the Company never
achieves a minimum of $32 million of net sales for any quarter in 2003, then
the Second Half Bonus shall be forever forfeited by Executive and the Company
shall have no obligation to pay the Second Half Bonus. The Success Bonus
Payment shall be made even if Executive is not employed with the Company at
the time of the payment so long as Executive had been employed with the
Company during the whole Bonus Quarter.

                  1.3 Termination or Resignation. Notwithstanding anything in
this Agreement to the contrary, if Executive is terminated or resigns for any
reason during calendar year 2003 prior to any occurrence of the Bonus Quarter,
then the Company shall pay to Executive the Second Half Bonus ($32,377.50) on
the effective date of such termination or resignation.

         6.      GENERAL PROVISIONS.

                  6.1 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).

                  6.2 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.

                  6.3 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.

                  6.4 Entire Agreement. This Agreement constitutes 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.

                  6.5 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.

                  6.6 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.

                  6.7 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.

                  6.8 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.

                  6.9 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.

                  6.10 Mutual Agreement to Arbitrate. 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
2.8 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 2.2. 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
2.8 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)

                  2.12 Effective Date. The terms of this Agreement have been
approved by the Compensation Committee of the Company and this Agreement is
effective as of January 16, 2003.


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

ZILOG, INC.

By: ______________________________

Print Name: James M. Thorburn

Title: Chairman and CEO




______________________________________
Perry Grace