Zilog to appoint Riley principal to board as part of settlement

By Lisa Kerner

Charlotte, N.C., Aug. 8 - Zilog, Inc. and Riley Investment Management LLC entered into an agreement effectively ending their proxy dispute.

According to a Zilog statement, under the agreement:

• Zilog will increase the size of its board of directors to six, from five, divided evenly among its three classes;

• Zilog's board will appoint Riley senior investment analyst Eric Singer as a class III director and as a member of the compensation committee; and

• Zilog will include Singer in its proxy materials as a nominee for election to the board as a class III director at the annual meeting on Oct. 6.

Riley entities agreed to:

• Vote their shares in favor of Zilog's slate of nominees at the 2008 and 2009 annual meetings;

• Refrain from soliciting proxies in connection with those meetings; and

• Abide by certain confidentiality and standstill obligations through the completion of Zilog's 2009 annual meeting, including an agreement not to acquire total beneficial ownership of more than 13% of Zilog's outstanding common stock.

Zilog said Riley entities and their clients currently own 1,433,055 shares, or 8.5%, of the company.

"Through this agreement, Zilog and Riley will avoid a costly and disruptive proxy contest at a time when the company is exploring a full range of strategic alternatives to enhance shareholder value," Zilog president and chief executive officer Darin Billerbeck noted in the release.

In July Zilog announced it is evaluating strategic alternatives with the assistance of Oppenheimer & Co. Inc.

On July 7, Riley Investment Partners Master Fund, LP, a 7.8% shareholder, notified Zilog that it would seek to elect Riley principal John Ahn to Zilog's board as a class III director as well as amend Zilog's bylaws to allow for stockholders to fill a vacancy created by stockholder expansion of the board of directors or stockholder removal of directors, it was previously reported.

On Feb. 6, Riley said it was disappointed that Zilog rejected Universal Electronics Inc.'s bid to acquire the company in a deal that Riley would finance.

As previously noted, Zilog turned down Universal Electronics' unsolicited Jan. 18 offer of $4.50 cash per share.

Based in San Jose, Calif., Zilog is a supplier of eight-, 16- and 32-bit microcontroller and microprocessor system-on-a-chip products.

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