Exhibit 10.1
MICRO LINEAR CORPORATION
1991 STOCK OPTION PLAN
(as amended through February 24, 2006)
     1. Purposes of the Plan. The purposes of this Stock Option Plan are:

  º   to attract and retain the best available personnel for positions of
substantial responsibility,     º   to provide additional incentive to Employees
and Consultants, and     º   to promote the success of the Company’s business.

Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant. Stock
Purchase Rights may also be granted under the Plan.
     2. Definitions. As used herein, the following definitions shall apply:
          (a) “Administrator” means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.
          (b) “Applicable Laws” means the legal requirements relating to the
administration of stock option plans under state corporate and securities laws
and the Code.
          (c) “Board” means the Board of Directors of the Company.
          (d) “Code” means the Internal Revenue Code of 1986, as amended.
          (e) “Committee” means a Committee appointed by the Board in accordance
with Section 4 of the Plan.
          (f) “Common Stock” means the Common Stock of the Company.
          (g) “Company” means Micro Linear Corporation, a Delaware corporation.
          (h) “Consultant” means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services and who is compensated
for such services, provided that the term “Consultant” shall not include
Directors who are paid only a director’s fee by the Company or who are not
compensated by the Company for their services as Directors.

 

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          (i) “Continuous Status as an Employee or Consultant” means the
employment or consulting relationship is not interrupted or terminated by the
Company, any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Board, including sick leave, military leave, or any
other personal leave; provided, however, that for purposes of Incentive Stock
Options, any such leave may not exceed ninety (90) days, unless reemployment
upon the expiration of such leave is guaranteed by contract (including certain
Company policies) or statute; or (ii) transfers between locations of the Company
or between the Company, its Parent, its Subsidiaries or its successor.
          (j) “Director” means a member of the Board.
          (k) “Disability” means total and permanent disability as defined in
Section 22(e)(3) of the Code.
          (l) “Employee” means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director’s fee by the Company shall be
sufficient to constitute “employment” by the Company.
          (m) “Exchange Act” means the Securities Exchange Act of 1934, as
amended.
          (n) “Fair Market Value” means, as of any date, the value of Common
Stock determined as follows:
               (i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation (“NASDAQ”) System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the last market
trading day prior to the day of determination, as reported in the Wall Street
Journal or such other source as the Administrator deems reliable;
               (ii) If the Common Stock is quoted on the NASDAQ System (but not
on the Nasdaq National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and high asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Administrator deems reliable; and
               (iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
               Notwithstanding the foregoing, for purposes of setting the
exercise price of a stock option at the fair market value of the Common Stock to
comply with the requirements of Section 409A or 422 of the Code, as applicable
to the stock option, the Administrator may adopt and

 

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apply any valuation method to determine the Fair Market Value of the Common
Stock which complies with the requirements of Section 409A of the Code or
Section 422 of the Code, based on guidance from the Internal Revenue Service.
          (o) “Fully Diluted Shares” means the number of Shares outstanding as
of January 1 of each year assuming (i) conversion of all securities and other
instruments convertible into Common Stock and (ii) exercise of all outstanding
options, warrants, and other instruments exercisable for Common Stock or
preferred stock of the Company.
          (p) “Incentive Stock Option” means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
          (q) “Nonstatutory Stock Option” means an Option not intended to
qualify as an Incentive Stock Option.
          (r) “Notice of Grant” means a written notice evidencing certain terms
and conditions of an individual Option or Stock Purchase Right grant. The Notice
of Grant is part of the Option Agreement.
          (s) “Officer” means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
          (t) “Option” means a stock option granted pursuant to the Plan.
          (u) “Option Agreement” means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
          (v) “Option Exchange Program” means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
          (w) “Optioned Stock” means the Common Stock subject to an Option or
Stock Purchase Right.
          (x) “Optionee” means an Employee or Consultant or who holds an
outstanding Option or Stock Purchase Right.
          (y) “Parent” means a “parent corporation”, whether now or hereafter
existing, as defined in Section 424(e) of the Code.
          (z) “Plan” means this Micro Linear Corporation 1991 Stock Option Plan
as amended from time to time.

 

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          (aa) “Restricted Stock” means shares of Common Stock acquired pursuant
to a grant of Stock Purchase Rights under Section 11 below.
          (bb) “Restricted Stock Purchase Agreement” means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
          (cc) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
          (dd) “Share” means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
          (ee) “Stock Purchase Right” means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
          (ff) “Subsidiary” means a “subsidiary corporation”, whether now or
hereafter existing, as defined in Section 424(f) of the Code.
     3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 3,864,000 Shares of Common Stock plus an annual increase on
each of January 1, 1998 and January 1, 1999 equal to the lesser of (i) 750,000
shares or (ii) 4% percent of the Fully Diluted Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock. However, should the
Company reacquire Shares which were issued pursuant to the exercise of an Option
or Stock Purchase Right, such Shares shall not become available for future grant
under the Plan.
          If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, the unpurchased Shares which were subject
thereto shall become available for future grant under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, and the original purchaser of such
Shares did not receive any benefits of ownership of such Shares, such Shares
shall become available for future grant under the Plan. For purposes of the
preceding sentence, voting rights shall not be considered a benefit of Share
ownership.
     4. Administration of the Plan.
          (a) Procedure.
               (i) Multiple Administrative Bodies. The Plan may be administered
by different Committees with respect to different groups of Service Providers.

 

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               (ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
“performance-based compensation” within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more “outside
directors” within the meaning of Section 162(m) of the Code.
               (iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
               (iv) Other Administration. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.
          (b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
               (i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(n) of the Plan;
               (ii) to select the Consultants and Employees to whom Options and
Stock Purchase Rights may be granted hereunder;
               (iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof, are granted hereunder;
               (iv) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
               (v) to approve forms of agreement for use under the Plan;
               (vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or times when
Options or Stock Purchase Rights may be exercised (which may be based on
performance criteria), and any restriction or limitation, or any waiver of
forfeiture restrictions regarding any Option or Stock Purchase Right or the
shares of Common Stock relating thereto, based in each case on such factors as
the Administrator, in its sole discretion, shall determine;
               (vii) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option was granted;
               (viii) to construe and interpret the terms of the Plan;

 

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               (ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
               (x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
               (xi) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
               (xii) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by an Optionee
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable;
               (xiii) to institute an Option Exchange Program;
               (xiv) to determine the terms and restrictions applicable to
Options and Stock Purchase Rights and any Restricted Stock; and
               (xv) to make all other determinations deemed necessary or
advisable for administering the Plan.
          (c) Effect of Administrator’s Decision. The Administrator’s decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.
     5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. If otherwise eligible, an Employee or Consultant who has been
granted an Option or Stock Purchase Right may be granted additional Options or
Stock Purchase Rights.
     6. Limitations.
          (a) Each Option shall be designated in the Notice of Grant as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value:
               (i) of Shares subject to an Optionee’s incentive stock options
granted by the Company, any Parent or Subsidiary, which

 

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               (ii) become exercisable for the first time during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 6(a), incentive stock options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares shall be determined as of the time of grant.
          (b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee’s
employment or consulting relationship with the Company, nor shall they interfere
in any way with the Optionee’s right or the Company’s right to terminate such
employment or consulting relationship at any time, with or without cause.
          (c) The following limitations shall apply to grants of Options and
Stock Purchase Rights to Employees:
               (i) No Employee shall be granted, in any fiscal year of the
Company, Options and Stock Purchase Rights to purchase more than 250,000 Shares.
               (ii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company’s capitalization as described in
Section 13 hereof.
               (iii) If an Option or Stock Purchase Right is canceled in the
same fiscal year of the Company in which it was granted (other than in
connection with a transaction described in Section 13 hereof, the canceled
Option or Stock Purchase Right will be counted against the limit set forth in
Section 6(c)(i) hereof. For this purpose, if the exercise price of an Option or
Stock Purchase Right is reduced, the transaction will be treated as a
cancellation of the Option or Stock Purchase Right and the grant of a new Option
or Stock Purchase Right.
     7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
effective upon the earlier to occur of its adoption by the Board or its approval
by the shareholders of the Company as described in Section 19 of the Plan. It
shall continue in effect for a term of ten (10) years unless terminated earlier
under Section 15 of the Plan.
     8. Term of Option. The term of each Option shall be stated in the Notice of
Grant; provided, however, that the term shall be ten (10) years from the date of
grant or such shorter term as may be provided in the Notice of Grant. However,
in the case of an Incentive Stock Option granted to an Optionee who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Incentive Stock Option shall be five
(5) years from the date of grant or such shorter term as may be provided in the
Notice of Grant.
     9. Option Exercise Price and Consideration.
          (a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

 

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               (i) In the case of an Incentive Stock Option
                    (A) granted to an Employee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.
                    (B) granted to any Employee other than an Employee described
in paragraph (A) immediately above, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
               (ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
               (iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction.
          (b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
          (c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
               (i) cash,
               (ii) check,
               (iii) promissory note,
               (iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised,

 

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               (v) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price,
               (vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee’s participation
in any Company-sponsored deferred compensation program or arrangement;
               (vii) any combination of the foregoing methods of payment, or
               (viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
          10. Exercise of Option.
               (a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
               An Option may not be exercised for a fraction of a Share.
               An Option shall be deemed exercised when the Company receives:
(i) written notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 13 of the
Plan.
               Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
          (b) Termination of Employment or Consulting Relationship. In the event
an Optionee’s Continuous Status as an Employee or Consultant terminates (other
than upon the Optionee’s death or Disability), the Optionee may exercise his or
her Option, but only within such period of time as is determined by the
Administrator, and only to the extent that the Optionee was entitled to exercise
it at the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant). In the case of an
Incentive Stock Option, the

 

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           Administrator shall determine such period of time (in no event to
exceed ninety (90) days from the date of termination) when the Option is
granted. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
          Notwithstanding the above, in the event of an Optionee’s change in
status from Consultant or Director to Employee or Employee or Director to
Consultant, an Optionee’s Continuous Status as a Director or Consultant shall
not automatically terminate solely as a result of such change in status.
However, in such event, an Incentive Stock Option held by the Optionee shall
cease to be treated as an Incentive Stock Option and shall be treated for tax
purposes as a Nonstatutory Stock Option three months and one day following such
change of status from an Employee to a Consultant.
          (c) Disability of Optionee. In the event an Optionee’s Continuous
Status as an Employee or Consultant terminates as a result of the Optionee’s
Disability, the Optionee may exercise his or her Option, but only within twelve
(12) months from the date of such termination, and only to the extent that the
Optionee was entitled to exercise it at the date of such termination (but in no
event later than the expiration of the term of such Option as set forth in the
Notice of Grant). If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
          (d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee’s estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after death, the Optionee’s
estate or a person who acquired the right to exercise the Option by bequest or
inheritance does not exercise the Option within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.
     11. Stock Purchase Rights.
          (a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing, by means of a Notice of Grant, of the terms, conditions and
restrictions related to the offer, including the number of Shares that the
offeree shall be entitled to purchase, the price to be paid, and the time within
which the offeree must accept such offer, which shall in no event exceed six
(6) months from the date upon which the Administrator made the

 

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determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form determined by the
Administrator.
          (b) Repurchase Option. Unless the Administrator determines otherwise,
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser’s employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
          (c) Other Provisions. The Restricted Stock Purchase March 25, 1997
Agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its sole
discretion. In addition, the provisions of Restricted Stock Purchase Agreements
need not be the same with respect to each purchaser.
          (d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
     12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
     13. Adjustments Upon Changes in Capitalization, Dissolution or Merger.
          (a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been “effected
without receipt of consideration.” Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as

 

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expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option or Stock Purchase
Right.
          (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option or Stock
Purchase Right has not been previously exercised, it will terminate immediately
prior to the consummation of such proposed action. The Board may, in the
exercise of its sole discretion in such instances, declare that any Option or
Stock Purchase Right shall terminate as of a date fixed by the Board and give
each Optionee the right to exercise his or her Option or Stock Purchase Right as
to all or any part of the Optioned Stock, including Shares as to which the
Option or Stock Purchase Right would not otherwise be exercisable.
          (c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option and Stock Purchase Right may be assumed or
an equivalent option or right may be substituted by the successor corporation or
a Parent or Subsidiary of the successor corporation. In the event the successor
corporation does not assume or substitute the Options and Stock Purchase Rights,
then the Administrator shall provide for the Optionee to fully vest in and have
the right to exercise the Option or Stock Purchase Right as to all or a portion
of the Optioned Stock, including Shares as to which it would not otherwise be
vested or exercisable. If the Administrator makes an Option or Stock Purchase
Right exercisable in lieu of assumption or substitution in the event of a merger
or sale of assets, the Administrator shall notify the Optionee that the Option
or Stock Purchase Right shall be fully vested and exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right will terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the merger or sale of assets, the option or right confers the
right to purchase, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets was not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
     14. Date of Grant. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.

 

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     15. Amendment and Termination of the Plan.
          (a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
          (b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Sections 162(m) and 422 of the Code (or any successor rule or statute or
other applicable law, rule or regulation, including the requirements of any
exchange or quotation system on which the Common Stock is listed or quoted).
Such shareholder approval, if required, shall be obtained in such a manner and
to such a degree as is required by the applicable law, rule or regulation.
          (c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
     16. Conditions Upon Issuance of Shares.
          (a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange or quotation
system upon which the Shares may then be listed or quoted, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance. The Plan, and the Options and Stock Purchase Rights granted under
the Plan, shall be governed by the substantive laws of the State of Delaware but
not the rules and laws of that state dealing with the choice of law.
          (b) Investment Representations. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
     17. Liability of Company.
          (a) Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company’s counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
          (b) Grants Exceeding Allotted Shares. If the Optioned Stock covered by
an Option or Stock Purchase Right exceeds, as of the date of grant, the number
of Shares which may be issued under the Plan without additional shareholder
approval, such Option or Stock Purchase shall

 

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be void with respect to such excess Optioned Stock, unless shareholder approval
of an amendment sufficiently increasing the number of Shares subject to the Plan
is timely obtained in accordance with Section 15(b) of the Plan.
     18. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
     19. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.

 

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MICRO LINEAR CORPORATION
1991 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
     Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
     [Optionee’s Name and Address]
     You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:

         
Grant Number
       
 
     
 
       
Date of Grant
       
 
     
 
       
Vesting Commencement Date
       
 
     
 
       
Exercise Price per Share
  $    
 
     
 
       
Total Number of Shares Granted
       
 
     
 
       
Total Exercise Price
  $    
 
     
 
       
Type of Option:1
  [Nonstatutory Stock Option/Incentive Stock Option]
 
       
Term/Expiration Date:
  Fifth-year anniversary of Date of Grant.

     Vesting Schedule:
     Subject to the Optionee continuing to be a Service Provider on such dates,
this Option shall vest and become exercisable as to one-fourth (1/4th) of the
Optioned Stock six months following the above Date of Grant, and as to an
additional one-twenty-fourth (1/24th) of the Optioned Stock following each month
of continuous service with the Company thereafter.
 

1   If this is an incentive stock option under Section 422 of the Internal
Revenue Code, it (plus your other outstanding incentive stock options) cannot be
first exercisable for more than $100,000 in any calendar year. Any excess over
$100,000 is a nonstatutory stock option.

-1-

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     Notwithstanding the foregoing, the following special vesting provisions
shall apply to this Option:
     (i) In the event that the employment of the Optionee with the Company is
terminated within the first six (6) months following the above Date of Grant for
reasons other than “Cause” (as defined below), then the vesting of the Optioned
Stock shall be accelerated six months.
     (ii) In the event of a “Change of Control” (as defined below) of the
Company and the successor corporation does not assume, or substitute a
replacement stock option for, this Option, then the vesting of the Option Stock
shall be accelerated in full.
     (iii) In the event of a “Change of Control” (as defined below) and the
employment of the Optionee with the successor corporation or its affiliate is
involuntarily terminated for reasons other than “Cause” (as defined below)
within twelve (12) months of the Change of Control, then the vesting of the
Optioned Stock shall become accelerated in full.
     Termination Period:
     This Option may be exercised for thirty (30) days after Optionee ceases to
be a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for such longer period as provided in the Plan. In no event
shall this Option be exercised later than the Term/Expiration Date as provided
above.
II. AGREEMENT
     1. Grant of Option. The Plan Administrator of the Company hereby grants to
the Optionee named in the Notice of Grant attached as Part I of this Agreement
(the “Optionee”) an option (the “Option”) to purchase the number of Shares, as
set forth in the Notice of Grant, at the exercise price per share set forth in
the Notice of Grant (the “Exercise Price”), subject to the terms and conditions
of the Plan, which is incorporated herein by reference. Subject to Section 14(b)
of the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
     2. Exercise of Option.
          (a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
          (b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the “Exercise Notice”),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the “Exercised Shares”), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to administrator of the Plan or the Chief
Financial Officer of the Company. The Exercise Notice shall be accompanied by
payment of the aggregate Exercise Price as to all

-2-

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Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.
          No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
     3. Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
          (a) cash;
          (b) check;
          (c) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
          (d) surrender of other Shares which (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, and (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised Shares.
     4. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by the Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
     5. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
     6. Tax Consequences. Some of the federal tax consequences relating to this
Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
          (a) Exercising the Option. The Optionee may incur regular federal
income tax liability upon exercise of an NSO. The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Exercised Shares on the
date of exercise over their aggregate Exercise Price. If the Optionee is an
Employee or a former Employee, the Company will be required to withhold from his
or her compensation or collect from Optionee and pay to the applicable taxing
authorities an amount in cash equal to a percentage of this compensation income
at the time of exercise, and may refuse to

-3-

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honor the exercise and refuse to deliver Shares if such withholding amounts are
not delivered at the time of exercise.
          (b) Disposition of Shares. If the Optionee holds NSO Shares for at
least one year, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes.
     7. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee’s interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of Delaware.
     8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT
THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER).
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
     9. Definitions. Solely for purposes of this Option, the following terms
shall have the meanings given them below:
          (a) “Cause” shall mean the occurrence of any one of the following as
determined in good faith by the Company or its successor corporation:
(i) Optionee’s continuous failure to perform his or her regular duties after
fifteen (15) calendar days written notice from the Company or successor
corporation of the failure, (ii) Optionee’s intentional misconduct or gross
negligence in the performance of Optionee’s duties for the Company,
(iii) Optionee’s intentional failure to comply with the employment policies and
rules and regulations of the Company or successor corporation, (iv) Optionee’s
commission of a material fraud against or a material intentional
misrepresentation to the Company or the successor corporation, or (v) the
Optionee’s misappropriation of the assets of the Company or successor
corporation.
          (b) “Change of Control” shall mean a merger of the Company with or
into another corporation, or the sale of substantially all of the assets of the
Company.
     By your signature and the signature of the Company’s representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the

-4-

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Plan and this Option Agreement. Optionee has reviewed the Plan and this Option
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Option Agreement and fully understands all
provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions relating to the Plan and Option Agreement.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.

          OPTIONEE   MICRO LINEAR CORPORATION
 
       
 
  By:    
 
       
Signature
       
 
       
 
  Title:    
 
       
Print Name
       
 
       
 
       
Residence Address
       
 
       
 
       

-5-

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EXHIBIT A
MICRO LINEAR CORPORATION
1991 STOCK OPTION PLAN
EXERCISE NOTICE
Micro Linear Corporation
2050 Concourse Drive
San Jose, CA 95131
Attention: [Title]
     1. Exercise of Option. Effective as of today, ___, 20___, the undersigned
(“Purchaser”) hereby elects to purchase ___shares (the “Shares”) of the Common
Stock of Micro Linear Corporation (the “Company”) under and pursuant to the 1991
Stock Option Plan (the “Plan”) and the Stock Option Agreement dated ___, 2006
(the “Option Agreement”). The purchase price for the Shares shall be $___, as
required by the Option Agreement.
     2. Delivery of Payment. Purchaser herewith delivers to the Company the full
purchase price for the Shares.
     3. Representations of Purchaser. Purchaser acknowledges that Purchaser has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
     4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 12 of the
Plan.
     5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser’s purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.

 

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     6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser’s interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
Delaware.

     
Submitted by:
  Accepted by:
 
   
PURCHASER
  MICRO LINEAR CORPORATION
 
   
 
Signature
 
 
 
   
 
   
Print Name
  Name
 
   
 
   
 
  Title
 
Date Received
   

         
Address: