EXHIBIT 10.1

 
 
CREDIT AGREEMENT
 
(LINE OF CREDIT)
 
(LETTER OF CREDIT SUB-FACILITY)
 
(FOREIGN EXCHANGE SUB-FACILITY)
 
(TERM LINE OF CREDIT)
 
This Agreement (the "Agreement") is made and entered into as of May 7, 2009, by
and between BANK OF THE WEST (the "Bank") and MICREL, INCORPORATED (the
"Borrower"), on the terms and conditions that follow:
 
SECTION
 
1
 
DEFINITIONS
 
1.1  
Certain Defined Terms:  Unless elsewhere defined in this Agreement, the
following terms shall have the following meanings (such meanings to be generally
applicable to the singular and plural forms of the terms defined):

 
1.1.1  
"Advance":  shall mean an advance to the Borrower under the credit facility(ies)
described in Section 2.

 
1.1.2  
"Alternate Base Rate": shall mean, for any day, a rate per annum equal to the
greatest of (a) the Prime Rate in effect on such day or, (b) the Federal Funds
Rate in effect on such day plus 0.5% or (c) the Applicable Floating Rate on such
date (or, if such date is not a Business Day, the immediately preceding Business
Day). Any change in the Alternate Base Rate due to a change in the Prime Rate
or, the Federal Funds Rate or the Applicable Floating Rate shall be effective
from and including the effective date of such change in the Prime Rate or, the
Federal Funds Rate or the Applicable Floating Rate, respectively. 

 
1.1.3  
"Alternate Base Rate Advance": shall have the respective meaning as it is
defined for each facility under Section 2, hereof.

 
1.1.4  
"Applicable Floating Rate".  shall mean, as of any date, (a) the One-Month LIBOR
Rate on such day multiplied by the Statutory Reserve Rate plus (b) 1.00%.
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board of Governors of the Federal Reserve System with respect
to the One-Month LIBOR Rate for Eurocurrency funding (currently referred to as
“Eurocurrencies Liabilities” in Regulation D of the Board of Governors of the
Federal Reserve System), including those reserve percentages imposed pursuant to
Regulation D, adjusted automatically and as of the effective date of any change
in any reserve percentage.

 
1.1.5  
"Business Day": shall mean a day, other than a Saturday or Sunday, on which
commercial banks are open for business in California.

 
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1.1.6  
“Close-Out Date”:  shall mean the Business Day on which the Bank closes out and
liquidates an FX Transaction.

 
1.1.7  
 “Closing Value”: has the meaning given to it in Section 7.5(i) hereof.

 
1.1.8  
“Closing Gain” and “Closing Loss” :shall mean the amount determined in
accordance with Section 7.5(ii) hereof.

 
1.1.9  
“Credit Percentage”: shall mean 10%.

 
1.1.10  
"Debt":  shall mean all liabilities of the Borrower less Subordinated Debt, if
any.

 
1.1.11  
"Effective Tangible Net Worth":  shall mean the Borrower's stated net worth plus
Subordinated Debt but less all intangible assets of the Borrower (i.e.,
goodwill, trademarks, patents, copyrights, organization expense, and similar
intangible items including, but not limited to, investments in and all amounts
due from affiliates, officers or employees).

 
1.1.12  
"Environmental Claims": shall mean all claims, however asserted, by any
governmental authority or other person alleging potential liability or
responsibility for violation of any Environmental Law or for discharge or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon (a) the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent, sudden or
non-sudden, accidental or non-accidental placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Material at, in, or from property,
whether or not owned by the Borrower, or (b) any other circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.

 
1.1.13  
"Environmental Laws": shall mean all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authorities, in each case
relating to environmental, health, safety and land use matters; including but
not limited to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA”), the Clean Air Act, the Federal Water Pollution
Control Act of 1972, the Solid Waste Disposal Act, the Federal Resource
Conservation and Recovery Act, the Toxic Substances Control Act, the Emergency
Planning and Community Right-to-Know Act, the California Hazardous Waste Control
Law, the California Solid Waste Management, Resource, Recovery and Recycling
Act, the California Water Code and the California Health and Safety Code.

 
1.1.14  
"Environmental Permits":  shall have the meaning provided in Section 4.12
hereof.

 
1.1.15  
"ERISA":  shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, including (unless the context otherwise requires) any
rules or regulations promulgated thereunder.

 
1.1.16  
"Event of Default":  shall have the meaning set forth in Section 6.

 
1.1.17  
"Expiration Date":  shall mean April 30, 2011, or the date of termination of the
Bank's commitment to lend under this Agreement pursuant to Section 7, whichever
shall occur first.

 
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1.1.18  
“Federal Funds Rate": shall mean, for any day, the weighted average (rounded
upwards, if necessary to the next 1/100 of 1%) of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average (rounded upwards, if necessary, to the
next 1/100 of 1%) of the quotations for such day for such transactions received
by the Bank from three Federal funds brokers of recognized standing selected by
Bank.

 
1.1.19  
“Foreign Currency”:  shall mean any legally traded currency other than US
dollars and which may be transferred by paperless wire transfer or cash and in
which the Bank regularly trades.

 
1.1.20  
 “Foreign Exchange Sub-Facility”:  shall mean the credit facility described as
such in Section 2.

 
1.1.21  
“FX Risk Liability”:  shall mean the product of (a) the Credit Percentage, times
(b) the aggregate of the Notional Values of all FX Transactions outstanding, net
of any Offsetting Transactions.

 
1.1.22  
“FX Limit”:  shall mean $2,000,000.00.

 
1.1.23  
“FX Transaction”:  shall mean any transaction between the Bank and the Borrower
pursuant to which the Bank has agreed to sell to or to purchase from the
Borrower a Foreign Currency of an agreed amount at an agreed price in US dollars
or such other agreed upon Foreign Currency, deliverable and payable on an agreed
date.

 
1.1.24  
"Hazardous Materials":  shall mean all those substances which are regulated by,
or which may form the basis of liability under, any Environmental Law, including
all substances identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.

 
1.1.25  
"Indebtedness":  shall mean, with respect to the Borrower, (i) all indebtedness
for borrowed money or for the deferred purchase price of property or services in
respect of which the Borrower is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which the Borrower otherwise assures a
creditor against loss and (ii) obligations under leases which shall have been or
should be, in accordance with generally accepted accounting principles, reported
as capital leases in respect of which the Borrower is liable, contingently or
otherwise, or in respect of which the Borrower otherwise assures a creditor
against loss. The word “Indebtedness” also includes expenses incurred by the
Bank to enforce obligations of the Borrower under this Agreement, together with
interest on such amounts as provided in this Agreement, and all other
obligations, debts, and liabilities of the Borrower to the Bank as well as all
claims by the Bank against the Borrower that are now or hereafter existing,
voluntary or involuntary, due or not due, absolute or contingent, liquidated or
unliquidated, whether the Borrower may be liable individually or jointly with
others, whether recovery upon such Indebtedness may be or hereafter may become
barred by any statute of limitations, and whether such Indebtedness may be or
hereafter may become otherwise unenforceable.

 
1.1.26  
“Letter of Credit”: shall have the meaning given to such term in Section 2.

 
1.1.27  
“Letter of Credit Sub-Facility”:  shall mean the credit facility described as
such in Section 2.

 
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1.1.28  
"LIBOR Advance": shall have the respective meaning as it is defined for each
facility under Section 2, hereof.

 
1.1.29  
"LIBOR Interest Period": shall have the respective meaning as it is defined for
each facility under Section 2, hereof.

 
1.1.30  
"LIBOR Rate": shall have the respective meaning as it is defined for each
facility under Section 2, hereof.

 
1.1.31  
"Line Account":  shall have the meaning provided in Section 2.5 hereof.

 
1.1.32  
"Line of Credit":  shall mean the credit facility described as such in Section
2.

 
1.1.33  
“Notional Value”:  shall mean the US Dollar equivalent of the price at which the
Bank agreed to purchase or sell to the Borrower a Foreign Currency in an
aggregate amount not to exceed $20,000,000.00.

 
1.1.34  
"Obligations":  shall mean all amounts owing by the Borrower to the Bank
pursuant to this Agreement including, but not limited to, the unpaid principal
amount of any loans or advances.

 
1.1.35  
“Offsetting Transaction”: shall mean a FX Transaction to purchase a Foreign
Currency and a FX Transaction to sell the same Foreign Currency , each with the
same Settlement Date and designated as an Offsetting Transaction at the time of
entering into the FX Transaction.

 
1.1.36  
"One-Month LIBOR Rate": shall mean, for any day, the rate of interest per annum
that is equal to the one month LIBOR rate appearing on the REUTERS BBA Libor
Rates Page 3750 (or on any successor or substitute page of such page) at
approximately 11:00 a.m. London time on such day.

 
1.1.37  
"Ordinary Course of Business":  shall mean, with respect to any transaction
involving the Borrower or any of its subsidiaries or affiliates, the ordinary
course of the Borrower's business, as conducted by the Borrower in accordance
with past practice and undertaken by the Borrower in good faith and not for the
purpose of evading any covenant or restriction in this Agreement or in any other
document, instrument or agreement executed in connection herewith.

 
1.1.38  
"Permitted Liens":  shall mean: (i) liens and security interests securing
indebtedness owed by the Borrower to the Bank; (ii) liens for taxes, assessments
or similar charges not yet due; (iii) liens of materialmen, mechanics,
warehousemen, or carriers or other like liens arising in the Ordinary Course of
Business and securing obligations which are not yet delinquent; (iv) purchase
money liens or purchase money security interests upon or in any property
acquired or held by the Borrower in the Ordinary Course of Business to secure
Indebtedness outstanding on the date hereof or permitted to be incurred herein;
(v) liens and security interests which, as of the date hereof, have been
disclosed to and approved by the Bank in writing; (vi) those liens and security
interests which in the aggregate constitute an immaterial and insignificant
monetary amount with respect to the net value of the Borrower's assets; and
(vii) liens securing capital leases entered into in the Ordinary Course of
Business.

 
1.1.39  
"Prime Rate":  shall mean an index for a variable interest rate which is quoted,
published or announced by Bank as its prime rate and as to which loans may be
made by Bank at, above or below such rate.

 
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1.1.40  
“Prior Agreement”: shall mean that certain credit agreement dated April 20, 2007
and upon execution of this Agreement, the Prior Agreement is hereby cancelled
and terminated. Any outstanding Advances under the Prior Agreement shall be
deemed to have been made under this Agreement.  The Interest Period in
connection with any outstanding Advances under the Prior Agreement shall
continue under this Agreement and no penalties, breakage costs or other like
fees will be charged in connection with the entry into this Agreement.From and
after the date of this Agreement, no new Advances will be made under the Prior
Agreement.

 
1.1.41  
“Settlement Date”:  shall mean the Business Day on which the Borrower has agreed
to (a) deliver the required amount of Foreign Currency, or (b) pay in US dollars
the agreed upon purchase price of the Foreign Currency.

 
1.1.42  
"Subordinated Debt":  shall mean such liabilities of the Borrower which have
been subordinated to those owed to the Bank in a manner acceptable to the Bank.

 
1.1.43  
"Term Line of Credit":  shall mean the credit facility described as such in
Section 2.

 
1.2  
Accounting Terms:  All references to financial statements, assets, liabilities,
and similar accounting items not specifically defined herein shall mean such
financial statements or such items prepared or determined in accordance with
generally accepted accounting principles consistently applied and, except where
otherwise specified, all financial data submitted pursuant to this Agreement
shall be prepared in accordance with such principles.

 
1.3  
Other Terms:  Other terms not otherwise defined shall have the meanings as
applicable attributed to such terms in the Uniform Commercial Code as in effect
on July 1, 2001 and from time to time thereafter in the State of California.

 
SECTION
 
2
 
CREDIT FACILITIES
 
2.1  
THE LINE OF CREDIT

 
2.1.1  
The Line of Credit:  On terms and conditions as set forth herein, the Bank
agrees to make Advances to the Borrower from time to time from the date hereof
to the Expiration Date, provided the aggregate amount of such Advances
outstanding at any time does not exceed $5,000,000.00 (the “Line of
Credit”).  Within the foregoing limits, the Borrower may borrow, partially or
wholly prepay, and reborrow under this Section 2.1.  Proceeds of the Line of
Credit shall be used to assist with the working capital needs of the Borrower's
operations.

 
2.1.2  
Making Line Advances:  Each Advance shall be conclusively deemed to have been
made at the request of and for the benefit of the Borrower (i) when credited to
any deposit account of the Borrower maintained with the Bank or (ii) when paid
in accordance with the Borrower's written instructions.  Subject to the
requirements of Section 4 and provided such request is made in a timely manner
as provided in Section 2.1.5 below, Advances shall be made by the Bank under the
Line of Credit.

 
2.1.3  
Repayment:  On the Expiration Date, the Borrower hereby promises and agrees to
pay to the Bank in full the aggregate unpaid principal amount of all Advances
then outstanding, together with all accrued and unpaid interest thereon.

 
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2.1.4  
Interest on Advances:  Interest shall accrue from the date of each Advance under
the Line of Credit at one of the following rates, as quoted by the Bank and as
elected by the Borrower below:

 
(i)  
Alternate Base Rate Advances: At the Alternate Base Rate plus 1.00%. Interest
shall be adjusted concurrently with any change in the Alternate Base Rate. An
Advance based upon the Alternate Base Rate is hereinafter referred to as an
"Alternate Base Rate Advance".

 
(ii)  
Applicable Floating Rate Advances: At the Applicable Floating Rate plus
1.25%.  Interest shall be adjusted concurrently with any change in the
Applicable Floating Rate.  An Advance based upon the Applicable Floating Rate is
herein referred to as an “Applicable Floating Rate Advance”.

 
(iii)  
LIBOR Advances:  A fixed rate quoted by the Bank for 1, 2, 3 or 6 months or for
such other period of time that the Bank may quote and offer (provided that any
such period of time does not extend beyond Expiration Date) (the "LIBOR Interest
Period") for Advances in the minimum amount of $100,000.00.  Such interest rate
shall be a percentage approximately equivalent to 2.25% in excess of the Bank's
LIBOR Rate which is that rate of interest per annum that is equal to the 1, 2, 3
or 6 months or such other period appearing on the Reuters BBA Libor Rates Page
3750 (or any successor or substitute page) at approximately 11:00 AM London time
on such day (adjusted for any and all assessments, surcharges and reserve
requirements) (the "LIBOR Rate").  An Advance based upon the LIBOR Rate is
hereinafter referred to as a "LIBOR Advance".

 
Interest on any Advance shall be computed on the basis of 360 days per year, but
charged on the actual number of days elapsed (other than with respect to any
Alternate Base Rate calculated using the Prime Rate, in which case such
calculation should be based upon a year of 365 days or, in the case of a leap
year, 366 days, shall be payable for the actual days elapsed (including the
first day but excluding the last day) in the period for which such interest is
payable, and shall be adjusted in accordance with any changes in the Alternate
Base Rate to take effect on the beginning of the day of such change in the
Alternate Base Rate).
 
The Borrower hereby jointly and severally promises and agrees to pay interest in
arrears on Applicable Floating Rate Advances and LIBOR Advances on the last day
of each month.
 
The LIBOR Rate shall be adjusted to occur on the same day that payment is due as
set forth in the section entitled Payments below.
 
If Interest is not paid as and when it is due, it shall be added to the
principal, become and be treated as a part thereof, and shall thereafter bear
like interest.
 
2.1.5  
Notice of Borrowing:  Upon written or telephonic notice which shall be received
by the Bank at or before 2:00 p.m. (Pacific time) on a Business Day, the
Borrower may borrow under the Line of Credit Facility by requesting:

 
(i)  
An Alternate Base Rate Advance may be made on the day notice is received by the
Bank, provided however, that if the Bank shall not have received notice at or
before 2:00 p.m. on the day such Advance is requested to be made, such Alternate
Base Rate Advance may, at the Bank's option, be made on the next Business Day.

 
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(ii)  
Applicable Floating Rate Advances.  An Applicable Floating Rate Advance may be
made on the day notice is received by the Bank; provided, however, that if the
Bank shall not have received notice at or before 2:00 p.m.  on the day such
Advance is requested to be made, such Applicable Floating Rate Advances may, at
the Bank's option, be made on the next Business Day.

 
(iii)  
A LIBOR Advance.  Notice of any LIBOR Advance shall be received by the Bank no
later than two Business Days prior to the day (which shall be a Business Day) on
which the Borrower requests such LIBOR Advance to be made.

 
2.1.6  
Notice of Election to Adjust Interest Rate:  The Borrower may elect:

 
(i)  
That interest on an Alternate Base Rate Advance shall be adjusted to accrue at
the LIBOR Rate or Applicable Floating Rate Advance; provided, however, that such
notice shall be received by the Bank no later than two Business Days prior to
the day (which shall be a Business Day) on which the Borrowers request that
interest be adjusted to accrue at the LIBOR Rate or One Month LIBOR Rate.

 
(ii)  
That interest on an Applicable Floating Rate Advance shall be adjusted to accrue
at the LIBOR Rate or Alternate Base Rate; provided, however, that such notice
shall be received by the Bank no later than two Business Days prior to the day
(which shall be a Business Day) on which the Borrower requests that interest be
adjusted to accrue at the LIBOR Rate or Alternate Base Rate.

 
(iii)  
That interest on a LIBOR Advance shall continue to accrue at a newly quoted
LIBOR Rate or shall be adjusted to commence to accrue at the Alternate Base Rate
or Applicable Floating Rate; provided, however, that such notice shall be
received by the Bank no later than two Business Days prior to the last day of
the LIBOR Interest Period pertaining to such LIBOR Advance.  If the Bank shall
not have received notice (as prescribed herein) of the Borrowers’ election that
interest on any LIBOR Advance shall continue to accrue at the newly quoted LIBOR
Rate for such new interest period, the Borrowers shall be deemed to have elected
that interest thereon shall be adjusted to accrue at the Alternate Base Rate
upon the expiration of the then existing LIBOR Interest Period pertaining to
such LIBOR Advance.

 
2.1.7  
Prepayment:  The Borrower may prepay any Advance in whole or in part, at any
time and without penalty, provided, however, that:  (i) any partial prepayment
shall first be applied, at the Bank's option, to accrued and unpaid interest and
next to the outstanding principal balance; and (ii) during any period of time in
which interest is accruing on any Advance on the basis of the LIBOR Rate, no
prepayment, unless otherwise permitted, shall be made except on a day which is
the last day of the LIBOR Interest Period pertaining thereto.  If the whole or
any part of any LIBOR Advance is prepaid by reason of acceleration or otherwise,
the Borrower shall, upon the Bank's request, promptly pay to and indemnify the
Bank for all costs, expenses and any loss actually incurred by the Bank and any
loss (including loss of profit resulting from the re-employment of funds) deemed
sustained by the Bank as a consequence of such prepayment.

 
The Bank shall be entitled to fund all or any portion of its Advances in any
manner it may determine in its sole discretion, but all calculations and
transactions hereunder shall be conducted as though the Bank actually funded all
Advances through the purchase of dollar deposits bearing interest at the same
rate as U.S. Treasury securities in the amount of the relevant Advance and in
maturities corresponding to the date of such purchase to the Expiration Date
hereunder.

 
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Indemnification for Applicable Floating Rate Costs or LIBOR Costs:  During any
period of time in which interest on any Alternate Base Rate Advance or LIBOR
Advance is accruing on the basis ofthe Applicable Floating Rate or LIBOR Rate,
the Borrower shall, upon the Bank's request, promptly pay to and reimburse the
Bank for all costs incurred and payments made by the Bank by reason of any
future assessment, reserve, deposit or similar requirement or any surcharge, tax
or fee imposed upon the Bank or as a result of the Bank's compliance with any
directive or requirement  of any regulatory authority pertaining or relating to
funds used by the Bank in quoting and determining the Applicable Floating Rate
or LIBOR Rate.
 
2.1.8  
Conversion from Applicable Floating Rate or LIBOR Rate:  In the event that the
Bank shall at any time determine that the accrual of interest on the basis of
the Applicable Floating Rate or LIBOR Rate (i) is infeasible because the Bank is
unable to determine the One-Month LIBOR Rate or the LIBOR Rate due to the
unavailability of U.S. dollar deposits, contracts or certificates of deposit in
an amount approximately equal to the amount of the relevant Advance and for a
period of time approximately equal to relevant LIBOR Interest Period or (ii) is
or has become unlawful or infeasible by reason of the Bank's compliance with any
new law, rule, regulation, guideline or order, or any new interpretation of any
present law, rule, regulation, guideline or order, then the Bank shall give
telephonicnotice thereof (confirmed in writing) to the Borrower, in which event
any Alternate Base Rate Advance bearing interest at the Applicable Floating Rate
or any LIBOR Rate Advance bearing interest at the LIBOR Rate shall thereupon
immediately accrue interest at the greater of the Prime Rate or Fed Funds Rate.

 
2.2  
LETTER OF CREDIT SUB-FACILITY

 
2.2.1  
Letter of Credit Sub-Facility:  The Bank agrees to issue commercial and/or
standby letters of credit (each a "Letter of Credit") on behalf of the Borrower
of up to $5,000,000.00.  At no time, however, shall the total principal amount
of all Advances outstanding under the Line of Credit, combined with the
aggregate FX Risk Liability together with the total face amount of all Letters
of Credit outstanding, less any partial draws paid by the Bank, exceed the Line
of Credit.

 
For the purposes hereof, any Letters of Credit issued and outstanding for the
account of the Borrower as of the date hereof shall be deemed to be issued
hereunder.
 
(i)  
Upon the Bank's request, the Borrower shall promptly pay to the Bank annual
issuance fees of 1.25% for standby letters of credit and standard pricing for
commercial letters of credit, and such other fees, commissions, costs and any
out-of-pocket expenses charged or incurred by the Bank with respect to any
Letter of Credit.  Letter of Credit fees shall be paid quarterly in advance on
standby letters of credit and at the time of issuance for commercial letters of
credit.

 
(ii)  
The commitment by the Bank to issue Letters of Credit shall, unless earlier
terminated in accordance with the terms of the Agreement, automatically
terminate on the Expiration Date of the Line of Credit and no Letter of Credit
shall expire on a date which is more than 365 days after the Expiration Date.

 
(iii)  
Each Letter of Credit shall be in form and substance satisfactory to the Bank
and in favor of beneficiaries satisfactory to the Bank, provided that the Bank
may refuse to issue a Letter of Credit due to the nature of the transaction or
its terms or in connection with any transaction where the Bank, due to the
beneficiary or the nationality or residence of the beneficiary, would be
prohibited by any applicable law, regulation or order from issuing such Letter
of Credit.

 
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(iv)  
Prior to the issuance of each Letter of Credit, but in no event later than 10:00
a.m. (California time) on the day such Letter of Credit is to be issued (which
shall be a Business Day), the Borrower shall deliver to the Bank a duly executed
form of the Bank's standard form of application for issuance of a Letter of
Credit with proper insertions.

 
(v)  
The Borrower shall, upon the Bank's request, promptly pay to and reimburse the
Bank for all costs incurred and payments made by the Bank by reason of any
future assessment, reserve, deposit or similar requirement or any surcharge, tax
or fee imposed upon the Bank or as a result of the Bank's compliance with any
directive or requirement of any regulatory authority pertaining or relating to
any Letter of Credit.

 
In the event that the Borrower fails to pay any drawing under any Letter of
Credit or the balances in the depository account or accounts maintained by the
Borrower with Bank are insufficient to pay such drawing, without limiting the
rights of Bank hereunder or waiving any Event of Default caused thereby, Bank
may, and Borrower hereby authorizes Bank to create an Advance bearing interest
at the rate or rates provided in Section 8.2 hereof to pay such drawing.
 
2.3  
FOREIGN EXCHANGE SUB-FACILITY

 
2.3.1  
Foreign Exchange Sub-Facility:  The Bank agrees to enter into FX Transactions
with the Borrower, at the Borrower’s request therefor made prior to the
Expiration Date, provided however, that at no time shall the aggregate FX Risk
Liability of the Borrower exceed the FX Limit, and provided further, at no time
shall the aggregate FX Liability combined with the total face amount of all
Letters of Credit outstanding less any partial draws paid by the Bank together
with the total principal amount of all outstanding Advances, exceed the Line of
Credit. Each FX Transaction shall be used to hedge the Borrower’s foreign
exchange exposure.

 
(i)  
Requests.  Each request for a FX Transaction shall be made by telephone to the
Bank’s Treasury Department (“Request”), shall specify the Foreign Currency to be
purchased or sold, the amount of such Foreign Currency and the Settlement Date.
Each Request shall be communicated to the Bank no later than 3:00 p.m.
California time on the Business Day on which the FX Transaction is requested.

 
(ii)  
Tenor.  No FX Transaction shall have a Settlement Date which is more than 365
days after the date of entry into such FX Transaction, and provided further, no
FX Transaction shall expire on a date which is after the Expiration Date.

 
(iii)  
Availability.  Bank may refuse to enter into a FX Transaction with the Borrower
where the Bank, at its sole discretion, determines that (1) the requested
Foreign Currency is unavailable, or (2) the Bank is not then dealing in the
requested Foreign Currency, or (3) the Bank would be prohibited by any
applicable law, rule, regulation or order from purchasing such Foreign Currency.

 
(iv)  
Payment.  Payment is due on the Settlement Date of the relevant FX Transaction.
The Bank is hereby authorized by the Borrower to charge the full settlement
price of any FX Transaction against the depository account or accounts
maintained by the Borrower with the Bank on the Settlement Date. In the event
that the Borrower fails to pay the settlement price of any FX Transaction on the
Settlement Date or the balances in the depository account or accounts maintained
with Bank are insufficient to pay the settlement price, without limiting the
rights of Bank hereunder or waiving any Event of Default caused thereby, Bank
may, and Borrower hereby

 
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(v)  
authorizes Bank to, create an Advance bearing interest at the Prime Rate to pay
the settlement price on the Settlement Date.

 
(vi)  
Increased Costs.  Borrower shall promptly pay to and reimburse the Bank for all
costs incurred and payments made by the Bank by reason of any assessment,
reserve, deposit, capital maintenance or similar requirement or any surcharge,
tax or fee imposed upon the Bank or as a result of the Bank’s compliance with
any directive or requirement of any regulatory authority pertaining or relating
to any FX Transaction.

 
(vii)  
Impossibility of Performance.  In the event that the Borrower or the Bank cannot
perform under a FX Transaction due to force majeure or an act of state or it
becomes unlawful or impossible to perform, all in the good faith judgement of
the Borrower or the Bank, then upon notice to the other party, the Borrower or
the Bank may require the close-out and liquidation of the affected FX
Transaction in accordance with the provisions of this Agreement.

 
2.4  
THE TERM LINE OF CREDIT

 
2.4.1  
The Term Line of Credit:  On terms and conditions as set forth herein, the Bank
agrees to make Advances to the Borrower from time to time from the date hereof
until August 6, 2009, provided the aggregate amount of such Advances outstanding
at any time does not exceed $15,000,000.00 (the “Term Line of Credit”). Any sums
repaid under the Term Line of Credit may not be reborrowed.  Proceeds of the
Term Line of Credit shall be used to assist with the repurchase of stock.

 
2.4.2  
Making Line Advances:  Each Advance shall be conclusively deemed to have been
made at the request of and for the benefit of the Borrower (i) when credited to
any deposit account of the Borrower maintained with the Bank or (ii) when paid
in accordance with the Borrower's written instructions.  Subject to the
requirements of Section 4 and provided such request is made in a timely manner
as provided in Section 2.2.5 below, Advances shall be made by the Bank under the
Term Line of Credit.

 
2.4.3  
Repayment:  On August 6, 2009, the outstanding amount of Advances outstanding
hereunder shall be amortized on a twenty one month basis and the Term Line of
Credit shall be repaid in twenty one (21) equal monthly installments. The
Borrower hereby promises and agrees to pay each installment commencing on August
31, 2009 and continuing on the last day of each month thereafter.  On the
Expiration Date, the Borrower hereby promises and agrees to pay to the Bank the
entire unpaid principal balance, together with accrued and unpaid interest
thereon.

 
Each payment received by the Bank shall, at the Bank's option, be applied to pay
interest then due and unpaid and the remainder thereof (if any) shall be applied
to pay principal.
 
2.4.4  
Interest on Advances:  Interest shall accrue from the date of each Advance under
the Term Line of Credit at one of the following rates, as quoted by the Bank and
as elected by the Borrower below:

 
(i)  
Alternate Base Rate Advances: At the Alternate Base Rate plus 1.00%. Interest
shall be adjusted concurrently with any change in the Alternate Base Rate. An
Advance based upon the Alternate Base Rate is hereinafter referred to as an
"Alternate Base Rate Advance".

 
(ii)  
Applicable Floating Rate Advances: At the Applicable Floating Rate plus 1.25%.

 
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(iii)  
Interest shall be adjusted concurrently with any change in the Applicable
Floating Rate.  An Advance based upon the Applicable Floating Rate is herein
referred to as an “Applicable Floating Rate Advance”.

 
(iv)  
LIBOR Advances:  A fixed rate quoted by the Bank for 1, 2, 3 or 6 months or for
such other period of time that the Bank may quote and offer (provided that any
such period of time does not extend beyond Expiration Date) (the "LIBOR Interest
Period") for Advances in the minimum amount of $100,000.00.  Such interest rate
shall be a percentage approximately equivalent to 2.25% in excess of the Bank's
LIBOR Rate which is that rate of interest per annum that is equal to the 1, 2, 3
or 6 months or such other period appearing on the Reuters BBA Libor Rates Page
3750 (or any successor or substitute page) at approximately 11:00 AM London time
on such day (adjusted for any and all assessments, surcharges and reserve
requirements) (the "LIBOR Rate").  An Advance based upon the LIBOR Rate is
hereinafter referred to as a "LIBOR Advance".

 
Interest on any Advance shall be computed on the basis of 360 days per year, but
charged on the actual number of days elapsed (other than with respect to any
Alternate Base Rate calculated using the Prime Rate, in which case such
calculation should be based upon a year of 365 days or, in the case of a leap
year, 366 days, shall be payable for the actual days elapsed (including the
first day but excluding the last day) in the period for which such interest is
payable, and shall be adjusted in accordance with any changes in the Alternate
Base Rate to take effect on the beginning of the day of such change in the
Alternate Base Rate).
 
The Borrower hereby jointly and severally promises and agrees to pay interest in
arrears on Applicable Floating Rate Advances and LIBOR Advances on the last day
of each month.
 
The LIBOR Rate shall be adjusted to occur on the same day that payment is due as
set forth in the section entitled Payments below.
 
If Interest is not paid as and when it is due, it shall be added to the
principal, become and be treated as a part thereof, and shall thereafter bear
like interest.
 
2.4.5  
Notice of Borrowing:  Upon written or telephonic notice which shall be received
by the Bank at or before 2:00 p.m. (Pacific time) on a Business Day, the
Borrower may borrow under the Term Line of Credit Facility by requesting:

 
(i)  
An Alternate Base Rate Advance may be made on the day notice is received by the
Bank, provided however, that if the Bank shall not have received notice at or
before 2:00 p.m. on the day such Advance is requested to be made, such Alternate
Base Rate Advance may, at the Bank's option, be made on the next Business Day.

 
(ii)  
Applicable Floating Rate Advances.  An Applicable Floating Rate Advance may be
made on the day notice is received by the Bank; provided, however, that if the
Bank shall not have received notice at or before 2:00 p.m.  on the day such
Advance is requested to be made, such Applicable Floating Rate Advances may, at
the Bank's option, be made on the next Business Day.

 
(iii)  
A LIBOR Advance.  Notice of any LIBOR Advance shall be received by the Bank no
later than two Business Days prior to the day (which shall be a Business Day) on
which the Borrower requests such LIBOR Advance to be made.

 
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(iv)  
Notice of Election to Adjust Interest Rate:  The Borrower may elect:

 
(v)  
That interest on an Alternate Base Rate Advance shall be adjusted to accrue at
the LIBOR Rate or Applicable Floating Rate Advance; provided, however, that such
notice shall be received by the Bank no later than two Business Days prior to
the day (which shall be a Business Day) on which the Borrowers request that
interest be adjusted to accrue at the LIBOR Rate or One Month LIBOR Rate.

 
(vi)  
That interest on an Applicable Floating Rate Advance shall be adjusted to accrue
at the LIBOR Rate or Alternate Base Rate; provided, however, that such notice
shall be received by the Bank no later than two Business Days prior to the day
(which shall be a Business Day) on which the Borrower requests that interest be
adjusted to accrue at the LIBOR Rate or Alternate Base Rate.

 
(vii)  
That interest on a LIBOR Advance shall continue to accrue at a newly quoted
LIBOR Rate or shall be adjusted to commence to accrue at the Alternate Base Rate
or Applicable Floating Rate; provided, however, that such notice shall be
received by the Bank no later than two Business Days prior to the last day of
the LIBOR Interest Period pertaining to such LIBOR Advance.  If the Bank shall
not have received notice (as prescribed herein) of the Borrowers’ election that
interest on any LIBOR Advance shall continue to accrue at the newly quoted LIBOR
Rate for such new interest period, the Borrowers shall be deemed to have elected
that interest thereon shall be adjusted to accrue at the Alternate Base Rate
upon the expiration of the then existing LIBOR Interest Period pertaining to
such LIBOR Advance.

 
2.4.6  
Prepayment:  The Borrower may prepay any Advance in whole or in part, at any
time and without penalty, provided, however, that:  (i) any partial prepayment
shall first be applied, at the Bank's option, to accrued and unpaid interest and
next to the outstanding principal balance; and (ii) during any period of time in
which interest is accruing on any Advance on the basis of the LIBOR Rate, no
prepayment shall be made except on a day which is the last day of the LIBOR
Interest Period pertaining thereto.  If the whole or any part of any LIBOR
Advance is prepaid by reason of acceleration or otherwise, the Borrower shall,
upon the Bank's request, promptly pay to and indemnify the Bank for all costs,
expenses and any loss actually incurred by the Bank and any loss (including loss
of profit resulting from the re-employment of funds) deemed sustained by the
Bank as a consequence of such prepayment.

 
The Bank shall be entitled to fund all or any portion of its Advances in any
manner it may determine in its sole discretion, but all calculations and
transactions hereunder shall be conducted as though the Bank actually funded all
Advances through the purchase of dollar deposits bearing interest at the same
rate as U.S. Treasury securities in the amount of the relevant Advance and in
maturities corresponding to the date of such purchase to the Expiration Date
hereunder.
 
2.4.7  
Indemnification for Applicable Floating Rate Costs or LIBOR Costs:  During any
period of time in which interest on any Alternate Base Rate Advance or LIBOR
Advance is accruing on the basis ofthe Applicable Floating Rate or LIBOR Rate,
the Borrower shall, upon the Bank's request, promptly pay to and reimburse the
Bank for all costs incurred and payments made by the Bank by reason of any
future assessment, reserve, deposit or similar requirement or any surcharge, tax
or fee imposed upon the Bank or as a result of the Bank's compliance with any
directive or requirement  of any regulatory authority pertaining or relating to
funds used by the Bank in quoting and determining the Applicable Floating Rate
or LIBOR Rate.

 
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2.4.8  
Conversion from Applicable Floating Rate or LIBOR Rate:  In the event that the
Bank shall at any time determine that the accrual of interest on the basis of
the Applicable Floating Rate or LIBOR Rate (i) is infeasible because the Bank is
unable to determine the One-Month LIBOR Rate or the LIBOR Rate due to the
unavailability of U.S. dollar deposits, contracts or certificates of deposit in
an amount approximately equal to the amount of the relevant Advance and for a
period of time approximately equal to relevant LIBOR Interest Period or (ii) is
or has become unlawful or infeasible by reason of the Bank's compliance with any
new law, rule, regulation, guideline or order, or any new interpretation of any
present law, rule, regulation, guideline or order, then the Bank shall give
telephonicnotice thereof (confirmed in writing) to the Borrower, in which event
any Alternate Base Rate Advance bearing interest at the Applicable Floating Rate
or any LIBOR Rate Advance bearing interest at the LIBOR Rate shall thereupon
immediately accrue interest at the greater of the Prime Rate or Fed Funds Rate.

 
2.5  
Line Account: The Bank shall maintain on its books a record of account in which
the Bank shall make entries for each Advance and such other debits and credits
as shall be appropriate in connection with the credit facilities granted
hereunder (the “Line Account”).  The Bank shall provide the Borrower with a
statement of the Borrower's Line Account, which statement shall be considered to
be correct and conclusively binding on the Borrower unless the Borrower notifies
the Bank to the contrary within 30 days after the Borrower's receipt of any such
statement which it deems to be incorrect.

 
2.6  
Payments: If any payment required to be made by the Borrower hereunder becomes
due and payable on a day other than a Business Day, the due date thereof shall
be extended to the next succeeding Business Day and interest thereon shall be
payable at then applicable rate during such extension.  All payments required to
be made hereunder shall be made to the office of the Bank designated for the
receipt of notices herein or such other office as Bank shall from time to time
designate.

 
2.7  
Late Payment:  In addition to any other rights the Bank may have hereunder, if
any payment of principal or interest or any portion thereof, under this
Agreement is not paid within 15 days of when due, a late payment charge equal to
five percent (5%) of such past due payment may be assessed and shall be
immediately payable.

 
SECTION
 
3
 
CONDITIONS PRECEDENT
 
3.1  
Conditions Precedent to the Initial Extension of Credit:  The obligation of the
Bank to make the initial Advance or the first extension of credit to or on
account of the Borrower hereunder is subject to the conditions precedent that
the Bank shall have received before the date of such initial Advance or such
first extension of credit all of the following, in form and substance
satisfactory to the Bank:

 
(i)  
Authority to Borrow.  Evidence that the execution, delivery and performance by
the Borrower of this Agreement and any document, instrument or agreement
required hereunder have been duly authorized.

 
(ii)  
Fees.  A fee of $42,500.00, such fee to be deemed to be fully earned upon
payment together with payment of all of the Bank's out-of-pocket expenses in
connection with the preparation and negotiation of this Agreement.

 
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(iii)  
Miscellaneous.  Such other evidence as the Bank may request to establish the
consummation of the transaction contemplated hereunder and compliance with the
conditions of this Agreement.

 
3.2  
Conditions Precedent to All Extensions of Credit:  The obligation of the Bank to
make each Advance or each other extension of credit, as the case may be, to or
on account of the Borrower (including the initial Advance or the first extension
of credit) shall be subject to the further conditions precedent that, on the
date of each Advance or each extension of credit and after the making of such
Advance or extension of credit:

 
(i)  
Reporting Requirements.  The Bank shall have received the documents set forth in
Section 5.1.

 
(ii)  
Subsequent Approvals.  The Bank shall have received such supplemental approvals,
opinions or documents as the Bank may reasonably request.

 
(iii)  
Representations and Warranties.  The representations contained in Section 4 and
in any other document, instrument or certificate delivered to the Bank hereunder
are true, correct and complete (other than representations which are made with
respect to a specific date, in which case such representations shall be true and
correct in all material respects on the date specified).

 
(iv)  
Event of Default.  No event has occurred and is continuing which constitutes, or
with the lapse of time or giving of notice or both, would constitute an Event of
Default.

 
The Borrower's acceptance of the proceeds of any loan, Advance or extension of
credit, or the Borrower's applying for any Letter of Credit, or the Borrower's
execution of any document or instrument evidencing or creating any Obligation
hereunder shall, unless otherwise communicated in writing to Bank by Borrower,
be deemed to constitute the Borrower's representation and warranty that all of
the above statements are true and correct.
 
SECTION
 
4
 
REPRESENTATIONS AND WARRANTIES
 
The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:
 
4.1  
Legal Status:  The Borrower’s correct legal name is as stated in this Agreement
and the Borrower is a corporation duly organized and validly existing under the
laws of the state of California and with its chief executive office in the state
of California and is properly licensed and is qualified to do business and in
good standing in, and, where necessary to maintain the Borrower's rights and
privileges, has complied with the fictitious name statute of every jurisdiction
in which the Borrower is doing business.

 
4.2  
Authority and Validity:  This Agreement and each other document, contract and
instrument required by or at any time delivered to the Bank in connection with
this Agreement have been duly authorized, and upon their execution and delivery
in accordance with the provisions hereof will constitute legal valid and binding
agreements and obligations of the Borrower or the party which executes the same,
enforceable in accordance with their respective terms.

 
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4.3  
Solvency.  The Borrower is now and shall be at all times hereafter solvent and
able to pay the Borrower’s debts (including trade debts) as they mature.

 
4.4  
Legal Effect:  This Agreement constitutes, and any instrument, document or
agreement required hereunder when delivered hereunder will constitute, legal,
valid and binding obligations of the Borrower enforceable against the Borrower
in accordance with their respective terms.

 
4.5  
Fictitious Business Names:  There are no fictitious business names used by the
Borrower in connection with its business operations other than Micrel
Semiconductor. The Borrower shall notify the Bank not less than 30 days prior to
effecting any change in the matters described herein or prior to using any other
fictitious business name at any future date, indicating the name and state(s) of
its use.

 
4.6  
Financial Statements:  All financial statements, information and other data
which may have been or which may hereafter be submitted by the Borrower to the
Bank are true, accurate and correct as of the date thereof and have been or will
be prepared in accordance with generally accepted accounting principles
consistently applied and accurately represent the financial condition or, as
applicable, the other information disclosed therein.  Since the most recent
submission of such financial information or data to the Bank, the Borrower
represents and warrants that no material adverse change in the Borrower's
financial condition or operations has occurred which has not been fully
disclosed to the Bank in writing.

 
4.7  
Title to Assets:  The Borrower has good and marketable title to all of its
assets and the same are not subject to any security interest, encumbrance, lien
or claim of any third person except for Permitted Liens.

 
4.8  
ERISA Warranty: The Borrower has not withdrawn from (and no termination, partial
termination or other event has occurred with respect to) any deferred
compensation plan maintained for the benefit of Borrower’s employees, and has
not withdrawn from any multi- employer plan described in Section 4001(a)(3) of
ERISA.

 
4.9  
Payment of Taxes: All assessments and taxes, whether real, personal or
otherwise, due or payable by, or imposed, levied or assessed against the
Borrower, or any of the Borrower’s property, have been paid in full before
delinquency.

 
4.10  
Margin Stock.  The proceeds of any loan or advance hereunder will not be used to
purchase or carry margin stock as such term is defined under Regulation U of the
Board of Governors of the Federal Reserve System.

 
4.11  
Environmental Compliance.  The operations of the Borrower comply, and during the
term of this Agreement will at all times comply, in all respects with all
Environmental Laws; the Borrower has obtained all licenses, permits,
authorizations and registrations required under any Environmental Law
("Environmental Permits") and necessary for its ordinary course operations, all
such Environmental Permits are in good standing, and the Borrower is in
compliance with all material terms and conditions of such Environmental Permits;
neither the Borrower nor any of its present property or operations is subject to
any outstanding written order from or agreement with any governmental authority
nor subject to any judicial or docketed administrative proceeding, respecting
any Environmental Law, Environmental Claim or Hazardous Material; there are no
Hazardous Materials or other conditions or circumstances existing, or arising
from operations prior to the date of this Agreement, with respect to any
property of the Borrower that would reasonably be expected to give rise to
Environmental Claims; provided, however, that with respect to property leased
from an unrelated third party, the foregoing representation is made to the best
knowledge of the Borrower.  In addition, (i) the Borrower does not have any
underground storage tanks that are not properly registered or permitted under
applicable Environmental Laws, or that are leaking or

 
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4.12  
disposing of Hazardous Materials off-site, and (ii) the Borrower has notified
all of their employees of the existence, if any, of any health hazard arising
from the conditions of their employment and have met all notification
requirements under Title III of CERCLA and all other Environmental Laws.

 
4.13  
Warranties and Representations Cumulative.  Each warranty, representation and
agreement contained in this Agreement shall be automatically deemed repeated
with each loan and/or advance and shall be true, accurate and correct at each
such time and shall be conclusively presumed to have been relied on by the Bank
regardless of any investigation made or information possessed by the Bank.  The
warranties, representations and agreements set forth herein shall be cumulative
and in addition to any and all other warranties and representations and
agreements which the Borrower shall give, or cause to be given, to the Bank,
either now or hereafter.

 
SECTION
 
5
 
COVENANTS
 
The Borrower covenants and agrees that, during the term of this Agreement, and
so long thereafter as the Borrower is indebted to the Bank under this Agreement,
the Borrower will, unless the Bank shall otherwise consent in writing:
 
5.1  
Reporting and Certification Requirements:  Deliver or cause to be delivered to
the Bank in form and detail satisfactory to the Bank:

 
(i)  
Not later than 95 days after the end of each of the Borrower's fiscal years, a
copy of the annual audited financial report of the Borrower for such year,
prepared by a firm of certified public accountants acceptable to Bank and
accompanied by an unqualified opinion of such firm.

 
(ii)  
Not later than 50 days after the end of each of the first three fiscal quarters
of such fiscal year of the Borrower, a copy of the Borrower's unaudited
financial statement as of the end of each such fiscal quarter.

 
(iii)  
Not later than 90 days after the end of each of the Borrower’s fiscal year, a
copy of the Borrower’s budget for the upcoming operating year.

 
(iv)  
Promptly upon the Bank's request, such other information pertaining to the
Borrower hereunder as the Bank may reasonably request.

 
5.2  
Financial Condition:  The Borrower promises and agrees, during the term of this
Agreement and until payment in full of all of the Borrower's Obligations,
commencing, unless otherwise noted, with fiscal quarter ending March 31, 2009,
the Borrower will maintain at all times:

 
(i)  
A Minimum Effective Tangible Net Worth in excess of the aggregate of
$155,000,000.00 plus 50% of the amount of net income after tax per quarter
(without reduction for losses).

 
(ii)  
A ratio of Debt to Effective Tangible Net Worth of not more than .75 to 1.

 
(iii)  
The aggregate of cash, cash equivalents, marketable securities, and 50% of the
book value of auction rate securities as stated on Borrower’s quarterly and
annual financial statements, of not less than $50,000,000.00

 
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(iv)  
Profitability, by not allowing more than one quarterly loss(es) in any four
consecutive fiscal quarters.

 
(v)  
Commencing with fiscal year ending December 31, 2009, a minimum net profit after
tax of at least $5,000,000.00 at each fiscal year end.

 
5.3  
Preservation of Existence; Compliance with Applicable Laws:  Maintain and
preserve its existence and all rights and privileges now enjoyed; and conduct
its business and operations in accordance with all applicable laws, rules and
regulations.

 
5.4  
Merge or Consolidate:  Not liquidate or dissolve, merge or consolidate with or
into, or acquire any other business organization, provided however, that
Borrower may make business acquisitions of up to $5,000,000.00 in any one fiscal
year.

 
5.5  
Maintenance of Insurance:  Maintain insurance in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower
operates and maintain such other insurance and coverages as may be required by
the Bank.  All such insurance shall be in form and amount and with companies
satisfactory to the Bank.

 
5.6  
Payment of Obligations and Taxes:  Make timely payment of all assessments and
taxes and all of its liabilities and obligations including, but not limited to,
trade payables, unless the same are being contested in good faith by appropriate
proceedings with the appropriate court or regulatory agency.  For purposes
hereof, the Borrower's issuance of a check, draft or similar instrument without
delivery to the intended payee shall not constitute payment.

 
5.7  
Depository Relationships:  Maintain its primary business depository relationship
with Bank, including general, operating and administrative deposit accounts and
cash management services.

 
5.8  
Inspection Rights and Accounting Records:  The Borrower will maintain adequate
books and records in accordance with generally accepted accounting principles
consistently applied and in a manner otherwise acceptable to Bank, and, at any
reasonable time and from time to time, permit the Bank or any representative
thereof to examine and make copies of the records and visit the properties of
the Borrower and discuss the business and operations of the Borrower with any
employee or representative thereof.  If the Borrower shall maintain any records
(including, but not limited to, computer generated records or computer programs
for the generation of such records) in the possession of a third party, the
Borrower hereby agrees to notify such third party to permit the Bank free access
to such records at all reasonable times and to provide the Bank with copies of
any records which it may request, all at the Borrower's expense, the amount of
which shall be payable immediately upon demand.

 
5.9  
Payment of Dividends:  Cash dividends may be made to the Borrower’s shareholders
provided however that any said payment may not be made if any covenant violation
shall occur as a result of said payment.

 
5.10  
Transfer Assets: Not, after the date hereof, sell, contract for sale, convey,
transfer, assign, lease or sublet, any of its assets except in the Ordinary
Course of Business and, then, only for full, fair and reasonable consideration.

 
5.11  
Change in Nature of Business:  Not make any material change in its financial
structure or the nature of its business as existing or conducted as of the date
hereof.

 
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5.12  
Maintenance of Jurisdiction:  Borrower shall maintain the jurisdiction of its
organization and chief executive office, or if applicable, principal residence,
as set forth herein and not change such jurisdiction name or form of
organization without 30 days prior written notice to Bank.

 
5.13  
Compensation of Employees:  Compensate its employees for services rendered at an
hourly rate at least equal to the minimum hourly rate prescribed by any
applicable federal or state law or regulation.

 
5.14  
Notice:  Give the Bank prompt written notice of any and all (i) Events of
Default; (ii) litigation, arbitration or administrative proceedings to which the
Borrower is a party and in which the claim or liability exceeds $2,500,000.00;
(iii) other matters which have resulted in, or might result in a material
adverse change in the financial condition or business operations of the
Borrower.

 
5.15  
Environmental Compliance:  The Borrower shall conduct its operations and keep
and maintain all of its property in compliance with all Environmental Laws.

 
SECTION
 
6
 
EVENTS OF DEFAULT
 
Any one or more of the following described events shall constitute an event of
default (an "Event of Default") under this Agreement:
 
6.1  
Non-Payment:  Any Borrower shall fail to pay the principal amount of any
Obligations when due or interest on the Obligations within 5 days of when due.

 
6.2  
Performance Under This Agreement:  The Borrower shall fail in any material
respect to perform or observe any term, covenant or agreement contained in this
Agreement or in any document, instrument or agreement relating to this Agreement
or any other document or agreement executed by the Borrower with or in favor of
Bank and any such failure shall continue unremedied for more than 30 days after
written notice from the Bank to the Borrower of the existence and character of
such Event of Default.

 
6.3  
Representations and Warranties; Financial Statements:  Any representation or
warranty made by the Borrower under or in connection with this Agreement or any
financial statement given by the Borrower or any guarantor shall prove to have
been incorrect in any material respect when made or given or when deemed to have
been made or given.

 
6.4  
Other Agreements:  If there is a default under any material agreement to which
Borrower is a party with Bank or with a third party or parties resulting in a
right by the Bank or by such third party or parties, whether or not exercised,
to accelerate the maturity of any Indebtedness.

 
6.5  
Insolvency:  The Borrower or any guarantor shall:  (i) become insolvent or be
unable to pay its debts as they mature; (ii) make an assignment for the benefit
of creditors or to an agent authorized to liquidate any substantial amount of
its properties and assets; (iii) file a voluntary petition in bankruptcy or
seeking reorganization or to effect a plan or other arrangement with creditors;
(iv) file an answer admitting the material allegations of an involuntary
petition relating to bankruptcy or reorganization or join in any such petition;
(v) become or be adjudicated a bankrupt; (vi) apply for or consent to the
appointment of, or consent that an order be made, appointing any receiver,
custodian or trustee, for itself or any of its properties, assets or businesses;
or (vii) in an involuntary proceeding, any receiver, custodian or trustee shall
have been appointed for all or substantial part

 
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6.6  
of the Borrower’s or guarantor’s properties, assets or businesses and shall not
be discharged within 30 days after the date of such appointment.

 
6.7  
Execution:  Any writ of execution or attachment or any judgment lien shall be
issued against any property of the Borrower and shall not be discharged or
bonded against or released within 30 days after the issuance or attachment of
such writ or lien.

 
6.8  
Suspension:  The Borrower shall voluntarily suspend the transaction of business
or allow to be suspended, terminated, revoked or expired any permit, license or
approval of any governmental body necessary to conduct the Borrower's business
as now conducted.

 
6.9  
Material Adverse Change:  If there occurs a material adverse change in the
Borrower's business or financial condition, or if there is a material impairment
of the prospect of repayment of any portion of the Obligations, or if a Borrower
who is a natural person shall die.

 
6.10  
Change in Ownership:  There shall occur a sale, transfer, disposition or
encumbrance (whether voluntary or involuntary), or an agreement shall be entered
into to do so, with respect to more than 15% of the issued and outstanding
capital stock of the Borrower.

 
SECTION
 
7
 
REMEDIES ON DEFAULT
 
Upon the occurrence of any Event of Default, the Bank may, at its sole and
absolute election, without demand and only upon such notice as may be required
by law:
 
7.1  
Acceleration:  Declare any or all of the Borrower's indebtedness owing to the
Bank, whether under this Agreement or any other document, instrument or
agreement, immediately due and payable, whether or not otherwise due and
payable.

 
7.2  
Cease Extending Credit:  Cease making Advances or otherwise extending credit to
or for the account of the Borrower under this Agreement or under any other
agreement now existing or hereafter entered into between the Borrower and the
Bank.

 
7.3  
Termination:  Terminate this Agreement as to any future obligation of the Bank
without affecting the Borrower's obligations to the Bank or the Bank's rights
and remedies under this Agreement or under any other document, instrument or
agreement.

 
7.4  
Letters of Credit:  Require the Borrower to pay immediately to the Bank, for
application against drawings under any outstanding Letters of Credit, the
outstanding principal amount of any such Letters of Credit which have not
expired.  Any portion of the amount so paid to the Bank which is not applied to
satisfy draws under any such Letters of Credit or any other obligations of the
Borrower to the Bank shall be repaid to the Borrower without interest.

 
7.5  
Close-Out and Liquidation:  Close-out and liquidate each outstanding FX
Transaction so that each FX Transaction is canceled in accordance with the
following:

 
(i)  
Closing Value. The Bank shall calculate value of such canceled FX Transaction by
converting (1) in the case of a FX Transaction whose Settlement Date is the same
as or later than the Close-Out Date, the amount of Foreign Currency into US
dollars at a rate of exchange at which the Bank can buy or sell US dollars with
or against the Foreign Currency for delivery on the Settlement Date of the
relevant FX

 
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(ii)  
Transaction; or (2) in the case of a FX Transaction whose Settlement Date
precedes the Close-Out Date, the amount of the Foreign Currency adjusted by
adding interest with respect thereto at the Prime Rate from the Settlement Date
to the Close-Out Date, into US Dollars at a rate of exchange at which the Bank
can buy or sell US dollars with or against the Foreign Currency for delivery on
the Close-Out Date.

 
(iii)  
Closing Gain or Loss.  (1) For a FX Transaction for which the Bank agreed to
purchase a Foreign Currency, the amount by which the Closing Value exceeds the
Notional Value shall be a Closing Loss and the amount by which the Closing Value
is less than the Notional Value shall be a Closing Gain; and (2) For a FX
Transaction for which the Bank agreed to sell a Foreign Currency, the amount by
which the Closing Value exceeds the Notional Value shall be a Closing Gain and
the amount by which the Closing Value is less than the Notional Value shall be a
Closing Loss.

 
(iv)  
Net Present Value.  The Closing Gain or Closing Loss for each Settlement Date
falling after the Close-out Date will be discounted by the Bank to it net
present value.

 
(v)  
Payment.  To the extent that the net amount of the aggregate Closing Gains
exceeds the Closing Losses, such amount shall be payable by the Bank to the
Borrower. To the extent that the aggregate net amount of the Closing Losses
exceeds the Closing Gains, such amount shall be payable by the Borrower to the
Bank.

 
7.6  
Non-Exclusivity of Remedies:  Exercise one or more of the Bank's rights set
forth herein or seek such other rights or pursue such other remedies as may be
provided by law, in equity or in any other agreement now existing or hereafter
entered into between the Borrower and the Bank, or otherwise.

 
SECTION
 
8
 
MISCELLANEOUS
 
8.1  
Amounts Payable on Demand:  If the Borrower shall fail to pay on demand any
amount so payable under this Agreement, the Bank may, at its option and without
any obligation to do so and without waiving any default occasioned by the
Borrower having so failed to pay such amount, create an Advance under this
Agreement in an amount equal to the amount so payable, which Advance shall
thereafter bear interest as provided hereunder.

 
8.2  
Default Interest Rate:  If an Event of Default, or an event which, with notice
or passage of time could become an Event of Default, has occurred or is
continuing, the Borrower shall pay to the Bank interest on any Indebtedness or
amount payable under this Agreement at a rate which is 3% in excess of the rate
or rates then in effect under this Agreement.

 
8.3  
Reliance and Further Assurances:  Each warranty, representation, covenant,
obligation and agreement contained in this Agreement shall be conclusively
presumed to have been relied upon by the Bank regardless of any investigation
made or information possessed by the Bank and shall be cumulative and in
addition to any other warranties, representations, covenants and agreements
which the Borrower now or hereafter shall give, or cause to be given, to the
Bank.  Borrower agrees to execute all documents and instruments and to perform
such acts as the Bank may reasonably

 
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8.4  
deem necessary to confirm and secure to the Bank all rights and remedies
conferred upon the Bank by this agreement and all other documents related
thereto.

 
8.5  
Attorneys' Fees:  Borrower shall pay to the Bank all costs and expenses,
including but not limited to reasonable attorneys fees, incurred by Bank in
connection with the administration, enforcement, including any bankruptcy,
appeal or the enforcement of any judgment or any refinancing or restructuring of
this Agreement or any document, instrument or agreement executed with respect
to, evidencing or securing the indebtedness hereunder.

 
8.6  
Notices:  All notices, payments, requests, information and demands which either
party hereto may desire, or may be required to give or make to the other party
hereto, shall be given or made to such party by hand delivery or through deposit
in the United States mail, postage prepaid, or by facsimile delivery, or to such
other address as may be specified from time to time in writing by either party
to the other.

   
To the Borrower:
 
MICREL, INCORPORATED
2180 Fortune Drive
San Jose, CA 95131
Attn:Raymond D. Zinn
President & CEO
Ray Wallin
Vice President, Finance & CFO
FAX:           (408) 474-1077
To the Bank:
 
BANK OF THE WEST
San Jose Office (NBO)
One Almaden Boulevard
San Jose, CA 95113
Attn:Dirk Price
Vice President
FAX:           (408) 292-4092

 
8.7  
Waiver:  Neither the failure nor delay by the Bank in exercising any right
hereunder or under any document, instrument or agreement mentioned herein shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any other document, instrument or agreement mentioned
herein preclude other or further exercise thereof or the exercise of any other
right; nor shall any waiver of any right or default hereunder, or under any
other document, instrument or agreement mentioned herein, constitute a waiver of
any other right or default or constitute a waiver of any other default of the
same or any other term or provision.

 
8.8  
Conflicting Provisions:  To the extent the provisions contained in this
Agreement are inconsistent with those contained in any other document,
instrument or agreement executed pursuant hereto, the terms and provisions
contained herein shall control.  Otherwise, such provisions shall be considered
cumulative.

 
8.9  
Binding Effect; Assignment:  This Agreement shall be binding upon and inure to
the benefit of the Borrower and the Bank and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of the
Bank.  The Bank may sell, assign or grant participation in all or any portion of
its rights and benefits hereunder.  The Borrower agrees that, in connection with
any such sale, grant or assignment, the Bank may deliver to the prospective
buyer, participant or assignee financial statements and other relevant
information relating to the Borrower and any guarantor.

 
8.10  
Jurisdiction:  This Agreement, the rights of the parties hereunder, and any
documents, instruments or agreements mentioned or referred to herein shall be
governed by and construed according to the laws of the State of California
without regard to conflict of law principles, to the jurisdiction of whose
courts the parties hereby submit.

 
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8.11  
Waiver Of Jury Trial.  THE BORROWER AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL
BY JURY IS A CONSTITUTIONAL RIGHT, AND THAT IT MAY BE WAIVED UNDER CERTAIN
CIRCUMSTANCES.  TO THE EXTENT PERMITTED BY LAW EACH PARTY, AFTER CONSULTING (OR
HAVING THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS CHOICE, WAIVES ANY RIGHT
TO TRIAL BY JURY IN THE EVENT OF LITIGATION RELATED TO THIS AGREEMENT OR ANY
OTHER DOCUMENT, INSTRUMENT  OR TRANSACTION BETWEEN THE PARTIES.

 
8.12  
Judicial Reference Provision.  In the event the above Jury Trial Waiver is
unenforceable, the parties elect to proceed under this Judicial Reference
Provision.  With the exception of the items specified below, any controversy,
dispute or claim between the parties relating to this Agreement or any other
document, instrument or transaction between the parties (each, a “Claim”), will
be resolved by a reference proceeding in California pursuant to Sections 638 et
seq. of the California Code of Civil Procedure, or their successor sections,
which shall constitute the exclusive remedy for the resolution of any Claim,
including whether the Claim is subject to reference.  Venue for the reference
will be the Superior Court in the County where real property involved in the
action, if any, is located, or in a County where venue is otherwise appropriate
under law (the Court). The following matters shall not be subject to reference:
(i) nonjudicial foreclosure of any security interests in real or personal
property, (ii) exercise of self-help remedies (including without limitation
set-off), (iii) appointment of a receiver, and (iv) temporary, provisional or
ancillary remedies (including without limitation writs of attachment, writs of
possession, temporary restraining orders or preliminary injunctions). The
exercise of, or opposition to, any of the above does not waive the right to a
reference hereunder.

 
The referee shall be selected by agreement of the parties. If the parties do not
agree, upon request of any party a referee shall be selected by the Presiding
Judge of the Court.  The referee shall determine all issues in accordance with
existing case law and statutory law of the State of California, including
without limitation the rules of evidence applicable to proceedings at law. The
referee is empowered to enter equitable and legal relief, and rule on any motion
which would be authorized in a court proceeding, including without limitation
motions for summary judgment or summary adjudication. The referee shall issue a
decision, and pursuant to CCP §644 the referee’s decision shall be entered by
the Court as a judgment or order in the same manner as if tried by the Court.
The final judgment or order from any decision or order entered by the referee
shall be fully appealable as provided by law. The parties reserve the right to
findings of fact, conclusions of law, a written statement of decision, and the
right to move for a new trial or a different judgment, which new trial if
granted, will be a reference hereunder.  AFTER CONSULTING (OR HAVING THE
OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS CHOICE, EACH PARTY AGREES THAT ALL
CLAIMS RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND
NOT A JURY.
 
8.13  
Telephone Recording:  The Borrower agrees that the Bank may electronically
record all telephone conversations between the Borrower and the Bank with
respect to any FX Transaction and that any such recording may be submitted in
evidence in any arbitration or other legal proceeding. Such recording shall be
deemed to be conclusive evidence as to the terms of any FX Transaction in the
event of a dispute.

 
8.14  
Counterparts:  This Agreement may be executed in any number of counterparts and
all such counterparts taken together shall be deemed to constitute one and the
same instrument.

 
8.15  
Headings:  The headings herein set forth are solely for the purpose of
identification and have no legal significance.

 
8.16  
Entire Agreement and Amendments:  This Agreement and all documents, instruments
and agreements mentioned herein constitute the entire and complete understanding
of the parties with

 
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8.17  
respect to the transactions contemplated hereunder.  All previous conversations,
memoranda and writings between the parties pertaining to the transactions
contemplated hereunder not incorporated or referenced in this Agreement or in
such documents, instruments and agreements are superseded hereby. This Agreement
may be amended only by an instrument in writing signed by the Borrower and the
Bank.

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

   

BANK:
 
BANK OF THE WEST
 
BY: /s/ Dirk Price            
NAME:  Dirk Price, Vice President
BORROWER:
 
MICREL, INCORPORATED
 
BY: /s/ Raymond D. Zinn           
NAME:  Raymond D. Zinn, President & CEO

 

 
 
BY: /s/ Clyde R. Wallin            
NAME:  Ray Wallin, Vice President, Finance & CFO
   

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