**EXHIBIT 10.3**

**INTERNATIONAL****DISTRIBUTOR AGREEMENT**

This Distributor Agreement (the “Agreement”) is made and effective asof November 30, 2004 by and between Micro Linear Corporation, having itsprincipal place of business at 2050 Concourse Drive, San Jose, CA  95131(hereinafter referred to as “MANUFACTURER”) and Clavis, a division ofMacnica, Inc. 1-6-3 Shin Yokohama, Kohoku-ku, Yokohama, 222-8561, Japan(hereinafter referred to as “DISTRIBUTOR”).

          In consideration ofthe mutual promises herein contained, the MANUFACTURER and DISTRIBUTOR agree asfollows:

1.       APPOINTMENT

          A.          Subjectto the terms stated herein, MANUFACTURER appoints DISTRIBUTOR, and DISTRIBUTORhereby accepts such appointment, as an authorized MANUFACTURER’Sdistributor for the Products in the territory (as defined in Section 3Abelow).

          B.          Therelationship of MANUFACTURER and DISTRIBUTOR established by this Agreement isthat of independent contractors.  Nothing contained in this Agreement shallbe construed to give either party the power to direct and control the day-to-dayactivities of the other, or constitute the parties as partners, joint ventures,co-owners or otherwise as participants in a joint or common undertaking. DISTRIBUTOR, its agents, and employees are not the representative ofMANUFACTURER for any purpose except as expressly set forth in theAgreement.  They have no power or authority as agent, employee, or in anyother capacity to represent, act for, bind, or otherwise create or assume anyobligation on behalf of MANUFACTURER for any purpose whatsoever.  Allfinancial obligations associated with DISTRIBUTOR’S business are the soleresponsibility of DISTRIBUTOR.  All sales and other agreements betweenDISTRIBUTOR and its customers are DISTRIBUTOR’S exclusive responsibilityand shall have no effect on DISTRIBUTOR’S obligations under thisAgreement.  DISTRIBUTOR shall be solely responsible for, and shallindemnify and hold MANUFACTURER free and harmless from any and all claims,damages, or lawsuits arising solely out of the acts of DISTRIBUTOR, itsemployees, and its agents.

2.       DEFINITION OF“PRODUCTS”

          A.          Theterm “Products” shall mean all products offered for sale byMANUFACTURER as set forth and described in MANUFACTURER’S current publishedDistributor Price List.

          B.          AdditionalProducts may be added to this agreement, including products specified inMANUFACTURER’S Published Price List but not approved for DISTRIBUTORstocking, by mutual agreement between the parties.

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3.       DEFINITION OF “TERRITORY”

          A.          Theterm “Territory” shall mean the geographic area known as Japan and inaddition shall include subsidiaries of Japanese customers located in SingaporeTaiwan, Hong Kong, China and South Korea in those instances where the design winwas transacted with their respective Japanese parent companies.  Manufacturer and Distributor agree, however, that coverage of this geographicarea shall be non-exclusive and that Manufacturer and Distributor shall agree ina separate writing on the customers to be serviced by Distributor  underthe terms of this Agreement.

4.       TERM

          The term of this Agreement shall commence upon the Effective Date set forth forthe initial period of one year and shall be automatically renewed unlessterminated by either party giving at least thirty (30) days written notice perSection 28 (Twenty-Eight) of this agreement.

5.       DISTRIBUTOR ACTIVITIES

          A.          DISTRIBUTORagrees to actively and diligently solicit the trade in the territory, and ingeneral make all reasonable efforts to sell MANUFACTURERS Products.

          B.          During the term of this Agreement, DISTRIBUTOR shall have the right within theTerritory to indicate to the public that it is an authorized DISTRIBUTOR of theProducts and to advertise such items under the trademarks, service marks, andtrade names that MANUFACTURER may adopt from time to time(“MANUFACTURER’S Trademarks”).  DISTRIBUTOR shall not alteror remove any MANUFACTURER’S Trademarks applied to the Products. Nothing herein shall grant to DISTRIBUTOR any right, title or interest inMANUFACTURER’S Trademarks.  All uses of MANUFACTURER’S Trademarksby DISTRIBUTOR shall inure to the benefit of MANUFACTURER.  At no timeduring the term of this Agreement shall DISTRIBUTOR challenge or assist othersin challenging MANUFACTURER’S Trademarks or the registration thereof norattempt to register any trademarks, service marks or trade names confusinglysimilar to those of MANUFACTURER.

          C.          Upontermination of this Agreement, DISTRIBUTOR shall forthwith cease any further useof any trademark, service mark, or trade name for which consent to use had beengranted by MANUFACTURER.

          D.          DISTRIBUTORagrees to examine, or cause to be examined, all Products shipped by MANUFACTURERpromptly upon receipt thereof, and to immediately file or cause to be filed aclaim with the carrier upon delivery for any damage to or shortage in theProducts, and to notify MANUFACTURER within ten (10) days after receipt of theProducts of any such claim pertaining thereto.

          E.          DISTRIBUTORagrees to comply with all applicable laws and regulations currently existing inthe territory relating to the Products.

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          F.          DISTRIBUTORwill pass on to its customers MANUFACTURER’S warranty with respect to allproducts purchased by customers.  DISTRIBUTOR will not pass on to itscustomers any warranty that exceeds the scope of MANUFACTURER’S writtenwarranty.  DISTRIBUTOR shall indemnify and hold MANUFACTURER harmless fromand against any and all claims and liabilities, costs, and expenses (includingthe reasonable fees of attorneys and other professionals) incurred by, orthreatened against, MANUFACTURER in connection with any representation byDISTRIBUTOR or DISTRIBUTOR’S personnel or agents inconsistent with orbroader than the warranties and disclaimers set forth in thisAgreement.

          G.          DISTRIBUTORshall use its reasonable best efforts, consistent with prudent businesspractice, to maintain a representative inventory of Products in reasonablesufficient quantities to provide reasonably adequate and timely delivery toDISTRIBUTOR’S customers.

          H.          DISTRIBUTORand its employees shall participate, when and to the extent appropriate, in suchtraining programs as may be offered by Supplier, to the extent that suchparticipation does not materially detract from the conduct of DISTRIBUTORSbusiness.

          I.          DISTRIBUTOR,at its election, may translate MANUFACTURER promotional materials into locallanguages.  DISTRIBUTOR will promptly provide MANUFACTURER with a soft andhard copy of all translated materials and revisions thereto forMANUFACTURER’S approval, which approval shall not be unreasonably withheldor delayed.  DISTRIBUTOR may publish or distribute such translatedmaterials only after MANUFACTURER has approved their use in writing.  Thecopyright on all such translations shall be owned by MANUFACTURER by virtue ofthe “work for hire” doctrine or shall be transferred toMANUFACTURER.

6.       MANUFACTURER OBLIGATIONS

          A.          MANUFACTURERshall maintain a policy of engaging in Product merchandising and advertising ona worldwide basis to provide a continuing demand for MANUFACTURERProducts.  MANUFACTURER will, at its sole discretion, include DISTRIBUTORSname in such advertising from time to time, with prior approval.

          B.          MANUFACTURERshall furnish DISTRIBUTOR with price lists, sales literature, books, catalogues,product briefs, advanced product information, data sheets, and the like, asMANUFACTURER may prepare for national distribution at no cost to DISTRIBUTOR.MANUFACTURER shall also provide DISTRIBUTOR with such technical and salessupport as may be necessary to assist DISTRIBUTOR in effectively carrying outits activities under this Agreement.

          C.          MANUFACTURERagrees that its facilities will be regularly and actively employed to the mutualbenefit of MANUFACTURER and DISTRIBUTOR and to assist DISTRIBUTOR in whatevermanner is deemed proper by MANUFACTURER for the sale of Products.

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          D.          MANUFACTURERshall ship, mark and pack all Military Products in accordance with the relevantspecifications.

          E.          MANUFACTURERshall refer to DISTRIBUTOR: customers and potential customers for quantities ofthe Products customarily handled by distributors.

          F.          MANUFACTURERshall establish and maintain such quality control procedures, electrostaticdischarge sensitivity procedures, testing of Products and other customaryprograms as are necessary to ensure that the Products, as manufactured and soldto DISTRIBUTOR, are of the highest quality and reliability.

7.       MANUFACTURER - DISTRIBUTOR LIABILITY

          A.          NeitherMANUFACTURER nor DISTRIBUTOR shall be liable for failure to perform anyobligation under this Agreement if such failure is caused by circumstances notdirectly under the party’s control, including failures resulting from forcemajeure, acts of God, acts of public authorities, war and war measures, strikes,fires, or failures or delays of suppliers or carriers. 

          B.          MANUFACTURER’STOTAL LIABILITY ARISING OUT OF THIS AGREEMENT AND/OR THE SALE OF ANY PRODUCTSHALL NOT EXCEED THE DISTRIBUTOR PRICE FOR THE PRODUCT GIVING RISE TO THELIABILITY.  IN NO EVENT SHALL MANUFACTURER BE LIABLE FOR COSTS OFPROCUREMENT OF SUBSTITUTE GOODS BY ANYONE.  IN NO EVENT SHALL MANUFACTURERBE LIABLE TO DISTRIBUTOR OR ANY OTHER ENTITY FOR ANY SPECIAL, CONSEQUENTIAL,INCIDENTAL, OR INDIRECT DAMAGES OR LOST PROFITS, HOWEVER CAUSED, WHETHERPURSUANT TO A THEORY IN BREACH OF CONTRACT, NEGLIGENCE, OR OTHERWISE, ANDWHETHER OR NOT MANUFACTURER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCHDAMAGES.  THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OFESSENTIAL PURPOSE OF ANY LIMITED REMEDY.  THE ESSENTIAL PURPOSE OF THISPROVISION IS TO LIMIT THE POTENTIAL LIABILITY OF MANUFACTURER ARISING OUT OFTHIS AGREEMENT AND DISTRIBUTION OF PRODUCTS.

8.       COMPLIANCE WITH LAWS

          A.          DISTRIBUTOR will comply with all laws and governmental regulations, which prohibit export or diversion of MANUFACTURERS products to certain countries, and not knowingly assist or participate in any such diversion or other violation of applicable U.S. laws and regulations.

          B.          DISTRIBUTORunderstands and acknowledges that MANUFACTURER is subject to regulation byagencies of the U.S. Government, including the U.S. Department of Commerce,which prohibits export or diversion of certain products and technology tocertain countries.  Any and all obligations of MANUFACTURER to provideproducts or documentation or any media in which any of the foregoing iscontained, as well as any technical assistance, shall be subject in all respectsto MANUFACTURER’S compliance with such United States laws and regulationsas shall from time to time govern the license and delivery of technology andproducts abroad by persons subject to the jurisdiction of the United States,including the Export Administration Act of 1979, as amended, any successorlegislation, and the Export Administration Regulations issued by the Departmentof Commerce, Bureau of Export Administration.

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          C.          Withoutlimiting the foregoing, DISTRIBUTOR certifies that unless prior writtenauthorization is obtained from the United States Bureau of Export Administrationor the Export Administration Regulations explicitly permit the re-export withoutsuch written authorization, it will not export, re-export, or transship,directly or indirectly, the Products to country groups D-1 or E-2 (as defined inthe Export Administration Regulations), which currently consist of Albania,Armenia, Azerbaijan, Belarus, Bulgaria, Cambodia, China (PRC), Cuba, Estonia,Georgia, Kazakhstan, Kyrgyzstan, Laos, Latvia, Libya, Lithuania, Moldova,Mongolia, North Korea, Romania, Russia, Tajikistan, Turkmenistan, Ukraine,Uzbekistan and Vietnam, or to Iran, Iraq or Syria or to any other country as towhich the U.S. Government has placed an embargo against the shipment ofproducts, software or technology which is in effect during the term of thisAgreement.  This Section 8.C. shall survive any termination of thisAgreement.

          D.          DISTRIBUTORshall at all times during the term of the Agreement have in effect all licenses,permits, and authorizations from all governmental agencies necessary to theperformance of its obligations hereunder, and shall comply with all applicablelaws, rules, and regulations affecting its activities hereunder.

9.       TERMS OF PAYMENT

          A.          MANUFACTURERwill invoice DISTRIBUTOR upon shipment of each order. Payment for all productsshipped and invoiced by MANUFACTURER are due by the 20th of the monthfollowing the month of shipment.

          B.          Allpayments shall be made in the currency set forth in MANUFACTURER’SDistributor Price List.  DISTRIBUTOR represents and warrants that nocurrency control laws applicable in the Territory prevent the payment toMANUFACTURER of any sums due under this Agreement.   In the event thatany such laws come into effect and the local government of the Territory doesnot permit that payment be made in the currency described above, DISTRIBUTORwill notify MANUFACTURER immediately, and if so instructed by MANUFACTURER,deposit all monies due MANUFACTURER to the account of MANUFACTURER in a localbank of MANUFACTURER’S choice in the Territory.

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10.     APPLICATION OF CREDITS

          A.          MANUFACTURERreserves the right to apply any outstanding credits due to DISTRIBUTOR as aset-off against any debit due from DISTRIBUTOR to MANUFACTURER.

          B.          Inthe event DISTRIBUTOR is entitled to a credit from MANUFACTURER hereunder, andthe amount of such credit exceeds DISTRIBUTOR’S obligation to MANUFACTURERat the time, MANUFACTURER shall forthwith pay the amount of such excess toDISTRIBUTOR.

11.     REPORTS

          A.          InventoryReports -

                        TheDISTRIBUTOR will submit a monthly inventory report covering all of MANUFACTURERSproducts on hand in each stocking location.  This is to be supplied alongwith the Point of Sales (“POS”) report described in paragraph11B.

          B.          POSReports -

                        DISTRIBUTORagrees to submit monthly reports to MANUFACTURER showing total sales ofMANUFACTURER Products by complete part number, quantity sold, unit price, priceextension, and customer identification and location.  Each monthly reportshall be submitted by the fifteenth (15th) of the month immediately followingthe close of the preceding business month.

12.     PRICES

          A.          Theprices to be paid by DISTRIBUTOR for Products purchased for resale shall bethose prices set forth in MANUFACTURER’S established Distributor Price Listin effect at the time of shipment from the Factory.  For special pricesnegotiated with the MANUFACTURER, all sales are final.

          B.          Pricesquoted in MANUFACTURER’S Distributor Price List do not include Federal,State, Local, Sales, Use, Value Added (VAT), Excise, Customs, Import or similartaxes or duties imposed by any governmental agency that has jurisdiction overthe import, export, or purchase over the Products.  DISTRIBUTOR shall beliable for and shall pay all applicable taxes, duties, license fees or othercharges incident to the sale of Products when MANUFACTURER has the legalobligation to collect such taxes.  The appropriate amount shall be added toMANUFACTURER’S invoice and paid by DISTRIBUTOR unless DISTRIBUTOR providesMANUFACTURER with a valid tax exemption certificate authorized by theappropriate taxing authority.  In the event that DISTRIBUTOR is required bylaw to make deductions or withholdings from payments to MANUFACTURER, thenDISTRIBUTOR shall pay such additional amounts to MANUFACTURER as may benecessary to assure that the actual amount received by MANUFACTURER afterdeduction or withholding (and after payment of any additional taxes due as aconsequence of such additional amount) shall equal the amount that would havebeen received if such deduction or withholding were not required.

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          C.          Allprices shall be subject to change or withdrawal at the discretion ofMANUFACTURER with sixty (60) day advance notice, subject to the provisions ofSection 14.  Notice of any changes in prices shall be given DISTRIBUTOR byfurnishing new Distributor Price Lists or written advises.

          D.          MANUFACTURERrepresents and warrants that the prices and discounts, if any, extended toDISTRIBUTOR in connection with the Products comply with all applicable laws andare not, and will not be, less favorable than those extended to other purchasersof similar quantities of Products from MANUFACTURER, or otherdistributors.

13.     F.O.B.

          A.          Allprices are F.O.B. MANUFACTURER’S domestic shipping facility.

          B.          Themode of shipment from MANUFACTURER to the DISTRIBUTOR will be as directed by theDISTRIBUTOR.  MANUFACTURER will ship via the best way consistent with thedelivery schedule and MANUFACTURER’S requirement fortraceability.

14.     PRICE CHANGES AFFECT ONLY STANDARD PRODUCT SOLDAT STANDARD DISTRIBUTOR COST

          A.          Price Increases -

          Prior to theeffective date of a price increase, DISTRIBUTOR may order Products for deliverywithin the term of this Agreement.  All Products shipped under orderssubmitted by DISTRIBUTOR prior to the effective date of any price increase willbe shipped and invoiced at the price in effect at the time of orderplacement.

          B.          PriceDecreases -

          In the eventMANUFACTURER decreases the price of any Product, DISTRIBUTOR shall be entitledto a credit equal to the difference between the price paid for the Product byDISTRIBUTOR, less any prior credits granted by MANUFACTURER on such Products,and the new decreased price for the Product, multiplied by the quantity of suchProduct in DISTRIBUTOR’S inventory on the effective date of thedecrease.  Similar price adjustment, if appropriate, will also be made onall Products in transit to DISTRIBUTOR on the effective date of the pricedecrease and, for sixty (60) days after such effective date, on all Productsreturned to DISTRIBUTOR.  DISTRIBUTOR shall submit to MANUFACTURER, withinsixty (60) business days following the effective date of such price decrease orthe date DISTRIBUTOR actually receives notice thereof, whichever occurs later, areport of the Products subject to the price decrease.  All Products shippedafter the effective date of any price decrease will be shipped and invoiced atthe price in effect at the time of shipment.

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15.     ORDERS

          A.          Ordersfor Products placed by DISTRIBUTOR shall be accepted subject to those terms setforth in this Agreement.  Any terms and conditions presented on ordersplaced by DISTRIBUTOR, which are in conflict with this Agreement, shall beinapplicable to the sale without the express written approval ofMANUFACTURER.

          B.          Ordersshall describe the Products ordered, the quantities, shall request deliverydates, shall set forth prices and shall provide shipping instructions. MANUFACTURER will acknowledge each such order in writing at the earliestpossible date, but in any event within ten (10) business days followingreceipt.  In such acceptance, MANUFACTURER will confirm the requestedshipment date or specify an acknowledged shipment date.  If theacknowledged shipment date is more than thirty (30) days later thanDISTRIBUTOR’S requested shipment date, DISTRIBUTOR, at its election, maycancel the order without penalty.

          C.          Cancellationsand Reschedules -

                        1)          Ordersmay not be canceled or rescheduled within thirty (30) days of acknowledgeddelivery.

                        2)          DISTRIBUTORmay, upon at least thirty (30) days prior written notice, reschedule theAcknowledged Shipment Date of, or cancel, any order.  Any such reschedulingor cancellation of deliveries shall be at no charge to DISTRIBUTOR.

          D.          DropShipments -

          Shipments to aDISTRIBUTOR customer will be made only if the quantity exceeds the last columnpricing established by the MANUFACTURER.

          E.          Early Shipments -

          If any Products aredelivered more than 2 weeks prior to their Acknowledged Shipment Date,DISTRIBUTOR shall have the right in its discretion to accept or reject any suchdelivery.  If MANUFACTURER is notified of DISTRIBUTOR’S intention toreturn any such delivery, it shall promptly issue a Return MaterialAuthorization.  Notwithstanding the acceptance of such delivery or anyother term or provision in this Agreement, DISTRIBUTOR shall not becomeobligated to pay any invoices submitted therefore until forty-five (45) daysafter the Acknowledged Shipment Date.

16.     TITLE AND RISK OF LOSS

          A.          Thetitle, risk of loss and right of possession to any Product sold to theDISTRIBUTOR shall remain a part of MANUFACTURER until shipped F.O.B. Factory toDISTRIBUTOR.  The title, risk of loss and right of possession to anyProduct returned to MANUFACTURER by DISTRIBUTOR, which return is authorized byMANUFACTURER, shall remain in DISTRIBUTOR until received by MANUFACTURER at itsplant, whereupon title and risk of loss shall pass to MANUFACTURER.

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          B.          Untilthe purchase price and all other charges payable to MANUFACTURER hereunder havebeen received in full, MANUFACTURER hereby retains and DISTRIBUTOR hereby grantsto MANUFACTURER a security interest in the Products delivered to DISTRIBUTOR andany proceeds there from.  DISTRIBUTOR agrees to promptly execute alldocuments reasonably requested by MANUFACTURER to perfect and protect suchsecurity interest.  In the event DISTRIBUTOR fails promptly to execute suchdocuments, DISTRIBUTOR hereby appoints MANUFACTURER its attorney-in-fact for thesole purpose of executing such documents, which appointment shall be a powercoupled with an interest and shall be irrevocable.

          C.          DISTRIBUTORshall inspect all Products upon receipt thereof, and DISTRIBUTOR may reject anyitem that fails substantially to conform to the then current Productspecifications.  To reject a Product, DISTRIBUTOR shall within five (5)working days of receipt of such Product notify MANUFACTURER in writing or byfacsimile of its rejection and request a Return Material Authorization (R.M.A.)number.  Within ten (10) working days of receipt of the R.M.A. number,DISTRIBUTOR shall return the rejected Product to MANUFACTURER’S designatedreturn facility, freight prepaid and properly insured, in its original shippingcarton with the R.M.A number displayed on the outside of the carton.

          D.          IfMANUFACTURER confirms the defect, MANUFACTURER shall, at MANUFACTURER’Soption and expense, either repair or replace the Product.  MANUFACTURERshall reimburse DISTRIBUTOR for the shipping charges to return properly rejectedProducts and shall pay the shipping charges for the delivery of such repaired orreplacement Products to DISTRIBUTOR; otherwise, DISTRIBUTOR shall be responsiblefor all shipping charges.

17.     NEW PRODUCT STOCKING

          A.          MANUFACTURERand DISTRIBUTOR shall agree on the appropriate initial minimum level ofinventory of each Product to be stocked by DISTRIBUTOR.  Each new Productof MANUFACTURER shall also be subject to stocking at a mutually agreed initialminimum inventory level.  Non-periodic return within first year of slow ornon-moving recommended inventory is available to DISTRIBUTOR.

          B.          Forthe first twelve (12) months after appointment, a new DISTRIBUTOR will have theright to return an amount up to 50% of their initial stocking order with norestocking charge or offsetting order required.

          C.          Productsin this section shall not be counted as “stock rotation” for purposesof computing the amount of Products returnable by DISTRIBUTOR.

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18.     STOCK ROTATION APPLIES ONLY TO STANDARD PRODUCT BOUGHT AT STANDARD DISTRIBUTOR COST

          A.          Slow-movinginventory, as defined by DISTRIBUTOR, may be returned for a credit up to a valueof five (5) percent of the prior 6-month purchases, with approval ofMANUFACTURER and subject to the following conditions:

                        1)          Productshall be returned freight pre-paid at the DISTRIBUTOR’S expense within 30days of authorization by MANUFACTURER.

                        2)          Theperiod for stock rotations will be twice every twelve (12) months and will beallowed only within MANUFACTURER’S Fiscal Month of February andMANUFACTURER’S Fiscal Month of August in accordance with theMANUFACTURER’S annual calendar.

                        3)          Anoffsetting purchase order for an equal dollar month must accompany the requestfor the return.  The requested delivery schedule of the offsetting purchaseorder must be within 60 days of the order placement and isnon-cancelable.

                        4)          AllProducts returned must be in the original condition as shipped byMANUFACTURER.

          B.          DISTRIBUTORmay apply to MANUFACTURER for authorization to return that portion of itsinventory in an amount not exceeding five (5) percent of Net Total DollarPurchases of MANUFACTURER Products by DISTRIBUTOR during the immediatelypreceding six (6) month period.  Credit issued for such returned Productswill be based upon the price paid by DISTRIBUTOR less any prior credits grantedby MANUFACTURER on the returned Product.

19.     NEW PRODUCT

          MANUFACTURER willgive DISTRIBUTOR at least thirty (30) days prior notice of the introduction ofany new Products that preclude or materially limit DISTRIBUTOR from selling likeProducts in its inventory and shall work with DISTRIBUTOR to move the effectedinventory through resale for ninety (90) days.  If, after the aboveefforts, effected Product still remains in DISTRIBUTOR’S inventory,MANUFACTURER agrees to replace it with the new products within one hundredtwenty (120) days of the official public announcement of such new products orMANUFACTURER’S first shipment of the New Product, whichever occursfirst.

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20.     DISCONTINUANCE AND OBSOLESCENCE

          A.          MANUFACTURERreserves the right to discontinue the manufacture or sale of, or otherwiserender or treat as obsolete, any or all of the Products covered by thisAgreement upon at least thirty (30) days prior written notice toDISTRIBUTOR.

          B.          DISTRIBUTORmay, within sixty (60) days following receipt of such notice, notify supplier inwriting of its intention to return any or all discontinued or obsolete Productswhich remain in its inventory and shall receive a credit for such Products equalto the net price paid by DISTRIBUTOR, less any prior credits granted byMANUFACTURER on the returned product.  DISTRIBUTOR may make such returnsfrom one or more stocking locations.  Products must be returned within 30days of the date of DISTRIBUTOR’S receipt of MANUFACTURER’S ReturnMaterial Authorization.

          C.          MANUFACTURERshall pay all freight and shipping charges in connection with any such returnsfor discontinuance or obsolescence.  DISTRIBUTOR shall not count returns ofProducts under this section as “stock rotation” for purposes ofcomputing the amount of Products returnable.

21.     MODIFICATION OF PRODUCTS

          A.          MANUFACTURERshall give DISTRIBUTOR at least ninety (90) days prior written notice of allengineering modifications that will affect Products in DISTRIBUTOR’Sinventory if such changes affect form, fit, or function.  If thesemodifications preclude or materially limit DISTRIBUTOR’S inventory fromselling once the engineering modifications are implemented.  MANUFACTURERwill work with DISTRIBUTOR to move the affected inventory through resale orrepurchase for ninety (90) days.  If after the above efforts, affectedProduct still remains in DISTRIBUTOR’S inventory, MANUFACTURER agrees toreplace it with upgraded Products within one hundred twenty (120) days of theofficial public announcement of such modification or MANUFACTURERS firstshipment of the modified Product, whichever occurs first.

          B.          MANUFACTURERshall pay all freight and shipping charges in connection with any such return orreplacements.  DISTRIBUTOR shall not count returns of Products under thissection as “stock rotation” for purposes of computing the amount ofProducts returnable.

22.     RETURN MATERIAL AUTHORIZATION

          A.          Allauthorized returns shall be shipped to MANUFACTURER’S domestic facility,and must display the appropriate MANUFACTURER Return Material Authorizationnumber on containers in which the returned Product is shipped.

          B.          Unauthorizedreturns will be reshipped to DISTRIBUTOR Freight Collect.

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          C.          Uponfinal approval by MANUFACTURER of credit for any returned Product, such creditshall be computed on the basis of the price paid by DISTRIBUTOR, less any priorcredits granted by MANUFACTURER.

23.     WARRANTY

          A.          The“Warranty Term” for a particular Product is twelve (12) months fromthe date of DISTRIBUTOR’S delivery of such Product F.O.B. to the endcustomer.

          B.          MANUFACTURERshall warrant each Product against defects in material and workmanship undernormal use and service during the Product’s Warranty Term. Provided thatMANUFACTURER has received a request in writing or by facsimile authorization forwarranty service not later than thirty (30) days after the expiration of theWarranty Term, MANUFACTURER shall repair or replace any defective Product, orissue a credit or refund, based on the purchase price paid.  MANUFACTURERshall have the right to elect which of the foregoing options it wishes toinvoke.  MANUFACTURER shall pay, or refund the amount of, shipping chargesfor any defective Products returned under this section.

          C.          Theexpress warranties set forth in this Section 23 specifically exclude and do notapply to defects to a Product:  (a) caused through no fault ofMANUFACTURER during shipment to or from DISTRIBUTOR; (b) caused by the useor operation of Products in an application or environment other than thatspecified by MANUFACTURER; (c) caused by modifications or alterations madeto the Products by DISTRIBUTOR or any third party; (d) caused bymaintenance performed on the Products by DISTRIBUTOR or any third party; or(e) which are the result of the Products being subjected to unusualphysical or electrical stress.  

          D.          EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTIES, MANUFACTURER MAKES ANDDISTRIBUTOR RECEIVES NO WARRANTIES OR CONDITIONS ON THE PRODUCTS, EXPRESS,IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS AGREEMENT OR COMMUNICATIONWITH DISTRIBUTOR.  MANUFACTURER SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTYOR CONDITION OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. MANUFACTURER MAKES THE FOREGOING LIMITED WARRANTY SOLELY TO DISTRIBUTOR FORDISTRIBUTOR’S SOLE BENEFIT. 

          E.          DISTRIBUTORshall not make any representation, promise guarantee or warranty, nor isauthority given to assume to create obligations on behalf of MANUFACTURER.

          F.          Inall warranty or quality returns, final approval by MANUFACTURER as to credit, orreplacement shall depend upon inspection and/or testing of the returned Productby MANUFACTURER.  No credit or replacement will be given for returnedProduct that falls into one or more of the exclusions set forth in Section 23and such Product will be returned to DISTRIBUTOR, Freight Collect.

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24.     REPURCHASES

          By mutual agreementbetween MANUFACTURER and DISTRIBUTOR, and upon receipt of written request byMANUFACTURER, DISTRIBUTOR shall deliver F.O.B. point of origin such reasonablequantities of products out of DISTRIBUTOR’S inventory to such regularcustomers of MANUFACTURER with whom MANUFACTURER has an agreement as may bedesignated by MANUFACTURER and as are called for under orders issued by suchcustomers.

25.     SPECIAL PURCHASES

          MANUFACTURER andDISTRIBUTOR may at any time during the term enter into separate agreements forthe special purchase of other Products including non-standard Products andProducts in greater quantities than those set forth in MANUFACTURER’S thencurrent Published Price List, and such agreements shall be subject to all termsand conditions hereof.

 26.     RESTRICTIONON RECRUITMENT OF EMPLOYEES

          MANUFACTURER andDISTRIBUTOR agree not to solicit for employment the employees of the otherparty, and shall reject any requests for employment made any employees of theother party and will refuse employment to all such employees of the other party,as long as this provision does not violate the provisions of any law whicheither party is subject to.  The terms of this provision shall remain ineffect for the length of this Agreement and shall survive the termination ofthis Agreement for an additional one (1) year.  

27.     NOTICES

          All notices, exceptfor termination, shall be sent by mail, postage pre-paid to MANUFACTURER andDISTRIBUTOR to the addresses stated at the outset of this Agreement, or suchother places as either party may designate in writing.  Notification ofTermination must be sent by Registered Mail.

28.     TERMINATION

          A.          MANUFACTURERor DISTRIBUTOR may at any time terminate this Agreement without cause and forits convenience by giving thirty (30) days prior written notice to the other,via Registered Mail.  Both MANUFACTURER and DISTRIBUTOR represent that theyhave considered the making of expenditures in preparing to perform under thisAgreement, as well as the possible losses, which might result in the event ofany termination of the Agreement.  Both parties acknowledge that neitherparty shall in anyway be liable to the other for any loss, expense or damage,including special, consequential, or incidental damages, by reason of anytermination of this Agreement.  Without limiting the foregoing, neitherparty shall be liable to the other, because of such termination, forcompensation, reimbursement or damages on account of the loss of prospectiveprofits or anticipated sales or on account of expenditures, inventory,investments, leases or commitments in connection with the business or goodwillof MANUFACTURER or DISTRIBUTOR.

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          B.          ThisAgreement shall also terminate, immediately upon notice byMANUFACTURER:

                        1)          Inthe event that any legislation or exchange controls then in effect underapplicable law preclude DISTRIBUTOR from making payments to MANUFACTURER inUnited States currency for a period of sixty (60) days; provided, however, thattermination under this subsection shall not relieve DISTRIBUTOR of its paymentobligations under this Agreement; or

                        2)          Uponthe enactment of any law, decree, or regulation by the government of theTerritory which would impair or restrict (A) the right of MANUFACTURER toterminate or elect not to renew this Agreement as herein provided,(B) MANUFACTURER’S right, title, or interest in the Products or theintellectual property rights therein, (C) MANUFACTURER’S rights toreceive the payments under this Agreement, or (D) MANUFACTURER’S orDISTRIBUTOR’S ability to market, sell, or distribute the Products in theTerritory.

                        3)          In the event that DISTRIBUTOR is in material breach of its obligations under this Agreement and fails to cure such breach within thirty (30) days after written notice, or DISTRIBUTOR makes a general assignment for the benefit of its creditors, appoints or has appointed a receiver, trustee in bankruptcy or similar officer to take charge of all or part of its property, files or has filed against it a petition in bankruptcy, and/or is adjudged to be insolvent or bankrupt.

DISTRIBUTOR agrees to give MANUFACTURER prompt written notice of any law, decree, or regulation covered by Section 28.B.

          C.          Upon termination of this Agreement, DISTRIBUTOR shall make such disposition of price lists, advertising matter and other materials furnished by MANUFACTURER as MANUFACTURER may direct.  MANUFACTURER’S name, MANUFACTURER’S Trademarks, and similar identifying symbols shall not be displayed or used by DISTRIBUTOR thereafter.

          D.          Inthe event of any termination, MANUFACTURER shall, if requested to do so byDISTRIBUTOR, honor any open DISTRIBUTOR purchase order outstanding as of thedate of notice of termination for delivery during a period of up to 90 daysafter the effective date of termination.  Notwithstanding anything hereinto the contrary, in the event that DISTRIBUTOR retains by statute the right todistribute Products in the Territory to any customer or in any country afterexpiration or termination of this Agreement, then the terms and conditions ofthis Agreement shall remain in effect as to such customers or countries, as thecase may be, until such activities cease.

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          E.          Upontermination of this Agreement for whatever reason, such termination shall bewithout prejudice to any remedy of either party for the recovery of any moneydue under this Agreement.

          F.          Inthe event of termination of this Agreement by MANUFACTURER, DISTRIBUTOR agreesto sell and MANUFACTURER agrees to purchase DISTRIBUTOR’S inventory ofProducts that are unaltered in any manner from the original form and design,subject to test, inspection and acceptance by MANUFACTURER.  The price tobe paid by MANUFACTURER for such inventory shall be the price the DISTRIBUTORpurchased the inventory for, less any prior credits granted byMANUFACTURER.  MANUFACTURER shall pay all freight and shipping charges inconnection with such repurchase.

          G.          Inthe event of termination of the agreement by DISTRIBUTOR, MANUFACTURER agrees torepurchase all inventories of DISTRIBUTOR at the price the products werepurchased from MANUFACTURER, less any prior credits granted byMANUFACTURER.  DISTRIBUTOR agrees to ship such inventory F.O.B.MANUFACTURERS domestic facility.

          H.          Moniesfor repurchased inventory will be paid by MANUFACTURER to DISTRIBUTOR withinthirty (30) days of receipt of said inventory.  The credit will be computedusing the price paid by DISTRIBUTOR, less any prior credit granted byMANUFACTURER.

          I.          Theprovisions of Sections 5C, 5F, 5I, 7, 8, 23, 27, 28, 29, 30 and 35 shall survivetermination of this Agreement for any reason.

29.     INDEMNIFICATION

          A.          DISTRIBUTORagrees to indemnify, defend, and hold MANUFACTURER and its directors, officers,employees, and agents harmless from, and against any and all claims (includingthose for personal injury or death) and liabilities (including attorneys’and other professional fees and other costs of litigation) arising out of orattributable to the marketing, distribution, or sale of Products, where and tothe extent any associated liability for such liability is alleged to have beencaused by the negligence, willful misconduct or other fault of DISTRIBUTOR, orits employees or agents and/or any breach of this Agreement byDISTRIBUTOR.  

          B.          DISTRIBUTORagrees that MANUFACTURER has the right to defend, or at its option to settle,and MANUFACTURER agrees, at its own expense, to defend or at its option tosettle, any claim, suit or proceeding brought against DISTRIBUTOR or itscustomer on the issue of infringement or misappropriation of any third partypatent, maskwork right, trade secret, copyright or trademark, each of theforegoing in the Territory, by Products distributed by DISTRIBUTOR in the mannerpermitted in this Agreement, subject to the limitations hereinafter setforth.  MANUFACTURER shall have sole control of any such action orsettlement negotiations, and MANUFACTURER agrees to pay, subject to thelimitations hereinafter set forth, any final judgment entered againstDISTRIBUTOR or its customer on such issue in any such suit or proceeding defended byMANUFACTURER.

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DISTRIBUTOR agrees that MANUFACTURER atits sole option shall be relieved of the foregoing obligations unlessDISTRIBUTOR or its customer notifies MANUFACTURER promptly in writing of suchclaim, suit or proceeding and gives MANUFACTURER authority to proceed ascontemplated herein, and, at MANUFACTURER’S expense, gives MANUFACTURERproper and full information and assistance to settle and/or defend any suchclaim, suit or proceeding.  If the Products, or any part thereof, are, orin the opinion of MANUFACTURER may become, the subject of any claim, suit orproceeding for infringement of any patent, copyright or trademark, or if it isadjudicatively determined that the Products, or any part thereof, infringe anycopyright or trademark, or if the distribution or use of the Products, or anypart thereof, is, as a result, enjoined, then MANUFACTURER may, at its optionand expense:  (i) procure for DISTRIBUTOR and its customers the rightunder such patent, copyright or trademark to distribute or use, as appropriate,the Products or such part thereof; (ii) replace the Products, or partthereof, with other suitable Products or parts; (iii) suitably modify theProducts, or part thereof; or (iv) if the use of the Products, or partthereof, is prevented by injunction or if the foregoing alternatives cannot beaccomplished on a commercially reasonable basis, require DISTRIBUTOR to returnall of the Products in inventory and refund the aggregate payments paidtherefore by DISTRIBUTOR.  MANUFACTURER shall not be liable for any costsor expenses incurred without its prior written authorization.

          C.          Notwithstandingthe provisions of Section 29.B., MANUFACTURER assumes no liability for(i) any infringement claims with respect to any product in or with whichany of the Products may be used but not covering the Products standing alone;(ii) any trademark infringement involving any marking or branding notapplied by MANUFACTURER or involving any marking or branding applied at therequest of DISTRIBUTOR;  (iii) the modification of the Products, orany part thereof, unless such modification is made by MANUFACTURER;  or(iv) infringement resulting from DISTRIBUTOR’S distribution of Productsafter a recall as specified in Section 29.B. (iv) above, which distributionshall be a breach of this Agreement and result in the indemnification used forthis Section 28.A.

          D.          THEFOREGOING PROVISIONS OF THIS SECTION 29 STATE THE ENTIRE LIABILITY ANDOBLIGATION OF MANUFACTURER AND THE EXCLUSIVE REMEDY OF DISTRIBUTOR AND ITSCUSTOMERS WITH RESPECT TO ANY ALLEGED INFRINGEMENT OF PATENTS, COPYRIGHTS,TRADEMARKS, OR OTHER INTELLECTUAL PROPERTY RIGHTS BY THE PRODUCTS.

30.     CONFIDENTIAL INFORMATION

          DISTRIBUTORacknowledges that by reason of its relationship with MANUFACTURER hereunder itwill have access to certain confidential and proprietary information andmaterials concerning the Products and MANUFACTURER, including without limitationMANUFACTURER’S business, plans, customers and technology that areconfidential and of substantial value to MANUFACTURER, which value would beimpaired if such information were disclosed to third parties.  DISTRIBUTORagrees that it shall not use in any way for its own account or the account ofany third party, nor disclose to any third party, any such confidential information disclosedby MANUFACTURER.

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DISTRIBUTOR shall take every reasonableprecaution to protect the confidentiality of such information, including, at therequest of MANUFACTURER, the entry by DISTRIBUTOR’S agents and employeesinto confidentiality agreements in a form approved by MANUFACTURER, prohibitingany disclosure to third parties of confidential information provided byMANUFACTURER.  DISTRIBUTOR shall not publish any technical description ofany Product or other confidential information of MANUFACTURER beyond thedescription published by MANUFACTURER.  In the event of termination of thisAgreement, DISTRIBUTOR agrees that there shall be no use or disclosure byDISTRIBUTOR, its agents, or employees of any confidential information ofMANUFACTURER, and DISTRIBUTOR shall not manufacture or have manufactured anyproducts utilizing any of MANUFACTURER’S confidential information. Uponsuch termination, DISTRIBUTOR shall deliver to MANUFACTURER all copies withinits possession or within its control of customer lists, catalogues,specifications, proposals, quotations, price lists, contracts and all otherdocuments and data relating to the Products or the conduct ofMANUFACTURER’S business.

31.     FORCE MAJEURE

          Nonperformance underthis Agreement shall be excused, and neither party shall be liable for any loss,damage, penalty or expense, to the extent that such performance is renderedimpossible or delayed by fire, flood, acts of God or the public enemy, acts ofthe Government, labor difficulties, riot, inability to obtain materials or anyother cause where the failure to perform or delay is beyond the reasonablecontrol of the non-performing party and without the negligence of suchparty.

32.     INVALIDITY OF PROVISIONS

          In the event thatany term or provision of this Agreement shall be deemed by a court of competentjurisdiction to be overly broad in scope, duration or area of applicability, thecourt considering the same shall have the power and hereby is authorized anddirected to modify such term or provision to limit such scope, duration or area,or all of them, so that such term or provision is no longer overly broad and toenforce the same as so limited.  Subject to the foregoing sentence, in theevent any provision of this Agreement shall be held to be invalid orunenforceable for any reason, such invalidity or unenforceability shall attachonly to such provision and shall not affect or render invalid or unenforceableany other provision of this Agreement.

33.     ASSIGNMENT

          Neither party shallhave the right to assign this Agreement or any rights hereunder without theprior written consent of the other.  For purposes hereof, the term“assign” shall include, without limitation, a merger, sale of assetsor business, or other transfer of control by operation of law orotherwise.

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34.     AUTHORITY

          Both partiesrepresent and warrant to each other that they have the right and lawfulauthority to enter into this Agreement, and that there are no other outstandingagreements or obligations inconsistent with the terms and provisions between theparties.

35.     GENERAL

          A.          ThisAgreement supersedes and cancels all prior Agreements between the parties,written, oral or implied; except that it shall not relieve either party from thepayment of any debit owed the other party under any prior Agreement therebetween.

          B.          Nomodification, change or amendment to neither this Agreement, nor any waiver ofany rights in respect hereto, shall be effective unless in writing signed by theparties.

          C.          Inthe event of a conflict or inconsistency between the terms of this Agreement andthose of any order, quotation, solicitation or other communication from oneparty to the other, the terms of this Agreement shall be controlling.

          D.          ThisAgreement is made under and shall be construed by the laws of the State ofCalifornia, U.S.A., without reference to provisions of conflicts of laws. If a court of competent jurisdiction deems any provision unenforceable, suchprovision shall be severable and the remaining provisions shall continue in fullforce and effect. The parties expressly disclaim the application of the UnitedNations Convention on the International Sale of Goods.  Each party consentsto the jurisdiction of the state courts and federal courts in the NorthernDistrict of California, U.S.A., which courts shall have the exclusivejurisdiction and venue to resolve any dispute arising out of thisAgreement.  Each party hereto agrees and consents to service of process byregistered mail to the address listed in this Agreement.** **

          E.          ThisAgreement shall be made in the English language, which language shall becontrolling in all respects, and all versions hereof in any other language shallnot be binding on the parties hereto.  All communications and notices to bemade or given pursuant to this Agreement shall be in the Englishlanguage.

IN WITNESS WHEREOF, THE PARTIES HERETOBY THEIR DULY AUTHORIZED REPRESENTATIVES HEREBY EXECUTE THIS AGREEMENT

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| MICRO LINEAR CORPORATION |                  | Clavis, a division of   Macnica, Inc. |
|--------------------------|-----------------------|---------------------------------------|
|                     |                  |                                  |   |   |
| By:                      | /s/ David Neubauer    |                                  | By: | /s/ Ryuji Tezuka |
|                     |                       |                                  |   |  |
| Name:                    | David Neubauer        |                                  | Name: | Ryuji Tezuka |
|                     |                  |                                  |   |   |
| Title:                   | V.P., Strategic Sales |                                  | Title: | Company President |
|                     |                  |                                  |   |   |
| Date:                    | December 10, 2004     |                                  | Date: | December 2, 2004 |

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