Document:

exhibit_10-1.htm

    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.

                

        

        
          
             

          

          
            -1-

            
              

            

          

          
             

          

        

         

        
          	
                  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.

                

        

        
          
             

          

          
            -2-

            
              

            

          

          
             

          

        

         

        
          	
                  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.

                

        

        
          
             

          

          
            -3-

            
              

            

          

          
             

          

        

         

        
          	
                  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.

                

        

        
          
             

          

          
            -4-

            
              

            

          

          
             

          

        

         

        
          	
                  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.

                

        

        
          
             

          

          
            -5-

            
              

            

          

          
             

          

        

         

        
          	
                  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.

                

        

        
          
             

          

          
            -6-

            
              

            

          

          
             

          

        

         

        
          	
                  (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.

        
          
             

          

          
            -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.

         

        
          	
                  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.

                

        

        
          
             

          

          
            -8-

            
              

            

          

          
             

          

        

         

        
          	
                  (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

                

        

        
          
             

          

          
            -9-

            
              

            

          

          
             

          

        

         

        
          	
                  (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%.

                

        

        
          
             

          

          
            -10-

            
              

            

          

          
             

          

        

         

        
          	
                  (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.

                

        

        
          
             

          

          
            -11-

            
              

            

          

          
             

          

        

         

        
          	
                  (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.

                

        

        
          
             

          

          
            -12-

            
              

            

          

          
             

          

        

         

        
          	
                  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.

                

        

        
          
             

          

          
            -13-

            
              

            

          

          
             

          

        

         

        
          	
                  (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.

                

        

        
          
             

          

          
            -14-

            
              

            

          

          
             

          

        

         

        
          	
                  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

                

        

        
          
             

          

          
            -15-

            
              

            

          

          
             

          

        

         

        
          	
                  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

                

        

        
          
             

          

          
            -16-

            
              

            

          

          
             

          

        

         

        
          	
                  (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.

                

        

        
          
             

          

          
            -17-

            
              

            

          

          
             

          

        

         

        
          	
                  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

                

        

        
          
             

          

          
            -18-

            
              

            

          

          
             

          

        

         

        
          	
                  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

                

        

        
          
             

          

          
            -19-

            
              

            

          

          
             

          

        

         

        
          	
                  (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

                

        

        
          
             

          

          
            -20-

            
              

            

          

          
             

          

        

         

        
          	
                  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.

                

        

        
          
             

          

          
            -21-

            
              

            

          

          
             

          

        

         

        
          	
                  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

                

        

        
          
             

          

          
            -22-

            
              

            

          

          
             

          

        

         

        
          	
                  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

                
	 
      	 
      

        

        
          
          

          
            -23-exhibit_10-2.htm

    EXHIBIT 10.2

    

 

    STOCK PURCHASE
AGREEMENT

     

    This
STOCK PURCHASE AGREEMENT (this “Agreement”), is
entered into as of May 7, 2009, by and among the sellers listed on Schedule I attached
hereto (each, a “Seller” and
collectively, the “Sellers”), and
Micrel, Incorporated, a California corporation (the “Corporation”) and
each of the natural persons listed on Schedule II attached
hereto, severally but not jointly (each such natural person a “Purchaser” and
collectively, the “Purchasers” and
together with the Corporation, the “Purchaser Group,” and
individually, a “member of
the Purchaser
Group”).

     

    WHEREAS,
each member of the Purchaser Group wishes to purchase from the Sellers, and the
Sellers wish to sell to the Purchaser Group those number of shares of common
stock, no par value per share (the “Shares”), set forth
next to such member of the Purchaser Group’s name on Schedule II attached
hereto, of the Corporation, subject to the terms and conditions set forth
herein;

     

    NOW,
THEREFORE, in consideration of the mutual covenants herein contained, and for
such other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:

     

    ARTICLE  I 

     

    PURCHASE AND SALE OF
SHARES

     

    1.1 Sale of
Shares.  Upon the terms and conditions hereinafter set forth,
the Sellers shall on the date hereof transfer, assign, set over and deliver to
the Purchaser Group, and the Purchaser Group shall purchase from the Sellers,
all of Sellers’ right, title and interest in and to the Shares.  In
connection with the foregoing, the Sellers shall deliver the Shares to the
Purchaser Group through the facilities of the Depository Trust Company.
 

     

    1.2 Purchase
Price.  The purchase price per Share shall be approximately
U.S. $6.50, totaling in the aggregate U.S. $20,104,065.06 (the “Purchase
Price”).  This Purchase Price per share represents a discount
to the average trading price of the Corporation’s common stock on the NASDAQ
Stock Market over the 30 calendar days immediately preceding the date of this
Agreement of approximately 10%.  On the date hereof, the Purchaser
Group shall deliver to the Sellers the Purchase Price by wire transfer of
immediately available funds in accordance with the wire instructions set forth
on Schedule III
attached hereto.

     

    ARTICLE  II

     

    REPRESENTATIONS, WARRANTIES
AND AGREEMENTS OF THE SELLERS

     

    Each
Seller hereby jointly and severally represents and warrants to, and agrees with,
each member of the Purchaser Group, as of the date hereof, as
follows:

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    

     

    2.1 Each
Seller is duly organized, validly existing and in good standing under the laws
of its organization, with all requisite power and authority to execute this
Agreement and to consummate the transactions contemplated hereby.

     

    2.2 The
Sellers are not in violation of any provision of their organizational documents
that would prevent the execution or delivery of this Agreement by the Sellers or
the consummation of the transactions contemplated hereby.

     

    2.3 This
Agreement has been duly authorized, executed and delivered by each Seller and
constitutes the valid and binding obligation of each Seller, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, moratorium or other similar laws
relating to or affecting the rights of creditors generally and by equitable
principles, including those limiting the availability of specific performance,
injunctive relief and other equitable remedies and those providing for equitable
defenses.

     

    2.4 Assuming
the accuracy of the representations of the Purchaser Group set forth in Article
III, all consents, approvals or authorizations of, or registrations, filings or
declarations with, any governmental authority, if any, required in connection
with the execution, delivery and performance by the Sellers of this Agreement or
the transactions contemplated hereby have been obtained by the Sellers and will
be in full force and effect.

     

    2.5 The
execution and delivery of this Agreement, the consummation of the transactions
contemplated hereby and performance of the Sellers obligations under this
Agreement will not result in a breach by Seller of, conflict with, or constitute
a default by Seller, with or without the passage of time and giving of notice,
under any agreement, instrument, judgment, order, writ, prohibition, injunction
or decree to which Seller is a party, to which the Seller may be subject or by
which Seller may be bound or an event which results in the creation of any lien,
charge or encumbrance upon the Shares to be sold by such Seller or would prevent
the execution or delivery of this Agreement by the Sellers or the transfer,
conveyance and sale of the Shares pursuant to the terms hereof.

     

    2.6 Each
Seller is the sole beneficial, record and legal owner of, and has good, valid
and marketable right, title and interest in and to, the Shares set forth next to
their name on Schedule
I attached hereto, free and clear of any and all liens and
encumbrances.

     

    2.7 No broker
or finder has acted for the Sellers in connection with this Agreement or the
transactions contemplated hereby, and no broker or finder is entitled to any
brokerage or finder’s fee or other commissions in respect of such transactions
based upon agreements, arrangements or understandings made by or on behalf of
the Sellers.

     

    2.8 In
connection with the sale of the Shares hereunder, each Seller has not and each
of its agents has not (a) engaged in any “general solicitation,” as defined in
Regulation D promulgated under the Securities Act of 1933, as amended (the
“Securities
Act”), (b) “published” any “advertisement,” as defined in the California
Corporate Securities Act of 1968, as amended, and the regulations thereunder, or
(c) offered the Shares to any person who is not an “accredited investor,” as
defined in the Securities Act, in connection with the offer and sale of the
Shares.

     

    

    
      
        
           

        

        
          2 

          
            

          

        

        
           

        

      

    

    

    

     

    2.9 Each
Seller has had the opportunity to meet with the officers and directors of the
Corporation to learn about the business affairs and financial condition of the
Corporation.  Each Seller has received all information that it has
reasonably requested from the Corporation regarding the Corporation, the
Corporation’s assets, financial condition, results of operations, business and
its prospects, and acknowledges that in the future, the Shares may have a value
greater than the amount paid for the Shares under this
Agreement.  Each Seller further represents and warrants that it has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of selling the Shares to be sold
hereunder by it.  Each Seller understands that Seller may be deemed to
be an “affiliate” within the meaning of the Rule 144(a)(1) of the Securities Act
and the Shares being sold hereunder are being sold pursuant to an exemption from
the registration provisions under the Securities Act.

     

    2.10 Each
Seller acknowledges that the Corporation is making no representation or warranty
as to the tax consequences to the Sellers in connection with the transactions
contemplated by this Agreement.  Each Seller further acknowledges that
it has had an opportunity to seek independent counsel and advisors with respect
to tax and other matters relating to this Agreement, and such Seller
acknowledges and agrees that it shall bear its own tax consequences in
connection with the transactions contemplated by this Agreement.  Each
Seller is a partnership organized or created in the United States or a
subdivision thereof for U.S. federal income tax purposes.

     

    ARTICLE  III

     

    REPRESENTATIONS, WARRANTIES
AND AGREEMENTS OF THE PURCHASER GROUP

     

    3.1 Representations and
Warranties of the Corporation.  The Corporation hereby
represents and warrants to the Sellers, as of the date hereof:

     

    (a) The
Corporation is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and has all requisite power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.

     

    (b) The
Corporation is not in violation of any provision of its organizational documents
that would prevent the execution or delivery of this Agreement by the
Corporation or the consummation of the transactions contemplated
hereby.

     

    3.2 Representations and
Warranties of the Purchasers.  Each Purchaser, severally but
not jointly, hereby represents and warrants to the Sellers, as of the date
hereof, as follows:

     

    (a) Each
Purchaser is an “accredited investor” as defined in Rule 501(a) promulgated
under the Securities Act, and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
transactions contemplated under this Agreement.  Each Purchaser
represents that by reason of its business and financial experience, each
Purchaser has the capacity to evaluate the merits and risks of its investment in
the Shares and to protect its own interests in connection with the transactions
contemplated in this Agreement.  Each Purchaser’s financial condition
is such that it is able to bear all economic risks of investment in the Shares,
including a complete loss of its investment.  Each Purchaser
understands the terms of and risks associated with the acquisition of the
Shares.

     

    

    
      
        
           

        

        
          3 

          
            

          

        

        
           

        

      

    

    

    

     

    (b) Each
Purchaser is acquiring the Shares for investment purposes, with no intention of
distributing or reselling any of the Shares or any interest
therein.  Each Purchaser is not purchasing the Shares as a result of
any advertisement, article, notice or other communication regarding the Shares
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.  Each Purchaser does not
presently have any contract, undertaking, agreement or arrangement with any
entity, organization or individual to sell or transfer or grant participations
in, the Shares to any such entity, organization or
individual.  

     

    (c) Each
Purchaser understands that each Purchaser may be deemed to be an “affiliate”
within the meaning of the Rule 144(a)(1) of the Securities Act and the Shares
acquired hereunder by affiliates of the Corporation may not be later sold,
pledged or otherwise transferred unless a registration statement for such
transaction is effective under the Securities Act and any applicable state
securities laws, or unless an exemption from such registration provisions is
available with respect to such transaction.

     

    3.3 Representations and
Warranties of the Purchaser Group.  Each member of the
Purchaser Group severally but not jointly, hereby represents and warrants to the
Sellers, as of the date hereof, as follows:

     

    (a) This
Agreement has been duly authorized, executed and delivered by each member of the
Purchaser Group and constitutes the valid and binding obligation of each member
of the Purchaser Group, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
moratorium or other similar laws relating to or affecting the rights of
creditors generally and by equitable principles, including those limiting the
availability of specific performance, injunctive relief and other equitable
remedies and those providing for equitable defenses.  

     

    (b) No
authorization, consent, approval or other order of, or declaration to or filing
with, any governmental agency or body is required for the valid authorization,
execution, delivery and performance by each member of the Purchaser Group of
this Agreement and the consummation of the transactions contemplated
hereby other than any applicable filings under the Securities Act and the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) and
rules and regulations promulgated thereunder.

     

    (c) No broker
or finder has acted for the Purchaser Group in connection with this Agreement or
the transactions contemplated hereby, and no broker or finder is entitled to any
brokerage or finder’s fee or other commissions in respect of such transactions
based upon agreements, arrangements or understandings made by or on behalf of
any member of the Purchaser Group.

     

    

    
      
        
           

        

        
          4 

          
            

          

        

        
           

        

      

    

    

    

     

    ARTICLE  IV

     

    MISCELLANEOUS

     

    4.1 Survival of Representations,
Warranties and Covenants.  The representations, warranties and
covenants of the Sellers and the Purchaser Group contained herein shall survive
the date hereof.

     

    4.2 Indemnification.  Each
party shall indemnify, defend and hold harmless the other party, its managers,
directors, officers, members, partners, shareholders, employees, attorneys,
accountants, agents and representatives and their heirs, successors and assigns
from and against all liabilities, losses, and damages, together with all
reasonable costs and expenses related thereto (including, without limitation,
legal and accounting fees and expenses) based upon or arising out of (a) any
inaccuracy or breach of any representation and warranty of such party herein,
and (b) any breach of any covenant and agreement of such party
herein.

     

    4.3 Withholding.  Each
Seller shall deliver to the Purchaser Group, concurrently with the execution of
this Agreement, a properly executed Internal Revenue Service Form W-9 or Form
W-8 along with all required attachments, certifying that such Seller is not
subject to backup withholding.  If such form is not received by
Purchaser Group, Purchaser Group shall be entitled to withhold and deduct such
amounts from the Purchase Price as are required under U.S. tax law, in which
case (i) Purchaser Group shall promptly pay such amounts to the appropriate
governmental authority and (ii) such withheld amounts shall be treated as having
been paid to the applicable Seller for all purposes under this
Agreement.  Each Seller shall indemnify, defend and hold harmless the
Purchaser Group from and against any withholding tax applicable to payments to
such Seller pursuant to this Agreement.

     

    4.4 Notices.  All
notices and other communications by the Purchaser Group or the Sellers hereunder
shall be in writing to the other party and shall be deemed to have been duly
given when delivered in person or by an overnight courier service, or sent via
telecopy transmission and verification received, or when posted by the United
States postal service, registered or certified mail, return receipt requested
with postage prepaid, at the address set forth on the signature page hereto or
to such other addresses as a party may from time to time designate to the other
party by written notice thereof, effective only upon actual
receipt.

     

    4.5 Severability.  Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

     

    4.6 Entire
Agreement.  This Agreement constitutes the entire agreement by
the parties hereto and supersedes any other agreement, whether written or oral,
that may have been made or entered into between them relating to the matters
contemplated hereby.

     

    4.7 Amendments and
Waivers.  This Agreement may be amended, modified, superseded,
or canceled, and any of the terms, representations, warranties or covenants
hereof may be waived, only by written instrument executed by each of the parties
hereto or, in the case of a waiver, by the party waiving
compliance.

     

    

    
      
        
           

        

        
          5 

          
            

          

        

        
           

        

      

    

    

    

     

    4.8 Captions; Counterparts,
Execution.  The captions in this Agreement are for convenience
only and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.  This Agreement may
be executed in one or more counterparts, each of which shall be an original, but
all of which together shall constitute one and the same instrument.

     

    4.9 Governing
Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to conflicts
of laws principles.  Any legal action or proceeding in connection with
this Agreement or the performance hereof may be brought in the state and federal
courts located in the State of California for the County of Santa Clara, or the
United States District Court for the Northern District of California, and the
parties hereby irrevocably submit to the non-exclusive jurisdiction of such
courts for the purpose of any such action or proceeding.  The parties
hereby irrevocably waive trial by jury in any action, proceeding or claim
brought by any party hereto or beneficiary hereof on any matter whatsoever
arising out of or in an way connected with this Agreement.

     

    4.10 Further
Assurances.  Each of the parties hereto will use all reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the purchase and sale of the Shares and the other transactions contemplated by
this Agreement.

     

    [-signature pages
follow-]

     

    

    
      
        
           

        

        
           
6

          
            

          

        

        
           

        

      

    

    

    IN
WITNESS WHEREOF, the Purchaser Group and the Sellers have caused this Agreement
to be duly executed as of the date first above written.

     

    

     

    PURCHASER
GROUP:

    

    CORPORATION:                                                                                     MICREL,
INCORPORATED

    

    

    

    By:  
/s/ Ray Zinn        

    Name:  Ray  Zinn

    Title:    President,
CEO and Chairman of the Board

    Address:  2180
Fortune Drive, San Jose, CA 95131

    

    PURCHASERS:

     /s/ Neil Miotto           

    Neil
Miotto

    Address:  2146
Harkins Avenue

                     Menlo
Park, CA 94025

    

    

     /s/ Frank Schneider        

    Frank
Schneider

    Address:  13291
Pierce Road

                    Saratoga,
CA 95070

    

    

     /s/ Jung-Chen Lin        

    Jung-Chen
Lin

    Address:
11578 Raintree Spring Court

                  Cupertino,
CA 95014

    

    __________________________________

    

    

    

    

    
      
        
           

        

        
          Signature
page to Stock Pruchase Agreement  

          
            

          

        

        
           

        

      

    

    

    SELLERS:                                                                                     OBREM
CAPITAL OFFSHORE MASTER, LP

    By: Obrem Capital (GP), LLC, its
general

    partner

    

    

    By: /s/
Andrew Rechtschaffen        

    Name:  Andrew
Rechtschaffen

    Title:    Managing
Member

    Address:  733
3rd
Street, 11th
Floor

        New York,
NY 10017

    

    OBREM
CAPITAL (QP), LP

    By: Obrem Capital (GP), LLC, its
general

    partner

    

    

    By:  
/s/ Andrew Rechtschaffen        

    Name:  Andrew
Rechtschaffen

    Title:    Managing
Member

    Address:  733
3rd
Street, 11th
Floor

        New York,
NY 10017

    

    
      
        
           

        

        
           Signature
page to Stock Pruchase Agreement 

          
            

          

        

        
           

        

      

    

    

    

    Schedule
I

    

    

    
      	
              Sellers

            	 	
              Number
      of Shares

            	 	 	
              Purchase
      Price

            	 
	
              Obrem
      Capital Offshore Master, LP

            	 	 	 	 	 	 
	
              Obrem
      Capital (QP) LP

            	 	 	 	 	 	 
	
              TOTAL

            	 	 	3,091,000	 	 	$	20,104,065.06	 

    

    

    

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    Schedule
II

    

    
      	
              Purchaser Group

            	 	
              Number of Shares

            	 	 	
              Purchase Price

            	 
	
              Corporation

            	 	 	 	 	 	 
	
              Micrel,
      Incorporated

            	 	 	3,075,000	 	 	 	20,000,000.00	 
	
              Purchasers

            	 	 	 	 	 	 	 	 
	
              Frank
      Schneider

            	 	 	6,000	 	 	 	39,024.40	 
	
              Jung-Chen
      Lin

            	 	 	5,000	 	 	 	32,520.33	 
	
              Neil
      Miotto

            	 	 	5,000	 	 	 	32,520.33	 
	
                TOTAL

            	 	 	3,091,000	 	 	$	20,104,065.06	 

    

    

    

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    Schedule
III

    

    Wire
Instructions

    

    Chase
Manhattan Bank, N.Y.

    ABA#
021-000-021

    F/A/O
Goldman Sachs & Co, N.Y.

    A/C#
930-1-011483

    F/F/C
(Obrem Capital Management,
LLC)

    A/C#
002-13244-7

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