MICRO LINEAR CORP /CA/, S-8, 1999-05-19

MICRO LINEAR CORP /CA/
S-8, 1999-05-19
SEMICONDUCTORS & RELATED DEVICES

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As filed with the Securities and Exchange Commission on May 19, 1999
Registration No. 333-________

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

--------------------

FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

--------------------

MICRO LINEAR CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 94-2910085
(State of Incorporation) (I.R.S. Employer
Identification No.)

2092 Concourse Drive
San Jose, California 95131
(Address of Principal Executive Offices, including Zip Code)
----------------------------------------

1991 Stock Option Plan
1998 Nonstatutory Stock Option Plan
(Full title of the plans)
--------------------

David Gellatly
President and Chief Executive Officer
MICRO LINEAR CORPORATION
2092 Concourse Drive
San Jose, California 95131
(408) 433-5200
(Name, address and telephone number of agent for service)
--------------------

Copy to:
J. Robert Suffoletta
WILSON SONSINI GOODRICH & ROSATI, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
--------------------

<PAGE>

CALCULATION OF REGISTRATION FEE

- -------------------------------------------- -------------------- ------------------ ---------------------- ----------------
Proposed Maximum Proposed Maximum Amount of
Title of Securities to Amount to be Offering Price Aggregate Offering Registration
be Registered Registered Per Shares (1) Price (1) Fee
- -------------------------------------------- -------------------- ------------------ ---------------------- ----------------
<S> <C> <C> <C> <C> <C>
Common Stock, $0.001 par value, to be 588,720 $3.0625 $1,802,955 $501.22
issued under the 1991 Stock Option Plan
Common Stock, $0.001 par value, to be 400,000 $3.0625 $1,225,000 $340.55
issued under the 1998 Nonstatutory Stock
Option Plan
TOTAL: 988,720 $3,027,955 $841.77
- -------------------------------------------- -------------------- ------------------ ---------------------- ----------------
<FN>

(1) The Proposed Maximum Offering Price Per Share was estimated pursuant to Rule
457 under the Securities Act of 1933, as amended (the "Securities Act"). The
price per share was determined by reference to the average between the high and
low price of the Common Stock as reported in the Nasdaq National Market on May
19, 1999.
</FN>
</TABLE>

<PAGE>

REGISTRATION STATEMENT ON FORM S-8

PART II

INFORMATION REQUIRED IN REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference.

The following documents and information previously filed with the
Securities and Exchange Commission (the "Commission") by Micro Linear
Corporation (the "Company") are hereby incorporated by reference in this
Registration Statement:

(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 filed pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").

(b) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1999 filed pursuant to Section 13(a) or 15(d) of the Exchange Act.

(c) The description of the Company's common stock which is contained in the
Company's Registration Statement on Form 8-A filed with the Commission pursuant
to Section 12 of the Exchange Act, and any description of any securities of the
Registrant which is contained in any registration statement filed after the date
hereof under Section 12 of the Exchange Act, including any amendment or report
filed for the purpose of updating any such description.

(d) The description of the Company's preferred share purchase rights which
is contained in the Company's Registration Statement on Form 8-A filed with the
Commission pursuant to Section 12 of the Exchange Act, and any description of
any securities of the Registrant which is contained in any registration
statement filed after the date hereof under Section 12 of the Exchange Act,
including any amendment or report filed for the purpose of updating any such
description.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities registered have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference in this Registration Statement and to be
part hereof from the date of filing of such documents.

Item 4. Description of Securities.

Not applicable.

Item 5. Interests of Named Experts and Counsel.

Not applicable.

Item 6. Indemnification of Directors and Officers.

The Company's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law provides
that directors of a company will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except for liability (i) for
any breach of their duty of loyalty to the company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
knowing violation of law, (iii) for unlawful payments or dividends or unlawful
stock repurchases or redemptions as provided Section 174 of Delaware General
Corporation Law or (iv) for transactions from which the director derived an
improper personal benefit.

The Company's Bylaws provide that the Company shall indemnify its
officers and directors and may indemnify its employees and other agents to the
fullest extent provided by Delaware law, including those circumstances where
indemnification would otherwise be discretionary under Delaware law. The Company
believes that indemnification under its Bylaws covers at least negligence on the
part of indemnified parties. The Bylaws authorize the use of indemnification
agreements and the Company has entered into such agreements with each of its
directors and officers.

The Company carries officer and director liability insurance with
respect to certain matters, including matters arising under the Securities Act.

Delaware Law does not permit a corporation to eliminate a director's
duty of care, and the provisions of the Company's Certificate of Incorporation
have no effect on the availability of equitable remedies such as injunction or
rescission, based upon a director's breach of the duty of care. Insofar as
indemnification for liabilities arising under the Exchange Act may be permitted
to foregoing provisions and agreements, the Company has been informed that in
the opinion of the staff of the Commission such indemnification is against
public policy as expressed in the Exchange Act and is therefore unenforceable.

Item 7. Exemption from Registration Claimed.

Not applicable.

Item 8. Exhibits.

Exhibit
Number Description

4.1 1991 Stock Option Plan, as amended.

4.2 1998 Nonstatutory Stock Option Plan, as amended.

5.1 Opinion of Wilson Sonsini Goodrich & Rosati, P.C.

23.1 Consent of Independent Accountants.

23.2 Consent of Independent Auditors.

23.3 Consent of Counsel (contained in Exhibit 5.1).

24.1 Power of Attorney (see page II-4).

Item 9. Undertakings.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.

<PAGE>

(4) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Exchange Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Exchange Act
and will be governed by the final adjudication of such issue.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Jose, State of California, on this 19th
day of May, 1999.

MICRO LINEAR CORPORATION

By: /s/ David Gellatly
-------------------
David Gellatly
President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints David Gellatly and J. Philip
Russell, and each of them acting individually, as his or her attorney-in-fact,
each with full power of substitution, for him or her in any and all capacities,
to sign any and all amendments to this Registration Statement on Form S-8, and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or any substitute, may do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on May 19, 1999 by the following
persons in the capacities indicated:

Signature Title

/s/ David Gellatly Director, Chief Executive Officer
- ----------------------- and President (Principal
David Gellatly Executive Officer)

/s/ J. Philip Russell Chief Financial Officer (Principal
- ----------------------- Financial and Accounting
J. Philip Russell Officer

/s/ Joseph D. Rizzi Director
- ----------------------
Joseph D. Rizzi

/s/ Roger A. Smullen Director
- ----------------------
Roger A. Smullen

/s/ Jeffrey D. West Director
- ----------------------
Jeffrey D. West

/s/ William B. Pohlman Director
- ----------------------
William B. Pohlman

<PAGE>

MICRO LINEAR CORPORATION

REGISTRATION STATEMENT ON FORM S-8

INDEX TO EXHIBITS

Exhibit
Number Description

4.1 1991 Stock Option Plan, as amended.

4.2 1998 Nonstatutory Stock Option Plan, as amended.

5.1 Opinion of Wilson Sonsini Goodrich & Rosati, P.C.

23.1 Consent of Independent Accountants.

23.2 Consent of Independent Auditors.

23.3 Consent of Counsel (contained in Exhibit 5.1).

24.1 Power of Attorney (see page II-4).
<PAGE>

EXHIBIT 4.1
MICRO LINEAR CORPORATION

1991 STOCK OPTION PLAN

(as amended through May 28, 1997)

1. Purposes of the Plan. The purposes of this Stock Option Plan are:

o to attract and retain the best available personnel for
positions of substantial responsibility,

o to provide additional incentive to Employees and Consultants,
and

o to promote the success of the Company's business.

Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant. Stock
Purchase Rights may also be granted under the Plan.

2. Definitions. As used herein, the following definitions shall apply:

(a) "Administrator" means the Board or any of its Committees
as shall be administering the Plan, in accordance with Section 4 of the Plan.

(b) "Applicable Laws" means the legal requirements relating to
the administration of stock option plans under state corporate and securities
laws and the Code.

(d) "Code" means the Internal Revenue Code of 1986, as
amended.

(e) "Committee" means a Committee appointed by the Board
in accordance with Section 4 of the Plan.

(f) "Common Stock" means the Common Stock of the Company.

(g) "Company" means Micro Linear Corporation, a California
corporation.

(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services and who is
compensated for such services, provided that the term "Consultant" shall not
include Directors who are paid only a director's fee by the Company or who are
not compensated by the Company for their services as Directors.

<PAGE>

(i) "Continuous Status as an Employee or Consultant" means the
employment or consulting relationship is not interrupted or terminated by the
Company, any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Board, including sick leave, military leave, or any
other personal leave; provided, however, that for purposes of Incentive Stock
Options, any such leave may not exceed ninety (90) days, unless reemployment
upon the expiration of such leave is guaranteed by contract (including certain
Company policies) or statute; or (ii) transfers between locations of the Company
or between the Company, its Parent, its Subsidiaries or its successor.

(j) "Director" means a member of the Board.

(k) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.

(l) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.

(m) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.

(n) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National Market
of the National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, the Fair Market Value of a Share of Common Stock shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock) on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or such
other source as the Administrator deems reliable;

(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the Nasdaq National Market thereof)
or is regularly quoted by a recognized securities dealer but selling prices are
not reported, the Fair Market Value of a Share of Common Stock shall be the mean
between the high bid and high asked prices for the Common Stock on the last
market trading day prior to the day of determination, as reported in the Wall
Street Journal or such other source as the Administrator deems reliable;

(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be
determined in good faith by the Administrator.

(o) "Fully Diluted Shares" means the number of Shares
outstanding as of January 1 of each year assuming (i) conversion of all
securities and other instruments convertible into Common Stock and (ii) exercise
of all outstanding options, warrants, and other instruments exercisable for
Common Stock or preferred stock of the Company.

(p) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.

(q) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.

(r) "Notice of Grant" means a written notice evidencing
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.

(s) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

(t) "Option" means a stock option granted pursuant to the
Plan.

(u) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.

(v) "Option Exchange Program" means a program whereby
outstanding options are surrendered in exchange for options with a lower
exercise price.

(w) "Optioned Stock" means the Common Stock subject to an
Option or Stock Purchase Right.

(x) "Optionee" means an Employee or Consultant or who holds an
outstanding Option or Stock Purchase Right.

(y) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.

(z) "Plan" means this Micro Linear Corporation 1991 Stock
Option Plan as amended from time to time.

(aa) "Restricted Stock" means shares of Common Stock
acquired pursuant to a grant of Stock Purchase Rights under Section 11 below.

<PAGE>

(bb) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.

(cc) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.

(dd) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 13 of the Plan.

(ee) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.

(ff) "Subsidiary" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 3,864,000 Shares of Common Stock plus an annual increase
on each of January 1, 1998 and January 1, 1999 equal to the lesser of (i)
750,000 shares or (ii) 4% percent of the Fully Diluted Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock. However, should the
Company reacquire Shares which were issued pursuant to the exercise of an Option
or Stock Purchase Right, such Shares shall not become available for future grant
under the Plan.

If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, the unpurchased Shares
which were subject thereto shall become available for future grant under the
Plan (unless the Plan has terminated); provided, however, that Shares that have
actually been issued under the Plan, whether upon exercise of an Option or
Right, shall not be returned to the Plan and shall not become available for
future distribution under the Plan, except that if Shares of Restricted Stock
are repurchased by the Company at their original purchase price, and the
original purchaser of such Shares did not receive any benefits of ownership of
such Shares, such Shares shall become available for future grant under the Plan.
For purposes of the preceding sentence, voting rights shall not be considered a
benefit of Share ownership.

4. Administration of the Plan.

(a) Procedure.

(i) Multiple Administrative Bodies. The Plan
may be administered by different Committees with respect to different groups of
Service Providers.

(ii) Section 162(m). To the extent that the Administrator determines it to
be desirable to qualify Options granted hereunder as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the Plan shall
be administered by a Committee of two or more "outside directors" within the
meaning of Section 162(m) of the Code.

(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3,
the transactions contemplated hereunder shall be structured to satisfy the
requirements for exemption under Rule 16b-3.

(iv) Other Administration. Other than as
provided above, the Plan shall be administered by (A) the Board or (B) a
Committee, which committee shall be constituted to satisfy Applicable Laws.

(b) Powers of the Administrator. Subject to the provisions of
the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:

(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(n) of the Plan;

(ii) to select the Consultants and Employees to whom
Options and Stock Purchase Rights may be granted
hereunder;

(iii) to determine whether and to what extent Options
and Stock Purchase Rights or any combination
thereof, are granted hereunder;

(iv) to determine the number of shares of Common
Stock to be covered by each Option and Stock Purchase
Right granted hereunder;

(v) to approve forms of agreement for use under
the Plan;

(vi) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any award granted hereunder. Such terms and conditions include,
but are not limited to, the exercise price, the time or times when Options or
Stock Purchase Rights may be exercised (which may be based on performance
criteria), and any restriction or limitation, or any waiver of forfeiture
restrictions regarding any Option or Stock Purchase Right or the shares of
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;

(vii) to reduce the exercise price of any Option or Stock Purchase Right to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option or Stock Purchase Right shall have declined since the
date the Option was granted;

(viii) to construe and interpret the terms of the Plan;

(ix) to prescribe, amend and rescind rules and regulations relating to the
Plan, including rules and regulations relating to sub-plans established for the
purpose of qualifying for preferred tax treatment under foreign tax laws;

(x) to modify or amend each Option or Stock Purchase Right (subject to
Section 15(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;

(xi) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;

(xii) to allow Optionees to satisfy withholding tax obligations by electing
to have the Company withhold from the Shares to be issued upon exercise of an
Option or Stock Purchase Right that number of Shares having a Fair Market Value
equal to the amount required to be withheld. The Fair Market Value of the Shares
to be withheld shall be determined on the date that the amount of tax to be
withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;

(xiii) to institute an Option Exchange Program;

(xiv) to determine the terms and restrictions
applicable to Options and Stock Purchase Rights and any
Restricted Stock; and

(xv) to make all other determinations deemed
necessary or advisable for administering the Plan.

(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.

5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights
may be granted to Employees and Consultants. Incentive Stock Options may be
granted only to Employees. If otherwise eligible, an Employee or Consultant who
has been granted an Option or Stock Purchase Right may be granted additional
Options or Stock Purchase Rights.

6. Limitations.

(a) Each Option shall be designated in the Notice of Grant as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value:

(i) of Shares subject to an Optionee's incentive stock options granted by
the Company, any Parent or Subsidiary, which

(ii) become exercisable for the first time during any calendar year (under
all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such
excess Options shall be treated as Nonstatutory Stock Options. For purposes of
this Section 6(a), incentive stock options shall be taken into account in the
order in which they were granted, and the Fair Market Value of the Shares shall
be determined as of the time of grant.

(b) Neither the Plan nor any Option or Stock Purchase Right
shall confer upon an Optionee any right with respect to continuing the
Optionee's employment or consulting relationship with the Company, nor shall
they interfere in any way with the Optionee's right or the Company's right to
terminate such employment or consulting relationship at any time, with or
without cause.

(i) No Employee shall be granted, in any fiscal year of the Company,
Options and Stock Purchase Rights to purchase more than 250,000 Shares.

(ii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 13 hereof.

(iii) If an Option or Stock Purchase Right is canceled in the same fiscal
year of the Company in which it was granted (other than in connection with a
transaction described in Section 13 hereof, the canceled Option or Stock
Purchase Right will be counted against the limit set forth in Section 6(c)(i)
hereof. For this purpose, if the exercise price of an Option or Stock Purchase
Right is reduced, the transaction will be treated as a cancellation of the
Option or Stock Purchase Right and the grant of a new Option or Stock Purchase
Right.

7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
become effective upon the earlier to occur of its adoption by the Board or its
approval by the shareholders of the Company as described in Section 19 of the
Plan. It shall continue in effect for a term of ten (10) years unless terminated
earlier under Section 15 of the Plan.

8. Term of Option. The term of each Option shall be stated in the
Notice of Grant; provided, however, that the term shall be ten (10) years from
the date of grant or such shorter term as may be provided in the Notice of
Grant. However, in the case of an Incentive Stock Option granted to an Optionee
who, at the time the Incentive Stock Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Incentive Stock Option
shall be five (5) years from the date of grant or such shorter term as may be
provided in the Notice of Grant.

9. Option Exercise Price and Consideration.

(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the Fair Market Value per Share on
the date of grant.

(B) granted to any Employee other than an Employee described in paragraph
(A) immediately above, the per Share exercise price shall be no less than 100%
of the Fair Market Value per Share on the date of grant.

(ii) In the case of a Nonstatutory Stock Option, the per Share exercise
price shall be determined by the Administrator. In the case of a Nonstatutory
Stock Option intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.

(iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price of less than 100% of the Fair Market Value per Share on the
date of grant pursuant to a merger or other corporate transaction.

(b) Waiting Period and Exercise Dates. At the time an Option
is granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions which must be satisfied before
the Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.

(c) Form of Consideration. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:

(i) cash,

(ii) check,

(iii) promissory note,

(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned
by the Optionee for more than six months on the date of surrender, and (B) have
a Fair Market Value on the date of surrender equal to the aggregate exercise
price of the Shares as to which said Option shall be exercised,

(v) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price,

(vi) a reduction in the amount of any Company liability to the Optionee,
including any liability attributable to the Optionee's participation in any
Company-sponsored deferred compensation program or arrangement;

(vii) any combination of the foregoing methods of payment, or

(viii) such other consideration and method of payment for the issuance of
Shares to the extent permitted by Applicable Laws.

10. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed exercised when the Company receives: (i) written
notice of exercise (in accordance with the Option Agreement) from the person
entitled to exercise the Option, and (ii) full payment for the Shares with
respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 13 of the
Plan.

Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.

(b) Termination of Employment or Consulting Relationship. In
the event an Optionee's Continuous Status as an Employee or Consultant
terminates (other than upon the Optionee's death or Disability), the Optionee
may exercise his or her Option, but only within such period of time as is
determined by the Administrator, and only to the extent that the Optionee was
entitled to exercise it at the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Notice of Grant).
In the case of an Incentive Stock Option, the Administrator shall determine such
period of time (in no event to exceed ninety (90) days from the date of
termination) when the Option is granted. If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

Notwithstanding the above, in the event of an Optionee's
change in status from Consultant or Director to Employee or Employee or Director
to Consultant, an Optionee's Continuous Status as a Director or Consultant shall
not automatically terminate solely as a result of such change in status.
However, in such event, an Incentive Stock Option held by the Optionee shall
cease to be treated as an Incentive Stock Option and shall be treated for tax
purposes as a Nonstatutory Stock Option three months and one day following such
change of status from an Employee to a Consultant.

(c) Disability of Optionee. In the event an Optionee's
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option, but only
within twelve (12) months from the date of such termination, and only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.

(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised, at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. If, at the time of death, the Optionee was not
entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall revert to the Plan. If, after death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.

11. Stock Purchase Rights.

(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing, by means of a Notice of Grant, of the terms,
conditions and restrictions related to the offer, including the number of Shares
that the offeree shall be entitled to purchase, the price to be paid, and the
time within which the offeree must accept such offer, which shall in no event
exceed six (6) months from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form determined by the
Administrator.

(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.

(c) Other Provisions. The Restricted Stock Purchase March 25,
1997 Agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its sole
discretion. In addition, the provisions of Restricted Stock Purchase Agreements
need not be the same with respect to each purchaser.

(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.

12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.

13. Adjustments Upon Changes in Capitalization, Dissolution or Merger.

(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.

(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option or Stock
Purchase Right has not been previously exercised, it will terminate immediately
prior to the consummation of such proposed action. The Board may, in the
exercise of its sole discretion in such instances, declare that any Option or
Stock Purchase Right shall terminate as of a date fixed by the Board and give
each Optionee the right to exercise his or her Option or Stock Purchase Right as
to all or any part of the Optioned Stock, including Shares as to which the
Option or Stock Purchase Right would not otherwise be exercisable.

(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right may
be assumed or an equivalent option or right may be substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
the successor corporation does not assume or substitute the Options and Stock
Purchase Rights, then the Administrator shall provide for the Optionee to fully
vest in and have the right to exercise the Option or Stock Purchase Right as to
all or a portion of the Optioned Stock, including Shares as to which it would
not otherwise be vested or exercisable. If the Administrator makes an Option or
Stock Purchase Right exercisable in lieu of assumption or substitution in the
event of a merger or sale of assets, the Administrator shall notify the Optionee
that the Option or Stock Purchase Right shall be fully vested and exercisable
for a period of fifteen (15) days from the date of such notice, and the Option
or Stock Purchase Right will terminate upon the expiration of such period. For
the purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase, for each Share of Optioned Stock subject to
the Option or Stock Purchase Right immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets was not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.

14. Date of Grant. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.

15. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.

(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Sections 162(m) and 422 of the Code (or any successor rule or statute or
other applicable law, rule or regulation, including the requirements of any
exchange or quotation system on which the Common Stock is listed or quoted).
Such shareholder approval, if required, shall be obtained in such a manner and
to such a degree as is required by the applicable law, rule or regulation.

(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company.

16. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares shall not be issued pursuant to
the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
or quotation system upon which the Shares may then be listed or quoted, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.

(b) Investment Representations. As a condition to the exercise
of an Option or Stock Purchase Right, the Company may require the person
exercising such Option or Stock Purchase Right to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.

17. Liability of Company.

(a) Inability to Obtain Authority. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option or Stock Purchase Right exceeds, as of the date of grant,
the number of Shares which may be issued under the Plan without additional
shareholder approval, such Option or Stock Purchase shall be void with respect
to such excess Optioned Stock, unless shareholder approval of an amendment
sufficiently increasing the number of Shares subject to the Plan is timely
obtained in accordance with Section 15(b) of the Plan.

18. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

19. Shareholder Approval. Continuance of the Plan shall be subject to approval
by the shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted. Such shareholder approval shall be obtained in the
manner and to the degree required under applicable federal and state law.
<PAGE>

EXHIBIT 4.2
MICRO LINEAR CORPORATION
1998 NONSTATUTORY STOCK OPTION PLAN

(as amended through January 11, 1999)

1. Purposes of the Plan. The purposes of this Nonstatutory Stock Option
Plan are:
$ to attract and retain the best available personnel for
positions of substantial responsibility,

$ to provide additional incentive to Employees, Directors
and Consultants, and

$ to promote the success of the Company's business.

Options granted under the Plan will be Nonstatutory Stock
Options.

2. Definitions. As used herein, the following definitions shall apply:

(a) "Administrator" means the Board or any of its
Committees as shall be administering the Plan, in accordance
with Section 4 of the Plan.

(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.

(d) "Code" means the Internal Revenue Code of 1986, as amended.

(e) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.

(f) "Common Stock" means the Common Stock of the Company.

(g) "Company" means Micro Linear Corporation, a Delaware corporation.

(h) "Consultant" means any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services to such entity.

(i) "Director" means a member of the Board.

(j) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.

(k) "Employee" means any person, including Officers, employed by
the Company or any Parent or Subsidiary of the Company. A Service Provider shall
not cease to be an Employee in the case of (i) any leave of absence approved by
the Company or (ii) transfers between locations of the Company or between the
Company, its Parent, any Subsidiary, or any successor. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.

(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

(m) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National Market
or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or system for the last market trading
day prior to the time of determination, as reported in The Wall Street Journal
or such other source as the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, the Fair Market Value of a Share of
Common Stock shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of determination,
as reported in The Wall Street Journal or such other source as the Administrator
deems reliable;

(iii) In the absence of an established market for the Common Stock, the
Fair Market Value shall be determined in good faith by the Administrator.

(n) "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Option grant. The Notice of Grant
is part of the Option Agreement.

(o) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

(p) "Option" means a nonstatutory stock option granted pursuant
to the Plan, that is not intended to qualify as an incentive stock option within
the meaning of Section 422 of the Code and the regulations promulgated
thereunder.

(q) "Option Agreement" means an agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.

(r) "Option Exchange Program" means a program whereby outstanding options are
surrendered in exchange for options with a lower exercise price.

(s) "Optioned Stock" means the Common Stock subject to an
Option.

(t) "Optionee" means the holder of an outstanding Option granted
under the Plan.

(u) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.

(v) "Plan" means this 1998 Nonstatutory Stock Option Plan.

(w) "Service Provider" means an Employee including an Officer,
Consultant or Director.

(x) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 12 of the Plan.

(y) "Subsidiary" means a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is One Million (1,000,000) Shares. The Shares may be authorized,
but unissued, or reacquired Common Stock.

If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated).

4. Administration of the Plan.

(a) Administration. The Plan shall be administered by (i) the
Board or (ii) a Committee, which committee shall be constituted to satisfy
Applicable Laws.

(i) to determine the Fair Market Value of the
Common Stock;

(ii) to select the Service Providers to whom Options may be granted hereunder;

(iii) to determine whether and to what extent
Options are granted hereunder;

(iv) to determine the number of shares of Common
Stock to be covered by each Option granted hereunder;

(v) to approve forms of agreement for use under the Plan;

(vi) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any award granted hereunder. Such terms and conditions include,
but are not limited to, the exercise price, the time or times when Options may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or the shares of Common Stock relating thereto,
based in each case on such factors as the Administrator, in its sole discretion,
shall determine;

(vii) to reduce the exercise price of any Option to the then current Fair
Market Value if the Fair Market Value of the Common Stock covered by such Option
shall have declined since the date the Option was granted;

(viii) to institute an Option Exchange Program;

(ix) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;

(x) to prescribe, amend and rescind rules and regulations relating to the
Plan, including rules and regulations relating to sub-plans established for the
purpose of qualifying for preferred tax treatment under foreign tax laws;

(xi) to modify or amend each Option (subject to Section 14(b) of the Plan),
including the discretionary authority to extend the post-termination
exercisability period of Options longer than is otherwise provided for in the
Plan;

(xii) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option previously granted by the
Administrator;

(xiii) to determine the terms and restrictions applicable to Options;

(xiv) to allow Optionees to satisfy withholding tax obligations by electing
to have the Company withhold from the Shares to be issued upon exercise of an
Option that number of Shares having a Fair Market Value equal to the amount
required to be withheld. The Fair Market Value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined. All elections by an Optionee to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and

(xv) to make all other determinations deemed necessary or advisable for
administering the Plan.

(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.

5. Eligibility. Options may be granted to Service Providers; provided,
however, that notwithstanding anything to the contrary contained in the Plan, an
Option may only be granted to an Officer as an inducement essential to his or
her initial employment with the Company.

6. Limitation. Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee's relationship as a
Service Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.

7. Term of Plan. The Plan shall become effective upon its adoption by the
Board. It shall continue in effect for ten (10) years, unless sooner terminated
under Section 14 of the Plan.

8. Term of Option. The term of each Option shall be stated in the Option
Agreement.

9. Option Exercise Price and Consideration.

(a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator.

(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. Such consideration may consist entirely of:

(i) cash;

(ii) check;

(iii) promissory note;

(iv) other Shares which (A) in the case of Shares acquired upon exercise of
an option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised;

(v) consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan;

(vii) such other consideration and method of payment for the issuance of
Shares to the extent permitted by Applicable Laws; or

(viii) any combination of the foregoing methods of payment.

10. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. An Option may not be exercised for a fraction of
a Share.

An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 12 of the Plan.

(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option, but only within such
period of time as is specified in the Option Agreement, and only to the extent
that the Option is vested on the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for three (3) months following the Optionee's termination.
If, on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option
Agreement, to the extent the Option is vested on the date of termination (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.

(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.

(e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.

11. Non-Transferability of Options . Unless determined otherwise by the
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.

(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.

(c) Change of Control. Upon or in connection with an acquisition
of the Company in a transaction or series of related transactions consisting of
a merger, purchase of outstanding stock, sale of all or substantially all of the
Company's assets, or other form of business acquisition or combination, and
which results in a change in control of the Company (the "Acquisition"), all
rights to exercise this Option or to acquire any shares of stock hereunder shall
automatically terminate except as provided in this Section. At such time prior
to the consummation of the Acquisition as the Committee shall designate by
written notice to the Optionee, the Optionee or other person then entitled to
exercise this Option shall have the right to exercise the vested, unexercised
portion of this Option which would, but for this Section, otherwise be vested
and exercisable as of the date on which the Acquisition occurs. If provision is
made in writing in connection with the Acquisition for the assumption of this
Option, or the substitution for this Option of an option covering the stock of a
successor employer corporation, or a parent or subsidiary thereof, with
appropriate adjustments, if any, in accordance with the applicable provisions of
the Plan as to the number and kind of shares optioned and their exercises
prices, then the Optionee shall elect in writing, within time limits as may be
designated in written notice from the Committee to the Optionee, to accept the
assumed or substituted option arrangements, or, in lieu thereof, to exercise the
Option to the extent permitted under this Section, but the Optionee shall not be
entitled in any event to accept the benefits, in whole or in part, of both of
those alternatives. The Optionee agrees that failure to timely accept or
exercise rights under this Section by written confirmation designated in form
and substance by the Committee shall forever bar and release any rights
otherwise granted to the Optionee under this Section or other provisions of this
Option. The Optionee shall have no right to require that this Option be assumed
or replaced with a substitute option in connection with any Acquisition.

13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.

14. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.

(b) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to options granted under the
Plan prior to the date of such termination.

15. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

(b) Investment Representations. As a condition to the exercise of
an Option the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required.

16. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

<PAGE>

MICRO LINEAR CORPORATION

1998 NONSTATUTORY STOCK OPTION PLAN

STOCK OPTION AGREEMENT

Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.

I. NOTICE OF STOCK OPTION GRANT

[Optionee's Name and Address]

You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:

Grant Number

Date of Grant

Vesting Commencement Date

Exercise Price per Share $

Total Number of Shares Granted

Total Exercise Price $

Type of Option: Nonstatutory Stock Option

Term/Expiration Date:

Vesting Schedule:

Subject to the Optionee continuing to be a Service Provider on such
dates, this Option shall vest and become exercisable as to ___% of the Optioned
Stock on [date], and as to an additional ___% of the Optioned Stock on ____.

<PAGE>

Termination Period:

This Option may be exercised for thirty (30) days after Optionee ceases
to be a Service Provider. Upon the death or Disability of the Optionee, this
Option may be exercised for such longer period as provided in the Plan. In no
event shall this Option be exercised later than the Term/Expiration Date as
provided above.

II. AGREEMENT

1. Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 14(b) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.

2. Exercise of Option.

(a) Right to Exercise. This Option is exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Option Agreement.

(b) Method of Exercise. This Option is exercisable by delivery
of an exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required by
the Company pursuant to the provisions of the Plan. The Exercise Notice shall be
completed by the Optionee and delivered to [Title]. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such aggregate Exercise
Price.

No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with Applicable Laws. Assuming
such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.

3. Method of Payment. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:

(a) cash;

(b) check;

(c) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or

(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.

4. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

5. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.

6. Tax Consequences. Some of the federal tax consequences relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.

(a) Exercising the Option. The Optionee may incur regular
federal income tax liability upon exercise of an NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

(b) Disposition of Shares. If the Optionee holds NSO Shares
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes.

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

8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.

By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.

OPTIONEE MICRO LINEAR CORPORATION

___________________________________ By: _______________________________
Signature

____________________________________ Title: ____________________________
Print Name

- ------------------------------------
Residence Address

- ------------------------------------

<PAGE>

EXHIBIT A

MICRO LINEAR CORPORATION

1998 NONSTATUTORY STOCK OPTION PLAN

EXERCISE NOTICE

Micro Linear Corporation
2092 Concourse Drive
San Jose, CA 95131

Attention: [Title]

1. Exercise of Option. Effective as of today, ________________, 199__,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Micro Linear Corporation (the "Company")
under and pursuant to the 1998 Nonstatutory Stock Option Plan (the "Plan") and
the Stock Option Agreement dated , 19___ (the "Option Agreement"). The purchase
price for the Shares shall be $ , as required by the Option Agreement.

2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.

3. Representations of Purchaser. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.

4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 12 of the
Plan.

5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.

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

Submitted by: Accepted by:

PURCHASER MICRO LINEAR CORPORATION

__________________________________ By: _______________________________
Signature

__________________________________ Title: ____________________________
Print Name

Date Received

Address: Address:

<PAGE>

EXHIBIT 5.1

May 19, 1999

Micro Linear Corporation
2092 Concourse Drive
San Jose, California 95131

Re: Registration Statement on Form S-8

Ladies and Gentlemen:

We have examined the Registration Statement on Form S-8 to be filed by you
with the Securities and Exchange Commission on or about May 19, 1999, in
connection with the registration under the Securities Act of 1933, as amended,
of 588,720 shares of Common Stock (the "Option Shares") to be issued under your
1991 Stock Option Plan (the "Option Plan") and 400,000 shares of Common Stock
(the "NSO Shares") to be issued under your 1998 Nonstatutory Stock Option Plan
(the "NSO Plan").

As your legal counsel, we have examined the proceedings taken and are
familiar with the proceedings proposed to be taken by you in connection with the
sale and issuance of the Option Shares and the NSO Shares (collectively, the
"Shares"). It is our opinion that the Shares, when issued and sold in the manner
referred to in the Option Plan and NSO Plan (collectively, the "Plans"), and
pursuant to the agreements which accompany the Plans, will be legally and
validly issued, fully paid and nonassessable.

We consent to the use of this opinion as an exhibit to said Registration
Statement and further consent to the use of our name wherever appearing in said
Registration Statement and any amendments thereto.

Sincerely,

WILSON SONSINI GOODRICH & ROSATI
Professional Corporation

/s/ WILSON SONSINI GOODRICH & ROSATI
------------------------------------
<PAGE>

EXHIBIT 23.1

Consent of Independent Accountants

We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated January 25, 1999, relating to the
financial statements, which appears in the Micro Linear Corporation's Annual
Report on Form 10-K for the year ended January 3, 1999.

/s/ PRICEWATERHOUSECOOPERS LLP
- -----------------------------
San Jose, California
May 14, 1999

<PAGE>

EXHIBIT 23.2

Consent of Ernst & Young LLP, Independent Auditors

We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the 1991 Stock Option Plan and 1998 Nonstatutory Stock
Option Plan of Micro Linear Corporation of our report dated January 20, 1997,
with respect to the financial statements and schedule of Micro Linear
Corporation included in its Annual Report (Form 10-K) for the year ended
December 31, 1998, filed with the Securities and Exchange Commission.

/s/ ERNST & YOUNG LLP
- ---------------------
San Jose, California
May 14, 1999