Maxim Integrated Products, Inc. (the "Company") suspended stock option exercises starting September 23, 2006 as a result of not having timely filed its periodic reports on Form 10-K and Form 10-Q with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended, because of the previously-announced Special Committee inquiry into certain past stock option grants and granting practices, as well as the Company's need to restate certain historical financial statements to record additional stock-based compensation expense as a result of that inquiry. The Company will continue to prohibit the exercise of stock options until the Company completes its financial restatement and becomes current in its reporting obligations with the Commission.

During the period which the exercise of stock options has been and will be suspended, stock options held by current and former employees have expired and will expire due to the expiration of their 10-year terms. The Company has implemented a program to provide cash payments to individuals who hold options granted from September 1996 through March 1998 that expire due to their maximum 10-year terms. This program will terminate following the completion of the financial restatement and the Company becoming current in its reporting obligations with the Commission.

Under this program, the Company will make a cash payment to the holder of a stock option that expires as a result of reaching its 10-year term during the period that stock options may not be exercised. For options expiring on or before September 30, 2007, the cash payment will equal $33.06 minus the exercise price of the option multiplied by the number of shares, less applicable tax withholding. For options expiring after September 30, 2007, the cash payment will be based on the amount the "calculated value" of the option exceeds the exercise price multiplied by the number of shares, less applicable tax withholding. For this purpose, the "calculated value" is equal to the price at which 10% of the daily close prices of the Company's common stock fall above this price for trading days from August 7, 2006 through the expiration date of the option. The cash payment will be subject to the option holder executing a release of all claims relating to the option. Approximately 525 individuals will be eligible for this program, and the aggregate payments are expected to total approximately $98 million, subject to adjustment as a result of future changes in the Company's stock price until the program terminates. The Company expects that stock options covering approximately 5,153,753 shares will expire as a result of reaching their 10-year term and such options will no longer be outstanding. The Company expects to incur a compensation expense equal to the amount of cash paid out under the program.

Named executive officers of the Company hold stock options that are eligible to participate in the program and they will participate on the same terms and conditions that apply to all other program participants. The following table sets forth the estimated cash payments that the Company expects to make under the program to its named executive officers:

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