MAXIM INTEGRATED PRODUCTS INC, DEF 14A, 1996-09-26

MAXIM INTEGRATED PRODUCTS INC
DEF 14A, 1996-09-26
SEMICONDUCTORS & RELATED DEVICES

Previous: TNP ENTERPRISES INC, 424B4, 1996-09-26

Next: INSURED MUNICIPALS INCOME TRUST SERIES 116, 497J, 1996-09-26

<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

Maxim Integrated Products, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

Maxim Integrated Products, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.

(1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:

- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1

- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registrations statement number, or
the form or schedule and the date of its filing.

(1) Amount previously paid:

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

(2) Form, schedule or registration statement no.:

- --------------------------------------------------------------------------------
(3) Filing party:

- --------------------------------------------------------------------------------
(4) Date filed:

- --------------------------------------------------------------------------------
<PAGE> 2
[MAXIM LOGO]

September 26, 1996

Dear Stockholder:

You are invited to attend the Annual Meeting of Stockholders of Maxim
to be held at 11:00 a.m. on Thursday, November 14, 1996 at the Company's offices
at 120 San Gabriel Drive, Sunnyvale, California. At this meeting you are being
asked to vote on several matters recommended by the Board of Directors. In
addition, I want to emphasize the importance of Proposal 3 -- our stock option
proposal -- to our past and future success.

The market for individuals with unique skills in the analog industry
continues to be very competitive. The long term growth potential of this
industry continues to make it difficult to attract, retain and motivate the
caliber of individual Maxim requires to continue to build our Company. Our
success in attracting and retaining the best people in the industry is largely
dependent upon our ability to offer them the opportunity, through their hard
work and dedication, to participate in increases in stockholder values.

During 1996, we invested the options you approved last year in
strengthening the circuit design, process development, manufacturing and sales
areas of the Company. In 1995, you approved an increase of 3,400,000 shares
under the plan. Those shares went primarily to the recruitment of over 300 new
employees and the retention of 600 existing employees. Officers only received
new options to purchase 80,000 shares in 1996 which will not vest until 2000.

In the circuit design, process development, and engineering areas we
added talented, skilled, one of a kind engineers to our existing organization.
This organization introduced 57 products in Q4 and is committed to introducing
50% more products in 1997 than were introduced in 1996. Our engineering
community, which now exceeds 40% of our salaried headcount, understands there is
a direct correlation between the rate of new product introduction, the increase
in our stockholders' value, and their individual equity position.

In the manufacturing area, we expanded our organization to respond to
our backlog and business level and we are now capable of supporting revenue run
rates in excess of $500 million per year. That organization's ownership of Maxim
through the stock option plan has been a major factor in obtaining material
productivity and capacity improvements that have positively impacted our current
and future profitability and has allowed us to achieve record revenue growth in
fiscal 1996.

In the sales and marketing area, we have attracted the talent necessary
to allow us to transition from a less effective independent factory
representative organizations to a very motivated and effective direct
organization worldwide.

Our record financial results for 1996: Increase in net revenues of 68%
to $422 million, increase in operating income of 225% to $185.9 million, and an
increase in earnings per share of 217% to $1.74 per share, occurred through the
dedication and hard work of each and every employee at Maxim.
<PAGE> 3
In fact, over 96% of the Company's salaried employees participate in
our stock option programs. At June 30, 1996, over 14.6 million shares of
previously granted options were not vested and will vest over the next six
years. New options granted to existing employees generally vest in the fourth
and fifth year after the grant. Options to new employees generally vest over a
four to five year period. For example, 89% of the options granted in Fiscal 96
vest in years beyond 1996 with over 55% of the total shares granted vesting in
fiscal 1999 and beyond. We understand the strategic importance of this program
and we ensure that the interest of the employees are directly linked with those
of our stockholders.

This partnership between Maxim's employees and its stockholders has
yielded extraordinary results. Since our IPO, our shareholders have received a
compounded annual return of 44% per year. If you had invested $10,000 in Maxim
at our IPO in 1988, your investment would be worth $200,000 today.

In 1996, we continued to receive significant cash benefits from our
option program. We received $19.7 million from the exercise of options and an
additional $32.7 million of cash from the allowed tax deduction generated by the
program.

To limit the dilution of this program, we continued our practice of
repurchasing shares of the Company's stock. In 1996, we repurchased $27 million
and so far in 1997, our purchases have exceeded $16 million. In addition, the
proposed new grants will be dilutive to Maxim's earnings only when there is an
increase in Maxim's stock price. For example, if our stock price rises $10 or
33%, the proposed 3,500,000 shares, when fully granted by the Company, will
increase our common and common equivalent shares by 568,750 shares or 0.8% of
our outstanding shares. Management believes this dilution is insignificant when
you consider a 33% increase in shareholder value.

Lastly, we understand the importance of ensuring that our plans closely
align with the interest of our shareholders. Our plan has specific restrictions
on the Company's ability to reprice options and grant options with exercise
prices below the fair market value of the Company's stock.

Our Board of Directors urge you to vote yes on continuing our option
program. I hope it is clear, this option program has been and will continue to
be critical to our Company's growth and the future appreciation of your
investment. Your approval of our option program is very necessary and
appreciated. Please sign, date and promptly mail the enclosed proxy in the
prepaid envelope provided.

Thank you

John F. Gifford
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 4
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Thursday, November 14, 1996
11:00 A.M.

TO THE STOCKHOLDERS:

Notice is hereby given that the Annual Meeting of Stockholders of Maxim
Integrated Products, Inc., a Delaware corporation (the "Company"), will be held
at the Company's offices, 120 San Gabriel Drive, Sunnyvale, California 94086 on
Thursday, November 14, 1996 at 11:00 a.m., to consider and act upon the
following matters:

(1) To elect four (4) directors.

(2) To approve the Company's 1996 Stock Incentive Plan and amend
the 1987 Employee Stock Participation Plan.

(3) To approve the Company's 1988 Nonemployee Director Stock Option
Plan, as amended.

(4) To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for fiscal 1997.

(5) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.

Only stockholders of record at the close of business on September 16,
1996 are entitled to notice of and to vote at this meeting and any adjournment
or postponement thereof.

By Order of the Board of Directors

John F. Gifford
President, Chief Executive Officer
and Chairman of the Board

Sunnyvale, California
September 26, 1996

WHETHER OR NOT YOU EXPECT TO ATTEND THIS MEETING, PLEASE MARK, DATE, AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE
NEED BE AFFIXED TO THE ENVELOPE IF MAILED IN THE UNITED STATES.

1
<PAGE> 5
MAXIM INTEGRATED PRODUCTS, INC.
120 San Gabriel Drive
Sunnyvale, California 94086

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 14, 1996

This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Maxim Integrated Products, Inc., a
Delaware corporation ("Maxim" or the "Company"), for use at its Annual Meeting
of Stockholders to be held at 11:00 a.m., local time, on November 14, 1996 and
at any adjournment or postponement of that meeting. The approximate mailing date
for this proxy statement and the enclosed proxy is September 26, 1996. The proxy
holders will vote all proxies in accordance with the instructions contained in
the proxy, and if no choice is specified the proxy holders will vote in favor of
the proposals set forth in the Notice of Meeting. Proxies will confer upon the
proxy holders discretionary authority to vote upon matters which the Board of
Directors does not know as of the date hereof are to be presented at the meeting
and upon matters incident to the conduct of the meeting.

The Board of Directors has fixed the close of business on September 16,
1996 as the record date for the determination of stockholders entitled to vote
at the Annual Meeting. At that time, there were outstanding 61,018,034 shares of
Common Stock.

Any person signing a proxy in the form accompanying this proxy
statement has the power to revoke it prior to or at the meeting. A proxy may be
revoked by a writing delivered to the Secretary of the Company stating that the
proxy is revoked, by a subsequent proxy signed by the person who signed the
earlier proxy, or by attendance at the meeting and voting in person.

Holders of Common Stock are entitled to one vote for each share held.
In the election of directors, however, each stockholder has cumulative voting
rights and is entitled to as many votes as equal the number of shares held by
such stockholder multiplied by the number of directors to be elected (four). If
cumulative voting is requested at the meeting, stockholders' votes may be cast
for a single candidate or distributed among any or all of the candidates. In the
event of cumulative voting, proxy holders may distribute votes among the
nominees in such manner as they deem advisable. Discretionary authority to
cumulate votes is solicited by the Board of Directors.

All votes will be tabulated by the inspector of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted in determining whether a matter has been approved.

The Company will bear the cost of soliciting proxies. In addition, the
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Original solicitation of proxies by mail may be supplemented
by telephone, telegram or personal solicitation by directors, officers or other
regular employees of the Company or, at the Company's request, a private proxy
solicitation firm. No additional compensation will be paid to directors,
officers or other regular employees for such services, but any private proxy
solicitation firm will be paid their customary fee by the Company, estimated to
be $5,000.

2
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of June 30, 1996 by: (i) each
director and nominee for director; (ii) each of the executive officers named in
the Summary Compensation Table; (iii) all executive officers and directors of
the Company as a group; and (iv) all those known by the Company to be beneficial
owners of more than five percent of its Common Stock.

<TABLE>
<CAPTION>
Beneficial Ownership (1)
-------------------------------------
Beneficial Owner Shares % of Total
- ---------------- ------------- ----------
<S> <C> <C>
T. Rowe Price Associates, Inc. 6,543,900 (2) 10.7%
Putnam Investments, Inc. 5,107,296 (3) 8.3%
FMR Corp. 4,141,480 (4) 6.7%
John F. Gifford 1,022,454 (5) 1.7%
Stephen R. Combs 499,030 (6) *
Ziya G. Boyacigiller 276,666 (7) *
James R. Bergman 94,000 (8) *
Robert F. Graham 85,000 (9) *
A.R. Frank Wazzan 61,200 (10) *
Kenneth J. Huening 32,626 (11) *
Michael J. Byrd 30,000 (11) *
Frederick G. Beck 12,000 (11) *
All executive officers and directors
as a group (16 persons) 3,201,153 (12) 5.0%
</TABLE>

- ------------------------
* Less than one percent

(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13G filed with the SEC. Unless
otherwise indicated in the footnotes to this table and subject to
community property laws where applicable, each of the stockholders named
in this table has sole voting and investment power with respect to the
shares indicated as beneficially owned. Applicable percentages are based
on 61,445,519 shares outstanding on June 30, 1996, adjusted as required by
rules promulgated by the SEC.

(2) These securities are owned by various individual and institutional
investors which T. Rowe Price Associates, Inc. serves as investment
adviser with power to direct investments and/or sole power to vote the
securities. For purposes of the reporting requirements of the Securities
Exchange Act of 1934, T. Rowe Price Associates, Inc. is deemed to be a
beneficial owner of such securities; however T. Rowe Price Associates,
Inc. expressly disclaims that it is, in fact, the beneficial owner of such
securities. T. Rowe Price Associates, Inc. holds dispositive power over
all the shares shown, and sole voting power over 379,200 shares. The
address of T. Rowe Price Associates, Inc. is 100 East Pratt Street,
Baltimore, MD 21202. The table is based upon information supplied in a
Schedule 13G dated May 10, 1996.

(3) Certain Putnam Investments, Inc. managers (together with their parent
corporations, Putnam Investments, Inc. and Marsh & McLennan Companies,
Inc.) are considered beneficial owners of these shares which were acquired
for certain of their advisory clients. Putnam Investments, Inc. holds
shared dispositive power over all shares shown and shared voting power
over 200,344 shares. The address of Putnam Investments, Inc. is One Post
Office Square, Boston, MA 02109. The address of Marsh & McLennan
Companies, Inc. is 1166 Avenue of the Americas, New York, NY 10036. The
table is based upon information supplied in a Schedule 13G dated January
15, 1996.

3
<PAGE> 7
(4) FMR Corp. holds dispositive power over all shares shown, and sole voting
power over 313,100 shares. The address of FMR Corp. is 82 Devonshire
Street, Boston, Massachusetts 02109. The table is based upon information
supplied in a Schedule 13G dated May 9, 1996.

(5) Includes 503,342 shares subject to option exercisable within 60 days of
June 30, 1996. Does not include shares held in trust for the benefit of
Mr. Gifford's children.

(6) Includes 386,954 shares subject to options exercisable within 60 days of
June 30, 1996.

(7) Includes 176,666 shares subject to options exercisable within 60 days of
June 30, 1996.

(8) Includes 35,000 shares subject to options exercisable within 60 days of
June 30, 1996.

(9) Includes 55,000 shares subject to options exercisable within 60 days of
June 30, 1996.

(10) Includes 5,000 shares subject to options exercisable within 60 days of
June 30, 1996.

(11) Represents shares subject to options exercisable within 60 days of June
30, 1996.

(12) Includes 2,102,535 shares subject to options exercisable within 60 days of
June 30, 1996. Does not include shares held in trust for the benefit of
Mr. Gifford's children.

There is no family relationship between any of the directors, or
between any of such directors and any of the Company's executive officers.

PROPOSAL 1 - ELECTION OF DIRECTORS

Action is to be taken at the Annual Meeting with respect to the
election of directors to fill the four board positions presently authorized.
Each director to be elected will hold office until his successor is elected and
qualified, or until his earlier death, resignation or removal. Stock represented
by the accompanying proxy will be voted for the election of the four nominees
recommended by the Board of Directors, who are named in the following table,
subject to discretionary power to cumulate votes, unless the proxy is marked in
such a manner as to withhold authority so to vote. All of the nominees were
elected directors by a vote of the stockholders at the last Annual Meeting of
Stockholders which was held on November 16, 1995. The candidates receiving the
highest number of votes, up to the number of directors to be elected, will be
elected. If any nominee for any reason is unable to serve or for good cause will
not serve, the proxy may be voted for such substitute nominee as the persons
appointed in the proxy may in their discretion determine. Stock represented by
the accompanying proxy cannot be voted for a greater number of persons than the
number of nominees (four).

The following is information regarding the nominees, including
information furnished by them as to their principal occupations for the
preceding five-year period, certain directorships, and their ages as of
September 16, 1996.

<TABLE>
<CAPTION>
Name Age Director Since
----------------- --- --------------
<S> <C> <C>
James R. Bergman 54 1988
John F. Gifford 55 1983
Robert F. Graham 67 1990
A.R. Frank Wazzan 60 1990
</TABLE>

Mr. Bergman has been a general partner of DSV Associates since 1974 and
a founder of DSV Partners, DSV Partners III and DSV Partners IV. These firms
provide venture capital and management assistance to emerging companies,
primarily in high technology. He is also a director of Quad Systems Corporation.

Mr. Gifford, a founder of the Company, has served as Maxim's President
and Chief Executive Officer since its incorporation in April 1983.

4
<PAGE> 8
Mr. Graham was Chairman of the Board of Novellus Systems, Inc. a
manufacturer of vapor deposition equipment for use in semiconductor fabrication
until his retirement in May of 1996. He was employed at Novellus since 1986.

Dr. Wazzan is Dean of the School of Engineering and Applied Science,
University of California, Los Angeles, a position he has held since 1987.

FURTHER INFORMATION CONCERNING THE BOARD

During the fiscal year ended June 30, 1996, the Board of Directors held
four meetings. The Company has a standing Audit Committee, which met once during
the fiscal year and a standing Compensation Committee, which met three times
during the fiscal year. During the fiscal year ended June 30, 1996, all members
of the Board of Directors attended all meetings of the Board and of the
committees on which each served.

The Audit Committee is comprised of Messrs. Bergman and Graham and Dr.
Wazzan. Among the committee's functions are recommending engagement of the
Company's independent auditors and meeting with such auditors to consider the
scope and results of the annual audit, and to receive and consider the auditors'
comments on internal controls, accounting staff and similar matters.

The Compensation Committee is comprised of Messrs. Bergman and Graham
and Dr. Wazzan. The Compensation Committee determines salaries and incentive
compensation for the president and other executive officers, awards stock
options to employees and consultants under the Company's stock option plans and
otherwise determines compensation levels and performs such other functions
regarding compensation as the Board may delegate.

Nonemployee directors of the Company receive a $4,000 annual retainer
and fees of $1,000 per meeting attended.

Nonemployee directors participate in the 1988 Nonemployee Director
Stock Option Plan (the "Director Plan"). The Director Plan authorizes the grant
of options to purchase up to 625,000 shares of the Company's Common Stock. See
"Proposal 3 - 1988 Nonemployee Director Stock Option Plan" below.

EXECUTIVE COMPENSATION

COMPENSATION OF EXECUTIVE OFFICERS

The compensation for the Company's Chief Executive Officer at June 30,
1996 and the five most highly compensated executive officers other than the CEO
who were serving as executive officers at June 30, 1996 for all services
rendered in all capacities to the Company and its subsidiaries during the fiscal
years ended June 30, 1996, 1995 and 1994 is set forth below.

5
<PAGE> 9
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
NAME AND ----------------------- UNDERLYING
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#)
------------------ ---- ---------- --------- ------------

<S> <C> <C> <C> <C>
John F. Gifford 1996 264,023 * 0
President, Chief 1995 264,023 600,000 0
Executive Officer and 1994 264,023 450,000 540,000
Chairman of the Board

Stephen R. Combs 1996 185,110 * 0
Vice President 1995 183,330 113,338 0
1994 185,110 84,000 120,000

Frederick G. Beck 1996 170,000 * 40,000
Vice President 1995 170,000 147,763 0
1994 78,846 33,430 192,000

Michael J. Byrd 1996 170,000 * 0
Vice President and 1995 170,000 139,362 0
Chief Financial Officer 1994 62,115 58,000 352,000

Ziya G. Boyacigiller 1996 152,000 * 0
Vice President 1995 141,950 30,500 40,000
1994 132,254 33,500 88,000

Kenneth J. Huening 1996 136,000 * 0
Vice President 1995 122,500 160,994 0
1994 105,881 77,200 120,000
</TABLE>

- ------------------------
* The Company has accrued $3,400,000 for executive officer performance
bonuses relating to fiscal 1996. The Compensation Committee has not
approved the specific bonus amounts for the executive officers. However,
it has set a range of up to $1,000,000 for the Company's chief executive
officer and up to $260,000 for a vice president. The annual salary reviews
for the Company's officers have not occurred and adjustments have not been
determined.

OPTIONS GRANTED TO EXECUTIVE OFFICERS

The Board of Directors currently has authority to grant stock options
to employees under the Incentive Stock Option Plan, as amended (the "ISO Plan"),
the 1987 Supplemental Stock Option Plan, as amended (the "Supplemental Plan")
and the 1996 Stock Incentive Plan. The following two tables set forth certain
information regarding stock options granted to, exercised by and owned by the
executive officers named in the foregoing Summary Compensation Table during
fiscal 1996.

6
<PAGE> 10
OPTION GRANTS IN FISCAL YEAR 1996

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE OR APPRECIATION FOR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION OPTION TERM (1)
NAME (#) (2) FISCAL YEAR ($/SH) DATE (3) 5% ($) 10% ($)
---- ---------- ------------- ----------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Frederick G. Beck 40,000 1.2% 33.375 10/09/05 839,574 2,127,646
</TABLE>

(1) The dollar amounts under these columns are the result of calculations
at the 5% and 10% annual rates of stock appreciation prescribed by the
Securities and Exchange Commission and are not intended to forecast
possible future appreciation, if any, of the Company's stock price. No
gain to the optionees is possible without an increase in the price of
the Company's stock, which will benefit all stockholders
commensurately.

(2) The options were granted on October 9, 1995 and will become exercisable
on a quarterly basis during the year ending July 1, 2000.

(3) The options were granted for a term of ten years, but are subject to
earlier termination under certain circumstances relating to termination
of employment or a change of control of the Company. Options may be
repriced under certain limited circumstances. See "Amendments and
Discontinuance" in the discussion of Proposal 2.

AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND JUNE 30, 1996 OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED JUNE 30, 1996 (#) JUNE 30, 1996 ($) (1)
ON VALUE ---------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John F. Gifford 235,000 6,564,106 453,342 850,000 10,246,158 15,164,062
Stephen R. Combs 61,428 2,234,805 366,954 196,000 9,147,694 3,517,125
Frederick G. Beck 128,000 3,422,250 0 196,000 0 2,408,250
Michael J. Byrd 82,000 2,132,349 17,000 253,000 262,437 3,829,187
Ziya G. Boyacigiller 90,000 3,625,186 176,666 184,000 4,364,934 2,784,000
Kenneth J. Huening 55,000 1,786,117 25,626 183,000 605,414 3,286,875
</TABLE>

(1) Based on a price per share of $27.3125, which was the price of a share
of Common Stock on the NASDAQ at the close of business on June 30, 1996.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with each of Messrs.
Combs, Beck, Byrd, Boyacigiller, and Huening. The agreement does not grant the
executive officer any right to be retained by the Company, and the Company may
terminate employment of the executive officer either with or without cause. In
the event of termination of employment by the Company with or without

7
<PAGE> 11
cause, all compensation and benefits, except benefits provided by law (e.g.,
COBRA health insurance continuation benefits) immediately cease to accrue.
However, in the event of termination of employment by the Company without cause,
severance payments are to be made in accordance with the Company's normal policy
or as mutually agreed between the Company and the executive officer.

If the executive officer terminates his full-time employment with the
Company and his written notice of termination provides that he is willing to act
as a consultant to the Company, the Company will make health insurance coverage
available to the executive officer and his family. The terms of the consultancy,
unless otherwise agreed, will provide for part-time consulting (up to one day
per month) and annual compensation equal to at least 5% of the executive
officer's base salary at the time of termination. Health insurance coverage
means coverage under any group health plan the Company maintains for its
employees.

During the ten-year period following the notice of termination, the
executive officer pays the same amount for health coverage as a similarly
situated full-time employee is required to pay for coverage under the Company's
group health plan. After the ten-year period, the executive officer pays the
Company's cost of the coverage. In the event of the executive officer's death
while receiving health insurance coverage, the executive officer's spouse is
eligible for health insurance coverage until her death so long as she pays for
the coverage in an amount equal to the cost for an employee with identical
coverage. In the event the executive officer becomes disabled while receiving
health insurance coverage, he is deemed to be a consultant to the Company during
the disability.

Mr. Gifford entered into an employment agreement with the Company in
1987, which was amended and restated in February 1994. The agreement provides
that Mr. Gifford shall propose annually the amount of his bonus to the Board of
Directors, which shall reflect the Company's achievements and profitability for
the preceding year, and shall be reflective of the accomplishments of the
management group as a whole. The Board of Directors, in its discretion, shall
approve or modify such proposed bonus; provided that any bonus awarded shall not
be less than the bonus paid to any officer. The employment agreement provides
vesting for 100% of the unvested portion of his stock options either upon Mr.
Gifford's death or upon his disability, which results in his termination of
employment, while employed by the Company. The employment agreement also
provides that in the event Mr. Gifford becomes disabled while employed by the
Company, as long as Mr. Gifford remains disabled, the Company will provide for
continuation of his base salary (offset by any earnings) for life through
insurance or direct payment, or both. In addition, if Mr. Gifford's employment
with the Company is terminated due to disability, the Company will provide to
Mr. Gifford the post-employment health insurance coverage on the same terms as
the other officers described above. In addition, in the event Mr. Gifford's
employment is terminated without cause as defined in the agreement, the Company
will retain Mr. Gifford as a consultant and Mr. Gifford agrees to remain
available to the Company as a consultant for a period of either (i) one (1) year
in the event that his employment is terminated with justification as defined in
the agreement or (ii) two (2) years if his employment is terminated without
justification as defined in the agreement. During the period that Mr. Gifford
serves as a consultant to the Company, he shall not be required to devote more
than two (2) days a week to such consulting activities. During the period of Mr.
Gifford's retention as a consultant, he shall be entitled to full pay, which is
defined as his average annual total compensation (salary plus bonus) received
during the previous two years, normal employee benefits, and his stock options
and shares of restricted stock shall continue to vest. In addition, if Mr.
Gifford's employment is terminated without cause or justification, the vesting
of his stock options and shares of restricted stock shall be immediately
accelerated so that the options and stock that would otherwise have vested over
the two (2) year period commencing two (2) years after the date of termination
shall become immediately exercisable. Thus, if his termination is without cause
or justification, Mr. Gifford will vest a total of four (4) years of options and
restricted

8
<PAGE> 12
stock, two (2) years tied to continuing consulting retention and two (2) years
by acceleration of vesting that would otherwise have occurred if he had remained
employed for the third and fourth years after the date of his termination. The
employment agreement also provides that upon a "change of control" of the
Company, as such term is defined in his employment agreement, 50% of his
unvested stock and options shall become fully vested on the date of the sale or
merger. The remainder of the stock and options shall become fully vested within
one year of the sale or merger provided that Mr. Gifford is willing (whether or
not he is actually requested to do so) to remain as CEO for the remaining
vesting period of his options up to a maximum of one year. The employment
agreement provides Mr. Gifford fringe benefits substantially equal to other
officers. If Mr. Gifford terminates his full-time employment with the Company
and his written notice of termination provides that he is willing to act as a
consultant to the Company, the Company will provide to Mr. Gifford the post
employment health insurance coverage on the substantially same terms as the
other officers described above.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)

The Compensation Committee of the Board of Directors reviews and
approves cash and equity compensation for the Company's chief executive officer
and other executive officers. Cash compensation is comprised of a salary and
bonus, and equity compensation has been comprised of stock options.

The level of compensation is related to both corporate and individual
performance. Corporate performance is judged based upon results in the current
year, but more importantly on the Company's performance over the longer term.
Individual performance is measured based upon particular responsibilities of
each function, performance to specified goals and general management skills.

Salary. The Compensation Committee meets at least annually to review
and approve each executive officer's salary for the ensuing fiscal year. The
base salary component of compensation is intended to reward an executive officer
for normal levels of performance, as opposed to the bonus component which is
intended to compensate for performance exceeding expected levels. When reviewing
base salaries, the Compensation Committee considers the following factors:
individual performance, corporate performance (such as that described below
under CEO Compensation), levels of responsibility and prior experience. The
Compensation Committee also reviews published information regarding the
compensation of executive officers at companies comparable to Maxim to determine
that the Company's compensation is both competitive and reasonable, but does not
attempt to set compensation within any particular range or level by comparison
with the compensation reviewed.

Bonus. Based upon the quality of corporate performance over time, the
Compensation Committee annually approves a maximum bonus pool for the CEO and
other executive officers of a percentage of profit before tax for the applicable
fiscal year. The actual cash bonus for each individual executive officer, aside
from the CEO (discussed below), is then determined by first setting a maximum
bonus for each officer position based upon perfect performance of that position
and the total bonus pool available, and then considering the individual
performance of the executive officer involved. Although executive officer
bonuses for fiscal 1996 have not yet been determined, the Compensation Committee
has set a range of up to $260,000 for any executive officer (other than the
CEO).

- -------------------------
(1) This Section is not "soliciting material," is not deemed filed with the SEC
and is not to be incorporated by reference in any filing of the Company under
the 1933 Act or the 1934 Act whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing.

9
<PAGE> 13
Stock Options. Given the Company's limited resources and commitment to
the bottom line, the Company believes it cannot rely solely on cash compensation
to compete for and to provide incentives to its employees. Stock options are,
therefore, used by the Company to provide long-term incentives to executive
officers. The Company has attempted for a number of years to provide for each
executive officer, and for most other employees who participate in the Company's
stock option program, a number of shares subject to option that will vest over a
continuous period of usually four to five years into the future. To accomplish
this the Company has added one to two years of unvested options every one to
three years. The number of options per officer is determined by an assessment
principally of the significance of the function performed by the officer and
also of the officer's individual past, current and expected future contribution
to the success of the Company.

CEO Compensation. Under the terms of Mr. Gifford's Employment
Agreement, his annual bonus "shall reflect the Company's achievements and
profitability for the preceding year, and shall be reflective of the
accomplishments of the management group as a whole." Although Mr. Gifford's
bonus for fiscal 1996 has not yet been determined, the Compensation Committee
has set a range of up to $1,000,000 for Mr. Gifford.

Section 162(m). Section 162(m) of the Internal Revenue Code (the
"Code") limits the Company to a deduction for federal income tax purposes of no
more than $1 million of compensation paid to the chief executive officer and the
four other most highly paid executive officers in a taxable year. Compensation
above $1 million may be deducted if it is "performance-based compensation"
within the meaning of the Code.

The Board of Directors has determined that stock options granted under
the Option Plans with an exercise price at least equal to the fair market value
of the Company's Common Stock on the date of grant shall be treated as
"performance-based compensation." As a result, the Company's stockholders
previously approved an amendment to the Option Plans that would generally allow
any compensation recognized by an executive officer named in the Summary
Compensation Table as a result of the grant of such a stock option to be
deductible by the Company.

COMPENSATION COMMITTEE
Robert F. Graham
James R. Bergman
A.R. Frank Wazzan

10
<PAGE> 14
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the SEC initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than ten percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.

To the best of the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, during the fiscal year ended June 30, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with, except that one
report, covering one transaction, was filed late by Ziya G. Boyacigiller.

CERTAIN TRANSACTIONS

In connection with his relocation to the Company's facility in
Beaverton, Oregon, Robert F. Scheer, a Vice President of the Company, was
granted a loan in the original principal amount of $1,282,000 to assist him in
the purchase of a home in the Beaverton area. The loan bore interest at the rate
of 3% per annum and was due and payable upon the sale of his previous residence.
The loan was secured by a deed of trust on his Oregon home and by his stock
options and stock option proceeds. As of June 30, 1996 the loan was paid in
full. The largest aggregate amount of indebtedness outstanding during fiscal
1996 was $1,329,733.

In connection with his employment as a Vice President of the Company,
Anthony C. Gilbert was granted a loan in the original principal amount of
$100,000, bearing interest at the rate of 6% per annum. The loan was secured by
a pledge agreement and was due and payable within five years or sooner if the
value of vested option exceeded $1 million. Recourse for the loan was limited to
stock options or stock option proceeds. At June 30, 1996 the loan was paid in
full. The largest aggregate amount of indebtedness outstanding during fiscal
1996 was $105,392.

11
<PAGE> 15
PERFORMANCE GRAPH

The following chart shows the value of an investment of $100 on June
30, 1991 in cash of (i) the Company's Common Stock, (ii) the NASDAQ Stock Market
Composite Index and (iii) the NASDAQ Electronics Components Stock Index. All
values assume reinvestment of the full amount of all dividends and are
calculated as of June 30 of each year. 1

<TABLE>
<CAPTION>
Cumulative Total Return
--------------------------------------------
6/91 6/92 6/93 6/94 6/95 6/96

<S> <C> <C> <C> <C> <C> <C>
Maxim Integrated Prods Inc. 100 130 212 322 633 678

Nasdaq Stock Market - US 100 120 151 153 204 261

Nasdaq Elec Cmpnts 100 122 210 231 476 504
</TABLE>

12
<PAGE> 16
PROPOSAL 2
APPROVAL OF 1996 STOCK INCENTIVE PLAN
AND AMEND THE 1987 EMPLOYEE STOCK
PARTICIPATION PLAN

On August 16, 1996, the Board of Directors adopted a new 1996 Stock
Incentive Plan (the "Plan") which will replace the Company's Incentive Stock
Option Plan, 1987 Supplemental Stock Option Plan and Supplemental Nonemployee
Stock Option Plan which will expire on August 12, 2002, June 1, 1997 and August
12, 2002, respectively.

On August 16, 1996, the Board of Directors also adopted an amendment to
extend the expiration date of the 1987 Employee Stock Participation Plan (the
"ESP Plan") from August 25, 1997, to August 25, 2007. (The 1996 Incentive Stock
Option Plan and the 1987 Employee Stock Participation Plan are together referred
to as the "Employee Stock Plans. ")

The Board of Directors is hereby submitting for stockholder
ratification and approval the 1996 Stock Incentive Plan and the amendment to the
ESP Plan herein described.

The Company has determined that substantial equity participation for
employees is critically important to creating an organization in which employees
will remain for very long periods of time and the Employee Stock Plans are
designed to contribute toward this goal.

In order to be adopted, this proposal requires the affirmative vote of
a majority of the shares represented in person or by proxy and voting at the
Annual Meeting. The Board of Directors recommends a vote FOR this proposal.

As of June 30, 1996, 22,690,113 stock options remain outstanding from
all of the stock plans, of which 8,131,602 options are vested and exercisable
while the remaining 14,558,511 options vest over the next six years as follows:

<TABLE>
<CAPTION>
Year Ending June 30, Number of Options to Vest
-------------------- -------------------------
<S> <C>
1997 3,939,890
1998 3,829,264
1999 3,357,522
2000 2,571,136
2001 755,762
2002 104,937
----------
14,558,511
==========
</TABLE>

The principal uses for the increase to the stock option pool are to
provide for option grants for recruiting employees by offering a means by which
their creativity and dedicated efforts will allow them to participate in the
increased stockholder value; and for grants to existing employees generally for
periods vesting beyond 2000, by adding option grants at the end of an employee's
current vesting period.

13
<PAGE> 17
The following table sets forth options granted from July 1, 1996 to
September 16, 1996, as to (i) the Company's Chief Executive Officer and its
five other most highly compensated executive officers, (ii) all current
executive officers as a group and (iii) all non-executive officer employees as a
group. The executive officer options listed below had a weighted average
exercise price of $29.875.

<TABLE>
<CAPTION>
Number of Shares
Name and Position Subject to Options
------------------------------------- ------------------
<S> <C>
John F. Gifford, President,
Chief Executive Officer and
Chairman of the Board 200,000

Michael J. Byrd
Vice President and
Chief Financial Officer 10,000

Ziya G. Boyacigiller
Vice President 20,000

Kenneth J. Huening
Vice President 30,000

Executive Officer Group (13 persons) 384,000

Non-Executive Officer Employee Group 743,450
</TABLE>

The material features of the Employee Stock Plans are as follows:

Purpose

The common purpose of the Employee Stock Plans is to increase
stockholder value, which is accomplished largely as a result of the Company's
successful, on-going stock option programs in which 894 key salaried employees
(96% of all salaried employees) currently participate. The Company believes that
Maxim's long-term commitment to employee ownership of Maxim stock has
significantly contributed to limiting turnover among salaried employees. The
Company also strongly believes that the employee ownership of Maxim is largely
responsible for Maxim's consistent and impressive growth.

The Plan authorizes the granting of incentive stock options and
non-qualified stock options (the "Options") with respect to an aggregate of
3,500,000 shares of the Company's Common Stock (subject to adjustments as
provided below). Any shares or options returned to the Incentive Stock Option,
1987 Supplemental Stock Option Plan and Supplemental Nonemployee Stock Option
Plan (collectively referred to as the "Option Plans") will increase the number
of shares available for Options under the Plan. The 3,500,000 shares reserved
under the Plan, equals approximately 4.9% of the Company's common and common
equivalent shares for the quarter ending June 30, 1996. The closing price of the
Company's Common Stock on the Nasdaq National Market was $33.9375 on September
16, 1996.

The Common Stock covered by the Plan may be either authorized but
unissued shares or treasury shares. If there is a lapse, expiration, termination
or cancellation of any Option granted under

14
<PAGE> 18
the Plan without the issuance of shares or payment of cash thereunder, or if
shares are issued under any Option under the Plan and thereafter are reacquired
at their original purchase price by the Company pursuant to rights reserved upon
the issuance thereof, or pursuant to the payment of the purchase price of shares
under options by delivery of other Common Stock of the Company, the shares
subject to or reserved for such Option, or so reacquired, may again be used for
new Options under the plan. However, the Common Stock issued under the Plan that
is not reacquired by the Company pursuant to rights reserved upon the issuance
thereof or pursuant to payment of the purchase price of shares under options by
delivery of other Common Stock of the Company may not exceed the total number of
shares reserved for issuance under the Plan.

The following summary of certain provisions of the Plan is qualified in
its entirety by reference to the Plan, a copy of which has been filed
electronically with the Securities and Exchange Commission as an appendix to
this Proxy Statement.

Administration

The Plan provides that grants of Options and other determinations under
the Plan shall be made by (i) the Board of Directors or (ii) a Committee
designated by the Board (the "Administrator") which, in case of grants of
Options to employees who are officers or directors of the Company, is
constituted in a manner to permit the grants and related transactions under the
Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule
16b-3 of the Securities Exchange Commission and which, in the case of grants to
"covered employees," is intended to constitute "performance-based compensation"
is made up solely of two or more "outside directors" as such terms are defined
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code").

Performance Based Compensation

Section 162(m) of the Code limits to $1 million annually the deduction
a public corporation may claim for compensation paid to any of its top five
executive officers, except in limited circumstances. One such exception is for
"performance based compensation," which is defined as compensation paid solely
on account of the attainment of one or more performance goals, but only (1) if
the goals are determined by a compensation committee of the Board of Directors
comprised of two or more outside directors, (2) the performance goals are
disclosed to stockholders and approved by a majority vote before the
remuneration is paid, and (3) before the remuneration is paid, the compensation
committee certifies that the performance goals and any other material terms were
in fact satisfied.

Internal Revenue Service regulations provide that compensation
attributable to a stock option will be deemed to satisfy the requirement that
performance goals be pre-established if the grant of the Option is made by the
compensation committee; the plan under which the Option is granted states the
maximum number of shares with respect to which options or rights may be granted
during a specified period to any employee; and , under the terms of the Option,
the amount of compensation the employee could receive is based solely on an
increase in the value of the stock after the date of the grant.

The Plan includes features intended to permit the Administrator to
grant Options, subject to stockholder approval of the Plan, to employees that
will qualify as performance-based compensation. Options granted prior to
obtaining stockholder approval will not qualify as performance-based
compensation. The Plan limits the number of shares with respect to which
incentive stock options and non-qualified stock options may be granted in any
one fiscal year of the Company to any one participant to 3,000,000 shares.

15
<PAGE> 19
Eligibility

Selected employees, directors, consultants, advisors, independent
contractors, vendors, customers and others having a past, current or prospective
business relationship with the Company and any parent or subsidiaries will be
eligible to receive Options under the Plan. Options may be granted to eligible
persons residing in foreign jurisdictions under additional terms and conditions
to accommodate local laws and to provide such eligible persons favorable
treatment under local laws, provided that no such terms are inconsistent with
the Plan.

Duration

The Plan will continue in effect until terminated by the Board of
Directors, except that no Option may be granted more that ten years after the
date of adoption of the Plan by the Board of Directors.

Adjustments

The Plan provides for adjustment in the number of shares reserved and
in the shares covered by each outstanding Option in the event of a stock
dividend or stock split and may provide in the Administrator's discretion for
vesting of Options and removal of restrictions on Options in the event of
certain corporate transactions, including a change of ownership or control of
the Company. Generally, a change in control will occur for purposes of the Plan
in the event of the acquisition by any person of beneficial ownership of 50% or
more of the Company's voting stock, other than an acquisition directly from the
Company or as part of a business combination approved by the Board of Directors.

Options

The Plan provides that the purchase price of any incentive stock option
shall be at least 100% of the fair market value of the Common Stock at the time
the option is granted. The Plan further provides that the purchase price of any
non-qualified stock option shall be not less that 85% of fair market value at
the time the option is granted, provided that the exercise price may be less
than 100% of fair market value only if the Administrator determines in writing
in good faith that (i) such grants are made infrequently, (ii) there is a good
business reason for the grant that outweighs the normal presumption of per share
exercise price of not less than one hundred percent of the fair market value per
share on the date of grant, and (iii) the aggregate number of shares subject to
such option does not exceed 5% of the 3,500,000 shares identified in the Plan.
The Plan provides that the aggregate fair market value (determined as of the
time the option is granted) of the Common Stock with respect to which incentive
stock options may become exercisable for the first time by any individual during
any calendar year may not exceed $100,000. The Administrator may provide for the
payment of the purchase price in cash, by delivery of other Common Stock of the
Company having a market value equal to the purchase price of such shares, or by
any other method, such as delivery of promissory notes. A participant may pay
the purchase price by delivery of an exercise notice accompanied by a copy of
irrevocable instructions to a broker to deliver promptly to the Company sale or
loan proceeds to pay the purchase price.

The Administrator may permit or require a participant to pay all or a
portion of the federal, state and local taxes, including FICA and Medicare
withholding tax, arising in connection with the exercise of a non-qualified
stock option by having the Company withhold shares or by delivering shares
received in connection with the Option or previously acquired, having a fair
market value approximating the amount to be withheld.

16
<PAGE> 20
The period of any Option will be ten years from the date it is granted,
except that the period for Options granted to non-employee directors shall be
five years. Options are exercisable for a period of 90 days after termination or
retirement, 547 days after termination due to death, or 365 days after
termination due to disability.

Amendments and Discontinuance

The Plan is subject to amendment or termination by the Board of
Directors without stockholder approval as deemed in the best interests of the
Company. However, no such amendment shall, without the consent of the holder,
reduce the amount of any Option or adversely change the terms and conditions
thereof.

The terms and conditions applicable to any Options granted and
outstanding may at any time be amended, modified, or canceled by mutual
agreement between the Administrator and the participant so long as any amendment
or modification does not increase the number of shares of Common Stock issuable
under the Plan. In addition, options granted under the Option Plans may only be
repriced by the Board or the Compensation Committee under the following limited
conditions: (i) the number of options subject to repricing in any 12 month
period may not exceed 5% of the aggregate pool of shares reserved for issuance
under the Employee Stock Plans, and (ii) repricing should occur only
infrequently and must not be solely due to poor operating performance by the
Company.

Terms of Options and Rights under the ESP Plan

The Board has the power from time to time to grant or provide for the
grant of rights to purchase stock of the Company under the ESP Plan to eligible
employees (an "Offering") on a date or dates (the "Offering Date(s)") selected
by the Board. Each Offering will be in such form and will contain such terms and
conditions as the Board deems appropriate, except that each Offering must
include the substance of the required provisions of the ESP Plan, which are
described below. The provisions of separate Offerings need not be identical.
Each Offering can be no longer than 27 months (the "Purchase Period"). Offerings
are expected to be of approximately 12 months' duration.

Eligibility. Under the ESP Plan, any person who is customarily employed
at least 20 hours per week and five months per calendar year by the Company on
the first day of each Purchase Period (as defined in "Terms of Rights Under the
Plans, ESP" below) is eligible to participate, provided such employee has been
in the continuous employ of the Company for a specified period preceding the
first day of the purchase period as determined by the Board. The number of
eligible employees was approximately 1,800 as of June 30, 1996. Employees of an
affiliate of the Company designated by the Board of Directors are eligible to
participate in the ESP Plan provided they meet the same employment requirements.
Directors and officers of the Company or an affiliate who are highly compensated
(as defined in the Code) are not eligible to be granted rights under the ESP
Plan. Notwithstanding the foregoing, no employee shall be eligible for the grant
of any rights under the ESP Plan if, immediately after such grant, that employee
would own stock possessing 5% or more of the total combined voting power or
value of all classes of stock of the Company or of any affiliate (including any
stock which such employee may purchase under all outstanding rights and
options), nor can any employee be granted rights under the ESP Plan which would
permit that employee to buy more than $11,765 worth of stock (determined at the
fair market value of the shares at the time such rights are granted) under all
employee stock purchase plans of the Company and its affiliates as defined in
Section 423 of the Code in any calendar year.

17
<PAGE> 21
Participation. An eligible employee becomes a participant in an
Offering by delivering an agreement to the Company, within the time specified in
each Offering, authorizing payroll deductions of up to 20% of his compensation
(as defined in the ESP Plan) during the Purchase Period. All payroll deductions
made for a participant are credited to his account under the ESP Plan and are
deposited with the general funds of the Company. If specifically allowed
pursuant to the terms of the Offering, a participant may make direct payments
into his or her account to the extent such participant has not had the maximum
amount withheld during the Purchase Period. The purchase price of the shares is
accumulated by payroll deductions (or direct payments) over the Purchase Period.
At any time during the Purchase Period a participant may terminate his payroll
deductions, but a participant may increase, reduce or begin such payroll
deductions after the beginning of any Purchase Period only as provided for in
the Offering.

Amendment. The Board may at any time amend or terminate any of the ESP
Plan, except that such amendment or termination shall not impair or alter any
rights granted under a plan prior thereto without the consent of the person to
whom such rights were granted.

The Board may suspend or terminate any or all of the ESP Plan at any
time. In August of 1996, the Board of Directors also adopted an amendment to
extend the expiration date of the ESP Plan from August 25, 1997, to August 25,
2007. This amendment is now being submitted for stockholder approval.

Number of Shares in an Offering. In connection with each Offering, the
Board will specify a maximum number of shares any employee may be granted the
right to purchase and the maximum aggregate number of shares which may be
purchased pursuant to such Offering by all participants. If the aggregate number
of shares purchased upon exercise of rights granted in the Offering would exceed
the maximum aggregate number, the Board will make a pro rata allocation of the
shares available in as nearly a uniform manner as practicable and as it shall
deem to be equitable. Unless the employee's right to purchase shares will be
exercised automatically on a date or dates specified in each Offering (an
"Exercise Date") at the applicable price. It is expected that Exercise Dates
will occur on the last day of each calendar quarter of each calendar year within
a Purchase Period.

Purchase of Stock. On each Exercise Date, the balance in each
participant's account will be applied to the purchase of whole shares of stock
of the Company. No fractional shares shall be issued upon the exercise of rights
granted under the ESP Plan. The amount remaining in each participant's account
after the purchase of shares which is less than the amount required to purchase
one share of stock on the final Exercise Date of an Offering shall be held in
each such participant's account for the purchase of shares under the next
Offering under the ESP Plan, unless such participant withdraws from such next
Offering or is no longer eligible to be granted rights under the ESP Plan, in
which case such amount is distributed to such participant after the Exercise
Date, without interest. The amount, if any, of accumulated payroll deductions
remaining in any participant's account after the purchase of shares which is
equal to the amount required to purchase whole shares of stock on the final
Exercise Date of an Offering is distributed in full to the participant after
such Exercise Date, without interest.

Purchase Price. The purchase price per share of stock acquired pursuant
to the ESP Plan will not be less than the lessor of: (i) an amount equal to 85%
of the fair market value of a share of Common Stock on the Offering Date; or
(ii) an amount equal to 85% of the fair market value of a share of Common Stock
on the Exercise Date.

Withdrawal. While each participant in the ESP Plan is required to sign
an agreement authorizing payroll deductions, the participant may withdraw from a
given Offering by terminating his

18
<PAGE> 22
payroll deductions and by delivering to the Company a notice of withdrawal from
the Offering. Such withdrawal may be elected at any time prior to the end of the
applicable Purchase Period. Upon any withdrawal from an Offering by the
employee, the Company will distribute to the employee his accumulated payroll
deductions (reduced for prior purchases) without interest, and such employee's
interest in the Offering will be automatically terminated. The employee is not
entitled to participate again in that Offering. An employee's withdrawal from an
Offering will not have any effect upon that employee's eligibility to
participate in subsequent Offerings under the ESP Plan, but such employee is
required to submit a new participation agreement.

Termination of Employment. Rights granted pursuant to any Offering
under the ESP Plan shall terminate immediately upon cessation of an employee's
employment for any reason, and the Company shall distribute to such employee all
of his or her accumulated payroll deductions (reduced for prior purchases),
without interest.

Nontransferability. Rights granted under the ESP Plan are not
transferable and can only be exercised by the person to whom such rights are
granted.

Federal Income Tax Consequences

In fiscal 1996, exercises of employee stock options resulted in over
$32.7 million of cash savings as a result of tax deductions for the Company and
in $19.7 million of cash to the Company from stock option exercises, for total
cash generated of over $52.4 million, a significant contribution to the strength
of the Company's balance sheet and a material reduction to any dilutive effect
of such programs. Approximately $27.4 million of the proceeds have been used to
repurchase 827,000 shares on the open market, reducing the dilutive effect of
the option program. The Company plans to continue repurchasing its common stock.

Under existing law and regulations, the grant of non-qualified stock
options will not result in income taxable to the employee or provide a deduction
to the Company. However, the exercise of a non-qualified stock option results in
taxable income to the holder, and the Company is entitled to a corresponding
deduction. At the time of the exercise of a non-qualified stock option, the
amount so taxable and so deductible will be the difference between the fair
market value of the shares purchased and the exercise price.

No income is recognized by an optionee when an incentive stock option
is granted or exercised. If the holder holds the shares received on exercise of
an incentive stock option for at least two years from the date of grant and one
year from date of receipt of the optioned stock, any gain realized by the holder
on the disposition of the stock will be accorded long-term capital gain
treatment, and no deduction will be allowed to the Company. If the holding
period requirements are not satisfied, the employee will recognize ordinary
income at the time of disposition equal to the lessor of (i) the gain realized
on the disposition, or (ii) the difference between the option price and the fair
market value of the shares on the date of exercise. Any additional gain on the
disposition not reflected above will be long-term or short-term capital gain,
depending upon the length of time the shares are held. The Company will be
entitled to an income tax deduction equal to the amount of ordinary income
recognized by the employee.

The foregoing discussion is not a complete description of the federal
income tax aspects of Options under the Plan. In addition, administrative and
judicial interpretations of the application of the federal income tax laws are
subject to change. Furthermore, no information is given with respect to state or
local taxes that may be applicable to any Options. Participants in the Plan who
are residents of

19
<PAGE> 23
or are employed in a country other than the United States may be subject to
taxation in accordance with the tax laws of that particular country in addition
to or in lieu of United States federal income taxes.

ESP Plan. Participation in the ESP Plan is intended to qualify for the
favorable federal income tax treatment accorded employee stock purchase plans
under Section 423 of the Code. Under these provisions, a participant will be
taxed on amounts withheld for the purchase of shares as if such amounts were
actually received. Other than this, no income will be taxable to a participant
until disposition of shares acquired, and the method of taxation will depend
upon the holding period of the purchased shares.

If the shares are sold or disposed of at least two years after the
beginning of the offering period and at least one year after the purchased
shares are transferred to the participant, then the lesser of (i) the excess of
the fair market value of the shares at the time of such disposition over the
exercise price or (ii) the excess of the fair market value of the shares as of
the beginning of the offering period over the exercise price (determined as of
the beginning of the offering period) will be treated as ordinary income. Any
further gain or any loss will be taxed as a long-term capital gain or loss.
Capital gains currently are generally subject to lower tax rates than ordinary
income. The maximum capital gains rate for federal income tax purposes is 28%
while the maximum ordinary rate is effectively 39.6% at the present time.

If the shares are sold or disposed of before the expiration of either
or both of the holding periods described above, then the excess of the fair
market value of the shares on the exercise date over the exercise price will be
treated as ordinary income at the time of such disposition, and the Company in
the future may be required to withhold income taxes relating to such ordinary
income from other payments made to the participant. The balance of any gain will
be treated as capital gain. Even if the shares are disposed of for less than
their fair market value measured as of the exercise date, the same amount of
ordinary income is attributable to a participant, and a capital loss is
recognized equal to the difference between the sales price and the fair market
value of the shares on such exercise date. Any such capital gain or loss will be
long or short-term depending on whether the shares have been held for more than
one year from the date they are transferred to the participant.

There are no federal income tax consequences to the Company by reason
of the grant or exercise of rights under the ESP Plan. The Company is entitled
to a deduction to the extent amounts are taxed as ordinary income to a
participant (subject to the requirement of reasonableness, the provisions of
Section 162(m) of the code and the satisfaction of a tax reporting obligation).

20
<PAGE> 24
PROPOSAL 3
APPROVAL OF 1988 NONEMPLOYEE DIRECTOR
STOCK OPTION PLAN, AS AMENDED

In August 1996, the Board of Directors adopted, subject to stockholder
approval, an amendment to the Company's 1988 Nonemployee Director Stock Option
Plan (the "Director Plan") to increase the number of shares of the Company's
Common Stock on which options may be granted under the Director Plan by 15,000
shares.

The Board of Directors is hereby submitting for stockholder
ratification and approval the Director Plan, including the amendment to the
Director Plan herein described.

The Board of Directors believes that the success of the Company is
affected by the ability of the Company to attract and retain as members of its
Board of Directors knowledgeable persons of broad business or professional
experience who have no employment relationship with the Company. The Board
adopted and now amended the Plan to enhance the Company's ability to attract and
retain qualified nonemployee directors by providing eligible directors with a
proprietary interest in the Company through the grant of stock options.

Background

In August 1988, the Board of Directors adopted, subject to stockholder
approval, the 1988 Nonemployee Director Stock Option Plan which authorized the
sale of up to 200,000 shares of the Company's Common Stock. In October 1988, the
stockholders approved the Plan. In August 1990, the Board of Directors adopted,
subject to stockholder approval, certain amendments to the Plan, including an
amendment which authorized the sale of up to 345,000 shares of the Company's
Common Stock. In October 1990, the stockholders approved the Plan as amended. In
May and August 1991, the Board of Directors adopted, subject to stockholder
approval, certain additional amendments to the Plan, including an amendment
which authorized the sale of up to 625,000 shares of the Company's Common Stock.
In November 1991, the stockholders approved the Plan as amended. In August 1996,
The board of Directors adopted, subject to stockholder approval, certain
additional amendments to the Plan which are described herein, including an
amendment which authorized the sale of up to 640,000 shares of the Company's
Common Stock. This amendment is now being submitted for stockholder approval.

Purpose

The purpose of the Director Plan is to provide a means by which each
director of the Company who is not an employee of the Company be given an
opportunity to purchase stock of the Company. The Company, by means of the
Director Plan, seeks to retain the services of persons now serving as
nonemployee directors of the Company, to secure and retain the services of
persons capable of serving in such capacity, and to provide incentives for such
persons to exert maximum efforts for the success of the Company.

21
<PAGE> 25
Administration

The Director Plan is administered by the Company's Board of Directors.
The Board is authorized to delegate administration of the Director Plan to a
committee composed of not fewer than three members of the Board. If
administration is delegated to a Committee, the Committee shall have the powers
theretofore possessed by the Board, subject to such resolutions not inconsistent
with the provisions of the Director Plan as may be adopted from time to time by
the Board. The Board may abolish the Committee at any time and may revest in the
Board the administration of the Director Plan.

Stock Subject to the Director Plan

The Board has amended the Director Plan to increase the number of
shares of the Company's Common Stock that may be sold pursuant to options
granted under the Director Plan by 140,000 shares. During the last three fiscal
years, options covering 165,000 shares have been granted to three directors of
which 145,000 remain outstanding. As of this date, adding 15,000 shares to the
Director Plan as proposed would make 30,000 shares available for grant (not
including shares that might lapse from outstanding grants.)

If any change is made in the stock subject to the Director Plan, the
Director plan and outstanding options will be appropriately adjusted. If any
option granted under the Director Plan shall for any reason expire or otherwise
terminate without having been exercised in full, the stock not purchased under
such option shall again become available for the Director Plan.

Eligibility

Options under the Director Plan may be granted only to directors of
the Company who are not employees of the Company. Mr. Gifford is not eligible
under the Director Plan because he is an employee of the Company.

Automatic Grants

The Director Plan provides for the nondiscretionary grant of options to
purchase shares of Common Stock of the Company to nonemployee directors. The
grants are nondiscretionary in order to preserve the independence of the
directors with regard to their actions on other option grants under the employee
plans.

The Director Plan provided that each person who is elected for the
first time to be a nonemployee director shall, upon the date of his initial
election to be a nonemployee director by the Board or the stockholders, be
granted an option to purchase 40,000 shares of the Company's Common Stock which
was amended to an initial grant of 30,000 shares, effective February 29, 1996.
The Director Plan provides that these initial option grants vest in quarterly
installments over three years.

The Director Plan also provided for annual option grants of 15,000
shares to each nonemployee director which was amended to annual option grants of
10,000 shares to each nonemployee director, effective February 29, 1996.
However, all of these additional annual option grants will only start to vest
after all previously granted options under the Director Plan have vested. Once
vesting commences, these additional annual grants will vest in quarterly
installments over a one-year period.

22
<PAGE> 26
Terms of Options. Options under the Director Plan have a five-year
term; however, each option may terminate prior to the expiration date if the
optionee's service as a nonemployee director of the Company terminates. In such
instance, the option shall terminate with regard to unvested shares on the date
of termination as a nonemployee director and with regard to unexercised vested
shares seven months after the date of termination (12 months in the event of
death). The term of an option may be extended if exercise within the periods is
prohibited for specified reasons.

The exercise price of each option under the Director Plan must be equal
to the fair market value of the stock subject to the option on the date of
grant. Fair market value is determined by referring to the last sale price of
the Company's Common Stock for the preceding trading day as reported in The Wall
Street Journal on the date of grant.

An option under the Director Plan is not transferable except by will or
by the laws of descent and distribution, and may be exercised during the
lifetime of the person to whom the option is granted only by such person or by
his guardian or legal representative.

Duration, Amendment and Termination

The Board may suspend or terminate the Director Plan at any time.
Unless sooner terminated, the Director Plan will terminate on August 23, 1988.

The board may amend the Director Plan at any time and from time to
time. However, any amendment must be approved by the vote of the stockholders of
the Company within twelve months before or after the adoption of the amendment,
where the amendment would (i) materially increase the number of shares which may
be issued under the Director Plan, or (ii) materially modify the requirements as
to eligibility for the participation in the Director Plan, or (iii) materially
increase the benefits accruing to the participants in the Director Plan.

Rights and obligations under any option granted before amendment of the
Director Plan may not be altered or impaired by any amendment of the Director
Plan, except with the consent of the person to whom the option was granted.

Effect of Certain Corporate Events

In the event of a dissolution, liquidation or specified type of merger
or corporate reorganization of the Company, outstanding options under the
Director Plan become exercisable in full for a period of at least 10 days prior
to such event. Outstanding options which have not been exercised prior to such
event shall terminate on the date of such event unless assumed by a successor
corporation.

Federal Income Tax Consequences of Options Under the Director Plan

Options granted under the Director Plan will be non-qualified stock
options. For a discussion of the federal income tax consequences of
non-qualified stock options, see Proposal 2.

23
<PAGE> 27
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the year ending June 30, 1997, and has further directed
that management submit the selection of independent auditors for ratification by
the stockholders at the Annual Meeting. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting, will have an opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.

Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. In
the event the stockholders fail to ratify the selection, the Board will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board in its discretion may direct the appointment of different
independent auditors at any time during the year if the Board feels that such a
change would be in the best interests of the Company and its stockholders.

OTHER MATTERS

The Board of Directors does not know of other matters which may come
before the meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise to act, in accordance with their judgment on such matters.

STOCKHOLDER PROPOSALS - 1997 ANNUAL MEETING

Proposals of stockholders which are intended to be presented at the
Company's 1997 Annual Meeting of Stockholders must be received by the Company no
later than May 27, 1997 in order to be included in the proxy statement and proxy
relating to that meeting.

John F. Gifford
President, Chief Executive Officer
and Chairman of the Board

September 26, 1996

THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THIS
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. STOCKHOLDERS WHO ATTEND
THE MEETING MAY VOTE THEIR SHARES PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR
PROXIES.

24
<PAGE> 28
MAXIM INTEGRATED PRODUCTS, INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS

FOR ANNUAL MEETING OF STOCKHOLDERS - NOVEMBER 14, 1996

The undersigned hereby appoints John F. Gifford and Michael J. Byrd,
and each of them, as proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Maxim Integrated Products,
Inc. which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of Maxim Integrated Products, Inc. to be held on November 14, 1996
at 11:00 a.m., local time, and at any adjournment or postponement thereof, with
all powers that the undersigned would possess if personally present, upon and in
respect of the following materials and in accordance with the following
instructions, with discretionary authority as described in the proxy statement
as to any and all other matters that may properly come before the meeting or any
adjournment or postponement thereof.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR
AND FOR PROPOSALS 2, 3 AND 4.

THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED,
WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2, 3 AND 4.

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

25
<PAGE> 29
Please mark votes as in this example

ALL MATTERS ARE PROPOSED BY MAXIM INTEGRATED PRODUCTS, INC. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES AND FOR PROPOSALS 2, 3 AND 4.

1. Election of Directors

Nominees: J.R. Bergman J.F. Gifford R.F. Graham A.R. Wazzan

FOR WITHHELD

----------------------------------------
For all nominees except as noted above

2. Approval of the 1996 Stock Incentive Plan and amendment to the 1987
Employee Stock Participation Plan.

FOR AGAINST ABSTAIN

3. Approval of the 1988 Nonemployee Director Stock Option Plan, as amended.

FOR AGAINST ABSTAIN

4. Approval of Independent Auditors for fiscal 1997.

FOR AGAINST ABSTAIN

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT

NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.

Signature: Date:
-------------------------- -----------------